Court Of Appeal Summaries (September 26, 2022 – September 30, 2022) - Civil Law

In Badesha v. Cronos Group Inc., a shareholder of Cronos Group Inc. sought leave to proceed with and certify a proposed class action for alleged secondary market misrepresentations in Cronos' financial statements that resulted in a drop in the respondent's share price once the errors were corrected. The motion judge denied leave to proceed, and dismissed the motion for certification on the basis that the appellant relied on nearly 8,000 individual misrepresentations. The Court held that the motion judge erred in characterizing the claim as asserting nearly 8,000 misrepresentations instead of one main one. This mischaracterization at the outset of the hearing tainted the findings of the motion judge, who had concluded that the appellant had no reasonable possibility of success at trial. The Court held that there was conflicting evidence on whether the reissuance of the financial statements led to a drop in the share price, and this was sufficient to grant leave to bring the proceeding under s. 138.3 of the Securities Act. The issue of certification was remitted to the Superior Court.

In Buduchnist Credit Union Limited v. 2321197 Ontario Inc., each party brought contested motions regarding the distribution of proceeds of sale of properties. The question was raised as to whether a party may enforce a judgment debt that arose in breach of a Mareva order, thereby defeating the purpose of the Mareva Order. The Court granted leave to appeal.

In Bogue v Miracle, the Court confirmed that a non-Indian cannot appoint a receiver over a Indian debtor's property on reserve in order to collect a debt. In this case, a lawyer had successfully handled an arbitration on a 25% contingency fee basis, recovering $11 million for their client. The client, who is an "Indian" under the Indian Act, only paid $12,500 of their $2.75 million debt. The Superior Court had appointed a receiver over the debtor's businesses to run them and pay off the debt. The Court set the receivership aside.

Other topics this week included stay pending appeal in a dispute over the removal of estate trustees, and interest and costs under a commercial lease.

Civil Decisions

Badesha v. Cronos Group Inc., 2022 ONCA 663

Keywords: Securities Law, Secondary Market Misrepresentation, Class Proceedings, Leave to Commence Proceeding, Certification, , Securities Act, R.S.O. 1990, c. S.5, ss. 138.3 – 138.8, Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 5(1), Business Corporations Act, R.S.O. 1990, c. B.16, Canadian Imperial Bank of Commerce v. Green, 2015 SCC 60, Rahimi v. SouthGobi Resources Ltd., 2017 ONCA 719, 1654776 Ontario Limited v. Stewart, 2013 ONCA 184, Theratechnologies Inc. v. 121851 Canada Inc., 2015 SCC 18, Kaynes v. BP, P.L.C., 2018 ONCA 337, Mask v. Silvercorp Metals Inc., 2016 ONCA 641, Drywall Acoustic Lathing and Insulation, Local 675 Pension Fund (Trustees of) v. SNC-Lavalin Group Inc., 2016 ONSC 5784

Buduchnist Credit Union Limited v. 2321197 Ontario Inc., 2022 ONCA 670

Keywords: Bankruptcy and Insolvency, Receiverships, Priority Dispute, Civil Procedure, Orders, Injunctions, Mareva Injunctions, Leave to Appeal, Stay Pending Appeal, Security for Costs, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-43, s. 193(e), 195, 243(1), Courts of Justice Act, R.S.O. 1990, c. C.43, s. 101, Rules of Civil Procedure, R. 56.01, 60.12(c), 61.06(1)(b), Bankruptcy and Insolvency General Rules, C.R.C., c. 368, s. 31(1), Trade Capital v. Cook, 2017 ONSC 1857, aff'd 2018 ONCA 27, KingSett Mortgage Corporation v. 30 Roe Investments Corp., 2022 ONCA 479, Business Development Bank of Canada v. Astoria Organic Matters Ltd., 2019 ONCA 269, Buduchnist Credit Union Limited v. 2321197 Ontario Inc., 2019 ONCA 588, REF II BHB IV Portofino, LLC. v. Portofino Corporation, 2015 ONCA 906, Industrial Alliance Insurance and Financial Services Inc. v. Wedgemount Power Limited Partnership, 2018 BCCA 283, Dal Bianco v. Deem Management Services Limited, 2020 ONCA 585, Fanshawe College of Applied Arts and Technology v. Hitachi Ltd., 2022 ONCA 144, Ilic. v. Ducharme Fox LLP, 2022 ONCA 463, Lawrence v. International Brotherhood of Electrical Workers (IBEW) Local 773, 2017 ONCA 321, aff'd, 2018 SCC 11, Heliotrope Investment Corporation v. 1324789 Ontario Inc., 2021 ONCA 23, Chandra v. Canadian Broadcasting Corp., 2016 ONCA 448, Hillmount Capital Inc. v. Pizale, 2021 ONCA 364, Re Bearcat Exploration Ltd. (Bankrupt), 2003 ABCA 365, 2403177 Ontario Inc. v. Bending Lake Iron Group Limited, 2016 ONCA 225, Ontario Wealth Management Corporation v. Sica Masonry and General Contracting Ltd., 2014 ONCA 500, Trade Capital Finance Corp. v. Cook, 2017 ONSC 1857, Diversitel Communications Inc. v. Glacier Bay Inc. (2004), 181 O.A.C. 6 (C.A.)

