Court Of Appeal Summaries (June 26 – 30, 2023) - Civil Law

Good evening.

Please find below our summaries of the civil decisions of the Ontario Court of Appeal for the week of June 26, 2023.

In 10720143 Canada Corp. v. 2698874 Ontario Inc., a default judgment was obtained against a business partner and his lawyer for fraud. The lawyer's appeal was dismissed. While the motion judge had erred in finding negligence, he did not err in finding that the lawyer had knowingly assisted his client in perpetrating the fraud against the respondent.

Other topics covered included vexatious litigants, plans of arrangement under the CBCA and the removal of trustees.

Wishing our readers a Happy Canada Day long weekend!

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Ines Ferreira
Blaney McMurtry LLP
416.593.2953 Email

Civil Decisions

10720143 Canada Corp. v. 2698874 Ontario Inc., 2023 ONCA 463

Keywords: Torts, Fraud, Knowing Assistance, Negligence, Civil Procedure, Noting in Default, Default Judgments, Appeals, Jurisdiction, Final or Interlocutory, Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 6(1)(b), 19(1)(a) and (1.2), Rules of Civil Procedure, r. 19.08, National Bank of Canada v. Royal Bank of Canada (1999), 44 O.R. (3d) 533 (C.A.), Laurentian Bank of Canada v. Goldshmidt, 2013 ONCA 122, Laurentian Plaza Corp. v. Martin (1992), 7 O.R. (3d) 111 (C.A.), Roblin v. Drake, [1938] O.R. 711 (C.A.), Marcus Direct Marketing Inc. v. M & K Plastic Products Ltd., [1989] O.J. No. 467 (C.A.), Laredo Construction Inc. v. Sinnadurai (2005), 78 O.R. (3d) 321 (C.A.), Elekta Ltd. v. Rodkin, 2012 ONSC 2062

Di Santo v. Di Santo Estate, 2023 ONCA 464

Keywords: Wills and Estates, Trusts, Trustees, Removal, Succession Law Reform Act, R.S.O. 1990 c. S. 26, Part V, Virk v Brar Estate, 2014 ONSC 4611

NexJ Systems Inc. (Re), 2023 ONCA 451

Keywords: Corporations, Plans of Arrangement, Fair and Reasonable, Canada Business Corporations Act, R.S.C. 1985, C. C-44, s. 192, Rules of Civil Procedure, rr. 14.05(2) and 14.05(3), Hryniak v Mauldin, 2014 SCC 7, Re: Mid-Bowline Group Corp., 2016 ONSC 669, BCE Inc. v 1976 Debentureholders, 2008 SCC 79, Sattva Capital Corp. v Creston Moly Corp., 2014 SCC 53, Weyerhaeuser Company Limited v Ontario (Attorney General), 2017 ONCA 1007

Williams v. Tuck, 2023 ONCA 452

Keywords: Civil Procedure, Vexatious Litigants, Inherent Jurisdiction, Courts of Justice Act, R.S.O. 1990, c. C.43, s. 140, Rules of Civil Procedure, Rule 2.1.01, Balanyk v. Dutton Brock LLP, 2014 ONCA 122, Lukezic v. Royal Bank of Canada, 2012 ONCA 350, Foy v. Foy (No. 2) (1979), 26 O.R. (2d) 220 (C.A.), 102 D.L.R. (3d) 342n, Kallaba v. Bylykbashi (2006), 207 O.A.C. 60, [2006] S.C.C.A. No. 144, Peoples Trust Company v. Atas, 2019 ONCA 359

Short Civil Decisions

Ferraro v. Neilas, 2023 ONCA 456

Keywords: Contracts, Interpretation, Interest

Caroti v. Kegalj, 2023 ONCA 455

Keywords: Fraud, Civil Procedure, Appeals, Dismissal for Delay, Lifting of Stay Pending Appeal, Evidence, Hearsay, Certified Translations, Courts of Justice Act, R.S.O. 1990, c. C.43 section 125(2)

Janzen v. Cook, 2023 ONCA 457

Keywords: Family Law, Child Support, Separation Agreements, Civil Procedure, Evidence, Child Support Guidelines, O. Reg. 391/97, Palmer v. The Queen, [1980] 1 S.C.R. 759, Barendregt v. Grebliunas, 2022 SCC 22, Roberts v. Roberts, 2015 ONCA 450

CIVIL DECISIONS

10720143 Canada Corp. v. 2698874 Ontario Inc., 2023 ONCA 463

[Doherty, Hoy and Favreau JJ.A.]

