Corporate/Commercial Law - ONCA

The appellants appealed a trial judgment that found they had overvalued inventory in a share purchase agreement and ordered them to repay the purchase price.

The Court of Appeal agreed that the inventory was overvalued but found the trial judge erred in calculating damages by failing to deduct a tax benefit and settlement proceeds received by the purchaser.

The Court reduced the purchaser's damages to $186,781.

The Court also allowed the appellants' counterclaim for $300,000 on an earn-out promissory note, setting off the purchaser's damages against this amount.

As a result, the personal action against the appellant guarantor was dismissed.

The appellants, a lawyer and his law firm, appealed a Divisional Court decision dismissing their application for judicial review.

They challenged the jurisdiction of the Ontario Securities Commission (OSC) to reprimand the lawyer for allegedly making misleading statements while representing a client.

The appellants argued that such conduct must be dealt with exclusively through quasi-criminal proceedings or by the Law Society.

The Court of Appeal dismissed the appeal, holding that the Securities Act provides the OSC with a flexible range of remedial options, including administrative reprimands under s. 127.

The Court also affirmed that the OSC has jurisdiction to reprimand lawyers acting in their professional capacity, provided that solicitor-client privilege is respected.

The respondent financial advisory firm was engaged by the appellant trust company to raise debt or equity financing.

The agreement permitted the appellant to sell its assets without obligation to the respondent.

After the respondent obtained a letter of interest from a bank, the appellant terminated the engagement, paid the contractual fees, and later sold its assets to the bank.

The trial judge awarded the respondent $420,000 for unjust enrichment.

The Court of Appeal allowed the appeal and dismissed the action, finding that the respondent failed to establish an enrichment, a corresponding deprivation, or the absence of a juristic reason, as the services were not freely accepted for an asset sale and the respondent had no reasonable expectation of compensation beyond the contract.

The appellants appealed a judgment confirming a Master's report on an accounting of music royalties for the song 'When I Am With You'.

The Court of Appeal dismissed the corporate publisher's appeal regarding the calculation of co-publishing revenues and prejudgment interest.

However, the Court allowed the appeal of the corporation's directing mind, finding no basis to pierce the corporate veil and hold him personally liable.

The Court also allowed the respondents' cross-appeal, finding that performing rights royalties should be included in the calculation of co-publishing revenues based on the plain meaning of the agreement and the parties' prior conduct.

The appellant, a jewellery consultant, entered into consignment agreements with a retailer, requiring proceeds to be held in a separate trust account.

The retailer opened an account with the respondent bank, but the bank incorporated it into a consolidated off-set balance system, using the funds to offset the retailer's debts.

The Court of Appeal allowed the appeal, finding the funds were impressed with a trust and the bank had constructive knowledge of the trust because it failed to follow its own account agreement requiring two signatures before transferring funds.

The developer of a multi-phased condominium project marketed the development as having an outdoor recreational area.

The disclosure statement and related documents provided that the recreational area might not be built.

The developer later decided to build townhouses on the recreational lands instead.

The condominium corporation opposed this and obtained a permanent injunction at trial.

On appeal, the Court of Appeal allowed the appeal, finding that the developer did not owe a fiduciary duty or a duty of good faith to prospective purchasers during the pre-contractual phase.

The developer's obligations were circumscribed by the statutory disclosure requirements, which clearly stated the developer was under no obligation to build the recreational facilities.

The appellant corporation appealed its capital tax assessments, arguing that management fees paid to independent contractors in Alberta should be deemed salary under s. 302(7) of Reg. 183 of the Corporations Tax Act, thereby allocating more capital to Alberta (which does not levy capital tax).

The Court of Appeal dismissed the appeal, applying the plain meaning rule and the 'modus operandi' test.

The Court held that because the appellant's normal practice in Alberta was to use contractors rather than employees, the services were not 'normally performed by employees of the corporation' within the meaning of the regulation.

The appellant bank appealed a decision ordering a court-appointed receiver to pay municipal realty taxes to the respondent municipality in priority to the bank's secured claims.

The Court of Appeal dismissed the appeal, holding that under section 382 of the Municipal Act, municipal realty taxes have priority over all other claims except the Crown.

The Court also held that a court-appointed receiver is a 'trustee' within the meaning of section 400(11) of the Act, giving the municipality priority over the proceeds of personal property realized by the receiver.

The respondents purchased shares in a company from Mader and subsequently sued Mader and the company's accountants, Peat Marwick Thorne, for misrepresentation and breach of fiduciary duty regarding the company's financial status.

The trial judge awarded damages against all defendants.

The accountants appealed.

The Court of Appeal allowed the appeal, finding that the trial judge erred in finding a fiduciary relationship and that the purchasers did not rely on the accountants' financial statements, having preferred to rely on Mader's assurances.

The appellant, Welch Foods Inc., appealed a trial judgment that found it had unreasonably withheld consent for the respondent, Cadbury Beverages Canada Inc., to enter into a co-packing arrangement with a third party under their 1972 licensing agreement.

The trial judge awarded damages to the respondent for the unreasonable refusal and imposed conditions on the appellant's future discretion to withhold consent.

The trial judge also found the respondent breached the agreement by selling competing products but refused to allow the appellant to terminate the agreement, instead ordering a royalty payment.

The Court of Appeal dismissed most of the appeal, upholding the trial judge's interpretation of the agreement, the finding of unreasonable refusal, the damages award, and the refusal to terminate the agreement.

However, the Court allowed the appeal in part by removing certain conditions imposed on the appellant's future discretion to withhold consent.

The appellants appealed a trial judgment granting rescission of an agreement of purchase for a franchise donut shop.

