Legal Blog

Comma

Grammar seems to be a lost art these days. Rules of grammar and drafting often do not mean anything, if only because neither the writer nor the reader knows what the rules are. This writer is often asked to opine on various clauses in an agreement and, in some cases, throws up his hands in disgust, noting that the clauses are so badly drafted that no one would know what they mean. This can be a problem when an agreement is being interpreted in court, particularly if a lot of money rides on the interpretation. This is exactly what happened in Austin v. Bell Canada 2019 ONSC 4757. The entire decision revolved around the insertion of a comma.

Class Action

A Bell Canada (“Bell“) retiree was the representative plaintiff in a class action. He claimed that his pension, and those of 35,000 other pensioners, should be calculated for 2017 with a 2%, rather than a 1%, increase over the 2016 pension. Of course, this difference would affect the 2018 and subsequent pension amounts because each increase is piggybacked on the previous year’s pension amount. That lowly 1% difference could have cost the Bell pension plan up to $130 million. The dispute revolved around the interpretation of one clause in the pension plan’s constating documents (the “Plan“).

Lose – Lose

We have continually maintained that, in many cases, judgment debtor examinations are of no real use because judgment debtors often lie about their assets during these examinations – assuming that the debtors even deign to attend the examinations. The debtor in Re Brennan, a 2019 Ontario Superior Court of Justice decision, provided one more example of a debtor not cooperating with the notice for a judgment debtor examination and, when finally examined, lying. In this case, however, all did not go well for the debtor.

Lie

The creditor, who at one time was the debtor’s lawyer, obtained a Small Claims Court judgment against the debtor on March 21, 2018. We were not told the judgment amount, but it was somewhere between $13,000 and $25,000.

Economic Duress

Elias v. Van Zanten 2019 Ont SCJ (MC)

Plaintiff provided financing for a corporation and insisted upon a guarantee from the corporation’s principal. When the corporation defaulted, the principal claimed that he was not liable on the guarantee because he signed it after economic duress. The Master noted that the plaintiff merely demanded the guarantee as a condition to the investment; there was no unlawful act or even a doubtful lawful act, such as threatening a breach of contract. There was no illegitimate pressure. Accordingly, there was no economic duress. The Master also noted that there was nothing unconscionable about the terms of the guarantee. The Master granted judgment.

Bond Mitigation

Lopes Limited v. Guarantee Company of North America 2019 Ont CA

General contractor defaulted, owing the mechanical sub $183,000 (originally higher, but reduced after the sub received its proportional amount of the holdback under its claim for lien). Bonding company under a performance bond had appointed another general to complete the project. The new general requested tenders to complete the mechanical work and the mechanical sub bid on that tender call and was successful. As it happened, the tender price was substantially higher than what the sub would have received under its original subcontract with the defaulting general for the incomplete work. The mechanical sub then sued under the labour and material payment bond for the amount that the defaulting general owed to it. The bonding company, incensed that the sub had already received more in total under the old and new contracts then it would have been entitled to under the old contract alleged that the sub had suffered no actual damages. The motion judge and the Court of Appeal disagreed. The sub’s decision to bid on and enter into a new completion subcontract was not an action taken to mitigate its loss from the defaulting general. It would have secured the benefits of its new subcontract regardless of whether money was owed under the old subcontract. It was the defaulting general’s abandonment of the subcontract, not its failure to pay for completed work, that created the necessity for the completion subcontract. The sub’s successful bid for the completion subcontract did not arise from the defaulting general’s failure to pay its invoices.

Mitigation

Gao v. Khan 2019 Ont SCJ

After default, purchaser offered to again purchase the property after forfeiting only $25,000 of his original $65,000 deposit. The vendor refused, sold the property for a $5,000 loss, and claimed the deposit of $65,000. Purchaser claimed that the vendor did not deal with the agreement in good faith (i.e. he should have accepted purchaser’s offer). The court held that an obligation to perform a contract in good faith does not mean that the party must accept an offer for less money than he is seeking for his property.

