Legal Blog:

Real Estate Damages: Court of Appeal Overturns Motion Judge’s Decision

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

The motion judge’s decision was overturned on all grounds relating to damages and sent back for another hearing. The court held that the measure of the damages of the vendor could be reduced by the value of the purchaser’s claim for a misrepresentation of income that the property produced and for mitigation. Further, the usual date for the determination of damages is the date of closing. The motion judge used the date on which the purchaser’s claim for specific performance was dropped and did not explain why he used that date.

Notice and Waiver: Court of Appeal Reinstates Arbitrator’s Award

Ledore Investments Ltd. v. Ellis-Don Construction Ltd 2018 Ont CA

The Court of Appeal overturned the motions judge and reinstated the arbitrator‘s order. The court held that the arbitrator’s interpretation of the notice letter, said to be a delay claim, was reasonable and that a court had to give effect to a reasonable award and could not substitute its own interpretation. In this case the letter was very detailed as to the complaints and certainly gave an intention to claim, but the arbitrator held that the letter was not an actual claim as called for in the subcontract.

Court Makes 15 Orders On Motion to Implement Pierringer Agreement

Allianz v. Canada 2017 Ont SCJ

Plaintiff insurance company was suing 3 defendants relating to a plane accident. The plaintiff entered into a Pierringer agreement with 2 of the defendants and wanted to continue the action against the 3^rd. In doing so, the plaintiff proposed to amend the statement of claim to make it clear that it was claiming against the 3^rd defendant for only the share of damages actually caused by its negligence. As an example, if the 2 defendants were held to have been 70% responsible for the damages and the 3^rd defendant 30% responsible, then the plaintiff would receive only 30% of its damages against the 3^rd defendant and would receive from the other 2 defendants the amounts for which they had settled. The judge held that it had jurisdiction to deal with the matter and dismissed all of the cross claims among the 3 defendants, but wanted to ensure that, in so doing, the remaining 3^rd defendant would not be prejudiced. Accordingly, he set out 15 points in his order, including orders permitting the remaining parties to use previous affidavits of documents, document production, and discovery transcripts in the litigation; allowing the 3^rd defendant to bring a motion seeking production and discovery against any of the settling defendants; ensuring that the settling defendants preserved all documents listed in their affidavits of documents and any other documents subsequently produced; and requiring the settling defendants to keep the 3^rd defendant informed as to the whereabouts of any witnesses who were deposed for discovery and any other employees or former employees who might be required as witnesses.

Contract Formation: Master’s Decision Overturned – Court Grants Judgment For Claim On The Basis Of Quantum Meruit

Demir v. Kilic 2018 Ont SCJ

The Master held, on a reference, that there was a cost plus contract, but that the construction manager failed to prove that a management fee was a term of the contract. The Master therefore ordered damages based on cost only with no management fee. Since she decided that there was a contract, she did not deal with the manager’s claim for quantum meruit. The referring judge overturned the decision and allowed the full claim of the manager on the basis of quantum meruit. He held that there was no contract, based on the Master’s own findings that there was no meeting of the minds of the fundamental terms of the contract, including its scope, its price, the price of labour, the selection of materials, and the payment of the manager’s own work. Since there was no contract, the owner was unjustly enriched, receiving the benefit of the hours of the manager’s work without payment.

Officers’ Liability: Court Rejects Summary Dismissal Application

Swanby v. Tru-Square Homes Ltd. 2016 Alta QB (MC)

Pleading allegations that were sufficient to allow the owners’ action to continue against the officer of the homebuilder: (i) deficiencies resulted in dangerous premises; (ii) the corporation invoiced for work that it did not do, resulting in a dishonest act of the controlling mind of the corporation; (iii) the case went beyond mere shoddy construction because the work was so poorly done that the officer never had a bona fide intent to provide the building for which the owners were paying; and (iv) the officer assured the owners that the house was being built in accordance with the plans to induce the owners to make progress payments and to avoid an obligation to correct deficiencies.

