Ontario Court of Appeal: No Right to Require Proof of a Will in Solemn Form

In a decision released March 8, 2016 – Neuberger v. York, 2016 ONCA 191 – the Ontario Court of Appeal rejected the argument that Ontario's  Rules of Civil Procedure (“Rules”) give a person the right to require that a will be proved "in solemn form" before it is subject to probate. 

 

Chaim and Sara Neuberger had two daughters – Edie and Myra.  Chaim's long-standing intention was to provide for his daughters equally on his death.  Chaim died on September 25, 2012 at age 86.  Sara predeceased him.  He left a real estate empire estimated to be worth over $100 million.  Edie and Myra survived him.  Each daughter has adult children.

 

Chaim executed primary and secondary wills in 2004 and again in 2010.  Both sets of wills left his estate to his two daughters and their children.  However, the sets of wills differed in one significant way which allegedly resulted in Myra’s share exceeding Edie’s share by approximately $13 million.  As a result of this unequal sharing, which was contrary to Chaim's stated intention, Edie and her son Adam commenced separate actions challenging the 2010 wills. 

 

Justice Susan Greer of the Ontario Superior Court of Justice dismissed the will challenges on a motion on the basis that they were barred by the equitable doctrines of estoppel by representation and estoppel by convention.  Justice Greer held that Edie was estopped from challenging the validity of the 2010 wills because she delayed in bringing her challenge and had no reasonable explanation for the delay.  Justice Greer also held that the actions that Edie had taken as estate trustee and the prejudice that would ensue from having to unwind the estate freeze and that the respondents would suffer as having taken steps on the basis of the 2010 wills. 

 

Justice Greer also held that Adam should not be allowed to challenge the 2010 wills because he had no independent knowledge of the estate, its assets, previous wills and pertinent information about the estate planning nor did he have a close relationship with his grandfather or a real explanation as to why he left it so late to come forward.

 

The Court of Appeal (Justices Gillese, van Rensburg and Miller) disagreed with the conclusion reached by Justice Greer and allowed the appeal.  The decision of the Court of Appeal was written by Justice Gillese.

 

Justice Gillese examined the nature of the court’s role and jurisdiction in probate cases.  She accepted Justice Maurice Cullity’s explanation that the court’s jurisdiction in probate is inquisitorial.  In other words, the court does not simply adjudicate upon a dispute between the parties.  The court’s function and obligation is to ascertain and pronounce what documents constitute the testator’s last will and that are entitled to be admitted to probate.

 

Justice Gillese then looked at rules 74 and 75 of the Rules.  She held that subrule 75.06(3) plays an important role in contentious estate proceedings.  The subrule provides:  “any person who appears to have a financial interest in an estate may apply for directions, or move for directions in another proceeding under this rule, as to the procedure for bringing any matter before the court.” 

 

In addition, rule 75.01 provides:  “…any person appearing to have a financial interest in an estate may make an application under rule 75.06 to have a testamentary instrument that is being put forward as the last will of the deceased proved in such manner as the court directs.” 

 

Justice Gillese did not accept the proposition that as a general principle an interested person is entitled, as of right, to require that a will be proved in solemn form.  Rather the rule provides such a person the ability to make an application to have the will “proved in such manner as the court directs”.   The two rules read together provide that a court has discretion whether to order that a will be proved, as well as discretion over the manner in which the will is proved. 

 

In the Justice Gillese's  view, an “interested person” must meet some minimal evidentiary threshold before a court will accede to a request that a will be proved.  Otherwise, estates would be exposed to needless expense and litigation. She held that the correct approach was that the applicant must adduce "some evidence" which, if accepted, would call into question the validity of the will or testamentary instrument that was being propounded.

 

Justice Gillese accepted that some decisions have indicated that next of kin are entitled as of right to have the will proved in solemn form.  However, such cases are reflective of a presumption that applies in situations where no certificate of appointment of estate trustee has been issued, rather than a hard and fast rule. 

