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August 7, 2017

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Law Times • augusT 7, 2017 Page 15 www.lawtimesnews.com CASELAW evade enforcement of Default Judgment, was outrageous and reprehensible. JN and JPN were at all relevant times the directing minds of both numbered com- panies. Together with numbered companies, they deliberately and f lagrantly attempted to evade A Corp.'s enforcement of Default Judgment by liquidating assets of 9153 and transferring jbloom business to 9279, in an attempt to avoid 9153's liability for the dam- ages and costs awards set forth in paragraph 5 of Default Judgment. ASICS Corp. v. 9153-2267 Québec Inc. (2017), 2017 Car- swellNat 622, 2017 FC 257, Paul S. Crampton C.J. (F.C.). Pensions FEDERAL AND PROVINCIAL PENSION PLANS Federal pension plans Minister not entitled to judicial review of Social Security Tribunal - Appeal Division's reasons Pension claimant JT injured her wrist in 2007 and worked sporadically until August 2008 when she was no longer able to work. Social Security Tribunal– General Division determined that claimant was eligible for dis- ability pension under Canada Pension Plan because disability was severe and prolonged as of minimum qualifying period. Social Security Tribunal–Ap- peal Division granted Minis- ter of Employment and Social Development leave to appeal on ground that General Divi- sion may have erred in finding that disability was severe, but did not grant leave on other two arguments. Minister brought application for judicial review, seeking to have appeal proceed on all three arguments. Applica- tion dismissed. Minister alleged three distinct erroneous findings but they all fell within just one ground of appeal recognized by statute. Minister was seeking ju- dicial review of Appeal Division's reasons, not its disposition. Ap- peal Division referred to other is- sues as "grounds" and found they did not have reasonable chance of success, but to refer to all in- stances of error as "grounds" was problematic. Language of statute was clear that there were only three possible grounds of appeal and that appeal was either grant- ed or refused. Since Minister was not seeking different disposi- tion, Minister had no basis upon which to bring judicial review application prior to completion of appeal proceedings. Appeal Division was specialized tribunal with expertise to interpret scope of its own appeal jurisdiction and statute. There was no reason to interfere with Appeal Divi- sion's finding on issue of capacity to work and severity of disability. Appeal Division's determination of factual issues raised by Minis- ter was reasonable. Canada (Attorney Gen- eral) v. Tsagbey (2017), 2017 CarswellNat 1310, 2017 FC 356, Richard G. Mosley J. (F.C.). Tax Court of Canada Tax INCOME TAX Administration and enforcement Director liable for corporation's unpaid balance of source deductions following bankruptcy G was majority shareholder and director of corporation. Corpo- ration experienced severe finan- cial difficulties and G retained services of trustee in bankruptcy. G was unable to fulfill proposals and corporation made assign- ment into bankruptcy on August 1, 2006. On August 26, 2006, new trustee in bankruptcy was ap- pointed and CRA collections is- sued proof of claim on August 28, 2006 addressed to first trustee in bankruptcy. Revised or amended proof of claim was filed with sec- ond trustee in bankruptcy on July 24, 2007. Documentation cor- roborated G's version of facts as to change of trustee in bankruptcy on August 26, 2006, filing of pro- posal on June 29, 2006, and that all real property was transferred to mortgagee pursuant to final or- der of foreclosure and that court appointed receiver-manager took possession and control of cash in bank, accounts receivable, and machinery and equipment such that there was no equity avail- able to bankrupt estate. G was assessed under s. 227.1 of Income Tax Act (ITA) from liability of corporation for unpaid balance of source deductions together with penalties and interest in amount of $66,865.44. G appealed from notice of assessment. Appeal dismissed. Words "with all due dispatch" set out in s. 152(1) of Act had no bearing on analysis. G did not sign or deliver letter of resignation and merely assumed that he was no longer director of corporation as of bankruptcy date. On basis of evidence, G was still director of corporation when notice of