Source: https://www.blaneysappeals.com/2017/06/09/ontario-court-of-appeal-summaries-june-5-9-2017/
Timestamp: 2019-04-19 08:16:20+00:00

Document:
Following are the summaries for this week’s civil decisions of the Court of Appeal for Ontario.
There were a couple of noteworthy cases which may interest those interested in estate and franchise law.
In Levesque v. Crampton Estate, the Court overturned the lower court’s decision that the respondent joint tortfeasor is not barred by the Trustee Act in actions against an estate. In this case, the respondent issued a crossclaim against the estate more than two years after the claim was discovered. The estate brought an action under the Trustee Act to dismiss the crossclaim, arguing that the claim was statute-barred. The motion judge found the Limitations Act trumped other limitation periods that arguably applied and dismissed the motion. The Court of Appeal found that the Trustee Act trumps the limitation periods in the Limitations Act, based on section 19 of the Limitations Act, which defers to limitation periods set out in certain other statutes.
In Mendoza v Active Tire & Auto Inc., the Court overturned the lower court’s decision to forgive the respondent’s deficient disclosure in the sale of a franchise and denied the appellants’ motion to rescind the agreement. The Court of Appeal held that the Arthur Wishart Act was intended to protect franchisees by imposing requirements on franchisors. If a disclosure document is materially deficient, then no disclosure has been made, and rescission is available to the franchisee.
Other topics covered include constructive dismissal, negligent investigation by the LSUC and the application of the Law Society Act, and motions for extensions of time used in a frivolous and vexatious fashion.
For Criminal and Ontario Review Board Decisions, click here.
The plaintiff, Raymond Levesque, Jr., alleged that he was sexually assaulted by a priest, Father Dale Crampton (“Father Crampton”), in 1976. Mr. Levesque was 12 years old at the time. Father Crampton pleaded guilty to indecent assault and on appeal, was sentenced to eight months’ imprisonment.
Father Crampton died in 2010. In 2013, Mr. Levesque and his family brought an action against Father Crampton’s estate and the Roman Catholic Episcopal Corporation of Ottawa (“RCECO”), claiming that RCECO was vicariously liable for the priest’s conduct and breached independent duties owed to Mr. Levesque. In 2014, RCECO issued a statement of defence and crossclaim against Father Crampton’s estate, relying on the allegations of wrongdoing against Father Crampton in the statement of claim.
In 2015, the plaintiffs consented to an order dismissing their claim against the estate because it was barred by the two-year limitation period in s. 38(3) of the Trustee Act. The estate brought an unsuccessful motion to dismiss the crossclaim, relying on s. 38(3) of the Trustee Act, R.S.O. 1990, c. T.23 (“Trustee Act”). The estate appealed.
(1) Did the motion judge correctly find that RCECO’s crossclaim against the Crampton estate was not time-barred by s. 38(3) of the Trustee Act?
(1) No. The Court of Appeal agreed with the appellant estate’s submission that a crossclaim is an “action” and, therefore, by rule 1.03(1) of the Rules of Civil Procedure, falls within s. 38 of the Trustee Act. On the contrary, the respondent RCECO argued that s. 38(3) of the Trustee Act has no application to a claim for contribution and indemnity against the estate of a deceased person. The respondent relied on the wording of s. 38(2) of the Trustee Act , which provides, in summary, that if a deceased person has committed a wrong to another person, “the person wronged” may maintain an action against the executor or administrator of the deceased person.
The Court of Appeal disagreed with the respondent. The Court of Appeal held that a claim for contribution and indemnity against a deceased person can only be made pursuant to the Trustee Act. Since the purpose of s. 38 of the Trustee Act is to enable claims to be brought against estates, it is reasonable to treat a person seeking contribution and indemnity as a “person wronged”. In this case, the wrong suffered is having been required to pay more than the share of damages proportionate to the person’s fault.
