Below are the summaries for this week's civil decisions of the Court of Appeal for Ontario. Topics covered this week included: the effect of pending retirement on a high income earner with spousal support obligations (Schulstad); a dispute between two law firms regarding an agency agreement that resulted in a charging order (Fancy Barristers); and the sufficiency of a pleading in a defamation case (Catalyst Capital).
For those interested in the hot topic of "conflicts of interest", you may wish to read the entire Whirlpool decision which contains a dissenting opinion.
Have a nice weekend.
[Benotto, Brown and Miller JJ.A.]
S. Siddiqui, for the appellants
J.R. Morse, for the respondents
Keywords: Endorsement, Charging Order, Solicitors Act, s.34, Thomas Gold Pettinghill LLP v. Ani-Wall Concrete Forming Inc., 2012 ONSC 2182, Judicial Bias, Wewaykum Indian Band v. Canada, 2003 SCC 45
This appeal involved a dispute between law firms that resulted in a charging order granted by the application judge for fees. Fancy Barristers P.C. ("Fancy") was retained on a contingency fee basis by two minor plaintiffs. Fancy retained Morse Shannon LLP ("Morse") to assist with the claims on the agreement that Fancy and Morse would split the fees in the two actions after repayment for docketed time and disbursements. Morse spent time and incurred fees and disbursements, but the relationship between Fancy and Morse broke down and the agency agreements were terminated. Fancy did not pay Morse for docketed time or disbursements. The judge granted charging orders to ensure Morse would be paid out of eventual proceeds.
Did the judge err in granting the charging order?
No. Despite the fact that the terms of the charging order covered the entire proceeds of the plaintiffs' recovery, not just the 25% referred to in the agreements, Morse acknowledged that it was never its intent to interpret the order to apply to the entire proceeds.
Fancy further argued that the application judge was biased, relying on the fact that she changed her view on certain points. There is a strong presumption of judicial impartiality and a heavy burden on the party seeking to rebut the presumption. The Court found nothing in the material that rebutted the presumption of impartiality.
[Doherty, Brown and Miller JJ.A.]
C. A. Muccilli, for the appellant
G. L. Adrian, for the respondent
Keywords: Endorsement, Right-of-Way, Form of Order
This appeal concerned a dispute between the parties with respect to a right-of-way. Also at issue was the form of an order made by the application judge. Certain undertakings were referred to in the recitals to the order, but were not made part of the formal order and were not part of any declaration made by the application judge.
- Did the application judge err in holding that the right-of-way provided the appellant only with access to the garage along the existing laneway?
- Did the application judge err in his findings with respect to certain posts erected as part of a fence constructed by the respondents along a pathway?
- Is there an issue as to the form of the order made by the application judge?
- The application judge properly instructed himself on the controlling legal principles. He was required to examine both the terms of the document that created the right-of-way and the surrounding circumstances. His determination as to the nature and scope of the right-of-way is a finding of fact. The application judge made no legal error and did not misapprehend the evidence in coming to his conclusion as to the nature of the appellant's right-of-way. The Court of Appeal deferred to the application judge's finding of fact.
- The application judge found that the posts did intrude to a small extent on the right-of-way. The application judge made no finding that the posts in any way interfered with the use of the right-of-way as a means of getting into and out of the garage. The issue was moot. The posts are gone so there was no reason to consider the effects on the right-of-way.
- As part of the order, the application judge accepted certain undertakings from the respondents (not to reinstall gates that had been removed and to move fence posts). The form of the order is a matter for the discretion of the application judge. Some judges might have included the substance of the undertakings as part of a formal declaration and others would not. When it comes to enforcing the order, there is no significant difference between the two options. There was no reason to interfere with the manner in which the application judge chose to frame the order.
[Strathy C.J.O., LaForme and Benotto JJ.A]
J. Dahany and G. D. Graham, for the appellant
A. Sternberg and J. Figliomeni, and the respondents
Keywords: Conflict of Interest, Duty to Defend, Bright Line Rule, Canadian National Railway Co. v. McKercher LLP, 2013 SCC 39, R v. Neil, 2002 SCC 70, Indemnity Agreement
In the early 1990s, an area of land on the western edge of downtown Toronto was being assembled for development. It is now known as Liberty Village. The land consisted of four adjacent properties: the CP Lands, the Oxford Lands, the CN Lands and the Inglis Lands.
