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September 18, 2017

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Law Times • sepTember 18, 2017 Page 15 www.lawtimesnews.com CASELAW TRIALS Time of trial Trial adjourned pending appeal of unsuccessful motion to strike plaintiff 's claim Right to pursue appeal. Plaintiff sold securities and was employed by D defendants for years until his employment was terminated. Plaintiff was found guilty of mis- conduct by Mutual Fund Dealers Association of Canada, and was permanently prohibited from conducting securities-related business due to finding of delib- erate deceit and document falsi- fication. Plaintiff brought action against Ds and W defendants, claiming breach of share pur- chase agreement and oppression, and all defendants brought coun- terclaim for damages for plain- tiff 's misconduct. Matter had been set down for scheduled four- week trial. There were outstand- ing costs orders of $9,113 against plaintiff, and Ws brought motion to strike plaintiff 's pleadings or stay claim. Ws motion was dis- missed and they applied for leave to appeal. Ws brought motion for adjournment of trial pending ap- peal. Motion granted. Allowing matter to proceed to trial could result in conf licting outcomes, if plaintiff succeeded at trial but Ws succeeded on appeal and action was struck. There were no special reasons to maintain case on trial list and disentitle Ws to right to pursue appeal. If trial proceeded, costs would be substantial and, given plaintiff 's impecuniosity, Ws had no reasonable expecta- tion of recovering costs. Plaintiff initiated series of events that led to motion, by bringing unsuc- cessful motions for partial sum- mary judgment and leave to ap- peal. Adjournment would delay trial but would not permanently deprive plaintiff of right to have matter adjudicated. Popovich v. Financial Invest- ment Centre Inc. (2017), 2017 CarswellOnt 4260, 2017 ONSC 1514, George W. King J. (Ont. S.C.J.). Construction Law CONSTRUCTION AND BUILDERS' LIENS Practice on enforcement of lien To allow trust funds to be used to pay costs of action was contrary to Construction Lien Act Building project failed, numerous claims for liens were registered, mortgages were outstanding, and many actions were commenced. Court directed completion of homes in project, supervised closing to purchasers of homes, and ordered net proceeds of sale remain as security for lien claim- ants, mortgagees and other claim- ants to monies ("trust funds"). Mortgagees were paid out, and there were insufficient funds to pay all lien claimants total amount of their liens. Lien claim- ants believed they had arrived at settlement, but issue arose when Q Ltd. wanted payment of salvage costs. In order to allow other lien claimants to receive some of trust funds immediately, court ordered payment to other lien claimants, albeit at lesser pro-rata share for their liens, while maintaining trust funds pending court's de- termination as to whether Q Ltd. was entitled to any salvage costs. Claimed salvage costs was dis- missed, and it was determined that Q Ltd. was entitled to recover $82,278.69 under its registered and valid claims for lien. Costs endorsement was made. Issue arose, with Q Ltd. seeking to have its costs of motion and action paid out of trust funds. Court de- clined to order that Q Ltd.'s costs be paid from trust funds. Issue had already been decided in costs endorsement. To allow remain- ing trust funds to be used to pay Q Ltd.'s costs of action and mo- tion was contrary to provisions of Construction Lien Act, contrary to order made, and would be in- consistent with other lien claim- ants having to pay their own costs of their separate lien actions. Quality Rugs of Canada Ltd. v. Sedona Development Group (Lorne Park) Inc. (2017), 2017 CarswellOnt 6154, 2017 ONSC 2558, Ricchetti J. (Ont. S.C.J.). Contracts CONSTRUCTION AND INTERPRETATION Resolving ambiguities Reasonable to interpret success fee requirement as linked to some action on part of party to agreement Plaintiff R Inc. entered into agreement to assist defendant C Corp. in developing and imple- menting "strategic alternatives". Agreement provided for service fees based on specific work per- formed by R Inc., and for suc- cess fee, payable on completion of "transaction", as defined by agreement ("tail provision")In course of agreement, C Corp. was subject of takeover R Inc. brought action against C Corp.. Sole issue at trial was