Lerners' Monthly Lists
March 2018
 
Top 5 Civil Appeals from the Court of Appeal
 
1. Houle v. St. Jude Medical Inc., 2018 ONCA 88 (Simmons, Roberts and Nordheimer JJ.A.), February 1, 2018
 
2. The Dominion of Canada General Insurance Company v. State Farm Mutual Automobile Insurance Company, 2018 ONCA 101 (Hoy, A.C.J.O., van Rensburg and Roberts JJ.A.), February 2, 2018
 
3. Lakehead Roofing & Metal Cladding Ltd. v. 1304808 Ontario Inc., 2018 ONCA 129 (Feldman, MacPherson and Huscroft JJ.A.), February 12, 2018
 
4. Luckevich v. Ivany, 2018 ONCA 144 (Doherty, Paciocco and Nordheimer JJ.A.), February 14, 2018
 
5. Bain v. UBS Securities Canada Inc., 2018 ONCA 190 (LaForme, Rouleau and van Rensburg JJ.A.), February 27, 2018
 
 
  
1. Houle v. St. Jude Medical Inc., 2018 ONCA 88 (Simmons, Roberts and Nordheimer JJ.A.), February 1, 2018
 
The question of what orders are final and what orders are interlocutory has come before the Court of Appeal again and again. In this decision, the court weighed in on what it called a “seemingly never ending battle” over jurisdiction. 
 
The appellants, Shirley and Roland Houle, appealed from the order of Perrell J. dated August 29, 2017. The moving parties, St. Jude Medical Inc. and St. Jude Medical Canada, Inc., brought a motion asking the court to quash the appeal on the basis that the order was interlocutory, rather than final, and thus could only be appealed to the Divisional Court with leave.
 
The impugned order arose from a proposed class action. The proposed representative plaintiffs brought a motion seeking approval of a third party litigation funding agreement, under which Bentham IMF Capital Limited agreed to pay a portion of the legal fees and disbursements for the proposed class action on certain terms, as well as an order that would make the agreement binding on all putative class members. The motion judge conditionally approved the funding agreement, subject to certain changes being made to some of its terms, failing which the approval motion would be dismissed. The proposed representative plaintiffs, proposed class counsel, and Bentham, all objected to the required changes. Appeals were taken both to the Court of Appeal and by way of a motion for leave to appeal to the Divisional Court. 
 
The Court of Appeal granted St. Jude’s motion, holding that the appeal should be quashed as the order was interlocutory, and thus only appealable to the Divisional Court with leave. 
 
A problem on this, as on other such motions, was that there is no definition in the Courts of Justice Act, R.S.O. 1990, c. C. 43 as to what constitutes a final order. As Laskin J.A. acknowledged in Capital Gains Income Streams Corp. v. Merrill Lynch Canada Inc., 2007 ONCA 497, the Court of Appeal’s extensive jurisprudence on the distinction between interlocutory and final orders “has been anything but a model of consistency”. 

The court went back to its very first consideration of this distinction in Hendrickson v. KalIio, [1932] O.R. 675 (C.A.) in which the court explained:

The interlocutory order from which there is no appeal is an order which does not determine the real matter in dispute between the parties – the very subject matter of the litigation, but only some matter collateral. It may be final in the sense that it determines the very question raised by the applications, but it is interlocutory if the merits of the case remain to be determined.
 
The court reviewed how subsequent cases have expanded on that definition, clarifying that where a substantive right of a party is determined, even if other aspects of the proceeding remain to be determined, the resulting order is a final order. To be final, an order must deal with the substantive merits of the case as opposed to mere procedural rights, no matter how important the procedural rights may be. The question is whether the impugned order finally disposes of any rights of the parties, in the sense of substantive rights to relief or a substantive defence. 
 
Writing for the court, Nordheimer J.A. noted that in this case, the issue was further complicated by the fact that two of the parties appealing the conditional approval order were not, strictly speaking, parties to the proceeding. Nonetheless, referring to the plain language of the impugned order, Nordheimer J.A. held that it did not finally dispose of the rights of proposed class counsel or Bentham, as the motion judge did not dismiss the approval motion. The order conditionally approved the funding agreement, subject to certain revisions being made to it. Subject to making the required revisions, the proposed representative plaintiffs, proposed class counsel, and Bentham, got what they had sought from the motion judge: approval of the funding agreement. It was a conditional order, akin to other conditional orders such as an order for security for costs. If security is not posted in compliance with a security for costs order, the proceeding may come to an end; however, the order is still an interlocutory order.
 
