Court Of Appeal Summaries (August 14 – 18, 2023) - Constitutional & Administrative Law

Firstly, we would like to congratulate our firm's very own, Robert Potts (and his co-counsel, Alan Pratt), for the result obtained in Whiteduck v Ontario. In that case, our clients, the Algonquins of Ontario, sought a declaration that Ontario breached its duty to consult and accommodate their interests before it recognized the Killarney and the Mattawa/Ottawa River Métis communities and gave them unlimited harvesting rights. Our clients' claim was struck by the motion judge on the basis of a lack of standing. The appeal was allowed. The duty to consult and accommodate gave the Algonquins the necessary standing to bring the action and to claim the consequential relief sought. The Court also found that the Algonquins were free to challenge Ontario's decision by way of action rather than by way of judicial review.

In Canada Christian College and School of Graduate Theological Studies v. Post-Secondary Education Quality Assessment Board, the Court upheld the Divisional Court's decision that the Minister's decisions regarding an application by the appellant to be recognized as a university were reviewable, justiciable, and reasonable. The Court rejected arguments that the Minister's actions exceeded his authority, emphasizing the permissibility of referring matters to a Board and delaying proclamation according to legislative provisions. The Court also dismissed claims of unfairness, maintaining that the process met fairness standards and that the Minister's discretion was subject to legitimate constraints.

Benjamin Cochrane Trust (Re) was a passing of accounts case in which parents who were administering their son's trust funds derived from a personal injury settlement were found not to have properly accounted for the use of the funds and were ordered to pay funds back into the trust. The matter was heard over a 14-day trial involving relatively modest sums.

In Dramel Limited v. Multani, the Court refused a stay of the enforcement of a mortgage over a residential property pending appeal.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Ines Ferreira
Blaney McMurtry LLP
416.593.2953 Email

Civil Decisions

Whiteduck v Ontario, 2023 ONCA 543

Keywords: Constitutional Law, Aboriginal Law, Duty to Consult, Duty to Accommodate, Administrative Law, Judicial Review, Civil Procedure, Striking Pleadings, Constitution Act, 1982, s 35(1), Canadian Charter of Rights and Freedoms, Judicial Review Procedure Act, RSO 1990, c J1, ss 2(1), 6, Federal Courts Act, RSC 1985, c F-7, s 18, Courts of Justice Act, RSO 1990, c C43, s 138, Rules of Civil Procedure, rr. 5.03(1), 21.01(1)(b)(3)(a), R. v Powley, 2003 SCC 43, Beckman v Little Salmon/Carmacks First Nation, 2010 SCC 53, Mikisew Cree First nation v. Canada (Governor General in Council), 2018 SCC 40, Haida Nation v. British Columbia (Minister of Forests) 2004 SCC 73, Mikisew Cree First nation v Canada (Minister of Canadian Heritage), 2005 SCC 69, Mitchell v M.N.R., 2001 SCC 33, Restoule v. Canada (Attorney General), 2021 ONCA 779, Nevsun Resources Ltd. v Araya, 2020 SCC 5, Doucet-Boudreau v Nova Scotia (Minister of Education), 2003 SCC 62, Manitoba Metis Federation Inc. v. Canada (Attorney General), 2013 SCC 14, R v Marshall, [1999] 3 S.C.R. 456, Newfoundland and Labrador (Attorney General) v. Uashaunnuat (Innu of Uashat and of Mani-Utenam), 2020 SCC 4, Tsilhqot'in Nation v British Columbia, 2014 SCC 44, Rio Tinto Alcan Inc. v Carrier Sekani Tribal Council, 2010 SCC 43, Rodaro v Royal Bank of Canada, (2002), 59 O.R. (3d) 74, North Slave Métis Alliance v Canada (Indian Affairs and Northern Development), 2017 FC 932, Behn v Moulton Contracting Ltd., 2013 SCC 23, Chilian v Augdome Corp. (1991), 2 O.R. (3d) 696, Lax Kw'alaams Indian Band v Canadian (Attorney General), 2011 SCC 56, Keewatin v Ontario (Minister of Natural Resources) (2003), 66 O.R. (3d) 370, Canada (Attorney General) v TeleZone Inc., 2010 SCC 62, Apotex Inc. v Ontario (Minister of Health) (2000), 10 CPR (4th) 166, Ontario Federation of Anglers and Hunters v Ontario (Minister of Natural Resources and Forestry), 2015 ONSC 7969, Ontario (Attorney General) v Clark, 2021 SCC 18, Ontario Federation of Anglers and Hunters v. Ontario (Natural Resources and Forestry), 2016 ONSC 2806, Zhang v Canada (Attorney General), 2007 FCA 201, Krieger v Law Society of Alberta, 2002 SCC 65, R v Anderson, 2014 SCC 41

