Michael A. Penny

Appeal from a Master's costs order made in bankruptcy-related proceedings arising from an earlier judgment over lottery winnings held in trust.

The appellant creditor had moved to lift the stay of proceedings, while the bankrupt debtor obtained a costs award against her after the stay issue had effectively become moot upon discharge.

The court held that the Master proceeded on wrong principles and made palpable and overriding errors by relying on an expired offer to settle, failing to explain a departure from the principle that costs follow the event, and apparently including costs related to the trustee's unopposed motion.

The $6,000 costs award was set aside and no costs were ordered for the underlying motion.

The applicants sought judgment on a $5 million promissory note securing advanced commissions paid under a charity fundraising and consulting arrangement.

The respondent contended the advance had been fully earned through commissions on funds raised in 2008 and therefore nothing remained owing on the note.

The court accepted the respondent's position, relying heavily on the charity's 2008 tax filings to find that the advanced commissions had been earned and that the note debt was extinguished by statutory set-off under s. 111 of the Courts of Justice Act.

The court dismissed the applicants' claim, discharged the related security, and held that the respondent's attempt to recover an additional commission balance was statute-barred.

The applicants sought initial protection under the Companies’ Creditors Arrangement Act after becoming insolvent with liabilities exceeding $5 million and being unable to meet obligations as they fell due.

The court considered jurisdiction, the necessity of a stay of proceedings, oversight during the stay, pre-filing payments, the appointment of a monitor, and the granting of priority charges including a DIP charge, administrative charge, and directors’ and officers’ charge.

The applicants intended to pursue a sale and investment solicitation process to refinance or sell the business and maximize value for stakeholders.

The court found the applicants met the statutory requirements for CCAA protection and that the proposed restructuring steps, financing, and charges were reasonable and necessary.

An initial stay of proceedings and related relief were granted.

The applicant sought approval of accounts relating to the guardianship of an incapable person’s property and personal care.

An objector challenged the accounts, alleging unlisted assets, inadequate disclosure, and a failure by the guardian to investigate alleged misappropriation by a prior attorney for property.

The court held that the objector’s allegations were speculative and unsupported by evidence and that the guardian was not obligated to investigate historic allegations absent credible proof, particularly where a court-approved management plan governed the guardianship.

The court also emphasized that objections inconsistent with a previously consented management plan required evidence of new or previously undiscoverable information.

The accounts were approved and the objections dismissed.

Investors who lost $17 million in a fraudulent certificate of deposit scheme brought a motion for leave to amend their statement of claim against a bank that had acted as a correspondent bank for the fraudster.

Earlier pleadings alleging a general duty on banks to monitor customers for fraud had been struck for failing to disclose a reasonable cause of action.

The proposed amendments added detailed allegations based on documents obtained by liquidators showing internal concerns within the bank about suspicious activities and regulatory issues surrounding the customer.

The court held that the amended pleading alleged a more specific duty arising from particular knowledge and circumstances rather than a broad duty to investigate customers generally.

Because the new allegations relied on information not reasonably available earlier and could potentially support a tenable claim, leave to amend was granted.

The applicants sought enforcement of a final arbitration award ordering the respondents to purchase the applicants’ minority shareholding in hotel development corporations for $1.15 million after findings of oppressive conduct.

The respondents requested additional time to arrange financing before enforcement.

The court exercised its authority under the Arbitration Act to enforce the award but stayed enforcement for approximately six weeks to permit completion of financing for the buy‑out.

Requests concerning termination of the minority shareholder’s board veto rights and the status of a mortgage held by the minority shareholder were declined.

Operational arrangements ordered in prior interlocutory endorsements were continued pending the buy‑out deadline.

A bankruptcy trustee sought a declaration that a property interest held in the name of the bankrupt’s brother was held in trust for the bankrupt and therefore formed part of the bankrupt estate.

The trustee argued the brother was added to title solely to facilitate mortgage refinancing and had no beneficial ownership.

The respondents asserted the brother contributed significant funds toward the purchase and mortgage payments and held a beneficial interest proportionate to those contributions.

