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Civil Procedure

DEFAULT

There was plausible excuse for failure of defendants to defend claim

CM Inc. hired corporate defendant to install paving stones at plaza at price of $140,000. Work was completed by defendant’s subcontractors in November 2009. All rights and interests in plaza were transferred from CM Inc. to plaintiff pursuant to court order. Plaintiff commenced action against defendants for breach of contract and negligence. Plaintiff claimed $200,000 for cost of removing and re-installing paving stones as it alleged that many areas began heaving during winter of 2010-2011 as result of improper installation. Defendants were served with claim on August 29, 2011. Plaintiff agreed to waive filing of statement of defence pending investigation by defendants’ insurer. Defendants were noted in default on November 1, 2011. Order dismissing action as abandoned dated June 18, 2012 was received by defendants on or near June 18, 2012. Default judgment was issued on October 25, 2013 in amount of $119,030.41. Notice of garnishment was issued on October 2, 2014. Defendants brought motion to set aside noting in default, default judgment and stay notice of garnishment. Motion granted. Defendants brought motion without delay upon learning of default judgment. There was plausible excuse for failure of defendants to defend claim. They believed that action was being defended by their insurer. Defendants had arguable defence that damages occurred outside one year warranty provided for work performed. Prejudice of defendants being held liable for damages and costs in excess of $120,000 based on alleged breach of contract for which there was arguable defence greatly outweighed prejudice, if any, to plaintiff. Noting in default and default judgment were set aside. Defendant was to deliver statement of defence within two weeks. Funds seized pursuant to notice of garnishment were to be returned to defendants.
Foremost Cranberry Mews Limited Partnership v. Ferreri (Apr. 30, 2015, Ont. S.C.J., M. Faieta J., File No. CV-11-433182) 253 A.C.W.S. (3d) 790.

Associations

MEETINGS

Applicants’ motives in requisitioning meeting were not “clearly” of personal nature

Applicants were members of respondent non-profit corporation. They requisitioned directors of respondent to call meeting of members to vote on reinstatement of suspended provincial section members and removal of named directors. Directors refused, saying that primary purpose of motions submitted in requisition was to enforce personal claim or address personal grievance. Applicants decided to call their own meeting and requested list of members from directors, who did not comply with request. Respondent applied under Canada Not-for-Profit Corporations Act for exemption from requirement to provide requested shareholder list. Director was currently reviewing application but had not issued requested exemption. Applicants applied for order that respondent call meeting of members. Application allowed. Right to call special meeting was substantive one and was not lightly to be interfered with. Applicants’ motives in requisitioning meeting were not “clearly” of personal nature. To contrary, it appeared there were profound policy and direction disagreements of sort that membership was best suited to assess and decide. Respondent had not right under Act to stay of proceeding pending determination of their exemption application. Respondent was ordered to call meeting of members.
Saskatchewan WTF Taekwondo Assn. Inc. v. Taekwondo Canada (May. 5, 2015, Ont. S.C.J., Sean F. Dunphy J., File No. CV-15-526240) 253 A.C.W.S. (3d) 762.

Contempt of Court

GROUNDS

Respondent demonstrated intention to carry out and satisfy order

Applicants purchased two new adjoining townhouses. Applicants noticed extensive water penetration at properties and made claim to respondent. Respondent investigated and denied applicant’s claim for water penetration. On appeal, tribunal directed respondent to carry out necessary steps to determine cause of water penetration and to ensure that necessary repairs were completed. Applicants brought motion for order finding respondent in contempt of tribunal’s order. Motion dismissed. Order was clear on its face. However, there was no evidence that respondent willfully and deliberately disobeyed tribunal’s order. Respondent had taken numerous steps to identify cause of water penetration and repair leakage. There was no evidence that showed contempt beyond reasonable doubt. Respondent demonstrated intention to carry out and satisfy order.
Cheng v. Tarrion Warranty Corp. (Mar. 10, 2015, Ont. S.C.J., Carole J. Brown J., File No. CV-14-514780) 252 A.C.W.S. (3d) 699.

Civil Procedure

DISCOVERY

Defendant failed to show why additional medical records relevant to issues on certification

Plaintiff commenced class action on behalf of all persons who were implanted in Canada with defendant’s metal-on-metal hip products. Plaintiff had filed six affidavits, including his personal affidavit describing his experiences with defendant’s metal-on-metal hip implants. Attached to personal affidavit were six pages of medical records that were generated at time of his third surgery that also included brief synopsis of plaintiff’s first two surgeries and his experience with implants that were installed. In response to request from defendant, plaintiff had provided some additional medical information such as product code labels for hip implant components that were allegedly used in plaintiff’s first and second hip surgeries. Certification motion was scheduled to proceed in September 2015. Defendant had filed motion for summary judgment asking that action be dismissed in its entirety. Defendant brought motion for all of plaintiff’s medical records relating to his hips, his hip surgeries, and their outcomes and consequences. Motion dismissed. Bald assertions aside, defendant failed to show how or why additional medical records would assist the court or were in any way relevant to issues on certification. Dismissal of motion was without prejudice to defendant’s right to pursue records again on cross-examination. If they were refused and if defendant could show they were indeed relevant to certification, matter could be revisited on proper refusals motion.
Dine v. Biomet Inc. (Apr. 15, 2015, Ont. S.C.J., Edward P. Belobaba J., File No. CV-13-490112-CP) 252 A.C.W.S. (3d) 652.

