Following are summaries of this week's civil decisions of the Court of Appeal of Ontario.
In a case that has received much media and judicial attention, Yaiguaje v Chevron Corporation, it appears that the Court has finally put an end to the matter. The Court determined that the shares of Chevron Canada and its assets are not available to satisfy a US$9.5 billion judgment against the ultimate US parent, Chevron Corporation. The Court stated that the separate legal personality of corporations is fundamental to our law, and embodied in statute, and there was no basis for piercing the corporate veil in accordance with the test set out in Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co., (1996), 28 O.R. (3d) 423. The Court commented that to allow the judgment to be enforced against the shares in, and assets of, Chevron Canada, would be to incorporate into our law the "group enterprise" theory of liability, which holds that where several corporations operate closely as part of the same "group" of corporations, they are in reality a single enterprise and should, accordingly, be responsible for each other's debts. This theory has been consistently rejected by our courts, and was rejected once again. The Court did, however, significantly reduce the costs awarded to the Chevron corporations, having determined that this was public interest litigation.
In Beatty v Wei, the Court set aside the application judge's interpretation of the Illegal Substances Clause commonly used as an additional term in the Ontario Real Estate Association/Toronto Real Estate Board standard form Agreement of Purchase and Sale (APS). Given that this was a standard form contract, the standard of review was correctness. Since the Sellers' representation and warranty that the use of the property had never been for the growth or manufacture of illegal substances was limited to their "knowledge and belief", the Court found that there was no breach of that clause when it was subsequently discovered by the Purchaser, much to the surprise of the Sellers, that the home had previously been used to illegally grow cannabis. It was therefore the Purchaser who was in breach for failing to close.
Other topics covered this week included the reversal of summary judgment granted against the Attorney General in a negligence and breach of statutory duty claim arising out of the assault by and against inmates on the basis that the judge's findings of fact were not supported by the evidence and a trial was required, discoverability of a nuisance claim where a parallel injurious affection claim was before the OMB, discoverability in a MVA action, production of settlement privileged documents on a motion to set aside an approved proposal in bankruptcy, a mortgage priority dispute involving the doctrine of equitable subrogation, setting aside default judgments and extension of time to appeal."
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Blaney McMurtry LLP
Tel: 416 593 2053
[Hourigan, Huscroft and Nordheimer JJ.A.]
Lenczner, B. Morrison, K. Baert and C. Poltak, for the appellants
Grant, for the appellants
Zarnett, S. Kauffman and P. Kolla, for the respondent Chevron Canada Limited
L.P. Lowenstein, L. K. Fric, C. Hunter and R. Frank, for the respondent Chevron Corporation
O'Sullivan and P. Michell, for Chevron Canada Capital Company
Keywords: Corporations, Separate Legal Personality, Piercing Corporate Veil, Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co., (1996), 28 O.R. (3d) 423, Civil Procedure, Orders, Enforcement, Execution, Exigible Assets, Execution Act, RSO, 1990, c E24, Costs, Public Interest Litigation
The appellants are indigenous peoples of the Orienté region of the Republic of Ecuador. From 1964 to 1992, oil exploration and extraction activities were undertaken on their lands resulting in extensive environmental pollution of the area.
One of the corporations involved in the oil operations was an indirect subsidiary of Texaco Inc. ("Texaco"). Since 2001, Texaco has been part of the global conglomerate, Chevron Corporation. Chevron Corporation's principal business is holding 100 percent of the shares in its subsidiary corporations and managing those investments.
The appellants sought compensation for the environmental devastation through a class action in the Ecuadorian court resulting in a US$9.5 billion judgment against Chevron Corporation. Since Chevron Corporation had no assets in Ecuador, the appellants sought enforcement of their judgment in the United States. Chevron Corporation opposed the enforcement of the judgment on the ground that it had been obtained by fraud and the United States District Court accepted Chevron Corporation's submission and made an order enjoining any enforcement proceedings of the Ecuadorian judgment in the United States.
The appellants then targeted the shares and assets of Chevron Canada Limited ("Chevron Canada") in an action in 2012 in the Ontario Superior Court of Justice for the recognition and enforcement of the Ecuadorian judgment. The parties agreed to determine by means of a summary judgment motion the issue of whether Chevron Canada's shares and assets are exigible to satisfy the judgment debt of Chevron Corporation. Hainey J. heard the motion for summary judgment. Chevron Corporation and Chevron Canada were successful on that motion.
The appellants argued that the broad wording of s. 18(1) of the Execution Act, R.S.O., 1990, c. E.24 (the "Act"), permits execution on Chevron Canada's shares and assets to satisfy the Ecuadorian judgment. In the alternative, they submitted that the court should pierce the corporate veil in order to render Chevron Canada's shares and assets exigible.
Motion for Summary Judgment
Hainey J. concluded that the shares and assets are not available pursuant to the Execution Act to satisfy the Ecuadorian judgment against Chevron. He noted that Chevron Corporation does not own the shares of Chevron Canada. Rather, all of Chevron Canada's shares are owned by its direct parent, Chevron Canada Capital Company ("CCCC"). Furthermore, Hainey J. concluded that Chevron Canada's shares and assets cannot be made available to satisfy the judgment by piercing the corporate veil because the appellants failed to meet the test established in Transamerica Life Insurance Co. of Canada v Canada Life Assurance Co., (1996), 28 O.R. (3d) 423 (Gen. Div.).
