Ontario Court Of Appeal Summaries (June 5 – 9, 2017)

Good afternoon,

Following are the summaries for this week's civil decisions of the Court of Appeal for Ontario.

There were a couple of noteworthy cases which may interest those interested in estate and franchise law.

In Levesque v. Crampton Estate, the Court overturned the lower court's decision that the respondent joint tortfeasor is not barred by the Trustee Act in actions against an estate. In this case, the respondent issued a crossclaim against the estate more than two years after the claim was discovered. The estate brought an action under the Trustee Act to dismiss the crossclaim, arguing that the claim was statute-barred. The motion judge found the Limitations Act trumped other limitation periods that arguably applied and dismissed the motion. The Court of Appeal found that the Trustee Act trumps the limitation periods in the Limitations Act, based on section 19 of the Limitations Act, which defers to limitation periods set out in certain other statutes.

In Mendoza v Active Tire & Auto Inc., the Court overturned the lower court's decision to forgive the respondent's deficient disclosure in the sale of a franchise and denied the appellants' motion to rescind the agreement. The Court of Appeal held that the Arthur Wishart Act was intended to protect franchisees by imposing requirements on franchisors. If a disclosure document is materially deficient, then no disclosure has been made, and rescission is available to the franchisee.

Other topics covered include constructive dismissal, negligent investigation by the LSUC and the application of the Law Society Act, and motions for extensions of time used in a frivolous and vexatious fashion.

Have a great weekend.

Civil Decisions:

Levesque v. Crampton Estate, 2017 ONCA 455

[Strathy C.J.O., Gillese and Pardu JJ.A.]

Counsel:

  1. Sammon, for the appellant

  2. Williams, for the respondent

    Keywords: Intentional Torts, Assault, Vicarious Liability, Estates, Crossclaims, Contribution and Indemnity, Limitation Periods, Limitations Act, 2002, S.O. 2002, c. 24, Sch. B., s. 18(1), Trustee Act, R.S.O. 1990, c. T.23, s. 38(3), Waterloo Region District School Board v. CRD Construction Ltd., 2010 ONCA 838, Canaccord Capital Corp. v. Roscoe, 2013 ONCA 378, Bikur Cholim Jewish Volunteer Services v. Penna Estate, 2009 ONCA 196

    Facts:

    The plaintiff, Raymond Levesque, Jr., alleged that he was sexually assaulted by a priest, Father Dale Crampton ("Father Crampton"), in 1976. Mr. Levesque was 12 years old at the time. Father Crampton pleaded guilty to indecent assault and on appeal, was sentenced to eight months' imprisonment.

    Father Crampton died in 2010. In 2013, Mr. Levesque and his family brought an action against Father Crampton's estate and the Roman Catholic Episcopal Corporation of Ottawa ("RCECO"), claiming that RCECO was vicariously liable for the priest's conduct and breached independent duties owed to Mr. Levesque. In 2014, RCECO issued a statement of defence and crossclaim against Father Crampton's estate, relying on the allegations of wrongdoing against Father Crampton in the statement of claim.

    In 2015, the plaintiffs consented to an order dismissing their claim against the estate because it was barred by the two-year limitation period in s. 38(3) of the Trustee Act. The estate brought an unsuccessful motion to dismiss the crossclaim, relying on s. 38(3) of the Trustee Act, R.S.O. 1990, c. T.23 ("Trustee Act"). The estate appealed.

    Issues:

    (1) Did the motion judge correctly find that RCECO's crossclaim against the Crampton estate was not time-barred by s. 38(3) of the Trustee Act?

    Holding: Appeal allowed.

    Reasoning:

    (1) The Trustee Act

    (1) No. The Court of Appeal agreed with the appellant estate's submission that a crossclaim is an "action" and, therefore, by rule 1.03(1) of the Rules of Civil Procedure, falls within s. 38 of the Trustee Act. On the contrary, the respondent RCECO argued that s. 38(3) of the Trustee Act has no application to a claim for contribution and indemnity against the estate of a deceased person. The respondent relied on the wording of s. 38(2) of the Trustee Act , which provides, in summary, that if a deceased person has committed a wrong to another person, "the person wronged" may maintain an action against the executor or administrator of the deceased person.

    The Court of Appeal disagreed with the respondent. The Court of Appeal held that a claim for contribution and indemnity against a deceased person can only be made pursuant to the Trustee Act. Since the purpose of s. 38 of the Trustee Act is to enable claims to be brought against estates, it is reasonable to treat a person seeking contribution and indemnity as a "person wronged". In this case, the wrong suffered is having been required to pay more than the share of damages proportionate to the person's fault.

