Please find below our summaries of last week's civil decisions of the Court of Appeal for Ontario.
In a 68-page decision in Carmichael v. GlaxoSmithKline Inc., a tragic case, the Court set out the test for determining whether a limitation period was suspended as a result of the plaintiff's incapacity under ss. 7(1)(a) of the Limitations Act, 2002.
In Tran v. Bloorston Farms Ltd., the Court reviewed the Rule in Foss v Harbottle, which prohibits a shareholder from suing for damage caused to the corporation. The Court adopted the test set out in a UK House of Lords decision in 2000 for when a shareholder can sue for diminution in value of her shares in a corporation by way of an exception to the Rule.
Other topics covered included:
- the enforceability of forum selection and choice of law clauses in a case relating to the unreasonable withholding of consent to assign various leases and credit card agreements in both Ontario and Quebec.
- the intersection of condominium and municipal/planning law;
- the interpretation of a Tarion Addendum clause in an agreement of purchase and sale of land in the receivership context;
- defamation and negligence in respect of withdrawn charges of bid-rigging;
- equitable assignments of choses in action in the slip and fall and litigation funding context;
- custody in a high-conflict matrimonial dispute;
- costs where nominal damages are awarded for breach of Charter rights; and
- summary judgment on claims by and against a bank in respect of various credit facilities.
Blaney McMurtry LLP
[Benotto, Zarnett and Thorburn JJ.A.]
Mark A. Ross and Eric Brousseau, for the appellant
Evan L. Tingley, for the respondents
Keywords: Corporations, Separate Legal Personality, Rule in Foss v. Harbottle (1843), 67 E.R. 189 (U.K.H.L.), Contract, Interpretation, Real Property, Commercial Leases, Breach, Damages, Reasonable Foreseeability, Civil Procedure, Summary Judgment, Sufficiency of Reasons, Standard of Review, Ontario Business Corporations Act, RSO 1990, c. B16, ss. 28(1) and 41, Meditrust Healthcare Inc. v. Shoppers Drug Mart (2002), 220 D.L.R. (4th) 611 (Ont. C.A.), Johnson v. Gore Wood & Co. (No. 1) (2000),  B.C.C. 820 (U.K.H.L), Quadrangle Group LLC et al. v. Attorney General of Canada, 2015 ONSC 1521, leave to appeal to Div. Ct. refused, 2015 ONSC 7346, Hercules Management Ltd. v. Ernst & Young,  2 S.C.R. 165, SFC Litigation Trust v. Chan, 2019 ONCA 525, George Fischer (Great Britain) Ltd v. Multi Construction Ltd. (1994),  B.C.C. 310 (C.A.), Robak Industries Ltd. v. Gardner, 2007 BCCA 61, BCE Inc. v. 1976 Debentureholders, 2008 SCC 69, Chevron Corp. v. Yaiguaje, 2015 SCC 42, Saramia Crescent General Partner Inc. v. Delco Wire and Cable Limited, 2018 ONCA 519, Hryniak v. Mauldin, 2014 SCC 7, Hersey v. Hersey, 2016 ONCA 494, Sattva Capital v. Creston Moly, 2014 SCC 53
The respondent, STT, was the named tenant who leased premises pursuant to a written lease.
STT operated a restaurant at the premises through her corporation, 1835068 Ontario Ltd. ("183"), of which she was the 100% shareholder.
The appellant landlord, Bloorston Farms Ltd. ("Bloorston") purchased the leased premises and inherited the existing lease. It measured the leased premises and determined that they were larger than as specified in the written lease. The allocation of property taxes to the leased premises was therefore increased from 26.77% to 43.59%. Bloorston demanded increased minimum and additional rent to reflect the actual size of the leased premises. STT paid the rent in accordance with past practice, but refused to pay the increased rent demanded. Bloorston took the position that STT was in default under the lease and changed the locks. 183 was therefore put out of business.
STT sued Bloorston for wrongful termination of the lease, claiming the return of her deposit and damages for breach of the lease. 183 was later added as plaintiff. Bloorston counterclaimed for lost rent and other losses.
On a motion for summary judgment by Bloorston, the motion judge determined that there was nothing in the lease that permitted Bloorston to adjust the minimum rent payable based on a recalculation of the square footage of the leased premises. Bloorston's demand for minimum rent was therefore improper. Regarding additional rent, the motion judge found that while the lease permitted the landlord to re-estimate additional rent "acting reasonably", Bloorston had not acted reasonably, and the lease did not permit the landlord to change the method of allocation of property taxes from that used by its predecessor. He found that the demand for additional rent was also unjustified. Finally, the motion judge determined that there had been no breach of the lease by assigning it to 183 or letting 183 use the premises. He found that there had been no assignment, and that the prior landlord and Bloorston had known about 183's involvement and had not objected.
The motion judge therefore found that the lease had been wrongfully terminated by Bloorston. He determined that STT was entitled to damages for the diminution in value of her shares in 183. He awarded damages for the diminution in value of the shares in the amount of about $140,000, plus the return of a $5,000 deposit. The motion judge refused to deduct from the damage award an advance to 183 in the amount of $137,000 made by STT's sister, finding that it was not a loan, and therefore that this amount represented part of the capital of 183.
- Whether the Rule in Foss v Harbottle should have been applied to deny STT's claim against Bloorston for the diminution in value of her shares.
- Whether the motion judge erred in failing to deduct the sister's advance from the damage award.
- Whether the motion judge erred in finding that Bloorston breached the lease and was not entitled to succeed on its counterclaim.
1. No. The wrong in this case was not done to the corporation, but to the shareholder personally. Only STT was a tenant under the lease and only she had a cause of action for its wrongful termination. In these circumstances, neither the rule in Foss v. Harbottle nor its rationale applied. The motion judge therefore did not err in allowing Sang's claim for diminution in share value. Nor did the motion judge err in the quantification of that diminution or in finding that Bloorston had breached the lease.
The Court discussed rule in Foss v. Harbottle, which is part of the law of Ontario, and related case law in detail. The rule stipulates the following: a shareholder of a corporation—even a controlling or sole shareholder—does not have a personal cause of action for a wrong done to the corporation. There are two reasons for the rule. First, the corporation is a separate legal entity. The corporation, and not its shareholders, is liable for the corporation's acts and defaults, and the corporation, not its shareholders, acquires causes of action when wrongs are committed against it. Second, the rule avoids a multiplicity of actions; without the rule, a shareholder would always be able to sue on the basis that a wrong done to the corporation, which caused harm to the corporation, indirectly harmed the shareholder:
While the rule in Foss v. Harbottle prevents a shareholder from suing for any type of damage resulting from a wrong done to the corporation, it is frequently invoked when a shareholder attempts to recover for the diminution in value of his or her shares. Such claims offend the rule because a wrong done to the corporation that results in diminished share value does not ground a personal cause of action for the shareholder. The party with the cause of action for the wrong is the corporation. The loss in share value is simply reflective of the loss incurred by the corporation as a result of the wrong done to it, and would be remedied if the corporation took action to recover its loss from the wrongdoer.