Motion to add CCCC as a party
Over a month after arguments concluded on the summary judgment motion, the appellants brought a motion to further amend their Amended Statement of Claim to add CCCC as a defendant. Hainey J. dismissed this motion on the basis that because the appellants sought the same relief against CCCC as they did against Chevron Canada, their claim against CCCC could not succeed for the same reasons that it could not against Chevron Canada. Hainey J. further held that the appellants did not establish that the courts of Ontario would have jurisdiction over CCCC, a company incorporated in Nova Scotia with no assets or operations in Ontario.
Hainey J. awarded costs of the motion on a partial indemnity basis in the amounts of $533,001.81 to Chevron Canada and $313,283 to Chevron Corporation. Given the high stakes of the litigation, the various theories the appellants advanced, and the appellants' numerous requests for additional discovery and cross-examination, it was reasonable for the appellants to expect Chevron Corporation and Chevron Canada to expend significant resources to defend the claims. Hainey J. rejected the appellants' submissions that he should award no or only nominal costs because the appellants' action raised novel points of law that were in the public interest. As the appellants were partially successful on their motion to strike Chevron Corporation's defences, Hainey J. reduced Chevron Corporation's claim for costs by $50,000.
(1) Did Hainey J. err in his interpretation of the Act, such that Chevron Canada's shares and assets are exigible to satisfy the judgment debt of Chevron Corporation?
(2) Did Hainey J. err in failing to pierce the corporate veil?
(3) Did Hainey J. err in dismissing the motion to add CCCC as a party?
(4) Should the appellants' motion to tender fresh evidence on appeal be granted?
(5)(a) Should leave to appeal the costs order be granted?
(b) If so, should the court interfere with the costs order?
Holding: Appeal dismissed, except on the issue of costs.
(1) No. The appellants sought a declaration against Chevron Canada that the shares of its company are exigible. Such an order is a legal impossibility and cannot be made. A corporation's shares do not belong to the corporation, but to the shareholders. Chevron Corporation has no existing rights as against the assets of Chevron Canada. The appellants relied on s. 18(1) to argue that it permits the seizure of any interest and further submit that Chevron Corporation has an "indirect interest" in Chevron Canada. It is not enough to state that Chevron Corporation has an amorphous indirect right to the assets of Chevron Canada; there must be an existing legal right that permits seizure of the assets. While a sheriff may seize money, equipment, or shares owned by a judgment debtor corporation, the assets of the issuing corporation are not exigible. Hainey J. did not err in rejecting the appellants' submission that under the Act, Chevron Canada's shares and assets are exigible to satisfy the Ecuadorian judgment. The appellants' interpretation is not supported by the wording of the Act and would violate fundamental principles of our corporate law.
(2) No. The court has repeatedly rejected an independent just and equitable ground for piercing the corporate veil in favour of the approach taken in Transamerica, which states that there are only three circumstances where the court will pierce the corporation veil:
(1) When the court is construing a statute, contract or other document;
(2) When the court is satisfied that a company is a "mere façade" concealing the true facts; and
(3) When it can be established that the company is an authorized agent of its controllers or its members, corporate or human.
This test is consistent with the principle reflected in the various business corporation statutes in Canada that corporate separateness is the rule. It is important that courts be rigorous in their application of the Transamerica test because the rule is provided for in statute and stakeholders of corporations have a right to believe that, absent extraordinary circumstances, they may deal with the corporation as a natural person.
The appellants submitted that Hainey J. erred in finding that Chevron Corporation did not wield sufficient control of Chevron Canada to meet the first part of the Transamerica test. This argument was not considered as the appellants could not meet the second part of the conjunctive test: that the subsidiary company was incorporated for a fraudulent or improper purpose or used by the parent as a shell for improper activity. In the appellants' Amended Statement of Claim, they specifically plead that Chevron Canada has not engaged in any inappropriate conduct. Hainey J. correctly found that, under the Transamerica test, this is a complete bar to the request to pierce the corporate veil.
The appellants argued that Transamerica is not applicable because in this case we are dealing with the enforcement of a judgment debt, not a case of first instance where the issue is establishing liability. This submission was not accepted. If it were, a judgment against any corporation could be enforced against the assets of any other related corporation. Not only is such an argument problematic from a policy standpoint, it comes dangerously close to the adoption of the group enterprise theory of liability. That theory holds that where several corporations operate closely as part of the same "group" of corporations, they are in reality a single enterprise and should, accordingly, be responsible for each other's debts. This theory has been consistently rejected by our courts.
The appellants further submitted that the corporate separateness of Chevron Corporation and Chevron Canada should be ignored for policy reasons. Yet they provided no guidance regarding the basis upon which it will be appropriate to pierce the corporate veil in future cases. Their submissions boiled down to an exhortation that we should do the right thing, untethered to the jurisprudence, the statutory rights of corporations, or any discernible principle. Even if the court were free to do that, which it is not, this case illustrates the difficulties with such an approach. At this stage, the equities of this case are far from clear.
(3) No. The claim against CCCC's assets must fail for the same reasons that the claim against Chevron Canada's assets must fail. Accordingly, the amended pleading was not legally tenable and did not disclose a cause of action as against CCCC. The test under rule 5.04(2) was not met to add CCCC as a party.
(4) No. The documents proposed to be tendered relate primarily to the interactions among Chevron Canada and its subsidiaries. They are, at best, of marginal relevance to the matters at issue on these appeals and could not have affected the result.
