ONTARIO COURT OF APPEAL SUMMARIES (APRIL 18-21, 2017)

Good afternoon,

Following are the summaries for this week’s civil decisions of the Court of Appeal for Ontario.

In Lawrence v International Brotherhood of Electrical Workers (IBEW) Local 773, in a split decision, the Court of Appeal granted a representation order nunc pro tunc to commence a wrongful dismissal action against a Union after the limitation period had expired because the Union and some of its representatives had defended the proceeding to the point that it was ready for trial.

In Midland Resources Holding Limited v. Shtaif, 2017 ONCA 320, the court partially upheld complicated and detailed findings of fraud, unlawful conspiracy, deceit, and breach of fiduciary duty by the shareholders and directors of two failed corporate ventures to develop oil and gas fields in Russia.

In an administrative law, aboriginal law and Charter case, Gehl v Canada (Attorney General), the court set aside a decision by the Registrar under the Indian Act to deny Dr. Gehl status as an “Indian” under the 1985 amendments to Indian Act.  The court came to the conclusion that the decision was unreasonable because it denied Dr. Gehl Indian status due to her inability to prove that her paternal grandfather was Indian, even though she had circumstantial evidence that he was Indian and there was no evidence to the contrary. Justice Sharpe partially relied on the application of Charter values in reaching his conclusion. Justices Miller and Lauwers relied solely on the basis of administrative law principles and declined to apply Charter values.

Other topics covered included wills and estates, vexatious litigants and setting aside default judgments.

John Polyzogopoulos

Blaney McMurtry LLP

jpolyzogopoulos@blaney.com

Tel 416 593 2953

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

 

Table of Contents

Jansen v Niels Estate, 2017 ONCA 312

Keywords: Wills and Estates, Inter Vivos Gifts, Joint Tenancies, Severance Hansen Estate v. Hansen, 2012 ONCA 112, McNamee v. McNamee, 2011 ONCA 533, Foley v. McIntyre, 2015 ONCA 382

Stanbarr Services Limited v Reichert, 2017 ONCA 318

Keywords: Real Property, Mortgages, Civil Procedure, Trials, Adjournments

Collins v Ontario, 2017 ONCA 317

Keywords: Civil Procedure, Vexatious Litigants, Rules of Civil Procedure, Rule 2.1

Gehl v Canada (Attorney General), 2017 ONCA 319

Keywords: Aboriginal Law, Indian Act, R.S.C. 1985, c. I-5, s. 6, “Indian” Status, Proof of Paternity Policy, Administrative Law, Canadian Charter of Rights and Freedoms, s. 15

Lawrence v International Brotherhood of Electrical Workers (IBEW) Local 773, 2017 ONCA 321

Keywords: Civil Procedure, Employment Law, Wrongful Dismissal, Labour Law, Unions, Legal Capacity, Representation Orders, Amending Pleadings, Adding Parties, Limitation Periods, Rights of Labour Act, R.S.O. 1990 c. R.33, s. 3(2), Rules of Civil Procedure, Rule 12, Orders, Final or Interlocutory

Midland Resources Holding Limited v Shtaif, 2017 ONCA 320

Keywords: Torts, Fraudulent Misrepresentation, Deceit, Unlawful Conspiracy, Corporations, Derivative Actions, The Rule in Foss v. Harbottle (1843), 67 E.R. 189, Directors, Duties, Fiduciary Duties

Ken Jackson Construction Limited v Macklin, 2017 ONCA 324

Keywords: Contracts, Debtor-Creditor, Corporations, Corporate Veil, Civil Procedure, Default Judgments, Setting Aside, Intact Insurance Co v. Kisel, 2015 ONCA 205

For Civil Endorsements, click here.

For Criminal Decisions, click here.

Civil Decisions

Jansen v Niels Estate, 2017 ONCA 312

[Simmons, Pepall and Huscroft JJ.A.]

C. A. Brown, for the appellant

J. L. Turner, for the respondent, Ingrid Niels

Keywords: Wills and Estates, Inter Vivos Gifts, Joint Tenancies, Severance Hansen Estate v. Hansen, 2012 ONCA 112, McNamee v. McNamee, 2011 ONCA 533, Foley v. McIntyre, 2015 ONCA 382

Facts:

This decision concerned the estate of Theadora Niels, who died in November 2010. The principal issue was whether the interest in her house passed by right of survivorship to her daughter-in-law, Ingrid Niels, pursuant to a joint tenancy established by gift, or became part of her estate that is to be shared among her children.

Theadora made two wills prior to the 2004 will and codicil, one in 1998 and one in 1999. These wills divided her estate into three shares, one for her son Richard, one for Marjolein, and one to be divided between her son Frank and his children.

In 2004, Marjolein noticed a “for sale” sign on Theadora’s property. In November of 2004, Marjolein wrote a provocative letter to her mother asserting that the sale of the property was her business, that Theadora had always said the house belonged to Marjolein and her brothers, and that it was wrong for Theadora to sell the home.

Theadora did not respond to the letter, and Marjolein and Theadora never spoke again. On December 1, 2004, two days following Marjolein’s letter, Theadora made a new will. She removed Marjolein as executor but continued to leave her one-third share of her estate.

Theadora had purchased the property that was the subject of the appeal (the “Flos Road property”), but the sale had not yet closed when she made her new will. A codicil dated December 1, 2004 was executed providing that if Theadora died before title was taken to the property, title would be taken by Richard and the purchase would be funded by Theadora’s estate.

Theadora took title to the property in April 2005. Title was twice converted to a joint tenancy. First it was between Theadora and Richard, then it was to Theadora, Richard, and Richard’s wife Ingrid as joint tenants.

In 2009, Richard and Ingrid signed a separation agreement that Richard downloaded off the internet. The agreement provided that Richard would transfer his interest in the property to Ingrid following the death of Theadora, and the property would be the inheritance of their children.

In 2010, Theadora was diagnosed with cancer. She asked Ingrid to take care of her, and Ingrid did so. Shortly before her death, she made a phone call to her alternate executor, Carol Harding (the assistant of her lawyer), seeking assurance that the property would go to Richard and Ingrid when she died.

In 2011, Richard and Ingrid signed an amendment to the separation agreement which stated that they jointly owned the property and that Richard was transferring his right, title and interest to Ingrid. In December 2011, a transfer was registered.

Theadora’s daughter, Marjolein Jansen, brought an application seeking a declaration that the house is part of Theadora’s estate and should be distributed under the will and codicil made in 2004. Her application was dismissed. She appealed from that decision and sought leave to appeal the application judge’s costs award.

Issues:

  1. Was the joint tenancy severed?
  2. Did Theadora gift the property to Richard and Ingrid?
  3. Was Theadora subject to undue influence?
  4. Did the application judge err in awarding costs against Marjolein and not the estate, or err in the amount awarded?

Holding:

Appeal dismissed.

Reasoning:

(1) No. Severance of a joint tenancy may be achieved in one of three ways: 1) unilaterally acting on one’s own share, such as selling or encumbering it; 2) a mutual agreement between co-owners to sever; or 3) any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common.

Marjolein first argued that the joint tenancy was severed by the 2009 separation agreement. This submission was rejected, as the separation agreement did no more than express an intention to convey an interest in the future. An expression of intention is insufficient to achieve severance. Furthermore, the conveyance of one joint tenant’s interest to another severs the interest of the joint tenant making the conveyance or granting exclusive possession. It does not sever the whole of the joint tenancy. So, the separation agreement could sever no more than Richard’s one third interest in the joint tenancy. When Theadora died, the two-thirds interest she held jointly with Ingrid passed to Ingrid by survivorship, leaving no portion of the property to pass to her estate.