But the rule has a limit. It only provides that shareholders cannot raise individual claims in respect of a wrong done to the corporation. The rule in Foss v. Harbottle does not preclude an individual shareholder from pursuing a claim for harm done directly to her, assuming the shareholder can make out all the elements of her own cause of action.
The limited reach of the rule in Foss v. Harbottle is important in two different circumstances. The first is where both the corporation and shareholder have the same or overlapping causes of action. The second is where only the shareholder has a cause of action. This case involved the second circumstance. Only STT, as the tenant, had a cause of action for wrongful termination of the lease. 183 had no cause of action against the landlord.
The Court cited with approval the House of Lords decision in Johnson v. Gore Wood & Co. (No. 1) (2000),  B.C.C. 820 (U.K.H.L), which sets out the three circumstances in which a shareholder can sue for diminution in value of his or her shares. The Court rejected Bloorston's argument that Johnson had been rejected by Canadian courts. The three propositions set out in Johnson for when a claim to diminution in value of shares can be made are as follows:
- Where a company suffers loss caused by a breach of duty owed to it, only the company may sue in respect of that loss. No action lies at the suit of a shareholder suing in that capacity and no other to make good a diminution in the value of the shareholder's shareholding where that merely reflects the loss suffered by the company. A claim will not lie by a shareholder to make good a loss which would be made good if the company's assets were replenished through action against the party responsible for the loss, even if the company, acting through its constitutional organs, has declined or failed to make good that loss.
- Where a company suffers loss but has no cause of action to sue to recover that loss, the shareholder in the company may sue in respect of it (if the shareholder has a cause of action to do so), even though the loss is a diminution in the value of the shareholding.
- Where a company suffers loss caused by a breach of duty to it, and a shareholder suffers a loss separate and distinct from that suffered by the company caused by breach of a duty independently owed to the shareholder, each may sue to recover the loss caused to it by breach of the duty owed to it but neither may recover loss caused to the other by breach of the duty owed to that other.
The damages for diminution in value of STT's shares awarded by the motion judge were reasonably foreseeable in this case, and the judge's failure to explicitly make a finding using the words "reasonably foreseeable" did not constitute reversible error on the basis of insufficiency of reasons. Damages for breach of a lease are reasonably foreseeable if:
(i) in the 'usual course of things', they arise fairly, reasonably, and naturally as a result of the breach of contract; or
(ii) they were within the reasonable contemplation of the parties at the time of contract.
The lease in this case specified that the premises were for use as a restaurant. The original tenant under the lease was STT's sister, who, like STT, also operated a restaurant on the premises through a corporation. Additionally, the motion judge found that Bloorston and its predecessor were aware of and did not object to 183's occupation of the premises. Bloorston's demands for additional payments show that it was aware of the operation of a restaurant on the premises. That a restaurant operating on leased premises would cease to operate if the lease were wrongly terminated was reasonably foreseeable. If the tenant benefitted from the continuation of the lease and the operation of the restaurant, loss from the inability to continue in operation would arise "in the usual course of things" from a breach of the lease. Bloorston would not be able to complain if STT claimed losses for the discontinuance of the restaurant business if she had operated it herself as a sole proprietorship. That her interest was as a shareholder does not take the loss out of the type that would have been in the reasonable contemplation of the parties at the time of contracting.
2. No. The motions judge's factual findings were entitled to deference and had support in the evidence. The motion judge was not required to refer to all of the evidence in expressing his conclusion.
3. No. The motion judge's interpretation of the lease involved findings of mixed fact and law, and therefore attracted the deferential standard of review. There was no palpable and overriding error that justified appellate interference.
[Doherty, MacPherson and Benotto JJ.A.]
David G. Boghosian and Mai T. Nguyen, for the appellants (C67140) and respondents (C67159)
Christopher D. Salazar, for the respondent (C67140) and appellant (C67159)
Keywords: Real Property, Condominiums, Municipal Law, Draft Plan Approval, Exemption Applications, Condominium Act, 1998, S.O. 1998, c. 19, ss. 9(6) and (7), Planning Act, R.S.O. 1990, c. P. 13, Municipal Act, 2001, S.O. 2001, c. 25, ss. 8(1) and 10(2), Building Code , O. Reg. 350/06
Balmoral Developments Hilda Inc. ('Balmoral') built stacked townhouses consisting of 24 rental units in two buildings in the City of Orillia ('City'). Originally, the development was to be for affordable senior housing. However, when the funding for that project was no longer available, Balmoral modified the project to develop residential housing for students and other tenants.
The City advised Balmoral that the project was subject to the barrier-free accessibility requirements under the Building Code. Balmoral did not appeal this decision. Balmoral complied with the City's requirements with respect to the internal construction of two units in the development. Balmoral did not comply with the City's requirements respecting exterior ramps, guards and handrails.
When construction was complete in 2011, Balmoral sought a ruling from the Superior Court of Justice that the development was not a boarding, lodging or rooming house pursuant to the City's zoning by-law, thereby enabling it to rent each unit to up to seven students attending a local community college or university. A Superior Court justice ruled in Balmoral's favour in 2012. That decision was overturned by the Court on appeal, which concluded that occupancy by more than four persons per unit would constitute a boarding, lodging or rooming house.
Balmoral submitted an application to the City for a condominium exemption pursuant to ss. 9(6) and (7) of the Condominium Act, 1998. The permissible effect of invoking this process was to bypass the requirements for notice and draft approval set out in the Planning Act. Two years later, the City passed a by-law granting Balmoral's exemption application subject to one condition: "Each unit or any group of units shall not be occupied and used as a 'boarding, lodging or rooming house..."
Balmoral commenced an action against the City; it made two claims: (1) the City lacked the power to include a condition when granting the exemption application; and (2) the City unlawfully imposed barrier-free requirements on its development project.
On a motion for summary judgment, the motion judge found in favour of Balmoral on the first issue, but in favour of the City on the second issue. Both the City and Balmoral appealed.
- Did the application judge err in determining that the City did not have the authority to impose a condition on its approval of Balmoral's exemption application under ss. 9(6) and (7) of the Condominium Act, 1998?
- Did the application judge err in determining that Balmoral's complaint that the City had imposed barrier-free requirements on its development was moot?
City's appeal allowed. Balmoral's appeal dismissed.
1. Yes. There is nothing in ss. 9(6) and (7) of the Condominium Act, 1998 that prohibits the imposition of conditions as part of an exemption order. These provisions simply establish an alternate route for a property owner to seek approval of its development project. In many cases, this is probably a desirable route for property owners because it has the potential to be simpler, faster and less expensive. There is nothing in the actual words of ss. 9(6) and (7), to suggest that the property owner is entitled to a straight-up 'Yes' or 'No' answer to its exemption application. The broad wording of s. 9(7) gives the approval authority the opportunity to balance the interests and submissions of the municipality and the land owner and achieve a disposition that is more nuanced, and potentially fairer, than a simple 'Yes' or 'No' result.
Moreover, ss. 8(1) and 10(2) of the Municipal Act, 2001 permits municipalities to pass by-laws respecting the health, safety and well-being of persons. The City by-law in question was for such a purpose. The purpose of the condition attached to the exemption application was to notify all future unit owners and occupants that use of the units as boarding, lodging or rooming houses was not permitted due to health and safety hazards.
