COURT OF APPEAL FOR ONTARIO

CITATION: 1173928 Ontario Inc. v. 1463096 Ontario Inc., 2018
    ONCA 669

DATE: 20180727

DOCKET: C63357

Lauwers, Benotto and Nordheimer JJ.A.

BETWEEN

1173928 Ontario Inc.

Plaintiff
(Appellant)

and

1463096
    Ontario Inc., the Estate of Luella Ramsden

and Barbara Ramsden

Defendants
(Respondents)

AND BETWEEN

1463096 Ontario Inc.

Plaintiff
(Respondent)

and

Robert
    Van Alphen, Joanne Van Alphen,

1358329 Ontario Inc., 1358329
    Ontario Inc. carrying on business as Nu-Co, 1732076 Ontario Limited and 1173928
    Ontario Inc.

Defendants
(Appellants)

Geoff R. Hall and Anu Koshal, for the appellants

Peter M. Callahan, for the respondents

Heard: May 14, 2018

On appeal from the judgment of Justice Alissa K. Mitchell
    of the Superior Court of Justice, dated January 24, 2017, with reasons reported
    at 2017 ONSC 588, and from the corrigenda, dated March 14, 2017, and from the costs
    reasons, dated May 16, 2017.

Lauwers J.A.:

A.

Introduction

[1]

The underlying fact situation in this appeal is convoluted, but the
    basics can be simply stated. The appellant, Robert Van Alphen, operates a
    business known as Nu-Co Plastics in a building on a property at 34 Storey
    Street in Blenheim owned by the respondent corporation, 1463096 Ontario Inc.
    (146). The property was leased to Mr. Van Alphens company, 1358329 Ontario
    Inc. (135).

[2]

In March 2008, the landlord, 146, defaulted in paying the mortgage held
    by Bayview Financial LP. Seeing the situation either as perilous to the business
    operations of Nu-Co Plastics or as an opportunity (or both), Mr. Van Alphen
    took active steps to acquire the property. Through his various companies, he played
    a cat-and-mouse game over the succeeding years with 146 in an ongoing attempt
    to acquire the property.
[1]

[3]

In the judgment under appeal, Mr. Van Alphen lost. The trial judge decided
    two actions. She dismissed the mortgage action for payment and possession
    brought against the respondents as mortgagors by Mr. Van Alphens company,
    1173928 Ontario Inc. (117), as assignee of the mortgage. She also granted
    judgment in the lease action in favour of 146, as landlord, against Mr. Van
    Alphen, 135, and 1732076 Ontario Limited (173), jointly and severally.

[4]

The appellants appeal the judgment in the mortgage action but not in the
    lease action. For the reasons that follow, I would dismiss the appeal.

B.

The Facts

[5]

The chronology and many of the critical facts were set out by the trial
    judge at para. 9 of her reasons for decision, on which I build. For the most
    part, these are not in dispute. The story is best laid out chronologically.

(1)

Matching defaults

[6]

146, the landlord from which 135 rented the property, defaulted in its
    obligations under Bayview Financials mortgage on March 1, 2008. A short time
    later, on July 1, 2008, Mr. Van Alphen caused 135 to default in payment of its
    increased rental obligations to 146 under the lease. This obviously added to
    the financial woes of 146.

[7]

As mortgagee, Bayview Financial took several steps in response to 146s mortgage
    default. On October 16, 2008, it demanded payment under the mortgage, claiming arrears
    of $67,244.60. On November 6, 2008, it issued a notice of direction of rents
    and demand for particulars of tenancy to 135, as the original named tenant
    under the lease. Then, on November 17, 2008, Bayview Financial issued a notice
    of sale to 146 and to Luella and Barbara Ramsden (the original shareholders,
    officers, and directors of 146), as guarantors. The notice claimed the fully
    accelerated amount of $368,472.41 owed under the mortgage.

(2)

Mr. Van Alphen buys the mortgage

[8]

On January 6, 2009, 117 borrowed $230,000 from Libro Credit Union
    Limited and purchased the mortgage from Bayview Financial for $360,705.12, which
    was the balance then owing under the mortgage. On that same date, 117 received
    an assignment of the mortgage, the guarantees, and related security including
    the attornment of rents and a Loan and Security Agreement.

[9]

Bayview Financial gave 146 notice of the assignment of the mortgage and
    related security. 117 registered the Assignment of Mortgage and Notice of
    Assignment of Leases and Rents on title to the property later in January 2009.

[10]

On
    January 8, 2009, 117 listed the property for sale on MLS at the price of
    $400,000, utilizing the notice of sale issued by Bayview Financial.

[11]

On
    January 12, 2009, 117 purported to terminate the existing lease and enter into
    a new lease on significantly more favourable terms in an effort to reduce the
    rental credit to which 146 was entitled as mortgagor.

[12]

On
    January 16, 2009, 146 responded by starting an application as landlord under s.
    20 of the
Commercial Tenancies Act
, R.S.O. 1990, c. L.7, against Mr. Van
    Alphen and 117 seeking payment of the outstanding rental arrears together with
    injunctive relief restraining 117 from enforcing the mortgage.

[13]

On
    March 4, 2009, 117 started the mortgage action that is the subject of this
    appeal. Within several days, 117 received but did not accept an offer to purchase
    the property for $250,000.

[14]

On
    June 25, 2009, 117 tried to sell the property through a public auction. The
    highest bid at the auction was $210,000, well below the reserve price of $531,000
    ordered by the court.

(3)

Mr. Van Alphens efforts to acquire the property and the progress of the
Commercial Tenancies Act
application

[15]

I
    consider Mr. Van Alphens efforts to acquire the property via mortgage remedies
    together with the progress of the
Commercial Tenancies Act
application
    because the chronology reveals the steps in the cat-and-mouse game I
    mentioned earlier.

[16]

Mr.
    Van Alphen made three separate efforts to acquire the property, all relying on
    the original notice of sale issued by Bayview Financial in November 2008. First,
    on October 1, 2009, acting as mortgagee selling under power of sale, 117 entered
    into an agreement of purchase and sale with itself as purchaser to acquire the property
    for a price of $210,000 plus unpaid municipal taxes of $29,327 (First Sale). 117
    did not give 146 notice of the purported sale of the property. This transaction
    took place in the teeth of the
Commercial Tenancies Act
application
    brought by 146, which was scheduled to be heard on November 2, 2009.

[17]

The
    First Sale foundered on the basis that 117 did not have an interest in the mortgage
    entitling it to sell the property because it had earlier assigned the mortgage
    and related security to Libro Credit Union as security for its loan. The
    assignment was registered against title to the property in favour of Libro
    Credit Union on January 23, 2009. It is now common ground among the parties that
    117s first effort to buy the property was invalid.

[18]

F
or the same reason, 117 had no status to bring the mortgage action
    when it did so on
March 4, 2009
. The form of the trial
    judges order curing this defect is important. She stated, at para. 10:

At the outset of trial, 117 moved for an order granting
    standing to 117,
nunc pro tunc
, to commence the Mortgage Action,
without prejudice to 146 to defend the action on the basis 117
    did not hold title to the Mortgage during the period January 23, 2009 through
    May 27, 2010
. That order was granted and the trial of the Mortgage
    Action proceeded. [Emphasis added.]

[19]

On
    November 2, 2009, a month after the abortive First Sale, Hockin J. heard 146s
Commercial
    Tenancies Act
application. By judgment dated January 18, 2010, with
    reasons reported at 2010 ONSC 394, he granted an interim order relieving 117
    from forfeiture of the lease for the property. The terms of the order provided:

After a calculation of the liquidated amounts payable to this
    date under the lease and the mortgage, the net figure will be paid to 146. I
    mean by the net figure that 117 may subtract from what is owing under the
    lease, the arrears payable by 146 under the mortgage. No set-off will be
    included under the calculation of the rent payable.

In the event that this court[-]mandated attempt to reinstate
    the lease and mortgage fails, 146 may move for final relief and 117 may proceed
    under its mortgage as it may be advised.

[20]

On
    May 27, 2010, Libro Credit Union re-assigned the mortgage back to 117 and took
    a general security agreement from 117 in its place, and 117 regained status to
    act under the mortgage as of that date.

[21]

Justice
    Hockin had crafted the interim order in the
Commercial Tenancies Act
application in an attempt to help the parties return to a peaceful,
    commercially sensible relationship, but it failed. The parties appeared again
    before him on August 16, 2010.  On August 20, 2010, he ordered 117 and Mr. Van
    Alphen to pay the rental arrears owed under the lease for the period from
    January 1, 2007 to August 31, 2010, fixed in the amount of $240,000 as agreed
    by the parties. He ordered costs of the application payable to 146 on a full
    indemnity basis.

[22]

Less
    than a week later, on August 26, 2010, Mr. Van Alphen listed the property for
    sale at a price of $225,000. No offers were received.

[23]

Then,
    on October 6, 2010 (before the listing expired on October 26, 2010), Mr. Van
    Alphen made a second effort to acquire the property. Relying once again on Bayview
    Financials original notice of sale, 117 purported to convey the property to itself
    under power of sale for the purchase price of $210,000 (Second Sale).

[24]

Less
    than a week later, on October 12, 2010, as the putative owner, 117 purported to
    convey the property in fee simple to 173 for the purchase price of $213,750 (Third
    Sale).

[25]

This
    court dismissed the appeal from Hockin J.s order on May 3, 2011 with costs:
1463096
    Ontario Inc. v. Van Alphen
, 2011 ONCA 346. On August 3, 2011, Thomas J.
    directed that all amounts owing under Hockin J.s order, then totaling
    $286,793.80, be paid into court pending the outcome of the mortgage action that
    is the subject of this appeal.

[26]

On
    January 12, 2012, 146 started the lease action against Mr. and Ms. Van Alphen,
    135, 117, and 173, in order to recover all rental arrears including those
    accrued and owing after Hockin J.s order. As noted, the trial judge granted
    judgment to 146 in the lease action.

C.

The Decision under appeal

[27]

The
    trial judge held that the First Sale was invalid because Libro Credit Union
    not 117  owned the mortgage at the date of the purported transaction. As noted
    above, the appellants concede that the First Sale was invalid.

[28]

The
    trial judge found that the Second Sale of the property by 117 to itself was
    invalid. She held, at para. 26, that a mortgagee can legally transfer its
    security to itself, but only where it can establish it acted in good faith and
    took reasonable precautions to obtain a proper price. However, the trial judge
    found that 117 lacked good faith, giving three reasons, which I summarize here and
    describe in more detail below.

