Lerners' Monthly Lists
March 2016
Top 5 Civil Appeals from the Court of Appeal
1. Roth Estate v. Juschka, 2016 ONCA 92 (Feldman, Hourigan and Benotto JJ.A.), February 2, 2016
2. Mapleview-Veterans Drive Investments Inc. v. Papa Kerollus VI Inc. (Mr. Sub), 2016 ONCA 93 (Blair, Hourigan and Brown JJ.A.), February 2, 2016
3. Teva Canada Limited v. Bank of Montreal, 2016 ONCA 94 (Weiler, Laskin and Cronk JJ.A.), February 2, 2016
4. Gray v. Rizzi, 2016 ONCA 152 (Sharpe, Brown and Miller JJ.A.), February 25, 2106
5. Meridian Credit Union Limited v. Baig, 2016 ONCA 150 (Strathy C.J.O., LaForme and Huscroft JJ.A.), February 25, 2016

1.  Roth Estate v. Juschka, 2016 ONCA 92 (Feldman, Hourigan and Benotto JJ.A.), February 2, 2016
A lawyer acted for all parties in a transaction where there was a significant potential conflict of interest. In this decision, the Court of Appeal considered whether he breached his fiduciary duty to his clients.

Harold Roth, an experienced grocer, wanted to acquire a grocery store in Corunna and operate it with his wife Marlene and his daughter and son-in-law, Cynthia and Roy Juschka, while teaching them the business. They acquired the store in 1985. Later that year, they incorporated Roth-Juschka Holdings Ltd., with Harold receiving 51% and Roy and Cynthia receiving 49% of the shares.
The respondent lawyer, Allan D. Brock, acted for all of the parties on the incorporation.
The store became very successful, with the Juschkas taking over more responsibility while the Roths cut back on their involvement over time. In 1992, confronted with health issues, Harold decided to deal with succession planning for the disposition of his shares in the company and to provide an ongoing income for himself and his wife for the rest of their lives. He wanted his shares to go to Roy and Cynthia, but was concerned about interference from other family members if the shares were left as part of his estate.
Ultimately, the parties entered into a share-purchase agreement, with the Roths as vendors and the Juschkas as purchasers, consulting agreements for Harold and Marlene (for ongoing income) and a promissory note from the Juschkas to Harold. The note provided that Roy and Cynthia would pay Harold $408,000, representing the purchase price of the shares, on demand in 40 years’ time, if the store was sold or if Cynthia’s voting share interest fell below fifty percent.
Brock prepared the documents, delivered them to the parties, and claimed that all four individuals were familiar with the documents and understood the arrangement. Notably, he explained to the Juschkas that the promissory note was meant be forgiven in the Roths’ wills, but that this could not be put into writing. It was not incorporated into the note as Brock believed it would undermine the position taken with Revenue Canada that it was an arm’s length transaction for fair value. Although the deal was directed by Harold, Brock acted for all four parties, and did not consider the question of independent legal advice for the Juschkas.
Following the share transfer, the Juschkas operated the business alone and paid the Roths an ongoing income pursuant to the consulting agreements. The store started having financial difficulties and, in late 2007, the Juschkas sold it to Sobeys. After Harold died in 2008, Marlene demanded payment of the note, and eventually brought an action against the appellants, the Juschkas and Roth-Juschka Holdings Ltd.
The appellants brought a third party claim against Brock for negligence and breach of fiduciary duty. At trial, the action on the note was successful, while the third party claim was dismissed. The parties to the main action settled for a lesser sum after judgment.
The appellants appealed the dismissal of their claim against Brock, seeking indemnification for the amount they paid to settle the judgment on the note. They argued that the trial judge made palpable and overriding errors of fact which undermined his conclusion on their third party claim. The Court of Appeal agreed, holding that the respondent breached his fiduciary duty to the appellants by acting for all parties where there was a significant potential conflict of interest and by not sending them for independent legal advice. The respondent also fell below the standard of care by failing to warn the appellants of the risks of the transaction.
