Ontario Court Of Appeal Summaries (May 21 – 24, 2019)

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Good evening,

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

In 2386240 Ontario Inc. v. Mississauga (City), 2019 ONCA 413, the Court upheld a municipal by-law prohibiting the smoking of waterpipes in various public places. The court held that the purpose and effect of the by-law was the protection of public health and safety, and therefore within the scope of the Peel Region's powers. The Court acknowledged that while the potential economic impact on businesses that supply waterpipes and smoking products is an unfortunate incidental effect of the by-law, it is not determinative of its purpose.

In V Hazelton Ltd. v. Perfect Smile Dental Inc., 2019 ONCA 423, the Court addressed the impact of s. 3 of the Commercial Tenancies Act on the common law rule which apparently provides that a sublessor must reserve the last day of the term of the head lease in the sublease in order to preserve the original landlord tenant relationship. The Court ruled that a failure to reserve the last day of the head lease term in a sublease does not always result in an assignment of the lease to the subtenant. Courts must look to the objective intentions of the parties to determine the nature of the impact on the subletting party in regards to its rights under the head lease.

Other topics covered this week included annulling a bankruptcy where the bankrupt was not really insolvent and appeared only to try to avoid paying on a judgment, damages for breach of an agreement of purchase and sale of land, discoverability of a claim for negligent tax advice ("appropriate means"), and amending pleadings.

Have a nice weekend.

John Polyzogopoulos

Blaney McMurtry LLP

416.593.2953 Email

CIVIL DECISIONS

Birchcliffe Core-Harbour Inc. v. Pinnock, 2019 ONCA 417

[Doherty, Benotto and Huscroft JJ.A.]

Counsel:

D. Taub and J. Preece, for the appellant

O. G. Barnwell, for the respondents

Keywords: Contracts, Real Property, Agreements of Purchase and Sale of Land, Breach of Contract, Damages, Expectation Damages

FACTS:

The appellant purchaser and respondent vendors had entered into an Agreement of Purchase and Sale ("Agreement") of a property to which the respondents did not hold title. For this reason, they were unable to deliver unencumbered title to the appellants as promised in the Agreement. The appellants had provided a deposit of $25,000 and ended up paying a further $187,500 over and above the agreed-upon price in order to purchase the property from the mortgagee.

While the motion judge awarded damages for breach of contract to the appellants, she limited the damages to the amount of the deposit, $25,000. The motion judge stated that the further sum could only be recovered for a loss of bargain, which she said did not exist between the appellant and respondent in this case.

The appellant sought leave to appeal to the Court of Appeal on the issue of whether there was a loss of bargain in this case and, if so, what amount of damages the appellants would be entitled to under such a finding. The respondents cross-appealed in respect of their position that the appellants were cause for the breach of the Agreement.

ISSUES:

(1) With respect to the main appeal, did the motion judge err in limiting the amount of damages awarded to the appellant?

(

1. Did the motion judge err in finding a breach in the Agreement between the respondent vendor and appellant purchaser?

   (b) Did the motion judge err in finding that there was no loss of bargain between the respondent vendor and appellant purchaser?

   (2) With respect to the cross-appeal, did the motion judge err in finding that the appellant purchaser's conduct was not the cause of the respondent's failure to close the transaction?

   HOLDING:

   Appeal allowed. Cross-appeal dismissed.

   REASONING:

   (1) Yes. The motion judge should not have limited the amount of damages awarded to the appellant to the amount of the deposit.

   (

1. No. The motion judge found that the respondent vendors could not deliver unencumbered title as they had promised in the Agreement, and were therefore in breach of the agreement with the appellant purchaser. The Court of Appeal found no error in that finding.

   (b) Yes. The motion judge stated that the remedy of damages for a breach of contract to compensate for a loss of bargain presupposes that there was a bargain to begin with. Here, the motion judge found that the economic consequences of the failed Agreement merely caused the illusion of a loss of bargain, but no actual loss of bargain. The Court disagreed, and found that there was a real bargain, not an illusion of a bargain.

   The motion judge had also found that as a condition of recovering damages for the difference in the price agreed upon with the respondents and the higher price eventually paid, the appellant was required to show that the respondents "appropriated the benefit" otherwise available to the appellant. The Court disagreed, stating that damages for loss of benefit are measured by the higher price paid by the appellant purchasers, independent of any benefit that may have been flowed to or been bestowed upon the respondent vendors.

