The following are our summaries of this week's civil decisions of the Ontario Court of Appeal.
In Yip v HSBC Holdings plc, the Court of Appeal upheld the stay of a US$7 billion class action claim for secondary securities market misrepresentation on jurisdictional grounds. The securities at issue were bought by Canadians on foreign exchanges, as they did not trade on a Canadian stock exchange. The Court determined that Ontario securities law did not extend as far as to permit a claim for secondary market misrepresentation under the Securities Act to proceed in Ontario in such circumstances, and therefore upheld the stay of proceedings imposed by the motion judge.
In Malkov v Stovichek-Malkov, the Court of Appeal confirmed that the test for a plaintiff to re-open their case in the context of family law proceedings is as set out in Catholic Children's Aid Society of Toronto v. M.R., 2014 ONCJ 762.
Other topics covered this week included crown wardship, constructive dismissal, partial summary judgment, unjust enrichment as a result of an overpayment by an insurer, a construction lien action, and a claim for negligent investigation and related torts against the police and Fire Marshall in a case of arson by negligence (the claims were dismissed).
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Civil Decisions
Yip v HSBC Holdings plc, 2018 ONCA 626
[Lauwers, Benotto and Nordheimer JJ.A]
Counsel:
Paul J. Bates, John Archibald, and Earl A. Cherniak, Q.C., for the appellant
Paul Steep, Brandon Kain, and Bryn Gray, for the respondents
Keywords: Torts, Negligent Misrepresentation, Securities, Secondary Market Misrepresentations, Securities Act, RSO 1990, c S 5, s. 138.1, Definition of "Responsible Issuer", Abdula v Canadian Solar Inc, 2012 ONCA 211, Statutory Interpretation, Bell ExpressVu Limited Partnership v Rex, 2002 SCC 42, Rizzo & Rizzo Shoes Ltd (Re), [1998] 1 SCR 27, Civil Procedure, Class Actions, Jurisdiction Simpliciter, Real and Substantial Connection, Forum Non Conveniens, Club Resorts Ltd v Van Breda, 2012 SCC 17, Moran v Pyle National (Canada) Ltd, [1975] 1 SCR 393, Kaynes v. BP, PLC, 2014 ONCA 580, Kaynes v BP PLC, 2016 ONCA 601, Costs, Public Interest Litigation, Enterpreneurial Litigation, Disbursements, Experts, Proportionality, Fantl v Transamerica Life Canada, 2009 ONCA 377, 3664902 Canada Inc. v. Hudson's Bay Co. (2003), 169 O.A.C. 283 (C.A.), Class Proceedings Act, 1992, SO 1992, c 6, s. 31(1), Rules of Civil Procedure, Rule 1.04(1.1)
Facts:
This appeal concerns a proposed securities class action for negligent misrepresentation against HSBC Holdings ("HSBC Holdings"). HSBC Holdings is the parent holding company of an international banking conglomerate with its head office in London, UK. The securities have never traded or been listed on any Canadian stock exchange. They are traded on the London and Hong Kong Stock Exchanges with secondary listings on the Bermuda Stock Exchange and the Paris Euronext Stock Exchange. HSBC's American Depository Receipts (ADRs) traded on the New York Stock Exchange. HSBC Holdings has about 220,000 shareholders in 129 countries, including Canada. The appellant asserts that he and other purchasers of HSBC Holdings' shares or ADRs were misled by HSBC Holdings' continuous disclosure documents and public statements in two primary respects: (i) that it had complied with anti-money laundering and anti-terrorist financing laws; and (ii) that it had not participated in an illegal scheme to manipulate certain international benchmark rates. The motion judge proceeded on the assumption that these misrepresentations occurred.
The appellant asserts that these misrepresentations caused investors in HSBC Holdings to suffer about US$7 billion in losses because they purchased shares and ADRs at artificially inflated prices. This is the basis of his statutory and common law tort claims for misrepresentation.
The motion judge heard two motions. HSBC Holdings moved to dismiss or stay the appellant's action because the Ontario court lacks jurisdiction simpliciter and because Ontario is forum non conveniens. The appellant brought a cross-motion for a declaration that HSBC Holdings is a responsible issuer under s.138.8 of the Ontario Securities Act. The motion judge dismissed the appellant's action and stayed the common law misrepresentation claim. He dismissed the appellant's cross-motion.
Issues:
(1) Did the motion judge err in his interpretation of the definition of responsible issuer in s. 138.1 of the Securities Act?
(2) Did the motion judge err in his application of the common law real and substantial connection test?
(3) Did the motion judge err in his application of the doctrine of forum non conveniens?
(4) Should leave to appeal the costs award be granted and should the costs award be varied?
Holding: Appeal dismissed.
Reasoning:
(1) No, the motion judge did not err in his interpretation of the definition of responsible issuer in s. 138.1 of the Securities Act. The appellant's statutory tort claim is based on s. 138.3, which gives investors a statutory cause of action against a responsible issuer for a misrepresentation in a "document" released by it or contained in a public oral statement. Section 138.3 defines a responsible issuer to mean "(b) any other issuer with a real and substantial connection to Ontario, any securities of which are publicly traded" (emphasis added). The appellant relied on Abdula v Canadian Solar Inc, 2012 ONCA 211, and urged the court to find that: "An issuer that knows or ought to know that its investor information is being made available to Canadian investors has a securities regulatory nexus" with Ontario sufficient to establish a real and substantial connection. The appellant argued that this would be a purposive interpretation consistent with the goal of the Securities Act to protect investors from fraudulent practices.
In the alternative, the appellant submitted that the court should identify a new presumptive connecting factor for cases of secondary market misrepresentation. The appellant argued that HSBC Holdings "ought to know both that" the putative class members "may well be injured and it [was] reasonably foreseeable that the misrepresentation" would be acted upon: Moran v Pyle National (Canada) Ltd, [1975] 1 SCR 393. The appellant therefore argued that the motion judge erred in declaring that HSBC Holdings is not a responsible issuer.
The Court rejected this argument because the proposed formulation of the test might make Ontario a universal jurisdiction for secondary market misrepresentations made anywhere in the world. The Court reiterated that the words of an Act are to be read in their entire context and their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Legislature: Bell ExpressVu Limited Partnership v Rex, 2002 SCC 42, at para 26; and Rizzo & Rizzo Shoes Ltd (Re), [1998] 1 SCR 27, at para 21.
