Legal Blog:

Termination Provision in Employment Agreement

Rahman v. Cannon Design Architecture Inc. 2022 Ont CA

An employment agreement provided that the employer could terminate the employee’s employment without notice or payment if the employee engaged “in conduct that constitutes a just cause for summary dismissal.” That provision was contrary to the Employment Standards Act which excepts termination payment provisions under the Act only if the employee is guilty of “wilful misconduct, disobedience or wilful neglect of duty that is not trivial and has not been condoned.” In accordance with previous jurisprudence, once one of the termination provisions is held to be invalid, all of the termination provisions are invalid. Accordingly, the four weeks contractual notice provision did not apply and common-law notice was imposed.

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Adjudication

Okkin Construction Inc. v. Apostolopoulos 2022 Ont SCJ

By way of adjudication, an owner was ordered to pay substantial money to the general contractor. The owner did not wish to pay the money because the subcontractor had also liened the project and the owner was concerned that he would have to pay the same money twice, once by way of the adjudication and once by way of the subcontractor’s lien. The owner requested an order by which the money ordered to be paid to the general contractor instead be paid to a lawyer and held in escrow pending resolution of the lien actions. The judge held that he had no authority to vary the adjudicator’s order. The judge was not concerned about possible double payment because, he noted, any money paid to the general contractor was to be held by it in trust for the subcontractor under the trust provisions of the Construction Act.

Oppression Damages

Tahmasebi v. Hosseini 2022 Ont SCJ (Div Ct)

When a corporation is being wound up as a remedy for oppression and nothing is being paid towards shareholders’ loans or other money shown on the records as due to shareholders, damages do not include what the corporation would have been worth had the amounts due to the shareholders been recorded accurately.

We reported on the Superior Court decision in 2021.

OHSA

Her Majesty the Queen v. The Corporation of The City of Greater Sudbury 2019 Ont SCJ

The Occupational Health and Safety Act creates offences for people who breach their health and safety duties under the Act. The “constructor” on a construction project has strict liability for health and safety. A municipality was charged with a breach of the Act after a fatal accident. The Crown argued that because the municipality was given the contractual authority to have its employees enter the project to oversee quality control, it somehow became the constructor. The court rejected this argument and acquitted.

Mortgage Priority

Scott, Pichelli Easter Limited v. DuPont Developments Ltd. 2021 Ont SCJ (Div Ct), 2022 Ont CA

Under section 78(3) of the Construction Act, mortgages registered before the time when the first lien arose have priority over liens arising from the improvement to the extent of the lesser of (i) the actual value of the premises at the time when the first lien arose, and (ii) the money advanced under the mortgage. The mortgage arose as a vendor takeback mortgage on the sale of the land and, almost by definition, it would have been less than the value of the land at the time of the sale and therefore before any liens arose. It was common ground that the mortgage principal had priority to the liens. The Divisional Court held that the mortgage priority included not only the principal, but also the interest and other charges set out in the mortgage. The Court of Appeal dismissed the appeal.

Small Claims Court Jurisdiction

Canaccede Credit LP v. Shulz-Hallihan 2021 Ont SCJ

A creditor bought many files from a bank and then started to collect on them. It commenced actions in the Superior Court for amounts claimed that were far below the Small Claims Court $35,000 jurisdiction. It had difficulties in serving the defendants in three of them and moved for an order for substituted service. The motion judge allowed the order, but transferred the claims to the Small Claims Courts in which the defendant reside. He held that the Superior Court actions were an abuse of process. The claim of the creditor’s lawyer that “All creditors do this” was neither backed up by evidence nor persuasive to the judge.

Security for Costs

Gowing Contractors Ltd. Walsh Construction Company Canada 2022 Ont SCJ

General posted bonds to vacate a sub’s claims for liens on two projects. Later, it moved for security for costs. The associate judge refused the request because the holdback amounts were significant and because the general offered insufficient proof as to the setoff it claimed for alleged deficiencies.

Arbitration – Summary Judgment

Optiva v. Tbaytel 2022 Ont CA

Section 25 of the Arbitration Act allows an arbitrator to conduct an oral hearing or a hearing based on documents. The arbitrator decided that this section (bolstered by a section in the arbitration agreement allowing him to decide procedural matters) allowed him the jurisdiction to have certain issues decided by summary judgment. The court agreed.

Mareva Injunction

Sapex Canada Inc. v. 2264233 Ontario Inc. 2022 Ont SCJ

Landlord was suing tenant and indemnifier for damages for breach of a lease. The indemnifier bought a house and was selling her old house in the ordinary course. It was expected she would net about $20,000 from the sale. Landlord moved for a Mareva injunction. The judge agreed that he had jurisdiction to issue an injunction under the Simplified Rues, but held that the balance of convenience favoured the indemnifier. There was no genuine risk of the indemnifier putting her assets beyond the reach of the landlord. She had equity in the new house and the corporate tenant was still a going concern.

Mortgage Priority & Holdbacks

BCIMC Construction Fund Corp v. 33 Yorkville Residences Inc. 2022 Ont SCJ

Section 78(1) of the Construction Act notes that, subject to exceptions (e.g. see ss. 2), liens arising from an improvement have priority over mortgages of the owner’s interests. Section 78(2) gives a lien priority to the extent of the deficiency in any holdbacks the owner is required to maintain. In this case, the owner had two building mortgages. Had the owner only one building mortgage, the lien claimants would have had priority over $x of the deficiency in the holdback. But, because there were two mortgages, the lien claimants argued that they had priority of $x over each mortgage. The judge held that they were limited to $x in aggregate.