Court Of Appeal Summaries (April 10 – 13, 2017)

There were several important civil decisions released this week.

In Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc and Sankar v. Bell Mobility Inc., the Court reconsidered, but ultimately upheld, its prior decisions on appeal. Both those cases involved the standard of review from decisions of contractual interpretation. The unsuccessful parties in both matters sought leave to appeal to the Supreme Court. While the leave applications were pending, the Supreme Court released its decision in Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co, which modified Sattva Capital Corp. v. Creston Moly Corp by clarifying that the standard of review is correctness, not palpable and overriding error, for standard form contracts and extricable questions of law. Rather than grant or deny leave, the Supreme Court remanded both cases back to the Court of Appeal for reconsideration in light of Ledcor.

In Romspen Investment Corporation v. Courtice Auto Wreckers Limited, the Court of Appeal, in a split decision, lifted a stay of proceedings imposed in a receivership to permit a union to proceed with a certification hearing and unfair labour practices complaint after the receiver terminated some of the employees after the certification application had been commenced. The Court was not satisfied on the evidence that the unionization of the employees would hinder the sale process. In his dissent, Lauwers JA warned that permitting unions to certify in the middle of insolvency proceedings will result in a "sea change" in insolvency practice.

In Tim Ludwig Professional Corporation, the Court extended Keays v Honda Canada aggravated damages for intangible harms flowing from the manner of dismissal in employment cases to the explusion of partners from partnerships. Applying Hadley v Baxendale, such damages were found to have been within the reasonable contemplation of the parties at the time the partnership agreement was entered into.

Other topic covered included coverage under CGL policies, family law, jurisdiction and wills and estates.

Table of Contents:

Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc., 2017 ONCA 293

Sankar v. Bell Mobility Inc., 2017 ONCA 295

Romspen Investment Corporation v. Courtice Auto Wreckers Limited, 2017 ONCA 301

Tim Ludwig Professional Corporation v BDO Canada LLP, 2017 ONCA 292

G & P Procleaners and General Contractors Inc. v. Gore Mutual Insurance Company, 2017 ONCA 298

Mason Homes Limited v Lombard General Insurance Company of Canada, 2017 ONCA 289

Cora Franchise Group Inc. v. Watters, 2017 ONCA 286

Goldman v. Kudelya, 2017 ONCA 300

McMurtry v. McMurtry, 2017 ONCA 296

Parque Industrial Avante Monterrey, SA de CV v 1147048 Ontario Ltd, 2017 ONCA 311

For Civil Endorsements, click here

For Criminal Decisions, click here

Civil Decisions:

Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc., 2017 ONCA 293

[Cronk, Pepall and Miller JJ.A.]

Counsel:

D.H. Rogers, Q.C. and R. Moore, for the appellan

13. J. Halpin, for the respondent

    Heard: In Writing

    Keywords: Real Property, Contracts, Commercial Leases, Interpretation, Standard of Review, Extricable Questions of Law, Correctness, Supreme Court Act, Remand Order, Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., Sattva Capital Corp. v. Creston Moly Corp

    Facts: On October 1, 2014, Deslaurier Custom Cabinets Inc. (the "Tenant") obtained summary judgment in the Superior Court of Justice against 1728106 Ontario Inc. (the "Landlord") for recovery of its losses arising from a fire at premises leased by it from the Landlord under a commercial lease dated November 28, 2007 (the "Lease"). The fire occasioned significant damage to the Landlord's building and the Tenant's property and business.

    The Landlord appealed. On April 4, 2016, the Court of Appeal allowed the appeal, set aside the summary judgment and dismissed the Tenant's action against the Landlord (the "Appeal Decision"). On June 3, 2016, the Tenant sought leave to appeal to the Supreme Court of Canada. On September 15, 2016, while the Tenant's leave application was pending, the Supreme Court released its decision in Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co ("Ledcor").

    The Supreme Court did not grant or deny leave to appeal. Instead, on October 21, 2016, it directed that the case forming the basis of the application for leave to appeal be remanded to the Court of Appeal, pursuant to s. 43(1.1) of the Supreme Court Act, for disposition "in accordance with Ledcor" (the "Remand Order").

