Ontario Take Five February 2011

February 2011

Inside this Issue:

This month we have summarized what we feel are the five most interesting cases from the Ontario C.A. in January 2011.

We highlight cases from the following areas of law:

Civil Procedure; Default Judgments- p.3

Torts; Interference with Contractual Relationsand Economic Interests- p.5

Access to Information and Privacy- p.7

Civil Procedure; Limitation Periods- p.8

Civil Procedure; Banking and Finance- 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

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February 2011


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Bodkin Leasing Corporation v. Celej, 2011 ONCA 25Area of Law: Civil litigation; Civil procedure; Default judgments

The appellant in this case was Ms. Celej. The respondent was Bodkin Leasing Corporation. Ms.Celej appealed the dismissal of her motion to set aside the respondent’s default judgment from a costs award. The judgment related to the appellant’s non-payment of her obligations under a truck lease with the respondent. The motion was dismissed because the appellant had failed to bring it as soon as possible after she became aware of it. The evidence established that the appellant was served with the respondent’s statement of claim in November 2008 and that she did nothing. She was served with other materials in August 2009 and ordered to attend examinations, and still she did nothing. The appellant further failed to inquire

about a writ arising from the default judgment in May 2009. She knew of the judgment by June or July 2009 at the latest, but did not move to set it aside until September 2009.

[continued on the next page]

BACKGROUND

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Bodkin Leasing Corporation v. Celej (cont.)

The appeal was dismissed. The Court

determined that the motion judge provided sufficient reasons for dismissing the appellant’s motion. The decision was reasonable. The Court rejected the appellant’s contention that the motion judge’s reasons were inadequate in that they did not disclose a basis for the decision. It determined instead that while the reasons were brief, it was clear from the endorsement that the motion judge was aware of and properly addressed the relevant factors for determining whether a default judgment should be set aside. The appellant provided no evidence to support her position that the respondent had made a commercially unreasonable

sale of the truck, and provided an insufficient explanation for her delay in attending to the action and the default judgment. The costs award was reasonable.

APPELLATE DECISION

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February 2011


The appellants were members of the Kovachis family (collectively, the “Landlord”), and owned commercial premises in the heart of Toronto’s entertainment district. The respondent was a company called Print N’ Promotion (Canada) Ltd. Pursuant to an assignment of a lease made as of April 2004, the Landlord leased the premises to a numbered company for use as a bar and restaurant. Under the terms of the head lease, the nonpayment of rent after five consecutive business days from the due date constituted an event of default, entitling the Landlord to terminate the head lease and enter the premises. The head lease also gave the tenant the right to sublet one of the exterior walls for advertising and signage purposes with the Landlord’s consent. In September 2006, when the tenant purportedly defaulted under the terms of the head lease by failing to pay the rent due, the Landlord terminated the head lease. The Landlord changed the locks, but the tenant re-entered the premises and shortly thereafter entered into a sublease with the respondent, an advertising and media company, for the use of the exterior wall. As the dispute regarding the termination of the head lease was still ongoing, the Landlord’s consent to the sublease was not obtained and the Landlord refused to recognize the validity of the sublease. When discussions between the tenant and the Landlord failed to resolve the dispute, the tenant and the respondent applied to the court for relief. The tenant later discontinued its action against the Landlord, but the respondent continued its claim for damages for the tort of intentional interference with contractual relations and economic interests. At trial, the trial judge found that the Landlord’s termination of the head lease was invalid and that the Landlord had interfered with the contractual relations between the tenant and the respondent. She found that the respondent was entitled to damages for its loss of actual client advertising and contracts and for its loss of future revenues. The Landlord appealed the decision on the basis that even if the trial judge correctly concluded that its termination of the head lease was invalid, the tort of intentional interference with contractual relations and economic interests was not made out on the trial judge’s findings or on the evidentiary record. [continued on the next page]


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Print N’ Promotion (Canada) Ltd. (c.o.b. megaposter.ca) v. Kovachis, 2011 ONCA 23Areas of Law: Torts; Interference with Contractual Relations and Economic InterestsUnder Appeal: Justice Roberts

BACKGROUND






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Print N’ Promotion (Canada) Ltd. (c.o.b. megaposter.ca) v. Kovachis, (cont).