(5)(a) Yes. Hainey J. erred when he found that this was not public interest litigation. The fact that this is public interest litigation impacts on the quantum of costs. It should have been factored into Hainey J.'s analysis of a reasonable amount of costs in all of the circumstances.
(5)(b) Yes. It fell to the court to make the proper costs award in all of the circumstances. When the true nature of the litigation is considered, the amounts awarded below were excessive. The court reduced the costs awarded to $150,000 to Chevron Canada and $100,000 to Chevron Corporation, all-inclusive.
Nordheimer J.A. (concurring):
Norheimer J.A. disagreed with Hourigan J.A. and Huscroft J.A. on (i) whether the test established in Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. is the appropriate one to apply in these circumstances; and (ii) on the general approach he adopts with respect to when it is appropriate to pierce the corporate veil. While he accepted the conclusion that it would not be appropriate to do so in this case, he did not agree that it would never be appropriate to lift the corporate veil to permit the enforcement of a judgment unless the requirements of the Transamerica test are met.
[Pepall, Hourigan and Brown JJ.A.]
John Lo Faso and David Morawetz, for the appellants JoB and JaB
Patrick Bakos and Shida Azari, for the respondent Zhong Wei
Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Ontario Real Estate Association/Toronto Real Estate Board Standard Forms, Contractual Interpretation, Standard of Review, Correctness, Illegal Substances Clause, Breach of Representation, Breach of Warranty, Ledcor Construction Ltd v Northbridge Indemnity Insurance Co, 2016 SCC 37
This appeal puts into question the interpretation of an Illegal Substances Clause ("the Clause") commonly used in the Ontario Real Estate Association/Toronto Real Estate Board standard forms of Agreement of Purchase and Sale ("APS"). At issue is the second part of the Clause, where the seller represents and warrants that "to the best of the Seller's knowledge and belief, the use of the property and the buildings and structures thereon has never been for the growth or manufacture of illegal substances."
In the present case, after the parties had entered into an APS, the Purchaser discovered that the property had been used as a marijuana grow-op before the Sellers had acquired it. The Purchaser took the position that he was entitled to terminate the agreement and demanded the return of his deposit. The Sellers disagreed and refused to terminate the APS. Competing applications ensued. The application judge held that the Purchaser's discovery of information about the property's prior use amounted to a breach by the Sellers of their representation and warranty in the Clause. The application judge held the Purchaser was entitled to rescind the agreement and obtain the return of the deposit, but directed the Purchaser's claim for damages to proceed to trial. The Sellers appealed.
(1) Is the interpretation of a standard form contract a question of law subject to the standard of review of correctness?
(2) Did the application judge err in his interpretation of the Clause?
Holding: Appeal allowed.
(1) Yes. In Ledcor Construction Ltd v Northbridge Indemnity Insurance Co, 2016 SCC 37, the Supreme Court recognized that: "[W]here an appeal involves the interpretation of a standard form contract, the interpretation at issue is of precedential value, and there is no meaningful factual matrix that is specific to the parties to assist the interpretation process, this interpretation is better characterized as a question of law subject to correctness review": para. 24. Illegal Substances Clauses are standard provisions commonly included in residential APS's in the Toronto region. There is no meaningful factual matrix specific to the parties that could assist interpreting the Clause. In addition, interpretation of the Clause in this case will have precedential value, since Illegal Substances Clauses are widely-used. Therefore, the interpretation of the Clause is best characterized as a question of law subject to a correctness review.
(2) Yes. As set out below, the application judge erred in his interpretation of the Clause in various ways.
The application judge's differentiation of the "representation" from the "warranty" in the Clause. When he considered the legal effect of the Clause, the application judge applied different analytical approaches to the same contractual term: he interpreted the "warranty" language as a term of the contract, while he looked at the "representation" language through the lens of the principles concerning pre-contractual representations. That approach contained several errors: It failed to consider the inter-related nature of the "representation" and the "warranty" in this particular contract. It failed to address the real interpretive issue of what the representation in the Clause actually meant. It was problematic to view the "representation" in the Clause as a pre-contractual or collateral representation. Finally, to treat the "representation" contained in the Clause as something other than a term of the contract would ignore the language of the entire agreement clause in the APS. Instead, the application judge should have interpreted the Clause as a term of the parties' contract in accordance with the standard rules of contractual interpretation.
The application judge's reliance on a duty to disclose to inform his interpretation of the Clause. The application judge erred in his reasoning, as he posited that if the Sellers had discovered after the execution of the APS, that the property had been used as a marijuana grow-op before they acquired it, their silence - or failure to disclose such information to the Purchaser - could found an action for misrepresentation. From this, he concluded that the Purchaser's rights are not affected by the fact that he was the one who discovered this information and communicated it to the Sellers. This reasoning is not persuasive, as the representation and warranty the Sellers gave about the use of the premises was limited, not absolute. It was a representation or warranty "to the best of [their] knowledge and belief". The Purchaser's discovery that a previous owner of the house had used it for a grow-op was a complete surprise to the Sellers. While liability may attach where a vendor knew about a major latent defect but concealed the information from the purchaser, these are not the facts of the present case. Therefore, the application judge improperly applied principles concerning a vendor's concealment of material information about the condition of a property to a situation where no such concealment had occurred.
