1. Di Michele v. Di Michele, 2014 ONCA 261 (MacPherson, Cronk and Gillese JJ.A.), April 3, 2014
3. R & G Draper Farms (Keswick) Ltd. v. 1758691 Ontario Inc. (ATV Farms), 2014 ONCA 278(Cronk, Gillese and Strathy JJ.A.), April 8, 2014
4. Bondy v. London (City),2014 ONCA 291 (Feldman, Rouleau and Hourigan JJ.A.), April 15, 2014
5. Verch Estate v. Weckwerth, 2014 ONCA 338(Cronk, Watt and Strathy JJ.A.), April 30, 2014
In this decision, the Court of Appeal considered the scope of an estate trustee's power to mortgage property governed by the Land Titles Act.
Antonio Di Michele was named trustee of his late mother's estate, which was willed to him and his two brothers, Roberto and Michele, in equal shares. In his capacity as estate trustee, Antonio registered a Transmission by Personal Representative to take title to the home that his mother had owned and lived in until her death. Neither Roberto nor Michele registered on title any interest in or claim to the home, which was within the land titles system. Antonio, who was involved in personal litigation with the respondents, then put up his late mother's home as security in their favour.
When the respondents obtained judgment against Antonio in the amount of $1.5 million, they brought an application seeking to have the property sold. Roberto brought a counter-application, disputing the respondents' right to sell it and claiming sole entitlement to the property. Having lived with his parents in the property for many years, and having continued to live there with his wife after their deaths, Roberto maintained that he and his brothers had agreed that the property would be his.
The trial judge declared that the property was vested in the three brothers equally and that the mortgage was valid. He ordered the partition or sale of the property and dismissed Roberto's counter-application.
Roberto appealed, asking that the Court of Appeal set aside the mortgage and the part of the judgment giving relief under the Partition Act, R.S.O. 1990, c. P.4. He also sought an order that he replace Antonio as estate trustee. The respondents cross-appealed, submitting that the trial judge erred in finding that the mortgage only bound Antonio's one-third interest in the property.
Roberto challenged the validity of the mortgage on three grounds. He claimed: (i) that Antonio had no interest in the property, either personally or as estate trustee, over which he could grant a mortgage; (ii) that the respondents were not bona fide purchasers for value without notice; and (iii) that the solicitors engaged on the transaction were unaware that Antonio was not the legal owner of the property. As a result, the mortgage was a product of Antonio's fraudulent representation that he was the owner of the property, and therefore was invalid.
Gillese J.A. rejected each of these submissions. She found that Roberto's claim that Antonio had no interest in the property must fail in light of s. 2(1) of the Estates Administrations Act, R.S.O. 1990, c. E. 22, which provides that upon a person's death, all of her property vests in the estate trustee. The Land Titles Act, R.S.O. 1990, c. L.5, also defeated the appellant's submission, entitling the Registrar to register the estate trustee as owner of property in the place of the deceased, and providing that the person registered in the place of a deceased owner is in the same position as if he had taken the land under a transfer for valuable consideration. The relevant statutory provisions confirmed that Antonio did have an interest in the property and the right to grant the mortgage.
Turning to the appellant's second submission that the respondents were not bona fide purchasers for value without notice, Gillese J.A. held that because Antonio's solicitor offered the property as security, the respondents were entitled to assume that Antonio was acting lawfully in granting the mortgage. Moreover, the fact that the respondents agreed to adjourn the trial and share the cost of Antonio's forensic accountant in exchange for the mortgage constituted value within the meaning of "bona fide purchaser for value without notice". As for the issue of notice, Gillese J.A. observed that s. 62(2) of the Land Titles Act specifically provides that describing the owner of land as a trustee shall be deemed not to constitute notice of a trust, nor does it impose a duty on the person dealing with the owner to inquire as to his authority in respect of the property.
In light of these findings, Gillese J.A. held that Roberto's submission that the parties were operating under the misapprehension that Antonio was the owner of the property was untenable and, by extension, so was his claim that Antonio fraudulently obtained the mortgage. Gillese J.A. explained that a breach of trust does not amount to fraud; while a fraudulent transaction may be invalid, one that might merely amounts to a breach of trust is not. Gillese J.A. therefore dismissed Roberto's claim that the mortgage was invalid.
