Tag Archives: civil litigation

Ontario Court of Appeal Moves the Needle in Favour of Creditor Rights

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Two decisions of the Ontario Court of Appeal made in the past year have the potential to significantly diminish the effectiveness of creditor-proofing techniques commonly used by companies and businesspeople. 

FNF Enterprises Inc. v Wag and Train Inc.

The first such case was FNF Enterprises Inc. v Wag and Train Inc.  The company Wag and Train Inc. was the tenant of the landlord FNF Enterprises Inc. pursuant to the commercial lease. 

Before the end of the lease, the sole owner of Wag and Train Inc. engaged in a creditor-proofing technique known as “asset-stripping” or “value-stripping”.  She set up a new corporation and transferred all the assets of Wag and Train Inc. to that new corporation. The new corporation then carried on the same business in another location and abandoned the rented premises before the end of the lease.  The prior corporation (Wag and Train Inc.) thus became a shell corporation with no assets, and FNF Enterprises Inc. had no way of recovering damages from Wag and Train Inc. for breach of the commercial lease.  

The Court of Appeal ruled that the landlord could not pierce the corporate veil and bring a claim against the owner of Wag and Train Inc. in her personal capacity, but could bring an oppression claim against the owner of Wag and Train Inc. in her capacity as a director of the corporation.  The landlord had standing under the Business Corporations Act to bring an oppression claim against the corporate director because, as a creditor of the defendant corporation, it qualified as a “complainant” within the meaning of the Act.

Ontario Securities Commission v Camerlengo Holdings Inc.

The second case was Ontario Securities Commission v Camerlengo Holdings Inc. The defendant Camerlengo Holdings Inc. was owned by Fred Camerlengo.  Back in 1996, when he first set up his company, Fred transferred his house to his wife for nil consideration.  A reasonable assumption to draw from this transaction is that Fred was attempting to put the house out of reach of his and his company’s creditors.  In so doing, Fred was doing only what many similarly-situation businesspeople have done for decades: moving assets into the name of family members to protect them from potential seizure.

It should be noted that Camerlengo Holdings was not in trouble with the Securities Commission: it had borrowed $200,000.00 from an entity called Bluestream—and Bluestream was in trouble with the Securities Commission.  In this lawsuit, which it commenced in 2019, the Securities Commission was trying to recover that $200,000.00 loan from Camerlengo Holdings so that it could seize those funds in partial satisfaction of the moneys that were owed by Bluestream to the Ontario Securities Commission. 

Reversing the motion judge’s decision, the Ontario Court of Appeal ruled that a creditor could, under the Fraudulent Conveyances Act, attack a prior transfer of assets from a co-owner to his wife, even though the transfer of the property had taken place many years before the creditor became a creditor of that company.  Obviously, when Mr. Camerlengo transferred his house to his wife in 1996 he did not do so to protect his asset from the Ontario Securities Commission, because his company did not owe any money to the Ontario Securities Commission at that time.  Nevertheless, the Court of Appeal held that a subsequent creditor who was not a creditor at the time of the transfer can still attack a transfer under the Fraudulent Conveyances Act if it was made with the intent to “defraud creditors generally, whether present or future”.

It is important to note that in both these cases, the creditor has not yet recovered against the respective defendants: the Court of Appeal simply ruled that FNF enterprises Inc could proceed with a claim under the Business Corporations Act and the Ontario Securities Commission could proceed with a claim under the Fraudulent Conveyances Act.

These legal precedents mean that, in this future, these commonplace creditor-proofing techniques are likely to be considerably less effective.  While they may delay creditors, they will likely not ultimately defeat motivated and well-resourced creditors.

You Make Me Want to Make a New Tort Up

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When I last blogged about a new tort in Ontario, I predicted that the next time we would see the creation of a new tort would “not be for some time”.  That prediction has already been proved wrong.  We now have yet another new cause of action to contend with in Ontario law. 

Yenovkian v Gulian

Recently, the Ontario Superior Court of Justice had to deal with a case which involved a deeply unhinged person writing hurtful and defamatory things on the Internet.  In that case, the Judge did not believe that the existing legal tools provided a sufficient remedy for the wronged party.  In her view, to do justice it was necessary to create a new legal tort to address this type of Internet-based harassment.  The Court “discovered” the new tort of “publicity placing a person in a false light” and awarded judgment on the basis of this new tort.

Caplan v Atas

The more recent case of Caplan v Atas dealt with the same problem: an obviously unhinged person who was writing hurtful and defamatory things on the Internet.  In Yenovkian v Gulian, the ex-husband used the Internet to, among other things, allege that his wife had kidnapped and drugged their children.  In Caplan v Atas, Ms. Atas made postings on the Internet against her perceived enemies and their family members in which she made all sorts of vile accusations.  Her defamatory statements ran the gamut, but she usually fell back on accusing them of being paedophiles. 

