Source: https://www.blaneysappeals.com/2019/03/15/blaneys-appeals-ontario-court-of-appeal-summaries-march-11-15-2019/
Timestamp: 2019-04-19 08:28:40+00:00

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There were six substantive civil decisions released by the Court of Appeal for Ontario this week.
The most notable is Merrifield v Ontario (Attorney General), where it appears that for the first time, a Canadian appellate court was asked to determine whether a common law tort of harassment exists. The court held that such a tort should not be recognized at this time. The Court did not foreclose the development of a properly conceived tort of harassment that might apply in appropriate contexts, but concluded that the respondent failed to present a compelling reason to recognize a new tort of harassment in this case. The Court determined that this was not a case of a culmination of a number of related legal developments, and that current Canadian and international legal authority does not support the recognition of a tort of harassment.
In Plate v Atlas Copco Canada Inc, the Court dealt with the admissibility of judicial findings made during criminal sentencing proceedings in related civil proceedings. While the Court held that such findings were admissible, it cautioned about the weight to be accorded to such findings. In the sentencing proceedings, the judge found that the defendant was a “fiduciary” on the basis of the “breach of trust” provisions of the Criminal Code. There had been no submissions before the sentencing judge about the meaning of “fiduciary” or “fiduciary duties” in the civil context or whether such duties had been breached. Accordingly, the findings made by a civil judge of breach of fiduciary duty on a motion for summary judgment in reliance on findings made by the sentencing judge were set aside.
Two cases dealt with employment law matters. In Colistro v. Tbaytel, the court considered negligent infliction of mental illness and constructive dismissal. Swampillai v. Royal & Sun Alliance Insurance Company of Canada considered the test for unconscionability in the context of an employee seeking to get out of a release of LTD claims against an employer.
The respondent claimed that he was harassed and bullied by the Royal Canadian Mounted Police’s (the “RCMP”) managerial members from 2005 to 2012. The respondent became a junior constable in 2005. He was promoted to Corporal in 2009 and to Sergeant in 2014. In February 2005, the respondent was assigned to the RCMP’s Threat Assessment Group (“TAG”), a unit responsible for providing protective services to federal politicians, monitoring criminal, extremist, and terrorist groups, and carrying out threat assessments.
In May 2005, the respondent’s strained relations with RCMP management began when his superiors learned that he had run for the nomination to be the Conservative Party’s candidate in the upcoming federal election without complying with applicable RCMP regulations. It was decided that the respondent was potentially in a conflict of interest and he was transferred out of TAG into a unit that was not responsible for protecting politicians.
In July 2005, the respondent appeared on a radio show as a “terrorism consultant” and discussed terrorist threats to Canada. When his superior, M.P., learned that this was not the first time that he had spoken publicly about national security, M.P. sent a memorandum to him with respect to his obligation to comply with applicable RCMP policies regarding media appearances. In October 2005, the respondent was refused assignment to the Special Operations Centre (the “SOC”), which had been convened to respond to a terrorist threat.
In January 2006, the respondent was transferred to Customs and Excise and at the same time commenced sick leave. Shortly after, the respondent wrote to M.P., accusing him of misconduct in M.P.’s audit of his RCMP credit card, which had been cancelled for non-payment. M.P. commenced a formal investigation to establish whether the respondent’s use of his credit card contravened the RCMP’s Code of Conduct (the “Code”). The investigator concluded that the respondent had contravened the Code.
(1) Did the trial judge err by recognizing a new tort of harassment?
(2) Did the trial judge err in applying the test for the intentional infliction of mental suffering?
(3) Did the trial judge commit palpable and overriding errors in her fact-finding?
(1) Yes. Change in the common law proceeds slowly and incrementally rather than quickly and dramatically. Courts may not be in the best position to address problems in the law and significant change may best be left to the legislature. In Bhasin v Hrynew, 2014 SCC 71, the Supreme Court created a new duty of honest contractual performance on the basis that good faith contractual performance already existed in Canadian common law. Similarly, in Jones v Tsige, 2012 ONCA 32, the Court recognized the existence of a tort of intrusion upon seclusion on the basis that there was an emerging acceptance of claims for privacy breaches. The Court’s decision was couched in terms of confirming the tort’s existence rather than simply creating it.
In this case, the trial judge erred in relying on four trial-level decisions as supporting the existence of the tort and establishing its elements: Mainland Sawmills, Savino, McHale, and Evangelista. These cases neither confirm the existence of the tort, nor its elements. Mainland Sawmills is neither the authority for the existence of the tort of harassment nor the elements of such a tort. The foregoing cases assume rather than establish the existence of the tort.
The common law does not and should not function in such a way as to recognize new torts as a matter of judicial discretion. A court cannot create new torts anytime it considers it appropriate to do so. Unlike Tsige, this is not a case of a culmination of a number of related legal developments. Current Canadian legal authority does not support the recognition of a tort of harassment. No foreign judicial authority, academic authority or compelling policy rationales were provided to support the recognition of a new tort and its requisite elements. Furthermore, unlike Tsige, where the facts cried out for the creation of novel legal remedy as a result of a highly significant intrusion into personal information, in this case there are legal remedies available to redress conduct that is alleged to constitute harassment, such as the tort of IIMS.
