Canada: Top 5 Civil Appeals From The Court Of Appeal (September 2012)

Last Updated: October 3 2012
Article by Kirk F. Stevens

Taylor v. Canada (Attorney General), 2012 ONCA 479 (Doherty, Weiler, Laskin, Sharpe and Armstrong JJ.A.), July 6, 2012

On a special case brought directly to it under rule 22.03 of the Rules of Civil Procedure, the Court of Appeal again grappled with the knotty issue of when a government regulator owes a prima facie private law duty of care. The parties asked the court to address perceived inconsistencies arising from: Drady v. Canada (Minister of Health), 2008 ONCA 659, 300 D.L.R. (4th) 443, leave to appeal to S.C.C. refused, [2008] S.C.C.A. No. 492, Attis v. Canada (Minister of Health), 2008 ONCA 660, 93 O.R. (3d) 35, leave to appeal to S.C.C. refused, [2008] S.C.C.A. No. 491 and Sauer v. Canada (AG), 2007 ONCA 454, 225 O.A.C. 143, leave to appeal to S.C.C. refused, [2007] S.C.C.A. No. 454. The special case arose out of a motion to decertify a class action on the basis that it is plain and obvious that the statement of claim does not allege a reasonable cause of action. In the result, the court rejected Canada's position that this class action concerning temporomandibular (jaw) joint implants that were manufactured in the United States and sold in Canada is bound to fail.

The representative plaintiff, Taylor, alleged that Health Canada breached a private law duty of care in the exercise of its responsibilities under the Food and Drugs Act R.S.C. 1985, c. F-2to protect her and other class members from unsafe medical devices. The nub of the case is the allegation that Health Canada announced that it had issued a notice of compliance for the implants when, in fact, it had not done so.

In contrast to the claims against Health Canada in Drady and Attis, a five-judge panel, per Doherty J.A., held that it was not "plain and obvious" that the action could not succeed.

Doherty J.A. noted that where the courts have found a prima facie duty of care, the facts have demonstrated a connection between the plaintiff and the regulator that is distinct from and more direct than the relationship between the regulator and members of the public. Drady and Attis are consistent with this approach.  However, the court's treatment of proximity in Sauer, which amounted to a simple reference to the regulator's public statements, is not consistent with the jurisprudence, particularly in light of the Supreme Court's later judgment in R. v. Imperial Tobacco Canada Limited, 2011 SCC 42, [2011] 3 S.C.R. 45. Thus, to establish proximity, Taylor cannot simply rely on public assurances by Health Canada that it was performing its statutory duties.  

What distinguishes this case from Drady and Attis are the allegations that Health Canada had erroneously stated that it had issued a notice of compliance for the implants and then failed to correct this misrepresentation when it became aware of it. These allegations arguably describe "a relationship between Health Canada and the users of those implants that is different from the relationship that exists between Health Canada and consumers of medical devices at large."

It was at least arguable at this stage of the litigation that the misrepresentations, combined with the failure to correct them "in the face of knowledge of the serious and ongoing risk posed to a clearly definable and relatively small group of consumers" gave rise to a breach of a private law duty of care.

Association of Justice Counsel v. Canada (Attorney General), 2012 ONCA 530 (Sharpe, Armstrong, Pepall JJ.A.), August 7, 2012

How far does the constitutional right to freedom of association go to protect the collective bargaining rights of government employees?

This case was the first Charter challenge to the Expenditure Restraint Act, S.C. 2009, c. 2, s. 393 (the "ERA") to reach a Court of Appeal.  The Association of Justice Counsel (the "AJC"), the certified collective bargaining agent representing nearly three thousand lawyers working for the federal government, challenged the ERA provisions that limited increases for federal employees from 2006 to 2011 on the basis of s. 2(d) of the Charter.

The application judge held that all of the impugned provisions violated s. 2(d) because they rendered collective bargaining on salary useless. Moreover, the provisions limiting salaries for 2006-2007 were unconstitutional because they could not be justified under s. 1 of the Charter. However, the provisions governing subsequent years were justified under s. 1 due to the pressing and substantial objective of responding to the global financial crisis of 2008. Both the Attorney General and the AJC appealed.

The Court of Appeal held that no constitutional right was infringed, thus allowing the Attorney General's appeal and dismissing the AJC's appeal.

Writing for the court, Sharpe J.A. applied Ontario (Attorney General) v. Fraser, 2011 SCC 20, [2011] 2 S.C.R. 3 where the Supreme Court of Canada clarified its earlier decision in Health Services and Support - Facilities Subsector Bargaining Assn. v. British Columbia, 2007 SCC 27, [2007] 2 S.C.R. 391. That decision held that s. 2(d) does not require a particular model of bargaining or outcome but, rather, only guarantees a "meaningful process".

