Court Of Appeal Summaries (July 8 – July 12, 2024) - Civil Law - Litigation, Mediation & Arbitration

Congratulations to Blaneys' very own David Ullmann and David Mackenzie, who were successful on our client's appeal in R. v. Travelers Insurance Company of Canada. This was a complex case in which criminal law, the law of restitution and insurance law intersected. Our client, Travelers, indemnified its insureds for losses arising from cyber and ransomware attacks. The perpetrator pleaded guilty to criminal fraud charges, and his assets were seized by the RCMP. As a result of errors made by the Crown at sentencing, Travelers did not receive the full restitution order it was entitled to from the sentencing judge. The funds were, therefore, to be forfeited to the Crown instead. Our client sought relief from forfeiture at the first instance and was partially unsuccessful. However, on appeal, the Court determined that our client did have an adequate interest in the proceeds of crime and should be entitled to full restitution on the basis of unjust enrichment and the imposition of a constructive trust.

In Muslim Association of Canada v. Canada (Attorney General), the appellant challenged a CRA audit into the activities of its members on the basis that the audits were discriminatory and breached their Charter rights. The application judge had dismissed the application to terminate the audits as premature. The Court dismissed the appeal, holding that the application judge correctly applied the prematurity principle. The Court agreed that the Association must complete the internal CRA review process before seeking Charter relief, finding there was an insufficient record to determine alleged Charter violations at this stage.

In Peakhill Capital Inc. v. 1000093910 Ontario Inc., the Court granted 255's request to stay the provisional execution order, allowing the debtor to pay off its first mortgage. The Court found that 255 had standing to appeal as the successful bidder to purchase the debtor's assets, and that the issues raised required full appellate review.

Coulson v. Ojha was an anti-SLAPP case in which the Court upheld the motion judge's decision dismissing the anti-SLAPP motion on the basis that the appellants' expressions were related to private interactions (over damage to trees caused by the construction of a neighbouring retirement facility), not matters of public interest.

Joannides v. Delaney was a dispute over the interpretation of easements and the use of extrinsic evidence to resolve ambiguities in their terms.

Civil Decisions

Joannides v. Delaney, 2024 ONCA 540

Keywords: Contracts, Interpretation, Real Property, Easements, Evidence, Admissibility, Extrinsic Evidence, Land Titles Act, R.S.O. 1990, c. L. 5, ss 159-160, Austerberry v. Corp. of Oldham (1885), 29 Ch. D. 750 (Eng. C.A.), Mihaylov v. 1165996 Ontario Inc., 2017 ONCA 116, Gibbs v. Grand Bend (Village) (1995), 26 O.R. (3d) 644 (Ont. C.A.), Arthur Anderson Inc. v. Toronto Dominion Bank (1994), 17 O.R. (3d) 363 (Ont. C.A.), Herold Estate v. Canada (Attorney General), 2021 ONCA 579, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Taylor v. City Sand & Gravel Ltd., 2010 NLCA 22, Missilinda of Canada Ltd. v. Husky Oil Operations Ltd., 2007 MBCA 24, Shewchuk v. Blackmont Capital Inc., 2016 ONCA 912, Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, Heritage Capital Corp. v. Equitable Trust Co., 2016 SCC 19, Casurina Ltd. Partnership v. Rio Algom Ltd. (2004), 40 B.L.R. (3d) 112 (Ont. C.A.), Keefer Laundry Ltd. v. Pellerin Milnor Corp, 2009 BCCA 273, Markowski v. Verhey, 2020 ONCA 472, Square-Boy Limited v. The City of Toronto, 2017 ONSC 7178, Laurie v. Winch, [1953] 1 S.C.R. 49, Chippewas of Mnjikaning First Nation v. Ontario, 2010 ONCA 47, Primont (Castelmont) Inc. v. Friuli Benevolent Corporation, 2023 ONCA 477, Boone v. Brindley (2003), 179 O.A.C. 50 (Ont. C.A.), Remicorp Industries v. Metrolinx, 2017 ONCA 443, Fyfe v. James (2006), 42 R.P.R. (4th) 221 (Ont. S.C.), Day v. Adili, 2011 ONSC 1835, Hopper Estate v. Salisbury (Village), 2005 NBQB 448, British Columbia (Minister of Environment, Lands & Parks) v. Thomas (1998), 161 D.L.R. (4th) 74 (B.C.C.A.)

