Ontario Court Of Appeal Summaries (January 22 – January 26, 2018)

Good evening.

It was a busy week for the Ontario Court of Appeal. Numerous decisions were released on such issues as estates litigation, wrongful dismissal, the liability of directors and officers for acts of the corporation, insider trading and tipping, fraud and franchise law, among other issues.

In a positive decision for franchisors, the Court allowed the franchisor's appeal in Raibex Canada Ltd. v. ASWR Franchising Corp.. The Court held that the failure to disclose in a franchise disclosure document served under the Arthur Wishart Act a lease for a location that did not yet exist, and the cost of upgrading an existing location rather than building one out from a shell, did not entitle the franchisee to the two-year rescission remedy under ss 6(2) of the AWA.

In Finkelstein v. Ontario Securities Commission, a regulatory prosecution, the Court discussed the test for establishing insider trading and insider tipping under Section 76(5)(e) of the Securities Act.

In DBDC Spadina Ltd. v. Walton, the Court discussed at length the claims and remedies of knowing assistance of breach of trust/fiduciary duty and knowing receipt of trust property in the context of whether corporations under the de facto control of a fraudster could be saddled with liability for knowing assistance or knowing receipt. The court also discussed the remedies of damages for such breaches, as well as the constructive trust remedy. Justice van Rensburg dissented because the effect of the majority's decision would be to grant most of the remaining spoils to the large claimants and deny recovery to claimants owed smaller amounts.

Finally, I would like to invite all of our readers to attend the Top Appeals of 2017 CLE that my partner, Lea Nebel and I will be co-chairing with Justice Epstein of the Court of Appeal. The CLE has been scheduled as a casual evening/dinner program at the OBA offices on Toronto Street to take place on Monday, February 26, 2018. In-person registration will be at 5:30, dinner will be served at 6, and the formal program will run from 6:30 to 8pm. For those who cannot attend in person, you can participate via live webcast. Please see the program agenda for further details and to register.

There are three decisions being featured. The first is Moore v Sweet, 2017 ONCA 182, which relates to the remedy of constructive trust. That case will be heard by the Supreme Court on February 8. Counsel on that matter, David M. Smith and Jeremy Opolsky, have agreed to participate in our panel discussion. The second case is Presidential MSH Corporation v. Marr Foster & Co. LLP, 2017 ONCA. That case canvassed, summarized and clarified the law regarding when the "appropriate means" analysis under s. 5(1)(a)(iv) of the Limitation Act, 2002, can be applied to delay the start of the running of the basic two-year limitation period. Counsel for the parties on that matter, Allan Sternberg, Daniella Murynka and Michael Girard, will be our panelists. The law in this area is continuing to evolve. The third decision featured is Hodge v Neinstein, 2017 ONCA 494. That case has certainly received the attention of the plaintiffs' personal injury bar and the media and has, no doubt, been a catalyst behind the Law Society's efforts to develop a standard form contingency fee agreement and disclosure obligations aimed at providing better information to clients. Counsel for the class plaintiffs, Peter Waldmann, will be joined on our panel by Bevin Shores and Audrey P. Ramsay, who are involved with the OBA and the Law Society working groups looking at this issue.

Wishing everyone a very nice weekend.

Civil Decisions:

Bennett v. Bennett Estate, 2018 ONCA 45

[Feldman, MacPherson and Huscroft JJ.A.]

Counsel:

William V. Sasso, for the appellant

Christopher Statham, for the respondent A. Miron Topsoil Ltd.

No one appearing for the respondents the Estate of Joyce Margaret Bennett, Deceased, Alan Leslie Soles and Bertram Shan Soles

Keywords: Contracts, Real Property, Rights of First Refusal, Privity of Contract

Facts:

The Bennett brothers (Donald, John, Dennis and George) divided a large parcel of land given to them by their father into separate properties, and entered into an agreement establishing a right of first refusal in the event of a sale of any of the properties by any of them. Donald Bennett died in 2006 and is survived by his wife Darlene Bennett. John Bennett died in 2009, and his property was transferred to his wife Joyce and her sons, Bertram Shaun Soles and Alan Leslie Soles.

