Canada: Ontario Court Of Appeal Summaries (April 20 – 24, 2015)

Hello everyone. It was a busy week for the Court of Appeal.

This week, the court dealt with the appropriate treatment of financial assistance, statutory accident benefits and various other settlement allocations in the context of a bankruptcy following a motor vehicle accident. It upheld an Environmental Review Tribunal decision that found serious and irreversible harm to the Blanding's turtle and put the brakes on plans to develop a wind farm in Prince Edward County.

In the area of civil procedure, there was a forum non conveniens decision which found that England was a more appropriate forum than Ontario to litigate a matter dealing with abduction, incarceration and torture in Iran. The court also dealt with whether summary judgement was an efficient and proportionate way to deal with an action commenced as a simplified proceeding under Rule 76.

The court dealt with various contract disputes. One case dealt with liability for road resurfacing work; a second dealt with whether the terms of various agreements allowed a party to withhold funds owing under a promissory note; a third dealt with whether Alberta's ultimate limitation period of 10 years or Ontario's ultimate limitation of 15 years applied in a particular context; and a fourth dealt with the applicability of an entire agreement clause in a real estate agreement of purchase and sale.

With regard to damages, the court clarified whether punitive damages could be joint and several, and whether punitive damages could be made against, rather than in favor, of a deceased's estate.

In family law, the court decided whether allowing overnight visits by a parent in a custody dispute would be in the child's best interest.

There were also several reviews of Ontario Review Board decisions.

Conforti (Re), 2015 ONCA 268

[Laskin, Blair and Pepall JJ.A.]

Counsel:

Robert A. Klotz, for the appellant, Vincenzo Francesco Conforti

Howard F. Manis and Debora Miller-Lichtenstein, for the respondent Trustee in Bankruptcy, Pat Robinson Inc.

Keywords: Bankruptcy Law, Bankruptcy and Insolvency Act, Motor Vehicle Accident, Calculation of Total Income, Surplus Income for Distribution to Creditors, Financial Assistance, Statutory Accident Benefits

Facts:

The appellant, Vincenzo Francesco Conforti, was permanently disabled as a result of a motor vehicle accident and was unable to continue to work in his previous employment as a truck driver. He claimed statutory accident benefits ("SABs") and also commenced an action for damages. Two and a half years after the accident, he filed an assignment in bankruptcy. While bankrupt, he received financial assistance from the Ontario Ministry of Community and Social Services (the "Government"). He also received proceeds from the settlements of his SABs claim and his action. The appellant failed to disclose either of the settlements to his Trustee in Bankruptcy.

As part of the bankruptcy proceedings, the Trustee was required to calculate the appellant's total and surplus income under s. 68 of the Bankruptcy and Insolvency Act to ascertain if any amount was available for distribution to the appellant's creditors. The Trustee sought directions from the court on the appropriate treatment to be accorded the financial assistance and the settlement payments received by the appellant. At the same time, the appellant asked the court for a discharge from bankruptcy.

The motion judge provided directions and included all of the financial assistance, all of the SABs settlement, and a pro-rated portion of the settlement of the action proceeds in the appellant's total income calculation. This resulted in surplus income of $27,986.28 available for creditors. He also imposed a $15,000 penalty on the appellant due to his non-disclosure. The appellant was granted a discharge upon payment of these two sums.

The appellant appealed certain parts of the motion judge's order. He submitted that the motion judge erred in his treatment of the financial assistance and settlement payments and in his pro-rating methodology. He argued that no surplus income was owed to the Trustee for distribution to creditors. He accepted that he should be admonished for his conduct, but submitted that a penalty of $15,000 was only appropriate if no surplus income was payable.

Issues:

(1) Did the motion judge err in including the financial assistance payments in the appellant's total income calculation?

(2) Did the motion judge err in including the settlement allocations for future care, housekeeping and costs, disbursements and HST, less an additional amount in legal fees, in the total income calculation?

(3) Did the motion judge err in including all of the SABs settlement proceeds of approximately $21,000 in the appellant's total income calculation?

(4) Did the motion judge err in pro-rating the funds allocated to future loss of competitive advantage over the applicant's years in bankruptcy relative to his estimated remaining working life of 15 years?

(5) Did the motion judge err in ordering a penalty of $15,000?

Decision: Appeal allowed, in part

Reasoning:

(1) Yes. Following the accident, the appellant received SABs at the rate of $1,600 per month after tax until December 31, 2008. He then claimed additional SABs payments and also applied for financial assistance from the Government. The Government agreed to pay the fees for his assignment into bankruptcy and to provide him with monthly financial assistance. In return, the appellant agreed to reimburse the Government from the proceeds of his personal injury action. The repayment obligation was secured by an assignment of those proceeds. The agreement and the assignment are signed and dated February 2009. Thereafter, the appellant received financial assistance payments monthly. The appellant was not bankrupt in February 2009 when he signed the agreement and gave the assignment to the Government. The assignment was security to ensure repayment of the loan made by the Government to the appellant. At the time, it was open to him to give an assignment of the fruits of his personal injury action.

The Trustee never challenged the assignment, nor put the Government on notice of an issue with it. The Government did not file a proof of claim in the bankruptcy and there was no evidence before the court on the issue of perfection. The Government loan cannot be described as a substitution for income, akin to income, in the nature of income or to have retained its (previous) character of income. Subject to the issue of perfection, it would appear to be a secured debt. The motion judge's decision left the appellant exposed to an obligation to repay 100 per cent of the debt to the Government, while the inclusion of this amount in the appellant's total income calculation effectively imposed an additional payment obligation on him. The motion judge erred in including approximately $38,000 on account of the financial assistance payments in the appellant's total income calculation

(2) Yes. The motion judge erred in treating any part of the amount received for legal costs, disbursements and HST as income received by the appellant. The court found that the payments for future care and housekeeping were personal to the appellant and akin to damages on account of pain and suffering. They should not be included in the total income calculation.

(3) No. The appellant paid all of the SABs settlement proceeds to a Mr. Crupi. He did not disclose any debt owed to Mr. Crupi in his statement of affairs; he did not disclose the debt to his Trustee; and he did not disclose to the Trustee that he had paid the full sum of $21,892.59 to Mr. Crupi. In these circumstances and based on the record before him, it was open to the motion judge to treat this lump sum payment as income in the year of receipt.

(4) Yes. Before the motion judge, the appellant argued that all of the funds allocated to future loss of competitive advantage should be pro-rated over the appellant's years in bankruptcy relative to his estimated remaining work life of 15 years. The motion judge acceded to the appellant's submissions but applied a fraction of 4/15. Before the Court of Appeal, the appellant argued that the numerator was in error and that the pro-rating fraction should have been 2/15 reflecting the two years between the settlement of the personal injury action on February 10, 2010 and the appellant's discharge in May 2012 and not the 4/15 applied by the motion judge. The allocation on account of future loss of competitive advantage is in the nature of a general damages payment and, as such, the date of the settlement is the proper commencement date for the calculation. The motion judge correctly pro-rated the settlement payment of $100,000 over 15 years but used the September 24, 2009 date of the assignment into bankruptcy and the May 2012 date of discharge as the relevant dates for the purpose of calculating the appellant's total income. Instead, the relevant dates were February 10, 2010 and May 2012. These dates result in a fraction of 2/15.

