Court of Appeal Summaries (August 26 – August 30)

September 05, 2024
John Polyzogopoulos

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Live Nation Ontario Concerts GP, Inc. v. Aviva Insurance Company of Canada was an insurance coverage dispute where some of the claims were covered by the insured’s CGL policy and others were not. The insurer was found to only be liable for the portion of the defence costs attributable to the defence of the covered claims.

Spina v. Shoppers Drug Mart Inc. was a lengthy class action decision involving Shoppers Drug Mart’s liability to franchisees for “Professional Allowances” under the Ontario Drug Benefit Act.

In Bogue v Miracle, the Court ordered security for outstanding costs and for the costs of the pending appeal. However, the Court rejected the moving party’s request for security for judgment. Security for judgment is an “extraordinary remedy” that was not appropriate in this case.

In Surefire Dividend Capture, LP v. National Liability & Fire Insurance Company (Berkshire Hathaway Specialty Insurance) the Court granted intervener status to a receiver of a corporation. The corporation in receivership was not technically a party to this insurance coverage proceeding, but it was affected by it, as the application judge had found that the corporation was an insured under the fidelity policy at issue.

Civil Decisions

Live Nation Ontario Concerts GP, Inc. v. Aviva Insurance Company of Canada, 2024 ONCA 634

Keywords: Contracts, Insurance, Commercial General Liability, Coverage, Duty to Defend, Equitable Contribution, Liquor Licence Act, R.S.O. 1990, c. L.19, Occupiers’ Liability Act, R.S.O. 1990, c. O.2, Hanis v. Teevan, 2008 ONCA 678, Markham (City) v. AIG Insurance Company of Canada, 2020 ONCA 239, Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, Michaud v. Sécurité Nationale compagnie d’assurance, 2021 NBCA 39, Non-Marine Underwriters, Lloyd’s of London v. Scalera, 2000 SCC 24, Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, 2010 SCC 33, Papapetrou v. 1054422 Ontario Ltd., 2012 ONCA 506, Nichols v. American Home Assurance Co., [1990] 1 S.C.R. 801, Atlific Hotels and Resorts Ltd. v. Aviva Insurance Co. of Canada (2009), 97 O.R. (3d) 233 (SC), Daher v. Economical Mutual Insurance Co. (1996), 31 O.R. (3d) 472 (C.A.), Family Insurance Corp. v. Lombard Canada Ltd., 2002 SCC 48, Loblaw Companies Limited v. Royal & Sun Alliance Insurance Company of Canada, 2024 ONCA 145

Bogue v. Miracle, 2024 ONCA 643

Keywords: Contracts, Solicitor and Client, Contingency Fee Agreements, Aboriginal Law, Bankruptcy and Insolvency, Receiverships, Civil Procedure, Appeals, Security for Costs, Security for Judgment, Indian Act, R.S.C. 1985, c. I-5, s. 89, Courts of Justice Act, R.S.O. 1990, c. C.43, s. 101, Bankruptcy and Insolvency Act, R.S.C. 1985, c B-3, s. 147, Rules of Civil Procedure, rr. 56.01(1), 61.01(1), Bogue v. Miracle, 2021 ONCA 278, Bogue v. Miracle, 2022 ONCA 672, leave to appeal refused, [2023] S.C.C.A. No. 3, Bogue v. Miracle, 2024 ONSC 1964, Miracle v. Bogue, 2024 ONSC 3028, Thrive Capital Management Ltd. v. Noble 1324 Queen Inc., 2021 ONCA 474, Yaiguaje v. Chevron Corporation, 2017 ONCA 827, Combined Air Mechanical Services Inc. v. Flesch, 2010 ONCA 633, Wiseau Studio, LLC. v. Harper, 2021 ONCA 31, leave to appeal refused, [2021] S.C.C.A. No. 464

Surefire Dividend Capture, LP v. National Liability & Fire Insurance Company (Berkshire Hathaway Specialty Insurance), 2024 ONCA 644

Keywords: Contracts, Insurance, Fidelity, Coverage, Civil Procedure, Interveners, Insurance, Coverage, Receivership, Fraud, Rules of Civil Procedure, RSO 1990, c C.43