There are good reasons opposing the recognition of the proposed tort at this time. The tort of IIMS is well established in Ontario, and may be asserted as a basis for claiming damages for mental suffering in the employment context. Whereas IIMS requires flagrant and outrageous conduct, the proposed tort would require only outrageous conduct. Whereas IIMS is an intentional tort, which requires intention to cause harm or knowledge that it would occur, the proposed tort would require intention or objectively-defined reckless disregard. Whereas IIMS requires conduct that is the proximate cause of a visible and provable illness, causing severe or extreme emotional distress is sufficient for the proposed tort.
Plainly, the elements of the proposed tort are similar to, but less onerous than, the elements of IIMS. It is more difficult to establish the tort of IIMS than the proposed tort, not least because IIMS is an intentional tort, whereas harassment would operate as a negligence-based tort. While the Court did not foreclose the development of a properly conceived tort of harassment that might apply in appropriate contexts, it concluded that the respondent had failed to present a compelling reason to recognize a new tort of harassment in this case.
(2) Yes. To establish the tort of IIMS, a plaintiff must establish that the defendant’s conduct: (1) was flagrant and outrageous; (2) was calculated to harm the plaintiff; and (3) caused the plaintiff to suffer a visible and provable illness. The trial judge erred in concluding that the tort of IIMS was established based solely on the facts of the credit card investigation. The trial judge made palpable and overriding errors in her fact-finding and incorrectly applied the legal test.
The trial judge was incorrect in suggesting that M.P. was required to be satisfied that there was a breach of the Code prior to ordering the credit card investigation. M.P. had authority under s 40(1) of the RCMP Act to order an investigation after having satisfied himself that the respondent may have contravened RCMP policies. The trial judge was incorrect in stating that M.P.’s January 2016 letter, which stated that the respondent was suspected of having contravened RCMP policies, was the equivalent to alleging the commission of criminal offences.
The trial judge made a legal error in finding that M.P.’s initiation of the credit card investigation was flagrant and outrageous because M.P. himself engaged in disgraceful conduct contemporaneously with initiating the investigation. The inference that M.P.’s concerns with the respondent’s credit card misuse could not be bona fide because he had breached a wholly unrelated provision of the Code after initiating the investigation is palpably wrong. There is simply no logical connection between the two. The trial judge’s reliance on this evidence vitiated her entire finding with respect to the investigation, and called into question her evaluation of M.P.’s evidence. This evidence (of M.P.’s disgraceful conduct) was irrelevant, should never have been pleaded, and should not have been admitted into evidence.
The IIMS argument failed at the first requirement (flagrant and outrageous). The trial judge erred in concluding otherwise, and erred in finding that the second and third elements were established. There was no evidence that M.P.’s conduct was intended to cause harm or that he knew that harm was substantially certain to follow from his decision to order the investigation. Further, “emotional distress” was insufficient in any event. The evidence simply did not establish the requisite causal connection.
(3) Yes. The trial judge made numerous palpable and overriding errors in her fact-finding, including that she: ignored relevant evidence; considered irrelevant matters; and made fact-findings that were clearly wrong. Such errors preclude a conclusion that the respondent was harassed as well as the trial judge’s conclusion that the tort of IIMS was established in relation to the credit card investigation or in any other context.
The trial judge’s findings concerning the respondent’s rationalization of his political activities and the RCMP’s reaction were clearly unreasonable, since she failed to keep in mind the requirements of the RCMP’s governing regulations. The regulations provided that a member could only engage in certain political activities while on leave without pay. The respondent was made aware of the regulations. He considered them closely and sought clarification. A Sergeant confirmed the leave without pay requirement, and provided further information. Notwithstanding, the respondent engaged in political activities without advising the RCMP, and did not request leave without pay. When the respondent was asked about his political ambitions, he stated that he would not be running in an election. A few days later, his superiors learned he had been running for the Conservative Party nomination.
The respondent’s superiors thought that he had not been forthright with them. When the respondent was confronted, he drew a meaningless distinction in his activities. Given the regulations, it made no difference – he was required to be on leave. He should have sought and obtained leave without pay before standing for nomination, as a Sergeant had informed him. The trial judge clearly erred in finding that the respondent’s superiors were unreasonable in not accepting his reliance on irrelevant distinctions. His superiors had good reason to conclude that he could not be trusted to be forthright with them – a matter of importance in any position, but especially so in the context of employment in the RCMP. The trial judge supported the respondent’s rationalizations by pointing to several irrelevant considerations that did not excuse the respondent’s failure to comply with the regulations. Doing so constituted a legal error.
