COURT OF APPEAL FOR ONTARIO

CITATION: Lauesen v. Silverman, 2016 ONCA 327

DATE: 20160503

DOCKET: C59992

Feldman, Lauwers and Benotto JJ.A.

BETWEEN

Melody Lauesen

Plaintiff (Appellant)

and

Fern Silverman and Goldman Sloan Nash and Haber
    LLP

Defendants (Respondents)

Bryan D. Rumble and Alissa P. Goldberg, for the
    appellant

B. Robin Moodie and Bronwyn M. Martin, for the
    respondents

Heard: October 29, 2015

On appeal from the order of Justice Andra Pollak of the Superior
    Court of Justice, dated April 16, 2015.

Feldman J.A.:

[1]

The appellant did not know she should sue her former lawyer for making
    an improvident settlement of a car accident action until she went to another
    lawyer who advised her to do so, after he obtained an expert opinion about the
    extent of her injuries. The issue in this case is discoverability for
    limitation purposes: when is it reasonable for a lay person to know that she should
    sue her former lawyer?

[2]

The appellant was injured in a car accident on November 16, 2002. Her
    car was stopped at a red light when another driver struck her vehicle violently
    from behind. The appellant consulted the respondent solicitor, Ms. Fern Silverman
    (the respondent), who commenced an action against the other driver for damages
    suffered in the accident. At mediation on November 14, 2005, the appellant relied
    on the advice of the respondent to accept $26,169.36 in full settlement of the
    tort claim.

[3]

The appellant continued to suffer from her injuries and asked the
    respondent to continue to assist her in obtaining statutory accident benefits.
    In 2009, the solicitor-client relationship between the parties ended when the
    respondent asked the appellant for a further monetary retainer to pursue her
    statutory accident benefits claim. In 2010, the appellant consulted another
    lawyer about pursuing that claim. When that lawyer obtained an opinion from a
    psychiatrist in June 2011 that the appellants injuries met the catastrophic
    threshold under the statutory accident benefits regulation, the appellant
    commenced an action against the respondents for breach of contract, negligence,
    and breach of fiduciary duty for advising her to accept an improvidently low settlement
    amount for her tort claim, as well as for failing to explain to her that the
    settlement was full and final. The action against the respondents was commenced
    on August 26, 2011, almost six years after the date of the impugned settlement.

[4]

On a motion for summary judgment, the motion judge framed the issue as
    whether the appellants claim was discoverable prior to August 26, 2009, two
    years before she issued her statement of claim against the respondents. The
    motion judge accepted the respondents argument that the appellant had the
    necessary knowledge to bring her claim against them when she entered into the
    settlement, or at least that she should have had that knowledge more than two
    years before the claim was issued. The motion judge therefore granted summary judgment
    dismissing the action. This is the appeal of that order.

Facts

[5]

The appellant sustained both physical and psychological injuries in a
    car accident in November 2002, where the other driver was at fault. In May 2004,
    she retained the respondent, who commenced an action against the driver of the
    other vehicle in November of that year. Following examinations for discovery in
    October 2005, the appellant attended a mediation in November with the
    respondent, who recommended that she settle the tort claim for the final offer
    of $26,169.36. Although she was unhappy with the amount, the appellant accepted
    the respondents advice and agreed to the settlement. Her evidence before the
    motion judge was that although she felt the amount of the settlement was too low,
    she attributed the unfairness of it to the law and the legal system, and not to
    the respondent.

[6]

The respondent continued to represent the appellant for the purposes of
    obtaining statutory accident benefits. The appellant continued to suffer pain
    and psychological trauma and in May 2008, she wrote to the respondent, asking
    whether anything more could be done with respect to the car accident. In
    February 2009, the respondent advised the appellant that she would require a further
    retainer fee of $500.00 to continue to pursue her statutory accident benefits
    claim. The appellants evidence was that she could not afford the retainer, and
    the solicitor-client relationship was terminated at that time. The respondent never
    indicated to the appellant that she had erred in recommending the settlement,
    nor did the appellant terminate the relationship for that reason. In fact, the
    respondent continues to maintain that she made no error.

[7]

On the recommendation of a law clerk she spoke with, the appellant
    consulted and retained her current counsel, Mr. G. Joseph Falconeri, in April
    2010, to assist her in obtaining her statutory accident benefits. He sent her
    for a medical-legal assessment in November 2010 to a psychiatrist, Dr. Richard Guscott,
    who provided a report in June 2011.

[8]

That report provided his opinion that the appellant had suffered physical
    and psychological damage as a result of the accident that was sufficiently
    severe to meet the definition of catastrophic impairment under the statutory accident
    benefits regulation. Specifically, he found that the appellant showed Class IV
    marked impairments with respect to activities of daily living, social
    functioning, concentration, persistence, and pace, as well as an increased
    likelihood of deterioration or decompensation in a work or work-like setting.

[9]

Upon receipt of Dr. Guscotts report, Mr. Falconeri determined that it
    was appropriate for the appellant to sue the respondent for breach of contract,
    negligence, and breach of fiduciary duty for recommending the improvident
    settlement, and he issued the statement of claim on August 26, 2011.

Summary judgment

[10]

Because the claim was issued more than two years after the impugned settlement,
    the respondents took the position that the action was statute barred under the
Limitations
    Act, 2002
, S.O. 2002, c. 24,

Sched. B, and brought a summary
    judgment motion to determine that issue. The parties agreed that no trial was
    necessary and that the issue could be determined on summary judgment.