The judge who decided the Atas case found that the statements were defamatory.  He also took the view that a judgment for defamation was not sufficient to do justice for the defamed parties.  To fully do justice in this case, the presiding judge decided to “discover” yet another new tort.  The Court created the new tort of “harassment in internet communications” and awarded the plaintiffs additional remedies on the basis of this new tort. 

Don’t Like What Someone has Written on the Internet? Make up a New Tort!

Because the two cases are so similar, it is very interesting that the judge in the Atas case did not even consider the Yenovkian case.  It appears the lawyers did not bring the Yenovkian case to his attention: perhaps they were unaware of it themselves. 

This is a shame, because it gives the impression that the Superior Court’s left hand did not know what its right hand was doing.  By handing down a decision about Internet-based harassment without discussing or even referring to the last notable decision about Internet-based harassment, the development of the law is impoverished.  It would have been very useful for the bar to hear Justice Corbett’s reasoning on how his new tort of harassment in internet communications differs, if at all, from Justice Kristjanson’s tort of publicity placing someone in a false light. 

We also don’t know if Justice Corbett’s decision would have been different if he had been made aware of the Yenovkian decision.  Had he been made aware of it, he might have decided that the situation in the case before him was captured by the test for publicity placing a person in a false light.  Had he been aware of the “false light” tort, he might have declined to create the tort of harassment in internet communications in the first place.  Or, maybe not.  The difficulty is, we just do not know. 

In both these cases, it appears that the respective judges let their hearts run ahead of their heads a little bit.  To be sure, the things that Mr. Yenovkian wrote and the things that Ms. Atas wrote were outrageous.  They were highly offensive and outright shocking.  The Court was, in both cases, understandably shocked and offended.  However, it seems that, probably because of how offensive these Internet postings were, the Court set aside its dispassionate demeanour to some extent so that it could throw the book at these Internet harassers.  It looks like the Court was so shocked by this appalling behaviour that they decided to do whatever they had to do to serve justice – even if they had to change the law to do it. 

The Supreme Court of Canada Reiterates the Duty of Good Faith Contractual Performance

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If the Supreme Court releases a decision and no one follows it, is it still the law?

Six years ago, the Supreme Court of Canada released a case that was meant to clarify the law of contract.  The case was called Bhasin v Hrynew and, at the time, it was viewed as a bombshell in Canadian law.  Everyone in the legal industry was talking about this landmark case.  And then, something very peculiar happened: just as quickly, everyone stopped talking about.  They went back to carrying on as though this case had never been released.  No one seemed to notice that a case, which everybody agreed was a game-changer when it was released, was not changing any games.

The Supreme Court must have been frustrated that the Bhasin case was not having the impact that was intended.  So frustrated, that they decided to hand down the same judgment a second time, just to drive the point home.  The most recent case released by the Supreme Court is called C. M. Callow Inc. v Zollinger, but it might as well be called Bhasin: Redux.

The similarities between Bhasin and Zollinger are striking and the differences inconsequential.  Both cases involved a small business which had a contract with a larger entity.  In both cases, the larger entity could terminate the contract early by giving written notice (six months’ notice in the Bhasin case, ten days’ notice in the Zollinger case). 

In both cases, the larger entity misled the small business about its intention to terminate the contract.  In both cases, the small business was led to believe that the contract would be continued, and even renewed, when that was not so.  And in both cases, the larger entity terminated the contract by giving the required written notice in accordance with the terms of the contract. 

Bhasin

In Bhasin, the Court set out to resolve an ambiguity in the common law.  They stated for the first time, clearly and unequivocally, that there was, in Canadian law, a duty of good faith contractual performance.  This duty of good faith means that parties to a contract cannot lie or actively mislead each other about matters directly linked to the performance of the contract.  This duty applies whether it is written as a term of the contract or not.  The parties cannot mutually agree that this duty does not apply to their contract.  They held that the larger entity had breached the duty of good faith contractual performance when it misled Mr. Bhasin into thinking his contract would be renewed, when in fact they had already decided to terminate it. 

The Court described this duty as “a general duty of honesty in contractual performance.”  This case made a big splash when it was released, but in the years following, it didn’t really change the way the lower courts decided contract disputes.  It turned into the legal equivalent of the waffle iron you got for your wedding: you were really excited when you got it, and you even talk about it from time to time, but you never really use it. 

Zollinger at the Ontario Court of Appeal

The Zollinger case came up from the Ontario Court of Appeal.  The plaintiff provided maintenance services for a condominium complex.  Just like in Bhasin, the plaintiff’s contract had a term which allowed for early termination on notice. 

The condo complex decided in the Spring that they were not going to renew the contract, but they didn’t tell the plaintiff until September.  At trial, the Superior Court found that they had basically misled the plaintiff about the renewal so that it would do extra work outside the scope of the contract for free over the summer, to try and convince the condo complex to renew the contract. 