(5) No. In the event that the appeal on surplus income was allowed, the appellant had no objection to the penalty of $15,000, The penalty of $15,000 was therefore affirmed.

Kalra v. (Re), 2015 ONCA 262

[Doherty, Cronk and Hourigan JJ.A.]

Counsel:

Andrew Menchynski, for the appellant

Kevin Rawluk, for the Crown respondent

Michelle O'Bonsawin, for the Brockville Mental Health Centre

Keywords: Endorsement, Administrative Law, Mental Health, Conditional Discharge

Holding: Appeal dismissed.

Reasoning: The Board's order continuing the conditional discharge was not unreasonable and it did not reflect a failure to approach its task in accordance with the binding authorities. The Court did not read Winko v. British Columbia (Forensic Psychiatric Institute), [1999] 2 S.C.R. 625 as requiring that the Board identify a specific risk or harm in its assessment.

The Board dealt with the attitude of the appellant's parents toward his illness as opposed to the merits of the cultural explanation for that attitude. The Court found that the Board was correct in taking that approach and did not misapprehend that evidence.

Olumide v Ottawa (City), 2015 ONCA 271

[Laskin, Lauwers and Hourigan JJ.A]

Counsel:

Ade Olumide, appellant appearing in person

Jeremy J. Wright and Karen Papadopoulos, for the respondent

Keywords: Endorsement

Facts:

Mr. Olumide appeals the decision of Justice Hackland dated December 12, 2014.

Issue:

(1) Did the judge err in dismissing the application?

Holding:

Appeal dismissed. Costs of $375 awarded for Mr. Wright's expenses.

Reasoning:

(1) No, Justice Hackland made no error in dismissing the application.

Prince Edward County Field Naturalists v. Ostrander Point GP Inc., 2015 ONCA 269

[Cronk, Juriansz and Epstein JJ.A.]

Counsel:

Eric K. Gillespie and E. Wallace, for the appellant Prince Edward County Field Naturalists

Sylvia Davis and S. Kromkamp, for the respondent the Ministry of the Environment

Neil Finkelstein, D. Hamilton and B. Kain, for the respondent Ostrander Point GP Inc.

John B. Laskin and A. Smith, for the intervener Canadian Wind Energy Association

Stephen Hazell, for the intervener Nature Canada

Stephen G. Paliare and A.K. Lokan, for the intervener Prince Edward County South Shore Conservancy

Keywords: Environmental Law, Renewable Energy Approval, Judicial Review, Fresh Evidence, Environmental Protection Act, ss. 142.1(3)(b), ss. 145.2.1(2), s. 145.6, Green Energy Act, Endangered Species Act, Serious and Irreversible Harm to Animal Life, Dunsmuir v. New Brunswick

Facts: The subject of this appeal involved a Renewable Energy Approval ("REA") which the Director for the Ministry of the Environment ("Director") granted the respondent, permitting the construction of wind turbines ("the project") on a parcel of Crown land in Prince Edward Country, Ontario. The REA was issued, pursuant to the Green Energy Act, 2009, S.O. 2009, and amendments made under the Environmental Protection Act, R.S.O. 1990 ("EPA"). Subsequently, the appellant appealed the Director's decision to grant the REA to the Environmental Review Tribunal, pursuant to ss. 142.1(3)(b) of the EPA. The appellant claimed that the proposed construction would cause serious and irreversible harm to a variety of animal and plant species and the natural environment, namely birds, bats, butterflies, turtles and alvar plants and the alvar ecosystem. In reaching its decisions, the Tribunal applied its authority under ss. 145.2.1(2) of the EPA, which provides:

The Tribunal shall review the decision of the Director and shall consider only whether engaging in the renewable energy project in accordance with the renewable energy approval will cause,

a) serious harm to human health; or

b) serious and irreversible harm to plant life, animal life or the natural environment.

The tribunal allowed the appeal. Applying the above statutory test, the Tribunal found that the project would cause serious and irreversible harm to only one animal species, the Blanding's turtle. The Tribunal also revoked the REA initially granted to the respondent.

The appellant then appealed the Tribunal's decision to the Divisional Court, regarding serious and irreversible harm that would be caused to birds and alvar if the project proceeded. Additionally, the respondent and the Director appealed from the Tribunal's finding of serious and irreversible harm to the Blanding's turtle and its decision to revoke the REA. The Divisional Court dismissed the appellant's appeal and allowed the appeal of the respondent and the Director, thereby setting aside the Tribunal's finding of serious and irreversible harm to the Blanding's turtle and the revocation of the REA.

The appellant was subsequently granted leave to appeal to the Court of Appeal. The respondent cross-appealed, claiming the Divisional Court erred in dismissing its fresh evidence application.

Issues:

(1) Did the Divisional Court identify the appropriate standard of review and apply it correctly when setting aside the Tribunal's finding of serious and irreversible harm to the Blanding's turtle and revocation of the REA?

(2) Did the Divisional Court err in refusing the respondent's cross-appeal to admit fresh evidence?

(3) Did the Divisional Court err in finding the Tribunal erred by not exercising its remedial discretion to decide that it could not overrule the policy of the Ministry of Natural Resources ("MNR") to keep public roads open to vehicles while the project was under construction?

Holding: The appeal was allowed in part. The Tribunal's conclusion that the project would cause serious and irreversible harm to the Blanding's turtle, if permitted to proceed, was restored. The respondent's cross-appeal to admit fresh evidence was allowed. The aspect of the cross-appeal with respect to the lack of procedural fairness accorded to the parties by the Tribunal was allowed. The matter of the appropriate remedy was remitted back to the Tribunal, where the parties will be given an opportunity to make submissions on it before a ruling is made. No costs were awarded to either party, given the mixed success on the appeal and cross-appeal.

Reasoning:

Issue 1

No. The Divisional Court correctly identified that the reasonableness standard applied to its review of the Tribunal's decisions with respect to findings of serious and irreversible harm under ss. 145.2.1(2) of the EPA, but it failed to correctly apply this standard. The Tribunal's decision on this issue was found to be reasonable.

In finding that the Tribunal's decision on the matter of serious and irreversible harm to the Blanding's turtle was unreasonable, the Divisional Court pointed to three major errors:

1. The Tribunal dealt with serious harm and irreversible harm together and failed to explain its reasons for concluding that the harm would be irreversible;
2. The Tribunal concluded there would be serious and irreversible harm without evidence of the size of the population of Blanding's turtle, the current level of vehicular traffic on the Area and the degree of increase in vehicular traffic that would result from the project; and
3. The Tribunal failed to give sufficient weight to the existence of the permit granted to the respondent under Ontario's Endangered Species Act, 2007, the conditions attached to that permit, the obligation of the MNR to monitor and enforce the permit, and the fact that the REA expressly required the respondent to comply with the ESA permit.