In the Court of Appeal’s view, the limitation period in the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B., (“Limitations Act, 2002”) is also plainly applicable to the crossclaim. By virtue of ss. 5 and 18(1) of the Limitations Act, 2002, the claim for contribution and indemnity is discovered on the day the first alleged wrongdoer is served with the claim in respect of which contribution and indemnity is sought. Section 4 sets out the basic two-year limitation period from the date of discovery. There is no merit to the appellant’s submission that s. 18(1) applies to claims against a joint tortfeasor, but not to claims against the joint tortfeasor’s estate. The estate stands in the place of the deceased.
Since both limitation periods apply, the Court of Appeal necessarily had to resolve the conflict. Relying on Waterloo Region District School Board v. CRD Construction Ltd., 2010 ONCA 838, (“Waterloo”) and Canaccord Capital Corp. v. Roscoe, 2013 ONCA 378, 115 O.R. (3d) 641 (“Canaccord”), the motion judge found that s. 18(1) of the Limitations Act, 2002 “trumps other limitation periods that arguably apply. However, the Court of Appeal distinguished Waterloo from this case. In Waterloo, unlike this case, the limitation period applicable to the crossclaim was the “basic” two-year limitation period, subject to the deemed discovery rule in s. 18 of the Limitations Act, 2002. There was no potential conflict between that limitation period and another one, such as s. 38(3) of the Trustee Act. The Court of Appeal also distinguished Canaacord because there was no conflicting limitation period that applied to the claims for contribution and indemnity. However, such a conflict exists here.
By the terms of s. 19(4) of the Limitations Act, 2002, limitations provisions set out in the Schedule prevail over the provisions of the Limitations Act, 2002. As s. 38(3) of the Trustee Act is set out in the Schedule, it must prevail if it applies: Bikur Cholim Jewish Volunteer Services v. Penna Estate, 2009 ONCA 196, 94 O.R. (3d) 401, at para. 26 (“Bikur”).The Court of Appeal held that the result reached in Bikur is consistent with the nature, purpose and history of the Trustee Act provision. The Limitations Act, 2002 is based on discoverability. Section 18(1) deems the claim to be discovered on the date the claim is served on the person who seeks contribution or indemnity. In contrast, s. 38(3) of the Trustee Act is a “hard” or absolute limitation period. It is triggered by a fixed and known event – the death of the party against whom a claim is made. The purpose of the Trustee Act limitation period is clear. It is to provide a remedy for a limited time, without indefinite fiscal vulnerability to the estate. Accordingly, the Court of Appeal allowed the appeal and RCECO’s crossclaim against the estate was dismissed as being statute-barred.
The appellants purchased an Active Tire franchise from the respondent. After operating the franchise for three months at a loss, the appellants sought to rescind the agreement under s. 6(2) of the Arthur Wishart Act (“Act”) on the basis that the disclosure was deficient. The motion judge forgave the respondent’s deficient disclosure.
(1) Did the motion judge err in law in his interpretation and application of the Act and Ontario Regulation 581/00 (“Regulation”)?
(1) Yes. The motion judge erred in his interpretation and application of the Act and Regulation. The respondent’s deficient disclosure could not constitute the disclosure document required by the detailed requirements of the Act and Regulation. The appellants were entitled to rescind the agreement under s. 6(2) of the Act.
The Act is intended as protective legislation for franchisees. The scheme of the Act is to impose a number of requirements on franchisors to fully disclose the type of financial and other information a prospective franchisee would normally need in order to decide whether to become a franchisee.
(2) A franchisee may rescind the franchise agreement, without penalty or obligation, no later than two years after entering into the franchise agreement if the franchisor never provided the disclosure document.
Where a disclosure document is materially deficient, then no disclosure will be found to have been made. In this case, there were three notable deficiencies in the disclosure document.
(i) The disclosure certificate was signed by only one officer or director, not two, as required by s. 7(2)(c) of the Regulation.
