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Following are the summaries for this week's civil decisions of the Court of Appeal for Ontario.
In 2386240 Ontario Inc. v. Mississauga (City), 2019 ONCA 413, the Court upheld a municipal by-law prohibiting the smoking of waterpipes in various public places. The court held that the purpose and effect of the by-law was the protection of public health and safety, and therefore within the scope of the Peel Region's powers. The Court acknowledged that while the potential economic impact on businesses that supply waterpipes and smoking products is an unfortunate incidental effect of the by-law, it is not determinative of its purpose.
In V Hazelton Ltd. v. Perfect Smile Dental Inc., 2019 ONCA 423, the Court addressed the impact of s. 3 of the Commercial Tenancies Act on the common law rule which apparently provides that a sublessor must reserve the last day of the term of the head lease in the sublease in order to preserve the original landlord tenant relationship. The Court ruled that a failure to reserve the last day of the head lease term in a sublease does not always result in an assignment of the lease to the subtenant. Courts must look to the objective intentions of the parties to determine the nature of the impact on the subletting party in regards to its rights under the head lease.
Other topics covered this week included annulling a bankruptcy where the bankrupt was not really insolvent and appeared only to try to avoid paying on a judgment, damages for breach of an agreement of purchase and sale of land, discoverability of a claim for negligent tax advice ("appropriate means"), and amending pleadings.
Have a nice weekend.
Blaney McMurtry LLP
[Doherty, Benotto and Huscroft JJ.A.]
D. Taub and J. Preece, for the appellant
O. G. Barnwell, for the respondents
Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Breach of Contract, Damages, Expectation Damages
The appellant purchaser and respondent vendors had entered into an Agreement of Purchase and Sale ("Agreement") of a property to which the respondents did not hold title. For this reason, they were unable to deliver unencumbered title to the appellants as promised in the Agreement. The appellants had provided a deposit of $25,000 and ended up paying a further $187,500 over and above the agreed-upon price in order to purchase the property from the mortgagee.
While the motion judge awarded damages for breach of contract to the appellants, she limited the damages to the amount of the deposit, $25,000. The motion judge stated that the further sum could only be recovered for a loss of bargain, which she said did not exist between the appellant and respondent in this case.
The appellant sought leave to appeal to the Court of Appeal on the issue of whether there was a loss of bargain in this case and, if so, what amount of damages the appellants would be entitled to under such a finding. The respondents cross-appealed in respect of their position that the appellants were cause for the breach of the Agreement.
(1) With respect to the main appeal, did the motion judge err in limiting the amount of damages awarded to the appellant?
(a) Did the motion judge err in finding a breach in the Agreement between the respondent vendor and appellant purchaser?
(b) Did the motion judge err in finding that there was no loss of bargain between the respondent vendor and appellant purchaser?
(2) With respect to the cross-appeal, did the motion judge err in finding that the appellant purchaser's conduct was not the cause of the respondent's failure to close the transaction?
Appeal allowed. Cross-appeal dismissed.
(1) Yes. The motion judge should not have limited the amount of damages awarded to the appellant to the amount of the deposit.
(a) No. The motion judge found that the respondent vendors could not deliver unencumbered title as they had promised in the Agreement, and were therefore in breach of the agreement with the appellant purchaser. The Court of Appeal found no error in that finding.
(b) Yes. The motion judge stated that the remedy of damages for a breach of contract to compensate for a loss of bargain presupposes that there was a bargain to begin with. Here, the motion judge found that the economic consequences of the failed Agreement merely caused the illusion of a loss of bargain, but no actual loss of bargain. The Court disagreed, and found that there was a real bargain, not an illusion of a bargain.
The motion judge had also found that as a condition of recovering damages for the difference in the price agreed upon with the respondents and the higher price eventually paid, the appellant was required to show that the respondents "appropriated the benefit" otherwise available to the appellant. The Court disagreed, stating that damages for loss of benefit are measured by the higher price paid by the appellant purchasers, independent of any benefit that may have been flowed to or been bestowed upon the respondent vendors.
As a result, the Court ruled that the appellant was entitled to the difference between the agreed-upon purchase price and the price eventually paid for the same property, which was $187,500, in addition to $25,000 deposit.
(2) No. The respondent vendors' arguments on the cross-appeal were all premised on the assertion that the appellant purchaser's improper conduct disabled the respondents from being able to close the transaction under the terms of the Agreement. The Court deferred to, and accepted, the motion judge's finding of fact, which rejected those arguments. Regardless of the conduct of the appellant purchaser, the respondents' negative equity in the property meant they were never in a realistic position to provide clear title to the appellants.
[Simmons, Tulloch and Brown JJ.A.]
