Court Of Appeal Summaries (January 18, 2016-January 22, 2016)

Hello again.

The Court of Appeal released several civil decisions this week. Topics covered included franchising, jurisdiction, reasonable apprehension of bias, bankruptcy and insolvency and family law. In one noteworthy decision, Bank of Montreal v Javed et al, the court stated that the test for unconscionability had not been changed by the duty of good faith as set out in Bhasin v Hrynew. Stuart Budd & Sons Limited v IFS Vehicle Distributors ULC is an interesting but unfortunate decision in which there was a finding of reasonable apprehension of bias on a jurisdiction motion, leaving the parties back at square one.

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Enjoy your weekend.

CIVIL DECISIONS

Bank of Montreal v. Javed, 2016 ONCA 49

[Cronk, Pepall and Lauwers JJ.A.]

Counsel:

Shahzad Siddiqui, for the appellants

No-one appearing for Amer Javed

Ian Klaiman, for the respondent

Facts: Mr. Shah, together with the co-defendant, Amer Javed, provided a joint and several guarantee to the respondent Bank of Montreal (the "Bank") to secure a small business loan to 7596308 Canada Inc. (the "Company"). Mr. Shah later resigned as a director of the Company and ceased to have an active role in it, although he remained vice-president. The Company defaulted on the loan. The Bank made demand for payment on Mr. Shah under his guarantee. The motion judge granted summary judgment on the personal guarantee and ordered the appellants to pay the respondent. He also set aside the transfer of the appellant Ileshkumar Shah's half-interest in the matrimonial home to his spouse, the appellant Mayaben Shah, on the basis that it was a fraudulent conveyance.

Issues:

(1) Did the Bank's conduct render the loan transaction unconscionable?

(2) Did the motion judge err in finding that Mr. Shah's transfer of his interest in the matrimonial home to Mrs. Shah was a fraudulent conveyance?

Holding: Appeal dismissed.

Reasoning:

(1) No. The three-part test for determining unconscionability is set out in Teitelbaum v. Dyson. Bhasin v Hrynew and the organizing principle of good faith in contract law have not altered that test. That test requires a plaintiff to show that the defendant abused its bargaining power, preyed upon the plaintiff, or that the bargain was improvident. The motion judge found that the test for unconscionability was not met. The Bank's account manager refused to provide information to Mr. Shah because the Company had withdrawn his authorization. However, based on the language of the guarantee, the Bank had an obligation to provide information to the guarantor regarding the state of the Company's indebtedness to the Bank, to the extent that it was secured by the guarantee, and, hence, to information about the state of the guarantor's personal exposure under the guarantee. In this case, since the Bank provided nothing to Mr. Shah in response to his request, it therefore breached its contractual obligation to provide information to him in accordance with the terms of the guarantee. Nevertheless, the breach by the Bank of its contractual disclosure obligation to Mr. Shah was not sufficiently serious to give rise to a right of rescission in his favour. Furthermore, the appellants did not discharge their positive obligation to prove damages for the Bank's breach.

(2) No. The motion judge made no error in finding that Mr. Shah's transfer of his half-interest in the matrimonial home to Mrs. Shah two days after being told by the Bank's account manager that a demand would be made on the guarantee was a fraudulent conveyance.

Global Royalties Limited v. Brook, 2016 ONCA 50

[Strathy C.J.O. (In Chambers)]

Counsel:

Harvey Stone, for the respondents

Frank Bennett, for the appellant

Facts:

The appellant was deemed bankrupt in February 2015. The respondents brought an action in June 2015. The statement of claim alleges that the appellant, a former employee, breached his fiduciary duties to them by opening up a competing business, stealing proprietary information and diverting sales to the new business. The statement of claim seeks damages, injunctive relief and declaratory relief and alleges breaches of duty before and after the date of bankruptcy.

The appellant took the position that the action was invalid because, as an undischarged bankrupt, the proceedings against him were stayed by s. 69.3 of the BIA.

In the Superior Court, the respondents brought a motion for the following relief:

(a) a declaration that s. 69.3 of the BIA did not apply to stay the claims for injunctive and declaratory relief, or the claims for damages from the appellant's post-bankruptcy conduct, because they are not claims provable in bankruptcy; and

(b) an order under s. 69.4 of the BIA lifting the stay of proceedings for the damages claimed against the appellant for his pre-bankruptcy conduct.

The motion judge granted the motion. The motion judge agreed that the claims arising after the date of bankruptcy and the claims for injunctive and declaratory relief were not stayed by s. 69.3. This was because they were not claims provable in bankruptcy under s.121 of the BIA. The motion judge therefore found there was no need for an order lifting the stay for those claims.

The appellant appealed under s. 193(b) of the BIA, and also sought leave to appeal under s. 193(e).

Issues:

(1) Did the appellant have a right of appeal under s. 193(b) of the BIA?

(2) Should the appellant be granted leave to appeal, if necessary, under s. 193(e)?

Holding: Appeal Dismissed, Leave to Appeal Denied.

Reasoning:

(1) No. The court held that the appellant had no right of appeal under s. 193(b). The court made it clear that s. 193(b) concerns "real disputes" likely to affect other cases raising the same or similar issues. The court held that it was a matter of speculation to suggest that this case would likely affect other cases involving similar issues. Further, the court held that none of the grounds of appeal set out in the...