Canada Christian College and School of Graduate Theological Studies v. Post-Secondary Education Quality Assessment Board, 2023 ONCA 544

Keywords: Constitutional Law, Administrative Law, Judicial Review, Ministerial Decisions, Justiciability, Procedural Fairness, Legislation Act 2006, S.O. 2006, c. 21, Sched. F., Northern Regional Health Authority v. Horrocks, 2021 SCC 42, Agraira v. Canada (Public Safety and Emergency Preparedness), 2013 SCC 36, University of Ontario Institute of Technology v. Ontario (Finance), 2016 ONSC 7741, Roncarelli v. Duplessis, [1959] S.C.R. 121, C.U.P.E. v. Ontario (Minister of Labour), 2003 SCC 29, [2003] 1 S.C.R. 539, R. v. Secretary of State for the Home Department ex p Fire Brigades Union, [1995] UKHL 3 (“Fire Brigades Union”), Authorson v. Canada (Attorney General), 2003 SCC 39, Attorney General of Canada v. Inuit Tapirisat et al., [1980] 2 S.C.R. 735, Canada (Attorney General) v. Mavi, 2011 SCC 30

Dramel Limited v. Multani,, 2023 ONCA 540

Keywords: Contracts, Real Property, Mortgages, Debtor-Creditor, Civil Procedure, Judgments, Enforcement, Writs of Possession, Courts of Justice Act, s. 134(2), Rules of Civil Procedure, r. 63.02(1), RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, Starkman v. Home Trust Company, 2015 ONCA 436, Morguard Residential v. Mandel, 2017 ONCA 177

Benjamin Cochrane Trust (Re), 2023 ONCA 546

Keywords: Trusts, Trustees, Passing of Accounts, Compensation, Remedies, Equitable Set-Off, Civil Procedure, Prejudgment Interest, Costs, Trustee Act, R.S.O. 1990, c. T.23, Zimmerman v. McMichael Estate, 2010 ONSC 2947, Birks v. Micklethwait (1864), 33 Beav. 409, The Catalyst Capital Group Inc. v. West Face Capital Inc., 2023 ONCA 381, Toller James Montague Cranston (Estate of), 2021 ONSC 1347, aff'd 2022 ONSC 6636, Steven Thompson Family Trust v. Thompson, 2012 ONSC 7138, Simone v. Cheifetz (2000), 36 E.T.R. (2d) 297 (Ont. C.A.)

Short Civil Decisions

Awad v. Dover Investments Limited , 2023 ONCA 542

Keywords: Civil Procedure, Appeals, Extension of Time, Costs, Machado v. Ontario Hockey Association, 2019 ONCA 210

CIVIL DECISIONS

Whiteduck v Ontario , 2023 ONCA 543

[Fairburn A.C.J.O., Doherty and Lauwers JJ.A]

Counsel:

Robert Potts and Alan Pratt, for the appellants

J. Madden, A. Saieva-Finnie, P. Seaman, and K. Brown, for the respondents, Métis Nation of Ontario and Métis Nation of Ontario Secretariat Inc.

W. MacLarkey and J. Claydon, for the respondent His Majesty the King in Right of Ontario

S. Luk and B. Brookwell, for the interveners

facts:

The Algonquins have been negotiating with Ontario and Canada under a 1994 framework to arrive at a modern-day treaty concerning, among other matters, the harvesting rights of the Algonquins to fish, hunt and trap wildlife resources within the settlement area.

The competing Indigenous interests at the heart of this case resulted from the Supreme Court's seminal decision in R v Powley. Before Powley, the Algonquins held the only Aboriginal rights to the resources in question under Ontario's 1991 Interim Enforcement Policy (the “Policy”). After Powley, the Policy was extended to Métis from Métis communities recognized in that decision, but not to other Métis. However, in 2017, Ontario recognized six Métis communities including the Killarney and Mattawa/Ottawa River Métis – purportedly under Powley, and extended harvesting rights to them under the 2018 Framework Agreement in a large area that overlaps with the Algonquin settlement area.

