Canada

Following are this week's summaries of the Court of Appeal for Ontario for the week of June 5, 2023.

In Bhatnagar v. Cresco Labs Inc., the Court interpreted the Supreme Court's decision in C.M. Callow Inc. v. Zollinger. There is language in the Callow decision that suggests that a breach of the duty of honest performance of a contract leads to a presumption of lost opportunity damages. The Court determined that Callow does not stand for such a proposition, and damages have to be proved by the plaintiff in the normal course.

Other topics covered included a breach of contract case involving physicians and a hospital in respect of the operation of an offsite clinic, the interpretation of an option to purchase land in a lease following the environmental remediation of the property, interveners, setting aside administrative dismissals for delay in an MVA case.

Civil Decisions

Justice Centre for Constitutional Freedoms v. Costa, 2023 ONCA 405

Keywords: Constitutional Law, Human Rights, Civil Procedure, Appeals, Interveners, Costs, Non-Parties, Public Interest Litigation, Rules of Civil Procedure, rr. 13.02, 57.01(1), Canadian Charter of Rights and Freedoms, ss. 2(a), 7, 8, 15, Jones v. Tsige (2011), 106 O.R. (3d) 721 (C.A.), Peel (Regional Municipality) v. Great Atlantic & Pacific Co. of Canada Ltd. (1990), 74 O.R. (2d) 164 (C.A.), Childs v. Desormeaux (2003), 67 O.R. (3d) 385 (C.A.), Huang v. Fraser Hillary's Limited, 2018 ONCA 277, 40 Days for Life v. Dietrich, 2023 ONCA 379, British Columbia (Attorney General) v. Trial Lawyers Association of British Columbia, 2022 BCCA 354

Physicians' Dialysis Center Inc. v. Credit Valley Hospital, 2023 ONCA 402

Keywords: Contracts, Enforceability, Illegality, Breach of Contract, Breach of Fiduciary Duty, Unjust Enrichment, Torts, Conversion, Damages, Civil Procedure, Limitation Periods, Canada Health Act, R.S.C. 1985, c. C-6, Commitment to the Future of Medicare Act, 2004, S.O. 2004, c. 5, Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, ss. 4 and 5, Moore v. Sweet, 2018 SCC 52, Citadel General Assurance Co. v. Lloyds Bank Canada, [1997] 3 S.C.R. 805, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Housen v. Nikolaisen, 2002 SCC 3, Crombie Property Holdings Limited v. McColl-Frontenac Inc. (Texaco Canada Limited), 2017 ONCA 16, Longo v. MacLaren Art Centre Inc., 2014 ONCA 526

Piedrahita v. Costin, 2023 ONCA 404

Keywords: Torts, Negligence, MVA, Civil Procedure, Orders, Administrative Dismissal for Delay, Setting Aside, Rules of Civil Procedure, r. 48.15 (repealed), Prescott v. Barbon, 2018 ONCA 504

Bhatnagar v. Cresco Labs Inc., 2023 ONCA 401

Keywords: Breach of Contract, Duty of Good Faith and Honest Performance, Damages, Expectation Damages, Disgorgement, Punitive Damages, Civil Procedure, Fresh Evidence, C.M. Callow Inc. v. Zollinger, 2020 SCC 45, Palmer v. The Queen, [1980] 1 S.C.R. 759., Katokakis v. William R. Waters Ltd. (2005), 194 O.A.C. 353 (C.A.), Barendregt v. Grebliunas, 2022 SCC 22, Atlantic Lottery Corp. Inc. v. Babstock, 2020 SCC 19, Corner Brook (City) v. Bailey, 2021 SCC 29, Housen v. Nikolaisen, 2002 SCC 33

Horn Ventures International Inc. v. Xylem Canada LP, 2023 ONCA 408

Keywords: Contracts, Interpretation, Real Property, Agreements of Purchase and Sale of Land, Leases, Options to Purchase, Environmental Protection Act, R.S.O. 1990, c. E.19, s. 95

