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

1. Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450 (Rouleau, Lauwers and van Rensburg JJ.A.), June 9, 2014

In this decision, the Court of Appeal considered the recent decision of the Supreme Court in Hryniak v. Mauldin.

Ralph Canonaco, a home-builder, entered into a series of transactions with Alex Haditaghi, a mortgage broker, with respect to a property in Barrie. Disputes arose, and litigation followed. Alex first sued Ralph on two promissory notes which Ralph had signed personally and Alex believed were due and owing. Ralph responded with his own claim, accusing Alex and other parties of fraud and breaches of agreement. The lawsuits were consolidated into a single proceeding comprised of Ralph's action and Alex's counterclaim on the promissory notes.

The motions judge granted summary judgment dismissing the action on the basis that it was precluded by the terms of a release which was authentic and valid. He did not, however, grant summary judgment on the counterclaim, instead ordering a half-day mini-trial pursuant to Rule 20.04(2.2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, to assess conflicting evidence about the promissory notes. After hearing from Alex, Ralph and Ralph's brother Frank, the motions judge concluded that the enforceability of the notes could not be determined summarily and that a full trial was necessary.

Noting that the promissory notes and the release were signed at the same time and in the context of the same series of transactions, the appellants submitted that any uncertainty about the reliability of the evidence on the promissory notes, which led the motions judge to order the mini-trial, ought to have similarly influenced his conclusion about the validity of the release. If the evidence on the promissory notes was unreliable, the appellants argued that so too was that with respect to the release. The respondents countered that the procedure directed by the motions judge was consistent with the decision in Hryniak v. Mauldin, in which the Supreme Court encouraged motion judges to utilize the mini-trial procedure referred to in Rule 20.04(2.2)

Writing for the Court, Lauwers J.A. acknowledged that the Supreme Court rejected the "full appreciation" test for summary judgment in Combined Air Mechanical Services v. Flesch, 2011 ONCA 764, finding that the Court of Appeal placed "too high a premium on the 'full appreciation' of evidence that can be gained at a conventional trial." Karakatsanis J. encouraged motion judges to utilize the powers granted under Rule 20.04(2.2) where they will allow the judge to reach a fair and just adjudication on the merits and will serve the objectives of timeliness, affordability and proportionality.

Lauwers J.A., found, however, that the motions judge made a material error in principle, failing to assess the advisability of the summary judgment process in the context of the litigation as a whole. As Karakatsanis J. explained in Hryniak v. Mauldin, it might not be in the interests of justice for a motion judge to use the new fact-finding powers to grant summary judgment in all cases, such as against a single defendant, where such partial summary judgment might cause duplicative proceedings or inconsistent findings of fact. Because the release and the promissory notes were part of the same series of transactions, it was an error for the motions judge to refer the enforceability of the promissory notes to trial while summarily determining the enforceability of the release. The motions judge questioned the promissory notes because the parties "fabricated and executed documents that did not reflect the true state of affairs", and determined that they were therefore not amenable to enforcement on a motion for summary judgment. The release ought to have been treated in the same manner. Lauwers J.A. further noted that if the matter of the promissory notes went to trial, where a judge would have the opportunity to develop a deeper understanding of the case, it could result in a decision that would be inconsistent with the motions judge's binding conclusion that the release was valid and effective.

Key to the motions judge's decision to determine the issue of the release were certain admissions made by Ralph during cross-examination on his affidavit. Lauwers J.A. noted that these statements came before the motions judge by way of a transcript; Ralph was not given an opportunity to address the admissions - which were not, in fact, made in relation to the release - at the mini-trial. Lauwers J.A. held that the motions judge erred in distinguishing between the promissory notes and the release on the basis of de-contextualized transcript evidence, and cautioned that in actions where credibility is a significant factor, judges must take great care in considering evidence without the benefit of the affiant's "authentic voice".

The Court allowed the appeal, set aside the judgment and directed both the claim and counterclaim to proceed to trial.

2. Harris v. Leikin Group Inc., 2014 ONCA 479 (Hoy A.C.J.O. and Sharpe and van Rensburg JJ.A.), June 18, 2014

This appeal arose from a rift between the shareholders in a family business.

