COURT OF APPEAL SUMMARIES (OCTOBER 17 – 21, 2016)

Hello,

Below are the summaries for this week’s civil decisions of the Court of Appeal. There were two interesting civil decisions. In Canada Post Corporation v. Hamilton (City), the Court of Appeal considered the question of whether or not the municipality of Hamilton (which apparently opposed the federal government’s decision to do away with door to door mail delivery) had the authority to become involved in the decision of where to place thousands of Canada Post mailboxes. On constitutional division of powers grounds, the Court found that the City’s By-Law conflicted with federal regulations granting the authority to Canada Post, therefore the City’s appeal from the quashing of its By-law was dismissed.

In Novatrax International Inc. v. Hägele Landtechnik GmbH, the Court of Appeal addressed the effect of a forum selection and arbitration clause in an agreement. The Court of Appeal was split in its decision. Justice Brown, writing for the majority, held that the clause led to a stay of all the claims in Ontario, even those against defendants who were not parties to the arbitration agreement. Justice Feldman disagreed with the majority and held that the stay of the claims against the non-parties to the arbitration clause should be set aside. She held that the stay unjustifiably deprived the appellant of its right to litigate those claims in Ontario under Ontario law.  In reaching this conclusion, Justice Feldman adopted a three-part test used by the Alberta Court of Appeal to address the question of jurisdiction where some parties are subject to an arbitration agreement and some are not.

This case highlights the difficulties that can often arise with arbitration clauses. Such clauses are inserted by our solicitor colleagues into commercial agreements to try to provide for a more efficient, timely, cost-effective and private dispute resolution process. Instead, an arbitration clause can often end up making things more complicated, drawn out, costly and just as public as court proceedings. I often wonder whether arbitration clauses are more trouble than they are worth. Rather than agree to them on the front end, perhaps we as a litigation bar should consider whether it would be more appropriate to explore arbitration after a dispute has arisen, even where there is no arbitration clause. By that point, the parties actually know what the issues are and what parties are involved, and can custom design their arbitration. Doing this, of course, requires cooperation of counsel and their clients, which is easy to say but hard to do in practice given the adversarial nature of litigation, where parties are constantly seeking to gain the upper hand on one another.

Other topics covered this week included slip and fall, striking a claim for disclosing no cause of action and being an abuse of process, a dispute over entitlement to land following the entering into of a sham agreement of purchase and sale, and family law.

Please feel free to share this blog with anyone whom you think might be interested. As always, we welcome your comments and feedback.

Have a nice weekend.

John Polyzogopoulos

Blaney McMurtry LLP

jpolyzogopoulos@blaney.com

Tel: 416.593.2953

http://www.blaney.com/lawyers/john-polyzogopoulos

Table of Contents: 

Civil Decisions: 

Bonilla v. Preszler, 2016 ONCA 759

 

Palkowski v. Ivancic, 2016 ONCA 762

 

Mazza v. Ornge Corporate Services Inc., 2016 ONCA 753

 

Quinto v. Stadler, 2016 ONCA 766

 

Canada Post Corporation v. Hamilton (City), 2016 ONCA 767

 

Reilly v. Johnson and Junger Law Firm, 2016 ONCA 768

 

Davis v. East Side Mario’s Barrie, 2016 ONCA 770

 

Novatrax International Inc. v. Hägele Landtechnik GmbH, 2016 ONCA 771

 

Civil Endorsements (click here for decisions)

 

Criminal Decisions (click here for decisions)

Civil Decisions: 

Bonilla v. Preszler, 2016 ONCA 759

[Hoy A.C.J.O., Benotto and Huscroft JJ.A]

Counsel:

K. Doan, for the appellant

E. Grossman, for the respondent The Personal Insurance Company of Canada

Keywords:  Insurance Law, Statutory Accident Benefits, Income Replacement Benefits, Limitation Periods, Insurance Act, Statutory Accident Benefits Schedule – Accidents on or After November 1, 1996, O. Reg. 403/96

Facts:

The appellant appealed the decision of the motion judge, which granted summary judgment and dismissed the appellant’s action against the respondent insurer for terminating the Income Replacement Benefits (“IRB”) she had been receiving. The motion judge concluded that the appellant’s action was barred by the two-year limitation period by the Insurance Act, R.S.O. 1990 c. I.8 and the Statutory Accident Benefits Schedule – Accidents on or After November 1, 1996, O. Reg. 403/96.

At the time the respondent informed the appellant that it would no longer pay the IRB (February 2003), the appellant was represented by counsel and did not challenge the respondent’s decision. In 2007 the appellant retained new counsel and commenced her proceeding for IRB by applying for mediation on April 3, 2008. After the mediation failed, the appellant commenced her action against the respondent on December 12, 2008 – almost six years following the end of her IRB.