Her Honour did, however, agree with the appellant that even if the mortgage was valid, the respondents were not entitled to a remedy under the Partition Act because they did not have a crystallized right of possession. The respondents argued that the end result of enforcement of the mortgage would be the same, and suggested that the relief ordered was an attempt by the trial judge to avoid the time and cost of foreclosure. While acknowledging that the respondents were likely correct with respect to the trial judge's reasoning, Gillese J.A. emphasized that the law governing partition is clear. The Court of Appeal has interpreted s. 3(1) of the Partition Act and its predecessor legislation as permitting only those entitled to the immediate possession of an estate in property to bring an action or make an application for its partition or sale. Because the respondents were not entitled to immediate possession they were not entitled to a remedy under the Partition Act.
Turning to the appellant's submission that he ought to be appointed as estate trustee in Antonio's stead, Gillese J.A. held that while there may be good reason to remove Antonio as trustee pursuant to s. 37(1) of the Trustee Act, R.S.O. 1990, c. T.23, Roberto was not the proper person to serve as his replacement because his personal interests conflicted with the obligations he would undertake as trustee. The estate trustee's fundamental obligation is to duly administer the estate. Since Roberto claimed the property as his own, that interest would likely conflict with court orders relating to the property, particularly those involving the enforcement of the mortgage. Roberto's personal interests also conflicted with the estate trustee's obligation to take steps to recover any losses caused by the prior estate trustee's defaults. This obligation would require Roberto to take action against Antonio for losses he caused the estate, which is in direct conflict to Roberto's claim that Antonio gifted him his interest in the estate.
Returning to the matter of the mortgage and the respondents' cross-appeal, Gillese J.A. disagreed with the trial judge's finding that, although the mortgage was valid, it was binding only on Antonio's one-third share. Relying on s. 9 of the Estates Administration Act, the trial judge held that the property vested in Ms. Di Michele's beneficiaries three years after her death, just as if the estate trustee had conveyed it to them. Therefore, the vesting occurred before the mortgage was granted, at which time it could only attach to Antonio's one-third interest in the property.
Gillese J.A. noted that s. 9 of the Estates Administration Act was intended to give estate trustees additional powers, but only to the extent that they do not conflict with the intention of the deceased, as expressed in her will, which is always paramount. Where a will gives the estate trustee the power to sell property at such times and in such manner as he sees fit, s. 9 of the Estates Administration Act will not limit the scope of that power by requiring that the property vest after a specific period of time. Gillese J.A. disagreed with the trial judge that Ms. Di Michele's will contained no clear intention with respect to the estate trustee's sale of the property, finding that, on a plain reading of the will, Antonio was given discretion to postpone the sale of the property for whatever period of time he thought advisable. Therefore, s. 9 did not apply and the property did not vest in the beneficiaries.
Gillese J.A. also found that the beneficiaries' entitlement under the will did not amount to a property interest in the deceased's home. The brothers were not given a specific bequest of property, but a contingent interest in the residue of the estate. That interest did not give rise to a property interest in any asset of the estate unless and until that asset was appropriated by the trustee. Because the estate had not been distributed when the mortgage was granted, the brothers' contingent interests had not yet vested. Antonio therefore did not have a one-third interest in the property at that time. Finally, even if the beneficiaries had an interest in the property that pre-existed the granting of the mortgage, that interest was unregistered and therefore trumped by the registered mortgage. The land titles system puts the rights of a bona fide purchaser for value who has registered its interest in the property above any prior unregistered interests in the property. Gillese J.A. concluded therefore that the mortgage bound the entire property.
The Court allowed the appeal in part and allowed the cross-appeal.
The appellants claimed damages arising out of alleged fraudulent activities by T.A. McGill Mortgage Services Inc. (MMSI) and other parties. The respondent, Echelon General Insurance Company, was MMSI's professional liability insurer. Echelon had, however, rescinded MMSI's errors and omissions policies due to misrepresentations made by the brokerage when it applied for coverage. In this decision, the Court of Appeal considered the insurer's right to rescind the policies and its obligations to the appellants.