[11]

The motion judge outlined the appellants and respondents positions and
    arguments. In granting summary judgment to the respondents, she agreed that the
    appellant had the necessary knowledge at the time of the settlement to bring
    her claim, or else that she ought to have taken steps to discover her claim and
    failed to do so. The motion judge specifically accepted the respondents argument
    that the plaintiffs evidence was deficient because she did not explain how Dr.
    Guscotts report caused her to realize that she had a cause of action against
    the respondents, given that the report did not address either the settlement or
    the standard of care the respondent owed to the appellant.

Issues

[12]

The issue to be resolved on this appeal is whether the motion judge erred
    in her interpretation and application of s. 5(1) of the
Limitations Act,
    2002
by finding that the appellants claim was discovered or discoverable
    prior to August 26, 2009.

Analysis

[13]

The governing statutory framework is ss. 4 and 5 of the
Limitations
    Act,

2002
, which state:

4.
Unless this Act
    provides otherwise, a proceeding shall not be commenced in respect of a claim
    after the second anniversary of the day on which the claim was discovered.

5. (1)
A claim is
    discovered on the earlier of,

(a) the day on which the person with the claim
    first knew,

(i) that the injury, loss or damage had
    occurred,

(ii) that the injury, loss or damage was
    caused by or           contributed to by an act or omission,

(iii) that the act or omission was that
    of the person           against whom the claim is made, and

(iv) that, having regard to the nature
    of the injury, loss or         damage, a proceeding would be an appropriate
    means          to seek to remedy it; and

(b) the day on which a reasonable person with the
    abilities and in the circumstances of the person with the claim first ought to
    have known of the matters referred to in clause (a).

(2)
A person with a
    claim shall be presumed to have known of the matters referred to in clause (1)
    (a) on the day the act or omission on which the claim is based took place,
    unless the contrary is proved.

[14]

In this case, the injury, loss or damage is the impugned settlement of
    the car accident claim that the appellant made with the driver of the other
    car, on the advice of her lawyer, the respondent.

[15]

When a person settles an action, it is most often for an amount that is
    less than the full amount of the claim. It is based on a compromise reached by
    both sides in order to finalize the litigation without incurring the additional
    cost, time and risk of an uncertain result in proceeding to trial. Many factors
    go into the decision to settle an action rather than have a trial. They include
    the perceived strength of the case, the availability of necessary evidence, the
    credibility and reliability of that evidence, and the delay until a trial date,
    to name but some of the factors.

[16]

The fact that a person accepts a settlement that is less than the full
    amount of the claim does not mean the person has suffered an actionable loss.
    The person has made a calculated assessment of all of the relevant factors and
    decided to accept an amount that reflects that assessment and is acceptable on
    that basis.

[17]

That is what occurred in this case. At the time, the appellant was not
    happy with the amount she was receiving. That is quite normal. But she accepted
    it based on her lawyers advice. It would be anomalous indeed if every
    settlement of an action for less than the amount of the claim were viewed as an
    injury, loss or damage based on breach of contract, negligence or breach of fiduciary
    duty by the lawyer acting for the settling party.

[18]

The respondents position continues to be that the settlement was
    appropriate. She maintains there was no injury, loss or damage at all. However,
    as the alleged improvidence of the settlement forms the basis of the
    appellants claim, the issue for limitation purposes is when the appellant knew
    about it and when she ought to have known about it.

[19]

The respondents submitted on the motion that the appellant was aware of
    the following facts before August 26, 2009, which was two years before the
    statement of claim was issued:

·

The appellant had settled her tort claim arising out of the
    accident at the mediation on November 14, 2005;

·

The appellant was unhappy with the settlement amount, and had
    been told by her parents that it was insufficient;

·

The appellant continued to suffer from significant physical and
    psychiatric injuries;

·

The appellant had been diagnosed with chronic pain syndrome, post-traumatic
    stress disorder, fibromyalgia, chronic psychiatric difficulties, anxiety, and
    major depression;

·

The appellant was unable to pay for her needs and treatments; and

·

The appellant required ongoing help and treatment.

[20]

The respondents argued before the motion judge that the appellant was
    unhappy with her 2005 settlement, but did nothing to investigate its propriety
    until 2010. They submitted that ignorance of the law or the legal consequences
    of the facts does not postpone the running of the limitation period. They also
    argued that Dr. Guscotts expert report added nothing new to the appellants
    knowledge of the facts supporting her claim, nor did it comment on the
    settlement or the appropriate standard of care, and it therefore was irrelevant
    to the determination of when the limitation period began to run. In the
    alternative, they argued that the appellant was not duly diligent in seeking to
    acquire the material facts that gave rise to her claim.

[21]

The motion judge did not make a finding whether the appellant had actual
    knowledge of the material facts underlying her claim at the time of the
    settlement, or when a reasonable person with the appellants abilities and in
    her circumstances first ought to have known of them. It was implicit in the finding
    that the appellants action was statute barred that the motion judge accepted
    the respondents argument that the appellant knew or ought to have known she
    had a claim more than two years before the statement of claim was issued on
    August 26, 2011.