The meaning of the Illegal Substances Clause: The Sellers' representation and warranty that the use of the property had never been for the growth or manufacture of illegal substances was limited to their knowledge and belief as it existed when they executed the APS. This conclusion is reached for three reasons: (1) The plain language used in the clause; (2) The absence of any language in the Clause that speaks of the Sellers' knowledge and belief at the date of closing, in contrast to the use of such language in other provisions of the APS; and (3) The effect of the "survives closing" language at the end of the Clause does nothing more than clarify that whatever the content of the representation or warranty given by the Sellers, it did not merge with the deed on closing. The representation and warranty survived closing to offer a basis for a post-closing action of breach. However, that language does not assist in ascertaining the content or meaning of the representation or warranty given.
For these reasons, the Sellers' representation and warranty in the Clause that the use of the property had never been for the growth or manufacture of illegal substances was limited to their knowledge and belief as it existed when they executed the APS [emphasis added]. At that time, they did not know about the property's prior use as a grow-op. In those circumstances, the application judge erred in finding the Sellers had breached the Clause. They did not breach the Clause.
In the result, the Sellers were entitled to a declaration that the Purchaser was in breach of the APS for failing to complete the purchase, and were entitled to keep the $30,000 deposit that had been paid by the Purchaser. The matter was remitted to the Superior Court to determine the Sellers' entitlement to the costs of the application below, the real estate broker and agent's entitlement to costs and the Sellers' claim to damages.
[Lauwers, Benotto and Nordheimer JJ.A.]
Sean Gaudet and Joel Levine, for the appellant
Doug Wright, for the respondents
Keywords: Torts, Negligence, Statutory Duty of Care, Summary Judgment, Genuine Issue Requiring Trial, Fact-Finding Powers, Fair and Just Determination, Standard of Review, Hryniak v Mauldin, 2014 SCC 7
This action arises out of an assault that was committed on the respondent, JF, by the three named individual defendants, none of whom defended the underlying action. The assault occurred while the respondent and the three named defendants were all inmates at Millhaven Institution, a maximum security penitentiary located in Bath, Ontario. The respondent was seriously injured.
The underlying action alleged that the Attorney General of Canada, as the representative of the Federal Crown, was negligent and breached a statutory duty of care by failing to keep the respondent reasonably safe while he was an inmate of the penitentiary.
The Attorney General of Canada appeals from the summary judgment of the motion judge who found in favour of the respondents on the issue of liability but ordered the issue of damages to proceed to trial.
(1) Did the motion judge err in granting summary judgment in favour of the respondents?
Holding: Appeal allowed.
(1) Yes. The court held that the motion judge greatly exceeded his authority in granting summary judgment in favour of the respondents. In so doing, he made unjustified findings of fact. The evidentiary record before the motion judge was insufficient to reach a fair and just determination that any duty of care owed by the appellant to the respondent had been breached. A trial was necessary to determine liability in this case. Thus, the court held that the trial judge's conclusion could not be sustained.
The court held that the motion judge correctly cited the law that applies to summary judgment motions, particularly the decision in Hryniak v. Mauldin, 2014 SCC 7. However, he failed to properly apply that law in reaching his decision. The court noted that while the decision to exercise summary judgment powers is discretionary, deference is not owed to that decision where the motion judge comes to a decision "that is so clearly wrong that it resulted in an injustice": Hryniak, at para. 83.
[Feldman, Pepall and Huscroft JJ.A.]
Shane Rayman and Conner Harris, for the appellant
Frank Sperduti and Andrew Baker, for the respondent
Keywords: Torts, Nuisance, Expropriations, Injurious Affection, Ontario Municipal Board, Exclusive Jurisdiction, Expropriations Act, RSO 1990, c. E.26, Ontario Municipal Board Act, R.S.O. 1990, c. O.28, Civil Procedure, Limitation Periods, Discoverability, Subjective Branch of Discoverability Test, Objective Branch of Discoverability Test, Fennell v Deol, 2016 ONCA 249, "Appropriate Means", 407 ETR Concession Company Limited v Day, 2016 ONCA 709, 133 OR (3d) 762, Presidential MSH Corporation v Marr Foster & Co. LLP, 2017 ONCA 325, Limitations Act, 2002, s.5
The appellant's property was damaged by flooding following two significant rainfalls on May 21 and May 28, 2013. The floodwaters came from adjacent land that the respondent municipality had expropriated in 2009 for a construction project. In 2011, the appellant instituted a proceeding before the Ontario Municipal Board ("OMB") claiming damages for injurious affection in respect of that expropriation.
Following the flooding, on June 3, 2013, the appellant's lawyer wrote a claim letter stating that the respondent's construction activities resulted in the flooding and consequent damage to the appellant's property, and indicating that the source of the flooding had to be determined without delay. In its response of June 28, 2013, the respondent advised that the flooding was not caused by its construction activities, but that there was a blocked catch basin on the appellant's property that the appellant should arrange to flush.
The appellant instituted the within action on June 29, 2015, two years following the receipt of the June 28, 2013 letter (June 28, 2015 was a Sunday). The respondent pleaded that the action was statute-barred and brought a motion for summary judgment. The motion judge agreed and dismissed the action on the basis that the appellant's claim was discoverable when the flooding occurred in May 2013.
1) Did the motion judge err in law or misapprehend the evidence by finding that the appellant had sufficient knowledge regarding the cause of the flooding on June 3, 2013, to commence an action against the respondent in Superior Court for damages that were not properly damages for injurious affection, and therefore not within the exclusive jurisdiction of the OMB?