Founded by the late Harry Leikin, the Leikin Group is a collection of real estate and property development companies, whose primary asset is College Square, a shopping centre in Ottawa. The Leikin Group was designed to remain a family business, with shareholders prevented from selling or transferring their shares to anyone other than the issue of Harry Leikin.

Each of Leikin's eleven grandchildren held an equal number of common shares. When the relationship between them began to deteriorate, eight shareholders decided to sell their shares to the remaining three. Extensive negotiations ensued, central to which was the value of College Square. The parties acknowledged that the value attributed to the shopping centre would determine the amount the selling shareholders would receive. Ultimately, they agreed on a value of $60 million and executed a share redemption agreement whereby each member of the selling group received $3.395 million.

A week later, the non-selling shareholders entered into an agreement with First Capital Realty ("FCR") to purchase a fifty percent interest in College Square. This transaction was based on a value for the shopping centre of $78.8 million.

The appellants, six of the eight members of the selling group, commenced an action against the non-selling group, FCR, the Leikin Group, and the Leikin Group's lawyers and accountants, seeking damages of $11 million, which they claimed was the non-selling shareholders' profit from their deal with FCR. The appellants claimed that the defendants owed them a fiduciary duty, which they breached by withholding information about discussions between the non-selling shareholders and FCR during the negotiations leading to the share redemption.

On motions for summary judgment, the motions judge dismissed the claim against FCR and directed a trial against the remaining defendants. He ordered that the trial judge adopt a "hybrid" approach pursuant to Rules 20.05(1) and (2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. In keeping with this directive, the trial judge made extensive use of the evidence filed on the summary judgment motions, supplemented by findings based on evidence led at trial. He found no fiduciary relationship between the selling and non-selling shareholders or the Leikin Group's professional advisors, and dismissed the appellants' claims.

The appellants appealed on both procedural and substantive grounds. They submitted before the Court of Appeal that the hybrid model adopted by the trial judge deprived them of control of the "trial narrative" and was contrary to the Court's directions in Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, 108 O.R. (3d) 1. They further argued that the trial judge erred in fact and law in his analysis of the fiduciary duty issue. In addition, the appellants sought leave to appeal the costs order, submitting that while substantial indemnity costs were warranted, the trial judge's order of over $2.5 million was neither fair nor reasonable.

Writing for the Court, Sharpe J.A. noted that the appellants had no right of appeal on procedural grounds. Following the motions for summary judgment in 2011, the appellants appealed the portion of the order dismissing their claim against FCR, but they did not challenge the part of the order that directed a hybrid approach to the trial. They then proceeded with a trial in accordance with that directive. To allow them to challenge the fairness of the order now that they had been disappointed at trial would be "contrary to law and common sense."

Sharpe J.A. held, in any event, that the terms of the judge's directions fell within the language of Rule 20.05 and the recent decision of the Supreme Court in Hryniak v. Mauldin, 2014 SCC 7, 314 O.A.C. 1 (S.C.C.). In that case, which modified Combined Air, the Supreme Court explained that Rule 20.05 allows the judge "to use the insight she gained from hearing the summary judgment motion to craft a trial procedure that will resolve the dispute in a way that is sensitive to the complexity and importance of the issue, the amount involved in the case, and the effort expended on the failed motion." In Sharpe J.A.'s view, that was precisely what the motions judge did in this case.

The appellants argued that despite its modification of Combined Air, the Supreme Court did not overrule the Court of Appeal's direction that while Rule 20.05 may be used "to salvage the resources that went into the summary judgment motion," it "should not be applied so as to effectively order a trial that resembles the motion that was previously dismissed." Sharpe J.A. rejected the suggestion that the trial was simply "a reconfiguration of the dismissed motion", noting that the trial judge afforded the parties considerable latitude in presenting their case. Sharpe J.A. also noted that the appellants did not challenge any aspect of the procedure during the trial itself, emphasizing that a party cannot appeal on the basis of some aspect of trial procedure to which it did not object, only to complain on an unfavourable result. Moreover, the appellants failed to identify any aspect of the trial that was unfair or prejudicial, nor did they demonstrate that they were prevented from putting forth the case they wanted. Sharpe J.A. denied the appellants' motion to file fresh evidence to establish that they objected to the trial management process following the release of the decision in Combined Air, noting again that the appropriate way to challenge the trial management order was to appeal the order, and finding that, in any event, the proposed evidence would not affect the outcome of the appeal.

