1. Children's Aid Society of the Regional Municipality of Waterloo v. C.T., 2017 ONCA 931 (MacFarland, Watt and Benotto JJ.A.), December 1, 2017
This decision demonstrates the difficulty when a judge determines that the justice system has failed and something should be done for the litigants. While one may sympathize with the judge’s concerns, this is a recipe for a decision that will get overturned on appeal.
This was the second appeal from a trial decision that a 10 year old girl be made a Crown ward with no parental access for the purpose of adoption.
On the biological parents’ appeal of the no access order, the appeal judge found no error with the trial judge’s determination, but nonetheless ordered access after an openness hearing ordered by him. He determined that trial counsel for the parents had been incompetent and ordered her to pay costs personally. He declared that the trial was unfair and that there had been a miscarriage of justice. He apologized to the parents on behalf of “the system”.
The Children’s Aid Society, supported by the Office of the Children’s Lawyer, appealed the appeal judge’s orders as to access. The biological parents cross-appealed, seeking declarations that there had been a miscarriage of justice. Trial counsel cross-appealed the findings of ineffective assistance and the costs award against her.
The Court of Appeal allowed the appeal, restoring the trial judge’s determination of no access.
Writing for the court, Benotto J.A. noted that the appeal judge found no palpable and overriding error by the trial judge and therefore erred in varying the “no access” order. That conclusion should have ended the appellate inquiry, but the appeal judge went on to consider fresh evidence about access, which did not support overturning the trial judge’s decision. While the rule for admitting fresh evidence is more flexible in a child protection matter so that evidence providing “an accurate assessment of the present situation” can be considered, the proposed fresh evidence did not provide an accurate assessment of the present or future. There was nothing in the fresh evidence about access that was not before the trial judge.
Benotto J.A. also observed that the requirements of s. 59(2.1) of the Child and Family Services Act, R.S.O. 1990, c. C.11, which create a presumption against access for a Crown ward, prohibited the making of an access order in this case. She wrote that the appeal judge failed to identify how the biological parents had discharged their burden to show that access was “meaningful and beneficial” to the child as required under that provision. Further, there was uncontroverted evidence of the prospective adoptive mother that she would not adopt the child if there was contact with her biological parents.
Benotto J.A. found that the appeal judge further erred in partially basing his order of access on the indigenous status of the child in the absence of any evidence that the biological parents had any connection to their culture, that the child was ever exposed to the Indigenous culture or that anyone from the Indigenous community had ever been involved with the parents or the child. Benotto J.A. noted that while Indigenous membership has expanded to include self-identification, there must still be evidence in relation to the child so a determination can be made as to whether access is beneficial or meaningful to her. The appeal judge erred by ordering access based on the parents’ self-identification in the absence of any evidence on this issue specific to the child.
Benotto J.A. also determined that the appeal judge had no jurisdiction to order an openness hearing or to seize himself of it. By making the access order, to be followed by the openness hearing, the appeal judge ignored the mandatory process set out in s. 145.1.1(3) of the Child and Family Services Act. Moreover, the appeal judge was sitting in a non-Family Branch site and was acting in his appellate capacity as a Superior Court judge, not as a family court judge.
Benotto J.A. dismissed the biological parents’ cross-appeal, holding that the remedy of a declaratory judgment can only be granted if it will have practical utility or will settle a “live controversy” between the parties. In this case, there was no utility to the remedy sought: there were no interests to be determined and nothing would be settled as a result.
Benotto J.A. allowed counsel’s cross-appeal, holding that the appeal judge erred in finding ineffective assistance of counsel and ordering costs against her personally. Having found no error on the part of the trial judge, the issue of ineffective assistance was moot. It was also not open to the appeal judge to consider counsel’s failure to apply for an access order after the trial judgment given the issue before him was the no access order from trial. Further, Benotto J.A. disagreed that such a motion would have succeeded.