 

The Court of Appeal also rejected Justice Greer's reasoning dealing with the equitable doctrines of estoppel by representation and estoppel by convention.  Justice Greer had relied on three cases as authority for the power to invoke estoppel to bar the will challenge.  However, Justice Gillese held that one of the cases did not offer any authority or support for the notion that the doctrines applied to probate matters.  She found that there is nothing in the jurisprudence to support the extension of the equitable doctrines of estoppel by convention or representation to matters involving validity of a will.   

Regards,

Blair

Court of Appeal Rejects Lawyer's Application to Set Aside Fraudulent Misrepresentation Finding

In a recent decision - Meridian Credit Union Limited v. Ahmed Baig, 2016 ONCA 150  - the Ontario Court of Appeal affirmed a motion judge’s decision to grant summary judgment against the party who had made the motion despite the fact that the responding party had not made a cross-motion for judgment.  The court also upheld a finding by the motion judge that the defendant  was personally liable for fraudulent misrepresentation; failed to disturb the motion judge’s finding that the defendant could be held vicariously liable for his lawyer’s fraudulent misrepresentation; and refused leave of the lawyer, and his law firm, to introduce fresh evidence on appeal .  The court dismissed the lawyers' argument that they had a right to be heard and refused to set aside the findings of fraudulent misrepresentation the motion judge had made against them.

 

In this case, Meridian Credit Union Limited (“Meridian”) was a creditor in a court-appointed receivership.  The defendant, Ahmed Baig (“Baig”), agreed to purchase a building located on Bay Street in Toronto from the receiver for $6.2 million.  Unknown to the receiver and prior to closing, Baig agreed to resell the property to Yellowstone Property Consultants Corp. (“Yellowstone”) for $9 million.   The receiver claimed that had it known of this resale transaction, it would not have recommended that the court approve the sale to Baig.

 

Meridian subsequently discovered the resale transaction.  It had not recovered the full amount owing to it in the receivership.  The receiver assigned its cause of action against Baig to Meridian and Meridian then commenced an action against Baig for breach of contract and fraudulent misrepresentation.

 

The receiver had agreed to sell the property to Baig in trust for a corporation to be incorporated.  Before that transaction closed, Baig agreed to resell the property to Yellowstone.  Baig did not tell the receiver about the second agreement with Yellowstone.

 

Baig then retained the law firm of Miller Thomson to assist him with the transaction.  Peter Kiborn, who practiced law at Miller Thomson, acted for Baig in structuring the transaction.  Both Baig and Kiborn wanted to prevent the receiver from discovering the sale to Yellowstone because they believed that the $2.8 million difference in price would jeopardize court approval.  As a result, Kiborn informed the receiver that title was to be directed to Yellowstone on closing.   The receiver assumed that Yellowstone was Baig’s corporation incorporated for the purpose of the agreement.  Neither Baig or Kiborn,  or anyone else at Miller Thomson,  ever corrected that misunderstanding. 

 

At the summary judgment motion before Justice Frederick Myers of the Superior Court of Justice, Baig brought a motion for summary judgment dismissing Meridian’s claim.  Justice Myers dismissed that motion.  Instead he found Baig liable for fraudulent misrepresentation.  The Court of Appeal found that Justice Myers did not err by granting summary judgment against Baig.  Baig’s lawyers had submitted that all of the relevant evidence was before the court and had explicitly invited Justice Myers to render a decision in favour of either party.  Two recent decisions from the Court of Appeal make it clear that it is permissible for a motion judge to grant judgment in favour of the responding party even in the absence of a cross-motion for such relief. 

 

Justice Myers found Baig liable for two reasons.  He concluded Baig was liable for misrepresentations made by Miller Thomson – the documents delivered as part of the closing contained untrue statements.  Kiborn knew that these statements were false and he intended for the receiver to rely on them.  On the motion, Justice Myers noted a concession made by Baig’s lawyer, that Baig could be held liable for tortious misrepresentations made by his lawyers Miller Thomson.

 

Second, Justice Myers found Baig liable for his own personal conduct.  He held that Baig’s failure to correct the misimpression that Yellowstone was a corporation created by Baig amounted to a fraudulent misrepresentation.

