COURT OF APPEAL FOR ONTARIO

CITATION:
Toronto-Dominion Bank v. Mawji, 2012 ONCA 152

DATE: 20120309

DOCKET: C54257

Winkler C.J.O., Simmons and Cronk JJ.A.

BETWEEN

The Toronto-Dominion Bank

Plaintiff (Respondent)

and

Karima Mawji also known as Karima Padamsey and
    Karim Mawji also known as Karim Sadrudin Gulam Hussein Mawji and Hoyes,
    Michalos & Associates Inc., Trustees in Bankruptcy of the Estates of Karima
    Padamsey and Karim Mawji also known as Karim Sadrudin Gulam Hussein Mawji,
    Bankrupts

Defendants (Appellants)

Richard D. Howell, for the appellants

Susanne M. Balpataky, for the respondent

Heard and released orally: March 1, 2012

On appeal from the order of Justice Herman Wilton-Siegel
    of the Superior Court of Justice, dated August 19, 2011.

ENDORSEMENT

[1]

The Deputy Registrar in Bankruptcy dismissed the
    respondent's motion for an order under s. 69.4 of the
Bankruptcy and
    Insolvency Act
, R.S.C. 1985 c. B‑3, lifting
    the automatic stay to permit the respondent Bank to proceed with an action
    against the bankrupts for fraudulent misrepresentation and obtaining funds from
    a line of credit by false pretences. The Deputy Registrar concluded there was
    no evidence of oral contact between the bankrupts and the Bank and no evidence
    of written misrepresentation by the bankrupts.

[2]

On appeal to the Superior Court, Wilton-Siegel
    J. allowed the appeal and lifted the automatic stay. The bankrupts appeal from
    that decision.

[3]

This is a case in which the bankrupts
    obtained continuing advances under a line of credit after the collateral
    mortgage securing the line of credit had been paid out and discharged with part
    of the proceeds of a conventional mortgage. Nonetheless, the bankrupts
    continued to draw advances and make payments under the line of credit.

[4]

Although there was no direct evidence on
    the motion of a misrepresentation or false pretences, the appeal judge held
    that the background circumstances leading up to the unsecured draws could lead
    a trier of fact to infer that, to the knowledge of the bankrupts, the Bank
    would not have been prepared to provide them with an unsecured line of credit.
    This, in turn, could support an inference that the manner of using the line of credit
    amounted to a false representation or false pretence.

[5]

We agree with the appeal judges conclusions
    concerning the available inferences. The appeal is therefore dismissed.

[6]

Costs of the appeal are to the respondent on a
    partial indemnity basis, fixed in the amount of $5,765, inclusive of
    disbursements and applicable taxes.

Winkler C.J.O.

Janet Simmons
    J.A.

E. A. Cronk J.A.


COURT OF APPEAL FOR ONTARIO

CITATION:
Veolia
    ES Industrial Services Inc. v. Brulé, 2012 ONCA 173

DATE: 20120320

DOCKET: C53054

Doherty, Rosenberg and Hoy JJ.A.

BETWEEN

Veolia ES Industrial Services Inc.

Plaintiff (Appellant/                                                                                Respondent
    by way of cross-appeal)

and

John Brulé and Clean Water Works Inc.

Defendants
    (Respondents/
    Appellants by way of cross-appeal)

and

John Brulé

Plaintiff by Counterclaim

Rodney M. Godard and Daniel Ableser, for the
    appellant/respondent by way of cross-appeal

Joseph Y. Obagi and Elizabeth A. Quigley, for the respondents/appellants
    by way of cross-appeal

Heard: January 16, 2012

On appeal and cross-appeal from the judgment of Justice Albert
    J. Roy of the Superior Court of Justice, dated October 27, 2010.

Hoy J.A.:

[1]

Veolia ES Industrial Services Inc. (Veolia) successfully sued its
    former employee, John Brulé, for breaching a non-competition covenant in his
    employment contract and for breach of fiduciary duty. Veolia appealed the
    quantum of damages awarded. Mr. Brulé cross-appealed, claiming that the trial
    judge erred in finding that he breached the his non-competition covenant or his
    fiduciary duty.

[2]

In my view, the trial judge erred both in finding that Mr. Brulé
    breached his non-competition covenant and in finding that he breached his
    fiduciary duty. I would allow Mr. Brulés cross-appeal and dismiss the action. It
    is not necessary to address the issue of damages raised by Veolia and I would
    dismiss its appeal.

BACKGROUND

[3]

Mr. Brulé founded Veolia. Veolia engaged in inspecting, cleaning and
    rehabilitating sewers using a cost-effective technique that it developed.

[4]

In 1999, Mr. Brulé sold Veolia to its current shareholders.  As part of
    that transaction, Mr. Brulé entered into an employment agreement which obliged
    him to continue as Veolias President and Chief Operating Officer until
    December 31, 2004 and prohibited him from competing with Veolias business for
    five years thereafter.

[5]

Irritants developed in the employment relationship.  Before the expiry
    of the initial employment agreement, Veolias parent corporation approached Mr.
    Brulé with a new proposal and Mr. Brulé, Veolia and its parent corporation
    entered into the Senior Executive Employment Agreement dated for reference
    January 1, 2004 (the Agreement) at issue on this appeal.

[6]

The Agreement expressly superseded Mr. Brulés initial employment
    agreement.  The parties stipulated that the Agreement was the whole of the
    agreement between the parties and that there are no collateral
    representations, agreements or conditions not specifically set forth herein.

[7]

Pursuant to the Agreement, Mr. Brulé was employed by Veolia, as
    President.  In addition, he was to act as Chief Executive Officer of the parent
    corporations business in Ontario and as President of Veolias Ontario
    affiliates.  The arrangement was to continue for a three-year term (s. 1.2),
    subject to Veolias right to terminate Mr. Brulé for cause or without cause
    upon payment of the compensation to which he was entitled until the end of the
    term (s. 2.3(a)), and to Mr. Brulés right to terminate the arrangement on 180
    days notice (s. 2.3(b)).

[8]

The Agreement contains the following non-competition covenant:

5.1 Non-Competition. Subject to sections 1.2 and 2.3, and to
    any other provision of this Agreement, during the Senior Executives employment
    with the Employer and for a period of:

(a) Two (2) years following the termination of the Senior
      Executives employment for cause or, two (2) years from the termination of the
      Agreement pursuant to section 1.2, the Senior Executive covenants and agrees
      not to compete, either directly or indirectly, with the core Business within;

(i) the Provinces of Ontario and
        Quebec; or

(b) Two(2) years
commencing on January 1, 2007
following termination by the Senior Executives employment without cause.

(c) Two years
commencing on January 1, 2007
following termination by the Senior Executive pursuant to section 2.3(b).  [Emphasis
      added.]

[9]

On July 7, 2004, Mr. Brulé gave notice to Veolia, pursuant to s. 2.3(b)
    of the Agreement, that he was terminating his employment in 180 days.  Veolia
    advised Mr. Brulé that he was not to come into work, but was to be available
    for consultation and discussion, if necessary.  Veolia continued to pay Mr.
    Brulé until one or two weeks prior to the January 3, 2005 end of the 180 day
    notice period.

[10]

Mr.
    Brulé had a Veolia employee assemble a binder containing 30-50 recent municipal
    tenders and information about bids by Veolia and others. He took this binder
    and a list of Veolias employees when he left Veolia.

[11]

Mr.
    Brulé incorporated the defendant Clean Water Works Inc.  He intended Clean
    Water Works to be involved in rehabilitating water mains, not sewers.  Veolia
    was not engaged in rehabilitating water mains.

[12]

In
    the fall of 2005, Clean Water Works did not have sufficient work to keep all of
    its employees employed. The City of Ottawa issued a public tender for sewer
    work.  Mr. Brulé obtained the tender documents and sought legal advice
    regarding his obligations to Veolia.  Veolia was aware that Mr. Brulé had
    obtained the tender documents. Both Veolia and Clean Water Works submitted
    bids.  Clean Water Works was awarded the tender; Veolia was the next-lowest
    bid.  Veolia sued Mr. Brulé and Clean Water Works, seeking the gross profits
    that Veolia lost as a result of not being awarded the tender. Mr. Brulé counterclaimed
    for unpaid compensation pursuant to the Agreement.

THE TRIAL JUDGES DECISION

[13]

The
    trial judge cited
Consolidated

Bathurst v. Mutual Boiler
,

[1980] 1 S.C.R. 888

for the proposition that where there is
    confusion or ambiguity in contracts, the court should attempt to determine what
    the intention of the parties was.  He found that the parties were trying to
    get a two year non-competition agreement and unfortunately, the draftsmanship
    of the lawyer drafting the agreement did not produce what, in fact, the parties
    intended (at pp. 18-19).  He concluded that severing the words commencing on
    January 1, 2007 where they appeared in the non-competition covenant would
    produce exactly what the parties had intended, and was consistent with the
    Supreme Court of Canadas  test for blue-pencil severance in restrictive
    covenants set out in
KRG Insurance Brokers (Western) Inc. v. Shafron
,
    [2009] 1 S.C.R. 157. As severing the words commencing on January 1, 2007 from
    s. 5.1(c) resulted in Mr. Brulé having a two year non-competition covenant
    running from January 3, 2005, and such a covenant was, in the trial judges
    opinion, reasonable, the trial judge found that Mr. Brulé had breached his
    non-competition covenant.

