Legal Blog:

Costs on Indulgence

Swiderski v. Castelli 2019 Ont SCJ (MC)

The registrar administratively dismissed an action for delay. The defendant forced the plaintiff to bring a motion to set aside the dismissal – even after the plaintiff had offered to pay $500 for the cost to review and execute the consent. The Master applied the 5 Reid factors and granted the order. The plaintiff claimed partial indemnity costs of slightly more than $12,000; the defendant countered that no costs should be awarded because the plaintiff had asked for an indulgence. The Master ordered costs of slightly more than $6,000, holding that, once the defendant received the plaintiff’s materials, the defendant ought to have agreed to set aside the order.

Set Down for Trial & Estoppel

QH Renovation & construction Corp. v. 2460500 Ontario Ltd. 2019 Ont SCJ (MC)

Under section 37 of the Construction Act, a plaintiff must set down an action for trial or obtain an order for the trial of the action within 2 years of the date on which the lien is perfected. The plaintiff was 13 days late in doing so, but had set down the action 3 days before the deadline in a consent timetable order. The plaintiff argued that the consent order reflected an agreement to extend the prescribed time. The Master noted that in his original timetable order, he did not consider the Construction Act nor did he even know that the matter was a construction matter. He held that the provisions of section 37 and 46 of the Construction Act are mandatory with no room for judicial discretion – even if he accepted the argument that there had been an agreement to extend the time, which he did not. This decision made no reference to promissory estoppel (see J.D. Strachan Construction Limited v. Egan Holdings Inc. 2019 Ont SCJ, which held that promissory estoppel could apply to a time limit by which a lien claimant had to perfect a claim for lien). We prefer the QH decision.

Trust Funds & Lien Assignment

Great Northern Installation Services Ltd v. King Road Paving and Landscaping Inc. 2019 Ont SCJ (Div Ct)

Players: an owner, a general, 2 subs, and the lawyers for the general. General, through the services of the lawyers, obtained judgment against the owner. Similarly, the 2 subs, pursuant to their claims for liens, obtained judgment against the general and, on account of holdback, against the owner. The money actually available from the owner was insufficient to pay the subs and that money was allocated between them on a pro rata basis. One of the subs had assigned its claim to the general. The general therefore claimed the money to be paid to that sub. Realising that the general otherwise had no money to pay them, the general’s lawyers obtained a charging order against any money to be paid to the general. That charging order would have allowed the lawyers to scoop the funds payable to the sub who had assigned its claim, but only if those funds were not to be held in trust for the other sub. The court held that, since the general had not proven that the money it paid to obtain an assignment from the sub came from non-trust funds, the sub who had not assigned its claim was to be paid first. This money exhausted the money that was available, the general was therefore to receive nothing, and the lawyers who had a charging order of what was ultimately nothing, received nothing. Query: would the result have changed had the general used a 3^rd party to take an assignment of the claim for lien?

Undertakings

Air Bravo Corp. v. Norris 2019 Ont SCJ

An undertaking once given must be satisfied. On a motion for undertakings and refusals, the plaintiff was successful on all 77 questions it submitted (of which approximately 25 dealt with unfulfilled undertakings). The judge held that the defendant’s behaviour was unreasonable and awarded substantial indemnity costs of the motion.

Distress

Pita Royale Inc. v. Buckingham Properties Inc. 2019 Ont CA

A landlord cannot terminate a lease (by way of locking out a tenant or otherwise) and then distrain. The remedies are mutually exclusive. The landlord was liable for conversion of the tenant’s chattels and $10,000 in punitive damages.