The motion judge found this deficiency to be insignificant and not misleading. This finding was an error. S. 7(2)(c) of the Regulation is linked to s. 7 of the Act, which provides the damages remedy for any misrepresentation in the disclosure statement that causes the franchisee a loss. Under s. 7(1)(e) of the Act, those who sign the disclosure document are liable in damages to the franchisee for any such misrepresentation. The purpose of s. 7(1)(e) of the Act is to give the franchisee substantive rights in damages against the directors and officers who sign the document, and by doing so, to impress upon those who sign, the importance of ensuring that the document is complete and accurate.
The motion judge also accepted the argument that since the appellant acknowledged he had not read the entire 175 page disclosure document, he could not take the position that its contents were of importance to him. This finding was an error. The Act imposes significant disclosure obligations on franchisors for the benefit of franchisees. The rescission remedy is not conditional on the approach taken by a particular franchisee to the disclosed material. This approach is consistent with the intent of the Act. Franchisees are entitled to rely on its contents and the ability to later verify what they believed and understood when they decided to proceed with the franchise.
S. 7(2)(c) of the Regulation and s. 7(1)(e) of the Act constitute material components of any franchise agreement and a failure to follow either constitutes non-disclosure.
(ii) The failure to provide audited financial statements as required by s. 5(4)(b) of the Act and s. 3(1) of the Regulation.
The motion judge found this deficiency to be insignificant and not misleading. This finding was an error. S. 3(1) requires an audited financial statement for the most recently completed fiscal year, prepared in accordance with generally accepted auditing standards. The respondent’s financial year-end is in August; the respondent had not completed its 2014 financial statement during 2015 negotiations. Thus, it could not comply with s. 3(1) as its most recent statement was from 2013.
S. 3(2) provides a 180 day grace period. If 180 days have not passed since the end of the most recently completed fiscal year, a financial statement from the previous fiscal year is acceptable if it meets the requirements of s. 3(1). In this case, the respondent delivered its previous year’s statement over two weeks beyond the 180 day grace period. Financial statements “are clearly an extremely significant component” of the information a prospective franchisee requires to assess the viability of the franchisor’s franchise operations and the safety and security of becoming a franchisee.
Together, the first two deficiencies represent material deficiencies which are fatal to the ability of the purported disclosure document to constitute a disclosure document within the meaning of the Act.
(iii) The failure to provide the disclosure document at one time as required by s. 5(3) of the Act.
S. 5(3) requires one document at one time, and not piecemeal information over a period of months.
The respondent-Collicutt sold a piece of equipment known as a heat and power package and chiller HVAC to the appellant 2441472 (“244”). The full amount of the purchase price was not paid. 244’s failure to pay spawned five motions. In one of those motions, 244 challenged Collicut’s assertion that it had a valid purchase money security interest in the equipment registered under the Personal Property Security Act (“PPSA”). The motion was dismissed and 244 appealed the motion judge’s order. On appeal, 244 argued that the motion judge erred in law in deciding the issue under the PPSA, while Collicutt argued that since the motion was interlocutory, the appeal should have been brought to the Divisional Court.
(1) Is the order under appeal final, thus giving this court jurisdiction to hear the appeal?
(i) The jurisdictional basis for the PPSA part of the motion was not pleaded.
(ii) The motion was not framed as a motion for summary judgment or the determination of an issue before trial.
(iii) The motion judge dismissed the PPSA aspect of the motion.
(iv) The motion judge did not make an explicit, final determination as to the enforceability of any agreement between the parties.
(v) The validity of the PPSA registration is not the real issue in dispute between the parties.
The real issue in dispute is who owes what to whom in relation to the equipment and its alleged deficiencies. Since the order is interlocutory, the Court of Appeal has no jurisdiction over the appeal and it is quashed. However, the appellant, 244 is able to appeal to the Divisional Court.
Counsel for the responding party requested a review pursuant to Rule 2.1 seeking to have Mr. Sch’s two motions for an extension of time dismissed on the basis that they are frivolous, vexatious, or otherwise an abuse of the process of the court.
(1) Should Mr. Sch’s motions for an extension of time be dismissed?
