Court Of Appeal Summaries (July 20-24, 2015)

Hello everyone. Below are the summaries of this week's Ontario Court of Appeal decisions. Topics covered include vicarious liability; lease assignments; setting aside default judgments; bankruptcy; contempt orders and reasonable apprehension of bias.

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Ravazzolo v. Romaniuk, 2015 ONCA 542

[Hoy A.C.J.O., Epstein and Huscroft JJ.A.]

Counsel:

Ross Macfarlane, for the appellant.

Angelo Fazari, for the respondents.

Keywords: Breach of Fiduciary Duty, Fraud, Default Judgment, Setting Aside, Mountain View Farms Ltd. v. McQueen

Facts:

The appellant, an investment and wealth management advisor, was given a loan that was co-signed by his wife and her parents. The loan pledged jointly-owned investments as security for the loan. His wife's parents are the respondents.

The appellant moved the loan to Bank of Montreal ("BMO") to obtain more favourable interest rates. The applicant's wife and the respondents pledged more investments as security for the loan. On June 28, 2012, BMO demanded payment from the respondents of an overdue amount and on September 19, 2012, the respondents received a notice of intent to sell the pledged securities. The respondents paid loan installments to protect their securities, which lead to significant out of pocket expenses for the respondents. The respondents sued the appellant for breach of fiduciary duty, breach of contract, fraudulent and negligent misrepresentation, fraud, and breach of good faith. They alleged that the appellant was their personal investment and wealth management advisor and that he did not explain the risk in the loan transaction.

Around three months after the respondents served their Statement of Claim, the appellant had not yet filed a Statement of Defence despite warning that if he failed to do so the respondents would move for default judgment. The respondents brought an ex parte motion for default judgment. The respondents claimed $101,347.87 as follows: Payments made by the respondents $13,877.36; Monies claimed by BMO $46,317.64; Punitive damages $30,000.00; and costs of $11,152.87.

On August 2, 2013, the motion judge granted default judgment against the appellant for $101,347.87 plus pre- and post-judgment interest. The order granting default judgment declared that the appellant was in "breach of contract, breach of fiduciary duty, breach of his duty to act in good faith, fraud and fraudulent misrepresentation".

The appellant became aware of the default judgment in January 2014 and brought a motion in April 2014, after the respondents refused to consent to setting aside the judgment. The appellant acknowledged his obligation to repay the respondents the $13,877.36 they paid to BMO and consents to judgment against him in that amount. However, the appellant brought a motion to set aside the rest of the default judgment.

The motion judge dismissed the appellant's motion to set aside the default judgment. The motion judge held that the appellant failed to meet the test set out in Mountain View because the appellant's delay was unexplained, inexplicable, inexcusable, and unjustified. The appellant appeals the motion judge's decision.

Issue:

Did the motion judge err by refusing to set aside the default judgment?

Holding:

The appeal is allowed. The default judgment is set aside and substituted with a default judgment against the appellant for $13,877.36, plus prejudgment interest from September 1, 2012 to August 2, 2013, and post-judgment interest thereafter.

The appellant is entitled to his costs of the appeal in the amount of $10,000, inclusive of HST and disbursements. There shall be no costs on the motion below

Reasoning:

Yes, the motion judge erred in dismissing the appellant's motion to set aside the default judgment. In Mountain View Farms Ltd. v. McQueen, 2014 ONCA 194, 119 O.R. (3d) 561, the court set out five factors that a court should consider in determining whether to set aside a default judgment. These factors are not rigid rules, but must be examined based on what is just in the circumstances of the case. The motion judge made several errors in concluding that the appellant failed to meet the Mountain View test.

First, the motion judge failed to consider the first Mountain View factor, namely whether the appellant had moved promptly to set the default judgment aside. Once he learned of the default judgment, the appellant moved reasonably promptly to set it aside.

Second, the motion judge erred in concluding that the appellant did not have an arguable defence on the merits. The respondents did not advance a simple, liquidated claim. Instead, the respondents claimed and received a judgment for damages that they have not suffered and may never suffer. The appellant clearly has a defence to the extent the motion judge ordered the appellant to pay the respondents amounts that the respondents have not paid to BMO. Further, the motion judge failed to analyze whether the facts alleged in the Statement of Claim entitled the respondents to the declaratory relief or to the punitive damages they sought.

Finally, the motion judge failed to consider the prejudice to the appellant of refusing to set aside the default judgment and misapprehended the prejudice to the respondents of setting aside the default judgment. The substantial prejudice to the appellant, an investment and wealth management advisor, of declarations that he has committed breach of fiduciary duty, fraud and fraudulent misrepresentation is obvious. Setting aside the default judgment would not have seriously prejudiced the respondents.

Therefore, it is just to relieve the appellant from the majority of the consequences of his default.

Green v Green, 2015 ONCA 541

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

Counsel:

A. Franks & M. Zalev, for the appellant Charles David Green Sr. M. Hilbing & F. Coscarella, for the appellant by way of cross-appeal Charles David Green Jr. S. Mitra & M. Spence, for the appellants Strike Furlong Ford LLP and Robert James Lorne Ford M. Poepjes, for the respondent Diana Freda Green R. Alexander, for the respondent L. Maxwell B. Yurko, acting in person

Keywords: Family Law, Divorce, Bankruptcy, s. 38 Bankruptcy and Insolvency Act

Facts:

The parties had been married for 48 years and they had three children. During the early years, Diana did not work outside the home. Once the youngest child was ten years old, she began working and earned a modest wage. Theirs was a traditional marriage.

In 1981, the parties purchased an island on Georgian Bay, just over four acres. The island property became their matrimonial home. In 1995, the island property was transferred to the adult children with a view to saving estate tax. The children continued to treat the property as owned by the parents. By the time of separation, everyone, including the parents and children, appear to have forgotten about the transfer.

In 2006, Charles Sr. and Diana executed a separation agreement. Diana surrendered any right to claim support. The agreement provided for the sale of the island property, with Charles Sr. and Diana each to receive half of the net proceeds. Diana waived her entitlement to any further equalization of family property.

In 2008, Diana commenced this proceeding, in which she sought to accelerate the sale of the island property, set aside the separation agreement that contained a release of equalization and support, equalize the net family properties, and attain spousal support.

In 2009, Diana made a voluntary assignment into bankruptcy. Her claims for an interest in the island property and equalization vested in her Trustee in bankruptcy. Immediately following the assignment into bankruptcy, Ford and SFF removed themselves as solicitors. SFF filed a proof of claim for its unpaid fees of approximately $15,000. Diana's total indebtedness to all creditors was approximately $40,000.

Pursuant to s. 38(2) of the Bankruptcy and Insolvency Act, SFF assumed carriage of the property claims, determining that it would only advance a claim for one half of the property interest in the island property.

Two years later, SFF purported to assign its s.38 BIA rights to Charles Green Jr., the son of Charles Sr. and Diana, for the sum of $90,000. It is clear that SFF thought it was assigning, and Charles Jr. thought he was acquiring whatever interest Diana had in the island property, free of any obligation to account to the Trustee for any surplus value recovered in the matrimonial litigation.

SFF and Charles Jr. take the position that by virtue of the assignment, if Charles Jr. succeeds in demonstrating that Diana is entitled to a one-half ownership interest in the island property, Charles Jr. would acquire that interest in his own right.

Just as Charles Jr. became aligned in interest with his father, the two other children, Lisa and Brenda...