A solicitor acting for a client owes the client a duty to act in the best interests of that client. As Justice Wilson explained in Davey v. Woolley (1982), 35 O.R. (2d) 599, (leave to appeal to S.C.C. refused (1982) 37 O.R. (2d) 499n),
A solicitor is in a fiduciary relationship to his client and must avoid situations where he has or potentially may develop a conflict of interests. This is not confined to situations where his client’s interests and his own are in conflict […] It also precludes him from acting for two clients adverse in interest unless, having been fully informed of the conflict and understanding its implications, they have agreed in advance to his doing so.
In Waxman v. Waxman (2004), 44 B.L.R. (3d) 165 (C.A), (leave to appeal refused [2005] 1 S.C.R. xvii (note)), the Court affirmed the principle that a lawyer should not act on both sides of a transaction where the interests of one client potentially conflict with those of the other. The Court noted that there may be some simple or routine transactions where a lawyer can act for both parties, “but a share sale is not one of them”.
Writing for the Court, Feldman J.A. noted that the respondent acted for all parties on a share sale transaction without ever even considering whether there was a potential conflict of interest because he viewed the transaction as a gift from Harold to the Juschkas. The respondent failed to fulfill the most basic obligations of a lawyer to his client: to raise the issue of acting for both sides, to explain the potential conflict and to obtain consent to act for both sides or to recommend that the parties seek independent legal advice.
In Feldman J.A.’s view, the trial judge’s finding that the transaction was, as the respondent claimed, beneficial to the Juschkas such that there was no conflict, was based on a misapprehension of the transaction and an error of law. In fact, the transaction did not leave the Juschkas in a financially better position and there was a significant potential conflict of interest between them and the Roths. Moreover, the respondent’s suggestion that a term of the transaction that was critical to the interests of the Juschkas, namely that the promissory note be forgiven, remain undocumented and potentially unenforceable by them in order to protect Harold’s interests, revealed an actual conflict of interest.
Justice Feldman found that the respondent failed to both understand and explain the significance and potential consequences of the transaction to the Juschkas. It was a palpable and overriding error for the trial judge to find that the Juschkas would have signed the documentation “whether they had gone to another lawyer or not” as there was no evidence to support that conclusion.
Feldman J.A. also noted that the respondent was required to bring reasonable care, skill and knowledge to the performance of his services, and fell below that standard of care on behalf of the Juschkas. He failed to appreciate that, between the consulting agreement and the promissory note, the Juschkas could potentially pay an amount for the Roths’ percentage of the shares that was far in excess of their value. He also failed to warn the Juschkas of the risks of the transaction. 
2.  Mapleview-Veterans Drive Investments Inc. v. Papa Kerollus VI Inc. (Mr. Sub), 2016 ONCA 93 (Blair, Hourigan and Brown JJ.A.), February 2, 2016
At issue in this appeal was whether the respondent was entitled to exercise a right of renewal contained in a commercial lease of a Barrie premises, where it operates a Mr. Sub franchise.
The respondent, Papa Kerollus VI Inc., entered into a commercial lease agreement in 2000 for a 15 year term. The lease gave Papa Kerollus an option to renew for one further period of five years on the same terms and conditions “save as to the rental rate which shall be the then current rate”. Papa Kerollus purported to exercise the renewal option within the time required, in November, 2014.
The appellant, Mapleview-Veterans Drive Investments Inc., was the owner of the premises and the successor landlord under the lease. It disputed Papa Kerollus’ right to renew, claiming that the renewal option was void for uncertainty, with no guidelines for the calculation of the renewal term rent and no arbitration provision to settle it if an agreement was not reached. Mapleview further argued that Papa Kerollus was in default of a precondition to the exercise of the option because it had not “paid the rent and all other sums payable” under the lease and was also in default of a precondition to the exercise of the option because it had not “performed all other covenants under the Lease” at the time it purported to exercise the renewal option.
