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Case Law is a sample selection from the weekly summaries of notable unreported civil and criminal court decisions published in Law Times newspaper.

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Bankruptcy and Insolvency

Bankruptcy and receiving orders
Rescission or stay of order

Receiver should have responsibility for evaluating claims of secured creditors

Debtor company became insolvent. Receiver was appointed by court and sold debtor’s assets. Debtor made assignment into bankruptcy without leave of court or consent of receiver. Trustee in bankruptcy purported to disallow claim of secured creditor. Secured creditor brought motion to stay bankruptcy proceeding until after receiver completed its evaluation of secured creditors’ claims. Motion granted in part. Leave granted for bankruptcy proceeding to continue, in tandem with receivership, before same judge. Receiver should have responsibility for evaluating claims of secured creditors. It would be unfortunate if receiver and trustee had to duplicate work or work at cross purposes. Because receivership was put in place first and because bankruptcy was initiated without court approval, receiver was authorized to complete its work. Trustee had right to be heard both as trustee and as holder of debtor’s residual rights, right to be informed of steps taken by receiver and right to take position when report was submitted for court approval. If receiver and trustee reached different conclusions on status and quantum of secured claims, hearing would be required in receivership.
Royal Bank of Canada v. Casselman PHBC Ltd. (2017), 2017 CarswellOnt 10241, 2017 ONSC 4107, Calum MacLeod J. (Ont. S.C.J.).

Alternative Dispute Resolution

Relation of arbitration to court proceedings

Stay of court proceedings

Judge refusing partial stay as unreasonable to separate consumer and non-consumer claims

Plaintiffs claimed defendant phone companies engaged in undisclosed billing practices of “rounding up” calls to next minute. Defendants’ contracts contained mandatory arbitration clause but pursuant to s. 7(2) of Consumer Protection Act, claims in respect of consumer contracts can proceed in court. Motions judge granted plaintiffs’ motions to certify actions as class proceedings and dismissed defendants’ motion for stay of non-consumer claims pursuant to s. 7(5) of Arbitration Act, 1991. In refusing to grant partial stay, judge followed Ontario Court of Appeal decision in G case, which she concluded had not been overtaken by Supreme Court of Canada decision in S case. Judge determined it would be unreasonable to separate consumer and non-consumer claims. Defendants appealed denial of partial stay of non-consumer claims. Appeal dismissed. Judge’s decision to refuse stay was upheld. Judge was correct in applying G case to determine whether partial stay of proceedings should be granted under s. 7(5) of Arbitration Act, 1991 in proposed class proceeding involving both consumer and business customer claims. While both G case and S case involved arbitration clauses in context of proposed class proceeding, S case was decided under relevant laws of BC, which differed in material ways from those of Ontario. Arbitration agreement did not oust jurisdiction of court. G case remained good law in respect of proceedings commenced in Ontario, and had not been overtaken by S case. Judge did not refuse stay of proceedings of arbitrable claims based on conclusion that class action would be preferable procedure.
Wellman v. TELUS Communications Company (2017), 2017 CarswellOnt 8100, 2017 ONCA 433, K.M. Weiler J.A., R.A. Blair J.A., and K. van Rensburg J.A. (Ont. C.A.); affirmed (2014), 2014 CarswellOnt 16562, 2014 ONSC 3318, Conway J. (Ont. S.C.J.).