 

Baig subsequently commenced an action against both Kiborn and Miller Thomson, claiming among other things, contribution and indemnity.  Miller Thomson and Kiborn obtained leave to intervene on the appeal.  In addition, they sought leave to introduce fresh evidence on the appeal.  The interveners sought to set aside the finding of Justice Myers that they had made fraudulent misrepresentations on the grounds that the motion judge breached the rules of natural justice and procedural fairness by making findings about them in their absence. 

 

The appeal was heard before Justices LaForme, Strathy and Huscroft.  The court’s decision was written by Justice LaForme.

 

The Court of Appeal dismissed Baig’s appeal and denied the interveners’ application for the following reasons.  The Court of Appeal reviewed the recent Supreme Court of Canada decision in Hyrniak v. Mauldin concerning proving civil fraud and noted that the record disclosed that Baig had engaged in actions that amounted to misrepresentation.  Both he and his counsel had actively concealed the agreement to sell to Yellowstone and had fraudulently misrepresented that Yellowstone was the corporation incorporated to close the sale with the receiver.  In certain circumstances, silence and half-truths can amount to a misrepresentation. 

 

At the appeal, Baig’s counsel attempted to withdraw his concession at the motion that Baig would be liable for any tortious misrepresentation made by his lawyers.  Justice LaForme found that it was inappropriate for Baig to withdraw such concession and argue for the first time on appeal that there was no basis for him to be held liable because he was protected by the corporate veil.  In any case, Justice LaForme found that Baig had made the fraudulent misrepresentations in his personal capacity.  Because that finding was upheld, Justice LaForme found it was not necessary to address whether Baig would be liable for his lawyers’ actions.

 

With respect to the interveners’ arguments, Justice LaForme denied their application to introduce fresh evidence on the appeal.  He held that the fresh evidence about why they did not intervene in the summary judgment motion was irrelevant to the issues raised and could not have affected the results of the motion. 

 

Justice LaForme also rejected the interveners’ argument that they had a right to be heard because Justice Myers had made adverse findings against them.  To the contrary, he held that they did not have a right to be heard or to receive notice.  As non-parties to the action, Miller Thomson and Kiborn were not directly impacted by the summary judgment order.  They were not bound by Justice Myers’ finding that they made fraudulent misrepresentations.  They were free to defend their reputations and argue in the action made against them by Baig that they never made fraudulent misrepresentations. 

 

Their main complaint was that Justice Myers’ publicly available reasons could damage their reputations.  Justice LaForme found that the authorities did not support the right in a civil action to notice of a non-party witness or to adduce evidence and make submissions whenever an adverse finding may be made.  Such procedural entitlements would impose too great a burden on the courts and threaten the finality of decisions.   Justice LaForme held that non-parties are limited to whatever procedural rights they have under the rules. 

 

Justice LaForme held that Miller Thomson and Kiborn were fully aware of the action and its potential impact on the claim against them.  In spite of this, they chose not to intervene, adopting a wait and see approach.  Now that a finding had been made with which they took issue, they believed that the finding should be set aside.  He held that non-parties should not be able to lurk in the shadows and then spring up to challenge a decision whenever the outcome or findings of fact may affect them in some manner they do not like.  

Regards,

Blair  

Court Lifts Automatic Stay Pending Appeal in the "Interests of Justice"

In Ontario, the delivery of a notice of appeal automatically stays any order, final or interlocutory, for payment of money, other than a support order or a support enforcement order - rule 63.01(1) of the Rules of Civil Procedure (Rules).  Judgment debtors knowing that an appeal may have little or no merit, will often deliver a notice of appeal as a matter of course in order to buy themselves more time to delay or frustrate the ability of a judgment creditor to enforce the judgment. 

 

The Rules also provide that:  “A judge of the court to which the appeal is taken may order, on such terms as are just, that the stay provided by subrule (1) does not apply' - rule 63.01(5).

