- Brisco Estate v. Canadian Premier Life Insurance Company, 2012 ONCA 854 (Rosenberg, Goudge and Feldman JJ.A.), December 5, 2012
- St. Mary's Cement Inc. (Canada) v. Clarington (Municipality), 2012 ONCA 884 (Winkler C.J.O., Pepall J.A. and Smith J. (ad hoc)), December 17, 2012
- Trang v. Nguyen, 2012 ONCA 885 (Simmons, Juriansz and Epstein JJ.A.), December 17, 2012
- Dembeck v. Wright, 2012 ONCA 852 (Gillese, Rouleau and Epstein JJ.A.), December 4, 2012
- The Canada Trust Company v. Browne, 2012 ONCA 862 (Feldman, Simmons and Cronk JJ.A.), December 7, 2012
1. Brisco
Estate v. Canadian Premier Life Insurance Company, 2012
ONCA 854 (Rosenberg, Goudge and Feldman JJ.A.), December 5,
2012
In this appeal, the Court considered the admissibility and
possible use of hearsay evidence – in this case, the evidence
of the deceased – in an action by beneficiaries of a life
insurance policy against the insurance company.
Brisco died in January 2004 in an airplane crash, triggering
the $1,000,000 insurance benefits for common carrier fatal
accidents. At the time of his death, he held a number of insurance
policies.
The appellant, Canadian Premier Life Insurance Company, had
insured the deceased under a group accident insurance policy but
claimed that Brisco had cancelled that policy. The respondent
beneficiaries of Brisco's estate submitted that the appellant
cancelled the policy in error and that the deceased had intended to
cancel a different policy. The respondents' claim rested on
statements made by the deceased over the course of several years
with respect to his insurance. At trial, Justice Tausendfreund
admitted these statements under the state of mind exception to the
hearsay rule.
Rosenberg J.A. of the Court of Appeal agreed with the
appellant that the trial judge erred in relying on the state of
mind exception. The statements made by the deceased in 2003
–that he owned two million-dollar insurance policies—
may demonstrate his state of mind at that time, but his state of
mind in 2003 was not at issue. What was at issue were acts taken by
the deceased in 1998, when the appellant claims that the policy was
cancelled. The deceased's state of mind when he made the
impugned statements was therefore only relevant to determining past
acts, an inference prohibited under the leading state of mind
exception cases R. v. Smith, [1992] 2 S.C.R. 915 and
R. v. Starr, 2000 SCC 40, [2000] 2 S.C.R. 144. In both of
those cases, the Supreme Court adopted Justice Doherty's
statement in R. v. P. (R.) (1990), 58 C.C.C. (3d)
334 (Ont. H.C.) that hearsay evidence is "not admissible to
establish that past acts or events referred to in the utterances
occurred."
Rosenberg J.A. did find, however, that the deceased's
statements were admissible under the principled approach to
hearsay. Citing R. v. Khelawan, 2006 SCC 57, [2006] 2
S.C.R. 787, which established that hearsay evidence may be admitted
"if sufficient indicia of necessity and reliability are
established," Rosenberg J.A. explained that threshold
reliability in this case rested on demonstrating that, in the
context in which the statements were made, there was no real
concern about whether or not they were true. Considering the
circumstances in which Brisco's comments were made along with
the confirmatory evidence, Rosenberg J.A. held that the statements
met sufficient threshold reliability to warrant
admissibility.
The Court further rejected the appellant's argument that
the trial judge erred in holding that s. 13 of the Evidence
Act was not applicable and that, regardless, there was
evidence to satisfy the corroboration requirement. Considering the
words "heirs, next of kin, executors, administrators or
assigns of a deceased person" in the provision, Rosenberg J.A.
concluded that s. 13 is limited to circumstances in which the
interested party claims under one of the enumerated categories and
not simply because he or she happens to fall within one of them. In
this case, the Brisco children did not claim as next of kin but
under a contractual right as beneficiaries of the insurance policy.
Because the provision did not apply to the Brisco children, there
was no need for corroboration of their evidence.