Another legal error was the finding that the respondent’s conflict of interest was “remote at best”, and that the RCMP’s concern about it was not bona fide. In arriving at this conclusion, the trial judge failed to consider all of the evidence, particularly that the respondent himself had perceived the potential for a conflict. The trial judge failed to provide a complete or accurate account of the respondent’s testimony. The trial judge did not refer to the respondent’s decision not to perform certain functions related to the perceived conflict of interest. Such decisions undermined her conclusion that the perception was “remote at best”. The trial judge’s finding that the RCMP’s perceived conflict was not bona fide lacked evidentiary support. The respondent’s involvement with the Conservative Party meant that he was partisan and his objectivity might be questioned. The RCMP must be objective, especially with respect to political investigations. Further, the respondent had spoken against some laws of the day, laws which the RCMP had to enforce. The fact that M.P. consulted and followed the advice of internal resources at the RCMP before forming a firm opinion that the respondent posed a potential conflict of interest and before transferring him out of TAG demonstrated that the trial judge’s finding that M.P.’s action was not bona fide was clearly wrong.
The applicants are appealing a trial judgment where it was found that they engaged in fraudulent conduct and which ordered them to pay the respondent roughly $20 million. The trial judge ordered that the applicants were restrained from “selling, removing, dissipating, alienating, transferring, assigning, encumbering or dealing with any assets, whether solely or jointed [sic] owned, wherever situated in the world…”. The order denied the applicant access to any and all of their funds or assets that could be used to fund their appeal.
“(i) Has the defendant established on the evidence that he has no other assets available to pay his expenses other than those frozen by the injunction?
(ii) If so, has the defendant shown on the evidence that there are assets caught by the injunction that are from a source other than the plaintiff, i.e., assets that are subject to a Mareva injunction, but not a proprietary claim?
(iii) The defendant is entitled to the use of non-proprietary assets frozen by the Mareva injunction to pay his reasonable living expenses, debts and legal costs. Those assets must be exhausted before the defendant is entitled to look to the assets subject to the proprietary claim.
On the first branch of the test, the trial judge found that the applicants had access to other sources of funds that were not subject to his non-dissipation order. On the fourth branch of the test, he concluded that he would not exercise his discretion to permit the applicants to have access to any funds. The applicants applied to set aside or vary the order below.
Did the trial judge err in refusing to permit the applicants to have access to any funds?
Yes. The first branch of the test was met. The trial judge’s order covered all of the applicants’ assets, with the result that even if there are other assets under the ownership or control of the applicants, those assets would also be subject to the order. The second branch of the test was met. The trial judge expressly found that a $143,000 down payment on a home was money to which the respondent had not “established a proprietary claim”. The third branch of the test was met. The applicants do not have access to the $143,000. It is these monies that the applicants seek access to precisely because the respondent has no proprietary claim to them.
With respect to the fourth branch of the test, the Court did not agree that the appeal is devoid of merit. The test regarding the merits of an appeal, on a preliminary pre-appeal motion, is a very low bar. The Court was satisfied that there were arguable grounds of appeal. A party has the right to meaningfully participate in their appeal. Due to this case’s complexity, meaningful participation could not be achieved with the applicants unrepresented.
The applicants have a right to appeal the trial judgment and need access to monies to pay counsel for that purpose. The respondent has no proprietary claim to the $143,000. The respondent’s claim must therefore take second place to the applicant’s need to fund their reasonable legal expenses of the appeal. The Court permitted the applicants to have access to $100,000 of the house’s sale proceeds to fund reasonable legal fees for the appeal, but not for past legal fees.
The appellant worked for Tbaytel and its predecessor, the City of Thunder Bay (the “City” and collectively with Tbaytel, the “respondents”) for nearly 20 years. Tbaytel announced the hiring of SB as an executive. Eleven years earlier, SB had been the appellant’s immediate supervisor. At the time of SB’s hiring, the appellant was the executive assistant of another executive. The appellant advised this executive that she was not feeling well and went home. Later that evening, the appellant and her husband met with this executive and Tbyatel’s Vice-President of Human Resources and told them that the City had terminated SB’s employment eleven years earlier for sexually harassing the appellant and others.
The appellant advised during subsequent months that she was suffering physical symptoms, and after seeing a doctor, advised she would be off work due to stress for a month. Tbaytel made inquiries. SB had not been interviewed by the City when it conducted its investigation into the allegations of sexual harassment. He had not been terminated for cause, but the complaints of sexual harassment were part of the reason for this termination.
Tbaytel proceeded with hiring SB. They could have chosen not to proceed without consequences. The CEO of Tbaytel advised the appellant of this decision via letter (the “Letter”), and offered to accommodate her by transferring her into an equivalent position in an adjacent building. The appellant would accept nothing less than Tbaytel not proceeding with the hiring of SB.