Mapleview applied to court for declaration that the renewal option was void for uncertainty, or in the alternative, for an order and declaration that Papa Kerollus was in breach of terms of the lease such that the purported exercise of the renewal option was invalid and unenforceable.
The application judge held that the renewal option was not void for uncertainty because the term “current rate” was capable of judicial determination provided the parties called expert evidence on the point. He found that there was a live issue, however, as to the proper calculation of what Papa Kerollus owed for additional amounts of arrears, and that once it had paid the arrears, if any, the “current rate” for the renewal period was to be determined judicially on the basis of expert evidence presented by the parties. The application judge found that Papa Kerollus’ alleged default of non-rent covenants, such as its failure to maintain the premises and the improper subleasing of space to others for advertising, had been “substantially cured” by the time of the application.
Mapleview withdrew its reliance on the non-rent covenant defaults in support of its argument that the renewal option could not be exercised, but pursued its appeal of the application judge’s other findings. Specifically, Mapleview argued that the application judge erred in holding that the renewal option clause was not void for uncertainty and in concluding that Papa Kerollus was entitled to exercise the renewal option once the amount of rental arrears owed by it had been determined by way of a trial of that issue.
Writing for the Court of Appeal, Blair J.A agreed with the application judge that the renewal option was not void for uncertainty. The parties clearly intended to make a binding agreement as to the renewal rate. They simply declined to specify that rate in a dollar amount because neither wished to assume the risk of error fifteen years later. It made commercial sense to express the renewal rate as the “then current rate”, the functional equivalent of specifying the “then market value” or the “then prevailing market rate”, expressions that have been deemed sufficient to overcome a void-for-uncertainty argument.
Blair J.A. found that the application judge erred, however, in concluding that Papa Kerollus was not in rent-related default at the time of its purported exercise of the option to renew and was entitled to judicial determination of what amounts were owed under the lease. Papa Kerollus failed to demonstrate that it complied with its obligation to “[have] paid the rent and all other sums payable under [the] Lease when due” as a precondition for the exercise of the renewal option. Justice Blair held that the application judge erred in law in overlooking the onus that Papa Kerollus was required to meet, and made palpable and overriding errors of mixed fact and law in failing to hold that Papa Kerollus had not complied with its obligation to pay all additional rent when due and that it consequently was not in a position to exercise its option to renew the lease.
If the application judge considered the question of onus, the Court determined that he would have realized that Papa Kerollus failed to meet that onus. While there was a dispute as to the amount of additional rent Papa Kerollus was required to pay, there was no dispute that it was required to pay something. In fact, Papa Kerollus itself acknowledged some arrears and conceded that it was not in compliance with the method for payment set out in the lease. Blair J.A. concluded that, based on the record, Papa Kerollus was in default in the payment of additional rent and, therefore, could not satisfy its onus of establishing that it had complied with all the preconditions for its exercise of the renewal option. 
3. Teva Canada Limited v. Bank of Montreal, 2016 ONCA 94 (Weiler, Laskin and Cronk JJ.A.), February 2, 2016
This appeal concerned the application of provisions of the Bills of Exchange Act which create statutory defences for banks in actions for conversion in the case of fictitious and non-existing payees and holders in due course.
The appellant banks, TD Canada Trust and Bank of Nova Scotia, and the respondent Teva Canada Limited, a manufacturer of generic pharmaceuticals, were the innocent victims of a more than $5 million fraud, perpetrated by Neil McConachie, a Teva employee. Between 2003 and 2006, McConachie requisitioned numerous cheques payable to six entities he designated. Four of these entities were current or former customers of Teva, while the other two he simply invented. None of these entities was owed any money by Teva. McConachie and several accomplices opened accounts in the names of the six entities and deposited sixty-three cheques, which the banks negotiated, into these accounts.
