Law Times

Law Times • November 14, 2016 Page 15 www.lawtimesnews.com CASELAW not denied procedural fairness by Tribunal's determination to render decisions. Tribunal sim- ply released one set of reasons on discrimination complaint and second set on retaliation complaint. Although this man- ner of proceeding was not best practice, because it could pos- sibly prevent parties from ne- gotiating remedy for complain because they might need entire outcome of matter determined before they could do so, but this was not case here because Tribunal explicitly retained ju- risdiction over two complaints. Tribunal was at liberty to fol- low its own procedure to yield just and expeditious outcome with respect to each complaint following hearing, and it did so fairly. First Band's alleged errors was nothing more than request for Court to reweigh and reas- sess evidence and outcomes be- fore Tribunal. Millbrook First Nation v. Tabor (Aug. 3, 2016, F.C., Keith M. Boswell J., T-887-15, T-1379- 15) 270 A.C.W.S. (3d) 451. Tax Court of Canada Taxation GOODS AND SERVICES TAX Minister was justified in using alternative audit method to assess registrant Registrant operated pizzeria restaurant, primarily providing pizza for takeout. Minister car- ried out audit into three years of quarterly reporting periods. To determine amount of un- reported sales, auditor used al- ternative method consisting of comparing reported sales with quantity of pizza boxes pur- chased for year in which sales recording module was opera- tional and then extrapolating results to prior years for which such detailed information was not available. Minister issued assessment under Excise Tax Act (Can.), claiming additional net tax amount of $23,768.85, penalties of $5,942.23 under s. 285 of Act, and interest. Reg- istrant appealed. Appeal al- lowed in part. Minister was justified in using alternative audit method to assess regis- trant, as registrant's books and records could not be considered reliable. Evidence clearly estab- lished that registrant did not report all its income. Auditor's method had significant weak- ness in that it did not take into account 14-inch pizza boxes in calculation. According to audi- tor's calculation excluding 14- inch pizza boxes, 55.69 per cent of sales were reported but, if 14- inch boxes were used, result in- dicated that almost 70 per cent of sales were reported. Auditor dismissed 14-inch pizza boxes because according to sales re- cording module, there were more sales than purchases, but calculation could not provide true ref lection of reality with- out including 14-inch pizzas that were registrant's best-sell- ing pizza size. This supported conclusion that 30 per cent of registrant's sales were unreport- ed such that only $12,802.35 should have been added to net tax. Registrant knowingly, or under circumstances amount- ing to gross negligence, made false statement or omission in its tax returns for period. Fac- tors, such as cash register drawer remaining open between sales so that sale data would not ap- pear in sales recording module and fact that unreported sales represented 30 per cent of total sales, showed gross and not just ordinary negligence. Significant and repeated omissions in tax returns led to conclusion that registrant intentionally con- cealed significant portion of its sales. 9091-2239 Québec Inc. v. R. (Sep. 14, 2016, T.C.C. [Gen- eral Procedure], Dominique Laf leur J., 2015-710(GST)I) 270 A.C.W.S. (3d) 664. Ontario Civil Cases Appeal LEAVE TO APPEAL Court not authorized to dispense with statutory leave requirement Judgment dealt with custody, access and child support. Re- sponding party was declared to be vexatious litigant. Respond- ing party's application to set aside order was dismissed and further order was made de- claring responding party to be vexatious litigant. Responding party was denied leave to con- tinue appeal. Responding party court should dispense with compliance with requirement that he obtain leave. Moving party sought order dismiss- ing responding party's appeal of judgment. Motion granted. Responding party's appeal was quashed. Rule 2.03 of Rules of Civil Procedure (Ont.) per- mitted court to dispense with compliance with Rules, but did not authorize court to dispense with compliance with statutory leave requirement set out in s. 140 of Courts of Justice Act (Ont.). Vermette v. Nassr (Sep. 6, 2016, Ont. C.A., K. Feldman J.A., Janet Simmons J.A., and P. Lauwers J.A., CA M46599 (C59706)) 270 A.C.W.S. (3d) 463. Bankruptcy and Insolvency ARRANGEMENTS Judge did not have jurisdiction to apply doctrine of equitable subordination Company was in Companies' Creditors Arrangement Act (Can.) ("CCAA") protection. Former employees of company claimed its American parent company ran company into insolvency to further its own interests. Former employees sought to have CCAA judge apply American legal doctrine of "equitable subordination" to subordinate parent company's claims to former employee's claims. CCAA judge held that he had no jurisdiction to ap- ply doctrine of equitable sub- ordination. Union appealed. Appeal dismissed. Nowhere in words of, nor did it fall within scheme of statute, which fo- cused on implementation of plan of arrangement or com- promise. Words "may make any order it considers appropriate in circumstances" in s. 11 of CCAA must be read as "may in furtherance of purposes of act make any order it considers appropriate in circumstances". There was no support for con- cept that phrase "any order" in s. 11 provided at-large equitable jurisdiction to reorder priorities or to grant remedies as between creditors. Section 6(8) of CCAA effectively subordinates "equity claims", as defined, to claims of all other creditors. "Equitable subordination" is form of equi- table relief to subordinate claim of creditor who has engaged in inequitable conduct, such claim was not "equity claim" as defined. There was no "gap" in legislative scheme to be filled by equitable subordination through exercise of discretion, common law, court's inher- ent jurisdiction or by equitable principles. U.S. Steel Canada Inc., Re (Sep. 9, 2016, Ont. C.A., George R. Strathy C.J.O., P. Lauwers J.A., and M.L. Benotto J.A., CA C61331) 270 A.C.W.S. (3d) 471. Landlord and Tenant OPTION TO PURCHASE Application judge dismissed