[14]

Mr.
    Brulé did not dispute that he had owed a fiduciary duty to Veolia, and that he
    had continuing duties for a reasonable period of time after the end of his
    employment.  The trial judge concluded, at p. 27, that it would be reasonable
    that the term for the fiduciary duty would be the same length of time as the
    non-competition agreement.  He then concluded that Mr. Brulé breached his duty
    to Veolia because he breached his non-competition covenant, he left Veolia with
    the binder of information with respect to prior bids, which the trial judge described
    as confidential information, and he did not tell Veolia that he was submitting
    a bid.

[15]

The
    trial judge determined that $465,000 would be reasonable compensation to Veolia
    for Mr. Brulés breach of the non-competition covenant and his fiduciary duty and
    fixed damages in that amount.  On this appeal, Veolia seeks damages in the
    amount of $930,000.

[16]

The
    trial judge also determined that Veolia owed Mr. Brulé $90,896.62 pursuant to
    the Agreement.  The parties do not appeal this determination.

ANALYSIS

(1)

DID MR. BRULÉ BREACH
    HIS NON-COMPETITION AGREEMENT?

[17]

In
    my view, blue-pencil severance could not be resorted to in this case to remove
    the words commencing on January 1, 2007 from the non-competition covenant. Without
    the deletion of these words, the restrictive covenant, which commences two
    years after Mr. Brulé ceased to be employed by Veolia, is clearly unreasonable
    and unenforceable. Moreover, the undisputed evidence was that Mr. Brulé competed
    with Veolia in the fall of 2005 and not in the two years commencing on January
    1, 2007.  As a result, even if the non-competition covenant was enforceable, he
    did not breach it.

[18]

The
    principles of general contract interpretation in
Consolidated Bathurst
are subject to the test for blue-pencil severance of restrictive covenants in
    employment contracts set out in
Shafron
.  Restrictive covenants are
prima
    facie
unenforceable.  A restrictive covenant will be upheld only where it
    is shown to be reasonable by the party seeking to enforce it.

[19]

In
Shafron
, the Supreme Court of Canada addressed when the doctrine of
    severance may be invoked to resolve an ambiguous term in a restrictive covenant
    in an employment contract or render an unreasonable restriction in the covenant
    reasonable. Rothstein J., writing for the court, stated at para. 2:

Severance, when permitted, appears to take two forms.
      Notional severance involves reading down a contractual provision so as to
      make it legal and enforceable. Blue pencil severance consists of removing
      part of a contractual provision. For reasons I set out below, notional
      severance is not an appropriate mechanism to cure a defective restrictive
      covenant. As for blue-pencil severance, it may only be resorted to in rare
      cases where the part being removed is trivial, and not part of the main purport
      of the restrictive covenant.

[20]

The
    Supreme Courts application of the test for blue-pencil severance in
Shafron
is instructive.  In that case, the employee agreed not to compete within the
    Metropolitan City of Vancouver  a term with no legal or judicial definition.
     The British Columbia Court of Appeal determined that the parties intended to
    prevent the employee from competing in the City of Vancouver and in an area
    beyond the City, and that what likely was in the reasonable contemplation of
    the parties when they made their agreement was the City of Vancouver, the
    University of British Columbia Endowment Lands, Richmond and Burnaby.  The
    Supreme Court held, at para. 47,  that the British Columbia Court of Appeal
    erred in trying to resolve the ambiguity in the term Metropolitan City of
    Vancouver by reading down the covenant according to its notion of
    reasonableness and what it thought the parties might have intended.

[21]

Further,
    in the circumstances, blue-pencil severance was not available to delete the
    word Metropolitan and thereby reduce the geographical scope of the covenant
    to the City of Vancouver.  The Supreme Court referred to Canadian
American
    Financial Corp. (Canada) Ltd. v. King
(1989), 60 D.L.R. (4th) 293
    (B.C.C.A.), at pp. 305-306:

The courts will only [apply blue pencil severance to] sever the
      covenant and expunge a part of it if the obligation that remains can fairly be
      said to be a sensible and reasonable obligation in itself and such that the
      parties would unquestionably have agreed to it without varying any other terms
      of the contract or otherwise changing the bargain. ... It is in that context
      that reference is made in the cases severing and expunging merely trivial or
      technical parts of an invalid covenant, which are not part of the main purport
      of the clause, in order to make it valid.

[22]

The
    Court of Appeal had concluded that the parties intended a geographic reach that
    included the City of Vancouver and something more.  Blue-pencil severance was
    not available because there was no evidence that the parties would have
    unquestionably agreed to remove the word Metropolitan without varying any
    other terms of the contract or otherwise changing the bargain.

[23]

In
    this case, there was evidence, not referenced by the trial judge in his
    reasons, that the parties would not have agreed to remove the words commencing
    on January 1, 2007 without varying other terms of the contract.  Blue-pencil
    severance was therefore not available.

[24]

The
    Agreement went through numerous drafts.  Initially, Mr. Brulés obligation not
    to compete extended beyond the period of his employment only if he was
    terminated for cause.  On October 29, 2003, Mr. Vasseur of Veolia sent a
    memorandum to Mr. Brulé proposing the following addition:

5.1(a) Or for the termination of the Executives employment
      without cause, two years starting from January 1, 2007.

[25]

In his memorandum, he explained: Salaire payé jusqua la fin du
    terme  employé jusqua la fin du terme.
(Salary paid until the end of
    the term  employed until the end of the term )

[26]

Mr.
    Vasseur did not testify.  The evidence of Daniel Marc-Aurèle, for Veolia, was
    that he was aware that Mr. Vasseurs proposal was being sent and that starting
    from January 1, 2007 was added to create a sunset clause.  Veolia wanted to
    make clear that if Mr. Brulé continued in employment beyond the three-year term
    of the Agreement, and Veolia terminated Mr. Brulé without cause, he would in no
    event be bound by a non-competition covenant beyond December 31, 2008.  In Mr.
    Marc-Aurèles words, Mr. Brulé would never have accepted it [the Agreement]
    otherwise.

[27]

The
    evidence of Veolias own witness indicates the parties would not
    unquestionably have agreed to remove the words commencing on January 1,
    2007 without varying any other terms of the contract or otherwise changing the
    bargain.

[28]

Mr.
    Vasseurs memorandum to Mr. Brulé, in my view, suggests a more obvious
    rationale for the addition of the words commencing January 1, 2007.  To
    terminate Mr. Brulés employment without cause, Veolia had to immediately pay
    Mr. Brulé his salary until the end of the three-year term of the Agreement.  Given
    this, it is logical that Veolia would seek to have Mr. Brulé treated as if he
    continued to be employed until the end of the three-year term for the purpose
    of determining his non-competition obligation and have his non-competition
    obligation end two years after the end of that three-year term, and not two years
    after he ceased to be employed by Veolia.  Removing the words commencing on
    January 1, 2007 without varying any other terms of the contract would have
    left Mr. Brulé free to compete with Veolia during a period in respect of which
    he may have been paid by Veolia.  It cannot fairly be said that the parties
    would unquestionably have agreed to remove the words commencing on January
    1, 2007 without varying any other terms of the contract or otherwise changing
    the bargain.

[29]

The
    words commencing on January 1, 2007 are not trivial.  They go to the duration
    of the restriction and are part of the main purport of the clause.  This is not
    one of those rare cases where blue-pencil severance may be resorted to.

[30]

I
    do not accept Veolias argument that, in any event, a case for severance is
    made out based on the doctrine of rectification. In
Shafron
, at para.
    53, the Supreme Court stated that rectification is to be used with great
    caution and set out three requirements: (1) an inconsistent prior oral
    agreement; (2) that the party seeking to uphold the written agreement knew or
    ought to have known about the lack of correspondence between the written
    document and the oral agreement, in circumstances amounting to fraud or the
    equivalent of fraud; and (3) the precise form in which the written instrument
    can be made to express the prior intention.

[31]

In
    this case, Veolia has shown no prior oral agreement, let alone the content of
    one.  There do not even appear to have been oral discussions about the
    non-competition agreement.  Mr. Marc-Aurèles evidence was that Veolia never
    received any response from Mr. Brulé pertaining to its drafts of the
    non-competition provisions and Veolia merely assumed that he understood its
    interpretation.

(2)

DID MR. BRULÉ BREACH
    HIS FIDUCIARY DUTY TO VEOLIA?