Regardless, Rosenberg J.A. opined that the same evidence which
rendered the deceased's statements admissible under the
principled approach to hearsay was capable of satisfying the
corroboration requirement in s. 13. A cumulative consideration of
the evidence could corroborate that of the Brisco children and of
the executor of the estate.
The appeal was dismissed.
2. St.
Mary's Cement Inc. (Canada) v. Clarington
(Municipality), 2012 ONCA 884 (Winkler C.J.O., Pepall J.A.
and Smith J. (ad hoc)), December 17, 2012
In this case, the Court of Appeal considered whether
substituting alternative fuel for part of the conventional fossil
fuel used in a cement manufacturing plant constituted a permissible
change in land use under a municipal zoning by-law.
St. Mary's Cement Inc. (Canada) ("SMC") operates
a cement manufacturing plant in the Municipality of Clarington. It
proposed to substitute fuel recovered from post-recycling and
post-composting materials for part of the conventional fossil fuel
currently used in its cement manufacturing process. The
municipality opposed the proposal on the basis that it would give
rise to a new land use, namely the use of the site as a "waste
disposal area" which is not permitted under the by-law
governing the use of the site.
SMC appealed from a decision on an application for the
interpretation of the municipality's by-law 84-63. The
application judge interpreted the by-law in favour of Clarington,
holding that the use of the alternative fuel would be an
impermissible change in land use.
Writing for the Court, Winkler C.J.O. held that, while the
application judge correctly found that the proposed fuel fell
within the broad definition of "waste" under the
EPA, he erred in concluding that the use of this waste as
fuel would bring the plant within the definition of a "waste
disposal area", therefore constituting a new and additional
use.
There was no dispute among the parties that the use of the
lands as a "waste disposal area" is impermissible under
the by-law. Winkler C.J.O. found, however, that the application
judge failed to apply the express language used in the by-law to
define "waste disposal area", namely "a place where
garbage, refuse or domestic or industrial waste is dumped,
destroyed, or stored in suitable containers." Under its
proposal, SMC would not dump, destroy or store waste at the site.
The use of alternative fuel is not the "destruction of
waste", but is in fact the productive use of the fuel for the
operation of a cement manufacturing plant, the use expressly
permitted under the by-law.
As Winkler C.J.O. explained, when considering the definition
of "waste disposal area" in the context of the by-law as
a whole and the plans of the municipality, it is clear that the
municipality seeks "to regulate land that is used for the
purpose of removing, containing or managing unwanted
materials." SMC was simply proposing to use these materials as
a resource for a permitted and existing process.
Clarington also submitted before the Court of Appeal that the
proposed substitution of fuels is a prohibited additional use
because the by-law does not permit the processing of waste at the
site. Winkler C.J.O. disposed of this argument, holding that
SMC's use of alternative fuel did not constitute an additional
use of the land.
Winkler C.J.O. looked to the decision of Court of Appeal of
England and Wales in R. (ex parte Lowther) v. Durham County
Council and Lafarge Redland Aggregates Limited,
[2001] EWCA Civ 781, in which that court considered the proposition
that partial substitution of alternative fuels constitutes a change
in use. In Lowther, the court held that the use of
alternative fuel was not a material change in land use: the burning
of fuel is "so entirely part of the manufacture of cement
[...] that it would be wrong to characterise it as a separate
use." Winkler C.J.O. concluded that because the burning of
fuel is "inherent in the production of cement," the use
of alternative fuel did not constitute a separate use of the
land.
The Court allowed the appeal and issued an order that
SMC's proposed use of alternative fuels at its plant in
Clarington did not constitute a new land use and was permissible
for the purposes of the municipality's zoning by-law.
At issue in this appeal was whether an unregistered equitable
interest in land can take priority over a lien registered by the
Canada Revenue Agency against a taxpayer's real property. The
Court of Appeal ruled that it can.