Wu v. Chen , 2022 ONCA 664

Keywords: Contracts, Debtor-Creditor, Promissory Notes, Damages, Interest, Interest Act, R.S.C. 1985, c. I-15, s. 4, Housen v. Nikolaisen, 2002 SCC 33, Elcano Acceptance Ltd. v. Richmond, Richmond, Stambler & Mills (1989), 68 O.R. (2d) 165 (H.C.)

Di Santo v. Di Santo Estate, 2022 ONCA 671

Keywords: Wills and Estates, Estate Trustees, , Civil Procedure, Order, Costs Order, Leave to Appeal, Stay Pending Appeal, Rules of Civil Procedure, r. 63.01(1), RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311

Professional Court Reporters Inc. v. Pistachio Financier Corp., 2022 ONCA 669

Keywords: Contracts, Real Property, Commercial Leases, Damages, Interest, Costs, Courts of Justice Act, R.S.O. 1990, c. C.43 s. 127, National Leasing Group Inc. v. Verbanac Law Firm Professional Corporation, 2015 ONSC 145, Boucher et al. v. Public Accountants Council for the Province of Ontario et al., (2004), 71 O.R. (3d) 291 (C.A.)

Bogue v Miracle, 2022 ONCA 672

Keywords: Aboriginal Law, Contracts, Debtor-Creditor, Enforcement, Receiverships, Indian Property on Reserve, , Indian Act, R.S.C. 1985, c. I-5, ss. 87, 88, 89 and 90, Courts of Justice Act, R.S.O. 1990, c. C.43. s. 101, Tyendinaga Mohawk Council v. Brant, 2014 ONCA 565, McDiarmid Lumber Ltd. v. God's Lake First Nation, 2006 SCC 58, Mitchell v. Peguis Indian Band, [1990] 2 S.C.R, Williams v. Canada, [1992] 1 S.C.R. 877, Benedict v. Ohwistha Capital Corporation, 2014 ONCA 80, Tribal Wi-Chi-Way-Win Capital Corp. v. Stevenson et al., 2009 MBCA 72, Bastien Estate v. Canada, 2011 SCC 38

Short Civil Decisions

2748355 Canada Inc. v. Aviva Insurance Company of Canada, 2022 ONCA 667

Keywords: Contracts, Insurance, Coverage, Civil Procedure, Parties, Procedural Fairness

Glenrio Financing Limited v. Rakovac, 2022 ONCA 677

Keywords: Contracts, Real Property, Mortgages, Civil Procedure, Summary Judgment

Downey v. Arey, 2022 ONCA 673

Keywords: Wills and Estates, Contracts, Real Property, Agreements of Purchase and Sale of Land, Fundamental Terms

CIVIL DECISIONS

Badesha v. Cronos Group Inc. , 2022 ONCA 663

Feldman, Roberts and Favreau JJ.A.

Counsel:

P. Bates, G. Myers and P. Guy, for the appellant

J. Doris, M. O'Brien and A. Matic, for the respondents

facts:

The appellant was a shareholder in Cronos Group Inc. ("Cronos"). Cronos is a cannabis company in Canada. In March 2019, Cronos entered into two cannabis product exchange transactions with third parties. Cronos attributed revenue to these transactions in the three subsequent quarterly interim financial statements. In November 2019, Cronos entered into a series of similar transactions, and reported revenue from the transactions on the following quarterly interim financial statement. Over the course of several press releases between February and March 2020, Cronos ultimately issued a material change report and reissued the quarterly financial statements disclosing that the revenue reported for 2019 Q1 would be reduced by $2.5 million and for 2019 Q3 by $5.1 million. Cronos also disclosed that it anticipated reporting one or more material weaknesses in its internal controls.

The appellant sought leave to proceed with a proposed class action on behalf of the shareholders of the respondent Cronos alleging that there were misrepresentations in Cronos' 2019 public filings. In order to proceed with the proposed action, the appellant required leave of the court pursuant to s. 138.8 of the Securities Act, R.S.O. 1990, c. S.5, and certification of the action as a class proceeding pursuant to the Class Proceedings Act, 1992, S.O. 1992, c. 6. The motion judge heard the leave motion and certification motion together. The motion judge characterized the appellant's proposed claim as an action alleging that the defendants made 7,449 separate misrepresentations. He dismissed the motion for leave under the Securities Act ("SA") on the basis that the appellant failed to put forward any evidence that each of the alleged misrepresentations materially contributed to the drop in the price of Cronos's shares at the relevant time. The motion judge also dismissed the motion for certification on the same basis.

issues:

(1) Did the motion judge err in characterizing the claim as 7,449 individual misrepresentations?

(2) Did the motion judge err in finding that the appellant had no reasonable possibility of success at trial?