2. DHMK Properties Inc. v. 2296608 Ontario Inc., 2017 ONCA 961 (Rouleau, Benotto and Roberts JJ.A.), December 7, 2017
This appeal emphasizes the important damages principle that the injured party should be put in the position it would have been in but for the breach. This includes examining the consequences of the injured party breaching the contract on which it has sued.
The appellants, 2296608 Ontario Inc. and Mund Real Estate Group Inc., appealed from the judgment granted in favour of the respondent, DHMK Properties Inc., following a motion for summary judgment on the issue of damages.
On January 30, 2013, Mund entered into an agreement of purchase and sale with DHMK to purchase DHMK’s commercial property for $5,300,000. The agreement provided a warranty whereby DHMK warranted that the reports of revenue and operating expenses given to Mund were “true and correct in all respects”, and that the property would have a net cash flow prior to debt service of no less than $441,925. The agreement also permitted Mund to conduct due diligence inquiries and to terminate the agreement by the notice date, which the parties subsequently agreed was June 13, 2013. The transaction was scheduled to close at the end of June, 2013.
Mund did not terminate the agreement by the notice date, but instead took the position that it would only close the transaction with a substantial abatement of the purchase price, alleging that the net income from the property was materially less than the amount warranted in the agreement.
When DHMK refused to close the transaction on this basis, Mund brought a proceeding for specific performance of the agreement with an abatement of the purchase price. DHMK responded with a claim for damages incurred as a result of the failed transaction.
The application judge held that Mund had breached the agreement by failing to close without the abatement of the purchase price. He found that Mund had the option of either terminating the agreement by the notice date or closing and suing on the warranty. He ordered the forfeiture to DHMK of Mund’s $100,000 deposit, costs, and an assessment of the issue of DHMK’s damages from the failed transaction. The appellants abandoned their appeal from that judgment.
On the assessment of damages, the motion judge found that the damages were the difference between $5.3 million (the agreed price) and $4.27 million (the market value of the land in August, 2014, which was the date that the appeal from the application judge’s decision was abandoned). He did not discount the $5.3 million for DHMK’s potential liability under the warranty or explain why he chose August, 2014 as opposed to the date of closing.
The Court of Appeal agreed with the appellants that the motion judge erred in failing to take into account the effect of DHMK’s warranty of the net income from the property when calculating DHMK’s loss from the failed transaction.
In assessing DHMK’s damages arising from Mund’s breach of the agreement of purchase and sale, the accepted principle was that DHMK was entitled to be put, as far as damages would permit, into the same economic position that it would have occupied had the transaction closed (subject to DHMK’s duty to mitigate its damages). Although he referenced this principle in his reasons, the motion judge erred in failing to apply it. Specifically he erred in finding that, because Mund breached the agreement, its potential claim for damages for DHMK’s breach of warranty did not have to be considered. Notwithstanding Mund’s repudiation of the agreement, DHMK’s prospective warranty obligations as embodied in the agreement were relevant and had to be taken into account in the assessment of damages.
The Court of Appeal found that the motion judge further erred in choosing August, 2014 as the date for the valuation of the property for purposes of calculating DHMK’s loss, without providing any analysis or reasons on this issue. This choice departed from the general principle noted by the motion judge that “the proper date for taking the market value should be the time fixed for closing”. While there is judicial discretion to select a date other than the closing date, the motion judge did not explain his exercise of that discretion. Moreover, the difference in market valuation dates amounted to a substantial variation in the damage award.
3. Bailey v. Milo-Food & Agricultural Infrastructure & Services Inc., 2017 ONCA 1004 (Hourigan and Brown JJ.A. and Himel J. (ad hoc)), December 19, 2017
This appeal dealt with when the limitation period commences in wrongful dismissal actions and claims for severance pay.
