Legal Blog:

Costs – Substantial or Full Indemnity

Net Connect Installation Inc. v. Mobile Zone Inc. 2017 Ont CA

The trial judge awarded costs on a full indemnity basis because the defendant sold and encumbered properties during the course of the proceedings, fabricated evidence, and conducted herself in other ways that were not set out in the Court of Appeal decision. The Court noted that elevated costs (beyond partial indemnity) are justified in narrow circumstances only: where an offer to settle is engaged or when the losing party has behaved in a manner that is worthy of sanction. Once costs are elevated, substantial indemnity costs are the norm and full indemnity is applicable only if the conduct worthy of sanction is especially bad. The court allowed the full indemnity costs award to stand, noting that it was one of the rare and exceptional cases where this type of award was justified.

Summary Judgment – Partial

Butera v. Chown Cairns LLP 2017 Ont CA

Client’s action against franchisor was dismissed by way of a summary judgment motion after an adverse limitations finding. The motions judge also noted, in obiter (i.e. discussions that were not germane to the final result), that the defendant’s alleged representations were not misrepresentations. The motions judge did not deal with other causes of action alleged in the claim, such as negligence, breach of contract, and breach of the Arthur Wishart Act. The client appealed that decision; the Court of Appeal dismissed the appeal on the limitation grounds. The client then sued his lawyer claiming that the lawyer argued his case negligently. The lawyer brought a summary judgment motion, ultimately relating only to the misrepresentation issue, arguing that this issue was res judicata (i.e. already decided by the motions judge). The lawyer was initially successful in the partial summary judgment motion.

The Court of Appeal reversed the decision for 2 reasons. (i) the original motion judge’s decision was based on a limitation problem, not his findings relating to misrepresentation; therefore the issue was not res judicata; (ii) the matter was not suitable for a partial summary judgment.

Contempt

We no longer have debtor’s prisons; they were abolished before confederation. We cannot imagine putting people in jail merely because they are unable to pay their debts. However, we can easily imagine some creditors who would love to see their debtors in jail. Can a creditor ever be instrumental in jailing a debtor? Yes, but only if the debtor is guilty of civil contempt, an issue that was front and centre in Greenberg v. Nowack and again in 2363523 Ontario Inc. (“Ontco“) v. Nowack, 2016 decisions of the Ontario Court of Appeal.

Nasty

You will note that both cases involved the same defendant. He seems to be a nasty piece of work. The Greenbergs gave him their life savings to invest on their behalf, never to be returned. When they sued, they and the defendant entered into an agreement for repayment. The defendant defaulted and the Greenbergs obtained a judgment for $3.5 million.

Repudiation

As we have stated previously (see newsletters of October 1999 and February 2000), a party repudiates a contract when it evinces an intention not to be bound by it. The test is objective. Just as for fundamental breach, the court must ask whether the breach deprives the innocent party of substantially the whole benefit of the contract. A simple breach of contract is not necessarily a repudiation of the contract.

Contrary to the concept of rescission, repudiation requires the non-repudiating party to make an election. If that party treats the contract as being in full force and effect, the contract remains in force for both parties. If it accepts the repudiation, the contract is terminated and the non-repudiating party can sue for damages for failure to receive its benefits under the contract. This is exactly what a law firm’s client expected in Miller, Canfield, Paddock and Stone v. BDO Dunwoody LLP 2016 ONCA 281.

Retainer

The client and the law firm entered into a contingency agreement. Under the agreement, the firm agreed to act on behalf of the client “in any and all proceedings.” The agreement also contained a provision entitling the client to “cancel“ the firm’s services, with or without cause, but, in that case, was liable to pay the value of all services rendered to the termination. The agreement set out the methodology to value those services.

Tactics

At times, some parties are more interested in raising procedural hurdles than in having a matter tried on its merits. It would seem that the case of York Condo No. 890 v. Hendler 2017 ONSC 3420 is an example of that proposition.

Dispute

A lawyer acted for a condominium. He was a partner in a law firm and, under its name, rendered an account for his services to the condo. The condo did not pay the account and the law firm moved to assess it. So far, this is a garden variety fees dispute.

