Court Of Appeal Summaries (April 3 – 7, 2017)

There were several substantive civil decisions released this week.

Topics covered included family law (spousal and child support), employment law, religious organizations, administrative law (OSC), standing to oppose a settlement entered into by a party under a disability , limitation periods, and contempt for breach of Mareva orders.

Civil Decisions

Etaliq Inc. v. Cisco Systems Inc., 2017 ONCA 271

[Juriansz, Lauwers and Hourigan JJ.A.]

Counsel: J. M. Wishart, for the appellants P. J. Cronyn, for the respondent

Keywords: Endorsement, Torts, Breach of Confidence, Trade Secrets, Civil Procedure, Summary Judgment, Limitation Periods, Discoverability, Limitations Act, 2002

Facts:

The respondent brought an action claiming the appellants improperly used confidential and proprietary information the respondent had disclosed to them in 2002. The respondent filed its action on September 9, 2011. The appellants moved under r. 20 to strike the claim on the basis that it was statute-barred by the Limitations Act, 2002.

In their motion, the appellants also sought orders declaring that the evidence on discovery of Kenneth Poisson, the principal of the respondent, would be binding on the respondent for all purposes, irrespective of the source of his knowledge, and could be used for all purposes against the interests of the respondent. The reason for that is that Mr. Poisson was also a principal of MetaData, a company associated with the respondent, and on behalf of MetaData had provided consulting services to the appellants and had access to information allegedly relevant to the discoverability of the respondent's claim.

The motion judge issued an order granting the respondent partial summary judgment dismissing the appellants' limitations defence, and adjourning the portion of the motion related to the examination for discovery of Mr. Poisson.

The appellants appeal from the motion judge's dismissal of their limitations defence.

Issue:

(1) Did the motion judge err by determining that the respondent's claim was not statute-barred?

(2) Did the motion judge err in law in her application of the "reasonable diligence" test?

Holding:

Appeal dismissed.

Reasoning:

(1) No. The motion judge found that even if no distinction were made between Mr. Poisson's knowledge acquired through MetaData and the respondent, the respondent's obligation to exercise due diligence in the investigation of its potential claim against the appellants was not triggered prior to April, 2009. Further, she found that to the extent Mr. Poisson was exposed to the appellants' affairs through his work as a MetaData consultant, "that exposure was not sufficient to constitute actual notice of a claim against [the appellants] or to trigger an obligation on the part of [the respondent] to exercise due diligence in the investigation of the potential claim against [the appellants]."

The motion judge was called upon to consider a large and complex record and make findings. There was an evidentiary basis for all of her findings. It is not the function of the Court of Appeal to reweigh the evidence.

(2) No. The appellants argue that the motion judge excused the respondent from making earlier inquiries that it refrained from making in order to avoid damaging its business prospects. However, the Court of Appeal states that the above submission is based on isolated sentences of the motion judge's reasons taken out of context. In considering all the circumstances, the motion judge had to consider the particular position of Mr. Poisson, who was subject to a non-disclosure agreement while working as a consultant to the appellants and other clients. She recognized the importance in the industry that individual consultants not breach confidentiality agreements into which they had entered. The record contained Mr. Poisson's explanation why it was not until the appellants returned the respondent's two demo servers that he discovered Cisco software that was potentially based on the respondent's proprietary specification. He then embarked on a technical inquiry in breach of his confidentiality agreement. The motion judge accepted Mr. Poisson's statement of the importance of his reputation with respect to confidentiality and his explanation of his ability to have discovered the respondent's potential claim against the appellants at a date earlier than September 11, 2009.

Accordingly, the Court of Appeal was satisfied that the record supported the motion judge's finding that the respondent, exercising reasonable diligence, could not have discovered its claim until September 11, 2009.

Trade Capital Finance Corp v Cook, 2017 ONCA 281

[Rouleau, van Rensburg and Miller JJ.A.]

