Legal Blog:

Set Aside Bankruptcy Stay

Fiorito v. Wiggins 2017 Ont CA

Husband had been awarded $200,000 in costs after a bitter family law battle with wife. The court then ordered a review of access provisions. Before the review, husband brought a motion to obtain security for or payment of the $200,000 costs order as a condition of proceeding with the review. On that motion, wife filed evidence that she intended to pay the costs award and denied a suggestion that she intended to file for bankruptcy after the review to thwart husband’s claim. The motions judge only restrained wife from disposing of her RSPs and dissipating her assets. After the motion and during the review, wife assigned into bankruptcy. Husband then moved under section 69.4 of the Bankruptcy and Insolvency Act to lift the stay; although RSPs are exigible under Ontario law, they are not seizable upon a bankruptcy. The court granted that motion on equitable grounds for 4 reasons: (1) the debt arose from family law proceedings that husband had to pursue to have any relationship with his children; (2) wife had not paid anything towards the costs and husband would receive nothing once wife was discharged from bankruptcy; (3) wife reneged on assurances that she had made to the court in the previous motion; (4) none of the other creditors would be prejudiced because the lifting of the stay would have resulted only in husband being able to attack an asset (the RSP) that the other creditors would not have been able to attack regardless.

Unjust Enrichment

Direct Equipment Ltd. v. Sundial Homes (Sharon) Limited 2017 Ont SCJ

Supplier of rental equipment attempted to claim, on the basis of unjust enrichment, against the owner of the project for rent due on equipment after the contractor went bankrupt and until the equipment was returned. This claim was in addition to the supplier’s lien claim. The supplier was unsuccessful because there was no evidence that the owner used the supplier’s equipment after the contractor abandoned it on the owner’s site. One cannot have unjust enrichment without first having enrichment.

Trust Limitation Period

MGL Construction Inc. v. IBuild Corporation 2017 Ont SCJ

Appeal from Small Claims Court decision. Subcontractor rendered invoices on 2 projects more than 2 years before the action was commenced. The action was for breach of contract and breach of trust. The Divisional Court held that the action could continue for the following reasons: (1) the general allegedly had promised to pay the subcontractor, thereby “delaying me”; this promise to pay could be construed as an extension of the limitation period because the subcontractor continued to perform services in accordance with the forbearance. (2) As to the breach of trust claim, the subcontractor had requested an order for financial information as to the state of accounts between the owner and the contractor and these productions might have demonstrated that the contractor did not receive funds from the owner within the limitation period; a trust does not exist until the monies have been received by the contractor. Reason #2 relating to the trust claim is quite valid. Reason #1 relating to the breach of contract claim is not correct; the Limitations Act requires a written acknowledgment of a debt.

Limitations (4)

Limitations cases, under the Limitations Act, 2002, just keep coming. Limitations issues abound: when did the period start, how long was the period, was it reasonable to commence an action, when was the cause of action discovered, etc.? Consequently, we have written about limitations issues in the construction context many times. Three of our newsletters have had the word “limitations” in the heading; hence, we entitle this newsletter, Limitations (4).

We now have two more cases to discuss: Weinbaum v. Weidberg, a 2017 decision of the Ontario Divisional Court and Employment Professionals Canada Inc. v. Steel Design and Fabricators (SDF) Ltd., a 2016 decision of the Ontario Superior Court of Justice.

Summary Judgment

Deavitt v. Greenly 2017 Ont Div Ct

Farmers brought an action against neighbouring land owners and the City alleging that, because there was a run-off of bio solids, presumably obtained from a wastewater treatment plant, onto the farmers’ lands, the neighbours and the City were liable for trespass, negligence, and nuisance. The motions judge dismissed a motion for summary judgment that the defendants brought. He decided that he was unable to have a full appreciation of the evidence and therefore the matter had to go to trial. The Divisional Court allowed the appeal and dismissed the farmers’ action. The “full appreciation” test was long gone as a result of the Hyrniak Supreme Court of Canada decision. Now, a motions judge must first determine, based only on the evidence, whether there is a genuine issue requiring a trial. If the judge concludes that there is such a genuine issue, the judge must then determine if the trial can be avoided by using fact-finding powers available to the judge under the Rules. In this case, the farmers had put forward almost no evidence to support their allegations – other than their own observations. Assuming that they had put their “best foot forward”, as they were required to do, they had no evidence to show that there was a genuine issue for trial.

