Canada: Court Of Appeal Summaries (August 24 – 28, 2015)

Last Updated: September 6 2015
Article by John Polyzogopoulos

There was only one civil law decision released this week by the Ontario Court of Appeal. It involved privity of contract, agency and joint liability under a settlement agreement.


1196303 Inc. v Glen Grove Suites Inc., 2015 ONCA 580

[Weiler, Laskin and Epstein JJ.A.]


M. Simaan, for the appellants

F. Tayar, for the respondent

Keywords: Contracts, Privity of Contract, Not Absolute, Agency, Courts of Justice Act, ss. 139(1), Joint Liability, Election, Judgment Against One Defendant Not Precluding Liability of Other Jointly Liable Defendant


This appeal concerned whether the respondent, 1196303 Ontario Ltd. ("119"), was entitled to money from the sale of real property, which has been paid into court. The basis put forward for the entitlement was a settlement agreement (the "Settlement"), entered into by 119 and 1297475 Ontario Inc. ("129"), which purported to place guarantee and security obligations on the owner of 2387 Yonge Street in Toronto, the appellant Glen Grove Suites Inc. ("Glen Grove").

Edwin Hyde was a lawyer and real estate developer. Glen Grove and Spendthrift owned leases on the Yonge Street Property (the "Property"). In 1993 and 1994, Edwin transferred his beneficial interest in the Property and 100% of the Glen Grove shares to his wife, Sylvia Hyde.

In 1997, Edwin was petitioned into bankruptcy by 119 (the "Receiver") by investors who had loaned his companies several million dollars, secured by mortgages over various properties. In 2002, 129 made an offer to purchase the Receiver's proof of claim against Edwin, as well as related debts. This formed the basis of the Settlement on which Edwin negotiated the terms. Edwin died an undischarged bankrupt before the Settlement was approved in 2004.

At the time the Settlement was negotiated, Sylvia owned 100% of the shares in both Glen Grove and Spendthrift. She was the sole director and officer of these companies. She also owned 100% of the shares of 129, a shell corporation, and was a director and officer of this company, along with Edwin as officer. Notwithstanding her roles as sole shareholder and director, Sylvia had limited involvement in the affairs of her companies prior to Edwin's death.

Post-approval, 129 took no steps to fulfil its obligations under the Settlement. Consequently, in 2005, the Receiver commenced an action seeking judgment in accordance with the Settlement, and default judgment was granted against 129. In 2008, without obtaining prior court approval and without notice to the Receiver, Glen Grove registered a new mortgage against the Property, guaranteed by Sylvia and Spendthrift. In 2010, a certificate of pending litigation was granted against the Property. Sylvia died in 2011.

At a summary judgment motion in 2012, the Receiver discovered that Glen Grove had sold its interest in the Property. Some of the proceeds were paid into court to the credit of the action. After payment of the mortgage and the money paid into court, Sylvia's estate received net proceeds that it might not have received had the Receiver not given up its ability to attack the transfer to Sylvia of the Glen Grove shares and the interest in the Property.

The trial judge found that Glen Grove and Spendthrift were bound by the Settlement, and that the Receiver was entitled to the funds. The trial judge found that the only reason Edwin was able to propose that security on the Glen Grove Property would form part of the Settlement was his common de facto control of 129, Glen Grove, and Spendthrift. Upon his death, that control passed into Sylvia's hands. If Edwin had not died before the court approved the order, the terms of the Settlement would have been fulfilled. Sylvia knew about the Settlement before its court approval and she permitted the Settlement to be placed before the court for approval.


(1) Did the trial judge err in finding that Sylvia was generally aware of the settlement negotiations, exercised control over 129 and that, had Edwin not died before the approval order was made, the terms of the Settlement would have been fulfilled?

(2) Did the trial judge err in law by finding that (a) Glen Grove and (b) Spendthrift were liable under the contract because Sylvia exercised "unity of control" over these separate corporations?

Holding: Appeal dismissed as it relates to Glen Grove. Appeal allowed as it relates to Spendthrift, with costs.