The Court of Appeal found that the three errors of the Tribunal found by the Divisional Court did not demonstrate that the Tribunal's decision on this issue was unreasonable. In its review, the Court of Appeal applied the test for judicial review from Dunsmuir, and found that in determining whether a Tribunal's decision is reasonable, the reviewing court is concerned with "justification, transparency and intelligibility" of its reasons. Furthermore, the Tribunal's decision will be held to be reasonable if its reasons demonstrate that the result falls within a range of possible reasonable outcomes.

Applying the test for reasonableness from Dunsmuir, the Court of Appeal held on the first alleged error that the Divisional Court erred in finding that the Tribunal erred in failing to engage in a separate analysis of serious harm and irreversible harm in this case. Whether the project would cause serious harm required no analysis and the Tribunal's analysis focused on whether the harm was irreversible. Since all parties agreed at the hearing before the Tribunal that the project would create serious harm to the Blanding's turtle, it was not necessary for the Tribunal to consider this aspect of the test under ss. 145.2.1(2)(b) of the EPA.

Reviewing the second alleged error, it was held that the Tribunal did not err in any of these respects. It was found that the Tribunal could reasonably accept the evidence of two experts that the project would cause serious and irreversible harm without having specific numerical data on the turtle's population size, the volume of traffic, and the rate of mortality. Furthermore, the Tribunal's reasons for accepting the opinions of these experts were found to be intelligible, and its conclusion there would be serious and irreversible harm falls within the range of reasonable outcomes and should not be disturbed.

With respect to the third alleged error, it was found that the Tribunal did not err in this respect. The Tribunal correctly considered the evidence of an MNR official who testified that in granting the ESA permit, the MNR concluded that the project would bring an "overall benefit" to Blanding's turtle in Ontario. Regardless of this testimony the Tribunal had the authority under the ss. 145.2.1(2)(b) of the EPA and did in fact explain that it was considering the impact of the project on the local population of Blanding's turtle in the immediate area, and not in all of Ontario. Furthermore, the ESA permit was not binding on the Tribunal, because the permit expressly states that it does not release the respondent from the "obligation to obtain permission under or to comply with all applicable federal, provincial and municipal laws." Therefore, the respondent was obliged to comply with the EPA's requirement that it obtain an REA and abide by the decision of the Tribunal if the granting of the REA was appealed.

Issue 2

Yes. The Divisional Court erred in two respects in refusing to permit the respondent to admit fresh evidence of the steps it was taking (after the hearing at the Tribunal was held) to have the roads surrounding the proposed project location closed to the public. The Court of Appeal granted the respondent's cross-appeal to admit this fresh evidence.

In the first respect, it was held that the Divisional Court erred by applying the test for fresh evidence too strictly when it reasoned that the respondent could have led the evidence before the Tribunal if it had exercised reasonable diligence. The Divisional Court reasoned that the respondent knew that road mortality of the turtles was an issue at the time of the Tribunal hearing, and it could have taken steps to lease the property and close the access roads prior to the end of the (tribunal) hearing. If it had done so, it was reasoned that the respondent could have led evidence of the roads' closure before the Tribunal hearing. The Court of Appeal responded to this reasoning by holding that the parties were not in a position to address ways to reduce possible harm to the turtles without first knowing the Tribunal's decision on the merits. In other words, the respondent was not in a position to mitigate potential risk of harm to the turtles until the Tribunal rendered its decision on the level and type of harm to the turtles that the project would create.

The Divisional Court's second reason for dismissing the fresh evidence application was that the fresh evidence pertained to the "facts." The Divisional Court noted that its jurisdiction on the appeal was limited to questions of law under s. 145.6 of the EPA. On this point, the Court of Appeal held that the fresh evidence about road closures was not tendered solely to address factual issues. The respondent specifically attempted to admit this evidence at the Divisional Court to demonstrate that the Tribunal made two errors of law by failing to provide the parties with procedural fairness and by misinterpreting its statutory remedial authority under the EPA.

Issue 3

No. The Divisional Court correctly found that Tribunal failed to give the parties an opportunity to address the issue of the appropriate remedy, and thereby violated the principles of natural justice and procedural fairness. Specifically, the Tribunal made the following remark, which demonstrates that its decision on this matter was not clear and therefore not reasonable-"[it was] not in a position to alter the decision of the Director, or to substitute its opinion for that of the Director." The Tribunal here was referring to the fact that it was not in a position to alter the Director's decision, as part of the grant of the REA, to maintain public access to the roads. By making the statement that it was "not in a position", this suggests that the Tribunal needed to hear submissions from both parties to make an informed decision about whether or not public access to the roads could be maintained and whether this would affect the grant or revocation of the REA.

Bouzari v Bahremani, 2015 ONCA 275

[Juriansz, Rouleau and van Rensburg JJ.A.]

Counsel:

No one appearing for the appellant
M.H. Arnold, for the respondents

Keywords:
Intentional Torts, Torture, Conflict of Laws, Club Resorts Limited v Van Breda, Forum Non Conveniens, Juridical Advantage

Facts:
The respondents were Houshang Bouzari ("Bouzari"), his wife, and children. Bouzari was a former Iranian national who is now a Canadian citizen and resident of Ontario. Bouzari alleged that in 1993, the appellant Mehdi Hashemi Bahremani (referred to in the proceedings as "Hashemi") and his co-defendants compelled Bouzari's abduction, incarceration, and torture in Iran.

In 2005, the respondents commenced these proceedings against Hashemi and others in the Superior Court. The action was not defended, and on August 26, 2011, the respondents obtained default judgment against Hashemi. In granting default judgment, Low J. noted that the Superior Court took jurisdiction as a forum of necessity because there was no reasonable basis upon which the plaintiffs could be required to commence the action in a foreign jurisdiction, particularly Iran, the state where the torture took place.

Hashemi brought a motion to set aside the default judgment, which was originally opposed by Bouzari. On June 25, 2013, the motion was granted on consent, with terms permitting Hashemi to move to challenge the forum. The parties agreed it was impossible to litigate the dispute in Iran. However, Hashemi – a citizen of Iran, with no connection to Canada, who had been living and studying in England – brought a forum non conveniens motion, asserting that the Ontario action should be stayed in favour of Bouzari and his family commencing proceedings in England. By the time the motion was argued, however, Hashemi had voluntarily returned to Iran to face prosecution, and was unable to leave that country. The motion judge concluded that Hashemi had not met his burden of proving England was clearly a more appropriate forum than Ontario and accordingly dismissed the motion.

Holding:

Appeal allowed.

Reasoning:
The motion judge's conclusion that Hashemi had not met the burden of proving that England was clearly the more appropriate forum was discretionary. The decision was worthy of deference, absent an error of law or a clear and serious error in the determination of the relevant facts

The Court of Appeal held that the motion judge made certain errors of fact which informed the exercise of her discretion. The first error was in relation to Hashemi's relative ability to travel to England and to Canada to defend proceedings. The motion judge concluded that there was "no evidence" that Hashemi would be denied entry to Canada to defend the litigation, when all of his previous efforts, including in the course of the motion, had been unsuccessful. The Court of Appeal found this reasoning "unreasonable". The evidence that Hashemi was twice denied visas to enter Canada for the very purpose of participating in these proceedings amply supported the inference that he would be denied entry in the future. This conclusion went directly to Hashemi's ability to defend himself in Canada and England.