2. No. In light of Balmoral's conduct, namely compliance with the City's requirements with respect to the internal construction of the two units and failure to appeal the City's decision, it was too late in the day for Balmoral to challenge the lawfulness of the accessibility component of the City's by-law.
[Trotter, Zarnett and Jamal JJ.A.]
Randy Sutton, Kate Findlay and Justine Smith, for the appellant
Michael F. Smith and James Yap, for the respondent
Keywords: Torts, Negligence, Product Liability, Civil Procedure, Limitation Periods, Suspension, Capacity, Summary Judgment, Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, ss. 4, s. 7(1)(a), 7(2), Courts of Justice Act, R.S.O. 1990, c. C.43, s. 134(1), Rules of Civil Procedure, Rule 20.04(2), Huang v. Braga, 2016 ONSC 6306, appeal quashed, 2017 ONCA 268, leave to appeal refused, 2017 ONSC 3826, and Hengeveld v. Ontario (Transportation) , 2017 ONSC 6300, Deck International Inc. v. The Manufacturers Life Assurance Company, 2012 ONCA 309, Winter v. Sherman Estate, 2018 ONCA 379, A.C. v. Joyce, 2016 ONSC 2164, rev'd on other grounds, Cook v. Joyce, 2017 ONCA 49, Moore v. Apollo Health & Beauty Care, 2017 ONCA 383, Benhaim v. St‐Germain, 2016 SCC 48, Waxman v. Waxman (2004) , 186 O.A.C. 201 (C.A.), leave to appeal refused,  S.C.C.A. No. 291, Pucci v. The Wawanesa Mutual Insurance Company, 2020 ONCA 265, Hryniak v. Mauldin, 2014 SCC 7, Bryars Estate v. Toronto General Hospital (1997), 152 D.L.R. (4th) 243 (Ont. C.A.), Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), 28 O.R. (3d) 423 (Gen. Div.), aff'd  O.J. No. 3754 (Ont. C.A.); 2212886 Ontario Inc. v. Obsidian Group Inc. , 2018 ONCA 670, leave to appeal refused,  S.C.C.A. No. 391, Dawson v. Rexcraft Storage & Warehouse Inc. (1998), 164 D.L.R. (4th) 257 (Ont. C.A.), Tim Ludwig Professional Corporation v. BDO Canada LLP, 2017 ONCA 292, Broadgrain Commodities Inc. v. Continental Casualty Company (CNA Canada), 2018 ONCA 438
This was a tragic case. On July 31, 2004, the respondent, DC, strangled to death his 11-year-old son. At the time, DC was suffering from mental illness and psychotic delusions. He was also taking the antidepressant drug, Paxil, manufactured by the appellant, GlaxoSmithKline Inc. ("GSK").
DC was charged with murder but was found to be not criminally responsible on account of mental disorder ("NCRMD"), and thus came under the jurisdiction of the Ontario Review Board ("Board"). He received in-patient treatment at a psychiatric hospital and in late 2007 started living in the community. He was granted an absolute discharge on December 2, 2009.
In early 2004, DC began to wean himself off Paxil, and in March 2004, he stopped taking it. At that time, he did some internet research and read articles suggesting that potential side-effects of Paxil included violence and the desire to commit suicide or kill someone. He also read about a U.S. lawsuit against GSK's predecessor company alleging that someone had killed himself and three others while taking Paxil.
In May 2004, GSK issued a warning to the medical community that some Paxil users reported "severe agitation-type adverse events coupled with self-harm or harm to others." GSK recommended "rigorous clinical monitoring" of patients for "agitation-type emotional and behavioural changes". In June 2004, Health Canada issued an advisory to Canadians stating that it had introduced stronger warnings on newer antidepressants, including Paxil. It warned that patients "may experience behavioural changes and/or emotional changes that may put them at increased risk of self-harm or harm to others."
Between July 31, 2004, when DC killed his son, and December 2, 2009, when he received an absolute discharge, DC worked with and instructed several lawyers, including his criminal defence counsel, his counsel before the Board, and his divorce lawyer. He also travelled to Texas to meet with a U.S. lawyer with whom he discussed the possibility of suing GSK. DC published a website and a booklet describing how he believed Paxil had caused his psychosis, gave media interviews to newspapers and a national television program, and approached GSK about sponsoring or buying his website.
On October 5, 2011, DC sued GSK for damages. The action was commenced more than seven years after DC killed his son and nearly two years after he received an absolute discharge.
GSK moved for summary judgment to dismiss the action as statute-barred. The motion judge dismissed the motion, holding that that the two-year limitation period under s. 4 did not begin to run until DC received an absolute discharge on December 2, 2009. In his view, DC had proved that he was "incapable of commencing a proceeding in respect of the claim" because of his "psychological condition" under s. 7(1)(a) of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B ("Act"), and had thus rebutted the presumption of capacity under s. 7(2). GSK appealed.
- Did the motion judge err in law by applying the wrong legal test under s. 7(1)(a) of the Act?
- Did the motion judge err in law by reversing the onus of proving incapacity?
- Did the motion judge misapprehend the evidence regarding capacity and did this misapprehension lead to a palpable and overriding error in applying ss. 7(1)(a) and 7(2) of the Act to the evidence?
1. No. After a detailed review of the purpose of limitation periods, applicable principles of statutory interpretation, and the case law regarding the determination of capacity, the Court concluded that capacity under ss. 7(1)(a) of the Act is to be assessed in accordance with the indicators of capacity set out in Huang v. Braga, 2016 ONSC 6306, appeal quashed, 2017 ONCA 268, leave to appeal refused, 2017 ONSC 3826, and Hengeveld v. Ontario (Transportation), 2017 ONSC 6300 (the "Huan/Hengeveld indicators of capacity"), which are as follows:
- A person's ability to know or understand the minimum choices or decisions required to make them;
- An appreciation of the consequences and effects of his or her choices or decisions;
- An appreciation of the nature of the proceeding;
- A person's ability to choose and keep counsel;
- A person's ability to represent himself or herself;
- A person's ability to distinguish between relevant and irrelevant issues; and
- A person's mistaken beliefs regarding the law or court procedures.
The factors listed in Huang/Hengeveld, while not exhaustive, provide helpful indicators of capacity under s. 7(1)(a). They provide concrete and objectively verifiable indicators of a potential litigant's capacity to commence an action: if absent, this tends to support a finding that the person was incapable of commencing a proceeding in respect of the claim; if present, this tends to weigh against a finding that the person was incapable of commencing a proceeding in respect of the claim. These factors are neither necessary nor sufficient in themselves to establish incapacity; they are indicia that guide a holistic weighing of all the evidence on capacity in the context of the case. Depending on the circumstances, it may also be relevant for a court to consider other factors.
The person's incapacity must also be "because of his or her physical, mental or psychological condition". None of these terms is defined in the Act. A "physical condition" is a condition arising in or relating to a person's body. A "mental condition" is a condition affecting or arising in a person's mind, and includes mental disability, mental incompetency, or mental illness. And a "psychological condition" is a condition relating to the mental or emotional state of a person. The physical, mental, or psychological condition must be the cause for the incapacity relied on under s. 7(1)(a). The incapacity cannot arise from other sources, such as lack of sophistication, education, or cultural differences.
