ONTARIO COURT OF APPEAL SUMMARIES (MARCH 5 – MARCH 9)

Good evening,

Below are this week’s Court of Appeal summaries. Topics included security for costs, bankruptcy and insolvency, family law, real property & condo law, as well as several procedural decisions.

Douglas v. Stan Fergusson Fuels Ltd. is a rare example of the Court of Appeal convening a five-member panel in order to overrule itself. The case dealt with a subrogated insurer who sued the appellants for contamination of property resulting from a home oil spill. As is required under the law of subrogation, the insurer brought the claim in the name of its insured. However, at the time the claim was brought, the insured was an undischarged bankrupt who no longer had an ownership interest in the property. By virtue of the bankruptcy, title vested with the Trustee in Bankruptcy.

The appellants, who had been sued by the insurer for causing the spill, brought a motion to dismiss the claim on the basis that it was a nullity because the insured was bankrupt when it was commenced, and therefore the cause of action had vested in his Trustee in Bankruptcy, who was not the named plaintiff. The motion judge and the Divisional Court had both allowed the action to proceed, finding that the bankruptcy did not catch the insurer’s subrogated claim.

However, a five-panel member of the Court of Appeal determined that the action was not properly constituted, as the cause of action vested in the Trustee when it was commenced. The action therefore was caught by the bankruptcy. The Court extensively discusses the doctrine of subrogation, as well as bankruptcy law principles regarding the vesting of property in a Trustee upon bankruptcy and the inability of undischarged bankrupts to bring claims in their name.

In coming to its conclusion, the Court overruled its own decision in Mariner Foods Ltd. v. Leo-Progress Enterprises Inc., 2017 ONCA 7, leave to appeal dismissed [2017] S.C.C.A. No. 64. The Court noted that its decision in that case was a short, five-paragraph endorsement disposing of an application to admit fresh evidence on appeal. The Court in that case had cited the Divisional Court’s decision in this case for the principle that a subrogated claim brought by an insurer is not caught by a bankruptcy. Mariner was decided while the appeal in this case was pending, without reference to binding judicial authority or analysis. The five-judge panel was convened to permit the Court, if warranted, to over-rule Mariner to the extent that, in reliance on the Divisional Court’s decision in this case, it stands for the principle that a subrogated claim brought by an insurer is not caught by a bankruptcy. In the Court’s view, the broad principle enunciated in Mariner conflates the concepts of subrogation and assignment and is incorrect in law. Accordingly, the Court applied the per incuriam exception to stare decisis and overruled Mariner to the extent it stands for that principle.

The majority dismissed the claim outright, without giving the insurer the chance to regularize the pleading by substituting the name of the Trustee for the name of the insured. The minority would have allowed the insurer to bring a motion to the lower court to substitute the name of the Trustee for the name of the insured.

Wishing everyone an enjoyable March break.

John Polyzogopoulos

Blaney McMurtry LLP

jpolyzogopoulos@blaney.com

Tel: 416 593 2953

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

Table of Contents:

Novak v. St. Demetrius (Ukrainian Catholic) Development Corporation, 2018 ONCA 219

Keywords: Civil Procedure, Appeals, Security for Costs, Chevron Corp. v. Yaiguaje, 2017 ONCA 827

Hampton Securities Limited v. Dean, 2018 ONCA 216

Keywords: Civil Procedure, Appeals, Stay Pending Appeal, Rules of Civil Procedure, Rule 63.02(1), RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311

Susin v. Susin, 2018 ONCA 220

Keywords: Civil Procedure, Extension of Time, Security for Costs

Metropolitan Toronto Condominium Corporation No. 723 v. Reino, 2018 ONCA 223

Keywords:  Real Property, Condominiums, Status Certificates, Estoppel, Condominium Act, 1998, S.O. 1998, c. 19, s. 76

DBDC Spadina Ltd. v. Walton, 2018 ONCA 232

Keywords: Civil Procedure, Costs, Fraud, Rule 57.01, Rules of Civil Procedure, Boucher v. Public Accountants Council (Ontario) (2004), 71 O.R. (3d) 291 (C.A.)

Douglas v. Stan Fergusson Fuels Ltd., 2018 ONCA 192

Keywords:  Bankruptcy and Insolvency, Property of Bankrupt, Undischarged Bankrupts, Trustees, Vesting of Property, Choses in Action, Insurance Law, Subrogation, Mariner Foods Ltd. v. Leo-Progress Enterprises Inc., 2017 ONCA 7, Civil Procedure, Striking Pleadings, Capacity to Sue, Orders, Nunc Pro Tunc, Amending Pleadings, Adding Parties, Limitation Periods, Appeals, Stare Decisis, Powers on Appeal, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, ss. 38, ss. 40,  ss. 67, Courts of Justice Act, R.S.O. 1990, c. C.43, s. 134

Holtby v. Draper, 2018 ONCA 231

Keywords: Family Law, Property, Co-ownership, Resulting Trust, Unjust Enrichment, Costs

For Criminal Decisions click here

For Short Civil Decisions click here

Civil Decisions:

Novak v. St. Demetrius (Ukrainian Catholic) Development Corporation, 2018 ONCA 219

[Juriansz, Miller and Nordheimer JJ.A.]