COUNSEL:

S. R. Fischhoff, for the appellants

J. Hamilton for the respondents

FACTS:

M.H. discussed the possibility of the respondent investing in his growing business. The respondent advanced $386,000 to M.H. Most of the money was supposedly for the purchase of a valuable farm property referred to as the "Keele property". The proposed investment never transpired and the respondent lost all of the money he had given to M.H.

The respondents brought their initial action against M.H., his companies, his counsel and his counsel's professional corporation. Counsel and his professional corporation are the appellants.

The respondents alleged that the appellants knowingly assisted their client, M.H. in defrauding the respondent. The respondents alleged that on the initiative of M.H., the respondents deposited $300,000 into the appellants' trust account ostensibly to find the purchase of the Keele property.

By October 2019, the respondent was concerned about his investment and inquired about his investment to the appellants. In early October, the respondent had received a letter authorized by the appellants which indicated that the purchase of the Keele property remained imminent and that a meeting would occur in the near future. Nothing in the letter suggested that the $300,000 earmarked for the purchase of the property was not still in the appellants' trust account. Subsequent investigation revealed the Keele property had been sold several months before the letter was sent and that the appellants had acted for the purchaser.

The respondents maintained that the appellants' deception with respect to the Keele property supported an inference that the appellants were a party to M.H.'s fraud and had knowingly assisted in the perpetration of that fraud. The appellants were also found liable in negligence.

The respondents successfully obtained default judgment against M.H., his companies, and the appellants. The respondent obtained judgment for $428,319.15 and punitive damages in the amount of $20,000 against M.H. alone.

ISSUES:

Does the court have jurisdiction to hear the appeal?
Did the motion judge err in refusing to set aside the noting in default of the appellants?
Did the motion judge err in granting judgment against the appellants?

HOLDING:

Appeal dismissed.

REASONING:

Yes.

The respondents did not raise any challenge to the court's jurisdiction in their factum. In correspondence from the Executive Legal Officer, the court raised with the parties the possibility that it did not have jurisdiction to hear the appeal.

The appellants challenged both the order refusing to set aside the noting in default of the defendants and the order granting default judgment. An order refusing to set aside a noting in default is not on its own, a final order. The motions to set aside the noting in default and the default judgment were heard together. The motion judge's decision to grant default judgment was premised, in part, on the validity of the order noting the appellants in default.

The Court noted that the distinction was premised on form over substance when determining the appropriate appellate jurisdiction to treat the noting in default as a separate and distinct order from the order granting default judgment. In determining the Court's jurisdiction, the focus should be on the order granting default judgment.

Treating a default judgment as a final order requiring an appeal to the Court would cause considerable delay and added expense. In National Bank, the Court held that r. 19.08 provides a specific remedy to those who are subject to a default judgment. Those persons may move in the Superior Court of Justice to set aside the default judgment.

However, this motion for a default judgment was not a typical default judgment motion. The defendants participated in the motion and had a full opportunity to put before the motion judge whatever they deemed relevant to their position. As the motion judge noted, the motion before him took on the characteristics of a motion to set aside a default judgment.

The Court recognized disagreement in the law as the proper forum to appeal an order refusing to set aside a default judgment. Some authorities take the position that a refusal to set aside a judgment awarding damages is itself not a money judgment and is, therefore, appealable in all cases as a final order to the Court of Appeal. Other authorities take the view that an order refusing to set aside a judgment awarding damages is, like the judgment awarding damages, an order for the payment of money, meaning the appropriate appellate forum depends on the amount of the award.

The Court concluded that on the facts of this case, this appeal was properly brought to the Court of Appeal. If the order under appeal was not a money order, the appeal lies to the Court. If the order setting aside the default judgment was a money order, given that it is for an amount in excess of $50,000 (the Divisional Court limit) then it is also properly appealable to the Court.

