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22 November 2023

Court Of Appeal Summaries (November 13 – November 17)

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Blaney McMurtry LLP
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Following are this week's summaries of the Court of Appeal for Ontario for the week of November 13, 2023.
Canada Litigation, Mediation & Arbitration
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Good afternoon.

Following are this week's summaries of the Court of Appeal for Ontario for the week of November 13, 2023.

In D'Silva v Algrnati, the appellant vendors who refused to close on the sale of land argued that the Agreement of Purchase and Sale became null and void due to non-compliance with severance conditions and Planning Act requirements. The Court dismissed the appeal, noting that non-compliance was as a result of the appellants' own default.

In Ontario Securities Commission v. Bridging Finance Inc, the motion judge made a finding that certain classes of owners of units in a publicly traded limited partnership that was put into receivership by the Ontario Securities Commission had priority over other unit holders as a result of s. 130.1 of the Ontario Securities Act. The Court found that the Securities Act did not contain any priority rules between claimants and allowed one of the appeals.

In Brown v. Williams, which was too short to summarize, the Court allowed the appeal and restored a defence that had been struck after moving counsel was less than candid with the court.

Other topics covered in short decisions this week included security for costs, default judgment and an estates matter.

Wishing everyone an enjoyable weekend.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Ines Ferreira
Blaney McMurtry LLP
416.593.2953 Email

Table of Contents

Civil Decisions

D'Silva v. Algranti, 2023 ONCA 758

Keywords:  Contracts, Real Property, Agreements of Purchase and Sale of Land, Remedy, Anticipatory Breach, Remedies, Specific Performance, Civil Procedure, Summary Judgment, Planning Act, RSO 1990, c P 13, ss 50(21), Morgan Trust Company of Canada v Falloncrest Financial Corporation, 2006 CanLII 38728 (C.A.)

Ontario Securities Commission v. Bridging Finance Inc., 2023 ONCA 769

Keywords:  Contracts, Interpretation, Remedies, Rescission, Securities Law, Enforcement, Bankruptcy and Insolvency, Receiverships, Priority of Claims, Pari Passu, Appeals, Standard of Review, Ontario Securities Act, RSO 1990, c S 5, ss 129. 130.1, Limited Partnerships Act, RSO 1990, c L16, s 24, Bankruptcy and Insolvency Act, RSC, 1985, c B-3, ss 14.06(7)(b) 67(3), Companies' Creditors Arrangement Act, RSC, 1985, c C-36, ss 11.8(8)(b), 18.3(2), Residential Tenancies Act, 2006, SO 2006, c 17, Ontario Business Corporations Act, RSO 1990, c. B.16, ss 221(1), 222, Personal Property Security Act, RSO 1990, c P 10, ss 30-35, Wages Act, RSO 1990, c W 1, Sattva Capital Corp. v Creston Moly Corp., 2014 SCC 53, MacDonald v. Chicago Title Insurance Co. of Canada, 2015 ONCA 842, Ledcor Construction Ltd. v Northbridge Indemnity Insurance Co., 2016 SCC 37, Mikelsteins v. Morrison Hershfield Limited, 2019 ONCA 515, Harvey v. Talon International Inc., 2017 ONCA 267, Oakville (Town) v Clublink Corporation ULC, 2019 ONCA 826, Ventas, Inc. v Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205, Century Services Inc. v. Canada (Attorney General), 2010 SCC 60, Hamilton (City) v. The Equitable Trust Company, 2013 ONCA 143

Short Civil Decisions

Brown v. Williams, 2023 ONCA 777

Keywords:  Civil Procedure, Striking Pleadings, Adjournments, Professional Responsibility, Lawyers, Duty of Candour to the Court, Bell ExpressVu Limited Partnership v. Torroni, 2009 ONCA 85

Doherty v. Doherty, ONCA 763

Keywords:  Wills and Estates, Civil Procedure, Applications

Gill v. MacIver, 2023 ONCA 776

Keywords:  Civil Procedure, Appeals, Security for Costs, Frivolous and Vexatious, Rules of Civil Procedure, r. 61, Lavallee v. Isak, 2022 ONCA 290, Pickard v. London Police Services Board, 2010 ONCA 643, Henderson v. Wright, 2016 ONCA 89, York University v. Markicevic, 2017 ONCA 651, Chemical Vapour Metal Refinishing v. Terekhov, 2016 ONSC 7080, Heidari v. Naghshbandi, 2020 ONCA 757

HSBC Bank Canada v. 1481396 Ontario Inc., 2023 ONCA 762

Keywords:  Contracts, Interpretation, Contra Proferentem, Real Property, Mortgages, Civil Procedure, Default Judgment, Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37

CIVIL DECISIONS

D'Silva v. Algranti, ONCA 758

[Pepall, van Rensburg and Monahan JJ.A.]