The Court of Appeal considered Zollinger in light of Bhasin.  And yet, the Court of Appeal still held that the condo complex’s actions did not constitute a breach of the duty of good faith contractual performance.  They distinguished Zollinger by pointing out that Bhasin dealt with a contract that was set to renew automatically unless cancelled, while the contract in Zollinger did not automatically renew.  By granting leave, and the appeal, the Supreme Court seems to be saying that the similarities between these two cases were far more important than their differences. 

Zollinger at the Supreme Court of Canada

It seems that the Supreme Court granted leave to appeal in this case at least in part because they were frustrated with the way that the Ontario Court of Appeal applied the Bhasin precedent.  They took this case to send the message that the lower courts have not been taking the Bhasin precedent seriously enough. 

The Supreme Court’s legal analysis in Zollinger is, in large part, a repetition of the analysis from Bhasin.  The decision is not written as though it is meant to expand the law in the area: more like it is meant to remind the bar and the lower courts of the law.  The Supreme Court concluded that the condo complex had the right to terminate the contract on notice, but that it was not permitted to be dishonest in the way that it exercised that right.  In other words, the exact same conclusion they reached in the Bhasin case.

There is no legal innovation in Zollinger: just a restatement of a previous precedent which, it seems, the Supreme Court would like to see applied more rigorously.  We didn’t see a major change in the jurisprudence after Bhasin – maybe Zollinger will end up having that effect.

Judge Slams Toronto Landlord as Racist

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The Elias Restaurant is a 1,500 square foot hole-in-the-wall in a dreary post-capitalist strip mall on one of the busiest arterial roads in the far reaches of Toronto’s soul-crushing urban sprawl.  It is sandwiched between a nondescript beauty supply store and an equally nondescript convenience store.  It is two doors down from a “New York Fried Chicken”.  Situated in this desert of concrete, power lines, and cell phone towers, Elias Restaurant has managed to carve out a niche for itself, serving an Afro-Caribbean menu since it opened its doors in 2013. 

They must have been moving a lot of jerk chicken, because they never missed a monthly rental payment under their lease, even though the rent was close to $50 per square foot per year (which seems like a lot to me).  Good thing they are situated on that aforementioned busy arterial road. 

Commercial leases, like all contracts, are infinitely malleable.  A contract can say pretty much whatever the parties to the contract want it to say.  For example, this particular lease expired in 2017.  But the lease also contained a provision which allowed the tenant to renew the lease if it wanted to stay. 

When the lease expired in 2017, Elias Restaurant did not exercise their option to renew within the required time.  So what happens if the tenant doesn’t legally renew the lease, but stays in the unit anyway?  That’s called “overholding”, and this lease said that if the tenant did overhold they would have to pay rent at the rate of 125% – which Elias Restaurant did.  This case came to court because the landlord tried to evict Elias Restaurant (on the basis that the lease had expired without being renewed), even though Elias Restaurant had never missed a rental payment. 

It is very difficult to evict a tenant who is current with the rent.  This landlord’s efforts to kick out the tenant backfired spectacularly.  The tenant went to Court and asked for “relief from forfeiture”.  Not only did they get the relief they were seeking, but they got it in the most sensational way possible. 

In ordering that the tenant could remain in the premises, the judge also found that the landlord was motivated to try and evict this tenant because of its prejudice against this tenant’s black proprietors and (overwhelmingly) black customers.  In other words, the judge called this commercial landlord racist.  While he stopped short of using the “r-word” specifically, he did say that the landlord’s actions were based on “prejudices” and “stereotypes”, and also said there was “some good reason” to describe the landlord’s conduct as “unseemly” and “uncalled for”.  Reading the decision as a whole, there is no ambiguity about what the judge meant.

Some commentators have described the judge as ruling that the landlord acted on the basis of “unconscious bias”, but the judge wasn’t even that generous with this landlord.  He actually said that the landlord acted on the basis of its “subjective, if perhaps unconscious prejudices.”  He was only willing to grant that the landlord’s prejudices were perhaps unconscious – which, of course, leaves the insinuation that the landlord’s prejudices may very well have been conscious. 

There are a couple of lessons to be taken from this remarkable case.  The first is that judges are human.  They are just as susceptible to trends and societal developments as the rest of us.  If this case had come to court in 2019, the decision would have been very different.  The outcome probably would have been the same: the judge would have simply and quietly applied the test for relief from forfeiture, determined that there is no prejudice to letting a paying tenant stay in the unit, and moved on without providing extensive comments on the landlord’s perceived racial prejudices.  But in 2020, with the widespread publicity of the Black Lives Matter movement, this routine commercial lease dispute took on a completely different tenor.  This decision is a product of the zeitgeist.  It shows that the judiciary are not perfectly detached and dispassionate.  They can be influenced by societal developments and prevailing political moods, just like the rest of us can. 

