Canada: Court Of Apeal Summaries (January 11-15, 2021)
Blaney's Appeals

Please find below our summaries of the civil decisions of the Court of Appeal for Ontario for the week of January 11. There were only three substantive civil decisions released this past week.

In Wiseau Studios LLC, Justice Thorburn granted security for judgment, an apparent first in Ontario. In this case, Wiseau Studios, the producers of the cult-classic movie The Room, had engaged in improper litigation conduct, such as refusing to pay costs awards and improperly obtaining an injunction that was later set aside. The moving parties, who had produced a documentary about the cult-like following of The Room, but could not release their film because of the litigation, successfully brought a motion for security not only for the costs of the trial and appeal, but for the amount of the trial judgment itself. In making the order, Her Honour relied on s. 134(2) of the Courts of Justice Act and mostly BC appellate decisions, as well as the Supreme Court's well-known Mareva injunction decision in Aetna Financial v Feigelman.

Stonehouse Group Inc. is an appeal from a rare tax decision of the Superior Court. In interpreting the Corporations Tax Act (an Ontario statute), the Court concluded that the taxpayer who had been compelled to overpay tax pending a reassessment was entitled to "enhanced interest" on the overpayment after they succeeded in the reassessment, rather than normal interest, which is currently set at 0%.

In Heliotrope Investment Corporation, the Court granted leave to file a supplementary notice of appeal but denied leave to file fresh evidence.

Table of Contents

Civil Decisions

Stonehouse Group Inc. v Ontario (Finance), 2021 ONCA 10

Keywords: Tax Law, Statutory Interpretation, Standard of Review, Interest on Overpayment of Tax, Enhanced Interest, Corporations Tax Act, R.S.O. 1990, c. C.40, s. 79(7), s. 82(5), Housen v. Nikolaisen, 2002 SCC 33, Placer Dome Canada Ltd. v. Ontario (Minister of Finance), 2006 SCC 20, The Ontario Committee on Taxation, The Provincial Revenue System, vol. III (Toronto: Queen's Printer, 1967)

Heliotrope Investment Corporation v 1324789 Ontario Inc., 2021
ONCA 23

Keywords:  Contracts, Real Property, Mortgages, Civil Procedure, Appeals, Extension of Time, Fresh Evidence, Rules of Civil Procedure, Rule 3.02(1), Rizzi v. Mavros, 2007 ONCA 350, Bratti v. Wabco Standard Trane Inc., 1994 CanLII 1261 (Ont. C.A.), Chandra v. Canadian Broadcasting Corporation, 2016 ONCA 448, Enbridge Gas Distribution Inc. v. Froese, 2013 ONCA 131

Wiseau Studio, LLC v Harper, 2021 ONCA 31

Keywords: Copyright, Injunctions, Civil Procedure, Appeals, Security for Costs ,Security for Trial Judgment, Courts of Justice Act, RSO 1990, c C43, s. 134(2), Rules of Civil Procedure, Rule 56.01, Vaillancourt v Cater, 2017 ABCA 282, Aetna Financial Services Ltd. v Feigelman, [1985] 1 SCR 2, C.H. v. M.H., 1997 ABCA 263, Vaccarov Twin Cities Power-Canada U.L.C., 2013, ABCA 252, Creative Salmon Company Ltd. v. Staniford, 2007 BCCA 285, Richland Construction Inc. v. Manningwa Developments Inc., 1996 CanLII 3188 (B.C. C.A.), First Majestic Silver Corp. et al. v Davila, 2013 BCCA 312, Paz v. Hardouin, 1995 CanLII 1808 (B.C. C.A.), Cadinha v. Chemar Corp. Inc., 1995 CanLII 1017 (B.C. C.A.), Kedia v. Shandro Dixon Edgson, 2007 BCCA 316, Chan v. Vancouver Trade Mart Ltd., 1997 CanLII 4108 (B.C. C.A.)

CIVIL DECISIONS

Stonehouse Group Inc. v Ontario (Finance), 2021 ONCA 10

[Lauwers, Miller and Nordheimer JJ.A.]

Counsel:

Kutyan and T. Trieu, for the appellant

A.H. Bornstein and J. Epp-Fransen, for the respondent

Keywords: Tax Law, Statutory Interpretation, Standard of Review, Interest on Overpayment of Tax, Enhanced Interest, Corporations Tax Act, R.S.O. 1990, c. C.40, s. 79(7), s. 82(5), Housen v. Nikolaisen, 2002 SCC 33, Placer Dome Canada Ltd. v. Ontario (Minister of Finance), 2006 SCC 20, The Ontario Committee on Taxation, The Provincial Revenue System, vol. III (Toronto: Queen's Printer, 1967)

Facts:

The appellant was reassessed with respect to its 2008 taxation year to disallow a deduction for a loss carried back under the Corporations Tax Act, R.S.O. 1990, c. C.40 (the "CTA"). As a result, the appellant was required to pay $560,000 in taxes, plus interest. Although the appellant filed an objection, the full amount owed was paid pending the determination of the objection, as statutorily required.