The respondents commenced the lawsuit in February 2020. Counsel, who was acting for M.H. and the appellants, quickly filed a Notice of Intention to Defend. No Statement of Defence was forthcoming. Counsel for the respondents gave numerous indulgences and extended the acceptable deadline but no Statement of Defence was filed. Only the appellants filed an affidavit on the motion to set aside the noting in default. That affidavit did not address the merits of the claim.

The appellants submitted that they demonstrated an intention to defend by serving the Notice of Intention to Defend shortly after the claim was issued. The appellants were critical of the respondents for not advising M.H. and the appellants that they had noted them in default.

The Court asserted that this criticism rang hollow in the face of the respondents' repeated requests for a Statement of Defence and the setting of two deadlines for the filing of a Statement of Defence, both of which were ignored by M.H. and the appellants.

Furthermore, the motion judge found that M.H. and the appellants had not acted in good faith in their conduct of the litigation. He found that they were deliberately delaying the progress of the litigation in an attempt to avoid a merits-based determination, thereby thwarting the respondents' ability to recover their damages. The Court found no error in refusing to set aside the noting in default.

On a motion for default judgment on an unliquidated claim, the respondents were required to show that they were entitled to judgment on the claim as pleaded.

The appellants submitted that the motion judge erred in holding that they were liable, both in fraud and in negligence. They contended that the facts as pleaded and the evidence only supported a finding that the appellants acted for M.H. in certain matters that, as it turns out, facilitated M.H.'s fraud on the respondent.

In respect of the negligence claim, the appellants submitted first, that negligence, while mentioned in the prayer for relief in the Statement of Claim, was not properly pleaded in the claim and, second, that the elements of negligence were not made out either in the facts as pleaded, or the evidence adduced by the respondents. Specifically, the appellants maintained that there was no basis upon which they could be found to have owed any duty of care to the respondents. The Court agreed with the appellant's submissions, stating that the appellants should not have been found liable in negligence. However, the Court was satisfied that the finding of liability in negligence was redundant and that the finding that the appellants knowingly assisted in the fraud perpetrated by M.H. was enough to support the judgment granted by the motion judge.

The motion judge was satisfied on the evidence that the appellants knowingly assisted their client, M.H., in his deliberate and continuous misleading of the respondent in respect of the investments M.H. had persuaded the respondent to make on behalf of his company. The motion judge inferred from all circumstances that the letter provided by the appellant to the respondent was a knowing falsehood intended to mislead the respondent about the status of his investment.

The trial judge also found that the $300,000 that came from the respondent and was deposited into the appellants' trust account was released to M.H. and used by companies controlled by him on other projects. The motion judge determined that the appellants were aware that the funds had been disbursed.

The findings on which the motion judge based his conclusion spoke to fraud and not to negligence. The motion judge's reasons clearly showed that he found the appellants liable as knowing participants in fraud. His mistaken alternate description of that liability as sounding in negligence was of no moment. The Court held that the motion judge properly granted default judgement.

Di Santo v. Di Santo Estate, 2023 ONCA 464

[Hoy, Harvison Young and Favreau JJ.A.]

COUNSEL:

I. Hull, D. Lok-Yin-So, and J. Faso, for the appellants

M. Rendely and N. Hojjati, for the respondent

K. Charlebois for CIBC Trust Corporation, in its capacity as Estate Trustee During Litigation of the Estate of the deceased, and in its capacity as Trustee During Litigation of the deceased 2003 Family Trust

Keywords: Wills and Estates, Trusts, Trustees, Removal, Succession Law Reform Act, R.S.O. 1990 c. S. 26, Part V, Virk v Brar Estate, 2014 ONSC 461

FACTS:

The appellants are the trustees under the Public and Private wills (the "Wills") executed by the deceased. Three of the appellants are also the trustees of the deceased's 2003 Family Trust. Two of the appellants are two of the deceased's three adult children. The respondent is the deceased's third child.

The respondent successfully moved for further interim funding of professional fees and personal expenses, and the removal of the appellants as trustees under the Wills and Family Trust and their replacement by CIBC Trust Corporation. On appeal, the Trustees challenged their removal as Trustees, but not the further interim funding ordered by the motion judge. The respondent sought leave to adduce new evidence about events that have transpired since the motion was heard, which he asserted further demonstrated that it was necessary to remove the Trustees.

