Legal Blog:

Knowing Assistance/Knowing Receipt

Caja Paraguaya de Jubilaciones y Pensiones del Personal de Itaipu Binacional v. Garcia 2020 Ont CA

The issue was whether the wife, who was also a sole shareholder of a corporation involved in the transfer of funds, was liable either for knowing receipt or knowing assistance of the fraud that husband carried on. In effect, when is a stranger to a fiduciary relationship made liable to the beneficiary of that relationship? As to knowing assistance, the stranger needs to have actual knowledge of the fiduciary relationship and the fraudulent and dishonest conduct and assist in that conduct. Actual knowledge would encompass wilful blindness or recklessness. Wilful blindness is a subjective standard that depends upon the stranger’s actual state of mind; it is not an objective standard as to what the stranger ought to have known. Mere carelessness or negligence is not sufficient. Knowing receipt requires that the stranger receive trust property with actual or constructive knowledge that the trust property is being misapplied. Unlike knowing assistance, the requirement of actual knowledge includes knowledge of facts that would put a reasonable person on inquiry and that inquiry is not made.

Inspection

Pordell v. Crowther 2020 Ont SCJ

A fire occurred in a house before the closing of an agreement for sale. The agreement was based on the standard OREA form of contract. It stated that the buildings remain at the risk of the seller and that the seller holds all insurance policies in trust for the parties as their interests may appear. It gives buyer the right to terminate the agreement or complete it and take the insurance. Notwithstanding the agreement, no insurance was available because seller had left the property empty for more in 30 days. Buyer attempted to view the damage and obtain information regarding the repairs that seller made. Seller stonewalled buyer and, accordingly, buyer refused to close. The judge ordered the return of buyer’s deposit.

Derivative Action

Tran v. Bloorston Farms Ltd. 2020 Ont CA

Tenant’s corporation ran a business from tenant’s land. Landlord improperly terminated the lease and, consequently, the business failed. Tenant sued for the diminution in the value of her shares in the corporation. Landlord argued that, based on the rule in Foss v. Harbottle, a shareholder had no right to sue for a wrong done to the corporation and, accordingly, the tenant had no right to claim that loss against landlord. The court noted that there were exceptions to this rule. An applicable exception occurs when the shareholder is not suing for a wrong done to the corporation for which the corporation can sue. In this case, the corporation, which had no relationship to the landlord, had no right to sue and, if tenant had no right to sue, the improper actions of landlord would have no remedy. The court ordered landlord to pay to tenant the loss of the value of the corporation’s business.

Susanne Balpataky presents, “The New Infectious Disease Emergency Leave: How it Impacts your Workplace” at MBOT Webinar

On June 25, 2020, Susanne Balpataky, partner with Speigel Nichols Fox LLP, presented at MBOT’s webinar: Getting Back to Work and Understanding the New Normal and discussed the Employment Standards Amendment Act and the new Infectious Disease Emergency Leave Regulation. Susanne highlighted implications, considerations, and exceptions under the new regulation.

The video presentation is available here.

If you or your business have questions regarding employment, please contact Susanne at: susanne@ontlaw.com

Waiver of Tort

Atlantic Lottery Corp. Inc. v. Babstock 2020 SCC 19

Class action in which the class plaintiffs alleged that video lottery terminal machines were so deceptive that they contravened the Criminal Code and that, based on three causes of action, the lottery corporation had to return to the class all profit that the corporation earned from the machines. The lottery corporation moved to dismiss the action on the basis that it had no reasonable chance of success.

What is waiver of tort?

When a tort was made out, but the plaintiffs chose to pursue a claim to recover the defendant’s ill-gotten gains, the plaintiff was said to “waive the tort.” This term was a misnomer. The plaintiff was not waiving the wrongfulness of the defendant’s conduct, it was electing to pursue an alternative, gain-based, remedy. The court stated that the term “waiver of tort” generates confusion and should be abandoned. It also noted that, in order to make out a claim for disgorgement, which is exactly what the plaintiffs wanted, a plaintiff must first establish actionable misconduct.

Rectification

2484234 Ontario Inc. v. Hanley Park Developments Inc. 2020 ONCA 273

Purchaser claimed rectification of an agreement relating to an easement over part of land necessary to allow access to other lands that purchaser had purchased from vendor.

The Court noted that “Rectification is an equitable remedy available to correct a document that fails to accurately record the parties’ true agreement. It is not available to correct an improvident bargain or to fill a gap in the parties’ true agreement, even when the omission defeats what one (or both) of the parties was seeking to achieve. As an equitable remedy, it is also not available when the party seeking it does not have ‘clean hands’.”

Frustration

Once the COVID-19 dust settles, we are going to hear a lot more about the frustration concept. However, like all court cases, it takes one to three years before we start seeing some decisions. Given that the courts are operating at a significantly reduced capacity, even this time estimate could be optimistic. Accordingly, for the moment, we will have to make do with cases arising out of circumstances that took place three years ago. One such case is Perkins v. Sheikhtavi, 2019 ONCA 925.

Unconscionable

The Supreme Court of Canada has rendered its decision in Uber Technologies Inc. v. Heller 2020 SCC 16 and, by a 6-1 majority, upheld the decision of the Ontario Court of Appeal. We discussed that decision in our December 2019 newsletter.

Uber forced its drivers to agree to an arbitration provision by which all disputes had to be arbitrated in the Netherlands pursuant to the International Commercial Arbitrations Act. This was all very nice, but the cost to an Uber driver to do so would have involved up-front administration fees of $14,000 USD plus travel and legal costs. Had this arbitration provision been held to be effective, it would have been a powerful disincentive to have any dispute tried and would have effectively precluded any action by any driver.

Economic Duress

Two men enter into a contract. The first does what was required under the contract; the second does not. He claims that he entered into the contract under economic duress. Can the first enforce that contract? As with many legal concepts, it all depends. The defence of economic duress certainly exists; the question, as in almost all actions, is whether the facts meet the criteria necessary to sustain the defence. These criteria and the defence were discussed in Elias v. Van Zanten, a 2019 decision of the Ontario Superior Court of Justice.

Pressure

The defendant was the operating mind of a corporation, which itself was a member of a joint venture that invested in a corporation trading in oil. He and his buddies had already sunk significant amounts of money into the venture; his investment alone was $750,000. Unfortunately, the investment was a bit of sinkhole and, by 2015, his corporation needed more funds to meet its obligations to the joint venture. None of these funds was forthcoming from the defendant or his buddies.