After the fraud was discovered, after firing McConachie, Teva sued the banks for damages for conversion. As the Supreme Court explained in Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce, [1996] 3 S.C.R. 727, this strict liability tort arises when a bank converts an instrument, such as a cheque, by dealing with it under the direction of one not authorized, by collecting it and making the proceeds available to someone other than the person rightfully entitled to possession. The Supreme Court confirmed that the drawer of a cheque has an action in conversion against a collecting bank for crediting the account of a party not authorized to deal with it. Because neither McConachie nor his accomplices were lawfully in possession of the sixty-three cheques at issue, TD Canada Trust and Bank of Nova Scotia were prima facie liable to Teva for converting them.
The banks argued that because the cheques were payable to non-existing or fictitious payees, they were entitled to negotiate them pursuant to section 20(5) of the Bills of Exchange Act (BEA), R.S.C. 1985 chapter B.4, and the banks became holder in due course under section 165(3). On competing motions for summary judgment, the motion judge rejected these defences, concluding that the banks should bear the loss for the fraud.
The Court of Appeal allowed the banks’ appeal, finding that they indeed had a valid defence to Teva’s conversion action under the BEA as the payees were fictitious and non-existing.
While a bank that credits the account of someone not authorized to deal with the cheque, even innocently, is prima facie liable in conversion, section 20(5) of the BEA provides both a collecting bank and a drawing bank with a valid defence to a conversion claim. That section provides that where the payee is “a fictitious or non-existing person”, a cheque is payable to the bearer. The purpose of section 20(5) is to protect banks from fraud on the drawer committed by a third party, including, as in this case, an insider in the drawer’s organization. This allocates the loss to the drawer, who is typically better able to discover the fraud or insure against it.
Writing for the Court, Laskin J.A. outlined the four propositions identified by Falconbridge in Banking and Bills of Exchange for determining whether a payee is non-existing or fictitious:
  1. If the payee is not the name of any real person known to the drawer, but is merely that of a creature of the imagination, the payee is non-existing, and is probably also fictitious. 
  2. If the drawer for some purpose of his own inserts as payee the name of a real person who was known to him but whom he knows to be dead, the payee is non-existing, but is not fictitious. 
  3. If the payee is the name of a real person known to the drawer, but the drawer names him as payee by way of pretence, not intending that he should receive payment, the payee is fictitious, but is not non-existing. 
  4. If the payee is the name of a real person, intended by the drawer to receive payment, the payee is neither fictitious nor non-existing, notwithstanding that the drawer has been induced to draw the bill by the fraud of some other person who has falsely represented to the drawer that there is a transaction in respect of which the payee is entitled to the sum mentioned in the bill.
The Supreme Court modified the non-existing payee defence under Falconbridge’s first proposition in Boma, as Iacobucci J. appeared to treat non-existing and fictitious payees interchangeably. Instead of adhering to Falconbridge’s explanation of “non-existing” as a question of objective fact, he imported the notion of “plausibility” into the question of whether a payee is non-existing. The effect of this modification is that even if a payee is “a creature of the fraudster’s imagination”, the payee may still not be “non-existing” if the drawer had a plausible and honest belief that the payee was a real creditor of the drawer’s business.
The appellants argued that all six payees designated by McConachie fell under Falconbridge’s first proposition: the two “creatures of his imagination” were non-existing, while the other four payees, though not non-existing, were fictitious because Teva had no intention that payments be made to them.
Laskin J.A. agreed, finding that the motion judge erred in failing to hold that the two inventions of McConachie were non-existing payees under Falconbridge’s first proposition, even as modified in Boma. Teva argued that they were payees under the Boma modification, as although invented by McConachie, the names of these two invented companies were similar to those of legitimate customers, such that Teva could plausibly have believed that these entities were real with a connection to its business. Justice Laskin rejected this submission, observing that there was no evidence of anyone at Teva other than McConachie turning their minds to the names of the payees on the cheques at the time they were drawn.