The second lesson is the unpredictability of going to court.  Regardless of how stubborn or hard-headed this landlord was, NO ONE goes to court if they think there is even a one percent chance that they are going to end up being called a racist by the judge.  Clearly, the landlord did not see this coming.  Something went badly wrong for the landlord in the preparation of this case.  Losing in court?  That happens.  Losing in court and getting called racist by the presiding judge?  You can’t just chalk that up to a bad day at the office. 

There is a lot going on in this headline-grabbing case.  How it ended up getting this far in the first place is a question the landlord needs to ask itself.

Legal Challenge to the Will of Former Maple Leafs Head Coach Dan Maloney

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A version of this article was originally published by The Lawyer’s Daily (www.thelawyersdaily.ca), part of LexisNexis Canada Inc.

Hockey fans of a certain age will remember Dan Maloney as a player for, and later the head coach of, the Toronto Maple Leafs in the 1970s and 80s.  He passed away recently at the age of only 68, and there are many unanswered questions about whether the hits he took (and dished out) during hockey’s toughest era contributed to the decline in his health and, ultimately, his death. 

Complicating Dan Maloney’s final years was the fact that his family was not united about how to manage his health and personal affairs.  As reported by Dan Robson in his excellent article at The Athletic (subscription required – and strongly recommended), Maloney’s family were still arguing about whether he had legal capacity to make his own health care decisions less than two (2) weeks before he died. 

When Maloney died, the disputes within his family continued.  His daughter, Shelley, challenged his Will in Superior Court and the decision, released last year, is a great example of how a civil court case is all about the intersection between the legal and the personal.

Dan named a niece, rather than any of his children, as his estate trustee but, in all other respects, his Will was unremarkable.  His Will provided that his estate was to be divided equally amongst his three (3) children: the only exception being that, in addition to her one-third (1/3) share, Shelley would also get an oak china cabinet.

Shelley represented herself at court, and it is clear from reading the case that her objection her father’s Will was more a cathartic or therapeutic exercise than anything to do with the legal validity of his Will.  To begin with, even if she had been successful in having her father’s Will invalidated, that simply would have meant that the estate would have been divided equally amongst Dan’s three (3) children—which is already what the Will said.  The only change would have been that Shelley would not have received the oak china cabinet that Dan wanted her to have. 

What is more, much of the relief that Shelley asked for was relief which the Court could not even award.  In addition to asking for the Will to be invalidated, she also asked the Court to, among other things:

  • Revoke the licence to practise medicine of the estate trustee (who, in addition to being Dan’s niece, happened to be a doctor);
  • Revoke the licence to practise law of the lawyer who drafted Dan’s Will;
  • Order the Ontario Provincial Police and the Chief Coroner to conduct an investigation into the death of Dan Maloney; and
  • Order paternity tests to be conducted on her brothers.

Even though she was self-represented, I suspect that Shelley knew full well that her challenge of her dad’s Will was not going to succeed.  It seems that the motivation behind her proceeding was personal and emotional, rather than legal or financial.  While there may be a perception that the law is dull and sterile, this case is a reminder that the courts are often the place where the law collides with the very real lives of the people it impacts. 

This case also provides a good example of how to respond to a litigant who is using the court process for some sort of moral, therapeutic, or emotional purpose, and not for any actual legal remedy.  The judge who decided the case, Justice Christie, was not at all dismissive of Shelley’s challenge to the validity of her father’s Will.  Instead of dismissing the case on the spot, she took the time to write a judgment which was detailed and thorough and gave a fulsome analysis of the applicable law.  While her exasperation could not help but at times seep through, she nevertheless delivered a judgment that, overall, treated the legal case with the solemnity and gravitas which we rightly expect from the courts.  A court case which had no possible chance of success from a legal perspective, and which probably took less than two (2) hours of court time to argue, still resulted in a twelve-page legal decision. 

It is sometimes said that judges should “write for the loser”, and that’s what Justice Christie did here.  She certainly wasn’t writing for the appeal court (there was an exactly zero percent chance of this ruling being overturned on appeal) and she wasn’t writing for the benefit of the estate trustee’s lawyers (who already know the law).  This ruling was for the benefit of the person who—unsuccessfully—challenged the Will.  While Shelley would undoubtedly have been disappointed in the result, she can hopefully take some comfort that her concerns were given due consideration by a Judge of the Superior Court, and at least she was heard.  And there is every chance that, at the end of the day, that is all she really wanted. 

Can You Daisy-Chain Your Way Around a Limitation Deadline?

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The short answer is “no”.

The long answer is contained in this fascinating case from the Ontario Court of Appeal called H.M.B. Holdings Limited v The Attorney General of Antigua and Barbuda.

Background

If you get a civil court judgment against someone in another country, you can (in most cases) have that judgment registered in Canada.  You would want to do this if the party against whom you have a foreign civil judgment owns assets in Canada which you could potentially seize in satisfaction of your judgment. 