Issues:

  1. Was the respondent’s termination notice clear and unequivocal?
  2. Did the motion judge err in concluding that the action was time barred?

Holding:

Appeal dismissed.

Reasoning:

1. Yes. The respondent insurer sent two letters to the appellant indicating that it refused to pay her claim for benefits, the second of which was copied to her then lawyer. The motion judge correctly found that the message was clear an unequivocal.

2. No. The Court rejected that appellant’s assertion that the two-year limitation period is a rolling limitation period, such that each refusal to pay IRB sets a new two-year limitation term running. It is well established in case law that the limitation period is triggered by a single event, which in this case was the refusal of an insurer to pay the IRB claimed: see e.g. Bonaccorso v. Optimum Insurance Company Inc., 2016 ONCA 34, 129 O.R. (3d) 544 and Sietzema v. Economical Mutual Insurance Company, 2014 ONCA 111, 118 O.R. (3d) 713. Based on the date of the refusal, the appellant’s action was several years too late.

Palkowski v. Ivancic, 2016 ONCA 762

[Pardu, Benotto and Huscroft JJ.A]

Counsel:

R. G. Chapman, for the appellant

M. Z. Tufman and G.A.P. Tufman, for the respondents

Keywords: Endorsement, Real Property, Agreements of Purchase and Sale, Fraud, Conveyancing and Law of Property Act, Trusts, Express Trusts, Constructive Trusts, Unjust Enrichment

Facts:

The parties to this appeal signed an agreement of purchase and sale with respect to the respondents’ home at a price that was significantly below market value. The document was signed as part of a joint scheme with the appellant to defraud the respondents’ creditors by tricking them into believing that the respondents could not pay their debts. The trial judge found the agreement of purchase and sale to be a “sham.”

Litigation began between the parties in 2005 when the appellant refused the respondents’ demand that the property be re-conveyed to them. The respondents claimed that the property was held in an express trust for them, and also claimed unjust enrichment and a constructive trust. The respondents’ claim for an express trust was dismissed on a summary judgment motion because it was an agreement that was not in writing. The Court of Appeal upheld the decision. The remaining claims went to trial. The respondents sought relief for unjust enrichment, and a re-conveyance of the property pursuant to s. 37(1) of the Conveyancing and Law of Property Act, R.S.O. 1990, c. C.34 (“CLPA”). The trial judge granted judgment in the respondents’ favour and ordered a re-conveyance to them, subject to a payment to the appellant to reflect his contributions which included a cash payment to the respondents at the time of the conveyance.

Issues:

  1. Did the trial judge err by ordering the transfer of the property pursuant to an unjust enrichment analysis?
  2. Did the trial judge fail to apply the “clean hands” doctrine to the claim for equitable relief?
  3. Did the trial judge err in his application of s. 37(1) of the CLPA?

Holding: Appeal dismissed.

Reasoning:

1. The trial judge found that the appellant had been enriched and that there was a corresponding deprivation on the part of the respondents. He concluded that there was no juristic reason to justify the enrichment. The appellant submitted that in this respect the trial judge erred because the existence of a contract can constitute a juristic reason for an enrichment. The existence of the agreement of purchase and sale, they argued, constitutes an absolute bar to a claim for unjust enrichment.

This submission ignored the trial judge’s unchallenged finding with respect to the agreement of purchase and sale. The trial judge found that the agreement was a “sham” transaction. Thus, as between the appellant and respondent, there was no contract to bar the claim for unjust enrichment.

2. The trial judge correctly applied the doctrine of unjust enrichment. He found that monetary damages were not adequate and that there was a link between the contribution that founded the action and the property in which the constructive trust was claimed. The discretionary remedy was based on the findings of the trial judge, which are not challenged by the appellant. The trial judge’s reasons make it abundantly clear that he was aware of the “clean hands” doctrine. He considered neither party to be blameless and used his discretion to fashion an appropriate remedy.

3. The panel found that whether the trial judge could have granted the same relief under s. 37(1) of the CLPA did not need to be considered.

Mazza v. Ornge Corporate Services Inc., 2016 ONCA 753

[Strathy C.J.O., LaForme and Benotto JJ.A.]

Counsel:

A. Schorr, for the appellant
J. Goodman and E. O’Dwyer, for the respondent

Keywords: Endorsement, Employment Law, Wrongful Dismisssal, Common Employers

Facts:

The appellant, Mazza, entered into Minutes of Settlement with the trustee in bankruptcy of his former employer, releasing the bankrupt estate from his claim for termination of his employment and from all other claims that could have been raised in the bankruptcy.

The appellant then brought similar claims against affiliated companies, asserting they were liable, as common employers, for the termination of his employment. He also asserted claims for interference with economic relations and conspiracy to injure, alleging that they conspired to use the bankruptcy process to defeat his legitimate claims.