[29]

First,
    she cited, at para 28, Mr. Van Alphens long history of self-help and
    self-dealing when it comes to dealing with the Ramsdens and in particular,
    146. Second, the trial judge cited 117s failure to provide an updated
    statement of account to 146 to reflect the reduction of the mortgage balance
    achieved through the attornment of rents, contrary to ss. 22(2) and (3) of the
Mortgages
    Act
, R.S.O. 1990, c. M.40. Third, she found the notice of sale to be
    invalid under s. 31 of the
Mortgages Act
.

[30]

The
    trial judge also found that 117 took few, if any, reasonable precautions to
    obtain a proper price for the property but rather relied on a single bid
    received at auction more than a year prior.

[31]

Accordingly,
    the trial judge stated, at para. 42: 117's attempt to sell the Property to
    itself pursuant to power of sale on October 6, 2010 was ineffective in
    transferring title. Because 117 did not acquire title to the property through
    the Second Sale, it was not the fee simple owner. This invalidated the Third
    Sale.

[32]

The
    trial judge concluded, at para. 43, that [s]ince there were no valid transfers
    of the Property by 117, as mortgagee, 117 remained holder of the Mortgage until
    the mortgage was paid in full from the receipt of rents. Accordingly 146 had
    retained title to the property throughout. She ordered Mr. Van Alphen, 135, and
    173 to pay the rental arrears on the basis of joint and several liability. In a
    subsequent unreported corrigendum, she provided guidance on the calculations
    the parties should undertake to determine the date on which 146 could be said
    to have paid off the mortgage. The trial judge found that enough rent was
    standing to the credit of the mortgage that all amounts owed under the mortgage
    were paid in full by November 1, 2014.

[33]

The
    trial judge found that 117 had no further rights under the mortgage and
    dismissed the mortgage action.

D.

The Issues on Appeal

[34]

The
    appeal raises two issues:

1.    Was the original notice of sale issued by Bayview
    Financial valid?

2.    Did the mortgagee, either Bayview Financial or later 117,
    fail to comply with s. 22 of the
Mortgages Act
, and, if so, what was
    the effect of non-compliance on the Second Sale and Third Sale?

Although the notice of sale preceded the request for a
    mortgage statement, I begin with the second issue, and, in light of the
    decision on it, I decline to make a definitive ruling on the first. I am also obliged
    to comment on the trial judges invocation of s. 41 of the
Conveyancing and
    Law of Property Act
,
R.S.O. 1990, c. C.34, because of its broader
    potential application
.

E.

Analysis

[35]

I
    start with four observations. First, the factual context is most unusual. The
    parties were locked in a terminal struggle. Justice Hockin noted, at para. 3:
    There is a strange twist to the positions of the parties in relation to each
    other in law and in equity. He explained how [s]ince both parties are in
    default, Mr. Van Alphen now finds himself at risk of the forfeiture of his
    lease with 146 and 146 is at risk of the loss of Storey Street to Mr. Van
    Alphen acting under his power of sale under the mortgage. However, Hockin J. pointed
    out, at para. 12, that the inability of 146 to honour its obligation on the
    covenant is principally related to Mr. Van Alphen's failure to pay rent.

[36]

Second,
    it is necessary to bear in mind the purposes served by mortgage law in order to
    set the legal issues in context. The evolution of mortgage law shows growing
    recognition that a mortgage is simply security for a debt: see the Ontario Law
    Reform Commission,
Report on the Law of Mortgages
(Toronto: Ministry
    of the Attorney General, 1987), at pp. 136-149. Equity worked to mitigate the
    harshness of the common law in its treatment of mortgagors; later the
    Legislature acted to control the contractual power of sale, which provided a
    measure of protection to mortgagors. The provisions of the
Mortgages Act
reflect these equitable purposes and must be construed in a purposive manner.

[37]

Third,
    it is not the courts function to seek pretexts to invalidate a mortgage sale.
    The cases insist that the mortgagee is entitled to be paid in full and is
    entitled to take enforcement steps without undue judicial interference. The
    courts have taken a functional approach:
1175945 Ontario Ltd. v. Michael
    Wade Construction Co
.
, 2010 ONSC 3732, 95 R.P.R. (4th) 257, at
    paras. 14-17. In a commercial context involving sophisticated parties who know
    what is going on, reasonable expectations should govern, and a court should be
    reluctant to force a mortgagee to start over. No useful purpose would be served
    by replicating the "technical traps and procedural delays" of
    foreclosure and judicial sale in respect of the contractual power of sale: see
    the Ontario Law Reform Commission,
Report on the Law of Mortgages
,

at
    p. 137.

[38]

The
    fourth observation is that the cases have not addressed the appropriate
    interplay between s. 31(1) of the
Mortgages Act
, which prescribes the
    content and use of a notice of sale, and s. 22(2), which prescribes the content
    and use of a mortgage statement. To some extent the cases have tended to see
    these legislative provisions as silos; in my view, mortgage remedies are better
    seen as an integrated package, as I will explain. I now turn to the issues.

(1)

Did the mortgagee, either Bayview Financial or later 117, fail to comply
    with s. 22 of the
Mortgages Act
, and if so, what was the effect of
    non-compliance on the Second Sale and Third Sale?

[39]

The
    trial judge found that 117 failed to provide updated statements of account to
    146 to reflect the reduction of the mortgage balance achieved through the
    attornment of rents, contrary to ss. 22(2) and (3) of the
Mortgages Act
.
    She also noted, at para 29:

The evidence of Dennis Asher makes it clear Bayview did not
    provide credits for amounts held in Escrow and insurance premiums paid by 146.
    No efforts were made by 117 to facilitate 146's redemption of the Mortgage or
    enable 146 to place the Mortgage back into good standing despite the repeated
    requests by 146 for a proper statement of account.

(a)

The Governing Principles

[40]

Section
    22 of the
Mortgages Act
provides:

(1)
Despite
    any agreement to the contrary, where default has occurred in making any payment
    of principal or interest due under a mortgage or in the observance of any
    covenant in a mortgage and under the terms of the mortgage, by reason of such
    default, the whole principal and interest secured thereby has become due and
    payable,

(a)     at
    any time before sale under the mortgage; or

(b)     before
    the commencement of an action for the enforcement of the rights of the
    mortgagee or of any person claiming through or under the mortgagee,

the mortgagor may perform such covenant or pay the amount due
    under the mortgage, exclusive of the money not payable by reason merely of
    lapse of time, and pay any expenses necessarily incurred by the mortgagee, and
    thereupon the mortgagor is relieved from the consequences of such default.

(2)  The mortgagor may, by a notice in writing, require
    the mortgagee to furnish the mortgagor with a statement in writing,

(a) of the amount of the principal
    or interest with respect to which the mortgagor is in default; or

(b) of the nature of the default or
    the non-observance of the covenant,

and of the amount of any expenses necessarily incurred by the
    mortgagee.

(3)  The mortgagee shall answer a notice given under
    subsection (2) within fifteen days after receiving it, and, if without
    reasonable excuse the mortgagee fails so to do or if the answer is incomplete
    or incorrect, any rights that the mortgagee may have to enforce the mortgage
    shall be suspended until the mortgagee has complied with subsection (2).

[41]

The
    purpose of s. 22(1) of the
Mortgages Act
(and also of s. 23(1), which
    does not figure into this decision) is to provide a mortgagor with access to
    relief from acceleration of the entire mortgage debt that came about because of
    the default. See generally
Marriott and Dunn: Practice in Mortgage Remedies
    in Ontario
, loose-leaf, 5th ed. (Toronto: Thomson Reuters, 1995), at §19.2.

[42]

Section
    22(2) works together with s. 22(3). Where the mortgagee fails to answer a
    request for a mortgage statement within 15 days without reasonable excuse or
    answers it incompletely or incorrectly, then the mortgagees rights to enforce
    the mortgage, including the exercise of a power of sale or commencement of a
    mortgage action, is suspended until the mortgagee provides an accurate and
    complete mortgage statement. But the provision is not to be used as a shelter
    by a mortgagor who does not desire to bring the mortgage into good standing. A
    mortgagor is not entitled to suspend the mortgagees rights for an indefinite
    period of time, simply by questioning the [mortgage statement]:
Double D
    Developments Ltd. v. Green
(1979), 24 O.R. (2d) 391 (H.C.), at para. 9.
    Tendering or paying into court the amount of money that the mortgagor claims is
    owed could evince an intention to redeem the mortgage in the face of ongoing
    accounting disputes:
Double D Developments Ltd
.
, at para. 8.

[43]

Section
    22(3) of the
Mortgages Act
applies before the mortgagors right to get
    relief from acceleration by putting the mortgage into good standing ends. That
    right ends under s. 22 at the earlier of: (i) the acceptance by the mortgagee of
    an offer to purchase (such as an agreement arising from the exercise of a power
    of sale); or (ii) the commencement of a mortgage action by the mortgagee (after
    which the mortgagor can seek relief from acceleration under s. 23):
Michael
    Wade
, at para. 22;
Mission Construction Ltd. v. Seel Investments Ltd
.
,
    [1973] 2 O.R. 190 (H.C.);
Theodore Daniels Ltd. v. Income Trust Co
.
(1982), 37 O.R. (2d) 316 (C.A.), at para. 13; and
Armanasco v.
    Linderwood Holdings Inc
.
, 2016 ONSC 1605, 66 R.P.R. (5th) 150, at
    paras. 51-59. However, although the suspension effect of s. 22(3) of the
Mortgages
    Act
will no longer apply after the mortgagors right to put the mortgage
    in good standing ends, the mortgagor continues to have the right to a mortgage
    statement under s. 22(2) of the
Mortgages Act

until the right
    of redemption is irrevocably lost.

(b)

The Positions of the Parties

[44]

The
    respondents submit that the trial judge properly invalidated the Second Sale
    because neither Bayview Financial nor 117 provided a mortgage statement that
    complied with ss. 22(2) and (3) of the
Mortgages Act
, despite requests
    from 146. The fundamental purpose of an updated mortgage statement in the
    context of a sale  to allow the mortgagor to intelligently assess its position
     was not met.

[45]

The appellants submit that 117 did provide an updated statement of
    account to 146 that complied with s. 22 of the
Mortgages Act
in August 2010, as part of the
Commercial Tenancies Act

application.
The statement consisted of a schedule that
    was an exhibit to Mr. Van Alphens affidavit in that proceeding. It stated that
    the outstanding mortgage balance on August 1, 2010 was $209,412.92. The
    appellants argue that the statement constituted an answer within the meaning of
    s. 22(2) of the
Mortgages Act
; providing the statement lifted the
    suspension of 117s rights to enforce the mortgage before the date of the
    Second Sale on October 6, 2010.