R. P. Zigler, for the appellants
B. H. Kussner and S. R. Rouleau, for the respondent
Keywords: Municipal Law, By-laws, Jurisdiction, Public Health and Safety, Municipal Act, 2001, S.O. 2001, c. 25, Occupational Health and Safety Act, R.S.O. 1990, c. O.1, Control of Exposure to Biological or Chemical Agents, R.R.O. 1990, Reg. 833, 2326169 Ontario Inc. v. Toronto (City), 2016 ONSC 6221, Canada Post Corp. v. Hamilton (City), 2016 ONCA 767
The appellants own several hookah lounges located within the Regional Municipality of Peel (the "Region"). In their lounges, the appellants supply waterpipes and smoking products (including herbal shisha, a legal substance) to their customers to be consumed on site.
In 2016, the Region passed by-law No. 30-2016, Peel Waterpipe Smoking By-law (the "By-law"). The By-law prohibits smoking waterpipes in specified places, which includes the appellants' lounges. Sections 2(a), (b) and (c) of the By-law prohibit waterpipe smoking in an enclosed public place, an enclosed workplace and a restaurant or a bar patio. Section 5 prohibits a proprietor, an employer, or an employee from permitting waterpipe smoking in the locations specified in ss. 2(a), (b) and (c). The appellants applied under s. 273 of the Municipal Act, 2001 for a declaration that ss. 2(a), (b), (c) and s. 5 of the By-law are illegal and should be quashed.
The appellants argue that the Region acted outside the scope of its powers because the subject matter of the By-law is not for the protection of public health and safety. Instead, they argue that the sole effect of the By-law is to target their businesses, which would ultimately result in closure of their lounges and substantial economic loss. Further, they argue that the By-law is inconsistent with provincial legislation and that the Region acted in bad faith by failing to consult with hookah lounge employees.
The application judge found that most of the issues raised had been determined in the previous case of 2326169 Ontario Inc. v. Toronto (City), 2016 ONSC 6221. That case involved a challenge to a by-law prohibiting waterpipe smoking in premises Toronto had licensed to carry on business. As in the City of Toronto case, the application judge here found that the Municipal Act, 2001 confers powers on the Region similar to those conferred on Toronto. The application judge also found that the purpose of the By-law was the protection of public health and safety, and that it did not conflict with the Occupational Health and Safety Act (the "OHSA"). Further, the appellant's claim of bad faith was rejected, as the Region had engaged in diligent and thorough levels of consultation, research and inquiry.
(1) Did the application judge err in failing to find the By-law ultra vires the Region?
(2) Did the application judge err in failing to find that the By-law conflicts with the OHSA?
(3) Did the application judge err in failing to find that the Region acted in bad faith in enacting the By-law?
(1) No. The application judge did not err in failing to find the By-law ultra vires the Region.
The appellants stated that waterpipe smoking was occurring in 24 enclosed public places, all of which were waterpipe establishments. Therefore, the sole purpose of the By-law was to prohibit the appellants businesses. They claimed this was a violation of the Municipal Act, 2001, as it does not grant municipalities the power to prohibit businesses. Further, the appellants stated that the application judge erred by relying on the City of Toronto decision. The appellants instead urged the Court to rely on the decision in Canada Post Corp. v. Hamilton (City), 2016 ONCA 767, which establishes that it is necessary to consider not only the purpose, but also the effects of a by-law to determine if it is intra vires.
The Court did not accept these submissions and agreed with the application judge that the purpose of the By-law was to protect public health and safety, which is authorized by s. 11(2)(6) of the Municipal Act, 2001. The Court affirmed the application judge's decision to review the process which led to the enactment of the By-law in order to determine its purpose. The same process had been used in the City of Toronto case. Concerns about the harmful effects of waterpipe use had been raised by the Public Health Division of the Region's Health Services Department in reports from 2012 and 2015. The 2015 report included recommendations such as the development of a By-law prohibiting waterpipe smoking in enclosed public spaces and workplaces. Following the 2015 report, the Region conducted stakeholder consultations to determine how the Region could address public health risks associated with waterpipe smoking in public places. A 2016 report from these consultations recommended the enactment of a by-law prohibiting waterpipe smoking of both tobacco and non-tobacco products in enclosed public places, enclosed workplaces, and specified outdoor locations within the Region. Following these recommendations, the Region enacted the By-law at a council meeting on April 28, 2016.
Further, while the Court was cognizant of the potential economic impact the By-law has on the appellant's businesses, this was considered an unfortunate incidental result of the By-law rather than being determinative of its purpose. The Court held that the sole effect of the By-law is not its potential economic impact. Instead, its effect is to prevent harmful effects of waterpipe smoking both at its enactment and in the future. Section 2 of the By-law states that waterpipe smoking is prohibited not only on business premises, but instead many public places such as restaurants, playgrounds, sporting areas, and schools.
(2) No. The application judge did not err in failing to find the By-law conflicts with the OHSA.