Instead of just dealing with the assessment, the condo went on the offensive. On the eve of the assessment, it commenced an action against the partner and the law firm claiming that they were negligent in dealing with the condo’s affairs. (i.e. they gave faulty advice).

Super Priority to CRA

Manitoba Housing and Renewal Corp. v. Able Eavestroughing Ltd. 2017 Man QB

This was a priority fight between the surety and subs of a general against CRA. The owner had held back $463,000 from the general and wanted to pay that amount into court. Before the owner’s application, CRA issued a third party demand against the owner for payment of $712,000 relating to the general’s payroll source deduction arrears. GCNA and the subs attempted to argue that the owner had a duty to pay them directly, rather than the general, so that the third party demand was irrelevant. The judge held that (i) there was no obligation of the owner to mitigate the losses of GCNA and the unpaid subcontractors, (ii) the prime contract and the bonds created no legal obligation on the part of the owner to pay subcontractors; it merely had a right to do so; (iii) even if there were something in the contract that said this, the contract could not displace the rights of CRA. Accordingly, since the owner had no obligation to pay the funds to the surety or the subcontractors, the funds had to be paid to the general and, pursuant to the third party demand, were to be paid to CRA. Although those funds were subject to the liens and trust claims of the subs, they ranked behind CRA’s claim in priority and the subs and GCNA got nothing.

Incorporation by Reference

Trenchline Construction Inc. v. Unimac-United Mgmt Corp. 2017 Ont SCJ (MC)

Subcontractor claimed for standby charges for delay. There were 3 types: arrival at site without work to do; told not to attend site because there was no work to do; and working after the original substantial performance date. The subcontract documents were barebones but stated “Standard CCDC Contract applies.” This was enough for the Master to incorporate by reference the provisions in the CCDC documents dealing with delays. The Master refused to award the standby costs for a number of reasons, including (i) there was no evidence that the general promised in the subcontract to make the site available on every day of the subcontractor’s schedule for completing the work, (ii) there was no corroboration of payment of the claimed standby charges: no cheques, pay stubs, timesheets, or affidavits from the sub’s workers, and (iii) the claim for standby charges while the subcontractor was still working was, in reality, damages for lost revenue on other projects and nothing was proven in that regard.

Costs Construction

2283624 Ontario Limited v. Performance Heating & Floor Coating Ltd. 2017 Ont SCJ

The judge awarded costs of $45,000 to the defendant on an unsuccessful construction lien action for payment of $59,000. He dismissed arguments of proportionality because, he stated, it was the plaintiff who made the decision to use the Construction Lien Act process rather than sue in Small Claims Court or use the Simplified Rules.

Limitations

Waterstone Properties Corporation v. Caledon (Town) 2017 Ont CA

Developer was held to have agreed, in a 1973 subdivision agreement, to transfer land to the Town for a park. The developer did so, but the Town failed to register, and then lost, the transfer. In the meantime, the Town used the land as a park. Over 40 years later, the new, and related to the old, owner of the land and the Town each moved for a declaration of ownership of the land. The Court held that the Real Property Limitations Act governed. The words “to recover any land” was held to mean “to obtain any land by judgment of the Court.” This encompassed claims for a declaration in respect of land and claims to the ownership of land advanced by way of resulting or constructive trust. The Court, however, held that the limitation period did not start running because, pursuant to section 5 (1) of the Act, the Town had never been dispossessed from its possession of the land. The Court agreed that the land was that of the Town.

Specific Performance

Xiong Zhang v. Meng Zhang 2017 Ont SCJ (MC)

Case of a convoluted real estate transaction that went bad. Purchaser obtained and registered a certificate of pending litigation without notice. The vendor and mortgagee moved to set it aside. The Master held that the property was unique (a key finding for purposes of an action for specific performance) because, due to the quickly rising prices at the time and the tying up of his $40,000 deposit, the purchaser had no equivalent property to be found at the agreed upon purchase price in the neighbourhood he had selected. The Master indicated that the calculation of damages at trial, years down the road, would be highly speculative and inadequate compared to an order for specific performance. This decision expands the definition of “unique”, which previously referenced only the property itself.