Key Takeaways From 2023 Appellate Decisions

• Published date: 11 March 2024
• Subject Matter: Corporate/Commercial Law, Corporate and Company Law, Contracts and Commercial Law, Shareholders
• Law Firm: Aird & Berlis LLP
• Author: Kate Findlay and Anisha Bhardwaj

For 2023, our annual summary of key Supreme Court of Canada and Ontario appellate cases with commercial implications includes:

• Reframing of the public benefit test for adverse possession
• Assessing whether the contents of an employer's investigation report are protected by the doctrine of "qualified privilege"
• Guidance on piercing the corporate veil and the oppression remedy
• Direction on when the duty of good faith may include a duty to inform
• Clarification of the presumption of loss in a breach of the duty of honest performance
• Clarity about when the normal measure of damages is presumptive
• Consideration of the presumption of consistent expression in contractual interpretation
• Determination of when a material change has occurred under securities law
• Direction on when deemed admissions in a pleading can result in debt surviving bankruptcy
• Clarity about what constitutes a withdrawal of an admission in a pleading

Reframing the Public Benefit Test to Create a Rebuttable Presumption

InKosicki v. Toronto (City), 2023 ONCA 450, the majority of the Court of Appeal provides the first appellate commentary regarding the public benefit test, proposed by the Superior Court,¹ that municipal parkland is unavailable for adverse possession, and reframes the test creating a rebuttable presumption rather than a complete bar.

In Kosicki, the relevant facts were as follows: the City of Toronto was the registered owner of a strip of land. Before 1972, a fence was erected around the disputed land by the property of the then-owners Pawel Kosicki and Megan Munro (the "Homeowners"). In 2021, the Homeowners approached the City about purchasing the disputed land. The City, based on its policy, refused to sell. The Homeowners brought a claim for adverse possession.

While the application judge found that the Homeowners' claim would have met the threshold for adverse possession, the judge concluded that publicly owned land of this kind is "immune" to such claims.

The central question raised on the appeal was whether private landowners can gain title over municipal parkland through adverse possession. The majority set out a single question to be addressed in applying the public benefit test: claims in adverse possession against municipal parkland at common law will generally not be available, unless it can be shown on the evidence, that the municipality waived its presumptive rights, acknowledged or acquiesced to such possession. The court accordingly created a rebuttable presumption, rather than a complete bar, to the rule that municipal parkland is unavailable for adverse possession.

Contents of an Investigation Report Protected by the Doctrine of Qualified Privilege

In Safavi-Naini v. Rubin Thomlinson LLP, 2023 ONCA 86, the Court of Appeal held that workplace investigations may be matters of public interest, passing the threshold test for anti-SLAPP protection under the Courts of Justice Act ("OCJ Act"),² where allegations arise at a public institution, garner media attention and raise public safety concerns. The court also upheld the motion judge's finding of qualified privilege applying to statements made by the investigator in summaries of the workplace and sexual harassment investigation.

A medical resident at the Northern Ontario School of Medicine ("NOSM") alleged that both her program director and a NOSM faculty member sexually harassed her. NOSM investigated her complaints. After the investigation was completed, the investigator submitted executive summaries to NOSM containing her findings, including insights into the resident's credibility. Each respondent and select staff at NOSM received copies of the summaries. The medical resident commenced an action against the investigator and her law firm alleging that the summaries were defamatory. The defendants moved to dismiss the medical resident's action under s. 137.1 of the OCJ Act. As we explained in further detail in our recent article, a defendant may move under s. 137.1 of the OCJ Act for an order dismissing the proceeding. The lower-court judge granted the defendants' motion and dismissed the medical resident's action.

The Court of Appeal upheld the dismissal of the medical resident's action. In particular, the court held that the workplace investigation summaries engaged the public interest, due to the nature of NOSM as an educational institution, the media attention garnered and the public safety concerns arising from the allegations.

With respect to the motion judge's application of qualified privilege, the court held that the respondents' provision of the executive summaries to NOSM falls squarely within the scope of qualified privilege.³ As required under s. 32.0.7 of the Occupational Health and Safety Act, the respondents were retained to investigate allegations of workplace harassment and to prepare investigation reports for NOSM. Thus, NOSM had a legal duty to provide, in writing, the results of the investigation and any corrective action taken to the complainant and her alleged harassers.

Corporate Director's Conduct Results in Oppression Remedy

InFNF Enterprises Inc. v. Wag and Train Inc., 2023 ONCA 92, the Court of Appeal held that a director was personally liable under the oppression remedy for knowingly stripping value from the corporation to the prejudice of creditors.

The defendant, Linda Ross, was the sole director, officer and shareholder of the corporate defendant, Wag and Train Inc. ("W&T"). The plaintiffs, FNF Enterprises Inc. and 2378007 Ontario Inc. (the "Owners"), leased commercial premises to W&T and failed to pay amounts owing under the lease.

The Owners asserted two key causes of action against Ms. Ross: (1) oppression pursuant to s. 248 of the Business Corporations Act (Ontario)("OBCA");⁴ and (2) her conduct justified lifting the corporate veil. The Owners alleged two key categories of conduct by Ms. Ross: (1) she misused corporate powers for her own benefit by stripping value from W&T and causing the same business to be carried on elsewhere to avoid payment of amounts known to be owing; and (2) she controlled W&T and thus made the decisions which caused it to breach the lease. On Ms. Ross's motion to strike, the judge struck out both causes of action and the Owners appealed.

With respect to the oppression remedy claim, the Court of Appeal held that W&T's allegations that Ms. Ross stripped value from W&T to avoid payment of amounts known to be owing presented an arguable case for a personal remedy against her under the oppression remedy. In light of the allegation of unpaid amounts owing to creditors, Ms. Ross, as sole shareholder, was not entitled to use W&T's money as her own or to appropriate its business, nor could she, as sole director, confer either upon herself. The court further stated that the power of a director to declare a dividend to shareholders is subject to the corporation being able to pay its creditors, pursuant to s. 38(3) of the OBCA, but that a shareholder of a corporation does not have a right to the corporation's assets while it is ongoing, unless the corporation is wound up. Upon winding up, a shareholder's right to payment or to receive assets is subject to the prior rights of unpaid creditors, pursuant to s. 221(1)(a) of the OBCA.

With respect to the claim of piercing of the corporate veil, the Court of Appeal agreed with the lower court that it should not be lifted, but for different reasons. The court relied upon the existing Supreme Court of Canada authority in Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co.⁵ that, in order to pierce the corporate veil, a moving party must satisfy the court of: (1) not just ownership or control of a corporation, but complete domination or abuse of the corporate form; and (2)...