 

In the case of Antunes v. Limen Structures Ltd. 2016 ONCA 61, Justice Lauwers of the Ontario Court of Appeal, made an order pursuant to rule 63.01(5), lifting the automatic stay in respect of an award of wrongful dismissal damages, prejudgment interest and costs.  He reserved the costs of the motion to the panel who would hear the appeal. 

 

Antunes successfully sued Limen Structures for wrongful dismissal.  Justice C. Brown rendered judgment on June 2, 2015 awarding Antunes damages for wrongful dismissal in the amount of $105,000 plus prejudgment interest and costs.  Justice Brown also found that Antunes was entitled under his employment contract to 5% of Limen Structures’ shares and awarded “other damages” in the amount of $500,000 representing the value of the shares. 

 

Limen Structures filed a notice of appeal in respect of the award of damages for $500,000 but did not appeal the award of wrongful dismissal damages, prejudgment interest or costs.  However, the effect of the notice of appeal was an automatic stay of the entire judgment pending appeal pursuant to rule 63.01(1).

 

Antunes brought a motion to lift the automatic stay in respect of the wrongful dismissal damages, prejudgment interest and costs since those were not appealed.  In response, Limen Structures filed a supplementary notice of appeal appealing from those amounts.  The supplementary notice of appeal would have been out of time if it had been the original notice of appeal, but the Rules entitle an appellant to amend a notice of appeal without leave before the appeal is perfected.

 

On the motion before Justice Lauwers, Antunes argued that the financial condition of Limen Structures had deteriorated and continued to deteriorate.  He submitted that by the time the appeal was argued the company would be insolvent and its assets dissipated.  In fact, Limen Structures’ lawyer had stated to Antunes’ lawyer on many occasions that the company did not have the financial ability to pay the judgment.  In addition, Limen Structures’ financial statements showed an operating loss in excess of $5 million and an accumulated deficit of $2.9 million with secured loans to related parties of greater than $3.4 million. 

 

Finally, Antunes doubted the honesty of Limen Structures.  Based on the trial judge’s reasons, she was also satisfied that at the time of entering into the contract and at the time of terminating the employment of Antunes, the company had failed to act honestly in its contractual performance.

 

Justice Lauwers reviewed the test for lifting the stay.  He accepted that the stay of execution imposed by rule 63.01 was intended to offer some protection to an appellant against payments which it might not eventually be obliged to make.  The test for lifting the stay requires the court to consider a number of factors including the grounds of appeal, the parties’ position at trial, what has happened since the trial, the general circumstances of the case including the trial judge’s reasons, the probable delay between trial and appeal that cannot be controlled by the parties. 

 

The Court of Appeal in a previous case (SA Horeca Financial Services v. Light 2014 ONCA 811) stated:  “In considering whether to lift a stay the court should have regard to three principal factors:  (1)  financial hardship to the respondent if the stay is not lifted; (2)  ability of the respondent to repay or provide security for the amount paid; and (3)  the merits of the appeal.” 

 

In applying that test to this case, Justice Lauwers observed that at trial, Antunes testified and was found by the trial judge to be credible.  By contrast, Limen Structures had called no evidence at trial.  The trial judge was critical of the company’s failure to call its President with whom Antunes had negotiated the employment contract. 

 

On the issue of hardship, Antunes had been unable to find employment for almost a year and a half from the date of termination.  That employment was short-lived and since he had only found short-term consulting work.  As a result, he was unable to repay or provide security for the amount of the wrongful dismissal damages.  His lawyer offered to offered to hold the money in his trust account pending the outcome of the appeal. 

    

At all times, Limen Structures had asserted its inability to pay.  Justice Lauwers accepted that businesses can find themselves in financial difficulties for many reasons having nothing to do with the wrongful dismissal claim of a former employee.  But he took into account the “scorched earth” trial and appeal tactics taken by the company. 

 

In respect of the merits of the wrongful dismissal appeal, Justice Lauwers found that the company’s challenge was not one of law but of the weight that the trial judge had accorded to the factors which determined the length of the period of reasonable notice.  To succeed on that ground, the company would be required to demonstrate that the trial judge had made a palpable and overriding error. 