[22]

I will address each of the respondents arguments. Accepting that the
    appellant knew the facts set out above at para. 19, those facts were also known
    to the respondent, who continued to act as the appellants lawyer to pursue her
    statutory accident benefits claim until February 2009. Those facts did not
    cause the respondent to consider that the appellant had a claim against her.
    Had she thought otherwise, she was obliged by r. 7.8(1) of the Law Society of
    Upper Canadas
Rules of Professional Conduct
to advise the appellant
    that she had made an error. And in accordance with r. 7.8(2), she would also
    have had to notify her liability insurer, LAWPRO, to ensure the client would be
    indemnified, if required.

[23]

Advising a client of an error or omission will normally give the client
    knowledge of the facts necessary to know that she has a claim, and thereby  commence
    the running of the limitation period under s. 5(1)(a). However, that did not
    occur in this case.

[24]

The appellants uncontradicted evidence was that although she felt the
    settlement was unfair as far back as 2005, she did not know the settlement was
    improvident or that she had a claim against the respondent until she was so
    advised by her new lawyer, based on Dr. Guscotts report. That responds to s.
    5(1)(a) of the Act. It also responds to s. 5(2), as it rebuts the presumption that
    she knew of the matters referred to in s. 5(1)(a) on the day she entered into the
    settlement.

[25]

Under s. 5(1)(b), the question is when a reasonable person with the
    appellants abilities and in her circumstances ought to have first known that
    she had a claim against the respondent for breach of contract, negligence, or
    breach of fiduciary duty for recommending an improvident settlement. In other
    words, when is it reasonable for a lay person to know that she should sue her
    lawyer?

[26]

Until the appellant retained her current counsel, no one advised her
    that the respondent may have made an error in recommending the settlement. A leading
    recent decision on this issue is
Ferrara v. Lorenzetti, Wolfe Barristers
    and Solicitors
,
2012 ONCA
    851, 113 O.R. (3d) 401.
[1]
In that case, a lawyer erred in his calculation of a statement of adjustments for
    the purposes of minutes of settlement, leaving his client liable for a
    deficiency. The lawyer assured his client he had not made an error. When the
    client sued the lawyer within two years of the court finding against the client
    on the deficiency, the lawyer moved for summary judgment on the basis that the
    claim was statute barred because the client should have known about the
    lawyers error once the statement of claim in the deficiency action had been
    issued. The motion judge granted summary judgment, but this court allowed the
    appeal.

[27]

The appellant in that case had been a client of the respondent lawyer for
    20 years. The lawyer repeatedly assured the client he had not made an error and
    was also involved in the defence of the deficiency action. He never advised the
    client in accordance with r. 7.8 (then r. 6.09) of the
Rules of
    Professional Conduct
that he might have made an error. Furthermore, none
    of the senior litigation lawyers the appellant retained to defend the
    deficiency action ever told him he had a claim against his lawyer.

[28]

Those two factors were determinative for Laskin J.A. in concluding, based
    on the modified objective test under s. 5(1)(b), that the claim was not
    discoverable until the court in the deficiency action found that the lawyer had
    made an error in his calculation. Laskin J.A. observed that it lay ill in the
    mouth of the lawyer to say that although he had maintained throughout that he
    made no error, the client should have known that he did.

[29]

Unlike in
Ferrara
,

where the correctness of the statement of adjustments prepared by the
    lawyer was in dispute in the deficiency action, in this case, no issue was ever
    raised about the propriety of the settlement. The respondent never advised or
    suggested to the appellant that she had made an error, and she continued to act
    for the appellant in pursuing her further rights arising out of the car
    accident.

[30]

Moreover, although the appellant in this case did not consult other
    senior litigation lawyers  as was the case in
Ferrara
 neither did
    she receive legal advice from anyone else while the solicitor-client
    relationship with the respondent was ongoing as to any potential problem with
    the settlement.

[31]

For these reasons, although the facts of
Ferrara
are different
    in some respects, the factors relied upon by Laskin J.A. are nevertheless
    applicable. On the record in this case, a reasonable person with the
    appellants abilities and in her circumstances would not have realized that she
    had a claim against the respondents, when no one, including the respondent, indicated
    to her that an error might have been made with respect to the settlement.

[32]

The next argument, accepted by the motion judge, was that the appellant
    did not explain how the opinion of Dr. Guscott caused her to realize that she
    had a claim against the respondent because it did not address the respondents
    alleged negligence or the settlement.

[33]

This conclusion constitutes a misapprehension of the evidence by the
    motion judge. The expert opinion of Dr. Guscott made clear for the first time
    that the extent of the appellants injuries from the accident was legally
    significant in that it met the catastrophic threshold for the purposes of a
    statutory accident benefits claim. The appellants evidence was that on the
    basis of that opinion, Mr. Falconeri concluded that the appellant should not
    have settled her tort claim for such a low amount and that her former lawyer
    was at fault for advising her to do so.

[34]

It was only with that information, and with the legal advice of her new lawyer,
    that the appellant first knew or had the ability to know that she had a claim
    against the respondents.

[35]

The motion judge equated the case to
McSween v. Louis
(2000), 187
    D.L.R. (4th) 446 (Ont. C.A.), a medical malpractice action commenced only after
    the plaintiff patient obtained a medical expert opinion. In that case, this
    court held that the action was statute barred and that the receipt of the
    expert opinion was not a determinative factor.

[36]

The court explained that it was the type of case where a medical opinion
    was not necessary for the plaintiff to know the material facts on which to base
    an action against her doctor. That was because when the medical procedure was performed,
    the plaintiff knew something had gone wrong. In any event, the experts letter
    did not add any new information to what the plaintiff already knew about the
    circumstances of the injury, or offer an opinion as to its cause. The
McSween
case is wholly distinguishable.