The motion judge dismissed the plaintiff’s claims because the motion judge held that the affiliated companies were not common employers.

The plaintiff appealed the motion judge’s finding on the basis that the motion judge should not have considered the common employer issue because the respondent had admitted, for the purpose of arguing the effect of the release given to the trustee, that the Ornge defendants were common employers.

Issue:

Did the motion judge err in considering whether the affiliated companies are common employers?

Holding:

Appeal dismissed.

Reasoning:

No. The motion judge did not err in considering whether the affiliated companies were common employers. The respondents denied they were common employers in their statement of defence. As such, whether the respondents were common employers was a contested issue.

Further, there was no unfairness in the procedure adopted by the motion judge to address the issue of whether the respondents were common employers. Having found that this was an appropriate case for summary judgment, the motion judge was entitled to ask the parties for further submissions on the issue of whether the common employer argument could succeed in light of the provisions of the Employment Agreement and the Master Management Agreement.

Lastly, the appellant has not demonstrated that the motion judge made a palpable and overriding error in the assessment of the evidence related to the common employer issue. In fact, the motion judge correctly held that the appellant’s common employer claim was not supported by the facts as the appellant adduced no evidence in support of that claim. Specifically, the Employment Agreement identified only one employer and contained an express release of claims against affiliated corporations.

Quinto v. Stadler, 2016 ONCA 766

[Cronk, Juriansz and Brown JJ.A.]

Counsel:

M. Boire, for the moving party

S. Harvey, for the responding party

Keywords: Endorsement, Family Law, Custody, Access, Reintegration Reconciliation Counselling, Stay Pending Appeal, Motion to Quash Appeal, Jurisdiction, Whether Order Interlocutory or Final

Facts:

The appellant moves for an order granting a stay of the order of R. P. Kaufman J. of the Superior Court of Justice dated June 15, 2016, until such time as her appeal from that order can be heard. Her husband, the respondent, moves for an order quashing the appellant’s appeal.

In April, 2015, the appellant commenced matrimonial litigation against the respondent seeking custody of their child and child support. In his June, 2015 answer, the respondent asserted claims regarding the custody of, and access to, their child. Temporary orders were made that the child primarily reside with the appellant and fixing the amount of child support. The parties then agreed the appellant would have sole custody of the child.

In May, 2016, the respondent initiated a motion seeking weekly supervised access to the child for reconciliation therapy. In June, 2016, the appellant moved for various relief, including summary judgment dismissing the respondent’s claim for access, documentary disclosure, and questioning.

Both motions came on before the motion judge on June 15, 2016. He adjourned the appellant’s motion to July 20, 2016. In respect of the respondent’s motion, he wrote that he was “inclined to order reintegration reconciliation counselling” but wanted the curriculum vitae of the proposed therapist filed. He wrote that, absent agreement between the parties on who would act as the therapist, he would “make a decision on the basis that such counselling is necessary in the circumstances of this case.” He adjourned that issue to July 20 and gave directions for the filing of further materials. However, he stated that the materials could not address “the need for such counselling which this court has already determined to be needed.”

The appellant filed a notice of appeal from that order on July 13, 2016.

Issues:

  1. Was the June 15th order final because the motion judge failed to deal with the Appellant’s requests for summary judgment, documentary disclosure, and questioning?
  2. Was the June 15th order final because the motion judge found that a need existed for reintegration counseling, effectively deciding the issue of access between the parties?

Holding: The June 15th order was interlocutory. The respondent’s motion to quash the appeal was granted.

Reasoning:

1. The motion judge’s endorsement stated the appellant’s motion had been scheduled for July 6, 2016; he adjourned it until July 20, 2016. His discretionary adjournment order clearly was interlocutory. As matters transpired, Corkery J. dealt with the appellant’s disclosure and questioning requests in his July 20, 2016 order.

In respect of the access issue, the June 15, 2016 order must be read together with the July 20, 2016 order made by Corkery J., before whom the motions of both the appellant and respondent were returned. He adjourned the appellant’s summary judgment motion seeking the dismissal of the respondent’s access claim to a date in November, 2016. Respondent’s counsel acknowledged no prejudice would enure to the respondent by awaiting the determination of the respondent’s access claim at the hearing of the summary judgment motion scheduled for next month.

2. No. With respect to the respondent’s request for reintegration reconciliation counselling, Corkery J. ordered:

The parties shall each complete intake forms with the Family Services York Region to determine what reintegration or reconciliation counselling services are available to them and their child, if any, at what cost and when such services are available. If the parties are unable to agree on enrolling for such services, either side may bring a motion to determine access. No such motion may be brought before the stay application regarding Justice Kaufman’s June 15, 2016 order is heard. [Emphasis added.]