Spina v. Shoppers Drug Mart Inc., 2024 ONCA 642

Keywords: Contracts, Interpretation, Franchise Agreements, Duty of Good Faith Performance, Civil Procedure, Class Proceedings, Aggregate Damages, Appeals, Standard of Review, Limitation Periods, Arthur Wishart Act (Franchise Disclosure), 2000, S.O., 2000, c. 3, s. 3, Class Proceedings Act, 1992, S.O. 1992,c. 6, ss. 24, 25, Ontario Drug Benefit Act, R.S.O. 1990, c. O.10, s. 11.5, Drug Interchangeability and Dispensing Fee Act, R.S.O. 1990, c. P.23, s. 12.1, O. Reg 201/96, s. 1, s. 3 (Code of Conduct), R.R.O. 1990, Reg. 935, s. 2, Sched 1 (Code of Conduct), Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, Canada (Director of Investigation and Research) v. Southam Inc., [1997] 1 S.C.R. 748, Ontario Securities Commission v. Bridging Finance Inc., 2023 ONCA 769, Canada (Attorney General) v. Fontaine, 2017 SCC 47, Karkhanechi v. Connor, Clark & Lunn Financial Group Ltd., 2022 ONCA 518, leave to appeal refused, [2022] S.C.C.A. No. 353, Richards v. Sun Life Assurance Company of Canada, 2016 ONSC 5492, Pickering Square Inc. v. Trillium College Inc., 2016 ONCA 179, Marvelous Mario’s Inc. v. St. Paul Fire and Marine Insurance Co., 2019 ONCA 635, Crombie Property Holdings Limited v. McColl-Frontenac Inc. (Texaco Canada Limited), 2017 ONCA 16, Longo v. MacLaren Art Centre Inc., 2014 ONCA 526, Bhasin v. Hrynew, 2014 SCC 71, C.M. Callow Inc. v. Zollinger, 2020 SCC 45, Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, 2021 SCC 7, Fulawka v. Bank of Nova Scotia, 2012 ONCA 443, Ramdath v. George Brown College, 2014 ONSC 3066, Markson v. MBNA Canada Bank, 2007 ONCA 334, Fresco v. Canadian Imperial Bank of Commerce, 2022 ONCA 115, Shah v. LG Chem Ltd., 2018 ONCA, Brazeau v. Canada (Attorney General), 2020 ONSC 7229, Hryniak v. Mauldin, 2014 SCC 7, Lundy v. VIA Rail Canada Inc., 2015 ONSC 7063, Geoff R. Hall, Canadian Contractual Interpretation Law, 3^rd and 4^th eds. (Toronto: LexisNexis, 2016), Concise Oxford English Dictionary, 12th ed. (New York: Oxford University Press, 2011), John D. McCamus, The Law of Contracts, 3rd ed. (Toronto: Irwin Law, 2020), Canadian Oxford Dictionary, 2nd ed. (Don Mills, ON: Oxford University Press, 2004), Black’s Law Dictionary, 11th ed. (Saint Paul: Thomson Reuters, 2019), Steven J. Burton & Eric G. Andersen, Contractual Good Faith: Formation, Performance, Breach, Enforcement (Boston: Little, Brown and Co, 1995), Report of the Attorney General’s Advisory Committee on Class Action Reform, (Toronto: Ministry of the Attorney General of Ontario, 1990)

Thomas v. Thomas, 2024 ONCA 646

Keywords: Family Law, Parenting, Relocation, Child Abduction, Convention of the Civil Aspects of International Child Abduction, The Hague, October 25, 1980, [1983] Can. T.S. No. 35, Katsigiannis v. Kottick-Katsigiannis (2001), 55 O.R. (3d) 456 (C.A.), Ibrahim v. Girgis, 2008 ONCA 23, Jackson v. Graczyk, 2007 ONCA 388.