(c)

The Principles Applied

[46]

The
    critical dates for determining the effect of s. 22 of the
Mortgages Act
are (i) the date of the mortgagors request for a mortgage statement; (ii) the
    date of the mortgagees response; (iii) the date of a sale (the possibilities
    are October 6, 2010, the date of the purported Second Sale; or October 12,
    2010, the date of the purported Third Sale); and (iv) the date of the
    commencement of a mortgage action by the mortgagee (March 4, 2009 at the
    earliest). As I will explain, neither the dates of the purported sales nor the
    date on which 117 started the mortgage action figure into the decision.

[47]

On
    the facts of this case, the date of the first request for a mortgage statement
    could be one of three dates. The first is December 10, 2008, which is the date
    for which the respondents contend. This is the date of Mr. Ashers letter to Bayview
    Financials counsel in which he questioned the accuracy of the notice of sale. In
    that letter, he also took the customary step of requesting a mortgage statement
    as to principal and interest arrears and mortgagees expenses relating to the
    mortgage effective December 28, 2008. The second and third possible dates are
    June 15, 2009 and January 19, 2010, when 146 gave written notice of a request
    for a mortgage statement to 117.

[48]

The
    trial judge did not clearly find the governing date, nor need I do so, in view
    of the status of 117 to bring the action.

[49]

With
    respect to the first date, December 10, 2008, the evidence is that Bayview
    Financials lawyers responded after the 15-day period by letter, dated January
    13, 2009, in which they gave the amount outstanding at January 7, 2009 as
    $67,270.67. However, the letter noted that the mortgage had been assigned to
    117 on January 7, 2009. The respondents assert that Bayview Financials
    response was inaccurate; it did not come within 15 days and not until after it
    sold the mortgage to 117; and therefore, it did not comply with s. 22(3) of the
Mortgages Act
.

[50]

On
    the second date, June 15, 2009, Mr. Asher wrote to 117s lawyers requesting a
    statement of the mortgage account and a notice of the interest rate adjustment,
    since it was a variable rate mortgage. They did not respond.

[51]

On
    the third date, January 19, 2010, Mr. Asher wrote again to 117s lawyers
    requesting a mortgage statement and an account of the rental money received by
    117. In his letter, dated February 12, 2010, Mr. Asher confirmed that he had
    received no response.

[52]

Although
    117 started the action on March 4, 2009, 117 had no status to do so then
    because the mortgage was in hands of Libro Credit Union, which did not consent
    to the proceeding. The trial judge found that the mortgage had been assigned
    absolutely to Libro Credit Union, which had not consented to any of 117s
    mortgage enforcement efforts including the commencement of the action. 117 did
    not get the re-assignment of the mortgage and full status to pursue it until
    May 27, 2010.

[53]

The
    trial judges
nunc pro tunc
order at the outset of trial, which
    granted standing to 117, provided expressly
, at para. 10, that
    it was
without prejudice to 146 to defend the action on the basis 117
    did not hold title to the Mortgage during the period January 23, 2009 through
    May 27, 2010. This was the period in which the mortgage was in the hands of
    Libro Credit Union. Both the second and third requests to 117 for a mortgage
    statement fell into the interim. It is necessary to give effect to this
    qualifier in the
nunc pro tunc
order.

[54]

Accordingly,
    when 117 gained full status on May 27, 2010 to enforce the mortgage and bring
    the action (and therefore to continue it), there were two outstanding requests
    to 117 for a mortgage statement that 117 had never answered, leaving the
    suspension in place.

[55]

I
    do not accept the appellants argument that the court should deem the schedule
    to Mr. Van Alphens August 10, 2010 affidavit to constitute a mortgage
    statement within the meaning of s. 22 of the
Mortgages Act
, even
    taking the functional approach. As noted, the schedule took the position that
    the outstanding mortgage balance on August 1, 2010 was $209,412.92. It was
    based on Mr. Van Alphens position on the amount and allocation of rental
    arrears, which Hockin J. later rejected as wrong. Justice Hockin concluded,
    based on the agreement of the parties, that the rental arrears alone, as of
    August 1, 2010, totaled $240,000.

[56]

Plainly,
    the purported statement was substantially incomplete and incorrect, contrary to
    s. 22 of the
Mortgages Act
. This was not a mere technical error that
    could be remedied through the application of the functional approach. It was
    part of a strategy by Mr. Van Alphen, and it prejudiced 146s ability to assess
    its position under the mortgage. In my view, the radically misleading mortgage
    statement, on which the appellants rely in this case, takes it out of the
    run-of-the-mill mortgage statements over which there are accounting quibbles.
    Here, the actual amount owing could not be determined without the trial, at
    which point Mr. Van Alphens machinations stood fully revealed. Accordingly,
    117s ability to enforce the mortgage was suspended by operation of s. 22 of
    the
Mortgages Act
until the trial of this action, when the outstanding
    factual issues were resolved and the mortgage accounts fully reconciled with
    the rent accounts.

[57]

Consequently,
    both the Second Sale and the Third Sale were invalid because they were executed
    at a time when 117s enforcement rights were statutorily suspended under s.
    22(3) of the
Mortgages Act
.

[58]

This
    is a sufficient basis on which to dismiss the appeal. I nonetheless consider
    the next issue because it raises several questions of broader application.

(2)

Was the original Bayview Financial notice of sale valid under s. 31 of
    the
Mortgages Act
?

[59]

The
    trial judge found the Bayview Financial notice of sale to be invalid under s.
    31 of the
Mortgages Act
on two grounds. First, the original notice of sale
    issued by Bayview Financial, upon which 117 relied throughout, was not correct
    in all material aspects when it was issued. She found, at para 29, that it did
    not reflect the correct amount needed to redeem the mortgage then, contrary to
    s. 31 of the
Mortgages Act
.

[60]

Second,
    the trial judge expressed the view that 117 was obliged to issue a fresh notice
    of sale because the mortgage debt had changed over time, as she noted at paras.
    28 and. 32. Accordingly, the notice of sale was invalid because it no longer
    met the requirements of s. 31 of the
Mortgages Act
.

(a)

The Governing Principles

[61]

Section
    31 of the
Mortgages Act
provides:

(1)
A
    mortgagee shall not exercise a power of sale unless a notice of exercising the
    power of sale in the Form to this Act has been given by the mortgagee to the
    following persons, other than the persons having an interest in the mortgaged
    property prior to that of the mortgagee and any other persons subject to whose
    rights the mortgagee proposes to sell the mortgaged property:

[T]o every person appearing  to have an interest in the
    mortgaged property.

[62]

The
    Form of the Prescribed Notice of Sale under Mortgage requires the disclosure of
    certain information identifying the property, the mortgage, and the amounts due.
    It warns the mortgagor and others having an interest in the property that, if
    the amounts are not paid by a certain date, the mortgagee will sell the
    property. The form is provided to recipients who may be entitled to redeem the
    same.

[63]

The
    law has generally required strict compliance with the legal requirements for
    the exercise of a power of sale. See
Re Botiuk v. Collison

(1979),
    26 O.R. (2d) 580 (C.A.), at p. 589; and
Roth v. 340529 Ontario Ltd
.
(1982), 24 R.P.R. 198 (Ont. H.C.), at pp. 199-200. This is because [t]he
    exercise of the power of sale is considered a self-help measure, with serious
    consequences for all persons having an interest in the property: the Ontario
    Law Reform Commission,
Report on the Law of Mortgages
, at p. 147. The
    recipients of the notice of sale are in danger of losing their interest in the
    property through its sale by the mortgagee.

[64]

However,
    the cases also qualify the notion of strict compliance. This is not a
    formalistic requirement but a substantive one; a notice of sale should not be held
    inoperative because of minor irregularities, so long as it meets the purpose
    for which it is required.

That purpose was explained by
    Zuber J.A. in
Grenville Goodwin Ltd. v. MacDonald

(1988), 65 O.R. (2d) 381 (C.A.)
,
at
    para. 6. The demand for accuracy is imposed so that "the mortgagor or,
    indeed, subsequent encumbrancers may intelligently assess their position with
    respect to redemption of the mortgage."

[65]

While
    s. 31 of the
Mortgages Act
has been interpreted to require accuracy,
    the cases show a degree of tolerance for errors. The required degree of
    accuracy has not been definitively resolved in the cases; in my view, it is
    evolving towards a standard of commercial reasonableness:
Hornstein v.
    Gardena Properties Inc.

(2005), 34 R.P.R. (4th) 301 (Ont. S.C.),
    appeal dismissed, (2006), 46 R.P.R. (4th) 56 (Ont. C.A.), at paras. 4-5.

[66]

That
    said, serious errors will invalidate a notice of sale. In
Grenville Goodwin
,

the court addressed the notice of sales failure to accurately deal with
    municipal taxes. The balance on the mortgage was about $4.7 million. Justice Zuber
    stated, at para. 7:

This is not a case of an inadvertent minor variance that might
    be excused by the operation of s. 27(d) of the
Interpretation Act
[R.S.O.
    1980, c. 219
[2]
].
    The amount claimed to be due is overstated by $221,331.43. Nor is this a case
    where a mortgagee has a reasonable basis upon which to claim that an amount is
    due and that amount may be shown to be in error in a subsequent accounting: see
Toronto-Dominion Bank v. Pallet Developments Ltd.
(1984), 47 O.R. (2d)
    251, 3 O.A.C. 161 (Div. Ct.).

[67]

This
    court found the magnitude of the error to be fatal to the notice of sale, which
    it invalidated, along with the sale itself.

[68]

I
    turn now to consider the governing principles as to when a fresh notice of sale
    will be required, on which the trial judge opined. Neither the
Mortgages
    Act
, which does not expressly require a fresh notice of sale at any time,
    nor the cases provide clear guidance. I make two observations.