Laskin J.A. found that the motion judge further erred in failing to hold that the payees were “fictitious”. In Boma, Iacobucci J. explained that fictitiousness depends not on the intent of the creator of the instrument, but on that of the drawer itself. Therefore, it was Teva’s intent, not McConachie’s, that governed, at the time the cheques were drawn, not afterward. The four existing payees were real persons, actual Teva customers or service providers, but Teva failed to demonstrate that it intended them – or the two non-existing payees – to receive the proceeds of the cheques.
Justice Laskin concluded that the two invented companies were non-existing and that, even if deemed “real”, all six payees were fictitious. The banks therefore had a valid defence to Teva’s conversion action under section 20(5) of the Bills of Exchange Act. The Court set aside the judgment of the motion judge and dismissed Teva’s action. 
4. Gray v. Rizzi, 2016 ONCA 152 (Sharpe, Brown and Miller JJ.A.), February 25, 2106
In this decision, the Court of Appeal considered a retroactive variation order under the Divorce Act which resulted in the elimination of substantial child and spousal support arrears and imposed significant repayments from recipient to payor.
Nadine Ellen Gray commenced an application for divorce from Mario Rizzi in 2003 and, in 2005, a final order was made dealing with access and child support of two children, as well as spousal support. The final order granted Gray sole custody of both children and placed Rizzi’s access to the children in Gray’s sole discretion. It imputed annual income to Rizzi in the amount of $133,000 and ordered that he pay monthly child support of $1,584 and monthly spousal support of $2,874, as well as a proportional share of section 7 expenses, all retroactive to the date of separation.
In 2009, Rizzi brought a motion to vary the final order pursuant to section 17 of the Divorce Act, R.S.C. 1985, chapter 3 (2nd Supp.), on the ground that he had experienced a material change in circumstances as a result of a significant reduction in his income. In 2014, the motion was disposed of by a variation order, the trial judge holding that Rizzi had demonstrated that he experienced a material change in circumstances which justified a reduction in his child and spousal support obligations retroactive to the date of the parties’ separation.
Based on this variation order, about $320,000 in support arrears owed by Rizzi were eliminated and Gray was obligated to reimburse him a significant amount for overpayment of support.
Gray appealed, asking that the variation order be set aside and Rizzi’s motion be dismissed. She submitted that the trial judge erred in finding that events which took place prior to the making of the final order could constitute a material change in Rizzi’s circumstances, and in making a support variation order extending back to the date of separation.
Writing for the Court of Appeal, Brown J.A. found that the trial judge improperly relied on events that pre-dated the final order to conclude that Rizzi had met the threshold for a variation of support under section 17 of the Divorce Act. This was an error in principle. The trial judge effectively conducted a correctness review of the final order, impermissibly substituting her view about what order should have been made at first instance. She further erred in accepting that a motion to vary is available to a payor on the basis of financial information that is new to the court because the payor had failed to meet his prior financial disclosure obligations. To do so would “eviscerate the financial disclosure regime”. The trial judge made no error, however, in calculating Rizzi’s income from 2006 to 2012. It was clear that he experienced a “significant and sustained” reduction in his annual income which constituted a material change in means and circumstances, meeting the threshold for a variation of the final order during that time period.
The Court of Appeal also agreed with Gray that the trial judge erred in making retroactive adjustments to Rizzi’s support obligations, ignoring the principles set out in D.B.S. v. S.R.G., 2006 SCC 37, and L.M.P. v. L.S., 2011 SCC 64.