Section 7(1) suspends the running of the limitation period in s. 4 only "during any time" in which the person is incapable, and thus begins to run again once the incapacity ceases.
A potential litigant will usually require persuasive medical or psychological evidence to prove that they lacked the capacity to commence the proceeding in respect of the claim.
Other evidence may also be relevant, such as:
- Evidence from persons who know the plaintiff well, the appearance and demeanour of the plaintiff, testimony of the plaintiff, or the opinion of the plaintiff's own counsel;
- The plaintiff's ability to commence other civil proceedings; and
- Other indicators of capacity, such as the potential litigant's ability to travel, instruct counsel, swear affidavits, and make decisions affecting legal rights, if they bear on the capacity to commence a proceeding in respect of the claim.
Finally, just because a person can function on a day-to-day basis and make the decisions required in daily life does not necessarily mean they have the capacity to start an action in respect of a claim. On the other hand, just because a person has a mental illness does not necessarily mean that they are incapable of instructing a lawyer or commencing a proceeding.
While the motion judge's reference in his reasons to DC's "psychological strength" was potentially confusing and unhelpful, and such term should be avoided, the Court was not satisfied that this comment revealed that the motion judge had applied the wrong test of capacity under ss 7(1)(a) of the Act.
2. No. In citing A.C. v. Joyce, 2016 ONSC 2164, rev'd on other grounds, Cook v. Joyce, 2017 ONCA 49, the motion judge did not reverse the onus for proof of incapacity. The motion judge cited A.C. v. Joyce for the proposition that a plaintiff's discovery of a cause of action and their legal capacity to sue "should not be conflated", and for the proposition that "the capacity to start an action stands apart from the capacity to deal with other stressful circumstances that can be part of our daily lives". The law recognizes that capacity is not an all-or-nothing affair. A person may have the capacity to deal with many complex matters, yet still lack the capacity to commence a particular action or indeed any action.
3. Yes. The motion judge erred in concluding that DC "would not have been able to understand the minimum choices or the decisions he would have been required to make, to appreciate the consequences of those choices, to fully understand the nature of the proceedings, to choose and keep counsel and to represent himself or distinguish between relevant and irrelevant issues." The medical evidence proffered by DC did not support the motion judge's finding. This misapprehension of the evidence was obvious and went to the very core of the outcome of the case. Accordingly, it constituted a palpable and overriding error.
While appellate courts have the power of fact-finding, they are cautious about exercising them. Appellate courts will not make findings of fact if this requires the court to assess credibility or if the evidentiary basis needed to draw the necessary inferences is inadequately developed in the record at first instance. However, in keeping with Hryniak v. Mauldin, 2014 SCC 7, when an appellate court can find no genuine issue requiring a trial and can reach a fair and just determination of the merits of a motion for summary judgment through an appropriate exercise of its fact-finding powers under s. 134 of the Courts of Justice Act, it should do so.
The Court concluded that, in this case, it was appropriate for it to exercise its fact-finding powers for the following reasons:
- The appeal did not raise questions of credibility, but rather depended crucially on the court's appreciation of the expert evidence.
- The record was complete for the purpose of deciding whether to grant summary judgment. The record included affidavits, transcripts of cross-examinations and examinations for discovery, medical reports, and other information that was before the Board.
- The parties did not materially dispute the facts. They disputed the legal significance of the facts, arising from a documentary record. The Court was therefore as well placed as the motion judge to decide the issues.
- Neither party asked the Court to remand the matter to the Superior Court for redetermination if it set aside the motion judge's order.
- The tragic events of this case occurred almost 16 years ago and have now been before the courts for almost a decade. This gave particular poignancy to Hryniak's admonition that the "prompt judicial resolution of legal disputes allows individuals to get on with their lives".
The Court then reviewed the two-step process for determining whether a genuine issue requiring a trial exists under Rule 20.04(2) of the Rules of Civil Procedure, as set out in Hryniak.
The Court then reviewed the medical evidence in detail and, after applying the Huang/Hengeveld indicators of capacity, concluded that DC had not proved that he was incapable of commencing the action before December 2, 2009 because of his psychological condition.
The Court therefore granted summary judgment in favour of GSK and dismissed DC's action as statute-barred.
[Strathy C.J.O., Lauwers and van Rensburg JJ.A.]
R. Brendan Bissell, for the appellant, Terra Firma Capital Corporation
Megan Mackey and Thomas McRae, for the respondents, the Certain Curzon Purchasers
Chris Burr, for Alvarez & Marsel Canada Inc. in its capacity as both Receiver and Manager, and Construction Lien Trustee of the Assets, Undertakings and Properties of Urbancorp (Leslieville) Developments Inc., Urbancorp (Riverdale) Developments Inc., and Urbancorp (The Beach) Developments Inc.
Keywords: Contracts, Interpretation, Real Property, Condominiums, Agreements of Purchase and Sale of Land, Definition of "Levy", Tarion, Land Planning, Park Dedication, Civil Procedure, Standard of Review, Planning Act, R.S.O. 1990, c. P.13, s. 42, Ventas, Inc. v. Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, MacDonald v. Chicago Title Insurance Co. of Canada, 2015 ONCA 842, leave to appeal refused,  S.C.C.A. No. 39
After this Urbancorp residential development project went into receivership, the Receiver renegotiated the agreements of purchase and sale with purchasers of units for a much higher price than was originally the case ($255,000 more per unit). The new APS' included the standard-form Tarion Addendum (the Tarion Warranty Corporation Statement of Critical Dates and Addendum to Agreement of Purchase and Sale), which provided, in part, as follows:
The Purchaser shall be responsible for the amount of any parks levy or any charges pursuant to a Section 37 Agreement (pursuant to the Planning Act), levied, charged or otherwise imposed with respect to the Condominium, the Property or the Unit by any governmental authority, which is equivalent to the common interest allocation attributable to the Unit as set out in Schedule "D" to the Declaration. [Emphasis added.]
On the evidence, it was clear by the time the APS' were being approved, that the City was likely going to require a conveyance of parkland in order to comply with section 42 of the Planning Act. That section provides a municipality in which land is to be developed with the power to require the developer to convey land to it for parkland purposes, or instead to require the payment of cash in lieu of land. As expected, the City required a transfer of 700.09 sq. meters to it for parkland purposes, not a cash payment-in lieu of the conveyance.
On closing, the Receiver demanded that the purchasers pay between an additional $13,000 and $18,800 to close, representing the value of the parkland dedicated to the city apportioned to each unit. The purchasers paid these additional charges, but then applied to the court for a determination of whether those amounts were properly chargeable.
The motion judge, Chief Justice Morawetz, found for the purchasers and ordered the Receiver to reimburse the purchasers. The ranking creditor, Terra Firma Capital Corporation, appealed.
Did the Chief Justice err in interpreting the APS' in favour of the purchasers?