Dan Bailey sued his former employer, Milo-Food & Agricultural Infrastructure & Services Inc. (“Milo-FAIS”) and its President and CEO, Geetu Pathak, for wrongful dismissal, severance pay pursuant to the Employment Standards Act, 2000, S.O. 2000, c. 41, emotional upset and mental distress, and breach of the Ontario Human Rights Code, R.S.O. 1990, c. H19 and the Occupational Health and Safety Act, R.S.O. 1990, c. O.1.
By letter dated March 7, 2013, Pathak advised Bailey, a long-term employee of Milo-FAIS and its predecessor, that the company could “no longer sustain the costs of his position” and proposed two options for his exit from employment. Bailey rejected the offer. By letter dated March 18, 2013, Bailey was advised that his service to the predecessor of Milo-FAIS would not be recognized and that his employment would end on March 22, 2015. Bailey worked until that date and commenced his action on December 21, 2015.
Milo-FAIS and Pathak moved to strike the Statement of Claim pursuant to r. 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, on the basis that it disclosed no reasonable cause of action because it was statute barred. The motion judge granted the motion in respect of Bailey’s severance pay and wrongful dismissal claims, but dismissed the motion in respect of the other claims.
Bailey appealed, seeking a declaration that his claims for severance pay and damages for wrongful dismissal were commenced within the limitation period. Milo-FAIS and Pathak brought a cross-appeal seeking to strike the balance of Bailey’s claims.
The Court of Appeal rejected Bailey’s submission that the motion judge erred in concluding that his cause of action for wrongful dismissal arose on the date he was provided with notice and not on the last day he worked for Milo-FAIS. The court declined to adopt what it deemed a restrictive interpretation of Jones v. Friedman, 2006 CanLII 580 (ON C.A.). The court held that Jones stands for the principle that a cause of action for wrongful dismissal arises on the date of notice of termination, and held that the motion judge made no error in his reliance on that case or in striking the wrongful dismissal claim.
The motion judge applied the same principle to the issue of severance pay. However, the Court of Appeal accepted Bailey’s “novel and credible” argument based on ss. 11(5), 63(1)(a), 64(1) and 65(1) of the Employment Standards Act that, until employment is completed, the claim for severance pay does not crystalize. Noting that the parties submitted no authority in opposition to this argument, the court held that it was not plain and obvious that the limitation period for the severance pay claim should not run from the date of completion of employment.
Turning to the cross-appeal, the court found no error in the motion judge’s conclusion that it was inappropriate to dismiss the other claims brought by the appellant on a Rule 21 motion. Pursuant to r. 21.01(2)(b), Bailey’s allegations that he was subjected to conduct which caused him emotional upset and mental suffering, and which breached his rights under the Human Rights Code and the Occupational Health and Safety Act until the end of the notice period, were presumed to be true. The court held that the motion judge was correct to dismiss the motion to strike these claims, since they were “entangled with factual issues”.
4. Ernst & Young Inc. v. Essar Global Fund Limited, 2017 ONCA 1014 (Blair, Pepall and van Rensburg JJ.A.), December 21, 2017
This appeal arose from a successful oppression action brought by a monitor amid the restructuring of Essar Steel Algoma Inc. (“Algoma”), one of Canada’s largest integrated steel mills. The decision confirms the standing of a monitor to bring an oppression claim.
In 2013, the respondent Algoma was faced with a liquidity crisis. On September 26, 2016, Newbould J. granted an order authorizing the respondent Ernst & Young Inc., the court-appointed monitor under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (CCAA), to commence and continue proceedings under s. 241 of the Canada Business Corporations Act, R.S.C. 1985, c. C-44 (CBCA), for oppression against Algoma’s parent, the appellant Essar Global Fund Limited (“Essar Global”) and the remaining appellants which were other companies owned directly or indirectly by Essar Global (the “Essar Group”).
The action arose in the context of a recapitalization of Algoma and a transaction between Algoma and Port of Algoma Inc. (“Portco”) (two companies indirectly owned by Essar Global) in which Algoma’s port facilities in Sault Ste. Marie (the “Port”) were conveyed to Portco (the “Port Transaction”).
