Ontario Court Of Appeal Summaries (April 25-29, 2016)

Good afternoon everyone.

Following are this week's summaries of civil decisions released by the Court of Appeal. Topics covered included insurance, settlements, construction, debtor-creditor, contracts, real property, MVA and medical malpractice.

Wishing everyone a nice weekend and a Happy Easter to those of the Eastern Orthodox faith.

Civil Decisions

Business Development Bank of Canada v. Aventura II Properties Inc., 2016 ONCA 300

[van Rensburg J.A. (In Chambers)]

Counsel:

Sean N. Zeitz, for Revital Druckmann and Jean-Jacques Myara

Kelli Preston, for the receiver Pollard & Associates Inc.

Catherine Francis, for DUCA Financial Services Credit Union Ltd.

Keywords: Debtor-Creditor, Bankruptcy and Insolvency, Receiverships, Mareva Injunctions, Leave to Appeal, Bankruptcy and Insolvency Act, s.193(e), Security for Costs of Appeal, Rules of Civil Procedure, 61.06(1)(a), 40.04(1)

Facts:

Pollard was the court-appointed receiver of the debtor companies. The Order at issue had extended a Mareva injunction against Revital, who was the spouse of the principal of the Debtors. The Order also directed that Pollard was entitled to immediate possession ("repatriation") of certain monies, being the proceeds of an HST refund paid to one of the Debtors and diverted in contravention of a prior Receivership Order. The Order also dismissed a claim by Myara seeking an interest in the monies.

Revital sought leave to appeal the Order under s. 193(e) of the Bankruptcy and Insolvency Act. Revital made no claim of her own to the impugned monies and did not oppose the repatriation of the funds. Instead, she challenged the procedure followed by Pollard in obtaining, ex parte, the original interim Mareva injunction against her. Myara appealed as of right, claiming that the monies were his and thus objected to any repatriation of the funds. Pollard and the secured creditor, DUCA, each moved for security for costs of Myara's appeal.

Issues:

(1) Should Revital be granted leave to appeal the Order pursuant to s.193(e) of the Bankruptcy and Insolvency Act?

(2) Should the Receiver and Debtor's motions for security for costs be granted?

Holding: (1) No. (2) Yes. Motion for leave to appeal dismissed and motions for security for costs granted.

Reasoning:

(1) Leave under s.193(e) of the BIA is discretionary and the court must consider whether the proposed appeal (a) raises an issue that is of general importance to the practice in bankruptcy and insolvency matters or to the administration of justice as a whole; (b) is prima facie meritorious; and (c) would unduly hinder the progress of the bankruptcy or insolvency proceedings. The Court found that there was no arguable merit to Revital's proposed appeal as Revital did not claim any interest in the HST Refund and did not challenge the substantive grounds on which the Mareva Order was made and extended; her concerns were strictly procedural.

Revital argued that the motions judge erred in granting the Order because (a) Pollard had not made full and frank disclosure on the original ex parte motion; (b) the court did not require an undertaking for damages from the moving party or grant an order dispensing with that requirement; and (c) the Order could not be made against her as a "third party" where there was no pending or intended proceeding against her.

The Court rejected these arguments. While Pollard was required to make full and frank disclosure of material facts, Pollard was not required to file a factum pursuant to Rule 40.04(1). The obligation on a moving party to file a factum in an injunction motion applies in contested, but not ex parte, motions. Second, the motion judge's granting of the Mareva Order was based on the application of settled principles and entirely justified by the evidence placed before him.

Moreover, Pollard was not required to provide an undertaking as to damages as the order was made in a court-appointed receivership; Pollard had a duty to recover the property of the Debtors and the order sought was in aid of powers granted to the Receiver by court order. The motion judge was thus entitled to grant the Mareva Order without requiring an undertaking as to damages. Revital's argument that the Mareva Order should not have been issued against her because there was no existing or proposed action in which she was a defendant was also rejected as the Order was granted on the basis of overwhelming evidence.

(2) Pollard and DUCA moved for security for costs of Myara's appeal under r. 61.06(1)(a) and, in doing so, were required to establish that there was "good reason to believe that the appeal [was] frivolous and vexatious and that the appellant ha[d] insufficient assets in Ontario to pay the costs of the appeal." The first part of the test involved a consideration of "[t]he apparent merits of the appeal, the presence or absence of an oblique motive for the launching of the appeal, and the appellant's conduct in the prosecution of the appeal" as well as other factors that may be specific to the case. The latter aspect was not in dispute. The Court was satisfied that both parties were entitled to security for costs given that the appeal appeared to have little chance of success.