When the June 15 and July 20 orders are read together, it is clear that neither determined the issue of the respondent’s access. That issue will be considered on the hearing of the appellant’s summary judgment motion next month. Consequently, the motion judge’s June 15, 2016 order concerning reintegration reconciliation counselling was interlocutory in nature.

Canada Post Corporation v. Hamilton (City), 2016 ONCA 767

[Doherty, Epstein and Miller JJ.A.]

P. Griffin and R. Gillis, for the appellant

J. B. Laskin and Y. Bienenstock, for the respondent

S. Émard-Chabot for the intervener, the Federation of Canadian Municipalities

Keywords: Constitutional Law, Canada Post Corporation Act, Division of Powers, Pith and Substance, Jurisdiction (Vires), Double Aspect Doctrine, Doctrine of Paramountcy

Facts:

In an attempt to adapt to the structural decline in revenue as a result of the rise of electronic communications, Canada Post announced that it would restructure delivery services away from door-to-door delivery and towards community mailbox (“CMB”) delivery.

The appellant, City of Hamilton, opposed Canada Post’s plan to phase out door-to-door mail delivery. The City recognized that the decision to switch to CMBs is a decision for Canada Post and not for the City, however, it maintained that it has a supervisory role – effectively, a veto – over Canada Post’s site selection for CMBs within the boundaries of the City.  

The City set out a number of conditions that Canada Post should meet if it replaced door-to-door delivery with CMBs, including concern about impact of traffic flow, parking, and winter road maintenance. Canada Post stayed the course and provided Hamilton with 1,000 intended CMBs. Hamilton adopted a motion of September 24, 2014, that acknowledged Canada Post’s exclusive jurisdiction over postal services in Canada, but also asserted the City’s authority to regulate with respect to public highways, the protection of property, the prevention of nuisance, and the health, safety, and wellbeing of its residents. It voiced concerns about the convenience, accessibility, and security of CMBs.

The result was the enactment of a By-Law 15-091, which established a regulatory regime that gave the City control over the installation of equipment, including CMBs, on municipal roads (the “By-Law”). The By-Law also included a moratorium provision that prohibited the City’s Director of Engineering Services from considering any permit application from Canada Post for installing CMBs or issuing permits until 120 days after Canada Post paid an upfront fee of $200 each for the first 500 CMB permits. Canada Post has not paid the $100,000 fee set by the City, so the moratorium remains in effect.

Canada Post successfully challenged the By-Law on six grounds, with the application judge declaring it to be inapplicable and inoperative with respect to the installation of CMBs by Canada Post. The City of Hamilton appealed.

Issues:

Does the respondent, Canada Post Corporation, have authority to make unilateral decisions about the placement of community mailboxes?

Holding:

Appeal dismissed.

Reasoning:

Yes. To determine the legitimacy of the By-Law, the Court of Appeal considered the pith and substance of the By-Law, the heads of power, vires, and the doctrine of paramountcy.

i. Pith and Substance

The Court accepted the argument of the City that the trial judge erred in his analysis of the pith and substance of the By-Law in finding that the desire of the Council to “derail” the transition to CMBs constituted its pith and substance. Rather, the Court found that looking to the legal effect of the law was a better way to establish the law’s “true character”. The Court found that the pith and substance of the By-Law was to protect against risks of harm to property and harm to persons using municipal roadways.

ii. Heads of Power

The next step in the analysis was to determine whether this subject matter came within the provincial head of power. The City stated that its authority to enact the By-Law derived from ss. 92(10) and (13) of the Constitution Act, 1867, respectively the powers over local works and undertakings, and property and civil rights in the province. Protection of persons and property from harm clearly comes within provincial jurisdiction.

However, the subject matter of the By-Law does impact the federal head of power over the postal service. This led the application judge to conclude that the By-Law usurped the jurisdiction of Canada Post. The Court of Appeal disagreed. Specifically, the application judge erred in his application of the double aspect doctrine. The doctrine provides that the authority of one level of government to legislate with respect to a subject matter does not mean the other level of government does not have the authority to legislate with respect to another aspect of the same subject matter for another purpose: Canadian Western Bank.

iii. Vires

The By-Law falls within the City’s jurisdiction.

iv. Paramountcy

There are two types of conflict that can ground a paramountcy analysis: operational conflict, and frustration of the purpose of the federal law. There was no operational conflict here, so only frustration of the purpose was at issue.

The relevant conflict was between the By-Law and the federal purpose of the Regulation and the Canada Post Corporation Act (“CPCA”), which grants sole decision-making power over the location of mail receptacles to Canada Post. The federal purpose of the CPCA and the Regulation in conferring on Canada Post the power to place mail receptacles on municipal roads is in furtherance of the objects of Canada Post, which include having regard to the “need to conduct its operation on a self-sustaining financial basis while providing a standard of service that will meet the needs of the people of Canada.” The By-Law conflicted with the federal purpose by giving the city a veto over the siting of mail receptacles.

