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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

Companies’ Creditors Arrangement Act

Arrangements

Canadian debtors’ plan of compromise and arrangement was sanctioned

Global telecommunications company with corporate entities in many jurisdictions (debtors) became insolvent. Canadian debtors were granted Companies’ Creditors Arrangement Act protection. Dispute arose regarding $7.3 billion held in escrow after sale of debtors’ assets (allocation dispute), which involved protracted litigation in Canada and U.S. with various parties from multiple jurisdictions. Parties executed settlement and support agreement (Agreement). Monitor brought motion to sanction Canadian debtors’ plan of compromise and arrangement (Plan) and to release escrowed sale proceeds in accordance with Agreement. Motion granted. Plan sanctioned. Release of sale proceeds authorized in manner set out in Agreement. Plan was fair and reasonable. Plan received approval from 99.7 percent of creditors and called for payment to creditors on pari passu basis, which was bedrock of Canadian insolvency law. Objections to approval of Plan by long-term disability (LTD) beneficiaries were dismissed. LTD claimants were bound to prior agreement that their claims were to rank as unsecured claims that shared pari passu with other unsecured claims against Canadian debtors and that any claim for priority treatment had been released. Plan was not contrary to ss. 7 and 15 of Charter of Rights and Freedoms with respect to LTD claimants.
Nortel Networks Corp., Re (2017), 2017 CarswellOnt 1120, 2017 ONSC 700, Newbould J. (Ont. S.C.J. [Commercial List]).

Professions and Occupations

Barristers and solicitors

Negligence

Negligence claim against lawyer was ordered to proceed to trial

Lawyer G represented plaintiffs in settlement of tort and accident benefit claims. Plaintiffs retained lawyer C with respect to issues with retainer of G. Plaintiffs brought claims against C, which were dismissed on summary judgment motion. Motion judge found that plaintiffs retained C to represent them only with respect to assessment of G’s accounts, and that they did not retain C in relation to any possible negligence action against G. Judge found that C advised plaintiffs to seek legal advice on negligence issue. Judge found that C did not owe plaintiffs duty of care to either pursue or provide them with legal advice about possible negligence action, including limitation period. Plaintiffs appealed. Appeal allowed; trial ordered. Judged erred in determining that C met burden to establish that there was no genuine issue for trial on issue of duty of care to advise as to limitation period. Where it is alleged that lawyer’s duty of care arises out of and extends beyond retainer, court must meticulously examine all relevant surrounding circumstances, including form and nature of client instructions and sophistication of client, to determine whether duty is owed beyond four corners of retainer. This was not done in present case. Judge did not explain how she was able to conclude that C did not owe plaintiffs duty to advise about existence of limitation period. There was change over course of C’s assessment retainer of his views about competency of G’s representation; C advised plaintiffs that in assessment proceeding they should allege G had been negligent; and, C advised plaintiffs that they might have negligence claim against G. Judge did not take into account all material facts.
Meehan v. Good (2017), 2017 CarswellOnt 1351, 2017 ONCA 103, Janet Simmons J.A., David Brown J.A., and L.B. Roberts J.A. (Ont. C.A.).

Financial Institutions

Issuance of credit
Miscellaneous

Creditor’s action against bank for declaration that it had priority over funds was dismissed

Overdrafts. Creditor financed its sale of debtor with vendor take back note that was secured by general security agreement covering debtor’s assets. Debtor started using services of bank H after creditor refused to subordinate its security to bank H. Debtor opened two related chequing accounts in different currencies and obtained company credit card. Accounts did not allow overdrafts, but debtor frequently went into overdraft and provided funds to cover overdrafts before cheques were at risk of being dishonoured. After debtor went bankrupt, creditor brought action against bank H for declaration that it had priority over funds in accounts used to pay overdrafts and credit card debt and for payment of amounts alleging owing. Creditor brought motion for summary judgment, and bank brought cross-motion for summary judgment dismissing action. Motion dismissed; cross-motion granted. Creditor had not established bank H had extended credit to debtor by way of overdrafts. Overdrafts were created when bank made decision to cover cheque that put account into negative balance. Under bank H’s system, decision to create overdraft could not be made until day after cheque was posted to account. Until such time as bank H made decision to honour or return cheque, it was not providing any credit to debtor or assuming any risk on debtor’s behalf. Debtor always covered cheques with its own funds before bank H made decision to honour cheque, and interest charges were in nature of penalty rather than proof of loan.
Kari Holdings Inc. v. HSBC Bank Canada (2017), 2017 CarswellOnt 566, 2017 ONSC 437, Conway J. (Ont. S.C.J.).