whether, under agree- ment, R Inc. was entitled to suc- cess fee in respect of any or all of transactions involved in takeover even though it played no part in transactions. Action dismissed. R Inc. appealed. Appeal dismissed. Trial judge found that R Inc. was not entitled to success fee under agreement. Tail provision simply provided for payment of success fee if mandate is carried out after agreement has been terminated. This interpretation of tail provi- sion was not inconsistent with requirement that transaction in respect of which success fee was payable relate to work performed by R Inc. before agreement was terminated. Trial judge did not dismiss out of hand R Inc.'s claim for success fee because R Inc. had not provided services in respect of transactions that occurred. Rather, he interpreted agreement to determine whether success fee was payable in such circumstanc- es, and concluded that in respect of this agreement, "causal link" was required before success fee was payable. Trial judge's inter- pretation of success fee require- ment as being linked to some action on part of R Inc. was rea- sonable interpretation borne out by consideration of agreement as whole. Trial judge determined, based on his review of agreement, what was objectively intended by agreement, or "intent expressed in the written words". Trial judge did not make findings as to par- ties' subjective intentions in en- tering agreement, nor did he al- low evidence of subjective inten- tion to oust plain words of agree- ment. Interpretation adopted by trial judge was not commercially unreasonable and made com- mercial sense. RBC Dominion Securities Inc. v. Crew Gold Corporation (2017), 2017 CarswellOnt 12188, 2017 ONCA 648, K.M. Wei- ler J.A., K. van Rensburg J.A., and Grant Huscroft J.A. (Ont. C.A.); affirmed (2016), 2016 CarswellOnt 14607, 2016 ONSC 5529, Gans J. (Ont. S.C.J.). Environmental Law STATUTORY PROTECTION OF ENVIRONMENT Approvals, licences and orders Process of consultation by Ministry of Natural Resources and Foresty not passing constitutional muster Company applied for licence for limestone quarry on lands it owned, in area of First Nation's traditional territory and where many aggregate projects were on- going. Upon learning of project more than three years later, First Nation raised concerns about cumulative environmental im- pact of such projects on its rights, absence of coherent consultation process, and its need for funding to engage meaningfully in pro- cess. Application was granted by Minister of Natural Resources and Forestry. First Nation ap- plied for judicial review. Appli- cation granted. Ministry's pro- cess of consultation did not pass constitutional muster. For three years, Ministry failed to consult with First Nation in accordance with its own assessment of scope of that duty and, when First Na- tion eventually learned of project, Ministry's approach was reactive and ad hoc. Ministry created ex- pectations in First Nations as to process and funding that were repeatedly disappointed and never followed through on its own designated process. Submis- sion that First Nation's substan- tive concerns had been heard and addressed regardless of various process failures missed valid- ity of First Nation's entitlement to proper consultation process. Company's frustration and in- terests in moving forward with project were not valid reasons to defeat First Nation's constitution- al rights. Company refused role in facilitating consultation process, as it was entitled to do, but one consequence was further delay to complete adequate consultation. Decision to issue licence would be set aside, without prejudice to Minister's right to approve licence after reasonable consultation. Saugeen First Nation v. On- tario (MNRF) (2017), 2017 Car- swellOnt 10872, 2017 ONSC 3456, Nordheimer J., D.L. Cor- bett J., and DiTomaso J. (Ont. Div. Ct.). Family Law CUSTODY AND ACCESS Joint custody Parties granted joint custody as both able to provide for guidance, education and needs of children Parties had two children. Assess- ment found that mother should have sole custody of children as couple identified few decisions for children that they were able to make together without conf lict. Mother argued that parties were unable to agree on important decisions, there was no change in circumstance from time of assessment and that father's past behaviour had been abusive. Mother brought motion for sole custody and primary residency