(1) Yes. Mr. Sch has been found to have used the appeal process as a means of delaying payment, causing considerable prejudice to the respondent. Mr. Sch continued to bring motions that have already been dismissed and continues to serve the respondent’s former counsel, despite being informed that counsel no longer acts for the respondent. These motions are frivolous, vexatious, and an abuse of process of the court.
Appellant sought to appeal from the application judge’s order referring his account for assessment under the Solicitors Act.
(1) Does this court have jurisdiction to hear the appeal?
(1) No. The order in question is interlocutory rather than final in nature. Thus, the appeal lies to the Divisional Court. This is because the order at issue does not determine the real matter in dispute between the parties. The appellant has not been deprived of a substantive right because he is not precluded from defending the quantum of his account.
The appellant appeals from the order of J. Wilson J of the Superior Court of Justice, dismissing his appeal from the trial judgment of R. Zisman J. of the Ontario Court of Justice.
The appellant raises four issues.
(1) Did the trial judge err by denying the appellant procedural fairness due to judicial bias?
(2) Did the trial judge err by imposing a restraining order on the appellant?
(3) Did the trial judge err by prohibiting the appellant from initiating any further court proceedings in this case without leave of the court?
(4) Did the trial judge err by granting costs to the respondent in the amount of $52, 899.32?
(1) No. There is a steep hurdle for litigants who seek to overturn a judicial ruling based on the alleged bias of the judicial decision-maker. This case does not meet this high hurdle. The trial judge’s interventions were designed to clarify the evidence and the matters in issue, minimize irrelevancies, and maintain control of the trial process.
(2) No. The trial judge found that the appellant had engaged in a pattern of persistent and continuing abusive behaviour towards the respondent, and that he acted in a threatening manner toward her, both throughout their relationship and after their separation. The judge believed it unlikely that the appellant would be able “to self-regulate either his conduct or method of communicating”.
(3) No. This case has a lengthy history, involving multiple court appearances and multiple costs awards against the appellant, many of which remain outstanding in full. To that end, the appellant threatened further court proceedings to resolve any disputed issue or conflict with the respondent. The order in question was appropriate, given the appellant’s future litigious intentions, and the litigation history between the parties.
(4) No. The trial judge provided clear and detailed reasons for her cost award. The respondent was successful at trial and had acted reasonably throughout litigation. In contrast, the appellant acted unreasonably by making unsupported allegations and adopting a litigation strategy that was calculated to intimidate the respondent and increase her legal costs.
attempting to show that he did so following a long examination, and was suffering from a headache and additional ailments. The motion judge found that he had not met his burden of proof and there was no legally justifiable reason to set aside the settlement. The appellant also argues that the amount of the costs awarded do not reflect the handwritten endorsement of the motion judge.
(1) Did the motion judge err in finding the burden of proof was not met?
(2) Was the amount for costs awarded incorrect?
(1) No. The court found the evidence fell short of establishing incapacity.
(2) No. The court found the official transcript indicated otherwise and was not persuaded to interfere with the formal order.
The Law Society of Upper Canada (“LSUC”) brought disciplinary proceedings against the appellant in 2007 that finally resolved in his favour in October 2014. The appellant then brought an action claiming damages from LSUC for negligent investigation, malicious prosecution, and mischief in public office. The appeal concerns the motion judge’s decision to strike the claim for negligent investigation as disclosing no reasonable cause of action under rule 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
The motion judge based his decision on s.9 of the Law Society Act, R.S.O. 1990, c. L.8, which provides that no action or other proceedings for damages shall be instituted against any LSUC official for any act done in good faith in the performance of a duty or exercise of power. The appellant argues that s. 9 only protects LSUC employees and officials from negligence claims, but not LSUC itself.
1) Is LSUC immune from suit by virtue of s.9 of the Law Society Act?
P.D.S. Jackson, A. Gray, J. Opolsky, A. Shelley, for the moving party, Port of Algoma Inc.