The appellant did not return to work and was ultimately diagnosed with post-traumatic stress disorder and depression. She commenced an action of intentional infliction of mental suffering and wrongful dismissal against the respondents. The trial judge dismissed her claim for intentional infliction of mental suffering, but found that the appellant had been constructively dismissed as of the date of the Letter. The trial judge awarded pay in lieu of 12 months’ notice and damages pursuant to Honda Canada Inc. v. Keays, 2008 SCC 39 (“Honda damages”) in the amount of $100,000. However, the trial judge held that the respondents were substantially successful at trial and ordered the appellant to pay costs to Tbaytel in the amount of $150,000 and to the City in the amount of $50,000. The appellant appealed the dismissal of her claim for intentional infliction of mental suffering, and the respondents appealed the finding that the appellant was constructively dismissed.
(1) Did the trial judge err in finding that the elements required for the tort of negligent infliction of mental illness were not made out?
(2) Did the trial judge err in finding that the appellant was constructively dismissed and awarding Honda damages?
(3) Did the trial judge err with respect to his costs order?
(1) No. The trial judge correctly applied the test for negligent infliction of mental illness. The trial judge determined that the appellant did not meet the second element of the test, which requires that the conduct in question be calculated to produce harm. The appellant argued that the trial judge erred by imposing a requirement that Tbaytel had to know that the exact kind of harm that she suffered was substantially certain to follow, down to her specific diagnosis. The Court found that the decision in Piresferreira v. Ayotte, 2010 ONCA 384, did not require that the respondents must have intended to produce a particular, recognized psychiatric illness or have known that it was substantially certain to follow. The Court agreed with the appellant that the trial judge erred to the extent he required Tbaytel to have known of the exact kind of harm that resulted, down to the particular psychiatric illness that was subsequently diagnosed. A finding that Tbaytel knew the Letter was substantially certain to cause the appellant serious psychological injury would have satisfied the second element of the test.
The Court agreed with the trial judge that the second element of the test was not made out. The second element of the test is subjective, and where a plaintiff relies on the “substantially certain to follow” branch of the second element of the test, more than evidence of foreseeability or reckless disregard is required. The Court stated that the requirement that the defendant has intended to produce the harm that occurred, or known that the harm was substantially certain to follow as a result of his or her conduct, is an important limiting element of the tort and distinguishes it from actions in negligence. The Court reiterated that it is now well established that a plaintiff can recover in negligence for mental injury per Saadati v. Moorhead, 2017 SCC 28 and Mustapha v. Culligan of Canada, 2008 SCC 27, but an employee cannot pursue a claim for negligent infliction of mental suffering in an employment context.
The Court found that Tbaytel sought to accommodate the appellant in the Letter, and in light of that offer, a finding that Tbaytel had subjective knowledge that serious psychological injury was substantially certain to follow from its February 6, 2007 decision and offer to accommodate was not reasonably available on the evidence. Although this evidence might support an inference that serious psychological injury was reasonably foreseeable, that was not sufficient to ground an intentional tort.
(2) No. The Court found that the trial judge did not err with respect to finding that the appellant was constructively dismissed and entitled to Honda damages. Tbaytel argued that the trial judge’s finding that the appellant was constructively dismissed effectively rested a single act (the Letter) and that the persistent or repeated conduct required to establish constructive dismissal was not present. The Court reviewed the Supreme Court of Canada’s summary of the guiding principles applied to constructive dismissal set out in Potter v. New Brunswick Legal Aid Services, 2015 SCC 10. The Court then rejected Tbaytel’s argument that a single act by an employer cannot evince an intention not to be bound by the contract. Per Potter, courts have properly taken a flexible approach in determining whether the employer’s conduct evinced an intention to no longer be bound by the contract.
The trial judge evaluated the Letter in light of Tbaytel’s knowledge of the sexual harassment complaints, and the trial judge’s finding that Tbaytel’s position, as reflected in the Letter, was demeaning, dismissive, and re-victimized the appellant was well-founded. The Court was not convinced that the trial judge committed a palpable and overriding error in concluding that a reasonable person would see the appellant’s continued employment as intolerable under such circumstances and deferred to his finding. The Court also added that the trial judge could have approached his task by considering whether there was an implied term or duty in the appellant’s contract that the employer will treat the employee with civility, decency, respect, and dignity and accordingly find a sufficiently serious breach to constitute constructive dismissal.
The Court dismissed Tbaytel’s argument that the trial judge’s conclusion was based on the subjective feelings of the appellant. The Court confirmed that whether an employer’s treatment of an employee made continued employment intolerable is assessed objectively per Potter at para. 42. The Court then rejected Tbaytel’s argument that the trial judge’s references to the appellant’s reaction to the hiring and to Tbaytel’s position having re-victimized the appellant and minimized the conduct of SB in the eyes of the appellant demonstrated that he improperly based his conclusion on the subjective feelings of the appellant. It was clear that the trial judge directed his mind to the correct legal standard concluding that an objectively reasonable bystander would find that the appellant’s continued employment in these circumstances was intolerable.
