Canada: Top 5 Civil Appeals from the Court of Appeal (January 2014)

Last Updated: January 22 2014
Article by Stuart Zacharias

1.  McLean v. McLean, 2013 ONCA 788 (Weiler, Rouleau and Pepall JJ.A.), December 27, 2013

2.  MHR Board Game Design Inc. v. Canadian Broadcasting Corporation, 2013 ONCA 728 (Rosenberg, Rouleau and Pardu JJ.A.), December 3, 2013

3.  Setia v. Appleby College, 2013 ONCA 753 (Goudge, Watt and Pepall JJ.A.), December 13, 2013

4.  Yaiguaje v. Chevron Corporation, 2013 ONCA 758 (MacPherson, Gillese and Hourigan JJ.A.), December 17, 2013

5.  Canada (Superintendent of Bankruptcy) v. 407 ETR Concession Company Limited, 2013 ONCA 769 (Doherty, Simmons and Pepall JJ.A.), December 19, 2013

1.  McLean v. McLean, 2013 ONCA 788 (Weiler, Rouleau and Pepall JJ.A.), December 27, 2013

In this decision, the Court of Appeal considered the equitable remedy of rectification.

The appellant and her late husband sold their farming business – including all real and personal property – to their son and daughter-in-law, the respondent, pursuant to the terms of a memorandum of agreement signed in May, 1989. The appellant claimed rectification of that agreement on the basis of common mistake, specifically that the total purchase price was incorrectly recorded. She submitted that the portion of the purchase price related to the real property, which was to be paid by way of a vendor take-back mortgage, was incorrectly noted in the agreement as significantly less than fair market value. She testified at trial that the sale of the business was intended to be at fair market value, which had been appraised at $733,255. The respondent testified that while the sale was to proceed at fair market value, she believed the total purchase price for the business, including the real and personal property, to be $625,000. She argued that without a consensus on this amount, rectification could not be granted.

The trial judge refused to grant rectification, finding that the appellant failed to meet the standard of proof for rectification, which he held was "convincing proof". He also found that while there was consensus that the sale was to occur at fair market value, the requirements for rectification were not met because the parties lacked a common intention as to the amount of consideration for the business at the time the agreement was signed.

Writing for the Court of Appeal, Weiler J.A. held that the trial judge first erred by holding the appellant to a standard of "convincing proof". Weiler J.A. agreed with the appellant that Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club, 2002 SCC 19, [2002] 1 S.C.R. 678 –which was relied upon by the trial judge – was superseded by the later decision of F.H. v. McDougall, 2008 SCC 53, [2008] 3 S.C.R. 41. In that case, the Supreme Court held that there is only one civil standard of proof at common law: on a balance of probabilities. This standard of proof applies to all civil actions, including claims for rectification. Weiler J.A. concluded that by requiring that the appellant provide "convincing proof" of a prior common intention to support her claim for rectification, the trial judge was in error.  

Turning to the claim itself, Weiler J.A. explained that in order to obtain rectification of the agreement on the basis of common mistake, the appellant was required to demonstrate: (i) that the parties had a common continuing intention prior to the preparation of the agreement; (ii) that that intention existed at the time the agreement was signed; and (iii) that by mistake, the parties executed the agreement which failed to reflect their common intention. 

Weiler J.A. found that the trial judge erred in his approach to determining whether a common intention existed at the time the agreement was signed. He relied almost exclusively on the respondent's testimony as to her subjective understanding of the total purchase price for the business, when in fact he should have adopted an objective approach, determining what an objective reasonable observer would have believed the parties intended at the time the agreement was executed. As Weiler J.A. explained, the court must determine whether the totality of the evidence – which can include the testimony of a party as to what she understood the terms to be, but which must be considered together with the remainder of her evidence, in addition to the evidence of other witnesses and any documentary evidence – supports the conclusion, on a balance of probabilities, that an agreement was in place but that an error was made in recording it. In relying almost solely on the respondent's evidence of her own subjective belief as to the purchase price of the business, the trial judge not only erred in principle, but failed to consider the totality of the evidence.

Weiler J.A. concluded that applying the ordinary civil standard of proof, and considering the documentary and oral evidence as a whole, the requirements for rectification based on common mistake had been met. It was undisputed that the parties intended to complete the transaction at fair market value. That value was clear and was incorrectly expressed in the agreement. The purpose of rectification is to prevent unjust enrichment. Granting this remedy would prevent the unjust enrichment of the respondent at the appellant's expense.