The motion judge also erred in concluding, without evidence, that deferring to an English court might deprive the respondents of certain rights. It was not Hashemi's burden to prove that English law was the same as or would afford the same benefits as, Canadian law. The respondents adduced no evidence on the motion that an English court would apply English law, rather than the substantive law of Ontario or indeed Iran, the lex loci delicti, and that, if English law were to apply, that this would result in a juridical disadvantage. In any event, while the loss of a juridical advantage to a party can be a relevant consideration in the forum non conveniens analysis, it is a concept that should be applied with caution, having regard to the principle of comity.

Conducting a fresh analysis of the forum non conveniens question, the Court found that Hashdical aadvantageslso weighed in favour of England.hat Hashemi would be able to attend trial in England than in Ontario. The pemi met the burden of establishing that England was a more appropriate forum for the litigation, and the Ontario proceedings were stayed in favour of litigation in the alternative court. Hashemi had no connection to Ontario or Canada and both parties had some connection to England. All of the witnesses resided outside of Canada. Furthermore, Hashemi had consented to the action proceeding in England and it was more likely that Hashemi would be able to attend trial in England than in Ontario. The parties' choice of counsel also weighed in favour of England.

Bruell Contracting Limited v. J. & P. Leveque Bros. Haulage Limited, 2015 ONCA 273

[Feldman, Watt, and van Rensburg JJ.A]

Counsel:

Ronald Carr and Fatema Dada, for the appellant Jeffrey S. Percival, for AECOM Canada Ltd.

Charles Loopstra and Daron L. Earthy, for Bruell Contracting Limited

Tom Corbett and Marcia Oliver, for J. & P. Leveque Bros. Haulage Limited

Keywords: Construction Law, Contracts, Interpretation, Method Specification Contract, Expert Witnesses, Conduct of Counsel, Costs

Facts: This action arose out of a road surfacing contract between the Ontario Ministry of Transportation ("MTO") and the contractor, J. & P. Leveque Bros. Haulage Limited ("Leveque"). The contract was administered by the MTO and by Earth Tech Canada Inc., now AECOM Canada Ltd. ("AECOM"). AECOM was also the Highway Designer.

Between September 24, 2007 and October 1, 2007, Leveque and a subcontractor, Bruell Contracting Limited ("Bruell"), constructed a double lift surface treatment on Hwy. 575 near Verner, Ontario. Shortly after completion, the surface treatment began to show signs of failure. The MTO required Leveque to remove the initial surface and reapply it, then refused to pay for that work.

The two liability issues at trial were (i) who bore responsibility under the terms of the contract in the event of a performance failure? and (ii) what caused the surface treatment to fail? The MTO alleged that Leveque was responsible because, although Leveque used materials specified in the contract, it did not test the compatibility of the specific products it sourced. The MTO's position was that the resulting incompatibility of the materials caused the failure.

The trial judge found that the contract was a "method specification" contract, under which the contractor was not responsible for performance failure provided it followed the contract specifications, which in this case Leveque did. He also found that the primary causes of the failure were high binder application rates prescribed by the MTO, weather, and the heavy truck traffic that MTO allowed on the road before the surface had fully cured. The incompatibility of the resurfacing materials used was at most a contributing factor.

The trial judge rejected the opinion evidence of the MTO's expert witness, in part because he found improper conduct by counsel who instructed the expert. The trial judge also found that MTO personnel had acted improperly in a number of ways in their dealings with Leveque in regards to the remediation of the problem. The trial judge awarded full indemnity costs to Leveque because of his findings of misconduct by MTO personnel, including MTO counsel. He awarded mixed partial and substantial indemnity costs to Bruell. He also made the MTO responsible for AECOM's costs on a partial indemnity basis through a Sanderson order.

The MTO appealed the trial judge's interpretation of the contract, his findings regarding the cause of the failure of the surface treatment, his findings of misconduct by the expert witness and counsel, and the costs awards.

Issues:

1) Did the trial judge make a reversible error in the interpretation of the contract between MTO and Leveque?

2) Did the trial judge err in his finding that Dr. Maher's evidence was tainted by undue influence, and in his findings regarding the cause of the surface treatment failure?

3) In the alternative, should Leveque have been required to contribute to the cost of the remediation?

4) Did the trial judge err in his findings of litigation misconduct?

5) If so, does the error affect the costs award? And were the costs awards excessive and unreasonable?

Held: Appeal dismissed. Leave to appeal costs order granted. Costs Appeal allowed in part by reducing the amount of costs payable to Leveque by 20%.

Reasoning:

1) No. The court stated that deference is owed to a trial judge on questions of contractual interpretation, subject to extricable legal errors including the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor. The trial judge reviewed the contractual language and considered the explanations of the expert witnesses regarding the operation of a method specification contract as compared to a performance contract in the context of highway construction and resurfacing. The trial judge clearly preferred the evidence of the respondent's expert over the evidence of the appellant's expert and gave several reasons for this preference. The trial judge was entitled to accept the expert evidence that he did on the characterization of the contract. The court concluded that there was no extricable error in the trial judge's approach to the interpretation of the contract, nor in his conclusion that the contract specified everything the contractor was to do.

2) The court stated that it was conceded by the appellant that if the trial judge made no error in his interpretation of the contract or in his finding that the respondent Leveque was not liable under the warranty, then it would be unnecessary to decide the cause of the failure.

3) Similarly, the argument that Leveque should be held partially responsible for the failure of the surface treatment was premised on reversing the finding that the contract is a method specification contract. Therefore, again, the court found it unnecessary to address this question.

4) Yes. The court determined that there was no factual basis for the allegations of impropriety by trial counsel in his instructions, dealings or in the preparation of the expert report. The trial judge was unimpressed with the expert for other reasons, having heard his testimony and observing him under cross-examination. The trial judge was also concerned about the attitude displayed by MTO staff in their dealings with Leveque throughout. The court found that counsel's reputation for integrity is a precious commodity, not to be impugned without a clear, substantiated basis.

5) Yes. Although the amounts awarded were very high, the court found no basis in law or principle to interfere with the orders made. The court stated that the awarding of costs is a discretionary matter that attracts considerable deference on appeal, unless the trial judge makes an error in principle or the costs award is plainly wrong. It was noted that the trial judge was clearly very concerned about the conduct of the MTO throughout, and was satisfied that the award of costs should adequately reflect his concerns and disapproval.

However, the court found that one ground of appeal merited intervention. The trial judge ordered full indemnity costs against the MTO in favour of Leveque on the basis that MTO's misconduct was "unconscionable, egregious and reprehensible" and constituted bad faith. The court found that because part of the misconduct that influenced the trial judge's full indemnity costs award was the alleged misconduct attributed to trial counsel, a finding which was set aside on appeal, the award of costs at the full indemnity level no longer rested fully on findings supported by the record and the award was reduced by 20%.

D'Antonio v. Monaco, 2015 ONCA 274

[Sharpe, van Rensburg and Benotto JJ.A.]