While the responding parties asserted that the result was the end of the litigation because the proposed representative plaintiffs would not have funding to pursue their claims, Nordheimer J.A. emphasized that this result was a consequence of their decision not to amend the agreement, not a result of the order. No substantive right was determined by the conditional approval order. The final disposition of the rights of proposed class counsel and Bentham was not a necessary result of the order as it would have been avoided if the agreement was amended. Consequently, the order was interlocutory, only appealable to the Divisional Court with leave.
 
2. The Dominion of Canada General Insurance Company v. State Farm Mutual Automobile Insurance Company, 2018 ONCA 101 (Hoy, A.C.J.O., van Rensburg and Roberts JJ.A.), February 2, 2018

These two appeals were considered together because they turned on the same issues: the standard of review applicable to arbitral decisions resolving priority disputes arising from the statutory accident benefits regime under the Insurance Act, R.S.O. 1990, c. I. 8, as well as statutory and contractual interpretation issues affecting the priority question. 

Both appeals arose from arbitral decisions concerning the interpretation of “insured person” under s. 3(1) of the Statutory Accident Benefits Schedule – Effective September 1, 2010, O. Reg. 34/10 (SABS), as applied to the particular provisions of the claimants’ respective insurance policies. At issue was whether the claimants, both of whom were listed as excluded drivers on their parents’ automobile policies, were covered for SABS when not driving the vehicles to which the driver exclusions applied. The answer to this question would determine which insurer had first priority to respond to the claimants’ SABS claims. 

Under s. 3(1) of the SABS, an “insured person” is defined as “any person specified in the policy as a driver of the insured automobile”.

In the State Farm arbitration, the arbitrator found that an excluded driver can be an “insured person” under the SABS. The judge on the first appeal applied a standard of correctness and overturned the arbitrator’s decision. In the Dominion arbitration, the arbitrator was also of the view that an excluded driver can be an “insured person” under the SABS; however, he concluded that he was bound by the appeal decision in the State Farm appeal. The judge on the first appeal, who was not bound by the other first instance appeal decision, applied a reasonableness standard to the arbitrator’s underlying reasoning and found that his original interpretation was reasonable. 

In the State Farm appeal, the claimant was a “Listed Driver”, but both he and his parents had signed an Endorsement (OPCF 28A form) to exclude him as a driver (at the request of the insurer due to the claimant’s poor driving record). It stated that “[e]xcept for certain Accident Benefits”, there would be “no coverage under the policy for property damage and bodily injury, damage to the automobile(s) and most Accident Benefits”. The arbitrator felt that there was ambiguity to a person reading the OPCF 28A about whether there would be still be full accident benefits if not driving the excluded vehicle and some accident benefits even if driving the excluded vehicle, with the ambiguity to be resolved in favour of the insured. 

State Farm submitted that in accordance with the Court of Appeal’s decision in Intact Insurance Company v. Allstate Insurance Company of Canada, 2016 ONCA 609, the applicable standard of review from an arbitral decision was reasonableness. Dominion, however, argued that Intact had been overtaken by the Supreme Court’s decision in Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, such that correctness was the appropriate standard of review.

The Court of Appeal allowed the State Farm appeal and dismissed the Dominion appeal, holding that the standard of review of an arbitrator’s decision is reasonableness. 

Like these appeals, Intact involved an arbitrator’s determination of a priority dispute between two insurers concerning the payment of statutory accident benefits. To resolve the issue, the arbitrator had to determine whether the claimants were principally dependent for financial support on the insured, their mother’s new partner. This required the arbitrator to make factual findings concerning the relationship between the claimants and the insured, in accordance with the arbitrator’s interpretation of the relevant insurance policy and statutory provisions.

Dominion took the position that Intact was distinguishable on the basis that it was a dependency case in which the factual matrix dominated the analysis. In the case at bar, however, the arbitrator was faced with a pure question of law and there was no need for the arbitrator to make findings of fact or to apply the law to those findings. As a result, there were no questions of fact or mixed questions to which a standard of reasonableness would apply, according to Dominion.  

Roberts J.A. rejected these submissions, holding that Dominion’s characterization of Intact as a fact-driven dependency case was too narrow. Moreover, she emphasized that the depiction of the standard of review dispute as simply one of choosing between “a mixed fact and law exercise” or “an extricable legal error”, without regard for the nature of the decision-maker, was explicitly rejected by LaForme J.A. in Intact. While the nature of the question (whether legal, factual, or mixed) may be dispositive in civil ligation, it is not dispositive in the context of commercial arbitral awards by specialist tribunals.  