In analyzing the Legislature's intention, the Court found that by introducing civil liability for secondary market misrepresentations, the Legislature did not intend that Ontario would become the default jurisdiction for issuers around the world whose securities were purchased by residents of Ontario. The Court additionally found that the Legislature's adoption of the language in which the common law jurisdiction simpliciter test is framed was not accidental. Rather, it was well entrenched, and it specifically aimed at preventing jurisdictional overreach. The concern about jurisdictional overreach affects the assessment at three levels of the common law test for determining whether a Canadian court will assume jurisdiction: (i) requiring the presence of a presumptive connecting factor; (ii) determining whether the factor has been rebutted; and (iii) in applying the forum non conveniens doctrine.
Further, in assessing the judicial history of the real and substantial connection test, the Court cited the Supreme Court's decision in Club Resorts Ltd. v. Van Breda, 2012 SCC 17. Justice LeBel expressed similar concerns in his formulation of the factors a court is to consider in determining whether a real and substantial connection exists in a tort case. He repeatedly expressed one of the primary aims of the test: to reduce the "risk of jurisdictional overreach" (at para. 22); to "prevent improper assumptions of jurisdiction" (at para. 26); to prevent "courts from overreaching by entering into matters in which they had little or no interest" (at para. 38); and to reduce the risk of "sweeping into that jurisdiction [,] claims that have only a limited relationship with the forum" (at para. 89). In his view, a judicial approach that leads to "universal jurisdiction" should be avoided.
Accordingly, the Court rejected the appellant's argument that, on purposive grounds, the interpretation of the expression "real and substantial connection" in the Securities Act must be different than its common law meaning in the jurisdiction simpliciter cases. Rather, a purposive interpretation led the Court to reject the appellant's proposed test and alternative argument that the court should recognize a new presumptive connecting factor for this type of statutory claim. The Court rejected that an issuer that knows or ought to know that its investor information is being made available to Canadian investors creates a securities regulatory nexus sufficient to establish a real and substantial connection to Ontario. In determining whether an issuer is a responsible issuer, the courts are generally to apply the common law test for a real and substantial connection.
(2) No, the motion judge did not err in his application of the common law test for a real and substantial connection. The Ontario Superior Court of Justice has jurisdiction over a foreign defendant in a tort action if the plaintiff establishes that a real and substantial connection exists between the subject matter of the litigation and Ontario. In Van Breda, the Supreme Court formulated four rebuttable presumptive connective factors, at para 90:
[I]n a case concerning a tort, the following factors are presumptive connecting factors that, prima facie, entitle a court to assume jurisdiction over a dispute:
(a) the defendant is domiciled or resident in the province;
(b) the defendant carries on business in the province;
(c) the tort was committed in the province; and
(d) a contract connected with the dispute was made in the province.
The appellant asserted that HSBC Holdings was caught by two of the presumptive connecting factors: it committed a tort in Ontario; and it carries on business in Ontario. The appellant contended that the motion judge erred by requiring HSBC Holdings to have a physical presence in Ontario. The Court of Appeal disagreed with this argument. The motion judge's finding that HSBC Holdings' business is that of managing a global enterprise of a group of commonly bannered banks to the extent of setting global standards for a global enterprise was correct and entitled to deference. The Court found that HSBC Holdings could not be said to have carried on business in Ontario simply because the appellant could access a non-reporting issuer's disclosure information using his home computer in Ontario. This would amount to an "extremely weak connection" to securities regulation in Ontario. It would also give rise to the universal jurisdiction that LeBel J. explicitly rejected in Van Breda.
The Court distinguished Abdula, where the issuer was found to be a responsible issuer because there was a real and substantial connection to Ontario, at para. 88. The issuer in Abdula had been incorporated in Ontario; its executive offices as well as some business and governance operations were in Ontario; and it had held its annual meeting in Ontario. Here, HSBC Holdings' management business was distinct from the businesses it manages. Very few activities of HSBC Holdings' business had ever occurred in Ontario; it had no fixed place of business in Canada; and there was no agent of HSBC Holdings doing its management business in Ontario. Therefore, HSBC Holdings is not a responsible issuer under the Securities Act because it had no real and substantial connection to Ontario.
(3) No, the motion judge accurately expressed and applied the principles in the forum non conveniens analysis and this determination attracts deference: see Van Breda, at para. 112.
A court may decline jurisdiction on the basis that there is another more appropriate forum under the forum non conveniens doctrine, even if it finds it has jurisdiction simpliciter. Given the Court's conclusion that Ontario courts do not have jurisdiction simpliciter, it was unnecessary to consider the forum non conveniens doctrine. However, since the appellant raised arguments about the interaction between this court's decisions in Kaynes (2014) and Kaynes v BP PLC, 2016 ONCA 601, 133 O.R. (3d) 29, the Court found that a response would be helpful.
The Court went on to extensively discuss the Kaynes decisions, in which the court had first stayed a securities class action in 2014 on jurisdictional grounds, and then lifted the stay in 2016 to permit the claim to proceed. The appellant's argument that there was inconsistency between the court's decisions in Kaynes (2014) and Kaynes (2016) was rejected. In Kaynes (2016), the court lifted the stay it imposed in Kaynes (2014) in order to allow the appellant to have his claim adjudicated on its merits. The panel did not suggest that the framework it set out in Kaynes (2014) was wrong. The law did not change in Kaynes (2016); the facts changed. The court in Kaynes (2016) stated, at para. 16: these developments, taken as a whole, are sufficient to justify lifting the stay. Comity was central in Kaynes (2014). The importance of comity did not change in Kaynes (2016). In Kaynes (2014), the court showed respect for the U.S. court, which was already adjudicating similar claims. When the U.S. District Court judge dismissed the claim on a "purely procedural barrier", there was no decision on the merits that the court could recognize: Kaynes (2016), at para. 16. In addition, given that Mr. Kaynes had commenced his claim in Ontario in time, it was unfair that this be a basis for preventing the claim from being heard on its merits. Thus, in Kaynes (2016), the court did not elevate the juridical advantage of asserting a claim as a class action to the status of an inviolable right. Rather, it applied the Kaynes (2014) framework to a new set of facts.
The appellant argued that the motion judge failed to give due weight to the loss of juridical advantage he would suffer if Ontario declined jurisdiction, and he asserted: There is no authority for the proposition relied on by the motion judge that juridical advantage should be viewed as "a weak and problematic factor". This is incorrect. The Supreme Court noted that the juridical advantage factor is problematic in the forum non conveniens analysis, both as a matter of comity and as a practical matter: Breeden v Black, 2012 SCC 19, [2012] 1 SCR 666, at para 27; Van Breda, at para 112.
