
Legal Blog:
Elevated Costs as Punishment
N Drive Navigation Systems, S.A. v. Zhou 2021 Ont SCJ
In the action, the judge held that the defendant breached fiduciary duties and improperly withheld money that he was to have paid to the plaintiff. The judge also awarded punitive damages and dismissed the defendant’s counterclaim of fraud. The judge reviewed all of the costs factors and all of the defendant’s obstructionist tactics in dealing with the plaintiff’s summary judgment motion and awarded costs of $230,000, presumably on a substantial indemnity basis.
Continue Reading >Entire Agreement Clause
10443204 Canada Inc. v. 2701835 Ontario Inc. 2022 Ont CA
Vendor of a coin laundry sued the purchaser for payment of a purchase money loan. The purchaser defended, alleging that the vendor made negligent and fraudulent misrepresentations as to the revenue of the business. The agreement had an entire agreement clause disavowing all representations. It also gave the purchaser the right to review all accounts and attend at the premises for due diligence. The motion judge granted judgment on a summary judgment motion, holding that the entire agreement clause, coupled with the purchaser’s right for and lack of due diligence disentitled the purchaser to claim negligent or fraudulent misrepresentation. The Court of Appeal overturned regarding the fraudulent misrepresentation defence. An entire agreement clause insulates the vendor from the noise of the negotiations, but does not do so for fraudulent misrepresentations – regardless of lost opportunities for due diligence.
Continue Reading >Changed Substratum
Celestini v. Shoplogix Inc. 2023 Ont CA
An employment agreement may properly set out the notice to be given to a terminated employee. However, if, during the period between the date of the agreement and termination, the employment duties changed so significantly that it can be said that the parties could not have intended the employment agreement to apply to the new circumstances, then the employment agreement no longer binds and common law notice governs. This is known as the changed substratum doctrine. In this case, the court held that the employment duties changed so significantly that the 12-month notice period in the agreement could not stand and that 18 months was more appropriate.
Continue Reading >BIA – Conveyance Under Value
Jovkovic v. DaSilva 2023 Ont CA
Debtor transferred his half interest in the matrimonial home to wife about one year before debtor assigned into bankruptcy. The property was value at $580,000. There was a mortgage (but its amount was unstated in the reasons for decision); however, we know that the equity was substantial. The trial judge set aside the transfer under s. 96(1) of the Bankruptcy and Insolvency Act. The transfer was undervalued whether one looked at half of the value of the property or just half of the equity. Wife had put on an increased mortgage a year after the transfer and claimed that she used the excess funds to pay debtor’s debts. The trial judge noted that consideration was determined at the time of the transfer, not one year later. The judge set aside the transfer and the Court of Appeal dismissed wife’s appeal.
Continue Reading >Interest and Costs
Everest Finance Corporation v. Jonker 2023 Ont CA
Judgment on a mortgage. The motion judge limited interest because of the court’s delay in dealing with the claim arising from COVID problems. The judge also reduced costs from $34,000 to $20,000 in the exercise of her discretion. The Court of Appeal overruled on both issues. Courts can refuse interest when the creditor is dilatory, but not when the courts are dilatory. Further, the mortgage stated full indemnity costs and the judge had no discretion to order anything other than full indemnity unless the amounts requested were either inappropriate or excessive.
Continue Reading >Solicitor-Client Privilege
1824120 Ontario Limited v. Matich 2023 Ont SCJ (Div Ct)
Agreement of purchase and sale had a clause stating that the agreement was conditional on the seller’s lawyer approving the agreement’s terms. The lawyer gave an opinion to the sellers; they refused to waive the condition and the agreement failed. The buyer sued, alleging that the sellers did not exercise the clause reasonably, honestly, and in good faith. The sellers denied the allegations. The buyers then requested the lawyer’s file and opinion letter, arguing that the sellers had impliedly waived privilege. The court refused to grant access to the opinion. The sellers had specifically stated that they did not waive privilege. The court held that the buyer could not allege bad faith and, when the sellers denied the allegation, state that the sellers had waived privilege. The court refused to intervene, even after the buyers alleged that the lawyer did not approve the terms because the seller had received a higher price. The court interpreted the condition and held that nothing in the condition precluded the lawyer from reviewing non-legal terms of the agreement.
Continue Reading >Personal Liability
Li v. Zhu 2023 Ont SCJ (AJ)
Associate judge decided that he had jurisdiction to grant default judgment on a reference. He held that the individual was liable for the corporation’s defaults because it was a one-person, single-purpose, shell corporation and the individual had falsely represented that he and the corporation could complete the renovation work properly. The individual was held liable both in misrepresentation and by piercing the corporate veil.
Continue Reading >Oppression
FNF Enterprises Inc. v. Wag and Train Inc. 2023 Ont CA
Landlord pleaded that the sole officer, director, and shareholder should be liable for rent when the corporate tenant left premises early. The statement of claim alleged that the director had stripped value from the corporation by setting up shop elsewhere. Landlord claimed inducing breach of contract, piercing the corporate veil, and oppression. The motion judge struck the claim under Rule 21.01(1)(b) as showing no reasonable cause of action. The Court of Appeal reversed as to the oppression remedy. An officer or director is not liable for inducing breach of contract of his or her corporation. There was no piercing of corporate veil because this needs fraudulent or improper conduct and the mere fact that a director or officer decides a corporation should breach its contract is not sufficient. The court held that a creditor is protected by the oppression provisions; there was nothing the landlord could have done to protect itself from the director’s alleged actions.
Continue Reading >Subsequent Creditors
Under the Fraudulent Conveyances Act (“Act“), creditors are given the ability to obtain a court order setting aside a conveyance of property if that conveyance was made with the intent to defraud creditors or others of their lawful debts. The question that often arises is “Which creditors?” Sometimes that question is very easy to answer. A claimant who was a creditor at the time of the transfer is certainly an included creditor. How about a claimant who became a creditor many years after the transfer? This question was answered in Ontario Securities Commission v. Camerlengo, 2023 ONCA 93.