In 1990, 863800 Ontario Limited ("863") purchased the CP and Oxford Lands. In 1991, 863 sought to purchase Whirlpool's parcel (the Inglis Lands) through its related corporations Chavila and Outrigger. It was discovered that the soil and groundwater on all four properties were contaminated. Negotiations ended but resumed years later when Whirlpool lowered its asking price in exchange for Chavila and Outrigger agreeing to indemnify it for all liability arising from the condition of the property (the "Indemnity Agreement"), and to defend any actions brought against it.
In 2004, 863 commenced an action against CP and Oxford for contamination of the CP and Oxford Lands. In 2012, instead of commencing third-party proceedings, CP and Oxford commenced a separate action against Whirlpool, claiming contribution and indemnity for 863's claims.
It was not disputed that the separate action will likely be consolidated with 863's Main Action, making the appellant a third party in the Main Action. A significant issue in the Main Action will be whether 863's claim is time barred. Whirlpool pleaded and claimed that it could adduce evidence that 863 discovered pollution on the CP and Oxford lands in 1991 and that the limitation period expired long before the action was commenced in 2004. CP and Oxford also raised the limitation period as a defence.
These claims against Whirlpool triggered Chavila and Outrigger's agreement to defend the action and to indemnify Whirlpool. 863 retained a lawyer, Simon Schneiderman, to defend Whirlpool, purportedly pursuant to the Indemnity Agreement given by Outrigger and Chavila. Whirlpool wanted to raise a limitation defence and advised Mr. Schneiderman accordingly. Mr. Schneiderman responded that the indemnitors had the right to control the defence.
Given that Whirlpool still wanted to raise the limitation defence, it brought an application in the Superior Court for an interpretation of the Indemnity Agreement that would prohibit Mr. Schneiderman from representing Whirlpool in the CP and Oxford actions. Whirlpool argued that allowing Mr. Schneiderman to represent it on the instructions of Outrigger and Chavila would put him in a prohibited conflict of interest. Whirlpool wanted to be able to instruct counsel itself.
The application judge concluded that there was no conflict because the immediate interests of Whirlpool were not adverse to those of Outrigger and Chavila. Further, the Indemnity Agreement itself contemplated the actions by CP and Oxford; the possibility of such actions was known to the parties when they signed the Agreement. As such, the application judge dismissed the application.
Did the application judge err in finding that Mr. Schneiderman's representation of Whirlpool did not place him in a prohibited conflict of interest?
No. The application judge did not err in law. A lawyer has a duty to avoid conflicts of interest when representing a client. This is established both by the Law Society of Upper Canada in its Rules of Professional Conduct and by the courts. A lawyer may not represent a client in one matter while representing that client's adversary in another matter. This is a bright line rule as articulated in R. v. Neil, 2002 SCC 70. However, the Canadian National Railway Co. v. McKercher LLP, 2013 SCC 39 ("McKercher") confirmed that the rule in Neil is limited in scope and only applies where the immediate interests of clients are directly adverse in the matters on which the lawyer is acting. The application judge correctly found that the "immediate interests" of Whirlpool were not "directly adverse" to those of Outrigger and Chavila. Indeed, the application judge accepted the evidence that Mr. Schneiderman would act in Whirlpool's best interests. Any suggestion to the contrary is speculative at best and does not meet the test in McKercher. This case therefore falls outside the scope of the bright line rule.
There was also no substantial risk that Mr. Schneiderman's representation of Whirlpool would be materially and adversely affected because he took instructions from Chavila and Outrigger, which share their sole officer and director with 863. The situation does not generate such a risk for three reasons
First, 863 and Whirlpool were not adverse in interest. Whirlpool had no direct interest in the outcome of either the 863 action or the CP and Oxford actions because its interests were fully protected pursuant to the terms of the Indemnity Agreement and the confirmation by 863 that it will not seek any damages from Whirlpool.
