Legal Blog:

Bankruptcy Annulment

Tran v. Royal Bank of Canada 2022 Ont SCJ

Creditor with a debt of $488,000 obtained an order of bankruptcy against debtor. One year later, debtor’s father bought the creditor’s debt (at a discount) and debtor applied to have the bankruptcy annulled. After all, the creditor did not care, the trustee did not care, and her father did not care. The judge did. s. 181(1) allows a judge discretion to annul a bankruptcy order if it ought not to have been made. In this case, the order should have been made. Further, the judge held that the there were public considerations. The bankrupt’s conduct is important.

Audited Statements

Lagana v. 2324965 Ontario Inc. 2022 Ont SCJ

A non-director shareholder requested the court to order that the other shareholder, who was the only director, deliver up audited financial statements from 2013. The judge agreed. The Business Corporations Act (s. 149-154) mandates that a corporation engage an auditor and deliver up audited statements unless the shareholders consent otherwise in writing. A judge has no discretion but to grant the order. The Limitations Act does not apply because the shareholder made no claim; he just wanted the enforcement of his statutory entitlement under the BCA.

Solicitor-Client Privilege

J.D. Buote Professional Corporation v. McLeod 2022 Ont SCJ

In an action for payment of fees, the statement of claim included information that was otherwise solicitor client privileged. The motions judge held that a client did not waive that privilege, merely by refusing to pay the account. However, if the information were necessary to set out a proper claim, the lawyer could include it in the SOC. The judge ordered that all documents setting out privileged information be sealed and stated that, in the normal course, the lawyer setting out the facts should request the sealing order.

Reliance Damages on Lease

2505243 Ontario Limited v. Princes Gates Hotel LP 2022 Ont C.A.

Landlord was not happy with tenant and looking elsewhere. Pandemic hit and landlord shut down its hotel and tenant’s restaurants. Landlord refused to use CECRA to assist tenant in paying rent. Landlord made a deal with new tenant and then terminated the lease for non-payment of rent. Court agreed with trial judge that landlord caused the tenant’s financial difficulty and could not rely on non-payment of rent and that landlord had acted in bad faith, pretending that the lease was continuing and, at the same time, knowing it was negotiating elsewhere and would terminate the lease as soon as it had an alternative tenant. Because, had the lease remained extant, it was unlikely that the tenant would ever have made a profit, the court allowed reliance damages (i.e. wasted expenditures) rather than expectation damages.

Solicitor’s Negligence

Miao v. Bhatia 2022 Ont SCJ

Purchaser retained a lawyer to get him out of a real estate deal. The lawyer tried, but failed, and the deal did not close. The vendor sued and the purchaser, through another lawyer, ultimately settled for $135,000. The judge held that the lawyer never guaranteed success in his negotiations and that he warned the purchaser that his chances of success were low. Further, the lawyer had notes to prove what he had advised. The judge held that the purchaser never had a guarantee of success if he did not close and should have closed. Further, even if the lawyer were negligent, ultimately the purchaser paid less in damages for not closing than he would have paid had he closed.

Resulting Trust

Costa v. Costa 2022 BCSC 704

Husband was given a 2% interest in property because he was co-signer on the mortgage and mortgagee insisted. All funds came from wife and all mortgage and upkeep payments were paid by wife. Wife moved to have husband return his 2% interest; she wanted to re-finance the property without husband’s involvement. Judge granted the order. There was no evidence of any real risk to husband in signing the mortgage; indeed, he had no more than a theoretical prospect of personal liability The judge held that husband provided no consideration and held his interest in trust for wife. The judge also held that husband had been unjustly enriched, wife was deprived, and no juristic reason for the enrichment and deprivation.

Adjudication

Pasqualino v. MGW-Homes Design Inc. 2022 Ont SCJ

Contractor registered a lien for $169,000, owner vacated it by posting money as security, and then contractor commenced an adjudication. The adjudicator ruled that owner pay the contractor $119,000. The owner balked. He argued that the contact had been terminated because the contractor registered a lien and therefore the adjudicator had no jurisdiction. The judge dismissed the appeal because (i) the owner did not argue jurisdiction before the adjudicator; (ii) a simple allegation of termination or abandonment would allow an owner to gut the adjudication provisions; and (iii) the owner would not be paying twice because he could obtain an order reducing the security that he posted to vacate the lien.

Option to Renew

Matiu Dentistry v. Canadiana Towers 2022 Ont SCJ

Tenant attempted to renew the term of the lease in accordance with its terms. Landlord argued that the option existed only if tenant were not in arrears of rent and, because tenant had not paid the amount landlord had claimed for arrears of realty taxes, he was in arrears. The judge held that landlord had not supplied information as required in the lease regarding the taxes and that, therefore, the payment was not in arrears.

Court Shopping

On occasion, the choice of court (including venue) or procedure is very important to one or both of the litigants. The court used or the procedure to follow can affect the cost and efficiency of an action. Sometimes strategies to get the most advantageous court or procedure are successful and sometimes they are not. In Canaccede Credit LP v. Schulz-Hallihan (and two other separate actions) and Bank of Nova Scotia v. Carmichael, 2021 and 2022 decisions of the Ontario Superior Court of Justice, the lawyers in collection proceedings did not get what they wanted.

Court & Venue

The creditor in Canaccede purchased credit card debts from a bank, assumedly for a significant discount from the actual debt amounts. The creditor then retained its lawyers to collect the debts. The cases involved three debtors, but, later in the reasons for decision, we learned that the creditor had commenced 109 collection actions.