The trial judge found the Port Transaction and other conduct of Essar Global to be oppressive and granted a remedy that was designed to address that oppression.
Essar Global and some of the members of the Essar Group, together with GIP Primus, L.P. and Brightwood Loan Services LLC (arm’s length lenders who loaned Portco US$150 million to effect the transaction), appealed from that judgment. Their principal submissions were that the monitor lacked standing to bring an oppression claim and that the alleged harm was to Algoma and, therefore, the appropriate redress was a derivative action. The Court of Appeal rejected these submissions.
Writing for the court, Pepall J.A. held that a court-appointed monitor can be authorized as a complainant under s. 238 of the CBCA on rare occasions. In determining whether to exercise his or her discretion as to whether a monitor should be so authorized, the CCAA supervising judge must consider whether: (i) there is a prima facie case that merits an oppression action or application; (ii) the proposed action or application itself has a restructuring purpose, or materially advances or removes an impediment to a restructuring; and (iii) any other stakeholder is better placed to be a complainant.
Pepall J.A. held that, in this case, the CCAA supervising judge was justified in giving authorization: a prima facie case had been established; the monitor had reviewed and reported to the court on related-party transactions; the oppression action served to remove an insurmountable obstacle to the restructuring; and the monitor could efficiently advance an oppression claim representing a conglomeration of stakeholders, namely the pensioners, retirees, employees, and trade creditors, who were not organized as a group and who were all similarly affected by the alleged oppressive conduct.
Pepall J.A. also rejected the appellants’ submission that the monitor’s claim could only be brought as a derivative action under s. 239 of the CBCA rather than an oppression action. The appellants argued that the claim being asserted was a corporate claim belonging to Algoma, if anyone, and that the stakeholders on whose behalf the monitor asserted the claim were not harmed directly or personally, but only derivatively through harm done to Algoma.
Although the appellants relied on the Court of Appeal’s decision in Rea v. Wildeboer, 2015 ONCA 373, Pepall J.A. held that that decision did not stand for the proposition that in all cases where there has been a wrong done to the corporation the action must be brought as a derivative action. Rather, the court had expressly re-affirmed the principle that a derivative action and the oppression remedy are not mutually exclusive and that there may be circumstances giving rise to overlapping derivative actions and oppression remedies where harm is done both to the corporation and to stakeholders in their separate capacities. In Pepall J.A.’s view, unlike the situation in Wildeboer, this case fell into the overlapping category.
Pepall J.A. dismissed the appellants’ other submissions, including their argument that the trial judge erred in his analysis of reasonable expectations and of wrongful conduct and harm. Noting that trial judges have broad latitude to fashion oppression remedies based on the facts before them, she also found no error in the trial judge’s remedy in this case.
5. Toronto-Dominion Bank, N.A. v. Lloyd’s Underwriters, 2017 ONCA 1011 (Simmons, Brown and Fairburn JJ.A.), December 21, 2017
This is an important decision on the circumstances when partial summary judgment can be granted, particularly in the context of contract interpretation and insurance coverage issues.
Toronto-Dominion Bank, the respondent in this appeal, was a named insured under a “Bankers Comprehensive Crime, Professional Indemnity and Directors’ and Officers’ Liability Programme” issued by the appellants, a syndicate of insurers.
The insurance policy was divided into two parts. The second part provided directors and officers liability coverage, while the first was divided into two sections: a financial institutions bond (“fidelity coverage” for, among other things, claims involving employee dishonesty) and a financial institutions professional liability policy (“professional liability coverage” for, among other things, claims involving errors or omissions by the financial institution).
One of the bank’s customers, a Florida-based lawyer, ran a Ponzi scheme involving the fraudulent sale of non-existent interests in structured settlements supposedly handled by his law firm. Investments in the scheme flowed through the law firm’s accounts at the bank.