The City objected that the placement of CMBs was a “fine-grained” issue that would not have substantial bearing on the operations of Canada Post. The Court disagreed, stating that the process of converting mail delivery to CMBs is complex, not only due to the necessary coordination with third parties but also because of internal procedures that Canada Post’s collective agreements mandate when a mail delivery route is restructured. Additionally, the issue is not the placement of a single receptacle, but hundreds, which form a national network. The logistical problem would be magnified by the number of municipalities enacting such a by-law with veto power over the placement of the CMBs.

The City argued that there was no conflict because the Regulation and the By-Law could be read together, and that respect for the constitutional principles of co-operative federalism and subsidiarity require giving effect to a harmonious interpretation. The Court of Appeal found that a harmonious reading was not possible.

Therefore, the Court of Appeal found that there was a conflict between the By-Law, and the CPCA and Regulation, and therefore the By-Law was inoperative to the extent of the conflict.

Reilly v. Johnson and Junger Law Firm, 2016 ONCA 768

[Strathy C.J.O., LaForme and van Rensburg JJ.A.]

Counsel:

P. Duncan Reilly, acting in person

C. Sinclair, for the respondent

Keywords: Endorsement, Torts, Professional Negligence, Lawyers, No Reasonable Cause of Action, Abuse of Process, Reasonable Apprehension of Bias

Facts:

The appellant appeals the order of Braid J. dated February 23, 2016, striking his claim in its entirety against a lawyer who represented the appellant’s former spouse in family law proceedings, George Johnson, and her current lawyer, Kathryn Junger.

The statement of claim alleges that Johnson’s conduct caused the appellant delays, distress and hardship in the course of his family law proceedings. The appellant appealed the Steinberg J. order to this court. His appeal was dismissed on June 5, 2013. His motion for leave to appeal that order to the Supreme Court of Canada was denied. The appellant also filed a complaint about these incidents with the Law Society of Upper Canada (“LSUC”) in June 2013.

LSUC investigated and closed its file. The respondent moved under rule 21 to strike the claims asserted in the statement of claim. The motion judge struck the claim in its entirety, without leave to amend. As for the claims related to Johnson, she found that there was no duty owed by the defendant solicitors to the appellant as an opposing client. She also concluded that the action was an abuse of process, as a collateral attack on the family court and LSUC decisions. She found that the claims against Junger alleging that, as the current lawyer for the appellant’s former spouse, she was causing delay in the family law proceedings, were frivolous and an abuse of process.

Issues:

  1. Did the motion judge, in striking the claims, err in failing to consider the complete case history, which the appellant says demonstrated fraud on the part of opposing counsel?
  2. Did the motion judge err in concluding that there was no reasonable cause of action?
  3. Was the motion judge biased, relying on part of a statement where she said, in her reasons: “It would be outrageous in my view for a lawyer to be sued…”?
  4. Did the motion judge err in finding that this action was an abuse of process?

Holding: Appeal dismissed.

Reasoning:

  1. No. The “complete case history” asserted by the appellant – consisting of the various communications about his grievances against his former spouse’s lawyers in the family law proceedings and to LSUC – was irrelevant and immaterial with respect to whether the claim disclosed a cause of action. Only the facts pleaded in the statement of claim (and presumed to be true) were relevant, and could be considered by the motion judge. As for whether the claims were an abuse of process, the appellant’s other proceedings were relevant, and confirmed that the appellant was seeking to relitigate matters already determined against him in the family law proceedings and the disposition of his LSUC complaint.
  2. No. Before the motion judge, and again before the Court of Appeal, the appellant framed his claim against the lawyers as a breach of their duty to the court, or a breach of the Rules of Professional Conduct. The motion judge was correct in concluding that such allegations would not support a cause of action in favour of the appellant against the lawyers.
  3. No. What the motion judge said was the following: “It would be outrageous in my view for a lawyer to be sued because of perceived delays or delay tactics that she takes on behalf of a client in a family law proceeding”. There is no actual or apprehended bias here. A review of the entire transcript reveals that the motion judge dealt fairly with the appellant and the motion in all respects.
  4. No. The Court of Appeal saw no error in the motion judge’s conclusions, first that the action against the lawyer Junger, based solely on allegations of delay in the family law proceedings, was frivolous and an abuse of process, and that the claims against Johnson were an abuse of process as a collateral attack on decisions made in other proceedings.

Davis v. East Side Mario’s Barrie, 2016 ONCA 770

[Cronk, Juriansz and Brown JJ.A.]

Counsel:

J. Sprague, for the appellants

R. Love and E. Vila, for the respondent

Keywords:  Torts, Negligence, Occupiers’ Liability Act, Consumer Protection Act, Bifurcation

Facts:

Appeal from a summary judgment that dismissed the appellants’ action in negligence in respect of a slip and fall at a restaurant.