Criminal Law

Prisons and prisoners
Regulation

Corrections Officer’s negligence caused inmate’s injuries

Plaintiff gang member (inmate) was sent to defendant province’s pre-trial detention facility with policy of distributing members of same gang as evenly as possible throughout facility. Corrections Officer (CO), A, applied policy and housed inmate in unit with R, high-level member of rival street gang who was on trial for alleged crimes committed in altercation with inmate’s gang. Inmate requested protective custody on prior occasion, but not on current occasion. Inmate was attacked, dragged to another area, beaten viciously by several people. Inmate brought successful action against province for damages for negligence. Trial judge held that policy fell squarely within category of policy decisions and was not justiciable, that A’s failure to take circumstances into account while fulfilling policy’s distribution requirement amounted to negligent conduct, that inmate compatibility should have formed part of calculus, that inmate’s failure to request protective custody did not absolve province from liability, that A ought to have known R posed risk to rival gang members, that layout of facility allowed prolonged attack to go undetected, and that inmate’s injuries were direct result of A’s negligence. Province appealed. Appeal dismissed. Read holistically, trial judge’s “duty of care” analysis disclosed no legal error. Trial judge’s findings of breach of that duty and causation of damage disclosed neither “palpable and overriding” error of fact nor error concerning “extricable question of law”. Trial judge did not conflate concepts of direct and vicarious liability or otherwise fail to apply principle that province’s liability had to derive from actionable negligence of specific CO. Trial judge did not hold that institution-level conduct of gathering and sharing information could ground liability but considered inter-institutional knowledge and sharing of information about R within government in support of conclusion that A knew or ought to have known of threat posed to inmate. Any liability of province flowing from these facts flowed through A’s negligence in housing inmate with R. Trial judge’s finding that A breached standard of care had sufficient evidentiary basis. Trial judge’s finding that A should have known not to place inmate in same unit as R did not disclose “palpable and overriding error” justifying court’s intervention. Trial judge did not unreasonably conclude that negligence of COs caused inmate’s injuries.
Walters (Litigation guardian of) v. Ontario (2017), 2017 CarswellOnt 574, 2017 ONCA 53, G.R. Strathy C.J.O., H.S. LaForme J.A., and K. van Rensburg J.A. (Ont. C.A.); affirmed (2015), 2015 CarswellOnt 12001, 2015 ONSC 4855, Gans J. (Ont. S.C.J.).

Conflict of Laws

Enforcement of foreign judgments

Defences

Foreign judgments are not exempt from limitation period under Limitations Act (Ont.)

Plaintiff obtained judgment in United States against defendant, and defendant’s appeal was dismissed. Plaintiff’s application in Ontario to enforce foreign judgment was granted, with dismissal of defendant’s defence arguing that limitation period commenced from date of first-instance judgment and not from dismissal of appeal. Defendant appealed. Appeal dismissed. Class of claims subject to no limitation period under s. 16 of Limitations Act, including in s. 16(1)(b) of Act to enforce order of court, did not include to proceeding on foreign judgment. Debt obligation created by foreign judgment could not be directly enforced as proceeding within province had to be brought first. Term “order of court” referred to order of domestic court, which could only be obtained if underlying cause of action was not time-barred whereas proceeding underlying foreign judgment had not passed any Ontario limitations hurdle. Other claims grouped together in s. 16 of Act were those considered so important that would be no limitation period. It would contrary to purpose of Act to exempt foreign judgments from limitation period, since problems associated with preservation and reliability of evidence were especially pronounced for foreign judgment debtors. Applicable limitation period was basic two-year period from when claim was discovered meaning that commencing proceeding was “appropriate” which meant “legally appropriate”. It was not legally appropriate to commence legal proceeding in Ontario on foreign judgment until time to appeal foreign judgment had expired or all appeal remedies had been exhausted. Plaintiff’s claim based on foreign judgment was discoverable when appeal was dismissed and so proceeding was commenced within limitation period.
Independence Plaza 1 Associates, L.L.C. v. Figliolini (2017), 2017 CarswellOnt 374, 2017 ONCA 44, George R. Strathy C.J.O., G. Pardu J.A., and David Brown J.A. (Ont. C.A.).