The Algonquins sought a declaration that Ontario breached its duty to consult and accommodate their interests before it recognized the Killarney and the Mattawa/Ottawa River Métis communities and gave them unlimited harvesting rights.

issues:

(1) Did the motion judge err in finding that the Algonquins do not have standing to contest Ontario's recognition of the Killarney and Mattawa/Ottawa River Métis Communities under Powley?

(2) On the assumption that the Algonquins have standing, did the motion judge err in holding that they could pursue their claims by way of an action rather than judicial review?

(3) Did the motion judge err in striking the statement of claim in its entirety with leave to amend some but not all of the claims?

holding:

Appeal allowed, in part.

reasoning:

(1) Yes.

The Court first outlined the governing principles that are to be applied to Aboriginal claims: 1) Reconciliation is the purpose of Aboriginal law; 2) Every right must have a remedy; 3) The Crown is bound by the honour of the Crown in all it does respecting Aboriginal rights; 4) The Crown's duty to consult and accommodate is fundamental; 5) The Crown is the steward of Aboriginal resources; and 6) The court must take a generous approach to pleadings in Indigenous cases.

The Algonquins claimed that Ontario had a duty to consult and accommodate them before making its decision to recognize the Killarney and the Mattawa/Ottawa River Métis communities and to give members of those communities unlimited harvesting rights. The Court noted that this asserted claim must condition a court's approach to standing.

In the Court's view, despite the primacy of the claim to the duty to consult and accommodate, the motion judge's decision turned on her analysis of the Algonquins' standing to bring the action, which is where she fell into error. The motion judge had accepted the Algonquins' argument that proven aboriginal rights under s. 35 of the Constitution Act, 1982 were not required to trigger the duty to consult. The motion judge then turned to the issue of standing, and noted that “[t]he statement of claim, on its face, does not assert any authorization to represent any Métis individuals or groups for the purpose of asserting or demarcating Métis Aboriginal rights.” In the motion judge's view, only Métis have the status to contest Métis Aboriginal rights; the Algonquins have “no authorization” to “challenge Métis group rights (and seek to eliminate them).” The motion judge also determined that “[the Algonquins] could seek to prove their own rights in this action and assert that their rights have been breached by another group, but they have not done so.” She then struck out the claims for declaratory relief without leave to amend, on the basis of standing.

The Court found that the motion judge's standing analysis was also inconsistent with her analysis of the duty to consult and accommodate. Her statement that the Algonquins were required to prove their own rights is not consistent with her statement that a potential for adverse impact suffices to raise the duty to consult and accommodate. In the Court's view, the Algonquins sought protection for their interests, which might prove out eventually to be rights, and argued that the recognition Ontario afforded to the Killarney and the Mattawa/Ottawa River Métis communities adversely impacts them.

The Court clarified that the question was whether, for the purpose of pleading, the Algonquins had a sufficiently credible claim to an interest in harvesting rights, that is, to fish, hunt and trap wildlife resources, particularly moose, within the Algonquin settlement area to give rise to a duty on Ontario's part to consult and accommodate them respecting the recognition of harvesting rights for the Killarney and the Mattawa/Ottawa River Métis communities in the same area.

The Court held that the Algonquins' interest was sufficiently made out to permit the action to proceed on the duty to consult and accommodate.

(2) No.

Ontario argued that the Algonquins were obliged to pursue the case by way of an application for judicial review, not by way of an action. The Court set out four reasons explaining why that was not the case. First, a claim for breach of the duty to consult can be advanced in an action. As a general principle, a litigating party can select the legal process it wishes to pursue, subject to the Rules of Civil Procedure and to the requirements of the law more generally. Unless the law mandates a certain form of proceeding, the party starting it can choose the legal process to its own advantage. Further, even if a party selects the wrong form of proceeding, striking a claim merely on the basis that a litigant has adopted the wrong form of action might not always be appropriate.

Second, it was understandable that the Algonquins would prefer a trial over judicial review, given the plethora of competing expert reports in which credibility and reliability play key roles.