Weiler J.A. rejected the respondent's submission that this was a case of mutual mistake. Citing the Court's recent decision in Lee v. 1435375 Ontario Ltd., 2013 ONCA 516, 363 D.L.R. (4th) 222, Weiler J.A. noted that mutual mistake occurs when both parties are mistaken, but about different things. That was not the case here, where the parties agreed to a sale of the farming business at fair market value. Weiler J.A. similarly dismissed the respondent's claim of unilateral mistake, explaining that this was not a situation where one party knew or ought to have known about the other's mistake and sought to take advantage of it.

2.  MHR Board Game Design Inc. v. Canadian Broadcasting Corporation, 2013 ONCA 728 (Rosenberg, Rouleau and Pardu JJ.A.), December 3, 2013

This case arose from the appellant's dissatisfaction with his portrayal on a reality TV show.

Marc Ribeiro pitched a business proposal on the CBC reality show Dragon's Den. He alleged that the version of his proposal that was broadcast was edited to misrepresent the merits of his business plan, amounting to "gross and reckless negligence, intentional misconduct, malice and bad faith" on the part of the respondent. He claimed that a colourful voiceover preceding the segment in which he appeared conveyed the idea that his business proposal was a "flop". Ribeiro and MHR Board Game Design Inc. sued the CBC alleging breach of contract, defamation, negligence and injurious falsehood.

On a motion for summary judgment, the motion judge found that Ribeiro had a signed a comprehensive release which amounted to an express and unambiguous release of all claims advanced in the Statement of Claim. The release provided, in part:

I understand that I may reveal, and other parties may reveal, information about me that is of a personal, private, embarrassing or unfavourable nature, which information may be factual and/or fictional. I further understand that my appearance, depiction and/or portrayal in the Program may be disparaging, defamatory, embarrassing or of an otherwise unfavourable nature which may expose me to public ridicule, humiliation or condemnation. I acknowledge and agree that Producer shall have the right to (a) include any or all such information and any or all such appearances, depictions or portrayals in the Program as edited by Producer in its sole discretion, and (b) to broadcast and otherwise exploit the Program containing any or all such information and any or all such appearances, depictions or portrayals in any manner whatsoever in any and all media now known or hereafter devised, or for any other purpose, throughout the universe in perpetuity...

The motion judge held that there was no reason not to give effect to the release and granted the respondent's motion.  Ribeiro and MHR Board Game Design Inc. appealed.

The Court of Appeal held that the motion judge was correct to conclude that no trial was required to determine the effect of the release on the appellants' claims. There were no facts in dispute, and a trial would not enlarge the factual context before the motion judge.

The Court rejected the appellants' claim that the respondent had a duty to edit Ribeiro's appearance in a positive light, noting that the CBC was under no duty to edit the broadcast in a manner favorable to the appellants. In fact, the release explicitly gave the CBC sole discretion to edit the recording, portraying a "factual, fictional or defamatory image of the appellants", as it desired. The CBC's conduct fells squarely within the release.

3.  Setia v. Appleby College, 2013 ONCA 753 (Goudge, Watt and Pepall JJ.A.), December 13, 2013

In this case, the Court of Appeal considered whether the Divisional Court had jurisdiction to grant an order for judicial review quashing a private school's decision to expel one of its students.

The appellant Appleby College, a private school in Oakville, expelled grade twelve student Gautam Setia for smoking marijuana on school property. Setia and his parents brought an application for judicial review under s. 2(1)1 of the Judicial Review Procedure Act, R.S.O. 1990, c. J.1 ("JRPA"), seeking an order quashing the expulsion. The Divisional Court found that the decision to expel Setia concerned "administration and discipline" under s. 11 of An Act to Incorporate Appleby School, 1 Geo. V. c. 140 ("Appleby Act") and was therefore a statutory power of decision for the purpose of the JRPA, rendering it subject to judicial review. The Divisional Court ordered the expulsion decision quashed on the basis that Appleby breached its duty of procedural fairness to the Setia family and denied them natural justice.

At issue before the Court of Appeal was whether the Divisional Court erred in finding that it had jurisdiction under the JRPA to review Appleby's decision to expel Setia. Writing for the Court, Goudge J.A. noted that the lower court's conclusion turned on its finding that the expulsion decision constituted the exercise of a statutory power of decision, as defined in s. 1 of the JRPA. This finding made the decision subject to an order for judicial review.