(3) If the motion judge did err in determining that the appellant had no reasonable chance of success, should the Court certify the class action?

holding:

Appeal allowed.

reasoning:

(1) Yes

The Court held that, viewed properly, the claim alleged one central misrepresentation, that is, Cronos misrepresented its revenues for the 2019 interim financial statements by treating transactions involving the exchange of cannabis products with a third party as generating revenue. The motion judge made a palpable and overriding error in characterizing the claim as alleging that the respondents made 7,449 separate misrepresentations. S. 138.3(6) of the Securities Act provides the Court with the discretion to treat multiple misrepresentations having common subject matter as a single misrepresentation.

Furthermore, though the appellant sought a declaration that there were multiple misrepresentations, it was clear that the purpose of this was to maximize available damages due to the limit imposed in s. 138.7 of the Securities Act. The Court stated that the declaration sought by the appellant was part of the relief sought, and therefore an issue to be dealt with at trial.

(2) Yes

The Court found that the test for leave to proceed with a misrepresentation claim under s. 138.3 of the Securities Act is that (a) the action is being brought in good faith, and (b) there is a reasonable possibility that the action will be resolved in favour of the plaintiff at trial. The Court noted that no issue was raised regarding good faith. In order to meet the "reasonable possibility" of success branch of the test, the plaintiff must show that there was a misrepresentation and that it was material. This branch is meant to be "more than a speed-bump", but not meant to be a "mini-trial": Theratechnologies Inc. v. 121851 Canada Inc., 2015 SCC 18, at para. 39.

The motion judge had accepted the evidence of the respondent's expert witness that the drop in the share price was largely a result of the COVID-19 pandemic. Furthermore, he found that the transactions that led to the restated financial reports were a relatively small portion of Cronos's business. The Court held that this analysis was tainted by the mischaracterization of the claim as being 7,449 individual misrepresentations. Therefore, a proper analysis on whether the single misrepresentation was material was never conducted. Had this been done, the motion judge ought to have found that misrepresentations were corrected in early 2020 and that there was a corresponding drop in the share price. There had been conflicting evidence regarding whether the share price dropped due to reissuing the financial statements or because of the COVID-19 pandemic. The reasonable possibility threshold was met and the issue should be left for trial.

(3) Yes

The motion judge simply dismissed the certification motion on the ground that the test for leave to proceed on the misrepresentation claim was not met. The requirements for certification under s. 5(1) of the Class Proceedings Act were not addressed. Accordingly, the Court held that it would not be appropriate to decide this issue and that the Ontario Superior Court was in a better position to address this at first instance. The issue of certification was therefore remitted to the Superior Court.

Buduchnist Credit Union Limited v. 2321197 Ontario Inc., 2022 ONCA 670

Paciocco J.A. (Motion Judge)

Counsel:

B. Grossman and S-A. Wilson, for the moving party (M53722) and the Responding Party (M53725) Buduchnist Credit Union Limited

P.W.G. Carey, C. Lee and D. Magisano, for the Moving Party (M53725) and the Responding Party (M53722) Trade Capital Finance Corp.

facts:

Trade Capital Finance ("TC") alleged that it was the victim of fraud perpetrated by Mr. DM. TC traced what it claimed to be the proceeds of the fraud into The Cash House Inc. ("Cash House"), and 2242116 Ontario Inc. ("116 Ontario Inc."), a family corporation, two entities allegedly controlled at the relevant time by Mr. DM. TC commenced an action against Mr. DM, 116 Ontario Inc., and other defendants but that action remains outstanding.

On May 6, 2015, to address the risk that defendants, including Mr. DM, would dissipate their assets before TC's claim could be determined, TC obtained a Mareva Order to enjoin Mr. DM from dealing with his assets. TC also provided notice of the Mareva Order to Buduchnist Credit Union ("BCU"), as it held three mortgages over Mr. DM's properties.

After receiving notice of TC's Mareva injunction, BCU arranged to use two of the mortgages as security for a post-Mareva debt to BCU that Mr. DM incurred. Mr. DM had written approximately $6 million in cheques from the Cash House to a BCU account. The accounts were credited before the cheques cleared and Mr. DM withdrew the funds. All relevant mortgages went into default and BCU obtained consent judgments against all mortgagors, which totalled more than $9 million.

On January 17, 2019, BCU obtained a Receivership Order over the mortgaged properties, pursuant to s. 243(1) of the Bankruptcy and Insolvency Act ("BIA"), and s. 101 of the Courts of Justice Act ("CJA"). All of the properties have now been sold pursuant to that order. TC objected to the distribution of any proceeds of sale in respect of any of the loans made by BCU after it received notice of the Mareva Order. The parties agreed that some of the proceeds of sale held by the receiver were attributable to the pre-Mareva advances, and those funds have been distributed to BCU pursuant to two consent Interim Distribution Orders. BCU brought a contested distribution motion to resolve what should happen to the remaining net proceeds of sale.