Counsel:

S Novak, acting in person

N Brankley, for the responding parties

Keywords: Civil Procedure, Appeals, Security for Costs, Chevron Corp. v. Yaiguaje, 2017 ONCA 827

Facts:

The appellant, Novak, brings this motion to review the decision of Epstein J.A. sitting as a single judge in motions court ordering her to post security of costs of the appeal in the amount of $20,000. The appellant confirms that she does not have the ability to pay any costs that may be awarded against her in the event that she loses the appeal. Further, she hints that she would refuse to pay costs in any event.

Issues:

(1) Did the motion judge err by ordering the appellant to post security for costs of the appeal in the amount of $20,000?

Holding: Motion dismissed.

Reasoning:

(1) No. The appeal has scant prospects of success and there is good reason to believe the appeal is frivolous. To succeed, the appellant would have to show that the trial judge made a palpable and overriding error in concluding she commenced the action out of time, and also in dismissing her case on the merits.

Although Justice Epstein’s order was made prior to the release of Chevron Corp. v. Yaiguaje, 2017 ONCA 827, which was included in the appellant’s materials, the decision did not alter the established test for ordering security for costs. The established test requires a judge, after analysing the specific factors spelled out in the rules, to consider the overall justness of the order sought. Epstein J.A. did not err in determining that ordering security for costs would be just. Unlike in Yaiguaje v. Chevron Corp, the appellant in this case has a direct economic interest in the appeal. The respondent is not a global enterprise but a not-for-profit senior citizens care centre operated by a church. Unrecoverable costs will reduce the respondent’s resources it can dedicate to the care of its clients. There is no indication the respondent sought security for costs as a litigation tactic to end the appeal. The appeal raises no overarching, important, or novel issue. There is no apparent overriding public interest in allowing the appeal to proceed without the posting of security for costs.

Hampton Securities Limited v. Dean, 2018 ONCA 216

[Fairburn J.A]

Counsel:

S J Erskine and D Barbaree, for the moving party

C J Somerville and D Hooper, for the responding party

Keywords: Civil Procedure, Appeals, Stay Pending Appeal, Rules of Civil Procedure, Rule 63.02(1), RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311

Facts:

The applicant is a registered investment firm. The respondent was employed at the firm as a trader. Her employment ended in 2009. The applicant maintains that the respondent was terminated with cause. The respondent maintains that she was constructively dismissed. On the day following the events leading to the respondent’s termination, the applicant filed a Notice of Termination (NOT) on the National Research Database (NRD). The NRD is maintained by the Investment Industry Regulatory Organization of Canada (IIROC). The NOT read: “Dismissed for cause…Failed to follow trading desk policies & procedures- unauthorized trading resulting in losses.” The applicant commenced an action against the respondent, claiming damages from losses she incurred as a trader. The respondent defended the action and counterclaimed for constructive dismissal and defamation. The trial judge found that the respondent had been constructively dismissed and defamed and ordered that the NOT be corrected. The applicant appealed that finding. This motion was for an order staying the trial judge’s order to correct the NOT, pending the determination of the appeal.

Issues:

(1) Should the order requiring that the NOT be changed be stayed until after disposition of the appeal?

Holding:

Motion dismissed.

Reasoning:

(1) No. Pursuant to rule 63.01(1), the monetary award against the applicant is automatically stayed pending resolution of the appeal. This motion relates to the applicant’s request under rule 63.02(1), that the trial judge’s order to amend the NOT be stayed pending disposition of the appeal. The test for a stay of a mandatory order pending appeal is the same as the test in RJR-MacDonald Inc. v. Canada (Attorney General), [1994] 1 S.C.R. 311 for an injunction: First, a preliminary assessment must be made of the merits of the case to ensure that there is a serious question to be tried. Secondly, it must be determined whether the applicant would suffer irreparable harm if the application were refused. Finally, an assessment must be made as to which of the parties would suffer greater harm from the granting or refusal of the remedy pending a decision on the merits.

The applicant raised numerous grounds of appeal. For purposes of this motion, he focusses on the suggestion that the trial judge erred in finding that the NOT was defamatory, that the defamation claim was properly met by the defence of qualified privilege, and that the trial judge exceeded his jurisdiction by making the mandatory order to amend the NOT. The Court found that this was sufficient to satisfy the first stage of the analysis.