Third, s. 6 of the Judicial Review Procedure Act requires an application for judicial review to be made to the Divisional Court. An application for judicial review is defined in s. 2(1) to mean a proceeding “by way of application for an order in the nature of mandamus, prohibition or certiorari” (s. 2(1)1) or a proceeding “by way of an action for a declaration or for an injunction, or both, in relation to the exercise, refusal to exercise or proposed or purported exercise of a statutory power” (s. 2(1)2).

The Court accepted the motion judge's observation that “[t]he core of the plaintiffs' case … is that Ontario breached its duty to consult with the plaintiffs.” The exercise of the Crown's duty to consult is an exercise of its constitutional responsibility, an important vestige of the royal prerogative; in itself, compliance with the duty to consult does not involve the exercise of a statutory power. Decisions made by the Crown resulting from consultation might involve the exercise of a statutory power or a statutory power of decision, but fulfilling or declining to fulfill the duty to consult itself is neither. Ontario's decision to recognize the Métis communities was made under s. 35 of the Constitution Act, 1982, and not under any statute. Ontario attempted to rely on Telezone for the proposition that a proceeding to set aside an administrative decision must be brought by way of judicial review. However, the Court found that Telezone was not applicable since it dealt with decisions of the federal government, the Federal Court's jurisdiction under the Federal Courts Act, and the concurrent jurisdiction of provincial superior courts under that Act.

Lastly, the Court found that it would make no sense to force the Algonquins into two lawsuits, one an action for a declaration on the duty to consult, and the other for judicial review of specific decisions. There should only be one proceeding.

(3) Yes.

The Court instructed lower courts to be cautious to not foreclose avenues of relief plausibly open to Aboriginal parties whose interests are engaged, particularly in the context of a pleadings motion that engages constitutional issues.

The Court then addressed the remaining issues with the pleadings. First, the Algonquins made submissions invoking the honour of the Crown even though it was not pleaded, as noted by the motion judge. She gave the Algonquins leave to amend “to assert that the honour of the Crown informs the duty to consult in this case.” The Court held that she did not err in doing so given the saliency of the honour of the Crown in its actions involving Aboriginal rights under s 35 of the Constitution Act, 1982.

Second, the motion judge struck out para. 2(e) of the Statement of Claim, which sought an interim and permanent injunction restraining the Métis Nation from issuing harvester cards under the Framework which the Algonquins did not appeal. The Algonquins did not appeal the striking of para. 2(e). The effect appeared to be that the Métis Nation may continue to issue harvester cards pending the resolution of the action.

Third, the motion judge struck out para. 2(d) of the Statement of Claim, which sought a declaration that Ontario may not extend harvesting rights to the alleged Killarney and Mattawa/Ottawa River Métis communities, or any other alleged Métis communities. She did so on the basis that: “…it is plain and obvious that the plaintiffs' challenge to the application of the [Enforcement Policy], resulting in the above declarations, seeks to have the court rule on the exercise of prosecutorial discretion, which is not justiciable.”

The Court noted that the Attorney General's independence from interference in prosecutorial decisions is a constitutional principle. The Supreme Court has recognized that courts will not interfere with [the Attorney General's] exercise of executive authority. The Algonquins asked the Court to “re-examine the justiciability of Ontario's Interim Enforcement Policy and recognize it, not as an exercise of prosecutorial discretion, but as an essential component of the Crown's constitutional and honourable obligations.” In a sense, para. 2(d) did raise the question of prosecutorial discretion somewhat inferentially because one mechanism by which Ontario can open the resource to the Métis Nation harvesters was by declining to prosecute them. The Algonquins argued that the Enforcement Policy, as policy, is inconsistent with the Crown's constitutional and honourable obligations. The Algonquins invoked the Supreme Court's decision in R. v. Anderson where the court said: “care must be taken to distinguish matters of prosecutorial discretion from constitutional obligations.” The Court accepted that this was an arguable proposition and should not be struck in a pleadings motion, concluding that the motion judge erred in striking para. 2(d) of the Statement of Claim.

Canada Christian College and School of Graduate Theological Studies v. Post-Secondary Education Quality Assessment Board , 2023 ONCA 544

[Roberts, Trotter and Sossin JJ.A.]