Sharpe J.A. explained that the question of whether the ERA violates s.2 (d) turns on the impact of the ERA on the process of collective bargaining. By the time the ERA came into force in 2009, the parties had already engaged in a lengthy process of collective bargaining that led to arbitration. The AJC had enjoyed the opportunity to present the wage demands of its members and to have them considered in good faith. Section 2(d) requires the government to afford a meaningful collective bargaining process with good faith exchanges, but it does not require that the parties conclude an agreement. Nor does it guarantee a dispute resolution mechanism in the event of an impasse.

Downey v. Ecore International Inc., 2012 ONCA 480 (Feldman, Simmons and Cronk JJ.A.), July 6, 2012

In this case, the Court of Appeal reiterated its commitment to purposive and commercially realistic interpretations of contractual agreements even where such construction favours a foreign litigant at the expense of an Ontario resident.

Ecore International, a Pennsylvania-based manufacturer, entered into a consulting agreement with CSR Industries Inc., a company whose principal was Paul Downey. At the same time, Ecore and Downey signed a confidentiality agreement which protected Ecore's proprietary information and contained a forum selection clause in favour of Pennsylvania. Downey sued Ecore in Ontario and Ecore unsuccessfully moved to stay or dismiss the action on the basis of the forum selection clause.

The motion judge focused on the fact that a consulting agreement executed in conjunction with the confidentiality agreement was not between Ecore and Downey but rather between Ecore and CSR. Although CSR was obliged under the consulting agreement to execute the confidentiality agreement, Downey signed the confidentiality agreement in his personal capacity. The motion judge determined that Downey never received consideration for executing the confidentiality agreement and was therefore not bound by its terms, including the forum selection clause.

In reasons by Cronk J.A., the Court of Appeal held that the motion judge had disregarded the "factual matrix" and did not accord with sound commercial principles. Indeed, the result below was characterized as "commercially absurd." Both contracts constituted a whole and had to be read together: Salah v. Timothy's Coffees of the World Inc., 2010 ONCA 673. When read together, it was clear that Ecore's proprietary information was to be protected by the person who was to receive that information, namely Downey. Moreover, it was Downey, and not CSR, who committed to performing the consulting services and it was Downey who would ultimately benefit from the relationship. CSR became a party to the transaction only so that Downey could achieve a more favourable tax position.

The court also rejected Downey's assertion, made in the context of a cross-appeal, that the confidentiality agreement was unenforceable against him because he never became an Ecore employee. Cronk J.A. held that s. 5 of the agreement, which provided that the agreement shall apply "during and after" Downey's employment with Ecore, simply confirmed that Downey's confidentiality obligations were to survive the termination of his relationship with Ecore. It is precisely upon the breakdown of the relationship with Downey that Ecore would require protection of its proprietary information. 

Indcondo Building Corporation v. Sloan, 2012 ONCA 502 (Goudge, Sharpe and Juriansz JJ.A.), July 18, 2012

The grinding of the wheels of justice in this dispute has been agonizingly slow.

In 2002, Indcondo obtained a judgment for $8 million against Mr. Sloan. Only then did Incondo learn that Sloan had transferred title in a matrimonial home to his wife, with no apparent consideration, just 45 days before the action was commenced in 1992.

Thus, Indcondo commenced another action (the 2002 action) against the Sloans and Sloan's company, Cave Hill Properties Ltd., to set aside the conveyance as fraudulent. Then, in 2004, Sloan declared bankruptcy. The 2002 action was thus stayed. Sloan listed Indcondo as a creditor for $8.7 million. Indcondo proved its claim in bankruptcy. At a meeting of creditors, Indcondo asked the Trustee in bankruptcy whether it would be pursuing the fraudulent conveyance claim. The Trustee replied that the estate was impecunious and would not do so. As the Trustee advised, Sloan's creditors would have to pursue the claim on their own under s.38 of the Bankruptcy and Insolvency Act, R.S.C. 1985 c. B-3 (the "BIA").

