Law Times

Law Times • February 2, 2009 CaseLawLaw ONTARIO CIVIL CASES Arbitration JURISDICTION Finding of partial summary judgment not proper basis to refuse mandatory stay under Arbitration Act, 1991 (Ont.) Arthur Wishart Act (Franchise Disclosure), 2000 (Ont.), provides drastic remedy against franchisors who do not provide disclosure of relevant information that fran- chisees may need before deciding whether to enter into franchise ar- rangement. Remedy permits fran- chisee to rescind franchise agree- ment and obtain return of moneys paid as well as damages. Issue raised was how remedy may be enforced procedurally when franchise agree- ment contains arbitration clause. Parties were in franchise relation- ship for seven years under two agreements. Franchisee relied on Act to rescind second agreement because franchisor did not deliver disclosure document. Appellant franchisor unsuccessfully moved for stay of respondent franchisee's action based on arbitration clauses contained in both agreements. Franchisee's cross-motion for sum- mary judgment for rescission of second agreement granted. Mo- tion judge compared two franchise agreements and concluded there were material changes and franchi- sor not entitled to exemption from providing disclosure before entering into second franchise agreement. Nor was franchisor entitled to rely on or enforce arbitration clause in second agreement because Regula- tions require that any alternative dispute resolution mechanism be described in detail in disclosure document. Appellant franchisor's appeal allowed. Motions judge erred by failing to stay action based on finding that arbitration clause invalid because franchisor did not provide disclosure of details of al- ternative dispute resolution agree- ment. Franchise agreement not in- valid but rather subject to rescission. Issues whether franchisee entitled to rescind agreement and jurisdic- tion of arbitrator for arbitrator to determine. Motion judge failed to give effect to purpose of summary judgment exception in Arbitration Act, 1991 (Ont.). To avoid referral to arbitration where further adju- dication unnecessary. By ordering partial summary judgment dealing only with liability, then full court trial of issue of damages. Finding of partial summary judgment not proper basis to refuse mandatory stay under Arbitration Act. MDG Kingston Inc. v. MDG Computers Canada Inc. (Sep. 30, 2008, Ont. C.A., Feldman, Sim- mons and Rosenberg JJ.A., File No. C47526) Order No. 008/275/056 (12 pp.). Bankruptcy And Insolvency ARRANGEMENTS Leave to commence lawsuit against receiver granted Numbered company owed debt to National that was secured by mort- gage. Soil of mortgaged property suffered environmental contami- nation from adjoining property. Court-appointed receiver brought motion for approval of third report and approval of sale of property to owner of adjoining property with settlement of claims against ad- joining property owner for final compensation of $200,000. Num- bered company sought leave to commence lawsuit against receiver. Receiver's third report was accepted and approved. Sale of property and settlement were approved. Settle- ment was reasonable. Leave was granted. It was not perfectly clear there was no foundation for claim or that action was frivolous and vexatious. Order was without prejudice to right of owner and guarantor to bring or continue ac- tion against receiver and National. Claims against owner of adjoining property would be extinguished by settlement. National Trust Co. v. 1117387 Ontario Inc. (Oct. 10, 2008, Ont. S.C.J., Brennan J., File No. 03-CV- 023199) Order No. 008/304/016 (13 pp.). Court had discretionary jurisdiction to relieve against late-filed or irregular applications Plan was approved under Compa- nies' Creditors Arrange-ment Act (Can.). Plan provided separate fund for HIV claimants. No distribution from HIV Fund was made. Advice was requested on jurisdiction to relieve against late-filed or irregular applications for determination of damages by referee appointed by plan. Court had discretionary juris- diction. Jurisdiction was to be ex- ercised sparingly. Society and other claimants would suffer no preju- dice. Uncertainty was created by limitations issues. Adequate notice was essential if plan was to be effec- tive. Application forms provided to claimants did not indicate clearly claimants were required to identify each claimant in family group that included infected person. Selection of appropriate methods of dissemi- nating notice of deadline for appli- cations may have been affected by misapprehension as to number of potential claimants. Trustee was to receive and dispose of late and ir- regular applications in accordance with Guidelines provided. HIV applicants whose applications were disallowed by trustee were to be PAGE 17 COURT DECISIONS ainmaker_LT_June2_08.indd 1 CaseLaw is a weekly summary of notable unreported civil and criminal court decisions by the Supreme Court of Canada, the Federal Court of Canada and all Ontario courts. Single or multiple copies of the full text of any case digested in this issue can be obtained by: 5/28/08 10:43:29 AM i) completing and mailing in the order form in this issue; or ii) calling CaseLaw's photocopy department at (905) 841-6472 in Toronto, (800) 263-3269 in Ontario and Quebec, or (800) 263-2037 in other provinces; or iii) faxing a copy of the completed order form to (905) 841-5085. informed of right to have decision reviewed by filing motion record. Canadian Red Cross Society (Re) (Sep. 29, 2008, Ont. S.C.J., Culli- ty J., File No. 98-CL-002970) Or- der No. 008/289/078 (17 pp.). CREDITORS Motion to have claim determined by court was allowed Applicant moved under Compa- nies' Creditors Arrangement Act (Can.), order to have a claim de- termined by court. Respondent brought cross-motion in relation to escrow account. Respondent and applicant were in contractual relationship. Applicant ran drug trials for respondent testing an anti-cancer drug. Applicant did so from March 2005 until April 2008 when respondent sought protec- tion from creditors under Act. Re- spondent's monitor disallowed over $5 million of applicant's claim. Ap- plicant abandoned $2 million of claim and sought to have balance of $3,415,000 of disputed claim determined by court. Parties en- tered into Master Services Agree- ment which sets out compensation and payment arrangement. Re- spondent stopped paying invoices in October 2007. Respondent had expressed continued frustration with the way applicant was provid- ing services. Parties had discusses potential changes to arrangement, including reconciliation of pay- ments to work done. However, contract was not changed to reflect this. Applicant filed proof of claim. Applicant did not give monitor any details of work or services provided during period. Monitor disallowed bulk of applicant's claim because it did not provide reconciliation of services rendered to services re- quested based on the scope of the work in the contracts. Applicant's motion allowed in relation to disal- lowance of $3,415,000 of its proof of claim. Respondent cross-motion allowed in part. Evidence shows applicant did provide services val- ued at amount of claim. Viventia Biotech Inc. (Re) (Oct. 15, 2008, Ont. S.C.J. (Comm. List), Mesbur J., File No. 08-CL- 7462) Order No. 008/294/057 (8 pp.). Civil Procedure DISCOVERY Net wealth of deceased at time of marriage contract was relevant consideration Applicant was widow and ben- eficiary under will. Deceased and applicant signed marriage contract validity of which was to be deter- mined. Applicant argued value of estate was critical to applicant's election either to take testamentary share under will or equalization of net family property. If marriage contract was enforceable it would www.lawtimesnews.com render issue of election moot. Net wealth of deceased at time of con- tract and at death was relevant con- sideration. Interests of parties were properly balanced by order for dis- closure. There would be adequate disclosure for purposes of trial if order for oral questioning was supplemented by order requiring each side to serve affidavit listing documents under Rule 19 of Rules of Civil Procedure (Ont.). Parties were ordered to do so within next 20 days. Kaptyn v. Kaptyn Estate (Oct. 22, 2008, Ont. S.C.J., Aston J., File No. 07-FA-15121) Order No. 008/308/047 (5 pp.). SEVERANCE Liability issues severed from damages issues R. was passenger in motor vehicle operated by C.. R. and C. claimed M. lost control of vehicle resulting in head-on collision. M. claimed unidentified driver swerved into M.'s lane and collision was solely caused by negligence of unidenti- fied driver. M. brought motion to bifurcate trial so as to sever issues of liability from issues of damages for both actions that were to be tried together. Motion was allowed. Is- sues to be tried were simple. Issues of liability were separate from issues of damages. Credibility was not is- sue. There was no overlapping is- sue of causation. There would be substantial cost and time savings. It was likely trial on liability would put end to actions. Delay from disposing of liability first would be minimal. Clifford v. MacKinnon (Oct. 16, 2008, Ont. S.C.J., DiTomaso J., File No. 03B-6288; 04-B7248) Order No. 008/304/007 (13 pp.). WANT OF PROSECUTION Action dismissed after defendants brought four motions to get plaintiff to comply with Rules Plaintiff claimed plaintiff was in- jured when plaintiff was struck from behind by defendants' ve- hicle while plaintiff awaited red light. Plaintiff brought motion for immediate resolution of claim in favour of plaintiff. Plaintiff sought two of defendants' solicitors to be charged with perjury and cancella- tion of order awarding costs against plaintiff. Defendants brought mo- tion to dismiss action for delay and non-compliance with order. De- fendants sought orders compelling plaintiff to re-attend examination for discovery, comply with under- takings and to attend defence medical. Defendants had to bring four motions to get plain- tiff to comply with obligation under Rules of Civil Procedure (Ont.). Action was dismissed. Plaintiff was wrong in law with respect to positions on issues. There was no perjury. Obst v. Tolmacheva (Oct. 20, 2008, Ont. S.C.J., Lemon J., File No. 03-BN-9897) Order No. 008/295/058 (10 pp.). Conflict Of Laws JURISDICTION Real and substantial connection between counterclaim and Ontario not established Plaintiff was manager of company. Defendant decided to terminate plaintiff's management of com- pany. Plaintiff brought action on defendants' guarantees. Defen- dants had full access to corporate and financial records of company after replacing plaintiff as manager and before signing guarantees. De- fendants claimed plaintiff set up scheme to defraud company de- pleting company's bank accounts. Plaintiff's motion to permanently stay counterclaim was allowed. De- fendants did not establish real and substantial connection between counterclaim and Ontario. First Gulf Bank v. Collavino Inc. (Oct. 30, 2008, Ont. S.C.J., Aston J., File No. 07-CV-326372-0000) Order No. 008/308/054 (8 pp.). Contracts INTERPRETATION Agreement clearly contemplated return of machine to defendant Plaintiff and defendant entered into written agreement. Within agreement defendant acknowl- edged indebtedness and gave pos- session of machine to plaintiff as security for payment. No payment was received by plaintiff. Plaintiff brought action to recover payment and interest against individual and corporation. No evidence to in- dicate plaintiff knew was dealing with anyone other than individual. Any relief for plaintiff would be solely against individual defen- dant. Plaintiff successful in claim against defendant in amount of $33,559.84 plus prejudgment in- terest at rate prescribed by Courts of Justice Act (Ont.). Agreement clearly contemplates return of ma- chine to defendant. Machine was being held as security and no ob- ligation on plaintiff to take owner- ship in satisfaction of debt. Marcel Baril Ltee v. 929454 On- tario Ltd. (Nov. 12, 2008, Ont. S.C.J., Gordon J., File No. C-7562- 03-SR) Order No. 008/323/047 (7 pp.). Courts ABUSE OF PROCESS Action barred by judicial immunity and abuse of process doctrines Defendants brought motion to strike plaintiff's Amended State- ment of Claim and dismiss action against them. Plaintiff brought ac- tion against two judges of Ontario

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