ISSUES:

Did the motion judge err in granting relief not sought by the respondent?
Did the motion judge err by failing to consider whether it was necessary to order the Trustees' replacement?
Should the Court admit the respondent's fresh evidence?

HOLDING:

Appeal dismissed. Motion dismissed.

REASONING:

After the motion judge released her reasons, the parties sought her assistance to settle the form of the order. The Trustees argued that the order should provide that they be removed only until the litigation is resolved, not permanently. The Court stated that the motion judge rejected that argument, writing that "[a] permanent removal of the Trustees has always been sought".

On appeal, the Trustees renewed their argument. In response, the respondent pointed to his factum where he sought the "removal" of the Trustees. The Court explained that the respondent's submission was that it was implicit that the removal was to be permanent.

The Court held that, in the absence of a transcript of the parties' submissions before the motion judge making it clear that a permanent removal was not sought, the Court was not persuaded that the motion judge made a palpable and overriding error about the nature of the relief sought.

Moreover, the Court found that the Trustees did not submit that they would have adduced different evidence, or made different submissions, had they believed that the respondent sought their permanent removal. The Court also noted that the Trustees acknowledged that although the order provided for their "permanent" removal, that order could be varied, with the respondent's consent, upon the resolution or settlement of the litigation.

The Trustees conceded that the motion judge cautioned herself that the threshold for the removal of a trustee is high: the court will not lightly interfere with the testator's choice of estate trustee. The Court also found that the Trustees acknowledged that the motion judge specifically adverted to the several relevant considerations when the court is asked to remove a trustee, as summarized in Virk v. Brar Estate, 2014 ONSC. The Court agreed with the motion judge, holding that those factors include that "there must be a "clear necessity" to interfere with the discretion of the testator".

The Court held that the motion judge's order for interim funding resolved the funding issues then before her, but that there will inevitably be further issues requiring the Trustees to exercise their discretion in relation to the respondent's interest as a beneficiary of the estate and the Family Trust as they are administered. Specifically, the Court found that the respondent may have further financial needs and will require further disclosure to understand how much income is available to fund his income for the balance of his life. Furthermore, a significant business was involved and the interplay of the Wills and the Family Trust was complex.

The Court explained that the motion judge found that the mindset of the Trustees "with respect to any requests made by [the respondent] has become intractable" and that "the Trustees are either in a position of conflict, have acted unilaterally or cannot objectively exercise their discretion".

The Court concluded that the motion judge considered the relevant factors and that her reasons explained why, in her view, it was clearly necessary to remove the Trustees. The Court found that, essentially, the Trustees disagreed with the motion judge's conclusion and asked the Court to re-weigh the evidence. The Court held that the appellants did not identify any error of law or palpable and overriding error, and that therefore, there was no basis for the Court to interfere with the motion judge's exercise of discretion in removing the Trustees.

The Court did not admit the fresh evidence. Among other reasons, it would not affect the disposition of the appeal.

NexJ Systems Inc. (Re), 2023 ONCA 451

[Roberts, Trotter and Sossin JJ.A.]

COUNSEL:

R. Agarwal and M. Bretgoltz, for the appellants, 36 shareholders of NexJ Systems Inc

L. Jackson and B. Burnstein, for N. Harris Computer Corporation

FACTS:

The appellants are 36 former employees and shareholders of NexJ Systems Inc. ("NexJ Systems"), as well as shareholders of NexJ Health Holdings Inc. ("NexJ Health"). They own 3.2% of the common shares of NexJ Systems. They became shareholders of NexJ Systems in 2011 subject to loan and pledge agreements (the "2011 agreements") with NexJ Systems and subsequently received their NexJ Health shares when the holding company was spun off from NexJ Systems

The appellants appealed the application judge's order approving a plan of arrangement put forward by NexJ Systems under s. 192(4) of the Canada Business Corporations Act ("the CBCA"). In accordance with the approved plan, the appellants were compelled to sell their shares in NexJ Systems and NexJ Health to a third party, N. Harris Computer Corporation. The appellants received compensation of 55 cents per NexJ Systems share and 25 cents per NexJ Health share, as well as the forgiveness of the balance of the interest-free employee loans that NexJ Systems gave them to purchase their NexJ System shares in 2011. The plan also provided for a broad release of all claims that the appellants may have in relation to any matter with respect to their shares and loans and the plan of arrangement

The appellants submitted that the application judge erred in approving the plan. The appellants argued the plan was not fair or reasonable because it breached the 2011 agreements and foreclosed their claims against NexJ Systems relating to the 2011 agreements, including for the alleged significant tax liabilities caused by the implementation of the plan.