2) Did the motion judge err in law by finding that the appellant had an ongoing duty, up to the date it commenced the action, to discover the cause of the damage?
3) Is the effect of recent case law of the court to postpone the commencement of the limitation period until the OMB determines its jurisdiction over the claim?
Held: Appeal allowed.
1) Yes. The basic two-year limitation period set out in s. 4 of the Limitations Act, 2002 begins to run on the day the claim was discovered. A claim is discovered on the earlier of two dates: the day on which a plaintiff either knew or ought to have known the constitutive elements of the claim and that a proceeding in Superior Court would be an appropriate means to seek a remedy. The court found that the motion judge erred in two ways: first in law, by not considering whether an action in Superior Court would be an appropriate means to seek a remedy; and second, by misapprehending the evidence of the appellant's lawyer, which explained why up until June 26, 2013, the appellant believed that a claim before the OMB would be an appropriate means to seek a remedy for the flooding damage.
2) Yes. The respondent argued that, even if the motion judge erred on the first issue, the action is statute-barred on the motion judge's alternative finding that the appellant did not rebut the presumption under s. 5(2) of the Limitations Act, 2002 by failing to exercise due diligence. The court found that the motion judge also erred in law on this alternative ground. A plaintiff rebuts the presumption under s. 5(2) by demonstrating when it gained actual knowledge of its claim (s. 5(1)(a)). A plaintiff need not show that it exercised due diligence in order to rebut that presumption, because due diligence is only relevant to the objective inquiry under s. 5(1)(b), not the inquiry into subjective knowledge under s. 5(1)(a): Fennell v Deol, 2016 ONCA 249, at paras. 23-24. If a plaintiff fails to exercise the diligence a reasonable person would, the claim is potentially discoverable earlier than the date the plaintiff had actual knowledge of the claim. Due diligence is therefore only relevant to the period of time preceding a plaintiff's actual knowledge of its claim, not the period after. Once a claim has been discovered, there is no ongoing duty on a plaintiff to further investigate the claim.
3) Not decided. The appellant argued for the first time in oral argument on appeal that the recent decisions of the court in 407 ETR Concession Company Limited v Day, 2016 ONCA 709, 133 OR (3d) 762 and Presidential MSH Corporation v Marr Foster & Co. LLP, 2017 ONCA 325, 135 OR (3d) 321 apply, with the effect that the limitation period for this action will not begin to run until the OMB determines whether it has exclusive jurisdiction over the claim for damage arising from the flooding. Because the court concluded that the appellant's claim is not statute-barred in any event, it was not necessary to decide whether the 407 ETR and Presidential MSH cases and the concept of "appropriate means" apply to postpone the commencement of the limitation period.
[Pepall, van Rensburg and Paciocco JJ.A]
Aaron Rousseau for the appellants
Barry W. Adams for the respondent
Keywords: Employment Law, Wrongful Dismissal, Civil Procedure, Default Judgments, Setting Aside, Mountainview Farms Ltd v McQueen, 2014 ONCA 194
The respondent sued the appellants Haylor Properties Niagara Ltd. and its principal, AW, for wrongful dismissal in 2011. A trial record was filed in November 2013 and a trial date was fixed for September 2015 to accommodate the appellants' counsel. The appellants' counsel was subsequently removed from the record, prompting an adjournment. This pattern continued until the trial was marked peremptory for a date in November 2016. In September 2016, the respondent brought a motion to strike the statement of defence. The motion was adjourned when the appellants asserted they had new counsel but neither counsel nor the appellants attended on the return date. The statement of defence was struck, the appellants were noted in default, and the respondent was granted judgment and costs in the uncontested matter. A motion to set aside the default judgement was dismissed. The motion judge, referring to the Mountainview Farms Ltd v McQueen factors, accepted that the motion had been brought promptly and that the appellants had an arguable defence. He concluded, however, that the circumstances leading to the default had not been adequately explained and that an order setting aside the default judgment would be prejudicial to the respondent and the justice system.
(1) Did the motion judge fail to consider that the appellants had a plausible explanation for their failure to attend at the uncontested trial?
(2) Did the motion judge make palpable and overriding errors of fact in concluding that the appellants had been intentionally delaying the matter?
Holding: Appeal dismissed.
(1) No. The explanation for the failure to attend was not relevant. The issue on the motion was not whether the appellants were able to explain their failure to attend the trial. They had been noted in default and thus were not entitled to notice of the uncontested trial or to participate further in the trial. The appellants knew the matter had been set peremptory and did not attend to oppose the motion to strike their defence. They cannot therefore rely on a failure to receive notice from the court that the uncontested trial was proceeding as a basis for setting aside the default judgment.
(2) No. The appellants argued that the motion judge erred in saying that the appellants had not paid certain costs. This was brought to the attention of the motion judge by the respondent's counsel and the motion judge acknowledged the error. This did not play a role in the decision and was not an overriding factor.
The appellants also assert that the motion judge erred in saying that they were never examined for discovery when Wood was, in fact, examined. This was an error, but nothing turned on it because Wood was only discovered after repeated adjournments. The motion to set aside the default judgment was refused because of the appellants' pattern of delay, not because of a failure to attend discovery. A motion judge's decision on a motion to set aside a default judgement is discretionary and attracts deference.