The applicant argued that the appeal could be rendered moot if the NOT were to be amended, as the order rests on a finding of defamation, which is subject to the appeal. The applicant argues that this would cause irreparable harm to its interests. The Court of Appeal disagreed, noting that if the appeal succeeds the NOT can simply be changed back to what it was originally or amended to reflect any remedy granted. Accordingly, irreparable harm was not established. Not having established irreparable harm, the applicant could not establish that the balance of convenience was in its favour either. The motion for a stay of the mandatory aspect of the trial judge’s order was therefore dismissed.

Susin v. Susin, 2018 ONCA 220

[Fairburn J.A.]

Counsel:

John Susin, in person

Sarah Whitmore, duty counsel

Margaret Hoy, via teleconference

Keywords: Civil Procedure, Extension of Time, Security for Costs

Facts:

The parties’ father passed away in 1997. After years of litigation, his estate is virtually non-existent. John Susin represented himself, and purported to speak on behalf of his sister, on this motion to obtain an extension of time.

In September 2015, Esther brought a motion in the Superior Court of Justice for directions in relation to her father’s estate. The motion was dismissed as an abuse of process. She then moved before Ramsay J. to set aside that finding, claiming that it had been obtained by fraud. She also asked to have the executor of the estate, her brother Fermino Susin (the respondent on this motion), cited in contempt. Esther was wholly unsuccessful in obtaining the relief she sought.

The moving parties seek an extension of time to bring a motion to set aside an order of Gillese J.A. requiring that they each post $15,000 as security for costs of their appeal from the lower court decision.

Issue: Should the moving parties be granted an extension of time to bring a motion to set aside Gilesse J.A.’s order for security for costs?

Holding: Motion dismissed.

Reasoning:

No. The test for an extension of time for filing a notice of appeal provides guidance on the relevant criteria for consideration in this context.  The question is whether the “justice of the case” requires that the extension be given. In Howard v. Martin, the Court of Appeal set out the relevant criteria to be considered in applying the test:

(1) whether the moving party formed a bona fide intention to appeal within the relevant period;

(2) the length of, and explanation for, the delay in filing;

(3) any prejudice to the responding party that is caused, perpetuated or exacerbated by the   delay; and,

(4) the merits of the proposed appeal.

For all intents and purposes, the moving parties in this case formed a bona fide intention to challenge the security for costs order within the required time. For the sake of argument, the Court was also prepared to accept that the failure to file the notice of motion resulted from an oversight on the part of the moving parties. Although these factors could be said to weigh toward allowing the extension of time, the other factors weigh strongly against granting this order. Not only is there no merit to the motion to set aside the order of Gillese J.A., but the respondent will be significantly prejudiced by allowing this matter to be taken any further.

The moving parties have failed to show any reason why the order for security for costs is wrong. A decision about whether to require security for costs is a discretionary one that must be afforded deference. Having regard to all of the circumstances, including the seemingly meritless attempt to challenge Gillese J.A.’s order and the multiple and hefty unpaid costs orders, the interests of justice require that the request for an extension of time to bring a motion to set aside the security for costs order be dismissed.

Metropolitan Toronto Condominium Corporation No. 723 v. Reino, 2018 ONCA 223

[Doherty, MacFarland and Paciocco JJ.A.]

Counsel:

Derek J. Bell and Brendan Clancy, for the appellant

Mark H. Arnold, for the respondent

Keywords:  Real Property, Condominiums, Status Certificates, Estoppel, Condominium Act, 1998, S.O. 1998, c. 19, s. 76

Facts:

The respondent, Dante Reino, purchased the condominium unit from his mother in 2013. He requested a status certificate at that time and was issued a “clean” certificate. When Mr. Reino decided to sell his unit in 2016, he requested another status certificate from the condominium corporation. This status certificate indicated the respondent had breached the condominium corporation’s declarations by altering the unit. The appellant acquired the unit in 2013 from his mother who had owned the unit since 2004. At the time of her purchase, she had received a “clean” certificate from the Condominium Corporation as did her son in 2013. The respondent’s evidence, accepted by the application judge, was that neither he nor his mother had carried out any alteration to the unit as described in the 2016 certificate. Despite the fact that representatives of the condominium corporation had been in the unit numerous times over the course of Reino’s occupancy – no one ever mentioned that the layout had been improperly altered.

The application judge concluded that s. 76 of the Condominium Act, 1998 was clear and unequivocal and that the condominium corporation was bound to its clean and clear status certificates from 2004 and 2013, and that it could not rely on the alleged breach in its 2016 status certificate. Furthermore, the condominium corporation was estopped from relying on its 2016 status certificate.

Issues:

(1) Did the application judge err in finding that the condominium corporation was bound by the clean certificate it provided in 2013?

(2) Did the application judge err in finding that the condominium corporation was estopped from issuing anything but a clean certificate?

Holding: Appeal allowed.