Marjolein also argued that the joint tenancy was severed by the provision of the 2009 separation agreement that Richard and Ingrid’s children would inherit the property. This submission was also rejected. In general, a joint tenancy is unaffected by a will, because property is conveyed pursuant to the joint tenancy outside the terms of the will.

Marjolein also submitted that the parties made a mutual decision to sever the joint tenancy. This too was rejected. Hansen Estate v. Hansen, 2012 ONCA 112 requires the court to determine, having regard to all of the evidence, whether the parties intended to treat their interests as constituting a tenancy in common. This is a fact-specific inquiry that is subject to deference on appeal. The application judge found “not one scintilla of evidence” that the parties intended to mutually treat the tenancy as a tenancy in common.

(2) Yes. The application judge applied the proper test for a gift, as set out in McNamee v. McNamee, 2011 ONCA 533. To establish a gift, one must show intention to donate, sufficient delivery of the gift, and acceptance of the gift. Theadora’s intention to gift the property was evident from her instructions to her solicitor and his assistant, as well as the executed documents.

(3) No. Marjolein submitted that the application judge erred by requiring her to establish undue influence rather than simply demonstrate that the relationship of the parties gave rise to a potential for undue influence. The judge applied the test in Foley v. McIntyre, 2015 ONCA 382, which holds that the presumption of undue influence applies where the potential for domination inheres in the relationship between the transferor and transferee. Where the presumption applies, the transferee must establish that a gift was the result of the full, free and informed thought of the transferor. The application judge found that the potential for domination and undue influence was completely rebutted based on the factual findings. Theadora was independent, cognitively engaged and unfettered by persuasion.

(4) No. The Estate had minimal involvement in the proceedings and was not represented at the hearing. The litigation was brought by Marjolein in an attempt to undo arrangements Theadora had made in order to ensure that no part of the property would pass to her. There were no public policy considerations that warranted relieving Marjolein of the responsibility to pay costs.

Stanbarr Services Limited v Reichert, 2017 ONCA 318

 [Feldman, Cronk and Miller JJ.A]

Counsel:

Ivan Y. Lavrence, for the appellant

M. Greenglass, for the respondents

Keywords: Real Property, Mortgages, Civil Procedure, Trials, Adjournments

Facts:

At issue was a default in payment on a second mortgage held by the respondents, which occurred in November 2011. On April 18, 2013, the respondents obtained partial summary judgment for possession of the mortgaged premises. In granting summary judgment, Bielby J. of the Superior Court of Justice rejected the appellant’s claim that he and his wife were merely tenants of the property and that the property was legally and beneficially owned by a family trust created by the appellant and his wife, rather than the appellant personally. The Court of Appeal dismissed the appellant’s appeal from Bielby J.’s judgment on October 2, 2013.

Thereafter, a court-appointed receiver sold the mortgaged premises, with court approval. The sale proceeds were insufficient to satisfy either the debt owing on a first mortgage on the property or any of the monies owing under the second mortgage held by the respondents.

The respondents’ action for payment of the mortgage debt was set down for trial in Brampton in December 2014, for an estimated six to ten days. In a pre-trial, the appellant, who was then self-represented, was cautioned by the court to retain counsel if he wished to do so. At a second pre-trial, the appellant sought and was granted an adjournment to afford him further time to retain counsel. At a third pre-trial of the mortgage action, the appellant had retained counsel, but counsel informed the court that his retainer had been terminated. The appellant again sought an adjournment of the trial. His request was denied by the pre-trial judge.

On May 12, 2016, the respondents attended court with counsel and their witnesses for commencement of the trial. Without prior notice to the respondents, neither the appellant nor any counsel on his behalf attended court. Instead, the appellant’s wife appeared and again requested an adjournment of trial, relying particularly on a doctor’s letter dated May 10, 2016, which stated that the appellant had suffered an emotional breakdown after the third pre-trial. It also emerged that the appellant had failed to pay several outstanding costs orders and, according to his wife, had no funds to pay them.

After hearing submissions, the trial judge declined to grant the adjournment and proceeded with the trial in the appellant’s absence. The judgment of Van Melle J. of the Superior Court of Justice dated May 12, 2016 ordered the appellant to pay the respondent mortgagees the sum of $1,293,734.54.

Issues:

1) Did the trial judge err by failing to grant an adjournment of the trial, per the request of the appellant’s wife?

2) Did the trial judge err by proceeding to conduct the trial and grant judgment in favour of the respondents in the appellant’s absence?

3) Should the Court of Appeal grant leave to introduce fresh evidence on appeal?

Holding:

Appeal dismissed. Application for leave to admit fresh evidence on appeal dismissed.

Reasoning:

1) No. The trial judge was fully justified in refusing to grant the appellant a further adjournment of the trial. By May 12, 2016, the action had been set down for trial for almost 17 months, three pre-trials had been conducted, the appellant had been warned of the need to retain counsel on a timely basis should he wish to do so, the trial had already once been adjourned at the appellant’s request and a new trial date – peremptory to the appellant – had been set, the appellant had retained, and terminated, the services of a solicitor, and the respondents and their counsel had prepared for trial and were ready, willing and able to proceed, together with their witnesses.

Further, the medical evidence proffered by the appellant’s wife indicated that the appellant would be unable to proceed with the trial for “months”. The appellant professed to have no funds to pay the respondents’ costs thrown away should an adjournment have been granted.

In all these circumstances, the granting of a further adjournment would have been manifestly unfair to the respondents and contrary to the interests of justice and judicial economy. It was open to the trial judge to deny an adjournment, in the exercise of her discretion.

2) No. Contrary to the appellant’s submission, it appears that the trial judge made no direction that, at the conclusion of the respondents’ evidence, the trial would be adjourned until May 16, 2016, for the purpose of allowing the appellant to attend trial and call evidence. Instead, the trial judge offered to adjourn the trial for a few days and also invited the appellant’s wife to remain and participate in the trial on behalf of the appellant. However, the appellant’s wife refused either accommodation.

Based on the doctor’s May 10 letter provided to the trial judge by the appellant’s wife, no reasonable expectation could have arisen that the appellant would be available for trial by May 16. In effect, an adjournment of an unspecified, but lengthy, duration was sought.

Moreover, the record did not support the appellant’s claim that he was denied procedural fairness because the trial judge denied his adjournment request without fully hearing from the parties. The trial judge heard submissions from the parties – including from the appellant’s wife – before ruling on the request.

3) No. The Court of Appeal was not persuaded that the fresh evidence sought to be tendered on appeal by the appellant, if admitted at trial, would have yielded a different outcome.

The appellant sought to defend the mortgage action solely on the basis that a family trust, rather than the appellant, was the legal and beneficial owner of the mortgaged property and liable for the mortgage debt. However, this claim was unequivocally rejected by Bielby J. when he granted judgment to the respondents for possession of the property. It was also unsupported by the mortgage itself, including the standard charge terms containing the appellant’s covenant to pay, the certificate of independent legal advice furnished by the appellant’s solicitor in relation to the mortgage transaction, the mortgage commitment letter, and various other documents related to the mortgage loan.

Furthermore, in documents filed with the court by the appellant on a summary judgment motion in a related solicitor’s negligence action, the appellant expressly acknowledged that he, rather than the trust, was the legal owner of the mortgaged property and that the relevant mortgage documents contained his personal covenant to repay the mortgage loan. He therefore had essentially admitted that the defence sought to be advanced by him in the mortgage action was factually and legally unsupportable.

Collins v Ontario, 2017 ONCA 317 

[LaForme, Pepall and Pardu JJ.A.]

