Top 5 Civil Appeals From The Court of Appeal (April 2016)

1. Roth Estate v. Juschka, 2016 ONCA 92 (Feldman, Hourigan and Benotto JJ.A.), February 2, 2016 2. Mapleview-Veterans Drive Investments Inc. v. Papa Kerollus VI Inc. (Mr. Sub), 2016 ONCA 93 (Blair, Hourigan and Brown JJ.A.), February 2, 2016 3. Teva Canada Limited v. Bank of Montreal, 2016 ONCA 94 (Weiler, Laskin and Cronk JJ.A.), February 2, 2016 4. Gray v. Rizzi, 2016 ONCA 152 (Sharpe, Brown and Miller JJ.A.), February 25, 2106 5. Meridian Credit Union Limited v. Baig, 2016 ONCA 150 (Strathy C.J.O., LaForme and Huscroft JJ.A.), February 25, 2016 1. Roth Estate v. Juschka, 2016 ONCA 92 (Feldman, Hourigan and Benotto JJ.A.), February 2, 2016 A lawyer acted for all parties in a transaction where there was a significant potential conflict of interest. In this decision, the Court of Appeal considered whether he breached his fiduciary duty to his clients. Harold Roth, an experienced grocer, wanted to acquire a grocery store in Corunna and operate it with his wife Marlene and his daughter and son-in-law, Cynthia and Roy Juschka, while teaching them the business. They acquired the store in 1985. Later that year, they incorporated Roth-Juschka Holdings Ltd., with Harold receiving 51% and Roy and Cynthia receiving 49% of the shares. The respondent lawyer, Allan D. Brock, acted for all of the parties on the incorporation. The store became very successful, with the Juschkas taking over more responsibility while the Roths cut back on their involvement over time. In 1992, confronted with health issues, Harold decided to deal with succession planning for the disposition of his shares in the company and to provide an ongoing income for himself and his wife for the rest of their lives. He wanted his shares to go to Roy and Cynthia, but was concerned about interference from other family members if the shares were left as part of his estate. Ultimately, the parties entered into a share-purchase agreement, with the Roths as vendors and the Juschkas as purchasers, consulting agreements for Harold and Marlene (for ongoing income) and a promissory note from the Juschkas to Harold. The note provided that Roy and Cynthia would pay Harold $408,000, representing the purchase price of the shares, on demand in 40 years' time, if the store was sold or if Cynthia's voting share interest fell below fifty percent. Brock prepared the documents, delivered them to the parties, and claimed that all four individuals were familiar with the documents and understood the arrangement. Notably, he explained to the Juschkas that the promissory note was meant be forgiven in the Roths' wills, but that this could not be put into writing. It was not incorporated into the note as Brock believed it would undermine the position taken with Revenue Canada that it was an arm's length transaction for fair value. Although the deal was directed by Harold, Brock acted for all four parties, and did not consider the question of independent legal advice for the Juschkas. Following the share transfer, the Juschkas operated the business alone and paid the Roths an ongoing income pursuant to the consulting agreements. The store started having financial difficulties and, in late 2007, the Juschkas sold it to Sobeys. After Harold died in 2008, Marlene demanded payment of the note, and eventually brought an action against the appellants, the Juschkas and Roth-Juschka Holdings Ltd. The appellants brought a third party claim against Brock for negligence and breach of fiduciary duty. At trial, the action on the note was successful, while the third party claim was dismissed. The parties to the main action settled for a lesser sum after judgment. The appellants appealed the dismissal of their claim against Brock, seeking indemnification for the amount they paid to settle the judgment on the note. They argued that the trial judge made palpable and overriding errors of fact which undermined his conclusion on their third party claim. The Court of Appeal agreed, holding that the respondent breached his fiduciary duty to the appellants by acting for all parties where there was a significant potential conflict of interest and by not sending them for independent legal advice. The respondent also fell below the standard of care by failing to warn the appellants of the risks of the transaction. A solicitor acting for a client owes the client a duty to act in the best interests of that client. As Justice Wilson explained in Davey v. Woolley (1982), 35 O.R. (2d) 599, (leave to appeal to S.C.C. refused (1982) 37 O.R. (2d) 499n), A solicitor is in a fiduciary relationship to his client and must avoid situations where he has or potentially may develop a conflict of interests. This is not confined to situations where his client's interests and his own are in conflict [...] It also precludes him from acting for two clients adverse in interest unless, having been fully informed of the conflict and understanding its implications, they have agreed in advance to his doing so. In Waxman v. Waxman (2004), 44 B.L.R. (3d) 165 (C.A), (leave to appeal refused [2005] 1 S.C.R. xvii (note)), the Court affirmed the principle that a lawyer should not act on both sides of a transaction where the interests of one client potentially conflict with those of the other. The Court noted that there may be some simple or routine transactions where a lawyer can act for both parties, "but a share sale is not one of them". Writing for the Court, Feldman J.A. noted that the respondent acted for all parties on a share sale transaction without ever even considering whether there was a potential conflict of interest because he viewed the transaction as a gift from Harold to the Juschkas. The respondent failed to fulfill the most basic obligations of a lawyer to his client: to raise the issue of acting for both sides, to explain the potential conflict and to obtain consent to act for both sides or to recommend that the parties seek independent legal advice. In Feldman J.A.'s view, the trial judge's finding that the transaction was, as the respondent claimed, beneficial to the Juschkas such that there was no conflict, was based on a misapprehension of the transaction and an error of law. In fact, the transaction did not leave the Juschkas in a financially better position and there was a significant potential conflict of interest between them and the Roths. Moreover, the respondent's suggestion that a term of the transaction that was critical to the interests of the Juschkas, namely that the promissory note be forgiven, remain undocumented and potentially unenforceable by them in order to protect Harold's interests, revealed an actual conflict of interest. Justice Feldman found that the respondent failed to both understand and explain the significance and potential consequences of the transaction to the Juschkas. It was a palpable and overriding error for the trial judge to find that the Juschkas would have...