The appellants argued that Regulation 833 of the Control of Exposure to Biological or Chemical Agents ("Regulation 833") comprehensively addresses the protection of Ontario workers from hazardous agents in the workplace, and trumps the By-law. In the alternative, the appellants stated that the By-law is incompatible with the purpose of Regulation 833 and is therefore void under s. 14 of the Municipal Act, 2001. The appellant's attempted to distinguish the reasoning in the City of Toronto case in which the court in that case dismissed a similar argument, which reasoning was adopted by the application judge in this case.
The Court rejected all of these submissions and found the By-law at issue to be complementary to both the purpose and the provisions of the OHSA. The Court concluded that contrary to the appellants' submission, the OHSA does not require the City to adopt measures short of a prohibition on hookah smoking in order to protect employment in hookah lounges.
(3) No. The application judge did not err in failing to find the Region acted in bad faith.
The appellants contended that in this context, all that is required for a finding of bad faith is that a municipality act arbitrarily and without the required degree of fairness, openness, and impartiality. Further, the appellants stated that because their employees' economic interests were affected by the By-law, as a matter of procedural fairness, they were entitled to be consulted concerning its impact.
The Court found that the appellants did not meet the heavy burden required to establish bad faith. The Court agreed with the application judge that the record disclosed diligent and thorough levels of inquiry, research and consultation by the Region prior to the enactment of the subject By-Law. There was a public meeting held to allow members of the public and stakeholders to state their concerns to the Regional council.
[Hoy A.C.J.O., Lauwers and Zarnett JJ.A.]
R. Colautti and A. Landry, for the appellant
S. Sullivan and H. Dahme, for the respondents
Keywords: Civil Procedure, Amending Pleadings, Environmental Claims, Limitation Periods, Discoverability, Abuse of Process, Rules of Civil Procedure, Rule 26, Environmental Protection Act, RSO 1990, c E.19, Limitations Act, 2002, SO 2002, c 24, Sched B, ss 5, 17, Joseph v. Paramount Canada's Wonderland, 2008 ONCA 469
The appellant, Strathan Corporation, is the owner and landlord of a commercial property located in Windsor. Chromeshield Co., Chromecraft Corporation, and FNG Corporation ("Chromeshield") were parties to a lease of a facility that plated metal components for the automobile industry on the property. On November 1, 2010, Chromeshield abandoned the property without advance notice and surrendered the lease.
The First Strathan Action was commenced with a notice of action issued March 27, 2009. The appellant advanced claims for environmental contamination of the property by Chromeshield, breach of the lease by reason of the abandonment of the premises, damages for arrears of rent, and damages for loss of rent over the balance of the term of the lease.
The Second Strathan Action was commenced by statement of claim issued November 21, 2012, wherein the appellant claimed for conversion, breach of the lease, negligent misrepresentation, deceit, fraud, unjust enrichment, and oppression remedies arising from the alleged wrongful removal of equipment and fixtures from the appellant's property. The parties to the Second Strathan Action include all of the defendants to the First Strathan Action, as well as Flex-N-Gate and the individual defendants, V, K, G, and P.
The appellant brought a motion under Rule 26 of the Rules of Civil Procedure seeking leave to amend the statement of claim in the Second Strathan Action. The appellant sought to add a claim for breach of statutory duty under the Environmental Protection Act for environmental contamination of the property. The motion judge refused to grant leave on the basis that the proposed amendments were statute-barred and also constituted an abuse of process.
(1) Was the motion judge correct in determining that the claim for environmental contamination to be a new and unrelated cause of action for the purposes of the Second Strathan Action??
(2) If yes, was the appellant statute-barred from amending the statement of claim??
(1) Yes. The Court agreed fully with the reasoning of the motion judge. The motion judge explained that the appellant's proposed claim for environmental contamination in the Second Strathan Action was based on the same factual allegations already claimed in the First Strathan Action. Accordingly, the two actions were connected.
The appellant argued, under ss. 5 and 17 of the Limitations Act, 2002, that the facts concerning the nature and the extent of the contamination underlying the proposed amendment were only recently discovered. The motion judge rejected this, finding that Strathan knew or ought to have known it had a claim for environmental contamination as of 2009 when it commenced its first action in 2009 specifically claiming environmental contamination on the same property. The motion judge further concluded that Strathan should not be allowed to amend its statement of claim in the Second Strathan Action because the proposed amendments were statute-barred and, if permitted, would amount to an abuse of process. The Court affirmed this conclusion and agreed that the assertion of a new cause of action in the Second Strathan Action was clearly statute-barred.
The appellant's submission that the claim for breach of a statutory duty under the Environmental Protection Act simply provided more particulars of an environmental claim mentioned in the statement of claim in the Second Strathan Action was rejected. At issue was a clause in the lease regarding Chromeshield's responsibility for environmental damage and the appellant's concern that Chromeshield breached the clause (which is the claim in the First Strathan Action). This appears only as part of the narrative, and there is no claim concerning those matters in the Second Strathan Action against the respondents not named in the first action. The amendments sought within the Second Strathan Action would constitute an entirely new cause of action.