The court rejected the credibility of the respondents’ evidence and preferred contemporaneous documentary records showing the transfer was made for financing purposes only.

The court set aside the transfer of joint tenancy, held the brother had no legal interest in the property, but recognized a trust interest for his $15,000 contribution.

Application concerning the validity of competing powers of attorney for an elderly incapable person and the conduct of family members acting as attorneys for property.

The court determined that a 2011 power of attorney appointing three children jointly was valid and revoked an earlier 2010 power appointing one child as sole attorney.

However, due to misconduct including transferring the incapable person’s assets into joint accounts and joint tenancy, that child was removed as attorney for property.

The court declined to appoint the Public Guardian and Trustee or a financial institution as guardian, finding the remaining attorneys capable of acting.

The court also resolved disputes on passing of accounts and awarded costs relating to a Mareva injunction and the proceedings.

In a receivership-related motion arising from alleged fraudulent investment activities, the receiver sought authorization to utilize frozen funds held by entities subject to prior court orders to pay ongoing investigation costs.

The court held that the circumstances differed from typical insolvency proceedings because many affected entities were not parties and no specific allegations had been pleaded against them.

Exercising discretion under the prior freezing order, the court declined to allow prepayment of the receiver’s investigative expenses from the frozen funds.

The court also rejected a request for a sealing order due to the strong presumption of open courts but granted a confidentiality order restricting the receiver from voluntarily providing information to tax or criminal authorities.

Costs were not awarded due to divided success.

Two competing applications concerned governance of a national non‑profit organization and ownership of real property administered by one of its local branches.

The court considered whether a trust agreement purporting to grant beneficial ownership of property to the branch was valid and whether the organization’s executive board lawfully removed the branch president and dissolved the branch.

Interpreting the organization’s constitution, the court held that branches could not own property and that all real property was owned beneficially and legally by the national organization.

The purported trust agreement was therefore invalid.

However, the executive board’s decisions removing the branch president and dissolving the branch were quashed for breach of natural justice because adequate notice and opportunity to respond were not provided.

The plaintiff sought specific performance of an alleged oral agreement granting him a 10% equity interest in a startup company in exchange for his work.

In the alternative, he claimed oppression under s. 248 of the Business Corporations Act arising from his termination and the denial of equity.

The court found that no binding oral contract had been formed, emphasizing the absence of contemporaneous documentation and the lack of objective evidence of mutual intention to create legal relations.

The plaintiff therefore failed to establish offer, acceptance, and enforceable agreement.

The court also rejected the oppression claim, holding that the plaintiff was not a shareholder, officer, or director and had no reasonable expectation of equity.

Two conflicting applications were brought in the name of a condominium corporation regarding a board of directors election.

The former board sought to set aside the election results based on alleged proxy tampering, while the newly elected board sought to uphold the results.

The court found that the meeting chair lacked the authority to decertify the election weeks after issuing his final report.

Furthermore, the applicants challenging the election failed to prove that improper proxy tampering occurred or materially affected the outcome.

The court upheld the election results and ordered strict identification and deposit requirements for proxies in future elections.

In a family law proceeding following separation, the applicant sought several orders including severance of the issue of the validity of a marriage contract for determination at a preliminary trial, summary judgment for repayment of an alleged $200,000 loan, repayment of funds withdrawn from a joint line of credit, and permission to sell the matrimonial home without the respondent’s consent.

The respondent sought leave to amend his answer to claim spousal support, interim spousal support, disclosure relating to the applicant’s interest in an estate planning vehicle, and an order that proceeds of sale of the matrimonial home be held in trust.

The court held that the validity of the marriage contract should be severed and determined at a preliminary trial because doing so would likely narrow the issues and promote settlement without causing meaningful prejudice.

Summary judgment on the alleged loan and the request for immediate repayment of the line of credit withdrawal were dismissed.

The respondent was granted leave to amend his pleadings and was awarded interim spousal support despite the marriage contract, on a without‑prejudice basis pending determination of the contract’s validity.

In a negligence jury trial arising from an alleged fall on a public transit bus, the plaintiffs sought to rely on the doctrine of spoliation after video footage from the bus surveillance system was overwritten pursuant to the transit authority’s standard 15‑hour retention policy.

