Ontario Take Five January 2011

January 2011

Inside this Issue:

This month we have summarized what we feel are the five most interesting cases from the Ontario C.A. in December 2010.

We highlight cases from the following areas of law:

Administrative law; Reasonable Apprehension of Bias- p.3

Civil Litigation; Limitations- p.5

Civil Litigation; Parties; Procedure- p.7

Real Property; Agreement of Purchase and Sale- p.8

Civil Litigation; Pleadings; Limitations- p.9

In honour of events occurring in Canada this

month, I thought including this inukshuk would be appropriate, particularly since this one looks like it just landed a perfect “10” in an aerial skiing competition...

Ontario Edition

Here’s hoping 2011 takes you in whatever direction you choose.

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January 2011


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Canadian College of Business and Computers Inc. v. Ontario (Private Career Colleges), 2010 ONCA 856

Area of Law: Administrative law; Reasonable Apprehension of Bias

The appellant Superintendant was the official responsible for administering and monitoring compliance with the Private Career Colleges Act (the “Act”) until 2006. The respondent college was registered under the Act and operated until 2006 when the Superintendent proposed to revoke the respondent’s registration due to concerns about the college’s operation. The Act required a hearing before the License Appeal Tribunal (the “Tribunal”) prior to revocation of registration. The Tribunal determined that the registration ought to be revoked and directed the Superintendent to revoke the same. The respondents appealed

to the Divisional Court on the basis that the Tribunal hearing was tainted by the reasonable apprehension of bias. The Divisional Court agreed and ordered a new Tribunal hearing.

[continued on the next page]

BACKGROUND

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http://www.ontariocourts.on.ca/decisions/2010/december/2010ONCA0856.htm


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Canadian College of Business and Computers Inc. (cont.)

The appeal was dismissed. The

Superintendent raised three grounds of appeal: that the Divisional Court did not properly fashion a remedy; that there was not a reasonable apprehension of bias; and that the Divisional Court erred in finding that the respondent had not waived its right to allege bias. On the issue of the reasonable apprehension of bias, the Court reviewed the duty of fairness owed by administrative tribunals to parties appearing before them and reiterated the test for establishing a reasonable apprehension of bias set forth by former Supreme Court Justice de Grandpre in his dissenting reasons in Committee for Justice and Liberty: “what would an informed

person, viewing the matter realistically and practically – and having thought the matter through – conclude. Would he think that it is more likely than not that [the decision maker], whether consciously or unconsciously, would not decide fairly.” The threshold to establish real or perceived bias is high and requires a real likelihood or probability of bias supported by a factual inquiry to displace the presumption in favor of the impartiality of a decision maker. The Court affirmed the Divisional Court’s finding that the Tribunal’s comments to the respondent that he was “misleading the Tribunal” and later questions about his possible involvement with a terrorist organization gave rise to a reasonable apprehension of bias. The

Court found that although the respondent had the opportunity to object to the adjudicator’s comments at the time they were made, it was self represented and may not have known of this right. Finally, as to the appropriate remedy, the Court agreed with the Divisional Court’s decision to order a rehearing. The Court stated that the seriousness of the issue for the respondent and the significance of the breach strongly militated toward a new hearing. The Court also stated that a new hearing is ordinarily the only appropriate remedy where an allegation of reasonable apprehension of bias is made out against an administrative decision maker.

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The appellant creditor brought an action against the respondent debtor for a fraudulent conveyance in 2002. In 2004, the respondent made an assignment into bankruptcy, and the provisions of the Bankruptcy and Insolvency Act (the “BIA”) stayed the appellant’s action. Although the creditor notified the trustee in bankruptcy of several alleged fraudulent conveyances on the part of the debtor, the trustee did not act on the information. The debtor was discharged from bankruptcy in 2005, and the fraudulent conveyance action was dismissed in accordance with the BIA in 2006. One day after the first action was dismissed, the appellant obtained a court order pursuant to s. 38 of the BIA permitting creditors to bring those actions against debtors that the trustee is entitled to bring. Acting on this order, the appellant commenced a second action against the respondent for fraudulent conveyance just over two years later in June 2008. The respondent successfully resisted the action on the basis that it was statute barred. The motions judge held that the Limitations Act, 2002 (the “Act”) provided for a 2-year limitation period that began running on the date that the trustee discovered the alleged fraudulent conveyance. According to the motions judge, because s.38 confers on a creditor the same rights as the trustee, it is the trustee’s discovery of the allegation that starts the limitation period.