tenant's claim for compensation Tenant entered agreement to purchase assets of body rub es- tablishment conditional upon tenant entering new lease for premises that included five- year term, option to renew for another five years and option to purchase for $800,000, and tenant obtaining licence to op- erate adult entertainment busi- ness. Section 3.01 of sub-lease dealt with term of lease. Land- lord brought application to ter- minate sub-lease and purchase tenant's business, as sub-lease entitled it to do in event base rent remained outstanding for over 45 days. Tenant brought counter-application seeking declaration that it was entitled to purchase property pursu- ant to option and sought dam- ages equal to monthly rent it paid from date it said purchase of property should have closed until actual closing of property purchase. Application judge dismissed landlord's applica- tion. Application judge granted tenant declaration that landlord was required to sell property to tenant under option, but dis- missed tenant's claim for dam- ages. Landlord appealed; tenant cross-appealed. Both appeals dismissed. In seeking monetary relief on its application, tenant bore burden of identifying cor- rect legal principles governing its claim and adducing evidence required to establish and quan- tify its claim. Record disclosed tenant did neither. Tenant ar- gued application judge erred by refusing its claim for damages for breach of contract. However, relief it sought in its cross-appli- cation was more akin to specific performance coupled with eq- uitable compensation for delay in closing transaction than to damages for breach of contract. There was no reason to inter- fere with application judge's dismissal of tenant's claim for compensation. 2405416 Ontario Inc. v. 2405490 Ontario Ltd. (Sep. 23, 2016, Ont. C.A., Eileen E. Gil- lese J.A., Paul Rouleau J.A., and David Brown J.A., CA C62401, C62402) Decision at 267 A.C.W.S. (3d) 940 was affirmed. 270 A.C.W.S. (3d) 623. Securities Regulation TAKE-OVER BID Security holders who transacted in secondary market could not rely on s. 131(1) of Securities Act (Ont.) Plaintiffs were security hold- ers of defendant B, which was target of hostile take-over bid. Security holders provided with take-over bid circular and di- rectors' circular. Plaintiffs brought class action alleging that circulars failed to disclose material information and that material that was disclosed was materially misleading and contained many misrepresen- tations. Plaintiffs brought ac- tion against persons and com- panies who signed and filed circulars, relying on Securities Act (Ont.). Defendants' mo- tions to strike out statement of claim was granted. Trial judge found that plaintiffs who wanted to bring action under s. 131(1) must make election as to whom they would sue, of- feror or offeror's directors and other individuals who signed or approved take-over bid cir- cular. Trial judge found that se- curity holders who transacted in secondary market could not rely on s. 131(1) to assert claim based on misrepresentation in take-over bid circular. Plain- tiffs appealed. Appeal allowed in part. Plaintiffs who elected to sue for damages rather than rescission could sue both of- feror and offeror's directors and signatories, and did not have to make election between de- fendants. Security holders who transacted in secondary mar- ket could not rely on s. 131(1) of Act to assert claim based on misrepresentation in take-over bid circular. While plain mean- ing of "security holder" might support broad interpretation, broad interpretation was not supported by context in which term appeared in Act and was inconsistent with scheme of Act, object of Act and intention of legislature. Rooney v. ArcelorMittal S.A. (Aug. 17, 2016, Ont. C.A., Janet Simmons J.A., E.E. Gillese J.A., and C.W. Hourigan J.A., CA C60949) Decision at 270 A.C.W.S. (3d) 658 was reversed. 270 A.C.W.S. (3d) 659. Ontario Criminal Cases Evidence HEARSAY Trial judge erred in admitting hearsay evidence Accused and deceased lived next to each other in rooming house and regularly used crack cocaine, often together. Ac- cused stabbed deceased several times with knife and chased her friend G down hall with knife. Accused was charged with first degree murder. Trial judge ad- mitted hearsay statement alleg- edly made by deceased to G that accused had stalked and beaten her, and statement by another rooming house resident P to police that accused was pos- sessive and jealous of deceased, under principled exception to rule against hearsay evidence. Jury acquitted accused of first degree murder but convicted him of included offence of sec- ond degree murder. Accused appealed conviction. Appeal allowed. Trial judge erred in admitting hearsay evidence in support of Crown's conten- tion that deceased's murder was motivated by accused's anger and jealousy over her re- lationship with G. Crown did not demonstrate that hearsay evidence on which it relied was sufficiently reliable to justify its admission under principled ex- ception to rule against hearsay evidence. Improperly admitted hearsay evidence was impor- tant feature of Crown's case as it related to accused's alleged animus towards deceased. That animus was central to Crown's case on issue of intent. It could not be said that verdict would necessarily have been same had evidence been excluded. There was no suggestion that deceased's statement to G, of- fered by Crown for proof of its contents to show that ac- cused had previously assault- ed, stalked, and was obsessed with deceased, fell within any of traditional exceptions to rule against hearsay evidence. Trial judge materially misap- prehended evidence that was central to his ultimate assess- ment of reliability of deceased's hearsay statement. Similarly, P's statement should not have been admitted. P's opinion about nature of deceased's re- lationship with accused was not admissible under princi- pled exception against hearsay evidence. Improper admission of P's statement exacerbated prejudice suffered by accused through improper admission of deceased's statement to G. New trial ordered. R. v. Dupe (Sep. 2, 2016, Ont. C.A., Doherty J.A., K. Feldman J.A., and David Brown J.A., CA C54443) 132 W.C.B. (2d) 472.

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