Echelon's original errors and omissions policy did not provide coverage to MMSI for fraudulent acts. However, after amendments were made to the Mortgage Brokerages, Lenders and Administrators Act, 2006, S.O. 2006, c. 29 and regulations, requiring that insurers providing professional liability errors and omissions coverage to mortgage brokers add a fraud endorsement to their policies, Echelon issued an amended policy to MMSI which included a fraud endorsement in the form approved by the Financial Services Commission of Ontario and also undertook to the FSCO that it had done so. When MMSI applied to renew the policy, it represented that it was unaware of any potential claims and acknowledged that any misstatements by it could result in a denial of coverage or the voiding of the policy. Two years later, Echelon learned that MMSI's applications had not been completed truthfully and advised the brokerage that it had elected to rescind the policies on the basis of material non-disclosures/misrepresentations in its applications, thereby voiding the policies.
Named as a defendant in the appellants' action against MMSI, Echelon brought a motion for summary judgment seeking the dismissal of the appellants' action as against it. The motion judge granted the motion on the basis that the insurer had validly rescinded the policies due to material misrepresentations and non-disclosures MMSI made when it applied for coverage.
The appellants appealed on several grounds.
The appellants first submitted that the motion judge erred in holding that any misrepresentations or omissions made by MMSI before fraud coverage was in place were material. Because the original policy did not include fraud coverage, they claimed that any information not disclosed by MMSI at that time was irrelevant. Proceeding on a standard of correctness, Pardu J.A. noted that the test of materiality is measured by the standard of a reasonable insurer, and whether that insurer would refuse to accept the risk or impose special conditions on an applicant if accurate answers were provided. Moreover, "materiality" is a question of fact.
The motion judge accepted the uncontradicted evidence of both a senior underwriter at Echelon and an independent underwriter that MMSI's misstatements and non-disclosures in its applications were material to Echelon's decision to offer the broker insurance. Pardu J.A. concluded that the motion judge did not err in accepting this evidence, nor did he err in relying on it to find that the misrepresentations were material ones justifying Echelon's rescission of the policies.
The appellants further claimed that, even in the event of a material misrepresentation, Echelon's undertaking to FSCO barred it from refusing their claims, giving them an independent right of action against the insurer with respect to fraud coverage that could not be voided by the rescission of the policies. Pardu J.A. rejected this submission, holding that the motion judge was correct to find that the FSCO undertaking, that "[i]njured third parties will have a direct right of action against the insurer under the policy, without affecting the insurer[']s right to adjudicate the claim in accordance with the policy's term[s] and conditions", meant simply that a third party claim depended on the existence of a valid policy. Echelon rescinded the policies as it was entitled to do; therefore, the appellants had no direct right of action against the insurer.
The appellants also argued that Echelon should be estopped from advancing a position that denies them coverage. Pardu J.A. dismissed this claim, affirming the motion judge's finding that the insurer should not be precluded from rescinding the policies based on MMSI's misrepresentations because of its undertaking to FSCO to provide fraud coverage. As the motion judge noted, the appellants did not rely upon the undertaking. Moreover, the undertaking was predicated on the existence of a valid policy.
The appellants finally submitted that even if Echelon was permitted to rescind the policies, they were still entitled to relief against forfeiture pursuant to s. 98 of the Courts of Justice Act R.S.O., 1990, c. C.43. They argued that the court has broad power to relieve against forfeiture of fraud coverage and that the motion judge erred in declining to do so. Citing the well-established principle that an applicant for insurance must act in good faith, Pardu J.A. emphasized that where the applicant makes a material misrepresentation in an application for coverage, the insurer is entitled to rescind the policy, rendering it void from the outset. Further, though some insurance policies provide that third parties are unaffected by material misrepresentations by the insured, the policies in this case contained no such provision.
