Law Times

Page 18 August 6, 2018 • LAw times www.lawtimesnews.com bels and vintages to two chari- ties and charities appraised fair market value of bottles at $22,600 over decade ago. None of wines were available at Liquor Control Board of Ontario (LCBO). Canada Rev- enue Agency (CRA) reassessed taxpayer and assigned value of $4,700, which represented about 20 per cent of amounts receipted by charities. Tax- payer's expert calculated, based on global wine seller's 2016 prices, that prices for wines were $5,500 and CRA's expert valued known sales based on wine auctions available to tax- payer as resident in Ontario, over decade ago, at $2,650. Taxpayer appealed. Appeal dis- missed. Critical problem with taxpayer's expert's valuation was that she did not provide evidence or opinion on how her values could be extrapo- lated back to decade ago. Since Ontario had actual, lawful and available real markets in which resident wanting to obtain as high price as possible for bottle of wine could participate, there was no need to consider creat- ing proxy marketing to evaluate value of bottles of wine. CRA's expert evidence was from com- pleted auction sales at single large U.S. consignment auction house, and this amount was far inferior to values used by CRA in reassessments. Accordingly, appeal had to be dismissed, as CRA could not be ordered to reassess using lower value than used in reassessments. McCuaig Balkwill v. The Queen (2018), 2018 Carswell- Nat 2849, 2018 TCC 99, Patrick Boyle J. (T.C.C. [General Proce- dure]). Ontario Civil Cases Bankruptcy and Insolvency COMPANIES' CREDITORS ARRANGEMENT ACT Initial application Any claim against auditors barred as condition of lifting stay to permit class action to proceed Bankrupt and others brought successful application pursuant to s. 18.6 of Companies' Credi- tors Arrangement Act for order recognizing and giving effect to automatic stay of proceedings granted to Chapter 11 appli- cants in US proceedings. Lead plaintiffs in securities litigation brought motion to lift stay to permit them to proceed with securities class action in US against two individuals, Z and B. Motion granted on terms. Monitor was supported by sev- eral parties on motion, includ- ing counsel for Z and B, who did not oppose lifting of stay to permit action to proceed but on terms. Court had jurisdiction to lift stay and impose terms in exercising that jurisdiction. US counsel for lead plaintiffs swore that lifting stay would not prejudice bankrupt. Terms requested by monitor appeared to be acceptable. There could be no prejudice to lead plaintiffs to have made clear what was ordered in claims procedure order, plan of arrangement, and order sanctioning plan of arrangement. Neither moni- tor nor stakeholders who could be affected had to rely on letter from US bankruptcy counsel as to intentions of lead plaintiffs. Sanctioned plan did not release claims based on fraud or will- ful misconduct. Any claim as- serted against auditors for fraud or willful misconduct would likely materially affect Canadi- an debtors as claim for indem- nity against bankrupt or other Canadian debtors would likely be made and time and expense of defending such indemnity claim would be enormous and final distributions to creditors would be materially affected. It was appropriate that any claim against auditors be barred as condition of lifting stay to per- mit class action to proceed In balancing interests of all stake- holders, and need for Canadian debtors to be finalized without significant cost and risk. It was appropriate for order to state that except for proven claim of fraud or willful misconduct against Z or B, no recovery could be made against them but only against any applicable in- surance policies, as provided for in sanctioned plea. Term requir- ing monitor's written consent or court order for any subpoena, interrogatories or other process was appropriate, given nature of US litigation. Given enormous cost of bankruptcy proceedings in this case, some control had to be put in place. Nortel Networks Corp., Re (2017), 2017 CarswellOnt 7971, Newbould J. (Ont. S.C.J. [Com- mercial List]). Contracts RECTIFICATION OR REFORMATION Prerequisites It was not possible to rectify corporate transaction to retroactively avoid adverse tax consequences Taxpayer and related entities entered into series of transac- tions, resulting in taxpayer suffering loss. In its income tax return, taxpayer included in income gains from hedge contracts and deducted corre- sponding amount in respect of loss realized by its disposition of its interest in partnership. Canada Revenue Agency disal- lowed taxpayer's claim for loss on ground that s. 98(5) of In- come Tax Act applied. Taxpay- er brought application for order rectifying series of transactions to replace them with transac- tions that dissolved partner- ship in way that s. 98(5) of Act did not apply. Application judge granted application and found that requirements for rectifica- tion were met. Crown appealed, and taxpayer cross-appealed seeking order to permit it to achieve intended tax purpose by way of court's inherent eq- uitable jurisdiction or equitable rescission. Appeal allowed and cross-appeal dismissed. Judge erred in granting rectifica- tion, as recent Supreme Court of Canada decision changed law and restricted scope of eq- uitable remedy to correction of written agreements. Relief sought by taxpayer on cross- appeal was type of correction of error in structuring and implementation of transaction to achieve taxation result that Supreme Court rejected, even though taxpayer called it differ- ent name. Supreme Court had concluded that it was not pos- sible to rectify corporate trans- action to retroactively avoid adverse tax consequences, and this applied whether it was characterized as rectification or some other equitable rem- edy. Equitable rescission was not available in these circum- stances. Canada Life Insurance Company of Canada v. Can- ada (Attorney General) (2018), 2018 CarswellOnt 9963, 2018 ONCA 562, Robert J. Sharpe J.A., Gloria Epstein J.A., and K. van Rensburg J.A. (Ont. C.A.); reversed (2015), 2015 Carswel- lOnt 17678, 2015 ONSC 281, L.A. Pattillo J. (Ont. S.C.J. [Commercial List]). Equity EQUITABLE DOCTRINES Relief against