Ontario Court Of Appeal Summaries (April 16 – April 20, 2018)

In Atos IT Solutions v Sapient Canada Inc., the Court confirmed that the "minimum performance principle" places a common law limit on expectation damages for breach of contract. In cases where the defaulting party has alternative modes of performing the contract, damages are calculated on the basis of the mode of performance that is least burdensome to the defaulting party and least profitable to the non-breaching party. A termination for convenience clause therefore effectively defines the upper limit of expectation damages, even where the defaulting party did not terminate under that clause, but rather purported to terminate for cause.

In Ojeikere v Ojeikere, a child abduction case, the Court took jurisdiction over custody and access of the children even though their habitual residence was Nigeria and there was an outstanding custody application pending in that country. The court relied on section 23 of the Children's Law Reform Act, which gave jurisdiction because the children were in Ontario and were found to be a risk of serious harm if they were to return to Nigeria. Coincidentally, the Supreme Court released another important child abduction decision today called Office of the Children's Lawyer v Balev.

Other topics covered this week included negligent misrepresentation, negligent police investigation, oppression in the not-for-profit corporation context, sealing orders, commercial mortgage lending, LTD coverage, occupier's liability, defamation and costs.

2249659 Ontario Ltd. v. Sparkasse Siegen, 2018 ONCA 371

[Watt, Pepall and Miller JJ.A.]

Counsel:

Jonathan Lisus and James Renihan, for the appellants

Evan Tingley, for the respondent Sparkasse Siegen

P.A. Neena Gupta, for the respondent Thomas Magnete GmbH

Keywords: Torts, Negligent Misrepresentation, Contracts, Guarantees, Civil Procedure, Procedural Fairness

Facts:

This appeal arises from the ruins of the turbulent economic times that gripped the automotive industry in 2008. Relying on a claim of negligent misrepresentation, the appellant, Rohwedder Canada Inc. ("RCI"), looked to blame the respondents for losses suffered. The trial judge dismissed the action.

As way of background, Chrysler awarded Getrag Transmission Manufacturing LLC ("Getrag"), a subsidiary of Getrag A.G., a German manufacturer and, at the time, the world's largest transmission company, a major contract for more than $500 million to design and manufacture automobile transmissions. Getrag subcontracted with the respondent, Thomas Magnete GmbH ("TM Germany"), to manufacture certain valves. In turn, TM Germany issued a purchase order dated September 7, 2007, to purchase three automated custom-designed assembly lines from the appellant, RCI, a subsidiary of a German public company, for C$6.75 million. RCI accepted the order on September 12, 2007.

Due to NAFTA regulations, the valves had to be manufactured in North America. TM Germany established a wholly-owned subsidiary, Thomas Magnete Canada Inc. ("TM Canada"), to operate the manufacturing facility in Cambridge, Ontario. TM Germany's bank, Sparkasse Siegen ("Sparkasse"), loaned funds and administered a financing facility of EUR10 million, subject to various conditions, to TM Canada to set up the plant. The loan was guaranteed by TM Germany and other related companies. Sparkasse reserved the right to terminate part of the loan facility on the basis of, among other things, "a significant deterioration in the asset situation of the end borrower [TM Canada]".

RCI did not demand any guarantees from TM Germany. TM Germany sought to transfer its purchase order with RCI to TM Canada, which was not viewed as controversial by either TM Germany or RCI.

On December 19, 2007, Silvio Osim, RCI's sales manager, wrote to TM Germany, stating:

Since we are transferring the PO from [TM Germany] to [TM Canada,] we would need a letter from [TM Germany] that, in case of illiquidity of [TM Canada], [TM Germany] would assume the project completion and any outstanding payments to [RCI]. This request came to me from our Controller who was informed about this requirement from our Bank.

At trial, Osim conceded that the last sentence of this email was untrue. RCI's bank had not made such a request.

TM Germany forwarded Osim's email to its bank, Sparkasse. Ms. Mueller, the manager at Sparkasse responsible for the TM Canada file, explained at trial that she was familiar with the type of comfort letter requested by RCI. She crafted a response stating that:

[T]he project of setting up a new production site by our client Thomas Magnete Group in Cambridge / Ontario is financially supported by [Sparkasse].

We hereby confirm, that - in line with the project plan - the necessary funds including expenses for the purchase of production lines and machinery are in place.

[TM Germany] provided a guarantee in our favour regarding the project's financing scheme, thus accepting financial liability for the project.