No. The Court agreed with the Chief Justice's interpretation of the clause in question. The plain and ordinary meaning of the clause only permitted an additional charge by way of a "park levy" if the City had requested from the Receiver a payment in lieu of a conveyance of land. In coming to this conclusion, the Chief Justice noted that the clause in question replicated the Tarion Addendum, and therefore had to be given the same consumer protective interpretation.
Terra Firma argued that the Chief Justice's interpretation resulted in a commercial absurdity. It argued that if the Receiver had refused to convey the land and had instead made a payment in lieu of a conveyance, the Receiver would have been able to charge purchasers their proportionate share of that levy, and would have been able to keep the land and sell it for a profit. The Court did not agree that a commercial absurdity resulted. The hypothetical example put forward by Terra Firma was not consistent with the way land is developed in Toronto. The Receiver did not have a choice to refuse to convey the land to the City and to make a payment in lieu of a conveyance instead. Furthermore, the Chief Justice did not improperly apply the doctrine of contra proferentem.
The Court concluded by noting that the standard of review in this case was correctness because the clause in question is a standard form Tarion clause and therefore the interpretation of the clause had precedential value. The Chief Justice's interpretation of the clause was correct.
[Rouleau, Hoy and Hourigan JJ.A.]
William Sammon, Kellie Stewart and Amanda Estabrooks, for the appellant
Elizabeth Richards, Mathew Johnson and Jennifer Bond, for the respondents
Keywords: Torts, Negligence, Negligent Misrepresentation, Defamation, Malice, Contracts, Tendering, Duty of Good Faith, Civil Procedure, Procedural and Natural Justice, Sufficiency of Reasons, Walsh Energy Inc. v. Better Business Bureau of Ottawa-Hull Incorporated, 2018 ONCA 383, Bhasin v. Hrynew , 2014 SCC 71, Martel Building Ltd. v. Canada, 2000 SCC 60, R. v. R.E.M., 2008 SCC 51
The appellant was charged with bid-rigging and fraud with respect to bidding on government contracts. The allegations were the subject of an article in the Globe & Mail. The charges were later stayed at the Crown's request. The appellant sued the government and its contracts manager for negligence, negligent misrepresentation and defamation in respect of their interviews with the Competition Bureau that led to the bid-rigging charges. The trial judge dismissed all claims.
Did the trial judge err in dismissing the appellant's claims?
The Court briefly reviewed the appellant's grounds of appeal on the various causes of action and dismissed them summarily, agreeing with the trial judge's factual determinations and legal conclusions on all issues.
[Rouleau, Hoy and Hourigan JJ.A.]
Ron Aisenberg, for the appellant Seahold Investments Inc.
No submissions on behalf of the respondent WF
No submissions on behalf of the respondent AF
No submissions on behalf of the respondent McNally Gervan LLP
Keywords: Contracts, Assignments, Choses in Action, Equitable Assignments, Irrevocable Directions re Funds, Debtor-Creditor, Civil Procedure, Judgments, Enforcement, Garnishments, Interpleader, Priority, Rules of Civil Procedure, Rules 43, 60.08, Bank of Montreal v. Union Gas Co. of Canada Ltd. (1969), 7 D.L.R. (3d) 25 (C.A.), Thibodeau v. Thibodeau, 2011 ONCA 110, Nadeau v. Caparelli, 2016 ONCA 730, Bitz, Szemenyei, Ferguson & MacKenzie v. Cami Automotive Inc., 1997 CarswellOnt 2309 (Gen. Div.), Richter LLP v. Big Truck TV Productions Inc., 2015 ONCA 567
AF was injured in a slip and fall accident in 2009. AF and his common law partner, WF, brought a claim and were represented by McNally Gervan LLP in the lawsuit. WF's claim was for loss of care, guidance and companionship in the amount of $25,000 under s. 45 of the Family Law Act.
AF and WF's relationship broke down. In April 2013, they entered into an agreement to settle all financial matters arising from the termination of their relationship (the "Agreement"). Paragraph 4(b) of the Agreement required AF to pay WF $120,000 for extraordinary care provided to AF and income forfeited as a result of providing that care. Paragraph 5 of the Agreement provided that should AF make any successful insurance claims or obtain any settlement funds from any parties found liable for the personal injury which brought about the need for extraordinary care and complications to the spousal relationship, any amount claimed therein for the re-imbursement of WF will be deducted from the monies referred to in 4(b). Paragraph 6 provided that monies payable under the Agreement became due and payable, without interest, on the later of September 1, 2015 or the day on which all claims made by AF for compensation for losses sustained by his personal injury are resolved or settled.
Between May 2013 and June 2014, the appellant, Seahold Investments Inc., provided litigation funding to AF for his slip and fall claim. As part of the litigation funding agreement, AF provided Irrevocable Directions re Funds requiring his lawyers to pay all sums owing to the appellant "immediately upon receipt by him/her or his/her law firm of all or any portion of the Settlement Funds and to make the aforesaid payment in priority to any other payment out of the Settlement Funds, saving and excepting any payment to my solicitor or his/her law firm."
In August 2017, the action settled for $150,000, all-inclusive. AF directed his lawyers to pay $12,000 out of the settlement proceeds to WF. In September 2017, AF consented to judgment against him in favour of WF for $185,000. WF then served the lawyers with a notice of garnishment.
On an interpleader motion by the lawyers, the motion judge found that the Agreement between AF and WF was executed first, and therefore WF had priority to the funds over the appellant.
Did the motion judge err in ordering the settlement proceeds to be paid to WF rather than the appellant?
Yes. The motion judge did not make an express finding that the Agreement and the Irrevocable Directions constituted equitable assignments of the settlement funds. However, it was implicit from the manner in which she resolved the priority issue that she considered both to be equitable assignments.
The motion judge erred by failing to consider what is required to make an equitable assignment. Having regard to what is required, only the Irrevocable Directions were equitable assignments. The Agreement was not an equitable assignment.
An equitable assignment is "an agreement between a debtor and a creditor that the debt owing shall be paid out of a specific fund coming to the debtor, or an order given by the debtor to his creditor upon a person owing money or holding funds belonging to the giver of the order, directing such person to pay such funds to the creditor". This "will create a valid equitable charge upon such fund, in other words, will operate as an equitable assignment of the debts or fund to which the order refers."
Equity does not require a particular form to effect a valid assignment. Whatever form is used must clearly show an intention that the assignee is to have the benefit of the debt or chose in action assigned.
In this case, only the Irrevocable Directions evidenced a clear intention to assign the proceeds of the settlement to the appellant. Directions by an assignor to a person holding funds of the assignor to pay the funds over to a third party has been recognized as an instance of a good equitable assignment.
The garnishment notice served on the law firm did not help WF because after paying out to the appellant pursuant to the Irrevocable Directions, there was no amount owing to AF that could be argued was a garnishable debt.
[Rouleau, van Rensburg and Roberts JJ.A.]