penalty and forfeiture Time of essence provision rendering late delivery of written objection more serious Sellers sold company to buy- ers for $182.5 million. On clos- ing, $1 million of purchase price was paid into escrow ac- count to secure any claim by buyers for breaches of sellers' representations and warran- ties. Agreement stipulated buy- ers had 18 months to make any such claim, and sellers had 30 days to file written objection to claim, failing which they would be deemed to have admitted claim. Agreement stipulated that time was to be of essence. Buyers filed claim, and sellers' written objection ended up be- ing seven days late due to sellers' solicitor and one of his associ- ates having health issues. Sellers brought application pursuant to s. 98 of Courts of Justice Act for relief from forfeiture. Applica- tion granted. Three guiding fac- tors to be considered in exercise of discretion were: i) conduct of sellers; ii) gravity of breach; and iii) disparity between value of what had been forfeited and damage caused by breach. Sell- ers had acted reasonably in meeting with their solicitor af- ter particulars had been provid- ed and instructing him to file required objection. Sellers had reasonably relied on solicitor to follow instructions and comply with 30-day time frame, and so- licitor's inadvertence in missing deadline was understandable and had been quickly remedied. Fact that there was time of es- sence provision rendered breach more serious than it otherwise would have been, but buyers could point to no actual preju- dice suffered as result of delay. There was significant dispar- ity between money forfeited by sellers and inferred prejudice suffered by buyers arising from time of essence provision. Voortman v. SPCVC Invest- ments Inc. (2018), 2018 Carswel- lOnt 9632, 2018 ONSC 3602, H. McArthur J. (Ont. S.C.J.). Estates and Trusts ESTATES Intestate succession Succession Law Reform Act does not give effect to status of " disinherited" Testator was born in Germany in 1937, emigrated to Canada around 1967, and died in 2016. Testator left no fewer than four potential wills, and had no rela- tives in Canada. Testator was estranged from his daughter at time of his death. Motion was brought by or with consent of all next of kin, save and except for daughter, for directions. Determination was made con- cerning wills. Will from 1967 was no longer in force, hav- ing been revoked by 1982 will, which in turn was revoked by making of 2000 holograph will. Document from 2009, oper- ating as codicil to 2000 will, expressed clear testamentary intention that daughter should not receive "a single euro from my estate". This led inexorably to intestacy in respect of resi- due. Daughter was only issue of testator and was entitled to application of s. 47(1) of Succes- sion Law Reform Act notwith- standing intentions of testator expressed in 2009 codicil. Part II of Act does not give effect to status of "disinherited". As- sertions that result was ineq- uitable amounted to plea that "there ought to be a law"; there was no such law. Legislature has provided hierarchy of claims, in mandatory language. There being no spouse and only one child, daughter was sole heir of residue. Eissmann v. Kuntz (2018), 2018 CarswellOnt 9724, 2018 ONSC 3650, S.F. Dunphy J. (Ont. S.C.J.). Family Law COSTS Custody and access Father made efforts to come to agreement with mother for expanded access Following parties' separation, child resided with mother who brought application for sole custody and supervised access. Father brought application for joint custody and shared par- enting in alternate weeks. Par- ties entered consent order pro- viding father with temporary daytime access in presence of paternal grandmother and re- questing report from Office of Children's Lawyer (OCL). After mother disputed report filed by first clinical investigator ap- pointed by OCL, OCL agreed to appoint another. Father brought successful motion to vary consent order to eliminate requirement for supervision and to allow for overnight ac- cess. Motion judge ordered un- supervised parenting time with father every second weekend from Friday to Sunday and once overnight each week. Motion judge dismissed report from first investigator and mother's concerns about father's use of drugs and alcohol, but found no evidence to corroborate that father had taken steps to ad- dress anger issues and found only relevant issue was best needs of child and that evi- dence was clear that both par- ties had emotional ties to child. Hearing was held to determine costs. Mother was ordered to pay father costs of $7,000 in- clusive of fees, disbursements and HST rather than $11,813.92 father sought on full recovery basis or $7,879.88 father sought on partial recovery basis. Offer father served on mother shortly before argument of motion was reasonable, similar to order, and satisfied all of require- ments of Rule 18(14) of Rules of Civil Procedure, so father was presumptively entitled to costs. Issue of access was not complex or difficult, hearing was limited to issue of access, and issue was important, in that it was in best interests of children to have is- sue resolved. Father's behaviour was reasonable, father made ef- forts to come to agreement with mother for expanded access, but mother refused to agree to unsupervised access. Father's lawyer's rates and disburse- ments were reasonable, time set out in bill of costs was more than what would have been ex- pected given narrow issue, but appeared to be properly spent on and relating to long mo- tion for access. Mother did not dispute whether work properly ref lected time spent on and re- lating to motion for access and or rates applied. Mother's con- tention that costs should be adjourned to trial judge was not assented to. Torok v. Ball (2017), 2017 CarswellOnt 5116, 2017 ONSC 2254, Rasaiah J. (Ont. S.C.J.); additional reasons (2017), 2017 CarswellOnt 1722, 2017 ONSC 922, Rasaiah J. (Ont. S.C.J.). CUSTODY AND ACCESS Interim custody Evidence raised doubts about ability of parties to harmoniously collaborate in joint and shared parenting Parties were in common-law relationship for 13 years, they had one child and mother had CASELAW

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