Coulson v. Ojha, 2024 ONCA 538

Keywords: Breach of Contract, Real Property, Civil Procedure, Anti-SLAPP, Courts of Justice Act, R.S.O. 1990, c. C. 43, s. 137.1, Building Code Act, 1992, S.O. 1992, c. 23, O. Reg. 332/12, Ontario College of Teachers v. Bouragba, 2019 ONCA 1028, 1704604 Ontario Ltd. v. Pointes Protection Association, 2018 ONCA 685, Echelon Environmental Inc. v. Glassdoor Inc., 2022 ONCA 391, 2110120 Ontario Inc. v. Buttar, 2023 ONCA 539

Muslim Association of Canada v. Canada (Attorney General), 2024 ONCA 541

Keywords: Administrative Law, Taxation, Charities, Constitutional Law, Charter Claims, Freedom of Religion, Freedom of Expression, Freedom of Association, Freedom from Discrimination, Civil Procedure, Prematurity, Canadian Charter of Rights and Freedoms, ss. 2, 15, 24(1), Income Tax Act, R.S.C. 1985, c. 1, Housen v. Nikolaisen, 2002 SCC 33, R v. Mills, [1999] 3 S.C.R. 668, Henry v. Canada (Attorney General), 2010 BCSC 610, Commission scolaire francophone des Territoires du Nord-Ouest v. Northwest Territories (Education, Culture and Employment), 2023 SCC 31, O'Neill Motors Ltd. v. Canada (1998), 162 D.L.R. (4th) 248 (Fed. C.A.), Canada (Attorney General) v. TeleZone Inc., 2010 SCC 62

R. v. Travelers Insurance Company of Canada of Canada, 2024 ONCA 553

Keywords: Criminal Law, Fraud, Sentencing, Restitution, Contracts, Insurance, Cyber Liability, Equitable Claims, Restitution, Unjust Enrichment, Equitable Remedies, Constructive Trust, Subrogation, Relief from Forfeiture, Criminal Code, R.S.C. 1985, c. C-46, ss. 462.37(2.01), 462.41(1), 462.42(1) and (2), 462.44, 462.42(4) and (6)(b), Connolly v. R., 2007 NLCA 5, Connolly v. R., 2004 NLTD 228, 1431633 Ontario Inc. v. Canada (Attorney General), 2010 ONSC 266, Chun v. R., 2015 QCCA 590, R. v. 170888 Canada Ltée, [1999] 174 D.L.R. (4th) 340, R. v. Popert, 2010 ONCA 89, Somersall v. Friedman, 2002 SCC 59, Lumen Inc. v. Canada (Attorney General) (1997), 151 D.L.R. (4th) 661 (Que. C.A.), R. v. Tatarchuk, [1993] 133 A.R. 6 (Alta. Q.B.), Wilson v. R., [1994] 15 O.R. (3d) 645 (C.A.), Pettkus v. Becker, [1980] 2 S.C.R. 834, Garland v. Consumers' Gas Co., 2004 SCC 25, Gladstone v. Canada, 2005 SCC 21, Kerr v. Baranow, 2011 SCC 10, Moore v. Sweet, 2018 SCC 52

Peakhill Capital Inc. v. 1000093910 Ontario Inc., 2024 ONCA 558

Keywords: Civil Procedure, Orders, Case Conference, Notice of Motion, Receivership, Bankruptcy, Real Estate, Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3, ss. 193(a)-(e), s. 195, Courts of Justice Act, R.S.O. 1990, c. C. 43, s. 6(1)(b), s.101, Cardillo v. Medcap Real Estate Holdings Inc., 2023 ONCA 852, Royal Bank of Canada v. Soundair Corp. (1991), 4 O.R. (3d) 1 (C.A.), Winick v. 1305067 Ontario Limited (2008), 41 C.B.R. (5th) 81, Skyepharma PLC v. Hyal Pharmaceutical Corporation (2000), 47 O.R. (3d) 234 (C.A.), RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311, Grillone (Re), 2023 ONCA 844, Adams v. Adams, 1996 CanLII 1006 (Ont. C.A.), Reynolds v. Alcohol and Gaming (Registrar), 2019 ONCA 788, Vector Financial Services v. 33 Hawarden Crescent, 2024 ONSC 1635, Rose-Isli Corp. v. Smith, 2023 ONCA 548, B&M Handelman Investments Limited v. Mass Properties Inc. (2009), 2009 CanLII 37930 (ON SC)

Short Civil Decisions

2533619 Ontario Inc. (Calibrex Development Group) v. Lucadamo, 2024 ONCA 536

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Conditions, Severances, Time of the Essence, Implied Terms, Repudiation, Jesan Real Estate Ltd. v. Doyle, 2020 ONCA 714, Ju v. Tahmasebi, 2020 ONCA 383, Dynamic Transport Ltd. v. O.K. Detailing Ltd., [1978] 2 S.C.R. 1072, Stamm v. Ratz, [1990] 37 C.L.R. 233 (Ont. Dist. Ct.)