Second, the terms of the Indemnity Agreement anticipated this very scenario. Whirlpool anticipated that 863 would be involved in litigation with CP and Oxford and that Outrigger and Chavila would be conducting Whirlpool's defence of any claims for contribution and indemnity. The agreement by Outrigger and Chavila to provide a "diligent defence" must be read in this context.
Third, by analogy to insurance law principles, there was no conflict. The insurer's contractual obligation to defend an action carries with it an obligation to exercise reasonable care and skill in so doing. These insurance law principles demonstrate that Outrigger and Chavila ― and the counsel they appoint for Whirlpool ― must exercise reasonable care and skill in defending the CP and Oxford actions and must pursue Whirlpool's best interests by minimizing its liability.
The application judge erred in law for two reasons: (1) by failing to identify a patent conflict between the appellant's interests and the interests of the respondent, 863; and (2) by failing to give any effect to the appellant's contractual right to be provided with a "diligent defence" by Chavila and Outrigger.
First, regarding the patent conflict, 863's appointment of Mr. Schneiderman to defend the appellant, and the instructions it had given to him, was contrary to the bright line rule in McKercher. In particular, in the defence of the appellant in the Main Action, Mr. Schneiderman took his instructions from 863. It was obviously not in 863's interest for the appellant to raise a limitations defence. If successful, that would defeat 863's claim. Therefore, a clear conflict of interest existed.
Second, the application judge also made an extricable error of law in concluding that the failure to raise the limitation defence was of no consequence because of the Indemnity Agreement. There was an immediate and direct conflict of interest. The abandonment of the limitations defence exposed the appellant to the possibility of a judgment going against it. The appellant has no obligation to accept a promise from a party with which it did not contract (863) in place of a promise of a "diligent defence" from parties with which it did contract (Chavila and Outrigger). The appellant was entitled to be represented by a lawyer who was free of conflicts and who would raise every viable defence.
The application judge also failed to recognize and to give any effect to the express contractual promise of Chavila and Outrigger to "assume the carriage and the diligent ... defence of any legal ... proceeding." Chavila and Outrigger did not provide the appellant with a "diligent defence" in good faith because they refused to instruct Mr. Schneiderman to raise the limitation defence against 863's claim.
[Weiler, Lauwers and Benotto JJ.A.]
S. Finamore, in person
No one appearing for the respondent
Keywords: Endorsement, Family Law, Divorce Application, Varying Final Order, Equalization Payment, Spousal Support, Child Support, Benefits
The parties separated in 2009 after 31 years of marriage. They have a son and a daughter who has Down's syndrome and remains a child of the marriage living with the appellant. During the marriage, the parties mortgaged the matrimonial home to purchase a business which they operated until 2012 when it went bankrupt.
- Did the trial judge err with respect to the equalization payment award?
- Did the trial judge err with respect to the spousal support award?
- Did the trial judge err with respect to the child support award?
- Should the Court of Appeal order the respondent to provide health and dental insurance for the appellant and her daughter?
- No. The trial judge determined that the appellant was owed an equalization payment of $90,218.31. After the trial, the respondent declared personal bankruptcy. The appellant successfully moved before the trial judge to vary the final order to provide that the respondent's two RRSPs, having a total value of $161,699.10, be vested in the appellant. She requested a recalculation of the equalization payment primarily on the basis that certain debts should not have been treated as joint but rather attributed only to the respondent.
The Court of Appeal cited two impediments to this assertion. First, any increase in the respondent's debts would result in a lower, not higher equalization payment. Second, and most important, the equalization payment was eliminated by the respondent's bankruptcy.
- No. The appellant submitted that the trial judge erred in imputing an income of $12,500 to her for purposes of spousal support. In making this determination, the trial judge took into account the appellant's 25 years working at a bank, her bookkeeping experience, and her testimony that her health was good and that she would like to return to work. He considered that her obligations to her daughter did not occupy all of her time as the daughter had a job at Shoppers Drug Mart. The Court of Appeal saw no errors in the trial judge's analysis.
