Canada: Top 5 Civil Appeals From The Court Of Appeal (April 2014)

Last Updated: April 23 2014
Article by Carolyn Brandow
  1. Kavanagh v. Lajoie, 2014 ONCA 187 (Cronk, Epstein, and Benotto JJ.A.), March 1, 2014
  2. Farwell v. Citair, 2014 ONCA 177 (Doherty, Lauwers and Strathy JJ.A.), March 7, 2014

  3. King Lofts Toronto I Ltd. v. Emmons, 2014 ONCA 215 (Watt, Strathy, and Benotto JJ.A.), March 21, 2014

  4. Clarke v. Johnson, 2014 ONCA 237 (Weiler, Epstein* and Pepall JJ.A.), March 28, 2014   *Epstein J.A. took no part in the reasons for judgment 

  5. Danecker v. Danecker, 2014 ONCA 239 (Feldman, MacFarland, and Epstein JJ.A.), March 31, 2014
1.  Kavanagh v. Lajoie,

2014 ONCA 187 (Cronk, Epstein, and Benotto JJ.A.), March 1, 2014

This appeal arose from a sibling dispute over ownership of a residential property in Ottawa.   In this case, the Court of Appeal considered whether a promise to gift a property should be given effect and, if not, whether the severance of a joint tenancy and a gift of a one-half interest should be set aside for undue influence.

The parties' father gave a property to the respondent and told the appellant that he would gift him another property.  Instead of a transfer of ownership of the property to the son, the father arranged for a joint tenancy of the residential property with the appellant son.  After a dispute about the residential property, the father severed the joint tenancy creating a tenancy-in-common and then transferred his half-interest to the respondent daughter.  The property was sold on consent and the proceeds paid into court pending the trial judge's decision regarding the appellant's entitlement to an order setting aside the 2009 transactions. 

At trial and on appeal, the son argued that he was entitled to 100% of the proceeds of sale of the property and his sister was not entitled to any of the proceeds as there had been a gift to him and the transfer to his sister was the result of undue influence.

The Court of Appeal held that an incomplete gift is nothing more than an intention to gift.  For a gift to be valid and enforceable it must be perfected.  The donor must have done everything necessary and in his power to effect the transfer of the property.  The creation of the joint tenancy, which comes with a right to sever and transfer an interest, had defeated any suggestion of an irrevocable inter vivos gift.  Further, the Statute of Frauds would be violated if the appellant's argument was accepted.

The Court of Appeal described the concept of undue influence as focusing on a person's dominance over another person's will by exercising a pervasive influence on him or her, whether through manipulation, coercion or outright abuse of power.  The onus is on the appellant, the person claiming undue influence, to prove affirmatively that this power was exercised for the purpose of securing some advantage.

The Court of Appeal held that the trial judge's findings of fact were amply supported by the evidence and there was no reason to interfere with the refusal to set aside the transactions.  There was an abundance of evidence that the father was an independent man known to exercise free will.  The father met with his lawyer privately and provided a reasonable explanation for his desire to transfer a one-half interest away from his son.  The lawyer's evidence was that he had no concerns with the father's mental competency or ability to freely make decisions. 

The appeal was dismissed. 

2.  Farwell v. Citair,

2014 ONCA 177 (Doherty, Lauwers and Strathy JJ.A.), March 7, 2014

In this appeal decision, the key issue addressed was the application of "efficient breach" to a wrongful dismissal.  The appellant argued that its former employee was obliged to mitigate his damages by remaining with the employer for the period of working notice.

After a trial, the appellant was found to have wrongfully dismissed the respondent and to owe the respondent 24 months' pay in lieu of notice.  The respondent had worked for the appellant for 38 years in a high level managerial position.  The appellant transferred the respondent from Operations Manager/Vice President of Operations to the position of Purchasing Manager, a position he had previously held which was of lesser status and prestige and reported to the Operations Manager. 

The appellant's arguments that the notice period was too long by two to four months and that there was no constructive dismissal were rejected on appeal.  The trial judge correctly applied the proper law from Farber v. Royal Trust Co., [1997] 1 S.C.R. 846 to the evidence with respect to whether the respondent was constructively dismissed.  Similarly, the trial judge applied the proper, well-known principles for assessing the reasonableness of notice from Bardal v. Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.J).

The appellant submitted that the respondent had a legal duty to mitigate his damages by accepting the position of Purchasing Manager. The appellant argued that the respondent's salary and working conditions would have been substantially the same as in his previous position, the only difference being a smaller bonus.

Writing for the Court of Appeal, Lauwers J.A. held that an employee's obligation to mitigate by remaining with his or her employer for the period of working notice is an aspect of what the law recognizes as "efficient breach" and it ought not be too discouraged.  In appropriate cases, efficient breach can be applied to employment contracts. 

The Court of Appeal held that the proper test with respect to whether the respondent was obliged to stay in the position for the period of working notice was set out in Evans v. Teamsters Local Union No. 31, 2008 SCC 20.  The issue was whether the employer offered the employee a chance to mitigate damages by returning to work for the employer and whether a reasonable person would accept such an opportunity.  In other words, these must be an offer that would be objectively acceptable.   