[69]

First,
    there is some case support for the proposition that a fresh notice of sale
    might be required on occasion, apart from the obvious case where the first
    contains material errors. For example, in
Hornstein
,

the
    mortgage on a commercial building went into default. A notice of sale was
    issued, and eventually the mortgagee entered into an agreement of purchase and
    sale. Immediately thereafter the mortgagor produced an offer that was $440,000
    or about 11.4% higher. The mortgagor challenged the validity of the notice of
    sale that had gone unchallenged for 25 months. Justice Feldman held that the
    notice of sale was not misleading. She noted, at para. 5:

The appellants also challenge the continued validity of the
    Notice of Sale on the basis that while payments were made by the mortgagors and
    other amounts were received that reduced the amount owing, no new Notice was
    issued. They submit that as a result of the changes in the amount outstanding,
    at some point the Notice of Sale expired. Counsel (who was not counsel on the
    application), advised that this aspect of the challenge to the Notice of Sale
    was not raised before the application judge. In my view, there is no merit to
    the submission in this case. The application judge made it clear that the
    appellants raised none of their objections to the Notice of Sale until they
    came forward with their new purchaser, nor did they ever attempt to redeem the
    mortgage.
Although there may well be circumstances when a
    Notice of Sale becomes inaccurate and misleading, in this case the application
    judge concluded that the Notice was reasonable.
I would not interfere
    with that finding. [Emphasis added.]

[70]

I
    note that Feldman J.A. considered the point that a fresh notice of sale might
    be required on occasion to be arguable, but she did not identify circumstances
    in which it would be required. An obvious example would be where the mortgage
    was brought into good standing and later went into default again.

[71]

Second,
    the expectation in the legislation is that the notice of sale is valid at a
    point in time, and this is the point at which the calculations in it are made.
    If it is not misleading at that point in time, it does not become misleading
    simply because of the flow of time and changes in the mortgage debt.

[72]

No
    cases have held that a fresh notice of sale is required whenever there is a
    change in the mortgage debt. The reason for this is obvious. For practical
    purposes and in normal circumstances, a party seeking to redeem will request a mortgage
    statement under s. 22 of the
Mortgages Act
, which will supersede the
    figures in the notice of sale. This is where the practical interplay between ss.
    22 and 31 the
Mortgages Act
comes into operation
.

[73]

As
    Morawetz J. pointed out at first instance in
Hornstein
,
at
    para. 46, in the context of a receivership, the numbers are always changing.
    The same is true where, for example, the interest rate in the mortgage is
    variable, as in this case; or where the mortgagee has attorned the rents, as in
    this case; or where the mortgagee has gone into possession and leased the
    property, as in
Michael Wade
. There is also case law supporting the
    proposition that partial payment of arrears owing under a mortgage does not lead
    to the requirement for a new notice of sale:
Aloi v. Spencer
,
(1980)
,
29 O.R. (2d) 435 (H.C.);

and

Karteri v. Sugarman

(1990),
    22 R.P.R (3d) 38 (Ont. Ct. (Gen. Div.)), at para. 68, (2003), 15 R.P.R. (4th)
    38 (Ont. C.A.).

[74]

Based
    on this courts decision in
Hornstein
,

at para. 5, the
    applicable standard is whether the notice of sale was reasonable in the
    circumstances. The court must assess whether the magnitude of the error in the
    notice of sale affected whether the borrower and subsequent encumbrancers were
    misled by it in assessing whether to redeem the mortgage, based on a
    commercially reasonable standard.

[75]

Neither
Grenville Goodwin
nor
Hornstein

addressed the
    appropriate interplay between a notice of sale issued under s. 31(1) of the
Mortgages
    Act
and a mortgage statement issued under s. 22(2) in assessing
    reasonableness. In my view, a timely, accurate, and complete mortgage statement
    would form part of the relevant circumstances and could serve to correct an
    inaccurate notice of sale.

(b)

The Positions of the Parties

[76]

The
    appellants submit that courts have adopted a functional approach to the evaluation
    of the validity of a notice of sale, citing

Michael Wade
, at
    paras. 17, 42, 45-46; and
Taro Properties Inc. v. Henry Waks & Sons Inc
.
,
    [1990] O.J. No. 643,  1990 CarswellOnt 659 (Ont. H.C.), at paras. 60-63. They
    assert that errors that do not prejudice the mortgagors ability to redeem the
    mortgage, should not invalidate a notice of sale. They add that any errors in
    the amounts claimed in the Bayview Financial notice of sale did not materially
    affect 146s ability to redeem, which it never attempted to do even though it
    was aware that 117 had purchased the mortgage.

[77]

The
    appellants argue that a fresh notice of sale was not required as a result of a
    reduction in the amounts owed under the mortgage through the attornment of
    rents. While a change in the terms of the agreement between the parties
    requires a new notice of sale, partial payment of arrears does not.

[78]

The
    respondents submit that the notice of sale provisions in s. 31 of the
Mortgages
    Act

require strict compliance. Incorrect figures in a notice of
    sale invalidate it. In this case, the notice had inaccurate figures in it that
    were never corrected.

(c)

The Principles Applied

[79]

As
    noted, the trial judge made two essential findings. First, she found that the
    original notice of sale did not reflect the correct amount needed to redeem the
    mortgage and contained material errors. She relied on the evidence of Dennis
    Asher, who was the lawyer representing the respondents.

[80]

Mr.
    Ashers evidence was that he sent a letter, dated December 10, 2008, to Bayview
    Financials lawyers pointing out (i) that the notice of sale did not account
    for 146s payment of insurance premiums, so that the inclusion of $4,774.00 as
    a disbursement was wrong; (ii) that the property taxes of $22,028.12 should
    have been paid out of an escrow account held by the mortgagee for that purpose
    and not added to the mortgage debt; (iii) that the notice failed to account for
    two payments of rent under the rent attornment, totalling $12,180.00; and (iv) finally,
    he disputed a small NSF charge.

[81]

In
    his December 10, 2008 letter to the appellants counsel, Mr. Asher pointed out
    the errors in the notice of sale and requested a mortgage statement as to
    principal and interest arrears and mortgagees expenses relating to the
    mortgage effective December 28, 2008.

[82]

Ordinarily
    a mortgagee would have responded in a timely manner to such a request. Had
    Bayview Financial done so, then any inaccuracies in the notice of sale could
    have been superseded by the new mortgage statement. The response by Bayview Financials
    lawyers came after the mortgage was assigned to 117.

[83]

I
    am reluctant to agree with the trial judge that the errors in Bayview Financials
    notice of sale were fatal to its validity based on the standard of commercial
    reasonableness. Counsel for 146 was aware of the alleged errors and brought
    them to Bayview Financials attention.

[84]

There
    is, as noted, a principle that partial payment of arrears owing under a
    mortgage does not lead automatically to the requirement of a new notice of
    sale. However, I would reject the appellants argument that the principle applies
    on the facts of this case. They cite
Aloi

and

Karteri
,
    but in neither case did the mortgagee surreptitiously attempt to alter the rent
    payments to its advantage as tenant and to the mortgagors detriment, as Mr.
    Van Alphen did in this case, in the trial judges view, at para.29.

[85]

I
    also find unpersuasive the appellants argument that any errors in the amounts
    claimed in the notice of sale did not materially affect 146s ability to redeem
    and that 146 never attempted to do so. I point out that this argument is more
    related to the issue of getting proper mortgage statements under s. 22 of the
Mortgages
    Act
, which I addressed earlier. The fight was ongoing about the
    relationship between the rents and the mortgage payments from the beginning
    until the bitter end at trial, and Mr. Van Alphen did not provide ongoing and
    proper disclosure of what he was doing. For 146 to redeem before trial and on
    Mr. Van Alphens terms would have required the respondents to capitulate to his
    theory of the case, which, in light of the outcome, would have been a mistake.

[86]

The
    trial judges second finding was that a fresh notice of sale was required in
    this case because the flow of time and the stream of attorned rental payments
    changed the state of the accounts, increasingly rendering inaccurate the
    original notice of sale. Because a notice of sale is a point-in-time document,
    it does not become inaccurate with the flow of time. The accounts undoubtedly
    changed, but the usual process for addressing changes in accounts is by the
    mortgagor requesting a mortgage statement under s. 22 of the
Mortgages Act
,
    not by requiring a fresh notice of sale.

[87]

The
    artificial staging of the issues brought about by Mr. Van Alphens strategy
    suggests that it would not be wise to rule definitively on when, if ever, a fresh
    notice of sale is required, and I would decline to do so.

(3)

Was 117 legally entitled to sell the property to itself under the power
    of sale?

[88]

Although
    the issue is moot, in her discussion of whether 117 was legally entitled to
    sell the property to itself under the power of sale, the trial judge opened a
    door better left closed. In the Second Sale, 117 purported to sell the property
    to itself under power of sale. The appellants invoked s. 41 of the
Conveyancing
    and Law of Property Act
.

[89]

The
    trial judge stated, at para 24: The common law and obligations of 117 pursuant
    to the
Mortgages Act
comprise the law applicable to the purported sale
    by 117 to itself on October 6, 2010. She then turned to consider s. 41 of the
Conveyancing
    and Law of Property Act
. It provides:

A person may convey property to or vest property in the person
    in like manner as the person could have conveyed the property to or vested the
    property in another person.

[90]

The
    trial judge described this as a general statutory provision that is subject
    to the more restrictive statutory provisions and common law principles imposed
    on mortgagees as transferors. She identified one such limit in the common law:
    a mortgagee cannot sell to itself under a power of sale, citing
Farrar v.
    Farrars Ltd.

(1888), 40 Ch. D. 395 (Eng. C.A.).

[91]

However,
    the trial judge stated that the rule in
Farrar

gives rise to a
    presumption that is rebuttable in certain circumstances. The trial judge
    referred to
Ostrander v. Niagara Helicopters Ltd
.
(1973)
,
1
    O.R. (2d) 281 (H.C.) and held, at para. 26, that a mortgagee can transfer its
    security to itself where it can establish it acted in good faith and took
    reasonable precautions to obtain a proper price. She found that Mr. Van Alphen
    could not rely on
Ostrander

because he had not acted in good
    faith and had not taken reasonable precautions to obtain a proper price for the
    property.

[92]

In
    my view, the trial judge had no basis upon which to apply the rebuttable
    presumption in
Ostrander
to the facts of this case. In
Ostrander
,
    a helicopter company defaulted on loans, and a receiver-manager took possession
    pursuant to the contractual terms of a mortgage deed (not a court-appointed
    receiver). The receiver-manager conducted a thorough sales process. However, during
    the sales process, the receiver-manager purchased shares in a company
    (representing a 2% interest in its total issued shares) that was chosen as the
    purchaser of the helicopter company. The mortgagor, who preferred another
    potential purchaser, brought an action to set aside the sale. The court held
    that the receiver-manager was not a fiduciary but was an agent for a mortgagee
    in possession, whose purpose was to protect the security of the bondholder.
    Since the receiver-manager had conducted a thorough sales process and was not
    acting in bad faith (i.e., fraud), the sale was valid.