As a matter of comity, secondary market trading is international and involves numerous jurisdictions. Comity is particularly important to maintain an orderly and predictable regime for dispute resolution. As stated by LeBel J. in Van Breda: "Comity cannot subsist in private international law without order, which requires a degree of stability and predictability in the development and application of the rules governing international or interprovincial relationships" (at para. 74). In this case, the motion judge properly expressed and applied the forum non conveniens principles. HSBC Holdings could not reasonably have expected that it would be subject to the securities regulation of the law of Ontario. Therefore, the motion judge was right to conclude that Ontario was forum non conveniens.
(4) Yes and yes. The Court granted leave to appeal the costs award, and varied it by reducing it from $1,000,455.22 to $800,000. In reducing the award, the court did not accept the appellant's submission that this litigation should be considered public interest litigation in the costs context (Pearson v. Inco Ltd. (2006), 79 O.R. (3d) 427 (C.A.)). There was no such specific or special significance of this case beyond the putative class members. This was entrepreneurial litigation. The Court also found that this litigation did not raise a novel issue: the central issue was jurisdictional. The Court did disagree with the motion judge where he drew a distinction between "altruistic" and "entrepreneurial" litigation. Class actions are generally entrepreneurial litigation: Fantl v Transamerica Life Canada, 2009 ONCA 377 at para 66. However, the Court did not disagree with the motion judge's conclusion that the fees sought by the respondent were fair and reasonable in the circumstances and the expert evidence and fees were necessary for the motion.
Expert fees are not to be arbitrarily reduced to reflect partial indemnity costs (3664902 Canada Inc. v. Hudson's Bay Co. (2003), 169 O.A.C. 283 (C.A.)). Proportionality is a matter of general principle in applying the Rules of Civil Procedure: see r. 1.04(1.1). The expert fees allowed must still be reasonable in terms of hours and rates charged in proportion to the matter. The motion judge referred to, but did not apply, this test. There was no information provided for three of the six experts in terms of the hours spent or the rates charged. That significantly constrained a review of the fees charged. While the court could have remitted the matter back to the motion judge, it decided to reduce the costs in respect of the expert fee disbursements incurred.
Malkov v Stovichek-Malkov, 2018 ONCA 620
[Feldman, Hourigan and Brown JJ.A.]
Counsel:
Robert G. Schipper and John Freeman, for the appellant
Leonard Susman, for the respondent MM
Keywords: Family Law, Civil Procedure, Trials, Evidence, Reopening Case, Abuse of Process, Rules of Civil Procedure, Rules 52.10, 53.01(3), Family Law Rules, O. Reg. 114/99, Scott v. Cook, [1970] 2 O.R. 769 (H.C.), Catholic Children's Aid Society of Toronto v. M.R., 2014 ONCJ 762
Facts:
The appellant appeals from the order of the trial judge (i) declaring that MM is the sole beneficial owner of the Property in question; and (ii) requiring the appellant to transfer her right, title and interest in the property to MM. At the start of the trial, the trial judge proposed and counsel agreed to hear MM's case, then the appellants', followed by closing submissions. While MM had initially indicated that he would be calling Ms. D as a witness, his counsel later advised that he would not. The appellant then put in her case, and did not seek to call Ms. D. The continuation of the trial was put over until a few months later. At that time, the appellant's counsel advised the court that he intended to call Ms. D as a witness. Noting that the appellant did not have a right to call reply evidence because she had not led her evidence first, the trial judge treated this as a request to reopen her case. The trial judge found that since the appellant did not frame her request as one based on accident or mistake, "to reopen her case to call a witness who [...] has no discovered evidence to provide would [...] be an abuse of process."
Issues:
Did the trial judge fail to conduct the proceedings in a fair manner due to her refusal to allow the appellant to call Ms. D as a witness?
Holding: Appeal dismissed.
Reasoning:
No, the trial judge did not fail to conduct the proceedings in a fair manner due to her refusal to allow the appellant to call Ms. D as a witness. The trial judge relied on the decision in Scott v. Cook, [1970] 2 O.R. 769 (H.C.), which held that on a motion to reopen trial proceedings, the requesting party must show that the evidence sought to be adduced is such that, if it had been presented during the trial, it probably would have changed the result. The appellant contended that the more appropriate test to be applied in the context of family law proceedings is that set out in Catholic Children's Aid Society of Toronto v. M.R., 2014 ONCJ 762, which lists the following factors a court will consider in civil cases in determining whether to allow a plaintiff to re-open their case:
- At what stage of the trial is the motion made?
- Why was evidence not adduced during the party's case?
- Did the party intentionally omit leading the evidence earlier? Or did the evidence only recently come to the party's attention, despite diligent earlier efforts?
- What is the prejudice to the defendant? A defendant might have conducted his case differently if he had known and had an opportunity to investigate the evidence which is the subject of the motion.
- Can any prejudice be remedied in costs?
- How would a reopening of the case affect the length of the trial? How much evidence would have to be revisited?
7.What is the nature of the evidence? Does it deal with an issue which was important and disputed from the beginning, or with a technical or noncontroversial point? Does it merely "shore up" evidence led in chief?
- Is the proposed new evidence presumptively credible?
The Court agreed that this case provides a helpful list of factors for a trial judge to consider when entertaining a party's request to reopen her case. However, the Court found that when the trial judge's reasons for her ruling are read as a whole, they disclose that she took into account the factors most relevant to the specific circumstances of the case.
When MM's counsel advised that he would not call Ms. D, the appellant was offered a mechanism by which she could secure Ms. D's evidence for her case without summons. However, she did not avail herself of the opportunity. Instead, she waited several months until the resumption of the trial to request reopening her case. Given the appellant's lack of forensic diligence regarding Ms. D's evidence, and the absence of any evidentiary basis to suggest the this evidence probably would have an important influence on the result of the case, the Court found no error in the cost/benefit and fairness analysis conducted by the trial judge that led her to exercise her discretion to refuse the appellant leave to call Ms. D.
Peel Children's Aid Society v MH, 2018 ONCA 619
[Feldman, Hourigan, and Brown, JJA]
Counsel:
Benjamin Vincents, for the appellant, SH
Laura Shaw and Amanda Rozario, for the respondent, Peel Children's Aid Society
James Cook and Chris Junior, for the respondent, MO
Keywords: Family Law, Publication Ban, Crown Wardship, Child and Family Services Act, RSO 1990 c, C-11, Abuse of Process, Ineffective Assistance of Counsel, Fresh Evidence, Children's Aid Society of the Regional Municipality of Waterloo v CT, 2017 ONCA 931
Facts:
MH and SH were each convicted of manslaughter for the death of their 2-year old child M which was the result of malnutrition. A second child, AM, was found at the time of M's death to be lacking in Vitamin D and B12. The doctor advising the parents recommended dietary supplementation as necessary. Five weeks later, the Peel Children's Aid Society ("CAS") commenced a child protection application after SH admitted that AM had not been given the recommended vitamins. A plan to return AM to the care of her parents was deemed unsuccessful due to the unwillingness of AM's parents to cooperate with CAS. AM was ultimately found in need of protection pursuant to the Child and Family Services Act, RSO 1990 c, C-11 (the "CFSA"). AZ, born subsequent to the finding, was apprehended at birth and placed in foster care and was later also found in need of protection under the CFSA. Both AM and AZ later became Crown wards without access. MH and SH unsuccessfully appealed the order from the Ontario Court of Justice to the Superior Court of Justice. They appealed again.