Reasoning:

(1) The condominium corporation is bound vis-à-vis the respondent Mr. Reino by the clean certificate it provided to him when he acquired the unit from his mother in 2013. The respondent has a remedy if the condominium corporation negligently issued the clean status certificate to him, to his detriment. He can sue the condominium corporation for any diminution in the value of his unit by reason of any improper disclosure that may have occurred – provided he does so before the limitation expires. In this sense, he is entitled to rely on the Certificate issued to him in 2013 and the condominium corporation is bound by it.

(2) While the condominium corporation is bound by the clean status certificate vis-à-vis the respondent, it does not follow that the condominium corporation is thereafter estopped from issuing anything but a “clean certificate” in relation to a unit where it has previously provided a clean certificate. If a condominium corporation becomes aware, after issuing a clean certificate, of a circumstance that is required to be disclosed by virtue of s. 76 or the regulations, it must include such information when it next issues a certificate. This does not change the fact that it will still be bound by its earlier certificate vis-à-vis the purchaser at the time or his mortgagee. Here, where the condominium corporation discovered that the unit layout had been switched between the time it issued its 2013 certificate and when it issued its 2016 certificate, it was obliged to include that information in the new certificate. To do otherwise would be misleading to the new prospective purchaser.

DBDC Spadina Ltd. v. Walton, 2018 ONCA 232

[Cronk, Blair and van Rensburg JJ.A.]

Counsel:

Peter H. Griffin, D. Glatt and S.N. Roy, for the appellants

Rosemary A. Fisher, for the respondents

Keywords: Civil Procedure, Costs, Fraud, Rule 57.01, Rules of Civil Procedure, Boucher v. Public Accountants Council (Ontario) (2004), 71 O.R. (3d) 291 (C.A.)

Facts:

The appellants, DBDC Spadina Ltd., who were successful on all aspects of the appeal, sought some of their costs of the application in the court below. In particular, they sought an order for the same amounts that were awarded to the respondents Christine DeJong Medicine Corporation (“DeJong”) and Dennis and Peggy Condos (the “Condos”) in the court below, namely $51,885.55 from DeJong and $14,017.28 from the Condos. They submitted that this is a significant and fair discount of their actual costs of approximately $300,000, which recognized that the appellants and the respondents were all victims of the Waltons’ fraud.

The respondents requested that the parties bear their own costs of the application. They pointed to the fact that this was a contest between victims, and that the practical effect of the court’s judgment was that they will recover almost nothing from the proceeds of the Schedule C Properties in which they invested.

Issue: What is the appropriate cost award?

Holding: Appellants awarded costs of the underlying application fixed at $51,885.55 against DeJong and $14,017.23 against the Condos.

Reasoning:

Costs are in the discretion of the court. The factors relevant to the exercise of discretion are set out in Rule 57.01 of the Rules of Civil Procedure. They include the result and relative success of each party, the complexity of the proceeding, the importance of the issues and the conduct of any party that impacted the duration of the proceeding. The court must consider the purposes of costs, which include both the indemnification of successful litigants for costs of the litigation and the facilitation of access to justice: Boucher v. Public Accountants Council (Ontario) (2004), 71 O.R. (3d) 291 (C.A.), at paras. 35-37.

The court stated that there was no question that the appellants were the successful parties, and that they would reasonably expect to be awarded their partial indemnity costs of the application, which would exceed the costs they now claim. The only issue is the impact of the fact that all of the parties were victims of the Waltons’ fraud. The court held that the appellants’ request that they be awarded the costs that the application judge awarded against them at first instance, is a reasonable response to both factors.

Accordingly, the appellants were entitled to their costs of the application fixed at $51,885.55 against DeJong and $14,017.23 against the Condos.

Douglas v. Stan Fergusson Fuels Ltd., 2018 ONCA 192

[Hoy A.C.J.O., Rouleau, Hourigan, Benotto and Roberts JJ.A.]

Counsel:

Amy Pressman and Diana Weir, for the appellants

Matthew Gervan, for the respondents

Keywords:  Bankruptcy and Insolvency, Property of Bankrupt, Undisharged Bankrupts, Trustees, Vesting of Property, Choses in Action, Insurance Law, Subrogation, Mariner Foods Ltd. v. Leo-Progress Enterprises Inc., 2017 ONCA 7, Civil Procedure, Striking Pleadings, Capacity to Sue, Orders, Nunc Pro Tunc, Amending Pleadings, Adding Parties, Limitation Periods, Appeals, Stare Decisis, Powers on Appeal, Bankruptcy and Insolvency Act, R.S.C. 1985, c. B-3, ss. 38, ss. 40,  ss. 67, Courts of Justice Act, R.S.O. 1990, c. C.43, s. 134

Facts: This was a five-panel decision of the Court of Appeal.