[32]

It
    is clear that certain of a fiduciary employees duties to his employer may survive
    his employment:
Can. Aero v. OMalley
, [1974] S.C.R. 592.

[33]

Without
    disclosure and consent, a fiduciary cannot compete with his employer during the
    course of his employment.  After his employment ends, the fiduciary employee generally
    cannot directly solicit the employers customers for a reasonable period of
    time:
Mountjoy v. Alberts
(1977), 16 O.R. (2d) 682 (H.C.J.) at paras.
    21-26. The parties agree that the fiduciary is free to otherwise compete once
    his employment ends, provided that he does not do so unfairly:
Cygnal
    Technologies Corp. v. Taylor
, [2005] O.J. No. 3093, (S.C.) at para. 16;
Sanford
    Evans List Brokerage v. Trauzzi
, [2002] O.J. No. 1394 (S.C.) at para. 49.

[34]

In
    my view, Mr. Brulé did not compete unfairly with Veolia, and in the result did
    not breach his fiduciary duty, as a result of Clean Water Works submitting its
    bid to the City of Ottawa.

[35]

The
    trial judges conclusion that Mr. Brulé breached his fiduciary duty to Veolia
    by competing is anchored by his finding that Mr. Brulé was subject to an
    enforceable non-competition covenant and breached that covenant. The
    unfairness aspect of the competition was the breach of contract.  As there
    was no breach of contract, this basis of liability falls away.

[36]

Nor,
    in my view, do the other bases identified by the trial judge  that Mr. Brulé
    left Veolia with the binder of information with respect to prior bids and did
    not tell Veolia that Clean Water Works was going to bid  amount to unfair
    competition.

[37]

I
    will address the issue of the binder first.

[38]

Counsel
    for Veolia argues that this case is on all fours with
Cygnal
.  In that
    case, the former fiduciary employee took sales reports that set out significant
    detailed information about his employers contracts with various customers.  Five
    months after leaving his employment, he bid against his former employer on
    several tenders.  His evidence was that he did not use the information in
    bidding.  McMahon J. found that by keeping this sensitive information, which
    could have been beneficial to someone competing for tendered contracts, and
    then competing directly five months later, the employee had competed in an
    unfair manner.

[39]

The
    trial judge did not find that Mr. Brulé used the information in the binder in
    making his bid, and the evidence is that he did not.  If he did not use the
    information, mere possession of it cannot make the competition unfair. In this
    regard, I respectfully differ from the view of McMahon J. in
Cygnal
.

[40]

Moreover, in my view the trial judge made a palpable error in inferring
    from the evidence that the information in the binder was confidential. No
    witness testified that the information in the binder was confidential. At the
    time, Veolia was known as SARP Sewer-Matic. The only evidence with respect to
    the contents of the binder was that of Mr. Brulé:

Q: when you left SARP Sewer-Matic, certain
    documents left with you --

A: Yes

Q: --that had been there before?

A: That's right

Q: Okay. What were they sir?

A: I believe I took the tender document book.
    It was a three-inch binder with 30, 40, 50 different municipality tenders in
    them. Either we bid it or we did it with the total numbers of the competitors
    and who won them.

Q: Did you use those binders at all with this
    job?

A: No.

Q: And was this a public tender sir?

A: Yes, it was.

[41]

In
Mr. Brulés cross examination he was
    asked again about the contents of the binder:

Q: Yeah. And the file you took had all of the
    tender results for Sewer-Matic for the whole period of time--

A: No, I did not have the whole period of
    time.

Q: Let me finish the question.

A; I'm sorry.

Q: Thank you. It had all of the file, the
    tender results that Sewer-Matic was involved in, including the competitors' per
    meter prices for at least the period of time since SARP bought your business,
    correct?

A: I disagree. I didn't think it went back
    from the day they bought me. There was one binder, and I would have to see it.

Q: All right. But the point is it was a binder
    that was kept by SARP because it was useful for the tender process?

A: That binder was not kept by SARP. I asked
    the girl at SARP Sewer-Matic to make it before I left.

Q: Yeah.

A: There were no other binders before that. I
    deliberately asked the girl to make a binder for me, and I took that binder
    with me.

Q: Right.

A: But what Sewer-Matic had before that is that
    we had every tender and each file for the last 20 years.

[42]

Municipal
    tenders are publically issued and inherently not confidential. Information
    about what Veolias competitors bid could not amount to Veolias confidential
    information, unless, perhaps, Veolia had acquired the information subject to
    the terms of a confidentiality agreement. There was no evidence that this was the
    case. In fact, Mr. Brulé testified that after the tender at issue closed, he
    obtained information from the City of Ottawa with respect to the bids submitted
    by all the competitors, including the prices per metre. Based on the record,
    the type of information in the binder was publically available. It was neither
    confidential nor sensitive.

[43]

Does
    the fact that Mr. Brulé did not tell Veolia that Clean Water Works was
    submitting a bid make his competition unfair?  In the trial judges view, the
    fact that Mr. Brulé knew that Veolia was bidding, but Veolia did not know that
    Clean Water was bidding meant that, [t]hey were not playing on a level playing
    field and that Mr. Brulé clearly had an unfair advantage.  Counsel for
    Veolia submits that had Veolia known that Clean Water Works was bidding it
    would have adjusted its bidding strategy to factor in this additional
    competition.  In my view, a former fiduciary employee who is free to compete is
    not required to tell his former employer that he is about to do so.  It must be
    kept in mind that the restrictive covenant on which Veolia was relying was
prima
    facie
unenforceable. It should also be noted that Veolia was aware that
    Mr. Brulé had obtained a bid package.

[44]

No
    other factors which would render Mr. Brulés competition unfair were drawn to
    our attention.  Clean Water Works bid was submitted in response to a public
    tender; it did not solicit the City of Ottawa.  The tender was issued by the
    City of Ottawa well after Mr. Brulé had left Veolia.  Mr. Brulé did not take
    advantage of a business opportunity developed during his employment.  He did
    not improperly solicit and hire Veolias employees in order to be in a position
    to compete.  Although Mr. Brulé had taught Mr. Peori, who compiled Veolias
    bid, how to put together estimates for sewer work, Mr. Brulé did not know what
    Veolia would bid.  Mr. Brulé and Mr. Peoris evidence describing how they
    determine the amount to bid suggests something akin to an art rather than a
    science.  Mr. Brulé was guessing what Veolia would bid some 15 months after he
    had ceased to be involved with Veolia.  There was no evidence that Veolias
    method of conducting the sewer work was, at the time, unique or proprietary.
    Mr. Brulé did not make preparations to compete, on company time or at Veolias
    premises while still an employee. Nor was there evidence that Mr. Brulé used or
    disclosed any confidential information of Veolia in competing.

[45]

Veolia
    argues that the fact that Mr. Brulé contacted a known third party competitor to
    ascertain if it was also putting a bid in amounts to unfair competition. Veolia
    submits that Mr. Brule knew the third party as a result of his employment. Veolia
    also contacted that third party.  The fact that the third party was among the
    universe of potential competitors could be ascertained from publically
    available documents.

COSTS

[46]

If
    the parties are unable to agree on the issue of costs at trial and on appeal,
    Mr. Brulé should provide brief written submissions within 14 days, and Veolia
    should provide its brief written submissions in response within 10 days
    thereafter. No reply submissions shall be provided without leave.

Released: March 20, 2012                                      Alexandra
    Hoy J.A.

DD                                                                   I
    agree Doherty J.A.

I
    agree M. Rosenberg J.A.


COURT OF APPEAL FOR ONTARIO

CITATION:
699982
    Ontario Limited v. Intact Insurance Company,
2012 ONCA 268

DATE: 20120426

DOCKET: C54484

Armstrong, Blair and Hoy JJ.A.

BETWEEN

699982
    Ontario Limited, James P. Chin, On W. Lau, Yu K.
    Chu, and Keow Y. Lee

Applicants/Appellants

and

Intact Insurance Company

Respondent

Ramon Andal, for the appellants

Jason P. Mangano and W. Colin Empke, for the respondent

Heard and released orally: April 23, 2012

On appeal from the order/judgment of Justice Lois B. Roberts
    of the Superior Court of Justice, dated October 3, 2011.

ENDORSEMENT

[1]

This is an appeal from an order dismissing an application for,
inter
    alia
, a declaration that the respondent insurance company had a duty to
    defend a third party claim against the appellants.  The third party claim is in
    respect of property damage allegedly caused by pollution from the dry cleaner
    tenants of a shopping plaza owned by 699982 Ontario Limited during the period
    January 28 to April 28, 1987.  The application judge held that under the insurance
    policy in issue, the claims asserted in the third party claim are not within the
    scope of coverage or are excluded from coverage and therefore there is no duty
    to defend.