The reassessment was eventually reversed to allow the full amount of the loss carry back. Accordingly, the respondent made a refund payment to the appellant, without any refund of the interest. The appellant objected to the failure of the respondent to refund the interest, and argued that the respondent ought to have paid interest calculated at the "enhanced rate" under the CTA.

The motion judge disagreed with the appellant's arguments, and found that the appellant was not entitled to the enhanced interest rate under the CTA, but was instead only entitled the "normal" interest rate. Due to the current state of low interest rates, the "normal rate" under the CTA is currently set at zero percent, which in turn meant that although the appellant was technically entitled to "normal interest", in practice there was no interest actually refunded to the appellant.

Issues:

1. Was the appellant entitled to "normal interest" or "enhanced interest" under the CTA?

Holding:

Appeal allowed.

Reasoning:

1. Was the appellant entitled to "normal interest" or "enhanced interest" under the CTA?

The appellant was entitled to "enhanced interest". The appellant's position was that it was entitled to interest calculated at the enhanced rate in accordance with s. 82(5) because, after the reversal of the reassessment, it had a surplus in its tax account, namely, the amount of tax that it had been required to pay because of the initial reassessment.

The respondent, on the other hand, contended that s. 79(7) of the CTA is a special provision relating to loss carry backs, which takes this particular situation outside the scope of s. 82(5). Specifically, the respondent submitted that the effect of s. 79(7) is that the tax payable is deemed to be the same as it was before the deduction of the loss.

The Court began by noting that since the appeal involved a question of law, the proper standard of review was correctness (Housen v. Nikolaisen, 2002 SCC 33). Further, the Court went on to add that there is no longer a special rule of interpretation that applies to taxation statutes. In other words, taxation statutes are not to be interpreted strictly against the taxing authority, as once was the case. Instead, taxation statutes are to be interpreted as any other statute would be, that is, "the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament" (Placer Dome Canada Ltd. v. Ontario (Minister of Finance), 2006 SCC 20).

After outlining the broad principles of statutory interpretation, the Court considered the positions of the parties, and concluded that the respondent's interpretation did not seem to give effect to the object and scheme of the CTA. Specifically, the Court found that the problem with the respondent's interpretation is that it would in fact operate to deny a corporation any refund interest, not just refund interest at the enhanced rate. The effect of this interpretation stood in contrast to the respondent's position as pleaded, namely, that the appellant was entitled to normal interest under s. 82(4), but not to the enhanced interest under s. 82(5).

Due to the Court's acknowledgement that the wording of s. 79(7) was anything but clear, alternative tools of statutory interpretation were necessary. As mentioned in Placer Dome, "where the words of a statute give rise to more than one reasonable interpretation, the ordinary meaning of the words will play a lesser role, and greater recourse to the context and purpose of the Act may be necessary." On that note, the Court looked to the report of The Ontario Committee on Taxation, The Provincial Revenue System, vol. III (Toronto: Queen's Printer, 1967), which was the report that gave rise to the adoption of the legislation providing taxpayers with the right to receive interest on overpayments of tax. The report of the Committee concluded that it would be fundamentally unfair for taxpayers to not receive interest on overpayments of tax, and that where the overpayment was the result of a compelled payment arising from a dispute between the taxpayer and the government, the taxpayer should receive interest at an enhanced rate if ultimately successful in disputing the tax.

The conclusion of the report of the Committee gave support to the Court's conclusion that s. 82(5) does in fact contemplate taking into account a deduction from a loss carried back when calculating tax payable. The respondent's interpretation was not only inconsistent with its own pleadings, but was also refuted by the background evidence. The Court concluded by noting that the language of s. 79(7) is not ambiguous when read in its entire context, and although not necessary to resort to it in this case, there remains a "residual presumption in favour of the taxpayer" in interpreting such legislative provisions, according to Placer Dome.

Heliotrope Investment Corporation v 1324789 Ontario Inc., 2021 ONCA 23

[Thorburn J.A. (Motions Judge)]

Counsel:

D. Marks for the moving parties, 1324789 Ontario Inc., 1073650 Ontario Inc., M. L. B. and J. G. B.

L. Merovitz and E. Lay for the responding parties, Heliotrope Investment Corporation and Canadian Western Trust Company

Keywords: Contracts, Real Property, Mortgages, Civil Procedure, Appeals, Extension of Time, Fresh Evidence, Rules of Civil Procedure, Rule 3.02(1), Rizzi v. Mavros, 2007 ONCA 350, Bratti v. Wabco Standard Trane Inc., 1994 CanLII 1261 (Ont. C.A.), Chandra v. Canadian Broadcasting Corporation, 2016 ONCA 448, Enbridge Gas Distribution Inc. v. Froese, 2013 ONCA 131

Facts:

The parties' principals were involved in residential land development projects since 2013, where the respondent would provide the financing and the appellant (the moving party) was the project manager. Through negotiations, the parties decided that the respondents would lend money to 1324780 Ontario Inc. ("132") through a Registered Retirement Savings Plans held with Canadian Western, secured by mortgages on several properties under development, pursuant to Joint Venture Agreements. The appellants would then provide management services to the Joint Ventures. However, the mortgages went into default due to cost overruns and delays.