Turning to the substantive aspect of the appeal, Sharpe J.A. wrote that the trial judge thoroughly reviewed the evidence and made detailed findings, three of which were fatal to the appellants' claims with respect to the fiduciary duty that they claim they were owed. The trial judge found that the relationship between the selling shareholders and the non-selling shareholders was "adversarial, bitter, acrimonious, and marked by distrust." This lack of trust not only led to the share redemption negotiations, but was reflected in them. The trial judge held that negotiations between bitter adversaries do not tend to attract the imposition of a fiduciary duty and that the relationship between the parties significantly undermined the appellants' claim that the non-selling shareholders owed them a duty to protect their interests during the negotiations. The trial judge also found that there was no "bought deal" between the non-selling shareholders and FCR, nor did the non-selling shareholders know during the share redemption negotiations that FCR was prepared to pay a specific price for College Square. Finally, the trial judge held that the non-selling shareholders refused the selling shareholders' requests for a "tag-along" clause and for representations that they had no information that might deter them entering into the agreement and no intention to sell College Square. Despite these refusals, the appellants - on the advice of legal, accounting and real estate professionals - proceeded with the agreement.

These findings, which were well-supported by the evidence, led the trial judge to conclude that the non-selling shareholders did not owe the selling shareholders a duty to act in their interests when negotiating the share redemption agreement.  Sharpe J.A. found the trial judge properly rejected the claims for breach of fiduciary duty.

Finally, on the matter of costs, Sharpe J.A. found that the trial judge's extensive reasons revealed no error in principle. The order was fair and reasonable.

3. Simpson Wigle Law LLP v. Lawyers' Professional Indemnity Company, 2014 ONCA 492 (Gillese, van Rensburg and Hourigan JJ.A.), June 25, 2014

Simpson Wigle Law LLP was insured by the Lawyers' Professional Indemnity Company under a policy with a limit of liability of $1 million per claim, with an aggregate limit of $2 million. The appellants, the law firm and two of its associates, brought an application for a declaration that allegations in an underlying action against them constituted two separate claims under the Policy, rather than a single claim.

The action was brought by the estate trustees of Angelo Agro, a former client of the firm, in connection with a Committeeship Application - in which the appellants and CIBC Trust Corporation asked the court to declare Angelo mentally incompetent and to appoint them committees of Angelo's person and estate - and the sale of properties jointly owned by Angelo and his brother Frank.

The Statement of Claim sought declarations that the appellants acted in breach of their fiduciary obligations owed to Angelo and his estate and that they acted in a conflict of interest with respect to the administration of Angelo's person and estate. The claim sought damages for breach of fiduciary duty, breach of contract and negligence, and an order disgorging all fees received by the appellants in respect of the administration of the person and affairs of Angelo after the Committeeship Application was granted.

The appellants argued before the application judge that the allegations contained in the Statement of Claim gave rise to at least two separate claims: one arising from the improper appointment of Francis Wigle and CIBC as committees of Angelo's person and estate, and another arising from the conflict of interest due to the various roles that Francis Wigle and Paul Milne played in respect of Angelo's and Frank's estates.

The claims advanced in the Statement of Claim fell within Part V(b)(ii) of the Policy, which provided that:

All claims ... which arise from a single or related error(s), omission(s), or negligent act(s), shall be considered a single claim regardless of the number of insureds or the number of persons or organizations making a claim or the time or times the error(s), omission(s) or negligent act(s) took place.

Acknowledging that the application turned on whether the two allegations were "related", the application judge found that they were related within the meaning of the policy. Importantly, the application judge excluded from his analysis certain losses outlined in the claim because the Policy does not insure against disgorgement of fees or provide coverage to CIBC.  The application judge concluded that the allegations made in the Statement of Claim constituted one claim for the purposes of the Policy.

The appellants argued before the Court of Appeal that the application judge erred in finding that the facts alleged in the Statement of Claim disclosed a single claim under the Policy. They asked the Court to set aside the judgment and declare that the Statement of Claim disclosed more than one claim.