[2]

The policy only covers property damage which is defined as restricted to
    injury or destruction which occurs during the policy period January 28, 1987 to
    January 28, 1988.

[3]

The exclusions in question provide that the policy does not apply to
    property owned by the insured (600 King Street East, Oshawa) or to property
    damage arising out of the actual, alleged or threatened discharge, dispersal,
    release or escape of pollutants at or from the premises owned by the insured.

[4]

We are of the view that the application judge correctly concluded that
    the claims asserted in the third party claim are not within the scope of
    coverage or fall within the exclusions and therefore the respondent was not
    obliged to provide a defence.

[5]

The appeal is therefore dismissed.  The respondent shall have its costs
    on a partial indemnity scale fixed in the amount of $15,000 inclusive of
    disbursements and applicable taxes payable by the appellants.

Robert P. Armstrong J.A.

R.A. Blair
    J.A.

Alexandra
    Hoy J.A.


COURT OF APPEAL FOR ONTARIO

CITATION:
1420041
    Ontario Inc. v. 1 King West Inc., 2012 ONCA 249

DATE: 20120420

DOCKET: C53690

Cronk and Blair JJ.A. and Strathy J. (
ad hoc
)

BETWEEN

1420041 Ontario Inc.

Plaintiff (Appellant)

and

1 King West Inc.

Defendant (Respondent)

Paul D. Guy and Scott W. McGrath,
    for the appellant

Megan Mackey, for respondent

Heard: January 26, 2012

On appeal from the order of the Divisional Court (Molloy,
    Sachs and Herman JJ.) dated December 9, 2010 allowing an appeal from the order
    of Stewart J. of the Superior Court of Justice dated February 19, 2010, with
    reasons by Sachs J. at 2010 ONSC 6671.

R.A. Blair J.A.:

[1]

The issue raised on this appeal is whether  and, if so, in what
    circumstances  an individual condominium unit owner has the legal capacity to
    sue for relief relating to the common elements.

Background
    and Facts

[2]

1 King West is a high-rise condominium complex in downtown Toronto.  It
    was promoted to be of the highest quality, designed to provide the benefits
    and ambiance of a boutique hotel, a deluxe residence, and an executive office
    facility.

[3]

In 2000 and 2001, when the complex was still under construction, the
    appellant agreed to purchase eight units from the respondent developer.  Four
    of the units were to be furnished as required for participation in the
    short-term rental program offered by the condominium.  The other four were to
    be constructed in a manner that would make them suitable for use as the
    appellants head office.  This involved a custom design and finishes unique to
    the appellants units.  The design included exterior doors, windows and walls that
    were to be installed in places not otherwise called for in the condominium
    plans.  While constructed to meet the appellants specific requirements, these
    exterior doors, windows and walls form part of the common elements of the
    condominium corporation.

[4]

After the building became available for occupancy in 2005, a
    disagreement arose between the parties over the adequacy of the common elements
    for the foregoing purposes.  The appellants main complaints centre around the
    exterior doors, windows and walls contemplated by the custom design and the alleged
    inability of the buildings HVAC system to respond to the special heating and
    air conditioning demands of those configurations in the appellants four head
    office units.  The HVAC system also forms part of the condominiums common
    elements.

[5]

In November, 2005, the appellant commenced this action (the Individual
    Action), seeking specific performance of its agreement with respect to the
    custom design and finishes it claims the respondent promised or, in the alternative,
    an abatement of the purchase price or, in the further alternative, damages.
    Much of the claim concerns matters unrelated to the common elements.

[6]

At the same time, all was not well with the construction of the common
    elements elsewhere in the development.  In March, 2007, the condominium
    corporation commenced an action (the Condominium Action) on behalf of itself
    and the individual unit owners, including the appellant, for common element
    deficiencies.  It claimed damages against the respondent developer, the
    construction manager, the general contractor, the co-developers, the
    architects, the structural engineer, the mechanical engineer, the electrical
    engineer, and the City of Toronto.  Notices were given to the individual unit
    owners under the
Condominium Act
,
1998
, S.O. 1998, c. 19, s.
    23(2) (the Act), advising that the condominium corporation intended to sue on
    its own behalf and on behalf of all unit owners for common element and
    construction deficiencies, and that the unit owners could opt out of the action
    if they wished to pursue their own action for damages to their units.  The
    appellant did not opt out.

[7]

During the course of examinations for discovery in the Individual
    Action, the respondent took the position that certain of the appellants complaints
    were in relation to the common elements and that the appellant did not have
    standing to pursue those claims because of s. 23(1) of the Act.  The respondent
    brought motions to strike the appellants claim on this basis and to stay the
    action on the basis that it duplicated the Condominium Action.  The respondent
    was unsuccessful at first instance, but on appeal the Divisional Court granted
    the relief sought, dismissed the Individual Action as it related to the common
    elements, and stayed the remainder as it related to the appellants individual
    units.

[8]

Since the appeal was launched, the Condominium Action has been settled.
    As a result, the issue regarding the stay is moot.  Counsel agree that the only
    question for determination here is whether the appellant has standing to sue in
    relation to the common elements.

[9]

In the particular circumstances of this case, I would allow the appeal
    and reinstate the Individual Action.

Analysis

The
    Applicable Standard of Review and Principles of Statutory Interpretation

[10]

Whether
    s. 23(1) gives the condominium corporation exclusive standing to commence an
    action in relation to the common elements is a question of law.  Counsel agree
    that the standard of review is correctness.

[11]

Nor is there any disagreement as to the applicable
    principles of statutory interpretation.  In Canada today, the words of a
    statute are to be read in their entire context, and in their grammatical and
    ordinary sense harmonious with the scheme of the Act, the object of the Act,
    and the intention of the legislature:
Rizzo & Rizzo Shoes Ltd. (Re)
,
    [1998] 1 S.C.R. 27, at para. 21;
Bell ExpressVu Limited Partnership v. Rex
,
    2002 SCC 42, [2002] 2 S.C.R. 559, at para. 26.

Section 23(1
)

[12]

Section
    23(1) of the Act empowers the condominium corporation to bring an action on its
    own behalf and on behalf of the unit owners in certain circumstances, including
    in relation to the common elements.  Section 23(1) states:

Subject to subsection (2)
[1]
,
    in addition to any other remedies that a corporation may have, a corporation
    may, on its own behalf and on behalf of an owner,

(a) commence, maintain or settle an
    action for damages and costs in respect of any damage to common elements, the
    assets of the corporation or individual units; and

(b) commence, maintain or settle an
    action with respect to a contract involving the common elements or a unit, even
    though the corporation was not a party to the contract in respect of which the
    action is brought.

The Issue

[13]

The
    central issue on the appeal revolves around the use of the word may in
    subsection (1).  Is may mandatory, in the sense that it grants a condominium
    corporation the exclusive authority to pursue an action in relation to the
    common elements of that condominium?  Or is it simply permissive, in the sense
    that it grants the corporation standing to bring such an action  a right that
    it would not otherwise have on behalf of individual unit owners at common law
    without taking away the right of a unit owner to bring such a proceeding in
    appropriate circumstances?

Discussion

[14]

As
    the issue arises on this appeal, I am satisfied that s. 23(1) does not preclude
    the appellant from advancing its claim under the agreement of purchase and sale
    in relation to the common elements.

History and Purpose of s. 23(1)

[15]

Section
    23(1)(a) of the Act gives a condominium corporation a broad power to sue on its
    own behalf and on behalf of the unit owners, not just with respect to common
    elements, but also with respect to the assets of the corporation and individual
    units.  This power is broadened even further by s. 23(1)(b) which extends the
    right to sue even to contractual situations where the condominium corporation
    is not a party to the contract in question.

[16]

In
Condominium Law and Administration
, 2d ed., looseleaf (Toronto: Thomson
    Reuters, 1998) Vol. 2, at para. 22-1(c)(i), Audrey Loeb suggests that s. 23(1)
    and its predecessor, s. 14 of the
Condominium Act
, R.S.O. 1990, c.
    C.26, were enacted to overcome problems arising under the Act prior to 1978
    where unit owners attempts to bring representative actions against developers
    for construction deficiencies in units and/or the common elements had
    floundered.  This was because of a line of jurisprudence holding that unit
    owners could not bring a class action in respect of damage to common elements:
    see, for example,
Loader v. Rose Park Wellesley Investments Ltd.
(1980), 29 O.R. (2d) 381 (H.C.J.).

[17]

The
    rationale underpinning that jurisprudence  in the era preceding the
    introduction of class action legislation in Ontario  was that a representative
    action could not be brought under former Rule 75 because s. 9(18) of the
Condominium
    Act
as it then existed already contained a statutory mechanism for a class
    action-like proceeding to be brought by the corporation.  The problem was that
    s. 9(18) was somewhat limited, providing as it did for an action with respect
    to the common elements only.  Because the ownership of condominium units
    changes frequently, privity of contract problems frequently arose; and because
    the nature of construction and other condominium problems are not always
    confined solely to the common elements  as this case illustrates  this remedy
    could not always satisfy the full needs of unit owners.