Dahroug v. Hassan, 2024 ONCA 550

Keywords: Family Law, Divorce, Conflict of Laws, Foreign Divorces, Validity, Talaq, Civil Procedure, Expert Evidence, Foreign Law, Divorce Act, R.S.C., 1985, c. 3, (2nd Supp.), Abraham v. Gallo, 2022 ONCA 874

Ang v. Lin, 2024 ONCA 549

Keywords: Tort, Negligence, MedMal, Civil Procedure, Summary Judgment, Evidence, Documents, Witnesses, Experts, Cross-examination, Rules of Civil Procedure, r. 20.04(2.1)

CIVIL DECISIONS

Joannides v. Delaney, 2024 ONCA 540

[Pepall, George and Dawe JJ.A.]

COUNSEL:

C. Trivisonno and S. Grassie, for the appellants

J. Chen and N. De Stefano, for the respondents

FACTS:

This appeal deals with a dispute between servient and dominant tenement landowners with respect to two easements: the "Right-of-Way" and the "Right-of-Access."

The appellants brought an application for: 1) a declaration that the Right-of-Way does not include any purpose other than ingress and egress, and specifically does not permit the "turnaround of vehicular activity upon the Right-of-Way"; and 2) a declaration that the Right-of-Access is null, void and expunged.

The respondents by counter-application sought: 1) a declaration that the respondents enjoy an indefeasible right to the Right-of-Way; 2) a declaration that one of the instruments setting out the details of the Right-of-Way be amended nunc pro tunc to correct an apparent drafting error; 3) an interim and permanent injunction that the appellants keep the Right-of-Way free from all obstructions and vehicles; and 4) general and punitive damages in the amount of $100,000.

The central dispute between the parties was over the respondents' use of what was referred to in the evidence as the turnaround, located on the Right-of-Way and its use of the well on the appellants' property. The application judge found that a deed, registered in 1996 conveying to the respondents under a PIN that is now owned by the appellants, included both the Right-of-Way and Right-of-Access easements, subject to the provisions of a January 1980 Agreement made between the then-owners of the parties' properties.

The application judge found that the disputed turnaround area is included in the Right-of-Way. The application judge found the January 1980 Agreement to include a latent ambiguity when it, and the 1964 Agreement, were applied to the Reference Plan considering the grant of easement. According to the application judge, ambiguity arose from the two possible interpretations of the January 1980 Agreement: 1) one that would allow the servient tenement owners (the appellants) to park on the turnaround, even if doing so blocked ingress and egress by the respondents; and 2) another which would permit the appellants to park on the turnaround, but not in a way that would restrict ingress and egress.

The application judge further found that there was a drafting error in the September 1980 Indenture. Pursuant to ss. 159 and 160 of the Land Titles Act, he amended the September 1980 Indenture nunc pro tunc. The application judge also found that the appellants had restricted, at least to some extent, the respondents' use of the Right-of-Way by erecting fence panels that narrowed the passage onto the respondents' land. However, while he directed that the obstructions be removed, the application judge declined to award damages to the respondents because the issues were open to interpretation. Finally, the application judge found that the Right-of-Access to the well had not been extinguished.

ISSUES:

1. Did the application judge commit extricable errors of law in his interpretation of the Right-of-Way easement?

2. Did the application judge err by not expunging the Right-of-Access to the well?

HOLDING:

Appeal dismissed.

REASONING:

(1) No. The Court found that this ground of appeal failed for three reasons.

i. Latent Ambiguity: Using Extrinsic and Subsequent Conduct Evidence

The Court held the application judge did not err in his finding of a latent ambiguity. He was open to consider extrinsic evidence for the purposes of ascertaining the intention of the grantor. The Court agreed with the application judge when finding that there were two possible interpretations of the January 1980 Agreement when considered in light of the land's instruments. Based on fact specific contractual interpretation principles in Sattva, the Court held it should show deference to findings of latent ambiguity.