As part of the Court's analysis, Pardu J.A. addressed the recent case of Kozel v. The Personal Insurance Company, 2014 ONCA 130, in which the Court held that s. 98 of the Courts of Justice Act can operate, in conjunction with s. 129 of the Insurance Act, R.S.O. c. I.8, to grant relief against loss of a right caused by a failure to perform a covenant or condition in a contract of insurance. The Court concluded that relief under s. 98 of the Courts of Justice Act is available where a breach constitutes imperfect compliance with a term of the policy, but not where it amounts to non-compliance with a condition precedent to the policy. The seriousness of the breach turns on the character of the policy provision: where the term is incidental, its breach is deemed imperfect compliance, while the breach of a fundamental or integral term constitutes non-compliance with a condition precedent. Applying Kozel to the case at bar, Pardu J.A. held that even if the appellants could apply for relief from forfeiture under s. 98 of the Courts of Justice Act, that relief would not be available because the breaches constituted non-compliance with a condition precedent. MMSI's misrepresentations and non-disclosures were material and "went to the heart of Echelon's decision to provide coverage." The motion judge therefore did not err in declining to grant the appellants relief from forfeiture.
This appeal arose out of disputes over the purchase and sale of carrots.
The parties, both members of the Fruit and Vegetable Dispute Resolution Corporation, brought their disputes to the DRC for resolution in accordance with the corporation's rules governing mediation and arbitration. The arbitrator ordered the appellant, R & G Draper Farms, to pay $58,507.42 to the respondent, ATV Farms. Draper Farms applied to the Superior Court of Justice to set aside the arbitral award on jurisdictional and other grounds, but that application was dismissed. Draper Farms appealed.
The appellant submitted that the application judge erred by finding that the Arbitration Act, 1991, S.O. 1991, c. 17 applied to the arbitration conducted by the DRC, as opposed to the International Commercial Arbitration Act, R.S.O. 1990, c. I.9, with the result that its challenge of the arbitral award was out of time. While section 47 of the Arbitration Act provides a period of thirty days in which a party to an arbitration may appeal or seek to set aside or vary an arbitral award, the ICAA provides a three-month time period to initiate the same steps. Although Draper Farms' application was issued within three months of the arbitrator's decision, it was not issued within the thirty days outlined in the Arbitration Act.
The Court of Appeal agreed with the application judge's conclusion that the Arbitration Act - and not the ICAA - applied to the arbitration in this case, notably her finding that the obligations of the commercial relationship between the two Ontario businesses were performed in Ontario, despite the ultimate sale of carrot chunks to a California purchaser. As the application judge explained, the California company was not a party to the purchase and sale agreements that were the subject of the arbitral award.
Pursuant to s. 2(1) of the Arbitration Act, that statute applies to an arbitration conducted under an arbitration agreement unless the application of the legislation is excluded by law, or if the ICAA applies to the arbitration. The Court noted that the application of the Arbitration Act was not excluded by any law and found that the ICAA did not apply to the arbitration, as it is directed at "international" commercial arbitrations.
As the application judge explained, the ICAA definition of "international arbitration" turns not on the mandate of the organization administering the arbitration process, which in the case of the DRC is international in nature, but "on the location of the place of business of the parties, the location of the actual arbitration, the place where the obligations are performed and the place the subject matter of the arbitration is connected with." In this case, all of those locations were Ontario. The arbitration was therefore not "international" in the sense contemplated by the ICAA and that statute did not apply.
The Court rejected Draper Farms' submission that Freshway Specialty Foods Inc. v. Fruit and Vegetable Dispute Resolution Corp. (2006), 2 O.A.C. 385 (Div. Ct.) stands for the proposition that Ontario courts have recognized that the ICAA applies to DRC arbitrations. First, Freshway concerned parties located in British Columbia and Arizona. The fact that the parties' businesses were located in different countries was, by itself, sufficient to render the arbitration "international" in accordance with the ICAA. In the present case, both parties' businesses were located in Ontario. The Court also noted that the DRC rules were drafted with the intent that either the Arbitration Act or the ICAA could apply to an arbitration between its members, depending on the unique circumstances of each dispute. In the Court's view, this ensured that disputes involving international matters would be governed by the ICAA while domestic cases involving Ontario-based parties would fall under the Arbitration Act. Finally, the Court again noted that s. 2(1) of the Arbitration Act renders the application of that statute and the ICAA mutually exclusive.
The Court therefore concluded that the Arbitration Act did apply to the arbitration, as did its thirty-day time limit for appealing an arbitral award. As a result, Draper Farms' application was out of time.