[18]

Consistent
    with this intention, courts have given the condominium corporations power to
    sue under s. 23(1) and its predecessor, ss. 14(1) and (2), a generous scope.
    In
York Condominium Corp. No. 420 v. Deerhaven Properties Ltd.
(1983),
    40 O.R. (2d) 106 (H.C.J.), at p. 109, Griffiths J. said:

In my view, s. 14(2) as remedial consumer legislation should
    not be rigidly or narrowly construed to the extent it confers on the
    condominium a right to sue.  On that principle, I conclude it is reasonable to
    interpret the section as conferring on the corporation an unlimited right to sue
    with respect to common elements, and further extending that right by providing
    that an action in contract may be maintained by the corporation even though it
    was not a party to the contract.

As I view s. 14 generally it seems to me that the obvious intention
    of the Legislature was not to restrict the broad power to sue previously held
    under s. 9(18) but rather to extend those powers by providing under s. 14(1) a
    right to sue and recover damages and costs in respect to not only the common
    elements but with respect to the assets and individual units of the corporation
    as well.  By s. 14(2) as I have found the Legislature intended to confer a
    right to sue on contracts to which the corporation was not a party.

[19]

It
    does not follow, however, that simply because the legislature intended to
    afford the condominium corporation a far-reaching right to sue on its own
    behalf and on behalf of the unit owners in order to enhance the effectiveness
    of remedies that might be asserted on the owners behalf, it intended at the
    same time to deprive those unit owners of rights of action they already had.
    The condominium corporations action has a different premise.  An important
    underlying tenet of s. 23(1) is its objective of protecting the interests of
    the condominium community as a whole, not the interests of individual unit
    owners in their capacity as individual unit owners.  Rosenberg J.A. intimated
    as much in
Wellington Condominium Corp. No. 61 v. Marilyn Drive Holdings
    Ltd.
(1998), 37 O.R. (3d) 1 (C.A.), at p. 19, where he said:

The primary responsibility of the corporation is to manage the
    assets.  It also has a duty to control and administer the common elements and
    the assets and has the power to own and acquire real property for the use and
    enjoyment of the property (s. 13(1)).  Most importantly, s. 14(2) of the Act
    provides that the corporation may sue on its own behalf with respect to the
    common elements even if the corporation was not a party to the contract in
    respect of which the action is brought.
These provisions manifest a
    legislative intention that the corporation be entitled to recover damages where
    the real injury is to the owners as a group rather than to any individual.
[Emphasis added.]

[20]

With
    the foregoing principles and considerations in mind, I turn to the
    interpretation of s. 23.

Section 23 Does Not Deprive The
    Appellant Of Its Right To Sue In Respect Of The Common Elements

[21]

What
    s. 23 is designed to do, in my opinion, is to empower a condominium corporation
    to bring an action where there is a common condominium issue to be addressed
     where, as Rosenberg J.A. put it in
Wellington,
the real injury is
    to the owners
as a group rather than to any individual
 (emphasis
    added).  Such a remedy, broad as it is, is not inconsistent with the right of
    an individual unit owner to pursue contractual or other claims that are unique
    to the owners unit, including those touching on common elements that
    immediately pertain to the unit and that do not concern the owners as a group.
    Indeed, such a right complements the class action-like remedy provided by s.
    23(1).

[22]

Respectfully,
    the Divisional Court made three errors when it concluded that s. 23(1) granted
    exclusive standing to a condominium corporation to sue in relation to the
    common elements.  First, although it acknowledged the appellant was seeking to
    have the exterior doors and windows in its units repaired and finished in
    accordance with what it says the agreement was with respect to the construction
    of those doors and windows, the Divisional Court treated the appellants claim
    primarily as a claim for damages in relation to those unfulfilled promises.
    Secondly, it placed too much emphasis on the nature of the proprietary regime governing
    common element ownership under the
Act
,
    and on the package of responsibilities imposed on condominium corporations to
    deal with the common elements set out therein.  Thirdly, it failed to recognize
    the illogical conclusion to which its reasoning leads: an individual unit owner
    would be deprived of the right to sue even with respect to the owners
    individual unit, a long-recognized right of the owner: see Loeb, at para.
    22-1(c)(i).

[23]

As
    mentioned above, it is true that the courts have given the condominium
    corporations powers to sue under s. 23 a liberal interpretation in recognition
    of the need for an effective remedy on behalf of the owners as a group and in
    recognition of the important managerial responsibilities imposed upon the
    corporation in relation to the common elements.  And, as the respondent
    submits, this approach is supported by the common-element ownership and
    common-element responsibility regime as framed in the Act.  While an owner is
    entitled to exclusive ownership of his or her unit, the owner holds an interest
    as a tenant-in-common in the common elements along with all the other unit
    owners (s. 11(1) and (2)).  The jointly-owned units may not be partitioned or
    divided (s. 11(5)), and a unit owner may only modify common elements without
    the permission of the board in limited circumstances (s. 98).  At the same time,
    primary responsibility for the common elements rests with the condominium
    corporation: the corporation is obliged to maintain the common elements (s.
    90(1)), to repair them (s. 89) and to insure them (s. 99); and it is entitled
    to make additions, alterations or improvements to the common elements in many
    cases without notice to the unit owners (s. 97).

[24]

The
    upshot of all of this is  so the respondent submits  that the unit owner has
    no right to repair the doors and windows, or the HVAC system adjacent to the
    owners unit, and therefore the only reasonable interpretation of s. 23(1)
    is that it affords a condominium corporation exclusive standing to bring an
    action regarding the common elements.  I disagree.

[25]

The
    appellant is not asserting a proprietary claim in relation to the common
    elements.  Nor is its claim essentially a claim for damages.   The appellant is
    asserting a contractual claim to compel specific performance of obligations
    pertaining uniquely to its own units and to common elements immediately
    pertaining to those units.

[26]

This
    is not immediately clear from a reading of the pleadings themselves, but, as
    counsel explained to us during argument, the big ticket items of the
    appellants claim in relation to the common elements concern the following
    issues:

(a)

the location of walls and doors
    in the design layout for the appellants suites (some of the contested
    locations concern walls and doors that form part of the common elements);

(b)

the location of exterior windows
    (all exterior windows in the building are of the same type, but the design plan
    called for windows in the appellants units to be located in different places
    than was the case for other units, e.g., one office was to have had a window
    providing access to a balcony, but there was no window or balcony  both common
    elements);

(c)

the suitability of the HVAC system
    providing air to the appellants units (because of the particular configuration
    of the appellants windows, there are contested problems concerning the
    systems capacity to work in tandem with windows that seal in air).

[27]

These
    are not claims for damage to common elements, as contemplated by s. 23(1) of
    the Act.  Indeed, there has been no damage to common elements.  They are
    claims to rectify the failure to construct common elements immediately
    pertaining to the appellants units as the developer allegedly agreed to do in
    the first place.  In this respect, the proprietary characteristics of common
    element ownership and the overall responsibilities of the condominium
    corporation towards the common elements, as formulated under the Act, are of
    limited relevance and the emphasis of the respondent and the Divisional Court
    on them is misplaced.

[28]

In
    my opinion, the word may, as employed in s. 23(1), is permissive; it is not
    mandatory.  By that I mean that it empowers the condominium corporation to sue
    on its own behalf and on behalf of all unit owners in relation, amongst other
    things, to common element deficiencies, but it does not require that
any
action touching the common elements
must
be brought by the condominium
    corporation.  Put another way, s. 23(1)
does not take away a right or deny
    standing
to individual unit owners; it
grants
a right that the
    condominium corporation would not otherwise have, namely the
standing (but
    not the exclusive standing)
to sue on behalf of the unit owners in
    relation to the common elements.

[29]

This
    interpretation is consistent with the
Rizzo Shoes
principle of
    statutory interpretation.  It corresponds with the grammatical and ordinary
    meaning of the language used: may is generally permissive; shall is
    mandatory.  It is an interpretation that is harmonious with the intent of the
    legislature and the scheme and object of the Act.  As I have explained, s. 23
    provides an effective mechanism whereby the condominium corporation and the
    unit owners may pursue a resolution of common problems affecting the
    condominium complex in an effective manner, without a multiplicity of proceedings,
    while at the same time permitting individual owners to pursue claims respecting
    the common elements immediately pertaining to their units in appropriate
    circumstances  both of which objects complement the consumer protection nature
    of the Act.