Gary S. Joseph and Stephen Kirby, for the appellant
Toni E. Wharton, for the respondent
Keywords: Family Law, Custody, Child Support, Income, Equalization of Net Family Property, Civil Procedure, Costs, Procedural and Natural Justice, Communications with the Court, Interim Orders, Sufficiency of Reasons, Evidence, Rule in Browne v Dunn, Courts of Justice Act, R.S.O. 1990, c. C.43, s. 133(b), Federal Child Support Guidelines, S.O.R./97-175, ss. 16 & 17, Rules of Civil Procedure, Rule 1.09, R. v. Teskey, 2007 SCC 25, Rule in Browne v. Dunn (1893), 6 R. 67 (H.L.), Nemchin v. Green, 2019 ONCA 634, R. v. Quansah, 2015 ONCA 237, leave to appeal refused,  S.C.C.A. No. 203, R. v. A.M., 2014 ONCA 769, Fraser v. Fraser, 2013 ONCA 715, Family Law Rules, Rules 18 and 24, Hobbs v. Hobbs, 2008 ONCA 598, Mattina v. Mattina, 2018 ONCA 867
After a 12-day trial in a high conflict contest over the custody of the parties' daughter, the trial judge granted sole custody of the child to the respondent husband, with a 50% shared parenting schedule. The decision was based on credibility findings made by the trial judge in favour of the husband and against the appellant wife, who was found to have fabricated allegations of domestic violence, and was, in fact, the one who exhibited violence against her husband.
With respect to the parties' financial and property issues, the trial judge found that the appellant was not entitled to spousal support, either on a compensatory or a needs basis. She ordered the appellant to pay the respondent $74,812.83 as equalization of net family property, $28,392.12 as reimbursement for expenses paid on her behalf by the respondent, and child support plus a proportionate contribution for other expenses for their daughter. The trial judge ordered that the net proceeds of sale of the parties' matrimonial home would be divided equally between the parties, subject to certain credits for payments owing between the parties, including occupation rent that the trial judge ordered that the appellant pay to the respondent until the closing of the sale of the matrimonial home. The trial judge also ordered the appellant to pay the respondent costs in the amount of almost $250,000 on a full recovery basis.
- Did the trial judge err in granting the respondent sole custody and ordering 50% shared parenting time?
- Did the trial judge err in calculating the appellant's income for child support purposes or in the post-separation adjustments made?
- Did the trial judge err in her disposition of costs?
1. No. There was no denial of natural justice as a result of post-trial communications with the trial judge. Communication with the trial judge by email was initiated on consent. The appellant's trial counsel was copied on the correspondence, did not object to this communication, and had an opportunity to be heard.
There was no error in the trial judge issuing a temporary custody order following trial that was incorporated into the final order. As the appellant acknowledged, it was within the trial judge's discretion to issue an order and subsequently provide reasons.
The Court went through the trial judge's credibility findings in detail and concluded that the trial judge did not err in her credibility analysis, and was entitled to draw adverse inferences against the appellant. The trial judge was under no obligation to reference every alleged inconsistency in the evidence or respond to every argument put before her.
The trial judge did not misapply the Rule in Browne v Dunn. The appellant's counsel failed to cross-examine the respondent on a key conversation. The appellant then testified on that conversation that directly contradicted the respondent's evidence. The respondent's counsel promptly objected on the basis of the Rule in Browne v Dunn. Following argument on the point, the trial judge concluded that it was not suitable to recall the respondent, and permitted the appellant to testify on the point. However, she ultimately concluded that the failure to cross-examine the respondent about the conversation called into question the reliability of the appellant's evidence.
The Rule in Browne v Dunn is not an inflexible rule but rather a matter within the trial judge's discretion. Its application was therefore subject to significant deference on appeal. The Court saw no error in the exercise of the judge's discretion in applying the Rule in this case.
Finally, the trial judge did not fail to focus her decision on the best interests of the child. On the contrary, the trial judge's focus was entirely on the best interests of the child. The trial judge recognized the importance of the daughter having the benefit of both parents in her life. She also acknowledged that notwithstanding the appellant's efforts to exclude the respondent from their daughter's life, the appellant was otherwise a good and loving mother. The trial judge contrasted the appellant's refusal to engage in joint decision-making or even to consult with the respondent about their daughter, with the respondent's conduct that respected the importance of the appellant's role in their daughter's life. The trial judge found that it was the appellant's inability to put the child's interests above her own and to permit their daughter to foster a relationship with both parents that warranted an award for sole custody to the respondent. Moreover, the trial judge concluded that the appellant's unwillingness and inability to communicate with the respondent precluded an order for joint custody. Nevertheless, the trial judge's custody order that requires their daughter to reside equally with her parents fairly reflects the equal importance of both parents in their daughter's life.
2. No. The trial judge did not err in including RRSP withdrawals as part of the appellant's income. The starting point is a party's total income as indicated on the party's T1 income tax form, which may include RRSP income. The appellant included RRSP withdrawals in the respondent's income to calculate his income for child support purposes, so it was only fair to treat the appellant's RRSP withdrawals the same way. Moreover, the order provided for annual adjustments to child support based on the prior year's income.
There was no error for the post-separation adjustments made by the trial judge.
3. No. The appellant required leave to appeal the costs award made against her. In order to be granted leave to appeal, the appellant had to show strong grounds on which the Court could find the trial judge erred in exercising her discretion to award costs. The appellant failed to meet this threshold.
Modern family cost rules are designed to foster three fundamental purposes: (1) to partially indemnify successful litigants; (2) to encourage settlement; and (3) to discourage and sanction inappropriate behaviour by litigants.
The trial judge's reasons reflected these principles. She made her costs order on the basis that the respondent exceeded his offer to settle and that the appellant took unreasonable and obstructive positions throughout the proceedings. She concluded that the appellant had engaged in bad faith conduct that was "designed to inflict emotional and financial harm to the respondent, was harmful to the daughter, and was taken to deceive both the respondent and the Court." She determined that the respondent's substantial legal fees could have been avoided but for the unreasonable positions and bad faith conduct of the appellant. The trial judge's findings were amply supported by the record.
While the amount awarded by the trial judge was large, when considered in the context of these proceedings, it was reasonable, proportionate and fair. These costs were incurred over three years of litigation made acrimonious and costly by the appellant's actions, which culminated in a 12-day trial. The trial judge found that the appellant had engaged in deceitful and obstructive conduct and was not a credible or reliable witness. The respondent was credible and reliable as a witness, did not overreach in his positions at trial, and supported the appellant as a good parent. His positions were reasonable and prevailed.
[Feldman, Fairburn and Nordheimer JJ.A.]
William C. McDowell and Brian Kolenda, for the appellant
Linda M. Plumpton and Jonathan Silver, for the respondent
Keywords: Contracts, Real Property, Commercial Leases, Assignment, Refusal to Consent, Implied Terms, Duty of Good Faith Bargaining, Duty of Honest Performance of Contracts, Civil Procedure, Conflict of Laws, Forum Selection Clauses, Choice of Law Clauses, Applications, Orders, New Issues on Appeal, Commercial Tenancies Act , R.S.O. 1990, c. L.7, s. 23(2), Courts of Justice Act, R.S.O. 1990, c. C.43, s. 138, Rules of Civil Procedure, Rules 14.05(3)(d), 38.10(1), Sobeski v. Mamo, 2012 ONCA 560, Uber Technologies Inc. v. Heller, 2020 SCC 16, Z.I. Pompey Industrie v. ECU-Line N.V. , 2003 SCC 27, The "Eleftheria" ,  1 Lloyd's Rep. 237 (Adm. Div.), Expedition Helicopters Inc. v. Honeywell Inc. , 2010 ONCA 351, leave to appeal refused,  S.C.C.A. No. 258, Bhasin v. Hrynew, 2014 SCC 71, Kaiman v. Graham, 2009 ONCA 77, R. v. Sweeney (2000), 50 O.R. (3d) 321 (C.A.)