Issues:
(1) Did the appellate judge err in upholding the decision that AZ was in need of protection and that both children should be made Crown wards?
(2) Did the CAS obtain Crown wardship by way of abuse of process?
(3) Did the appeal judge err in failing to find that the ineffective assistance of counsel did not allow for a fair trial?
(4) Did the appellate judge fail to properly review fresh evidence?
Holding: Appeal dismissed.
Reasoning:
(1) No. Given the death of M while in her parents' care, the previous finding that AM was in need of protection, and the appellants' demonstrated inability to cooperate with CAS, there was ample evidence to support the finding that AZ was in need of protection. The detailed reasons of the trial judge, which were upheld by the appellate judge, assessed, inter alia, the children's physical, mental, and emotional needs, level of development and the merits of the CAS plan and were sufficient. The trial judge's conclusion that the parents were unwilling to put the children's well-being first was correct.
(2) No. The allegations that the CAS hid from the appellate judge the father's presentation of a sufficient caregiver to CAS is meritless. The CAS repeatedly asked for names of family members who could care for the children and none of the family members presented a plan of care. Providing a name and phone number is not equivalent to providing a plan of care.
(3) No. The appellate judge carefully considered the appropriate case law in Children's Aid Society of the Regional Municipality of Waterloo v CT, 2017 ONCA 931, including whether or not any potential prejudice had occurred as a result of trial counsel's advocacy. While trial counsel had encouraged the parents to not testify, the appellate judge could not find, on a balance of probabilities, that the appellants wished to testify, nor that SH's testimony would have affected the result.
(4) No. The fresh evidence which the appellants wished to adduce to the appellate court below was found to simply restate or confirm the parents' views already in evidence. The appellate judge correctly concluded that the fresh evidence could not have affected the result. Filing fresh evidence is not an opportunity to reargue a case de novo.
Filice v Complex Services Inc, 2018 ONCA 625
[Simmons, Roberts and Nordheimer JJ.A.]
Counsel:
Frank Cesario, for the appellant
Margaret A. Hoy, for the respondent
Keywords: Employment Law, Constructive Dismissal, Payment in Lieu of Notice, Notice Period, Potter v New Brunswick Legal Aid Services Commission, 2015 SCC 10, Chapman v GPM Investment Management, 2017 ONCA 227, Cabiakman v Industrial Alliance Life Insurance Co, 2004 SCC 55, Damages, Bardal v Globe & Mail Ltd (1960), 24 DLR (2d) 140 (Ont HC), Punitive Damages, Whiten v Pilot Insurance Co, 2002 SCC 18, Hill v Church of Scientology of Toronto, [1995] 2 SCR 1130, Pate Estate v Galway-Cavendish (Township), 2013 ONCA 669, Rutman v Rabinowitz, 2018 ONCA 80
Facts:
This is an appeal from a judgment that awarded the respondent damages for constructive dismissal. The appellant operates Casino Niagara and Fallsview Casino (collectively, "the Casino"). The respondent was employed as a Security Shift Supervisor at the Casino since 1999. Security Shift Supervisors are required to maintain a valid gaming registration issued by the Alcohol and Gaming Commission of Ontario ("AGCO"). This requirement is mandated under the Gaming Control Act, S.O. 1992, c. 24 and is a condition of employment. In December 2007, the AGCO Compliance Unit performed an audit of the Casino's lost and found logs. The officers advised the Director of Security, RP, that the respondent was under investigation for theft in the workplace. RP then placed the respondent on an investigative suspension, pursuant to Casino policies. The respondent was suspended without pay.
The respondent was charged with four counts of theft under $5,000 and one count of breach of trust, and the AGCO suspended the respondent's gaming registration. The respondent's criminal charges were withdrawn and/or dismissed shortly thereafter, but his gaming registration remained suspended. The respondent had voluntarily surrendered his gaming registration to the AGCO. As a result, RP advised the respondent that his employment was at an end. The respondent commenced the underlying action against the appellant for wrongful dismissal, false arrest, malicious prosecution, breach of the Canadian Charter of Rights and Freedoms, negligence, and intentional infliction of mental suffering.
The appellant brought a motion for summary judgment seeking dismissal of the respondent's claims. Henderson J. granted partial summary judgment, dismissing all the claims except for the constructive dismissal claim. At trial, the respondent was awarded damages for constructive dismissal in the amount of $75,723.64, punitive damages of $100,000, and costs of $82,600.
Issues:
(1) Did the trial judge err in his constructive dismissal analysis?
(2) Did the trial judge err by concluding that punitive damages were appropriate in this case?
Holding: Appeal allowed.
Reasoning:
(1) Yes, the trial judge erred in his constructive dismissal analysis. The test for constructive dismissal involves two branches: Potter v New Brunswick Legal Aid Services Commission, 2015 SCC 10. The first branch of the test applies where there has been a single act by the employer that may constitute a breach of the contract of employment. The second branch applies where there has been a continuing course of conduct by the employer that may give rise to a finding that the contract of employment has been breached. The first branch of the test is engaged here.
The first branch of the test for constructive dismissal requires a review of the specific terms of the employment contract. It involves two steps that must be considered independently of each other: Potter, at para. 38. The first step is to identify an express or implied contractual term that has been breached on an objective basis. The second step is to then determine if the breach is sufficiently serious to constitute constructive dismissal on a modified objective standard of a reasonable employee in similar circumstances: Chapman v GPM Investment Management, 2017 ONCA 227, at paras 16-17.
The burden of establishing constructive dismissal lies on the employee. However, where an administrative suspension is involved, the burden shifts to the employer to show that the suspension is justified: Potter, at para. 41. A number of factors are to be considered in determining whether a suspension is justified, as discussed in Cabiakman v Industrial Alliance Life Insurance Co, 2004 SCC 55, at para. 65:
[T]he courts may consider the following factors: whether there is a sufficient connection between the act with which the employee is charged and the kind of employment the employee holds; the actual nature of the charges; whether there are reasonable grounds for believing that maintaining the employment relationship, even temporarily, would be prejudicial to the business or to the employer's reputation; and whether there are immediate and significant adverse effects that cannot practically be counteracted by other measures[...].