Short Civil Decisions

Gefen v. Gefen, 2023 ONCA 406

Keywords: Wills and Estates, Guardianship, Power of Attorneys, Civil Procedure, Litigation Guardians, Appeals, Jurisdiction, Orders, Final or Interlocutory, Rules of Civil Procedure, rr. 1.04 and 77.04, Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 6(2) and 19, Substitute Decisions Act, 1992, S.O. 1992, c. 30., ss. 22 and 22(3), Gefen v. Gefen, 2023 ONCA 29, Gefen Estate v. Gefen, 2019 ONSC 6015, Saunders v. Gefen, 2019 ONSC 6017 aff'd, 2022 ONCA 174, Roelandt v. Roelandt, 2016 ONCA 858, Public Guardian and Trustee v. Gaumont, 2018 ONCA 731, Lax v. Lax (2004), 70 O.R. (3d) 520 (C.A.), Berkelhammer v. Berkelhammer Estate, 2012 ONSC 6242

White v. Gauthier, 2023 ONCA 415

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, G. Hall, Canadian Contractual Interpretation Law, 4ed 2020, Ch. 1-2

Upper Canada Land Titles and Patent Research Initiative v. Niagara (Municipality), 2023 ONCA 416

Keywords: Real Property, Crown Patents, Municipal Law, Municipal Act, 2001, S.O. 2001, c. 25, ss. 14(1)(b) and 135

CIVIL DECISIONS

Justice Centre for Constitutional Freedoms v. Costa, 2023 ONCA 405

[Fairburn A.C.J.O. (Motion Judge)]

COUNSEL:

J. Roth, for the non-party (appellant)
J. Manson, for the applicants (respondents)
K. Marshal, for the respondent
S. Choudhry, for the proposed interveners

FACTS:

The applicants, who were enrolled in the respondent school brought an application claiming that the respondent breached their rights pursuant to ss. 2(a), 7, 8, and 15 Canadian Charter of Rights and Freedoms. The breaches were said to arise from the respondent's policy requiring all students who attend the respondent's campus to be fully vaccinated for COVID-19. The appellant represented the applicants at a motion seeking an interlocutory injunction to prevent the respondent from enforcing its vaccination policy against the applicants. The motions judge dismissed the applicants' motion for the interlocutory injunction.

The applicants and respondent could not agree on costs. Based on the written submissions of the parties to the motion, the motion judge ordered approximately $156,000 in costs against the non-party, the appellant. The costs were ordered against the appellant specifically, not the applicants who were the parties on the motion for an injunction.

After reviewing the appellant's mandate and active and continuous promotion of the case on its website, including fundraising for the litigation, the motion judge concluded that it was appropriate to hold the appellant liable for costs given "it is riding, in this case, the twin horses of advocate and interested party". The motion judge then proceeded to apply the r. 57.01(1) factors to determine the quantum of costs owed by the appellant to the respondent.

The appellant appealed the non-party costs order against them. The proposed joint interveners sought leave to intervene in the appeal. The respondent opposed. The applicants and the appellant took no position.

ISSUES:

Will the proposed joint interveners make a useful contribution without doing an injustice to the parties?

HOLDING:

Motion granted.

REASONING:

The Court held that in determining a motion for leave to intervene, it is necessary to consider the nature of the case, the issues that arise in the case, and the contribution that the proposed joint interveners could make in resolving the issues before the court, without doing an injustice to the parties.

The Court acknowledged that while there is generally a stricter onus applied to interventions in private disputes, the "more onerous threshold may be softened somewhat where issues of public policy arise": Tsige; Childs v. Desormeaux (2003); Huang v. Fraser Hillary's Limited, 40 Days for Life v. Dietrich.

The Court noted that while the nature of this case was a private dispute, the issues raised involved broader public policy considerations, specifically, the appropriate legal standard for awarding non-party costs against non-profit and public interest organizations.

The proposed joint interveners argued that a) a public interest organization does not become a de facto party liable for costs simply because they fundraised; b) there is nothing wrong with a public interest organization fundraising, such that it would trigger a costs order; c) where a public interest organization becomes a de facto claimant, costs must be dealt with under the legal framework for public interest litigation; and d) the Court should incorporate elements of the recent decision in British Columbia (Attorney General) v. Trial Lawyers Association of British Columbia, into the existing legal framework for costs in public interest litigation in Ontario.