The Court held there was evidence that, since 1962, the appellants and their predecessors consistently kept the turnaround clear so that use of the easement would not be blocked. They determined it was open to the application judge to rely on the extrinsic evidence that the respondents' predecessors' use of the turnaround was "open and notorious" when the 1980 instruments were formed. The Court believed the application judge appropriately admitted and relied on evidence of subsequent conduct in finding that the appellants' predecessors had kept the turnaround clear, and that the respondent's predecessor had used the turnaround since the early 1960s and did not seek permission from the appellants' predecessors to use it. The Court believed the only discernible reason for extending the right of way to the turnaround area was to permit the owners of the dominant tenement to use it to turn their vehicles around, to allow them to avoid having to back up or down the steep driveway.

ii. Objective Evidence and the Parties' Intentions

The Court found that the application judge correctly followed the approach in Sattva of reading the "contract as a whole," giving the words their ordinary meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. The Court found the application judge considered the plain language of the easement and the nature of the parties' relationship as created by the various agreements which provided knowledge and acceptance of the use of the turnaround when the January 1980 Agreement was ratified.

iii. Ancillary Rights Doctrine

Given the evidence provided by the parties, it had been "essential" for the respondents and their predecessors to use the turnaround for vehicles to climb the hill, as it posed a danger to back up the hill. The Court determined that it was open to the application judge to find that reversing up or down the cliff was dangerous and difficult to do, and that the turnaround is "essential" and reasonably required for ingress and egress from the respondents' property. This was tantamount to a finding that use of the turnaround was an ancillary right, which the Court would not disturb.

(2) No. The Court stated that under common law, an easement may be extinguished when the purpose for its creation ceased to exist. The fact that a Right-of-Access was not being used, or was no longer needed, did not mean it must be extinguished as a matter of law. It was a question of fact which, absent error, was owed deference. Because the Right-of-Access was the result of an express grant, and because there was no release nor consideration provided, the respondent bore a "high onus" to demonstrate that it was extinguished.

The application judge accurately stated the law and properly applied the relevant principles, making findings of fact that were available to him, including that the well had been used in the last eight years for laundry. The respondents had to show more than that use of the well was no longer needed because an alternate source of water existed; they had to show a "radical change" to the nature of the property rendering the easement permanently unusable or unnecessary. The application judge reasonably found that they had failed to show such a radical change.

Coulson v. Ojha, 2024 ONCA 538

[Sossin, Monahan and Madsen JJ.A.]

COUNSEL:

M. Vernon and J. Friedman, for the appellants

M. Lesage, for the respondent

FACTS:

The appellants, who were homeowners overlooking Muskoka Bay, were concerned about the development of an adjacent property where some of the respondents obtained zoning approval for the construction of a retirement facility. The conflict led to a proceeding before the Ontario Municipal Board, which resulted in a settlement.

Dissatisfied with the respondents' compliance with the settlement terms, the appellants initiated proceedings, alleging damage to their trees caused by construction work done without a tree preservation plan. They sought damages for breach of contract and declaratory and injunctive relief. In response, the respondents filed a counterclaim, seeking damages for breach of contract and alleged that the appellants had wrongfully opposed the development through various objections, including a complaint to the Chief Building Official.

The appellants brought a motion seeking to dismiss the counterclaim, which they claimed was a strategic lawsuit against public participation aimed at silencing their opposition to the development. The motion judge dismissed the appellants' motion at the first stage of the analysis, finding that their expressions were related to private interactions between neighbouring landowners rather than matters of public interest. The judge concluded that the expressions focused on ensuring the tree preservation plan was in place and protected the appellants' private property interests.

ISSUES:

Did the motion judge err in her determination that the expression of the appellants did not "relate to" matters of public interest?

HOLDING:

Appeal dismissed.

REASONING:

No. The Court found that the motion judge correctly identified the applicable law to be applied under s. 137.1(3), in the manner outlined by the Supreme Court in the leading decision, Pointes Protection. She fairly and reasonably concluded that what the impugned expressions were "really about" were private matters between adjacent landowners, in particular, the protection of the appellants' private property interests.

The Court found that the motion judge's statements regarding public interest and Ontario Building Code requirements illustrated her awareness, as a matter of law, of the breadth of what may be in the public interest. The Court also found that the motion judge did not impermissibly consider the "motivations" of the appellants at the threshold stage of the analysis. She considered the pleadings and their impugned expressions in context. She was entitled to review, on an objective basis, the appellants' stated claims to understand, contextually, what their expressions were about, and she did not embark on an impermissible enquiry into "motive, merit, and manner."

Muslim Association of Canada v. Canada (Attorney General), 2024 ONCA 541

Sossin, Monahan and Madsen JJ.A.