Bankruptcy and Insolvency

Proving claim

Provable debts

Fund liquidators failed to establish damages

British Virgin Islands fund, F Ltd., was part of group (F Group) which provided funds on behalf of itself and S Ltd. and L Ltd. to B’s security brokerage, B LLC, for investment. In December 2008, B was arrested for operating Ponzi scheme and trustee and liquidator was appointed under US Securities Investor Protection Act (SIPA) to collect and set aside fund of BLMIS customer property for distribution among BLMIS customers. SIPA trustee sought return of 3.5 billion from F Group. F Ltd. filed claims in SIPA proceeding. In 2011, liquidator appointed for F Ltd., K, agreed to pay SIPA trustee $70 million, parties consented to judgments in favour of SIPA trustee against each F Group fund, and F Ltd. was granted $230 million claim in SIPA proceeding. F Group brought action in breach of contract and negligence against auditor of its 2006 and 2007 financial statements for failing to discover and disclose Ponzi scheme, claiming US $2.577 billion difference between actual and estimated liquidation deficits had auditors discovered scheme earlier. Auditor admitted negligence. Auditor brought motion for summary judgment. Motion granted; action dismissed. Liquidators failed to establish damages so there was no genuine issue requiring trial. Evidence of auditor’s witness that F Group were better off by some $857,500,000 was accepted. Liabilities of F Group or their liquidators to SIPA trustee or customers of B LLC were incorrectly included in calculations. Net liability figure $2,329,525,000 used in calculation was invalid. Investments S Ltd. and L Ltd. made in B LLC were double-counted. Phantom earnings were included in calculations based on fictitious entries on B LLC statements. Hypothetical, statute-barred claims of B LLC investors against F Fund were included in calculations. Liquidators gave no details as to claims they rejected or included in damage calculation and no details of separate proceedings in BVI in which F Group were allegedly liable to investors.
Fairfield Sentry Limited et al v. PwC et al (2017), 2017 CarswellOnt 8995, 2017 ONSC 3447, Newbould J. (Ont. S.C.J. [Commercial List]).

Civil Practice and Procedure

Class and representative proceedings

Representative or class proceedings not under class proceedings legislation

Failure to obtain representation order within two year limitation period was fatal to action

Limitation period. Family-owned meat processing business went bankrupt and 800 employees were terminated without notice or severance. Two actions were commenced against bankrupt businesses, other allegedly family-owned companies and two individuals alleged to be common employers. Actions were intended to be representative actions, one on behalf on unionized employees and one on behalf of non-unionized employees, and sought damages for wrongful dismissal as well as punitive damages on basis of common employer, conspiracy and oppression. Solvent defendants brought motion to dismiss representative actions on basis they were time-barred because required representation order was not obtained within two-year limitation period. Motion granted in part; action on behalf of unionized employees dismissed. Failure to obtain representation order within two-year limitation period was fatal to action on behalf of unionized employees, because it was brought under R. 12.08 of Rules of Civil Procedure, which required representation order be made before proceeding was commenced. Action on behalf of non-unionized employees was brought under R. 10.01, which contemplated prior proceeding and later representation order. Nothing in R. 10.01 plainly and obviously required representation order be obtained within two-year period. Action on behalf of non-unionized employees could proceed, on proviso plaintiffs apply for representation order forthwith, upon which defendants could pursue arguments about balance of convenience and prejudice.
Caetano v. Quality Meat Packers Holdings Ltd. (2017), 2017 CarswellOnt 4093, 2017 ONSC 1199, Edward P. Belobaba J. (Ont. S.C.J.).

Construction Law

Construction and builders’ liens

Practice on enforcement of lien

Motion by third party to validate fourth party claim nunc pro tunc granted

Defendant in action brought under Construction Lien Act added third party without leave. Claim was not limited to contribution and indemnity. Third party added fourth parties without seeking leave. Fourth party claim was limited to contribution and indemnity. Plaintiff’s statement of claim and claim for lien were dismissed. Order said third party claim survived but said nothing about fourth party claim. Motion by third party to validate fourth party claim nunc pro tunc was granted. Fourth parties appealed on basis that limitation period for third party to bring claim had expired before leave was sought. Appeal dismissed. Motion judge correctly found that intention of order dismissing statement of claim and claim for lien, made on consent of third party, was to continue action on “ordinary track”. After disposing of lien claim entirely, order stated that third party claim, seeking damages for breach of contract and negligence in addition to contribution and indemnity, would “survive”. Since only claims for contribution and indemnity are permitted in construction lien third party proceedings under s. 56 of Act, third party claim that asserts other claims can only proceed on ordinary track. Accordingly, motion judge adopted only reasonable interpretation that could be given to order. Decision to allow third party to continue fourth party claim was correct. However, since third party proceedings continued on ordinary track, there was no need for nunc pro tunc order for leave.
Bentivoglio v. Groupe Brigil Construction (2017), 2017 CarswellOnt 7511, 2017 ONCA 413, H.S. LaForme J.A., K. van Rensburg J.A., and Grant Huscroft J.A. (Ont. C.A.); affirmed (2016), 2016 CarswellOnt 3318, 2016 ONSC 1237, W.D. Newton J. (Ont. S.C.J.).