The decision in Intact focused on the nature of the decision-maker and, next, whether the issue required the application of the decision-maker’s expertise. The administrative law framework, associated with Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, was held in Intact to be applicable to determine the standard of review on an appeal from an insurance arbitration decision. The first step from Dunsmuir, namely, ascertaining whether existing jurisprudence had already settled the degree of deference, showed that the reasonableness standard of review is applicable to questions of law that are within the specialized experience and expertise of insurance arbitrators in interpreting insurance law. The second step, while not necessary, also showed that a reasonableness standard was appropriate as the question caused the arbitrator to engage his specialized expertise in interpreting his home statute.  LaForme J.A. concluded in Intact that, in cases such as this, even an extricable question of law (i.e. on the SABS) will generally be reviewed on a reasonableness standard as such a standard recognizes the expertise of insurance arbitrators. Further, when a decision-maker is interpreting its home statute, or statutes closely connected to its function, there is a presumption that a reasonableness standard will apply.

Roberts J.A. went on to distinguish both Intact and the present appeal from the Supreme Court’s decision in Ledcor. The two cases involved fundamentally different contexts for determining the appropriate standard of review. In Ledcor, there was no expert arbitral decision-maker involved; rather, the court was considering an appeal from a trial judge’s interpretation of a standard form contract. The Supreme Court articulated the interpretation of a standard form contract as an exception to the rule that contractual interpretation by a specialized arbitrator is a question of mixed fact and law subject to deferential review on appeal. In Ledcor, the Supreme Court held that an appeal from a trial judge’s interpretation of a standard form contract which has precedential value and does not require engagement with any meaningful factual matrix is a question of law that should be reviewed for correctness. The Supreme Court was not assessing a specialized arbitrator’s interpretation of the home statute and the exercise of specialized expertise, which would have given rise to a deferential standard of review. Roberts J.A concluded that the Court of Appeal’s reasoning in Intact had not been overtaken by Ledcor
 
Applying the principles articulated by the court in Intact to the present case, Roberts J.A. held that the underlying arbitral decisions ought to have been reviewed on a standard of reasonableness as both had to apply specialized expertise to evaluate each SABS claim in the context of the home statute. Neither appellant had identified an “exceptional” question that would serve to rebut that standard. The appeal judges were therefore required to review the arbitral decisions from a deferential posture and consider whether each decision fell within a range of reasonable outcomes. The appeal judge in the State Farm appeal erred in reviewing the arbitrator’s decision for correctness and her decision was set aside. The appeal judge in the Dominion appeal appropriately applied the reasonableness standard of review, there was no error made in the appeal judge’s review of the arbitrator’s decision, and so the court affirmed the appeal judge’s conclusion that the arbitrator’s underlying conclusion was reasonable.
 
3. Lakehead Roofing & Metal Cladding Ltd. v. 1304808 Ontario Inc., 2018 ONCA 129 (Feldman, MacPherson and Huscroft JJ.A.), February 12, 2018

The appellant was a commercial tenant of the respondent landlord. The tenant sought a declaration under the Commercial Tenancies Act, R.S.O. 1990, c. L. 7 that the landlord had wrongfully and illegally distrained assets and equipment of the tenant after terminating the tenancy by changing the locks, or that the distraint was excessive. 

The tenant argued that its application could be granted based on the application record whereas the landlord took the position that a trial was required to resolve one or more of the factual issues.  

The application judge found that terminating the lease was neither the intent of the landlord nor the effect of changing the locks, such that the lease was not terminated before the distraint, and a trial was necessary to determine whether the distraint was excessive including proof of any damages suffered by the tenant.

The tenant appealed and asserted before the Court of Appeal that the application judge erred in concluding that: (i) the landlord’s notices and actions did not have the effect in law of terminating the lease before the distraint; and, (ii) a trial was needed to find excessive distraint, when the values attributed to the distrained equipment by both parties exceeded the rent that remained owing. 

The Court of Appeal disagreed, holding that the application judge was entitled to make the findings on the record before him. 

While the tenant acknowledged that by changing the locks on commercial premises a landlord does not automatically terminate a lease, it argued that the test is whether the intended and actual effect of changing the locks was to exclude the tenant from the premises, effectively terminating the lease. The tenant claimed that the application judge looked only at the written notice, which said that access would be given to the tenant on request, and erred in failing to consider or give effect to evidence that the landlord denied access. 