In 2012, Joyce and her sons proposed to sell their property to Miron Topsoil Ltd. The agreement of purchase and sale acknowledged the right of first refusal agreement. Notice of the offer to sell to Miron was given by the vendor's lawyer to the surviving brothers, Dennis and George, as well as to Darlene Bennett.

Darlene Bennett provided notice that she was exercising the right to purchase the property under the right of first refusal, and provided the required deposit. Both Miron and Darlene Bennett took the position that they were entitled to purchase the property. Neither proposed sale of the property closed. Darlene Bennett brought a motion for summary judgment requesting an order of specific performance granting her the right to purchase the property. Miron responded with its own motion for summary judgment, requesting an order dismissing Darlene Bennett's claim on the basis that she was not entitled to exercise the right of first refusal.

The motion judge found that the right of first refusal agreement clearly limited the right of first refusal to parties to the agreement, a right that did not extend to "family members" of the parties. Darlene Bennett could not exercise the right of first refusal because she was not a party to the agreement.

Issues:

(1) Was Darlene Bennett entitled to exercise the right of first refusal on the basis that she was a "family member" under the agreement?

Holding: Motion dismissed.

Reasoning: No. There was no evidence before the motion judge and the Court of Appeal concerning the appellant's ability to exercise the right of first refusal on behalf of the estate. The vendor's simple act of extending the offer to the appellant did not establish her legal entitlement to accept it on behalf of the estate, as the appellant asserts, nor did the respondent's statement that the appellant "purported" to exercise the right of first refusal constitute an admission that she had done so in accordance with the agreement. The motion judge was asked to determine the appellant's entitlement on the basis that she was a "family member". He cannot be faulted for having done so.

The motion judge's interpretation of the agreement is entitled to deference. It was open to the motion judge to find that the agreement was not ambiguous. On its face, the right of first refusal is limited to parties to the agreement. The problem for the appellant is that she failed to establish her ability to act on behalf of Donald Bennett's estate.

The motion judge also did not err in his analysis of the privity of contract doctrine. The doctrine applies only where the contract in question confers the relevant benefit on a third party. The motion judge's finding that the agreement did not confer a right of first refusal on anyone but the parties to the agreement is determinative of this analysis. In the absence of a benefit conferred on a third party, recent caselaw ameliorating the strictures of the privity doctrine and allowing third parties to enforce contractual provisions for their benefit is irrelevant and cannot assist the appellant.

Grabarczyk v. 2198802 Ontario Limited, 2018 ONCA 47

[Simmons, Roberts and Nordheimer JJ.A]

Counsel:

Julian Binavince, for the appellants

Jonathan Rosenstein, for the respondent

Keywords: Contracts, Interpretation, Real Property, Agreements of Purchase and Sale of Land, Civil Procedure, Applications, Actions

Facts:

The appellant, 2198802 Ontario Limited (the "appellant"), offered to purchase real property from the respondent under an offer that was accepted on October 10, 2015. The offer stipulated that it was conditional on the appellant satisfying itself of certain matters, and that unless the appellant gave notice in writing "not later than 11:59 p.m. thirty (30) days after acceptance, that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned" (the "due diligence clause"). The 30-day period elapsed on November 9, 2015. The appellant did not deliver notice in writing that the condition was satisfied by that date. Nonetheless, the appellant submitted an Amendment to Agreement of Purchase and Sale to the respondent that was accepted on November 14, 2015. The Amendment purported to delete the due diligence clause from the original agreement and to substitute an identically worded due diligence clause, save that "sixty (60)" was substituted for "thirty (30)".

The application judge concluded that even though the original agreement had become null and void, the amendment reflected an intention to create a new agreement incorporating all the terms of the original agreement, but modifying the original due diligence period from 30 days to 60 days from the date of acceptance of the original offer.

Issues:

(1) Did the application judge err by treating the modification as a new agreement?

Holding: Appeal allowed.

Reasoning:

(1) Yes. While holding that there was a new agreement, the application judge's interpretation treated the amendment as a resurrection of the original agreement. The application judge failed to turn her mind to the distinction between resurrection of a prior agreement; creation of a new agreement; the parties' intentions in that regard; and the parties' intentions had they turned their minds to the fact that the original agreement had become null and void. The record did not sufficiently address the parties' intentions with respect to whether they turned their mind to the fact that...