If you have a judgment in a country which has a reciprocal enforcement treaty with Canada (such as the United Kingdom), then you can simply apply at the Court office to have the foreign judgment registered as a judgment of the court in Canada.

If the country in which you have your judgment does not have a treaty with Canada, then you have to start a traditional lawsuit in the Canadian court in which you ask the court to grant a judgment recognising and incorporating the foreign judgment.  The deadline to bring this lawsuit is governed by the limitations law of whatever province you are commencing the lawsuit in. 

Ontario, via British Columbia?

H.M.B. Holdings Limited had a judgment from an Antiguan court against the Government of Antigua and Barbuda for millions of dollars.  H.M.B. Holdings must have believed that the Government of Antigua and Barbuda had assets in Ontario, because it wanted to have its Antiguan court judgment recognised in Ontario. 

The problem for H.M.B. Holdings was that the two-year limitation period to commence a lawsuit in Ontario had already expired.  (It had been more than two (2) years since it had obtained the court judgment from Antigua and Barbuda.)

However, the limitation deadlines are not the same across the country.  The deadline for starting a lawsuit in British Columbia to recognise a foreign judgment is six (6) years, not two (2).  A law in Ontario called the Reciprocal Enforcement of Judgments Act states that the courts in Ontario have to recognise court judgments obtained in other Canadian provinces.

H.M.B. Holdings decided to seek a court judgment in British Columbia, where the limitation deadline had not yet expired and then, within two (2) years of obtaining the British Columbian judgment, bring a lawsuit in Ontario to recognise the British Columbian judgment. 

Too clever by half?  Two (2) of the three (3) judges presiding at the Ontario Court of Appeal thought so.

When H.M.B. Holdings sued to have the British Columbia judgment registered in Ontario, the court dismissed the action.  H.M.B. Holdings appealed to the Court of Appeal. 

The “Original Judgment”

One of the legal issues considered by the Court was the meaning of the term “original judgment” in the Reciprocal Enforcement of Judgments Act.  The Act prohibits registration of a judgment where the judgment debtor would have a good defence if an action were brought on the “original judgment” [subsection 3(g)].  The majority held that “original judgment” referred to the Antiguan judgment.  Since Antigua and Barbuda would have valid limitations defence to an action to register the Antiguan judgment, the Act prohibits the registration of that “original judgment”, even if it takes a pit stop in Vancouver.

In dissent, Justice Nordheimer expressed his view that the term “original judgment” in the Act had to mean the specific judgment which the plaintiff sought to have registered which, in this case, was the British Columbian judgment. 

One can easily see both sides of this.  One could say that a litigant should not be allowed to do through the back door what it could not have done through the front door.  At the same time, one could equally say that judgment debtors should not be able to escape having to pay the judgment against them by having the enforcement proceedings defeated on procedural, rather than substantive, grounds.  There is also an argument that creative counsel should be rewarded, not punished, for using all of the legal mechanisms available to them in pursuit of justice for their client. 

UPDATE: We will have the opportunity to see this dispute go the next level, because the Supreme Court of Canada has granted H.M.B. Holdings Limited leave to appeal this decision. It will be fascinating to see how the Supreme Court deals with this question which divided the Ontario Court of Appeal.

Déjà Vu all Over Again

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It was déjà vu all over again at the Court of Appeal on the issue of punitive damages. 

Punitive damages are already a bit weird in the realm of civil litigation, because the purpose of the civil law is to compensate.  It is not to punish: that is a purpose of the criminal law.  Yet punitive damages can be awarded in a civil proceeding to (as their name implies) punish the defendant when his, her, or its conduct has been so malicious, oppressive, and high-handed that it offends the court’s sense of decency. 

The Supreme Court of Canada has said that punitive damages should be rare and modest, and they usually are.  I’ve only ever argued one case in which punitive damages were awarded and, even then, the punitive damages were only $25,000.00.

But sometimes, a showstopper of a case will come along where the jury makes an enormous award of punitive damages.  Two Ontario cases, about twelve years apart, both featured jury awards of $1,000,000.00 for punitive damages.  And yes, one of the cases involved Wal-Mart.

The first case was Whiten v Pilot Insurance.  A homeowner’s house burned down.  Her insurance company took the unreasonably hard-headed position of denying her claim on the basis that she had burned the house down herself, even though Pilot Insurance had no evidence of arson whatsoever.  The homeowner had to sue her insurance company, and take it all the way to trial, just to get her house rebuilt.  The jury was incensed by Pilot Insurance’s intransigent stance and, in addition to the compensatory damages, ordered the defendant to pay punitive damages of $1,000,000.00. 

Pilot Insurance appealed and the Court of Appeal reduced the punitive damages from $1,000,000.00 to $100,000.00.

On appeal to the Supreme Court of Canada, though, the Supreme Court overturned the Court of Appeal’s ruling on punitive damages and reinstated the jury award of $1,000,000.00.