Short Civil Decisions

Malhotra (Re), 2024 ONCA 640

Keywords: Bankruptcy and Insolvency, Claims Provable in Bankruptcy, Proofs of Claim

Janzen v. Cook, 2024 ONCA 654

Keywords: Family Law, Separation Agreements, Child Support, Parenting, Variation, Civil Procedure, Appeals, Jurisdiction, Transfer, Family Law Act, R.S.O. 1990 c. F.3, s. 35, Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 19(1)(a.1), 21.1(1), 110(1), Divorce Act, R.S.C. 1985, c. 3 (2^nd Supp.), Bahadori v. Samadzadeh, 2009 ONCA 10, Christodoulou v. Christodoulou, 2010 ONCA 93

O’Regan v. Carleton Condominium Corporation No. 169, 2024 ONCA 647

Keywords: Real Property, Condominiums, Common Elements, Special Assessments, Liens, Oppression, Civil Procedure, Summary Judgment, Reasonable Apprehension of Bias

Hanson Crossborder Tax Inc. v. Bazar McBean LLP, 2024 ONCA 645

Keywords: Civil Procedure, Appeals, Costs, Offers to Settle, Rules of Civil Procedure, r. 49

CIVIL DECISIONS

Live Nation Ontario Concerts GP, Inc. v. Aviva Insurance Company of Canada, 2024 ONCA 634

[Roberts, George and Monahan JJ.A]

Counsel:

D. Ong for the appellants

K. Pereira and A. Sharabi for the respondents

facts:

T.M. was injured at a concert at Budweiser Stage when security personnel removed an unruly patron. T.M. commenced an action against the respondents, Live Nation Ontario Concerts GP (“Live Nation”/ “the respondents”), and Northwest Protection Services Ltd. (“Northwest”), among others. Live Nation is a producer and promoter of live musical entertainment that leases and occupies Budweiser Stage. Northwest was contracted by the respondent to provide security personnel and “crowd management services” for all shows at the venue.

Live Nation had an insurance policy with Starr Indemnity & Liability Company (“Starr”) which included commercial general liability coverage and a duty to defend where the $1 million self-insured retention had been depleted. Northwest had an insurance policy with the appellants, Aviva Insurance Company of Canada and Aviva Canada Inc. (“Aviva” / “the appellants”), which included commercial general liability coverage for “bodily injury and property damage liability” resulting from the failure of Northwest’s services “to meet the level of performance, quality, fitness or durability warranted or represented” by Northwest. As part of this agreement, Northwest had named Live Nation as “Additional Insured.” This entitled the respondents to have Aviva “indemnify, defend and hold harmless [the respondents] from and against any and all claims or loss … arising from the acts or omissions of [Northwest].”

This coverage was triggered by T.M’s claim and Live Nation brought an application against Aviva for declaratory relief. On the application, Aviva argued that its policy was an excess policy that only applied when the limits under the Starr policy were met. The application judge disagreed and ordered Aviva to pay 100% of the past and future defence costs, subject to their right to apply to reapportion those costs at the end of trial.

On its appeal, Aviva argued that the application judge failed to treat the pleaded claims as mixed claims and in finding that the principles of equitable contribution were inapplicable. The respondents maintained that the application judge made no error. Further, they asserted that even if the claims were mixed, the principle of equitable contribution would not apply because they are an insurer and not the insured.

issues:

Did the application judge err in characterizing the claims made against the appellants?
Can the appellant, an insurer, seek equitable contribution against the respondent, an insured?

holding:

Appeal allowed in part.

reasoning:

1. Yes.

The application failed to recognize the claims levied against the appellant were mixed claims. Mixed claims are those which fall both within and outside of the insurance policy. The claims made against the respondents in the initial cause of action were comprised of two sorts. First, allegations that overlapped with the “security negligence claims” levied against Northwest. These claims dealt with the conduct of security personnel. Second, unrelated “statutory negligence claims” that pertained to the Liquor Licence Act and the Occupiers’ Liability Act. These claims pertained to serving alcohol in excess and the failure to provide safe premises. In his assessment, the application judge concluded that all the pleaded claims amounted to security negligence claims.

On this appeal, the Court found that the application judge mischaracterized the claims by finding them wholly covered. On the question of covered and uncovered claims, the application judge employed the Hanis test. The Court found that while the application judge applied the correct test, his mischaracterization of the pleadings led him to misapply the test. The Court found that some of the claims made by T.M. fell outside the scope of the insurance policy provided that the appellant’s coverage was triggered by Northwest’s inability to “meet the level of performance, quality, fitness or durability warranted or represented” to conduct their services. Due to the error in characterizing the pleadings, the application judge did not undertake the full Hanis analysis and accordingly, failed to consider whether any portion of the defence costs should have been allocated to the respondents.