[30]

A
    statute should not be interpreted as taking away a right of action unless it is
    explicit in doing so.  The interpretation I favour is also consistent with this
    principle.  It is well-established that in cases of ambiguity, where a statute
    is capable of more than one reasonable interpretation but one of those
    interpretations would serve to restrict a citizens right of action, the court
    should give effect to the interpretation that least restricts that right: see
Berardinelli
    v. Ontario Housing Corporation,
[1979] 1 S.C.R. 275, at p. 280;
Ukrainian
    (Fort William) Credit Union Ltd (In Liquidation) v. Nesbitt, Burns. Ltd
. (1998),
    36 O.R. (3d) 311 (C.A.), at p. 320, leave to appeal to S.C.C granted, [1997]
    S.C.C.A. No. 672, declared moot January 18, 1999;
Telecommunication
    Employees Association of Manitoba Inc. v. Manitoba Telecom Services Inc.
,
    2007 MBCA 85, 214 Man. R. (2d) 284, at para. 97; and
Campbell Estate v.
    Fang (
1994), 155 A.R. 270 (C.A.), at para.10.

[31]

Section
    23(1) does not explicitly deprive a unit owner of the right to sue in respect
    of the common elements affecting the owners unit.

[32]

The
    respondent contends that the strict construction approach is no longer
    appropriate, given the decision of the Supreme Court of Canada in
Canada
    3000 Inc. (Re)
, 2006 SCC 24, [2006] 1 S.C.R. 865.  I disagree.
Canada
    3000
does not change the principle that, where there is ambiguity as to
    the meaning of a provision, courts may resort to presumptions such as strict
    construction.  As Binnie J. clarified, at para. 84, it is only where there is
    an ambiguity that such additional techniques of statutory construction apply.

[33]

Here,
    ambiguity abounds in s. 23(1).  It is not clear whether the legislature
    intended the word may to grant a condominium corporation the exclusive right
    to sue with respect to the matters delineated in s. 23(1), or whether it merely
    granted the condominium corporation the standing to do so without limiting the
    right of the unit owner to sue in respect of those matters as well.  The
    well-argued positions of both counsel here attest to that tension and, as we
    shall see, courts have expressed differing opinions as well.  It is therefore
    appropriate in these circumstances to apply the strict construction approach
    to the interpretation of a provision that affects the individual unit owners
    right of action.

[34]

It
    makes sense for a condominium corporation to be empowered to bring an action
    where there is a common condominium issue to be addressed, rather than leaving
    it to individual unit owners, alone or collectively, to pursue their remedies
    as owners of an undivided interest in the common elements  with the
    potentially unwieldy consequences of such an option.  The power minimizes the
    risk of a multiplicity of proceedings and furnishes a mechanism whereby the condominium
    corporation and the unit owners can effectively pursue claims relating to the
    common elements through one vehicle.  The third party contract provision in s.
    23(1)(b) makes it clear that such an action cannot be defeated on privity of
    contract grounds by an argument that the action concerning the common problem
    may have aspects to it that relate to individual units or that arise out of a
    contract in respect of the common elements or a unit to which the condominium
    corporation was not a party.

[35]

For
    the reasons I have articulated, however, it does not follow that, if what is at
    issue is a contractually unique problem or other unit-specific wrong raising a
    discrete issue relating to common elements immediately pertaining to the unit,
    the unit owner is precluded from pursuing such a claim by reason of s. 23(1).

[36]

This
    interpretation is reinforced by a consideration of the logical consequences of
    the respondents argument.  If a condominium corporation has the exclusive
    right under s. 23 to pursue all claims for damages and costs in relation to the
    common elements (s. 23(1)(a)), and to pursue all contractual claims respecting
    the common elements, whether a party to the contract or not (s. 23(1)(b)), it
    must also by the same provisions have the exclusive right to do the same thing
    with respect to individual units, to the exclusion of the unit owners no matter
    what the claim.  This is because the condominium corporations standing to sue
    under s. 23 is not limited to the common elements; it extends to actions concerning
    the assets of the corporation, the individual units, and third party contracts
    involving  a unit (s. 23(1)(b)).

[37]

Put
    in the context of this case, the appellant would not have standing even to sue
    the respondent developer for the damages it says it has sustained with respect
    to the interior of its exclusively owned individual units because only the
    condominium corporation may pursue an action for damages  in respect of
    individual units (s. 23(1)(a)).  In addition, the appellants action would be
    blocked because only the condominium corporation could commence, maintain or
    settle an action with respect to a contract involving  [the appellants]
    unit, even though the corporation was not a party [to the contract] (s. 23(1)
    (b)).

[38]

Such
    a result would be absurd.

[39]

For
    that reason, the jurisprudence has correctly characterized the condominium
    corporations power under s. 23 as one that is triggered by a problem common to
    the condominium as a whole and to the owners as a group, rather than by a
    problem that is primarily related to a particular unit.  The appellants
    concerns are primarily related to its particular units.

[40]

In
    this respect as well, I think it is noteworthy that the power of the
    condominium corporation to commence, maintain or settle an action is not a
    power to do so only on behalf of an owner (or owners); it is a power to take
    steps on its own behalf and on behalf of an owner.  This bolsters my view
    that, whatever the action is, it must be an action with broader implications
    for the condominium community as a whole.

[41]

The
    respondent argues that to interpret s. 23(1) to permit individual unit owners
    to pursue their own claims respecting the common elements will lead to a
    multiplicity of proceedings and create the prospect of double recovery on the
    part of the unit owner.  I am not persuaded these possibilities pose a
    sufficiently serious problem to justify barring a unit owner from a right of
    action.

[42]

One
    of the purposes of the s. 23(1) proceeding is to minimize a multiplicity of
    proceedings and, for practical purposes, it will do so where the nature of the
    common element claim involves a problem that affects the condominium community as
    a whole. Nor is there likely to be an explosion of proceedings where a unit
    owner is seeking  as here  to pursue a remedy that is contractually unique to
    the unit or that deals with some other unit-specific wrong raising a discrete
    issue relating to common elements immediately pertaining to the unit.

[43]

The
    respondent contends that, if the appellant is permitted to pursue its claim
    with respect to the common elements and recovers damages, it will have
    recovered those damages twice, since the Condominium Action has settled and the
    damages recovered are deemed by s. 23(4) to be assets of the corporation  a
    corporation of which the appellant is a member.  Section 23(4) states:

A judgment for payment in favour of the corporation in an
    action that the corporation commences or maintains on its own behalf is an
    asset of the corporation.

[44]

I
    disagree.  First, it is too broad to say that assets recovered by the
    condominium corporation for damages to the common elements are deemed to be
    assets of the corporation.  Section 23(4) only deems a judgment for payment in
    favour of the corporation to be an asset of the corporation to the extent that
    the action is
on its own behalf
.  It does not say that is the case
    where the action is brought
on behalf of an owner
.  Thus, there may
    well be a difference between corporate damages recovered in relation to the
    common elements and individual damages.  It follows that the deemed corporate
    asset contemplated in s. 23(4) may not be the duplicate of any damages
    recovered by the individual unit owner regarding the common elements.
    Secondly, to the extent there is a risk of such double recovery for the same
    damages in the case of competing proceedings, the remedy of a stay of
    proceedings is available to guard against such an eventuality.

[45]

Finally,
    in support of its position that the condominium corporation has the exclusive
    right to pursue any action in relation to the common elements, the respondent
    argues that a unit owner precluded from bringing an action with respect to the
    common elements is not without a remedy.  It points to the availability of both
    an action against the condominium corporation for failure to maintain the
    common elements, and the oppression remedy.  Neither of these options provides
    a suitable alternative, in my view.

[46]

In
    the circumstances here, there has been no failure to maintain the common
    elements; the complaint is that the relevant common element features were not
    constructed as agreed in the first place.  Nor is an oppression remedy claim an
    alternative to the type of wrong being asserted in this type of case.  An
    oppression remedy calls for certain, often onerous, criteria to be met  quite
    different from the threshold a claimant must meet when asserting a contractual
    or other unit-specific wrong based claim.

[47]

I
    would not give effect to these arguments raised on behalf of the respondent.

Existing
    Jurisprudence

[48]

There
    is no authority in Ontario bearing directly on this issue.  Counsel referred us
    to three cases, however:
Hamilton v. Ball
, 2006 BCCA 243;
Kelly v.
    Reardon
(2004), 234 Nfld. & P.E.I.R. 358 (N.L. Prov. Ct. (Sm. Cl.
    Div.)); and
Loader v. Rose Park Wellesley Investments Ltd
.  None is
    binding or directly on point.

[49]

Kelly
    v. Reardon
is readily distinguishable.  Unlike Ontarios Act, Newfoundland
    and Labradors comparable legislation at the time contained mandatory language,
    stating in s. 12(6) that:

An action with respect to, arising from, or relating to a
    common element shall be brought by or against the corporation in its own name

[50]

Loader
is referred to earlier in these reasons.  It is also distinguishable.  The
    issue before the court was different than the issue concerning us here.
Loader
determined that individual purchasers of condominium units could not bring a
    representative action for construction deficiencies against the builders of a
    condominium complex under former Rule 75 because the
Condominium Act
in force at the time already contained a statutory mechanism for a class
    action-like proceeding to be brought.  Section 9(18) of that Act provided that
    [a]ny action with respect to the common elements may be brought by the
    corporation and a judgment for the payment of money in favour of the
    corporation in such an action is an asset of the corporation.