The second case was Boucher v Wal-Mart Canada Corp.  Ms. Boucher, an employee at a Windsor Wal-Mart, had been really viciously bullied by her immediate supervisor.  This supervisor yelled at Ms. Boucher, singled her out, screamed at her, and swore both to and about her, both in front of and behind her back.  (This manager, a one Jason Pinnock, had a propensity for workplace use of the F-word which was nothing short of pathological.) 

Perhaps the most disturbing part of this case of workplace bullying was the fact that Wal-Mart took Mr. Pinnock’s side and backed him up.  The jury was not impressed, and ordered Wal-Mart to pay Ms. Boucher punitive damages in the amount of $1,000,000.00. 

History repeated itself at the Court of Appeal.  When faced with an appeal of a $1,000,000.00 jury award for punitive damages, the Ontario Court of Appeal reduced it to—you guessed it—$100,000.00. 

Obviously it was not the same panel of judges at the Court of Appeal who heard Boucher as heard Whiten.  Still, it seems strange that the Boucher panel did not say, “Hey, last time we slashed a jury’s $1,000,000.00 punitive damages award by 90% the Supreme Court reinstated it – maybe we shouldn’t do that again?” 

In Whiten, the Supreme Court of Canada did not go so far as to say ‘the jury is always right’.  They said that juries should be given enough leeway to do their job and their awards should not be overturned on appeal unless they are “irrational”.  The Supreme Court went on to hold that, in that case, the jury award of $1,000,000.00, was not irrational and it should not have been overturned. 

In Boucher, the Court of Appeal held that $100,000.00 was all that was rationally required to punish Wal-Mart and to denounce and deter its conduct.  Which, allow me to say, is bonkers.  This is Wal-Mart we are talking about.  If $1,000,000.00 was not an “irrational” amount to punish, denounce, and deter a small Canadian insurance company which acted in an oppressive and high-handed manner, then how is the same amount of money, awarded for the same purpose, against one of planet earth’s largest corporations “irrational”? 

The facts of the two (2) cases were different but the respective juries’ decisions on the issue of punitive damages were the same.  If it was incorrect for the Court of Appeal to have reduced the first award by 90%, then I would have argued that it was similarly incorrect for the Court of Appeal to have reduced the second award by 90%. 

Might history have been repeated at the Supreme Court?  Would the Supreme Court have reinstated the million-dollar damages award in the Boucher case, just like it reinstated the million-dollar damages award in the Whiten case?  We will never know, because Ms. Boucher did not seek leave to appeal to Canada’s top court.

Sprayed in the Face with a Fire Extinguisher at Wal-Mart

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Wal-Mart gets involved in a lot of litigation in Ontario, usually not by choice.  The most recent lawsuit against Wal-Mart to make it through the courts is a doozy.

It was brought by a guy name Kim Manos who was accidentally sprayed with a fire extinguisher by an employee at the Waterdown Wal-Mart.  This is amazing to me for a few reasons.  First, how does a fire extinguisher go off accidentally anyway?  Second, what employee thinks it is a good idea to handle a fire extinguisher within spraying-distance of a customer?  And, of course, what are the chances you are going to hit the customer who already has respiratory problems?

I’m also fascinated by this case because I used to live in Waterdown and the Waterdown Wal-Mart is the Wal-Mart I have visited more than any other.  From a customer’s perspective, it was a really well-run store.  It was clean, safe, and well-organised.  My personal experience would be that it was one of the better-run Wal-Mart stores I have seen.  It is unlikely to make an appearance on the “People of Wal-Mart” blog.  (The Wal-Mart here in Stratford, on the other hand . . .)

Kim Manos sued Wal-Mart and the matter went to trial.  Wal-Mart retained medical experts who disputed the Plaintiff’s contention that he had developed a particular respiratory condition.  Wal-Mart’s experts also opined that, even if the Plaintiff did have that respiratory condition, it wasn’t caused by the fire extinguisher accidentally discharging in his face in the Waterdown Wal-Mart.  (It sounds more and more ridiculous each time I say it.)

The Plaintiff won at trial.  In addition to compensation for his actual monetary losses, the trial judge also awarded him $225,000.00 in general damages for his pain and suffering which, for sure, is on the high end for this kind of injury.

Insufficiency of Reasons

In giving his reasons, the trial judge accepted the evidence of the Plaintiff’s medical experts and did not accept the evidence of Wal-Mart’s medical experts.  The problem was that he never explained in his reasons why he was rejecting the evidence of Wal-Mart’s expert witnesses. 

Wal-Mart appealed.  The Court of Appeal granted the appeal and ordered a new trial.  The Court of Appeal’s rationale was that the trial judge failed to give adequate reasons for rejecting the expert evidence put forward by the Defendant.  The Court of Appeal confirmed that the trial judge was entitled to reject the Defendant’s expert evidence if he wanted to, but he had to give intelligible reasons for doing so.  By giving no reasons at all, he made it impossible for the Defendant to know why it had lost and made his decision incapable of meaningful appellate review. 

