Legal Blog:

Pleadings Attack

John v. Dallas 2019 Ont SCJ

A defendant who wants to attack the plaintiff’s statement of claim normally should not defend until after the motion is brought. However, if, regardless of a motion, the plaintiff threatens to note the defendant in default if the defendant does not defend, the defendant may still defend and not lose its right to attack the statement of claim.

Distress

Cassandro v. Glass 2019 Ont CA

Landlord terminated the lease and then seized tenant’s chattels by way of distraint. Landlord was held liable for the value of the chattels because the distraint was illegal. A landlord has a right to distrain chattels only if there is an existing tenancy.

Security for Costs

K Lee & Associates v. Lee 2019 Ont SCJ (MC)

Motion for security for costs under Rule 56.01 is a 2 part exercise. The defendant first must demonstrate that the plaintiff falls within one of the criteria for security and, if done, the onus shifts to the plaintiff to demonstrate that it would be unjust to require the posting of security for costs. Normally this 2^nd part involves a demonstration that the plaintiff is impecunious and neither it nor any of its shareholders can afford to pay the security for costs. In this case, the plaintiff admitted that it had no assets in Ontario, but stated that it was not impecunious in that it could ultimately raise the funds. It was therefore easy for the Master to find that the defendant met its onus and that there was no reason for the plaintiff not to post security for costs. Since the real driver of the action was whether the defendant received and retained funds to which she was not entitled, the counterclaim did not add any complexity to the action and therefore was not accounted for when security for costs was set. The Master ordered an initial amount to be paid into court but noted that there would be progressive security as the action commenced.

S. 38 BIA Orders

Re McEwen 2019 Ont SCJ

S. 38 of the Bankruptcy and Insolvency Act is designed for the benefit of creditors, not the bankrupt. A bankrupt has no standing to vary a s. 38 order. Further, a creditor moving for a section 38 order may do so on a without notice basis and, regardless, no notice has to be provided to the bankrupt. Finally, a trustee, regardless of its discharge, still remains the trustee of the estate for the performance of duties incidental to its administration and, therefore, has authority to give an assignment of its interest in property in accordance with s. 38.

Time of Essence

1179 Hunt Club Inc. v. Ottawa Medical Square Inc. 2019 Ont CA

Purchaser repudiated an agreement of purchase and sale by indicating that he would not be able to close on the set closing date. Vendor did not accept that repudiation and indicated that it expected the purchaser to close as scheduled. On the closing date, because of a problem with title, vendor was not able to close, but was able to close the next day. Vendor sued for the deposit and for damages. The court relied on the 1974 Court of Appeal decision in King v. Urban to conclude that, since neither party was ready to close on the date scheduled for closing and neither party set a new closing date, the agreement was terminated and the vendor had no right to the deposit or damages.

Bankruptcy Stay

Re Brennan 2019 Ont SCJ

At a judgment debtor examination, debtor stated that he did not have an RSP. 17 days later, debtor filed for bankruptcy and admitted that he had an RSP worth $13,000. The judge determined that, were it not for the false statement, the creditor could have and would have seized the RSP. He also determined that, because no contributions had been made to the RSP within one year of the date of bankruptcy, the RSP did not fall into the bankrupt’s estate. Accordingly, the judge decided to exercise his discretion under section 69.4 of the Bankruptcy and Insolvency Act to lift the stay of proceedings and allow the creditor to seize the RSP.

Interpretation

Austin v. Bell Canada 2019 Ont SCJ

Class action dealing with the interpretation of a pension plan’s provisions for the calculation of the annual inflation factor. The calculation according to Bell Canada was 1% for 2017 and according to the plaintiffs was 2%. Considering that 35,000 pensioners were affected, this difference represented many millions of dollars. The provision to be interpreted was: “‘Pension Index’ means the annual percentage increase of the Consumer Price Index, as determined by Statistics Canada, during the period of November 1 to October 31 immediately preceding the date of the pension increase.” The dispute was whether the determination by Statistics Canada index related only to the consumer price index or also to the annual percentage increase. The comma between “Index” and “as” would, in the normal course, mean that the modifying phrase related to both items on the list (i.e. both the percentage increase and the consumer price index). The judge, however, looked at other rules of interpretation to determine that the Statistics Canada publication would inform only the consumer price index and that the comma was improperly placed. Poor drafting, and inadequate grammatical knowledge, almost cost Bell Canada millions of dollars.

Acquiesce

Section 13(1) of the Construction Act attributes personal liability to a director, officer, and person in charge, of a corporate contractor that breaches the trust fund provisions if that person “assents to, or acquiesces in, conduct that he or she knows or reasonably ought to know amounts to (a) breach of trust by the corporation.” This determination is a question of fact. Sometimes it is fairly obvious; sometimes it is not.

Common Law Trust

In our November 2015 newsletter, we discussed (i) common law trusts and their effect on bankruptcy and (ii) common law trusts in comparison to statutory trusts, in particular under the Construction Act (CA). This discussion revolved around an Alberta Court of Appeal case and an Ontario Superior Court of Justice case. The issues discussed have been resolved, at least in Ontario, by the 2019 decision of the Ontario Court of Appeal in The Guarantee Company of North America v. Royal Bank of Canada.

Positions

A paving contractor went bust with four contracts on the go, three with one city and one with another. The cities paid the contractor’s receiver an aggregate of $675,000 (the “Funds“), the total of the amounts due to the contractor for the four projects. Pursuant to an order of the bankruptcy judge, the receiver deposited all of the Funds in one bank account and kept sufficient records so that one could tell what proceeds were received for each project.