Writing for the Court of Appeal, Gillese J.A. agreed with the appellants that the application judge erred in his approach to deciding whether the Statement of Claim disclosed more than one claim when he considered only the negligence claims in respect of the sales of the real property. The application judge was correct that the Policy does not apply to any claim relating to legal fees and does not provide coverage to CIBC; however, he misunderstood the nature of the damages being sought as the disgorgement of fees paid rather than the recovery of funds spent on Angelo's behalf due to the wrongful appointment of Wigle and CIBC as committees of Angelo's person and estate.

Turning to the question of whether the Statement of Claim disclosed more than one claim within the meaning of the Policy, Gillese J.A. considered the meaning of the word "related" in the relevant provision. Canvassing the relevant jurisprudence, Gillese J.A. found that two or more errors, omissions or negligent acts are "related" where there is "a sufficient association or connection between them", reading the Policy as a whole and with a view to its objective. Determining whether there is a sufficient association or connection requires a consideration of the similarities and differences between the nature and kind of the alleged misconduct which underlies each claim, and the character of the losses for which recovery is sought in each claim.

While noting that the claims were related on a general level, Gillese J.A. emphasized that the court must look beyond generalities to the particular errors, omissions or negligent acts underlying them. With this is mind, Gillese J.A. found that Statement of Claim contained two separate and distinct claims. Underlying the improper committee appointment was the appellants' failure to disclose crucial information to the court that heard that Committeeship Application, notably that Angelo had named his nephew as an alternate attorney in his powers of attorney.  Angelo's estate trustees sought damages representing the fees and expenses incurred as a result of Wigle and CIBC being appointed as Angelo's committees. Meanwhile, underlying the property claim were acts relating to the appellants' sale of properties in which Angelo had an interest and the damages claimed were for the diminution in the value of Angelo's estate resulting from the sales. Gillese J.A. concluded that the two claims arose from errors, omissions or negligent acts that are "sufficiently different in nature and kind" that they were not related within the meaning of the Policy. 

4.  Hincks v. Gallardo, 2014 ONCA 494 (Gillese, van Rensburg and Hourigan JJ.A.), June 26, 2014

This case, which arose from the dissolution of a same-sex partnership, presented the Court of Appeal with the opportunity to consider the meaning of the words "spouse" and "marriage".

Wayne Hinks and Gerardo Gallardo met in Ontario in 2009. Shortly thereafter, they moved to England, where they entered into a civil partnership under the United Kingdom's Civil Partnership Act 2004 (U.K.), c. 33, a regime which operated as the legal equivalent of marriage for same-sex couples, who were at that time unable to marry in the U.K. The couple later returned to Ontario, where they separated.

Hinks brought an application seeking relief under the Divorce Act, R.S.C. 1985, c. 3, and the Family Law Act, R.S.O. 1990, c. F.3. Gallardo argued that the parties were not spouses within the meaning of either statute. Hinks then moved for a declaration that the parties' civil partnership was a marriage under the Civil Marriage Act, S.C. 2005, c. 33.  Both the Attorney General of Canada and the Attorney General of Ontario elected to intervene in the motion.

The motion judge concluded that failing to recognize the parties' civil partnership as a marriage would "run contrary to the express values of Canadian society, expressed in both case law, and the statute itself and would constitute impermissible discrimination". She declared that the partnership was a "marriage" as defined by the Civil Marriage Act and the parties were "spouses" as defined by the Divorce Act and the Family Law Act.  Gallardo appealed.

Writing for the Court, Hourigan J.A. reiterated that the modern approach to statutory interpretation requires a court to consider the language of the statute in its ordinary sense along with the scheme and object of the legislation and the intention of Parliament. The motion judge had adopted the submissions of the Attorney General of Ontario that the parties deliberately and formally changed their legal status from singles to partners, while living in a relationship that was "functionally equivalent" to a marriage under the Family Law Act. When they entered into their civil partnership, the couple chose to be governed by a regime which was the statutory equivalent of that applying to married spouses in the United Kingdom. Importantly, in choosing to enter into a civil partnership, they chose an economic partnership that came with equal rights and responsibilities to those of married persons upon the breakdown of the relationship. The motion judge concluded that when interpreting the word "spouse" in section 1 of the Family Law Act according to the modern approach to statutory interpretation, the parties must be considered spouses.