This is another reason why I find this case so fascinating because the very first appeal I ever argued, way back in my law school days, was successful for the very same reason.  In that case, we were appealing a decision of the Discipline Committee of the College of Physicians and Surgeons of Ontario.  The Committee had a report from an independent assessor which was critical of the doctor in question.  In its decision, the Committee did not accept the conclusions of the report, but neither did it give any reasons for rejecting the report’s conclusions.  In the appeal to the Health Professions Appeal and Review Board we argued that this was unreasonable, and the Board agreed.  The Board held, “The Committee is not bound to accept the report of an independent assessor, but it is incumbent on the Committee to offer cogent reasons if it chooses to reject or discount the opinion of an assessor.”

That case was sent back to the Committee for re-consideration, just like the Manos case was sent back for a new trial. 

Appeal to the Supreme Court of Canada?

So when will the Manos case be re-tried?  Not any time soon, because (plot twist!) Mr. Manos has sought leave to appeal to the Supreme Court of Canada.

The overwhelming majority of applications for leave to appeal to the Supreme Court of Canada are dismissed, and my money would be on this application for leave being dismissed as well. 

So why would the Plaintiff seek leave when the chance of getting it is so low?  Well, one reason might be because the pay-off would be very much worth it in the unlikely event that that leave (and the subsequent appeal) are granted.  Success at the Supreme Court could mean that the Plaintiff gets to keep his $225,000.00 general damages award and would not have to put in the time and expense of a re-trial (which he might not even win, and which could also be appealed . . .).  I suspect that the Plaintiff knows very well that, even if he wins the re-trial, his is not going to get anywhere near the $225,000.00 he got the first time, because that really is on the high end of damages for the type of injury which he allegedly suffered.  If he can get the Supreme Court to overturn the Court of Appeal’s ruling the $225,000.00 damages award will stand and he will almost certainly be better off than he would be after winning the re-trial. 

I will keep a close eye on this fascinating case and provide an update once the application for leave to appeal is decided by the Supreme Court.

Publicity Placing Person in False Light

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To successfully sue someone, you need to have a legally-recognised basis for suing them.  These legally-recognised bases for suing someone are called “causes of action”.  Many of them are obvious and well known: where the evidence justifies it, you can sue someone for breach of contract, wrongful dismissal, or defamation.  Other causes of action are less well known, but nevertheless well-established, such as certiorari or mandamus.

Notably, the list of legally-recognised causes of action is not a closed list.  Where the right conditions are met, new causes of action can be “discovered” by the courts. 

False Light

Late last year, the Ontario Superior Court of Justice “discovered” another new cause of action in the family law case of Yenovkian v Gulian. 

There was a trial to determine the issues of custody, access, and spousal support.  At the trial, the wife put forward evidence of websites written and published by the husband which alleged that the wife and her parents were involved in kidnapping, child abuse, assault, and making death threats (among other things). 

The husband’s websites (which are still up, in violation of court orders to take them down) are written by someone who is clearly unhinged, and the allegations they contains against his ex-wife are outrageous.  The judge decided to give Ms. Gulian a remedy for the injury she suffered in having these things written about her on the Internet. 

Rather than give the wife a judgment which was based on an already-recognised cause of action, the judge decided to base the ruling on a cause of action which had never previously been recognised in Ontario law.  The Judge held that the cause of action by which Ms. Gulian was entitled to a remedy was “publicity placing a person in a false light”, and she awarded Ms. Gulian $100,000.00.

This ruling creates a situation of significant uncertainty in Ontario law.  First, it is not at all clear from this ruling how “publicity placing a person in a false light” is different from good old-fashioned defamation.  I don’t see how accusing your ex-wife of kidnapping and child abuse could possibly be anything other than defamatory so, in my personal view, the judge did not need to recognise a new cause of action in order to give Ms. Gulian a remedy: she could have simply awarded Ms. Gulian damages based on defamation. 

Second, because this case was decided by the Superior Court and not by the Court of Appeal, it is not binding on other courts in Ontario.  My own suggestion would be that the job of introducing new causes of action into Ontario law should be left to the Court of Appeal, whose decisions are binding on all the courts in the province.  The last time a new cause of action was discovered in Ontario (“intrusion upon seclusion”), it was done by the Court of Appeal.  The last time the Superior Court attempted to discover a new cause of action (the “tort of harassment”), the ruling was overturned by the Court of Appeal.

The Court of Appeal did not have the opportunity, in this case, to weigh in on the “false light” cause of action because the husband did not appeal.  One judge of the Superior Court was convinced that the cause of action of “publicity placing a person in a false light” exists in Ontario; another judge hearing a similar case may not be similarly convinced.  This creates the possibility of inconsistent legal rulings in the Ontario courts, which in turn could potentially erode public confidence in the justice system. Until the Court of Appeal rules on the “false light” cause of action, it will remain a big question mark in Ontario law. 