ISSUES:

Did the application judge err in law by deciding the merits of the appellants' claims and releasing them without a trial, thereby denying procedural fairness to the appellants?
Did the application judge exceed his jurisdiction under s. 192 of the CBCA by approving the forced sale of the appellants' shares in NexJ Health, a separate corporation from NexJ Systems?
Did the application judge misapply the fair and reasonable test by relying on unsupported evidence while dismissing or ignoring relevant factors supported by the record?

HOLDING:

Appeal dismissed.

REASONING:

The Court held that while it will not be appropriate or possible in every s. 192 application to summarily determine all issues, that decision is firmly within the discretion of the application judge. It will be up to the application judge to determine if the fair adjudication of the issues requires a trial in accordance with the required cultural shift in the civil process promulgated by the Supreme Court in Hryniak v. Mauldin; Re: Mid-Bowline Group Corp. The Court stated there was no procedural unfairness in this case. The appellants participated fully in the application, filing several affidavits and factums and making lengthy submissions.

The application judge made no error in determining the application on the record before him. The application judge determined that in keeping with the expedient nature and purpose of an application for approval of a plan of arrangement, "[t]he time for resolution of objections is now, not 2 to 3 years from now after lengthy contestation of an 'arguable' claim." The Court stated that, in concluding that the appellants had not raised an arguable case, the application judge made no error, and fairness did not require him to defer the determination of any issue to a trial.

The Court held that the application judge did not exceed his jurisdiction by approving, as part of the plan of arrangement, the sale of the appellants' NexJ Health's shares. The Court stated that NexJ Health was related to NexJ Systems, so it was not a stranger to the proceedings. Its inclusion was a necessary part of the financing arrangements of the plan of arrangement which benefitted the appellants because it provided a further paydown of their loans.

The Court held that, in considering whether to approve the proposed plan of arrangement, the application judge correctly adverted to the governing criterion in issue as argued by the appellants and as articulated by the Supreme Court in BCE Inc. v. 1976 Debentureholders, namely, whether the plan of arrangement was fair and reasonable, including whether it had a valid business purpose. The application judge's conclusions were grounded in his interpretation of the 2011 agreements and the evidence from NexJ Systems that he was entitled to accept. The application judge's interpretation of the 2011 agreements was "grounded in the text and read in light of the entire contract": Sattva Capital Corp. v. Creston Moly Corp.

The Court held that the application judge did not err in disregarding the appellants' evidence concerning the purpose and effect of the 2011 agreements. The Court agreed with the application judge's assessment that the evidence adduced by the appellants of its subjective intention was not admissible in interpreting commercial contracts. The Court referenced its decision in Weyerhaeuser Company Limited v. Ontario (Attorney General), in which the Court had explained that the factual matrix "cannot include evidence about the subjective intention of the parties" and that a judge interpreting a contract should "determine the intention of the parties in accordance with the language they have used in the written document, based upon the 'cardinal presumption' that they have intended what they have said." The application judge made no error in finding no ambiguity in the 2011 agreements and in determining that "on a plain reading" of its terms, the repayment of the loans could be triggered under either section 1.1 or 1.3. The application judge's findings on this issue were grounded in the record. In particular, the application judge reviewed the evidence about NexJ System's financial circumstances and its attempts to "identify viable strategic alternatives that it might pursue to address various financial, operating and market challenges." The application judge accepted NexJ's evidence that "there [was] no alternative transaction waiting in the wings" and that "NexJ's inability to consummate the Plan [was] likely to lead to a spiral of further uncertainty causing customers and employees to depart and leading to severe commercial and financial distress." Finally, the Court accepted the application judge's observation that the appellants did not proffer any evidence that "any transaction is possible which would solve their personal tax planning problems to their satisfaction."