The Court held that the proposed joint interveners were well-recognized organizations who regularly engaged in public interest litigation. The Court disagreed with the respondent's argument that they had no expertise in the discrete subject-area of the appeal, and that their interest was rooted simply in self-preservation.

The Court acknowledged that while it may be that the proposed joint interveners were self-motivated in the broadest sense of the term, they had an institutional self-interest, one that arises from the public interest that they each represent. The joint interveners' institutional missions, each motivated in the public interest, could be put at risk if they became more widely susceptible to costs orders.

The Court disagreed with the respondent that this was a strictly private dispute with no public interest component. The order appealed from brought squarely into focus the question of whether fundraising by a public interest organization can change that organization's status when it comes to costs. This raised an issue of public policy that extends beyond the appeal itself.

The Court further disagreed that the issues upon which the proposed joint interveners wished to make submissions were outside of the scope of the appeal, particularly as it related to fundraising generally and the legal framework for costs in public interest litigation. The motion judge expressly relied on fundraising efforts by the appellant to reach his conclusion that the appellant should be liable for costs. The Notice Appeal specifically raised an issue as to whether the motion judge erred by failing "to consider relevant authority cited by the Moving Applicants concerning costs in the context of public interest litigation."

The respondent also argued that the submissions of the proposed joint interveners would otherwise be duplicative of the appellant's submissions. The Court disagreed. While an intervener cannot repeat submissions of a party, the Court held that there is nothing wrong with an intervener building upon those positions.

Physicians' Dialysis Center Inc. v. Credit Valley Hospital, 2023 ONCA 402

[van Rensburg, Paciocco and Thorburn JJ.A.]

COUNSEL:

D. Christie, for the appellants (C70874), Physicians' Dialysis Center Inc., GW and GKTW
M. Ross and D. Milton, for the appellant (COA-22-CV-0392), DK
M. McWilliams and T. Watson, for the respondents, DP and PB

FACTS:

G.W., G.WO., A.W., D.K., D.P. and P.B. were all nephrologists and partners of Credit Valley Nephrology Associates ("CVNA"), who operated a clinic across from Trillium Health Partners and its satellite community clinics (the "Hospital"). In 1999, the Hospital received money from the Ministry of Health and Long-Term Care (the "Ministry") to fund a nephropathy clinic at the hospital. The hospital did not have space to facilitate the clinic. Dr. G.W., who was the head of nephrology at the time, came to an agreement where the clinic would operate within the adjacent premises rented by the CVNA. This agreement was crystalized in a memorandum of understanding ("MOU"). In exchange, the hospital would compensate "the Nephrologists" for a portion of the generated workload reimbursement.

The same year, G.W., G.WO., and A.W. incorporated Physicians' Dialysis Center Inc. ("PDC") to receive tax benefits from revenue earned from treatment and research projects. Unbeknownst to D.P. and P.B., the Hospital was instructed to make out cheques for payment to the PDC. Between 2006 and 2013, $1,616,404 was paid by the Hospital to PDC.
In 2013, D.P. replaced G.W. as the head of the Renal Program at the Hospital and learned that the Hospital had been flowing funds to the PDC. The Hospital refused to pay the PDC the amounts for part of 2012 and 2013. The PDC commenced an action against the Hospital and D.P.

D.P. filed a counterclaim against the PDC, G.W., G.WO., A.W. and D.K. for damages for unjust enrichment, breach of fiduciary duty, breach of contract and conversion for a proportionate amount of the funds. The trial judge held the appellants were jointly and severally liable to pay D.P. and P.B.

ISSUES:

On the main appeal, did the trial judge err in refusing to grant G.W. and G.WO any portion of the interpleaded funds?
On D.K.'s appeal, were a portion of D.K.'s share of the interpleaded funds unfairly awarded to D.P. and P.B. to help G.W. and G.WO. satisfy their judgment?

HOLDING:

Main appeal dismissed. D.K.'s appeal allowed.