Hourigan J.A. agreed, finding that the motion judge's interpretation achieved one of the fundamental purposes of the statutes, to provide the estranged parties with "an equitable and certain process for resolving their economic issues arising out of the dissolution of their relationship." By contrast, the interpretation advanced by the appellant would result in the couple being treated, essentially, as "legal strangers".  

The motion judge rejected Gallardo's submission that a civil partnership in the United Kingdom cannot be considered a marriage because it is not recognized as such under U.K. law. She distinguished the case from that of Nova Scotia (Attorney General) v. Walsh, 2002 SCC 83, [2002] 4 S.C.R. 325, in which Supreme Court held that heterosexual couples could choose either to marry or to cohabit and that to impose the rights and obligations of married spouses onto those who had chosen to cohabit was a violation of their autonomy. The parties in this case did not have the same options. Hourigan J.A. agreed with the motion judge that declaring the parties' partnership a "marriage" under Ontario law would not, as the appellant suggested, similarly transform all civil partnerships entered into in Canada into marriages because, in Canada, all couples have the choice to marry. With a statutory regime which applies equally to all couples, Canada has no mechanism specifically governing same-sex civil partnerships; civil partnerships in Canada are therefore not comparable to those in the United Kingdom, which are restricted to same-sex couples as a statutory equivalent to marriage.  

Gallardo submitted that the motion judge erred in finding that the parties intended to change their status to the equivalent of marriage. He argued that the couple viewed their civil partnership as a transitory status that was not equal to a marriage, pointing to their decision not to marry in Ontario as proof of this position. He also claimed that the United Kingdom's recent passage of the Marriage (Same Sex Couples) Act 2013 (U.K.), c. 30, which legalized same-sex marriage while preserving the civil partnership regime, supported his contention that the couple's decision to become civil partners was distinct from the choice to marry.

Hourigan J.A. rejected these arguments, emphasizing that the parties' subjective intention is only relevant to the question of whether they entered into their partnership voluntarily. Without any evidence that either party entered into their civil partnership under duress or fraud, or lacking the capacity to understand its consequences, the task of the court is simply to consider the legal effect of that union. That effect was "to bestow upon the parties all the rights and responsibilities of marriage." Moreover, the motion judge could not account for legislation that did not exist: the U.K. Marriage Act had not been enacted at the time of the motion, and is still not in full effect. Regardless of the legality of same-sex marriage in the U.K., however, the parties' relationship was governed by the scheme under which they entered their union.

Gallardo advanced an additional submission before the Court of Appeal, arguing that the motion judge ought to have considered that the respondent could have sought relief under Part IV of the Family Law Act, which deals with domestic contracts. Hourigan J.A. was critical of the fact that this submission was not contained in the appellant's factum, but in any event found that it was without merit. Both the Family Law Act and the U.K.'s Civil Partnership Act are distinct from domestic contracts. While the terms of a civil partnership are imposed upon the parties through legislation, domestic contracts are private in nature and allow for bargaining. Interpreting the couple's civil partnership as a domestic contract would fail to respect this distinction, particularly when the parties could have entered into a private contract in the United Kingdom but instead chose to engage the state to recognize their relationship. Part IV of the Family Law Act deals with private agreements between individuals.  Even if it could be interpreted as suggested by the appellant, the notion that same-sex couples must enforce their rights through domestic contracts essentially sanctions a separate-but-equal regime for same-sex relationships. Such a regime was rejected by the Court in Halpern v. Canada (Attorney General) (2003), 65 O.R. (3d) 161, and is inconsistent with Charter values.     

5.  Trillium Motor World Ltd. v. General Motors of Canada Limited, 2014 ONCA 497 (Doherty, LaForme and Lauwers JJ.A.), June 27, 2014

The appellant law firms moved for an order dismissing or staying the third party claim issued by Cassels Brock & Blackwell LLP in Trillium Motor World's $750 million national class action against General Motors and Cassels Brock arising from the bailout of GM.