COUNSEL:

G. R. Hall, A. Koshal and A. MacDonald, for the appellant

L. Marchildon, K. Palframan and M. Meraw, for the respondent

FACTS:

A registered charity, the Muslim Association of Canada (the "Association"), appealed the dismissal of its application challenging a CRA audit on the basis that the audit process violated its Charter rights. The Association's more than 500 members operated mosques, community centres and schools which served over 150,000 members of the Canadian Muslim community in 14 cities across Canada. Pursuant to its mandate to ensure registered charities meet statutory requirements and are not abused by terrorist organizations, the CRA commenced an extensive audit of the Association in 2015. In March 2021, while the audit process was still ongoing, the CRA released an Administrative Fairness Letter (the "AFL") detailing its preliminary findings and recommendations. Within the AFL, the CRA alleged that the Association had failed to comply with various provisions of the Income Tax Act (the "ITA") and recommended that the Association's charitable status be revoked.

In April 2022, the Association applied to the Superior Court seeking an order terminating the audit, claiming that the audit and the AFL had violated its Charter-protected rights to freedom of religion, freedom of expression, freedom of association, and freedom from discrimination. The Association argued that the CRA disproportionately singled out Muslim charities when determining which charities to audit. Moreover, the Association contended that it was referred for auditing by dubious, unreliable sources, and asserted that the audit was carried out in a manner reflecting Islamaphobic attitudes.

The application judge shared some of the Association's concerns about bias — he doubted whether many of the CRA's objections would have resulted in charities with other religious affiliations having their charitable status questioned. Nevertheless, he declined to find that the Association's Charter rights had been violated at this stage of the audit, ultimately concluding that the Application was premature. The application judge held that there was an insufficient record upon which to make findings of Charter violations, stating that while courts are well-equipped to adjudicate legal disputes, they are ill-suited to supervise ongoing administrative processes. No standard had been raised against which to measure the CRA's audit process, nor any criteria suggested to determine when merely commencing an investigation would infringe Charter rights. The application judge further relied on the fact that once the audit was concluded, the Association could access the ITA-prescribed internal appeal process within CRA, culminating in a right to appeal to either the Tax Court of Canada or the Federal Court of Appeal, either of which could handle the Charter violation allegations.

Although the audit was completed just prior to the release of the application endorsement, the parties agreed that the application judge should release his judgment without reviewing the audit decision. The application findings were not intended to bind a future court asked to decide identical or similar issues arising out of the completed audit.

ISSUES:

1. Did the application judge err by improperly applying the prematurity principle to an application for Charter relief?

2. Did the application judge err by wrongly assuming that the statutory appeal process provided the appellant with an alternative process to obtain the relief sought?

HOLDING:

Appeal dismissed.

REASONING:

(1) No. The Court held that the application judge did not err in applying the prematurity principle in these circumstances. Regarding the standard of review, the Court deemed whether the prematurity principle applied to Charter applications an extricable question of law reviewable on a correctness standard. However, assuming the principle applied, the issue of whether the Association's application should be found premature was a question of mixed fact and law, and thus reviewable on a standard of palpable and overriding error.

The Court affirmed the application judge's case law analysis. Despite the Association's argument that the prematurity principle was only relevant for judicial review proceedings like Henry and Mills, the application judge distinguished such cases as involving challenges to the constitutionality of legislation, while in the instant application the parties accepted the ITA's validity but disputed its application. The Court could not identify any error in the application judge's finding that the factual record on application was preliminary and incomplete. It was within the application judge's discretion to dismiss the application for prematurity and to decline to make legal determinations based on an insufficient record.

(2) No. The Court held that application judge did not err in requiring the Association to complete the internal CRA review and appeal process before bringing a court proceeding. The application judge recognized that since the audit process was ongoing and the CRA had not yet decided whether to impose a financial penalty, the basis to review such a penalty was unknown. Furthermore, the application judge correctly understood that when addressing an objection to a notice of intent to revoke charitable status, the CRA is obliged to consider whether the decision respects both Charter rights and the values underpinning them. The Court agreed with the application judge that the Tax Court has jurisdiction to grant remedies pursuant to s.24(1) of the Charter, including the right to vacate a CRA assessment where necessary.