    (2) The Limitations Act, 2002

    In the Court of Appeal's view, the limitation period in the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B., ("Limitations Act, 2002") is also plainly applicable to the crossclaim. By virtue of ss. 5 and 18(1) of the Limitations Act, 2002, the claim for contribution and indemnity is discovered on the day the first alleged wrongdoer is served with the claim in respect of which contribution and indemnity is sought. Section 4 sets out the basic two-year limitation period from the date of discovery. There is no merit to the appellant's submission that s. 18(1) applies to claims against a joint tortfeasor, but not to claims against the joint tortfeasor's estate. The estate stands in the place of the deceased.

    (3) Resolving the Conflict

    Since both limitation periods apply, the Court of Appeal necessarily had to resolve the conflict. Relying on Waterloo Region District School Board v. CRD Construction Ltd., 2010 ONCA 838, ("Waterloo") and Canaccord Capital Corp. v. Roscoe, 2013 ONCA 378, 115 O.R. (3d) 641 ("Canaccord"), the motion judge found that s. 18(1) of the Limitations Act, 2002 "trumps other limitation periods that arguably apply. However, the Court of Appeal distinguished Waterloo from this case. In Waterloo, unlike this case, the limitation period applicable to the crossclaim was the "basic" two-year limitation period, subject to the deemed discovery rule in s. 18 of the Limitations Act, 2002. There was no potential conflict between that limitation period and another one, such as s. 38(3) of the Trustee Act. The Court of Appeal also distinguished Canaacord because there was no conflicting limitation period that applied to the claims for contribution and indemnity. However, such a conflict exists here.

    By the terms of s. 19(4) of the Limitations Act, 2002, limitations provisions set out in the Schedule prevail over the provisions of the Limitations Act, 2002. As s. 38(3) of the Trustee Act is set out in the Schedule, it must prevail if it applies: Bikur Cholim Jewish Volunteer Services v. Penna Estate, 2009 ONCA 196, 94 O.R. (3d) 401, at para. 26 ("Bikur").The Court of Appeal held that the result reached in Bikur is consistent with the nature, purpose and history of the Trustee Act provision. The Limitations Act, 2002 is based on discoverability. Section 18(1) deems the claim to be discovered on the date the claim is served on the person who seeks contribution or indemnity. In contrast, s. 38(3) of the Trustee Act is a "hard" or absolute limitation period. It is triggered by a fixed and known event - the death of the party against whom a claim is made. The purpose of the Trustee Act limitation period is clear. It is to provide a remedy for a limited time, without indefinite fiscal vulnerability to the estate. Accordingly, the Court of Appeal allowed the appeal and RCECO's crossclaim against the estate was dismissed as being statute-barred.

    Mendoza v. Active Tire & Auto Inc., 2017 ONCA 471

    [Feldman, Cronk and Miller JJ.A.]

    Counsel:

    B.V. Hanuka, for the appellants

    M.A. Davis and R.D. Davis, for the respondent

    Keywords: Franchise Law, Arthur Wishart Act, Ontario Regulation 581/00

    Facts:

    The appellants purchased an Active Tire franchise from the respondent. After operating the franchise for three months at a loss, the appellants sought to rescind the agreement under s. 6(2) of the Arthur Wishart Act ("Act") on the basis that the disclosure was deficient. The motion judge forgave the respondent's deficient disclosure.

    Issues:

    (1) Did the motion judge err in law in his interpretation and application of the Act and Ontario Regulation 581/00 ("Regulation")?

    Holding: Appeal allowed.

    Reasoning:

    (1) Yes. The motion judge erred in his interpretation and application of the Act and Regulation. The respondent's deficient disclosure could not constitute the disclosure document required by the detailed requirements of the Act and Regulation. The appellants were entitled to rescind the agreement under s. 6(2) of the Act.

    The Act is intended as protective legislation for franchisees. The scheme of the Act is to impose a number of requirements on franchisors to fully disclose the type of financial and other information a prospective franchisee would normally need in order to decide whether to become a franchisee.

    Where there are a number of material deficiencies, the purported disclosure document is not a disclosure document within the meaning of the Act, and rescission is available under s. 6(2), which states:

    (2) A franchisee may rescind the franchise agreement, without penalty or obligation, no later than two years after entering into the franchise agreement if the franchisor never provided the disclosure document.

    Where a disclosure document is materially deficient, then no disclosure will be found to have been made. In this case, there were three notable deficiencies in the disclosure document.

    (i) The disclosure certificate was signed by only one officer or director, not two, as required by s. 7(2)(c) of the Regulation.

    The motion judge found this deficiency to be insignificant and not misleading. This finding was an error. S. 7(2)(c) of the Regulation...

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