and father brought motion for joint custody. Mother's mo- tion dismissed; father's motion granted. It was in best interests of children that there was joint custody. It was in best interests of children to have fewer transitions and regularize their movements between two homes. Assessment was based on events as at August 2015 and that mother exaggerat- ed behavioural problems that she reported. Parents had ability to act as parent. Parents could make important decisions regarding children. Parents were able and willing to provide for guidance, education and needs of children. There were strong ties between children and both parents, their extended families and new blended families. Father blended family with current partner. Moyer v. Moyer (2017), 2017 CarswellOnt 4047, 2017 ONSC 1110, W.D. Newton J. (Ont. S.C.J.). Guarantee and Indemnity GUARANTEE Contract of guarantee Motion judge to consider that amended guarantee served to reduce company's guaranteed obligations Guarantor personally guaran- teed company's debt in amount of US$3 million plus interest and costs. Lender bought company's debt, charged US$2.25 mil- lion facility fee to company, and increased interest rate. Parties signed forbearance agreements. Guarantee was amended to limit guarantor's exposure to lesser of US$3 million plus interest, or lender's deficiency less facil- ity and forbearance fees. At end of forbearance period, receiver was appointed. Lender's stalking horse asset purchase credit bid agreement was approved. Lender obtained summary judgment against guarantor for US$3 mil- lion plus 21 percent interest and costs. Guarantor appealed. Ap- peal allowed. Summary judgment reduced to US$250,000. Motion judge erred in law by failing to consider that amended guaran- tee served to reduce company's obligations that were guaranteed. Motion judge made further pal- pable and overriding factual and mathematical error in calculating amount owing under guarantee. Guarantor did not guarantee $3 million, he guaranteed compa- ny's debt excluding facility and forbearance fees. After $34.25 of company's $37 million debt was extinguished through credit bid, $3 million debt was outstanding. Excluding forbearance and facil- ity fees of $2,750,000 left $250,000 owing from guarantor on amend- ed guarantee. Callidus Capital Corpora- tion v. McFarlane (2017), 2017 CarswellOnt 11537, 2017 ONCA 626, K. Feldman J.A., E.E. Gil- lese J.A., and S.E. Pepall J.A. (Ont. C.A.); varied (2016), 2016 CarswellOnt 8479, 2016 ONSC 3451, Newbould J. (Ont. S.C.J. [Commercial List]). Insurance ACTIONS ON POLICIES Miscellaneous Insurer obligated to pay legal fees for services rendered in respect of SEC/OSC investigation LS Corp. was Nevada corpora- tion which explored and devel- oped mining properties in North America. LS Corp.'s share price and trading volume increased dramatically such that company's market capitalization exceeded $100 million which was highly unusual for little known junior mining company. United States Securities and Exchange Com- mission (SEC) issued order sus- pending trading and Ontario Securities Commission (OSC) followed suit. Following cease order, LS Corp. retained law firm and counsel. Law firms ultimately succeeded in demonstrating to both SEC and the OSC that none of LS Corp's officers and direc- tors were complicit in market manipulation. LS Corp. provided notice in writing under its policy of claim against officers and di- rectors of LS Corp. made by SEC pursuant to investigative order, which was denied. LS Corp. brought application for legal fees incurred on behalf of its officers and directors as result of investi- gation undertaken. Application granted. When wrongful act was considered in context of policy as whole and specifically in context of "formal … regulatory inves- tigation", wrongful act included any matters raised which gave rise to investigation. Investigative order constituted claim within meaning of policy. There was no question that insurer was "legally obligated to pay" invoices from law firms for services rendered in respect of SEC/OSC investi- gation when those invoices were rendered. There was nothing in policy that provided for when in- sured must be "legally obligated to pay" and any uncertainty of tim- ing must be resolved in favour of insured. Liberty Silver v. Liberty In- surance (2017), 2017 Carswel- lOnt 12015, 2017 ONSC 1946, L.A. Pattillo J. (Ont. S.C.J.).

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