The court considered whether the defendant intentionally destroyed relevant evidence in circumstances giving rise to a rebuttable presumption that the evidence would be unfavourable.

The evidence showed the footage was automatically overwritten under established policy before any notice of litigation and without authority for supervisors to download the footage absent police authorization.

The court held there was no factual foundation for intentional destruction of evidence related to contemplated litigation.

The issue of spoliation and any adverse inference was therefore removed from the jury.

A client opposed confirmation of an assessment officer’s certificate that had dramatically reduced the lawyer’s accounts under the Solicitors Act.

The court held that the assessment officer lacked jurisdiction to assess the lawyer’s criminal defence accounts because more than twelve months had passed since their delivery and payment without an order permitting assessment based on special circumstances.

However, the assessment officer had jurisdiction to assess the civil matter accounts, which were treated as interim and final accounts capable of review together.

The court found some of the assessment officer’s criticisms unsupported or not tied to specific reductions but agreed that certain overhead-related charges and lack of meaningful results justified a reduction.

The certificate was varied so that no rebate applied to the criminal matter and the client received a $7,500 rebate with interest for the civil matter.

The defendant lawyer brought a motion to strike a statement of claim alleging negligence and breach of contract arising from representation of the plaintiff in a criminal trial that resulted in convictions.

The plaintiffs alleged that but for trial counsel’s negligent conduct they would have obtained an acquittal.

The court held that allegations of ineffective assistance of counsel must be addressed through the criminal appeal process rather than through a collateral civil proceeding challenging the validity of the conviction.

Because the plaintiff’s appeal had already been dismissed and the ineffective assistance ground abandoned, allowing the civil claim would constitute an impermissible collateral attack and abuse of process.

The statement of claim was therefore struck without leave to amend.

The applicant husband brought a motion for interim spousal support and an advance on equalization to fund his litigation expenses.

The parties separated after a 30-year marriage during which the husband ran a successful art gallery owned entirely by the respondent wife.

The court determined the parties' respective incomes for support purposes, preferring the evidence of the husband's expert valuator over the wife's business consultant.

The court ordered the respondent wife to pay interim spousal support of $5,068 per month and an advance of $100,000 on the husband's expected equalization payment to cover his litigation costs.

Following prior reasons concerning the validity of a transfer of property and the appointment of guardians of property under the Substitute Decisions Act, the applicants sought directions to determine the market rent payable by a respondent who continued to occupy a residential property owned by an incapable person.

The court assessed competing valuation evidence and determined the fair rental value while granting a modest credit for minor property management services performed by the occupant.

The court also addressed ancillary orders required to implement its earlier judgment, including restoring title to the incapable person, directing the return of funds held in trust to the appointed guardians, removing a charge registered on title for legal fees, clarifying authority over insurance matters, and permitting section 3 counsel to withdraw.

The decision illustrates the court’s authority under Rule 59.06(2) of the Rules of Civil Procedure to give further directions necessary to carry an order into operation.

Adult children challenged their mother’s 2005 will, powers of attorney, and subsequent transfers of property to another sibling, alleging incapacity, undue influence, and misuse of assets.

The court held that the mother had testamentary capacity in 2005 and validly executed the will and powers of attorney.

However, by 2008 she lacked capacity to transfer her home to the respondent son, and that transfer was declared void due to incapacity and undue influence.

The court found she presently lacked capacity to manage property, personal care, grant powers of attorney, or make a will.

Although the 2005 powers of attorney were valid, the court removed the attorney due to misconduct and appointed two other sons as guardians of her person and property.

The plaintiff, a senior manager at an accounting firm, was terminated for cause following allegations of improper expense claims.

The court found that while the plaintiff had previously been reprimanded for defacing receipts, his subsequent conduct did not involve concealment and did not justify termination without notice.

The court awarded 10 months' reasonable notice and outstanding bonuses.

However, the court dismissed the plaintiff's claim for overtime pay under the Employment Standards Act, finding that his role was supervisory and managerial in character, thus exempting him from overtime entitlements.