Disclaimer of Liability: The Speigel Nichols Fox LLP Blog is intended to provide helpful general information; however, it is not legal advice. You must consult a lawyer if you have a specific legal question or issue that requires an answer.
For many years we have been harping on the necessity of contractors knowing the exact name of the person with whom they are contracting. Contracting with names and styles, rather than correct corporate names, can lead to disaster. As a corollary to this thesis, general contractors (who, by definition are contractors who are contracting with an owner) have to ensure that the “owner” is really the registered owner of the land upon which the contractor is to supply goods and services. In J. Lepera Contracting Inc. v. Royal Timbers Inc., a 2016 decision of the Ontario Divisional Court, the general learned this lesson the hard way.
The registered owner of a parcel of land decided that it would be beneficial to sell one part of its land and use the proceeds to develop the other. To effect that strategy, it entered into an “agreement in principle” with an American hotelier in which the hotelier would purchase a portion of the land.Continue Reading >
Wilson v. Alharayeri 2017 SCC
A disgruntled diluted shareholder commenced an oppression application for losses under section 241(3) of the Canada Business Corporations Act against the directors of a corporation, rather than the corporation itself, for the damages that the shareholders suffered as a result of a reorganisation of the corporation. The court held that 2 directors, who personally benefited from the reorganisation, were liable for the applicant’s losses. In making the award, the court was guided by 2 requirements: the director or officer must be implicated in the oppressive conduct and the order must be fit in all the circumstances. Four criteria inform whether the order is fit: (1) the oppression remedy must in itself be a fair way to deal with the situation (resulting in 4 subcategories: personal benefit to the directors; breach of the personal duty they owed as directors; misuse of a corporate power; or a remedy against the corporation would unduly prejudice other security holders); (2) the order should go no further than necessary to rectify the oppression; (3) the order should serve only to vindicate the reasonable expectation of the complainant; and (4) director liability should not be a surrogate for other forms of statutory or common law relief that may be more fitting in the circumstances.Continue Reading >
The condominium obtained a costs award against a unit owner for $15,000 in its application against the unit owner to obtain compliance with the unit owner’s duties; the unit owner had been harassing the condominium staff and other residents. Section 134(5) of the Condominium Act allows a condominium to add to the common expenses not only the damages and costs that the court awards (which may only be partial indemnity costs), but also the difference between the actual costs and partial indemnity costs. The order noted that the owner was to pay the condominium by March 17. The condominium did not register a notice of lien until December 12. By the time that the property was sold by agreement of the condominium corporation and the mortgagee, the costs had ballooned to $113,000, far more than the sale price. The judge held that the three-month requirement for registration of a lien (section 85 (2)) applies equally to orders of compliance as it does to normal common expenses. Although the condominium has the right under section 134(5) to postpone payment of the amount due under the order, it must do so before the three-month period has passed. The judge held that the lien was invalid and that the mortgagee had priority to the proceeds of sale.
The condominium corporation appealed the decision and the Court of Appeal dismissed the appeal, agreeing with the application judge’s decision in all respects.Continue Reading >
Costs can be awarded against a non-party (the “NP”) on two grounds. First, the actual plaintiff is a straw man. Under this principle, three criteria must be met: i) the NP must have standing to bring the action himself, ii) the actual plaintiff (the straw man) is not the true plaintiff, and iii) the straw man has been put forward to protect the NP from costs liability. Second, the plaintiff’s conduct of the litigation is based on fraud or is an abuse of court process. In this case, the corporate plaintiff was the proper plaintiff. The sole shareholder would not have had a cause of action himself. However, because the plaintiff had given an undertaking to the court to pay damages if the injunction were improper and had no funds to do so, the judge concluded that the representations to the court were fraudulent and the sole shareholder was liable on this basis alone. The court also concluded that the injunction request itself was brought for the sole purpose of a fishing expedition to cross-examine the defendant to determine whether there was a basis for an injunction and that this was an abuse of process sufficient to ground personal liability. Note: the request for costs personally came from after-acquired information based on a judgment debtor examination. The costs award was amended under Rule 59.06(2)(a).Continue Reading >
Cleland Metal Products Ltd. v. Proctor 2017 Ont Div Ct
Corporation and principal entered into a settlement agreement by which the corporation agreed to pay the plaintiff $37,000 over time and the principal guaranteed those payments. The guarantee was not a demand guarantee; it was a guarantee of each payment as it arose. By 2007, all payments ought to have been made, but were not. The plaintiff commenced its action on April 22, 2010, after the expiry of the usual two-year limitation period. However, the limitation period commencement date against the corporation was extended to April 22, 2008, the last date that the corporation made a payment towards the debt. The action was therefore commenced within time against the corporation. The judge held that the payment by the corporation was not an acknowledgment in writing of the debt made by the guarantor and was not a payment made by the guarantor – as required under s.13 (10) and 13(11) of the Limitations Act, 2002. Accordingly, the action against the guarantor was statute barred.Continue Reading >
Yuanda Canada Enterprises Ltd. Pier 27 Toronto Inc. 2017 Ont SCJ (Master)
Motion for security for costs against a B.C corporate plaintiff whose substantial lien had been bonded off by a non-party. The Master held that the test to obtain leave for the motion was whether the defendant had established that it had good reason to believe that the plaintiff had insufficient assets in Ontario to pay costs. This meant that the defendant had to show indicia of insolvency, not just rely on conjecture or speculation. The motion was unsuccessful because the admitted holdback was $1.3 million. The defendants claimed setoff and a counterclaim for far more than that. This was not sufficient because the defendants did not show that they had retained the basic holdback (and therefore did not necessarily have a setoff right). Further, the security to vacate the lien was posted by a non-party and usual procedural fairness to level the playing field did not arise. In obiter, the Master also noted that most of the action would have been taken up with the counterclaim and that he was loathe to have the plaintiff pay security for costs to defend itself.Continue Reading >
Bruff-Murphy v. Gunawardena 2017 Ont CA
A trial judge’s gatekeeper function for expert witnesses does not stop once the expert has been qualified as expert capable of giving testimony. It continues while the testimony is being given. In this case, the trial judge recognised that the expert had crossed the line from objective witness to defence advocate in a personal injury jury trial and did not exclude the evidence or alert the jury to the problems with it. The court allowed the appeal and ordered a new trial. The court did agree that the plaintiff’s lawyer was not allowed to cross-examine the expert on the other cases in which the expert’s testimony was criticised by a trial judge.Continue Reading >
Douez v. Facebook, Inc. 2017 SCC
Plaintiff wanted to commence a class-action for breach of privacy. Facebook’s contract noted that all disputes had to be resolved in California according to California law. The court noted that there is a 2-step process to determine whether to enforce a forum selection clause. First, the party seeking to enforce the forum selection clause (the “Enforcing Party”) has to establish that the clause is clear and enforceable and applies to the cause of action. At this step, the court references contract law principles to determine the validity of the clause and, as with any contract claim, the party resisting enforceability (the “Resisting Party”) may raise defences such as unconscionability, undue influence, and fraud. Second, if the Enforcing Party passes the first test, the Resisting Party must show strong reasons why the court should not enforce the clause and stay the action. To do so, the court has to consider all circumstances, including the convenience of the parties, fairness, the interests of justice and public policy. In this consumer context case, unlike a commercial matter, there was a gross inequality in bargaining power. Further, the rights being litigated were quasi-constitutional privacy rights. The Court did not enforce the clause.Continue Reading >