Ontario Court Of Appeal Summaries (September 24 – 28, 2018)

Good evening.

Following are the summaries for the civil decisions released by the Court of Appeal this week.

There were two wrongful dismissal cases this week. One was brought by a physician against Sick Kids Hospital. The Court found against the Hospital and allowed the appeal, remitting the matter back to the Superior Court for a determination of the damages. The second involved the breach of fiduciary duty of a senior officer of a public company who was found to have been self-dealing. The Court confirmed that the breach of fiduciary duty constituted just cause for termination.

Other topics included a complex variation of spousal support case that has been to the Court of Appeal on more than one occasion, setting aside an order in the CCAA context, and dismissal for delay.

Until next week.

John Polyzogopoulos Blaney McMurtry LLP 416.593.2953 Email

Table of Contents

Civil Decisions

Dunsmuir v. Royal Group, Inc, 2018 ONCA 773

Keywords: Employment Law, Wrongful Dismissal, Cause, Corporations, Officers, Breach of Fiduciary Duty, Conflicts of Interest, Related Party Transactions, Duty to Disclose, McKinley v BC Tel, 2001 SCC 38, Advanced Realty Funding Corp v Bannink (1979), 27 OR (2d) 193 (CA), Hodgkinson v Simms, [1994] 3 SCR 377

Crystallex International Corporation (Re), 2018 ONCA 778

Keywords: Bankruptcy and Insolvency, Appeals, Leave to Appeal, Orders, Debtor in Possession Financing, Setting Aside, Stay of Proceedings, Lifting Stay, Companies' Creditors Arrangement Act, RSC 1985, c C-36, Nortel Networks Corporation (Re), 2016 ONCA 332, Hebditch v Birnie, 2017 ONCA 169, Rules of Civil Procedure, RRO 1990, Reg 194, r 37.14 and 59.06(2)

Gholami v. The Hospital for Sick Children, 2018 ONCA 783

Keywords: Employment Law, Wrongful Dismissal, Termination for Cause, Duty of Good Faith, Defamation, Damages, Appeals, Suffiency of Reasons, R v Sheppard, 2002 SCC 26, Dovbush v Mouzitchka, 2016 ONCA 381, Maple Ridge Community Management Ltd v Peel Condominium Corp No 231, 2015 ONCA 520, R v Dinardo, 2008 SCC 24, Honda Canada Inc v Keays, 2008 SCC 39, Wallace v United Grain Growers Ltd, [1997] 3 SCR 701

Pustai v. Pustai, 2018 ONCA 785

Keywords: Family Law, Spousal Support, Variation, Material Change in Circumstances, Termination, Imputing Income, Spousal Support Guidelines, LMP v LS, 2011 SCC 64, Miglin v Miglin, 2003 SCC 24, Drygala v Pauli (2002), 61 OR (3d) 711 (CA), Riel v Holland, [2002] OJ No 5609, affirmed (2003), 67 OR (3d) 417 (CA), Gray v Rizzi, 2016 ONCA 152, Cassidy v McNeil, 2010 ONCA 218, Gray v Gray, 2014 ONCA 659, Schulstad v. Schulstad, 2017 ONCA 95

S.I.A.S.I Trading Limited v Teplitsky, 2018 ONCA 788

Keywords: Civil Procedure, Dismissal for Delay, Nissar v. Toronto Transit Commission, 2013 ONCA 361, Ticchiarelli v. Ticchiarelli, 2017 ONCA 1, Rules of Civil Procedure, Rules 24.01 and 48.11

Short Civil Decisions

McGregor v. O'Sullivan Animal Hospital , 2018 ONCA 776

Keywords: Civil Procedure, Summary Judgment, Procedural and Natural Justice, Notice

Markham Village Shoppes Limited v. Gino's Pizza Ltd., 2018 ONCA 782

Keywords: Costs, Summary Judgment

Esposito (Re), 2018 ONCA 780

Keywords: Ontario Review Board, Absolute Discharges, Conditional Discharges

Galanis v. Kingston General Hospital, 2018 ONCA 786

Keywords: Civil Procedure, Amending Pleadings, Adding Parties, Misnomer, "Litigating Finger" Test

Criminal Decisions

R. v. Lowe , 2018 ONCA 777

Keywords: Criminal Law, Domestic Violence, Sentencing, R v Campbell, 170 OAC 282, R v S (P), 2007 ONCA 299, R v Lacasse, 2015 SCC 64

R. v. H.C. , 2018 ONCA 779

Keywords: Criminal Law, Sexual Assault, Evidence, Burden of Proof, Credibility, R v W.D, [1991] 1 SCR 742

R. v. Abdella, 2018 ONCA 789

Keywords: Criminal law, Drug Trafficking, Evidence, Circumstantial Evidence

R. v. Yaghob , 2018 ONCA 775

Keywords: Criminal Law, Drug Trafficking, Drug Possession, Sentencing, Controlled Drugs and Substances Act, SC 1996, c. 19, s 5(2)

R. v. Omar , 2018 ONCA 787

Keywords: Criminal Law, Possession for the Purpose of Trafficking, Possession of Proceeds of Crime, Evidence, Voir Dire, Hearsay, Principled Exception to Hearsay Rule, Confidential Informants, Charter of Rights and Freedoms, ss. 8, ss. 9, s. 24(2), R v Debot, [1989] 2 SCR 1140, R v Baldree, 2013 SCC 35, R v Bridgman, 2017 ONCA 940, R v Malcolm-Evans, 2016 ONCA 28

CIVIL DECISIONS

Dunsmuir v. Royal Group, Inc, 2018 ONCA 773

[Rouleau, Pardu and Benotto JJ.A.]