[93]

Ostrander

does not stand for the proposition that the common law allows a mortgagee
    to sell under a power of sale to itself nor for the proposition that a
    mortgagee can sell to a company that is owned by the mortgagee. Rather, it
    stands for the proposition that a party acting for the mortgagee can sell to a
    corporation in which that party has some interest, if it can rebut the
    presumption of an invalid sale by evidence that it took reasonable steps to
    obtain a proper price and acted in good faith.
Ostrander
does not
    apply to a mortgagee selling to itself under power of sale.

[94]

Even
    though s. 41 of the
Conveyancing and Law of Property Act
was enacted
    (with slight differences) in 1933
[3]
,
    there are no reported decisions in which an Ontario court has squarely
    considered its effect on the common law rule in
Farrar
in a mortgage
    action.

[95]

Whether
    s. 41 of the
Conveyancing and Law of Property Act
has overcome the
    rule in
Farrar
is an issue best left for another day.  Given the
    potential for lenders to manipulate the system, allowing s. 41 of the
Conveyancing
    and Law of Property Act
to have this effect could adversely affect the purposes
    behind the centuries-long development of law and equity in the context of the
    power of sale: see the Ontario Law Reform Commission,
Report on the Law of
    Mortgages
,

at pp. 154-155; and Walter M. Traub,
Falconbridge on
    Mortgages
, loose-leaf, 5th ed. (Toronto: Thomson Reuters, 2018), at pp.
    35-35 to 36-36.

[96]

Given
    this conclusion, I would not address whether the trial judges finding that Mr.
    Van Alphens precautions to obtain a proper price for the property were inadequate.

F.

Disposition

[97]

I
    would therefore dismiss the appeal. As agreed by the parties, the appellants
    shall pay the respondents costs in the amount of $30,000, inclusive of
    disbursements and applicable taxes.

Released: July 27, 2018 PL

P. Lauwers J.A.

I agree. M.L. Benotto J.A.

I agree. I.V.B. Nordheimer J.A.

[1]
The appellant corporations are all controlled by Robert Van Alphen or his wife,
    Joanne Van Alphen.

[2]
Section 27 of the
Interpretation Act
,
R.S.O. 1990, c. I.11,
    which dealt with deviations in a form that did not affect the substance of the
    form, is now s. 84 of the
Legislation Act
,
2006
, S.O. 2006 c.
    21 Sched. F.

[3]

In 1933, it was s. 39a of the
Conveyancing and Law
    of Property Act
and stated:

A person may convey property
    to or vest property in himself in like manner as he could have conveyed such property
    to or vested such property in another person.


COURT OF APPEAL FOR ONTARIO

CITATION: 2212886 Ontario Inc. v. Obsidian Group Inc., 2018
    ONCA 670

DATE: 20180727

DOCKET: C63617

Pepall, van Rensburg and Trotter JJ.A.

BETWEEN

2212886 Ontario Inc., William Porteous and
    Kirsten Porteous

Plaintiffs (Respondents)

and

Obsidian Group Inc., Obsidian Inc. and Gus
    Karamountzos

Defendants (Appellants)

Geoffrey Adair, for the appellants

Daniel MacKeigan and Cole Vegso, for the respondents

Heard: December 15, 2017

On appeal from the judgment of Justice Marc A. Garson of
    the Superior Court of Justice, dated March 21, 2017, with reasons reported at
    2017 ONSC 1643.

van Rensburg J.A.:

OVERVIEW

[1]

This is an appeal from a partial summary judgment in litigation
    concerning a franchise dispute. The franchisee and its principals were granted
    rescission of the franchise agreement and damages against the franchisor and
    its director in the sum of $964,805.33. The counterclaim was dismissed.

[2]

There were two principal issues respecting liability. The first was
    whether the disclosure document provided by the franchisor in June 2010 was so
    materially deficient as to constitute no disclosure at all, giving rise to a
    right to rescission within two years of the execution of the franchise
    agreement under s. 6(2) and compensation under s. 6(6) of the
Arthur
    Wishart Act (Franchise Disclosure), 2000
,

S.O. 2000, c. 3 (the
    AWA). The second liability issue was whether the two year period ran from the
    date the parties first executed the franchise agreement, in which case the
    claim would be out of time, or from the date the parties executed a replacement
    agreement, in which case the claim was timely.

[3]

The respondents relied on a number of allegations of non-disclosure in
    support of their claim for rescission, only one of which was accepted by the
    motion judge. He concluded that the franchisors representative provided
    revenue projections in a meeting with the principals of the franchisee in May
    2010, that the information was highly material, and that the failure to include
    the projections in the franchisors disclosure constituted no disclosure. The
    motion judge also concluded that since the franchisor insisted on a replacement
    agreement, the time for asserting the rescission rights under s. 6(2) ran from
    the date of that agreement.

[4]

The appellants principal argument on appeal is that the motion judge
    erred in determining the central disputed factual issue on which liability
    depended, where the evidence was contradictory, and where the record did not
    permit such a determination to be made.

[5]

I would allow the appeal on this basis. The motion judge properly
    identified that the key factual issue was whether the franchisor provided
    earnings projections at a meeting in 2010. However, having found that the paper
    record was inadequate to resolve the issue, he erred in concluding that it was
    in the interests of justice to decide the disputed factual issue using the fact-finding
    powers under r. 20.04(2.1) of the
Rules of Civil Procedure
, R.R.O.
    1990, Reg. 194, and then in determining the issue without oral evidence.

[6]

Because the central factual issue on which liability depends requires
    oral evidence, the balance of the motion judges conclusions respecting
    liability and damages must fall. However, I would not interfere with the motion
    judges determination that the time for asserting the s. 6(2) rescission
    rights ran from the parties execution of the replacement agreement in
    September 2010. This is a distinct determination of what is essentially a
    limitation period defence that was properly made on the record before the
    motion judge and is free of any reversible error.

[7]

I would therefore allow the appeal in part, setting aside all but the motion
    judges determination of the limitation period issue.

FACTS

[8]

The appellants are Obsidian Group Inc. (Obsidian), the franchisor for
    Crabby Joes Tap and Grill (Crabby Joes), Obsidian Inc., the franchisees
    sub-landlord, and Gus Karamountzos (referred to by the motion judge as Gus),
    the sole director of both companies. The respondent 2212886 Ontario Inc. (221)
    is a franchisee that operated a Crabby Joes restaurant in Bradford, Ontario. 221
    was incorporated by its principals, the other two respondents to this appeal,
    William Porteous (William) and Kirsten Porteous (Kirsten).

[9]

William and Kirsten communicated their interest in acquiring a Crabby
    Joes franchise in April 2009. In June 2009, they paid a deposit of $31,500 and
    they incorporated 221 in July 2009. Between September 2009 and May 2010, the
    parties, working together, identified a suitable location. On June 1, 2010 the
    franchisor provided a franchise disclosure document. On June 16, 2010 Obsidian and
    221 entered into a franchise agreement. On September 7, 2010 they signed a new
    franchise agreement (the replacement agreement) that was substantially
    identical to the first agreement, as well as a franchise amending agreement (the
    amending agreement) to replace some of the standard terms for the benefit of
    the respondents.

[10]

The
    franchisee paid a total of $660,465 for the purchase of the franchise. The
    acquisition was financed in part by a small business loan from Royal Bank of
    Canada (RBC).

[11]

The
    respondents operated their Crabby Joes franchise from March 9, 2011 until they
    served notice of rescission of the franchise agreement and related agreements
    on September 5, 2012. They demanded payment of their rescission damages by
    letter dated September 18, 2012. The franchisor purported to terminate the
    franchise agreement and related agreements on September 18, 2012. The franchise
    was transferred to a third party in January 2013. The respondents were sued by
    RBC on their small business loan (the RBC litigation), resulting in judgment in
    June 2014 against 221 and the personal respondents.

[12]

The
    present proceedings were commenced by the respondents in December 2012, claiming
    rescission of the franchise agreement and rescission damages. They also claimed
    damages for breach of contract and the appellants fair dealing obligations
    under the AWA. The appellants counterclaimed, seeking a declaration that the
    franchise agreement had been validly and properly terminated, as well as
    damages. After pleadings closed, the respondents moved for partial summary
    judgment, seeking rescission of the franchise agreement and rescission damages.

DECISION OF THE MOTION JUDGE

[13]

Here,
    I will set out only briefly the conclusions of the motion judge on the material
    issues. Later in these reasons, I will address in more detail the motion
    judges treatment of the disputed evidence respecting the May 2010 meeting.

[14]

First,
    with respect to the time for asserting the claim of rescission, the motion judge
    concluded that the franchisee was within the two-year statutory rescission
    window which ran from the date of the replacement agreement (September 7, 2010)
    rather than the date of the original agreement (June 16, 2010). Although there
    was conflicting evidence about what prompted the need for a replacement
    agreement, it was clear that this occurred at the request of the franchisor.
    The motion judge reasoned that the franchisor, having required the franchisee
    to sign a replacement agreement, could not rely on the date of the first
    agreement as the effective date for the running of the two year limitation period
    for claiming rescission.

[15]

Next,
    the motion judge considered the various deficiencies in disclosure alleged by
    the respondents. He concluded that only one of the deficiencies in disclosure
    alleged by the respondents was sufficient to ground rescission. Although there
    was conflicting evidence, he determined that the franchisors representative,
    Danny Grammenopoulos (Danny), had shown the respondents a document containing
    weekly earnings projections at a May 2010 meeting, and that the franchisors
    disclosure document of June 1, 2010 was deficient in not including this information.
    He further found that the failure to include the earnings projections and the
    underlying basis for such projections
[1]
was a fundamental and stark omission. The motion judge found the omission so
    significant and material as to constitute no disclosure and to justify
    rescission under s. 6(2). The motion judge declared that the franchise
    agreement was rescinded and awarded damages in the sum of $964,805.33.

ISSUES

[16]

The
    appellants contend that the motion judge erred:

1.

in his
    approach to summary judgment  by making determinations of credibility and
    findings on a key factual issue, where the evidence was contradictory, where
    the appellants deponent was not cross-examined, and without calling for or
    even considering the need for oral evidence;

2.

in his
    conclusion that the failure to provide the earnings projections in the
    disclosure document constituted no disclosure under s. 6(2) of the AWA;

3.

in
    failing to dismiss the claim for rescission because it was asserted more than
    two years after the original franchise agreement was signed; and

4.

in his
    assessment of damages (essentially by including amounts for lease payments made
    by 221 to Obsidian Inc.).