In D.B.S. v. S.R.G, the Supreme Court identified four factors that a court should consider before making a retroactive child support order: (i) the reason why a variation in support was not sought earlier; (ii) the conduct of the payor parent; (iii) the circumstances of the child; and (iv) any hardship occasioned by a retroactive award. Brown J.A. held that the trial judge erred in principle in concluding that she need not consider each of these factors. Despite some modification being necessary, the fundamentals of these factors still apply where the income has gone down rather than up. Although the evidence supported the conclusion that Rizzi’s change in circumstances caused him to be unable to make all the ordered support payments, it did not support a finding that he would be unable to pay the arrears in the future. By failing to consider the D.B.S. v. S.R.G. factors in her variation analysis, the trial judge disregarded the fact that the elimination of support arrears would require that Gray repay Rizzi a substantial amount of the child support previously paid, causing her financial hardship. Rizzi had not given notice earlier than his motion. Brown J.A. concluded that Rizzi was not entitled to any retroactive variation of his child support obligations for his daughter, but was so entitled with respect to his son after 2010 when his son started receiving payments under the Ontario Disability Support Program (both children suffer mental health problems).
In L.M.P. v. L.S. the Supreme Court identified the approach that courts should take to motions to vary spousal support under the Divorce Act: any variation should properly reflect the objectives set out in section 17, take account of the material changes in circumstances and consider the existence of a separation agreement and its terms. Justice Brown held that the trial judge erred in principle by holding that L.M.P. v. L.S. did not apply because there was no separation agreement. Moreover, while Gray had achieved a level of economic self-sufficiency by 2011, there was no basis for retroactively varying Rizzi’s spousal support obligations before January, 2012. His delay in pursuing the variation application, his failure to make timely financial disclosure and his failure to co-operate with the support enforcement agencies all worked against an earlier retroactive variation date. Brown J.A. held that the trial judge further erred in failing to consider that, as with child support, the elimination of spousal support arrears would require that Gray repay Rizzi a substantial amount of the support previously paid.
Thus, Brown J.A. found that Rizzi experienced a material change in his financial circumstances after the final order and, applying the principles governing the variation of child and spousal support orders under section 17 of the Divorce Act, varied his child and support obligations. While the variation would have some retroactive effect, Rizzi remained obliged to pay significant support arrears and Gray would no longer be required to make any repayment to him. 
5.  Meridian Credit Union Limited v. Baig, 2016 ONCA 150 (Strathy C.J.O., LaForme and Huscroft JJ.A.), February 25, 2016
The appellant, Ahmed Baig, agreed to purchase a building located at 984 Bay Street in Toronto from the court-appointed receiver and manager of the property, in trust, for a corporation to be incorporated, for the price of $6.2 million. Unbeknownst to the Receiver and prior to the closing of the sale, the appellant agreed to flip the property to Yellowstone Property Consultants Corp. for $9 million.
While the agreement did not prevent the appellant from re-selling the property, it did prohibit him from assigning his interest under the agreement without the Receiver’s consent, which the Receiver could arbitrarily refuse unless the assignee was the corporation to be incorporated for the purpose of the agreement.
The Receiver was obligated to obtain court approval before selling the property.
Peter Kiborn of Miller Thomson LLP acted for the appellant in structuring the transaction. To avoid land transfer tax, Kiborn recommended that title to the property be transferred directly to Yellowstone. Kiborn informed the Receiver that title was to be directed to Yellowstone on closing and provided the Receiver with a number of documents listing Yellowstone as the purchaser. The Receiver assumed that Yellowstone was incorporated by the appellant for the purpose of the agreement, and neither Kiborn nor the appellant – both of whom wanted to prevent the Receiver from discovering the re-sale to save the land transfer tax – corrected this misunderstanding.
The Receiver obtained court approval for the agreement and the transaction closed. It claimed, however, that had it known of Baig’s plan to re-sell the property at a profit, it would not have recommended approval of the sale and would instead have negotiated with the appellant or Yellowstone to obtain a higher purchase price or have solicited new offers.
Three years after the sale, the respondent, Meridian Credit Union Limited, discovered the re-sale and informed the Receiver. Meridian had not recovered the full amount owing to it in the receivership proceeding. The Receiver assigned to Meridian its right, title and interest in a cause of action against the appellant.
Meridian commenced an action against the appellant, claiming that he misrepresented that Yellowstone was incorporated by him for the purpose of the agreement with the Receiver. Meridian sought an accounting for the profit made on the re-sale to Yellowstone or, in the alternative, damages for breach of contract, fraudulent misrepresentation and conspiracy.