Goudge J.A. dismissed the notion that the expulsion decision constituted the exercise of a statutory power of decision, noting that the JRPA requires that the power to make the decision be conferred "by or under a statute". Citing the decision of the Court of Appeal in Paine v. University of Toronto et al. (1982), 34 O.R. (2d) 770, he clarified that it is not enough that the impugned decision be made in the exercise of a power conferred by or under a statute; the legislation must authorize the decision-maker to make the decision. Effecting the will of the legislature is what gives the decision "a sufficient public character" to warrant judicial review. In this case, the Appleby Act authorized the Board of the school to confer on its officers and employees "such powers ... of discipline as it may think necessary". It was not the legislature, but the Appleby Board, that deemed expulsion power necessary; therefore, the decision to expel Setia did not effect the will of the legislature, but that of the school. 

In any event, Goudge J.A. noted that the remedy was ordered pursuant to s. 2(1)1 of the JRPA, not s. 2(1)2 of that statute. Therefore, jurisdiction to make an order for judicial review depended not on whether the expulsion decision constituted the exercise of a statutory power of decision, but rather on whether it was the kind of decision that is reached by public law and, as such, a decision to which a public law remedy can be applied. As Goudge J.A. explained, this reflects the purpose of the JRPA of providing a simplified process to obtain public law remedies where public law applies.

Citing the case of Air Canada v. Toronto Port Authority, 2011 FCA 347, Goudge J.A. outlined the factors to be considered when determining whether a decision is subject to public law, including, but not limited to: (i) the nature of the decision-maker and its responsibilities; (ii) the decision-maker's relationship to other parts of government or statutory schemes; (iii) the character of the matter for which review is sought; and (iv) the extent to which the decision is shaped by private law rather than public law.

Goudge J.A. noted that Appleby, the decision-maker in this case, is a creature of statute, engaged in the important public function of education. However, while these factors lend the institution a certain public character, not every action taken by Appleby is subject to judicial review. In this case, the decision at issue concerned the discipline of a single student. It was a private matter, with a limited connection to Appleby's educational mission. Therefore, despite the school's origin and function, neither factor was sufficient to provide a significant public character to the decision to expel Setia.

With respect to the second and third factors, Goudge J.A. noted that Appleby is a private school with only a modest relationship to the Ministry of Education. Its actions are neither directed nor influenced by government, and the decision at issue could only affect students who attend Appleby. For these reasons, the decision was of a private, not a public, nature.

Finally, considering the extent to which the decision was shaped by private law, Goudge J.A. noted that the expulsion decision originated in the Appleby Act, which conferred on the Appleby Board and the Head of School the power to discipline students. However, the decision was made based on criteria found in the contract entered into between Setia's parents and the school, a matter of private law.

Goudge J.A. concluded that the Divisional Court did not have jurisdiction under the JRPA to grant an order for judicial review quashing Appleby's decision to expel Setia. Jurisdiction for ordering this public law remedy turns on whether the impugned decision is the kind of matter that is reached by public law, and the expulsion of Setia simply lacked this public dimension. 

4.  Yaiguaje v. Chevron Corporation, 2013 ONCA 758 (MacPherson, Gillese and Hourigan JJ.A.), December 17, 2013

In this case, the Court of Appeal considered the recognition and enforcement of a foreign judgment.

The appellants are residents of Ecuador. They obtained a US$18 billion judgment against Chevron Corporation on behalf of thirty thousand indigenous villagers living in Sucumbíos province, arising from damage to their lands and livelihoods due to two decades of environmental pollution. The appellants sought the recognition and enforcement of this judgment in Ontario against Chevron and its Canadian subsidiary, Chevron Canada.

Brown J. of the Superior Court of Justice held that the Ontario court had jurisdiction to hear the action but stayed it on the basis that Chevron did not possess any assets in Ontario and that the plaintiffs had no hope of success in asserting that the corporate veil of Chevron Canada should be pierced so that its assets would become exigible to satisfy the judgment against the parent corporation.

The Ecuadorian plaintiffs appealed the stay, while Chevron and Chevron Canada cross-appealed the holding that the Ontario court has jurisdiction to recognize and enforce the judgment of the Ecuadorian court.