Summary Judgment

The respondents brought motions for summary judgment for payment of monies owing in respect of three mortgages with the appellants. The parties agreed that the respondents had advanced monies secured by mortgages, and that the appellants had been in default for some time.

The respondents took the position that these were two experienced commercial parties, where the respondents lent the appellants money secured by mortgages, and the mortgages are in default. Absent redemption of the mortgages, the respondents are entitled to enforce their rights, which include possession of the mortgaged lands and judgment for the amount due and owing on the loans (affirmed by Joint Venture Agreements signed in 2014).

The appellants disputed the enforceability of the mortgages, and raised two issues on the summary judgment motion: (1) the appellants claimed that the respondents made representations that the loans would not have to be repaid before development of the properties was completed; and (2) in any event, judgment should be stayed pending appeal as there was related litigation that, if successful, would reduce the amounts owing by the appellants. Both arguments were rejected by the motion judge.

The motion judge held that the debt instruments and Joint Venture Agreements were negotiated at arms-length with the benefit of independent legal counsel. As well, the appellant's did not adduce any evidence otherwise and there was no evidence of a fraudulent scheme by the respondents. The motion judge granted summary judgment in favor of the respondents and ordered that there should be no stay on the enforcement of the judgments, because lifting the stay would not prevent the appellants from proceeding with their other litigation between the parties.

Notices of Appeal

In the Notice of Appeal, the appellants sought an order that the judgment be stayed pending the determination of other related claims, as the motion for summary judgment comprises only three of the six enforcement actions on mortgages.

The appellants also sought to file a Supplementary Notice of Appeal because they claimed the Notice of Appeal filed by their lawyers focused on the order denying a stay, however, the appellants claimed they thought the merits of the underlying judgment were being appealed. The appellants also sought to file fresh evidence to support their argument that they did not have independent legal advice when they signed the Joint Venture Agreement, and that they signed the Agreement under duress.

The respondents claimed that the request to file a Supplementary Notice of Appeal was just another delay tactic to prevent them from recovering the funds owing pursuant to simple mortgage collection action. Regarding the fresh evidence, the respondents claimed that the appellants could have adduced this evidence earlier and, in any event, there was no evidence that the appellants were without legal counsel when they signed the Joint Venture Agreement.

Issues:

1. Should the Court extend the time for the appellants to file a Supplementary Notice of Appeal?
2. Should the Court permit the appellants to file fresh evidence?

Holding:

Motion granted, in part.

Reasoning:

(1) Yes. The Court allowed the request by the appellants to file a Supplementary Notice of Appeal that clarified that both issues (denial of stay of enforcement and underlying merits) were being raised by way of appeal from the motion for summary judgment. When looking at the evidence as a whole, and bearing in mind that it was the appellants' intention and the interest of justice that matters, the Court accepted that the appellants intended to raise both issues.

The Court did not accept the respondent's concern that the Supplementary Notice of Appeal would allow the appellants to appeal the monetary amounts. Rather, the Court stated that the motion judge noted that there was no dispute regarding the calculation of principal and accrued interest pursuant to the mortgages that were in default. The Court also rejected the respondents' claim that even if the appellants intended to appeal both issues, the interests of justice favoured dismissal of this motion to include the second issue, as this case has no precedential value, and is of interest only to the parties.

Regarding the court's discretion to extend the time for service of a Notice of Appeal, the court, citing Rule 3.02(1) of the Rules of Civil Procedure, commented that it is well-settled law that while appellate courts have to consider a number of different factors in determining whether to grant leave to extend the time to appeal, the governing principle is simply whether the "justice of the case" requires that an extension be given (Bratti v. Wabco Standard Trane Inc., 1994 CanLII 1261 (Ont. C.A.), at p. 3).

(2) No. The Court dismissed the appellants' request to adduce fresh evidence stating that there was no basis for allowing the fresh evidence. The appellants claimed they signed the Joint Venture Agreements under duress and without the benefit of legal advice. As a result of this, the appellants purchased a share in the property of the joint ventures and were unable to meet the payments due.

The Court held that the appellants knew whether they did or did not have legal representation at the time they signed the agreement and that the communications they sought to adduce were all available at the time of the hearing before the motion judge. Further, the court held that there was no issue that the appellants were represented by the same counsel and there was no evidence that the retainer had been terminated. Thus, there was nothing "fresh" about the evidence the appellants sought to adduce.

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