- No. The trial judge ordered child support based on the respondent's income of $70,000. The appellant advised that the respondent has a different job now, but his income is roughly the same. She, however, is concerned about the future for her daughter, in particular, that her health might deteriorate. The appellant also argued that the trial judge failed to award retroactive child support for the period December 2009 to December 2012, prior to the interim support award. During that time, she submitted that the respondent missed payments. However, the trial judge found that, until the interim order, the parties were effectively sharing income by drawing money from the company. In addition, the respondent was paying her $300 per week. The Court of Appeal found that it was clear from the trial judge's reasons that he was satisfied that the child's needs were being adequately covered during the period before the interim order and a retroactive adjustment was not necessary.
- No. There was no evidence before the trial judge that the respondent had health and dental insurance so he had no basis to make the order. Likewise, there was no evidence before the Court of Appeal that the respondent's current job provided the health and dental insurance. Accordingly, the court was unable to make the order requested.
[Weiler, Blair and van Rensburg JJ.A.]
R. DiPucchio and A. Winton, for the appellants
B. Morrison, for the respondent Veritas Investment Research Corporation
M. Milne-Smith and A. Carlson for the respondent West Face Capital Inc.
Keywords: Tort Law, Rule 21, Intentional Interference with Economic Relations, Defamation
The appellants sought to set aside an order striking out a single paragraph in their Statement of Claim as disclosing no cause of action because it alleged publication of defamatory statements by one of the respondents to unnamed third parties at unspecified times. They asserted the motion judge erred for a number of reasons, but primarily because they had already established a prima facie case of defamation by alleging publication to certain named persons (representatives of the other defendant) at a specified time and place. They submitted that in such circumstances the failure to name all of the persons to whom publication was made and/or all the times and places of publication – when these particulars are unknown to them but known to the defendant – is not automatically fatal to a defamation claim.
The respondent, West Face Capital Inc., argued that the appellants were attempting to lower the bar for pleading defamation so low so as to provide no bar at all.
Did the motion judge err in striking paragraph 25 of the Statement of Claim?
Yes. The Court of Appeal agreed with the appellants that the failure to name all persons to whom publication was made and/or to specify all the times and places of publication is not automatically fatal. Those particulars are unknown to the appellants but known to West Face and form an integral part of what is said to be an overall scheme of conspiracy to injure, intentional interference with economic relations, and defamation. The appellants had otherwise properly pleaded a prima facie claim in defamation (including publication to named persons) against West Face.
The Statement of Claim, read generously and as a whole, alleged material facts disclosing publication to unnamed third persons. Viewed in this overall context, the pleading should stand.
[Weiler, Rouleau and Roberts JJ.A]
P. MacEachern, for the appellant
R. Paritzky, for the respondent
Keywords: Family Law, Divorce Act, Spousal Support, Life Insurance, Retirement, Material Change, Willick v. Willick
The appellant is 69 years old and the respondent is 70. They were married for over 24 years when they separated in 1990. They have one child who is now an independent adult.
The appellant resides in Ontario and has not worked outside the home since before their separation. The respondent resides in Kentucky, in the United States, where he has enjoyed a very successful and well-remunerated career as a general surgeon.
On July 30, 1996, Byers J. ordered the respondent to pay spousal support of $7,500 CAD per month, indexed each year based on the Consumer Price Index for Canada, and to maintain insurance policies in favour of the appellant. In January 2014, the respondent brought an application to terminate his spousal support and life insurance obligations effective June 1, 2016, on the basis that he was planning to retire in June 2016. He also sought to reduce these obligations leading up to his retirement date.
The application judge concluded that the respondent's approaching retirement, and consequent reduction in income, was a material change in circumstances since Byers J.'s order and determined that the parties' respective assets and income would be about equal after the respondent's retirement. Therefore, the application judge terminated the respondent's spousal support and insurance obligations, effective on the anticipated date of his retirement in June 2016.
- Did the application judge err in considering the respondent's application because it was premature?
- Did the application judge err in finding that the respondent's retirement and reduction in income were a material change in circumstances?
- Did the application judge err in finding that the parties would be in financially similar circumstances after the respondent's retirement?