Turning to Draper Farms' second submission that the application judge erred by failing to extend the thirty-day time limit established by the Arbitration Act for appealing an arbitral award, the Court agreed with the application judge that she lacked jurisdiction to do so. The Court noted that the appellant failed to cite any authority in support of its claim that the application judge had the authority to extend the time period outlined in s. 47 of the Arbitration Act. Moreover, the Arbitration Act itself does not contemplate judicial discretion to extend the time period outlined therein. As the Court explained, s. 37 of the statute provides that an arbitral award binds the parties unless set aside or varied under s. 45 or 46. Section 50(3) provides that an arbitral award becomes final within thirty days unless otherwise set aside or varied. The statute makes no express provision for the extension of that time period. In fact, s. 50(3) is inconsistent with the notion of judicial discretion to extend the time to challenge an arbitral award. That s. 39 of the Arbitration Act does explicitly provide for the relaxation of time periods under certain circumstances provides further evidence that there is no residual discretion to extend the time limit established in s. 47 of the statute.
As a result, the application judge did not err in declining to extend the thirty-day time period outlined in the Arbitration Act.
This appeal arose from an action for a slip and fall injury which occurred in London, Ontario. The primary issue was whether a municipality's standard of care for road maintenance was elevated due to pedestrian traffic.
The appellant Bondy fell on the paved portion of a sloped boulevard following a freezing rain shower. The boulevard, which is the property of the City of London, forms part of the driveway of a property owned by a Ms. Lyszczek. Bondy brought an action against both the City and Lyszczek. Her action against the City was based on s. 44(1) of the Municipal Act, S.O. 2001, which provides that "the municipality that has jurisdiction over a highway or bridge shall keep it in a state of repair that is reasonable in the circumstances, including the character and location of the highway or bridge".
The Court rejected Bondy's submission that the standard of maintenance was elevated due to pedestrian traffic. As the Court explained, this is "a common situation"; the fact that people may cross the street at undesignated intervals does not create or impose on the municipality a higher standard of maintenance.
Turning to the appellant's claim against the adjacent property owner, the Court rejected Bondy's submission that Lyszczek was an occupier of the boulevard within the meaning of section 1 of the Occupiers' Liability Act, RSO 1990, c O-2, and due to London's street by-law. The Court agreed with the trial judge that the by-law does not impose a duty on Lyszczek to remove snow and ice from her driveway, nor is there anything in the by-law which renders her an occupier within the meaning of the Occupiers' Liability Act. Moreover, nothing on the facts of the case put Lyszczek in "control" of the boulevard within the meaning of the statute.
Albert Verch died in 2008, leaving his estate to his daughter-in-law Diane, the respondent. Verch's adult children, including the respondent's estranged spouse, brought an application to set aside their father's will and substitute a new distribution of his estate. Their application was dismissed.
The appellants argued before the Court of Appeal that the trial judge erred by failing to find that their father had a "moral obligation" to provide for them in his will in a "just and equitable" manner.
In its endorsement, the Court rejected this submission, finding that the appellants' moral obligation claim was "misconceived". The Court noted that the appellants cited no authority in Ontario to support their claim that a properly executed will may be set aside by the court pursuant to "some alleged overarching concept of a parent's moral obligation to provide on death for his or her independent, adult children."
The Court noted that the jurisprudence relied on by the appellants involved dependant's relief provisions under the Ontario Succession Law Reform Act. The appellants in this case conceded that they were not dependants of their father. They did not advance dependants' relief claims under the Succession Law Reform Act, nor was such a claim available to them. They also failed to assert a constructive trust or quantum meruit-based claim.
The Court also held that because the appellants did not plead their moral obligation claim at trial, it would be unfair to the respondents if they were permitted to raise the claim on appeal. Three issues were identified for trial: the competency of the testator, undue influence and conspiracy. The appellants were bound by the order determining the issues - which included no moral obligation claim - and never sought to vary it. Instead of amending their pleading to include a claim of moral obligation, the appellants argued that it was encompassed by their other claims, each of which was considered and rejected by the trial judge.
The appeal was dismissed.http://lernersappeals.ca/netletters
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