On June 17, 2022, the motion judge released the Final Disposition Order (the "Order"). He held that the post-Mareva mortgage loans to Mr. DM as security were in breach of the Mareva Order. The contested proceeds held by the receiver were ordered to be paid to the Sheriff for the benefit of Mr. DM's creditors. Finally, the motion judge found BCU to be entitled in its capacity as judgment creditor to execute on its judgment against all available assets of Mr. DM held by the Sheriff. On June 30, 2022, TC sought clarification from the motion judge as to the meaning of "all available assets." On August 3, 2022, the motion judge stated that the reasons were clear, and it meant that BCU was entitled to enforce its judgment against assets held by the Sheriff for the benefit of creditors. TC and BCU have each filed opposing notices of motion regarding the Order.

TC moved for an extension of time to appeal, leave to appeal, if necessary, and for stay pending appeal. BCU brought a cross-motion for security for costs.

issues:

(1) Does the BIA or the CJA govern TC's appeal?

(2) Is TC's appeal out of time, and if so, should relief be granted to TC, or should a declaration be made that TC's appeal is a nullity that does not stay the Order?

(3) Is TC's appeal as of right, or is leave required, and if so, should leave be granted?

(4) Should a stay pending appeal be applied?

(5) Should an order be made requiring TC to pay security for costs?

holding:

Motion for leave to appeal and stay pending appeal granted. Cross-motion for security for costs dismissed.

reasoning:

(1) The BIA applies.

The Court held that where a receivership order is made pursuant to both s. 243 of the BIA and s. 101 of the CJA, the more restrictive appeal provisions of BIA govern the rights of appeal. TC argued that the jurisdiction of the Court is governed by the substance of the order made. The Court stated that the test to be applied is whether the order under appeal is one granted in reliance on the jurisdiction of the BIA. It was clear that the Receivership Order in this case purported to direct a receiver, appointed pursuant to the authority of the BIA, in the management of the receivership. In other words, it was clear that the orders "substantively" engaged the receivership. The fact that TC's purported appeal also addressed orders governing creditors' rights issues relating to the distribution of the proceeds of sale did not change this. The BIA governs.

(2) No.

The Court held that when clarification of an order is required because the judgment is uncertain on an issue, it is reasonable to treat the date of the clarification as the date from which the appeal period begins. In this case, the Court found that there was no uncertainty with the order in question. Notwithstanding the Court's ruling that TC's appeal was out of time, the Court rejected BCU's request for a declaration that the appeal was a nullity. The implications of non-compliance with a procedural rule should turn on prejudice and broader interests of justice. BCU did not experience material prejudice because TC filed late.

The Court noted that granting the motion for an extension to file TC's appeal depended upon whether justice required it. The Court stated that the relevant considerations were: 1) whether TCF formed an intention to appeal within the appeal period; 2) the length of, and explanation for delay; 3) prejudice to BCU; and 4) the merits of the appeal. The Court was satisfied that TC formed an intention to appeal within the relevant appeal period, the delay was short and did not materially prejudice BCU and the proposed appeal had merit. The Court held it was in the interest of justice to grant an extension in this case.

(3) Leave was required and was granted.

TC argued that it was entitled to appeal as of right, pursuant to s. 193(c) of the BIA, which permits an appeal "if the property involved in the appeal exceeds in value ten thousand dollars". The court must evaluate the effect of the order to be appealed before determining whether the order "directly involves" property exceeding $10,000. The Court determined that the Order under appeal will not remove property from the proceeds held by the receiver, or in any way diminish or jeopardize the value of property held by the receiver, nor did the motion judge adjudicate the value of the mortgaged property or its proceeds in the orders that were being appealed. Instead, those orders related to the manner in which proceeds of sale of an agreed upon amount would ultimately be distributed. The Court held that TC did not satisfy s. 193(c). Therefore, TC required leave to appeal pursuant to s. 193(e).

The Court granted TC leave to appeal, notwithstanding that it failed to seek leave until filing its Supplementary Notice of Appeal almost two months after the Final Distribution Order.

The Court noted that in considering to grant leave, the focus is on whether the proposed appeal: 1) raised an issue of general importance to the practice in bankruptcy/insolvency; 2) was prima facie meritorious; and 3) would unduly hinder the progress of the proceedings.

First, the parties knew of no authority addressing whether a party may enforce a judgment debt, thereby defeating the purpose of a Mareva Order, where that judgment debt arises from a transaction undertaken in breach of a Mareva Order. The Court was satisfied that this was an issue of general importance to the practice in bankruptcy/insolvency. For similar reasons, as well as the fact that BCU and its claims are arguably not legitimate, rendering it unable to enforce a judgment against assets otherwise subject to a Mareva Order, the Court held that TCF's appeal was prima facie meritorious. Lastly, there was no evidence that granting leave would unduly hinder the progress of the proceeding.

(4) Yes

The Court held that the appeal had merit and lifting the stay would render the appeal moot. The balance of prejudice favoured leaving the stay in force.

(5) No.