In the main action, the class members, terminated GM dealers, claimed that GM forced them to sign Wind-Down Agreements (WDAs) in breach of franchise law. They claimed that Cassels Brock was negligent in failing to provide them with appropriate advice about the protections available under provincial franchise law, and about the benefit of collective action.

In the third party actions, Cassels Brock claimed that it was retained by the Canadian Automobile Dealers' Association and not by any of the individual dealers.  However, it sought contribution and indemnity from the third party law firms that provided the individual dealers with independent legal advice on the advisability of signing the WDAs, if found to have been retained by the dealers themselves and liable in negligence. Cassels Brock also submitted that if it were found to be liable to the class members for failing to provide appropriate advice about the WDAs, the lawyers retained by the dealers were liable as well.  Cassels Brock added about 150 law firms as third party defendants.

One jurisdictional motion to stay or dismiss the claims was brought by the 32 third party law firms based in Quebec, and another by 51 other law firms outside of Quebec and Ontario. The firms argued that the Ontario Superior Court lacked jurisdiction over the actions because none of the presumptive connecting factors outlined in Club Resorts Ltd. v. Van Breda, 2012 SCC 17, [2012] 1 S.C.R. 572, were engaged by the third party actions. The firms submitted in the alternative that the court should decline to exercise its jurisdiction on the basis of forum non conveniens, applying the principles in Van Breda.

The motion judge found that the court did have jurisdiction over the third party actions and the principle of forum non conveniens did not suggest another jurisdiction was more appropriate.  The Quebec firms appealed the dismissal of their motion.

The fourth Van Breda factor requires that a contract connected with the dispute have been made in the province. The motion judge found that the WDAs were such a contract.  Writing for the Court of Appeal, Lauwers J.A. rejected the appellants' contention that the only contracts relevant to the fourth presumptive connecting factor were the individual retainer agreements between the class members and their counsel. Lauwers J.A. instead agreed with the motion judge that relevant to the analysis was the work undertaken by the appellants under those retainers, namely the legal advice given in relation to the WDAs.

Lauwers J.A. further agreed with the motion judge that the WDA was an Ontario contract, both in terms of traditional contract placement rules and a broader contextual analysis. The motion judge's finding that the last and relevant act of contract formation occurred at GM's head office in Oshawa, where the Vice-President of the company accepted and signed the WDAs returned by the dealers that had executed them, was supported by the evidence. Moreover, the broader context supported the correctness of the motion judge's finding that the WDAs were Ontario contracts: the WDAs expressly stated that they were governed by the laws of Ontario and that the parties attorned to Ontario's jurisdiction in the event of a dispute, GM's head office was located in Ontario and the majority of the affected dealers were located in Ontario. The overall structure of the business relationships and the dispute was therefore "deeply related to Ontario."

The second Van Breda factor requires that the defendant carry on business in the province. The motion judge found that the firms characterized as "national law firms" were caught under this presumptive connecting factor because they had offices in Ontario. The appellants argued in the Court of Appeal that the motion judge erred in failing to find that the presumption had been rebutted, consistent with the Supreme Court's finding in Van Breda that "the presumption can be rebutted by showing that the subject matter of the litigation is unrelated to the defendant's business activities in the province." The appellants noted that only those lawyers working in Quebec were involved in the wind-down of the terminated dealers, and therefore argued that the relationship between the subject matter of the litigation and Ontario was weak.

In light of the applicability of the fourth presumptive connecting factor, Lauwers J.A. declined to address the second, preferring to leave the issue of the role of national law firms, and the application of the real and substantial test to them, to a future case.

The motion judge also refused to decline jurisdiction over the third party actions on the basis of forum non conveniens, finding that Ontario was the most appropriate and convenient forum given the concentration of the third parties in Ontario and the distribution of the others across the country. Lauwers J.A. rejected the appellants' submission that the motion judge did not apply the factors for addressing forum non conveniens, finding that while he did not expressly carry out the Van Breda analysis, the motion judge was alive to the issues, and particularly to the "relative strengths of the connections", in concluding that it would be reasonable to expect that the out-of-province lawyers would be called to answer the legal proceedings in Ontario. Lauwers J.A. inferred that the motion judge's decision was designed to avoid inconsistent results.