REASONING:

1. No

The appellants submitted that the trial judge erred in refusing to grant G.W. and G.WO any portion of the interpleaded funds on three grounds. First, the appellants claimed the trial judge erred in her interpretation of the MOU. The appellants argued that the MOU provided for the distribution of funds solely for the use of the rental premises for the clinic. Neither D.P. nor P.B. owned a part of the premises and the appellants argued that the trial judge erred in ordering that they were entitled to compensation. The Court rejected this argument and agreed with the trial judge that G.W. abused his position of power to direct public funds to the Hospital from the PDC and D.P. and P.B. were entitled to compensation.
Second, the appellants submitted that the trial judge's interpretation of the MOU resulted in an illegal agreement, because it would entail payment for "extra billing" for an insured health service rendered to an insured person, which is proscribed by the Canada Health Act. The Court noted it was not necessary to address this argument in detail because it misconstrued the findings of the trial judge. The trial judge did not find that payments were for the provision of nephrology services. Rather, she held that the provision of nephrology services was a criterion by which the payees of the rental premises (i.e. "the nephrologists") were to be defined. The MOU was to offset overhead charges associated with the Hospital having to provide clinical services off-site.
Third, the appellants claimed the trial judge erred in concluding that the respondents' claims were not statute-barred pursuant to the Limitations Act, 2002. The Court held that the claim was not discovered until May 2013 and was therefore not statute-barred.

2. Yes

The appellant argued that his share of the interpleaded MOU Funds was unfairly awarded to D.P. and P.B. to help G.W. and G.WO. satisfy their judgment. The uncontested expert report of the respondents showed that D.K. was entitled to $240,599 over the relevant period (2006 to 2013). However, the Agreed Statement of Facts, which was accepted, provided that D.K. was only paid $144,181.33 under the MOU. D.K. therefore claimed that the trial judge's finding that he received his fair share considering the accrued interest over time constituted a palpable and overriding error. The respondents took no position and submitted that the appellants in the main appeal who were responsible to pay the judgment in the main action have sufficient assets to pay the judgment regardless of whether any of the funds paid into court are used to satisfy D.K.'s appeal. Thus, the Court allowed D.K.'s appeal.

Piedrahita v. Costin, 2023 ONCA 404

[Simmons, Harvison Young and George JJ.A.]

COUNSEL:

M. Forget, for the appellant
J. Beaulieu and D. McIntyre, for the respondents

Keywords:Torts, Negligence, MVA, Civil Procedure, Orders, Administrative Dismissal for Delay, Setting Aside, Rules of Civil Procedure, r. 48.15 (repealed), Prescott v. Barbon, 2018 ONCA 504

FACTS:

The appellant alleged that the respondent was the driver of a vehicle that rear-ended her vehicle. In July 2012, the appellant retained counsel to act for her in relation to the accident. Her counsel issued a notice of action on May 6, 2014, and a statement of claim on May 27, 2014.

The registrar gave notice of intention to dismiss the action as abandoned in November 2014 and subsequently dismissed the action as abandoned on December 29, 2014. The action was dismissed under former rule 48.15 of the Rules of Civil Procedure, which was repealed on January 1, 2015.

Counsel for the appellant asserted that the notice of intent to dismiss and the order dismissing the action were received by his office, however, due to certain circumstances they did not come to his attention, and he sought to turn his file on this matter over to another lawyer. The new lawyer was not able to meet with the appellant until May 29, 2017, but agreed to assume carriage of the file after doing so.

The new counsel for the appellant discovered the dismissal in September 2017 when he tried to file a notice of change of solicitor. The motion to set aside the dismissal was brought in May 2018 but not heard until December 2, 2021.

The motion judge found that "the recurrent theme throughout this matter has been an inordinate delay on the part of the [appellant] and her counsel." He made specific findings that there was no satisfactory explanation for the litigation delay or the delay in bringing the set aside motion once the dismissal was discovered. He was also not satisfied that the appellant had shown a positive intent to proceed with the action. He concluded that the appellant had not met her onus to establish no significant actual prejudice to the respondents, noting that locating witnesses would be difficult and perhaps impossible given the eight-year delay from the accident, memories may have deteriorated, a defence medical would be significantly delayed and lack of timely discoveries would hamper the ability to obtain accurate recollections of the parties. He observed as well that there were considerations of security of legal position and finality. Accordingly, he dismissed the motion to set aside the administrative dismissal of the action for delay.

