Court Of Appeal Summaries (August 29 – September 2, 2016)

Hello everyone.

While there were only four substantive civil decisions released by the Court of Appeal this week, three of them were fairly lengthy and of some interest. Victoria University v GE Canada is an appeal from a rent arbitration decision that examines the application of issue estoppel in the context of interpreting the meaning of a lease on how to determine fair market value rent. The court held that while the rent resets every 20 or 30 years on the 100 year lease at issue and a rent arbitration may be required every so often to set the rent if the parties cannot agree, that does not give the parties the right to relitigate the interpretation of the lease and the principles to be applied in setting the rent. The parties are bound by the prior interpretation of the lease made in the earlier arbitration. The Central Auto Parts v Barclay decision was a successful appeal by the Thunder Bay police service from a seven figure judgment made against it for negligent investigation. The court held that the trial judge ought to have relied on expert evidence on the appropriate standard of care for the conduct of a police investigation and was not in a position to determine the standard on her own. The Carleton Condominium case will be of interest to condo lawyers, particularly those who represent condo boards. In that case, the court set aside an application judge's order that had overturned the actions of a condo board that were alleged to have been oppressive within the meaning of section 135 of the Condominium Act, 1998. The court applied the "business judgment rule" and held that as long as a board acts honestly and in good faith and exercises the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances, deference should be given to its decisions, which should be reviewed on a reasonableness standard. The court found that the condo board's actions in dealing with one of the unit owners in this case were reasonable. Finally, there was a short endorsement in an unfair competition case dismissing an appeal by an employer whose claim against a departed employee for breach of a non-competition covenant had been dismissed by way of summary judgment.

Have a great long weekend!

Table of Contents:

Civil Decisions

Victoria University (Board of Regents) v. GE Canada Real Estate Equity, 2016 ONCA 646

Keywords: Real Property, Leases, Rent Arbitration, Fair Market Value, Musqueam Indian Band v Glass, Issue Estoppel, Arbitration Act, 1991, Standard of Review, Correctness, Reasonableness, Sattva Capital Corp v. Creston Moly Corp

3716724 Canada Inc. v. Carleton Condominium Corporation No. 375, 2016 ONCA 650

Keywords: Real Property, Condominiums, Condominium Act, 1998, Directors, s. 135, Oppression, Standard of Review, Deference, Reasonableness

Donaldson Travel Inc. v. Murphy, 2016 ONCA 649

Keywords: Employment law, Non-Competition Covenants, Non-Solicitation Covenants, Enforceability, Reasonableness, J.G. Collins Insurance Agencies Ltd. v. Elsley, H.L. Staebler Co. v. Allan, Breach of Confidence, Summary Judgment

495793 Ontario Ltd. (Central Auto Parts) v. Barclay, 2016 ONCA 656

Key words: Torts, Negligence, Negligent Police Investigation, Standard of Care, Reasonable and Probable Grounds, Expert Evidence, Damages, Non-Pecuniary Damages, Mental Distress

For Criminal Law decisions, click here

Civil Decisions:

Victoria University (Board of Regents) v GE Canada Real Estate Equity, 2016 ONCA 646

[Doherty, Pepall and Benotto JJ.A.]

Counsel: S. Waqué, C. Higgs and R. Wood, for the appellant/respondent by way of cross-appeal, The Board of Regents of Victoria University

P. Griffin and A. Posno, for the respondents/appellants by way of cross-appeal, GE Canada Real Estate Equity and GE Canada Real Estate Equity Holding Company

S. Maidment, G. Moysa and S. Brown-Okrihlik, for the respondent/appellant by way of cross-appeal, Revenue Properties Company Limited

Keywords: Real Property, Leases, Rent Arbitration, Fair Market Value, Musqueam Indian Band v Glass, Issue Estoppel, Arbitration Act, 1991, Standard of Review, Correctness, Reasonableness, Sattva Capital Corp v. Creston Moly Corp

Facts:

This appeal concerned the meaning of the term "fair market value of the demised lands" in the rent-reset clause of two long-term leases, and the application of issue estoppel. At issue was whether the value of the "demised lands" should take into account a potential use—a freehold residential condominium project—that is impossible because the lands are subject to a lease.

The appellant and respondents are parties to two 100-year leases (the "Leases"). When the lease was entered into in 1960, the land was vacant and condominiums were not yet in existence in Ontario, until the enactment of the Condominium Actin 1967. The Act limited condominiums to freehold property. Therefore, condominiums could not be built by a landlord or tenant on lands subject to a lease.

At the time of the first rent reset in 1990, the parties could not agree on the rent. The rent reset clause makes reference to the fair market value ("FMV") of the demised lands. The dispute was resolved on appeal from arbitration to the Divisional Court, where it was held that the demised lands should be valued as if vacant but subject to a lease. This was referred to as the Revenue Properties #1 decision. Therefore, the FMV of the lands was determined without including a hypothetical freehold residential condominium project in the valuation.

After the first reset, Ontario enacted the Condominium Act, 1998, and the Supreme Court of Canada rendered its decision in Musqueam Indian Band v Glass, 2000 SCC 52, which addressed the interpretation of rent-reset clauses in long-term leases involving reserve lands. The Condominium Act, 1998 permitted leasehold condominiums. Musqueam established that absent a contrary intention in the lease, the word "land" refers to the freehold or fee simple interest in the lands at issue; the word "value" means the exchange value of the land, calculated by determining the "highest and best use" possible; and FMV should reflect legal restrictions on the land but should ignore any particular restrictions imposed by the lease itself.

The 2010 rent reset also resulted in arbitration. The majority of the arbitral panel (the "Majority") valued the lands based on development of a mixed-use commercial-retail and freehold condominium project. As a result of the Majority's interpretation, the rent of at least one of the respondents was reset at approximately four times the prior amount. On appeal, Wilton-Siegel J. (the "Appeal Judge") held that the Majority had erred in law in valuing the lands on the basis of its use for freehold condominium development. He set aside the award and remitted the dispute back to the same arbitral panel.

All of the parties appeal from that decision. The appellant asks that the Majority Award be restored. The appellant submits that the Appeal Judge erred in allowing the appeal of the Majority Award and requiring that the lands be valued by having regard to the impact of land use legislation on the tenants' use of the lands rather than on the basis of a valuation mandated by the ground leases themselves and the decision in Musqueam Indian Band v Glass. The respondents ask that the...