 

In conclusion, Justice Lauwers held that the merits of the wrongful dismissal appeal were weak, as was implicitly acknowledged by the company’s late amending of its notice of appeal to add the wrongful dismissal appeal in response to the motion.  Antunes had demonstrated financial hardship.  

Despite the fact that Antunes would be unable to repay any amounts if required, Justice Lauwers found that "the interests of justice" favoured the exercise of his discretion in favour of Antunes.  He did not require Antunes' lawyer to hold any amount in trust.  Justice Lauwers ordered the stay in respect of the award of wrongful dismissal damages, prejudgment interest and costs lifted.

Regards,

Blair

Appeal Court Finds Judicial Bias on Jurisdiction Motion

In a recently released decision, the Ontario Court of Appeal found that a motion judge’s actions on a jurisdiction motion gave rise to a reasonable apprehension of bias.  As a result, the Court of Appeal set aside the order made at the motion and ordered that the jurisdiction motion be heard again before a different judge of the Ontario Superior Court.  The full decision is report at Stuart Budd & Sons Limited v. IFS Vehicle Distributors ULC, 2016 ONCA 60.

 

In the action, various plaintiffs, including plaintiffs in Ontario, sued four foreign defendants for breach of franchise agreements.  The defendants brought a motion to dismiss the action arguing that the Ontario court lacked jurisdiction.  In the alternative, they asked the court to stay the action on the basis of forum non conveniens.  The motion was heard before Justice David Corbett of the Ontario Superior Court of Justice.  Justice Corbett dismissed the motion.  He found that there was jurisdiction simpliciter in Ontario for all claims, including for those claims that had arisen in other Canadian provinces.  He also held that Ontario was the most convenient forum in which a single proceeding would be held. 

 

The defendants appealed from Justice Corbett’s findings relating to jurisdiction simpliciter and forum non conveniens.  However, they also raised, as a ground of appeal, that Justice Corbett’s comments and conduct during the course of the motion raised a reasonable apprehension of bias.  The Court of Appeal agreed with this latter submission.

 

There were two hearings before Justice Corbett.  At the first hearing, the foreign defendants objected to the affidavit evidence filed by the plaintiffs’ sole affiant on the basis that it was extensively based on information without identifying the source of the information and setting out why the affiant believed the information to be true.  Justice Corbett agreed that the evidence presented by the plaintiffs "would be fatal" to their position on the motion.  He therefore adjourned the motion on his own initiative and ordered the plaintiffs to cure the defective affidavit by serving a further affidavit. 

 

After cross-examinations were held, the parties returned before Justice Corbett to argue the motion.  Prior to the lunch breach and before hearing argument on joinder and forum non conveniens issues, Justice Corbett rendered his decision dismissing the motion and referring to it as “an abuse of process”. 

 

Justice Corbett advised counsel that he would be delivering further reasons “for the purposes of any appeal of this decision”.   In his amended endorsement, Justice Corbett dealt with the issues of jurisdiction and joinder presented on the motion.  He concluded the endorsement with a section entitled “Process of this Motion” which he identified as necessary because the motion was “bad” and called for a sterner response.   In the section he criticized the defendants for the amount of time they took to prepare their materials for the initial hearing, and described their objection to the respondents’ evidence as “technical” asking rhetorically “What’s the point?” and concluded that the defendants’ cross-examination on the affidavits were a waste of time. 

 

The decision of a three judge panel of the Court of Appeal – Justices Weiler, Epstein and Huscroft – was written by Justice Epstein.  She found that at various points in the proceedings, Justice Corbett had conducted himself in a manner that gave the appearance that he favoured the plaintiffs’ position.  For example, a reasonable observer could perceive the adjournment that he gave at the first hearing on his own initiative as a judge going out of his way to assist the plaintiffs.  That perception was strengthened by Justice Corbett’s dismissive comment that he did not anticipate that the defendants’ cross-examination of the plaintiffs on their new material would add much to the background.