[51]

Loader
did not deal with, and did not decide, that an individual unit owner could not
    bring an independent action regarding common elements.  It was decided under an
    earlier incarnation of Ontarios condominium legislation and at a time when
    there was no class action legislation in place in Ontario.  It was a decision
    particular to its time and to the procedural landscape that existed at that
    time.

[52]

Hamilton
    v. Ball
is more helpful.  It arose in the context of condominium
    legislation similar to Ontarios.  In British Columbia the condominium
    corporation is known as a strata corporation.  Section 171(1) of the
Strata
    Property Act,
S.B.C. 1998, c. 43, Part II contains the type of permissive
    language found in the Ontario Act:

The strata corporation may sue as representative of all owners,
    except any who are being sued, about any matter affecting the strata
    corporation, including any of the following matters:

(b) the common property or common assets; ...

[53]

The
    British Columbia Court of Appeal held that the words may sue did not give a strata
    corporation exclusive authority to pursue claims involving common elements.  In
    this regard, Newbury J.A. said, at para. 27:

As for the notion that individual owners should not be
    permitted to circumvent s. 171 and sue directly for injury or damage to their
    interest in common property, I see nothing in the Act taking away that right,
    which I view not as statutorily created, but as a common law incident of the
    ownership of property, albeit a type of property unknown to the common law.
    Section 171 creates a mechanism by which a three-fourths majority of owners may
    use the strata corporation as their vehicle for suing and spread the expenses
    thereof.  But in the words of Seaton J.A. in
Strata Plan No. VR 368 v.
    Marathon Realty Co
.
(1982) 41 B.C.L.R. 155 at para. 14, that is as
    far as the legislation goes.  It would take much clearer language, in my
    respectful view, to remove the right of individual owners to enforce their
    rights on their own hook.

[54]

These
    comments can be applied comfortably to the language of s. 23(1) of the Ontario
    legislation, in my opinion.  I would simply add that here the appellants claim
    is asserted not so much as a common law incident of the ownership of
    property, but as an exercise of its contractual rights
vis-à-vis
the
    respondent.

Disposition

[55]

Section
    23(1) of the
Condominium Act
grants a condominium corporation standing
    (but not exclusive standing) to commence, maintain or settle the types of
    action referred to therein. Properly interpreted, it does not preclude an
    individual condominium unit owner from pursuing a claim relating to common
    elements where what is at issue is a contractually uni
que
    problem or other unit-specific wrong raising a discrete issue relating to
    common elements immediately pertaining to the owners unit.

[56]

I
    would, accordingly, allow the appeal, set aside the order of the Divisional
    Court and reinstate the appellants action in Court File No. 05-CV-300372PD3 as
    it relates to the common elements.

[57]

The
    appellant is entitled to its costs before the Divisional Court, fixed in the
    amount of $13,000.00 including HST, and to its costs of the motion before
    Stewart J., fixed in the amount of $4,500.00 including HST.  By agreement, the
    costs of this appeal are fixed in the amount of $15,000.00 inclusive of all
    applicable taxes, payable by the respondent to the appellant.

R.A. Blair J.A.

I agree E.A. Cronk
    J.A.

I agree G.R. Strathy
    J. (ad hoc)

Released: April 20, 2012

[1]
Subsection (2) is not relevant to these proceedings.


COURT OF APPEAL FOR ONTARIO

CITATION:
Bank
    of Mongolia v. Taskin, 2012 ONCA 220

DATE:  20120404

DOCKET: C54612

Doherty, LaForme JJ.A. and Turnbull J. (
ad hoc
)

BETWEEN

Bank of Mongolia

Applicant (Respondent in Appeal)

and

Senol Taskin

Respondent (Appellant)

Anser Farooq and Hashim Syed, for the respondent
    (appellant)

George Karayannides and Alejandro Manevich, for the
    applicant (respondent)

Heard: April 2, 2012

On appeal from the order of Justice Hoy of the Superior
    Court of Justice, dated October 14, 2011.

APPEAL BOOK ENDORSEMENT

[1]

The appellant chose not to defend the proceedings in Florida.  The
    respondent obtained judgment in Florida and then sought an order enforcing the
    judgement in Ontario.  The application judge granted the order.

[2]

The application judge asked herself the proper question  was there a
    real and substantial connection between Florida, the claim and the appellant?
    The application judge reviewed the pleadings (paras. 13-19).  She was entitled
    to accept the factual allegations in those pleadings as true given the decision
    not to defend.  On the pleadings, there was ample basis for a finding of real
    and substantial connection.

[3]

We see no basis to interfere with the application judges finding that
    the appellant did not make out either the fraud or the denial of natural
    justice defence.

[4]

The application judge was correct in holding that despite the
    outstanding motion in Florida, the judgment was final for the purposes of the
    enforcement of the judgment in Ontario.  We also note that the Florida motion
    was dismissed subsequent to the application judges reasons.  She had stayed
    her ordered pending that determination.

[5]

The appeal is dismissed.  Costs to the respondent in the amount of
    $22,000 all in.


COURT OF APPEAL FOR ONTARIO

CITATION:
Besharah v. Saikaley, 2012
    ONCA 214

DATE: 20120403

DOCKET: C53405

Sharpe, Armstrong and Rouleau JJ.A.

BETWEEN

Joseph Besharah

Plaintiff (Appellant)

and

Philip Saikaley, Najat Saikaley and Robert
    Saikaley

Defendants (Respondents)

Peter K. Doody and Jack Hughes, for the plaintiff
    (appellant)

Craig M. Bater, for the defendants (respondents)

Heard: March 26, 2012

On appeal from the judgment of Justice Martin S. James of
    the Superior Court of Justice, dated February 7, 2011, with reasons reported at
    2011 ONSC 616.

ENDORSEMENT

[1]

This appeal involves a dispute over the profits made by the respondent
    Philip Saikaley from the purchase and resale of a recreational property.
    Saikaley saw that an island near his own cottage was for sale. He negotiated an
    agreement to purchase the island for $120,000, conditional on obtaining
    financing. When the appellant Besharah visited Saikaleys cottage, Saikaley
    pointed out the island and indicated that it was for sale. Besharah decided
    that he wanted to buy the island and to offer $200,000. Saikaley agreed to
    present that offer to the vendor. There was a conflict in the evidence as to
    the discussions between the parties, but it is clear that Saikaley did not
    disclose that he had negotiated a conditional agreement to purchase the
    property. Saikaley waived the financing condition on his agreement to purchase
    the island and told Besharah that his offer had been accepted. However, the
    trial judge found that shortly thereafter, Besharah changed his mind and told
    Saikaley that he wanted to end the transaction. Saikaley subsequently re-sold
    the island without any involvement from Besharah for $235,000 and a profit of
    $115,000 less expenses.

[2]

Besharahs claim as pleaded and as presented at trial was for a 50%
    share of these profits. Besharah claimed that he had agreed with Saikaley to
    jointly purchase and market the island after Besharah decided not to purchase
    it on his own. Saikaley testified that there was no such agreement. The trial
    judge accepted Saikaleys evidence, rejected that of Besharah and found that
    there was no agreement. While Besharahs trial counsel made reference to a
    claim for breach of trust in his closing submissions, no claim for breach of
    fiduciary duty was pleaded or advanced at trial.

[3]

On appeal, Besharah does not challenge the finding that there was no
    agreement to share the profits but alleges breach of fiduciary duty and asserts
    a claim that Saikaley be required to disgorge 100% of the profits.

[4]

We are of the view that the appeal must be dismissed for the following
    reasons.

[5]

First, breach of fiduciary duty was not pleaded. Accordingly, the trial
    judge was not asked to make the crucial findings of fact necessary to sustain
    that claim. In our view, it is simply too late for Besharah to alter the theory
    and nature of his claim at this stage. In particular, we note that there was
    conflicting evidence from Besharah and Saikaley as to what was said and
    discussed before Besharah instructed Saikaley to offer to purchase the island.
    The trial judge recited their differing versions of the events at paras. 10-13
    of his reasons. He held, quite understandably, that it was not necessary for
    him to resolve those differences as the claim turned on whether or not the
    parties had made a subsequent agreement to jointly develop the property and
    share the proceeds.

[6]

On this record, it is not open to us on appeal to effectively retry the
    case and make the findings Besharah asks us to make in support of his
    late-blooming claim for breach of fiduciary duty.