The CRA, which registered liens against three properties owned
by Trang, brought a motion under rule 21.01(1)(a) of the Rules
of Civil Procedure to determine whether equitable interests to
the properties claimed by Trang's wife and sister could entitle
them to payment in priority to the liens. McKinnon J. of the
Superior Court of Justice held that the unregistered equitable
interests of Trang's wife and sister could be payable in
priority to the CRA's subsequent liens. McKinnon J. rejected
the CRA's argument that s. 223(5)(a) of the Income Tax
Act makes the CRA liens the equivalent of a "charge"
under s. 93(3) of the Land Titles Act, thus giving them
priority over existing unregistered interests, finding instead that
the provision gives the CRA the status of a judgment creditor which
does not override prior unregistered equitable interests.
On appeal to the Court of Appeal, the CRA raised essentially
the same argument under a different provision of the Income Tax
Act. The CRA submitted that s. 223(5)(b) of the Act
adopts the scheme created for amounts owing to the provincial
Crown, whereby once a notice of indebtedness to the Crown is
registered, it secures a "lien and charge" on a
debtor's lands.
The Court agreed to consider the CRA's argument on s.
223(5)(b) despite the fact that it was not raised below.
Nonetheless, it found that that provision was no more helpful to
the CRA than s. 223(5)(a) in creating a "charge" under
the Land Titles Act and obtaining for the CRA the priority
which s. 93(3) confers.
Writing for the Court, Simmons J.A. first explained that a
charge cannot be created under s. 93(3) of the Land Titles
Act without a voluntary act on the part of the owner of the
land. The CRA's liens are created by statute; therefore, they
cannot qualify as a "charge" within the meaning of the
provision.
Simmons J.A. similarly rejected the CRA's argument that s.
223(5)(b) of the Income Tax Act incorporates the remedies
contained in the Ontario tax collection statutes which create a
"lien and a charge" on the taxpayer's interest in the
property. The "lien and charge" in the Fuel Tax
Act and other provincial legislation cited by the CRA is no
more a "charge" under the Land Titles Act, for
the same reason that it does not arise through the voluntary act of
the property owner. Simmons J.A. opined that the Ontario
legislature did not intend to create a "charge" within
the meaning of the Land Titles Act when it enacted the
various tax collection provisions on which the CRA relied.
Moreover, the Ontario tax collection statutes contain their
own priority provisions for the "lien and charge" they
create. Section 17.1 of the Fuel Tax Act, for example,
creates a different priority from that created by s. 93(3) of the
Land Titles Act. For this reason, Simmons J.A. that it
would be inconsistent to hold that the provision has the effect of
creating "a charge" within the meaning of s. 93 of the
Land Titles Act.
Ultimately, neither s. 223(5)(a) nor s. 223(5)(b) of the
Income Tax Act were able to make the CRA liens over
Tran's property a "charge" under the Land Titles
Act. Therefore, they could not take priority over existing
unregistered interests in the land.
The appeal was dismissed.
In this appeal, the Court considered whether a spouse
"owns", on the date of marriage, an entitlement to an
Employment Standards Act severance payment that he or she
later receives.
At trial, Justice Perkins dealt with various financial
disputes between the parties. Before the Court of Appeal, the
appellant wife challenged a number of the judge's findings,
including his determination of the value of her business and of
certain household items, and his determination of the
respondent's support obligations.
The central issue on appeal, however, concerned a $190,000
severance package the respondent husband received when his
employment was terminated three days before the couple's
separation. The appellant argued before the Court of Appeal that
the trial judge erred in ruling that a portion of the amount of
severance the respondent husband was paid was property owned by him
on the date of their marriage. She submitted that, like the common
law damages portion, the respondent's right to severance under
the Employment Standards Act was not property owned by him
until his employment was terminated without cause.
Writing for the Court, Epstein J.A. noted that on a plain
reading of s. 57 of the Act, an employee does not have an
absolute right to be paid ESA severance, but is entitled
to severance only if his employment is terminated without
notice.