Holding: First two issues dismissed. Third issue allowed.
- No. Prematurity is an issue impacting the threshold question of whether or not there has been a material change in circumstances. It is well-established that any decision to vary must not be made in accordance with events which may or may not occur. An application to vary will be premature if based on speculative or uncertain changes in circumstances. In the particular and fact-specific circumstances of this case, it was open to the application judge to decide that the respondent's application was not premature. The application judge was also of the opinion that there was sufficient evidence regarding the parties' respective assets and incomes upon the husband's retirement to enable her to reach a decision as to whether the application was premature. This was a finding that was available to her on the evidence.
- No. While the respondent's retirement was within Byers J.'s contemplation at the time the original support order was made, the effect of that retirement was not considered in fixing the amount of support nor was there any evidence in the record to permit him to assess the financial impact of retirement. Byers J.'s determination that the appellant was entitled to spousal support "forever" could not foreclose the respondent's future application to reduce or terminate his support obligations upon the material change in his financial circumstances caused by his complete retirement from remunerative employment. Indeed, Byers J. appears to have alluded to this possibility when he cautioned the parties that if the respondent stops working, "the money stops."
- Yes. The application judge erred in finding that the parties would be in financially similar circumstances after the respondent's retirement. The application judge erred in finding that the factors that resulted in economic disadvantage to the appellant during the marriage and after its breakdown no longer existed and that the lost advantage had been recovered by the appellant. The application judge appears to have unduly focussed on the parties' respective net worth. In doing this, she made a significant error by failing to appreciate the material disparity between the parties' expected incomes.
The evidence established that the initial compensatory and need bases for the appellant's entitlement to support continued to exist. The disparity in the parties' potential incomes and income-producing assets was indicative of the appellant suffering economic disadvantage arising from her role during the parties' long-term marriage and its breakdown. In contrast, the respondent gained a significant economic advantage from the marriage that has not been affected by the marriage breakdown. A finding that the appellant is no longer entitled to support would undermine the objectives under s. 17(7) of the Divorce Act.
[Feldman, Rouleau and van Rensburg JJ.A.]
Angelina Marie Codina, acting in person
R. Morin, for the respondent
Keywords: Detention Order, Bail Review Hearing, habeas corpus, Immigration and Refugee Protection Act,
[Feldman, Benotto and Miller JJ.A.]
T. White and Philip Norton, for the appellant
B. Gluckman, for the respondent
Keywords: Criminal Law, Drug Trafficking, Reasonable Grounds For Arrest, Search Warrant, Exclusion of Evidence
[Feldman, MacPherson and Hourigan JJ.A.]
J. Blackburn, for the appellant Person in Charge of Waypoint Centre for Mental Health Care
D. Bonnet, for the respondent Attorney General of Ontario
B. Davies and O. Goddard, for the respondent David Thomas Scott
Keywords: Ontario Review Board, Mandatory Order, Escorted Home Visits
[Doherty, Brown and Miller JJ.A.]
M. Coady, appearing in person
E. Cappe for the Scotiabank
H. Robertson for the respondent, the Librarian and Archivist of Canada (represented by the Attorney General of Canada)
Keywords: Endorsement, Final Order, Summons to Witness
[Feldman, Rouleau and van Rensburg JJ.A.]
Lisa Gunn, for the appellant
John Patton, for the respondent
Keywords: Endorsement, Sentencing, Counselling to Commit Murder, Criminal Harassment
[Watt, Tulloch and Huscroft JJ.A.]
Keith William O’Loughlin, acting in person
M. Gourlay, duty counsel
D. Arron, for the Crown
Keywords: Assault Causing Bodily Harm, Sentencing, Parity Principle
[Watt, Epstein and van Rensburg JJ.A.]
R. Bottomley and S. Foda, for the appellant
A. Michaelson, Q.C., for the respondent
Keywords: Search Warrant, Garofoli Application, Standard of Proof, Residual Discretion
[Feldman, Epstein and Miller JJ.A.]
R. Shulman, for the appellant
A. Pascuzzi, for the respondent
Keywords: Addendum, Cost Order, Support Payments
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