[Rouleau, Roberts and Fairburn JJ.A]
D.B. Williams and M.M. Khami, for the appellant
C.J. Prince, for the respondent third party
Keywords: Torts, Negligence, Motor Vehicle Accident, Civil Procedure, Limitation Periods, Discoverability, Fennell v Deol, 2016 ONCA 249, Limitations Act, SO 2002, c 24, ss 5(1) and 5(2), Summary Judgment, Best Foot Forward
The appellant appeals from the summary judgment dismissal of his action against the defendant. The appellant was one of three occupants involved in a single motor vehicle accident on February 5, 2012. Two of the occupants tragically died and the appellant was seriously injured. The appellant commenced an action on January 31, 2014, against the deceased defendants' estates but not, at that time, against J.B. Sr, the appellant's own father and owner of the vehicle. It was not until July 31, 2014 that appellant's counsel learned from Aviva that the owner of the vehicle was J.B. Sr. and not the appellant. On October 28, 2014, the appellant obtained an ex parte order adding J.B Sr. as a defendant.
The third party respondent, Aviva, subsequently brought a successful motion for summary judgment to dismiss the action against J.B. Sr. on the basis that it was statute-barred. The motion judge determined that there was no genuine issue requiring a trial on the limitation period issue. Specifically, he found that the appellant had failed to put his "best foot" forward and rebut the statutory presumption under s. 5(2) of the Limitations Act, 2002, that he knew of the matters referred to in clause 5(1)(a) of the Act on the day the act or omission on which his claim is based took place, ie. that the appellant's father was the owner of the car and not himself.
(1) Did the motion judge err in his discoverability of the appellant's claim against the owner of the vehicle?
Holding: Appeal dismissed.
(1) No. The motion judge properly took into account all the circumstances relevant to the issue of discoverability in this case. It is well established that a limitation period begins to run on the date that the claim was discovered. The statutory presumption of the discoverability of the claim provided for under s. 5(2) was explained by the court in Fennell v. Deol, 2016 ONCA 249, at para. 21, as follows:
Section 5(1)(a) considers when the person with the claim had actual knowledge of the material facts underlying the claim. Unless the contrary is proved under s. 5(2), the person is presumed to have known of the matters in s. 5(1)(a)(i) through (iv) on the date of the events giving rise to the claim.
In response to Aviva's motion for summary judgment, no evidence was filed that had the effect of rebutting the presumption that as at the date of his accident, the appellant knew he was not the owner of the motor vehicle but his father was. Absent any evidence rebutting the presumption, the appellant and his counsel (as the appellant's agent) were presumed to know who owned the vehicle prior to the issuance of the statement of claim. As the motion judge stated, "[t]here could never be an argument that the appropriate remedy against the owner of the vehicle was anything other than to include him as a defendant in the action when the Statement of Claim was issued".
Given the appellant's obligation to put his "best foot forward" in response to Aviva's motion for summary judgment and his onus to rebut the presumption under s. 5(2), the motion judge was entitled to assume that there would be no additional evidence at trial to assist the appellant on these issues.
[Strathy C.J.O., Roberts and Paciocco JJ.A.]
Catherine Francis, for the appellant, Emery Silfurtan Inc.
Peter I. Waldmann, for the respondent, Warburg-Stuart Management Corporation
Keywords: Bankruptcy and Insolvency, Proposals, Civil Procedure, Setting Aside, Evidence, Documentary Disclosure, Settlement Privilege, Appeals, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, ss 63(1), 193(a)
This appeal arises from an order of the motion judge requiring the appellant and the trustee of the appellant's bankruptcy proposal to disclose to the respondent all documents and communications that set out any and all terms of the appellant's settlement with its creditor, Zodax. The Zodax settlement was important to the respondent because the appellant contended that it discharged the respondent's security interest, which the respondent relied upon in its bankruptcy claim.
The procedural history was as follows:
The appellant, Emery Silfurtun Inc., filed a proposal to its unsecured creditors under the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 ("BIA"). The appellant and its creditor, Zodax, subsequently entered into a settlement of Zodax's claims. The appellant's proposal was approved by a majority of its creditors. The trustee made its motion for approval on notice to all creditors who filed proofs of claim in the proposal for court approval. However, the respondent had registered a general security agreement against the appellant's assets to secure its claim for professional services allegedly rendered by the appellant, and was given notice. None of the creditors opposed court approval of the proposal, which was approved by Master Mills on November 22, 2016. The appellant fully performed the proposal as of December 6, 2016. A Certificate of Full Performance of Proposal was issued by the appellant's trustee.
The appellant subsequently attempted to resolve the respondent's asserted secured claim. However, negotiations failed. In February, the appellant commenced an application to set aside the respondent's security on the basis of the settlement concluded with Zodax. The next month, the respondent commenced an action against the appellant to enforce its security by appointing a receiver and manager over the assets and undertaking of the appellant. The respondent then brought a motion to annul the appellant's proposal in the bankruptcy proceedings pursuant to s. 63(1) of the BIA. More specifically, the respondent alleged that the appellant entered into a secret settlement agreement with Zodax and failed to disclose the particulars to the appellant's creditors. Moreover, the respondent alleged that this was done to circumvent the bankruptcy process and fraudulently obtain court approval of the proposal.
On July 13, 2017, Conway J. ordered that the respondent's motion to annul the bankruptcy proposal would proceed before the applications. She also directed that the respondent's production motion be heard before the other proceedings. Conway J.'s order was not appealed.