Counsel:

Michael Simaan and N. Erskine-Smith, for the appellant

Rocco DiPucchio and S. F. Laubman, for the respondent

Keywords: Corporate Law, Oppression, Contract Interpretation

Facts:

D'Antonio, Monaco and Dzeko entered into a business arrangement to acquire a property and to erect a large commercial sign on it. They incorporated a company (the "Company") to purchase the property. Each received 1/3 of the Company's 300 shares. D'Antonio financed the company. In exchange:

(i) Monaco and Dzeko signed promissory notes in favour of D'Antonio for 1/3 of the amount invested by him. The notes were secured through a Share Pledging Agreement, which gave D'Antonio the right to forfeit their pledged shares upon his written notice of default on the notes.

(ii) Monaco and Dzeko executed an Assumption Agreement, wherein they promised to assume the other's unpaid debt to D'Antonio in exchange for receipt of the other's shares.

After running into legal and financial difficulty, the Company required more funds from shareholders. Dzeko was unable to satisfy that call. He signed an Ownership Alteration Agreement that stipulated that if he failed to provide the funds by a deadline, 100% of his interest "shall be transferred and be divided equally between" D'Antonio and Monaco. Dzeko never met the deadline and his involvement in the business ceased.

Disputes arose between D'Angelo and Monaco over Monaco's management of the property and his fees. Although Monaco eventually paid approximately 90% of the money owed to D'Antonio under the promissory notes and for Monaco's receipt of Dzeko's shares, Monaco withheld approximately 11% of the debt he owed.

D'Antonio successfully brought a claim against Monaco for, among other things, breach of fiduciary duty and oppression. The trial judge found that D'Antonio owned 55% of the shares, as Monaco was entitled to the shares for which he had paid. She further ordered a "shot-gun" buy-sell arrangement of the Company's shares with Monaco making the buy-sell offer.

Monaco appealed, arguing that the trial judge erred in failing to declare that Monaco and D'Antonio were each 50% owners of the Company by virtue of the operation of the Ownership Alteration Agreement.

Issue: Did the trial judge err in finding that Monaco's failure to pay 11% of his outstanding debt allowed D'Antonio to acquire more than 50% of the shares?

Holding: Appeal dismissed.

Reasoning:

No. The trial judge's interpretation of the agreements and the intentions of the parties was a question of mixed fact and law, and was entitled to deference. Her findings were reasonable in the circumstances.

The court did not accept that the Ownership Alteration Agreement was a stand-alone contract. The Ownership Alteration Agreement made no reference to the indebtedness associated with Dzeko's shares. Monaco conceded that it was an implied term of the Ownership Alteration Agreement that he assumed responsibility for half of Dzeko's debt to D'Antonio. The terms of that debt could only be determined by reference to the promissory notes, the Share Pledging Agreements, and the Assumption Agreements. Dzeko's shares could not be transferred pursuant to the Ownership Alteration Agreement unburdened by the security afforded by the Share Pledging Agreements. There was nothing in the dealings between the parties or in the wording of the Ownership Alteration Agreement to support the contention that D'Antonio surrendered the security.

As for Monaco's submission that the shares were not forfeited until D'Antonio provided written notice of default on the promissory notes, the court saw no basis to interfere with the trial judge's finding that the statement of claim amounted to written notice. The trial judge's finding that Monaco was provided a reasonable period to make payment should stand.

Ottawa Community Housing Corporation v. Foustanellas (Argos Carpets), 2015 ONCA 276

[Cronk, Pepall and Benotto JJ.A.]

Counsel:

Gary G. Boyd, for the appellants

Joseph Y. Obagi and Elizabeth A. Quigley, for the respondent

Keywords: Contract Law, Fraud, Penalty Clauses, Liquidated Damages Clauses, Compensatory Damages, Punitive Damages, Joint and Several Liability, Full Indemnity Costs

Facts:

This appeal arose from a dispute concerning the supply and installation of carpets and under pads in various residential housing units in Ottawa. At issue was the trial judge's holding of the carpeting contractor and its principal liable in fraud, and his assessment of compensatory and punitive damages and costs in favour of the owner of the units.

The respondent, Ottawa Community Housing Corporation ("OCHC"), is a not-for-profit organization that provides subsidized social housing for low-income individuals in Ottawa. The appellant, Peter Foustanellas, is the sole shareholder, president and director of the corporate appellant, Argos Carpets Ltd. ("ACL"), a carpeting contractor. Robert Grimes, now deceased, was a former employee of ACL.

In mid-July 2004, OCHC invited competitive tenders for a one-year contract concerning the supply and installation of carpets and under pads in some of its housing units. It eventually accepted the lowest of five tenders, a bid submitted by "Argos Carpets" ("Argos") and signed by Grimes.

The contract between OCHC and Argos (the "Carpet Contract") provided for a fixed charge per installed square yard of carpet and under pad, with no extra charge for wastage. It also set out certain quality criteria and other specifications for the product and services Argos was to provide.

Neither the original Carpet Contract nor subsequent renewal contracts identified ACL as a party to the contractual arrangements with OCHC.

Over time, OCHC became suspicious that Argos was inflating the quantities of installed carpet and under pad identified in its invoices, suggesting significant overbilling of OCHC. It therefore undertook a series of investigations, eventually concluding that Argos had engaged in systemic overbilling for carpet and under pad allegedly supplied and installed in OCHC units. OCHC also concluded that, in many instances, the carpets furnished and the installations carried out by Argos were substandard, falling below the quality criteria and other specifications set out in the Carpet Contract.

Accordingly, in late May 2006, OCHC invoked clauses 1.6.1 and 1.6.3 of the Carpet Contract, and provided notice that it was withdrawing the remaining work under the Carpet Contract from Argos. It also withheld $141,724.55 in payments allegedly owing to Argos for work performed.

Litigation ensued. The trial judge held all the defendants liable to OCHC, on a joint and several basis, for compensatory damages in the total amount of $633,844.65. The trial judge also awarded OCHC punitive damages in the amount of $250,000 as against all the defendants on a joint and several basis by reason of the fraudulent scheme that he found they had perpetrated against OCHC.

Issues:

(1) Did the trial judge err by holding clause 1.6.3 of the Carpet Contract was neither a penalty nor a liquidated damages provision?

(2) Did the trial judge err by holding OCHC was unaware of ACL's involvement in the Carpet Contract?

(3) Did the trial judge err by holding the appellants were parties to the fraud perpetrated on OCHC?

(4) Did the trial judge err in reducing the amount otherwise owing to Argos under the Carpet Contract on account of wastage and quality deficiencies?

(5) Did the trial judge err in his assessment of punitive damages?

(6) Did the trial judge err by awarding OCHC its trial costs on a full indemnity basis?

Decision: Appeal Dismissed

Reasoning:

(1) No. The appellants argued clause 1.6.3 of the Carpet Contract constituted a penalty or liquidated damages provision, the effect of which was to limit the amount of any recovery by OCHC of damages for breach of, or other wrongdoing associated with, the Carpet Contract to an amount equal to the total sum outstanding and owed to Argos at the date of termination of the Carpet Contract. The trial judge correctly held that clause 1.6.3 was neither a penalty nor a liquidated damages clause as those clauses are recognized under the established case law.