ISSUES:

Did the motion judge err in refusing to set aside the administrative dismissal for delay?

HOLDING:

Appeal allowed.

REASONING:

Yes
On a motion to set aside a dismissal order for delay, the following test applies:

Have the plaintiffs provided a satisfactory explanation for the litigation delay?
Have the plaintiffs led satisfactory evidence to explain that they always intended to prosecute the action within the applicable time limits but failed to do so through inadvertence?
Have the plaintiffs demonstrated that they moved forthwith to set aside the dismissal order as soon as the order came to their attention?
Have the plaintiffs convinced the court that the defendants have not demonstrated any significant prejudice in presenting their case at trial as a result of the plaintiffs' delay or as a result of steps taken following the dismissal of the action?

The Court noted that it is required to consider and weigh all of the factors to determine the order that is just. The overriding objective is to achieve a result that balances the interests of the parties and takes account of the public's interest in the timely resolution of disputes: Prescott v. Barbon.

The Court highlighted that in the motion judge's reasons, he adopted broad assertions of general prejudice advanced through an affidavit filed by a lawyer in counsel for the respondents' office without considering them in the specific context of this case.

The respondents' claims of prejudice arising from the passage of time and their resulting inability to mount an effective defence were belied by the fact that they proceeded based on an understanding that the action was ongoing and asked that they not be required to file a defence while they took investigative steps for three years after the action was dismissed. The Court found it difficult to conceive how the respondents suffered any actual prejudice in the circumstances. The respondents did not know the action had been dismissed until after they served their defence in October 2017. The court found that there was no issue of security of legal position or finality in the circumstances.

Contrary to the motion judge's finding that there was no evidence of the appellant's intention to proceed with the action, the Court held that there was evidence of her intention to proceed, which included steps taken to advance the litigation. The Court also concluded that even if there was no adequate explanation for the appellant's overall delay, the absence of prejudice to the respondents and the importance of deciding cases on their merits should take precedence in the circumstances.

Bhatnagar v. Cresco Labs Inc., 2023 ONCA 401

[Gillese, Harvison Young, George JJ.A.]

COUNSEL:

S. Lederman and S. Hale, for the appellants/respondents by cross-appeal
Frankel and M. Rourke, for the respondents/appellants by cross-appeal

FACTS:

This was a multi-issue appeal and cross-appeal arising out of a contractual dispute. A central issue on this appeal required an interpretation of the Supreme Court decision in C.M. Callow Inc. v. Zollinger, and whether it created a legal presumption of loss once the court finds a breach of the contractual duty of honest performance.

Through a share purchase agreement dated February 19, 2019 (the "SPA"), the appellants sold their vape product business to Origin House. On April 1, 2019, Origin House announced it had entered into an agreement with the respondent, Cresco Labs Inc., under which the respondent would purchase Origin House (the "Cresco Transaction"). The SPA gave the appellants an opportunity to earn an additional $15 million if they met certain revenue and license milestones over the first three years after the SPA was entered. The SPA stipulated that if there was a change of control of Origin House in the three-year earn-out period, the appellants would be paid for all future entitlements to the unearned milestone payment. The Cresco Transaction was expected to close in 2019.

On October 20, 2019, Origin House learned that the respondent was proposing a new target closing date of January 15, 2020. Origin House did not directly share this information with the appellants at that time. The Cresco Transaction closed on January 8, 2020, and the appellants were paid for the 2020 and 2021 unearned milestone payments.

The appellants brought an application seeking an order directing the respondent to pay $2.5 million for the 2019 revenue and license milestones. The application judge found that the appellants were not entitled to the claimed payments. The application judge held that Origin House's failure to update important information about the closing date of the Cresco Transaction that it had previously provided was a breach of its duty of honest performance but awarded no damages because there was no evidence of lost opportunity by the appellants.