[37]

The motion judge also accepted the respondents submission that the appellants
    ignorance of the law or the legal consequences of the facts did not postpone
    the running of the limitation period. However, that proposition does not assist
    the respondents in this case because the appellant did not know the material facts
    that would constitute the elements of a cause of action against the respondents.
    Perell J. explained the concept in
Nicholas v. McCarthy Tétrault
,
2008 CanLII 54974 (Ont. S.C.), at para.
    27, affd 2009 ONCA 692, 254 O.A.C. 197, leave to appeal to S.C.C. refused,
    [2009] S.C.C.A. No. 476:

The circumstance that a potential claimant may not appreciate
    the legal significance of the facts does not postpone the commencement of the
    limitation period
if he or she knows or ought to know the
    existence of the material facts, which is to say the [constituent] elements of
    his or her cause of action.
Error or ignorance of the law or legal
    consequences of the facts does not postpone the running of the limitation
    period:
Coutanche v. Napoleon
    Delicatessen
(2004)
,
2004 CanLII 10091 (ON CA)
,

72 O.R. (3d) 122 (C.A.)
;

Calgar v. Moore
,

[2005] O.J. No.
    4606 (S.C.J.)
;
Milbury v.
    Nova Scotia (Attorney General)
(2007)
,

2007 NSCA 52 (CanLII)
,

283 D.L.R. (4th) 449 (N.S.C.A.)
;
Hill v. South Alberta Land Registration
    District
(1993)
,

1993 ABCA 75 (CanLII)
,
100 D.L.R. (4th) 331
    (Alta. C.A.)
. [Emphasis added.]

[38]

The respondents alternative argument was that the appellant did not
    exercise due diligence in attempting to gain knowledge of the material facts underlying
    her claim. The motion judge did not address this issue because she found that a
    reasonable person in the appellants circumstances would have known the facts necessary
    to bring this claim at the time of the settlement, or at least two years prior
    to the date on which the statement of claim was issued.

[39]

In order to analyze this allegation, it is necessary to examine the
    timeline of events. The settlement was made in November 2005. The respondent
    continued to represent the appellant with respect to her ongoing statutory
    accident benefits claim until February 2009. The respondent never advised the
    appellant of any error in her advice to accept the settlement. In February 2009,
    the solicitor-client relationship ended because the appellant was not able to
    pay a further monetary retainer  not because she was dissatisfied with the
    respondent as a lawyer.

[40]

As she continued to suffer from injuries related to the accident, and
    needed money to cover her expenses, about a year after the termination of the
    solicitor-client relationship, the appellant accepted the advice of a law clerk
    to consult and retain her current lawyer. Until Mr. Falconeri received the
    expert medical-legal opinion, he did not have enough information to decide
    whether to pursue a claim against the respondents. It took almost a year to
    obtain that opinion, but that delay was not the subject of complaint on the
    motion record.

[41]

In my view, it was not unreasonable for the appellant to take just over
    a year before seeking further legal assistance to pursue her statutory accident
    benefits claim, and she exercised due diligence in discovering her claim. This
    is especially so in the circumstances of this case for two reasons: 1) she left
    her first lawyer, the respondent, only because she was unable to afford her
    further assistance, and not because of any concern about the propriety of the
    settlement; and 2) she had no basis to believe that she might have a claim
    against the respondent or that the respondent had made any error or breach of
    duty in advising her to accept the settlement, and therefore there was nothing for
    her to investigate.

Conclusion

[42]

The motion judge erred in her interpretation and application of s. 5(1)
    of the
Limitations Act, 2002
to the circumstances of this case. The
    appellant did not have knowledge that she had a claim against her former
    lawyer, the respondent, until she learned about it from her current counsel,
    based on an expert medical-legal opinion he obtained. The motion judge
    misapprehended the significance of that expert opinion. It was the first
    indication to the appellant and her new lawyer that her injuries from the
    accident were very significant and warranted more compensation than she had
    received from the settlement.

[43]

Furthermore, given that the appellant had no reason to believe there was
    anything to investigate with respect to a potential claim against the
    respondent, she exercised reasonable due diligence in the circumstances of this
    case.

[44]

I would therefore allow the appeal and set aside the order of the motion
    judge that the appellants claim is statute barred, with costs to the appellant
    in the amount of $10,000, inclusive of disbursements and HST. Given that the
    parties agreed that the motion should be decided by summary judgment, I would
    order judgment to go that the claim is not statute barred and may proceed to
    trial on the merits.

Released: KF MAY 3, 2016

K. Feldman J.A.

I agree. P. Lauwers
    J.A.

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

[1]
See also
Clarke v. Faust
, 2016 ONCA 223, which was decided after the
    argument in this case.


COURT OF APPEAL FOR ONTARIO

CITATION: Lepage (Re), 2016 ONCA 403

DATE: 20160527

DOCKET: C60861

Sharpe, Juriansz and Roberts JJ.A.

In the Matter of the Bankruptcy of Raymond
    Stephen Paul Lepage

Stephanie Lauriault and Pierre-Paul Trottier, for the
    Attorney General of Canada

J. Alden Christian, for Raymond Lepage

Keith MacLaren, for the Trustee

Heard: April 4, 2016

On appeal from the judgment of Justice Robert N. Beaudoin
    of the Ontario Superior Court of Justice in Bankruptcy and Insolvency, dated July
    13, 2015, with reasons reported at 2015 ONSC 4525.