Conflict of Laws

JURISDICTION

Ontario had closest connection to contract action and was appropriate forum

Plaintiff was business incorporated in Ontario with head office in Toronto, and defendant was business incorporated in Wisconsin with head office in Wisconsin. Plaintiff brought action to collect royalty payments it claimed were due and owing under parties’ contract and sought accounting of all of defendant’s net sales, alleging it failed to provide accurate accounting as required by license agreement. Motion by defendant for order dismissing or staying action on basis court lacked jurisdiction simpliciter or was not convenient forum. Motion dismissed. Defendant clearly carried on business in Ontario, where it had actual physical presence, advertised, and sold products directly related to calculation of royalty payments in dispute. Rebuttable presumption of jurisdiction applied and defendant failed to rebut. Subject matter of litigation was directly related to monies made through defendant’s worldwide sales, which included those in Ontario. Ontario had closest connection to action and was appropriate forum. License agreements were signed by parties in Ontario and Wisconsin, plaintiff planned to call Ontario witnesses while defendant did not provided specifics about intended witnesses. There was no ongoing litigation in Wisconsin to which this action could be joined and no evidence in record regarding why Wisconsin law would apply so presumption was court would apply lex fori. While preamble to original agreement stated it was entered pursuant to Wisconsin law, more recent agreement and amendment contained no forum selection clause, and Ontario could apply foreign law anyway. Defendant did not meet burden to displace plaintiff’s choice of forum.
Orthoarm Inc. v. American Orthodontics Corp. (Mar. 30, 2015, Ont. S.C.J., Firestone J., File No. CV-14-511682) 252 A.C.W.S. (3d) 441.

Bankruptcy and Insolvency

PROPERTY

Tax obligations were given no special protection under Bankruptcy and Insolvency Act (Can.)

Applicant sought declarations that transaction between EFG and TFI was bulk sale; that transaction was void for failure to comply with Bulk Sales Act (Ont.) (“BSA”); that respondent was liable to account to trustee for value of property purchased in transaction; and for order requiring respondent to pay trustee consideration paid for transaction. Sale was found to be bulk sale and did not comply with BSA. Sale was declared void in part. Sale proceeds were used to pay secured creditor and TFI was not liable to any creditors for that amount. Parties could not agree on terms of formal order. Disagreement arose from fact that reasons failed to deal with disputed point. Plain and ordinary meaning of “value of stock in bulk” did not include HST exigible on goods sold. Principal meaning of value was worth, and there was no evidence that stock acquired by TFI was worth anything other than what it agreed to pay in arms’ length transaction. TFI had an offset for tax. Tax obligations and HST obligations were given no special protection under Bankruptcy and Insolvency Act (Can.), in bankruptcy situation. CRA might qualify as creditor under BSA, but that did not mean that HST owed to CRA qualified as part of value of stock in bulk that TFI acquired.
Ellen’s Food Group Inc. (Trustee of) v. TFI Foods Ltd. (Apr. 7, 2015, Ont. S.C.J., Penny J., File No. CV-14-10628-00CL) 252 A.C.W.S. (3d) 402.

Corporations

DIRECTORS

Defendant liable for payment of default judgment against corporation

Plaintiff had obtained default judgment against corporate defendants, but had been unable to recover. Plaintiff’s claim against respondent defendant was for repayment of US $1,000,000 debt and interest of $400,000, with liability arising from his alleged agreement to repay or by piercing the corporate veil. By means of defendant’s representations, plaintiff agreed to invest in energy project by way of US $1,000,000 loan, structured as convertible debenture: upon maturity, plaintiff had option of repayment with 30 per cent interest or converting investment to shares. Defendant directed funds to account controlled by corporate defendant, which he admitted was a shell and he personally and totally controlled funds. Issues arose on project and parties agreed to extension of one month with interest rate increased to 40 per cent. Plaintiff sent over 20 emails to defendant confirming terms of revised agreement and repayment obligations but he chose not to respond, other than sending text acknowledging he would make partial repayment of $700,000, though he did not repay anything, ignored repayment demands and now denied all liability. Motion by plaintiff for summary judgment of US $1.4 million. Motion granted in part. Defendant offered no credible evidence to address plaintiff’s allegations or explain his bald denials and some of his denials were contradicted by his own admission he received emails confirming he would cause $1.4 million to be repaid and his text message assuring he would repay $700,000. While loan agreement and debenture were not entered with defendant personally, and he did not execute guarantee, evidence established loan proceeds of US $1 million were transferred to company he controlled and had since disappeared without explanation. However, as defendant was not signatory or party to debenture, evidence fell short of establishing with necessary clarity that he had agreed to be responsible for repayment of interest provided for. Summary judgment for US $1 million granted against defendant but his personal liability for interest was a triable issue.
Irani v. Cheung (Mar. 24, 2015, Ont. S.C.J., Stewart J., File No. CV-13-494071) 252 A.C.W.S. (3d) 472.
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