The appellants appealed the application judge's conclusion that the finding of a breach of honest performance does not relieve a claimant from having to show an evidentiary foundation on which the court can conclude there was a loss of opportunity. The respondent cross-appealed the finding of a breach of its duty of honest performance and brought a motion to introduce fresh evidence.

ISSUES:

Preliminary issue:

1. Should the respondent be permitted to adduce fresh evidence on appeal?

Main appeal:

2. Did the application judge err by failing to presume loss by the appellants as a result of Origin House's breach of the duty of honest performance?
3. Did the application judge err by misapprehending the evidence of lost opportunity?
4. Did the application judge err in failing to award damages on a basis other than expectation damages?
5. Did the application judge err by failing to find that Origin House breached its contractual duty of good faith by impeding the appellants from achieving the milestones during the first earn-out period?

Cross-appeal:

6. Did the application judge err in concluding that Origin House breached its duty of honest performance by not advising the appellants, in October 2019, that the Cresco Transaction closing date was extended to 2020?

HOLDING:

Motion dismissed. Appeal dismissed. Cross-appeal allowed.

REASONING:

1. Should the respondent be permitted to adduce fresh evidence on appeal?

No. The Court held that the first criteria for fresh evidence as established in Palmer v The Queen is not met.

The Court rejected the respondent's argument that the fresh evidence met the criteria for admission established in Palmer. The Court held that the fresh evidence does not satisfy the first of the Palmer criteria which dictates that additional evidence should generally not be admitted if, by due diligence, it could have been adduced at trial. The Court found that the proposed fresh evidence was available at the time of the application and there was no suggestion that it could not have been obtained by the exercise of due diligence.

2. Did the application judge err by failing to presume loss by the appellants as a result of Origin House's breach of the duty of honest performance?

No. The Court held that Callow does not stand for the proposition that, where a party is found to have breached its duty of honest performance, the court must presume the aggrieved party is entitled to damages in the absence of an evidentiary foundation of a lost opportunity.

The appellants argued that Callow required the court to presume damages when there is a breach of the duty of honest performance, even absent evidence of an opportunity having been lost and that the application judge erred in law by requiring "an evidentiary premise .[to] prove the facts upon which damages are estimated." Their submission was based on para. 116 of Callow, which reads, in part, as follows:

[E]ven if I were to conclude that the trial judge did not make an explicit finding as to whether Callow lost an opportunity, it may be presumed as a matter of law that it did, since it was Baycrest's own dishonesty that now precludes Callow from conclusively proving what would have happened if Baycrest had been honest. [Emphasis added.]

The Court noted that the emphasized words are part of one sentence in para. 116. When read in whole, para. 116 demonstrates that Kasirer J. explicitly found an evidentiary foundation for Callow's claim of lost opportunity. The Court found that the appellants' submission that lost opportunity must be presumed fails to account for both the permissive language in the emphasized words and the qualifying language that immediately follows them. The Court noted that the use of the word "may" runs contrary to the appellants' submission that once the court found a breach of the duty of honest performance, it was obliged to presume that they had suffered a loss of opportunity.

Further, and in any event, the Court found that the appellants' submission failed to recognize that the emphasized words are followed by two qualifications: it might be presumed in law that Callow lost an opportunity (1) since it was Baycrest's own dishonesty that precluded Callow from (2) conclusively proving what would have happened. In the case at bar, the Court held that neither qualifier applied, as it was not Origin House's failure to advise the appellants of the delayed closing that precluded them from proving what would have happened had they been so advised. As for the second qualifier, the Court noted that in Callow there was an evidentiary foundation for the claim of lost opportunity and the defendant's dishonesty precluded Callow from "conclusively proving" lost opportunity.

3. Did the application judge err by misapprehending the evidence of lost opportunity?

No. The Court found no basis for appellate intervention with the application judge's determination of this matter.

The appellants argued that, even if a minimum evidentiary threshold must be met to demonstrate a lost opportunity, the application judge erred in failing to find that threshold had been met and that the application judge was incorrect in finding that the resignations of the appellants' principals meant it would have been impossible for the appellants to reach its milestones.