assessment was issued in May 2012. There was insuf- ficient evidence to show that G discharged his statutory duty of care for due diligence defence to apply. Signed proof of claim was admissible as evidence. There was nothing in statutory language contained in s. 227.1(2)(c) of Act requiring delivery of signed proof of claim to G as director and nothing prevented G from fol- lowing up with CRA representa- tive or her successor to verify that there would be sufficient assets to meet outstanding CRA claim, and nothing preventing G from following up or concluding ar- rangement with CRA in months after bankruptcy. Sending proof of claim to first trustee was error, however, on basis of wording of s. 166 of Act, assessment could not be vacated. Nothing turned on fact that amounts owing changed between date of initial proof of claim and second proof of claim. Grant v. The Queen (2017), 2017 CarswellNat 3033, 2017 TCC 121, Guy R. Smith J. (T.C.C. [General Procedure]). Ontario Civil Cases Alternative Dispute Resolution RELATION OF ARBITRATION TO COURT PROCEEDINGS Stay of court proceedings Judge refusing partial stay as unreasonable to separate consumer and non-consumer claims Plaintiffs claimed defendant phone companies engaged in undisclosed billing practices of "rounding up" calls to next minute. Defendants' contracts contained mandatory arbitra- tion clause but pursuant to s. 7(2) of Consumer Protection Act, claims in respect of consumer contracts can proceed in court. Motions judge granted plain- tiffs' motions to certify actions as class proceedings and dismissed defendants' motion for stay of non-consumer claims pursuant to s. 7(5) of Arbitration Act, 1991. In refusing to grant partial stay, judge followed Ontario Court of Appeal decision in G case, which she concluded had not been over- taken by Supreme Court of Cana- da decision in S case. Judge deter- mined it would be unreasonable to separate consumer and non- consumer claims. Defendants appealed denial of partial stay of non-consumer claims. Ap- peal dismissed. Judge's decision to refuse stay was upheld. Judge was correct in applying G case to determine whether partial stay of proceedings should be granted under s. 7(5) of Arbitration Act, 1991 in proposed class proceed- ing involving both consumer and business customer claims. While both G case and S case involved arbitration clauses in context of proposed class proceeding, S case was decided under relevant laws of BC, which differed in mate- rial ways from those of Ontario. Arbitration agreement did not oust jurisdiction of court. G case remained good law in respect of proceedings commenced in On- tario, and had not been overtaken by S case. Judge did not refuse stay of proceedings of arbitrable claims based on conclusion that class action would be preferable procedure. Wellman v. TELUS Commu- nications Company (2017), 2017 CarswellOnt 8100, 2017 ONCA 433, K.M. Weiler J.A., R.A. Blair J.A., and K. van Rensburg J.A. (Ont. C.A.); affirmed (2014), 2014 CarswellOnt 16562, 2014 ONSC 3318, Conway J. (Ont. S.C.J.). Bankruptcy and Insolvency BANKRUPTCY AND RECEIVING ORDERS Rescission or stay of order R eceiver should have responsibility for evaluating claims of secured creditors Debtor company became insol- vent. Receiver was appointed by court and sold debtor's assets. Debtor made assignment into bankruptcy without leave of court or consent of receiver. Trustee in bankruptcy purported to disal- low claim of secured creditor. Se- cured creditor brought motion to stay bankruptcy proceeding until after receiver completed its evalu- ation of secured creditors' claims. Motion granted in part. Leave granted for bankruptcy proceed- ing to continue, in tandem with receivership, before same judge. Receiver should have respon- sibility for evaluating claims of secured creditors. It would be un- fortunate if receiver and trustee had to duplicate work or work at cross purposes. Because receiv- ership was put in place first and because bankruptcy was initiated without court approval, receiver was authorized to complete its work. Trustee had right to be heard both as trustee and as hold- er of debtor's residual rights, right to be informed of steps taken by receiver and right to take posi- tion when report was submitted for court approval. If receiver and trustee reached different conclu- sions on status and quantum of secured claims, hearing would be required in receivership. Royal Bank of Canada v. Casselman