By the Court
:

[1]

In this tax-driven bankruptcy, the Trustee in bankruptcy had the value
    of the residence of the bankrupt, Raymond Lepage, appraised early in the
    bankruptcy in 2010, and concluded that it had negative equity and no value to
    the estate. The Canadian Revenue Agency (CRA), the sole unsecured creditor, did
    not dispute that valuation until 2015 when the Trustee filed its report regarding
    Mr. Lepages application for discharge.

[2]

The motion judge found that the Trustee made representations to Mr.
    Lepage in 2010 that the Trustee would disclaim the property. However, the Trustee
    took no steps pursuant to the
Bankruptcy and Insolvency Act
, R.S.C.
    1985, c. B-3 (
BIA
) to divest its interest in the residence. The motion
    judge found that Mr. Lepage relied on the Trustees representations by paying
    the mortgage, property taxes and insurance for several years.

[3]

This was Mr. Lepages second bankruptcy. As a result, pursuant to s.
    172.1(1)(b)(ii) of the
BIA
, he was not eligible for discharge for thirty-six
    months from the date of bankruptcy.

[4]

On Mr. Lepages application for discharge in 2015, the Trustee reported
    that no amounts were realized on Mr. Lepages property. In 2015, the CRA
    obtained a new appraisal of Mr. Lepages house. The appraisal indicated that
    there had been a significant increase to the equity in the property. As a
    result, the CRA objected to the Trustees report.

[5]

The motion judge ruled, pursuant to ss. 67(1)(c) and 71 of the
BIA
,
    that the increase in equity in Mr. Lepages house was after-acquired property
    that accrued to the estate and hence to the benefit of the CRA.

[6]

However, the motion judge found that the representations made by the Trustee
    and relied upon by Mr. Lepage gave rise to promissory estoppel and precluded
    the Trustee from claiming the entire increase in value of the equity.

[7]

Although Mr. Lepage sought credit for all interest, principal, taxes and
    insurance payments, the motion judge declined to grant him credit for all of
    those amounts, because he found that Mr. Lepage would have incurred living
    expenses elsewhere. However, he ruled that Mr. Lepage was entitled to credit
    for the reduction in the principal amount of the mortgage from October 31,
    2010, the date the Trustees representations were made, to the date of Mr.
    Lepages discharge.

[8]

While the motion judge did not explicitly find that the doctrine of
    promissory estoppel applied in this case, it is common ground that the motion
    judge must have reached that conclusion.

[9]

The CRA argues that he erred in applying the doctrine of promissory estoppel
    and in giving Mr. Lepage credit for the reduction in the principal amount of
    the mortgage.

[10]

To rely on promissory estoppel, Mr. Lepage must establish that:

(a)      the
    Trustee, by words or conduct, made a promise or assurance which was intended to
    affect its legal relationship with Mr. Lepage, and intended Mr. Lepage to act
    upon it; and

(b)      Mr.
    Lepage, relying on the Trustees representations, acted on it or in some way
    changed his position to his detriment.

(See
Deloitte &
    Touche LLP v. Marino
(2004), 72 O.R. (3d) 274, at para. 32)

[11]

It has been held that, in certain circumstances, a Trustee in bankruptcy
    can be barred from claiming an asset on the ground of estoppel:  see
Deloitte
    & Touche LLP v. Marino
;
Koenne (Re)
2010 ONCA 524, at para.
    13.

[12]

In the present case, there does not appear to be any dispute that the
    Trustee made the representation to Mr. Lepage that it would disclaim any
    interest in the house. In his affidavit, Mr. Lepage swore that he maintained
    the house in reliance on the Trustees representations. In our view, it was
    open on the evidence for the motion judge to find that Mr. Lepage relied on
    that representation by making payments on the mortgage.

[13]

The more difficult question is whether Mr. Lepage demonstrated
    detrimental reliance which is an essential element of promissory estoppel (see
Ryan
    v. Moore
, 2005 SCC 38, at para. 68).

[14]

The CRA argues that the motion judge erred in finding that promissory
    estoppel applied because there was no detrimental reliance by Mr. Lepage on the
    Trustees representations.

[15]

Mr. Lepage submits that but for the representations made by the Trustee,
    he would have made different choices, allowing him to benefit from the money he
    was entitled to spend on reasonable living expenses. Mr. Lepage contends
    further that the CRA unfairly benefitted from the increase in equity in his
    home because the increase in equity was available to the estate and the CRA
    only as a result of Mr. Lepage maintaining the home by paying taxes, insurance,
    mortgage interest and principal, and other charges on the basis of the
    Trustees representations.

[16]

We do not accept those submissions.

[17]

In our view, the motion judge erred by failing to apply the provisions
    of ss. 67, 68 and 71 of the
BIA
to Mr. Lepages surplus income and thereby
    allowed Mr. Lepage to retain the after-acquired equity that was created in his
    house.

[18]

During the period that he was an undischarged bankrupt, Mr. Lepage was
    not entitled to build up and keep any assets acquired after his bankruptcy. As
    the motion judge correctly recognized, all after acquired assets were vested in
    the Trustee for the benefit of Mr. Lepages creditors.

