Top 5 Civil Appeals from the Court of Appeal (January 2014)

1. McLean v. McLean, 2013 ONCA 788 (Weiler, Rouleau and Pepall JJ.A.), December 27, 2013

2. MHR Board Game Design Inc. v. Canadian Broadcasting Corporation, 2013 ONCA 728 (Rosenberg, Rouleau and Pardu JJ.A.), December 3, 2013

3. Setia v. Appleby College, 2013 ONCA 753 (Goudge, Watt and Pepall JJ.A.), December 13, 2013

4. Yaiguaje v. Chevron Corporation, 2013 ONCA 758 (MacPherson, Gillese and Hourigan JJ.A.), December 17, 2013

5. Canada (Superintendent of Bankruptcy) v. 407 ETR Concession Company Limited, 2013 ONCA 769 (Doherty, Simmons and Pepall JJ.A.), December 19, 2013

1. McLean v. McLean, 2013 ONCA 788 (Weiler, Rouleau and Pepall JJ.A.), December 27, 2013

   In this decision, the Court of Appeal considered the equitable remedy of rectification.

   The appellant and her late husband sold their farming business - including all real and personal property - to their son and daughter-in-law, the respondent, pursuant to the terms of a memorandum of agreement signed in May, 1989. The appellant claimed rectification of that agreement on the basis of common mistake, specifically that the total purchase price was incorrectly recorded. She submitted that the portion of the purchase price related to the real property, which was to be paid by way of a vendor take-back mortgage, was incorrectly noted in the agreement as significantly less than fair market value. She testified at trial that the sale of the business was intended to be at fair market value, which had been appraised at $733,255. The respondent testified that while the sale was to proceed at fair market value, she believed the total purchase price for the business, including the real and personal property, to be $625,000. She argued that without a consensus on this amount, rectification could not be granted.

   The trial judge refused to grant rectification, finding that the appellant failed to meet the standard of proof for rectification, which he held was "convincing proof". He also found that while there was consensus that the sale was to occur at fair market value, the requirements for rectification were not met because the parties lacked a common intention as to the amount of consideration for the business at the time the agreement was signed.

   Writing for the Court of Appeal, Weiler J.A. held that the trial judge first erred by holding the appellant to a standard of "convincing proof". Weiler J.A. agreed with the appellant that Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club, 2002 SCC 19, [2002] 1 S.C.R. 678 -which was relied upon by the trial judge - was superseded by the later decision of F.H. v. McDougall, 2008 SCC 53, [2008] 3 S.C.R. 41. In that case, the Supreme Court held that there is only one civil standard of proof at common law: on a balance of probabilities. This standard of proof applies to all civil actions, including claims for rectification. Weiler J.A. concluded that by requiring that the appellant provide "convincing proof" of a prior common intention to support her claim for rectification, the trial judge was in error.

   Turning to the claim itself, Weiler J.A. explained that in order to obtain rectification of the agreement on the basis of common mistake, the appellant was required to demonstrate: (i) that the parties had a common continuing intention prior to the preparation of the agreement; (ii) that that intention existed at the time the agreement was signed; and (iii) that by mistake, the parties executed the agreement which failed to reflect their common intention.

   Weiler J.A. found that the trial judge erred in his approach to determining whether a common intention existed at the time the agreement was signed. He relied almost exclusively on the respondent's testimony as to her subjective understanding of the total purchase price for the business, when in fact he should have adopted an objective approach, determining what an objective reasonable observer would have believed the parties intended at the time the agreement was executed. As Weiler J.A. explained, the court must determine whether the totality of the evidence - which can include the testimony of a party as to what she understood the terms to be, but which must be considered together with the remainder of her evidence, in addition to the evidence of other witnesses and any documentary evidence - supports the conclusion, on a balance of probabilities, that an agreement was in place but that an error was made in recording it. In relying almost solely on the respondent's evidence of her own subjective belief as to the purchase price of the business, the trial judge not only erred in principle, but failed to consider the totality of the evidence.

   Weiler J.A. concluded that applying the ordinary civil standard of proof, and considering the documentary and oral evidence as a whole, the requirements for rectification based on common mistake had been met. It was undisputed that the parties intended to complete the transaction at fair market value. That value was clear and was incorrectly expressed in the agreement. The purpose of rectification is to prevent unjust enrichment. Granting this remedy would prevent the unjust enrichment of the respondent at the appellant's expense.

   Weiler J.A. rejected the respondent's submission that this was a case of mutual mistake. Citing the Court's recent decision in Lee v. 1435375 Ontario Ltd., 2013 ONCA 516, 363 D.L.R. (4th) 222, Weiler J.A. noted that mutual mistake occurs when both parties are mistaken, but about different things. That was not the case here, where the parties agreed to a sale of the farming business at fair market value. Weiler J.A. similarly dismissed the respondent's claim of unilateral mistake, explaining that this was not a situation where one party knew...