The Court of Appeal found that the trial judge, after citing the correct test, took a subjective approach in her assessment.  However, despite the failure to apply the proper, objective test, the trial decision was not overturned as the Court of Appeal held that the appellant had failed to meet the requirements to prove efficient breach.  The appellant had failed to prove that the respondent was offered the opportunity to work as Purchasing Manager after the respondent had refused the position and advised that he was treating the position change as being constructively dismissed. 

The appeal was dismissed.

3.  King Lofts Toronto I Ltd. v. Emmons,

2014 ONCA 215 (Watt, Strathy, and Benotto JJ.A.), March 21, 2014

This appeal arose from a claim for solicitor's negligence in connection with a commercial real estate transaction.  In its decision, the Court of Appeal applied the Supreme Court of Canada's decision in Hryniak v. Mauldin, 2014 SCC 7.  

The appellants, Mr. Emmons and Fraser Milner Casgrain LLP, sought to overturn a decision granting summary judgment against them.  The respondents had not asked for summary judgment in a cross-motion, but nonetheless had been awarded summary judgment.

The respondent retained Mr. Emmons and Fraser Milner Casgrain LLP to act for it in the purchase of four commercial properties in downtown Toronto for $22.5 million.  The City of Toronto owned a strip of land under one of the buildings on one of the properties.  Mr. Emmons advised the respondent that the ownership of the strip of land was a minor issue that would only cost a few thousand dollars to resolve and that title insurance would deal with the matter.

Two years after purchase, the respondents wanted to sell the property and took steps to deal with the strip of land.  In April, 2008, the City of Toronto demanded $106,000 to transfer the strip.  A claim for coverage was denied by the title insurer in January, 2009. 

The appellants submitted that the motion judge erred in the determination of the limitation period, arguing that the notice of action was filed more than two years after the cause of action was discovered. The appellants argued that the limitation period ought to have begun when the respondent learned that the city expected to be paid for the laneway. The Court rejected this and agreed with the motions judge that the limitation period ran from the denial of title insurance as until that point the respondents believed, based on the appellants' advice, that title insurance would cover the issue and there was no cause of action. 

The Court of Appeal held that expert evidence was not required, in this case, to establish the standard of care as there was a clear duty to warn and no warning given. 

The appellant argued that the motion judge erred in granting judgment in favour of a party which had not given advance notice of a claim for summary judgment.  The Court of Appeal rejected this argument referencing two points.  First, no adjournment was requested at the time.  Second, following the "culture shift" approved by the Supreme Court of Canada in Hryniak v. Mauldin, the principles of proportionality and sensible management of the court process supported a ruling on the issue ($106,000 relating to a transaction involving $22.5 million).     

The appeal was dismissed.

4.  Clarke v. Johnson,

2014 ONCA 237 (Weiler, Epstein* and Pepall JJ.A.), March 28, 2014 *Epstein J.A. took no part in the reasons for judgment 

In this decision, the Court of Appeal addressed the principles of proprietary estoppel and unjust enrichment in the context of a family dispute over a recreational property.

The appellant, Martha Johnson, owned a camp located on Lake Panage near Sudbury. In 1971, she and her late husband purchased the property on which a camp was later built by their daughter, Victoria, and the respondent, Donald Clarke, who was Victoria's husband. During their marriage, Victoria, the respondent and their two children made frequent use of the camp. After they separated, the respondent continued to use the camp with the children. The respondent paid all of the bills and taxes associated with the property and invested significant funds and resources to maintain and improve it. The respondent ultimately developed a deep attachment to the camp.  When the relationship between the respondent and his son became strained, however, the respondent refused to allow his son (the appellant's grandson) to use the property.

The appellant objected to the exclusion of her grandson from use of the camp.  The appellant issued a trespass notice to the respondent and changed the locks to the camp.  The respondent sought and obtained an injunction returning his use of the camp to him.  The appellant sought to revoke the respondent's licence to use the camp.  The dispute eventually proceeded to trial.  The trial judge determined that the appellant owned the camp, but that the respondent had an equitable right to use the camp during his lifetime on the basis of proprietary estoppel and unjust enrichment.

The appellant argued that the trial judge erred in failing to find that the respondent's licence had been revoked.  The appellant further argued that even if the respondent's licence had not been revoked, the trial judge erred in finding that the respondent had established an equitable right to continue using the camp based on proprietary estoppel and unjust enrichment.

Writing for the Court of Appeal, Pepall J.A. noted that the parties had agreed that the respondent had a licence to use the camp.  The trial judge was found to have been correct to focus on the merits of the respondent's equitable claims as those were the only way that the respondent could stop the licence from being revoked.  Unless there are equitable bars to revocation, a licence of this nature can be revoked.