2. No.

The appellant, as an insurer, could not seek equitable contribution against the respondent, an insured. The Court found that the application judge did not err in declining to permit the appellant to seek equitable contribution from the respondents. In the absence of Starr as a party to the proceedings, the appellant could not seek equitable contribution from the respondents. The Court found that equitable contribution can only be sought from a concurrent insurer, not from the insured. Furthermore, the Court found that the existence of the respondent’s self-insured retention under their policy with Starr did not turn them into an insurer. Accordingly, the appellant’s argument for equitable contribution was unfounded.

In the result, only the security negligence claims were covered under the Aviva policy and the Aviva is not liable to pay defence costs that are solely related to the uncovered statutory negligence claims. However, the rest of the application judge’s order remained in place.

Bogue v. Miracle, 2024 ONCA 643

[Fairburn A.C.J.O.]

Counsel:

G. Roberts, for the moving party

I.J. Collins, for the responding party

facts:

This motion arose from a complex history of litigation. The dispute initially centered around the right to profits and ownership of an on-reserve business between the responding party and his son. The moving party represented the responding party as counsel in arbitration on a retainer agreement that reflected a contingency fee of 25 percent, which resulted in an award in favour of the responding party in the amount of $11,486,238 and his son’s interest in the business. The respondent has not collected the $11 million owing to him, but did recover his son’s interest in the business. After his son made an assignment in bankruptcy and was subsequently discharged, the trustee in bankruptcy, SLF, declared a dividend to be paid to creditors in the amount of $1,458,752.16, less a statutory levy of $56,734.08, payable under s. 147 of the Bankruptcy and Insolvency Act. The responding party is his son’s largest creditor.

The moving party claims that he was still owed $2,871,000 in legal fees by the respondent.

Following multiple appeals by the responding party with respect to whether an appointed receiver could recover proceeds from the responding party’s assets located on reserve, Mew J. granted summary judgment to the moving party in the amount of $2,858,500. Mew J. concluded that the responding party was bound by the original application judge’s decision that the responding party owed the moving party $2,858,500, set off by $30,000 to reflect the Court’s costs order. Justice Mew ordered costs in the following amounts:

for the vexatious litigant application – $14,938.65
for the charging order/solicitor’s lien application – $45,748.05
for the summary judgment motion – $24,340.20

The responding party did not pay these costs nor those in favour of SLF, and again appealed to the Court, arguing that a contingency fee did not have to be paid in circumstances where no monies have been collected. Pending appeal, the moving party brought this motion for security for costs and security for judgment.

issues:

Was the moving party entitled to an order for security for the outstanding costs and security for costs of the pending appeal?
Was the moving party entitled to an order for security for judgment?

holding:

Motion granted in part.

reasoning:

1. Yes.

The responding party was ordered to pay security for the outstanding costs in the amount of $85,026.9, and security for costs in the pending appeal in the amount of $30,000, for a total of $115,026.90. A judge of the Court has discretion to award security for costs of an appeal pursuant to r. 61.06(1) of the Rules. Citing Thrive Capital Management Ltd. v. Noble 1324 Queen Inc, the Court described the two-step reasoning process to be followed in assessing whether to make an order pursuant to r. 61.06(1): “[the] ordering of security for costs is discretionary; a two-step reasoning process is involved. The first question is whether the requirements of r. 61.06(1)(a), (b), or (c) are met. If so, the second question is whether it would be just to order security, considering the circumstances and the interests of justice: Yaiguaje v. Chevron Corporation”: Thrive Capital Management at para 17.

With respect to r. 61.06(1)(a), the Court held that the responding party’s grounds of the pending appeal were not entirely frivolous. From the record, the Court noted that the responding party had not received the money awarded by the arbitrator and that there were ongoing issues around how that money was touched by the operation of the Indian Act. While the Court concurred with Mew J.’s observations that the responding party appeared to have put up every obstacle possible to the moving party’s recovery of any money for the work that he did in securing the lucrative arbitration award, the Court held that the pending appeal could not be said to be frivolous, especially with the Court having decided the last appeal in this case on such a narrow basis.

The moving party also relied on r. 61.06(1)(b) on the basis that r. 56.01(1)(c) applied, arguing for its application given that he was a respondent below on the responding party’s vexatious litigant application and the responding party had not paid costs awarded by Mew J. on the dismissal of the application.