Counsel:

D. Mayer, for the moving party, The Attorney General of Ontario

A. Laldin, for the moving party, The Attorney General of Canada

M. Collins, in person

Keywords: Civil Procedure, Vexatious Litigants, Rules of Civil Procedure, Rule 2.1

Facts:

(1) Docket C62801

On September 26, 2016 Edwards J. of the Superior Court of Justice, “for oral reasons given” allowed Her Majesty the Queen in Right of Ontario’s (“Ontario”) motion and struck Ms. Collins’ statement of claim without leave to amend and ordered Ms. Collins to pay costs fixed in the amount of $10,260.

By Notice of Appeal dated October 20, 2016, Ms. Collins seeks to appeal the order to the Court of Appeal. The oral reasons are not part of the record on this request by Ontario. No order appears to have been signed, issued or entered.

(2) Docket C62802

On November 9, 2015, Turnbull J. of the Superior Court of Justice granted Canada’s motion to strike Ms. Collins’ statement of claim in this matter without leave to amend. She filed a Notice of Appeal in connection with this order in which she asserted that the motion judge was unfair and biased towards her and denied her access to justice. She unsuccessfully attempted to have the Registrar of the Court of Appeal issue a Notice of Application addressing her alleged right to accurate and complete transcripts.

Ms. Collins then challenged the Registrar’s denial of this request by bringing an application to the court of Appeal seeking an order that before she is required to pay for transcripts of court proceedings, she be assured they are accurate and complete. She did not want the transcriptionist to follow the Superior Court’s normal procedure of providing the draft to the affected judge for editing as to accuracy prior to release. By order dated January 20, 2016 Lauwers J.A. (in chambers) dismissed her motion based on lack of jurisdiction to issue an originating process such as a Notice of Application. He also directed the Local Registrar to provide Ms. Collins with a compact disc with the live recording of the relevant proceeding when she paid for and received the transcript.

On January 25, 2017, the Chief Justice agreed with Lauwers J.A.’s decision and granted Ms. Collins an extension of time to April 8, 2017 to perfect her appeal. On July 5, 2016, Ms. Collins’ appeal of the decision of Lauwers J.A. was dismissed by a panel of this court as was her appeal of the decision of the Chief Justice. The panel also noted that Ms. Collins had taken no steps to perfect her appeal.

On October 6, 2016 Walters J. of the Superior Court of Justice dismissed Ms. Collins’ application for a declaration that she be guaranteed accurate and complete transcripts of the court proceedings. Justice Walters noted that Ms. Collins had brought similar proceedings in the Court of Appeal and the Court of Appeal had provided directions on how to proceed to her and to the local Superior Court office to produce the compact disc once she had paid for the transcript. Walters J. concluded that Ms. Collins’ application was premature. Her fears may never arise as once she pays for the transcript, she can compare it with the compact disc. By Notice of Appeal dated October 20, 2016 Ms. Collins seeks to appeal Walter J.’s order to the Court of Appeal.

Canada and Ontario seek to quash both appeals on the basis that Ms. Collins is a vexatious litigant.

Issues:

Should rule 2.1 be invoked to dismiss Ms. Collins’ appeals on the basis that she is a vexatious litigant?

Holding:

Appeal in C62802 dismissed. Appeal in C62801 not dismissed.

Reasoning:

(1) C62801

No. The respondents’ requests under r. 2.1 was denied. The record before the court was inadequate and did not meet the requirements for a dismissal or stay under r. 2.1. The court was unable to properly assess the requests advanced.

(2) C62802

Yes. Rule 2.1 has typically been invoked to dismiss proceedings where the opposite party has engaged in abusive litigation conduct. The rule “is not for close calls” and its availability “is predicated on the abusive nature of the proceeding being apparent on the face of the pleadings themselves”.

In Simpson, the appeal came from an order declaring the appellant a vexatious litigant who was “clearly using the court system as a way to inflict damage on people with whom he is upset”. Ontario and Canada clearly take the view that Ms. Collins’ appeals lack merit. Absence of merit on its own, even assuming such absence, is not sufficient to justify dismissal under r. 2.1.

The rule does not replace the bringing of a motion to quash an appeal for want of jurisdiction or for lack of merit. However, it does allow for a speedy process for disposing of proceedings and motions that on their face are frivolous, vexatious or otherwise an abuse of process.

The court found Ms. Collins’ appeal to be clearly without merit and abusive. She has been provided with guidance on how to proceed but has neglected to pay for the transcript so she can compare it with the compact disc to address any concerns she has. As a result, she has not perfected her appeal in spite of having been given an extension of time to do so. Abuse of the process of the courts detracts from the ability of the system to achieve those objectives. This is unfair to the opposing parties, others in the system who wish to have their cases adjudicated and to the administration of justice.

Gehl v Canada (Attorney General), 2017 ONCA 319

[Sharpe, Lauwers and Miller JJ.A.]

Counsel:
M. Eberts, C. Big Canoe, and E. Lahaie, for the appellant
C. Mohr and A. Bourke, for the respondent
R. Pelletier and K. Nerland, for the intervener, the Women’s Legal Education and Action Fund

Keywords: Aboriginal Law, Indian Act, R.S.C. 1985, c. I-5, s. 6, “Indian” Status, Proof of Paternity Policy, Administrative Law, Canadian Charter of Rights and Freedoms, s. 15

Facts:

The issue on this appeal is whether the appellant, Dr. Lynn Gehl, is entitled to be registered as an “Indian” under the Indian Act, R.S.C. 1985, c. I-5 (the “Act”). Dr. Gehl’s entitlement turns on amendments made in 1985 to bring the Act into compliance with s. 15 of the Charter of Rights and Freedoms (the “Charter”). Those amendments repealed discriminatory provisions in the Act that had deprived several of Dr. Gehl’s ancestors of their Indian status, and retrospectively restored their status. The 1985 amendments also established a new two-tier system of registration. Children with two Indian parents now receive s. 6(1)(f) or “full” status, whereas a child with only one Indian parent receives s. 6(2) or “partial” status. Those with full status can pass on Indian status to their own children, regardless of the Indian status of the other parent. In contrast, those with partial status can pass on Indian status to their own child only if the other parent also has Indian status (whether full or partial). This is known as the “two-parent rule”, and creates what is known as the “second generation cut-off”

After the 1985 amendments, the Registrar for Aboriginal Affairs and Northern Development Canada (the “Registrar”) developed the Proof of Paternity Policy (the “Policy”). The Policy, at least as it stood at the time the Registrar considered Dr. Gehl’s application and protest, is an internal departmental guide. It is not expressly contemplated by the Act and it is not a regulation. At the time of Dr. Gehl’s application for registration and protest, the Policy was in draft form and not generally available to the public.

Following the 1985 amendments, Dr. Gehl brought an application to register as an Indian in 1994. The Registrar for Aboriginal Affairs and Northern Development Canada (the “Registrar”) denied Dr. Gehl’s application for registration on the ground that to qualify for status under the Act, Dr. Gehl had to prove that both her paternal grandmother and grandfather had status, and she had failed to prove the status of her unknown grandfather. In particular, the Registrar determined that s. 6(1)(c) of the 1985 amendments retroactively restored the status of Dr. Gehl’s paternal grandmother to a “full” Indian status. However, in the view of the Registrar, as the identity of Dr. Gehl’s paternal grandfather was unknown, Dr. Gehl’s father could only claim status through one parent, his mother, and accordingly, he only acquired partial status. As Dr. Gehl’s mother had no status, the Registrar considered her to be the child of one status Indian parent with s. 6(2) or partial status. Accordingly, Dr. Gehl could not satisfy the two-parent rule, and had no right to be registered.