C.P. Prophet, N. Kluge and D. Contractor, for the Monitor Ernst & Young Inc.
GIP Primus LP and Brightwood Loan Services LLC (collectively “GIP”) and Port of Algoma Inc. (“Portco”) applied for leave to appeal from an order made in the context of insolvency proceedings under the Companies’ Creditors Arrangement Act (“CCAA”), involving Essar Steel Algoma Inc. (“Algoma”).
In 2014, Algoma was in need of a cash injection and an attempt was made to address this issue through a solvent restructuring under the Canada Business Corporations Act (“CBCA”). During this complex transaction, GIP advanced US $150 million to Portco, which was in turn paid to Algoma. In total, Algoma received a total purchase price of US $171.5 million. Portco paid a smaller amount to Algoma and the balance of the purchase price was paid by a US $19.8 million promissory note from Portco to Algoma. Portco’s obligation under the note was assumed by Essar Global Fund Ltd. (“Essar”), the indirect parent of Portco and Algoma.
The restructuring was unsuccessful, and Algoma filed for protection under the CCAA in November, 2015. Under the initial CCAA order, Algoma was required to make certain payments; these payments ceased in May, 2016. At this time, the Debtor-In-Possession (“DIP”) lenders refused to approve budgets providing for these payments as long as the $19.8 million remained outstanding. The refusal gave rise to the current proceedings. In a series of three motions brought by Portco, supported by GIP (in the latter of the three, vice versa), Portco/GIP sought an order requiring Algoma to resume the payments, relying on the provisions of s. 11.01(a) of the CCAA. Portco/GIP advanced three different arguments, all of which were rejected.
(1) Should leave to appeal be granted?
Holding: Motion for leave to appeal dismissed.
(iv) whether the proposed appeal will unduly hinder the progress of the action.
The leave motion failed on the first two factors.
First, on the merits, the moving parties’ attempts on the first, second, and third motion all involved the interpretation of s. 11.01(a) and its application in the particular circumstances of the CCAA proceeding. Those issues were determined adversely against the moving parties three times. No steps were taken to obtain leave to appeal from the motion judge’s orders on the first and second motion. There was not any prima facie merit in the attempt to seek leave to appeal. Further, all the relevant factors for the application of issue estoppel are present, and the decisions are binding on the moving parties absent a successful appeal.
Second, with respect to the significance to the practice, the s. 11.01(a) issues have considerable significance for the particular CCAA proceeding, but do not have significance for the practice in the circumstances of the proceeding. Whether s. 11.01(a) is available to benefit the moving parties, thereby giving them an advantage over other stakeholders in terms of the servicing of the GIP loan, depends upon the interpretation and application of the particular agreements that underlie the transaction. In this case, the proposed appeals arise out of the unique and inter-relatedness of the initial agreements that formed the solvent restructuring transaction. There is little assistance to the general practice of insolvency law that would arise from the proposed appeals.
The appellant brought a motion to set aside the Registrar’s dismissal of his appeal for delay and granting him a 30-day extension of time within which to perfect his appeal from the orders of the Superior Court of Justice. Cronk J.A. dismissed Giannaris’ motion and granted the City’s cross-motion that he be prohibited from bringing any further motions in this proceeding – save for any motion to a full panel of the court to review Cronk J.A.’s decision – under r. 37.16 of the Rules of Civil Procedure.
(1) Was the appellant denied due process?
(1) No. The panel reviewed Cronk J.A.’s decision and determined there was no merit to the appellant’s submissions that he had never been before a court of competent jurisdiction, or that he had been denied due process.
The appellant was employed by Telus. She resigned and then sued the respondents for constructive dismissal. The action was dismissed at trial, where the appellant alleged constructive dismissal based on a significant change in her working conditions, namely, an increase in her working hours, and a “poisoned work environment.” The trial judge found she resigned out of dissatisfaction with management, unhappiness with the direction the company was taking, her critical view of the performance evaluation structure, and was particularly bothered by the treatment of her friend and mentor.