Art and Wendy Douglas purchased a home in Kingston, Ontario and arranged for the appellants to deliver fuel oil to their home. On January 9, 2008, fuel oil was delivered to the Douglases’ external oil tank. It is alleged that the fuel oil subsequently escaped and contaminated the Douglases’ property. The Douglases’ insurer, State Farm, appointed an adjuster, who determined that their Homeowners Policy provided coverage for losses associated with the spill. At the time of the oil leak, Wendy Douglas had no ownership interest in the property. Several months prior, she had been discharged from bankruptcy subject to the stipulation that her interest in the property remained vested in her trustee in bankruptcy. The Trustee remained on title to the property, together with Mr. Douglas.

The adjuster for the appellants sent invoices from the clean-up to State Farm. State Farm paid the invoices, and advised that it intended to recover these and any future clean-up costs from the appellants. The Homeowners Policy also contained a subrogation clause. Mr. Douglas filed an assignment in bankruptcy. The Trustee also became Mr. Douglas’s trustee in bankruptcy and replaced him on the title to the property. The week before Mr. Douglas filed his assignment, the Trustee signed a document entitled the “Trustee’s Limited Disclaimer” (the “Disclaimer”). The Disclaimer was addressed to State Farm, and recited the Trustee’s intention to sell the property as soon as it was remediated. It also disclaimed interest in insurance claims by the Douglases “for loss or damage in the oil spill to matrimonial household contents not affixed or enjoyed with the residential property or proceeds of personal property exempt under the Execution Act (Ontario) which would not vest in their Trustee in Bankruptcy.”

State Farm paid out the Douglases’ personal contents claims, and the Trustee sold the remediated property and satisfied the creditors. In January, 2010, State Farm commenced an action against the appellants in the names of Art Douglas and Wendy Douglas. The damages claimed were not restricted to those described in the Disclaimer. The action was commenced prior to Mr. Douglas’s discharge.

The issue of the Douglases’ capacity to bring this action came before the court in 2013, when the appellants brought a motion to strike the claim, arguing that the Douglases lacked capacity to commence the action because of their bankruptcies, and accordingly State Farm’s action in their names was a nullity. State Farm brought a cross-motion for: (a) directions with respect to the continuation of the action in the Douglases’ or its own name; (b) alternatively, for a declaration that it was the dominus litis and had the right to continue and control the action to pursue its subrogated claim; and (c) in the further alternative, an order permitting it to amend its statement of claim to plead that the plaintiffs were “Art Douglas and Wendy Douglas by their Subrogee State Farm Fire & Casualty Company”.

Both the motion judge and the Divisional Court allowed State Farm’s claim to proceed, emphasizing substance over form. The appellants appealed to the Court of Appeal.

Issues:

(1) Had State Farm acquired a property interest in Mr. Douglas’s cause of action at the time that he made his assignment, such that the cause of action did not vest in the Trustee?

(2) If not, did the subrogation clause in the Homeowners’ Policy permit State Farm to commence an action in the name of Mr. Douglas, who is an undischarged bankrupt?

(3) If the answer to the first two questions was “no”, could the court make an order under ss. 38 or 40 of the BIA to remedy the procedural impediment to State Farm’s subrogated action?

(4) Should the court regularize State Farm’s subrogated action by substituting the Trustee as plaintiff?

Holding: Appeal allowed.

Reasoning:

(1) No. The cause of action did not vest in State Farm before Mr. Douglas’s bankruptcy by operation of the common law doctrine of subrogation. When an insurer is subrogated to the claim of its insured, the claim nonetheless remains that of the insured in whose name and with whose rights the claim must be advanced. Mr. Douglas did not assign his cause of action to State Farm by operation of the common law doctrine of subrogation. State Farm’s argument that the right to any proceeds of the litigation that might be recovered could not vest in the Trustee by virtue of s. 67(1)(a), and therefore the cause of action to recover those proceeds could not have vested in the Trustee, was rejected.

Although certain categories of property are not divisible among creditors, such property becomes part of the bankrupt’s estate in the possession of the trustee. An insured that makes a recovery from a wrongdoer, and has recouped the costs of recovery, holds the rest in trust for the insurer up to the value of the insurer’s payment. The proceeds of such litigation would constitute trust property in the possession of the Trustee, although not available for distribution to creditors, pursuant to s. 67(1)(a) of the BIA. The cause of action giving rise to those proceeds would similarly be in the possession of the Trustee.

In Mariner Foods Ltd. v. Leo-Progress Enterprises Inc., the Court of Appeal had cited the Divisional Court’s decision in this proceeding for the principle that a subrogated claim brought by an insurer is not caught by a bankruptcy. Mariner was decided while this appeal was pending, without reference to binding judicial authority or analysis. The broad principle enunciated in Mariner conflated the concepts of subrogation and assignment and is incorrect in law. The per curiam exception to stare decisis applies, and Mariner was overruled to the extent it stands for that principle.

The subrogation clause in the Homeowners Policy did not amount to an assignment of Mr. Douglas’s cause of action. There is a difference between subrogation and assignment. State Farm is a sophisticated insurer. It would have been a simple matter for it to include an assignment clause in the Homeowners Policy if it indeed intended that Mr. Douglas assign his cause of action to it.