 

In the second hearing, Justice Corbett dismissed the motion halfway through the full day that had been scheduled without giving counsel the opportunity to make oral submissions on two issues that he properly identified as “principal arguments” joinder of claims and forum non conveniens. 

 

Justice Epstein found that deciding the jurisdictional challenge without allowing for oral argument on these major issues was a cause for particular concern in a case involving multiple parties on both sides.  Although Justice Corbett acknowledged the legitimacy of the defendants’ positions on a few occasions, the overall tenor of his remarks was derisive and suggested a view critical of jurisdiction motions and of this motion in particular, i.e. his finding that the motion was an "abuse of process" and a "colossal  waste of time".   Justice Epstein held that Justice Corbett’s finding that the motion was an abuse of process, made on his own initiative without the benefit of submissions or reference to any legal authority was unwarranted.  Further, Justice Corbett made discourteous comments towards the defendants’ counsel for no apparent reason.  In all three endorsements he repeatedly criticized defendants’ counsel on matters including their advocacy skills, knowledge of the law and handling of the matter.  He made a number of comments for which Justice Epstein found no justification. 

 

Justice Epstein held that an informed and reasonable observer would see Justice Corbett's amended endorsement, i.e. the endorsement he prepared for appeal purposes, as a desire by Justice Corbett to defend his decision to dismiss the motion.  His comments were motivated by his desire to respond to anticipated challenges to his decision.  Justice Corbett appeared to insinuate himself into the appeal process by attempting to defend his actions and his comments.

 

Justice Epstein considered the legal principles which apply to a motion for judicial bias.  She endorsed the decision of the Supreme Court of Canada in Yukon Francophone Schoolboard, Education Area No. 23 v. Yukon (Attorney General): 

 

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?

 

Having regard to that question, Justice Epstein concluded that she had no doubt that Justice Corbett was well-intentioned and that he had put a great deal of effort into resolving the jurisdiction issue.  However, her review of the three endorsements led her to conclude that Justice Corbett’s actions gave rise to a reasonable apprehension of bias.  In her opinion, the cumulative effect of Justice Corbett’s conduct was that an informed, reasonable observer, viewing the proceedings as a whole, would conclude that the defendants had not received a fair hearing to which they were entitled.

Regards,

Blair

 

 

 

Happy New Year!

Dear Readers,


All the best for a healthy, happy and prosperous 2016.  See you again soon.


Regards,


Blair

Supreme Court Set to Rule Upon Dismissal Provisions of Canada Labour Code

On January 19, 2016 the Supreme Court of Canada will hear arguments in the case of Joseph Wilson v. Atomic Energy of Canada Limited (“AECL”) (2015 FCA 17).  The case involves the proper interpretation of certain provisions of the Canada Labour Code (“Code”) and whether an employee whose employment is subject to the Code, if dismissed without cause, has automatically been unjustly dismissed. 

 

In this case, AECL had employed Mr. Wilson for four and a half years.  Starting out as a Senior Buyer/Order Administrator, Mr. Wilson had received many promotions.  His last position was Procurement Supervisor, Tooling.  That position was not managerial.  On November 16, 2009, AECL terminated Mr. Wilson’s employment without cause.  AECL offered Mr. Wilson a severance package equal to roughly six months’ pay in exchange for a full and final release.  Had his severance package been determined in accordance with the minimum statutory notice and severance requirements under the Code, he would have been entitled to only 18 days’ pay.

 

Mr. Wilson did not sign the release.  Instead he filed a complaint under Part III of the Code alleging that he had been unjustly dismissed.  At the request of his counsel, Mr. Wilson remained on AECL’s payroll for roughly six months, continuing his access to AECL’s employee benefit programs.  In the end he received the full amount of the severance package AECL had originally offered to him. 

 

An adjudicator was appointed to hear Mr. Wilson’s complaint under the Code.  In the agreed statement of facts placed before the adjudicator, the parties identified two “preliminary questions”:  1.  Whether as a matter of statutory interpretation AECL could lawfully terminate Mr. Wilson’s employment on a without cause basis; and 2.  If so, whether the severance package gave rise to a "just dismissal".