The application judge dismissed the application on grounds of prematurity, not jurisdiction. It followed that, once a final CRA decision had been made (i.e. after the conclusion of any internal CRA reviews and appeals), the Association's ability to appeal a penalty assessment to the Tax Court would not, in itself, bar the Superior Court from exercising its independent jurisdiction to grant Charter relief arising from the Association's concerns. The Court noted that the application judge appeared to conclude otherwise, and the Court disagreed with this finding. However, the Court ultimately concluded that even if the application judge erred with this finding, nothing called into question the correctness of his overall conclusion that there was an insufficient record upon which to grant the desired relief. As indicated in oral submissions on appeal, the CRA did indeed modify its preliminary findings and recommendations set out in the AFL, which the Court held confirmed the application judge's wisdom in dismissing the application as premature. There was no need to consider the content of the audit decision, and accordingly, the Court dismissed the fresh evidence motions brought by the appellant and the respondent.

R. v. Travelers Insurance Company of Canada, 2024 ONCA 553

[Benotto, Roberts, and Favreau JJ.A.]

COUNSEL:

David T. Ullmann, David Mackenzie, and Alex Fernet Brochu, for the appellant

M. Adams, for the respondent

FACTS:

Between May 2020 and January 2021, SVD conducted ransomware attacks in Canada and globally. He breached computer networks, hijacked data, and demanded Bitcoin ransoms for decryption keys. Travelers Insurance ("TICC") was the insurer for two victims of these attacks, XD and T. TICC paid out over $250,000 to XD and $1 million to T under their insurance policies, including costs for negotiating the ransom, acquiring and transferring cryptocurrency, and rehabilitating data and systems. There was a $10,000 deductible for both victims.

In January 2021, the RCMP seized around 700 Bitcoin and hundreds of thousands of dollars in cash from SVD. SVD subsequently pleaded guilty to five counts related to the ransomware attacks. The sentencing judge ordered restitution to seven Canadian victims, including just over $700k to T, but did not include XD because the Crown did not present the claim. TICC sought relief from forfeiture under section 462.42 of the Criminal Code seeking additional payment for XD's claims. The application judge allowed TICC's claim for the ransom payment but dismissed other claims, including deductibles and fees, stating that TICC had no proprietary interest in the forfeited property beyond the ransom amount.

TICC appealed the application judge's dismissal of part of its subrogated claim for payment from proceeds of crime that were forfeited to the Crown. The appeal turned on whether TICC had an interest in property by way of a constructive trust that should have been paid as restitution to its insured that was a victim of a crime but was instead forfeited in error to the Crown.

ISSUES:

1. Did the application judge err in her interpretation of what constitutes an "interest in property forfeited" under section 462.42 of the Criminal Code?
2. Did the application judge err in failing to conclude that TICC was a victim of crime and had the requisite interest in the forfeited proceeds?
3. Did the application judge err in finding that she did not have discretion to grant relief from forfeiture in the circumstances and in failing to exercise her discretion to repair the errors in the Crown's process?

HOLDING:

Appeal allowed.

REASONING:

(1) Yes. The application judge interpreted the term "interest in property forfeited" properly within the sphere of section 462.42 of the Criminal Code as requiring a specific proprietary interest in the forfeited property itself. She noted that such an interest must go "beyond that of a general or ordinary creditor." She acknowledged that TICC had paid out claims to its insureds, XD and T, under their respective insurance policies due to the attacks, and stepped into the shoes of its insureds for the ransom payments. However, the judge concluded that TICC's claims for additional amounts (deductibles, investigation fees, etc.) did not constitute an enforceable proprietary interest in the forfeited property. Instead, these claims were taken as similar to those of ordinary creditors without a specific claim to any assets of the debtor. This narrow interpretation led the judge to dismiss TICC's claims for amounts beyond ransom payments.

This interpretation was too narrow, as it only saw an interest in the funds that were paid as ransom to SVD. The application judge failed to consider whether the circumstances of the Crown's erroneous omissions and the likelihood of restitution to TICC gave rise to a claim for unjust enrichment supporting a constructive trust (and therefore a valid interest in the forfeited property) over the proceeds in the amount of the XD claim.

(2) Yes. The judge acknowledged that the Crown had erroneously failed to present TICC's XD claim to the sentencing judge, resulting in the claim not being paid. She noted that if the XD claim had been properly put before the sentencing judge, TICC would have likely received "a generous restitution order" akin to the one awarded to T mentioned above. Despite this error, the judge did not find that TICC had the requisite proprietary interest in the forfeited proceeds beyond the ransom payments. She noted that the additional amounts claimed by TICC were not directly paid to or possessed by SVD and could not therefore be considered an interest in the forfeited property. These amounts should be seen as general claims for losses, similar to those of ordinary creditors, as opposed to specific interests in the forfeited property itself.