(2) No. The issue of whether OCHC knew the Carpet Contract was with ACL, rather than an unincorporated entity, was important to the parties at trial because, if OCHC had knowingly contracted with ACL, then its recourse for the recovery of any damages awarded to it for breach of contract would have been confined, as a matter of law, to ACL. The trial judge explicitly addressed the appellants' claim that OCHC was aware of ACL's involvement in the Carpet Contract. He rejected this claim, finding that the fact that Argos' business, in reality, was the business of ACL "was never brought home or made clear to OCHC". This and other findings of fact were open to the trial judge on the evidentiary record. Absent palpable and overriding error, which had not been demonstrated, these findings were fatal to the appellants' attack on the trial judge's finding that OCHC was unaware that Argos' business was that of ACL.

(3) No. The evidentiary record supported the trial judge's findings.

(4) No. The appellants challenged the trial judge's holdings that the amount otherwise owing to Argos under the Carpet Contract should be reduced by 25% on account of improper billing for wastage and 20% by reason of the provision of substandard quality carpet, under pad and installations. Neither the price schedule nor the other terms of the Carpet Contract provided for any charges on account of carpet or under pad wastage on installation. There was evidence at trial supporting the wastage and quality discount employed by the trial judge and it was open to the trial judge to rely on that evidence.

(5) No. The trial judge made no error in his approach to the question of whether an award of punitive damages was warranted in this case, or in his application of the governing principles concerning such an award to the facts as he found them.

Two other issues arose concerning the trial judge's punitive damages ruling. First, the trial judge held all the defendants liable for punitive damages on a joint and several basis. The trial judge erred by awarding punitive damages on this basis. Punitive damages arise from the misconduct of the particular defendant against whom they are awarded. Joint and several responsibility for such an award therefore cannot be imposed. Consequently, the trial judge's assignment of joint and several responsibility for the punitive damages he awarded could not stand.

Second, given the conclusion above, how should liability for payment of the punitive damages awarded by the trial judge be allocated? On the trial judge's findings, it was clear a high degree of moral blameworthiness attached to Foustanellas for the serious fraudulent activity established by OCHC at trial. It was undisputed that Foustanellas was both the sole owner and the directing mind of ACL. For the purpose of the fraud against OCHC, no distinction needed be drawn between the "acts" of ACL and those of Foustanellas. ACL was directed and controlled by Foustanellas. ACL was merely the conduit through which the fraudulent activities were channelled. In these circumstances, Foustanellas should remain liable for the punitive damages assessed by the trial judge.

The trial judge's award of punitive damages as against the Grimes Estate posed an additional difficulty, however. The question whether, under Ontario law, an award of punitive damages may be made against, rather than in favour of, a deceased's estate was a matter of first impression for the court. The court noted, however, that it was unnecessary to resolve the issue in this case. That said, in the circumstances of this case, the court saw no need to punish or deter the Estate beneficiaries for Grimes' wrongful conduct when the objectives of punitive damages – including general deterrence – could readily be met by an award against Foustanellas. The court said that the punitive damages award as against the Estate should be set aside because such an award was unnecessary and would serve no rational purpose that could not otherwise be satisfied by maintaining the trial judge's award of punitive damages as against Foustanellas alone.

(6) No. A reviewing court may interfere with a trial judge's discretionary costs award only where the award is plainly wrong, or based on an error of principle. The appellants have failed to establish either basis for appellate intervention in this case.

M. v. F., 2015 ONCA 277

[MacFarland, Tulloch and Benotto JJ.A]

Counsel:

Edwin A. Flak and A.S. Dror, for the appellant

Thomas G. Bastedo Q.C. and S. Chousky, for the respondent

Keywords: Family Law, Custody and Access, Overnight Access, Best Interests of the Child, Parenting Arrangements

Facts:

The parties are parents of a six year old boy and have argued about parenting arrangements for his entire life. The child's primary residence is with his mother, the appellant. He has extensive time, but no overnights, with his father, the respondent. The parties had an on-again/off-again relationship from 2006 until 2009 when the child was born. The relationship of the parties is toxic. Both have additional children with other partners. The respondent was previously diagnosed with narcissistic personality disorder and struggled with alcohol issues. The appellant used marijuana. The appellant alleged that the respondent abused her physically, with the police being called on one occasion.

The overnight time was the main issue at trial where the trial judge concluded the child's best interest would be served by allowing overnights with his father. The trial judge adopted a parenting plan prepared by a child psychologist and held that the allegations against the respondent had no bearing on the respondent's ability to parent the child during the night. The trial judge also ordered the child's name be changed to include the respondent's surname. The mother appealed these findings on the basis that the trial judge gave insufficient reasons, the decision is not supported by evidence and the judge erred by not making an order for custody in her favour by "delegating" his authority to the assessor.

Issues:

(1) Did the trial judge provide insufficient reasons?

(2) Was the trial judge's decision unsupported by the evidence?

(3) Did the trial judge err by not making an order for custody in favour of the appellant and by "delegating" his authority to the assessor?

Holding:

Appeal dismissed with costs payable to the respondent fixed at $40,000, inclusive of disbursements and HST.

Reasoning:

(1) No, the court held that the submission with respect to the sufficiency of reasons was actually a complaint that the trial judge made the findings he did. The appellant submitted the trial judge failed to consider the mandatory selection criteria of subsection 24(2) of the Children's Law Reform Act ("CLRA"), failed to give proper weight to the allegations of domestic violence and did not articulate the basis for the credibility findings he made. The court held that the trial judge used subsection 24(2) of the CLRA to guide his analysis, did consider the allegations of domestic abuse and explained his findings of credibility.

(2) No, the court held that there was ample evidence to support the trial judge's finding that the parenting plan proposed by Dr. Butkowsky be implemented. The court held that the reports of Dr. Butkowsky were thoughtful and comprehensive. He had known the child for most of his life and recognized the dysfunctional relationship of the parties and proposed ongoing mediation or counselling. The court held the critique evidence by Dr. Jaffee had little probative value and risked elevating the animosity between the parties.

(3) No, the court held it was open to the trial judge to adopt the patenting plan proposed by the assessor without awarding custody. The Ontario legislation under ss. 28(1) of the CLRA is permissive and not mandatory. Additionally, the court held that the trial judge was not delegating his authority to a third person. The final order included a recommendation that the parties appoint a senior member of the family law bar to serve in the role of mediator/arbitrator to oversee the implementation and maintenance of the parenting plan. There was evidence that the appellant did consent to this at several points during cross-examination. She had said repeatedly that she would be willing for the court to make an order requiring her to deal with a mediator, arbitrator or parenting counselling.

Osawe (Re), 2015 ONCA 280

[Laskin, van Rensburg and Benotto JJ.A.]

