Legal Blog:

Default Judgment Set Aside

Redabe Holdings Inc. v. ICI Construction Corp 2017 Ont CA

As a general rule, a defendant is entitled to an order setting aside a default judgment if it is irregularly obtained – without imposition of terms other than, perhaps, costs. In this case, the appellant thought that there was an irregularity until discovering at the appeal hearing itself that the judgment was obtained with an appropriate affidavit that demonstrated sufficient evidence to warrant judgment. The appeal was dismissed, but without costs.

Stay

The Bankruptcy and Insolvency Act (BIA) exists to give debtors, some unfortunate and some not, a second chance financially. Regrettably, sometimes it is also a third or fourth chance financially because some bankrupts simply do not learn – or perhaps, they learn all too well. Under the BIA, a trustee in bankruptcy is appointed to take control of all of the bankrupt’s assets, convert them into money, and distribute them rateably to the bankrupt’s ordinary creditors. Of course, there are many more twists and turns than those set out above in our (perhaps, over-simplified) explanation.

To allow the trustee to do its job, section 69.3 of the BIA prohibits any creditor from any remedy against the bankrupt or the bankrupt’s property and prohibits all actions, executions, or other proceedings against the bankrupt for the recovery of a claim provable in bankruptcy. This stay of proceedings continues until the day that the trustee is discharged from its obligations, a date that is often later than the date on which the bankrupt is discharged from bankruptcy.

However, like many aspects of legislation, there are exceptions to the rule and, sometimes, exceptions to the exceptions. Section 69.4 of the BIA allows a person affected by a stay to apply to the court for a declaration that the stay does not apply to that person. The court may make this declaration if it is satisfied that (a) the person is materially prejudiced by the stay or (b) it is equitable on other grounds to make the declaration.

Perfect Plus

On occasion, we read reasons for decision and have to shake our head. “Really?,” we say to ourselves. One such decision is that of the Ontario Court of Appeal in Meehan v. Good 2017 ONCA 103, a decision dealing with the duty of a lawyer to a client to give advice outside the lawyer’s retainer.

Retainer

Clients retained a lawyer (“new lawyer”) to assess the accounts of their former lawyer (“old lawyer”), who had acted for them on the settlement of their tort and accident benefits claims arising out of a motor vehicle accident. Presumably, the clients felt that they had paid old lawyer too much money.

New lawyer made it crystal clear that the clients retained him only for the assessment and not for a possible negligence action against old lawyer. New lawyer went even further than that. He advised the clients more than once to seek legal advice regarding the negligence issue. The clients admitted that they had received this advice. They had even signed an acknowledgment that they had received this advice.

Pierringer Agreement

Gendron v. Thompson Fuels 2017 Ont SCJ

Owner, fuel company, and fuel tank manufacturer were litigating over the responsibility of an oil spill. Owner entered into a Pierringer Agreement with the manufacturer. As a result of this agreement, the manufacturer paid a settlement amount to the owner and was no longer a party to the action. Usually, under this type of agreement, there is a provision that should the manufacturer be held to be liable at trial for an amount that is more than it was to pay the plaintiff under the agreement, then the plaintiff would reduce the amount that it received so that the manufacturer would pay only the settlement amount. With this type of agreement, the plaintiff assures itself of a minimum amount and then looks for more from the non-settling defendant, in this case the fuel company. As a basic rule, after the liability proportions have been determined, the plaintiff cannot end up with more than its actual assessed damages. As an example, assume that the plaintiff settles with the settling defendant for $7, its damages are assessed at $10, and the non-settling defendant is held to be 80% liable for the damages. Under this scenario, the plaintiff could receive no more than $3 from the non-settling defendant. Conversely, if the non-settling defendant was held to be 20% liable for the damages, then the plaintiff would receive its $7 from the settling defendant and $2 from the non-settling defendant for a total of $9. The Gendron case dealt with a scenario in which the plaintiff was held to be 60% contributorily negligent for the damages. The non-settling defendant wanted to pay an amount that, when added to the amount that the settling defendant had paid, would equal 40% of the actual damages. Of course, if the settling defendant had paid more than 40% of the actual damages, the non-settling defendant would pay nothing. The judge held that the concept of a plaintiff not receiving more in aggregate then the total amount of its damages applied to its damages before deduction for contributory negligence.