COUNSEL:

J. Binavince, for the appellants

W. C. McDowell, A. Quinn and E. K. Gyan, for the respondents

Keywords:  Contracts, Real Property, Agreements of Purchase and Sale of Land, Remedy, Anticipatory Breach, Remedies, Specific Performance, Civil Procedure, Summary Judgment, Planning Act, RSO 1990, c P 13, ss 50(21), Morgan Trust Company of Canada v Falloncrest Financial Corporation, 2006 CanLII 38728 (C.A.)

FACTS:

In 2017 the appellants purchased two adjoining lots on Lake Muskoka for redevelopment. One lot had a cottage and a cabin, and the other was vacant. On September 16, 2020, the parties entered into an agreement of purchase and sale (“APS”) with respect to the lot containing the cottage, cabin, and a newly built dock and boathouse (the “Property”). The APS included paragraph 15, which was a condition for Planning Act compliance by the sellers and their covenant to proceed diligently and at their expense to obtain any necessary consent by completion.

In the months that followed, it was the common understanding of the parties and their lawyers that the required severance from the Town had been obtained, and that all that remained was the provision of the relevant property identification numbers (“PINs”). The parties agreed to several amendments to the APS. One amendment was to the completion date The parties agreed that the closing would take place “as soon as possible after the land registry office issues a PIN number and legal description” and the amendment stated that the respondents' preferred date was November 6, 2020, and no later than December 15, 2020.
On October 10, the parties walked the Property together. The appellants confirmed that land severance was complete, and that they were only waiting for the PINs to be issued. On October 16, the appellants' lawyer informed the respondents' lawyer that her clients did not want to move forward with the sale. The respondents refused to terminate the APS.
On December 14, the respondents' lawyer confirmed that his clients remained ready and willing to purchase the Property regardless of their stated preference for a closing of December 15.

The respondents commenced an action on January 15, 2021, claiming that the appellants breached the APS and sought specific performance. The respondents moved for summary judgment. The appellants' position was that the APS had become null and void on November 5, 2020. The motion judge rejected this argument. She concluded that the September 24 email from the appellants' lawyer contained a clear and unequivocal representation that everything had been completed.

The appellants argued in the alternative that the APS had come to an end on December 22. The motion judge rejected this argument. She referred to what had taken place in the days preceding December 22, concluding that the appellants were essentially relying on their own defaults to terminate the APS. The motion judge also rejected the appellants' argument that the APS was void for uncertainty because the legal description of the Property did not provide any rights of way to access the road.

ISSUES:

1. Did the motion judge err in rejecting the argument that the APS became null and void on November 5?
2. Did the motion judge err in concluding that the APS was not terminated on December 22, 2020?

HOLDING:

Appeal dismissed.

REASONING:

1. No.

The appellants argued it was wrong for the motion judge to conclude that the September 24 email from their lawyer to the respondents' lawyer constituted compliance with the severance condition or their waiver of the condition. The Court disagreed and found that the motion judge drew a reasonable inference from the references in the September 24 email from the appellants' lawyer which asserted her understanding that severance had been obtained, and “was intended to provide assurance to the respondents that they could rely on, and have confidence in, her representation that everything was completed, and the condition regarding consent to severance was moot”. The motion judge reasonably concluded that the representation was intended to be relied on and was in fact relied on by the respondents.

2. No.

First, the Court disagreed with the contention that the motion judge erred in her interpretation of para. 15 of the APS, when she failed to hold that the APS was null and void when the Planning Act condition was not met on the completion date. The appellants only referred to the opening phrase of s. 50(21) of the Planning Act. Section 50(21) must be read in full: [A]n agreement, conveyance, mortgage or charge made, or a power of appointment granted, assigned or exercised in contravention of this section or a predecessor thereof does not create or convey any interest in land, but this section does not affect an agreement entered into subject to the express condition contained therein that such agreement is to be effective only if the provisions of this section are complied with. [Emphasis Added.]

The effect of para. 15, combined with para. 10 of the standard form APS, is that vendors are required to do what is required to obtain Planning Act approval. Section 50(21) remedies an agreement that would otherwise contravene the Planning Act where, as here, the agreement is subject to an express condition that it is to be effective only if the subdivision control provisions of the Planning Act are complied with.