The Court of Appeal found that the suspension was clearly justified in this case. The respondent was a Security Supervisor with the appellant. Information came to the appellant's attention that the respondent was possibly involved in theft from the Casino's lost and found facilities. In these circumstances, and given the regulated nature of the appellant's operations, it was entirely reasonable for the appellant to suspend the respondent pending the determination of his misconduct. Whether the appellant was justified in suspending without pay is a separate issue.
Absent express language in the employment contract, the burden was on the appellant to establish that a suspension without pay was justified. If this cannot be justified, then taking that step amounts to a unilateral change in the employment relationship that constitutes a breach of the employment contract. In this case, suspension without pay was a matter of discretion. In making that determination, however, the appellant had to establish that it acted reasonably. In this case, it appeared that the appellant mistakenly treated the suspension without pay as being automatic. While there may be situations where an employer would be fully entitled to suspend an employee without pay, those situations are exceptional and it still falls to the employer to justify that decision as reasonable: Cabiakman, supra, at para. 60. It is difficult to see how the appellant could reasonably have concluded that a suspension without pay was warranted at the early stage of the investigation. Therefore, the appellant made a unilateral change to the employment relationship and breached the implied term of the employment contract that the power to suspend without pay would not be exercised unreasonably.
That conclusion then leads to the second step of the first branch of the Potter analysis, which requires the court to determine whether the suspension "could reasonably be perceived as having substantially changed the essential terms of the contract": Potter, supra, at para. 45. Part of the consideration is whether the suspension "had a minimal impact" on the employee. The Court found that suspending an employee without pay would have a more than a minimal impact. The substantial impact of suspending the respondent without pay therefore rendered it a breach of the employment contract that amounted to a constructive dismissal under the Potter test.
Compensatory damages
Having concluded that the respondent was constructively dismissed, the Court then considered the question of compensatory damages. The Court found that the trial judge failed to undertake a proper damages assessment. Damages for constructive dismissal are the same as they are for wrongful dismissal. The appropriate notice period has to be determined and damages awarded in lieu of that notice period. 17 months was an inordinately lengthy notice period for someone in the respondent's position. The 50 year old respondent's length of service was approximately 8 years and 8 months and he was earning approximately $50,000. It took the appellant seven months to find other employment. Relying on the factors from Bardal v Globe & Mail Ltd (1960), 24 DLR (2d) 140 (Ont HC), the Court found reasonable notice to be seven months.
A unique aspect of this case is that approximately a month after the respondent was suspended, his gaming registration was suspended by the AGCO. In order to fulfill his duties as a Security Supervisor, the respondent was required by law to have a gaming registration. Two consequences arose from that fact. First, the appellant argued that the suspension of the respondent's gaming registration limited any claim for damages arising from his dismissal to the one month before his gaming registration was suspended. The general rule for the assessment of damages is that they are assessed as of the date of the breach. The Court found that fairness did not require an exception to the general rule in this case. Secondly, the appellant did not have an obligation to offer the respondent another job within its organization that did not require a gaming registration. Holding that the appellant had a duty to offer alternative employment would be contrary to the fundamental principles of individual agency, freedom of contract, and would be tantamount to binding the parties to a specific performance obligation for employment.
(2) Yes, the trial judge erred in his finding that punitive damages were appropriate in this case. An appellate court has a much broader scope for review on an appeal from an award of punitive damages. The Supreme Court in Hill v Church of Scientology of Toronto, [1995] 2 SCR 1130 at para 197 stated: "The appellate review should be based upon the court's estimation as to whether the punitive damages serve a rational purpose. In other words, was the misconduct of the defendant so outrageous that punitive damages were rationally required to act as deterrence?" Punitive damages are only to be awarded where compensatory damages are inadequate to accomplish the objectives of retribution, deterrence, and condemnation: Pate Estate v Galway–Cavendish (Township), 2013 ONCA 669, at para 211; and Rutman v Rabinowitz, 2018 ONCA 80, at paras 94-97 per curiam. Further, an award of punitive damages is exceptional for "malicious, oppressive and high-handed" misconduct that "offends the court's sense of decency": Whiten v Pilot Insurance Co, 2002 SCC 18 at para 36.
In this case, the trial judge simply found that the compensatory award in addition to any costs award did not rationally meet the objectives of retribution, deterrence and denunciation. However, the trial judge did not engage in any analysis of why the compensatory award that he decided on was inadequate to achieve those objectives. This was an error in principle. The fact remains that, insofar as the appellant was not justified in suspending the respondent without pay, it will pay for that error through compensatory damages. On this point, it must not be forgotten that compensatory damages have a punitive element to them: Whiten, supra; Pate Estate, supra. Therefore, the award of punitive damages was set aside.
In the result, the appeal was allowed and set the trial judgment was set aside, including the damages awards. The Court granted judgment to the respondent solely for compensatory damages for seven months' lost wages.
[Strathy C.J.O., Feldman and Brown JJ.A.]
Counsel:
Raymond G Colautti and Anita Landry, for the appellants
Sheila C Handler and Paul Shand, for the respondents, RC, Windsor Police Services Board, RM, Windsor Fire and Rescue Services Department, MS and The Corporation of the City of Windsor
Jeremy Glick and Heather Burnett, for the respondents, CM and MO
Keywords: Torts, Negligent Investigation, Malicious Prosecution, Abuse of Process, Vicarious Liability, Breach of Charter Rights, Charter Damages, Criminal Law, Arson by Negligence, Reasonable and Probable Grounds, Costs, Criminal Code, RSC, 1985, c C-46, s 436, Canadian Charter of Rights and Freedoms, ss 7, 24
Facts:
This is an appeal from the trial judge's order dismissing the appellants' action alleging negligent investigation, malicious prosecution, abuse of process and Charter damages arising out of the respondents' investigation of a fire at a house in Windsor, Ontario.
The appellants purchased a house near the University of Windsor in 1996 (the "house"), which they rented to university students on an individual basis. The City of Windsor (the "City") classified the house as a "duplex", although it was clearly not one. After a previous fire at the house in 1999, a Fire Prevention Officer identified several violations of the provisions applying to duplexes in Ontario Regulation 388/97, which was passed under the Fire Protection and Prevention Act, 1999, S.O. 1990, c. 4 ("FPPA"). The officer prepared a report noting the violations and requiring compliance by the owners. However, the appellants did not receive the report and the City did not follow up with the appellants to confirm the status of the house.