Counsel:

Kelley J. Bryan, for the appellant

Maura Jetté, for the respondent, Attorney General for Ontario

Michele Warner, for the respondent, the Person in Charge of the Centre for Addiction and Mental Health

Keywords: Administrative Law, Judicial Review, Ontario Review Board, Duty of Procedural Fairness, Rejection of Joint Submission, Baker v. Canada (Minister of Citizenship and Immigration)

Facts:

The appellant appealed the disposition of the Ontario Review Board ("Board") from his annual review in 2014, on the grounds that he was denied procedural fairness, and in the alternative that the Board's decision was unreasonable. The appellant has been detained under the Board's jurisdiction at the Centre for Addiction and Mental Health (CAMH) continuously since November 2010. At his annual review in February 2014, all parties – the hospital, the Crown and the appellant – put before the Board a joint submission for the continuation of the appellant's previous disposition. Under this disposition, the appellant, subject to the hospital's permission, had unaccompanied hospital and grounds privileges; unaccompanied entry into the community; and even the possibility of living in the community in supervised accommodation. A month after this annual review, the Board released its decision and rejected the joint submission. The Board rejected the request for unaccompanied hospital and grounds privileges and instead substituted hospital and grounds privileges only if accompanied by staff; for unaccompanied entry to the community, it substituted entry to the community accompanied by staff or by a person approved by the person in charge; and it eliminated the possibility of community living altogether.

Following the Board's 2014 disposition, the appellant appealed it on the primary ground that the Board denied him a fair hearing by not giving him notice of its inclination to reject the joint submission and an opportunity to lead further evidence and make further submissions.

Issues:

(1) Did the Board fail to give the appellant a procedurally fair hearing by not giving him notice of its inclination to reject the joint submission and an opportunity to lead more evidence or make additional submissions?

Holding: The appeal was allowed, the disposition of the Ontario Review Board was set aside, and a new hearing was ordered.

Reasoning:

(1) Yes. The Board's duty to provide the appellant with procedural fairness in his hearing required that it give the appellant notice that it was considering rejecting the joint submission and imposing a more restrictive disposition. The Board also had a corollary duty to give the appellant and the other parties an opportunity to lead further evidence or make further submissions to address the Board's concerns. Although the Board can fulfill its duty to give notice in different ways, including by questions at the hearing, in this case it did not give the appellant adequate notice, and therefore breached the duty of procedural fairness it owed to him.

In the course of its reasoning, the Court of Appeal found that while the Board has the right under section 672.54 of the Criminal Code to reject a joint submission, the Board also has a corollary obligation under both the Criminal Code and the common law to give an accused person a fair hearing. It must do so because the Board's decisions affect an accused's rights, privileges, and indeed liberty, as provided for in Baker v. Canada (Minister of Citizenship and Immigration), [1999] 2 S.C.R. 817.

Reviewing the Baker case, the Court of Appeal found that the content of the duty of procedural fairness varies in each case, and is guided by four primary criteria:

• the importance of the decision to the individual affected
• the statutory scheme, the nature of the decision and the process followed in reaching a decision
• the tribunal's own procedures
• the legitimate expectations of the person challenging the decision

In applying these factors to a given case, the overarching goal of procedural fairness is to "ensure that administrative decisions are made using a fair and open procedure, appropriate to the decision being made and its statutory, institutional, and social context, with an opportunity for those affected by the decision to put forward their views and evidence fully and have them considered by the decision-maker."

Applying this overarching goal, and the above criteria, it was held that they support the appellant's position that the Board was obliged to give him notice of its inclination to reject the joint submission and impose a more restrictive disposition. Without notice, the goal of procedural fairness – giving Osawe an opportunity to put forward his views and evidence fully and have them considered by the Board – could not be met.

With respect to the first criterion, the importance of the decision to the appellant, it was held that the terms of the Board's disposition are profoundly important to him. In this case, the Board's disposition significantly departed from the terms proposed to it in the joint submission, thereby restricting the appellant's liberty and day-to-day living in a drastic manner. The Court of Appeal found that this factor supported the appellant's argument for notice and an opportunity to make additional submissions.

Applying the second criterion from Baker, it was held that the Board's role is inquisitorial in nature, requiring it to search out all information relevant to its disposition. That role favours the notice for which the appellant contended. In the context of a joint submission, if the Board does not give the accused sufficient notice that it may depart from that submission, it may not have all the information relevant to its decision about the appropriate disposition. With respect to the process followed in reaching a decision, since the parties put forward a joint submission, the hearings are typically very short – only 30 minutes in the appellant's case. In addition, had the parties known in advance that the Board was leaning towards rejecting the joint submission, it was likely that the relevant doctors would have testified at greater length about why the hospital recommended continuing the terms of the appellant's previous disposition. It was also found that the Board is expressly authorized under subsection 672.5(13.1) of the Criminal Code to adjourn a hearing for up to thirty days if it is necessary to ensure all relevant information is available before a disposition is made. This authorization is consistent with the argument that notice should have been provided to the appellant.

Regarding the third criterion from Baker, it was found that the Board's own rules of procedure did not address the subject of joint submissions, nor did they preclude giving notice of itsinclination to reject a joint submission and giving the parties an opportunity to put more evidence before it. This factor supported the appellant's argument as well.

Applying the fourth factor from Baker, it was held that this criterion was neutral and did not assist in determining the content of the Board's duty of fairness in this case.

The Court of Appeal then reviewed relevant case law and held that the principle established in the Divisional Court case of College of Physicians & Surgeons (Ontario) v. Petrie (1989), 32 O.A.C. 248 was relevant. Specifically, where a tribunal is imposing a more substantial penalty than that which has been recommended on a joint submission it should follow carefully the fundamental principle of audi alteram partem and indicate to those appearing before it that it is considering imposing such a penalty and request submissions thereon. Based on this case, and additional case law reviewed, it was held that they supported the appellant's argument that he was entitled to notice that the Board was considering rejecting the joint submission and imposing a more restrictive disposition.

The Court of Appeal then went on to establish a more general principle that when the Board contemplates rejecting a joint submission and imposing a more restrictive disposition, it must give the accused notice that it may do so and the opportunity to make further submissions and, if necessary, lead additional evidence. This procedure ensures that the overriding objectives of procedural fairness are met, including a fair and open process that allows affected individuals to put forward their views and evidence fully and have them considered. Despite this broad principle, it was explained that providing the accused with adequate notice in this circumstance may be given in different ways. Examples include the following: explicit comments by the presiding Board Chairperson at the hearing that it is concerned about accepting a joint submissions and asking the parties if they wish to lead additional evidence, adjourning hearings to permit the collection of further evidence, or the Board may ask obvious questions which demonstrate its concern about accepting the joint submission. The Board may also begin deliberations and then realize it requires additional information, in which case it can notify the parties and request further submissions or evidence.

R & D Partners v Mediamix Interactive Inc., 2015 ONCA 284

[Doherty, Cronk and Huscroft JJ.A.]

Counsel:

Andrew J. MacDonald for the appellant

Allison A. Thornton, for the respondent

Keywords:
Summary Judgment, Simplified Procedure, Rule 76

Facts:
The appellant challenged the partial summary judgment granted by the motion judge, arguing primarily that where the action was commenced as a simplified proceeding under Rule 76, summary judgment was not "an efficient and proportionate way to deal with the issues in dispute between the parties".