The appeal was allowed. For the Court, Justice

Cronk determined that the trial judge erred in finding that the Landlord’s conduct constituted wrongful interference with the contractual relations between the tenant and the respondent. This was because she made no express or implied finding that the Landlord’s termination of the head lease, which led to its refusal to permit the respondent to use the external wall, was intended, even in part, to inflict injury on the

respondent. Instead, the trial judge proceeded on the basis that mere knowledge by the Landlord of the respondent’s involvement with the tenant and of the likely consequences to the respondent if the head lease was terminated and the sublease was treated as invalid, was sufficient for showing an intention by the Landlord to injure the respondent. Furthermore, the trial judge misapprehended the evidence that she regarded as establishing knowledge by the Landlord of the

respondent’s subtenancy sufficient to make out the tort as she incorrectly concluded the Landlord was aware of the respondent prior to its termination of the head lease.

APPELLATE DECISION


February 2011


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Ontario (Ministry of Community Safety and Correctional Services) v. Ontario (Information and Privacy Commissioner), 2011 ONCA 32Areas of Law: Access to Information and Privacy

This case involved an appeal by the Ontario Ministry of Community Safety and Correctional Services (the “Ministry”) from a Divisional Court order. The respondent was the Ontario Information and Privacy Commissioner (the “Commissioner”). The Divisional Court order dismissed the Ministry’s applicati on for judicial review of an order requiring it to disclose to a former prison inmate his medical, personal, and institutional records held by two correctional facilities. The Ministry granted the former inmate complete access to his medical files, but withheld parts of the institutional records on the basis that they were correctional records and their disclosure could reasonably be expected to reveal information supplied in confidence. The former inmate appealed to the Commissioner and the adjudicator concluded that the records the Ministry sought to withhold all appeared to relate to pre-trial matters, and therefore did not constitute correctional records under s. 49(e) of the Freedom of Information and Protection of Privacy Act, R.S.O. 1990 (the “Act”). The Divisional Court accepted the adjudicator’s determination that the exemptions in s. 14 of the Act were meant to apply to pre-trial records in the custody of the Ministry. The Ministry now requested an exemption based on s. 49(e) for those records in its possession that were generated by the police only.

The appeal was allowed. Justice Moldaver, for the Court, ordered the matter to be remitted to a different adjudicator. The Court determined that the adjudicator’s narrow interpretation of the word “correctional” in s. 49(e) was unreasonable; it created an artificial distinction between pre-sentence and post-sentence custodial records that was not consonant with the governing legislation, which would prove difficult, if not impossible, to apply in practice. The Court further found that the adjudicator erred in importing a “harm” element into the provision. To qualify for a s. 49(e) exemption, the Ministry only needed to show that the records it sought to protect were “correctional” records, the disclosure of which “could reasonably be expected to reveal information supplied in confidence”. It did not have to go further and demonstrate, on detailed and convincing evidence, that a particular harm would result if the information were to be disclosed. The Court concluded that rather than defining the word “correctional” in s. 49(e) in a way that created an artificial and unworkable distinction between pre-sentencing and post-sentencing records, the adjudicator should have focused on the confidentiality aspect of the provision to narrow its reach.


BACKGROUND

APPELLATE DECISION

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The appeal was dismissed. For the Court, Justice MacPherson determined that the judge erred in holding that the cause of action arose on the date of Mr. Chimienti’s arrest in March 2000. For the purpose of a claim based on negligent investigation, the compensable harm consisted of the inconvenience, indignity, and cost of defending a criminal charge for a 34-month period. There was a logical inconsistency in requiring a plaintiff to pursue a civil action related to a police investigation while preoccupied with defending the ongoing criminal charges. As such, the Court determined that the cause of action was complete on the date on which the charges were dropped. However, if this was the case, then the trial judge’s alternative finding that the statement of claim was issued one day beyond the six-month limitation period was correct and should therefore be upheld. There was no inherent jurisdiction for relief from strict enforcement of the limitation period under the circumstances. Leave was not required by the defendants to bring the motion under appeal.

The appellants in this case were Mr.