After the 1999 fire, the appellants continued to rent bedrooms in the house to students. On January 25, 2006, a resident intentionally started a fire at the house. There were five (5) individuals in the house at the time of the fire: four (4) residents and one (1) guest.
The evidence indicated that the fire separations protecting the main floor bedroom were not up to the standards prescribed by the FPPA. The guest, who was trapped in the main floor bedroom, suffered critical injuries as a result. The evidence also indicated that the stairway was open and unprotected, which allowed the fire to spread rapidly to the second floor, and then to the loft. The occupants of a second floor bedroom and the loft were unable to escape the fire by means of the stairway. Since no other fire escape was accessible, they were forced to jump from the roof to the ground. They both suffered injuries as a result. The two (2) remaining residents escaped without injury.
Following the fire, a criminal investigation was pursued against the appellants regarding possible charges under s. 436 of the Criminal Code for arson by negligence. Each of the respondents assisted with the investigation. Detective RC, an employee of the Windsor Police Services Board, led the police investigation and was assisted by MO and CK of the Office of the Fire Marshal (the "OFM"), and RM of the Windsor Fire and Rescue Services Department. The respondent MS was the Chief Building Official for the City at the time of the fire.
The investigation revealed that the house was being used as a boarding, lodging and rooming house despite its classification in City records as a duplex. The house was also in breach a number of requirements in s. 9.3 of the FPPA applicable to boarding, lodging and rooming houses, including, inter alia, the absence of a fire separation between the first and second floors, allowing the rapid spread of fire and insufficient protection in stairways.
As a result of the breaches of the FPPA, the extensive damage and the severity of the resulting injuries, RC charged the appellants with arson by negligence contrary to s. 436 of the Criminal Code. However, the charge against GP was later withdrawn by the Crown when it became clear that she was not involved in the operation of the house. The charges against HP proceeded to a preliminary inquiry, although he was ultimately acquitted.
The appellants subsequently brought this action alleging negligent investigation, malicious prosecution and abuse of process against the individual respondents and seeking to hold their employers vicariously liable. The appellants also sought s. 24 damages for violations of their s. 7 Charter rights.
At trial, the appellants argued that the City and the OFM pressured RC to lay criminal charges against them for the improper purposes of discouraging landlords from renting houses to students. The appellants also asserted that the police were liable for a breach of their s.7 Charter rights for proceeding with charges without reasonable and probable grounds, even in the absence of malice. With respect to these claims, the trial judge found that RC acted independently in charging the appellants and that there was no evidence that anyone pressured him to lay the charges. Moreover, the trial judge found that the respondents had acted in good faith in the execution of their duties, without malice or negligence. Accordingly, the trial judge found that this was a complete defence to all personal claims against the respondents and dismissed the action against them in its entirety. Since the trial judge found that no malice had been proven, he also dismissed the appellants' claims of malicious prosecution and abuse of process. The trial judge further dismissed the appellants' Charter claim, which he noted was fatally flawed because the appellants had brought the claim against individual defendants and not against the state. Notably, the trial judge held that the appellants were "attempting to advance a malicious prosecution claim in the guise of a s. 24 Charter claim, in an effort to get around the clear requirement that malice be proven." With respect to the appellants' claim of negligent investigation, the trial judge held that RC had reasonable and probable grounds to believe that the appellants had committed arson by negligence. Accordingly, he dismissed the appellants' claim for negligent investigation as well. Given that all of the appellants' claims against the individual respondents were dismissed, it followed that the vicarious liability claims against their employers were also dismissed.
Issue:
(1) Did the trial judge err when he concluded that RC had reasonable and probable grounds to charge the appellants with arson by negligence?
Holding: Appeal dismissed.
Reasoning:
(1) No. While it is well-settled that a police officer's personal belief that there are reasonable and probable grounds is not sufficient to arrest and charge an individual, the trial judge established that RC's belief was both subjectively and objectively justifiable. The trial judge gave comprehensive and cogent reasons for his conclusion that RC had reasonable and probable grounds to charge the appellants under s. 436 of the Criminal Code. Furthermore, the appellants did not demonstrate any palpable or overriding error in the trial judge's findings of fact, which fully supported the existence of reasonable and probable grounds to arrest. Consequently, the court held that the trial judge's factual findings were entitled to deference.
In making its determination, the court noted that the actus reus is defined in s. 436(1) of the Criminal Code as a "marked departure from the standard of care that a reasonably prudent person would use to prevent or control the spread of fires or to prevent explosions". Furthermore, the court noted that subsection (2) contains a statutory inference that the failure to comply with any law respecting the prevention or control of fires or explosions in the property is a fact from which a marked departure from the standard of care may be inferred. In light of the foregoing, the court found that given the appellants' ownership of the house, and in the case of HP, his control of the house, the terms of the FPPA, the evidence of their breach and the statutory inference of a marked departure from the standard of care, RC had reasonable and probable grounds with respect to all of the elements of the offence, including both the actus reus and mens rea. Moreover, the court held that RC had no obligation to determine whether the charge would succeed at trial. He was not required to evaluate the evidence to a legal standard or to make legal judgements. Nor was he required to exhaust all possible investigations, interview all potential witnesses prior to arrest, obtain the accused's version of events or determine that the accused had no valid defence to the charge, before being able to establish reasonable and probable grounds.
With respect to costs, the court held that it is well-settled that an appellate court should not interfere with a trial judge's costs award unless the judge has made an error in principle or the award in plainly wrong. Since there were no such circumstances, the court held that while the costs were substantial, a high degree of deference should be given to the trial judge.
[Feldman, Hourigan and Brown JJ.A.]
Counsel:
James S.G. Macdonald, for the appellants
Bhupinder Nagra, for the respondent
Keywords: Family Law, Property, Loans, Gifts, Resulting Trusts, Civil Procedure, Partial Summary Judgment, Butera v Chown, Cairns LLP, 2017 ONCA 783
Facts:
KT and BT were married in 2002 and bought a matrimonial home in 2012 before separating in 2015. Following their separation, KT commenced family law proceedings. As well, BT's Parents commenced a civil suit against their son and daughter-in-law seeking payment of $132,000, which they alleged they had loaned KT and BT. The Parents also sought a declaration that they are the beneficial owners of a joint interest in the Property because BT and KT had used some of the loaned funds to purchase the Property. The Parents' action was consolidated with the family law proceedings.
BT did not defend against his Parents' claim. Default judgment was granted against him. KT moved for summary judgment dismissing the parents' action. The motion judge granted partial summary judgment. He concluded that he could not resolve the Parents' claim for repayment of the $132,000 as there was a genuine issue requiring a trial, but granted summary judgment dismissing the Parents' claim for an interest in the Property. The Parents appeal the dismissal of their claim for an interest in the Property.