(1) No. The trial judge's finding that Sylvia had knowledge of the existence of 129 was supported by the fact that her signature was on numerous documents relating to the company. Similarly, the trial judge drew a reasonable inference that although Sylvia was not involved in developing the Settlement, she knew settlement discussions were taking place. The trial judge's finding that Sylvia controlled 129 after Edwin's death was eminently reasonable. Sylvia was the sole shareholder and, after Edwin's death, the sole officer and director of 129. The evidence revealed that after Edwin died, Sylvia was in possession of the motion materials and corresponded extensively about the Settlement. Finally, the finding that Edwin would have fulfilled the terms of the Settlement had he lived was reasonable. The purpose of the Settlement was to remove any risk that Edwin's transfer to Sylvia of Glen Grove shares and an interest in the Property could be challenged, and that the Receiver would only agree to the Settlement if it was backed by security. Edwin could not achieve his goal without Glen Grove providing the security under the Settlement. It was reasonable for the trial judge to infer this would have continued had Edwin lived.

(2)(a) No. The trial judge was correct in his conclusion that Glen Grove was bound by the Settlement. Although privity of contract is a common law doctrine that a contract cannot (as a general rule) confer rights or impose obligations under it on any person except the parties to it, rigid application of the principle can lead to injustice. Taking a broad view of the privity principle, where companies intimately connected in interest are used by a common controlling mind in combination to secure a court-approved benefit, they cannot subsequently be used by the common controlling mind to avoid performing the obligations which arose from their earlier combined action. Privity is established if there is a sufficient degree of identification between two parties such that it would be just to hold that the decision rendered against one should be binding on the other, even if companies are separately incorporated. Furthermore, based on the conduct of the parties, 129 acted as an agent for Glen Grove by negotiating and providing security for them under the Settlement. Where parties have made an agreement that is subject to court approval, they do not have any power to resile from that agreement prior to the obtaining of court approval. Therefore, Glen Grove was bound by the Settlement. Moreover, notwithstanding the default judgment entered against 129, the Receiver was entitled to judgment against both 129 and Glen Grove. The principle of election did not prevent the granting of the judgment now sought by the plaintiff against Glen Grove and Spendthrift because the provisions of the default judgment against 129 as they would affect the interests of Glen Grove and Spendthrift were different in nature. Hence, the principle of election would not be engaged and default judgment granted against 129 would not bar the Receiver from obtaining judgment against Glen Grove. Under ss. 139(1) of the Courts of Justice Act, where two or more persons are jointly liable in respect of the same cause of action, a judgment against or release of one of them does not preclude judgment against any other in the same or a separate proceeding. It is therefore appropriate to dismiss the appeal on the basis that Glen Grove was liable under the Settlement, having been bound by its agent, 129.

(2)(b) Yes. The trial judge erred in his conclusion because there is insufficient evidence before the court to find that Spendthrift is also liable under the Settlement.

Cash House Inc. v Choy, 2015 ONCA 584

[Feldman, Simmons and Miller JJ.A.]


M. Marchioni and A. J. Marchioni, for the appellant

R. L. Youd, for the respondent, A. Mantella

M. Sclisizzi, for the respondent, Maple Trust Company

Keywords: Endorsement, Civil Practice and Procedure, Pleadings, Amendment after Closing Arguments, Duty of Care


United States v Mathurin, 2015 ONCA 581

[Weiler, Feldman and Benotto JJ.A.]


B. Bytensky, for the appellant

R. Kramer, for the respondent

Keywords: Extradition, Criminal Law, Canadian Charter of Rights and Freedoms, ss. 7 (Life, Liberty and Security of the Person), ss. 8 (Security Against Unreasonable Search and Seizure), ss. 10(b) (Right to Counsel), Criminal Code, ss. 487, ss. 489, Mutual Legal Assistance in Criminal Matters Act


The United States requested the extradition of the appellant in connection with fraud-related charges. The investigation leading to her arrest involved law enforcement officials from Canada and the United States. Following a request for assistance by American investigators, Canadian authorities obtained a production order for information associated with an IP address, pursuant to s.487.012 of the Criminal Code, which corroborated the appellant's involvement in the scheme. Investigators subsequently obtained and executed a warrant to search her residence. Following the execution of the warrant, there was no report to a justice as required by s. 489.1 of the Code, while the information obtained was shared with American law enforcement officials and relied on in support of the extradition request. The appellant alleged that the actions of the Canadian authorities breached her rights under sections 7, 8 and 10(b) of the Charter and sought disclosure of the evidence gathered. The extradition judge dismissed her application because there was no air of reality to the allegations and because there was sufficient evidence to order the appellant's committal for extradition.