The motion judge held that the respondent's allegations gave rise to serious questions about the propriety of the proposal process and thus concluded that production of the settlement documentation was necessary. The motion judge also held that the appellant had waived any privilege by relying on its settlement with Zodax in support of its application.
(1) Is leave to appeal required?
(2) Did the motion judge err in determining the production motion before the annulment motion?
(3) Did the motion judge err in ordering production of the settlement documentation and correspondence?
Holding: Appeal dismissed.
(1) Yes. The court held that leave was required because the motion judge's production order did not involve future rights nor was it likely to affect other cases of a similar nature in the bankruptcy proceedings. Leave to appeal was granted to the appellant under s. 193(e) of the BIA.
(2) No. There was a clear direction order from Conway J. requiring the motion judge to hear the production motion before the other applications. As the motion judge noted in his reasons, the production motion was the only matter before him. No appeal was taken from the order of Conway J., nor was there any attempt to have it set aside or modified. Furthermore, the motion judge correctly determined that he could not resolve the issue as to whether the respondent's annulment motion was an abuse of process because of the conflicting evidentiary record before him. Finally, the respondent was not required to appeal from Master Mills' approval order. The respondent's annulment motion was authorized under s. 63(1) of the BIA.
(3) No. The court held that the motion judge did not err in ordering production of the settlement documentation and correspondence. It was within the motion judge's authority to determine that the countervailing interests to the public interest in settlement privilege included the respondent's allegations of impropriety on the part of the appellant and their potential effect on the integrity of the proposal process. Absent production of the settlement documentation and communications, the motion judge concluded that it was impossible to determine whether the conduct of the parties and the terms of the settlement were bona fide or improper.
[Pepall, van Rensburg and Paciocco JJ.A.]
Bryan Skolnik, for the appellant
Mark Ross, for the respondent
Keywords: Real Property, Contracts, Mortgages, Priority, Equitable Subrogation, Mutual Trust Co v Creditview Estate Homes Limited,  OJ No 3258 (CA), Civil Procedure, Summary Judgment
On September 3, 2008, the appellant, L-Jalco Holdings, lent money to 837047 Ontario Limited ("837"). That loan was secured, in part, by a $1,100,000 mortgage placed on a commercial building at the corner of Queen and Division Streets in Kingston, Ontario. There were two prior mortgages on the property at the time. DP held the first mortgage in the amount of $449,070.37.
The respondent, BM, held the second mortgage in the amount of $49,900. L-Jalco paid off DP's mortgage and more than $75,000 in tax arrears, but not BM's mortgage.
837 subsequently defaulted on its payments on the L-Jalco mortgage, and on June 13, 2012, the property was sold by L-Jalco under power of sale. This was done without notice to BM. The building sold for $425,000. L-Jalco now claims all of the proceeds of sale. It brought an action against BM claiming that even though her mortgage was registered in priority to to L-Jalco's, it is entitled to priority based on equitable subrogation for having paid off DP's first mortgage and the property taxes. BM counter-claimed for priority payment of the amount outstanding on her mortgage.
In claiming equitable subrogation, L-Jalco relied on its claim that BM's lawyer failed to fulfill an undertaking to discharge her mortgage that L-Jalco claims he provided. L-Jalco also argued that BM should not be enriched by assuming first priority as a result of L-Jalco's act of paying off the first mortgage. L-Jalco argued that it could simply have taken an assignment of the DP mortgage, thereby securing priority over her mortgage, making it equitable that it receive priority to BM through the doctrine of equitable subrogation.
On June 29, 2017, BM was granted summary judgment. The motion judge rejected L-Jalco's claim that BM's lawyer undertook to discharge her mortgage. The motion judge also dismissed L-Jalco's claim to equitable subrogation and ordered L-Jalco to pay BM the sum secured by her mortgage of $49,900. J-Lalco appealed.
(1) Did the motion judge err in placing the onus on L-Jalco to establish the availability of the remedy of equitable subrogation when the summary judgment motion was brought by BM?
(2) Did the motion judge err in determining that facts were readily discernible even though there was disputed evidence relating to central issues?
(3) Did the motion judge fail to properly apply the doctrine of equitable subrogation?
Held: Appeal dismissed.
(1) No. The motion judge was correct to impose the burden on L-Jalco to prove its entitlement to equitable subrogation, notwithstanding that BM initiated the summary judgment motion. Once BM proved that her mortgage was registered in priority to L-Jalco's mortgage, the burden fell squarely on L-Jalco to prove the equitable subrogation claim it relied upon, in answer.
(2) No. At the commencement of the motion, L-Jalco encouraged the trial judge to proceed by way of summary judgment by commenting that, "there really isn't much dispute about the facts". L-Jalco relied heavily on documentary evidence to establish its claim that BM had undertaken to discharge her mortgage. The motion judge was well situated to assess this evidence. Therefore, the court saw no palpable or overriding error in the motion judge's decision to proceed by way of summary judgment despite the evidence in dispute.
(3) No. The motion judge's decision not to grant the remedy of equitable subrogation was discretionary. As the court recognized in Mutual Trust Co. v. Creditview Estate Homes Limited,  OJ No 3258 (CA), at pp. 6-7, "the fundamental principle underlying the doctrine of subrogation [is] one of fairness in the light of all the circumstances". On the findings the motion judge was entitled to make, L-Jalco went ahead with the loan to 837 knowing that BM's mortgage stood in priority to its own and that she would not postpone her interest.