Writing for the Court of Appeal, MacPherson J.A. addressed the cross-appeal first. On the jurisdictional issue, MacPherson J.A. agreed with Brown J. that Club Resorts Ltd. v. Van Breda, 2012 SCC 17, [2012] 1 S.C.R. 572 did not displace the Beals/Morguard test for assuming jurisdiction in the recognition and enforcement of a foreign judgment. Beals v. Saldanha, 2003 SCC 72, [2003] 3 S.C.R. 416 and Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077 stand for the principle that in recognition and enforcement proceedings relating to foreign judgments, the exclusive focus of the real and substantial connection test is on the foreign jurisdiction. In other words, a significant connection must exist between the cause of action and the foreign court and, as MacPherson J.A. explained, there is no parallel or even secondary inquiry into the relationship between the legal dispute in the foreign jurisdiction and the Canadian court from which recognition and enforcement is sought.

Applying Beals and Morguard to Chevron, MacPherson J.A. held that it was clear that the Ecuadorian judgment against the parent corporation satisfied the requirement of Rule 17.02(m) of the Rules of Civil Procedure permitting service outside Ontario without leave to enforce a foreign judgment. The Ontario court was therefore authorized to recognize and enforce the judgment against the non-resident defendant. With respect to Chevron Canada, however, Rule 17.02(m) did not apply, as the Canadian subsidiary was not a party to the Ecuadorian action and was not found liable under that judgment. In any event, MacPherson J.A. noted that Brown J. did not rely on that provision, instead grounding his decision in Chevron Canada's "physical, non-transitory, carrying on of business in Ontario". MacPherson J.A. agreed with the motion judge's acknowledgement of the subsidiary's "bricks-and-mortar business in Ontario" as well as its economically significant relationship with the parent corporation. 

Turning to the issue of the motion judge's decision to stay the action pursuant to s. 106 of the Courts of Justice Act, R.S.O. 1990, c. C. 43, MacPherson J.A. not only agreed with the appellants that Brown J. erred in granting a stay of their recognition and enforcement action, but found that his decision met the test for appellate intervention as outlined by the Court in Re Regal Constellation Hotel Ltd. (2004), 71 O.R. (3d) 355 (C.A.)

MacPherson J.A. noted that no party sought the stay; it was entirely a construct of the motion judge. And while s. 106 of the CJA does entitle the court to grant a stay, the Court of Appeal confirmed in Gruner v. McCormack (2000), 45 C.P.C. (4th) 273 (Ont. S.C.J.) that the circumstances under which it is appropriate to do so are rare. MacPherson J.A. opined that the test should be equally stringent, if not more so, when a stay has not been requested.

Citing the sophistication of Chevron and its Canadian subsidiary, MacPherson J.A. emphasized that the defendants chose not to attorn to the jurisdiction of the Ontario court. They could either use that refusal as a basis to resist the action in Ontario, or else accept the jurisdiction of the Ontario court and defend the action. Having both opted not to attorn to the Ontario court's jurisdiction, it was the expected outcome that they were then limited to jurisdictional objections. Their claim that an "extraordinary circumstance" precluded them from requesting a discretionary stay on any basis other than jurisdiction could not succeed.

MacPherson J.A. agreed with the appellants that the motion judge essentially "embark[ed] on a disguised, unrequested, and premature Rule 20 and/or Rule 21 motion." His findings about the structures of the defendant corporations and the viability of the plaintiffs' action ought to have been addressed at trial or in the context of a Rule 20 or Rule 21 motion, where the plaintiffs would be afforded an opportunity to make legal arguments. MacPherson J.A. similarly found that Brown J. improperly imported a forum non conveniens motion into his reasoning without providing the plaintiffs with an opportunity to contest the issue.

MacPherson J.A. further noted a "disconnect" between the motion judge's reasons on the matter of jurisdiction and his analysis with respect to the stay. While his analysis of the former issue suggested the recognition and enforcement of the Ecuadorian judgment in Ontario, he then prematurely indicated a number of factors which might ultimately challenge that recognition and enforcement action. 

Finally, MacPherson J.A. rejected Brown J.'s concern that if a stay were not granted, Ontario's resources would be wasted on a bitter and protracted fight amounting to nothing more than an "academic exercise". Citing the long history of this dispute, MacPherson J.A. held that the plaintiffs – some of the world's most vulnerable individuals, taking on one of the world's largest corporations – should have an opportunity to attempt to enforce the Ecuadorian judgment in a court where Chevron would have to respond on the merits. Their case should not fail on the basis of an argument that was not even made, to which they had no opportunity to respond. MacPherson J.A. concluded that this is a case that "cries out for assistance, not unsolicited and premature barriers".

The cross-appeal was dismissed and the appeal was allowed.

