Court Of Appeal Summaries (February 1, 2016 - February 5, 2016)

The Court of Appeal released a number of civil decisions this week with topics including the conversion of bills of exchange issued by a fraudulent employee and the fictitious and non-existent payee defences under the Bills of Exchange Act that protect banks, conflicts of interest in the solicitor-client relationship, family law, adverse possession and easements and commercial leases.

Civil Decisions

Henderson v. Wright, 2016 ONCA 89 [Strathy C.J.O. (In Chambers)]

Counsel: Robert Hammond, for the respondent/moving party Clinton Culic, for the appellant/responding party

Keywords: Contracts, Real Property, Civil Procedure, Appeals, Security for Costs, Frivolous and Vexatious, Rules of Civil Procedure, Rule 61.06

Facts: The appellant claims an interest in the respondent's home, in which he and his wife lived, paying rent for over 20 years. The respondent's former son-in-law claimed there was an agreement with the respondent whereby she would make a down payment on a home, which was purchased in the respondent's name, and he and his wife would pay rent to cover the mortgage, taxes and insurance. The respondent claimed that when the mortgage was paid off, the house was to be transferred to him and his wife.

The respondent's version was that she intended to make a real estate investment and provide her daughter and son-in-law with a nice place to live at a favourable rent. The respondent denied any intention to gift the amount of the down payment paid, $50,000, or to transfer ownership of the property once the mortgage was paid. The respondent also made several lump sum mortgage payments and the mortgage was paid off seven years after the home was purchased.

Following the appellant's separation from the respondent's daughter, he remained in the house but stopped paying rent. The respondent applied to the Landlord and Tenant board to evict him. The appellant claimed he had an ownership interest in the property based on the alleged agreement. Alternatively, the appellant relied on the equitable principle of promissory estoppel. The trial judge found in favour of the respondent's version of events and rejected the claim based on promissory estoppel. The appellant appealed and the respondent sought an order for security for costs of the appeal.

Issues: (1) Pursuant to Rule 61.06(1)(a) of the Rules of Civil Procedure, is there reason to believe the appeal is frivolous and vexatious?

(2) Pursuant to Rule 61.06(1)(c) of the Rules of Civil Procedure, is there any other good reason to order security for costs?

Holding: The appellant was required to post security for costs in the amount of $15,000 within 60 days.

Reasoning: (1) Yes. The court found there was good reason to believe the appeal was frivolous and vexatious, and to believe the appellant had insufficient assets in Ontario to cover the costs of the appeal. The appeal did not raise any arguable error in law, and challenged findings of fact and credibility which this court has held are appeals without merit. The court found the trial judge gave detailed and sound reasons for his findings, and in such cases, there would be almost no possibility of successfully overturning the result. In addition, the appellant demonstrated to the court through his less than diligent pursuit of his litigation that the appeal was frivolous and vexatious.

Further, the appellant's only asset of any significance was a 25% interest in a cottage property owned with other family members. The court found this asset to be illiquid and unmarketable, and insufficient for the respondent to rely on for the purposes of protecting costs of the appeal.

(2) The court stated that appellate courts in Ontario have ordered security for costs when an appeal has a low prospect of success coupled with an appellant who has the ability to pay costs but from whom it would be nearly impossible to collect costs. It referred to this as a "good reason" balance to ensure the appellant is not denied access to the courts, while protecting the respondent's right to be protected from the risk the appellant will not satisfy the costs of the appeal. Given the reasons regarding the first issue, the court found "good reason" applied in this case. Further, the appellant worked as a bartender with little or no proof of income, which would be nearly impossible for the respondent to garnish to satisfy costs.