Civil Practice and Procedure

Class and representative proceedings

Representative or class proceedings under class proceedings legislation

Class plaintiffs permitted to plead unlawful means conspiracy claim

Plaintiffs brought competition law class action on behalf of direct and indirect purchasers in two distribution channels in marketplace for rechargeable lithium ion batteries. Motion judge granted plaintiffs’ motion to certify class action. Plaintiffs satisfied cause of action criterion only for statutory cause of action under ss. 36 and 45 of Competition Act. Judge did not certify claim for umbrella purchasers because it was plain and obvious that umbrella purchasers did not have reasonable cause of action. Judge did not certify claims for unlawful means conspiracy and unjust enrichment because they failed to satisfy cause of action criterion and had been precluded by statutory cause of action. Plaintiffs, with leave, appealed denial of certification of unlawful means conspiracy claim and umbrella purchaser claims. Appeal allowed in part. Judge erred in denying certification of unlawful means conspiracy claim. Court of Appeal had permitted amendment to plead unlawful means conspiracy in similar case and on principle of stare decisis, this court was bound to follow that decision. Judge did not err in denying certification of umbrella purchaser claims. Four reasons advanced by defendants did not provide proper basis to conclude that umbrella purchasers did not have reasonable cause of action. Judge was right to conclude that allowing claims by umbrella purchasers would expose defendants to indeterminate liability. Claim of umbrella purchasers did not satisfy criterion under s. 5(1)(a) of Class Proceedings Act. Plaintiffs failed to plead requisite elements of claim that could be advanced for umbrella purchasers. No common issues were proposed respecting claims of umbrella purchasers, nor was there proposed representative plaintiff for umbrella purchasers.
Shah v. LG Chem, Ltd. (2017), 2017 CarswellOnt 6145, 2017 ONSC 2586, Kiteley J., Nordheimer J., and LeMay J. (Ont. Div. Ct.); reversed (2015), 2015 CarswellOnt 15099, 2015 ONSC 6148, Perell J. (Ont. S.C.J.).

Civil Practice and Procedure

Class and representative proceedings

Representative or class proceedings under class proceedings legislation

Impossible to certify class action against American defendants

Plaintiffs B and P were two former junior hockey players, who played in defendant league based in both Ontario and two U.S. states. B and P claimed that league and its defendant member clubs had violated employment law, by not paying them at least minimum wage. B and P proposed class action, on behalf of three classes of players based in Ontario, Michigan and Pennsylvania. League and clubs claimed that B and P were not proper representative plaintiffs. League and clubs claimed that common issues could not be found between Canadian and American-based players, due to operation of American state law. B and P moved for certification of action as class action. Motion granted in part. Class action certified on issues of breach of employment standards and unjust enrichment. Action not certified against American clubs. B and P certified as representative plaintiffs. Criteria for class action was met for all pleaded causes of action. Issues of American law would make it impossible for common issues to be litigated, for all proposed plaintiffs. Preferable procedure would be for American-based plaintiffs to litigate matter in corresponding state courts. Identifiable class was certified as Ontario-based plaintiffs, between 2012 season and date of certification motion.
Berg v. Canadian Hockey League (2017), 2017 CarswellOnt 6227, 2017 ONSC 2608, Perell J. (Ont. S.C.J.).
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An estate trustee who took an ‘egregious' position in litigation has been ordered to personally pay more than $140,000 in costs. Will this ruling serve as an appropriate caution to executors on how they conduct themselves in litigation?
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