   As a result, the Court ruled that the appellant was entitled to the difference between the agreed-upon purchase price and the price eventually paid for the same property, which was $187,500, in addition to $25,000 deposit.

   (2) No. The respondent vendors' arguments on the cross-appeal were all premised on the assertion that the appellant purchaser's improper conduct disabled the respondents from being able to close the transaction under the terms of the Agreement. The Court deferred to, and accepted, the motion judge's finding of fact, which rejected those arguments. Regardless of the conduct of the appellant purchaser, the respondents' negative equity in the property meant they were never in a realistic position to provide clear title to the appellants.

   2386240 Ontario Inc. v. Mississauga (City), 2019 ONCA 413

   [Simmons, Tulloch and Brown JJ.A.]

   Counsel:

   R. P. Zigler, for the appellants

   B. H. Kussner and S. R. Rouleau, for the respondent

   Keywords: Municipal Law, By-laws, Jurisdiction, Public Health and Safety, Municipal Act, 2001, S.O. 2001, c. 25, Occupational Health and Safety Act, R.S.O. 1990, c. O.1, Control of Exposure to Biological or Chemical Agents, R.R.O. 1990, Reg. 833, 2326169 Ontario Inc. v. Toronto (City), 2016 ONSC 6221, Canada Post Corp. v. Hamilton (City), 2016 ONCA 767

   FACTS:

   The appellants own several hookah lounges located within the Regional Municipality of Peel (the "Region"). In their lounges, the appellants supply waterpipes and smoking products (including herbal shisha, a legal substance) to their customers to be consumed on site.

   In 2016, the Region passed by-law No. 30-2016, Peel Waterpipe Smoking By-law (the "By-law"). The By-law prohibits smoking waterpipes in specified places, which includes the appellants' lounges. Sections 2(a), (b) and (c) of the By-law prohibit waterpipe smoking in an enclosed public place, an enclosed workplace and a restaurant or a bar patio. Section 5 prohibits a proprietor, an employer, or an employee from permitting waterpipe smoking in the locations specified in ss. 2(a), (b) and (c). The appellants applied under s. 273 of the Municipal Act, 2001 for a declaration that ss. 2(a), (b), (c) and s. 5 of the By-law are illegal and should be quashed.

   The appellants argue that the Region acted outside the scope of its powers because the subject matter of the By-law is not for the protection of public health and safety. Instead, they argue that the sole effect of the By-law is to target their businesses, which would ultimately result in closure of their lounges and substantial economic loss. Further, they argue that the By-law is inconsistent with provincial legislation and that the Region acted in bad faith by failing to consult with hookah lounge employees.

   The application judge found that most of the issues raised had been determined in the previous case of 2326169 Ontario Inc. v. Toronto (City), 2016 ONSC 6221. That case involved a challenge to a by-law prohibiting waterpipe smoking in premises Toronto had licensed to carry on business. As in the City of Toronto case, the application judge here found that the Municipal Act, 2001 confers powers on the Region similar to those conferred on Toronto. The application judge also found that the purpose of the By-law was the protection of public health and safety, and that it did not conflict with the Occupational Health and Safety Act (the "OHSA"). Further, the appellant's claim of bad faith was rejected, as the Region had engaged in diligent and thorough levels of consultation, research and inquiry.

   ISSUES:

   (1) Did the application judge err in failing to find the By-law ultra vires the Region?

   (2) Did the application judge err in failing to find that the By-law conflicts with the OHSA?

   (3) Did the application judge err in failing to find that the Region acted in bad faith in enacting the By-law?

   HOLDING:

   Appeal dismissed.

   REASONING:

   (1) No. The application judge did not err in failing to find the By-law ultra vires the Region.

   The appellants stated that waterpipe smoking was occurring in 24 enclosed public places, all of which were waterpipe establishments. Therefore, the sole purpose of the By-law was to prohibit the appellants businesses. They claimed this was a violation of the Municipal Act, 2001, as it does not grant municipalities the power to prohibit businesses. Further, the appellants stated that the application judge erred by relying on the City of Toronto decision. The appellants instead urged the Court to rely on the decision in Canada Post Corp. v. Hamilton (City), 2016 ONCA 767, which establishes that it is necessary to consider not only the purpose, but also the effects of a by-law to determine if it is intra vires.

   The Court...