Counsel:

G. MacKenzie and M. Diskin, for the appellant

H. Mackay and R. Ng, for the respondents

S. Choudhry and J. Hartery, for the intervener Canadian Constitution Federation

facts:

In 2020, the Legislature passed Bill 213 granting the appellant, Canada Christian College and School of Graduate Theological Studies (“CCC”), the right to refer to itself as a university and certain degree-granting rights: Better for People, Smart for Business Act, 2020, S.O. 2020, c. 34, Sched. 2. The legislation received Royal Assent on December 8, 2020. The Legislature decided that the amendments would not come into force upon Royal Assent.

The legislation provided that the amendments, including the provision relating to the appellant's change in status and degree-granting rights, were to come into force on a day to be named by the Lieutenant Governor. The Post-secondary Education Choice and Excellence Act, 2000 (“PSECE”) provides a licensing process which allows institutions to apply to the respondent Minister of Training, Colleges and University for consent to acquire university status and to grant university degrees without the need for the enactment of establishing legislation. Until the passing of the PSECE, institutions could be granted university status exclusively through statutes. The PSECE also established the respondent Postsecondary Education Quality Assessment Board (the “Board”), which makes recommendations concerning applications for ministerial consent.

The respondent Minister of Training, Colleges and Universities recommended against proclaiming the amendments in force following his solicitation of recommendations from the Board. The appellant sought judicial review of both the Minister's and the Board's decisions. The Divisional Court dismissed the application.

issues:

1. Did the Divisional Court err in finding that the Minister's decision not to proclaim the legislation was not justiciable?

2. Did the Divisional Court err in finding that the process applied by the Minister in relation to granting university status to the CCC was intra vires the PSECE?

3. Did the Divisional Court err in finding the hybrid process was procedurally fair?

holding:

Appeal dismissed.

reasoning:

The appellant argued that the Minister's decision to refer the CCC application to the Board, in effect, created a hybrid approach that exceeded the Minster's authority under the PSECE, involving both legislation conferring on CCC the status of a university and a distinct process for ministerial approval informed by a recommendation by the Board based on its independent review of CCC's application. Thus, the appellant argued that the hybrid process was unfair, as it failed to respect the CCC's legitimate procedural expectations and the process applicable under s. 5 of the PSECE.

The Court found that in reviewing the text, context and purpose of the PSECE, it was clear the Minister was granted a broad discretion over referrals of matters to the Board. There is no statutory bar to a referral of an applicant for “University” status to the Board where there is also legislation conferring that status.

The Court pointed out that the referral to the Board occurred prior to the legislation receiving Royal Assent. The fact that the process continued beyond the date of Royal Assent made the case unusual but did not render it unlawful.

There was no suggestion in the record that proclamation was being taken off the table, or that the question would not be reconsidered if and when the appellant met the threshold set out by the Board and accepted by the Minister for approval. The discretion to determine when proclamation would occur is a power expressly provided through the commencement provision in the PSECE. Exercising this discretion was not ultra vires to the Minister. To the contrary, it was precisely what the commencement provision contemplated. While the Minister's exercise of this lawful authority was entitled to deference, the power of a minister to defer proclamation was in no way unlimited. The Divisional Court's reasons did not mean simply that the Minister's discretion is unfettered, or that it is open to a Minister to decide that legislation once enacted will never be proclaimed, but reiterated the point from Sullivan that not all enacted statutes will in fact be proclaimed. The Court held that it would not be open to a Minister to decide that an enacted statute will never be proclaimed. There was no basis on which to conclude the Minister's decision was ultra vires or unreasonable.

1. No

The appellant argued that information was withheld by the Board's Secretariat and by the Board to the Minister. The appellant further submitted that the Board failed to give reasons and made public information which the appellant was advised would be kept private. The respondent argued that no duty of fairness applied, as the Minister's actions were part of the legislative process.

The Court noted that the setting of a Minister's decision whether or not to recommend proclamation was distinct from the actions of the Legislature itself, which are not subject to judicial review on fairness grounds. Further, the setting was distinct from executive decision-making over the issuing of regulations and other delegated legislative functions, which also was not subject to the duty of fairness.

The Court felt that it was unnecessary to determine if ministerial discretion with respect to proclaiming legislation generally attracts a duty of fairness.