Carnival

Employment Contract

North v. Metaswitch Networks Corporation 2017 Ont CA

Employer terminated employment pursuant to a termination clause in an employment agreement. Court found that that termination clause was initially void because it contravened the Employment Standards Act. The issue was whether the employer could rely on a clause stating that any part of the agreement found to be illegal would be severed from the agreement. The Court held that the severability clause was unenforceable relating to a termination clause. To hold otherwise would incentivize employers to draft contracts contrary to the ESA provisions, but include a severability clause to save the offending provision if the employee had the time and money to challenge the contract in court.

Employment Contract

KRG Insurance Brokers (Western) Inc. v. Shafron 2009 SCC

The issue was whether a severability clause could save a restrictive covenant from being too wide so as to be unenforceable. There are two types of severance: blue pencil and notional. Blue pencil severance means that the judge can take a blue pencil, draw a line through the offending provisions, and continue to apply the remainder of the words. Notional severance means reading down an illegal feature of the contract so as to render the contract to be in compliance with law. The Court rejected notional severance outright. It held that blue pencil severance should be resorted to sparingly and only if the part being removed was clearly severable, trivial, and not the main purport of the restrictive covenant.

Title Insurance

Nodel v. Stewart Title Guaranty Co. 2017 Ont SCJ

Identity fraud took place resulting in the Director of Titles voiding a mortgage that had been title insured by Stewart Title. The policy covered the mortgagee for mortgage fraud, but had an exception: the proceeds of the mortgage had to be paid to the registered title holder. In this case, the lawyer for the mortgagee made the funds payable, on direction, to the mortgagor’s lawyer in trust and, it seems, the mortgagor’s lawyer paid the money to people other than the registered title holder. The motions judge decided that the exception was ambiguous. It did not bear the interpretation that the insurer was attempting to put on it (i.e. money being paid means that the cheque must be made payable to title holder or wired to his bank account directly). The insurer argued that a direction to pay to the mortgagor’s lawyer would be acceptable only if that lawyer undertook to disburse the funds directly to the title holder. The motions judge disagreed and held that, because the insurer did not express the manner of payment, the exception permitted multiple payment methods, including disbursing the funds in trust to the mortgagor’s lawyer.

Deemed Undertaking Rule

CS v. NS 2017 2017 Ont Div Ct.

Rule 30.1.01(1) of the Rules of Civil Procedure states that all parties and their lawyers are deemed to undertake not to use evidence (documents or information) obtained in discovery for any purposes other than the proceedings in which they are obtained. The theory is that the law forces disclosure so that the disclosing individual should at least retain a modicum of privacy over the information. There are exceptions to the Rule. It does not prohibit the use of evidence filed with the court or given at a hearing; the use of evidence to impeach the testimony of a witness in another hearing; or the use of the evidence in a subsequent action. In this case, the counsel for the defendant in a civil action gave the discovery information to counsel for the defendant in the corresponding criminal proceeding for impeachment purposes – without notice to the plaintiff and without seeking directions from the court. The civil motions judge held that this was improper and that the court had to be involved any time an exception was being relied upon.

The appeal of this decision attracted a number of intervenors. The Divisional Court allowed the appeal noting that the Rule provided a prohibition regarding use, but with exceptions. “There is nothing in the Rule that establishes any requirement that a party must seek the approval of the court before (the party) relies on one of the exceptions. If there had been an intention to require such approval, the Rule could have so provided.”