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Indcondo Building Corporation v. Sloan, 2010 ONCA 890

Areas of Law: Civil Litigation; Limitations

BACKGROUND






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Indcondo Building Corporation, (cont).

The appeal was allowed. The Court and parties

agreed that if the trustee’s discoverability was applicable, the action by the respondent would be statute barred because the trustee discovered the alleged fraudulent conveyance more than two years prior to 2008. However, the Court found that it was the discover-ability of the creditor as a creditor that governed the applicable limitation period. Prior to the introduction of the Act there was no limitation period on claims for fraudulent conveyances. The transitional provisions of the Act state that where a cause of action did not have a limitation period prior to the introduction of the Act, and the act or omission on which the claim is based took place prior to the introduction of the Act, no

limitation is applicable if the discovery took place prior to the introduction of the Act on January 1, 2004. On the other hand, if the act or omission on which the claim was based occurred prior to January 1, 2004, but was not discovered until after that date, the Act applies as if the act or omission took place on January 1, 2004. The motions judge erred by not considering the application of s.12(1) of the Act, which contemplates actions brought on behalf of someone else. The provision deems knowledge of matters in an action to have occurred on the earlier of the claimant or its predecessors’ first knowledge of the matters giving rise to an action. In this case, because the appellant knew of the fraudulent conveyances prior to the trustee, the discovery occurred in 2002

when the initial fraudulent conveyance action was commenced. This triggered the transitional provision in the Act, and as such, no limitation is applicable since the conveyance occurred prior to January 1, 2004, and the claimant discovered the right of action prior to that date. The Court clarified that the operation of s. 12(1) to import an earlier discoverability date was only applicable to those creditors who proceed through s. 38 of the BIA.

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January 2011


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Harris v. Glaxosmithkline Inc., 2010 ONCA 872Areas of Law: Civil Litigation; Parties; Procedure

The appellant commenced a class proceeding against the respondent alleging, among other things, that it was liable for the tort of abuse of process by misusing the Patent Act to delay the drug Paxil from being available in generic form in Canada. The appellant alleged that the delay resulted in Canadian consumers paying much more than they otherwise could have for their medication. The respondent moved to strike the claim and dismiss the action. The judge granted the motion on the basis that the pleadings did not disclose a viable cause of action in accordance with Rules 21.01(1)(a) and 9(b) of the Rules of Civil Procedure.

The appeal was dismissed. The Court discussed each of the five grounds of appeal advanced by the appellants and took particular care to discuss the correct law on the tort of abuse of process. The Court confirmed the approach of the motions judge. Four elements must be present: the plaintiff was a party to a legal process initiated by the defendant; the legal process was initiated for the predominant purpose of furthering some indirect, collateral and improper objective; the defendant took or made a definite act or threat in furtherance of the improper purpose; and some measure of special damage has resulted. The motions judge correctly found that the first element was not made out; the appellants were not party to the regulatory process under the Patent Act. Furthermore, the Court did not accede to the appellant’s argument that the Court’s 2003 decision in Metrick v. Deeb, [2003] O.J. No. 2221 governed. In Metrick, the Court was not considering the constituent elements of the tort and focused only on two of the four requisite elements of the tort. The Court confirmed that the decision in Metrick did not alter the requisite elements of the tort and was not a full review of the law on the matter. Although the motions judge considered the policy reasons for not extending the tort to third parties and perhaps ought not to have done so absent an evidentiary record, the Court determined that such considerations were collateral to the finding that the requisite elements of the tort were not made out and did not alter the law with respect to the tort of abuse of process.


BACKGROUND APPELLATE DECISION

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The appeal was allowed. The Court found that the right to the refund was owned by the appellant as a chose in action at the time of the closing and could have passed to the respondent with the sale of the property in two ways: under the terms of the purchase and sale agreement or through the operation of real property legislation. The Court concluded that neither of these occurred and the appellant retained the right to the refund. A chose in action, being an intangible personal property right, can be assigned by legal or equitable assignment. No argument of equitable assignment was at issue and legal assignment requires an express assignment in writing that did not occur. The agreement for the sale of the property defined the property being sold as including the property, chattels, building and lands, and nowhere in the agreement was the intangible personal property included. The agreement also included an undertaking on the part of the respondent to readjust taxes, among other things, and this undertaking required the respondent to compensate the appellant for excess taxes paid prior to the closing date. Finally, on the question of unjust enrichment, the Court disagreed with the judge that the Act provided the respondent with a juristic reason to keep the refund. Rather, the provision in the Act was designed for administrative simplicity and express language is required for legislation to affect a person’s rights.