Issues:

  1. Did the motion judge err in interpreting s. 3 of the Occupiers’ Liability Act?
  2. Did the motion judge err in bifurcating the issue of the respondent’s liability?

Holding: Appeal dismissed.

Reasoning:

1.  The motion judge’s dismissal of the appellants’ claim based on the first branch of their theory of liability pertaining to the Occupiers’ Liability Act, R.S.O 1990, c. O.2 (the “OLA”) was amply supported by the evidentiary record. The appellants led no independent evidence on the summary judgment motion of any existing hazards on or unsafe conditions relating to the stairs at the respondent’s establishment at the time of the accident.

The motion judge held that with proper amendments to their pleading, it was open to the appellants to pursue a second branch of their theory of liability, namely, that the respondent was liable to the appellants in contract or under either or both of the OLA and the Consumer Protection Act, 2002, S.O. 2002, c. C.30 (the “CPA”]. The appellants amended their pleading accordingly.

2. The appellants were not prejudiced by the procedure followed by the motion judge. The motion judge was obliged to determine the respondent’s summary judgment motion on the basis of the appellants’ case as then pleaded. That is precisely what he did.

Novatrax International Inc. v. Hägele Landtechnik GmbH, 2016 ONCA 771

[Doherty, Feldman and Brown JJ.A.]

Justice Brown for the Majority
Justice Feldman, dissenting

Counsel:

C. Bryson, for the appellant
E. L. Tingley, for the respondents

Keywords: Contracts, Arbitration Agreements, Forum Selection Clauses, Jurisdiction, Third Parties, Momentous.ca Corp. v. Canadian American Association of Professional Baseball Ltd., 2010 ONCA 722, UCANU Manufacturing Corp. v. Calgary (City of), 2015 ABCA 22

Facts:

In July 2006, the appellant, Novatrax International Inc., renewed an Exclusive Sales Agreement (“ESA”) with the respondent, Hägele Landtechnik GmbH.

On November 24, 2009, Hägele notified Novatrax that it was terminating the ESA immediately for cause.

In January 2010, Novatrax commenced an action for damages alleging wrongful termination of the ESA and tortious misconduct against Hägele, its principals, the individual respondents Karl Hägele and Benjamin Hägele, and Cleanfix North America Ltd. (“Cleanfix”), a related company set up by Hägele to sell its products directly into the Canadian and American markets.

Section 18 of the ESA contains a forum selection clause which states:

The contractual parties agree that German law is binding and to settle any disputes by a binding arbitration through the “Industrie und Handelskammer” (Chamber of Commerce) in Frankfurt.

The respondents moved to stay the action relying on the agreement to arbitrate and forum selection clause. The motion judge granted a stay. Novatrax appealed.

Issue:

1. Did the motion judge err in interpreting the scope of the forum selection clause?

2. Did the motion judge err in staying the action against the respondents who were not parties to the ESA?

Majority Holding:

Appeal dismissed.

Majority Analysis:

1. The motion judge did not err in interpreting the scope of the forum selection clause to include all of the claims against Novatrax.

Novatrax’s contractual claims of wrongful termination and breach of the duty of good faith fall within the scope of s. 18 of the ESA for three reasons.

First, the scope of a forum selection clause is not determined by the professed subjective intention of one of the contracting parties at the time the contract was formed. Whether the nature of a claim lies outside of what was reasonably contemplated at the time the contract was signed turns on the interpretation of the forum selection clause in accordance with general contract law principles and the degree of connectedness between the nature of the claims pleaded and those covered by the clause.

Second, the language of s. 18 of the ESA is broad enough to include, within the term “any disputes”, claims relating to any stage of the ESA’s life-cycle, including the wrongful termination and breach of duty of good faith claims pleaded by Novatrax.

Third, the motion judge correctly held that the severity of the alleged breach of contract does not play a role in the strong cause analysis.

2. The motion judge was also correct that Novatrax’s tort claims fall within the scope of s. 18 of the ESA. It is well-established that a broad forum selection clause covering “any disputes” applies not only to contract claims, but also tort claims.No. The motion judge did not err in staying the action against the respondents who were not parties to the ESA.

The motion judge correctly followed and applied the reasoning of this court in Momentous.ca. Novatrax’s claims against the individual respondents and Cleanfix are so intertwined with the claims against Hägele. In particular, the individual respondents were added as parties to the action because of their relationship to Hägele, and Cleanfix was added because it was the corporation created by the other respondents to further their common purpose.

Even though Cleanfix and the individual respondents are not parties to the ESA, the claims pleaded against them all arise out of the same transactions and occurrences and raise common questions of fact and law linked to the claims pleaded against Hägele. Therefore, the claims against Hägele and the individual respondents must be dealt with together.