Assuming, for purposes of this analysis, that a duty of fairness was owed by the Minister to the appellant, the record disclosed that the process followed by the Minister was fair. The appellant was granted extensive opportunity to make submissions to the Board and the appellant's final responses were before the Board when it made its decision, in addition to the summaries prepared by the Board secretariat.

While the appellant alleged that the Minister somehow “implied” that he would not follow negative recommendations of the Board, it did not constitute a “clear, unambiguous and unqualified” representation required to establish a legitimate expectation. Further, the representation did not promise a different or more rigorous procedure but rather a substantive outcome, which did not constitute a legitimate expectation in Canadian administrative law.

While the 2019 Manual for Private Organizations Applying for Ministerial Consent made clear that the application process through the Board is public, representations were made to the appellant that the Board's process with respect to the CCC application would remain confidential. It does appear, for example, that the appellant's full application was published inadvertently. This inadvertent error did not affect the fairness of the process provided to the appellant.

Dramel Limited v. Multani , 2023 ONCA 540

[Sossin J.A. (Motion Judge)]

Counsel:

E. Smolarcik, for the moving parties

M. Robins and K. Leonard, for the responding party

facts:

The appellants, G.M. and S.M., moved for a stay of enforcement proceedings, and specifically a notice to vacate the appellant's residence (“81 Parkview Hills”). The respondent, Dramel Limited (“Dramel”), held a second mortgage on the appellants' residence, which had been in default for many years. On March 12, 2018, Dramel obtained a default judgment on the mortgage. The appellants never pursued any attempt to set aside the default judgment.

In separate proceedings, Dramel sought remedies in relation to a mortgage registered on a commercial property owned by the appellants at 1430 Gerrard Street East (the “1430 Mortgage”). The 1430 Mortgage was secured by and registered on five other properties owned by the appellants including 81 Parkview Hills. Chalmers J. found that a forbearance agreement signed by the parties in 2018, acknowledging an aggregate indebtedness of $16,803,723.73, was valid and binding and lifted interim stays on enforcement proceedings. Dramel took steps to obtain possession of the residence with a writ of execution and notice to vacate which prompted the appellants to seek an interim stay of enforcement of the writ of execution issued against 81 Parkview Hills.

issues:

Do appellants meet the test for an interim stay of enforcement proceedings pending the outcome of their appeal, pursuant to r. 63.02 of the Rules of Civil Procedure?

holding:

Motion dismissed.

reasoning:

No. The Court noted that the tests for granting a stay pending appeal under s. 134(2) of the Courts of Justice Act and r. 63(02) are the same. The moving party is required to establish that it is in the interests of justice to impose a stay, given the relative strengths and weaknesses of the following criteria: 1) there is a serious question to be adjudicated on appeal; 2) the moving party would suffer irreparable harm if the relief were refused; and 3) the balance of convenience favours the moving party.

Dramel argued that the enforcement proceedings leading to the writ of execution and notice to vacate related to matters not under appeal. The Court disagreed and held that Chalmers J's inclusion of 81 Parkview Hills in the aggregate indebtedness to Dramel made it part and parcel of the matters at issue in the appeal and concluded there was a serious question to be adjudicated.

With respect to irreparable harm, the Court noted that where the affected party knew they had no right to remain in their residence for a long period of time, any potential harm was arguably the result of the appellants' own failure to take reasonable steps to deal with the reality of defaulting on the mortgage. The Court was unable to conclude that the appellants would suffer irreparable harm if forced to vacate the residence.

With respect to the balance of convenience, both the appellants and Dramel had reasonably strong balance of convenience arguments. Ultimately, the Court concluded the balance of convenience did not favour a stay. In light of the analysis of the three-part test for a stay, the interests of justice did not favour a stay.

Benjamin Cochrane Trust (Re), 2023 ONCA 546

[Fairburn A.C.J.O., Simmons and Zarnett JJ.A.]