Rule 61.06(1)(b) authorizes the Court to make an order for security for costs that could be made against an appellant. However, a respondent in an appeal, such as BCU, may only rely upon Rule 61.06(1)(b) where it was not the applicant below, that is, the applicant in the proceeding where the Order was made that is the subject of the appeal. The Court explained that this limitation is intended to prevent imposing security for costs orders on impecunious parties who were forced into court. Although TC became a party because it took the initiative of objecting to the requested distribution order, it was responding to proceedings initiated by BCU. The Court held that a security for costs order against TC would not be fitting, nor in the interests of justice.

Wu v. Chen , 2022 ONCA 664

Zarnett, Coroza and Favreau JJ.A

Counsel:

A. Ostrom, for the appellant

J. Rosenstein, for the respondent

facts:

After the breakdown of their equal partnership in a business, the appellant sought recovery from the respondents of debts he claimed were owed to him. The appellant's debt claim was on a series of promissory notes, some signed by respondent Q.C., and some signed by respondent B.C. The respondents denied the notes were authentic and alleged they were forgeries. They also denied that the appellant had advanced the funds the note indebtedness was said to represent. The respondents claimed to have made their own financial contributions to the business which negated or reduced the appellant's claimed over-contribution, which the appellant contested.

The trial judge found the appellant to be a credible witness. She found the evidence of the respondent Q.C. to be neither reliable nor credible, and that the evidence of respondent B.C. had to be approached "with caution", however, she was satisfied that he made financial contributions to the business that had to be deducted from the appellant's claim against him. She accepted that the promissory notes were genuine and had been signed by the respondents, represented funds the appellant had advanced, and were valid debts of the respondents. The appellant argued these findings were not open to the trial judge; that having accepted the appellant's evidence and found the notes to be genuine, she ought to have rejected the respondents' evidence, including that of contributions.

The appellant also argued that the trial judge erred in failing to award interest on all of the promissory notes at the rate of 18 percent per year from their dates. Some of the promissory notes provided for interest at 1.5 percent per month. They did not express the interest as an annual rate. For those, the trial judge held that the Interest Act, R.S.C. 1985, c. I-15, limited the amount payable. The other promissory notes were silent as to interest.

Section 4 of the Interest Act provides that (except for mortgages) whenever interest is made payable by the terms of a written contract, and no statement of the equivalent yearly rate is stated in the contract, no greater rate is payable than 5 percent per year. The word "contract" in s. 4 of the Interest Act includes a promissory note: Elcano Acceptance Ltd. v. Richmond, Richmond, Stambler & Mills (1989), 68 O.R. (2d) 165 (H.C.), at p. 174, aff'd 3 O.R. (3d) 123 (C.A.). As a result, the trial judge awarded interest on these notes at the rate of 5 percent from their dates to the date that the appellant demanded payment. From that date, she awarded pre-judgment interest at 1.5 percent per month.

issues:

(1) Did the trial judge err in her findings by accepting the respondent's evidence that there were financial contributions made by them in the business?

(2) Did the trial judge err in failing to award interest on all of the promissory notes at the rate of 18 percent per year from their dates?

holding:

Appeal dismissed.

reasoning:

(1) No.

The Court held that the finding of the trial judge that there were contributions by respondent B.C. was open to her, and was entitled to deference from the Court. Absent a palpable and overriding error, the Court cannot interfere with them: Housen v. Nikolaisen, 2002 SCC 33. The trial judge conducted an assiduous review of the evidence. It was open to her to accept the evidence of any witness in whole or in part. She gave reasons for accepting the evidence of B.C. that he had made contributions, noting that it found some support in customs and shipping documents, and invoices. She considered difficulties with the respondents' evidence but also noted there were difficulties with the appellant's accounting as well.

(2) No.

The Court held that the language of s. 4 of the Interest Act was directly applicable to the foundation of the debt on which the appellant claimed and on which the trial judge awarded judgment, namely, the promissory notes. The Court, however, noted that arguably, the trial judge should have limited interest after demand on these notes to no more than 5 percent per year, but any error in this regard ran in the appellant's favour.

The appellant argued the trial judge should have awarded interest on these notes at 18 percent per year, to give effect to the appellant's evidence that 1.5 percent per month was a customary rate in the region of China from which the parties originate. The Court rejected this argument, stating that had the parties expressly incorporated the rate of 1.5 percent per month into these notes, and interest on them would have been limited to 5 percent per year by s. 4 of the Interest Act. A term may sometimes be implied into a written agreement by custom, but when that occurs, it is still a term of the written agreement. The Court was not satisfied that the trial judge found the customary rate was an implied term of the notes, but even if it were, it would be given the same effect as if it had been an express term in the written agreement.

Di Santo v. Di Santo Estate , 2022 ONCA 671

Gillese, Huscroft and Sossin JJ.A.

Counsel:

M. Hull, D. Lok Yin So and J. Lo Faso, for the moving parties (M53584) / responding parties (M53617 & M53638) J. D. S., C. D. S., S. M., T. D. P., and OJCR Construction Ltd. ("OJCR")

M.Rendely and N. Hojjati, for the responding party (M53584) / moving party (M53617 & M53638) O. D. S.