The Court held that it was clear that the application judge found there was no evidence to support the appellants' claim of lost opportunity. The Court found no palpable and overriding error in that finding. Further, the Court noted that the application judge explained it was "not open" to the appellants to argue there was anything they could have done in October 2019 to enable them to achieve their 2019 revenue targets. The two principals who resigned admitted that by the time they resigned - which was before the closing date had been moved to 2020 - and despite their best efforts, there was "little or no chance" of the targets being achieved.

4. Did the application judge err in failing to award damages on a basis other than expectation damages?

No. The court found no error in the application judge's determination that, despite having found Origin House had breached its duty of honest performance, the appellants were not entitled to damages.

The Court, citing Callow, noted that the ordinary approach is to award expectation damages that puts the aggrieved party "in the position that it would have been had the duty been performed." The Court noted that, in this case, there was no evidence to show that the appellants' position would have changed if Origin House had informed them, in October 2019, that the Cresco Transaction would close in January 2020. Thus, the appellants were not entitled to expectation damages, nor did they argue for such damages. Instead, the appellants argued that damages should be awarded on a different basis. The Court held that there was no basis to award punitive damages, nor was disgorgement for breach of contract appropriate in the circumstances.

5. Did the application judge err by failing to find that Origin House breached its contractual duty of good faith by impeding the appellants from achieving the milestones during the first earn-out period?

No. The Court held that Origin House cannot be said to have "jettisoned and abandoned" the appellants' legitimate expectations by entering into the Cresco Transaction when the parties themselves expressly contemplated such a transaction in the SPA.

The appellants argued that the application judge made several errors in her analysis of the evidence of Origin House's conduct with respect to the duty of good faith in contractual performance.

The court rejected this argument. The Court noted that, in challenging the application judge's determinations of the various alleged breaches of the duty of good faith, the appellants made many of the same arguments they raised below. Those determinations were on matters of mixed fact and law that were subject to appellate review on the palpable and overriding standard. The Court found that the application judge made no errors in the legal principles that she applied and the factual findings she made were fully open to her. The Court rejected the appellants' submission that the application judge erred in her good faith analysis and determinations.

Yes. The court found that the application judge did make a palpable and overriding error in finding that the appellants were unaware of the change of closing date until the Cresco Transaction closed in January 2020.

First, the respondent argued that the application judge made a palpable and overriding error in finding that Origin House "repeatedly" advised the appellants the Cresco Transaction would close in 2019 (the "First Alleged Error") because, in her reasons, she referred to only two occasions in which that occurred. Those two occasions were in June and late September of 2019. Second, the responded asserted that correspondence from the appellants' lawyer in November 2019 proved the appellants were aware the closing date was delayed to January 2020 and the application judge made a palpable and overriding error in finding otherwise (the "Second Alleged Error").

The Court allowed the cross-appeal. The Court did not accept that the application judge made the First Alleged Error. The Court noted that two occasions may not amount to Origin House having "repeatedly" advised the appellants of that matter but clarified that judges need not discuss every item of evidence in their reasons. The Court found that the November 2019 letter showed that the appellants were aware, in November 2019, that the Cresco Transaction could close in January 2020. The Court held that the application judge's finding that Origin House breached its duty of honest performance must be set aside and a finding that Origin House did not breach its duty of honest performance be substituted.

Horn Ventures International Inc. v. Xylem Canada LP, 2023 ONCA 408

[P. Lauwers, Grant Huscroft and B. Zarnett J.J.A.]

COUNSEL:

K. C. Armagon, for the appellant
S. Kugler, J. Danahy, and H. Vettyvel, for the respondents

Keywords: Contracts, Interpretation, Real Property, Agreements of Purchase and Sale of Land, Leases, Options to Purchase, Environmental Protection Act, R.S.O. 1990, c. E.19, s. 95

FACTS:

Horn Ventures International Inc. ("Horn Ventures") appealed the dismissal of its application to compel the respondents ("Xylem") to sell it property in Whitby, Ontario. The application judge rejected Horn Ventures' position that it had caused a binding agreement for sale to come into effect by triggering the "Obligation to Purchase" provision of an Offer to Lease between the parties.