    After the Remand Order, the Court of Appeal requested and received submissions from the parties on three issues: (a) the meaning and effect of the Remand Order; (b) the appropriate disposition in light of Ledcor; and (c) whether oral submissions should be received, at the request of the parties. No request for a further oral hearing was made. Accordingly, the remand case proceeded on the basis of the parties' written submissions.

    Holding: Appeal decision affirmed.

    Issues:

    What is the meaning and effect of the Remand Order? What is the appropriate disposition in light of Ledcor? Reasoning:

    What is the meaning and effect of the Remand Order? Having considered the terms of the Remand Order, the parties' submissions and the available authorities, it requires the Court of Appeal to reconsider its previous decision in light of the Supreme Court's authoritative pronouncements in Ledcor on issues that may have affected the Court of Appeal's disposition of the appeal. The Court of Appeal should not revisit questions that Ledcor does not touch upon. If the application of Ledcor mandates a different disposition, the Court of Appeal should alter its earlier decision in light of the teachings of Ledcor. If it does not, the Court of Appeal should affirm its earlier decision.

    What is the appropriate disposition in light of Ledcor? (i) Standard of Review Discussion in Appeal Decision

    First, Sattva Capital Corp. v. Creston Moly Corp ("Sattva") holds that in rare cases the correctness standard of review will apply to questions of contractual interpretation where it is "possible to identify an extricable question of law from within what was initially characterized as a question of mixed fact and law". The Supreme Court explained in Sattva that "extricable questions of law" include legal errors involving "the application of an incorrect principle, the failure to consider a required element of a legal test, or the failure to consider a relevant factor".

    Second, at the time of the Appeal Decision, the jurisprudence of some provincial appellate courts, including this court's decision in MacDonald v. Chicago Title Insurance Company of Canada, recognized an exception to the Sattva general standard of review rule for the interpretation of standard form contracts. These authorities had held that, for standard form contracts, the correctness standard applies. In Ledcor, the Supreme Court held that the correctness standard does generally apply to the interpretation of standard form contracts, as the factual matrix or surrounding circumstances are usually not engaged in the interpretation exercise.

    The Lease in this case is not a standard form contract but, rather, was negotiated by the parties. In the first instance, therefore, the palpable and overriding error standard of review applied to the motion judge's interpretation of the Lease. However, in the Appeal Decision, this court held that the motion judge's interpretation of the Lease was tainted by several legal errors involving extricable questions of law. Consequently, applying Sattva standard of review principles, the correctness standard was engaged.

    (ii) Ledcor Decision

    Ledcor involved the interpretation of an exclusion clause and an exception to that exclusion in a common form of builders' all-risk property insurance. The exclusion clause, a standard form provision, denied coverage for the "cost of making good faulty workmanship". As an exception to that exclusion, coverage applied for "physical damage" that "result[ed]" from the faulty workmanship. The Supreme Court considered two issues in Ledcor. First, what standard of appellate review applies to a trial judge's interpretation of a standard form insurance contract? Second, what interpretation should be given to the faulty workmanship exclusion clause and the "resulting damage" exception to that exclusion contained in builders' risk insurance policies?

    The trial judge in Ledcor had found the insurers to be liable under the relevant all-risk insurance policy, a standard form contract. The Court of Appeal of Alberta had held that standard form contracts are subject to appellate review on the correctness standard, and reversed the trial decision. The Supreme Court concluded that, in certain circumstances, standard form contracts are reviewable on the standard of correctness. However, the majority of that court disagreed with the Court of Appeal of Alberta's interpretation of the policy and restored the trial judge's decision.

    Ledcor identifies an exception to the general rule established by Sattva for contractual interpretation by holding that the proper interpretation of a contract is a question of law subject to appellate review on the standard of correctness where three criteria are satisfied:

    (1) the appeal involves the interpretation of a standard form contract;

    (2) the interpretation at issue is of precedential value; and

    (3) there is no meaningful factual matrix that is specific to the parties to assist the interpretation process.

    Where these three criteria are not met, Ledcor confirms that even the interpretation of standard form contracts may involve issues of mixed fact and law reviewable on the deferential standard of palpable and overriding error.

    The Ledcor court distinguished Sattva on a factual basis, noting that Sattva involved a complex commercial agreement concluded by sophisticated parties, and not a standard form contract. As a result, Sattva did not...