Additionally, the Court emphasized that the different parties to each action have distinct rights that must be respected. The Court did not accept the appellant's argument that the claim for environmental contamination was only discoverable after 2013 as against the individuals named in the second action but not the first on the basis that they were controlling minds of Chromeshield.
[Doherty, Nordheimer and Harvison Young JJ.A.]
J. Ewart, for the appellant
J. Montgomery, for the respondent
Keywords: Contracts, Breach of Contract, Tendering, Compliant Bids, Double N Earthmovers Ltd. v. Edmonton (City), 2007 SCC 3
The respondent submitted a tender for work to be done for the appellant. As a contractual requirement of the tender process, the appellant required that all tenders be submitted in a sealed envelope with the company's name and return address marked on the outside. The respondent however submitted its tender in a three-ring binder contained in a box and without the company name or address marked on the outside. While the terms of the tender process permitted the appellant to waive non-compliance, the appellant chose not to do so in this case. As a consequence, the appellant disqualified the respondent's tender and awarded the contract to the only other company that submitted a tender. The respondent sued the appellant for breach of contract.
The trial judge held that the respondent's failure to include its name and return address was a mere irregularity and therefore the disqualification of the respondent's tender constituted a breach of contract. Further, the trial judge found that the contract would have been awarded to the respondents had the appellant's evaluated the respondent's tender. Consequently, the trial judge awarded the respondent the lost profit from its failure to be awarded the contract for work.
(1) Did the trial judge err in finding a breach of contract in this situation?
(2) Did the trial judge err in finding that the appellant had not acted in good faith?
(1) No. The trial judge did not err in finding a breach of contract in this situation.
The Court affirmed that substantial compliance is the test to be applied in considering tender requirements (Double N Earthmovers Ltd. v. Edmonton (City), 2007 SCC 3). It was open to the trial judge to find that the respondent substantially complied with the tender requirements, and a failure to consider the tender constituted a breach of contract.
(2) No. The trial judge did not err in finding that the appellant had not acted in good faith.
The Court held that the trial judge's finding was a factual one, which is not to be interfered with unless there was a palpable and overriding error. The Court found no such error in this case. Further, the appellant did not put forward any evidence to the trial judge as to why it did not waive the non-compliance in this situation.
[Hourigan, Paciocco and Harvison Young JJ.A.]
S. Cosentino, in person
A. Antoniou, for the respondent
Keywords: Civil Procedure, Amending Pleadings, Partial Summary Judgment, Limitation Periods, Reasonable Apprehension of Bias, Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, ss 5(2), Rules of Civil Procedure, Rule 26.01, R. v. S. (R.D.),  3 S.C.R. 484, Frohlick v. Pinkerton Canada Ltd., 2008 ONCA 3
The appellant's motion to amend his statement of claim was dismissed. The motion judge held that amendments should await the determination of an outstanding motion for partial summary judgment.
(1) Was the motion judge biased?
(2) Did the motion judge err in refusing to grant leave to amend the statement of claim?
(1) No. The Court began this stage of the analysis by noting the high evidentiary burden that must be met to establish actual or apprehended judicial bias. The Court also drew attention to the strong presumption of judicial integrity, established by the Supreme Court of Canada in R. v. S. (R.D.). In para 117 of that decision, the Supreme Court stated that this presumption can be displaced with "cogent evidence" that demonstrates a reasonable apprehension of bias.
In the present case, the Court of Appeal found that the appellant's complaints amounted to nothing more than an expression of dissatisfaction with the results of the motion, and certain procedural aspects of the hearing. Apart from this weak foundation of support, there was no evidence of actual or apprehended bias on the part of the motion judge.
(2) No. The Court found that the motion judge did not err in refusing to grant leave to amend. In support of this finding, the Court relied on both the principle of judicial discretion, as well as statutory restrictions in the Limitations Act, 2002, and the Rules of Civil Procedure.
Leave to amend was refused, in part, on the basis that there was an outstanding motion for partial summary judgement that should be heard first. The Court gave effect to the motion judge's reasoning that substantial time and resources were expended in preparing for the motion for partial summary judgement, and that changing the pleadings would create prejudice. The Court concluded that this order was within the discretion of the motion judge, and there was no basis to interfere with that order.
Leave to amend was also refused because several of the proposed amendments involved new causes of action with expired limitation periods. The appellant submitted that he had rebutted the presumption in s. 5(2) of the Limitations Act that a claim is presumed to have been discovered on the date the underlying act or omission took place. In support of that submission, the appellant relied only on an excerpt from his affidavit. The appellant submitted that this was uncontroverted evidence and was sufficient to defeat a limitations defence. The Court rejected both of these submissions.
Lastly, the appellant submitted that the respondents failed to establish evidence of prejudice to overcome the mandatory requirement that leave to amend be granted under Rule 26.01. Once again, this submission was rejected. The Court held that the motion judge was correct to rely on Frohlick v Pinkteron Canada Ltd., which established that the loss of a limitations defence amounted to prejudice.