Chimienti and his mother, Patricia Chimienti. The respondent was the City of Windsor. The appellant Mr. Chimienti was arrested by the Windsor Police Services on March 30, 2000, following a brawl at a tavern in Windsor. The charge against him was assault causing bodily harm. Mr. Chimienti was released on the day of his arrest and was arraigned on April 27, 2000, on a charge of assault causing bodily harm. After a 17-day preliminary inquiry process, the charges were dropped on January 30,

Chimienti v. Windsor (City), 2011 ONCA 16Areas of Law: Practice and Procedure; Limitation Periods

2003. The appellants issued their Statement of Claim on July 31, 2003. They alleged that Mr. Chimienti was arrested despite the absence of evidence supporting the allegations and that the preliminary inquiry was unnecessarily prolonged “for the purpose of using him as a bargaining tool against the other defendants”. Their claim against the police officers was framed in terms of negligent and malicious investigation. The statement of claim was served in January 2004. In April 2009, the defendants moved to dismiss the claim as statute barred. The trial judge found that the claim was not filed and served within the six-month limitation period prescribed by s. 7(1) of the Public

Authorities Protection Act, R.S.O. 1990, c. P.38. The trial judge ruled that the cause of action arose on the day on which Mr. Chimienti was arrested and therefore the statement of claim was issued 40 months after the cause of action arose. Alternatively, the trial judge determined that the claim was commenced one day late if the cause of action arose on the date on which the charges were dropped, and found no basis for extending the limitation period.


BACKGROUND

APPELLATE DECISION




February 2011


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Royal Bank of Canada v. Rastogi, 2011 ONCA 47

Areas of Law: Civil Procedure; Banking and FinanceUnder Appeal: Justice Belobaba

BACKGROUND


The appellant in this case was the Royal Bank of Canada (“RBC”). The respondent was its former employee, Mr. Rastogi. The case involved an appeal by RBC from an order releasing a freeze on the respondent’s accounts. The appellant sought to recover trading profits that the respondent had made using an improper arbitrage scheme. It also sought a tracing order against third parties, naming the Toronto-Dominion Bank as a defendant. Rather than seeking an inter-locutory injunction, the appellant froze the respondent’s bank accounts on its own initiative when

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it discovered the trading activity. Six accounts were frozen in total, including three RBC accounts, two RBC Direct Investing accounts and a TD joint-chequing account that the respondent held with his wife. The respondent sought an interim order releasing the accounts pursuant to Rule 44 of the Ontario Rules of Civil Procedure. The trial judge ruled that the appellant was allowed to freeze its own accounts, but ordered that the remaining accounts be released immediately. The trial judge further found that RBC Direct Investing was a separate corporate entity, was not a bank, and had no legal claim against the respondent. Further,

the appellant’s claim against TD for a tracing order was not enough to justify any further retention by TD of the respondent’s funds, absent an injunction, court order, or some proof of legal entitlement. On appeal, RBC submitted that while the defendant’s motion was purportedly advanced under Rule 44 and sought only interim relief, it was in realty a motion for summary judgment. The Bank further argued that the motion judge erred by effectively giving judgment on some of the claims it advanced, as well as on some of the claims advanced by the respondent in his counterclaim, despite the existence of several triable issues. [continued on the next page]





The appeal was dismissed. Justice Doherty, for the Court, determined that the appellant was correct in alleging that Rule 44 had no application, as the claim was in reality a motion for summary judgment on the respondent’s entitlement to the funds in his accounts. However, the Court held that this was an appropriate case for summary judgment in the terms of the order made by the motion judge, and converted it as such by application of Rule 37.13(2)(a) of the Rules. The Court further held that the motion judge properly found that the appellant had no basis in law to prevent the respondent from accessing his funds with RBC Direct and TD. The mere fact of an arguable restitutionary claim did not give the appellant any right to interfere with the respondent’s accounts with other entities pending a determination of the merits of that claim. Rather, the appellant required more than an arguable case before it could obtain an

order freezing the other accounts. To find otherwise would permit the appellant to unilaterally achieve an injunction without a court order. The Court therefore varied the parts of the order referable to the accounts at RBC Direct and TD to a judgment in the same terms, and dismissed the appeal.


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Royal Bank of Canada v. Rastogi, (cont.)

APPELLATE DECISIONRecords 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.

[email protected]

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52 The Society of Notaries Public of British Columbia Volume 19 Number 2 Summer 2010


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