Dr. Gehl protested the Registrar’s decision and then appealed the refusal of her protest to the Superior Court. That appeal has been held in abeyance following the commencement of this action for Charter relief but the appeal remains open. Dr. Gehl, supported by the intervener LEAF, argues that s. 6(1)(f) of the Act and the Proof of Paternity Policy (the “Policy”), adopted by the Registrar for determining paternity, infringe s. 15 of the Charter by discriminating against her and other descendants of illegitimate children of aboriginal women on grounds of sex. Stripped to its essentials, Dr. Gehl’s argument is that, on the basis of the evidence she presented, she is entitled to status.

Issues:

(1) Is the challenge to the interpretation of s. 6 reflected by the Policy barred by an earlier court ruling?

(2) Can Dr. Gehl admit fresh evidence?

(3) On the evidence and on a proper application of s. 6(1)(f), is it unreasonable to deny Dr. Gehl status?

Holding:

Appeal allowed. The court is to grant Dr. Gehl a declaration that she is entitled to be registered pursuant to s. 6(2) of the Act as the child of one parent with full status.

Reasoning:

Sharpe J.A.:

(1) No. The 2001 decision striking the original statement of claim does not preclude Dr. Gehl from challenging the application of the Policy to her situation. No mention of the Policy was made in the 2001 decision. The current statement of claim is fundamentally different from that struck out in 2001. The claim for damages is gone and the focus is on declaratory relief. The amended claim directly puts in issue how an applicant is to establish the paternity of an unknown ancestor.

(2) No. The fresh evidence is not to be admitted. While this evidence was not known or available to Dr. Gehl at the time of the summary judgment motion, it is not relevant to the issues before the court. The proposed fresh evidence shows that the Registrar applies the pre-1985 presumption of paternity to individuals who had status under the pre-1985 Act at the time of their birth. That does not assist Dr. Gehl, as Mary Gagne did not have status at the time of Rodney Gagnon’s birth, but only acquired status as a result of the 1985 amendments.

(3) Yes. The Registrar’s application of the Policy to Dr. Gehl’s circumstances failed to take into account the equality-enhancing values and remedial objectives underlying the 1985 amendments, and was therefore unreasonable.

At the time the Registrar dealt with Dr. Gehl’s protest, the Policy was an informal and internal document, adopted by the Registrar to assist departmental officials when making determinations of entitlement to registration. It was administrative rather than legislative in nature. Therefore, the Policy is not law and is not amenable to Charter review.

Though the Policy is not amendable to Charter review, it is a basic proposition that administrative decision-makers must act consistently with the values underlying the grant of discretion, including Charter values. The courts accord deference to the administrative decision-maker’s exercise of discretion. Provided the decision-maker has properly balanced the Charter value with the statutory objectives, the decision will be found to be reasonable. On the other hand, if the decision-maker fails to balance the Charter rights or values at issue with the statutory objective in a reasonable manner, the decision is vulnerable to review

The relevant Charter rights and values that bear upon the Policy as it applies to Dr. Gehl are the rights and values encompassed by s. 15 of the Charter. Section 15 involves a flexible and contextual two-part inquiry. At the first stage, the question is whether “on its face or in its impact, the law creates a distinction based on an enumerated or analogous ground. At the second stage, the inquiry is whether the impugned law fails to respond to the actual capacities and needs of the members of the group and instead imposes burdens or denies benefits in a manner that has the effect of reinforcing, perpetuating or exacerbating their disadvantage.

The determination of entitlement to registration on the basis of the entitlement of both parents is, on its face, a gender-neutral rule. However, the Registrar is required to guard against an exercise of discretion that results in substantive inequality. Proof of identity of a parent is, as a matter of biology and common experience, more difficult for a mother to establish than a father. There can hardly ever be any doubt about maternity, but there may be considerable doubt about paternity.

The Policy imposes a relatively strict burden of proof essentially based upon documentary evidence. The Policy provides that where confidentiality or personal safety is a concern and documentary proof of paternity is not available, the Registrar may consider conducting a hearing and considering other evidence. However, the Policy falls short of what is required to address the circumstances where a woman may have good reason for her reluctance or inability to disclose the identity of her child’s father. This failure perpetuates the long history of disadvantage suffered by Indigenous women. As Parliament itself recognized in 1985, the historic practice of stripping and denying Indigenous women of status represented a significant disadvantage that was inconsistent with the Charter’s promise of equality.

At the time of Rodney Gagnon’s birth in 1935, the Indian Act, R.S.C. 1927, c. 98, s. 12, provided that the illegitimate child of an Indian woman had band membership unless the child was excluded from membership by the Superintendent General. Section 11(e) of the Indian Act, S.C. 1951, c. 29, provided that the illegitimate child of an Indian woman was entitled to register “unless the Registrar is satisfied that the father of the child was not an Indian”. Though Dr. Gehl cannot rely on the pre-1985 presumption of paternity, the 1985 amendments did not replace the former presumption of paternity with a presumption of non-paternity. Section 6(1)(f) is silent on the issue of standard and burden of proof, and the post-1985 Act imposes no presumption, one way or the other.

When applied to her situation, the Policy unreasonably fails to take into account evidence of the kind that Dr. Gehl has submitted and to the fact that Dr. Gehl’s father was born 50 years before the 1985 amendments. While the identity of Dr. Gehl’s paternal grandfather is unknown, as the motion judge observed, there is some evidence to support an inference that he had Indian status. That evidence is, of course, far from conclusive but, as the motion judge suggested, in the absence of any evidence to the contrary, it is capable of supporting an inference that Dr. Gehl’s father’s situation satisfies the two-parent rule, and that he therefore had full status.

The imposition of a relatively strict burden of proving paternity may well be appropriate to circumstances arising after 1985, when the new regime came into force and after the iniquities of the prior regime had been eliminated. However, it is unreasonable to apply that same burden to Dr. Gehl’s circumstances in relation to a birth that occurred 50 years prior to the amendments and to individuals who had been unjustly deprived of status. To impose such a burden fails to take into account and reflect both the equality-enhancing and the remedial purposes of the 1985 amendments.

Ordinarily, in a proceeding of this nature, a court will not substitute its decision for that of an administrative decision-maker, but rather will remit the matter back to the administrative decision-maker for further consideration. However there is an exception where doing so would be “pointless” as there is only one possible outcome in view of the court’s decision. This case falls within that category. Accordingly, it is appropriate for the court to grant Dr. Gehl a declaration that she is entitled to be registered pursuant to s. 6(2) of the Act as the child of one parent with full status.

Lauwers and Miller JJ.A. (Concurring):

Justice Miller and Lauwers concur with Justice Sharpe in the result and agree with much of his reasoning. However, they resolved this appeal solely on the basis of administrative law principles, without resort to the concept of Charter values.

The case can be resolved on straightforward administrative law grounds on the basis that the Registrar’s decision is simply unreasonable. The result of the Registrar’s decision is that Ms. Gehl is prevented from accessing benefits – benefits constitutionally guaranteed by s. 35 of the Constitution Act, 1982 – because of an imposed burden that she prove something that, in the circumstances, cannot be proven. The wrong in the Registrar’s decision is caused by the application of a categorical evidentiary rule that works in an exclusionary manner to deny registration and status to an entitled individual who cannot identify a relevant ancestor by name. It is the demand for evidence of specific identity when, in some circumstances, only circumstantial evidence of Indian status of an ancestor whose actual identity is not known (and is not knowable) is available.

The application of this rule – by which the Registrar refused Dr. Gehl’s application – is unreasonable because it is at odds with the purpose of s. 6 of the Indian Act, which is to provide for the registration of persons who are entitled to registration. It potentially denies the benefit of registration to some persons whom the Act entitles to registration – as the Registrar acknowledged on cross examination – solely because of their inability to satisfy an unreasonable evidential demand not mandated by the Act. The demand for evidence of a specific identity is unreasonable because it is a demand for evidence which is not only superfluous, but now, through the passage of time, unobtainable in this instance.