[7]

Second, we do not accept the submission that the conclusion that
    Saikaley was Besharahs agent or owed Besharah fiduciary duties necessarily
    flows from the trial judges findings and from Saikaleys own evidence.
    Saikaley was not a real estate agent. The trial judge did not find that he
    undertook anything more than to convey Besharahs offer to the vendor. There
    was no finding that Saikaley told Besharah what to offer. Nor did the trial
    judge find that Saikaley had the power to negotiate with the vendor on Besharahs
    behalf. The finding that Saikaley was authorized to convey the offer to the
    vendor, on its own, does not give rise to a full agency relationship.

[8]

We certainly do not condone Saikaleys deceptive conduct which could
    well have given rise to a claim by Besharah had he closed the transaction.
    However, we are not persuaded on the record we have that Saikaleys conduct
    placed him in a fiduciary relationship or gave rise to fiduciary duties in
    relation to the purchase of the island.

[9]

Finally, we note that Saikaley had acquired his interest in the island
before
he had any dealings on it with Besharah and that he resold the island at a
    profit
after
Besharah had repudiated his agreement to purchase the
    island. On those facts, it is difficult to see how Besharahs repudiated
    agreement to purchase the island had a sufficient nexus or connection the
    profits made by Saikaley to support a claim in equity for 100% of those
    profits.

[10]

Accordingly, the appeal is dismissed with cost to the
    respondent fixed at $19,076.77 inclusive of disbursements and HST.

Robert J. Sharpe J.A.

R.P. Armstrong J.A.

Paul Rouleau J.A.


COURT OF APPEAL FOR ONTARIO

CITATION:

Carleton Condominium Corporation No. 396 v. Burdet, 2012 ONCA 234

DATE: 20120413

DOCKET: C54549

Cronk and Epstein JJ.A. and Strathy J. (
ad
    hoc
)

BETWEEN

Carleton Condominium Corporation No. 396

Plaintiff (Respondent in Appeal)

and

Claude-Alain Burdet, Claude Alain Burdet,
    in trust,

1457563 Ontario Corporation, 1457563
    Ontario Corporation in trust,

Janet Sue Burdet, Nelson Street Law
    Offices,

LAcademie Christiane Sauve Inc. and
    International Beauty Depot

Defendants (Appellants)

Jonathan H. Fine and Claude-Alain Burdet, for the
    appellants

Janice B. Payne and Nancy Houle, for the respondent

Heard: March 22, 2012

On appeal from the order of Justice Paul Kane of the
    Superior Court of Justice, dated September 30, 2011.

ENDORSEMENT

[1]

The appellants, (the Burdet Group), appeal an aspect of the order of
    Kane J. dated September 30, 2011, granting partial summary judgment to the
    respondent, Carleton Condominium Corporation No. 396 (CCC 396).  The judgment
    amount of $109,440.16, represents arrears of common expense charges (condo
    fees) that the motion judge held the Burdet Group owed in respect of the 21
    units it holds in the 33-unit condominium complex.

[2]

This appeal is one of many court proceedings arising out of a long, bitter
    dispute between the Burdet Group and CCC 396 about voting rights and various
    financial matters. This dispute resulted in this court granting the Burdet Group
    majority voting control of the condominium corporation in 2000.  In 2002, the
    Superior Court issued an order putting the condominium corporation under the
    operating control of an independent administrator, the Condominium Management
    Group Inc. (CMG).  Among other things, the 2002 order stipulates that the
    Burdet Group is to pay its condo fees to CMG.

[3]

In 2005, CCC 396 registered condominium liens against several of the
    Burdet Groups units in order to secure unpaid condo fees. CCC 396 issued
    notices of sale for the units in February 2009 alleging indebtedness in the
    amount of $96,354.34. In response to the notices of sale, the Burdet Group paid
    $104,185.16 to CCC 396s lawyers to be held in trust pending the resolution of
    issues raised in an outstanding motion.  As of April 1, 2009, the Burdet Group
    stopped paying condo fees.

[4]

In June 2009, CCC 396 commenced this action for, among other forms of
    relief, immediate possession of the Burdet Groups units and judgment for condo
    fee arrears. The Burdet Group defended the claim and counterclaimed for various
    forms of relief based in part on allegations that CCC 396 was in breach of several
    provisions of the
Condominium Act, 1998
, S.O. 1998, c. 19.  CCC 396
    brought a motion for summary judgment, claiming judgment for condo fee arrears
    and payment out of the trust funds held by its lawyers.

[5]

Concluding that a trial was needed to determine most of the issues
    between the parties, the motion judge denied the majority of the relief sought and
    ordered that the matter proceed to a trial of an issue under rule 20.04(3).  However,
    since the evidence was clear that the Burdet Group had not paid condo fees since
    April 2009, the motion judge granted partial summary judgment of $109,440.52
    the then current amount of unpaid condo fee arrears  and ordered CCC 396s
    solicitors to distribute the money in the trust account toward payment of the
    arrears.  He also ordered the Burdet Group to pay its condo fees going forward.

[6]

In this appeal, the Burdet Group submits that the motion judge erred in
    concluding that the claim for condo fee arrears could be resolved by way of partial
    summary judgment. The Burdet Group contends that all the issues raised should
    be considered at once, including issues involving its claims for various
    set-offs, and that the obligation to pay condo fees as of April 2009 should not
    have been separated from the larger issues. According to the Burdet Group, the
    real issue is whether any amount in fact is owing to CCC 396 and, if so, the
    quantum of that amount.  The Burdet Group raises other issues, including the
    applicability of the provisions of the
Condominium Act
,
equitable
    estoppel, and set-off.

[7]

We conclude that the appeal should be dismissed.

[8]

In our view, the motion judge correctly concluded that there was no
    genuine issue requiring a trial in relation to the condo fee arrears from April
    1 2009 through August 2011.  The
Condominium Act
applies to this issue
    between the parties.  The 2002 order did nothing to change that.  In fact, all
    parties rely on the Act in their pleadings.  Significantly, the Burdet Group
    itself invokes the Act in its statement of defence and counterclaim.

[9]

Counsel for the Burdet Group candidly acknowledges that there is no
    statutory or jurisprudential authority for the proposition that the operation
    of the Act has somehow been suspended in relation to CCC 396, even taking into
    consideration the unique circumstances of CCC 396. He also candidly admits that
    if the Act applies, as in our view it does, then s. 84(3)(b) is a complete
    answer to this appeal. That provision states, in effect, that regardless of any
    other claims between the parties, condo fees must be paid.

[10]

The
    Burdet Group has acknowledged that the condo fees for the period April 2009 to August
    2011 have not been paid.  There was no evidence to contradict CCC 396s
    evidence establishing the amount of the monthly condo fees that the motion
    judge used in calculating the amount of the judgment.  Applying the clear
    provisions of the Act, the motion judge correctly found that there was no issue
    requiring a trial with respect to the condo fee arrears.

[11]

The
    motion judge was therefore entitled to order judgment in the amount of $109,440.52
    and that the money held in CCC 396s lawyers trust account be released in
    partial satisfaction of this judgment.  The money had been paid into trust on
    account of disputed condo fee arrears, past and future.  Those arrears were in
    issue on the summary judgment motion.  The trust fund, therefore, was properly
    released to be applied to this judgment.

[12]

The
    issues the Burdet Group raises with respect to the ultimate accounting between
    the parties are the subject of the trial of an issue. The terms of this trial
    were established by the motion judge in his order of January 11, 2012. We
    specifically note para. 2 of that order, which provides that the issues to be
    tried include:

a)

The amount of
      liability to the plaintiff for common expenses of each unit owned by the
      defendants, based on a statement of accounts (the Statement of Accounts),
      including:

i.

an
        account for each of the units owned by

the

defendants

at

the

commencement of the appointment of the
        Administrator in 2002;

ii.

the
        subsequent expenses and receipts of the plaintiff;

iii.

the basis of any
        subsequent special assessments and the per unit share thereof;

iv.

the amount of each
        defendants liability for the subsequent expenses and special assessments;

v.

the periodic
        common expenses per unit;

vi.

the defendants
        payments on account.

b)

The calculation of
      each defendants indebtedness to the plaintiff as of the date of registration
      of liens and Notices of Power of Sale by the plaintiff, if possession or sale
      are claimed by the plaintiff;

c)

The validity of the
      registered liens and the notices of sale served on the defendants; and

d)

Is the plaintiff
      entitled to possession of the subject units?

[13]

While
    counsel for the Burdet Group has expressed concerns about the terms of this
    order, it has not been appealed and therefore is not a matter before this
    court.

[14]

Finally,
    we see no merit in the Burdet Groups cost appeal and would therefore dismiss
    it.

[15]

For
    these reasons, the appeal is dismissed.   The parties submissions as to costs
    demonstrate similar expectations as to quantum.  We therefore order the Burdet
    Group to pay to CCC 396 the costs of this appeal, fixed in the amount of
    $30,000, inclusive of disbursements and all applicable taxes.

E.A. Cronk J.A.

G.J. Epstein J.A.

G.R. Strathy J. (
ad
    hoc
)