The trial judge found that a discrepancy in the agreement regarding minimum rent amounted to a misrepresentation by the vendor, as the landlord had increased the square footage upon which the base rent was calculated.

The Court of Appeal held that the trial judge was entitled to reach this conclusion on the evidence and found no error justifying intervention.

The appeal was dismissed with costs.

The appellant cleaning company appealed the dismissal of its action for breach of contract.

The respondent health club terminated its cleaning contract with the appellant and immediately hired two of the appellant's cleaners, breaching a non-solicitation clause that required payment of one year's compensation.

The trial judge found the clause was an unenforceable penalty and dismissed the action because the appellant claimed no actual damages.

The Court of Appeal allowed the appeal, agreeing the clause was a penalty but finding the appellant suffered provable damages from the loss of its investment in training the cleaners.

The Court awarded $12,600 in damages based on the appellant's lost profit during the six-month training period.

The appellant insurer sought to add Livent Inc. and several of its directors as defendants by counterclaim in an action brought by outside directors to enforce a Directors and Officers Liability policy.

The insurer also sought to lift a CCAA stay of proceedings against Livent.

The Court of Appeal allowed the appeal in part, adding Livent as a party because the insurer was entitled to seek a declaration regarding the policy's validity against the policyholder.

However, the court refused to add the additional directors, finding it would unnecessarily complicate the discrete legal issue of coverage for the innocent outside directors.

The CCAA stay was lifted to the extent necessary to give effect to the order.

The plaintiff entered into an agreement with the defendant to organize a consumer club.

The defendant delivered a notice terminating the agreement, which the plaintiff argued was ineffective based on the renewal terms.

The plaintiff sued for breach of contract and the defendant successfully moved for partial summary judgment.

On appeal, the Court of Appeal found the termination provision ambiguous and held that extrinsic evidence of surrounding circumstances is always admissible to interpret a contract.

The court concluded there was a genuine issue for trial and allowed the appeal.

The appellant airline appealed the dismissal of its action alleging that a wholesale travel agency retained excessive commissions from the sale of tickets issued on the airline's ticket stock.

The appeal turned on the interpretation of the passenger sales agency agreement and the incorporated travel agent's handbook, particularly whether the agency was entitled to retain 7% or 9% of the full retail fare value.

The court held that the specific commission provision in Resolution 016a governed and fixed the commission at 9%, and that the agency in fact retained less than that amount.

As a result, there was no breach of contract and the appeal was dismissed with costs.

The appellant borrower agreed under a commercial loan arrangement to pay the lender's actual legal fees and authorized the lender to debit its account for those fees.

After the lender paid its solicitors from the appellant's account over the appellant's objection and without providing meaningful billing detail, the appellant sought an assessment under the Solicitors Act.

The Court of Appeal held that s. 11 applied because the bills had been paid, but that the contractual wording did not preclude assessment and did not amount to a waiver.

Special circumstances existed because the payment was made over objection, the third party payer had virtually no information about the work done, and only an assessment could determine whether the fees actually fell within the contractual obligation.

The appeal was allowed, an assessment was directed, privilege issues were left to the assessment officer, and costs were awarded to the appellant.

The appellant trustee appealed the dismissal of an application seeking approval of three proposed assignees of leased commercial premises under s. 38(2) of the Commercial Tenancies Act.

The proposed assignees were newly incorporated numbered companies created to hold individual leases after the trustee sold the bankrupt’s assets to a related purchaser controlled by an established gas retail operator.

The court held that, although backing and guarantees from related corporations may in principle be considered when assessing a corporate assignee’s fitness, the landlords were entitled to look to the named tenants as the primary obligors under the leases.

On the evidentiary record, the motions judge was entitled to conclude that the assignees were shell corporations designed to insulate the real operators from liability and were therefore not fit and proper persons.

The appeal was dismissed with costs.

The appellant bank appealed an order striking portions of its defence in a cheque conversion action arising from employee fraud and forged endorsements.

The court held it lacked jurisdiction over the procedural complaint about allowing a late Rule 21 motion because that issue was interlocutory and required leave to the Divisional Court.

On the merits, the court held that the Supreme Court's strict liability conversion analysis in Boma bars a defence of contributory negligence, but does not eliminate the distinct statutory defence of preclusion under s. 48(1) of the Bills of Exchange Act.

Because the impugned paragraphs were unclear and could amount to contributory negligence, they were properly struck to that extent, but the appellant received leave to amend to plead any legally available defence clearly.

Costs were ordered in the cause.

On an appeal from an order refusing to add investor creditors as plaintiffs by counter-claim, the court held that a bank owed no fiduciary duty to unsecured creditors of its corporate customers merely because they shared a common debtor.

Applying the Anns/Kamloops framework, the court found no pleaded facts establishing proximity or reasonable reliance sufficient to create a prima facie duty of care in negligent misrepresentation.

The alleged statements to one guarantor did not support a relationship of reliance by a wider class of investors.

In any event, policy considerations barred recovery because recognizing such a duty would create indeterminate liability to an unlimited class.

The appeal was dismissed.

This appeal concerned a priority dispute under the Personal Property Security Act arising from refinancing of a printing press subject to a lease with an option to purchase.

The appellant bank discharged the original lender's security, enabling the debtor to obtain legal title, and then took its own security interest.

The court held that this financing enabled the debtor to acquire further rights in the collateral and therefore satisfied the statutory definition of a purchase-money security interest.

Because the statutory conditions for priority were met, the appellant's security interest ranked ahead of the respondent's earlier perfected general security agreement.

The appeal was allowed and priority declared in favour of the appellant.