Quickie Convenience appealed from the dismissal of its application for declaratory relief arising out of a proposed commercial transaction. The proposed commercial transaction involved several contracts, including leases and credit/debit card agreements, all relating to fuel stations in Ontario and Quebec. The appellant had put 15 fuel stations up for sale. Completion of the sale required that the appellant be able to assign these contracts. The respondent, Parkland Fuel, refused to consent to the assignments. The respondent had made its waiver of its rights of first offer to purchase and consent to the assignments subject to appellant agreeing to a five-year extension of the leases and credit card agreements in question. The appellant declined to provide that extension. The appellant sought a declaration that the respondent had refused its consent unreasonably.
The application judge found that the respondent had unreasonably withheld consent to the assignments of the leases and credit card agreements. However, on the basis of choice of forum and law clauses in some of the contracts in question in favour of Quebec, he apparently dismissed the application in its entirety even though most of the contracts were subject to choice of forum and law clauses in favour of Ontario. When asked for clarification on whether he intended to dismiss the application in its entirety, the application judge refused to provide it because, by then, his judgment was already under appeal.
Did the application judge err in refusing to declare that the respondent had unreasonably withheld its consent to the assignment of the contracts in question?
Yes. The application judge erred both in his reasoning and in his conclusion.
Eleven of the 15 leases at issue were subject to Ontario law and were either in Ontario or in Quebec, but subject to a Toronto forum selection clause. Accordingly, given his finding that consent was unreasonably withheld, he should have granted the declaration sought for those eleven locations.
The fact that the appellant had sought a declaration for all fifteen locations did not mean that it was an all or nothing case. Rule 38.10(1) specifically provides that on an application, a judge can grant the relief sought, or dismiss or adjourn the application "in whole or in part".
Regarding the four locations in Quebec, two of them had no choice of law or forum clause. There was therefore, no impediment to the judge dealing with those two locations on the merits.
As for the other two locations in Quebec that had Quebec choice of law clauses and a Montreal forum selection clause, those clauses should not have prohibited the judge from granting relief in respect of those two locations.
The application judge erred in his analysis of these clauses in a number of respects. First, the application judge conflated the analysis of these two different clauses. The application judge took the test that relates to when a court will depart from a forum selection clause and used it in determining the impact of the choice of law clause.
Second, the application judge erred in finding that the appellant bore the onus of establishing whether Quebec law was the same as, or different from, Ontario law. That onus rested with the respondent, if it was going to allege that the foreign law was different from the local law. The respondent acknowledged that it bore that onus. However, the respondent did not lead any evidence that Quebec law differed from Ontario law with respect to the issues that were before the application judge. In the absence of such evidence, the application judge ought to have proceeded on the basis that the Quebec law was the same as Ontario law.
Third, the application judge failed to properly apply the "strong cause test" set out in Z.I. Pompey Industrie v. ECU-Line N.V., 2003 SCC 27 to determine whether he ought to give effect to the forum selection clause. In that decision, the Supreme Court of Canada confirmed that foreign selection clauses are generally to be enforced unless the party seeking to avoid the forum selection clause shows "strong cause" why the clause should not be enforced. In this particular case, the appellant satisfied the strong cause test for the following reasons:
- This was not a case of a single contract with a single forum selection clause. Here there were 15 contracts — 11 of them select Toronto as the forum, two select Montreal, and two have no selection.
- The contemplated transaction was for the sale of the 15 gas stations as a whole. Commercial reality strongly favours having any issues raised with respect to the transaction dealt with in a single forum. Requiring the parties to litigate the same issue twice, in two different courts, does not advance that commercial reality.
- There is a general principle that courts will strive to avoid a multiplicity of proceedings, as reflected in s. 138 of the Courts of Justice Act, R.S.O. 1990, c. C.43.
- There was no evidence that the law as between Quebec and Ontario was any different, nor was there any other evidence that would have established that the respondent would lose any juridical advantage by having to litigate the issue in Toronto, instead of Montreal. On that latter point, the parties in fact litigated the issues in Ottawa and no one raised any objection to that. Moreover, the parties were as connected to Ontario, if not more so, than they were to Quebec.
- There was no evidence that the respondent genuinely desired to have the issues surrounding these two gas stations determined in Quebec, as opposed to simply engaging in an effort to gain a procedural advantage.
In summary, the factual situation here presented the type of exceptional circumstances that justified a departure from the general principle that forum selection clauses will be enforced.
Regarding the assignment of the credit card agreements, they simply provided that they could not be assigned without consent. The Court agreed that there was an implied term in those contracts that the consent could not be withheld unreasonably. This was as a result of the duty of honest performance of contracts and organizing principle of good faith set out in Bhasin v. Hrynew , 2014 SCC 71. The fact that this decision was not argued or relied upon before the application judge did not preclude argument on the point on appeal. The principle that courts should generally decline to hear a new issue on appeal is not an absolute rule. It is a discretionary decision to be made based on the facts of the individual case. The issue of whether the respondent unreasonably withheld consent to an assignment of the credit card agreements was squarely before the application judge. The fact that the appellant invoked different authority now, than it did before the application judge, did not offend the principle.
While the application judge did not make a specific finding of unreasonableness in refusing to consent to the assignment of the credit card agreements, his unreasonableness finding in respect of the leases was equally applicable. The respondent's refusal to consent to the assignment of the credit card agreements was as unreasonable or improper as was its refusal to consent to the assignment of the leases. It was inconsistent with the duty of good faith that the respondent owed to the appellant. It was also inconsistent with giving appropriate regard to the legitimate contractual interests of the appellant, that is, the appellant's legitimate interest in wishing to sell these gas stations. The appellant was entitled to expect that the respondent would act fairly and honourably in deciding whether to consent to the assignment of these agreements as part of a sale of the appellant's businesses to a third party. On that point, there was no evidence that the prospective purchaser's performance of the leases and the credit card agreements would pose any financial or other risk to the respondent. There was no principled basis for the respondent's refusal to consent to the assignment of the credit card agreements.
[Brown, Huscroft and Trotter JJ.A.]
Davin Charney and Christopher Rapson, for the appellant
Kevin McGivney and Jonathan Thoburn, for the respondent
Winston Gee and Sarah Whitmore, for the intervenor Canadian Civil Liberties Association
Keywords: Civil Procedure, Substantial Indemnity Costs, Public Interest Litigation, Rules of Civil Procedure , Rules 49 & 57.01, Carter v. Canada (Attorney General), 2015 SCC 5, Barresi v. Jones Lang Lasalle Real Estate Services Inc., 2019 ONCA 884
On appeal, LS was awarded Charter damages in the amount of $500 as a result of a bag search conducted by the Toronto Police at Allan Gardens during a G20 protest in 2010. He was also awarded $20,000 in costs of the appeal. The parties could not agree on the costs that ought to be payable on the costs of the proceedings in the court below. LS sought almost $115,000 from the police. The police sought costs from LS in the amount of $25,000.