The Court rejected granting security for costs on this basis. The Court explained that the responding party’s pending appeal arose from the summary judgment motion (determining a claim made against him by the moving party) and not the vexatious litigant application brought against the moving party.

Turning to r. 61.06(1)(c), the Court held that there was “other good reason” to grant security for costs. The Court explained that under r. 61.06(1)(c), the reason must be a “fairly compelling reason” and one that is related to the purpose for ordering security: Combined Air Mechanical Services Inc. v. Flesch at para. 8.

The Court noted that this litigation has been, and continues to be, very expensive for the moving party. He attempted to get answers from the responding party about his off-reserve properties and was met with no response at all. The Court found this troubling given that the Court clearly said that “s. 89 [did] not protect [the responding party’s] off-reserve assets from seizure” and that the existence and location of those assets would have to be “determined by the receiver”: Bogue (ONCA 2022), at para. 47. The Court explained that this included real and personal property.

The Court held that the responding party had been uncooperative in responding to questions about whether there were enough assets located off reserve to satisfy a costs award arising from the pending appeal should it be dismissed. The Court stated that while a Teraview search revealed a few assets, they appeared to be fully encumbered by a substantial CRA lien and sizable executions, and had no equity. This caused the Court significant concern, especially given the difficult history of this proceeding. It also caused the Court concern given Mew J.’s factual finding that the responding party did all in his power to prevent the moving party from receiving any payment at all, despite seeming to have acknowledged that the moving party did work that resulted in the arbitrator’s decision, a decision that resulted in great potential return to the responding party.

For these reasons, the Court concluded that it was just to order security for costs for the outstanding costs orders in favour of the moving party. Accordingly, the Court ordered that costs in the amount of $85,026.90 be paid into court as security for costs before the litigation proceed no later than 30 days after this order was issued.

In addition, given the history of this matter, the responding party’s resistance to paying the moving party almost anything, and the fact that he had been less than cooperative in making it known whether he had any off-reserve assets, the Court agreed with the moving party with respect to security for costs on the pending appeal and ordered that the responding party pay into court security for costs of the appeal in the amount of $30,000.

2. No.

The responding party was not ordered to pay security for judgment. The moving party asked for security for judgment in the amount of $1.5 million as a “top-up” to the sum that SLF was holding. This would effectively ensure that the entire amount that the moving party said was owing to him sat with both SLF and the court. The moving party argued that this was the “only way” in which he would “ever collect the full amount of the judgment” and get the funds off the reserve.

The Court explained that security for judgment is an “extraordinary remedy” and that such an order should be reserved for the most exceptional circumstances: Wiseau Studio, LLC. v. Harper.

The moving party acknowledged that this was about trying to get money secured into the court that may otherwise be money that rests on reserve. The Court held that this came very close, if not crossed over the line into what the Court had earlier said cannot be done by virtue of s. 89 of the Indian Act. The Court held that it was best that all of these issues be sorted out in the normal course and through litigation in the normal course, with a proper and complete evidentiary record.

Surefire Dividend Capture, LP v. National Liability & Fire Insurance Company (Berkshire Hathaway Specialty Insurance), 2024 ONCA 644

[Zarnett J.A.] (Motions Judge)]

Counsel:

R. Datt and M.P. Nadeau for the appellant

R. Lester for the respondent

G. Healy-Murphy for the proposed intervener

Keywords: Contracts, Insurance, Fidelity, Coverage, Civil Procedure, Interveners, Insurance, Coverage, Receivership, Fraud, Rules of Civil Procedure, RSO 1990, c C.43

facts:

M.F. as the Ancillary Receiver for Broad Reach Capital, LC (“BRC”) sought leave to intervene as an added party within the appeal.

The judgment under appeal resulted from a claim between the appellant, Surefire Dividend Capture, LP (“SDC”) on a fidelity bond issued by the respondent National Liability & Fire Insurance Company (“Berkshire”). The claim was for losses alleged to have resulted from a ponzi scheme operated by BRC’s CEO. BRC is a subsidiary of SDC. SDC claimed that the fidelity bond required Berkshire to indemnify it for the loss of its investment. SDC was a named insured under the bond, and the bond referred to BRC as a subsidiary. SDC and Berkshire did not agree on the meaning or effect of referring to BRC as a subsidiary. In the course of his reasons, the trial judge dismissed SDC’s claim. The trial judge did, however, find that BRC was an insured.