Counsel:

A. Bloom and J. Karjanmaa, for the appellants/respondents by way of cross-appeal W.C. and C.C.
B. v. Niejenjuis, C. Di Carlo, D. Goudge and S. Ahmad, for the respondent/appellant by way of cross-appeal B.C.
Keywords: Trusts, Trustees, Passing of Accounts, Compensation, Remedies, Equitable Set-Off, Civil Procedure, Prejudgment Interest, Costs, Trustee Act, R.S.O. 1990, c. T.23, Zimmerman v. McMichael Estate, 2010 ONSC 2947, Birks v. Micklethwait (1864), 33 Beav. 409, The Catalyst Capital Group Inc. v. West Face Capital Inc., 2023 ONCA 381, Toller James Montague Cranston (Estate of), 2021 ONSC 1347, aff'd 2022 ONSC 6636, Steven Thompson Family Trust v. Thompson, 2012 ONSC 7138, Simone v. Cheifetz (2000), 36 E.T.R. (2d) 297 (Ont. C.A.)

facts:

The appellants are the parents of the respondent, who suffered a serious brain injury when he was hit by a car in 1996 at the age of 12. The appellants brought an accident benefits claim on their son's behalf and settled the lawsuit for over $400,000 in 2000. The money was invested in an annuity that made payments to the appellants in trust for the benefit of their son for about 17 years.

The relationship between the appellants and respondent deteriorated over time. Eventually, the respondent alleged that the appellants had mismanaged the trust and they were ordered to pass accounts. The passing of accounts turned into a 14-day trial. The appellants admitted to having administered the trust in cash and had little documentary evidence to show how the trust funds were spent over the 17-year period covered by their statement of accounts. The respondent disputed every single one of the more than 2,000 disbursements claimed.

The trial judge found that the appellants had accounted for $253,144.11 of the $418,675.25 received by the trust during the relevant period of time. This left $165,531.14 unaccounted for. While the appellants claimed $131,038.42 in trustee compensation, the trial judge refused that amount because the trust had been so badly managed. Instead, she found that the appellants were entitled to $15,000 for their time spent administering the trust. She also denied them indemnification for legal costs related to the application to pass accounts.

In the end, the appellants were ordered to repay the trust $150,531.14, plus prejudgment interest in the amount of $53,649.64. The trial judge also ordered that the appellants pay $90,000 in costs in relation to the passing of accounts to the respondent. In total, the appellants have been ordered to pay $294,180.78. The appellants appealed and the respondent cross-appealed.

issues:

1. Did the trial judge err in disallowing reimbursement of properly incurred expenses that were paid by the appellants personally, when the reimbursement of out-of-pocket expenses was permitted under s. 23.1(1)(b) of the Trustee Act?

2. Did the trial judge err in failing to turn her mind to issues of quantum meruit and equitable set-off?

3. Did the trial judge err in denying the appellants indemnity for their legal fees?

4. Did the trial judge err in her calculation of prejudgment interest?

5. Did the trial judge err in ordering the appellants to pay costs to the respondent?

6. Did the trial judge err by passing the accounts and improperly relieving the appellants of their onus?

7. In the alternative, if the appellants met their onus, did the trial judge err by passing the accounts when the appellants breached their duties as trustees?

8. Did the trial judge err in awarding the appellants trustee compensation?

holding:

Appeal and cross-appeal dismissed.

reasoning:

1. No

The Court held that the trial judge's reasons, read in context, did not reflect a misunderstanding of s. 23.1 of the Trustee Act. Despite the fact that the trial judge made no further explicit reference to s. 23.1, she did in several instances approve disbursements in situations where the appellants had paid expenses personally and then been reimbursed from the trust, which is consistent with what is permitted under s. 23.1(1)(b). In contrast, she did not allow disbursements that were never paid or reimbursed from trust funds. The trial judge's reasons reflected the framing of the issues in the context of the case. The Court found no legal error.

2. No

The Court held that there was no basis to interfere with the trial judge's disallowance of the “fictional” disbursements, which were matched by “fictional” loans. In the trial judge's words, these were “unpaid disbursements included to offset any repayment order” as opposed to amounts “paid by the trust”.
It was only once she had determined the “truth of what happened” – or what disbursements to allow or disallow – that set-off came into play, since set-off was only required if there was a shortfall. Consistent with the appellants' submissions, after reviewing the disbursements claimed in the statement of accounts, the trial judge went on to consider whether the appellants were entitled to set-off in discussing trustee compensation.