Issue:
(1) Did the motion judge err in granting partial summary judgment?
Holding: Appeal allowed.
Reasoning:
(1) Yes, the motion judge made two reversible errors that require setting aside the partial summary judgment.
First, the motion judge's finding that there was "no tie that binds the advances and the purchase of the Property together" was based on a misapprehension of the evidence. The record disclosed a link between some of the Parents' advances and the purchase of the Property. The court found that a genuine issue requiring a trial therefore exists as to whether use of the funds originating from the Parents gives rise to any legal entitlement by them to an interest in the Property.
Second, on their face, the motion judge's reasons were internally inconsistent on the issue of the legal characterization of the Parents' advances. On the one hand, the motion judge stated he could not resolve the issue of whether the $132,000 advanced by the Parents to BT constituted a loan or a repayment of proceeds from the sale of the Indian property. On the other hand, in granting KT partial summary judgment, the motion judge concluded that there was no evidence that any of the $132,000 was a loan or an advance with an expectation of repayment. By granting partial summary judgment, the motion judge created the real possibility of inconsistent results with respect to the legal consequences of the $132,000, ignoring the strong caution issued by the court about granting partial summary judgment where such a risk exists: Butera v Chown, Cairns LLP, 2017 ONCA 783, at para. 26. A genuine issue requiring a trial exists as to the legal characterization of the $132,000.
Gore Mutual Insurance Company v Carlin, 2018 ONCA 628
[Feldman, Hourigan and Brown JJ.A.]
Counsel:
Debbie Orth, for the appellant
James L. MacGillivray, for the respondents
Keywords: Insurance Law, Fire Policy, Property Damage, Business Interruption Losses, Restitution, Overpayment, Unjust Enrichment, Brisette Estate v Westbury Life Insurance Co., [1992] 3 SCR 87, Kerr v Baranow, 2011 SCC 10, [2011] SCR 269, Garland v Consumers' Gas Co., 2004 SCC 25, Insurance Act, RSO 1990, c. I.8, s. 128
Facts:
This appeal raised the issue of whether an insured is permitted to retain the total amount paid by its insurer when it is subsequently determined that the amount paid was in excess of the loss suffered. The motion judge granted summary judgment to the insureds in this case, holding that they were free to keep the total amount paid by the insurer, even though it exceeded their loss by over $100,000.
The respondent Dr. GC carried on the practice of dentistry in a building owned by the respondent Windent Inc., located in Winchester, Ontario.
In 2012, a fire destroyed the building and its contents. At the time of the loss, the appellant had issued an insurance policy for the building and its contents with the named insured being Dr. GC Dentistry Professional Corporation. This policy also included coverage for business interruption. In addition to the policy issued by the appellant, there was coverage with Aviva Insurance Company of Canada ("Aviva"). That policy did not insure the building.
In 2013, the appellant's representative advised the respondents and their representative, as well as Dr. GC's wife SC, via email that he had authorized an advance for the loss payable for the building in the amount of $750,000.
SC sent an email to the appellant's representative in July, 2013, explaining why the respondents found the $750,000 offer to be inadequate. The appellant's representative replied that day stating, in part, that "the...advance of $750K is just that, a substantial advance toward your loss so you can get restoration under way...this $750K advance in no way ties either of us to follow either side's estimate."
The appellant's representative followed up with an email to the respondents' representative and SC in September, 2013. That email provided in part as follows:
As previously advised accepting the $750K offer does not tie you to anything or hold you to repairs of any certain nature. Legally under your insured contract, the insured is owe[d] the Actual Cash Value for an item as settlement assuming replacement has not been enacted. Accepting the advance you are well within your right to: rebuild as per pre-loss specifications, rebuild as per new upgraded specifications (upgrade at your own expense). Should you choose to re-build and your total costs are lower than the ACV issued, the additional funds are still yours to utilise as you see fit.
The appellant and the respondents participated in an appraisal on May 14, 2014, as provided for in s. 128 of the Insurance Act, R.S.O. 1990, c. I.8 (the "Act"). The amount found to be payable by the appellant under the appraisal was $713,767.33. To that amount was added an agreed sum for business interruption loss, being $205,444, and $7,465.70 for professional fees. The total amount payable by the appellant was $926,677.03. However, by this time the appellant had already paid out $1,030,187.04. It sued to recover the overpayment of $103,510.01.
The motion judge began his analysis by finding that the appellant is a sophisticated insurance party and that even though the $750,000 payment was referred to as an advance, it was not in fact an advance because it was paid on the basis that it could be used as the respondents saw fit.
The motion judge next found that the payment was deliberate and not the product of mistake, noting as well that both the policy and the Act were silent regarding what happens when an overpayment has been made.
The motion judge rejected appellant's claim of unjust enrichment on the grounds that the respondents obtained no benefit when they received the $750,000 payment, and that there was a juristic reason for sending the money, as set out in the September, 2013 email, which, according to the motion judge, indicated that the respondents could use the money as they wished.
Issues:
(1) Did the motion judge err in holding that the appellant is not entitled to recover the overpayment?
(2) Did the motion judge err in finding that unjust enrichment was not an available remedy?
Holding: Appeal allowed.
Reasoning:
(1) Yes. A contract of insurance is a contract of indemnity. It is not a vehicle for turning misadventure into profit. The court found that the motion judge's analysis ignored that fundamental principle, and contained a palpable and overriding error of fact regarding the September 13, 2013 email and extricable legal errors.
The motion judge erred in equating the actual cash value as referred to in the email with the $750,000 advance. This led him to erroneously conclude that the appellant was communicating to the insureds that they could keep the $750,000 regardless of the quantification of the actual cash value that was to be determined as part of the appraisal process. This was a palpable and overriding error of fact.
The first legal error arose from the motion judge's interpretation of the policy. The motion judge found that there was nothing in the wording of the policy that covers a situation where there has been an overpayment. Therefore, the motion judge concluded that the policy did not obligate the respondents to repay the overpayment.
Contracts of insurance are to be interpreted in a manner that results in neither a windfall to the insurer nor an unanticipated recovery to the insured: Brisette Estate v. Westbury Life Insurance Co., [1992] 3 SCR 87, at pp. 92-93. The motion judge's decision went beyond an unanticipated recovery to grant a windfall that was wholly unconnected to the recovery of any loss. The policy in question only provided for indemnification for a loss suffered.
The motion judge also erred in law in his analysis of the Act. Similar to his analysis of the policy, the motion judge limited his inquiry to a search for a specific provision in the Act addressing a situation where an overpayment is made, failing to consider the purpose and scheme of the Act.