[Sharpe, Pepall and Roberts JJ.A.]
J. P. E. Hardy, for the appellants
K. Page, for the respondents
Keywords: Bankruptcy and Insolvency, Definition of Insolvency, Annulling Bankruptcy, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, ss. 181(1), Re Wale (1996), 45 CBR (3d) 15
The appellants had obtained a Small Claims Court judgment against their neighbours, the respondents, in the amount of $25,565.64 on November 2, 2016. In April 2017, one of the respondents voluntarily made an assignment into bankruptcy 15 days after the appellant tried to enforce their judgment by serving notice of examination. In her Statement of Affairs, the respondent disclosed having assets of much less value than their true value, as determined by the Court in this case.
The appellants brought an application to annul the respondent's assignment into bankruptcy, arguing that she was not an insolvent person and that her bankruptcy was an abuse of process. The appellants also sought to annul the consumer proposal filed by the respondent prior to the judgment in 2016.
The application judge dismissed the appellants' application to annul the respondent's consumer proposal, which the appellants did not appeal.
The application judge accepted the appellants' submission that the respondents' jointly held property was valued much higher than the respondent alleged in her Statement, and that their mortgage debt was in good standing after having been reduced over time. However, he was not satisfied that the appellants had discharged their onus of showing the respondent was not insolvent on the date of her bankruptcy. The application judge made this decision according to the respondent's Monthly Income and Expense Statement, which listed expenses exceeding income by approximately $2,000 each month. As a result, the application judge concluded the appellants had not shown the respondent was able to meet her obligations generally as they became due. He also rejected that her bankruptcy was an abuse of process.
The appellants appealed on the basis that the application judge erred by failing to find the respondent was not insolvent or that her bankruptcy was an abuse of process, thus legitimizing an unjustified asset management strategy.
(1) Did the application judge err in failing to find that the respondent was not insolvent?
(2) Did the application judge err in finding the respondent's bankruptcy was an abuse of process?
(1) Yes. At the date of her filing bankruptcy, the respondent was not an insolvent person under the definition of the term in section 2 of the BIA. The value of her assets greatly exceeded her liabilities, and were available to satisfy all her liabilities. Other than the unexplained and unsupported monthly deficit, there was no evidence that the respondent could not meet her obligations or that she ceased to pay them as they generally became due. The only evidence of any obligation she had not paid was the debt owed to the appellants under the Small Claims Court judgment.
The Court referred to s.181(1) of the BIA, which permits a court to annul a bankruptcy order if it is of the opinion that it ought not to have been made. The court is permitted to exercise this jurisdiction in circumstances described in Re Wale, which were present in the case at bar. The respondent clearly did not meet any criteria of the definition of "insolvent person" and because bankruptcy is reserved for "clear cut situations where the liabilities on which the petition is founded and the act of bankruptcy are clearly established by sound and convincing evidence." The fact that the respondent reduced her mortgages and the absence of any mortgage default belie any claim she could not meet her expenses as they became due or had ceased to pay her current obligations. Electing to structure her affairs to run a monthly deficit of $2,000 did not mean she was insolvent, since she had significant assets available to satisfy this deficit and debt to the appellants. Citing Thorne Riddell v. Fleishman, a person is not insolvent if they have ample funds to meet their obligations but simply choose not to do so.
For these reasons, the Court was satisfied that the appellants had met their onus of demonstrating that the respondent was not an insolvent person at the date of her bankruptcy. The Court ordered the annulment of the respondent's bankruptcy.
(2) Since the Court answered Issue (1) in the affirmative, it was unnecessary to determine whether the respondent's assignment into bankruptcy was an abuse of process.
[Watt, Hourigan and Huscroft JJ.A.]
M.G. McQuade, for the appellant
R.W. Trifts and J.S. Quigley, for the respondents
Keywords: Contracts, Real Property, Commercial Tenancies, Commercial Leases, Subleases, Assignments of Leases, Duty of Good Faith, Option to Renew, Reversionary Interest, Privity of Contract, Civil Procedure, Appeals, Jurisdiction, Commercial Tenancies Act, RSO 1990, c L.7, s. 3, Courts of Justice Act, RSO 1990, c C.43, ss. 6(2), Bhasin v Hrynew, 2014 SCC 71, Highway Properties v Kelly, Douglas & Co Ltd,  SCR 562, Crystalline Investments Ltd v Domgroup Ltd, 2004 SCC 3, Jameson v London and Canadian Loan and Agency Co,  27 SCR 435, Goldman v 682980 Ontario Ltd,  Carswell Ont 3486 (ONCA), Dental Co of Canada v Sperry Canada Ltd,  SCR 266, Wotherspoon v Canadian Pacific Ltd,  1 SCR 952, Letourneau Developments v Red Fort Realty Ltd,  Carswell Alta 208 (ABCA)
Hazelton entered into a lease agreement with Perfect Smile, the landlord. The lease agreement was for seven years and set to expire on September 30, 2017. There was also a five-year renewal option for Hazelton. The appellant completed substantial renovation work on the premises – whether the renovation was undertaken with the consent of Perfect Smile remained an issue between the parties.