Further, the Trustee did not disclaim its interest in the cause of action through the Disclaimer. The Disclaimer is twice removed from an assignment of the cause of action to State Farm: (1) it disclaims insurance claims by the Douglases against State Farm, not tort claims by the Douglases against the appellants; (2) it is limited to matrimonial household contents and personal property exempt from seizure. The Disclaimer operated as no more than a signal from the Trustee to State Farm that insurance proceeds for damage to excluded property could be paid out directly to the Douglases. At the time Mr. Douglas made his assignment in bankruptcy, State Farm had not acquired any proprietary interest in the cause of action; Mr. Douglas had not assigned his cause of action to State Farm; and the Trustee had not disclaimed its interest in the cause of action by executing the Disclaimer.

(2) No. the Trustee acquired Mr. Douglas’s cause of action subject to State Farm’s contractual right of subrogation under the Homeowners’ Policy. However, long established bankruptcy law principles prevented the exercise of that right in the manner that State Farm sought to do so. The jurisprudence is clear that an undischarged bankrupt lacks capacity to commence an action in his name, if his cause of action vested in the trustee on his assignment or at any time before his discharge. Mr. Douglas’s cause of action vested in the Trustee on his assignment. At the time that State Farm commenced the action in Mr. Douglas’s name, Mr. Douglas did not have the capacity to commence the action. As the Trustee acquired Mr. Douglas’s cause of action subject to State Farm’s right of subrogation, State Farm was entitled to commence the action in the Trustee’s name. This conclusion gives effect to both the objectives and principles of the doctrine of subrogation and established principles of bankruptcy law. The doctrine of subrogation is rooted in the principle of indemnity and State Farm indemnified the Trustee for Mr. Douglas’s loss; under bankruptcy law, the Trustee, and not Mr. Douglas, had the capacity to commence the action; and under the doctrine of subrogation, upon becoming the dominus litus, State Farm (and not the Trustee) was entitled to control the litigation. Upon bankruptcy, it makes sense to read the subrogation clause in an insurance policy as if the trustee’s name appears in place of that of the bankrupt insured, just as is required to be done for the purposes of entitlement to indemnification under the insurance policy – at least where, as here, the Trustee has taken the benefit of the insurance policy. Therefore, while State Farm was entitled to commence a subrogated action, it was required to commence the action in the name of the Trustee, and not that of Mr. Douglas.

(3) No, State Farm is not entitled to a remedial order under ss. 38 or 40 of the BIA. Section 40(2) permits the court to grant an order disposing of any property that is incapable of realization where the trustee has been unable to dispose of such property. Orders pursuant to s. 40 can be granted on a nunc pro tunc basis in the appropriate case. The Divisional Court did not purport to grant an order under s. 40(2), re-vesting Mr. Douglas’s action in him, effective before State Farm commenced the action in his name. Assuming this cause of action could be seen as unrealizable property in the hands of the Trustee, there are two reasons why an order under s. 40(2) cannot normalize these proceedings.

First, an order under s. 40(2) re-conveying a cause of action to an undischarged bankrupt does not provide the bankrupt with capacity to commence the claim. To normalize this cause of action, State Farm would require an order under s. 40(2) effective on January 6, 2010, which is the day before it commenced the action in Mr. Douglas’s name. But Mr. Douglas did not receive an absolute discharge from bankruptcy until March 5, 2010. Although the court can vary a bankrupt’s date of discharge in certain circumstances, it cannot do so here. Therefore, it cannot grant an order under s. 40(2) re-conveying this cause of action to Mr. Douglas, effective January 6, 2010. Second, a nunc pro tunc order cannot be made in this case because of the passage of the relevant limitation period.

State Farm requested an alternate order under s. 38 of the BIA assigning the cause of action to State Farm on a nunc pro tunc basis. Such an order cannot be granted. State Farm did not comply with the procedure required by s. 38. It did not request the Trustee to take a proceeding against the appellants and did not bring a motion for an order authorizing State Farm to take the proceeding in its own name and at its expense and risk. Most significantly, the Trustee is not a party to this action. Indeed, there is no indication that the Trustee, who is now discharged, was even given notice that State Farm would seek an order against the Trustee on appeal under s. 38 of the BIA.

(4) No, the court cannot and should not grant this relief. Even if State Farm’s naming of Art Douglas as the plaintiff could be considered a “misnomer” and s. 41(10) of the BIA would permit the court to amend the style of cause after the Trustee’s discharge to substitute the name of the Trustee, as trustee of the estate of Art Douglas, a bankrupt, for that of Mr. Douglas, the court cannot, or if it can, should not, grant this relief at this juncture. First, an order under r. 5.04(2) substituting the name of the Trustee for that of Mr. Douglas, effective upon the issuance of the statement of claim, was not an order that ought to or could have been made by the motion judge, and therefore is not an order that the court can make under s. 134(1)(a).