Deposit

Azzarello v. Shawqi 2019 Ont CA

Purchaser failed to close and vendor sued for damages and the deposit. The trial judge awarded the deposit in addition to the damages. The Court of Appeal held that when an agreement only calls for the deposit to be credited to the purchase price on completion, the measure of damages is based on the difference between the purchase price and the ultimate lower sale price; accordingly, the intent of the agreement is that the deposit is applied to the purchase price whether received on completion or as damages. The court gave credit for the deposit against the damages. Purchaser had also argued that vendor ought to have accepted his offer to purchase the property for a 10% reduction in the purchase price. The court held that the duty to mitigate does not oblige a vendor to accept an offer from a defaulting purchaser for less than the agreed price and then have to sue the purchaser for the difference from the original agreed price.

No Cause of Action

Toronto Parking Authority v. BSAR (Eglinton) Ltd. 2019 Ont SCJ

Plaintiff sold land, but retained a right to purchase the retail component of the project. When it attempted to exercise this right, it found that the defendant had already sold the retail portion to someone else. The plaintiff commenced an action against the corporate defendant and the individual defendants who signed the agreement on behalf of the corporate defendant. The plaintiff claimed that the individuals had induced the corporate defendant to sell the retail component. The judge struck the allegation under Rule 21.01(1)(b) as failing to disclose a reasonable cause of action. The law is well established that individuals are not liable for a corporation’s actions unless the individuals have commenced torts of their own; merely directing the corporate entity to breach its contract is insufficient. The plaintiff then moved to amend its claim to allege that the individuals diverted the sale proceeds to themselves, stripped the corporate defendant of its assets and were acting independently of their roles as the principal and guiding minds of the corporation. These allegations were sufficient to allow the action to continue against the individuals.

Limitation – Lien Perfection

Pryers Construction Ltd v. MVMB Holdings Inc. 2019 Ont SCJ (Div Ct)

Lien claimant did not commence an action to perfect its lien within 90 days of the lien preservation expiry date. The trial judge purported to use the doctrine of “special circumstances” to extend the time. The Divisional Court overturned; the date set out in the Construction Act is a hard date and is not subject to any discretion. Worse yet, not only did the court hold that the lien was invalid, it held that the claimant’s contractual claim was also out of time, this time by way of the 2-year limitation period under the Limitations Act.

Default Judgment – Fast Practice

Shedden Investments Inc. v. Freitas 2019 Ont SCJ

Statement of claim was served May 13, 2019. On June 14, 2019, defendants’ lawyer served a notice of intent to defend (already out of time). He sought an indulgence to file the defence and explained that his clients had cognitive disabilities making it difficult for them to understand documents, which resulted in some extra time needed to investigate the claim. Without replying to the letter, the plaintiff’s lawyer moved for default judgment on June 24, 2019. The judge set aside the default judgment as of right, noting that the plaintiff’s counsel did not even “extend the courtesy of a reply. Within 11 days, he had obtained default judgment. In my view those precipitous actions were unprofessional and uncivilised.” The judge awarded substantial indemnity costs of the motion of $7,000.

Arbitration

Zenith Aluminum Systems Limited v. 2335945 Ontario Inc. 2018 Ont SCJ

The parties had agreed orally to arbitrate their dispute and had gone so far as to arrange for an arbitrator. The parties could not agree on the scope of the arbitration and pre-arbitration steps to be taken. The plaintiff commenced an action because the limitation period was fast approaching and the parties had not entered into a tolling agreement. The defendant served a withdrawal of notice of arbitration and indicated it was no longer willing to arbitrate the matter, given that the plaintiff had initiated a court action. The plaintiff brought a motion to stay its own action and to have the matter dealt with by way of arbitration. The judge declined to allow the defendant to unilaterally withdraw from its obligation under the oral arbitration agreement and ordered that the arbitration take place within 5 months.