Second, the motion judge did not err in holding that the appellants failed to act diligently to obtain the required consents, and therefore were in breach, and not permitted to rely on the finality clause to terminate the APS. This conclusion was grounded in the fact and expert evidence on the motion. The motion judge found that the appellants failed to take steps to rectify the Planning Act issues after December 21, 2020, although there were further steps available. Whether or not the appellants' refusal to take steps post-closing could be considered a breach of their obligations under the APS, there was no evidence that they discharged their obligations before the extended closing date of December 22. Their refusal to take any further steps when it was brought to their lawyer's attention that more was required to be done was reasonably considered by the motion judge to be inconsistent with their obligations under the APS.

Third, the motion judge did not err in finding the respondents waived their objection to title. The respondents' waiver and the practical requirement for post closing co-operation must be considered in context. After the appellants' lawyer communicated that they would take no further steps to address the conveyancing issues, the respondents' lawyer indicated that his clients remained willing to close the transaction, and that they were prepared to rectify the conveyancing issues at their own cost. It was the appellants who had proceeded with the initial severance application and subsequent dealings with the Town. The appellants had a duty to rectify the issues and co-operate in the correction of the conveyances.

Ontario Securities Commission v. Bridging Finance Inc., 2023 ONCA 769

[van Rensburg, Hourigan and Favreau JJ.A.]

COUNSEL:

R. Staley and D. Fenton, for the appellant, General Unitholders (COA23-CV-0559), and the respondent, General Unitholders (COA-23-CV-0560 and COA-23-CV-0514)

G. H. Finlayson and M. G. Smith, for the respondent, Outside Quebec Misrepresentation Claimants (COA-23-CV-0559)

S. Rigaud, E. Bédard, E. St-Pierre and J. Bouzaglou, for the respondent, Quebec Misrepresentation Claimants (COA-23-CV-0559), and the appellant, Quebec Redemption Claimants (COA-23-CV-0560)

R. English and M. J. van Zandvoort, for the appellant, Outside Quebec Redemption Claimants (COA-23-CV-0514)

J. L. Finnigan, G. B. Moffat and A. Driedger, for the respondent, PricewaterhouseCoopers Inc. (COA-23-CV-0514 and COA-23-CV-0560)

Keywords:  Contracts, Interpretation, Remedies, Rescission, Securities Law, Enforcement, Bankruptcy and Insolvency, Receiverships, Priority of Claims, Pari Passu, Appeals, Standard of Review, Ontario Securities Act, RSO 1990, c S 5, ss 129. 130.1, Limited Partnerships Act, RSO 1990, c L16, s 24, Bankruptcy and Insolvency Act, RSC, 1985, c B-3, ss 14.06(7)(b) 67(3), Companies' Creditors Arrangement Act, RSC, 1985, c C-36, ss 11.8(8)(b), 18.3(2), Residential Tenancies Act, 2006, SO 2006, c 17, Ontario Business Corporations Act, RSO 1990, c. B.16, ss 221(1), 222, Personal Property Security Act, RSO 1990, c P 10, ss 30-35, Wages Act, RSO 1990, c W 1, Sattva Capital Corp. v Creston Moly Corp., 2014 SCC 53, MacDonald v. Chicago Title Insurance Co. of Canada, 2015 ONCA 842, Ledcor Construction Ltd. v Northbridge Indemnity Insurance Co., 2016 SCC 37, Mikelsteins v. Morrison Hershfield Limited, 2019 ONCA 515, Harvey v. Talon International Inc., 2017 ONCA 267, Oakville (Town) v Clublink Corporation ULC, 2019 ONCA 826, Ventas, Inc. v Sunrise Senior Living Real Estate Investment Trust, 2007 ONCA 205, Century Services Inc. v. Canada (Attorney General), 2010 SCC 60, Hamilton (City) v. The Equitable Trust Company, 2013 ONCA 143

FACTS:

Bridging Finance Inc. (“Bridging”) is a privately held investment management firm which offered alternative investment options to retail and institutional investors through its investment vehicles (collectively, “Bridging Funds”). Bridging raised capital from investors through the sale of units (“Units”).

Serious issues arose regarding the operations of Bridging. On April 30, 2021, the Ontario Securities Commission (“OSC”) issued an application requesting an order pursuant to s. 129 of the Ontario Securities Act (“OSA”) to place the Bridging Funds into receivership. Bridging was ordered not to redeem existing Units in any of the Bridging Funds. In addition, on April 30, 2021, the OSC issued a temporary order (the “Temporary Order”) to cease trading the securities of most of the Bridging Funds.