Further, the majority of the panel disagreed with the minority that the effect of the motion judge’s decision is tantamount to adopting the proposition that a party who has not agreed to arbitration with another can be forced to arbitrate its claims against that party. The practical effect of the motion judge’s exercise of his discretion is to require the issue of whether Hägele wrongfully terminated the ESA to be decided first in an arbitration. That exercise of discretion by the motion judge is entitled to considerable deference on appeal absent an error in principle, misapprehension of the evidence, or unreasonable decision. No such error in principle, misapprehension of the evidence, or unreasonable decision exists in this case.

Minority Holding:

Appeal allowed in part. The stay of the claims in the Ontario action against the non-parties to the Exclusive Sales Agreement – namely, Karl Hägele, Benjamin Hägele, and Cleanfix – must be set aside.

Minority Analysis:

1. Did the motion judge err in interpreting the scope of the forum selection clause?

No. Justice Feldman agreed with the majority that the motion judge did not err in interpreting the scope of the forum selection clause to include all of the claims against Novatrax.

2. Did the motion judge err in staying the action against the respondents who were not parties to the ESA?

Yes. The motion judge erred in staying the action against the respondents who were not parties to the ESA. The motion judge erred in law by depriving the appellant of its right to litigate those claims in Ontario under Ontario law. As he erred in law, no deference is owed to his decision.

a. It is an error of law to purport to send the claims against the respondents who were not parties to the choice of law, choice of forum and arbitration clause contained in the Exclusive Sales Agreement to arbitration.

Where it is clear on the face of the arbitration agreement that a party to the litigation is not a party to the agreement, that issue can and should be determined by the court on a stay application. Moreover, an arbitrator cannot make an arbitral award that disposes of the rights between a party and a non-party to the agreement. As such, the motion judge incorrectly applied the reasoning of this court in Momentous.ca.

First, Momentous.ca’s facts and findings make it wholly distinguishable from this case. In Momentous.ca the statement of claim specifically pleaded that the claims against all parties were properly joined “on the ground that the claims for relief against the defendants arise out of the same transactions and occurrences; there are common questions of fact and law; damage and loss has been caused to the plaintiffs by the defendants and the joinder of all claims will promote the convenient administration of justice”. In this case, the statement of claim deals separately with the claims against the corporate respondent Hägele for breach of contract and wrongful termination of the ESA. It then makes claims against all of the respondents for other conduct.

There is no specific claim by the appellant that its claims must all be dealt with together. Certainly, it would be convenient to have all matters arising out of the breakdown of the business relationship among these parties dealt with in one proceeding. But unlike in Momentous.ca, there is no plea by the appellant that they must be. Nor are the claims necessarily so intertwined that the claims against the individual respondents for their deliberate conduct and the new Canadian corporation for wrongfully appropriating the appellant’s business could not be heard separately from the claims against Hägele.

Second, Momentous.ca does not stand for the proposition that a party who has not agreed to arbitration with another can be forced to arbitrate its claims against that party. That would be a change in the law of arbitration that would have required a significant jurisprudential and policy analysis.

In this case, there is no basis to infer consent by the appellant to arbitrate its claims against the non-contracting parties in Germany or to apply German law. Therefore, it is an error of law to purport to send the claims against the respondents who were not parties to the choice of law, choice of forum and arbitration clause contained in the ESA to arbitration, as was done in Momentous.ca.

b. Should the court have ordered a stay of the non-arbitrable claims against those respondents, pending the outcome of the arbitration with Hägele, and what test should have been applied?

The issue of how to fairly address the question of jurisdiction where some parties are subject to an arbitration agreement and some clearly are not has been considered more frequently in the Alberta courts. Justice Feldman adopted the principled approach that has been developed and applied by the Court of Appeal for Alberta, according to which the court must consider the following three factors:

1. whether the issues in the arbitration are substantially the same as the issues in the action;

2. whether the defendant has satisfied the court that continuing the action would work an injustice; and

3. whether the defendant has satisfied the court that the stay will not cause an injustice to the plaintiff.

Factor 1: whether the issues in the arbitration are substantially the same as the issues in the action?

The issue to be determined in the arbitration is whether the corporate respondent Hägele wrongfully terminated the ESA with Novatrax. The only allegation in the Statement of Claim that could involve some or all of the same issues as are pleaded against the other respondents is that the termination was part of a deliberate strategy to obtain control of sales in the North American market. There may therefore be some risk of inconsistent verdicts if that claim is pursued in the arbitration, as well as in the Ontario action. That risk will depend on how the appellant chooses to proceed with the arbitration in Germany. The appellant may well decide to limit its claims in the arbitration to breach of contract and wrongful termination, and to pursue the issues arising out of the conduct of the principals of the company and Cleanfix only in the Ontario action.