Hazelton entered into a sublease with a retail clothing store called Outhere, operated by the respondent MC. The term of the sublease did not reserve the last day of the head lease's term to Hazelton; instead, the head lease and sublease were set to expire on the same day. In the sublease agreement, Hazelton expressly exempted and excluded the five-year renewal term. In the sublease agreement, there was a clause that stated the appellant had no obligation as a sub-landlord to renew in favour of the sub-tenant. Further, the clause stated that the sublease was only for the term set out therein.
The appellant purported to exercise its right to renew the lease for a further five-year term on March 2, 2017. Counsel for Perfect Smile delivered a letter to Hazelton stating it had no right to exercise the five-year renewal option on September 28, 2017. The lease expired, and pursuant to an arrangement with Perfect Smile, Outhere remained in possession of the premises after the sublease ended. Hazelton commenced an application seeking various heads of relief, including: a declaration that it had rightfully exercised its option to a five-year renewal of its lease starting October 1, 2017; an order that Perfect Smile and Outhere deliver vacant possession of the premises; and an order that an arbitrator be appointed to determine the rent payable during the five-year renewal period.
The application judge found that Perfect Smile breached its contractual duty of good faith, as enunciated in Bhasin v Hrynew, 2014 SCC 71, by failing to negotiate in good faith. He found that Hazelton could claim damages as a consequence of the contractual breach, but Hazelton had not suffered any loss. With respect to MC, the application judge concluded he also breached a duty of good faith owed to Hazelton, but that Hazelton suffered no economic loss. Hazelton was not found to be in default under the lease. However, the application judge refused declaratory relief and declined to order that an arbitrator be appointed.
(1) Does the Ontario Court of Appeal have jurisdiction to hear this appeal?
(2) Does Hazelton have a right of renewal if it entered into a sublease agreement with a third party where it failed to reserve the last day of the head lease for itself?
(3) Did Hazelton breach the lease with Perfect Smile by completing substantial renovations?
(1) Yes. Pursuant to s. 6(2) of the Courts of Justice Act, the Ontario Court of Appeal retains the discretion to combine and hear all the issues raised on this appeal.
(2) Yes. A party may demonstrate that, notwithstanding a failure to reserve the last day of the head lease term, an assignment was not intended by the parties. Courts should be permitted to consider the objective intentions of the parties to a purported sublease in order to determine the nature of the impact on the subletting party vis-à-vis its rights under the head lease. Commercial leases are not only a conveyance, but also a contract.
Critical to the analysis in this case is the distinction between an assignment of a lease and a sublease. When a lease is assigned to a third party, the third party assignee becomes the tenant of the landlord and a privity of estate is established between the two. When the lease is assigned, the landlord's privity of estate with the original tenant comes to an end, but the privity of contract remains: Crystalline Investments Ltd v Domgroup Ltd. In contrast, a sublease creates no direct relationship between the subtenant and the landlord – there is neither privity of estate nor privity of contract between them. Rather, the head tenant stands in the position of landlord vis-à-vis the subtenant, while retaining its position as tenant vis-à-vis the original landlord.
Section 3 of the Commercial Tenancies Act ("CTA") directly impacts the long line of case law dating back hundreds of years, which holds that a sublease of the head lease operates as an assignment because there is no reversionary interest in the original tenant to support a tenurial relationship. On its face, s. 3 stipulates that the relation of landlord and tenant does not depend on tenure; a reversion in the lessor is not necessary in order to create the relation of landlord and tenant; a reversion in the lessor is not necessary in order to make applicable the incidents by law belonging to the landlord-tenant relation; and an agreement is not necessary in order to give a landlord a right of distress.
However, s. 3 does not mean that a landlord and tenant relationship is always established between the purported sublessor and subtenant regardless of whether there is a reversionary interest. This interpretation would be contrary to other provisions of the CTA, and the distinction between subleases and assignments would be lost. Rather, there must be sufficient evidence to show that the objective intention of the parties, as reflected in the sublease, was not to create an assignment.
The parties in this case clearly understood that Hazelton had a right to renew the lease and that Hazelton was not obliged to renew on behalf of Outhere. Further, Hazelton made clear in the sublease agreement that Outhere has no right to renew and that its rights under the sublease expire at the end of the term. The sublease provided sufficient evidence that the parties did not intend an assignment. Given the objective intention of the parties and s. 3 of the CTA, the agreement between Hazelton and Outhere was a sublease and not an assignment.