The “General Unitholders” were those Unitholders that have not opted out of representation by the Representative Counsel for the General Unitholders, and are neither Statutory Rescission Claimants nor Redemption Claimants.

Following the appointment of the Receiver, certain Unitholders and their advisors informed the Receiver that they may wish to pursue and/or preserve certain rights of rescission or rights of action for damages that arose before the Appointment Order as a result of alleged misrepresentations contained in the offering memoranda. These investors (the “Statutory Rescission Claimants”) asserted that they should have a priority claim on the assets of the Bridging Funds.

Other Unitholders provided notice of their intention to redeem Units in the Bridging Funds prior to the Date of Appointment and the Temporary Order and had redemption dates on or before April 30, 2021. However, due to the Temporary Order and the Appointment Order, such redemptions were not completed (the “Redemption Claims”). Those investors (the “Redemption Claimants”) also submitted that they should have had a priority claim over the assets of the Bridging Funds.

The Receiver brought a motion seeking an order declaring that the Redemption Claims and the Statutory Rescission Claims had no priority over the claims of the General Unitholders (i.e., those investors who had not opted out) and an order that all Unitholders shall rank pari passu with respect to the distribution of the proceeds of the Bridging Funds.

The motion judge ordered that the Statutory Rescission Claims had priority over the General Unitholders' Claims and that the Redemption Claims did not have priority over the General Unitholders' Claims. He further ordered that the Redemption Claims and the General Unitholders' Claims shall rank pari passu with respect to the distribution of the proceeds of the Bridging Funds.

ISSUES:

1. What is the appropriate standard of review?
2. Did the motion judge err in finding that the Redemption Claims are not entitled to any priority over the General Unitholders' Claims?
3. Did the motion judge err in finding that the Rescission Claims are entitled to priority over the General Unitholders' Claims?
4. Should all Unitholders rank pari passu with respect to the distribution of proceeds of the Bridging Funds?

HOLDING:

Appeal of the Redemption Claimants dismissed. Appeal of the General Unitholders allowed.

REASONING:

1. Correctness.

The standard of review of a decision interpreting a contract depends on the nature of the contract. The constating documents were contracts of adhesion and there was no relevant factual matrix that formed part of the contractual analysis. Further, the interpretation of the OSA, as a statute of general application, must be reviewed on a correctness standard.

2. No.

The Court found that the motion judge correctly determined that the claims had not crystallized as at the time of the Appointment Order and that they were still subject to Bridging's discretion to refuse to honour or postpone the redemption requests.

The Redemption Claimants' core argument was that the constating documents created an enforceable liability pursuant to which they are required to be paid within 30 days of the applicable Valuation Date. The motion judge concluded that the “fatal problem with this argument is that the redemption requests of these Redemption Claimants had not been completed.” He reasoned that the Unitholders who provided a notice to redeem but whose payments had not been issued by Bridging at the time of the Appointment Order had incomplete redemption requests because they were not priced, contracted, or paid out. In addition, the motion judge found that the redemption was subject to Bridging's overall discretion to refuse or postpone a redemption request.

The Redemption Claimants made two primary arguments: 1) they argued that the motion judge did not take into consideration the clear language of all the redemption provisions, including the language that provides that a redemption request becomes an enforceable liability on the Redemption Date. 2) they argued that the motion judge erred in considering post-contractual internal practices of the Fund Administrator as evidence supporting his derogation from the parties' constating documents.

The Court rejected these arguments, noting that contracts are to be interpreted as a whole, in a manner that gives meaning to all of their terms and avoids an interpretation that would render one or more of the terms ineffective. They are also to be interpreted in a fashion that accords with sound commercial principles and good business sense, and that avoids a commercial absurdity.

3. Yes.

The motion judge found that the Statutory Rescission Claims were entitled to priority over the General Unitholders' Claims and that the remedy for these claimants must be meaningful, Accordingly, he imposed a constructive trust. The Court disagreed with how the motion judge arrived at this conclusion. It appeared that there were two possible sources for the priority granted by the motion judge to the Statutory Rescission Claims: (a) the wording of s. 130.1 of the OSA, and (b) the nature of the rescission remedy.

(a) Section 130.1 of the OSA

The motion judge grounded his reasoning regarding the remedy by relying on s. 130.1 of the OSA. The Court noted that priority cannot be grounded in the OSA, as there is nothing in the language of the statute that suggests that the legislature intended to grant a priority. When legislatures grant priorities, they do so in clear and unambiguous terms. The ordinary meaning of a legislative provision is deemed to be the meaning intended by the legislature, unless compelling reasons exist to justify a departure from the ordinary meaning. The Court noted that courts have held that the absence of express statutory language was fatal to claims for statutory priority.