(1) Did the trial judge err in law by finding that the reasons for the resignation must be related to the constructive dismissal?
(2) Did the trial judge err in law by finding that a report of sabotage was not made in bad faith or was outrageous?
(3) Did the trial judge err in law by finding that the respondent did not induce breach of contract?
(1) No. The requirement for a causal link between the breach of contract and the damages suffered by the plaintiff is an essential element for a breach of contract claim. When an employee consents or acquiesces to changes to an essential term of the employment contract, the changes will not amount to a constructive dismissal.
The trial judge was correct in setting out the primary principles of law: “An employee is entitled to a reasonable period of time to assess [her] circumstances and make an election. However, a considerably extended period of time will preclude an action for constructive dismissal. In most circumstances, courts will view an employee’s willingness to remain in the altered position for a significant period of time as acceptance of the new terms, absent other mitigating factors.” In this case, the plaintiff remained silent as to an increase in working hours, thereby precluding a claim for constructive dismissal.
(2) No. Regarding the intentional infliction of mental distress claim, the trial judge found “there [was] no basis to find that Telus acted in ‘bad faith’ or in an ‘unfair’ manner, or engaged in any conduct that was ‘flagrant and outrageous,’” when it conducted a legitimate investigation into the sabotage of its IP system. The sabotage caused Telus a significant loss of revenue, and Telus had a good faith basis to conclude that the plaintiff was responsible.
(3) No. The appellant was in discussions to possibly enter into a contract with a third party, TekSystems, who had an opportunity to provide services to Telus in Edmonton. The appellant signed the contract through her consulting firm, but there was no evidence that TekSystems signed. Therefore, there was no evidence that Telus knew of this discussion and no evidence to establish that there was a valid and enforceable contract.
The applicant was denied interim release in the Superior Court pending his hearing for extradition to the United States, who seeks to prosecute him for conduct re;atomg to the Canadian offence of unauthorized use of a computer, contrary to s. 342.1 of the Criminal Code, R.S.C. 1985, c. C-46. The application judge denied the application for interim release finding the detention justified on all three grounds set out in s. 515(10) of the Criminal Code: (1) flight risk, (2) the need to protect the public, and (3) the need to maintain public confidence in the administration of justice. The application judge found the offence alleged to be a “serious offence”, committed for the benefit of, at the direction of, or in association with, a criminal organization, and therefore found that the reverse onus provided for in s. 515(6)(a)(ii) of the Criminal Code applied, which required applicant to satisfy the court that detention is not justified. The court found the applicant did not discharge the onus.
(1) Did the application judge err and misapprehend the evidence before him?
(2) Was there a material change in circumstances since the order which necessitates a variation of that order?
(1) No. The court stated the standard of review was the test from United States of America v. Chan (2000), 144 C.C.C. (3d) 93 (Ont. C.A.), “not whether I would grant bail if the matter came before me at first instance, but rather, whether the applicant can demonstrate [a] reviewable error on the part of [the application judge].” The court found even though the application judge misapprehended the evidence in some respects, these errors did not result in an improper application of the test. No error in principle was identified.
(2) No. The court stated it had the authority to vary the order, per R. v. St-Cloud, 2015 SCC 217 – if the court was satisfied of a material change in circumstances, such that the application judge would not have made the order that he did, had he been aware of these circumstances. The applicant had sought and was granted leave to admit fresh evidence, and argued the fact he was no longer accused of participating in a conspiracy, but only of unauthorized use of a computer, narrowed the allegations considerably and dictated that the reverse onus provision should not apply.
The court rejected this submission and stated that it remained the case that the applicant was alleged to have performed work, at the direction of others, for payment, for what he knew to have been a criminal purpose. The element of conspiracy in a criminal enterprise therefore remained, as did the application of the reverse onus provision. The court found that in the event the reverse onus provision did not apply, on the findings of the application judge and considering the fresh evidence, the Crown would still have discharged its onus of establishing that the release of the applicant would not be warranted under the three-part test.

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