Xylem listed the property for sale in about 1996. Horn Ventures was interested. The property was contaminated and needed remediation. The parties entered into the Offer to Lease on July 24, 1996. Horn Ventures agreed to lease the property for a term of 15 years and Xylem agreed to remediate the property to address all environmental conditions as required by the government, including those identified in the Phase I and Phase II Environmental Site Assessment ("ESA") reports prepared by an environmental consulting firm.

Xylem promised to make all commercially reasonable efforts to complete the remediation within the first ten years of the lease. If it was unsuccessful, the parties agreed to extend the period of remediation for another five years. There was no promise, however, that the remediation would be completed by any specific date. Horn Ventures acknowledged that the remediation may continue for an indefinite period.

The application judge found that the Obligation to Purchase provision in the Lease was not triggered unless and until Xylem advised Horn that the remediation was complete.

ISSUE:

Could the Obligation to Purchase provision be triggered before remediation of the property's environmental issues was completed?

HOLDING:

Appeal dismissed.

REASONING:

No.

The court was not satisfied that Horn Ventures had identified any reversible error in the application judge's interpretation of the Option to Purchase contained in the Lease.

It was accepted before the application judge that the remediation had not been completed. Horn Ventures did not contend that Xylem had failed to use its best efforts to complete the remediation. The issue for the application judge was, given those facts, whether Horn Ventures could require Xylem to sell the property by waiving the conditions about remediation in the Obligation to Purchase provision.

As he noted, if Horn Ventures was correct, it always had "an essentially unfettered right to purchase the Premises at any time of its choosing".

To determine the meaning of the Obligation to Purchase provision, the application judge was required to engage in "an exercise in which the principles of contractual interpretation are applied to the words of the written contract, considered in light of the factual matrix". Deference is owed to such a determination, absent an extricable error of law: Sattva Capital Corp. v. Creston Moly Corp. at paras. 50-52.

First, Horn Ventures submitted that the application judge erred in identifying in the Obligation to Purchase two conditions to its operation.

The provision states: "[Xylem] shall advise [Horn Ventures] that [Xylem] has completed the Remediation and shall provide an unqualified and unconditional certificate from an environmental consultant . confirming that any and all environmental problems . have been successfully remediated". Horn Ventures argued that this language described one condition - remediation - and the environmental certificate was simply the way Xylem was to advise that the remediation was complete. Therefore, the contractual right to waive the certificate was in reality a right to waive the one and only condition precedent to the operation of the Obligation to Purchase provision - fulfilment of the obligation to remediate. The Court disagreed. Applying the deferential standard of review, there was no basis to interfere with the application judge's interpretation. It was one the text could reasonably bear.

Second, Horn Ventures submitted that the application judge erred in finding that completion of the remediation was a mutual benefit, not one to Horn Ventures alone. It argued that remediation only benefitted Horn Ventures, such that the entire requirement to remediate could be waived by Horn Ventures. The Court disagreed. The finding, which was one of mixed fact and law, was available to the application judge on the record, and there was no basis to disturb it.

SHORT CIVIL DECISIONS

Gefen v. Gefen, 2023 ONCA 406

[Lauwers, Huscroft and Zarnett JJ.A.]

COUNSEL:

Salsberg and I. Matckars, for the appellant H.G.
Fishman, for the respondent HA.G.
Rabinowitz and H. Cunliffe, for the respondent S.E. in his capacity as Litigation Guardian and Guardian of Property for HE.G.
Graham, for the Estate of Y.G.

White v. Gauthier, 2023 ONCA 415

[Doherty and Harvison Young JJ.A.]

COUNSEL:

Cupello, for the appellant
Lester, for the respondent

Upper Canada Land Titles and Patent Research Initiative v. Niagara (Municipality), 2023 ONCA 416

[Doherty, Favreau and Monahan JJ.A]

COUNSEL:

Barnable, for the appellant
Duxbury and J. Perrell, for the respondents

Keywords: Real Property, Crown Patents, Municipal Law, Municipal Act, 2001, S.O. 2001, c. 25, ss. 14(1)(b) and 135

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Court Of Appeal Summaries (June 5, 2023 – June 9, 2023)

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