Turning to the issue of proprietary estoppel, Pepall J.A. remarked that the central consideration is whether the appellant unconscionably took advantage of the respondent by revoking his licence to use the camp.  Pepall J.A. provided a thorough examination of the evolution of the equitable doctrine, from the traditional approach of the "five probanda" outlined in the 1880 case of Willmott v. Barber (1880), 15 Ch. D. 96 to the modern approach. The modern approach to proprietary estoppel was summarized as involving a consideration of whether:  (i) the owner of the land induced, encouraged or allowed the claimant to believe that he had or would enjoy some right or benefit over the property; (ii) that in reliance upon his belief, the claimant acted to his detriment to the knowledge of the owner; and (iii) that the owner then sought to take unconscionable advantage of the claimant by denying him the right or benefit which he expected to receive.  The Court cautioned against an inflexible application to these considerations.    

The trial judge was found to have expressly identified and properly applied the modern approach to the doctrine and its three elements of inducement, detrimental reliance and unconscionability.  The trial judge found that the appellant and her late husband both induced and encouraged the respondent to believe that he would own the camp, and that the appellant acquiesced in the respondent's use. Moreover, the respondent, relying upon that encouragement and acquiescence, contributed significantly to the maintenance and betterment of the camp to the knowledge of the appellant and her late husband. The trial judge concluded that denying the respondent use of the camp under the circumstances was unconscionable.  The Court of Appeal upheld this finding that the respondent had established a claim in proprietary estoppel.

Turning to the claim in unjust enrichment, Pepall J.A. referenced the case of Peter v. Beblow, [1993] 1 S.C.R. 980, at p. 987, in which the Supreme Court held that in order to establish unjust enrichment, a claimant must prove an enrichment, a corresponding deprivation, and the absence of a juristic reason for the enrichment.  The Court of Appeal cited the definition of the absence of juristic reason in Kerr v. Baranow, 2011 SCC 10, [2011] 1 S.C.R. 269:  "no reason in law or justice for the defendant's retention of the benefit conferred by the plaintiff, making its retention 'unjust' in the circumstances of the case."

The trial judge found that there was an enrichment and a corresponding deprivation, noting the respondent's significant contributions to the camp and the fact that the appellant had never made any such contributions. Considering the parties' legitimate expectations, the trial judge found that there was a reasonable expectation that the respondent's use of the camp would continue until his death.

The appellant submitted on appeal that the juristic reason was the respondent's breach of the parties' expectations and his refusal to grant the grandson access to the camp. The Court of Appeal rejected this argument as it had not been proven that it was a condition of the licence that the respondent would share the camp with his children or that denial of access to them constituted a breach.  The trial judge's finding that the respondent had established his claim for unjust enrichment was upheld.

The selection of an appropriate remedy was held to require the exercise of discretion on a principled and reasoned basis.  The trial judge considered and rejected a monetary remedy on the basis that monetary damages were not adequate given the respondent's attachment to the camp.  The trial judge held that the imposition of a constructive trust reflected the expectations of the parties and effected justice, and confirmed that the respondent had an exclusive licence to occupy the camp until his death. The Court of Appeal did not find any error in the exercise of the trial judge's discretion in the award of a remedy.

The appeal was dismissed.

5.  Danecker v. Danecker,

2014 ONCA 239 (Feldman, MacFarland, and Epstein JJ.A.), March 31, 2014

In this family law decision, the Court of Appeal considered whether it is appropriate to order a sale of family property and the method of valuation of a partnership.

The parties were married for just shy of twenty years before they separated.  The parties operated the Stamford and Phoenix Physiotherapy Clinic as a 50-50 partnership.  The respondent stopped working at the clinic on December 4, 2009.  The appellant continued to operate the clinic.  No accounting or payments for the period after the respondent ceased working at the clinic had been provided.

The Court of Appeal described the evidence on the value of the partnership as "sparse."  One business valuator testified at trial for the respondent that the value was $443,000.  A one-page sheet of calculations by a CPA (without any supporting oral evidence) was submitted by the appellant that the value was $175,000.  The application judge held that the business valuator's valuation was "credible and acceptable", but also accepted arguments that the valuation was flawed.  The application judge decided the value should be $309,000 – an amount halfway between the two values in evidence.

The application judge concluded that a sale of the clinic would require a determination of the profits from December, 2009, forward, requiring more litigation, rather than the finality that the parties needed.  To achieve desired finality, the application judge ordered that the appellant buy out the respondent for $154,500. 

The Court of Appeal, referring to Buttar v. Buttar, 2013 ONCA 517, held that the only remedy available under the Family Law Act is a sale of the business to provide an equalization payment.  A redistribution of property through an order to purchase another's one-half interest is not available. 

With respect to the valuation, the Court of Appeal held that it was problematic for the application judge to simply take two numbers with which she had difficulty and average them, without a proper analysis of the competing evidence of the value.  This method of valuation was described by the Court of Appeal as flawed. 

The appeal was allowed and the Court ordered the business to be listed for sale.

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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Carolyn Brandow
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