[17]

As
    I have indicated, it is sufficient for the determination of this appeal to
    address only the first and third issues.

ANALYSIS

A.

Did the Motion Judge Err in Granting Summary Judgment After Determining
    the Key Factual Issue on Disputed Evidence?

(i)

The Evidence in Brief

[18]

The
    motion judge noted, at para. 45 of his reasons, that the only potential
    argument for material non-disclosure was based on what occurred at a meeting in
    May 2010 between the respondents and Danny, and whether Danny showed or flashed
    them a copy of earnings projections for the franchise but did not provide them
    with a hard copy. Williams and Dannys evidence about what happened at that
    meeting was contradictory.
[2]

[19]

In
    his first affidavit, William stated that, at a meeting he and his wife attended
    in or about May 2010, Danny showed them an earnings projections table that
    predicted weekly sales of $37,500-$44,000. William said that these projections
    were later included in a business plan submitted by the franchisor to Ken
    Kaufman at RBC. Williams affidavit attached a copy of an email from Danny to
    Kaufman dated June 22, 2010 that refers to an attached business plan. In a
    second affidavit, William denied having provided a business plan to RBC. He
    stated that the same earnings projections that he and his wife were shown at
    the May 2010 meeting, and were prevented from taking away, were included in the
    business plan that Danny sent to RBC.

[20]

Dannys
    affidavit categorically denied that he ever showed the respondents earnings
    projections or withheld a copy from them in a meeting in May 2010 or at any
    other time before they signed the franchise agreement. He stated that [i]t has
    not been my practice in over 25 years in the franchise business to show or
    provide earnings projections to prospective franchisees before they enter into
    a franchise agreement, and I did not do so in this case. He then set out in
    some detail his best recollection of his involvement with the respondents and
    RBC as it related to the earnings projections and business plan. While he had
    no recollection of sending the June 22 email to RBC, he had no evidence to
    contradict the assertion that he sent the email and attached a business plan.
    Danny stated that, although he would have worked with the respondents in
    preparing a business plan and would have helped them to come up with the
    figures to be included in their earnings projection, this would not have
    occurred until after they entered into the franchise agreement as there would
    have been little point in spending time and effort on a business plan before
    the [respondents] had committed to purchasing a franchise by signing a
    franchise agreement.

[21]

William
    gave inconsistent evidence about when he first saw the earnings projections and
    business plan. In his cross-examination, William stated that he first saw the
    business plan after March 2011. In the RBC litigation William stated that
    Kaufman presented the business plan and earnings projections to him and his
    wife at a meeting in July 2010, and that this was the first time they saw an
    earnings projection, which led to their decision to proceed with the purchase
    of the franchise.

[22]

In
    an affidavit delivered after his cross-examination, William offered an
    explanation for the inconsistencies. He stated that, at the time of the meeting
    with Kaufman of RBC in July 2010 he was shown a copy of the earnings projections,
    but he was not aware that they formed part of the business plan, which he saw
    for the first time after rescission. He provided an affidavit in the RBC
    litigation referring to what he saw at the July 2010 meeting as earnings
    projections and a business plan because, by that time he knew that what he was
    shown by RBC was
part of
a business plan.

(ii)

The Motion Judges Decision to Determine the Issues by Summary Judgment

[23]

The
    motion judge followed the direction of the Supreme Court in
Hryniak v.
    Mauldin
, 2014 SCC 7, [2014] 1 S.C.R. 87, at para. 66, to first determine if
    there was a genuine issue requiring a trial based only on the evidence before
    him and without using the fact-finding powers in rr. 20.04(2.1) (to weigh the
    evidence, evaluate the credibility of a deponent, or draw reasonable inferences
    from the evidence) and 20.04(2.2) (to hear oral evidence for the purpose of exercising
    such powers).

[24]

After
    acknowledging that there was conflicting evidence about what happened at the
    May 2010 meeting, the motion judge stated that he was satisfied that he could
    not make the necessary findings of fact, and that there was a genuine issue
    that required a trial. He stated, at para. 19:

Simply put, there is extensive conflicting evidence between
    William, Danny and Gus as to what took place at a meeting in May 2010 and the
    materials before me do not allow me to have a full appreciation of this event
    or to make the necessary findings of fact to then apply the law and achieve a
    just result.

[25]

The
    motion judge then noted, at para. 21, that he must next determine whether the
    use of the expanded powers in rr. 20.04(2.1) and (2.2) would allow him to
    achieve a fair and just result that was timely, affordable and proportionate to
    the action as a whole (which is the second step identified in
Hryniak
,

at para. 66).

[26]

The
    motion judge apparently resolved the question in the affirmative. After
    describing the legal framework for rescission claims in the franchise context,
    and the evidence on the motion, including the evidence concerning the May 2010
    meeting, the motion judge stated, at para. 41, that he [had] already
    determined that it is in the interests of justice to rely on the enhanced
    fact-finding powers. He then went on to assess the evidence and to make
    findings of fact about the May 2010 meeting.

(iii)

The Motion Judges Determination of the Factual Issues

[27]

The
    central factual issues were whether Danny provided an earnings projections table
    to the respondents before the franchise agreement was signed in June 2010,
    something that was alleged to have happened at a meeting in or about May 2010,
    and if so, whether the failure to include the earnings projections in the June
    2010 disclosure was so significant as to amount to no disclosure contrary to
    the AWA.

[28]

Dannys
    evidence was key. As the motion judge stated, at para. 44, [a]lthough the
    parties agree on very little, they both accept the importance of Dannys
    evidence on this motion.

[29]

The
    motion judge rejected Dannys evidence, notwithstanding that he was not
    cross-examined. He found his evidence to be heavy on speculation and general
    practice and light on direct knowledge, that Danny failed to identify specific
    sources for his belief, and that his affidavit consisted of argument and
    allegations instead of actual facts within his knowledge. Danny had no
    independent recollection of the May 2010 meeting and relied on his practice in
    over 25 years in the franchise business to reach the conclusion that he did not
    show the respondents an earnings projection at the May 2010 meeting. The motion
    judge also took into account the fact that Danny provided a similar earnings
    projection in the business plan sent to RBC in June.

[30]

The
    motion judge concluded that [t]he absence of cogent and probative evidence
    from [Danny] leads me to conclude that there was a meeting in May 2010 and that
    he did show William an earnings projection that suggested a range of $37,500 -
    $44,000 in projected weekly earnings for the franchise.

[31]

In
    dealing with Williams evidence, the motion judge acknowledged that he had
    given different accounts about when he saw the earnings projection and business
    plan in this litigation and in the RBC litigation. He stated that he recognized
    that William took one position in the RBC litigation, a second position in his
    cross-examination where he claimed that he first heard of the business plan
    after March 2011, and a third position in the affidavit that he was shown
    earnings projections by Danny in May 2010. He noted that he accepted Williams
    explanation for the inconsistencies and that, in light of his rejection of both
    Dannys and Guss evidence, the inconsistencies were not enough to create a
    triable issue.

[32]

The
    motion judge found that the franchisors disclosure on June 1, 2010 was
    deficient in not including the earnings projections. This was a material,
    fundamental and stark omission as it was potentially the most important
    information the franchisees would want to know. This omission was so
    significant that it constituted no disclosure under s. 6(2) of the AWA. While
    the motion judge agreed with the appellants that they did not have to disclose earnings
    projections, once they were provided they had to be included in the
    franchisors disclosure.

(iv)

Discussion

[33]

In
    my view, the motion judge erred in granting summary judgment in this case.

(a)

It was not in the interest of justice to determine the issues on summary
    judgment in this case without oral evidence

[34]

Where,
    on the record, there appears to be a genuine issue requiring a trial, the motion
    judge may then consider whether the need for a trial can be avoided by using
    the powers under rr. 20.04(2.1) and (2.2). The motion judges decision to
    exercise these powers is discretionary and attracts appellate deference provided
    that their use is not against the interest of justice:
1615540 Ontario
    Inc. (c.o.b. Healing Hands Massage Therapy Clinic) v. Simon
, 2016 ONCA
    966, at para.
22.

[35]

In
    this case the motion judge concluded that the record did not permit him to make
    an order for summary judgment, and that there was a genuine issue for trial
    with respect to the May 2010 meeting. He then proceeded to invoke the
    expanded powers under (1.1) to determine the rescission claims by summary
    judgment. However, he did not consider the obvious need for oral evidence under
    (2.2).

[36]

It
    will not be against the interest of justice to use the expanded powers where
    this will lead to a fair and just result and will serve the goals of
    timeliness, affordability and proportionality in light of the litigation as a
    whole:
Hryniak
, at paras. 61-66. Relevant considerations include the
    nature and complexity of the litigation, a comparison of the evidence that will
    be available at trial and on the motion, the opportunity to fairly evaluate the
    evidence, the proportional procedure considering the nature of the issues, as
    well as the nature and strength of the evidence:
Hryniak
, at paras. 58,
    59 and 82.

[37]

In
    this case, a number of factors were relevant and ought to have been considered
    before the motion judge decided to use the enhanced powers absent oral
    evidence to determine the respondents rescission claims in a motion for summary
    judgment.

[38]

The
    motion judge ought to have considered the central role of the disputed factual
    issue in the litigation. The case for rescission depended on a finding that Danny
    had shown William and Kirsten earnings projections before they signed the
    franchise agreement. It was only if this had occurred that they could possibly
    have been entitled to rescission and rescission damages.

[39]

The
    motion judge had to consider the state of the evidence that was before him on
    the motion on the disputed factual issues. There was no cross-examination of
    the appellants deponents, including Danny, whose evidence was key. The record
    that was available to the motion judge consisted of contradictory affidavit
    evidence on the central factual dispute. It also included inconsistent evidence
    by William. This was not a case where credibility could be determined by
    reference to documents the parties exchanged that was contemporaneous or
    otherwise.

[40]

The
    more important credibility disputes are to determining key issues, the harder
    it will be to fairly adjudicate those issues solely on a paper record:
A.C.
    v.
Joyce, 2017 ONCA 49, at para. 92. The Supreme Court observed at para.
    57 of
Hryniak
that on a summary
    judgment motion, the evidence need not be equivalent to that at trial but must
    be such that the judge is confident she can fairly resolve the dispute. A
    documentary record, particularly when supplemented by the new fact-finding
    tools, including ordering oral testimony, is often sufficient to resolve
    material issues fairly and justly.