In August 2005, Sloan was discharged from bankruptcy. Indcondo opposed the discharge but did not attend the hearing and the Deputy Registrar made no decision relating to the fraudulent conveyance claim. In April 2006, Sloan, his wife, and Cave Hill obtained an order dismissing the 2002 action under s. 178 of the BIA. Indcondo did not attend that hearing. However, the next day, it attended before the Deputy Registrar and obtained an order under s. 38(1) of the BIA authorizing it to bring an action  on behalf of the estate's creditors with respect to the fraudulent conveyance claim.Some months later, Indcondo moved unsuccessfully to set the dismissal order aside, claiming that its failure to attend the dismissal hearing was inadvertent. Sloan moved to set aside the s. 38(1) order but was unsuccessful. In June 2008, Indcondo commenced the present action under the authority of the s. 38(1) order. Sloan, his wife, and Cave Hill ("the defendants") then moved to have that action dismissed as barred by the Limitations Act and as an abuse of process, as well as res judicata and issue estoppel.

The motion judge granted the defendants' motion on the basis of findings that the action was a collateral attack (and thus an abuse of process)on the orders discharging Sloan from bankruptcy and dismissing the 2002 action. She also held that Sloan's discharge from bankruptcy discharged the underlying $8 million judgment debt.

The defendants then moved unsuccessfully for security for costs of the appeal against Indcondo's lawyers on the basis that they were retained pursuant to a contingency fee arrangement. Armstrong J.A. dismissed the motion. A motion to review his decision and the appeal on the merits came on for hearing at the same time.

Writing for the court, Goudge J.A. agreed with Armstrong J.A. that ordering counsel acting on contingency to post security would "chill the very access to justice that is a main objective of the contingency fee regime." He dismissed the respondents' motion and then allowed the appeal. He explained that the motion judge's reasoning rested on the erroneous premise that the plaintiff was advancing claims identical to those it advanced in the earlier action. Unlike the 2002 action which Indcondo brought on its own behalf, the current action was brought pursuant to s. 38(1) of the BIA and the claim was that of the Trustee. Goudge J.A. cited Shaw Estate (Trustee of) v. Nicol Island Development Inc., 2009 ONCA 276, 51, C.B.R. (5th), in which Cronk J.A. stated:

A creditor obtaining a s. 38 order advances not his or her own cause of action but, rather, the trustee's cause of action. [...] The proceeding authorized by a s. 38 order is brought on the basis that the trustee in bankruptcy has the right to bring the action, and the creditor with a s. 38 order is taking the action as if the creditor were the trustee. [...] This accords with the intended purpose of s. 38(1) of the Act, namely, to ensure that the bankrupt's assets are preserved for the benefit of all creditors.

Moreover, the action was not a collateral attack on the discharge order because Indcondo was standing in the place of the Trustee, which is indifferent to the discharge order. Finally, the release of the original judgment debt by Sloan's discharge from bankruptcy did not affect the Trustee's claim based on the alleged fraudulent conveyance.

Sobeski v. Mamo, 2012 ONCA 560 (Winkler C.J.O., Armstrong and LaForme JJ.A.), August 28, 2012

Does the deemed undertaking rule prevent a lawyer from using documents given to him or her by a client for production in a proceeding to defend himself or herself in an action brought against the lawyer by the opposing litigant in the previous proceeding against the client?

Mamo, a London lawyer, found himself in this unenviable position. He had acted for Ms. Sobeski in a matrimonial proceeding. Her former husband then sued him for defamation.

Mamo moved for an order pursuant to rule 30.1.01(8) of the Rules of Civil Procedure that the deemed undertaking did not apply. The motion judge found that the rule did cover some of the documents and that Juman v. Doucette, 2008 SCC 8, [2008] 1 S.C.R. precluded granting relief because the circumstances were not sufficiently exceptional. This, the motion judge recognized, created a dilemma for Mamo because he was obliged to disclose the documents upon which he relied to defend himself in his affidavit of documents. Accordingly, the motion judge proposed an "escape route": Mamo would return Ms. Sobeski's documents, allowing him to bring a later motion under rule 30.10 for non-party production. Mamo was thus ordered to return all of Ms. Sobeski's documents to her. Mamo successfully appealed.

Writing for the court, Armstrong J.A. first considered whether the deemed undertaking rule applied, noting that rule 30.1.01(2) restricts the deemed undertaking to evidence obtained under rule 30.1.01(1). While the documents were provided to Mamo by Ms. Sobeski in connection with the matrimonial proceedings, they were not obtained under rule 30.1.01(1)(a). Armstrong J.A. cited Kitchenham v. AXA Insurance (Canada), 2008 ONCA 877, 94 O.R. (3d) 276, which held that "the Rule exists to protect the privacy interest of the party compelled by the rules of disclosure to provide that information to another party to the litigation." Having found that the deemed undertaking rule does not apply, he did not find it necessary to determine whether relief from compliance should be granted. Armstrong J.A. agreed with Mamo that the motion judge should not have devised a remedy on his own accord.

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