Finally, the Court dismissed the respondents’ argument that the trial judge should not have awarded damages pursuant to Honda for conduct in the course of dismissal that was “unfair or is in bad faith by being, for example, untruthful, misleading or unduly insensitive”. The Court stated that this was an imprecise and fact-specific exercise, and from the trial judge’s reasons it was apparent that in his view the appellant’s conduct warranted this. The quantum of damages was not dissimilar to the amount recently awarded to other employees mistreated in their manner of termination.
(3) No. The appellant argued that the trial judge erred in the exercise of his discretion in fixing costs based on the offer exchanged, the bills of costs, and other relevant factors by not considering that vindication was important to her and not comparing in the cost consequences of the offers prior to trial versus that of the judgment received after trial. The Court stated that the appellant had not met the stringent test for seeking leave to appeal an order as to costs because she had not proven an obvious case where there were strong grounds upon which the court could find that the judge erred in exercising his discretion. The appellant’s submissions suggested that the trial judge determined that she was entitled to her costs, subject to the application of r. 49.10(2) of the Rules of Civil Procedure. However, he did not make that determination and proceeded on the basis that the responding parties were the substantially successful parties, and the record on appeal did not contain the settlement offers in question.
The appellant was employed as the General Manager of the respondent’s Construction and Mining Technique division (the “CMT”) and then promoted to the position of Vice-President, Global Strategic Customers. The respondent terminated the appellant’s employment in 2007 and commenced an action against the appellant and other individuals in 2008. The respondent alleged that the appellant and other individuals were involved in defrauding the respondent through a scheme involving the submission of “fake” or inflated invoices for employee benefit payments (the “scheme”). As a result of a criminal prosecution, the appellant was charged and convicted of defrauding the respondent. One participant, L.C., pled guilty. Another participant, D.H., was granted immunity in return for his testimony. The appellant was tried alongside his co-accused, P.C.; both were found guilty and neither appealed.
The sentencing judge was satisfied that the jury relied on a number of facts in finding the appellant and P.C. guilty of fraud, which included that: the respondent is a large multinational corporation; from 1997–2005 the appellant was General Manager of the CMT; beginning in the 1990’s, L.C. and P.C. started the scheme; the employee benefit invoices were administered through the CMT; the overbilling was facilitated by at least two company insiders, in addition to L.C.: D.H. and the appellant; D.H. reported to the appellant; the scheme was in place throughout 2001–2007; a forensic investigation found that there was a net overbilling of roughly $22.5 million in the years 2004–2007; the appellant was motivated by greed and a sense of entitlement and grievance because his pension was less generous than what he expected; P.C.’s company bought annuities for the appellant in the amount of $1,440,000; P.C.’s company’s ledgers revealed payments to the appellant in the amount of $175,930.10; and the jury rejected the appellant’s defence that these payments were legitimate and authorized by his superiors.
The sentencing judge made a number of additional factual findings, pursuant to s 724(2)(b) of the Criminal Code, in the course of imposing sentence. The sentencing judge found that: the appellant was “highly trusted” by the respondent and had “grossly betrayed” that trust through his participation in the scheme; the appellant’s conduct was a “gross breach of trust”; and, the appellant’s participation and “passive acquiescence” in the scheme was a “gross breach of his fiduciary duty” to the respondent. Relying solely on the criminal verdict and the sentencing judge’s findings in his Decision on Sentencing (the “Decision”), the respondent moved for summary judgment in its civil action. The motion judge determined that the sentencing judge’s findings – including the finding that the appellant had breached a fiduciary duty owed to the respondent – were entitled to “very considerable weight” in the civil proceeding.
The motion judge held that, given the similarity of the issues, the identity of the parties, and the criminal nature of the prior proceedings, the sentencing judge’s findings were admissible. The motion judge cautioned himself that this conclusion did not relieve him of the responsibility of determining which findings of fact made by the sentencing judge were necessarily implied by the jury’s verdict or otherwise required for sentencing purposes, and therefore properly made by the sentencing judge in accordance with R v Ferguson, 2008 SCC 6 (“Ferguson”). The motion judge concluded that the appellant failed to put forth evidence from which he could conclude that there would be any unfairness worked by the application of the abuse of process doctrine on the summary judgment motion. Accordingly, the motion judge held that the appellant was generally precluded by the abuse of process doctrine from re-litigating the sentencing judge’s findings.
The motion judge found that Ferguson permitted the sentencing judge to make the findings that he did “relative to fiduciary duty”. The motion judge concluded that the appellant was the respondent’s fiduciary during the scheme’s currency because the sentencing judge found the appellant to be a fiduciary and because that finding was supported by the appellant’s title, his duties and the respondent’s vulnerability to the appellant. The motion judge held that the appellant had breached his fiduciary duty through his participation in, and “passive acquiescence” to, the scheme. The motion judge gave the appellant credit for the amounts seized through the criminal proceeding and granted the respondent judgment for $20 million.
(1) Did the motion judge err in granting summary judgment in sole reliance on the sentencing judge’s findings relative to breach of fiduciary duty?
(a) Were the sentencing judge’s findings relative to breach of fiduciary duty admissible?