The circumstantial evidence advanced by Dr. Gehl is capable of supporting an inference that her paternal grandfather was of aboriginal ancestry. Therefore, in the circumstances of a historical claim such as this one, it is sufficient for the claimant to provide some evidence capable of giving rise to the inference that an unknown father may have had status, which constitutes sufficient proof of paternity for the purposes of the legislation, in the absence of any evidence to the contrary.

Justice Miller and Lauwers also made two substantive observations on Sharpe J’s proposal to resolve the appeal through the application of Charter values. First, where a case can be resolved without reference to Charter values, prudence suggests they should not be invoked because such an analysis would unnecessarily inject subjectivity and uncertainty into the legal analysis. Second, there is no need to resort to Charter values to displace any deference that an appellate body might owe to the original decision-maker because in Dr. Gehl’s case no deference is owed to the Registrar.

Overall, Justices Miller and Lauwers agreed with their colleague that this case falls within the category of exceptional cases in which remitting the matter to the decision-maker would be pointless since there is only one possible outcome. Accordingly, Dr. Gehl is granted the declaration that she is entitled to be registered under s. 6(2) of the Indian Act as the child of one parent with full status.

Lawrence v International Brotherhood of Electrical Workers (IBEW) Local 773, 2017 ONCA 321

[Sharpe, Lauwers and Hourigan JJ.A.]

Counsel:

D. Shields and B. O’Connor, for the appellant

R. D. Reynolds, for the respondent

Keywords: Civil Procedure, Employment Law, Wrongful Dismissal, Labour Law, Unions, Legal Capacity, Representation Orders, Amending Pleadings, Adding Parties, Limitation Periods, Rights of Labour Act, R.S.O. 1990 c. R.33, s. 3(2), Rules of Civil Procedure, Rule 12, Orders, Final or Interlocutory

Facts:

Pamela Lawrence, the respondent in this appeal, was terminated from her employment with the appellant, the International Brotherhood of Electrical Workers, Local 773 (“Local 773”). She brought this action for damages for wrongful dismissal, naming Local 773 as defendant. She subsequently obtained a consent order adding the individual appellants, all directors of Local 773, as defendants, and amended the statement of claim to plead that that the individual respondents were jointly and severally liable for her claim as against Local 773.

In its statement of defence, Local 773 pleaded that as a trade union, it could not be named as a party. It relied on the Rights of Labour Act, s. 3(2) which provides that: A trade union shall not be made a party to any action in any court unless it may be so made a party irrespective of this Act or of the Labour Relations Act..

No doubt, at that stage the respondent should have taken the required steps to amend the proceedings by way of a representation order under r. 12.07. The question before the Court of Appeal was whether, in the circumstances of this case, the respondent’s failure to do so prior to the expiration of the limitation period is fatal to her claim as against Local 773.

The action proceeded through the normal discovery, mandatory mediation and pre-trial conference phases. Local 773 and the individual appellants were all represented by the same counsel. A representative of Local 773 was produced and examined for discovery. The action was set down for trial. The appellants participated in all of these steps without reiterating the objection made in their statement of defence that Local 773 was not a suable entity.

After the expiry of the two-year limitation period, the appellants moved under r. 21 for an order dismissing the action on the ground that Local 773 was not a suable entity. They argued that the only way a trade union could be sued was by way of a representation order pursuant to r. 12.07, under which the court may authorize one or more individuals to defend a proceeding as representatives of the members of the trade union. The appellants also argued that the individual defendants were not personally answerable for the respondent’s claim.

The appellants’ motion to dismiss the action was dismissed: 2015 ONSC 5817. On that motion, the respondent did not bring a cross-motion asking for a representation order but she advanced that request in her factum. The motion judge refused to make a representation order in the context of the appellants’ motion and suggested that the prospect of success on a motion seeking that relief was doubtful given the limitations issue. The appellants’ motion to the Divisional Court for leave to appeal the dismissal of the r. 21 motion was dismissed: 2016 ONSC 497.

The respondent then brought a successful motion pursuant to r. 12.07 for the order that is the subject of this appeal, granting her leave to amend her statement of claim to add the individual appellants as representatives of all the members of Local 773. The motion judge ruled that the order the respondent sought was properly characterized as a motion to correct an error in the title of proceedings under r. 5.04(2),

The appellants appealed the motion judge’s ruling to this court. The respondent moved to quash this appeal on the ground that the order is interlocutory and therefore not within the jurisdiction of this court. The panel scheduled to hear the motion to quash on January 20, 2017, adjourned that motion to this panel on the ground that the issue of whether the order is final or interlocutory was closely related to the merits of the appeal.

Issues: Did the motion judge err by making a representation order authorizing the individual defendants to defend the proceeding as representatives of all the members of Local 773 after the expiry of the limitation period?

Holding: Motion to quash appeal dismissed. Appeal dismissed.

Reasoning:

It is well established that the Rights of Labour Act precludes a trade union from being named as a party and that an action brought in violation of the Act will be struck or dismissed: Nippissing Hotel Ltd. et al. v. Hotel & Restaurant Employees & Bartenders International Union et al., [1963] 2 O.R. 169 (H.C.J.);

The proper way to sue a trade union is to obtain a representation order pursuant to r. 12.07, authorizing one or more members of the union to defend a proceeding on behalf of all the other members.

The appellants rely on two trial level decisions where an amendment to a claim by way of obtaining a representation order was refused on the ground that the action naming a trade union contrary to the Rights of Labour Act was a “nullity”. Neither of the decisions are binding on the Court and the label “nullity” is inapt in the circumstances of this case for three reasons:

1) Local 773 did not treat the claim against it as a nullity. The union retained counsel, filed a statement of defence, and fully participated in the discovery process, a mandatory mediation and a pre-trial conference. The union did plead that it could not be made a party to the action and asked that the claim be dismissed on that account, but the statement of defence says nothing about “nullity’ and goes on to plead substantive defences. It is difficult to reconcile Local 773’s normal litigation activity on this matter over the course of more than two years with its argument that the action against it was so seriously flawed as to constitute a nullity. The motion judge correctly took Local 773’s conduct of the action into account when deciding whether to grant the amendment and to make a representation order. Local 773’s conduct was a carefully designed tactical ploy to avoid having the respondent’s claim adjudicated on the merits. There is no reason to reward that conduct.

2) The concept of “nullity” expressed in the two trial decisions is difficult to reconcile with modern principles of civil procedure. There may well be proceedings that are so irregular as to qualify as nullities but the Rules of Civil Procedure suggest that those proceedings should be confined to a very narrow range.

3) There is the question of how courts should interpret and apply the Rights of Labour Act in the contemporary context of the labour relations regime. The judgment of Goudge J.A. in P.I.P.S.C. v. Canada (Attorney General) (2003), 62 O.R. (3d) 682 (C.A.) puts the Rights of Labour Act in its proper historical context. The Act was designed to protect unions from “the unforgiving common law, which viewed trade unionism as an unlawful combination in restraint of trade.” Since that time, trade unions and collective bargaining have undergone an “extraordinary evolution” and for unions to “be able to properly fulfill the functions now expected of them, courts must treat them as juridical entities” (P.I.P.S.C., at para. 27).

As an unincorporated association, a union is “the sum of its members”. The members of Local 773 would have known that the respondent intended to name the legal entity that they comprised as members. Local 773 possesses a legal personality. It cannot be sued in its own name but it can be sued by way of a representation order. The motion judge held that the request for a representation order in this case could properly be characterized as a request to “correct the name of a party incorrectly named” within the meaning of r. 5.04(2). While the form of the order states that the amendment is to “add the individual Defendants…as representatives of all members of the Defendant…Local 773”, the individual defendants were already named and all other members of the union were on notice that the respondent intended to sue the entity they collectively comprise. This brings the case squarely within the principle articulated by this court in Lloyd v. Clark, 2008 ONCA 343, [2008] O.J. No. 1682, at para. 4:

The case law amply supports the proposition that where there is a coincidence between the plaintiff’s intention to name a party and the intended party’s knowledge that it was the intended defendant, an amendment may be made despite the passage of the limitation period to correct the mis-description or misnomer [citations omitted].