The appellant argued that the extradition judge erred by refusing to order disclosure and by issuing the order for committal. Specifically, the appellant submitted that there was an air of reality to the claims that her Charter rights were violated by (i) the decision by investigators not to proceed by way of the Mutual Legal Assistance in Criminal Matters Act (MLACMA), (ii) the failure to provide full and frank disclosure in the Information to Obtain of the intention to share information with U.S. authorities, and (iii) the failure to report back to the issuing justice after executing the orders and detaining the seized items. The respondent submitted that the judge correctly exercised his discretion to refuse to grant disclosure and that there was sufficient evidence to order the committal.

The court referred to a recent ONCA decision, R v. Garcia-Machado, which held that while the failure to file a timely s. 489.1(1) report breached s. 8 of the Charter, a section 24(2) analysis found that the evidence obtained should not be excluded.


(1) Should disclosure of the Canadian investigation have been ordered because there was an air of reality to the appellant's Charter claims?

Holding: Appeal allowed in part. The issue of section 489.1 was referred back to the extradition judge.


(1) The decision of whether to order disclosure beyond the Record of Case is discretionary, even when an applicant has demonstrated an air of reality to a Charter claim. An appellate court may only intervene if the lower court "misdirected itself or came to a decision that is so clearly wrong that it amounts to an injustice."

(i) There was no requirement to proceed under the MLACMA as the evidence was lawfully gathered and shared. Subsection 3(2) of the MLACMA makes clear that this legislation is meant to supplement, rather than abrogate or derogate from, any existing arrangement or practice between Canadian and foreign police forces or prosecutorial authorities. The court further noted that the Supreme Court of Canada has recently endorsed the importance of facilitating international cooperation through the sharing of information relating to criminal matters.

(ii) As the extradition judge noted, the Information to Obtain disclosed the existence of a joint investigation, so it was open to the extradition judge to hold that the issuing justice could infer that sharing would take place. The court found no reviewable error in the trial judge's conclusion that the search warrant and the production order were properly obtained.

(iii) Finally, the court held that the extradition judge followed the line of authority that there is no automatic breach of an individual's Charter rights where an unlawful detention of seized items occurs after an initially valid search. Moreover, after R v. Garcia-Machado, the law is now clear. The court remitted this issue back to the extradition judge on the question of whether the failure to return to the issuing justice affected the outcome of his decision.

Ultimately, the information and evidence acquired by the Canadian investigators was found to have been legally obtained under the Code. There was no obligation for Canadian authorities to proceed under or comply with the MLAMCA. The extradition judge would determine the effect of the failure to report to an issuing justice in compliance with s. 489.

R v Doucette, 2015 ONCA 583

[Strathy C.J.O., Doherty and Gillese JJ.A.]


C. Suter, for the appellant

C. Bartlett-Hughes, for the respondent

Keywords: Criminal Law, First Degree Murder, Jury Instructions, R v Rodgerson, Self-Defence, Criminal Code, ss. 34(2), Provocation, R v Gauthier, R v Pappas, Sentence Appeal, R v Danvers

R v K.M., 2015 ONCA 582

[Feldman, Simmons and Juriansz JJ.A.]


K.M., acting in person

C. Bartlett-Hughes, for the respondent

M. Halfyard, appearing as duty counsel

Keywords: Criminal Law, Sexual Assault, Physical Assault, Preliminary Inquiry Evidence, Use of the Complainant's Demeanor

R v Green, 2015 ONCA 579

[Hoy A.C.J.O., Doherty and Benotto JJ.A.]

J. Dawe and M. Dineen, for the appellant

S. Magotiaux, for the respondent

Keywords: Criminal Law, Search Warrant, Canadian Charter of Rights and Freedoms, ss. 8, ss. 24(2), Firearms Offences, Drug Possession, R v Sadikov, R v Caissey, R v Garofoli, R v Pires

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

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