Ontario Court Of Appeal Summaries (March 12 – March 16)

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

In Mars Canada Inc. v. Bemco Cash & Carry Inc., the Court upheld a settlement in which the parties had agreed to refrain from grey marketing Mars bars, finding that the settlement was not an improper restraint on trade.

O'Brien-Glabb v. National Bank of Canada is another example of the impact of "appropriate means" on the discoverability analysis under subsection 5(1) of the Limitations Act, 2002. In this case, the Court upheld the lower court's order dismissing a summary judgment motion that sought to dismiss the plaintiff's claim as being statute-barred. The Court found that it was not appropriate for the plaintiff to sue when she first began experiencing allergic symptoms that she suspected were caused by toxic mould in her workplace environment. Rather, it did not become appropriate to commence a claim until a specialist had provided an opinion, three years later, that the symptoms she was experiencing had been caused by toxic mould.

In Stanbarr Services Limited v. Metropolis Properties Inc., a sale of land by way of power of sale was attacked on the basis that the selling first mortgagee did not comply with the notice of sale provisions under the Mortgages Act, by failing to properly serve the notice of sale on all subsequent encumbrancers. The Court concluded that absent proof of actual notice on the part of the purchaser of non-compliance with the Mortgages Act, a purchase by way of power of sale could not be successfully attacked. In coming to that conclusion, the Court held that notice to the purchaser that a subsequent mortgagee had not received a notice of sale was not sufficient to support a finding that the purchaser had actual notice of non-compliance with the Mortgages Act. This was because a mortgagee could comply with the notice provisions of the Mortgages Act without the notice of sale actually coming to the attention of a subsequent encumbrancer. Accordingly, the purchaser in this case did not have actual notice of non-compliance with the Mortgages Act, and was therefore a bona fide purchaser for value without notice of any defect. The appeal from the Superior Court's order setting aside the sale as defective was therefore allowed.

In an notable insolvency law decision, Third Eye Capital Corporation v. Ressources Dianor Inc./ Dianor Resources Inc., the Court determined that the Superior Court had erred in finding that royalty rights attached to mining rights were not interests in land. In finding that the royalty rights created no interest in land, the Superior Court had granted a vesting order whereby a receiver sold the mining rights to a third party purchaser, free and clear of the royalty rights. The vesting order was not stayed pending appeal and was executed. The Court declined to determine that the appeal was moot because the vesting order had been executed. It held that there was still a possibility that the appeal was not moot. The Court invited further submissions on the issues of whether the Superior Court had jurisdiction to grant the vesting order free and clear of the royalty rights, and also whether or not the appeal was moot. Stay tuned...

In Abrahamovitz v. Berens, the plaintiffs were seeking payment of certain rents that were being withheld from them by the defendant property managers. The defendants refused to pay the rents over because the prior property manager, who had died, had been purportedly promised a portion of those rents by the plaintiffs, evidenced by written acknowledgments. The plaintiffs sued the defendants to recover the rents. The defendants did not claim the rents for themselves. They acknowledged that the rents belonged either to the plaintiffs, or to the estate of the deceased property manager. The defendants moved to interplead the rents into court, and to add the estate of the deceased property manager who had the claim to the rents.

The Superior Court refused to add the estate on the basis that its claim to the rents was statute-barred. In a somewhat curious decision, the Court of Appeal set aside that order and added the estate as a party. The Court found that the limitation period defence against the estate belonged to the defendants, not the plaintiffs. Since the defendants had invited the estate to bring its claim, had moved to add the estate to the action, and had not raised a limitation period defence, the plaintiffs were found to have no right to rely on the defendants' limitation period defence to deny the adding of the estate as a party.

I have some difficulty with this outcome, as it appears to favour form over substance and may have negative substantive consequences for the plaintiffs. If the defendants have no claim to the rents, then the true contest regarding the entitlement to the rents is between the plaintiffs and the estate, even though they had not sued each other. Presumably, now that the estate has been added as a party, the defendants will be permitted to interplead the funds into court and will be released from the action. In addition, the plaintiffs and the estate will presumably have an opportunity to exchange pleadings. The plaintiffs should be able to assert the limitation period defence to the estate's claim to the rents. If successful, the parties may well end up where the lower court got them, however, only after spending significantly more resources to get there. If the plaintiffs are now unable to assert a limitation period defence, then they will be faced with a troubling situation in which one of their substantive defences was taken away by a party with no interest in the outcome (the defendants).