Second, such an order would not be “just” in the circumstances, and thus the court cannot and should not grant such relief under s. 134(1)(c) of the Courts of Justice Act. The Court cited a number of reasons, including that it is not appropriate for an appellate court, twice removed from the parties’ initiating motion, to grant this relief; the appellants have not had the opportunity to make full submissions on this new issue; the “irregularity” that State Farm seeks to correct was intentional; the delay in seeking the alternate relief was significant; the pleadings would be deficient and unable to support an ongoing action by the Trustee without further amendments; and State Farm is a sophisticated party.

The entire panel allowed the appeal, and the majority (3 out of five), dismissed State Farm’s claim in the name of Art Douglas, without State Farm being granted leave to regularize the claim by substituting the Trustee’s name as plaintiff.

Rouleau and Roberts JJ.A. (Dissenting in part):

The minority, Rouleau and Roberts JJ.A., did not agree that the claim should be outright dismissed, and would have remitted the matter back to the Superior Court to permit State Farm to bring a motion to regularize the claim by substituting the Trustee’s name for Douglas’ name as plaintiff.

 Holtby v. Draper, 2018 ONCA 231

[Weiler, van Rensburg and Huscroft JJ.A.]

Counsel:

A M Franks and M Zalev, for the appellant

W R Clayton, for the respondent

Keywords: Family Law, Property, Co-ownership, Resulting Trust, Unjust Enrichment, Costs

Facts:

The appellant, Cheryl Draper, and the respondent, Ken Holtby, were married and co-owned property. Ms. Draper appealed the trial judge’s decisions on property ownership. Ms. Draper was the sole registered owner of Lot 8. The trial judge determined that, by way of resulting trust, Mr. Holtby was the beneficial owner of the entirety of Lot 8. On appeal, the Court of Appeal concluded instead that the parties were joint beneficial owners of the property. It followed from this, as reasonable and appropriate, that Ms. Draper was entitled to occupation rent for her half of the property during the lengthy period of time that Mr. Holtby had sole use of the property in its entirety (and Ms. Draper made mortgage and property tax payments). Given the finding of joint beneficial ownership and entitlement to occupation rent, the Court of Appeal also set aside the trial judge’s award reimbursing Ms. Draper for the payments she made toward the property in its entirety, while noting that Ms. Draper “may be entitled to reimbursement from Mr. Holtby for certain payments she made”. This decision are the supplementary reasons of the Court of Appeal dealing with the amount awarded for Lot 8, and costs.

Issues:

(1) Should Ms. Draper receive an additional amount in respect of Lot 8, as a result of the finding on appeal?

(2) In light of her success on appeal, should the cost award against Ms. Draper be reduced?

Holding:

Appeal allowed.

Reasoning:

(1) Ms. Draper made all mortgage and property tax payments on Lot 8 from May 1996 to December 2015. She claims $30,788.51, which is one-half of the total amount she paid. The basis for the claim is that Mr. Holtby was unjustly enriched by Ms. Draper’s payment of his share of the mortgage and property tax payments on his one-half interest in the property. Mr. Holtby argued that he incurred all of the input costs and did all of the work, or paid for the work, to generate income from Lot 8. He argued, therefore, that there was no unjust enrichment as Ms. Draper will benefit from receiving 50% of the net proceeds from the eventual sale of Lot 8, the value of which has appreciated considerably since its acquisition in 1999. The Court of Appeal disagreed, as it found that the basis for Ms. Draper’s entitlement to half of Lot 8 is not by way of constructive trust but rather a resulting trust interest, her entitlement to 50% of the proceeds of its sale does not compensate her for the payments she made towards Mr. Holtby’s share of the property. The law of unjust enrichment entitles Ms. Draper to recovery provided she can establish that Mr. Holtby was enriched by these payments to her detriment in the absence of a juristic reason. The trial judge found that Ms. Draper was under no obligation to make out-of-pocket payments towards the mortgage and property taxes for Mr. Holtby’s property. To allow him to retain such payments would unjustly enrich Mr. Holtby at Ms. Draper’s expense. The Court of Appeal, therefore, awarded Ms. Draper the sum of $30,788.51 plus prejudgment interest for the amounts she paid in relation to Mr. Holtby’s half of Lot 8.

An additional amount of $7,125 was also awarded for occupation rent for the post-trial period. Although this issue was raised for the first time on appeal, Mr. Holtby had been on notice since trial that Ms. Draper was claiming occupation rent and therefore the Court of Appeal entertained her submissions.

(2) Ms. Draper was ordered by the trial judge to pay Mr. Holtby all-inclusive costs of $100,000. Mr. Holtby was successful at trial and on appeal on the issue of ownership of Knapton. Ms. Draper gained joint beneficial ownership of Lot 8 on appeal. By comparison, the other issues at trial were minor, or depended on these determinations of ownership. The Court of Appeal found, therefore, that their relative success was evenly balanced and that each party should therefore bear their own costs.