When will we next see a new cause of action recognised in Ontario?  I suspect it will not be for some time.  A new cause of action is supposed to fill a gap in the existing law, and where it is not immediately obvious that there is a gap in the law which needs to be filled, it will be less likely that any potential new cause of action will be recognised. 

Quick, Good, Cheap – Pick Two

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Her Honour Madam Rosalie Abella, a Justice of the Supreme Court of Canada, recently penned an opinion column in The Globe and Mail titled, “Our Civil Justice System needs to be Brought into the 21st Century” (subscription required). 

While I came to agree with Justice Abella’s conclusion, she actually made two arguments in order to get there.  And while I agree with her second argument, I cannot bring myself to agree with her first.

Her first argument is basically just “Change for change’s sake.”  She notes that the adversarial system of civil litigation we use today is pretty similar to the one used at the turn of the (last) century.  She then goes on to argue that, since the airplane and the Internet have been invented in that time, we should similarly change the way we resolve civil disputes. 

The flip side to the sentiment that “we should change with the times” is “if it ain’t broke, don’t fix it.”  And of course, our adversarial system of civil litigation has a lot of things to commend it.  It is a system which has been honed and refined over centuries and it does a fairly good job of serving its objectives.  While other systems of dispute resolution have been conceived and tried our adversarial system remains, to paraphrase Churchill, the worst system except for all the others which have been tried from time to time.  So I would disagree with the suggestion that we ought to make any substantial changes to our civil litigation system solely on the basis that it is an old system.  We should not tear down a fence unless we know why it was put up in the first place. 

That being said, Justice Abella’s second argument really lays bare the biggest shortcoming of our “least bad” system.  She persuasively argues that the system is just too inaccessible for regular people, for the dual reasons that (i) it is too expensive and (ii) it takes too long.  One cannot really disagree with her assertion that it should not take litigants “forever and thousands of dollars to decide where their children live, whether their employer should have fired them, or whether their accident was compensable.” 

The gap between reality and expectation for participants in the civil litigation system can be profound.  I blogged last week about an employment case in Ontario which took eleven (11) years to go from start to completion at the Court of Appeal.  By comparison, a few years ago I represented an employee in an employment case that was decided by the Court of Appeal eleven months after the employee was fired.  And do you know what they told me after it was over?  They said, “If I knew it would have taken this long, I never would have done it.”  And that was in a case which, by the usual standards, was resolved quickly.

In my own practice, I have seen a fair number of clients walk away from good, promising cases—cases worth tens or even hundreds of thousands of dollars—because they are not willing to wait 1, 2, or 3 years before seeing the inside of a courtroom, or because they are no longer willing to continue funding litigation which will go on for another 1, 2, or 3 years. 

The people who are most likely to be caught on the outside are those who can’t or won’t sink thousands of dollars, and years of their lives, into fighting a legal dispute – even though their case may be just.  Justice Abella perspicaciously identifies this problem when she says, “They want their day in court, not their years.”

Normally, this is where I would criticize the author for identifying the problem but not identifying any solutions.  But I can’t criticize Justice Abella here, because I don’t have any answers at the moment either.  The civil justice system serves multiple goals, among them efficiency, truth-seeking, and justice.  Major reforms to improve the outcomes in one area are almost certain to be at the expense of the other goals of the justice system.  The legal system finds itself stuck in the classic consumer quandary of “Quick, cheap, good – pick two”. 

What should we do?  Eliminate or severely curtail pre-trial discovery?  That would certainly get us to trial more efficiently.  It would also bring back the old days of “trial by ambush”, which the profession definitely wants to avoid.  Getting rid of “trial by ambush” was a major reason for the significant expansion of pre-trial discovery in the first place.  We can make our civil litigation system quicker and cheaper, but it won’t be as good.

While I can’t say what we should do, I can make a suggestion about what we should not do.  We should not do mandatory mediation.

In my opinion, the experiment of mandatory mediation is a failure and should be abandoned.  For a number of years now, any civil lawsuit in Ottawa, Toronto, or Windsor has been required to go to mandatory mediation as a necessary pre-condition to going to trial.  And why is this such a bad a idea?  Simply put, if you want to make the process of a lawsuit quicker and cheaper, you should not add additional procedural hurdles to the lawsuit.  Mandatory mediation adds both time and expense and makes the overall lawsuit take even longer.  I cannot understand why anyone thought that the system would be made more efficient by adding an extra step to civil lawsuits: it is impossible to make a journey quicker by adding pit stops.  If we want to make the process of civil lawsuit a little bit quicker and a little bit less expensive without sacrificing quality, we can start by eliminating the costly and time-consuming step of mandatory mediation.