[19]

The only money that Mr. Lepage was entitled to keep as an undischarged
    bankrupt under the
BIA
was the portion of his income that he used as
    reasonable living expenses. In accordance with s. 68 of the
BIA
, money
    not used as reasonable living expenses was surplus income that vested in the
    Trustee for the benefit of Mr. Lepages creditors. The motion judge erred in
    failing to recognize that Mr. Lepages surplus income formed part of his estate
    that vested in the Trustee for the benefit of his creditors and in reasoning
    that Mr. Lepage could use his surplus income to walk away and build equity
    elsewhere.

[20]

Mr. Lepage was required to submit monthly income and expense statements
    to the Trustee. The Trustee was obliged to monitor Mr. Lepages income and
    expenses to determine whether there was any surplus income for the benefit of
    his creditors. In his statements, Mr. Lepage listed his monthly mortgage
    payments and other household expenses as part of his reasonable living
    expenses.  As the motion judge found, Mr. Lepage was not entitled to credit for
    his reasonable living expenses because, if Mr. Lepage had not continued to live
    at his residence, he would have incurred living expenses elsewhere.

[21]

There was no basis for the motion judge to distinguish between the
    mortgage principal payments and the other payments related to mortgage interest
    and maintaining the house, because, as stated by Mr. Lepage in his monthly
    statements to the Trustee, they were all reasonable living expenses. Mr. Lepage
    was not entitled to be effectively reimbursed for his reasonable living
    expenses from the increased equity in his house.

[22]

In our view,
Deloitte & Touche LLP v. Marino
is distinguishable. In that case, the bankrupt made
    mortgage and other payments after discharge relying on the trustees
    representations that no claim would be made against her home. As a discharged
    bankrupt, she was entitled to dispose of her property as she wished in
    accordance with the fresh start principle.

[23]

Mr. Lepages situation was
    different. As an undischarged bankrupt, he remained subject to the rule that
    after-acquired property vested in the trustee. Mr
. Lepage was not
    entitled to retain any surplus income that exceeded his reasonable living
    expenses. Having claimed the mortgage payments as reasonable living expenses,
    he was not entitled to be credited or reimbursed for those payments or to have
    them treated as other than after-acquired property that vested in the trustee.

[24]

The Trustee asks us to comment on the guidance offered by the motion
    judge on how Trustees should deal with a property such as that at issue in this
    appeal. Obviously, the overarching duty of the Trustee to maximize the value of
    the estate governs. How that is best accomplished will depend upon the
    circumstances of the particular case.

[25]

If the Trustee decides to hold on to the property in the hope that its
    market value will rise, a practical way to cover ongoing costs of interest,
    insurance, taxes and maintenance must be found. In many if not most cases, that
    will not be possible and the Trustee will conclude that it is best to dispose
    of the property quickly or disclaim any interest in it. We agree with the
    motion judge that if the bankrupt remains in the property or acquires it from
    the Trustee before discharge, subject to any order to the contrary, any
    increase in equity is after-acquired property that accrues to the benefit of the
    estate.

[26]

To ensure an orderly process, any arrangements between the Trustee and
    the bankrupt regarding the property should be reported to the inspectors at the
    time they are made so that timely objections can be made.

[27]

For these reasons, the appeal is allowed. The CRA is not seeking any
    costs in relation to this appeal or the motion. Accordingly, there will be no
    order as to costs.

Released: May 27, 2016

Robert J. Sharpe J.A.

R.G. Juriansz J.A.

L.B. Roberts J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Levesque (Re), 2016 ONCA 393

DATE: 20160525

DOCKET: C61210

Rouleau, Pardu and Benotto JJ.A.

In the Matter of the Bankruptcy of Michael
    Levesque

Of the Town of
    Lasalle, in the County of Essex, and Province of Ontario

Raymond Colautti and Anita Landry, for the appellant

Stephen Schwartz, for the respondent

Heard: May 6, 2016

On appeal from the order of Justice Helen A. Rady of the Superior
    Court of Justice, dated September 10, 2015.

ENDORSEMENT

[1]

The appellant, 363148 Ontario Limited o/a AAA StockN Lock Self Storage,
    has been unable to recover on a judgment it has against Michael Levesque and
    Engineered Systems Inc., jointly and severally, for just over $600,000. It
    appeals from the dismissal of its application for an order that the debtor, Mr.
    Levesque, be adjudged bankrupt.

[2]

It submits that the application judge erred in four respects:

·

She
    applied the wrong standard of proof and reversed the onus of proof.

·

She
    erred in concluding that there was only one creditor, the appellant, and that therefore
    special circumstances had to be proven before a bankruptcy order could be made.

·

Even
    if this was a case of a single creditor, she erred in failing to conclude that
    special circumstances justifying a bankruptcy order were present.

·

She
    erred in taking into consideration the fact that other enforcement steps could
    have been taken by the appellant.

[3]

We do not accept these arguments.

[4]

The petitioning creditor must establish the following essential elements
    to obtain a bankruptcy order:

·

There
    is a debt of at least $1000 owing to the petitioning creditor;

·

The
    debtor has committed an act of bankruptcy within the preceding six months; and

·

There
    is an unsecured part of the secured creditors claim that exceeds $1000, after
    the creditor has estimated the value of its security.

See the
Bankruptcy and Insolvency Act
, R.S.C.
    1985, c. B-3, s. 43 (the
BIA
);
Re Fengar Investments Corp.
(1993)
, 17 C.B.R. (3d) 167 (Ont. C.J. (Gen.
    Div.)), at para. 20.

[5]

Here, the act of bankruptcy alleged is that the debtor ceased to meet
    his liabilities generally as they become due: see the
BIA
, s. 42(1)(j).