5.  Canada (Superintendent of Bankruptcy) v. 407 ETR Concession Company Limited, 2013 ONCA 769 (Doherty, Simmons and Pepall JJ.A.), December 19, 2013

Can two legislative schemes co-exist in the context of a discharged bankrupt? In this case, the Court of Appeal considered whether a provision of the Highway 407 Act, 1998 conflicted with the Bankruptcy and Insolvency Act.

Moore was a truck driver who incurred a significant debt to 407 ETR Concession Company Limited, a private company which owns Highway 407 in partnership with the government of Ontario. ETR establishes and collects tolls and other fees pursuant to the Highway 407 Act, 1998, S.O. 1998, c. 28 and is entitled, by s. 22(4) of that statute, to enforce toll debt against a discharged bankrupt through the suspension of his vehicle permit by the provincial Registrar of Motor Vehicles.

Moore made an assignment in bankruptcy in 2007. While ETR was listed a creditor on his statement of affairs, the company did not file a proof of claim at that time. In 2011, Moore was granted an absolute discharge from bankruptcy. He then successfully moved for a declaration that his debt to ETR was released and an order compelling the Ministry of Transportation to issue him a vehicle permit. Newbould J. of the Superior Court of Justice granted ETR's motion to set aside the order of the Registrar of Bankruptcy. The Superintendent of Bankruptcy, who was not a party to the motion but was concerned with the impact of the decision on the bankruptcy and insolvency system, sought to appeal the motion judge's decision. The Court of Appeal noted that while the Superintendent did not have the right to bring an appeal, the circumstances were exceptional.

The Court of Appeal granted leave to the Superintendent to appeal Newbould J.'s decision.

The Superintendent argued before the Court that the doctrine of federal paramountcy renders s. 22(4) of the Highway 407 Act inoperative with respect to a discharged bankrupt because it conflicts with s. 178(2) of the Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3 (the "BIA") which provides that a discharge releases a bankrupt from all claims provable in bankruptcy. Moreover, s. 22(4) frustrates the purpose of the bankruptcy and insolvency system to provide a discharged bankrupt with a fresh start.

Writing for the Court of Appeal, Pepall J.A. noted that the test for determining whether there is an operational conflict between s. 22(4) of the Highway 407 Act and s. 178(2) of the BIA is that outlined by the Supreme Court of Canada in Multiple Access Ltd. v. McCutcheon, [1982] 2 S.C.R. 161. As Dickson J. (as he then was) explained in that case, a conflict exists "where one enactment says 'yes' and the other says 'no'; the same citizens are being told to do inconsistent things; compliance with one is defiance of the other." This test has been consistently applied by the Supreme Court, as recently as Marine Services International Ltd. v. Ryan Estate, 2013 SCC 44.

Applying that test to this case, Pepall J.A. found that it was not impossible for Moore and ETR to comply with both provisions. Moore could forego obtaining a vehicle permit and not pay his debt to ETR, or he could pay the debt and obtain a vehicle permit. Since he is not required to pay the debt and the BIA does not require that he obtain a vehicle permit, there is no impossibility of dual compliance. With respect to ETR, the company could comply with both laws by declining to initiate the enforcement procedure. If ETR initiates the enforcement procedure and bankruptcy occurs later, compliance then depends on the debtor. With dual compliance possible, there is no operational conflict between s. 22(4) of the Highway 407 Act and s. 178(2) of the BIA. To find an operational conflict where it is possible to comply with both laws would be contrary to the strict test for operational conflict applied by the Supreme Court of Canada. 

Pepall J.A. found, however, that the operation of s. 22(4) of the Highway 407 Act conflicts with the fresh start principle underlying the BIA. While a vehicle permit is a privilege, the non-renewal of a vehicle permit may be a significant deprivation, particularly if it is required for an individual's employment. Denial of a permit will affect a discharged bankrupt's ability to drive his own vehicle not just on Highway 407 but on any road in Ontario. This has the potential to cause great hardship to a discharged bankrupt struggling to start fresh. Section 22(4) of the Highway 407 Act is therefore incompatible with the fresh start and financial rehabilitation principles underlying the BIA. Pepall J.A. therefore concluded that the provision "frustrates the BIA's heart and the very foundation on which insolvency legislation stands."

The Court allowed the appeal and, in the place of the motion judge's order, substituted an order that, amongst other things, the Ministry of Transportation issue license plates to Moore upon payment of the usual licensing fees.

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

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