Legal Blog:

Mitigation

Humphrey v. Mene Inc. 2022 Ont CA

Wrongful dismissal action. Employee had been offered and refused a job at a comparable salary and, though not the same management position, a good one. The trial judge refused to deduct for lack of mitigation, saying that the employer had not provided the judge with persuasive evidence as to whether the two roles were comparable. The Court of Appeal held that comparable did not mean identical. It was sufficient that the employee had been offered a senior management position with a salary as good as or more than her previous salary and it was sufficient for the employer to show that the employee had been offered and rejected the job. Any further evidence had to come from the employee. The court reduced the award by 6 months for failure to mitigate.

Costs & Conduct

Gracias v. Dr. David Walt Dentistry 2022 Ont SCJ

Costs – the employee sued for wrongful dismissal and was mostly unsuccessful. Both the employer and employee asked for costs. The judge did not like the attitudes and actions of either of them. The employee could have been in Small Claims Court, made unsubstantiated claims of human rights violations, and was dilatory in production of documents. The employer had claimed it terminated for cause and alleged that the employee had fabricated evidence. Neither was proved. The judge refused to order costs to either of them.

Fraudulent Preference

Golden Oaks Enterprises Inc. v. Scott 2022 Ont CA

Trustee in bankruptcy brought an action against people who had received commissions and interest exceeding the criminal rate from a one-person corporation conducting a Ponzi scheme. The Court agreed that the people receiving the commissions had to return these funds because the corporation was insolvent from the start and was using fresh money to pay the commissions. S. 95(1)(b) of the BIA was invoked to justify the return as fraudulent preferences made to non-arm’s length people. For limitations purposes, the Court refused to attribute the individual fraudster’s knowledge to the corporation even though the corporation benefitted from the fraudster’s acts. The Court held that it would be improper to allow people who received criminal rates of interest to shield behind the corporate attribution rule at the expense of others creditors.

Relief from Forfeiture

City Star Roofers v. 216942 Ontario Limited 2022 Ont CA

After a mediation, the parties agreed that the owner could hold back $30,000. It would be released to the contractor after the contactor completed all deficiencies to the satisfaction of the owner’s engineer. The contractor has a specified time to do so and, upon failure, would receive none of the money. The contractor attended to fix deficiencies, but the engineer reported after the due date that the contractor still needed to complete about $10,000 worth of deficiencies. The contractor argued that the remaining deficiencies were only worth about $2,500. The owner kept all of the $30,000. The court held that the mediation terms were not unconscionable and refused relief from forfeiture: the mediation agreement was made with counsel and merely adopted a practical solution to resolving the parties’ dispute. It was not a penalty.

Stay of Court Decision

Ernst & Young v. Aquino 2022 Ont CA

The individual who had fraudulently issued false invoices to his corporations wanted to appeal the Court’s ruling to the Supreme Court of Canada and stay the effect of the ruling until after the appeal was heard. Unlike an appeal to the Court of Appeal, there is no automatic stay; the Court of Appeal had to grant the stay. The test to do so is similar to the granting of an injunction: serious issue, irreparable harm, and balance of convenience. The Court refused the motion, given the appellant’s admitted fraud.

Default Judgment

Paul’s Transport Inc. v. Immediate Logistics Limited 2022 Ont CA

Appeal by defendant to set aside or vary a default judgment. The Court of Appeal ruled that, although allegations of fact in a statement of claim are deemed by Rule 19.02(1) to be true, allegations of mixed fact and law are not covered by the Rule and are not deemed to be true (e.g. allegations of implied terms of the contract, allegations of negligence etc.). In this case, however, the contentious issue regarding the interest rate was not found as a fact based on the allegations in the statement of claim; it was found based on affidavits and cross-examinations.

Costs and Bankruptcy Survival

Yanic DuFresne Excavation Inc. v. Saint Joseph Developments Ltd. 2022 Ont SCJ

Debtor went bankrupt and creditor brought a motion, even after the debtor and trustee had been discharged, that the debt survived bankruptcy under s. 178(1)(d) of the BIA. The creditor was successful and costs of the motion were agreed at $50,000. The debtor argued that the costs should not survive bankruptcy because they were incurred after the bankruptcy. The judge held that if a judgment survives bankruptcy, it would be inequitable that costs would not. Costs are an intrinsic aspect and a consequence of the judgment. Debtor appealed (unsuccessfully) the original motion decision, but not the decision as to costs.

Judicial Sale

Bank of Nova Scotia v. Carmichael 2022 Ont SCJ

A judgment creditor attempted to obtain an order for judicial sale rather than using the process for a sheriff’s sale under the Execution Act. The creditor led no evidence of special circumstances, other than its contention that a judicial sale was faster, easier, and less costly. The judge dismissed the motion, for the same reasons as in RBC v. Wong: no special circumstances, no relief.

Adjudication

The prompt payment and adjudication provisions of the Construction Act (“Act“) have now been in effect for a couple of years and we have seen some court cases applying them. If a participant in an adjudication is unhappy with the decision, can that participant do anything about it? This question was answered in SOTA Dental Studio Inc. v. Andrid Group Ltd., a 2022 decision of the Ontario Divisional Court.

Background

The court set out the rationale behind the prompt payment provisions, so concisely that we will simply quote it:

The whole point of these provisions is to require prompt payment to avoid the consequences of disruptions to construction projects of brinksmanship over disputes that arise. The prompt payment provisions are based on similar provisions introduced in the United Kingdom more than a decade ago. They provide for a quick and relatively informal adjudication, by an adjudicator experienced in construction law disputes. The decision is without prejudice to the parties contesting issues between them at the end of the project. It triggers an obligation on the part of the payee to make its payments to its subcontractors, suppliers and workers. Effective implementation of these provisions is intended to reduce terminations (by payors) and work cessations (by payees) in the midst of construction, either of which can cause cascading losses down the construction pyramid. The obligation to pay, and to pay promptly, when ordered to do so, is fundamental to the scheme of the prompt payment provisions.