Unconscionable

Heller v. Uber Technologies Inc. 2019 Ont CA

A driver’s agreement stated that any dispute had to be resolved under the laws of, and arbitrated in, The Netherlands under the International Chamber of Commerce Mediation Rules and ICC Arbitration Rules. Compliance with this provision would result in a deposit of at least $14,500 US in addition to all other fees involved with mediation and arbitration. A driver was the representative of a class action claiming that drivers were employees and that Uber had breached the Employment Standards Act. The court refused to stay the action in accordance with the Arbitrations Act because (i) if the driver’s allegations were correct, the arbitration clause would be invalid as contravening the Act; and (ii) in any event, the provision was unconscionable. As to unconscionability, the driver proved a grossly unfair and improvident transaction, lack of independent legal advice or other suitable advice, an overwhelming imbalance in bargaining power, and Uber taking advantage of the driver’s vulnerability. The court discussed the possibility that the test for unconscionability would only necessitate proof of 2 elements: inequality of bargaining power and unfairness. However, the court did not deal with this alternative because the four criteria were met. The Supreme Court of Canada has granted leave to appeal.

Option to Renew or Extend Lease

McRae Cold Storage Inc. v. Nova Cold Logistics ULC 2019 Ont CA

A lease granted an option to renew (or extend) the term only if the tenant were not in default at the time of the exercise of the option. Landlord and tenant had an ongoing dispute (unrelated to the option) as to whether the lease called for increased payments of rent. When tenant did not pay the amount demanded, landlord advised tenant that non-payment would be considered a default under the lease and that, if it did not pay the rent requested, it would not be permitted to exercise its option to renew the lease. The application judge interpreted the contract to determine that the tenant ought to have paid the rent that landlord claimed and, accordingly, was in breach of the lease. The judge noted that the normal rules for relief from forfeiture did not apply when dealing with conditions set for an option to renew. In that case, the tenant had to show that it made diligent efforts to comply with the terms of the lease, “which are unavailing through no default of his or her own.” The judge held that tenant could easily have complied with the terms of the lease by paying the amount requested under protest and then seeking a resolution of the dispute. Tenant appealed, but only on the relief from forfeiture issue. The Court of Appeal dismissed the appeal, agreeing with the reasons of the application judge.

Pleading Amend

Klassen v. Beausoleil 2019 Ont CA

The plaintiff wanted to amend its statement of claim to plead, in the alternative to a claim for 50% of the outstanding shares, a claim for 33% of the outstanding shares. The court held that, since no new facts were pleaded, the plaintiff could make the alternative claim. It was not a new cause of action to which the Limitations Act would apply. The court held that there was no deemed or actual prejudice to the request for the amendment and, accordingly, under Rule 26.01, the court had to grant leave to amend the statement of claim.

Condition

We thought it time to explore how many angels can dance on the head of a pin. Put another way, if a condition in an agreement allows a party full discretion to determine its satisfaction regarding an aspect of the property, is the agreement still binding or, because it is so dependent on the party’s subjective state of mind, is it unenforceable? Further, even if the agreement is binding, must, and did, the party act reasonably in determining its “satisfaction?” The trial judge in Hacquard Wolfe Trust v. Richmond Holdings Ltd. 2016 BCSC 2139 had to conduct this exercise.

Clause

An agreement for purchase and sale contained a condition that provided for each party to be “completely satisfied in its sole and absolute discretion” with environmental reports as to potential contamination. The purchaser obtained a stage 2 environmental report and a further detailed report and provided them to the vendor. The parties extended the condition while the vendor removed the significantly contaminated soil. The parties obtained a new report, which indicated that the remaining contaminated soil was marginal and manageable.

Odyssey

Lawyers who engage in collection cannot be faint of heart. Sometimes, collection is easy; low-hanging fruit is there for the plucking. At other times, the lawyers must be prepared to climb to the top of the fruit tree and, if the climb takes 10 years, so be it. Such is the case of Luu v. Abuomar and Rumanek & Co. Ltd. v. Abuomar, 2017 and 2019 decisions of the Ontario Superior Court of Justice.

History

Many moons ago, the creditor commenced an application to enjoin the debtor from offering competing products in a strip mall. After much difficulty, the creditor was successful and was awarded significant costs of the application. Did the debtor pay? Of course not. And so began the odyssey.