BRC has been in receivership since 2020 and it is not a party to the proceeding. The Ancillary Receiver was appointed in 2024 for the purpose of analyzing BRC’s entitlement to coverage under the fidelity bond. It was at this point that the Ancillary Receiver sought to intervene. The SDC consented to the intervention, Berkshire opposed it.

The Ancillary Receiver argued that he should be allowed to intervene as a party at the appellate stage as the trial court made two findings that are favourable to BRC in its own dispute with the respondent insurer (including that BRC is an insured entity under the Bond) and those findings are in issue on the appeal. He also argued that no delay or prejudice would result from the intervention given that an adjournment of the appeal will not be required and his own submissions on the issues that are of concern are brief, focused, and address matters already in play on the appeal.

issues:

Should M.F. as the Ancillary Receiver of BRC be permitted to intervene in the appeal?

holding:

Motion granted.

reasoning:

The Court applied the two-part test for intervening as a party under Rule 13.01 of the Rules of Civil Procedure. The first prong of the test required the proposed intervener to show: (a) that it has an interest in the subject matter of the appeal; or (b) that it may be adversely affected by a judgment in the appeal; or (c) that there exists between the proposed intervener and one or more of the parties to the appeal a question of law or fact in common with one or more of the questions in issue in the appeal.

The Court found that the Ancillary Receiver met the third prong of the first part of the intervention test. The Ancillary Receiver indicated to the Court that BRC sought to pursue its own claim against Berkshire under the bond. This pending claim is in large part grounded by the trial judge’s finding that BRC is insured under the fidelity bond. If on appeal, the trial judge’s interpretation that BRC is an insured entity under the fidelity bond were overturned in favour of SDC’s contention that BRC does not have that status, BRC’s claim would be prejudiced. Accordingly, the Court found it fair to give the Ancillary Receiver a chance to be heard on that issue.

The second part of the test requires consideration of “whether the intervention will unduly delay or prejudice the determination of the rights of the parties to the proceeding.” The Court found that given the focused nature of the Ancillary Receiver’s intervention, it would not unduly delay or prejudice the determination of the rights of the parties to the appeal.

Spina v. Shoppers Drug Mart Inc., 2024 ONCA 642

[Simmons, Paciocco and Thorburn JJ.A.]

Counsel:

L. Rothstein, O. Soriano, K. Rosenberg, P. Davis, D. Montgomery and E. Snyder, for the appellants/respondents by way of cross-appeal

M. A. Gelowitz, G. Hunnisett, M. Aboud, L. Mishra and G. Buitenhuis, for the respondents/appellants by way of cross-appeal

facts:

This was an appeal and cross-appeal of orders made on motions for summary judgment. At issue was the entitlement to and quantification of Professional Allowance payments for enumerated direct patient care services. This involved a review of the franchise agreements between the parties. The appellants are licensed pharmacists and the representative plaintiffs. Through their companies, the corporate appellants, they are Shoppers Drug Mart franchisees referred to in the Agreements (defined below) as “Associates.” Shoppers Drug Mart Inc. and Shoppers Drug Mart (London) Limited (together “Shoppers”) operate a franchise system in which they grant licenses to operate full-service retail drug stores across Canada.

The Associates entered into standard form agreements with Shoppers which governed their franchisee-franchisor relationship. Shoppers introduced the 2002 version of the standard form Associate agreement in 2002 (the “2002 Agreement”). In 2010, Shoppers introduced an updated version of this agreement which it used for new Associates and for Associates whose 2002 Agreement expired (the “2010 Agreement”). The Ontario Class members (“The Ontario Class”) are parties to either or both of the 2002 and 2010 Agreements (the “Agreements”).

In 2006, the Ontario government introduced amendments to the Ontario Drug Benefit Act, and the Drug Interchangeability and Dispensing Fee Act, and their associated regulations, O. Reg 201/96 (the “ODBA Regulation”) and R.R.O. 1990, Reg. 935 (the “DIDFA Regulation”), collectively “the Legislation”, to ban rebates for products from generic drug manufacturers, such as those that Shoppers had been collecting. The Legislation did, however, allow payment for “Professional Allowances.”