(3) No. There is no basis to interfere with the application judge's conclusion that Hazelton did not breach the lease. The application judge found that Perfect Smile "knew of the renovation and the missing bathroom at least by early 2017, since its principal deposes in his affidavit that this is when he discovered the fact that the bathroom had been removed". The application judge noted that the respondent failed to give notice to Hazelton of any objections to the bathroom renovations. He also found that Perfect Smile's "complaint about the state of the Premises is a position adopted late in the day in order to justify its dealing directly with Chaves."
[Hoy A.C.J.O., Lauwers and Zarnett JJ.A.]
K. Dekker and C. Somerville, for the appellants R.L. and IPC Investment Corporation
J.J. Longo, for the appellants D.S. and Serre Financial consulting Services Inc.
B.A. Pickard, for the respondent
The respondent was a Hydro One employee for over 27 years. Her co-worker advised her that her financial planner, R.L. at IPC Investment Corporation had created a financial plan that would permit the co-worker to "retire early" without any reduction in her pension. R.L. advised the respondent to create an IPP and transfer the commuted value of her Hydro One pension plan to the IPP. R.L. and D.S. advised her to incorporate a company, start a business and work for that business for two years before retiring in order to receive substantially higher pension than she would have received at Hydro One.
After meeting with the appellants to begin the paperwork on her intended business, the respondent asked the CRA to register her IPP in June 2008. In August 2008, she left her employment at Hydro One. In October 2008, the CRA confirmed her IPP had been accepted and her pension transfer to the IPP completed a month afterwards.
In January 2009, the respondent requested a withdrawal from her IPP, but by the next month she became aware that the payments from her IPP were lower than what she had been expecting. In May 2009, her company's accountant advised her that there may be problems with her IPP. After communicating these concerns with the appellants, they reassured her that all was fine. She then retained the services of a lawyer and sought the opinion of a financial advisor and an accountant, who advised her that her IPP did not meet the requirements for registration under the ITA and that it was likely the CRA would revoke its registration. In August 2009, the respondent's legal counsel wrote to R.L. seeking confirmation of her IPP being in compliance with the ITA. She replied in September 2009 enclosing a memo from Serre Financial Services, stating the conditions of IPP's registration under the IPP required satisfying the Primary Purpose of the pension plan.
In March 2011, D.S. provided the respondent with an opinion assuring that the IPP was in compliance with the registration requirements, though he acknowledged the potential risk to this plan. In September 2011, the CRA responded to the respondent's counsel's letters to confirm that the respondent's IPP did not comply with the relevant provisions of the Income Tax Regulations.
The respondent sued her advisers, the appellants. They brought a motion for summary judgment to dismiss the claims against them as being statute-barred. The motion judge determined that the respondent's claim was brought within the applicable limitation period, as she had not discovered it until September 28, 2011, applying the "appropriate means" test set out ss. 5(1)(a)(iv), as well as ss. 5(b) of the Limitations Act, 2002.
The appellants appealed the motion judge's order: (i) dismissing their motions seeking summary judgment dismissing the respondent's claim against them on the basis that it was statute-barred; and (ii) ordering, pursuant to Rule 20.05(1) of the Rules of Civil Procedure, that the applicable limitation period commenced September 28, 2011, and did not expire before the respondent commenced her action on June 20, 2012.
(1) Did the motion judge err in finding that the respondent's claim was actionable in 2009 rather than in 2011?
(a) Did the motion judge err in characterizing the respondent's claim as a tax case, rather than one concerning alleged misrepresentation and negligent financial advice?
(b) Did the motion judge err in finding that it was appropriate for the respondent to commence an action no earlier than September 2011?
(c) Did the motion judge err in finding that the appellants reassured the respondent of her IPP's compliance with the Income Tax Act (ITA)?
(1) No. The Court agreed with the motion judge's acknowledgement that it would be suspect to believe the respondent had been prevented from discovering her losses as a result of the appellants' reassurances. However, that did not affect the conclusion that the respondent had not discovered her claim before September 2011, when the CRA confirmed that her IPP did not comply with the relevant provisions of the Income Tax Regulations. The Court was not persuaded that there was any basis to interfere with the motion judge's fact-driven conclusion that a proceeding was not legally appropriate before September 2011.
(a) No. The Court found that motion judge appropriately characterized this as a tax case because the claim was based on the tax consequences of deregistration of her IPP and hinged on the CRA's letter advising that her IPP did not conform to the relevant provisions of the Income Tax Regulations.
(b) No. The Court agreed with the motion judge's conclusion that it was not legally appropriate for the respondent to commence a proceeding before the CRA advised her that her IPP did not conform to the relevant provisions of the Income Tax Regulations. To know whether the appellants had made misrepresentations about or provided negligent advice in relation to the tax effectiveness of their plan, she first needed to know that the appellants' advice as wrong.