The application judge erred in her application of s. 462.42 in this case. She erroneously characterized Travelers as being an ordinary creditor and not a victim. This caused her to fail to give effect to her findings that support a constructive trust in favour of Travelers. This meant that the Crown received monies that, but for the Crown's erroneous omissions, should and would have been paid as restitution to TICC in satisfaction of its subrogated XD claim. As a result of the forfeiture, the Crown was unjustly enriched to the detriment of TICC.

The application judge's reasons ignored the effect of the Crown's erroneous omissions and the virtual certainty that TICC's XD claim would have been paid out in full. All of the other Canadian claims before the sentencing judge were paid. Additionally, the Court found that the requisite "interest in property that is forfeited" was not limited to the ransom payments. Interest in property that is forfeited can arise in other ways. In conclusion, the erroneous forfeiture to the Crown of monies that should have gone to TICC amounted to unjust enrichment to the Crown with a corresponding deprivation to TICC.

In conclusion, the Court found that public policy did not support the Crown retaining the funds erroneously kept from TICC. The wrongful payment of funds to one party instead of the rightful parties constitutes unjust enrichment and justified a constructive trust.

(3) Yes. The application judge determined that she did not have the jurisdiction to revisit the sentencing judge's decision or grant restitution as relief from forfeiture for claims beyond the ransom payment. She highlighted that claims for restitution must be made at the sentencing stage through the Crown. Since the XD claim was not presented to the sentencing judge due to the Crown's error, she could not grant relief from forfeiture for those amounts in her capacity. Additionally, the judge reasoned that TICC claims for amounts beyond the ransom payment, such as deductibles, investigation fees, consultation fees, and legal fees, were similar to those of an ordinary unsecured creditor and did not attach to the forfeited property itself. She also noted that exercising her discretion to allow payment of these claims from the forfeited funds could potentially benefit the criminal, SVD, by satisfying a potential civil judgment in TICC's favor, which would contradict the purpose of the forfeiture provisions under the Criminal Code. These provisions are designed to deprive criminals of the proceeds of their crimes, not to benefit them indirectly. Therefore, she concluded that it was inappropriate to grant further relief from forfeiture and denied TICC additional claims.

The Court was of the view that the application judge took an "unduly restrictive approach to the scope of her discretion" and failed to consider and apply the overall purpose of the relief from forfeiture provisions to all the relevant circumstances. This was especially applicable to the erroneous exclusion of TICC's restitution claim from the sentencing judge's consideration and the failure to give TICC the requisite notice of the Crown's forfeiture application.

The legal analysis did not end at determining the requisite interest was met. The Criminal Code provides that "the judge may make an order." This meant that the court retains discretion not to order relief from forfeiture even if the preconditions are met. The Court cited 1431633 Ontario Inc. v. Canada (Attorney General), wherein Molloy J. noted: "Although Parliament intended to deprive criminals of the fruits of their crimes, it clearly did not intend to do so at the expense of innocent third parties who may have a legitimate interest in that same property." The Court was of the view that this was an appropriate case in which to exercise its discretion to order relief from forfeiture. TICC stepped into the place of a victim of criminal conduct. In the circumstances, it had a legitimate interest in the property forfeited. The Court found that the discretion should be exercised to order relief from forfeiture.

Peakhill Capital Inc. v. 1000093910 Ontario Inc., 2024 ONCA 558

[Brown J.A. (Motion Judge)]

COUNSEL:

K. D. Sherkin and M. Lightowler, for the appellant/moving party (M55244)/responding party by way of cross-motion (M55245) 2557904 Ontario Inc.

G. M. Caplan and A. Simovonian, for the respondent/responding party (M55244 )/moving party by way of cross-motion (M55245) 1000093910 Ontario Inc.

D. Michaud, for the respondent/responding party/responding party by way of cross-motion Peakhill Capital Inc.

R. B. Swan and A. Nelms, for the Receiver, KSV Restructuring Inc.

D.J. Miller, for Firm Capital Corporation

L. Culleton, for the second mortgagee, Zaherali Visram

J. Squire, for Ren/Tex Realty Inc. and ReMax Premier Inc.

FACTS:

The case addressed two orders (the "Sutherland Orders") made in an appeal involving the receivership of 1000093910 Ontario Inc. (the "Debtor") whose main asset is an industrial property. The Sutherland Orders declined to grant the approval and vesting order sought by the court-appointed receiver, KSV Restructuring Inc. (the "Receiver"), in its notice of motion.