Should costs be awarded in favour of, or against LS for the proceedings in the court below, and on what scale?
Costs awarded to LS in the amount of $25,000.
The Court was not persuaded by LS' arguments that he was entitled to substantial indemnity costs against the police on the basis of any of the following arguments:
- his action was public interest litigation that warrants substantial indemnity costs;
- he achieved a result that was more favourable than the offer to settle that he made pursuant to Rule 49 of the Rules of Civil Procedure; and
- the proper application of the Rule 57.01 factors should result in an award of substantial indemnity costs.
Regarding the first argument, Carter v. Canada (Attorney General), 2015 SCC 5, requires a litigant to satisfy two criteria for an award of public interest litigation special costs, the first of which is to demonstrate that his proceeding involved matters of public interest that are "truly exceptional" and he had no personal, proprietary or pecuniary interest in the litigation that would justify the proceeding on economic grounds. LS did not satisfy this first criterion. He had an encounter with members of the police that he alleged resulted in the violation of several of his rights guaranteed under the Canadian Charter of Rights and Freedoms. LS brought a civil suit seeking a remedy for those violations. But, as the Supreme Court observed in Carter, almost all constitutional litigation concerns 'matters of public importance. While LS advanced important Charter claims, the Court did not regard the matters raised in his proceeding as "truly exceptional", within the meaning of Carter.
In addition, LS did not demonstrate that he had no personal, proprietary or pecuniary interest in the litigation that would justify the proceedings on economic grounds. On the contrary, the pleadings and history of this action show that LS had a personal and pecuniary interest in the litigation. He initiated the lawsuit in the Small Claims Court but then transferred it to the Superior Court of Justice. At trial, LS sought damages for the violation of his personal rights in the amount of $100,000 which, at the time, was the upper limit for a monetary claim in a simplified procedure action under the Rules. While LS reduced his request for damages during the appeal to $50,000, and then to $20,000, monetary damages as compensation for a wrong to his personal rights remained a key element of his claim. Accordingly, his action did not satisfy the Carter criteria for an award of substantial indemnity costs for public interest litigation.
Regarding the second argument, LS did not beat his Rule 49 offer.
Regarding the third argument, there was no conduct on the part of the police during the litigation that justified substantial indemnity costs.
The Court reviewed the offers to settle made by the police and the amount of costs claimed by the police and determined that the police beat one of the offers they made to KS. On a strict application of the costs consequences of Rule 49.10(2), LS should be ordered to pay the police $8,000 to $10,000.
However, the Court determined that in this case, that would be a harsh result, given that LS had successfully enforced his constitutional rights. The Court noted that a departure from the presumption should occur only where, after giving proper weight to the policy of the general rule (which is to encourage reasonable offers to settle), the importance of reasonable predictability and the even application of the rule, the interests of justice require a departure. The issues raised by LS' action will contribute to a better understanding of the interplay between Charter rights and permissible police crowd control techniques. In addition, LS had made a serious effort to settle for a modest amount and an admission of liability by the police. The Court therefore departed from the presumption of costs in Rule 49.10(2) and awarded costs of the proceedings below to LS in the amount of $25,000.
[Pepall, Hourigan and Roberts JJ.A.]
Oren Chaimovitch and Shawna Sosnovich, for the appellant
Andrew D. Ferguson, for the respondents
Keywords: Contracts, Privity, Banking, Debtor-Creditor, Torts, Negligence, Negligent Misrepresentation, Civil Procedure, Summary Judgment, Partial Summary Judgment, Counterclaims, Set-Off, Butera v. Chown, Cairns LLP, 2017 ONCA 783, Mason v. Perras Mongenais , 2018 ONCA 978
The appellant bank sued the corporate and personal respondents under a HELOC, Canada Small Business Financing Loan (CSBFL), line of credit, credit card loans and guarantees. The respondents defended and counterclaimed that the bank had breached its contract and been negligent. The primary allegations against the bank were that the bank over-valued the respondents' home (relying on the wrong address for the property) and therefore advanced too much to them under the HELOC. They also claimed the bank failed to advance the full amount of the CSBFL.
Both sides brought motions for summary judgment. The motion judge granted summary judgment to the bank on the loans outstanding, but also granted partial summary judgment to the respondents on one of their counterclaims (negligent breach of contract), but only on liability, ordering damages to go to trial (the parties had agreed to a bifurcation of liability from damages). In her order and reasons for decision, the motion judge treated all the respondents as one, and did not differentiate between which causes of action for breach of contract and negligence related to which respondent. Enforcement of the judgment in favour of the bank was stayed, subject to any set-off from the amounts awarded to the respondents on the counterclaims. The bank appealed and the respondents cross-appealed.
- Did the motion judge err in ruling that the amount owing to the bank on the HELOC had to await trial because there was a potential offset from the determination of damages for the bank's breach of contract?
- Did the motion judge err by failing to include her findings on breach of contract, negligence and negligent misrepresentation in her judgment, as properly reflected in her reasons?
Appeal allowed in part. Cross-appeal allowed in part.
1. No. The bank appeared to be suggesting that set-off was not available to one of the personal respondents against whom judgment on the HELOC was granted because the judgment of liability for negligent breach of contract against the bank in respect of the CSBFL was only in favour of the corporate respondent. The Court agreed that the judgment should be varied to reflect that the bank's contract in respect of the CSBFL was only breached with respect to the corporate respondent. However, the counterclaim having been referred to trial, the issue of any available set-off should be determined at that time.
2. Yes. The motions judge's reasons suffered from the same defect as her judgment. All of the respondents were treated as one. It appeared from her reasons that she found a negligent breach of contract, negligence and negligent misrepresentation. However, the reasons failed to analyze, with any particularity, the causes of action or how the pleadings supported her findings. Her formal judgment only referred to breach of contract, but said nothing about the respondents' remaining counterclaims of negligence and negligent misrepresentation.
This Court noted the pitfalls associated with partial summary judgment motions, as detailed in its prior decisions. In addition, the Court warned that bifurcation of proceedings sometimes results in an absence of precision in the disposition of the claims. Here, given the absence of particularized findings connecting the causes of action to the parties wronged and to the causes of action advanced in the pleadings, the Court was of the view that the subject matter of the counterclaim should be referred to trial along with the issues relating to the bank's defence to those counterclaims on the basis of the Rule in Foss v. Harbottle, and damages including any rights of set-off for either of the parties. In addition, the motion judge did not dispose of the bank's claims on the line of credit, credit card debt or the unlimited guarantees. Those claims were also referred to trial. However, liability under the HELOC and the bank's liability for negligent breach of contract of the CSBFL were not referred to trial, as they had already been determined by the motion judge.
Originally published 13 July, 2020
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