Legal Blog:
Economic Duress
Elias v. Van Zanten 2019 Ont SCJ (MC)
Plaintiff provided financing for a corporation and insisted upon a guarantee from the corporation’s principal. When the corporation defaulted, the principal claimed that he was not liable on the guarantee because he signed it after economic duress. The Master noted that the plaintiff merely demanded the guarantee as a condition to the investment; there was no unlawful act or even a doubtful lawful act, such as threatening a breach of contract. There was no illegitimate pressure. Accordingly, there was no economic duress. The Master also noted that there was nothing unconscionable about the terms of the guarantee. The Master granted judgment.
Continue Reading >Bond Mitigation
Lopes Limited v. Guarantee Company of North America 2019 Ont CA
General contractor defaulted, owing the mechanical sub $183,000 (originally higher, but reduced after the sub received its proportional amount of the holdback under its claim for lien). Bonding company under a performance bond had appointed another general to complete the project. The new general requested tenders to complete the mechanical work and the mechanical sub bid on that tender call and was successful. As it happened, the tender price was substantially higher than what the sub would have received under its original subcontract with the defaulting general for the incomplete work. The mechanical sub then sued under the labour and material payment bond for the amount that the defaulting general owed to it. The bonding company, incensed that the sub had already received more in total under the old and new contracts then it would have been entitled to under the old contract alleged that the sub had suffered no actual damages. The motion judge and the Court of Appeal disagreed. The sub’s decision to bid on and enter into a new completion subcontract was not an action taken to mitigate its loss from the defaulting general. It would have secured the benefits of its new subcontract regardless of whether money was owed under the old subcontract. It was the defaulting general’s abandonment of the subcontract, not its failure to pay for completed work, that created the necessity for the completion subcontract. The sub’s successful bid for the completion subcontract did not arise from the defaulting general’s failure to pay its invoices.
Continue Reading >Mitigation
Gao v. Khan 2019 Ont SCJ
After default, purchaser offered to again purchase the property, but forfeit only $25,000 of his original $65,000 deposit. The vendor refused, sold the property for a $5,000 loss, and claimed the entire deposit of $65,000. Purchaser claimed that the vendor did not deal with the agreement in good faith (i.e. he should have accepted purchaser’s offer). The court held that an obligation to perform a contract in good faith does not mean that the party must accept an offer for less money than he is seeking for his property.
Continue Reading >Deposit
Azzarello v. Shawqi 2019 Ont CA
Purchaser failed to close and vendor sued for damages and the deposit. The trial judge awarded the deposit in addition to the damages. The Court of Appeal held that when an agreement only calls for the deposit to be credited to the purchase price on completion, the measure of damages is based on the difference between the purchase price and the ultimate lower sale price; accordingly, the intent of the agreement is that the deposit is applied to the purchase price whether received on completion or as damages. The court gave credit for the deposit against the damages. Purchaser had also argued that vendor ought to have accepted his offer to purchase the property for a 10% reduction in the purchase price. The court held that the duty to mitigate does not oblige a vendor to accept an offer from a defaulting purchaser for less than the agreed price and then have to sue the purchaser for the difference from the original agreed price.
Continue Reading >No Cause of Action
Toronto Parking Authority v. BSAR (Eglinton) Ltd. 2019 Ont SCJ
Plaintiff sold land, but retained a right to purchase the retail component of the project. When it attempted to exercise this right, it found that the defendant had already sold the retail portion to someone else. The plaintiff commenced an action against the corporate defendant and the individual defendants who signed the agreement on behalf of the corporate defendant. The plaintiff claimed that the individuals had induced the corporate defendant to sell the retail component. The judge struck the allegation under Rule 21.01(1)(b) as failing to disclose a reasonable cause of action. The law is well established that individuals are not liable for a corporation’s actions unless the individuals have commenced torts of their own; merely directing the corporate entity to breach its contract is insufficient. The plaintiff then moved to amend its claim to allege that the individuals diverted the sale proceeds to themselves, stripped the corporate defendant of its assets and were acting independently of their roles as the principal and guiding minds of the corporation. These allegations were sufficient to allow the action to continue against the individuals.
Continue Reading >Limitation – Lien Perfection
Pryers Construction Ltd v. MVMB Holdings Inc. 2019 Ont SCJ (Div Ct)
Lien claimant did not commence an action to perfect its lien within 90 days of the lien preservation expiry date. The trial judge purported to use the doctrine of “special circumstances” to extend the time. The Divisional Court overturned; the date set out in the Construction Act is a hard date and is not subject to any discretion. Worse yet, not only did the court hold that the lien was invalid, it held that the claimant’s contractual claim was also out of time, this time by way of the 2-year limitation period under the Limitations Act.
Continue Reading >Default Judgment – Fast Practice
Shedden Investments Inc. v. Freitas 2019 Ont SCJ
Statement of claim was served May 13, 2019. On June 14, 2019, defendants’ lawyer served a notice of intent to defend (already out of time). He sought an indulgence to file the defence and explained that his clients had cognitive disabilities making it difficult for them to understand documents, which resulted in some extra time needed to investigate the claim. Without replying to the letter, the plaintiff’s lawyer moved for default judgment on June 24, 2019. The judge set aside the default judgment as of right, noting that the plaintiff’s counsel did not even “extend the courtesy of a reply. Within 11 days, he had obtained default judgment. In my view those precipitous actions were unprofessional and uncivilised.” The judge awarded substantial indemnity costs of the motion of $7,000.
Continue Reading >Arbitration
Zenith Aluminum Systems Limited v. 2335945 Ontario Inc. 2018 Ont SCJ
The parties had agreed orally to arbitrate their dispute and had gone so far as to arrange for an arbitrator. The parties could not agree on the scope of the arbitration and pre-arbitration steps to be taken. The plaintiff commenced an action because the limitation period was fast approaching and the parties had not entered into a tolling agreement. The defendant served a withdrawal of notice of arbitration and indicated it was no longer willing to arbitrate the matter, given that the plaintiff had initiated a court action. The plaintiff brought a motion to stay its own action and to have the matter dealt with by way of arbitration. The judge declined to allow the defendant to unilaterally withdraw from its obligation under the oral arbitration agreement and ordered that the arbitration take place within 5 months.
Continue Reading >Allison Speigel’s The Globe and Mail Article on Taking Over the Family Business
In 2013, I was disenchanted with the legal profession and skeptical about the traditional legal model. There was so much that I wanted to do differently – for example, revamping billing practices and improving the work environment. Although I wanted to create an alternative law firm, I was not ready to hang out my own shingle. And thus began conversations with my father and uncle, two partners in a seven-lawyer law firm. I joined the firm with the understanding that I would be part of the firm’s succession plan.
Continue Reading >Damages – Summary Judgment
Enterprise Rent-a-Car v. Richards 2019 Ont SCJ
The renter of a car accepted collision insurance through the car rental company. However, the accident was caused when her son was operating the car, without her permission, contrary to the express terms of the contract. The judge held, in a summary judgment motion, that the renter was liable for the damages. However, he directed a trial relating to the quantum of damages because he was not satisfied with the manner in which the rental company provided its estimate of damages. An estimate of damages as an exhibit to a law clerk’s affidavit is not acceptable. As an aside, this is not the type of case where the action should be dismissed because the plaintiff did not prove its damages; it was the type of case where the plaintiff clearly demonstrates that there are some damages, but does not adduce sufficient evidence for a court to conclude what those damages are.
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