In that notice of motion, the Receiver sought orders: approving the agreement of purchase and sale between the moving party, 2557904 Ontario Inc. ("255") and the Receiver (the "Stalking Horse Agreement") to purchase the assets of the Debtor; vesting the purchased assets in 255; distributing the sale proceeds to repay the total amount owing to the applicant first mortgagee, Peakhill Capital Inc. ("Peakhill"), and part of the amount owing to the second mortgagee, Zaherali Visram; and related relief, including the discharge of the Receiver.

255 filed an appeal against the judge's decision, which allowed the debtor to pay off its first mortgage on a property in Vaughan, Ontario. This decision went against the Receiver's plan to sell the property to 255, who had won the bid to buy it. The judge also terminated the Stalking Horse Agreement and outlined a process to discharge the Receiver. The judge provided brief reasons for his decision, mainly allowing the Debtor to pay off the mortgage and all associated costs, totalling $23,450,000, and said he would provide detailed reasons at a later date. Since then, he has not given full reasons for rejecting the Receiver's plan and approving the refinancing plan.

After 255 appealed, the judge added a provision for immediate enforcement of his decision despite the ongoing appeal. He emphasized the urgent need to implement the refinancing to avoid significant financial harm to the involved parties. Consequently, 255 and the Debtor filed competing motions. 255 sought to appeal and stay the judge's orders, while the Debtor sought to dismiss 255's appeal or require them to obtain permission to appeal. An urgent case conference was requested to address these issues, set dates for hearing the motions, and temporarily prevent enforcing the judge's orders until a decision was made. The urgency was due to the Receiver's intention to close the refinancing deal by July 10 and the funding commitment expiring on July 12. Motions were brought to stay or vary the Sutherland Orders pending appeal.

ISSUES:

1. Whether 255 has the standing to appeal the Sutherland Orders?

2. Whether it has an automatic right of appeal or requires leave to appeal?

3. Whether the provisional execution ordered by Sutherland J should be varied or canceled?

HOLDING:

Motions granted.

REASONING:

(1) Yes. The Court was satisfied that 255, as the successful bidder recommended by the Receiver for approval, had standing to request the interim relief sought in its motion pursuant to BIA s.195. The Court decided that next week's panel hearing should determine the contested issues in the receivership. This standing was crucial as 255 was directly affected by the termination of the Stalking Horse Agreement, which impacted its contractual and financial interests.

(2) No. The Court concluded that the issues of whether 255 had an automatic right of appeal or required leave to appeal did not raise jurisdictional concerns regarding the hearing of these motions. It is open to a single judge of the Court to grant the orders requested. However, the Debtor's request to dismiss 255's appeal was seen as effectively asking a single judge to quash the appeal. Under Ontario's appellate review structure, these requests should be brought before a panel rather than a single judge. Since a panel was available to hear these issues the following week, there was no need to address them at this stage, ensuring the procedural integrity of the appellate review process.

(3) Yes. The Court granted 255's request to stay the July 9 provisional execution order until the panel hears all the issues the following week. 255 had the burden of establishing compelling reasons to support a variation or cancellation of Sutherland J.'s July 9, 2024, provisional enforcement order. The Court considered the evidence filed on the motion considering the factors employed in Grillone (Re), at para. 35. These factors included the appellant's litigation conduct, the merits of the appeal, and the relative prejudice to the parties. The Court noted that the absence of detailed reasons from Sutherland J. for his July 4 order raised significant concerns about whether he had adequately considered the principles governing receivership sales and the integrity of the court-approved sale process. The stay was necessary to ensure that the appellate process could review these concerns thoroughly without rendering the appeal moot by allowing the refinancing transaction to proceed.

SHORT CIVIL DECISIONS

2533619 Ontario Inc. (Calibrex Development Group) v. Lucadamo, 2024 ONCA 536

[Roberts, Trotter and George JJ.A.]

COUNSEL:

R. Macklin and N. G. Wilson, for the appellant

W. Doodnauth, for the respondent

Dahroug v. Hassan, 2024 ONCA 550

[Roberts, Zarnett and Favreau JJ.A.]

COUNSEL:

AH, acting in person

No one appearing for the respondent

Ang v. Lin, 2024 ONCA 549

[Roberts, Miller and Gomery JJ.A.]

COUNSEL:

SSA., acting in person

W. Doodnauth, for the respondent

Keywords: Tort, Negligence, MedMal, Civil Procedure, Summary Judgment, Evidence, Documents, Witnesses, Experts, Cross-examination, Rules of Civil Procedure, r. 20.04(2.1)

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.

Court Of Appeal Summaries (July 8 – July 12, 2024)

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