Finally, in the odd case of Ferreira v. St. Mary's General Hospital, substantial indemnity costs were ordered against a lawyer who had unilaterally commenced legal proceedings, without instructions, in order to oppose the decision of her client's wife and next of kin to withdraw life support from her client. The lawyer was found to have had no authority to take such a step (since her client was incapacitated at the time). The Court determined that the lawyer had acted dishonourably and had seriously interfered with the administration of justice by taking such an unauthorized step.

Criminal Decisions

Short Civil Decision and Ontario Review Board Decision

Civil Decisions:

Mars Canada Inc. v. Bemco Cash & Carry Inc., 2018 ONCA 239

[Strathy C.J.O., Hourigan and Miller JJ.A.]

Counsel:

T. Summers, for the appellants J. and E. Udokang, for the respondent Keywords: Contracts, Enforceability, Restraint of Trade, Tank Lining Corp. v. Dunlop Industrial Ltd., (1982), 40 O.R. (2d) 219 (C.A.), Trademarks, Grey Marketing, Civil Procedure, , Hearings, Bifurcation, Bondy-Raphael v. Potrebic, 2015 ONSC 3655 (Div. Ct.), Summary Judgment, Hryniak v. Mauldin, Costs, Substantial Indemnity, Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131, Rules of Civil Procedure, rr. 6.1.01.1., 20.04(3), 57.01

Facts:

The respondent Mars Canada Inc., an Ontario company, is related to the well-known American candy company. The appellant Aizic Ebert ("Ebert") owns and controls the corporate appellants, Bemco Cash & Carry Inc. ("Bemco") and GPAE Trading Corp. ("GPAE"). Through those companies, he sold "grey market" Mars products in Canada. He bought the products in the United States, imported them to Canada, and sold them at a price lower than those offered by the respondent. The law is unsettled as to whether a Canadian trademark holder can prevent this activity.

In about 2006, the respondent discovered that Bemco was selling Mars products in Toronto. It brought an action in the Federal Court. After lengthy negotiations and legal advice, the parties settled the action (the "Bemco Settlement"). Under the Bemco Settlement, Bemco agreed to identify the source of its grey market products. It also agreed that it would not import or sell Mars products in Canada without the respondent's consent or without obtaining a declaratory judgment in the Superior Court authorizing it to do so. After the settlement, Bemco disclosed that GPAE was its supplier of foreign Mars products.

On disclosure of this information, the respondent demanded that GPAE cease its activities. GPAE agreed to do so. It agreed not to import or sell Mars products in Canada without the respondent's consent (the "GPAE Settlement"). The GPAE Settlement was to be binding on related companies and their shareholders – that is, Bemco and Ebert.

In 2010, the respondent discovered that foreign products bearing its trademarks were once again being sold in Canada, through another company, in concert with Bemco and GPAE. It brought this action to enforce the Bemco Settlement and the GPAE Settlement and for damages. The appellants defended on the ground, among others, that the settlement agreements were in restraint of trade and, therefore, void.

The respondent brought a motion for summary judgment. It sought declaratory relief and damages. It also sought rectification of the Bemco Settlement, to correct an error in Bemco's corporate name.

The Bemco Settlement was made in the name of Bemco Confectionary Sales, the company from which Ebert had purchased the business, rather than in Bemco's proper name. The motion judge found that both parties intended the agreement to be the name of Bemco and granted rectification. That order is not appealed.

The motion judge also found that both Bemco and GPAE had breached their settlement agreements. Bemco by continuing to engage in grey marketing, and GPAE by continuing to import Mars products into Canada. The motion judge rejected the appellants' argument that the settlement agreements were void as being in restraint of trade.

Having found that the appellants breached the agreements, he directed a reference as to damages pursuant to r. 20.04(3) of the Rules of Civil Procedure. He rejected the appellants' submission that this was an...