PHBC Ltd. (2017), 2017 CarswellOnt 10241, 2017 ONSC 4107, Calum MacLeod J. (Ont. S.C.J.). Civil Practice and Procedure DEFAULT PROCEEDINGS Application to set aside default judgment Irregularity for plaintiff to obtain monetary judgment when such relief not requested Defendant lawyer practiced law with defendant paralegal until they had falling out. Defendant company was management company of legal corporation through which lawyer and para- legal practiced, and their spouses were equal shareholders of all shares in management company. Plaintiff, paralegal's wife, brought action against defendants seek- ing order for payment of $75,000 from management company, and for order directing lawyer and paralegal to execute documents necessary to convey and pay funds from management compa- ny to her. Defendants were noted in default, and default judgment was granted against them. Law- yer was ordered to pay $99,221.50 to plaintiff. Lawyer brought mo- tion to set aside default judgment. Motion granted. There was no claim in statement of claim made by plaintiff against lawyer for sum of money to be paid, and only claim for money judgment was against management com- pany and was limited to $75,000. It was irregularity for plaintiff to have obtained judgment for pay- ment of money when such relief was not requested in statement of claim. Within four corners of statement of claim, plaintiff had no entitlement to judgment against lawyer for $99,221.50 he was ordered to pay. It was incum- bent on plaintiff to have amended statement of claim before seeking judgment in respect of substan- tial claim when no notice had been given to lawyer. Romero v. Romero (2017), 2017 CarswellOnt 3451, 2017 ONSC 1499, A.M. Mullins J. (Ont. S.C.J.). Contracts REMEDIES FOR BREACH Injunction Interlocutory injunction granted to maintain status quo pending arbitration of contract dispute In 2010, applicant B Inc. en- tered into $770 million contract ("contract") with respondent government agency M to design and supply 182 light rail vehicles ("LRVs") for municpality's tran- sit plan. In July 2016, M claimed that B Inc. was in material default under contract. B Inc. was served with notice of default. B Inc. dis- puted that it was in material de- fault and assured M that it would deliver LRVs in accordance with revised delivery schedule agreed to by parties. Contract contained mandatory multi–step dispute resolution process culminating in arbitration before specialized dispute review board ("DRB"). B Inc. challenged validity of notice of default by invoking dispute resolution process. M maintained that dispute resolution process in contract did not apply to its right to terminate contract for material default. M threatened to terminate contract for material default and proceed with another supplier before validity of notice of default can be determined by dispute resolution process. B Inc. brought application for inter- locutory injunction maintaining status quo. Application allowed. Injunction granted. B Inc. estab- lished that there was meaningful risk that it would suffer irrepa- rable harm if contract was termi- nated for material default because its ability to successfully bid on future LRV projects would be adversely affected. Damage to B Inc.'s supply chain and potential loss of certain of its expert work- force resulting from termination for material default would nega- tively affect B Inc.'s ability to start up again to perform its obligations under contract if DRB concluded that B Inc. was not in material de- fault. There was no realistic way to quantify these losses so that there was meaningful doubt as to adequacy of damages if injunc- tion was not granted. Balance of convenience favoured maintain- ing status quo between B Inc. and M. However, granting interlocu- tory injunction to preserve status quo was conditional. B Inc. had to take all reasonable steps to ex- pedite dispute resolution process and if it did not, M could attend on short notice to seek appropri- ate remedy. If DRB concluded that B Inc. was in material default of contract, interlocutory injunc- tion would no longer be in force following release of DRB's ruling. If B Inc. appealed DRB's ruling, further order from court would be required to extend interlocu- tory injunction. Bombardier Transporta- tion Canada Inc. v. Metrolinx (2017), 2017 CarswellOnt 5582, 2017 ONSC 2372, Hainey J. (Ont. S.C.J.).

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