Osim then responded and offered to send the signed purchase order immediately. RCI rendered its invoices to TM Canada and received payment from that company.

Getrag's relationship with Chrysler then fell apart, and on October 18, 2008, Getrag announced that the deal with Chrysler was dead. On November 17, 2008, Getrag filed for bankruptcy protection. Sparkasse withdrew its financing to TM Canada and TM Canada closed. In total, RCI received approximately 80% of the total contract price from TM Canada.

The appellant, 2249659 Ontario Ltd., an inactive company, purchased RCI including the cause of action against Sparkasse and TM Germany for one Euro on the insolvency of RCI's parent company. RCI is also now an inactive company.

In October 2010, the appellants sued Sparkasse and TM Germany for negligent misrepresentation. They alleged that the Sparkasse letter had been, among other things, untrue, inaccurate, and misleading and had failed to disclose that Sparkasse's financing was contingent on the financial health of TM Canada. It claimed the respondents owed RCI the outstanding amount of $1,489,617. The trial judge dismissed the action.

Issues:

(1) Did the trial judge make factual errors in dismissing the appellants' claim of negligent misrepresentation?

(2) Did the trial judge deny the appellants procedural fairness?

Holding: Appeal dismissed.

Reasoning:

(1) No. Appellate intervention is warranted where an inference of fact is not supported by any evidence and where an improper inference has a material effect on the outcome.

The court stated that while the trial judge's reasons were admittedly long and occasionally strayed into areas that were not demanding of any commentary, he had a firm grasp of the facts and applied the correct law in analysing the negligent misrepresentation claim.

First, the appellant asserted that the trial judge made a palpable and overriding error in finding that Sparkasse and TM Germany sent the December correspondence understanding that it would be relied upon by RCI's bank rather than RCI. The court stated that this was an overstatement of the trial judge's finding. The trial judge described the wording of RCI's email request as odd and then proceeded to describe some of its features. He did so from an objective perspective, stating that, when referring to RCI's bank's "requirement", the clear implication "to an objective reader" was that RCI needed something to show its banker. This was a reasonable conclusion.

Secondly, the appellants contended that the trial judge erred in finding that RCI deliberately omitted the word "guarantee" in its request. The court stated that it was open to the trial judge to infer that the omission was deliberate.

Third, the appellants submitted that the trial judge erred in finding that RCI was not concerned about transferring the purchase order to TM Canada because it knew that Getrag was contractually obliged to indemnify TM Canada for its payment obligations. The court stated that although the trial judge's reference to an indemnity was not grounded in the evidence, it was not a palpable and overriding error.

(2) No. The appellants complained that the trial judge made an "atmospheric error" by characterizing Osim and his request as dishonest, guileful, and misleading - a narrative that was not advanced by the parties, was untethered from the evidence, and which improperly coloured his treatment of the correspondence and his analysis of the issues.

The court stated that the trial judge's interpretation of the evidence was supported by the pleadings. In any event, RCI clearly did not request a guarantee and Osim admitted that he did not use the word guarantee in the email. As such, the court held that the trial judge fairly concluded that this was a deliberate decision, and there was no denial of procedural fairness.

Connelly v. Toronto (Police Services Board), 2018 ONCA 368

[MacFarland, LaForme and Epstein JJ.A.]

Counsel:

C Fiske and D Cassin, for the appellants

F Fischer and A Mintoff, for the respondent

Keywords: Torts, Negligent Investigation, Duty of Care, Police, Wellington v. Ontario, 2011 ONCA 274, Hill v. Hamilton-Wentworth (Regional Municipality) Police Services Board, 2007 SCC 41, Civil Procedure, Striking Pleadings, No Reasonable Cause of Action, Rules of Civil Procedure, Rule 21

Facts:

Pursuant to Rule 21, the motion judge struck out the appellants' (Connellys') claim, without leave to amend, on the basis that it did not disclose a reasonable cause of action. The motion judge found it was plain and obvious that the Toronto Police Services Board (TPSB) owed no duty of care to the appellants.

At the outset of the appeal, counsel for the appellants accepted that the Court of Appeal is precluded from reconsidering the decision of Wellington v. Ontario, 2011 ONCA 274. Instead, they argued that Wellington should be distinguished because the facts in the appellants' case are uniquely different. In Wellington, the Court of Appeal held that the Special Investigation Unit ("SIU") of the...