Seidel v. Markham (Town), 2016 ONCA 306

[Sharpe, LaForme and van Rensburg JJ.A.]

Counsel:

David G. Boghosian and Shaneka M. Taylor, for the appellant

Sean R. Chambers, for the respondent

Keywords: Insurance, Duty to Defend, Duty to Indemnify, Settlement, Motion to Enforce, Rules of Civil Procedure, Rule 49

Facts:

The appellant Town of Markham ("Markham") and the respondent Intact Insurance Company of Canada ("Intact"), were in dispute with respect to the interpretation of what both parties referred to as an "agreement". The plaintiff had sued for damages after alleging a slip and fall on Markham's property that occurred on March 6, 2011. Markham had a winter maintenance contract with V.T.A. Construction Ltd ("V.T.A.") and was named as an additional insured on VTA's policy with Intact, as required by the contract. Markham retained counsel, Mr. Persaud, and served a statement of defence and issued a third party claim against V.T.A. and Intact. The third party claim claimed contribution and indemnity from V.T.A. and a declaration that Intact owed a duty to defend and indemnify Markham in respect of the plaintiff's claims.

In May 2012, the plaintiff added V.T.A. as a defendant to the action and amended the statement of claim to plead that the accident occurred on March 5, 2011. In the fall of 2012 and early 2013, there were a series of communications between Mr. Persaud, Intact and Mr. Lipetz at Benson Percival Brown LLP ("BPB"), the law firm appointed to defend V.T.A. in the action, about the defence of the action and the third party claim. Mr. Persaud prepared an Assumption of Defence Agreement that specifically provided for Intact to assume Markham's defence and to indemnify Markham in respect of any damages in the action. Mr. Lipetz advised that Intact would not be executing the agreement but that his office would serve a Notice of Change of Lawyers. Mr. Persaud replied that he did not have to sign the agreement so long as it was understood that Markham would be covered for any amounts arising from a finding of liability against it. The next day, Mr. Lipetz delivered the Notice of Change of Lawyers, with the effect that BPB represented both V.T.A. and Markham in the defence of the action. BPB was the only firm representing Markham in the proceedings for 16.5 months, including attendance at examinations for discovery.

In December 2013, BPB notified Mr. Persaud that it was bringing a motion to remove itself from the record. Six months later new counsel was appointed for V.T.A. but not Markham. Markham brought a motion under Rule 49 to enforce the "settlement agreement". The motion judge dismissed Markham's motion that sought to enforce Intact's obligation to both defend and indemnify Markham in the action. He concluded that there had not been a "meeting of the minds" between the parties on the question of indemnification and that the agreement was not in clear enough terms to require Intact to indemnify Markham for any loss suffered as a result of V.T.A.'s negligence.

Issues:

(1) Did the motion judge err in concluding there was no agreement?

(2) Did the motion judge err in concluding that Intact could not have agreed to indemnify Markham for liability in the action, except as resulted from V.T.A.'s negligence?

Holding: Appeal allowed. Intact was ordered to appoint counsel to defend Markham at its expense and to indemnify Markham for any damages and costs awarded against Markham in the main action.

Reasoning:

(1) Yes. The parties both agreed that they entered into an agreement resulting in the appointment of the same counsel to represent V.T.A. and Markham in the defence of the action. The issue was not whether an agreement existed, but its interpretation.

(2) Yes. The court stated that in its third party claim, Markham claimed both a defence and indemnification from Intact. Intact could have: 1) denied both obligations, in which case Markham would have been on its own in the action; 2) resisted the claim for indemnification but accepted the obligation to defend, assuming the cost of Markham's defence by different counsel; or 3) accepted the obligation to defend and indemnify. The first two options would recognize that Markham and V.T.A. continued to be adverse in interest in the main and third party action. The third would mean that their interests were aligned or the same.

By appointing one firm to represent both parties, and the fact that BPB represented Markham and V.T.A. in litigation until discoveries had been completed, Intact had agreed to both defend and indemnify Markham. The court found the agreement to indemnify sufficiently clear, because without such an agreement, counsel appointed by Intact to act for both V.T.A. and Markham would have been in a conflict of interest.

The court also...