Legal Blog:

Lawyer and Non-Client

Furney v. Hazan and Chhina 2025 Ont CA

Plaintiffs claimed that a mortgage broker improperly instructed its lawyer to register a collateral mortgage without plaintiffs’ consent and that the lawyer registered the collateral mortgage to block plaintiffs’ mortgage financing and was involved in the improper removal of funds from his trust account. Plaintiffs also alleged that another entity, other than the lender, was somehow involved. The Court of Appeal dismissed the action against the other entity because it was not the lender and plaintiffs pleaded nothing to demonstrate its involvement. The Court allowed the action against the lawyer to continue, even though the lawyer was not plaintiffs’ lawyer, because plaintiffs had alleged that lawyer had participated in a fraud and merely following his client’s instructions did not insulate him from liability.

Adjudication Priorities

Westport Insurance Corporation v. BDA Inc. 2024 Ont SCJ

After a dispute, a general terminated its sub’s subcontract and claimed against the sub’s surety on the sub’s bonds. The surety advanced payments to the general under a mitigation agreement. The sub subsequently obtained an adjudication determination awarding money to it, which the general paid to its lawyer in trust. The sub and the surety each wanted those funds. The judge decided that the surety had a security interest over the money under its indemnification agreement with the sub and therefore had priority but was not entitled to immediate payment due to ongoing litigation between the parties that could affect the surety’s ultimate entitlement. The court ordered the disputed funds to be paid into court pending the outcome of those proceedings.

Norwich Order

Canadian Tire Corporation Limited v. Eaton Equipment and Milburn 2025 Ont CA

Canadian Tire recovered against Eaton and others a $3.3 mil judgment for a fraudulent warranty repair scheme in which Eaton billed Canadian Tire for non-authentic repairs. The defendants appealed the summary judgment decision and then brought a motion before the Court of Appeal seeking a Norwich order to compel production of insurance information from Canadian Tire and its insurers. The chambers judge refused the order because a Norwich Order is a pre-trial discovery remedy only. The judge also held that, given their established fraudulent conduct, the defendants did not come to the court with clean hands and were therefore disentitled to an equitable remedy.

Grammar – Interpretation

Paloma Resources LLC v. Axis Insurance Company 2025 US C of A

The plaintiff sued its insurer for denying coverage in a prior lawsuit in which a third party alleged that the plaintiff’s employee stole confidential information. The plaintiff settled the third party’s action and wanted the insurer to cover the settlement. The trial court granted summary judgment for the insurer, finding the insurance policy’s intellectual property exclusion applied. The Court of Appeals vacated the summary judgment regarding the exclusion. The interpretation turned on the grammatical effect of the insertion of the determiner “the” before another phrase in a list. The clause was over 5 lines long in one sentence and demonstrated the effect of bad drafting.

Guarantee

Zurich Insurance Company Ltd. v. Aquino 2025 Ont SCJ

John Aquino, a former director of Bondfield Construction Company Limited, provided an unlimited personal guarantee for Bondfield’s credit facility agreement with Bridging Finance Inc. Bondfield defaulted, leading Zurich Insurance Company Ltd. (who acquired the debt) to sue Aquino on the guarantee. Aquino argued against summary judgment, claiming the matter was too complex, key documents were missing, and partial summary judgment was inappropriate given his third-party claims against other Bondfield officers. The court disagreed, finding the guarantee’s enforceability was straightforward despite the insolvency’s complexity. The motion judge rejected Aquino’s claims of creditor misconduct, including impairing security, and altering priority interests; the guarantee explicitly permitted these actions. The court granted summary judgment for $40.8 mil plus interest of $27.8 mil. Aquino has appealed. SNF acted for Zurich.

Substantial Indemnity Costs

100 Bloor Street West Corporation v. Barry’s Bootcamp Canada Inc. 2025 Ont CA

Landlord and tenant disputed the calculation of the tenant’s property tax obligations under a ten-year triple net lease for a commercial property. The landlord attempted to evict the tenant, leading to an injunction and multiple applications and motions. The motion judge held for the tenant and awarded substantial indemnity costs against the landlord, deeming its litigation conduct “reprehensible.” The Court of Appeal allowed the landlord’s appeal regarding the costs, finding that while the landlord’s attempt to evict the tenant was unreasonable, the litigation itself was not a “ruse.” Even if substantial indemnity costs were applicable, the court would have reduced the amount as not-proportionate. Had it been asked, it would have also reduced the disbursement amount that included unsupported time of corporate counsel.

CPL

Nedaneg Financial Corporation v. Talebzadeh 2025 Ont SCJ

Creditor had a consent judgment against debtor. After the judgment, the debtor’s wife, son, and non-arms length corporation bought real properties. The creditor alleged that the debtor beneficially owned the properties and moved for a certificate of pending litigation (CPL). The associate judgment dismissed the motion. The Superior Court judge granted the appeal and allowed the CPL. The judge held that the associate judge failed to account for the constellation of facts typical of machination that debtors pursue to avoid paying a judgment – using layers of different entities and related individuals and corporations to shield them from judgment creditors while the debtors continue to carry on business.

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Privies (BIA)

Ernst & Young Inc. v. Anwar 2025 Sask KB

Trustee in bankruptcy applied to void transactions as transfers at undervalue (s. 96) or preferences (s. 95) under the Bankruptcy and Insolvency Act. Investigations revealed $1,383,800 in questionable transactions, primarily involving transfers to family members and associated entities of the bankrupts’ principal. The court found that several payments totaling $1.013 mil to the principal and his spouse were transfers at undervalue that diminished the bankrupts’ estates; the bankrupts received insufficient or no consideration,. Two payments to the principal’s nephew, totaling $140,000, were deemed voidable preferences. The court also declared several individuals and entities privy to and liable for these transfers. A privy is someone who benefits directly or indirectly from, and has knowledge of, the transaction for less than fair market value.

Deficient Reasons

Masonry Group Inc. v. Marydel Homes (Beaverton) Inc. 2025 Ont CA

Contractor and owner disagreed over payment for masonry work on a residential subdivision. Owner had paid most of the invoiced amount for work done through 2021; a balance of $193K remained in dispute. A subsequent 2022 contract for work on Lot 121 included a clause stating this balance would be added to the new contract price. Contractor registered a lien for $228K on Lot 121. Owner vacated it by paying security into court and then moved to reduce security. The motion judge reduced the security amount without giving any explanation for doing so. The judge said he would provide more reasons, but did not. The key issue involved interpreting the 2022 contract and the definition of “price” within the Construction Act to determine if the disputed balance was properly included in the lien amount. The court held that the motion judge’s reasons were insufficient, preventing meaningful review. The court set aside the order and remitted the matter to a different judge for re-determination.

Pierringer Agreement

Cadieux v. Cadieux 2025 Ont CA

Catastrophically injured children sued their father, another driver, and the City of Ottawa after an accident. The children entered into a Pierringer Agreement with Ottawa and sought court approval, also moving to amend their pleadings to limit claims against non-settling defendants to their joint and several liability. The non-settling defendants argued that the agreement prejudiced them because Ottawa had a deep pocket and other defendants, even with some insurance, did not. The court approved the agreement, finding that the mere possibility of a non-settling defendant being unable to obtain full contribution from another non-settling defendant was speculative and did not constitute sufficient prejudice.

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