 

The adjudicator accepted Mr. Wilson's submission that dismissal without cause is, by that reason alone, unjust dismissal within the meaning of the Code and that he was therefore entitled to a remedy.

 

Having made that decision, the adjudicator adjourned the hearing, directing the parties to discuss the appropriate remedy in the hopes that it might settle.   Absent settlement, he intended to conduct a hearing to determine whether a remedy was warranted and if so what it should be. 

 

AECL applied to the Federal Court for judicial review of the adjudicator’s decision.  The Federal Court dismissed the appellant’s objection that the judicial review was preliminary and found that the adjudicator’s statutory interpretation decision was unreasonable.  The Federal Court quashed the adjudicator’s decision and remitted the matter back to the adjudicator for decision. 

 

On further appeal to the Federal Court of Appeal, the court dismissed Mr. Wilson’s appeal. 

 

The Federal Court of Appeal found that the proper interpretation  of the Code had created two schools of thought which have persisted for decades.  The key consideration by the court was whether Part III of the Code ousted the common law of dismissal or whether it accepts the common law as given, supplementing and building upon it.  At common law, an employer could dismiss a non-unionized employee without cause, but is liable to provide reasonable notice or compensation in lieu of notice.  If the employee is given such notice, he or she is not wrongfully dismissed.

 

The Federal Court found that the provisions found in Part III of the Code do not represent a sea-change in the law of dismissal but rather enhance the remedies that may be available in appropriate cases of dismissal.   It will always be for the adjudicator to assess the circumstances and determine whether the dismissal, whether or not for cause, was unjust.  The dismissal of an employee without cause is not automatically unjust.

 

Part III of the Code sets out a complaints mechanism and remedies for “unjust” dismissal.  Specifically, a subsection of the Code empowers an adjudicator to “consider whether the dismissal of the person who made the complaint was unjust”.   The Code does not define unjust.  The Federal Court of Appeal examined whether Part III ousted the common law of employment or supplemented and built upon it as set out in that subsection.  

 

In reaching its decision, the Federal Court of Appeal held that the legislator is presumed not to depart from prevailing common law.   Such prevailing common law can be ousted only by way of explicit language or necessary implication.  An example of necessary implication is where the legislator has provided for something that conflicts with the common law so that the two can no longer live together.  The common law is not ousted unless Parliament has expressed its intentions to do so with “irresistible clearness”.  The Code does not contain text or necessary implication that can be taken to oust the aspects of the common law of employment.  The Code was enacted against the backdrop of the common law and does not explicitly oust it in this respect.   

Wilson has obtained leave to appeal from this decision to the Supreme Court of Canada.

AECL's case at the FCA was argued by my partner Ron Snyder.  I will keep you posted.

Regards,

Blair

Court Appointed Receiver Liable to pay Substantial Indemnity Costs

Earlier this year ( June 9th ), I wrote about a case in which the Court of Appeal for Ontario set aside "breathtakingly broad" receivership orders that put in place an "investigative receivership".  This month, the court released its ruling on costs arising from its decision. See Akagi v. Synergy Group (2000) Inc. 2015 ONCA 771. 

 

On the appeal, the court  had set aside ex parte orders issued by Justice Colin Campbell of the Superior Court of Justice (Commercial List).  The court concluded that the orders appointing the receiver stood “on a fundamentally flawed premise” and were “unjustifiably overreaching in the powers they granted”. 

 

In the court’s view, both the judgment creditor, Mr. Akagi - who commenced the receivership proceedings without taking any initial steps to recover on his judgment - and the receiver, J.P. Graci and Associates Ltd., who took the investigative receivership too far, should bear the cost consequences of the orders having been set aside.