Feldman J.A. rejected this submission, noting that the record before the application judge – consisting of affidavits from each side – revealed that the complaints of access denial problems were “minimal, sporadic and ad hoc”, and that the tenant was not excluded from the premises over the month-long notice period. While the application judge did not address the alleged access denial specifically, the court felt that it could be inferred that the application judge did not consider those problems significant enough to have the effect in law of terminating the lease, and that this conclusion was reasonable based on the record. 

Feldman J.A. also rejected the tenant’s submission that the application judge erred by ordering a trial of the issues surrounding excessive distraint and damages. The application judge was not faulted for his finding that the record was unclear as the amounts for value of equipment were only estimates and the amount in arrears was uncertain. The parties did not present sufficient evidence to determine, without a trial, the amount of rent that remained outstanding, if any, the value of the goods and equipment that had been distrained, and any damages suffered by the tenant if the distraint was excessive. The appeal was dismissed.

4. Luckevich v. Ivany, 2018 ONCA 144 (Doherty, Paciocco and Nordheimer JJ.A.), February 14, 2018

The Court of Appeal heard these two appeals together as they raised two common issues: first, whether a claim for contribution and indemnity amounts to property of the bankrupt that vests in the Trustee under s. 71 of the Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3 (BIA); second, if the answer to the first question is yes, whether the bankrupt entitled to advance such a claim where the Trustee refuses to do so. In both cases, the creditor/plaintiff had sought, and obtained, a lifting of the stay of proceedings under s. 69 of the BIA.

The appellant, Howard Ivany, was a defendant in both of the actions, which also originally named Terrence Reiber as a defendant. Ivany was petitioned into bankruptcy by the respondents after they initiated the actions and a stay was accordingly imposed upon the actions pursuant to s. 69 of the BIA. The actions against Reiber continued, and were eventually settled and dismissed.

The respondents then moved to lift the stay of proceedings in order to allow the actions to continue against the appellant, Ivany. The stays were lifted by orders of the Registrar in Bankruptcy with a provision that any judgment obtained against the appellant would be released unless the debt or liability came under the exemption provisions of s. 178 of the BIA. The respondents subsequently obtained orders amending the Statements of Claim to seek a declaration that the indebtedness came within s. 178. The amended claims were served and defended and the appellant was examined for discovery. 

The appellant claimed that during the examination for discovery it became clear to him, for the first time, that the respondents were seeking damages against him for acts or omissions of Reiber. The appellant asked for the consent of the respondents to issue a Third Party Claim in each action against Reiber for contribution and indemnity. The respondents refused to consent. The appellant brought a motion for leave to issue the Third Party Claims against Reiber and to extend the time for so doing. The respondents and the Trustee in Bankruptcy opposed the motion, arguing that such a claim for contribution and indemnity constituted property which was vested in the Trustee by virtue of s. 71 of the BIA

The motion judge found that the Trustee did not have any intention of pursuing the Third Party Claims, but went on to hold that the appellant could not pursue them because, as an undischarged bankrupt, he had no capacity to dispose of or otherwise deal with his property pursuant to s. 71 of the BIA. The motion was therefore dismissed.

Ivany appealed to the Court of Appeal. 

The appellant submitted that a claim for contribution and indemnity did not constitute property within the meaning of the BIA, arguing that the claim was strictly defensive in nature and served only to limit his exposure to liability and damages. Nordheimer J.A. disagreed, pointing out that a third party claim for contribution and indemnity is an action that can result in a benefit to the bankrupt and thus is a potential asset in which all of the bankrupt’s creditors should share (as it could result in some portion of a judgment being recovered with that value increasing the bankrupt’s estate). Further, the definition of “property” is very broad with the clear intention of vesting all of the property of the bankrupt in the Trustee. Finally, Nordheimer J.A. noted that the conclusion that a claim for contribution and indemnity constitutes property was consistent with the court’s conclusion in Meisels v. Lawyers Professional Indemnity Co., 2015 ONCA 406 that a claim for indemnity under an insurance policy was a claim that vested in the Trustee. A third party claim for contribution and indemnity was properly considered property as that term is defined in the BIA