Shoppers and the Associates participated in a complex profit-sharing arrangement. In 2006, Shoppers introduced a New Financial Model (the “Model”) which set out the profit-sharing arrangement between Shoppers and the Associates. After Associate earnings were calculated, Associates paid the remainder of store profits to Shoppers as a service fee.

The amendments to the Legislation terminated one major source of revenue for pharmacies and replaced it with a type of reimbursement for specifically enumerated direct patient care services: Professional Allowances. The Legislation also contained a Code of Conduct which was intended to establish system-wide guidance governing the use of professional allowances to be paid by manufacturers to operators of pharmacies. At times there were legislated caps on Professional Allowance amounts and any excess amounts were deemed rebates, not Professional Allowances.

Before 2006, Shoppers bought drugs in bulk from generic drug manufacturers and received rebates on the cost of those drugs. The drugs were then resold to the Associates. The direct patient care services were traditionally provided without direct compensation, so there was no “revenue” to either Shoppers or the pharmacies for the provision of direct patient care services. The 2002 Agreement continued to be used until January 1, 2010, following which the 2010 Agreement was used for new Associates and for Associates whose contracts had expired.

issues:

Is the appropriate standard of review for the interpretation of the Agreements a palpable and overriding error standard?
Did the motion judge err in concluding that there was a breach of the 2002 Agreement or, in the alternative, did the motion judge err in dismissing the claim for unjust enrichment?
Did the motion judge err in concluding that there was no breach of the 2010 Agreement or, in the alternative that there was no claim for unjust enrichment?
Did the motion judge err in finding that the Professional Allowance claims for 2006 and 2007 were statute-barred and in finding that a rolling limitation period applied to the Professional Allowance claims?
Did the motion judge err in holding that Shoppers received $955 million in Professional Allowances over the Class Period?
Did the motion judge err in refusing to award aggregate damages?

holding:

Appeal allowed, in part.

reasoning:

1. Yes.

In Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co, the SCC explained why some standard form contracts are subject to review on the standard of correctness and not on a deferential standard of review. The Court went on to consider the Ledcor factors as they applied in this case. First, the Court held that the Agreements are standard form contracts that govern the franchise relationship between Shoppers and the Associates across Canada. Second, the Court concluded that the interpretation of these provisions in this class action will not likely arise again in cases involving other parties and the precedential value was therefore not significant. Third, there was a factual matrix specific to these parties that was relevant to the interpretation of these Agreements. Thus, the Court concluded that in sum, although the Agreements are standard form contracts, there is a distinct factual matrix and no significant precedential importance, such that the analysis is not a question of law alone but rather, a question of mixed fact and law, reviewable on a palpable and overriding error standard of review.

2. No.

Professional Allowances are defined in the Legislation as “a benefit in the form of currency, services, or educational materials that are provided by a manufacturer …for the purposes of direct patient care”. The Code of Conduct provides that Professional Allowances were “to be calculated based on … [r]easonable costs to provide direct patient care,” “[r]easonable frequency of providing direct patient care,” and “a reasonable number of patients.” Professional Allowances are directly tied to direct patient care services, which were largely provided by the Associates at store-level. The Court held that the Professional Allowances provided for in the Legislation are materially different than “rebates”, “discounts” or “other similar advantages.”

The Associates were entitled to share in revenue pursuant to Article 7.01 of the 2002 Agreement. In 2006, the Professional Allowance Regime allowed generic drug manufacturers to pay for specifically enumerated direct patient care services. Those services were provided by the Associates. In the Court’s view, this was revenue earned by providing direct patient care services.

The Court held that there was no error in the motion judge’s conclusion that Professional Allowances are revenue earned by providing direct patient care services within the meaning of Article 7.01. The Code of Conduct required Professional Allowances be calculated based on the reasonable costs and frequency of providing direct patient care, and such services were provided by the Associates. The Legislation makes it clear that Professional Allowances “must be used only for” funding specifically enumerated direct patient care services such that, in the Court’s view, the Professional Allowances should be attributed to those who provided the specifically enumerated direct patient care services to be considered revenue pursuant to Article 7.01.