K.A. Charlebois, for CIBC Trust Corporation, in its capacity as Estate Trustee During Litigation of the Estate of V. D. S., deceased, and in its capacity as Trustee During Litigation of the V. D. S. 2003 Family Trust

facts:

The application judge ordered the removal of J. D. S., C. D. S., S. M. and T. D. P. as estate trustees for the Estate of V. D. S. (the "Order"). Further, J. D. S., S. M., and T. D. P. were removed as trustees of the V. D. S. 2003 Family Trust ("Family Trust"). CIBC Trust Corporation was ordered to be the estate trustee during litigation and the replacement trustee of the Family Trust. The application judge also ordered that certain interim funding payments be made to the respondent, O. D. S. (the "Respondent"), with such payments to be made from OJCR Construction Ltd. ("OJCR"). The application judge awarded the Respondent costs of the application of $80,000 (the "Costs Order").

J.D. S., C. D. S., S. M. and T. D. P., and OJCR (the "Appellants") have brought an appeal to be heard on December 7, 2022, appealing the provisions of the Order relating to the removal and replacement of the trustees. In the interim, the parties brought three motions before the Court.

In the first motion, the Appellants sought a stay of the provisions in the Order that removed the named trustees and replaced them with CIBC Trust, pending the disposition of the appeal (M53584). In the second motion, the Respondent sought an order lifting the stay of the Costs Order (M53617). In the third motion, the Respondent sought an order quashing or staying the appeal (M53638).

issues:

(1) Should the Appellant's motion for a stay of the provisions in the Order that removed the named trustees and replaced them with CIBC Trust pending appeal be granted?

(2) Should the second motion, brought by the Respondents, to lift the stay of the Costs Order be granted?

(3) Should the third motion, brought by the Respondents, to quash or stay the appeal be granted?

holding:

Appellants' motion granted. Respondents' motions dismissed.

reasoning:

(1) Yes.

In RJR-MacDonald Inc. v. Canada (Attorney General), the Supreme Court held that, on a motion for a stay pending appeal, the court must determine whether: (1) there is a serious issue to be determined on the appeal; (2) the moving party will suffer irreparable harm if the stay is not granted; and (3) the balance of convenience favours a stay.

The Court held that all three factors militated in favour of ordering the requested stay. On the first factor, the Court noted that removing a trustee whom a deceased has specifically chosen is a serious matter and is a serious issue to be determined on appeal. On the second factor, if the stay is not granted and the removal and replacement orders are overturned on appeal, the Estate, the Family Trust (the "Entities"), and their underlying businesses will suffer enormous business disruptions and financial upheaval. The ensuing harm cannot be quantified in monetary terms nor cured by damages. The stay is necessary to avoid the potential irreparable harm to the administration, and financial health, of the Entities. On the third factor, the Court noted that the appeal to be heard is in a few weeks and that the Appellants have (a) followed and continue to follow the interim support payments required by the Order and (b) are moving promptly to comply with other aspects of the Order, including disclosure and the passing of accounts. On this basis, the Court held that there would be no prejudice to the Respondent if the stay was ordered. The balance of convenience favoured granting the stay pending the disposition of the appeal.

(2) No.

The Costs Order was automatically stayed by the filing of the appeal: Rules of Civil Procedure, r. 63.01(1). The Court saw no basis for lifting that stay.

(3) No.

The Respondents' motion to quash or stay the appeal was based on two grounds. First, it was submitted that the appeal must be quashed for lack of jurisdiction because the appeal route for the interlocutory parts of the Order was to the Divisional Court (and, in some instances, leave of that court is required). Second, the Respondent said that the Appellants "flagrant[ly]" disregarded the Order and their "wilful breach[es]" disentitle them to proceed with their appeal.

In responding to the first ground, the Court held that the Order relating to the removal and replacement of trustees are final in nature and, therefore, the Court had jurisdiction to hear them.

In responding to the second ground, the Court held that the Appellants had made all payments of money and support required by the Order. Further, they acted reasonably and promptly in respect of disclosure and passing of accounts. In the Court's view, there was nothing in the Appellants' conduct that disentitled them from proceeding with their appeal. Thus, the Respondents' motion to quash or stay the appeal was dismissed.

Professional Court Reporters Inc. v. Pistachio Financier Corp., 2022 ONCA 669

Gillese, Huscroft and Sossin JJ.A.