After the fraud was discovered, several investor groups sued the bank. One group obtained judgment against the bank based on claims for fraudulent misrepresentations by bank employees and conduct by bank employees that aided and abetted the fraudster. Following that judgment, the bank settled the other investor claims.
The bank then sought indemnity under both the professional liability coverage and fidelity coverage sections of the insurance policy for amounts paid to the investor groups. The appellants denied coverage under both sections.
The bank commenced an action, seeking a declaration that it was entitled to indemnity under the professional liability section of the insurance policy for loss relating to its customer’s fraudulent scheme and damages for breach of contract in the amount of $300,000,000, the amount of the available coverage. To the extent that coverage was excluded under that section of the policy, it sought a declaration that it was entitled to indemnity and damages under the fidelity coverage provisions.
While documentary production was underway and prior to oral discovery, the bank brought a motion for partial summary judgment, seeking a declaration concerning the interpretation of the preamble to the fidelity coverage section of the insurance policy. The preamble provided:
NOW WE the Underwriters hereby undertake and agree, subject to the following terms, exclusions, limitations and conditions, to make good to the Assured, as stated in the Insuring Clauses … such direct financial loss sustained by the Assured …
The interpretation sought related to the conduct of one former employee in relation to three of the investor groups. The bank submitted that resolution of these “test claims” would lead to the resolution of the coverage issues.
The motion judge granted partial summary judgment, declaring that the bank sustained “direct financial loss” regarding at least some of the funds deposited in the law firm’s accounts by the investor groups.
The Court of Appeal allowed the insurers’ appeal, holding that this judgment was “fundamentally flawed”.
The court held that, in granting partial summary judgment, the motion judge made four material errors. First, he erred by failing to properly interpret Rule 20 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. This rule allows a party to seek summary judgment “on all or part of the claim in the statement of claim”. The bank’s motion did not seek judgment on all or part of any of the claims set out in its claim. Rather, it broke down its claim for indemnity under the fidelity coverage section of the insurance policy into its constituent elements and sought partial summary judgment on only one of the elements. Moreover, it sought an interpretation of that element only as it might apply to the damages it paid out to just three of the 19 investor groups who brought claims against it. This was not a proper request for summary judgment on “part of the claim in the statement of claim”. The motion judge should not have granted or even entertained this kind of summary judgment.
Second, the motion judge erred by ignoring the fundamental principle of contractual interpretation that a provision must be interpreted in light of the contract as a whole. Specifically, he failed to address how the provisions of the professional liability coverage section of the insurance policy might inform the interpretation of the insuring clause in the fidelity coverage section, when, in light of the structure of the bank’s claim, the interpretation of the latter required consideration of the former. He also limited his analysis to only some of the constituent elements of a claim under the first insuring clause, and to how those elements might apply to only three of the 19 investors’ settlements.
Third, in concluding that the judgment and settlements paid to three of the investor groups constituted a “direct financial loss” in that it was a “loss of funds or Property” of the bank within the meaning of the fidelity coverage section, the motion judge adopted a theory of liability not pleaded or advanced by the parties. He raised the theory that the bank held the funds deposited by investors into the law firm’s accounts as a constructive trustee on his own accord during the course of oral argument, without affording the parties an opportunity to properly address it.
Finally, the motion judge misconstrued the relief sought by the appellants. In determining that this was an appropriate case in which to grant partial summary judgment, the motion judge relied on his view that the insurers were asking him to grant reverse summary judgment, or to hold that the bank did not suffer “a direct financial loss”, and were therefore effectively acknowledging that this was an appropriate case for summary judgment. The court found that the motion judge incorrectly interpreted the “Order Requested” section of the insurers’ joint factum filed on the summary judgment motion. Read in context, the only order the insurers sought was the one asked for, namely an order denying the bank’s request for summary judgment on the basis that the bank failed to meet its burden on the motion.