(b) If so, did the motion judge err in giving “very considerable weight” to those findings (in particular the finding that the appellant was a fiduciary)?
(c) Did the motion judge err in granting summary judgment based on the sentencing judge’s findings?
(2) Did the motion judge err in applying the abuse of process doctrine to bar the appellant from relying on discovery evidence to defend the summary judgment motion?
(3) Did the motion judge err by finding that “passive acquiescence” to a fraudulent scheme constituted breach of fiduciary duty?
(4) Did the motion judge err by awarding damages for breach of fiduciary duty in excess of the amount of restitution ordered by the sentencing judge?
(1) Yes, the motion judge erred in granting summary judgment in sole reliance on the sentencing judge’s findings relative to breach of fiduciary duty.
(a) Yes, the sentencing judge’s findings relative to breach of fiduciary duty were admissible. The sentencing judge’s findings were relevant to the issues raised on the summary judgment motion. The appellant (as the accused) and the respondent (as the complainant) were “parties” or “participants” in the prior criminal proceedings, which raised similar or related issues. At the sentencing proceedings, the extent of the appellant’s breach of trust was a relevant consideration, pursuant to s 718.2(a)(iii) of the Criminal Code. It is in relation to this factor that the sentencing judge found the appellant to have breached a fiduciary duty to the respondent. Thus, the fact that the issues in the criminal proceedings were not identical to those in the civil proceeding did not operate as a bar to admissibility of the sentencing judge’s findings relative to the respondent’s breach of fiduciary duty.
R v Punko, 2012 SCC 39 (“Punko”) does not preclude the respondent from seeking to rely on findings made under s 724(2)(b) in the context of this civil action: a finding under s 724(2)(b) – while not a finding “on the merits” or relating to the accused’s criminal liability – is still a judicial finding. Punko also underlines the point that findings made in sentencing proceedings must be understood in context – and, in particular, in light of the statutory scheme that governs such findings. That point is consistent with British Columbia (Attorney General) v Malik, 2011 SCC 18 (“Malik”).
Malik put to rest the rule that prior judicial findings or judgments were hearsay or opinion evidence and thus inadmissible in a subsequent judicial proceeding. Malik explained that a judgment in a prior civil or criminal case is admissible as evidence as proof of its findings and conclusions, provided that the parties are the same. Malik reasoned that a court’s earlier decision is a judicial pronouncement after the contending parties have been heard which has a substantial effect on their legal rights. In this vein, “the admissibility of prior civil or criminal judgments in subsequent civil proceedings, and the effect to be given to them, must be seen in the context of the need to promote efficiency in litigation and reduce its overall costs to the parties”.
In this case, the motion judge identified the issues in the prior criminal proceedings as including “whether [the appellant] was guilty of the fraud charged and, once he was found guilty… what relevant aggravating and mitigating circumstances were present.” In his view, the findings of the sentencing judge were admissible in this civil proceeding. He reasoned that the scheme in the civil action was the same in the criminal action, and that the fiduciary duty in the civil action arose out of the same relationship as the fiduciary duty about which the sentencing judge made findings of fact. He observed that there was a large overlap of issues between the criminal and civil proceedings, and that the appellant was a party to both proceedings.
(b) Yes, the motion judge erred in principle by failing to consider factors that were relevant to the weight to be accorded to the sentencing judge’s findings relative to fiduciary duty. Where prior judicial findings are found to be admissible, Malik directs that the weight to be afforded to those findings will depend on all the circumstances of each case and that the opportunity to contest the prior judicial finding is an important factor in determining the weight to be given to that prior finding.
In this case, the motion judge concluded, upon weighing the evidence before him, that all the findings of the sentencing judge were entitled to “very considerable weight” because of the similarity of the issues, the identity of the parties, and the criminal nature of the prior proceeding, and that a trial was not required in order for him to undertake that weighing exercise. He did not revisit that blanket finding when he turned to deal with the breach of fiduciary duty claim.
The first reason the motion judge gave for concluding that the appellant was a fiduciary of the respondent from 2002–2007 was the sentencing judge’s finding that the appellant was a fiduciary. It is important to emphasize that the characterization of an individual as a “fiduciary” carries a particular meaning at common law and reflects a conclusion of mixed fact and law. The motion judge did not consider whether the issue of the appellant’s fiduciary status had been argued before the sentencing judge. Indeed, the Crown did not argue that the appellant was a fiduciary. Rather, it focused on the extent of the appellant’s breach of trust.
Pursuant to s 718.2(a)(iii) of the Criminal Code, abuse of a position of trust or authority is an aggravating factor in sentencing. Although a fiduciary relationship involves an element of trust, it has a distinct meaning at law from the term “position of trust” in s 718.2(a)(iii). The sentencing judge did not have the benefit of legal submissions from the parties on fiduciary duties and did not advert to any legal authority in his Decision on the test for imposing a fiduciary obligation, in finding the appellant to be a fiduciary.
