Legal Blog:

Certificate of Pending Litigation

Gerger Mechanical Ltd. v. Salvarinas 2012 Ont SCJ

On a motion, usually made without notice, for a certificate of pending litigation (CPL) arising out of an alleged fraudulent conveyance, the plaintiff need only demonstrate that it has put forward a reasonable claim to set aside a transfer based on fraud and that it already has a judgment against the transferor or would successfully recover judgment if there was just an action outstanding. The plaintiff does not have to demonstrate that the transfer was made with an intent to defeat or delay creditors or that the balance of convenience favours issuing a CPL. That may be the case on a motion to set aside a CPL, but not the original motion to obtain a CPL.

Release (3)

We have previously discussed the importance of wording in releases (see August 2012, June 2006, and December 2002 newsletters). The decision in Biancaniello v. DMCT LLP 2017 ONCA 386 highlights how important it is.

Dispute

A client and an accounting firm had a dispute over fees and the services that the firm rendered, which included applying for research credits, negotiating the departure of an employee, and, most importantly, structuring a reorganisational “butterfly transaction.” The firm commenced an action for $67,000.00 for its fees. The client claimed that it obtained little value from the services and had incurred damages arising out of the firm’s advice. Before the client delivered a statement of defence, the parties settled the action by way of a payment from the client to the firm of $35,000. Since the client had alleged improper advice, the firm demanded and received a release before it agreed to take $32,000 less for its accounts than it had wanted to receive.

Relief

The Ontario Municipal Act (the “Act“) establishes a procedure by which a municipality can sell property if the owner fails to pay arrears of property tax. A municipality has to wait a significant amount of time before it sells the property and some municipalities wait even longer than the minimum time. Even after the property is sold, any surplus (after payment of all arrears, interest, and costs) must be paid into court and any person who has a claim to the surplus funds may, within one year, apply to the court for payment of all or part of the funds. If no one makes application for the surplus, the Act deems the funds to be forfeited to the municipality.

What happens when a person (be it an owner, mortgagee, lien claimant, execution creditor, etc.), otherwise entitled to some or all of the funds, misses the deadline and applies too late? This question was answered in a 2016 decision of the Ontario Court of Appeal in Poplar Point First Nation Development Corp. v. Thunder Bay (City).

Contempt (2) Update

In our newsletter of June 2015, we discussed Walchuk Estate v. Houghton, a 2015 decision of the Ontario Superior Court of Justice. In that case, the debtor failed to attend an examination in aid of execution and the creditor obtained a court order pursuant to which the debtor was ordered to attend the examination on a specified date and to bring specified documents. The debtor assigned himself into bankruptcy. He then attended the examination, but brought no documents. Instead, he brought a notice of stay of proceedings that his trustee in bankruptcy issued for him.

The creditor moved for a contempt order and the motions judge held that the intervening bankruptcy did not affect a determination as to whether the debtor was in contempt of a previous order. The debtor appealed that decision.

Molly Luu’s Canadian Lawyer Magazine Article

Molly’s article was recently featured in Canadian Lawyer Magazine. Click here to read: When your client sees red: In litigation, emotions often cloud a client’s judgment

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.

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.

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.

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.

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.