Moreover, despite the importance of defining property broadly
in Family Law Act proceedings as articulated by Sharpe
J.A. in Lowe v. Lowe (2006), 78 O.R. (3d) 760
(C.A.), Epstein J.A. noted that the Ontario courts have
consistently held that entitlement to severance pay is only
property once it has crystallized. In Leckie v. Leckie
(2004), 238 D.L.R. (4th) 571 and Ross v. Ross (2006), 83
O.R. (3d) 1, the Court of Appeal made clear that "for a
severance package to be considered property at the date of
separation, there must be a right or entitlement to it at that
date."
Epstein J.A. also noted that in defining property, the
FLA does not distinguish between the date of marriage and
the date of separation; thus, for a severance package to be
considered property as of either of those dates that form the basis
of an equalization calculation, there must be a right or
entitlement to it on that date.
When the parties married, the respondent did not have a right
or entitlement to severance under the ESA. That right only
crystallized when his employment was terminated without cause. The
trial judge therefore erred in finding that the respondent's
accumulated ESA severance as of the date of marriage was
property owned by him at that point in time.
Epstein J.A. briefly considered and rejected the
respondent's alternative argument that his interest in the
ESA portion of the severance package retroactively became
date-of-marriage property when his entitlement crystallized.
Nothing in s. 4(1) of the FLA, which defines property as including
"any interest, present or future, vested or contingent, in
real or personal property," allows a court to reclassify an
interest due to changed circumstances. Moreover, as Blair J.A.
noted in Serra v. Serra, 2009 ONCA 105, 307
D.L.R. (4th) 1, Ontario deliberately chose a fixed valuation date
approach and there is no discretion to vary that date. Epstein J.A.
held that reclassifying an interest that is not property on the
date of marriage or the date of separation, even if that interest
can later be identified as property, would effectively allow
ongoing adjustments to what is and is not property. This
would undermine the "fixed date valuation" approach.
Epstein J.A. further opined that expanding the definition of
property to allow for retroactive reclassification would be
contrary to the intent to the FLA.
The Court allowed the appeal on the severance issue but
dismissed it in respect of the other issues raised by the
appellant.
5. The Canada Trust Company v. Browne,
2012 ONCA 862 (Feldman, Simmons and Cronk JJ.A.), December 7,
2012
This appeal concerns the use and consequences of a
"percentage trust" or "unitrust," in
circumstances where continuing set payments to income beneficiaries
would deplete the capital of the trust, to the detriment of minor
capital beneficiaries.
The trust was settled in 1980 in favour of Primo
Poloniato's grandchildren, the income beneficiaries, and their
issue, the capital beneficiaries. At one time worth more than $130
million, the trust holds shares in a holding company which, in
turns, holds an investment portfolio.
The trust was varied twice, in 1988 and in 1997, in accordance
with arrangements that were approved by the court. The second
arrangement, which was intended to afford the trustee greater
discretion as to the management of investments and to make
distributions to income beneficiaries more predictable, changed the
nature of the trust to a "percentage trust" or a
"unitrust". Under this arrangement, the income
beneficiaries received yearly income calculated by a formula and
subject to a floor and a ceiling. The Court of Appeal found that
the arrangement to vary the trust also provided that if the
investments chosen by the trustee did not produce sufficient income
to make the required distributions to the income beneficiaries, the
trustee could sell equities or other capital investments held by
the holding company to raise the funds necessary to make the
payments.
Although the 1997 variation was based on projected increases
in the value on the trust, the subsequent economic downturn
resulted in the trust having insufficient income to meet annual
payments to the income beneficiaries, without having the holding
company declare cash dividends resulting from the sale of its
capital assets.
It was in this context that the current trustee brought an
application for directions to clarify its obligations under the
trust agreement as varied by the arrangement in 1997. In
particular, the trustee sought direction on the extent of its
discretion not to make the minimum percentage distributions to the
income beneficiaries in order to preserve the value of the corpus
of the trust for the capital beneficiaries.
Using contractual interpretation principles, the application
judge interpreted the trust as mandating the trustee to make the
distributions to the income beneficiaries in spite of the downturn
in the market and its effect on the capital value of the trust. The
Children's Lawyer appealed on behalf of the minor, unborn and
unascertained capital beneficiaries of the trust. The principal
issue before the Court of Appeal was whether the application judge
made a fundamental error in his interpretation of the trust deed as
varied in 1997 in finding that minimum percentage payments to the
income beneficiaries were mandatory and that the "even hand
rule" had been ousted with respect to the management of trust
distributions.