Further, because the finding that the appellant was a fiduciary was not express or implied in the jury’s verdict, but was made by the sentencing judge in the exercise of his fact-finding power under s 724(2)(b) of the Criminal Code, the appellant’s ability to appeal that finding was constrained significantly. It is unlikely that contesting the sentencing judge’s finding that the appellant was a fiduciary would have had any practical effect on the sentence imposed. As a result, the appellant did not realistically have the opportunity to contest the sentencing judge’s finding that he was a fiduciary by way of appeal.
In this case, the fiduciary question was not in play before the sentencing judge and the appellant did not have a realistic opportunity to challenge the fiduciary finding. The motion judge failed to consider these factors – factors that diminished the weight to be accorded to the sentencing judge’s findings – and, in doing so, he erred in principle.
(c) Yes, the motion judge erred in granting summary judgment based on the sentencing judge’s findings. The subsidiary findings relied on by the motion judge were insufficient to eliminate the need for a trial on the fiduciary question.
In this case, in addition to relying on the sentencing judge’s finding that the appellant was a fiduciary, the motion judge accepted that the appellant was a fiduciary for the period of 2002–2007 because (1) the fiduciary finding was supported by the appellant’s title (General Manager and then Vice-President); (2) of the appellant’s duties and the respondent’s vulnerability; (3) the appellant provided no evidence to negate the fiduciary finding.
With respect to the appellant’s title, although senior level employees that form part of “top management” and exercise discretion to affect their employer’s legal and economic interests may owe a fiduciary duty to their employer, this is inherently a contextual and fact-specific determination. It is unhelpful to focus on job titles. The role of a “General Manager” can embrace dramatically different responsibilities and duties across different organizations.
With respect to the appellant’s duties, the motion judge did not point to specific findings. There was no mention of the appellant’s reporting obligations or any details as to the nature and scope of his responsibilities in either of his roles. With respect to vulnerability, again the motion judge did not point to particular findings. While the sentencing judge found that the appellant was “highly trusted”, not all relationships involving trust are fiduciary in nature. Further, vulnerability alone is insufficient to ground a fiduciary duty.
Given the Court’s concerns about the weight that could be afforded to the sentencing judge’s finding that the appellant breached a fiduciary duty, the limited nature of the other evidence relied upon by the motion judge and the overall approach that he adopted on the summary judgment motion, the Court was not satisfied that the record before him enabled him to make the necessary factual or legal findings to either grant judgment or dismiss the action.
(2) No, the motion judge did not err in applying the abuse of process doctrine. He concluded that the appellant was precluded from re-litigating the factual findings in the Decision. He found that the appellant had failed to place any evidence before him from which he might conclude that there would be an unfairness worked by the application of the abuse of process doctrine.
The abuse of process doctrine provides the court the discretion to prevent re-litigation where necessary to preserve the integrity of the adjudicative process. Re-litigation inevitably has a detrimental effect on the due administration of justice, as it can lead to inconsistent results, devalue finality, and contribute to the unnecessary expenditure of public and private resources, with no guarantee that the second result will be more accurate than the first.
Relying on the discovery evidence, the appellant’s key position on the summary judgment motion was that he had not been involved in the scheme. In essence, he sought to re-litigate his criminal conviction. The issues in the criminal proceeding were substantially similar to those in the civil proceeding. The discovery evidence the appellant sought to rely on existed before his criminal trial. Thus, there was no basis to interfere with the motion judge’s application of the abuse of process doctrine.
(3) No, the motion judge did not err by finding that “passive acquiescence” to a fraudulent scheme constituted breach of fiduciary duty. A fiduciary who knows about wrongdoing committed against the beneficiary has a duty to tell the beneficiary. As a matter of law, a fiduciary who knows of a fraudulent scheme perpetrated against the beneficiary and passively acquiesces to its continuation has breached his duty to the beneficiary.
(4) No, the motion judge did not err by awarding damages in excess of the amount of restitution. The quantum of restitution ordered under s 738(1)(a) of the Criminal Code and the assessment of damages for breach of fiduciary duty are guided by different principles. The quantum of restitution ordered by the sentencing judge does not represent the “upper limit” of the damages that the motion judge could order for breach of fiduciary duty. Sentencing principles do not guide the court in providing a civil remedy for breach of fiduciary duty. The quantum of damages for breach of fiduciary duty may exceed the amount of restitution ordered under s 738(1)(a) of the Criminal Code.
The respondent was employed by the appellant. After becoming disabled, the respondent received short-term disability benefits. The company administering the appellant’s benefits plan advised the respondent on March 31, 2015, that he was not eligible for long-term benefits because he did not meet the definition of disabled from “any employment”. On June 2, the administrator advised him that his appeal from that decision was dismissed and that he had until October 22, 2015, to appeal further. On June 19, he retained a law firm to pursue an appeal.