Williams v. Tuck, 2023, 2023 ONCA 452

[Miller, Paciocco and Coroza JJ.A.]

COUNSEL:

D. W., acting in person as the appellant

No one appearing for the respondents

FACTS:

The appellant commenced three actions in succession against more or less the same group of defendants that were all dismissed under Rule 2.1.01 of the Rules of Civil Procedure as frivolous, vexatious and an abuse of process. The appellant availed himself of the opportunity to make written submissions and demanded that the application judge recuse himself on the basis of bias. The application judge declined to recuse himself and made the finding that the appellant is a vexatious litigant, and that without the vexatious litigant order the appellant would simply continue filing the same proceeding over and over.

The appellant appealed the order of the application judge in which the judge invoked both inherent jurisdiction and the process under s. 140 of the Courts of Justice Act for controlling vexatious litigation. Following the scheme set out in s. 140, the application judge ordered that the appellant may not institute any proceedings in any court except with leave of a judge of the Superior Court of Justice, and that all proceedings previously instituted by him were immediately stayed.

ISSUES:

Did the application judge have a personal interest in the appellant's litigation such that he ought to have recused himself?
Did the vexatious litigant order fall outside the jurisdiction of the application judge?

HOLDING:

Appeal allowed.

REASONING:

There was no merit whatsoever to the allegation that the application judge had any interest in the litigation. Nor was there any credible evidence in the record to support the allegation of a reasonable apprehension of bias against the appellant on the part of anyone in the court system, least of all the application judge. The appellant pointed to an anonymous letter he received, which claimed that a judicial officer in Alberta was interfering to ensure the appellant would not receive justice. The allegation was fantastical and did not provide a basis for the request that the application judge recuse himself.

Yes.

While the vexatious litigant order initiated by the application judge appeared to the Court to be amply justified, there was an issue with the application judge's jurisdiction to make the order.

The current law under section 140 of the CJA provides that any interested person can bring an application for an order that no further proceeding be instituted by a person without leave of a judge of the Superior Court. This process is not optional. It must be by way of application, meaning an originating process as defined in the statute. This provides the subject of the proceeding with procedural fairness: the subject is provided with written notice that the order will be sought, the facts thought to justify the order, an opportunity to make written submissions, notice of an oral hearing, and an opportunity to make oral submissions at the hearing.

In this case, there was no such application, although the defendants could have brought one. The application judge approximated the process under s. 140, providing the appellant with all of the procedural protections he would have received had the matter proceeded by a third-party application. The application judge referred to both s. 140 and the court's inherent jurisdiction for the authority to do so. However, there is longstanding, binding authority from the Court in prior decisions that there is no inherent, common-law authority to make a vexatious litigant order, and s. 140 does not authorize the judge-initiated process employed here (Foy v Foy). The Court reluctantly vacated the vexatious litigant order.

SHORT CIVIL DECISIONS

Ferraro v. Neilas, 2023 ONCA 456

[Hoy, Brown and Coroza JJ.A.]

COUNSEL:

A. Koshal and Holly Kallmeyer, for the appellants

J. Binavince, for the respondents

Keywords: Contracts, Interpretation, Interest

Caroti v. Kegalj, 2023 ONCA 455

[Doherty, Hoy and Favreau JJ.A.]

COUNSEL:

L. Brusven and J. Stonehouse, for the moving parties

C. Abela, for the responding parties

Janzen v. Cook, 2023 ONCA 457

[Zarnett J.A.]

COUNSEL:

J. A. Brown, for the appellant/moving party

A. . Snelius, for the respondent/responding party

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be ought about your specific circumstances.

Canada: Court Of Appeal Summaries (June 26 – 30, 2023)
Blaney's Appeals

Table of Contents

Civil Decisions

Short Civil Decisions

CIVIL DECISIONS

SHORT CIVIL DECISIONS

Canada: Court Of Appeal Summaries (June 26 – 30, 2023) Blaney's Appeals

Table of Contents

Civil Decisions

Short Civil Decisions

CIVIL DECISIONS

SHORT CIVIL DECISIONS

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Canada: Court Of Appeal Summaries (June 26 – 30, 2023)
Blaney's Appeals