Counsel: A. Parley and E. Lederman, for the appellant, The Cash House Inc., and the non-parties, Osman Khan and 2454904 Ontario Inc. P. W. G. Carey and C. R. Lee, for the respondent

Keywords: Civil Procedure, Contempt of Court, Breach of Orders, Sentencing, Incarceration, Costs, Substantial Indemnity

Facts:

The respondent, Trade Capital Finance Corp is in the business of purchasing accounts receivable. It alleged that it was defrauded of approximately $6,500,000 in a sophisticated scheme in which it unknowingly purchased fictitious accounts receivable. It alleges that the majority of its lost funds were eventually deposited in bank accounts owned by the appellant, The Cash House Inc., a financial services company in the business of making payday loans, cashing third party cheques, and providing foreign exchange services. Cash House is owned by 2454904 Ontario Inc ("245"), which in turn is owned by Osman Khan.

On May 6, 2015, the respondent obtained a Mareva Order freezing the assets of named defendants, including Cash House, and ordering financial disclosure. Cash House, 245 and Khan (collectively "the appellants"), were later found to be in contempt of the Mareva Order. Khan was sentenced to 90 days incarceration, and the statement of defence and crossclaim of Cash House was struck.

The appellants appealed the finding of contempt, the sanction of incarceration, and the striking of the statement of defence and crossclaim of Cash House.

Issues:

(1) Whether the motion judge erred by finding the Mareva Order to be clear and unambiguous;

(2) Whether the motion judge erred by failing to correctly apply the test for striking a pleading;

(3) Whether the motion judge erred by providing insufficient reasons;

(4) Whether the motion judge erred by ordering a custodial sentence for the contempt;

(5) Whether the motion judge erred by failing to allow the appellants an opportunity to make submissions before awarding costs on a substantial indemnity basis.

Holding:

Appeal dismissed.

Reasoning:

(1) No. The elements of civil contempt, as summarized in 2363523 Ontario Inc v Nowack, 2016 ONCA 951, leave to appeal to SCC requested, are as follows:

A party seeking to establish civil contempt must prove that (a) the order alleged to have been breached states clearly and unequivocally what should and should not have been done; (b) the party alleged to have breached the order had actual knowledge of it; and (c) the party allegedly in breach intentionally did the act the order prohibits or intentionally failed to do the act the order compels. A judge retains an overriding discretion to decline to make a contempt finding where the foregoing factors are met where it would be unjust to do so, such as where the alleged contemnor has acted in good faith to take reasonable steps to comply with the relevant court order. The burden on a party seeking a contempt order is to establish the above elements by proof beyond a reasonable doubt.

An ambiguity in an order is to be resolved in favour of the person said to have breached the order.

The motion judge made no error in concluding that the use of a 245 account for the operations of Cash House was a breach of the Mareva Order, which prohibited the appellants from "dealing with the assets" of Cash House. The non-disclosure of the 245 account was also a breach of the requirement in the Mareva Order to provide particulars of Cash House's worldwide assets whether owned directly or indirectly. Referring to the Mareva Order's requirement for Cash House to submit to examinations under oath within thirty days of the delivery by Cash House of sworn statements or by such later date as may be confirmed by Plaintiff's counsel of record, the Court of Appeal held that the motion judge made no error. A Mareva Order does not want for clarity simply because it does not concretize every particular of a party's obligations. It need not do so. The order was made in the context of a self-governing legal profession with settled norms of practice. There can be no suggestion that the appellants, represented by counsel, did not understand their obligations.

(2) No. The appellants argued that the motion judge erred by striking the defence and crossclaim at the first instance, and thus using it as a remedy of first resort. However, that argument was contradicted by the procedural history of the motion, which indicated that the motion judge adjourned the hearing of the motion to strike for two months to provide the appellants with time to comply with court orders. He found that they did not do so.

With respect to the appellants' argument that the motion judge failed to consider whether a less extreme remedy would suffice, the Court noted that the motion judge chronicled the history of the appellants' contempt and specifically addressed the need to provide a remedy that is proportionate to the misconduct, expressing concern about turning the action into a default proceeding. He made the order without prejudice to Cash House moving for leave to amend after satisfying the court that the contempt has been purged.

The appellants also argued that the motion judge misapprehended the requirement that he assess the merits of the defence in order to consider whether the interests of justice warranted another method of...