On June 24, 2015, the appellant advised the respondent that his employment was terminated effective July 22, and provided him with a severance offer, which included a release of all claims against the appellant, including for long-term benefits. The appellant sought advice on the settlement from the law firm handling his appeal. He was informed that the firm did not practice employment law and that he could seek his legal advice on severance elsewhere. He did not seek employment law advice but instigated further negotiations on his own. After some negotiation, which led to improvement of the severance terms, the respondent accepted the offer and signed the release on July 14, 2015. He testified that he never “closely read” the release before signing it because he assumed it was “just a more legalese version of the June 24, 2015 letter”.
Despite having signed the release in July 2015, the appellant continued appealing the denial of his long-term disability claim and the administrator did not appear to have objected. After unsuccessfully pursuing appeals from the denial of his long-term disability claim, the respondent commenced an action against the appellant and the administrator for long-term disability benefits. Once the appellant started his claim, though, the appellant and the administrator brought a motion for summary judgment dismissing the action based on the release.
The motion judge found that in respect of the release of liability for the long-term disability benefits, the release was unconscionable based on the criteria for unconscionability set out in Titus v. William F. Cooke Enterprises Inc. Because those criteria were met, the motion judge denied summary judgment and the release, as it related to the long-term disability claim, was set aside and declared unenforceable.
Did the motion judge err in finding the release to be unenforceable?
In the Court of Appeal’s view, the motion judge erred by finding unconscionability based on the record before him. In the circumstances of this case, the issue of whether the release was unconscionable and therefore unenforceable was a genuine issue requiring a trial.
The record before the motion judge was insufficient to permit him to determine that the severance transaction in which the release was signed reached the high threshold of “grossly unfair and improvident” because it included the release of the respondent’s long-term disability claim. It is not disputed that the amount of severance based on years of service was more than fair, nor was it disputed that there was no specific amount that was designated to compensate for the loss of the potential success of the respondent’s long-term disability appeal claim. If successful, that claim to age 65 was estimated at $300,000.
The absence of any information in the record about the appeal proceedings or the potential merit of those proceedings left a critical factual void. Without that information, it was difficult to know the appellant’s risk in giving up his entitlement to a claim for long-term disability benefits or whether the admittedly enhanced severance adequately compensated for what may have been released. In other words, there was insufficient information against which the fairness of the transaction could be considered.
Further, while the motion judge took into account the fact that the release did not mention the administrator, he did not consider whether the respondent’s failure to closely read the release impacted the unconscionability analysis. This was a circumstance that the motion judge should have adverted to when determining whether the transaction was grossly unfair and improvident.
Accordingly, the Court of Appeal allowed the appeal, and referred the issues of the unconscionability and enforceability of the release for determination at trial.
The appellant owned a piece of commercial property (the “Property”). The appellant entered into discussions with the respondent to renovate and lease out the Property. The respondents paid some of the Property’s expenses and co-signed an agreement with a firm to conduct a Phase II Environmental Site Assessment of the Property. The respondents paid for that work, which revealed some lead contamination around the test bore holes. The appellant then sold the Property, with the respondent receiving some sale proceeds. The appellant commenced an action seeking declaratory relief that: (i) the respondents were “persons having control of a pollutant” on the Property, within the meaning of s. 99 of the Environmental Protection Act, R.S.O. 1990, c. E.19 (“EPA”), during the time they worked on the Property; and (ii) the respondents were liable to make contribution or indemnity in respect of any liability that might be imposed in the future upon the appellant by reason of the presence of any excess quantities of lead on the Property.
The respondents sought to dismiss the action on the basis that the action: (i) disclosed no reasonable cause of action (r. 21.01(1)(b) of the Rules of Civil Procedure); (ii) was frivolous and vexatious (r. 21.01(3)(d)); or (iii) was statute-barred under the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. The motion judge dismissed the action on the first two grounds. She did not consider or deal with the limitation period argument.
(1) Did the motion judge err by failing to consider and give effect to the court’s decision in Brozmanova v. Tarshis, 2018 ONCA 523, which discussed the proper use of Rule 21?
(2) Did the motion judge err in holding that the statement of claim did not disclose the material facts necessary to support its claim under s. 99 of the EPA?
(1) No. Although the motion judge did not refer to the Brozmanova decision, her reasons demonstrated that she was alive to Brozmanova’s holding that a motion under r. 21.01(1) was not an appropriate means by which to seek the adjudication of a limitation period defence, which usually requires making findings of fact. The motion judge specifically held that it was not necessary to consider the respondents’ argument based on the Limitations Act, and she made no findings in respect of it. Instead, the motion judge concluded that the respondents’ argument that the claim disclosed no reasonable cause of action was dispositive of the motion.
(2) No. The Court found that the motion judge made no error. The motion judge held that the statement of claim contained a “radical defect” because it did not allege any facts to support an ultimate finding that the respondents were owners or persons having control of the lead pollutant “immediately before the first discharge of the pollutant”, as required by s. 91(1) of the EPA. The motion judge correctly read the statement of claim. It contained no such pleading and did not even plead when the first discharge of lead took place. This was sufficient to dispose of the appeal.

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