[41]

The
    motion judge ought to have determined whether, in these circumstances, it would
    have been appropriate, or indeed necessary, to hear oral evidence as he was
    entitled to require under r. 20.04(2.2). If credibility cannot be assessed on a
    written record, that should be a sign that oral evidence or a trial is required:
Trotter Estate
, 2014 ONCA 841, 122 O.R. (3d) 625, at para. 55. Here, the
    motion judge ought to have considered whether oral evidence on the key disputed
    factual issue would have enabled him to determine the rescission claims on this
    motion: see for example
Hryniak
, at para. 51;
Choquette v. Viczko
,
    2016 SKCA 52, 476 Sask. R. 273, at paras. 54-56.

(b)

The motion judge could not, on this record, adequately resolve the credibility
    issues

[42]

The
    motion judges reasons for accepting Williams evidence on the key factual
    dispute and rejecting Dannys, are not persuasive.

[43]

First,
    the concerns about Dannys evidence that were identified by the motion judge
    were not sufficient to reject his evidence out of hand, especially where he had
    not been cross-examined. The motion judge characterized Dannys evidence as heavy
    on speculation and light on direct knowledge. However, Danny was, as the
    motion judge observed, a very experienced member of the industry who sold or
    opened at least 1000 franchises prior to this matter. His affidavit contained
    clear evidence. He had no specific recollection of the May 2010 meeting, but
    denied having shown an earnings projection before the franchise agreement was
    signed. He said that [i]t has not been my practice in over 25 years in the
    franchise business to show or provide earnings projections to prospective
    franchisees before they enter into a franchise agreement. This statement was
    not speculative or argumentative. It was a statement of fact based on Dannys
    prior experience. And Danny was not challenged on this statement, as he was
    never cross-examined. Had Danny been cross-examined, the weaknesses in his
    evidence, as well as the inconsistencies between his evidence and the more
    dogmatic evidence of Gus, may well have been explored.

[44]

The
    motion judge appears to have focussed on the evidence about the business plan
    (which contained the earnings projections) having been sent to RBC, which was
    confirmed by the email of June 22, 2010. However he misstated Dannys evidence
    when he said, at paras. 11 and 50, that Danny denied preparing or providing the
    business plan to RBC and that both Gus and Danny suggested the earnings
    projections never existed. It is true that Gus, who was not present at the May
    2010 meeting, and had no personal knowledge of what transpired, denied that the
    franchisor had any involvement in the business plan. However, Danny said that while
    he had no specific recollection of sending the email to Kaufman of RBC with the
    business plan attached, he had no evidence to contradict RBCs evidence.

[45]

The
    import of Dannys evidence was that if he had prepared a business plan and sent
    it to RBC, he would have done so at the request of the respondents to assist
    them in obtaining financing. Williams own evidence confirmed that the appellants
    provided him and his wife with assistance in obtaining financing from RBC. The
    determination that the franchisor was involved in the financing  whether by
    helping the respondents to prepare a business plan, or by preparing the
    business plan in its entirety for submission to RBC  is not determinative of
    the central issue: whether the earnings projections that were ultimately
    included in the business plan were shown to William and Kirsten, as they
    alleged,
before
they signed the franchise
    agreement in June 2010.

[46]

Second,
    after rejecting Dannys evidence, the motion judge did not critically assess
    the respondents evidence. The only mention of Williams evidence was in
    respect of the inconsistencies about when he first saw the business plan and
    earnings projections, and then to say that he accepted it. The motion judge
    stated at para. 40:

The [respondents] argue that the issue in the earlier RBC case
    was not whether they saw the earnings projections but whether RBC showed [them]
    the earnings projections in July 2010. William, in his supplemental affidavit
    of October 18, 2016, explains that he reviewed the earnings projections from
    the business plan in July 2010 but did not appreciate what it was until after
    receiving a copy of the business plan after rescission. I accept this
    explanation and the distinction he draws in this regard.

[47]

With
    respect, the explanation the motion judge appears to have accepted was not
    responsive to the concern about Williams contradictory evidence. The point was
    that William took one position in his litigation with RBC  that he and his
    wife decided to proceed with the financing and purchase the franchise because
    of earnings projections first shown to them by Kaufman at a meeting in July
    2010  and made a contrary but similar assertion in this litigation  that they
    decided to sign the franchise agreement because of an earnings projection they
    were shown by Danny at a meeting in May 2010. It was not in my view sufficient
    for the motion judge to resolve the issue of credibility based on the
    acceptance of Williams explanation, without going further into the evidence.
    This court has cautioned that in the summary judgment and mini-trial context, motion
    judges must take great care t
o ensure that
    decontextualized affidavit and transcript evidence does not become the means by
    which substantive unfairness enters:
Baywood Homes Partnership v.
    Haditaghi
, 2014 ONCA 450, 120 O.R. (3d)
    438, at para. 44. The motion judges treatment of the evidence, including his
    acceptance of Williams explanation for his inconsistencies, did not ensure that
    this key issue would be fairly resolved.

[48]

The
    motion judge did not address what may have been potential weaknesses in the
    respondents evidence, including that William had several meetings with Danny,
    could not recall what transpired at other meetings, did not recall the purpose
    of the meeting at which the earnings projections were alleged to have been
    provided, and did not have any notes or any further communications with Danny
    or anyone else about the projections. Nor did he identify any particular
    strengths. In the end, if he found William to be credible, the motion judge did
    not explain why he accepted his evidence about what transpired at the May 2010
    meeting, except that he had rejected Dannys evidence. He summed up his
    assessment of the evidence by saying, at para. 48, having accepted [Williams]
    explanation for the inconsistencies, and in light of my rejection of both Danny
    and Guss evidence in this regard, the inconsistencies in Williams evidence
    are not sufficient in the circumstances to raise triable issues.

[49]

In
    this case, the respondents choice not to cross-examine the appellants
    deponents on their affidavits and not to tender evidence from Kirsten ought to
    have been taken into consideration by the motion judge before he rejected the
    appellants evidence and accepted the respondents evidence on the key disputed
    factual issue. It is trite law that each side must "put its best foot
    forward
in a motion for summary
    judgment:
Transamerica Life Insurance Co. of Canada
    v. Canada Life Assurance Co.
(1996), 28 O.R. (3d)
    423 (Gen. Div.), at p. 434;
Goudie
    v. Ottawa (City)
, 2003 SCC 14, [2003] 1 S.C.R. 141, at
    para. 32;
Ramdial v. Davis
, 2015
    ONCA 726, 341 O.A.C. 78, at para. 27;
Canada (Attorney
    General) v. Lameman
, 2008 SCC 14, [2008] 1 S.C.R. 372, at
    para. 11;
Chernet v. RBC General Insurance Company
, 2017 ONCA 337, 11
    M.V.R. (7th) 1, at para. 12. A motion judge is entitled to draw an adverse
    inference from a partys failure to adduce personal evidence:
Mazza v.
    Ornge Corporate Services Inc.
, 2016 ONCA 753, 62 B.L.R. (5th) 211, at
    para. 9. Here, the motion judge did not address the fact that there was no
    affidavit from Kirsten, who was alleged to have been at the May 2010 meeting
    when the earnings projection was shown. Kirsten did not provide her own account
    of what transpired, except in an answer to an undertaking given in Williams
    cross-examination. The absence of her direct evidence on the critical points
    ought to have been taken into account in determining whether it would be fair
    and just to grant summary judgment in this case.

[50]

I
    would therefore allow the appeal on this basis. I would not purport to venture any
    opinion on the findings that a trial judge or another judge on summary judgment
    ought to make. Rather, I have set out some of my concerns about the motion
    judges treatment of the parties evidence, simply to underscore the
    difficulties in attempting to make credibility assessments and to find key and
    material facts without the benefit of oral evidence in this case. This is a
    case where oral evidence in particular on the question of the May 2010 meeting,
    would have permitted a full appreciation of the parties evidence, and a proper
    assessment of their credibility.

B.

Is the Motion Judges Decision Supportable on Another Basis?

[51]

I
    turn to address the respondents submission in oral argument that this court
    should uphold the motion judges decision on what they argue was an alternative
    basis for his decision.

[52]

Essentially,
    the respondents say that what transpired at the May 2010 meeting is irrelevant,
    and that so long as the franchisor provided earnings projections to RBC in June
    2010 (a finding which is unassailable), they were material and therefore ought
    to have been included in the disclosure document that was given to the
    respondents on June 1, 2010. In other words, it matters not whether the
    earnings projections were provided to the franchisees in May 2010 or later (in
    the business plan to RBC); if they were provided, then it was material
    non-disclosure amounting to no disclosure at all for the earnings projections
    not to have been included in the franchisors disclosure document. The
    respondents say that this is the effect of paras. 50 to 53 of the motion
    judges reasons.

[53]

I
    disagree. The respondents position is not supported by a fair reading of the
    motion judges decision. The motion judge structured his reasons to deal first
    with whether earnings projections were shown to the respondents at the May 2010
    meeting, at paras. 41 to 45. The motion judge had already determined that the
    earnings projections had been provided by the franchisor at the May 2010
    meeting. He had to then determine the significance of the non-disclosure, which
    he discussed under the heading The Effect of the May 2010 Meeting. I read
    paras. 50 to 53 as setting out the motion judges conclusions as to the effect
    of the meeting, in light of his prior finding about earnings projections having
    been provided at the May 2010 meeting. He considered whether the subsequent failure
    to include the projections before the franchise agreement was signed amounted
    to no disclosure as required by s. 6(2) of the AWA before rescission could be
    granted within two years of the signing of the franchise agreement.

[54]

The
    motion judge would have missed the point if, as the respondents argue, he had concluded
    that the failure to provide earnings projections as part of the disclosure was
    made out because the franchisor provided such projections to RBC with the
    business plan
after
the
    franchise agreement was signed. The purpose of disclosure is to enable a
    prospective franchisee to make an informed decision about whether or not to
    invest in a franchise:
6792341 Canada Inc. et al. v. Dollar It Limited
(2009),
    95 O.R. (3d) 291 (C.A), at para. 35. Disclosure is required to be made no later
    than 14 days before the franchisee signs the franchise agreement. If there is
    defective or incomplete disclosure, rescission must be exercised within 60 days
    of the disclosure having been made (s. 6(1) AWA). For s. 6(2) to apply, and for
    rescission to be available for two years, there must have been no disclosure.
    As such, the only basis on which the failure to provide the earnings projection
    could have amounted to non-disclosure was if the respondents had received the
    earnings projections
before
they signed the
    franchise agreement, and they had not been included in the disclosure. The
    provision of such information by the franchisor at a later stage in connection
    with the respondents financing may well have given rise to other arguments
    about misrepresentation (which were not raised in the action), but could not
    found a claim of rescission based on non-disclosure.