410784 Ontario Limited v. Little Zinger Inc. (Corktown Esso), 2016 ONCA 90 [Gillese, MacFarland and van Rensburg JJ.A.]

Counsel: P James Zibarras and Adam N. Weissman, for the appellant Wendy Greenspoon-Soer, for the respondents

Keywords: Real Property, Contracts, Fiduciary Duty, Good Faith, Torts, Conspiracy, Unlawful Interference with Economic Interests, Limitation Periods, Limitations Act, s. 5, Discoverability

Facts: A gas station, 410784 Ontario Limited ("410784"), leased property from a landlord until it was given notice to vacate. Two employees of the gas station incorporated a company and entered into a lease with the landlord in February 2006 to operate a gas station. This new corporation brought an action against 410784 and its principals for damages for remediation of the site in February 2009. 410784 brought a counterclaim in March 2009 seeking damages for breach of contract, breach of fiduciary duty, breach of good faith, conspiracy and unlawful interference with economic interests. The new corporation discontinued its claim, but the counterclaim proceeded to trial. The counterclaims were dismissed at trial on the basis that they were statute-barred. The trial judge concluded that 410784 knew that the employees had entered into a lease with the landlord prior to March 2007, which was more than two years before the counterclaim was issued.

Issues: (1) Did the trial judge make palpable and overriding errors in her factual determination?

(2) Did the trial judge err in law in concluding that the claims for inducing breach of contract were statute-barred?

Holding: Appeal dismissed

Reasoning: (1) No, the trial judge's finding was amply supported by the record. The trial judge's conclusion that 410784 knew before March 2007 that the employees had entered into a lease with the landlord was supported by the employees' testimony that they had a conversation with a principal of 410784 in February 2006 regarding this issue. The trial judge's finding is entitled to deference by the Court of Appeal.

(2) No. Although the trial judge did not specifically deal with whether the claim against the landlord for inducing breach of contract was statute-barred, the Court of Appeal held that it was unnecessary to deal with this issue because it failed on the merits. The trial judge found there was a lack of the necessary intention element, which was supported by the evidence.

Mapleview-Veterans Drive Investments Inc. v. Papa Kerollus VI Inc. (Mr. Sub), 2016 ONCA 93 [Blair, Hourigan and Brown JJ.A.]

Counsel: Milton A. Davis and Ian P. Katchin, for the appellant Sharon M. Addison for the respondent

Keywords: Real Property, Commercial Leases, Option to Renew, Whether Excercisable, Default, Whether Void for Uncertainty

Facts: Papa Kerollus entered into a commercial lease agreement in 2000 for a term of 15 years. The lease gave Kerollus an option to renew for one further period of five years on the same terms and conditions "save as to the rental rate which shall be the then current rate". Kerollus claims to have exercised the renewal option in November 2014 (within the time required). Mapleview disputed its right to do so claiming that the renewal option was void for uncertainty with no guidelines for the calculation of the renewal term rent and no arbitration provision to settle it if agreement was not reached. Further, Papa Kerollus was in default of a precondition to exercise the option because it had not paid rent and all other sums payable under the lease when due and it was also in default of a precondition to the exercise of the option because it had not "performed all other covenants under the Lease" at the relevant time.

Mapleview applied to the court for declaration that the renewal option was void for uncertainty, or in the alternative, for an order and declaration that Kerollus was in breach of terms of the lease and that the purported exercise of the renewal option was invalid and unenforceable.

After the hearing, the judge held that the renewal option was not void for uncertainty because the term "current rate" was capable of judicial determination provided the parties called expert evidence on the point. There was a live issue on the amount owing by Kerollus, once it had paid arrears, if any, "the current rate" for the renewal period was to be determined judicially on the basis of expert evidence.

Issues: (1) Did the application judge err in holding that the renewal option clause was not void for uncertainty?

(2) Did the application judge err in holding that Papa Kerollus was entitled to exercise the renewal option once the amount of rental arrears owing by it had been determined by way of a trial of that issue?

Holding: Appeal Allowed

Reasoning: (1) No. The court was satisfied that the parties intended to make a binding agreement as to the renewal rate; they simply declined to specify that rate in a dollar amount because neither wished to assume the risk of error (too high or too low, depending on their interest) 15 years later. This makes commercial sense. Expressing the renewal rate as the "then current rate" is the functional equivalent of saying the "then market value" or the "then prevailing market rate" – expressions that have been found to be sufficient to overcome a void-for uncertainty argument. The court agreed with the application judge's conclusion.

(2) The court found that the application judge erred in concluding that Kerollus was not...