Legal Blog:

Costs

Huang v. The Personal Insurance Co. 2017 Ont SCJ

An action to obtain coverage from an insurer is not like any other action, in which a successful party would recover only partial indemnity costs unless there was some sort of wrongdoing that would result in substantial or full indemnity costs. An insurance company that denies coverage, and is then found to have done so wrongfully, should compensate its insured, and by extension those to whom the insured is found liable, for the full costs of enforcing that coverage.

Estate

Mayer v. Rubin 2017 Ont SCJ

When beneficiaries or aggrieved non-beneficiaries of an estate are battling and its trustees are also involved as beneficiaries, it is usual for another trustee, possibly in institutional trustee, to be appointed as an estate trustee pending litigation, whether under sections 5 & 28 of the Estates Act or under Rule 75.06(3)(f) and the court’s inherent jurisdiction to supervise the management of estates and control its own processes. The purpose of doing so is to level the playing field such that neither side is able to use its control over the estate to benefit itself or prejudice the other side. In this case, the trustees were starting to play fast and loose so that it was an easy decision for the court to appoint an estate trustee pending litigation.

Affidavits

Airex Inc. v. Ben Air System Inc., 2017 Ont CA

On a summary judgment motion, if a party delivers its affidavit late, in non-compliance with the timetable established for the motion, that party is not able to complain that the other party failed to cross-examine on the late -delivered affidavit and an adverse inference should be drawn from the failure to cross-examine. In this case, the affidavit was insufficient in any case to demonstrate that a contractor did not breach its trust liabilities. There were bald assertions that payments to other subcontractors and suppliers were made without appropriate documentary evidence to back up those assertions.

Constructive Trust

Ciccocioppo Design/Build v. Gruppuso 2017 Ont SCJ

Time to preserve a lien came and went. The contractor issued a statement of claim claiming a constructive trust in the land on the basis of unjust enrichment. To show unjust enrichment, a party needs to show that there is an enrichment (in this case by the owner), a corresponding deprivation (in this case by the contractor for improving the land without full payment), and the absence of a juristic reason to deny recovery. The contractor’s claim was dismissed because there were 2 juristic reasons for the enrichment and deprivation. First, the parties had a contract; a contract is a juristic reason. If a party under a contract is aggrieved, that party should sue under the contract. Second, the Construction Lien Act sets out a statutory scheme providing for an interest in land in favour of contractors who have contributed to its betterment. The Act strikes a balance among all those involved in a construction project and allowing the claim of the plaintiff, who did not preserve his lien, would defeat the scheme of the Act.

Damages – Real Estate

DHMK Properties Inc. v. 2296608 Ontario Inc. 2017 Ont SCJ

Purchaser of a commercial building refused to close and sued for specific performance and an abatement because the income represented in the agreement of purchase and sale was lower than the actual income that the property produced. The trial judge held that the representation was a warranty, which entitled the purchaser to sue for damages but did not entitle the purchaser to refuse to close. Accordingly, the purchaser was in breach. Another hearing was held to determine the vendor’s damages arising out of the purchaser’s repudiation of the agreement. The court held that the damages were the difference between the sale price and the market value of the property at the date of closing. This difference was significant because the income was lower than that represented and therefore the fair market value was lower. Because the purchaser repudiated the agreement before closing, the vendor had a duty to mitigate its damages. The purchaser offered to purchase the property on the same terms as previously after it lost the first trial, but that offer was attached to a condition that the purchaser could sue for the misrepresentation as to income. The vendor, not surprisingly, refused that offer. The court held that the failure to accept this offer was not a failure to mitigate its damages; mitigation only requires a vendor to act reasonably rather than destroying or sacrificing previous rights as part of the mitigation.

Note: This decision has been overturned. Our summary of the decision rendered by the Court of Appeal can be found HERE.

Who’s Who

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.

Development

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.

Oppression

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.

Condominium Priority

CIBC Mortgages Inc. v. York Condominium Corp. No. 385 2016 Ont SCJ

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.

CIBC Mortgages Inc. v. York Condominium Corp. No. 385 2017 Ont CA

The condominium corporation appealed the decision and the Court of Appeal dismissed the appeal, agreeing with the application judge’s decision in all respects.

Costs Against a Non-Party

Quest Management Services Inc. v Quest Management Systems 2017 SCJ

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).

Limitations

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.