[55]

For
    these reasons, I would set aside the summary judgment granted in this case. The
    key and essential finding that there was non-disclosure which amounted to a
    breach of s. 6(2) of the AWA and justified rescission and damages ought not to
    have been made in the circumstances of this case. That finding could not be
    made on the basis of untested evidence, and without invoking at least the
    powers under r. 20.04(2.2) to hear oral evidence.

[56]

I
    turn to the issue of the effective date of the franchise agreement for the
    purpose of a rescission remedy.

C.

Was the Rescission Claim Out of Time?

[57]

Section
    6(2) of the AWA provides that a franchisee may rescind a franchise agreement no
    later than two years after entering into the franchise agreement if the
    franchisor never provided the disclosure document.

[58]

The
    respondents signed the franchise agreement on June 16, 2010. They signed a
    replacement agreement in substantially identical terms on September 7, 2010.
    The appellants contend that the motion judge erred in concluding that the
    respondents had a right of rescission under s. 6(2) of the AWA, when the original
    franchise agreement was signed more than two years before the purported
    exercise of rescission. If this issue were determined in the appellants
    favour, the respondents action would be dismissed.

[59]

The
    appellants say that there was contradictory evidence at the motion for summary
    judgment about the reason for executing a replacement franchise agreement. Their
    evidence was that the respondents were asked to sign a new agreement after they
    had been approved for financing, which meant the franchise location could
    proceed to be developed and a closing date could be confirmed. The respondents
    evidence was that the replacement agreement was signed because the franchisor
    wanted to report the transaction in a later time period, and to avoid paying a
    commission to its broker. Guss affidavit denied this, and noted that the
    broker had been paid.

[60]

This
    conflict in the evidence is not material. Whatever the motivation for the replacement
    agreement, it is undisputed that the request originated with the franchisor. There
    was nothing to suggest that there was any benefit to the franchisee in signing
    a replacement agreement in terms that were substantially identical to the
    original agreement. The motion judge rightly concluded that [h]aving chosen to
    require the franchisees to sign and enter into a replacement agreement, the
    franchisor cannot now argue that an existing franchise agreement is already in
    place such that the protections afforded under s. 6(2) are already partially
    diluted. In arriving at this decision, he properly considered the intent and consumer
    protection purpose of the AWA.

[61]

The
    motion judges decision on the effective date of the franchise agreement for
    the purpose of s. 6(2) is entirely reasonable and supported by the evidence.
    And I do not view the credibility issues identified earlier with respect to the
    earnings projections as in any way affecting the motion judges decision on
    this issue, or that oral evidence would have been required to determine it.

[62]

I
    would therefore not interfere with the motion judges determination of this
    issue.

[63]

Considering
    my resolution of the issues above, it is not necessary to examine the issue of
    damages.

DISPOSITION

[64]

For
    these reasons, I would allow the appeal. I would set aside the judgment of the
    motion judge, with the exception of the determination that the rescission claim
    was made in time. I would award costs to the appellants in the amount agreed
    between the parties, $20,000, inclusive of HST and disbursements. As for the costs
    of the motion in the court below, if the parties are unable to agree they may
    make written submissions to this court limited to five pages each, not
    including any costs outlines, as follows: the appellants within 20 days of
    these reasons, the respondents within 15 days of receipt of the appellants
    costs submissions, with reply submissions, if any, within ten days thereafter.

K. van Rensburg J.A.

I agree S.E. Pepall J.A.

I agree G.T. Trotter J.A.

Released: July 27, 2018

[1]
Earnings projections are not required to be disclosed, but when an earnings
    projection is provided, a statement specifying the reasonable basis for the
    projection, the assumptions underlying the projections and a location where
    information is available for inspection that substantiates the projection must
    be included in the disclosure: AWA, s. 5(4); O. Reg. 581/00, s. 6(3).

[2]

Gus, who was the sole officer
    and director of the franchisor and who was not directly involved in the
    relevant dealings, also provided an affidavit denying that earnings projections
    were shown in a meeting in May 2010 and that any business plan had been
    provided by the franchisor to RBC. The appellants take no issue on appeal with
    the motion judges rejection of Gus evidence.


COURT OF APPEAL FOR ONTARIO

CITATION: Carby-Samuels II v. Carby-Samuels, 2018 ONCA 664

DATE: 20180725

DOCKET: C64705 & C64716

Hoy A.C.J.O., van Rensburg and Pardu JJ.A.

BETWEEN

Raymond Carby-Samuels II

Appellant

and

Horace R. Carby-Samuels

Respondent

Raymond Carby-Samuels II, acting in person

John E. Summers, for the respondent

Heard and released orally: July 20, 2018

On appeal from the judgment and the order of Justice Sylvia
    Corthorn of the Superior Court of Justice, dated November 16, 2017, reported at
    2017 ONSC 6814 and 2017 ONSC 6834 respectively.

REASONS FOR DECISION

[1]

The appellant, Raymond Carby-Samuels, appeals (1) the judgment of the
    application judge granting his father, the respondent Horace Carby-Samuels,
    summary judgment dismissing the appellants claim against him, and (2) the
    order of the application judge declaring that the appellant had instituted
    vexatious proceedings and conducted proceedings in a vexatious manner, and
    prohibiting him from instituting a proceeding, directly or indirectly, in any
    court in Ontario without first obtaining leave under s. 140(3) of the
Courts
    of Justice Act
, R.S.O. 1990, c. C.43.

[2]

The appellant argues that the court cannot declare a Canadian citizen
    vexatious for seeking to ensure the well-being of his Mom as an expression of
    religious conscience as affirmed by the Charter. He also argues that the court
    should find that there was a reasonable apprehension of bias because the application
    judge accepted his fathers assertions, failed to refer to evidence that he
    says supported his position, failed to grant an adjournment, and proceeded in the
    face of his intention to bring a motion for an order that she recuse herself.
    Further, he argues that the application judge erred in relying on an affidavit
    of an administrator in his fathers counsels office. Finally, he also challenges
    the authority of Mr. Summers to act on behalf of his father and asks that he be
    ordered to disclose his fees.

[3]

There is no basis for this court to interfere with the application judges
    order granting summary judgment dismissing the appellants action against his
    father, seeking an order permitting him to see his mother, who was 85 years of
    age at the time of the motion. The application judge correctly held that there
    is no basis for the court to make an order compelling a mentally competent
    adult (the father) to require another mentally competent adult (the mother) to
    interact with a third family member (the appellant).

[4]

Nor is there any basis to interfere with the application judges order
    declaring the appellant a vexatious litigant and prohibiting him from
    instituting any proceeding in Ontario without leave. The application judge
    provided thorough and compelling reasons. Further, there is a strong
    presumption of judicial impartiality and a heavy burden on a party who seeks to
    rebut this presumption. The test is whether a reasonable, informed person,
    viewing the matter realistically and practically  and having thought the
    matter through   would conclude that it is more likely than not that the
    judge, whether consciously or unconsciously would not decide fairly: see
Childrens
    Aid Society of the Regional Municipality of Waterloo v. C.T.
, 2017 ONCA
    931, [2017] O.J. No 6324, at para. 84. The appellant has not discharged the
    heavy burden of rebutting the strong presumption of judicial impartiality.

[5]

The affidavit with which the appellant takes issue does not appear to be
    in the record. Counsel for the respondent advises that the affidavit merely
    served to put various court proceedings and other communications between the
    parties before the court. This is not unusual in vexatious litigant
    proceedings.

[6]

Finally, there is nothing in the record to suggest that Mr. Summers has
    been acting at any time in these proceedings without the fathers authority and
    there is no basis on which the court can compel the disclosure the appellant
    seeks.

[7]

Accordingly, the appeal is dismissed. The father is entitled to costs of
    the appeal, fixed in the amount of $1,500, inclusive of HST and disbursements.

Alexandra Hoy
    A.C.J.O.

K.M. van Rensburg
    J.A.

G. Pardu J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Caron (Re), 2018 ONCA 613

DATE: 20180705

DOCKET: C64814

Doherty, Rouleau and Fairburn JJ.A.

IN THE MATTER OF: Marc Anthony Caron

AN APPEAL UNDER PART XX.1 OF THE
CODE

Ian McCuaig, for the appellant, Marc Anthony Caron

Joe Hanna, the Attorney General of Ontario

Jacquie Dagher, for the respondent, the Person in Charge
    of the Centre for Addiction and Mental Health

Heard and released orally: July 3, 2018

On appeal from the disposition of Ontario Review Board,
    dated November 9, 2017, with reasons dated December 27, 2017.

REASONS FOR DECISION

[1]

The appellant was found not criminally
    responsible on October 6, 2015. The index offences involve threats to cause
    death and bodily harm to his biological mother.

[2]

The appeal is from the Boards disposition dated
    November 9, 2017. Although the appellant accepts the Boards view that he must
    remain detained within the secure forensic unit of the Brockville Mental Health
    Centre, he contends that the Board acted unreasonably in allowing him only
    supervised access to the hospital grounds. The appeal rests upon this narrow
    objection to the disposition.

[3]

We see no basis to interfere with the Boards
    decision on that point. It was within the range of reasonable outcomes.

[4]

We disagree that the Board arrived at its
    decision on the basis of an unsubstantiated suggestion that the appellant had
    previously threatened a staff member at the hospital. Although there is some
    uncertainty around what took place with the staff member, the Board
    specifically noted that the allegation was not critical to its decision.

[5]

The evidentiary record supports the Boards decision
    to maintain a level of monitoring when the appellant attends on the hospital
    grounds. In particular, the appellant:

·

is at a very high risk to reoffend, even if his
    mental illness is controlled;

·

has engaged in highly anti-social behaviour in
    the past;

·

has a lengthy and serious criminal record;

·

has a high score on the psychopathy checklist;
    and

·

has potentially suffered from a sadistic
    paraphilia that has not yet been adequately assessed.

[6]

Although the appellant has done well in the
    recent past, the psychiatrist who testified at the hearing emphasized that his
    progress should be considered against the fact that he is supervised at all
    times.

[7]

The Board acknowledged that the appellant had
    made significant progress. Even so, there was evidence upon which the Board
    could arrive at the conclusion that accompanied access to the grounds was still
    required. We defer to that finding.

[8]

The appeal is dismissed.

Doherty
    J.A.

Paul
    Rouleau J.A.

Fairburn
    J.A.