The respondent intended from the outset to name her employer as a defendant. Local 773 and its members knew well before the expiry of the limitation period that the respondent had brought an action claiming damages for wrongful dismissal against the entity that had been her employer. Both Local 773 and the same individual parties named as representatives of the members participated in the action for over two years. The action is now ready for trial. No further procedural steps would be required as a result of the representation order and the appellants would suffer no prejudice as a consequence of the representation order.

Hourigan J.A. (Dissenting):

Section 3(2) of the Rights of Labour Act, R.S.O. 1990, c. R.33 provides: A trade union shall not be made a party to any action in any court unless it may be so made a party irrespective of this Act or of the Labour Relations Act.

Firstly, with the enactment of s. 3(2) of the Act in 1944, the only way to commence a civil proceeding against an Ontario union is to obtain a representation order. An action brought against a union without the benefit of a representation order is a “nullity”.

Second, in the seminal case of Berry v. Pulley, 2002 SCC 40, the Supreme Court of Canada determined that trade unions have the capacity to sue or to be sued. See also Fullowka v. Pinkerton’s of Canada Ltd., 2010 SCC 5, [2010] 1 S.C.R. 132, at para. 118. However, this capacity only exists “absent express legislative provisions to the contrary”: Berry, at para. 46.

Third, s. 3(2) of the Act is an express legislative provision to the contrary. Accordingly, Berry did not change the law with respect to suing Ontario unions, and a representation order under r. 12.07 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 184, is still required:

Thus, the law in Ontario has been clear for over seventy years that without a representation order a union cannot be sued. In this case, the respondent did not obtain such an order before the limitation period expired. For that reason, by operation of s. 3(2) of the Act, no suit could be brought against the International Brotherhood of Electrical Workers, Local 773 (“Local 773”) within the limitation period. The motion judge was obliged to strike the statement of claim as against local 773.

The dissent was not persuaded by the arguments proffered by the majority that there is any principled basis to conclude that this case should not be subject to the well-established rule prohibiting suits against unions absent a representation order.

The majority views the concept of nullity as being difficult to reconcile with modern principles of civil procedure. However, the concept of an action being a nullity if it is brought in violation of a statutory requirement is not at all foreign to contemporary Ontario law. The majority’s reliance on r. 2.01 is also misplaced. That sub-rule is limited to situations where there has been non-compliance with Rules of Civil Procedure. It cannot operate to excuse non-compliance with a statute.

The decision of the motion judge and the reasons of the majority inject a degree of uncertainty into the law. As a result of the majority’s decision, the statutory requirement for a representation order is no longer absolute, but dependant on the equities and circumstances of any given case.

The reasons of the majority raise the issue of how s. 3(2) of the Act should be applied in the contemporary context of the labour relations regime. It is not open to courts to ignore legislation on the basis that they feel it is outmoded or archaic. Such an approach is contrary to the basic rules of our parliamentary democracy because it usurps the legislative role of government. This, of course, is a role for which courts are untrained and unaccountable. This court expressed a desire for legislative reform of s. 3(2) of the Act in P.I.P.S.C.; it does not have the authority to make the desired change itself by declining to apply the provision.

Midland Resources Holding Limited v Shtaif, 2017 ONCA 320

[Doherty, Brown and Roberts JJ.A.]

K. L. MacDonald, S. J. Sanderson, for the appellants Michael Shtaif and Eugene Bokserman

G. Roberts, in person

S. Zucker, K. Prehogan, and K. A. Mullin, for the respondents Midland Resources Holding Limited, Alex Shnaider and Eduard Shyfrin

Keywords: Torts, Fraudulent Misrepresentation, Deceit, Unlawful Conspiracy, Corporations, Derivative Actions, The Rule in Foss v. Harbottle (1843), 67 E.R. 189, Directors, Duties, Fiduciary Duties

Facts:

Shtaif decided to start a company called Euro Gas in which he would acquire undervalued Russian oil and gas companies, consolidate them into one company and take it public on the TSX. Shtaif hired Bokserman as an investment adviser to help find investors. Bokserman introduced Shtaif to a potential investor named John Howard. Unbeknownst to Shtaif at the time, “Howard” was an alias for Irwin Krakowsky. Krakowsky had been convicted of securities fraud and market manipulation and served time in prison. Howard held himself out as the principle of a public company incorporated in the US called BDW Holdings Ltd.

In November 2005, Howard offered Magellan as a corporate vehicle for Shtaif’s oil venture. Howard told Shtaif that Magellan was a Delaware public company trading on the “Pink Sheets”, meaning it did not meet the reporting requirements to be listed as a public company on a major exchange. Howard had fraudulently created Magellan that November specifically for Shtaif’s venture. Howard also stated that BDW would invest in Magellan.

Bokserman contacted Midland to invest in Magellan. Midland was jointly owned by Shnaider and Shyfrin. Bokserman arranged a meeting with Shnaider, Shtaif and himself. Shtaif said he was looking to raise $120 million and that BDW had already committed $70 million. Shnaider took comfort in the fact that BDW was committed to investing $70 million in Magellan. The trial judge found that Shtaif knew BDW’s offer was false as there had been numerous “red flags” preceding Howard’s offer.

In January 2006, Schnaider confirmed Midland would invest $50 million in Magellan. Shnaider believed BDW had already paid $8 million and that balance of $70 million was on the way. At this time, Howard transferred 8 million Magellan shares to himself and 12 million to Shtaif. He then asked his friend and former lawyer, Roberts, to be BDW’s representative on the board. He gave Roberts two million Magellan shares.

In February 2006, Magellan held a second board meeting in which it committed to buying SibinTek and Reef, two Russian oil fields. SibinTek did not close, but Reef closed mid July. This was Roberts’ first board meeting as a director. The trial judge found that Roberts breached his fiduciary duty to Magellan by failing to inform Shnaider and Shyfrin that i) Howard was using a pseudonym to hide his criminal past, ii) BDW and Magellan were Pink Sheet companies, and iii) Roberts had already received 2 million shares without board approval.

In April 2006, Midland paid its $50 million. Shnaider emailed Shtaif seeking confirmation that the $50 million had been deposited into Magellan’s bank account. Shtaif advised that it had and there was currently “over $60 million in the bank”, even though he knew this to be false as BDW had not yet contributed.

At a board meeting on May 16, Shtaif disclosed to Shnaider that BDW had not paid anything. Shtaif told Shnaider that Magellan would have to get rid of BDW and find other investors. Shtaif and Roberts then hired a securities lawyer at Fasken to get Magellan off the Pink Sheets and into a better exchange. In reality, they hired the lawyer to discover what they already knew, which was that Magellan was a sham.

By June 2006 it became apparent that Magellan was not a legitimate public company, but a sham public corporation promoted by two of the defendants. The shareholders then reorganized their venture using a new company, Koll resources Limited (“Koll”) to continue it. The terms of the agreement were memorialized in a June 21, 2006 Settlement Agreement between Midland and Magellan.

On July 13, 2006, Koll purchased Reef for US$18.5 million using money loaned from Midland. By July 15, the problems with the SibinTek deal came to light.