The Court noted that the whole point of creating statutory priorities was to alert the world regarding the distribution scheme for a given fund. The idea was to create certainty so that claimants understand where they stand relative to other claimants. A clear priority scheme also made it easier for courts to adjudicate competing claims. They were not required to examine the equities of the positions of the parties but are only obliged to implement the existing rules. The important public policy objectives of certainty, transparency, and efficiency underlying statutory priorities would be eroded if courts presumed an intention of a legislature to create a priority. The Court declined to presume a priority in this case.

(b) The Nature of the Rescission Remedy

The argument advanced by the Statutory Rescission Claimants was that rescission was a proprietary remedy, which puts the claimant in a position where the contract is void ab initio.
The competing claims were the General Unitholders' Claims, which, as mentioned, were the claims that are not Statutory Rescission Claims or Potential Redemption Claims. In the Agreed Statement of Facts, the parties referenced a court order that tolled limitation periods for certain claims. Included in this list were claims for damages or rescission pursuant to “any common law or civil law rights.”

The General Unitholders' Claims included common law claims to rescission. In other words, there was a subclass of Unitholders who could potentially assert a successful common law claim for rescission. The Court found, based on this, that there was no basis to award a priority to the Statutory Rescission Claimants over those with common law claims to rescission. Regardless of how the claim for rescission is established, the nature of the remedy was identical. Thus, the motion judge erred in finding that the Statutory Rescission Claimants have a “different relationship to the assets.”

In summary, neither the wording of s. 130.1 of the OSA nor the nature of the remedy of rescission provided a basis for finding that the Statutory Rescission Claimants have a priority. Accordingly, the Court granted the General Unitholders' appeal.

4. Yes.

There was no basis to find a priority for either the Redemption Claims or the Statutory Rescission Claims. Therefore, the Unitholders should share pari passu. This was consistent with the constating documents of the Bridging Funds, which provided that holders of Units had the same rights and obligations as all other holders of the same class or series of Units.

SHORT CIVIL DECISIONS

Brown v. Williams, 2023 ONCA 777

[Miller, Paciocco and Nordheimer JJ.A.]

COUNSEL:

J.W., acting in person

M.A. Klaiman, for the respondent

Keywords:  Civil Procedure, Striking Pleadings, Adjournments, Professional Responsibility, Lawyers, Duty of Candour to the Court, Bell ExpressVu Limited Partnership v. Torroni, 2009 ONCA 85

Doherty v. Doherty  , 2023 ONCA 763

[Lauwers, Hourigan and Coroza JJ.A.]

COUNSEL:

T.R.D. and S.J.D., acting in person

K. Gale and P. Mahajan, for the respondent

Keywords:  Wills and Estates, Civil Procedure, Applications

Gill v. MacIver, 2023 ONCA 776

[Roberts J.A. (Motion Judge)]

COUNSEL:

B. Radnoff and D. Seifer, for the respondent/moving party, The Pointer Group Incorporated

J.G. Saikaley and A.Brunet, for the appellant/responding party, Dr. K.K.G.

Keywords:  Civil Procedure, Appeals, Security for Costs, Frivolous and Vexatious, Rules of Civil Procedure, r. 61, Lavallee v. Isak, 2022 ONCA 290, Pickard v. London Police Services Board, 2010 ONCA 643, Henderson v. Wright, 2016 ONCA 89, York University v. Markicevic, 2017 ONCA 651, Chemical Vapour Metal Refinishing v. Terekhov, 2016 ONSC 7080, Heidari v. Naghshbandi, 2020 ONCA 757

HSBC Bank Canada v. 1481396 Ontario Inc., 2023 ONCA 762

[Lauwers, Hourigan and Coroza JJ.A.]

COUNSEL:

M. Z. Tufman, for the appellants

J. P. E. Hardy, for the respondent

Keywords:  Contracts, Interpretation, Contra Proferentem, Real Property, Mortgages, Civil Procedure, Default Judgment, Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be ought about your specific circumstances.

ARTICLE
22 November 2023

Court Of Appeal Summaries (November 13 – November 17)

Canada Litigation, Mediation & Arbitration
Contributor
Founded and based in Toronto's financial district, Blaney McMurtry is recognized as a Top 10 Regional Law Firm with 125+ lawyers. We are very proud to have been recognized and ranked for our top level expertise in litigation & advocacy, real estate and business law. Visit blaney.com to learn more.
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