SJ, acting in person
Andi Jin, for the respondent
Keywords: Civil Procedure, Appeals, Extension of Time, Kefeli v Centennial College of Applied Arts and Technology (2002), 23 CPC (5th) 35 (Ont. C.A., in Chambers)
The applicant sought an order granting her an extension of time to file a notice of appeal from the order of James J. dated June 7, 2017, striking out her statement of claim without leave to amend.
(1) Should the applicant be granted an extension of time to file a notice of appeal?
Holding: Motion dismissed.
(1) No. The principles that govern this request are set out in cases such as Kefeli v. Centennial College of Applied Arts and Technology (2002), 23 CPC (5th) 35 (Ont. C.A., in Chambers): (i) whether the applicant formed an intention to appeal within the relevant period; (ii) the length of, and explanation for, her delay; (iii) the prejudice to the respondent; (iv) the merits of the appeal; and (v) whether the justice of the case requires the extension sought.
The intention to appeal
The respondent does not contest that the applicant formed an intention to appeal within the requisite period.
The length of and explanation for the delay
The applicant filed her motion for an extension order some 10 months following the order she seeks to appeal. That is a long delay. The applicant deposed that it took 7 months for this court to consider her request for a fee waiver. The applicant did not include in her motion material any application for a fee waiver or any communication from the court approving or denying her fee waiver. As a result, there was a lack the evidence to assess this part of the applicant's explanation.
The applicant also deposed that since June 2017 she had suffered from various medical problems that prevented her from filing a notice of appeal or bringing a motion for an extension of time. After reviewing all of the evidence, Brown J.A. saw no evidentiary basis to support the applicant's contention that any medical condition prevented her from filing her motion for an extension of time until April 2018.
Prejudice to the respondent
The respondent did not contend she had suffered any prejudice from the applicant's delay.
Merits of the appeal
The applicant sued the respondent, an employee in the Registrar's office of the Superior Court of Justice in Ottawa, for damages for "inflicting unnecessary emotional pain, suffering and uncertainty."
Brown J.A. noted that the applicant's claim is very difficult to follow. The applicant alleged that the respondent mismanaged paperwork and court filings involved in the applicant's related proceeding, which resulted in certain orders being made against and to the prejudice of the applicant. The respondent's behaviour also caused the applicant stress. Even on the most liberal reading of the applicant's amended statement of claim, Brown J.A. was unable to discern a cause of action, and saw no merit to her appeal.
The justice of the case
Brown J.A. considered the multi-year history of the respondent's motion to strike and the delays in scheduling that motion due to the applicant's conduct, together with all of the factors set out above. When considered as a whole, the justice of the case required the dismissal of the applicant's motion.
Short Civil Decisions
[Lauwers, Benotto and Nordheimer JJ.A.]
Michelle Kropp and Kenneth Peacocke, for the appellant
Réjean Parisé, for the respondent
Keywords: Family Law, Custody, Orders, Variation, Material Change in Circumstances, Parental Conflict, Litman v. Sherman, 2008 ONCA 485
Criminal and Provincial Offences Decisions
[MacFarland, Watt and Paciocco JJ.A]
BH Greenspan, R. McKechney and P Hamm, for the appellants
Jull and J. Nehmetallah, for the respondent
Keywords: Provincial Offences, Conservation Authorities Act, RSO 1990, c C27, ss, 28(1), 28(16), Appeals, Standard of Review, Palpable and Overriding Error, Sentencing, Fines, Aggravating and Mitigating Factors
[MacFarland, Watt and Paciocco JJ.A.]
John Collins, for the appellant
Joseph Hanna, for the respondent
Keywords: Criminal, Dangerous Driving Causing Bodily Harm, Criminal Negligence Causing Bodily Harm
[Strathy C.J.O., Watt and Epstein JJ.A.]
Deepa Negandhi, for the appellant
Philippe G. Cowle, for the respondent
Keywords: Criminal Law, Assault with a Weapon, R v Nasogaluak, 2010 SCC 6,  1 SCR 206
[Hoy A.C.J.O., MacFarland and Roberts JJ.A.]
Lisa Joyal, for the applicant (appellant)
Paolo Giancaterino, for the respondent
Keywords: Criminal Law, Possession of Child Pornography, Make Available Child Pornography, Sentencing
[MacFarland, Watt and Paciocco JJ.A.]
David North, for the appellant
Carmen Elmasry, for the respondent
Keywords: Criminal Law, Sexual Offences Against a Minor, R v W (D)  1 SCR 742
[MacPherson, Hourigan and Miller JJ.A.]
RP, acting in person
Peter Copeland, appearing as duty counsel
Justin Reid, for the respondent
Keywords: Criminal Law, Sexual Interference, Attempt to Obstruct Justice, Orders Under Sex Offender Information Registration Act, S.C. 2004, c. 10 ("SOIRA"), Right of Appeal
[Epstein, Paciocco and Nordheimer JJ.A.]
Richard Litkowski and Jessica Zita, for the appellant
Shawn Porter, for the respondent
Keywords: Criminal Law, Possession of a Loaded Prohibited Firearm Without a License, Possession of Cocaine for the Purpose of Trafficking, Possession of the Proceeds of Crime, Evidence, Admissibility
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