The motion judge erred, however, in dismissing the appellant’s raised issue of the entitlement to review the decision of the Trustee not to pursue the claim and, if appropriate, authorize the bankrupt to advance it under s. 37 of the BIA. Nordheimer J.A. observed that precluding the bankrupt from bringing a claim for contribution and indemnity, in light of the Trustee’s refusal to do so, created a situation where the bankrupt could be faced with a judgment for the entire amount with no ability to reclaim some portion of that amount from another person who contributed to the loss. This worked not only to the detriment of the bankrupt, but also to the detriment of all creditors who would otherwise share in the benefit that would result from a reduction or possible elimination of any judgment that the respondents might obtain. Nordheimer J.A. pointed out that the inequity of this result became even more egregious in a situation where the respondents were seeking to have their claims declared to come within s. 178 of the BIA.

The appeal was allowed. 
 
5. Bain v. UBS Securities Canada Inc., 2018 ONCA 190 (LaForme, Rouleau and van Rensburg JJ.A.), February 27, 2018

This was an appeal of a judgment following trial in a wrongful dismissal action. 

The respondent, David Bain, was an investment banker employed by the appellant, UBS Securities Canada Inc. The respondent was dismissed without cause on February 28, 2013. 

From the time he was first employed by UBS’s predecessor, Bain’s annual compensation consisted of salary and a bonus. For the first eight years, Bain’s bonus was paid entirely in cash. From 2008 onwards, if the amount UBS determined for Bain’s bonus exceeded the equivalent of 250,000 Swiss Francs, then 40% was paid in cash and the other 60% was placed into an account in the form of “notional shares” in UBS AG (which would fluctuate over time as the value of the share price changed, and which would “vest” in equal amounts over a number of years). The deferred portion of the bonus was allocated and paid under UBS’s Equity Ownership Plan. 

The trial judge fixed the reasonable notice period at 18 months and awarded damages (inclusive of amounts for cash, deferred bonuses, and vacation pay), prejudgment interest, and costs. 

On appeal, UBS only contested the inclusion of the deferred portions of the bonus, or the amounts that Bain would have been allocated by way of notional shares, which would have vested in the future, after expiry of the notice period. The amount in dispute was 60% of the bonus, approximately $1.2 million. 

The court dismissed UBS’s appeal, holding that the trial judge did not err in including the deferred portions of Bain’s bonus in the damages award. 

The two-part test that was applicable in this case was articulated in Paquette v. TeraGo Networks Inc., 2016 ONCA 618. In order to determine whether a terminated employee was entitled to damages on account of a lost bonus, first the court must determine whether the plaintiff has a common law right to damages for breach of contract that would include compensation for a lost bonus. Second, the court must consider whether there is language in the bonus plan that “unambiguously alters or removes” the common law entitlement.

The Court of Appeal noted that Bain had a contractual right to receive compensation that included bonus in the event of his termination without cause. His letter of hire, which continued in force, provided that in the event of his termination Bain would receive “not less than six (6) months’ notice or compensation in lieu thereof”, and that “for greater clarity, the amount of equivalent compensation [would] be determined by reference to salary and bonuses”. 

The letter of termination offered to pay Bain the sum of $495,133 as the equivalent of 14 months’ notice, an amount corresponding to the average of Bain’s total compensation for the prior two years, calculated by UBS as including both the cash and deferred portions of the bonus.

It is settled law that the damages for wrongful dismissal without cause are measured by the loss of wages or salary and other benefits that would have been earned during the reasonable notice period including pension accrual, or, in this case, deferred portions of bonus which would have been earned during the notice period. Therefore, the trial judge reasonably included the deferred portions of Bain’s bonus for 2012, the stub year 2013, and the reasonable notice period, in Bain’s damages award. 

The court held that the trial judge also correctly included the bonuses earned as part of Bain’s “wages” for the purposes of calculating vacation pay under the Employment Standards Act, 2000, S.O. 2000, c. 41. The term “wages” is defined as “monetary remuneration payable by an employer to an employee under the terms of an employment contract” but does not include “sums paid as gifts or bonuses that are dependent on the discretion of the employer and that are not related to hours, production or efficiency”. In this case, the bonuses were at least partly performance-based. Therefore, there was no error in including them within “wages” earned for the purpose of calculating vacation pay.

The court rejected UBS’s submission that the trial judge erred in her calculation of pre-judgment interest from the date of termination rather than from the dates that Bain would have received payments had he been provided with working notice. It also rejected UBS’ argument that the trial judge erred in the amount of costs awarded to Bain.

The appeal was dismissed.

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