Counsel:

J. Sacks, for the appellant

P. Bakos, for the respondents

facts:

The appellant entered into a sub-tenancy agreement with the respondent, Pistachio Financier Corp. ("Pistachio"). The respondent, Real Crowd Capital Inc. o/a R2 ("RCCI"), indemnified Pistachio's obligations pursuant to the Sublease. Pistachio defaulted after failing to pay rent, which gave the appellant the option to terminate the Sublease. The appellant gave notice of termination and commenced an action against Pistachio and RCCI seeking payment of amounts owed under the Sublease and damages of $750,000, and pre- and post-judgment interest at the lesser of prime plus 5% per annum and the maximum rate permitted by applicable law, in accordance with the terms of the head lease. Under the terms of the Sublease, those matters were expressly governed by the head lease. The respondents commenced their own action claiming unlawful termination of the Sublease. The appellant successfully moved for summary judgment and was awarded damages of $91,952.58, pre-judgment and post-judgment interest in accordance with the Courts of Justice Act and costs on a partial indemnity basis. The damages award did not include the appellant's claim for loss of profit, the interest awarded was not the contractual rate of interest, and the costs awarded were not the contractual scale of costs.

issues:

(1) Did the motion judge err in finding there was no evidence to support the appellant's claim for loss of profit?

(2) Did the motion judge err by not enforcing the interest rate set out in the head lease with respect to the post-judgment interest?

(3) Did the motion judge err by awarding costs on a partial indemnity scale despite the higher costs scale set out in the head lease?

holding:

Appeal allowed in part.

reasoning:

(1) No.

The Court held that the motion judge carefully considered the matter and invited the appellant to address the calculation of damages for lost profits. In essence, the appellant relied on the difference between the rent RCCI owed under the lease and the amount it charged Pistachio as proof of loss of profits. The Court held that the motion judge was entitled to conclude that the appellant failed to establish that this disparity amounted to a loss of profits.

(2) Yes.

The Court held that the motion judge erred in declining to award post-judgment interest at the rate of interest set out in the head lease, namely, prime plus 5%. In the absence of exceptional circumstances, the appellant was entitled to interest at the rate set out in the head lease. The Court found that the motion judge provided no reasons for her decision not to give effect to the parties' agreement. Accordingly, the appellant was entitled to post-judgment interest at the rate of prime plus 5% per annum.

(3) Yes.

The Court noted that the motion judge found that the appellant's costs were reasonable but awarded them only on a partial indemnity basis. The Court further noted that the motion judge gave no reason for not enforcing the terms of the head lease, which clearly entitled the appellant to costs on a higher scale. Thus, the Court held that the appellant was entitled to costs of the appellant's summary judgment motion and dismissal of the respondents' action, which the Court fixed at $75,279, all inclusive.

Bogue v Miracle, 2022 ONCA 672

Doherty, Tulloch and Miller JJ.A

Counsel:

I.J. Collins, for the appellant

G. Roberts, for the respondent

facts:

The appeal originated as a dispute between father and son. Both are Mohawks of the Bay of Quinte and thus qualify as Indians under the Indian Act. The initial dispute focused on the right to profits and ownership over an on-reserve business, Smokin' Joes. The Superior Court of Justice ordered that the issue go to arbitration.

The appellant father retained the respondent to act for him on the arbitration on a contingency fee basis. The respondent is not an Indian for the purposes of the Indian Act. The contingency agreement stipulated that the respondent would receive 25 percent of any amount awarded in the arbitration. The arbitrator ultimately awarded the appellant over $11 million, as well as the right to take over Smokin' Joes from his son.

The appellant has only paid the respondent $12,500. The Superior Court appointed a receiver and manager over the appellant's property on October 11, 2019.

The Ontario Court of Appeal heard the appeal and returned the matter to the application judge to determine whether appointing a receiver contravened s. 89 of the Indian Act. The application judge held that the appointment of the receiver constituted an exception to s. 89. Hence, the receiver had the power to operate two of the appellant's businesses on-reserve. The receiver would collect the profits of the appellant's businesses until the debt to the respondent and the receiver fees and disbursements were satisfied.

The appellant appealed the order of the application judge on the ground that the order contravened s. 89 of the Indian Act, which prohibits the enforcement by anyone who is not an "Indian or a band" against the assets of an Indian situated on a reserve. The appellant argued that since the respondent is not an Indian for the purposes of the Indian Act, this section prevented the receiver from seizing the proceeds of the appellant's businesses. The Court determined that this was a threshold issue which needed to be decided before an appeal could be heard. The Court directed that the matter be returned to the application judge. On November 15, 2021, the application judge entered the order under appeal, which held that the appointment of the receiver constituted an exception to s. 89 of the Indian Act.

The application judge reviewed s. 89 of the Indian Act and drew, in part, upon McDiarmid Lumber Ltd. v. God's Lake First Nation, 2006 SCC 58. McDiarmid Lumber addressed the issue of whether the immunity offered under ss. 89 and 90(1) of the Indian Act extends to funds in an off-reserve account pursuant to a Comprehensive Funding Agreement between a band and the federal government, where those funds are to be spent exclusively for certain designated purposes. The application judge was satisfied this "commercial mainstream" exception to s. 89 applied in the circumstances. Since the sales of Smokin' Joes and the Canna Kure marijuana dispensary (collectively, the "appellant's businesses") were in the commercial mainstream and amounted to normal business transactions, they were not protected by s. 89 from being placed into receivership.

issues:

(1) Are the actions of the Receiver covered by s. 89 of the Indian Act?