(c) No. Despite the fact that it was clear by August 2009 that the respondent no longer trusted the appellants and that their September 2009 correspondence did not confirm her IPP was in compliance with the ITA, the Court agreed with the motion judge in concluding that it was legally appropriate for the respondent to wait for the CRA to respond to her counsel's express inquiry. Only after the CRA advised her that her IPP was not in conformity with the relevant provisions of the ITA was it legally appropriate to commence a proceeding. Though it is possible to commence a proceeding before obtaining this information, it would have jeopardized the respondent's position before the CRA, and it was the CRA's response that confirmed the unanticipated tax consequences of deregistering her IPP.
SHORT CIVIL DECISIONSKarafiloski v. Kalenga, 2019 ONCA 414
[Feldman, Paciocco and Fairburn JJ.A.]
A. Huff, for the appellants
No one appearing for the respondents
Keywords: Civil procedure, Appeals, Orders, Consent
[Sharpe, Pepall and Roberts JJ.A.]
C.C., in person
N. Chijindu, for the appellant
D.M. MacFarlane, for the respondent
Keywords: Contracts, Real Property, Mortgages, Default, Waiver, River Bungalows Ltd. v. Maritime Life Assurance Co.,  2 S.C.R. 490
[Tulloch, Benotto and Huscroft JJ.A.]
W.G. Punnett, for the appellant
No one appearing for the respondent
Keywords: Appeal Book Endorsement
[Strathy C. J. O, Lauwers and Zarnett JJ.A.]
M. H., acting in person
G. Ferguson, for the respondent
Keywords: Civil Procedure, Fresh Evidence
[Tulloch, Benotto and Huscroft JJ.A.]
M. White and J. Pasternak., for the appellant
S. O'Connor and K. Santini, for the respondent
Keywords: Torts, MVA, Contributory Negligence, Civil Procedure, Summary Judgment
[Hourigan, Paciocco, and Harvison Young JJ.A.]
M. Crystal, for the appellants
G. Zaman, for the respondent
Keywords: Criminal Law, Possession of Narcotics, Trafficking Narcotics, Possession of Proceeds of Crime, Evidence, Admissibility, Reliability, Credibility, Exclusion, Search and Seizure, Warrants, Exigent Circumstances, Canadian Charter of Rights and Freedom, ss 8 and 24(2) R v. Grant, 2009 SCC 32, R v. Godoy,  1 SCR 311, R v. Pino, 2016 ONCA 389, R v. Harrison, 2009 SCC 34, R v. Norman (1993), 26 CR (4th) 256 (ON CA), R v. Feeney,  2 SCR 13, R v. Caslake,  1 SCR 51, Hunter v Southam Inc.,  2 SCR 145, R v. Harrison, 2008 ONCA 85, R v. McGuffie, 2016 ONCA 365
[Doherty, Benotto and Huscroft JJ. A.]
S. DiGiuseppe, for the appellant
J. Barrett, for the respondent
Keywords: Criminal Law, Breach of Bail Conditions, Sentencing, Probation
[Doherty, Benotto and Huscroft JJ.A.]
B. Vandebeek, for the appellant
J. Gevikoglu, for the respondent
Keywords: Criminal Law, Drug-Related Offences, Search and Seizure, Right to Counsel, Canadian Charter of Rights and Freedoms, ss 8 and 10(b)
[Doherty, Benotto and Huscroft JJ.A.]
M. Dineen, for the appellant
J. D. Tatum, for the respondent
Keywords: Criminal Law, Fraud, Delay, Sentencing, Canadian Charter of Rights and Freedoms, s.11(b), R v. Jordan, 2016 SCC 27
[Hourigan, Paciocco and Harvison Young JJ.A.]
M. Lacy, for the appellant
J. Tatum, for the respondent
Keywords: Criminal Law, Assault, Sexual Assault, Unlawful Confinement, Assault with a Weapon, Aggravated Assault, Uttering a Death Threat, Evidence, Admissibility, Prior Inconsistent Statements, Credibility, Canadian Charter of Rights and Freedoms, s 11, Criminal Code, s 486, R v Jordan, 2016 SCC 27, R v Kiss, 2018 ONCA 184
[Doherty, Benotto and Huscroft JJ.A]
J. Dagsvik, for the appellant
J.A.Y. Trehearne, for the respondent
Keywords: Criminal Law, Sexual Assault, Invitation to Sexual Touching, Touching for a Sexual Purpose, Evidence, Credibility, Demeanour, Criminal Code, RSC 1985, c C-46, s 486
[Doherty, Benotto and Huscroft JJ.A.]
L. Adler, for the appellant
I. Erdei and C. Greene, for the respondent
Keywords: Criminal Law, Possession, Trafficking, Cultivating Marihuana, Certiorari Application, Criminal Code, RSC 1985, c C-46, s 548, R v Wilson, 2016 ONCA 235, R v Jackson, 2016 ONCA 736
[Doherty, Benotto and Huscroft JJ.A.]
B. Reitz, for the appellant
No one appearing for the respondent
Keywords: Criminal Law, Adjournments, Appeal Book Endorsement
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