After the parties terminated the Magellan arrangement, Shtaif and Roberts unlawfully conspired to convert to their own use Magellan money left in Fasken’s trust account and a TD bank account. Just before Shtaif resigned as CEO, he signed Magellan promissory notes to himself and Roberts as reimbursements for expenses they purportedly incurred while acting for Magellan. Roberts then commenced two actions in Superior Court he moved for consent judgments on the two promissory notes. He arranged for Howard, using the new alias of “John Sparrow”, to consent to judgment on behalf of Magellan when he had no authority to do so. Roberts then garnished the funds in the Fasken and TD accounts in satisfaction of the judgments.

Throughout the second half of 2006, the parties’ relationship deteriorated, with Shtaif and Roberts fighting Shnaider and Shyfrin for control of Koll.

By mid-2007, each group of shareholders had fully lost trust in the other. Competing lawsuits ensued, in which the parties alleged myriad acts of malfeasance against each other. The various actions were consolidated into this proceeding. The plaintiffs claimed that the defendants duped them into investing in a project they knew was fraudulent from the start, and then induced them to throw good money after bad by investing in Koll to recoup their losses.

The defendants counterclaimed that the plaintiff were the real fraudsters because they took control of the project after the Koll reorganization had failed, depriving the defendants of their interest in what they maintained was a potentially lucrative business.

After several unsuccessful attempts, the respondents sold Reef in 2010 for US $5 million. All told, Midland loaned Koll US $50 million, and its losses totalled US $46,105,879.50.

Following a 53-day trial, the trial judge released a 166-page decision in which she found the plaintiffs completely successful.

The defendants appealed.

Issues:

(1) Is the respondent’s claim precluded by the rule in Foss v. Harbottle, which holds that individual shareholders have no cause of action for wrongs done to a corporation?

(2) Does the June 21 2006 Settlement Agreement preclude the respondents from asserting claims before that date?

(3) Did the trial judge err in finding the appellants liable for deceit, unlawful conspiracy, and breach of fiduciary duty?

Holding: Appeal allowed in part.

Reasoning:

  1. Foss v. Harbottle

The appellants argue that if they committed any legal wrongs, the entities directly injured by their acts were the corporations Magellan and Koll, not the shareholders. As a result, the rule in Foss v Harbottle would prevent the respondents as shareholders from bringing suit to recover damages for wrongs caused to the corporations, absent leave to bring a derivative action. Shtaif acknowledged in oral argument that he was raising a Foss v. Harbottle argument for the first time on appeal.

The court gave two procedural reasons why effect would not be given to the appellants’ Foss v. Harbottle argument. First, the appellants’ tardiness in raising this defence and waiting until the appeal to raise it in any substantive way worked an unfairness on the respondents. Had they specifically pleaded a Foss v. Harbottle defence, the respondents submit they could have sought leave to bring a derivative action nunc pro tunc. Instead, the respondents only had a limited opportunity to reply to Roberts’ last minute raising of the defence. Second, the appellants’ submission was inconsistent with the position they took at trial on their counterclaims. Shtaif and Roberts did not view the rule in Foss v. Harbottle as precluding their counterclaims against the respondents based on allegations the parties were fiduciaries in respect of the Koll portion of their business venture. Accordingly, there was merit in the respondents’ submission that had the appellants pleaded a Foss v. Harbottle defence, they would have undercut the foundation for their own counterclaims.

The appellants’ submission mischaracterized the real nature of the respondents’ claims. The respondents did not allege the directors of Magellan or Koll failed to exercise the requisite care and diligence in discharging their duties by mismanaging those corporations’ investments in oil fields, thereby causing financial losses that harmed the respondents as shareholders. Instead, the respondents alleged the individual appellants engaged in deceit and conspiracies to induce them to part with their money and invest in Magellan and Koll. Those claims were personal in nature, seeking damages for tortious harm directly caused to the respondents.

The rule in Foss v. Harbottle does not preclude a shareholder from maintaining a claim for harm done directly to it. The trial judge found on the “unusual facts” of this case that Midland, the shareholder, did suffer a direct injury or loss by reason of the appellants’ conduct. The court found no reason to disagree with these findings. The rule in Foss v. Harbottle did not apply to the respondents’ claims for fraudulent misrepresentation and conspiracy.

  1. The Settlement Agreement

The appellants did not plead that the Settlement Agreement operated to release all pre-June 21, 2006 claims; nor did they raise the defence at trial. In addition, the terms of the Settlement Agreement, and the circumstances surrounding its making, did not support the appellants’ argument that the agreement constituted an unequivocal expression by the respondents to rescind Midland’s share subscription in Magellan by reason of the appellants’ fraud and thereby place all parties in status quo ante.

First, the appellants were not parties to the Settlement Agreement; it contains no terms for their benefit. Second, Midland gave no release of claims in the agreement; by contrast, Magellan released the respondents. Third, the Settlement Agreement contained no provision purporting to release the appellants from claims unknown to the respondents at the time the agreement was made. Finally, the Magellan promissory note lacked any value; it did not result in Midland recouping the funds used to pay Bokserman his commission because Magellan never had any assets other than the funds invested by Midland. 

  1. Deceit, Unlawful Conspiracy, Breach of Fiduciary Duty

i. Bokserman

While the respondents’ pleading alleged Bokserman’s representation led Shnaider to “express an interest” in investing, the evidence at trial was that Shnaider relied on Bokserman’s representation in deciding to invest. It was open to the trial judge to make the findings of reliance she did on the record before her. The court saw no basis for appellate interference with them. Moreover, the respondents were not required to establish that they relied only on that misrepresentation, simply that it contributed to their decision and was one of the facts that induced them to act.

ii. Roberts

Roberts submitted the information he possessed about “Howard’s” criminal background and his change of name were not material because, by the time of the February Board meeting, Midland already had signed the agreement to subscribe for Magellan shares. That argument was a non-starter. Such information struck at the root of the legitimacy of Magellan as a public company, and Roberts was required to disclose it regardless of whether the respondents had made some, all, or none of their investment in Magellan. The trial judge accepted Shnaider’s evidence that had Roberts disclosed this information, he would have realized that this was a “pump and dump” scheme and would have declined to further participate in Magellan. There was no basis upon which to interfere with that finding.

Roberts contended his silence at the February, 2006 Board meeting attracts no legal liability to Midland because his director’s duty was owed only to Magellan and, as a result, Midland cannot recover any damages resulting from it. A director may owe an ad hoc fiduciary duty to a shareholder, especially in “situations involving a family or other close special relationships of trust and dependency between the claimant and the defendant director, in which the director was seeking to take advantage of that relationship for personal gain or profit”. However, although the respondents pleaded the existence of an ad hoc fiduciary duty owed by Roberts to Shnaider and Shyfrin, the trial judge made no factual findings that such a duty arose in the circumstances. Thus, the trial judge’s implicit holding that Midland, as a shareholder, enjoyed a cause of action against Roberts for his breach of fiduciary duty to Magellan was not sustainable.

Although the trial judge erred in concluding Midland could recover its loss as the beneficiary of a fiduciary duty Roberts owed to Magellan, the court saw no error in the trial judge’s finding that Midland suffered a loss of US$8.27 million as a direct result of Roberts’ failure to disclose material information at the Magellan February Board meeting. The rule in Foss v. Harbottle was not an obstacle to the respondents’ claims. Midland therefore could sue to recover its direct loss. The court saw no unfairness to Roberts by upholding this part of the judgment, i.e. judgment against Roberts for US$8.27 million “on the unusual facts here.” Throughout the trial he knew the case he had to meet in respect of his conduct at the February Board meeting.

iii. Shtaif

Although Shtaif broadly submitted the trial judge erred in finding him liable, he did not point to any palpable and overriding error of fact in the trial judge’s deceit findings. In fact, at the hearing of the appeal, Shtaif’s counsel stated he was not challenging the trial judge’s findings of fact. In any event, the trial judge’s reasons analyzed each of those allegations of deceit, and ample evidence supported her findings of liability. That conclusion was sufficient to dismiss Shtaif’s appeal of that portion of the judgment awarding damages against him of US$8.27 million for Midland’s pre-June 21, 2006 losses. Shtaif, however, raised three additional grounds of appeal in respect of other findings of liability for his pre-June 21, 2006 conduct.