(2) Is there a "commercial mainstream" exception to s. 89 of the Indian Act?

(3) Are the appellant's on-reserve businesses "situated on reserve"?

(4) Did the appellant waive his s. 89 rights under the Indian Act?

holding:

Appeal allowed.

reasoning:

(1) Yes.

The Court held that while s. 89 does not expressly refer to receiverships, it does reference seizures and restraints of property, which captured the substance of the current order under appeal. The Superior Court had appointed a receiver to take control of the appellant's businesses located on reserve. Furthermore, the receiver was to recoup the proceeds from the operation of these businesses for the benefit of the respondent. The Court concluded that overall, the appointment of a receiver was closely akin to an order for the seizure or restraint of the debtor's property which brought it into the scope of s. 89.

(2) No.

The application judge interpreted McDiarmid Lumber to find that s. 89 did not extend to "contractual arrangements in the commercial mainstream that amount to normal business transactions". The appellant's business was therefore open to the receiver to take control of and recoup profits from. However, the Court held that the application judge committed a reversible error by inaccurately relying on a summary of the jurisprudence on s. 89. While the Supreme Court of Canada has recognized the existence of a "commercial mainstream" exception in relation to s. 90(1) of the Indian Act, this exception has not been extended to s. 89.

The Court noted that the application judge misinterpreted McDiarmid Lumber to stand for a broad application of the "commercial mainstream" exception. The Court clarified that the analysis in McDiarmid Lumber is bifurcated into two parts - one for s. 89, the other for s. 90. When read in context, McDiarmid Lumber refers to s. 90(1) of the Indian Act and not s. 89. Moreover, the Supreme Court of Canada reaffirmed that the "commercial mainstream" exception does not apply to s. 89 in Bastien Estate v. Canada. Cromwell J. noted that in Mitchell v. Peguis Indian Band, La Forest J. "was clear that, even if an Indian acquired an asset through a purely commercial business agreement with a private concern, the [ss. 87 and 89] exemption[s] would nonetheless apply if the asset was situated on a reserve".

The Court concluded that, apart from the case law, nothing in the language of s. 89 offered support for a broad "commercial mainstream" exception. S. 89 draws distinctions between: (1) the property of an Indian or band, and the property of others; (2) property located on, and off, reserve; and (3) execution-type measures taken by Indians or Indian bands, and those taken by everyone else. Foreclosing commercial property located on reserve from s. 89 would undermine both the text and purpose of the provision.

(3) Yes.

The Court held that the locations of the appellant's businesses were "objectively easy to determine". The appellant's businesses were firmly located on the Tyendinaga Mohawk Territory and owned by the appellant, who is an Indian within the meaning of the Indian Act. As such, neither property is "subject to charge, pledge, mortgage, attachment, levy, seizure, distress or execution in favour or at the instance of any person other than an Indian or a band". Thus, the Court concluded that the respondent's receiver, acting on behalf of a creditor who is not an Indian for the purposes of the Indian Act, cannot recoup profits from the appellant's on-reserve businesses.

(4) No.

The respondent cited Tribal Wi-Chi-Way-Win Capital Corp. v. Stevenson et al., a case where the debtor had signed a promissory note that included an express provision stating he would not exercise his rights under the Indian Act. The Manitoba Court of Appeal found that this constituted a valid waiver and as such, the debtor could not prevent the receiver-manager from seizing his on-reserve assets. The respondent submitted that, based on Tribal, it is possible to implicitly waive one's rights under the Indian Act. The Court rejected this argument could not see how the appellant's actions - written or otherwise - implicitly amounted to a waiver of s. 89 in this case.

SHORT CIVIL DECISIONS

2748355 Canada Inc. v. Aviva Insurance Company of Canada, 2022 ONCA 667

van Rensburg, Pardu and Copeland JJ.A

Counsel:

S. Carlstrom and G. Poirier, for the appellants

D. Ong, for the respondent

Keywords: Contracts, Insurance, Coverage, Civil Procedure, Parties, Procedural Fairness

Glenrio Financing Limited v. Rakovac, 2022 ONCA 677

Lauwers, Roberts and Miller JJ.A

Counsel:

D. Richter, for the appellants, M. R., 1255717 Ontario Ltd., 1255705 Ontario Ltd., and 1290976 Ontario Ltd.

C. Yamashita, for the respondents

Keywords: Contracts, Real Property, Mortgages, Civil Procedure, Summary Judgment

Downey v. Arey, 2022 ONCA 673

Feldman, Hoy and Lauwers JJ.A.

Counsel:

P.H. Griffin and L.M. Taylor, for the appellants

R.B. Cohen, for the respondent

Keywords: Wills and Estates, Contracts, Real Property, Agreements of Purchase and Sale of Land, Fundamental Terms

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

Canada: Court Of Appeal Summaries (September 26, 2022 – September 30, 2022) Blaney's Appeals

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Canada: Court Of Appeal Summaries (September 26, 2022 – September 30, 2022)
Blaney's Appeals