Holding:
Appeal dismissed.

Reasoning:
First, there is nothing to prevent a partial summary judgment motion in a simplified proceeding in a proper case. Second, the appellant filed no materials and adduced no evidence on the summary judgment motion. Third, the motion judge addressed the fact that the respondent included other potential claims in its statement of claim. Finally, the appellant was in no way prejudiced by the motion judge addressing the issues raised in the appellant's motion for directions in the context of the respondent's partial summary judgment motion.

Costs to the respondent of $4,000, inclusive of taxes and disbursements.

Lilydale Cooperative Limited v. Meyn Canada Inc., 2015 ONCA 281

[Laskin, Cronk and Rouleau JJ.A.]

Counsel:

Derek V. Abreu, for the appellants/respondents by way of cross-appeal

Jamieson Halfnight and A. Thompson, for the respondent Lilydale Cooperative Limited

Erin Hoult and D. K. Badham, for the respondents/appellants by way of cross-appeal EMK NV and Elboma Moortgat Konstruktie NV

Keywords: Private International Law, Jurisdiction, Real and Substantial Connection, Imperial Life Assurance Co. of Canada v. Segundo Casteleiro Y Colmenares

Facts: Meyn, is a multi-national enterprise, incorporated in Canada under the Canada Business Corporations Act and only operates in Ontario. Lilydale is an Alberta corporation. In 1993, Lilydale purchased a "fryer and oven system" from Meyn. Lilydale used it for 10 years, until January 2004, when a fire occurred in its plant. In January 2006, Lilydale sued Meyn in Ontario for negligence and breach of contract. It alleged that the fire and oven system was defective and caused the fire.

The parties jointly brought a motion by special case on an agreed set of facts to determine whether Alberta or Ontario law applied to the tort and breach of contract claims. Alberta and Ontario have different ultimate limitation periods. Alberta's ultimate limitation period is 10 years and Ontario's is 15 years. Both parties agreed that Lilydale's cause of action arose no later than August 31, 1994. Therefore, as Lilydale did not sue until January 2006, if Alberta law applied, the action was statute-barred; if Ontario law applied, it was not.

The motion judge found that Alberta law applied to the tort claim (Lilydale did not appeal that finding) and then found that Ontario law applied to the breach of contract claim.

Issue: Whether the motion judge erred in finding that Ontario law, rather than Alberta law, governed the contract between Meyn and Lilydale.

Holding: Appeal dismissed. The motion judge's findings on the relevant criteria were reasonable, as was her overall conclusion that the closest and most real connection to the contract was Ontario.

Reasoning:

The Real and Substantial Connection Test

Meyn and Lilydale did not include in their contract a clause for the law that would govern disputes between them. Therefore, the motion judge applied the test first set out by the Supreme Court of Canada in Imperial Life Assurance Co. of Canada v. Segundo Casteleiro Y Colmenares, [1967] S.C.R. 443. The motion judge focused on four criteria: the nature and subject matter of the contract, the place of performance of the contract; the place of contracting, and the domicile and residence of the parties.

The Nature and Subject Matter of the Contract

The motion judge was correct in characterizing that the contract was one "for the design, delivery, and installation of the System for Lilydale." It was held that this criterion pointed to Ontario.

The Place of Performance of the Contract

The place of performance of the contract is related to its subject matter and, for determining the applicable law, is perhaps the most important criterion. The contract was not just for the sale of a piece of equipment, but also for the design of a system. This contract was partly performed in Alberta, and partly performed in Ontario. The motion judge's finding that most of the contract was performed in Ontario was a reasonable finding, supported by the agreed statement of facts.

It was further mentioned that several cases of multi-jurisdictional contracts for the sale of goods have held that the place of delivery should be the place of performance. But this is not a general rule. A motion judge has discretion to determine in any given case whether the place of delivery should be controlling.

The Domicile and Residence of the Parties

The motion judge was justified in looking only to the residence of each company and in finding that, as they cancel each other out, this criterion was neutral.

Soboczynski v. Beauchamp, 2015 ONCA 282

[Hoy A.C.J.O., Epstein and Hourigan JJ.A.]

Counsel:

Benjamin G. Blay, for the appellants

W. Scott Gallagher, for the respondents

Keywords: Real Estate Law, Contract Law, Torts, Negligent Misrepresentation, Entire Agreement Clause, Agreement of Purchase and Sale

Facts: The appellants, Don and Louise Beauchamp, sold their home to the respondents, Adam and Olga Soboczynski. The appellants and respondents entered into an agreement of purchase and sale (the "APS") on November 21, 2007. Following the execution of the agreement, but before the transaction closed, the appellants, at the respondents' request, completed and signed a Seller Property Information Statement (the "SPIS"). In the SPIS, the appellants stated that the property was not subject to flooding. They also undertook to inform the respondents of any "important changes" to the information contained in the SPIS based on events, if any, that took place prior to closing.

On January 9, 2008, the basement of the house flooded, causing relatively minor damage. The appellants fixed the damage but did not disclose the incident to the respondents. The transaction closed as scheduled on January 18, 2008. On February 6, 2008, the basement flooded again. After learning of the pre-closing flood, the respondents sued the appellants for damages based on negligent misrepresentation, arguing that the SPIS required the appellants to disclose the January 9 flood to them.

The trial judge concluded that the entire agreement clause in the APS acted as a bar to the respondents' action. The Divisional Court disagreed with the trial judge's conclusion that the entire agreement clause precluded the respondents' tort action. The SPIS required the appellants to tell the respondents about the pre-closing flood. They failed to do so. And the other elements of the tort of negligent misrepresentation had been made out.

Issue(s):

(1) Did the Divisional Court err in finding that the entire agreement clause in the APS did not preclude a claim based on representations made in the SPIS?

(2) Did the Divisional Court err by concluding that the respondents had made out a claim for damages based on negligent misrepresentation?

Holding: Appeal allowed.

Reasoning:

(1) No. The court determined that in the circumstances of this case, any consequences flowing from representations made in the SPIS were outside the reach of the entire agreement clause. The court found that the entire agreement clause in the APS operated retrospectively, not prospectively. In other words, the application of the clause was restricted to limit representations, warranties, collateral agreements, and conditions made prior to or during the negotiations leading up to the signing of the APS. When the appellants made representations in the SPIS, a document completed after the APS had been signed by all parties, the entire agreement clause was spent. Therefore the court concluded that the representations the appellants made in the SPIS were actionable notwithstanding the entire agreement clause in the APS.

(2) Yes. The court found that despite the conclusion that the entire agreement clause did not prevent the respondents from advancing a claim in negligent misrepresentation, their claim still failed because they did not establish the fourth element of negligent misrepresentation – reliance. The court stated that a party seeking damages in an action for negligent misrepresentation is entitled to be put in the position he or she would have been in if the misrepresentation had not been made. However, the court found that had the appellants told the respondents of the January 9 flood, the respondents' position in relation to their obligations under the APS would not have changed. The respondents would have been obliged to complete the transaction under the terms of the APS. The fact that the respondents did not suffer any damage compensable in tort solidifies their inability to prove reliance.

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.