Criminal Decisions:

R v. Truong, 2018 ONCA 217

[Strathy C.J.O., Simmons and Hourigan JJ.A.]

Counsel:

Daniel Stein, for the appellant

Sandy Thomas, for the respondent

Keywords: Criminal Law, Drug Trafficking

R v. Boussoulas, 2018 ONCA 222

[Strathy C.J.O., Simmons and Hourigan JJ.A]

Counsel:

Randall Barrs, for the appellant

Alexander V. Hrybinsky, for the respondent

Keywords: Criminal Law, Firearms Offence, Fresh Evidence, Telewarrant, Unreasonable search, Charter of Rights and Freedoms, ss. 8, 24,  R. v. Garofoli, [1990] 2 S.C.R. 1421, R. v. Rocha, 2018 ONCA 84, Sentencing

R v. Currie, 2018 ONCA 218

[Strathy C.J.O., Simmons and Hourigan JJ.A.]

Counsel:

Mark Halfyard, for the appellant

Dena Bonnet, for the respondent

Keywords: Criminal Law, Dangerous Driving Causing Bodily Harm, Impaired Driving, Sentencing, Youthful First Offender, R. v. Rawn, 2012, ONCA 487

R v. Ariri, 2018 ONCA 226

[Pardu, Benotto and Nordheimer JJ.A.]

Counsel:

Godwyn Ariri, self-represented

Hannah Freeman, for the respondent

Keywords: Criminal Law, Ineffective Assistance of Counsel

R v. Lubansa, 2018 ONCA 227

[Rouleau, Huscroft and Fairburn JJ.A]

Counsel:

Melanie Webb, for the appellant

Mabel Lai, for the respondent

Keywords: Criminal Law, Fraud Over $5,000, Unlawful Detention, Charter of Rights and Freedoms, ss. 8, 9 & 10, Sentencing

R v. Pitters, 2018 ONCA 234

[Pardu, Benotto and Nordheimer JJ.A.[

Counsel:

Troy Pitters, acting in person via videoconference

Lorna Bolton, for the respondent

Keywords: Criminal Law, Attempted Murder, Sentencing, R. v. Stubbs, 2013 ONCA 514

R v. Shah, 2018 ONCA 236

[Pardu, Benotto and Nordheimer JJ.A.]

Counsel:

Robert Shah, self-represented

Lorna Bolton, for the respondent

Keywords: Criminal Law, Robbery, Aggravated Assault, Sexual Assault, Sentencing

R v. Yang, 2018 ONCA 230

[Rouleau, Huscroft and Fairburn JJ.A.]

Counsel:

Kathleen Farrell, for the appellant

Mark Ertel, for the respondent

Keywords: Criminal Law, Careless Use of a Firearm, Criminal Code, s. 86(3), R. v. Pham, 2013 SCC 15

Short Civil Decisions:

Dada v. Brantford Communities Ltd., 2018 ONCA 209

[Feldman, Benotto and Brown JJ.A.]

Counsel:

Derek Schmuck, for the appellants

Brendan Clancy, for the respondents

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Breach, Unconscionability, Negligence, Redstone Enterprises v. Simple Technology Inc., 2017 ONCA 282

Destaron Property Management Ltd. v. Hindmarsh, 2018 ONCA 200

[Feldman, Pardu and Benotto JJ.A.]

Counsel:

Howard Borlack and Miranda E. Serravalle, for the appellants

Robert W. Dowhan and James Prosser, for the respondent

Keywords: Contracts, Real Property, Commercial Leases, Releases, Insurance

Raibex Canada Ltd. v. ASWR Franchising Corp., 2018 ONCA 221 (Costs)

[Sharpe, Blair and Epstein JJ.A.]

Counsel:

Geoffrey B. Shaw and Christopher Horkins, for the appellants

David S. Altshuller and Lara Di Genova, for the respondents

Keywords: Contracts, Franchise Agreements, Rescission, Costs

Fleming v. Ontario, 2018 ONCA 225 (Costs)

[Cronk, Huscroft and Nordheimer JJ.A.]

Counsel:

Judie Im, Erin Rizok and Sean Hanley, for the appellants

Michael Bordin and Jordan Diacur, for the respondent

Keywords: Torts, Battery, Costs, Public Interest Litgation, Odhavji Estate v. Woodhouse, 2003 SCC 69

Growthworks Commercialization Fund Ltd., v. Growthworks WV Management Ltd., 2018 ONCA 233

[Epstein, van Rensburg and Brown JJ.A.]

Counsel:

Melvyn Solmon and Cameron Wetmore, for the appellant

Geoff R. Hall and Emily M. MacKinnon, for the respondent

Keywords: Corporations, Contracts, Interpretation, Dividends, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53

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.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

w

Connecting to %s