[6]

The application judge correctly set out the nature of bankruptcy
    proceedings and the standard of proof, at para. 4 of her reasons:

It is well established that proceedings under the
BIA
are quasi-criminal in nature. The act(s) of bankruptcy and all allegations set
    out in the application must be proven on sufficient evidence:
Re Holmes
(1975), 9 O.R. (2d) 240 (S.C.);
Re Valente
(2004), 70 O.R. (3d) 31
    (C.A.).

[7]

She went on to rely on Brown J.s decision in
Re Ivany
, 2012
    ONSC 7058, 97 C.B.R. (5th) 214, at para. 12, for the test for determining when
    a debtor has failed to meet his liabilities generally as they become due:

To demonstrate that a debtor has ceased to meet his liabilities
    generally as they become due generally requires, in the absence of special
    circumstances, (i) proof of the outstanding debt owed to the applicant and (ii)
    evidence that the debtor has ceased to meet his liabilities to its creditors in
    general. The existence of unpaid creditors is not sufficient, in and of itself,
    to establish an act of bankruptcy; the applicant must prove, on the balance of
    probabilities, that the debtor has ceased to meet its liabilities generally as
    they become due. Since the machinery of the BIA is for the benefit of the
    creditors of a debtor as a class, establishing that a debtor has ceased to meet
    his liabilities generally requires some evidence that the debtor has ceased to
    meet liabilities other than those incurred towards the applicant creditor. [Footnotes
    omitted.]

[8]

The application judge did not err in holding that the onus lies on the
    petitioning creditor to establish each of the elements prerequisite to a
    bankruptcy order on sufficient evidence.

[9]

The application judge was not persuaded on the evidence before her that
    the debtor had failed to meet his liabilities generally. His evidence was that
    his Visa card was current and that he was negotiating a settlement with another
    creditor. While the appellants principal had deposed that the debtor had other
    debts, he had no evidence of them.

[10]

As this court stated in
Re Valente

(2004), 70 O.R. (3d) 31, at para. 8, a bankruptcy order may be
    made in the case of a single debt where there are special circumstances:

It is now well-settled in the case law that the failure to pay
    a single creditor can constitute an act of bankruptcy under s. 42(1)(j) when
    there are special circumstances, which have been recognized in three
    categories: (a) where repeated demands for payment have been made within the
    six-month period; (b) where the debt is significantly large and there is fraud
    or suspicious circumstances in the way the debtor has handled its assets which require
    that the processes of the
B.I.A.
be set in motion; and (c) prior to
    the filing of the petition, the debtor has admitted its inability to pay
    creditors generally without identifying the creditors. [Citations omitted.]

[11]

The application judge was not satisfied that special circumstances had
    been proven. While she acknowledged that the debt was significant, she found
    there was no evidence of fraud or suspicious circumstances. And while she
    considered the respondents view of the value of the corporate assets to
    approach the grandiose, she also found that the debt had only been
    outstanding a relatively short time, the appellant appeared to have taken no
    steps to collect on a general security interest in its favour, and the
    appellant had not given any evidence on what steps it had taken to collect from
    the corporate judgment debtor. She concluded that the appellant had failed to
    provide the necessary evidence to invoke the bankruptcy process.

[12]

These factual findings were reasonably open to the application judge on
    the evidence before her. She did not err in considering that other steps to
    enforce the judgment could have been taken by the appellant.

[13]

We note that the application was dismissed without prejudice to a new
    application being made in future on further and better evidence.

[14]

The appellant has not demonstrated a basis for appellate intervention,
    and the appeal is dismissed, with costs to the respondent fixed at $6,467,
    inclusive of HST and disbursements.

Paul
    Rouleau J.A.

G.
    Pardu J.A.

M.L. Benotto J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Livent Inc. v. Deloitte &
Touche, 2016 ONCA 395

DATE: 20160524

DOCKET: M46130

Strathy C.J.O., (In Chambers)

BETWEEN

Livent
Inc.,

Through Its Special
Receiver and Manager Roman Doroniuk

Plaintiff (Respondent)

and

Deloitte & Touche
and Deloitte &
Touche LLP

Defendants (Appellants)

Alan J. Lenczner and Matthew Fleming, for the appellants

Peter Howard and Aaron Kreaden, for the respondent

Heard: March 17, 2016

Motion for a stay pursuant
to s. 65.1 of the
Supreme Court Act
, R.S.C. 1985, c. S-26.

ENDORSEMENT

[1]

On March 17, 2016 I granted a stay, on terms, of the judgment of the
Superior Court of Justice dated April 4, 2014 and of this courts order dated
January 8, 2016, pursuant to s. 65.1 of the
Supreme Court Act
, R.S.C.
1985, c. S-26, pending determination of the appellants application for leave
to appeal to the Supreme Court of Canada. I advised the parties my reasons
would follow. These are my reasons.

[2]

The trial judge found the appellants liable for damages of
$84,750,000.00, prejudgment interest of $33,285,770.55 and costs in an amount
agreed on by the parties.

[3]

This court dismissed the appellants appeal on January 8, 2016. The appellants
have filed an application for leave to appeal to the Supreme Court of Canada.

[4]

This court discussed considerations on this kind of motion in
Yaiguaje
v. Chevron Corporation
, 2014 ONCA 40. They are those set out in
RJR-MacDonald
Inc. v. Canada (Attorney General)
, [1994] 1 S.C.R. 311 at 334: (1) whether
there is a serious question to be determined on the proposed appeal; (2)
whether the moving party will suffer irreparable harm if the stay is not
granted; and (3) whether the balance of convenience favours a stay.