The appellant argued that the application judge erred in
interpreting the trust only as a contract and that he failed to
apply trust principles and take into account the proper factual
matrix in the interpretive process. The appellant further submitted
that the application judge erred by finding, contrary to trust
principles and the language of the trust, that the obligation of
the trustee to maintain an even hand was ousted, and permitted an
interpretation of the trust, as varied, that could not have been
approved at first instance.
Writing for the Court of Appeal, Feldman J.A. first addressed
the appellant's submission that the application judge erred in
narrowly construing the factual matrix so as to exclude
consideration of the role of the court and its jurisdiction in
approving the arrangement to vary the trust. She agreed that court
approval of the 1997 variation was an important part of the factual
matrix that informs the interpretation of the trust deed, but held
that, while the approval process was to ensure that the arrangement
to vary the trust was in the best interests of the minor
beneficiaries, the interpretation of that arrangement did not have
the same focus.
The Court went on to address and reject the appellant's
other challenges to the application judge's interpretation of
the trust. Feldman J.A. disagreed that the application judge failed
to consider a CRA tax ruling which sought to ensure that there
would be no disposition of the capital assets of the trust for the
benefit of the income beneficiaries, holding that the only
disposition about which CRA would be concerned would be that of the
shares of the holding company, not of its capital assets.
Feldman J.A. also dismissed the appellant's claim that the
application judge erred in finding that the intention of the
settlor –to financially benefit two generations of the
Poloniato family—was irrelevant in interpreting the trust
deed, reiterating that the application judge was charged with
interpreting a trust deed as varied, not considering the
application for approval of the arrangement to vary the
trust. If the "court approved a variation that did not
take the settlor's intent into account, and its meaning is
clear, it is not the role of the interpreting court to distort the
meaning of the deed as varied." Moreover, the intent and
effect of the variation was not to benefit the income beneficiaries
at the expense of the capital beneficiaries: "That was clearly
not the intent of the approving court, which was obliged to approve
the variation only if it was for the benefit of the capital
beneficiaries on whose behalf the approval was given."
Turning to the appellant's argument that the application
judge erred in failing to give effect to the duty of the trustee to
maintain an even hand between the interests of the income and
capital beneficiaries, Feldman J.A. held that it is "trite
law" that executors and trustees have a duty to treat
different classes of beneficiaries fairly and impartially unless
that obligation is explicitly displaced in the trust deed. In a
percentage trust, however, the trustee's duty is to increase
the size of the entire trust for the benefit of both classes of
beneficiaries. Feldman J.A. explained:
This includes increasing the capital rather than preserving
it, and therefore involves an investment strategy that may include
more risk. Because in a percentage trust the trustee is investing
to increase the entire value of the trust to benefit all, the issue
is not whether the trustee's even hand duty is ousted in
respect of the management of the trust's investments. What is
disputed is whether the duty has been ousted in respect of the
obligation of the trustee to make distributions to the
beneficiaries.
Feldman J.A. considered the Law Reform Commission's Report on the Law of Trusts, which recommends that trustees continue to maintain an even hand in the periodic valuation of the trust and when making the distributions, but noted that the percentage payable to income beneficiaries cannot be re-set in this case because it is based on a fixed formula. Therefore, the trustee must deplete the assets of the holding company if it is necessary to meet the obligation to the income beneficiaries. The even hand duty has been effectively ousted.
Feldman J.A. concluded that the application judge interpreted the trust deed in accordance with proper trust principles and in the way it was intended by the parties and by the approving court at the time. The trustee is therefore obliged to continue to make the minimum percentage distributions to the income beneficiaries. The appeal was dismissed.
Lerners LLP acted for the Children's Lawyer on behalf of the
minor, unborn and unascertained capital beneficiaries.
http://lernersappeals.ca/netletters
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