Factor 2: whether the defendant has satisfied the court that continuing the action would work an injustice?

The respondents have not demonstrated that they would suffer an injustice if the Ontario action were to continue. There could be some duplication of witnesses, depending on how the appellant proceeded in the arbitration, as well as the timing of the arbitration and the action. However, that is one possible consequence of including a wide-ranging arbitration clause in a contract between two parties where disputes may arise that also involve others.

Factor 3: whether the defendant has satisfied the court that the stay will not cause an injustice to the plaintiff?

There will be prejudice to the appellant if a stay is ordered of its claims against the individual respondents and the Canadian corporation, Cleanfix. There will be significant expense for the appellant to proceed with arbitration with Hägele in Germany. Further, the appellant alleges that its business has been ruined. The respondents are now proceeding to carry on that business in Canada to the exclusion of the appellant. Lastly, the fact that another law will apply to these claims if they are arbitrated in Germany is prima facie prejudicial to the appellant, which did not agree with those respondents to that choice of law, and is therefore entitled to sue in Ontario.

Civil Endorsements:

Laski v. Laski, 2016 ONCA 763

[Hoy A.C.J.O., Benotto and Huscroft JJ.A.]

Counsel:

P. Jervis, for the appellant

A. L. Di Battista, for the respondent, Wendi Susan Laski

Keywords: Endorsement, Extension of Time to Appeal, Judicial Discretion, Palpable and Overriding Error

Mid-Can Design Builder Ltd. v. Al-Islamiyyah, 2016 ONCA 764

[Cronk, Juriansz and Brown JJ.A.]

Counsel:

F. Feldman, for the moving party

A. M. Khan, acting in person

No one appearing for Jaamiah-Al-Uloom Al-Islamiyyah

Keywords: Endorsement, Notice of Appeal, Consent to Judgment, Courts of Justice Act, s. 133(a), Rules of Civil Procedure, Rule 61.03.1, Ruffudeen-Coutts v. Coutts, 2012 ONCA 65

Criminal Decisions: 

R. v. Joyes, 2016 ONCA 750

[Doherty, Hourigan, and Roberts JJ.A]

Counsel:

C. Martell, for the Appellant

B. Jones, for the Respondent

Keywords: Publication Ban, Endorsement, Criminal Law, Sexual Interference, Credibility, Post-Arrest Conduct, Sentencing

R. v. M.B., 2016 ONCA 760

[MacPherson, Pepall and Pardu JJ.A.]

Counsel:

C. Martell, appearing as duty counsel

C. Chorney, for the respondent

Keywords: Publication Ban, Criminal Law, Youth Criminal Justice Act, Sentencing, Pre-Sentencing Custody, R. v. Summers, 2014 SCC 26

R. v. Bhattie, 2016 ONCA 769

[Cronk, Juriansz and Brown JJ.A.]

Counsel:

M. K. Wendl, for the appellant

M. Stephens, for the respondent

Keywords: Criminal Law, Conspiracy to Commit Fraud, Uttering a Forged Document, Conspiracy to Procure Identity Documents, Sentencing, Sufficiency of Reasons

R. v. Brunton, 2016 ONCA 752

[Doherty, Simmons and van Rensburg JJ.A.]

Counsel:

M. D. Segal, for the appellant

L. Cecchetto, for the respondent

Keywords: Publication Ban, Criminal Law, Sexual Interference, Credibility, Post-Arrest Conduct, Sentencing, Sufficiency of Reasons, Evidence, W.(D.) Analysis

R. v. Kidd, 2016 ONCA 757

[MacPherson, Epstein and Lauwers JJ.A.]

Counsel:

R. Nelson Kidd, in person

M. Bojanowska, duty counsel

S. Ficek, for the respondent

Keywords: Publication Ban, Appeal Book Endorsement, Criminal Law, Canadian Charter of Rights and Freedoms, s. 11(b), Sentencing, Pre-Trial Custody Credit

R. v. Djuraev, 2016 ONCA 765

[Doherty, Hourigan and Roberts JJ.A.]

Counsel:

N. Jamaldin, for the appellant

N. Thomas, for the respondent

Keywords: Publication Ban, Endorsement, Criminal Law, Sexual Assault Causing Bodily Harm, Sentencing, Fresh Evidence

R. v. Fernandes, 2016 ONCA 772

[Doherty, Pepall and Hourigan JJ.A.]

Counsel:

L. Joyal, for the appellant

H. L. Krongold and K. Y.W. Jim, for the respondent

Keywords: Criminal Law, Arson, Inducement, Oppression, Voir Dire

R. v. Hebert, 2016 ONCA 773

The information contained in our summaries of the decisions is not intended to provide legal advice and does not necessarily cover every matter raised in a decision. For complete information or for specific advice, please read the decision or contact us.

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