The trial judge determined that the appellants had failed to fulfil their duty as trustees to keep proper accounts. Further, the appellants had acknowledged that they “never expected [their son] or the trust to repay the loans.” These findings of fact, to which deference was owed, undermined the appellants' suggestion that the trust was unjustly enriched by the services they provided to their son. The Court held that the appellants' submission was an attack on the trial judge's findings of fact. In conclusion, the trial judge was alive to the appellants' position that, if there was a shortfall, there should have been a recognition of the value of the services they provided by means of a set-off.

3. No

The principle laid down in Birks and relied on by the appellants – that trustees should not, generally speaking, be deprived of costs – is premised on the trustee “having done his duty”, and “having faithfully accounted”. The trial judge found that the appellants had failed in their primary duty to account, had rendered accounts that were misleading, and had falsified documentation. She also found that the trial “was unduly long and complicated” because they failed to keep proper accounts and that “[m]ost of the time and expenses associated with th[e] trial could have been avoided” had they fulfilled their duty. The Court chose not to interfere with the trial judge's decision to require the trustees to pay their legal fees and expenses personally in the circumstances.

4. No

In the Court's view, there was no reversible error in the trial judge's decision to rely on the spreadsheet to calculate prejudgment interest, save for one mathematical error raised by the appellants. The appellants should not have been charged prejudgment interest between April 19, 2016 and May 15, 2017, a period during which the respondent effectively had full control of the annuity funds, and it ought to be deducted from the total amount of prejudgment interest. The Court varied the order for prejudgment interest from $53,649.64 to $53,209.63.

5. No

There were not strong grounds to doubt the trial judge's discretionary costs decision. She explained why the respondent was entitled to costs and why the costs were payable on a partial indemnity scale, and she justified the quantum. In doing so, she took into account the respondent's conduct, among other factors. The Court found that her decision was entitled to deference.

6. No

The trial judge did not improperly relieve the appellants of the burden on them. Nor did she make guesses in their favour. As was evident from her reasons, she was alive to certain deficiencies in the statement of accounts and the evidence. However, she did not reject the appellants' evidence wholesale. Rather, she did the laborious work of assessing the evidence before her, deciding what evidence to accept and what evidence to reject, cognizant that the appellants bore the burden of proof.

Second, the trial judge found that “[g]iven the enormity of the account,” it was simply “not feasible to address each disbursement individually.” Instead, she structured her reasons by dealing with categories of disbursements. Within the categories, she addressed particular disbursements, and did not necessarily accept or reject every disbursement. In the Court's view, she approached her analysis in a logical and reasonable manner in light of the statement of accounts before her. Every judge hearing a passing of accounts need not follow an identical approach or methodology. Depending on the circumstances, it may be appropriate to deal with disbursements by category, as the trial judge did.

7. No

The trial judge was alive to the allegations of misconduct made against the trustees, including the four points that were raised on appeal, and addressed them insofar as they were relevant to the task before her – the passing of accounts. The respondent's submission misunderstood the nature of the passing of accounts process. Just because a trustee has committed a breach of trust, it does not mean that a court need refuse to pass the accounts writ large. Furthermore, while the trial judge stayed focused on the task at hand, she was very much alive to the allegations of misconduct and addressed them insofar as they were relevant.

8. No

The trial judge took into account the appellants' failures as trustees in assessing trustee compensation. As noted above, she found that the amount of trustee compensation sought by them was “unreasonable given that they failed to discharge their primary duty to account for the trust funds they received”. Nonetheless, she awarded them a “modest” compensation amount of $15,000, which was the equivalent of less than $900/year (or less than $75/month) over the 17 years.

SHORT CIVIL DECISIONS

Awad v. Dover Investments Limited, 2023 ONCA 542

[Hourigan, Brown and Monahan JJ.A.]

Counsel:

G. A., acting in person

H. Wolch, for the respondents

Keywords: Civil Procedure, Appeals, Extension of Time, Costs, Machado v. Ontario Hockey Association, 2019 ONCA 210

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be ought about your specific circumstances.

Canada: Court Of Appeal Summaries (August 14 – 18, 2023)
Blaney's Appeals

Table of Contents

CIVIL DECISIONS

SHORT CIVIL DECISIONS

Canada: Court Of Appeal Summaries (August 14 – 18, 2023) Blaney's Appeals

Table of Contents

CIVIL DECISIONS

SHORT CIVIL DECISIONS

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Canada: Court Of Appeal Summaries (August 14 – 18, 2023)
Blaney's Appeals