The Act defines insurance as "the undertaking by one person to indemnify another person against loss or liability for loss..." It was also stated that where the insurer and insured cannot agree on the quantum of the loss, they may have the issue determined by an appraisal, a mechanism provided for by the Act.
The motion judge's ruling was in conflict with the most basic elements of the Act by permitting recovery for amounts beyond the loss suffered by the insured. This was inconsistent with the definition of insurance as provided for in the Act and contrary to the purpose of conducting an appraisal.
(2) Yes. The motion judge erred in law in his unjust enrichment analysis. The test for unjust enrichment is well established in the jurisprudence. To successfully make an unjust enrichment claim, a plaintiff must prove three things: (1) the defendant must have received an enrichment, (2) the plaintiff must have suffered a corresponding deprivation, and (3) there was no juristic reason for the benefit and loss: Kerr v Baranow, 2011 SCC 10, at paras. 31, 36 and 40.
Where money is transferred from a plaintiff to a defendant, there is an obvious enrichment: Garland v Consumers' Gas Co., 2004 SCC 25, at para. 36. There can be no issue that the insured received a benefit and that the appellant suffered a corresponding deprivation.
In conclusion, the motion judge erred in his interpretation of the September, 2013 email. The email did not communicate that the respondents could do whatever they liked with the $750,000 payment regardless of the quantification of the actual cash value, which was an issue to be determined as part of the appraisal process. Therefore, the email was not found to be a juristic reason for the benefit and corresponding deprivation.
Larizza v Royal Bank of Canada, 2018 ONCA 632
[Pepall, van Rensburg and Paciocco JJ.A.]
Counsel:
Julian Heller and Neil Folley, for the appellant
Gavin Tighe and Scott Gfeller, for the respondent Fasken Martineau DuMoulin LLP
Adam Grant and Karen Bernofsky, for the respondent Minto Group Inc.
Keywords: Torts, Negligence, Intrusion Upon Seclusion, Negligent Misrepresentation, Intentional or Negligent Infliction of Mental Distress, Breach of Contract, Breach of Fiduciary Duty, Summary Judgment, Jones v Tsige, 2012 ONCA 32, Bhasin v Hrynew, 2014 SCC 71
Facts:
The appellant met a man, AR, online, who convinced her to quit her job, sell her home, give the proceeds of the sale to him and to move in with him into a Yorkville penthouse. AR was a fraudster who had lied to the appellant by telling her he was a wealthy businessman and heir to a fortune. The appellant lost all of her money to AR. The appellant sought damages for her financial loss from the penthouse landlord, Minto Group Inc. ("Minto") and her lawyers, Fasken Martineau DuMoulin LLP ("Faskens"). Minto and Faskens successfully brought motions for summary judgment, and the appellant's action against them was dismissed.
Issues:
(1) Did the trial judge err in concluding that there was no genuine issue requiring a trial with respect to her claim against:
i) Minto?
ii) Faskens?
Holding: Appeal dismissed.
Reasoning:
(1)(i) No. The appellant claimed damages from Minto for intrusion upon seclusion, breach of contract, negligence, negligent misrepresentation, and intentional or negligent infliction of mental distress. At AR's request, Minto had conducted and provided to AR an Equifax credit report search on the appellant without her knowledge or consent when AR and the appellant rented their Yorkville penthouse condo together. It was on the strength of that credit report that the appellant and AR were approved as tenants, as AR's credit did not qualify him.
The motion judge correctly set out the test for intrusion upon seclusion, which comes from Jones v Tsige and states: the defendant's conduct must be intentional or reckless; the defendant must have invaded, without lawful justification, the plaintiff's private affairs; and a reasonable person would regard the invasion as highly offensive, causing distress, humiliation, or anguish. While Minto's actions were intentional, the appellant failed to meet the other two elements of the test, since the information in the private credit report was not about the appellant's "private affairs or concerns" and a reasonable person would not regard Minto's actions as highly offensive, causing humiliation or mental anguish.
With respect to the breach of contract claim (the only contract with Minto was the penthouse lease), the appellant relied on the duty of good faith from Bhasin v Hrynew. The motion judge correctly held that this duty arises in the context of the performance of a contract, not the formation of one.
With respect to the final three claims, the Court of Appeal confirmed that the appellant's claim in negligence was too remote, and that there was no conduct on the part of Minto that could be characterized as "extreme, flagrant and outrageous".
(ii) No. The appellant claimed damages from Faskens for negligence, negligent misrepresentation, breach of contract, and breach of fiduciary duty arising from her dealing with a lawyer, EH.
A lawyer at the defendant law firm, Wildeboer & Dellelce LLP, who purportedly acted for AR (and who possibly acted for the appellant), referred the appellant to EH, a partner at Faskens who specializes in estate planning and personal tax. The appellant met EH only one time. The appellant states that she retained EH to advise her on a prenuptial agreement, estate planning, and a trust fund. Specifically, she sought advice about: a prenuptial agreement that AR's lawyers in Switzerland were allegedly preparing; estate planning to draft a new will for the appellant given her pending marriage to AR; and the establishment of a trust. AR was purportedly purchasing a $10 million insurance policy naming as the beneficiary a trust for the benefit of the appellant and her daughters.
EH stated that she advised the appellant that she did not practice family law and would have to refer the appellant to a family law lawyer when the prenuptial agreement was ready for review. The appellant contested this evidence and claimed that EH was her family lawyer.
There was no written retainer.
After the initial meeting, the appellant and EH exchanged various communications and EH sent draft documents but never received responses to her inquiries. The prenuptial agreement was never available for review from Switzerland (or for referral to a family lawyer). EH requested further information, including the date of the appellant's pending marriage to AR, but none was ever provided.
The appellant did not answer EH's emails or comment on drafts provided to her by EH. The appellant and AR married without advising EH. As found by the motion judge, none of the tasks were completed because EH did not receive instructions or information requested that would allow her to complete the tasks.
The appellant alleges that as part of the retainer, EH and Faskens had a duty to protect the appellant from AR by investigating his background. The appellant argued that had EH exercised reasonable due diligence, the unavailability of AR's funds would have been revealed. The appellant's claims in negligence, negligent misrepresentation, and breach of contract against EH and Faskens depended on whether there was an implied requirement for EH to conduct a background check on AR. The Court agreed with the motion judge that this defied common sense.
With respect to the remaining claims against EH and Faskens, the appellant claimed that EH failed to disclose a conflict of interest arising from the referral from Wildeboer, which represented AR. The motion judge found that Faskens had never been retained by AR, and there was therefore no conflict to disclose.The Court of Appeal agreed that the record supported such a finding.
The Birkshire Group Inc v Wilkes, 2018 ONCA 631
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