The appellant moved for summary judgment dismissing Meridian’s claim. The motion judge dismissed the motion and, instead, granted summary judgment in favour of Meridian finding the appellant liable for fraudulent misrepresentation. The Court of Appeal noted that doing so without a motion being brought by Meridian was permissible.
The appellant had commenced an action against Kiborn and Miller Thomson, claiming contribution and indemnity for any amounts found owing to Meridian. Kiborn and Miller Thomson were not parties to either the Meridian action or the summary judgment motion, but sought to intervene as parties to Baig’s appeal of the motion judge’s order.
The Court of Appeal considered whether the motion judge erred by finding the appellant personally liable for fraudulent misrepresentations and whether the interveners were denied natural justice when the motion judge made adverse findings about them in their absence.
The appellant submitted that there was no evidence to support the motion judge’s finding he was liable. He also argued that the motion judge erred in piercing the corporate veil and in holding him liable for a fraud committed by his counsel. The Court rejected each of these submissions.
As the Supreme Court explained in Hryniak v. Mauldin, 2014 SCC 7, a plaintiff asserting a claim for civil fraud must prove, on a balance of probabilities: (i) a false representation by the defendant, (ii) some level of knowledge of the falsehood of the representation on the part of the defendant, whether actual knowledge or recklessness, (iii) that the false representation caused the plaintiff to act and (iv) that the plaintiff’s actions resulted in a loss.
Writing for the Court of Appeal, LaForme J.A. held that there was sufficient evidence to prove all four elements of this test and to find the appellant personally liable for fraudulent misrepresentation. The appellant engaged in actions that amounted to misrepresentations. Both he personally and his counsel actively hid his agreement to sell the property to Yellowstone and fraudulently misrepresented that Yellowstone was incorporated to close the sale with the Receiver. The appellant personally signed the title direction falsely identifying Yellowstone as the purchaser, knowing that it was not, in order to avoid paying the land transfer tax.
The representations caused the Receiver to seek court approval and to transfer title of the property directly to Yellowstone. But for the false representations, the Receiver likely would have acted differently and, notably, to the appellant’s detriment. Finally, as a result of the misrepresentations, the Receiver lost an opportunity to negotiate a higher price with the appellant or another party. As the Court held in Hamilton (City) v. Metcalfe & Mansfield Capital Corporations, 2012 ONCA 156, that lost opportunity is a sufficient loss to ground a claim for civil fraud.
Justice LaForme concluded that the motion judge did not err in finding the appellant personally liable for fraudulent misrepresentations. This finding was implicitly based on the corporate veil as having no application and was established without the need to rely on vicarious liability.
Citing the principle of audi alteram partem, or the right to be heard, the interveners submitted that by making adverse findings against them in their absence, the motion judge breached the rules of natural justice and procedural fairness. LaForme J.A. denied the interveners’ request to introduce fresh evidence on appeal, concluding that they did not have the right to be heard in this case.
Audi alteram partem applies whenever a person’s rights, interests or privileges are affected by a decision. As non-parties to this action, the interveners were not directly impacted by the order. They were not bound by the motion judge’s finding that they made fraudulent misrepresentations and were able to argue that they never made them when defending against the appellant’s action. Accordingly, the “right to be heard” did not apply.
LaForme J.A. cautioned that affording non-party witnesses in a civil action entitlement to notice, to make submissions and to adduce evidence whenever an adverse credibility finding may be made, would “impose a great burden on the courts and threaten the finality of decisions”. Non-parties are limited to whatever procedural rights they have under the Rules of Civil Procedure. Once served with the statement of claim in the appellant’s action, the interveners knew about the Meridian action and had the option to intervene as a party on the motion, yet they chose not to. They cannot “lurk in the shadows” and then challenge a decision when the outcome affects them in a manner they did not like.
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