Court of Appeal Examines Relief from Forfeiture Finding

Scicluna v. Solstice Two Limited 2018 Ont CA

A purchaser defaulted under an agreement of purchase and sale. She had already paid $264,000 of the $294,000 purchase price. Shortly after the aborted closing date, the purchaser assigned into bankruptcy, but did not list the $264,000 or any claim for it in her assets. The vendor requested that she sign an agreement in which she agree that the vendor would resell the house and return everything other than $30,000. She misread the request and assumed the vendor was to keep $60,000 and sued the vendor for the return of the full amount previously paid. The vendor then claimed the total amount – even though it ultimately re-sold the house for $435,000. The motions judge allowed the vendor to keep $30,000, granted relief from forfeiture for the remainder, and, much to the consternation of the purchaser, directed that the remainder be paid to the purchaser’s trustee in bankruptcy. Both the vendor and the purchaser appealed and the Court of Appeal dismissed both appeals. It held that a payment of 80% of the total purchase price was so grossly disproportionate that there would be relief from forfeiture. It also held that it does not lie in the mouth of a bankrupt who has hidden an asset from her trustee to claim that the trustee was not entitled to that asset – even after the bankruptcy discharge.

Summary Judgment Findings: Court of Appeal Examines the Scope of the Motion Judge’s Order and Analysis

Trez Capital Limited Partnership v. Bernstein 2018 Ont CA

A mortgagee commenced an action against a corporate investor of the mortgagor on grounds that the corporate investor had hidden its involvement with the project and therefore had escaped giving a guarantee. The defendant brought a motion for summary judgment based on a limitations defence. The motions judge made findings of credibility after a mini trial, including factual findings that the defendant submitted went far beyond what was necessary to determine the limitations issue. The Court of Appeal noted that the findings of fact were necessary to be made in support of the judge’s credibility findings. It had little sympathy for the defendant, stating that it would be contrary to the purpose of the summary judgment rule to give the defendant another opportunity at trial to persuade the trial judge that the evidence, which the motions judge rejected, should be accepted.

Garnishment Hearing: Significant Financial Implications for Disregarding the Court Process

Couper v. Vitaquest International 2017 Ont SCJ (MC)

A creditor garnished the Canadian suppliers of an American debtor. The garnishee did not pay nor did it deliver a garnishee’s statement setting out why it would not pay. The creditor warned the garnishee that if it did not comply, the creditor would bring a garnishment motion to attach liability to the garnishee. The creditor brought the motion and served the garnishee, who attempted to evade service and ultimately did not attend the hearing. At the hearing, the creditor presented evidence indicating that garnishee would have owed $300,000 to $600,000 per month for material obtained from the debtor. The Master awarded the full judgment debt of $1.7 million against the garnishee even though the Master did not know the exact amount of money that the garnishee owed to the debtor. The Master was not impressed with the garnishee’s flagrant disregard of the court process.

Fraudulent Conveyance Claim Not Time Barred by Limitations Act

Prima Technology Inc. Yang 2018 BCSC

The debtor transferred property to relatives, including her 14-year-old daughter, without consideration, knowing that a prospective creditor was investigating her for possible fraudulent losses suffered. The creditor ultimately was awarded judgment and moved to set aside the conveyance. The judge held that there was no limitation problem because it was unreasonable for the creditor to investigate a possible fraudulent conveyance until its action was successful against the debtor. The judge held that, on the merits, the creditor was protected by the British Columbia Fraudulent Conveyances Act, which is almost identical to the Ontario statute. Even though not a creditor at the time, the creditor was protected by the term “and others” who had “just claims” not yet brought to fruition in terms of legal process. Further, the court approved the reasoning in the Ontario Indcondo decision, noting that if there were an intention to defeat creditors it mattered not whether it was to defeat present or future creditors. Further, if the intent to defraud existed at the time of the conveyance, it mattered not that person attacking it was not a creditor at that time.

Equitable Receiver: Exhausting All Normal Remedies Can Be An Exhausting Process

To collect a judgment debt through the legal process, a creditor ferrets out the debtor’s assets and income and then either has the sheriff seize and sell the assets or garnishes income or both. However, at times, although the assets are tantalizingly close, the creditor cannot get at them through normal means. The creditor then has a choice: give up or move for the appointment of an equitable receiver. The equitable receiver has far more power than a creditor and can take control of a debtor’s assets and income. The creditor in Luu v Abuomar, a 2017 Superior Court of Justice decision, moved for such a receivership.

Runaround

The debt arose from an application that was commenced about 14 years before the receivership motion. The debtor had operated a grocery store in a strip mall contrary to restrictive covenants. Ultimately, the creditor obtained an injunction and costs orders. These costs orders, including interest, amounted to approximately $82,000. Further, the creditor had obtained an order stating that the debtor was to pay for all enforcement costs, which now exceed $50,000.