The appellant sold an apartment building in

Toronto (the “Property”) to the respondent. Prior to the sale, the appellant engaged lawyers to appeal a property tax assessment on the Property. The reassessment was finalized two years after the sale closed and resulted in a refund of just over $250,000, attributable for the most part to tax years during which the appellant owned the property. The refund was paid to the respondent pursuant to the City of Toronto Act, 2006 (the “Act”) requiring tax refunds to be paid

80 Mornelle Properties Inc. v. Malla Properties Ltd., 2010 ONCA 850

Areas of Law: Real Property; Agreement of Purchase and Sale

to the owner of the land as indicated on the date of the adjustment. The appellant requested the refund from the respondent, who refused. The appellant applied for an order directing the respondent to reimburse him for the refund attributable to its period of ownership. The judge rejected the application on the basis that a contingent interest in a tax refund does not create a right against land or title to the land that is capable of creating a cause of action. The judge stated that the contingent tax refund, of an uncertain amount, was not a chose in action. The judge also rejected the claim of unjust enrichment

on the basis that the Act provided a juristic reason for the enrichment of the respondent.


BACKGROUND

APPELLATE DECISION




January 2011


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Waterloo Region District School Board v. Truax Engineering Ltd., 2010 ONCA 838

Areas of Law: Civil Litigation; Pleadings; Limitations

BACKGROUND

Records and DocumentationIf you are carrying on a business, you are required to keep adequate records that provide sufficient details and support to determine how much tax you owe. Estimates and incomplete information are not acceptable to CRA. In this regard, I refer you to CRA’s Guide RC4409 Keeping Records, which can be found on CRA’s Website.

A CompanyAnother way to do business is through a company. A company is a separate legal entity that can undertake to do business and own property in its own name. A company has its own requirements to file tax returns, pay taxes, and meet other obligations. A company pays tax at different rates than does an individual proprietor.

There may be circumstances where it is tax-efficient to do business through a company or where liability issues make incorporation a prudent choice.

There are costs associated with incorporation, however. Before making a decision, you should carefully consider the costs of incorporating and carrying on an incorporated business and compare them to the benefits that would be gained by doing so.

Professional advice is recommended to assist you in making this assessment.

CautionThis article is not intended to provide a complete summary of issues and requirements relating to individuals in business; it highlights a few preliminary considerations. The comments provided herein are based on information available at the time of writing and are general in nature. We recommend that individuals consult their own tax advisors before acting on information contained in this article, to ensure that their own specific circumstances and current tax legislation are taken into account. s

Kathryn G. Edwards, CA, is a Partner with Pagnanini Edwards Lam Chartered Accountants.

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The plaintiff school board sued the defendant Truax in negligence for engineering services Truax provided in 2002 and 2003. Truax resisted liability on the grounds that the action was statute barred, having not been brought until 2008 and governed by the 12-month limitation period provided in the Engineering Services Act. At issue before the judge was a motion for summary judgment brought by Truax against other defendants who cross-claimed against Truax for contribution and indemnity. The motions judge determined that, although the 12-month limitation period precluded the plaintiff from proceeding against Truax, the other defendants were not statute barred from proceeding and the motion for summary judgment was dismissed.





A panel of five justices dismissed the appeal. The Court addressed the proper interpretation of section 18 of the Limitations Act, 2002, which came into effect on January 1, 2004. Section 18 establishes the limitation period for cross-claimants bringing an action against other defendants for contribution and indemnity and sets the time at two years from the date the first wrongdoer was served with notice of the action. Prior to 2004, the Negligence Act included s.8, which explicitly permitted cross-claimants to continue with their claims notwithstanding a plaintiff’s inability to pursue an action due to a limitation period. This provision was repealed with the introduction of the new Limitations Act, 2002, and replaced with s.18, which does not explicitly allow cross-claims for contribution and indemnity after the limitation period expires. The Court faced the question of whether the lack of an explicit provision in either the Negligence Act or the Limitations Act, 2002 changed the law with respect to the limitation of cross-claims by a limitation barring a plaintiff’s action. The Court concluded that any claim for contribution and indemnity, in tort or otherwise, has a two-year limitation period in accordance with the basic limitation period set out in s.4 for all claims. The period begins to run when the person seeking the indemnity, in this case Truax, is served with the plaintiff’s claim. The Court further reinforced this position by noting the absence of any reference to a different limitation period for cross-claims in the Act. It also reviewed working papers and recommendations prepared for drafting a new Act, noting that there was no evidence in any of these sources suggesting any intention on the part of the drafters or legislators to change the effect of the former s. 8 of the Negligence Act.


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Waterloo Region District School Board, (cont.)

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