 

Mr. Akagi applied for the initial ex parte order appointing the receiver after obtaining a default judgment in the amount of approximately $147,000 based on allegations of fraud arising out of the loss of funds he had contributed to a tax program marketed and sold by the Synergy Group.  The program was supposed to generate tax loss allocations for him, but did not.  His judgment was against the Synergy Group and certain individuals associated with it.  The initial order made by Justice Campbell granted a receivership over all the assets and undertakings of the Synergy Group and an additional company, Integrated Business Concepts Inc. (“IBC”).   

 

It soon became clear however that the principal purpose of the receivership order was not to recover on Mr. Akagi’s judgment debt but to institute a broad ranging inquiry – a roving “investigative receivership” – into what was alleged to be a much larger tax fraud scheme, and to do so, purportedly on behalf of approximately 3,800 other investors who may have been caught in the tax scheme as well.  None of these investors were a party to the Akagi action or the receivership application, none purported to seek to have their interests protected, and Mr. Akagi and the receiver maintained throughout that they did not purport to represent the interests of those investors. 

 

Subsequently, through a series of further ex parte applications, the receivership order morphed into a wide ranging investigative receivership, freezing and otherwise reaching the assets of 43 additional individuals and entities including authorizing the registration of certificates of pending litigation against their properties.  Only three of these entities and individuals had any connection to the underlying Akagi action and only two were actually judgment debtors.

 

The Court of Appeal set aside the receivership orders on the basis that the receivership had proceeded on an entirely misguided course, the orders were impermissibly over-reaching, and the ex parte proceedings themselves had been tainted by certain procedural errors including the receiver's failure to disclose to Justice Campbell that the Canada Revenue Agency had discontinued its investigation into the tax allocation scheme several months before the receivership was sought when evidence of that inquiry had formed the basis for obtaining the orders.

 

All of the appellants, including IBC and Student Housing Canada Inc., sought their costs on a full or substantial indemnity basis against both Mr. Akagi and the receiver, jointly and severally. 

 

The receiver argued that no costs should be awarded against it because it was proceeding in good faith and simply carrying out what it understood to be its court-ordered mandate.  It’s conduct and activities pursuant to the receivership orders were approved by the court in two orders and the general rule is that a receiver is not exposed to costs against it personally in receivership proceedings.

 

Mr. Akagi argued that his involvement with the receivership had been limited solely to obtaining the initial receivership order and to defend that order throughout the receivership.  He argued against responsibility for costs incurred by the appellants subsequent to the initial order. 

 

The Court of Appeal did not accept that Mr. Akagi’s involvement in the receivership proceedings was minimal or limited to obtaining the initial order.  Mr. Akagi had tenaciously defended the subsequent ex parte orders.  Mr. Akagi’s counsel had attended and participated in various motions, scheduling appointments and examinations.  Mr. Akagi was a central participant on the appeal itself.  He instituted and supported the proceedings throughout.

 

As a result, the Court of Appeal found him responsible for costs. 

 

As for the receiver, the court held that it was also liable to pay costs.   The principle that costs are rarely awarded against the receiver applies only when the receiver is acting in his capacity as receiver in the course of the receivership.  It does not apply where the receiver turns itself into a real litigant, drawing others into the fray and forcing them to defend themselves in what amounted to a process that was extraneous to the creditor-driven receivership.

 

The court did not make a finding that the receiver acted in bad faith.  In its view however, the receiver had misconceived its role, and in the process had lost its objectivity in the notion that it was an investigative receiver.  Mr. Akagi’s claim was a relatively small one that did not justify or require the intrusive and far-reaching mareva like orders that were obtained.  In taking these steps, the receiver undermined its neutral position as an officer of the court and turned itself into a litigant for the cause.  As a litigant, it was subject to the loser pays costs regime that applies. 

 

The court awarded costs against the receiver on a substantial indemnity scale as a measure of its disapproval of its conduct. 

 

It awarded costs against Mr. Akagi on a partial indemnity basis.  It appeared to the court that the receiver was the more active litigant pushing for potential action on behalf of all 3,800 alleged victims and calling the shots on the over-reaching orders that were obtained.  In addition, the court reasoned that Mr. Akagi, as an unpaid creditor at least had some interest in pursuing the receivership.

Regards,

Blair