Counsel:

M.A. Davis, R.D. Davis and S. Green, for the appellant

N. Campbell and D. McLeod, for the respondent

Keywords: Employment Law, Wrongful Dismissal, Cause, Corporations, Officers, Breach of Fiduciary Duty, Conflicts of Interest, Related Party Transactions, Duty to Disclose, McKinley v BC Tel, 2001 SCC 38, Advanced Realty Funding Corp v Bannink (1979), 27 OR (2d) 193 (CA), Hodgkinson v Simms, [1994] 3 SCR 377

Facts:

At the time of his termination in 2004, the appellant was the Senior Vice-President, Chief Financial Officer, and a member of the board of directors of the respondent. The respondent is a public company. The trial judge held that there was just cause for the appellant's termination without notice, and relied on three incidents of misconduct.

The first incident involved a land flip. The controlling shareholder of the respondent (the "controlling shareholder") and senior officers of the respondent (the "controlling shareholder's group") bought property through a third party. Immediately after closing, the property was sold to the respondent for $6.5 million more than what had been paid for it. At the time, the appellant was responsible for real estate acquisitions, and was approached by the vendor's agent regarding whether the respondent was interested in purchasing the property. The appellant consulted the controlling shareholder and thereafter indicated to the vendor's agent that the respondent was not interested. Later, the controlling shareholder asked the appellant to assist him with effecting the land flip transaction. The appellant was involved with and assisted in the acquisition by the controlling shareholder's group and the immediate resale to the respondent.

The second incident involved the sale of one of the respondent's subsidiaries. The purchase price included a share warrant that entitled the respondent to purchase an additional 200,000 shares at a strike price. After the share price rose, the warrants were redeemed for the benefit of the respondent's senior management - including the appellant - for a total profit of $2 million. When this was disclosed through regular reporting, the shareholders launched a public outcry. The appellant allowed a different story to be told to the independent directors that covered up the reasons for why senior management's bonuses were greater than what the approved bonus plan provided. The third incident stemmed from the second incident and involved a tax scheme. The effect of the scheme was to mislead the Canada Revenue Agency (the "CRA") about the exercise of the warrants in order to reduce senior management's tax liability. The three incidents led the trial judge to find that the appellant breached his fiduciary duty to the respondent. The first two incidents constituted failures to disclose related party transactions to the independent directors or auditors. The third incident constituted a breach of a fiduciary duty because it involved the falsification of corporate documents for personal gain and the misleading of the CRA.

Issues:

(1) Did the trial judge err in law by failing to follow the test in McKinley v BC Tel, 2001 SCC 38 ("McKinley")?

(2) Did the trial judge err in law by relying on Advanced Realty Funding Corp v Bannink (1979), 27 OR (2d) 193 (CA) ("Advanced Realty")?

(3) Did the trial judge err in law by failing to consider that the appellant's actions had been condoned?

Holding:

Appeal dismissed.

Reasoning:

(1) No, the trial judge did not err in law by failing to follow the test in McKinley. The appellant argued that McKinley required the trial judge to conduct a contextual analysis of the entire employment situation, which in this case involved a corporate culture dominated by an autocratic controlling shareholder. No corporate culture existing in a public company can reasonably support the course of conduct of the appellant in his role as fiduciary, as evidenced by the three incidents. The appellant owed a fiduciary duty to the respondent and its shareholders which included a duty to disclose.

(2) No, the trial judge did not err in law by relying on Advanced Realty. The appellant argued that Hodgkinson v Simms, [1994] 3 SCR 377 ("Hodgkinson") overruled Advanced Realty such that the respondent had to show that the board of directors would have taken action if the appellant had disclosed the three incidents. Hodgkinson did not overrule Advanced Realty. Hodgkinson involved an assessment of damages and did not deal with a fiduciary's duty to disclose.

(3) No, the trial judge did not err in law by failing to consider that the appellant's actions had been condoned. The appellant cannot rely on other senior managers who were themselves participants of the unlawful conduct to establish condonation.

Crystallex International Corporation (Re), 2018 ONCA 778

[Sharpe, Juriansz and Pepall JJ.A.]

Counsel:

C.P. Prophet and N. Kluge, for the moving party, the Ad Hoc Committee of Shareholders of Crystallex International Corporation

T. Pinos, R.C. Jacobs and S. Kukulowicz, for the respondent, the DIP Lender

J.A. Swartz, J. Doris and R. Schwill, for the respondent, Crystallex International Corporation

A.E. Kauffman, for the respondent, Robert Fung and Marc Oppenheimer

Keywords: Bankruptcy and Insolvency, Appeals, Leave to Appeal, Orders, Debtor in Possession Financing, Setting Aside, Stay of Proceedings, Lifting Stay, Companies' Creditors Arrangement Act, RSC 1985, c C-36, Nortel Networks Corporation (Re), 2016 ONCA 332, Hebditch v Birnie, 2017 ONCA 169, Rules of Civil Procedure, RRO 1990...