[5]

It has been held that these factors are not to be treated as watertight
compartments and the strength of one may compensate for weaknesses of another.
The overarching consideration is whether the interests of justice call for a
stay.
In
BTR Global Opportunity
Trading Ltd. v. RBC Dexia Investor Services Trust
,
2011 ONCA 620,
Laskin J.A.
described the test as follows
, at para. 16
:

The moving party  must show that it has raised a serious issue
to be adjudicated, that it will suffer irreparable harm if a stay is not
granted, and that the balance of convenience favours a stay. These three
components of the test are interrelated in the sense that the overriding
question is whether the moving party has shown that it is in the interests of
justice to grant a stay.

See also
Longley v. Canada (Attorney General)
2007 ONCA 149 at paras. 14-15.

[6]

I turn to these factors.

(1)

Serious question to be determined

[7]

As MacPherson J.A. explained in
Yaiguaje
, the serious
question factor is modified in the context of stays pending appeal to the
Supreme Court of Canada to require not simply an assessment of the merits of
the proposed appeal, but also whether it raises an issue of public or national
importance and thus meets the stringent requirements of s. 40(1) of the
Supreme
Court Act.

[8]

Generally, this factor has been described as a low threshold: see
Circuit
World Corp. v. Lesperance
(1997), 33 O.R. (3d) 647 (C.A., Chambers).

[9]

In my view, the proposed appeal gets over the low threshold, even when
the burden under s. 40(1) of the
Supreme Court Act
is taken into
account. The duty of care owed by an auditor of a public company and the
applicable standard of care can reasonably be considered issues of public
importance. The appellants are able to present a serious argument for leave.

(2)

Irreparable Harm

[10]

The irreparable harm requirement refers to harm which either cannot be
quantified in monetary terms or which cannot be cured, usually because one
party cannot collect damages from the other:
RJR-Macdonald
at p. 341,
Fontaine
at para. 36. In Robert J. Sharpe,
Injunctions and Specific
Enforcement
, Looseleaf Edition, Canada Law Book, Toronto, it is stated at
para. 2.411 that [i]t has been held that the courts should avoid taking a
narrow view of irreparable harm.

[11]

In this case, as in
Yaiguaje
, the evidence of irreparable harm
is weak. Nevertheless, I am satisfied that permitting the respondent to
immediately enforce its judgment, while the leave application is pending, would
be sufficiently disruptive of the appellants business to amount to irreparable
harm. While it is weak, it is sufficient to require an assessment of the
balance of convenience.

(3)

Balance of Convenience

[12]

The balance of convenience is just that  a balancing of which party
will suffer the greater harm from the stay being granted or refused. In this
case, in my view, it goes in particular to the question of whether the
interests of justice make up for the weakness of the irreparable harm factor.

[13]

The respondent recognizes that, short of paying the judgment, the provision
of acceptable security for the judgment would eliminate or substantially
mitigate the risk of harm and tip the balance of convenience in favour of a
stay. For this reason, the debate before me centred on the nature of security
to be provided.

[14]

In my view, the security ultimately offered by the appellants was reasonable
and provides the respondent with satisfactory assurance that the judgment will
be promptly paid in full if the application for leave fails.

[15]

The appellants liability insurance covers the full amount of the
judgment. The appellants have purchased a currency hedge contract to cover any
fluctuation in the value of the Canadian dollar (in which the judgment is
expressed) against the U.S. dollar (in which the insurance is expressed). The
appellants insurers have undertaken to indemnify the appellants for the
amounts payable to the respondent within 30 days of the dismissal of the leave
application. The appellants have given a direction to the insurers to pay the funds
directly to the respondent. I have added a term that this direction be
irrevocable. There is evidence that there are no other outstanding claims under
the applicable policies. With one exception, the insurance is with well-known
institutional insurers. The exception is the appellants captive liability
insurer, which has given reasonable evidence of its solvency and of its
statutory surplus. There is no reason to believe that the solvency of any
insurer is at issue. I have made provision that the respondents may apply to the
court to vary or discharge the stay in the event of a material change in
circumstances, which would include a change in the solvency of any insurer. As
a backstop to the insurance, in the unlikely event it is required, the
appellants have provided financial evidence of their solvency.

[16]

Counsel for the appellants acknowledged that the court retains
jurisdiction over them for the purpose of enforcing compliance with the
insurers undertakings. Coupled with the evidence of the appellants own
financial position, this gives the respondent all the protection it can
reasonably require pending the disposition of the leave application.

[17]

For these reasons, it is my view that there is no reasonable likelihood
that the claim will not be immediately paid in full by the insurers if leave is
not granted. As in
Yaiguaje
, it can be anticipated that the Supreme
Court of Canada will deal with the leave application in a timely manner, likely
this fall.

[18]

In the circumstances, the balance of convenience clearly favours the appellants.

[19]

The motion is therefore granted and the judgment of the Superior Court
of Justice dated April 4, 2014 and order of this court dated January 8, 2016 are
stayed, on the terms set forth herein, pending the determination of the
application for leave to appeal to the Supreme Court of Canada.

[20]

Counsel are to provide a draft order incorporating these terms as well
as a form of sealing order with respect to the confidential financial
information filed on the motion. In my view, this is not an appropriate case
for costs, but the parties may file written submissions if costs are sought.