Wrongful Dismissal

Krishnamoorthy v. Olympus Canada Inc. 2017 Ont CA

Employee worked for Company A from 2005. In 2005, Company B purchased some of the assets of Company A and made offers of employment to most of the employees of Company A, including the plaintiff. Before starting employment with Company B, the plaintiff executed an employment agreement containing termination provisions. Company B terminated the plaintiff’s employment in 2015 and was prepared to pay the plaintiff in accordance with the employment agreement termination provisions. The plaintiff declined to accept those funds and sued, claiming common law wrongful dismissal damages. The plaintiff relied upon Section 9(1) of the Employment Standards Act, which states that when a purchaser purchases a business and takes over the employment of an employee of that business, the employee is deemed not to have been terminated “for the purposes of this Act.” The plaintiff therefore argued that since, under the Act, the plaintiff remained an employee of Company B, the employment agreement was entered into without consideration and was invalid. The motions judge bought the argument, but the Court of Appeal did not. The Court of Appeal noted that the employment was deemed to be continued only for the purposes of the remedies contained in the Act, not for all purposes, and certainly not to say that there was no consideration for an offer of employment that did not have to be made.

Unique Property

Patel v. Davis 2017 Ont SCJ

The vendor failed to close a condominium transaction and, in effect, ignored the purchaser. The purchaser sued for specific performance. The judge held that the condominium was unique to the purchaser after finding that were no comparable condominium units for sale in the same geographic region within a reasonable range of the purchase price. Accordingly, the judge awarded specific performance. The decision was probably stretching the definition of unique, a stretch that arose because of the cavalier and inappropriate manner by which the vendor treated the purchaser.

Fairness

Westwood Mall Holdings Limited v. Kapila 2017 Ont SCJ

Purchaser of commercial condominium sued the vendor in Small Claims Court because the vendor did not reduce the price of the condominium for him when it had done so for other purchasers. The purchaser claimed that the vendor did not do so because the purchaser had complained extensively about the vendor. The deputy judge allowed the claim. The Superior Court judge dismissed the appeal. She held that the vendor had breached its duty of fair dealing with the purchaser by not giving to the vendor a discount that was given to other purchasers. This is an incomprehensible decision.

Real Estate Agent

Powell v. Lojko 2017 Ont SCJ

Purchaser wanted desperately to purchase a particular house. She ignored the vendor’s home inspection summary alerting her to a leaking skylight. Instead of insisting upon receiving the full report, purchaser put in an unconditional offer which was accepted. It was determined later that the house, to the knowledge of the vendor, had problems with leaks and mould in the basement. The purchaser settled with the vendor but took its action against the real estate agent to trial. The judge held that the plaintiff was 25% liable for the damages, the real estate agent was liable for 25% of the damages, and the remaining 50%, allocated to the vendor, was merely 100% minus the contribution of the plaintiff and the real estate agent. This was a very unusual way of divvying up responsibility. Normally, a judge takes the whole liability and then creates percentages. The real estate agent was 25% liable because the judge held that she had a duty to advise the purchaser to obtain the full report or obtain the report of an independent home inspector and, in default, to advise the purchaser of the risk of submitting an unconditional offer.

Wrongful Dismissal

Mohamed v. Information Systems Architects Inc. 2017 Ont SCJ

Dependent/independent contractor (whom we will refer to as an employee) fired when employer’s client, as was its right, requested that employee not work at its project for security reasons. Before employer had retained employee, employee had informed employer that he had been convicted of assault with a weapon 17 years ago when in high school. Employer relied on the termination clause in the employment agreement. Judge held that the termination provisions were vague or uncertain and struck the provisions. They were vague because one part of termination provisions allowed the employer to terminate for breach of the agreement and another part allowed the employer to terminate if it were in the employer’s best interests. The employer wanted that clause to be interpreted as if employer had ultimate discretion to do anything it wanted. The judge noted that, if this were the case, there would be no need for the clause allowing termination upon breach of the agreement. In essence, the judge held that the clause was vague and inconsistent because the termination clause was “illogical and inconsistent.” The judge also held that there was no need to mitigate because the employer had terminated a fixed term contract. The judge held that there was no difference between an employment contract and independent contractor contract with regard to mitigation.