The trial judge also found Shtaif liable to the respondents for damages in the amount of US$8.27 million on the basis of his participation in an unlawful conduct conspiracy. Shtaif challenged that conclusion, not on the ground that the trial judge erred in her findings of fact, but on the basis that the respondents failed to plead unlawful conduct conspiracy “with any precision or particularity”. The court was not persuaded by this. The respondents’ Amended Fresh as Amended Statement of Claim contained lengthy and particularized allegations describing the unlawful conduct conspiracy, including Shtaif’s role in it and the unlawful conduct. Shtaif did not challenge the adequacy of the respondents’ pleading of conspiracy; instead, he pleaded over and denied the allegations. Finally, Shtaif fully responded to the respondents’ conspiracy allegations at trial.

iv. Shtaif and Roberts

The court accepted the submissions of Shtaif and Roberts that the trial judge erred in finding liability against them for the IPO-related Statements, for several reasons. Precision and particularity are necessary when pleading fraud. Rule 25.06(8) of the Rules of Civil Procedure requires any pleading of fraud or misrepresentation to contain “full particulars”. The evidence led at trial would not be read as clearly disclosing to Shtaif and Roberts that the respondents were alleging the IPO-related Statements constituted deceits. Third, in their written closings, the respondents specifically identified three statements they alleged constituted fraudulent misrepresentations: (i) BDW had invested money in Magellan; (ii) the true identity of “Howard”; and (iii) the status of the SibinTek treasury notes. The three IPO-related Statements found by the trial judge to constitute deceits were not identified by the respondents as such in their written closing. The substance of their oral closing submissions tracked those of their written submissions.

Given those circumstances, it was not open to the trial judge to find that any of the IPO-related Statements amounted to fraudulent misrepresentations for which Shtaif and Roberts were liable.

In the result, the court dismissed (i) Bokserman’s appeal, (ii) Shtaif and Roberts’s appeal in respect of the trial judge’s finding of liability in the amount of US$8.27 million for pre-June 21, 2006 conduct, and (iii) Roberts’s appeal of the dismissal of his counterclaim.

The court allowed the appeals of Shtaif and Roberts of the findings of liability in respect of their post-June 21, 2006 conduct, save and except for the liability in respect of their recoveries under the Magellan promissory notes.

Ken Jackson Construction Limited v Macklin, 2017 ONCA 324

[Weiler, Pardu and Roberts JJ.A.]

Counsel:

R. J. Reynolds, for the appellants

D. A. Grace and S. Habi, for the respondent

Keywords: Contracts, Debtor-Creditor, Corporations, Corporate Veil, Civil Procedure, Default Judgments, Setting Aside, Intact Insurance Co v. Kisel, 2015 ONCA 205

Facts:

The appellants appeal the dismissal of their motion to set aside the default judgment obtained by the respondent. In its action, the respondent sought payment of outstanding invoices for work rendered as the corporate appellant’s subcontractor on various construction projects.

Issue:

Should the default judgment be set aside?

Holding:

Appeal allowed.

Reasoning:

Yes. Firstly, the Registrar signed judgment against the individual appellants for the amounts of the invoices billed to the corporate appellant. The claims pleaded by the respondent against the individual appellants were for breach of trust and conversion. There was no basis pleaded that would make the individual appellants liable for invoices billed to the corporation. There was no basis pleaded that would make the individual appellants liable for invoices billed to the corporation. The respondent did not seek to pierce the corporate veil. In any event, personal liability like this would not amount to a “debt or liquidated demand in money” within the judgment-signing jurisdiction of the Registrar.

Secondly, the Registrar had no jurisdiction to grant judgment against the individual appellants on the claim against them for breach of trust and conversion, as this was also not for “a debt or liquidated demand in money.”

The Registrar had jurisdiction to sign judgment against the corporate appellant for the amounts invoiced to it by the respondent. Although the motion judge enumerated the five well-known criteria from Intact Insurance Co v. Kisel, 2015 ONCA 205, he applied them too rigidly and erred in failing to consider the overarching factor of whether the justice of the case required him to allow the action to be adjudicated on its merits.

The appellants’ evidence met the air of reality test and demonstrated an arguable defence on the merits in relation to the issues of whether the respondent’s action was statute-barred, whether the rate of interest claimed was sustainable and whether there was any claim for breach of trust against the individual appellants. Further, the respondent filed no evidence that it would suffer any prejudice if the noting in default and default judgment were set aside.

Having regard to the arguable defences on the merits and absence of prejudice, as well as the relatively short delay of about four months between the service of the statement of claim and the appellants’ retaining counsel to deal with the claim, together with the appellants’ explanation for the delay, the criteria to set aside the noting in default and default judgment are satisfied.

The motion judge erred in principle, and his exercise of discretion refusing to set aside the noting in default and default judgment was unreasonable. Accordingly, the appeal is allowed. The decision of the motion judge is set aside. The default judgment and the noting in default of the appellants are set aside.

Civil Endorsements:

Baradaran v Ontario, 2017 ONCA 304

[Doherty, MacFarland and Rouleau JJ.A.]

Counsel:

M. Baradaran, appearing in person.

B. Forson and E. Wagner, for her Majesty the Queen in Right of the Province of Ontario

J. W. Anisman, for LawPRO

P. Bakos, for the Friedman Law Firm

Keywords: Endorsement, Reasonable Apprehension of Bias, Fresh Evidence

Gyimah v Reda, 2017 ONCA 316

[Feldman, Cronk and Miller JJ.A.]

Counsel:

A. Giymah, acting in person

I. Ishai and G. M. McKeown, for the respondents

Keywords: Endorsement, Civil Procedure, Sriking Pleadings, Frivolous and Vexatious, Abuse of Process, Res Judicata

 

Criminal Decisions:

R v Rosenberg (Appeal Book Endorsement), 2017 ONCA 313 

[Laskin, Watt and Hourigan JJ.A.]

Counsel:

B. Rosenberg, appearing in person

B. Snell, duty counsel

S. Magotiaux, for the respondent

Keywords: Criminal Law, Fraud, Sentencing, Remorse

R v McCullough, 2017 ONCA 315 

[Lauwers J.A. (In Chambers)]

Counsel:

C. Verner, for the applicant

E. Nakelsky, for the respondent

Keywords: Criminal Law, First Degree Murder, Indignity to a Human Body, Criminal Code, s 684(1), Appointment of Counsel

R v Pilgrim, 2017 ONCA 309

[MacFarland, Pardu and Trotter JJ.A.]

Counsel:

S. M. Foda, for the appellant R. J. Pilgrim

H. Pringle, for the appellant T. L. Parent

S. Shaikh, for the respondent

Keywords: Criminal Law, Controlled Drugs and Substances Act, Possession of a Controlled Substance for the Purpose of Trafficking, Simple Possession of a Controlled Substance, Wilful Blindness

R v Martin (Publication Ban), 2017 ONCA 322 

[Cronk, Rouleau and Miller JJ.A.]

Counsel:

K. Bailey, for the appellant

K. Rawluk, for the respondent

Keywords: Criminal Law, Sexual Assault, Evidence, Credibility, The Rule in Browne v Dunn

R v Mugabo (Publication Ban), 2017 ONCA 323

[Gillese, Brown and Roberts JJ.A.]

Counsel:

H. L. Krongold, for the appellant

J. S. Joy, for the respondent

Keywords: Criminal Law, Sexual Assault, Evidence, Burden of Proof

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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