Commercial Law

Trade and commerce

Consumer protection

Waiver of liability was read down in accordance with doctrine of notional severance

Plaintiff voluntarily purchased season pass at ski resort and agreed to waiver for recreational use of defendant’s property. Plaintiff brought action for negligence related to injury while skiing at defendant’s ski resort. According to Consumer Protection Act, if consumer signs waiver of liability with supplier that waiver was unenforceable as it related to substantive and procedural rights that were protected by Act. Section 7(1) vitiates waiver of Act rights and returns them to consumer. Plaintiff wanted s. 7 of Act to interpret it in manner so as to vitiate defendant’s entire comprehensive waiver/release of liability which he signed. Plaintiff’s proposed interpretation of s. 7(1) of Act would have effect of eliminating protections afforded to occupiers by virtue of ss. 3(3) and 5(3) of Occupiers Liability Act which allows for waiver of liability for negligence claims. Plaintiff brought motion for judicial determination of question of law concerning application and breadth of s. 7(1) of Consumers Protection Act. Motion granted. Particular right at issue was deemed warranty that consumer shall receive services of reasonably acceptable quality as articulated in s. 9(1) of Consumer Protection Act. By operation of s. 7(1) of Act defendant could not disclaim liability for any breach of deemed warranty contemplated by s. 9(1) of Consumer Protection Act. Defendant’s waiver was read down in accordance with doctrine of notional severance to exclude from its ambit claims that involve protection of substantive and procedural rights contemplated by Act and remainder of waiver remained enforceable. To strike whole waiver, when waiver contemplated more than just consumer protection claims, would be contrary to legislative intent of Consumer Protection Act.
Schnarr v. Blue Mountain Resorts Ltd. (2017), 2017 CarswellOnt 373, 2017 ONSC 114, E.R. Tzimas J. (Ont. S.C.J.).

Civil Practice and Procedure

Costs

Scale and quantum of costs

Corporation’s application for determination of rights was dismissed

Corporation R Inc. and taxpayer K entered into minutes of settlement of taxpayers’ employment action. Corporation concluded that its obligation under Income Tax Act was to withhold and remit to Canada Revenue Agency on account of full $1.5 million settlement amount. Corporation brought application for determination of rights, and taxpayer brought motion for summary judgment for minutes to be enforced. Application judge dismissed corporation’s application and partially granted taxpayer’s motion, and awarded taxpayer costs of $28,565. Court of Appeal allowed corporation’s appeal from judgment granting taxpayer’s motion for summary judgment but dismissed corporation’s appeal of dismissal of its application as moot. Corporation was awarded costs of appeal in amount of $15,000 inclusive of disbursements and taxes. Parties made submissions on costs of original application and motion. Corporation was awarded costs of $28,565 for court below. Corporation’s offer to settle was of no relevance since it was made to settle corporation’s own application, which was dismissed. Result on appeal, and as consequence, in court below, was mixed because appeal was allowed on basis of motion. Amount of $57,031 sought by corporation as partial indemnity costs was excessive. In court below, taxpayer, who had initially been successful on application and motion, received costs of $28,565. Reasonable amount of costs in court below was same amount as originally awarded to taxpayer.
RJM56 Investments Inc. v. Kurnik (2017), 2017 CarswellOnt 197, 2017 ONCA 19, E.A. Cronk J.A., Paul Rouleau J.A., and Grant Huscroft J.A. (Ont. C.A.); additional reasons (2016), 2016 CarswellOnt 17210, 2016 ONCA 821, Cronk J.A., Rouleau J.A., and Huscroft J.A. (Ont. C.A.).
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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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