Legal Blog: Five Liners

Aug
14
2017

Contempt

Greenberg v. Nowack 2016 Ont CA

2363523 Ontario Inc. v. Nowack 2016 Ont CA

These cases involve the same judgment debtor, with different judgment creditors. In each case, the debtor was supposed to invest the creditors’ money and, somehow, the money disappeared. Each judgment was in the millions of dollars. In each case, the debtor was ordered to produce all financial transactions, bank statements, cheques etc so that money given to him could be traced. In each case, the debtor ignored the various orders, stalled, and prevaricated. In each case, the creditors brought civil contempt proceedings. In Greenberg, the motions judge thought it necessary for a creditor to prove that the debtor wilfully and deliberately disobeyed the relevant order. The Court of Appeal held that all that was required was an intentional act or omission that breached the order. The Court sent the matter back to another Superior Court judge for determination. In 2363523 Ont, the creditor was further along and had obtained not only a determination of contempt, but a 30 day jail sentence for the debtor. The debtor appealed. The Court dismissed the appeal and gave the debtor 45 days from his release to comply with the order. The Court indicated that the purpose of contempt proceedings is not to punish, but to force the contemnor to do what is ordered to be done.

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Aug
14
2017

Tender

Graillen Holdings Inc. v. Orangeville (Town) 2017 Ont CA

A disappointed tenderer is not awarded damages as of right merely because an owner accepts a non-compliant tender. The tenderer must still demonstrate that it would have been awarded the contract and lost profit because of the non-award. In this case, the trial judge decided that had the owner realised that the tender it accepted was non-compliant, it would not have accepted the bid of the disappointed tenderer (which used a process that the Town preferred not to use); rather, it would have re-tendered the project and the disappointed tenderer would still have lost. The Court of Appeal dismissed the appeal of the disappointed tenderer.

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Aug
14
2017

Trust Fund

Sirro Brothers Cement Finishing & Spray Ltd. v. Somerset Wallace Developments Limited 2017 Ont SCJ

Contractor brought an action for payment of monies due on contract and breach of trust. The parties disagreed as to what the defendants had to produce by way of documentation. The court held that it was reasonable for the developer to provide proof of deposits used by the developer to fund the project and a copy of the developer’s unredacted general ledger indicating what monies were paid out and to whom. All this would be relevant to the issue as to whether the developer paid all funds it received in accordance with its trust obligations.

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Aug
14
2017

Trust Fund

SGJ Northland Steel Manufacturing Inc. v. Local Decor Designs Inc. 2017 Ont SCJ

Owner sued the general and its sole officer and director because the general took deposit monies, completed only part of the project, and then abandoned the project. The judge held that the final cost to the owner of completing the project was $105,000 more than what the owner had contracted to pay the general, of which $44,000 was used to pay unpaid lien claimant subcontractors. The judge held that there was a breach of trust for which the sole officer and director would be liable under section 13 of the Construction Lien Act. The judge therefore held that the individual was liable for the full $105,000. We note that no one represented the individual or the general at the hearing. We have a problem with this decision. There was no analysis to determine why a third party would have a complaint against a trustee for breach of that trust to a beneficiary. The owner was not a beneficiary to that trust. If the owner had taken an assignment of the funds paid to the lien claimants, it may have been able to claim for the $44,000 paid to them, but there is no evidence that this took place and there is no reason, regardless, why the individual should be liable for the additional $61,000.

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Aug
14
2017

Bonds

Berkely Insurance Co. v. Rob Piroli Construction Inc. 2017 Ont SCJ

A surety agreed to post construction lien bonds to vacate construction liens on behalf of the general. As a condition for doing so, the general’s principal indemnified the surety for any loss that it might occur and, as additional security, the general undertook that it would direct the owner to pay $486,000 to the general’s lawyer and that these funds would be used as further security. The general breached its undertaking; it received $486,000 from the owner, but used the money to pay other subcontractors. The surety brought a motion for an order for specific performance requiring the general to honour its undertaking and, in the alternative, a mandatory interlocutory injunction compelling the general to honour its undertaking. The actual order would have been impossible to honour because the general no longer had any money to do so; the horse had already left the barn. However, the judge granted the order regardless. He did so because a judgment debt would have been treated as unsecured whereas the order would have resulted in a trust, which would give the surety priority over other unsecured creditors.

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Aug
14
2017

Client Duties

York Condo No. 890 v. Hendler 2017 Ont SCJ

A law firm moved to assess its legal fees against a condominium. The condominium then brought an action framed in negligence alleging faulty advice. In effect, the action was a setoff claim against law firm’s’ fees. The law firm represented itself in the action and brought a summary judgment motion. The lawyer in charge sworn an affidavit in that motion. The condominium then moved to remove the law firm as lawyers of record in the condominium’s action against the law firm. The judge noted that the law firm could represent itself, just as any other entity can represent itself; the actual lawyer would simply have to put on street clothes rather than a barrister’s gown. However, the judge felt that this would not be necessary. He held that this was merely a dispute over fees and that this type of relationship between a testifying lawyer and the law firm client does not jeopardise the fairness of the proceedings. There is nothing particularly unjust about a law firm defending its own economic interest.

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Aug
14
2017

Solicitors’ Negligence

Trillium Motor World Ltd. v. Cassels Brock & Blackwell LLP 2017 Ont CA

Trial judge found that law firm breached its retainer, which had given rise to a bright line conflict or, at minimum, a substantial risk of conflict. The law firm had not disclosed to its clients that it had a retainer with another party that would result in a refusal to act for the first party if the law firm felt that there was a conflict. The trial judge found that had the clients been properly represented, they would have had a 55% chance of successfully negotiating with a third party for a substantial increase in the compensation paid to the clients. The massive decision deals with fiduciary duty; negligence; standard of care and expert evidence; contract interpretation of the retainer; limited retainers; contract interpretation (Sattva) and the relevance of surrounding circumstances that occur before the contract and, if the contract is still ambiguous, that occur after the contract; conflict of interest; causation; and the doctrine of loss of chance in both contract and tort (which differ).

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Aug
14
2017

Settlement and Costs

Muskala v. Sitarski 2017 Ont SCJ

The plaintiff brought a motion for production of information by the corporate defendants. The parties settled the motion other than costs. The parties then submitted their costs requests to a motions judge. The judge held that costs normally should not be awarded when parties settle; such a settlement is usually a settlement without costs. The main reason for the refusal was that it was difficult, if not impossible, to balance the factors under Rule 57.01 without having heard the facts and made a decision on the actual dispute. Further, costs are an incident to the determination of the rights of the parties and are not themselves supposed to be the subject matter of litigation. There might be exceptional cases in which costs would be justified, but this case was not one of them. Accordingly, if costs are important, an attendance is necessary and the parties cannot indicate that the matter has been “settled”. Note: this decision seems to apply just as much for a settlement of the action itself as it would for a motion.

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