3. No.

The Court noted that in assessing whether the motion judge erred in holding that Shoppers did not breach the 2010 Agreement, the issue was whether the motion judge erred in holding that the words in Article 11.10 reflect an agreement to allow Professional Allowances to be retained by Shoppers. The 2010 Agreement must be read in accordance with the legislative amendments enacted in 2006, the meaning of the words in Article 11.10, including “concessions” and “other allowances”, and the objective knowledge and intention of the parties at the time of the formation of the contract.

First, the Court stated that the words “concessions” and “other allowances” in Article 11.10 of the 2010 Agreement, given their ordinary meaning, clearly included Professional Allowances. Second, the factual matrix confirmed this interpretation. The words “other allowances” and “concessions” were added into the 2010 Agreement several years after the Professional Allowance Regime was introduced and were within the objective knowledge of the parties. As noted by the motion judge, “[T]he Professional Allowance Regime was a part of the factual nexus of the [2010 Agreement]”, as the legislative amendments allowing Professional Allowances and prohibiting rebates were enacted in 2006.

The motion judge noted that Professional Allowances were a new breed of payment from a vendor to a wholesaler. In describing the difference between rebates and Professional Allowances, the motion judge also stated that “patients [who received direct patient care] likely did not receive patient care that was connected to the generic drug manufacturer’s merchandise for which the Professional Allowance was paid.” Therefore, the Court disagreed that the concluding language in Article 11.10 excluded Professional Allowances and the Court saw no error in the motion judge’s conclusion that Shoppers did not breach the 2010 Agreement.

4. No.

The Court held that the motion judge did not err in finding that the Ontario Class had sufficient knowledge to trigger the limitation periods applicable to the 2006 and 2007 claims. The motion judge found as a fact that the Professional Allowance Regime was “notorious” in the retail pharmacy sector. He held that the Associates ought to have known from the outset of the Professional Allowance Regime that they were suffering damages at the hands of Shoppers. Accordingly, the limitation period began to run when the Legislation was enacted.

The Court held that the motion judge did not misapprehend the evidence in concluding that the Ontario Class could make claims for Professional Allowances received by Shoppers between January 1, 2008, and November 19, 2008. Shoppers reconciled revenues at the end of each year and the motion judge held that rolling breaches of contract happened when “Shoppers did not remit the Professional Allowances so they became part of the revenue of the stores, the profits of which Shoppers would share with the Associates.” It followed that Shoppers’ breaches crystallized when profits were reconciled at year-end.

5. Yes.

The motion judge found that Shoppers “allocated the money it received under national agreements disproportionately”, such that “Ontario Professional Allowances were understated and rebates in the rest of Canada were overstated by a corresponding amount.” The motion judge acknowledged that Shoppers’ unilateral allocation often resulted in rebate rates in the rest of Canada in excess of 100% of the price of the drugs in the rest of Canada. However, he rejected that Shoppers received $1.084 billion in Professional Allowances in Ontario and concluded that Shoppers only received $955 million in Professional Allowances as Shoppers allocated $126 million as rebates outside of Ontario and that it was open to Shoppers to do so.

Article 7.01 of the 2002 Agreement provides that, “All revenues and income derived by the Associate from the Franchised Business shall be monies belonging to the Associate” (emphasis added). In 2006, the Legislation was amended to prohibit rebates but allow Professional Allowances. Rebates continued to be allowed in many other provinces and territories in Canada. Professional Allowances were revenue generated for providing the enumerated direct patient care services. Accordingly, the Associates’ right to share in all revenue from the franchised business included the right to their share of this revenue in the form of Professional Allowances for providing enumerated direct patient services. Shoppers reported the Professional Allowances it received to the Ontario government on behalf of the Associates.

Taking into account the legislated caps, the maximum allowable amount of Professional Allowances Shoppers could have accepted under the Legislation was $1.084 billion. Shoppers confirmed that its reports were submitted on behalf of the Associates. However, there was no suggestion that the Associates knew Shoppers decided not to ask for the full allowable amount of Professional Allowances in Ontario. Instead, Shoppers allocated only $955 million into Professional Allowances and treated the balance ($129 million) as rebates in the rest of Canada.

The Court stated that discretionary power is constrained by good faith. Whether a party to a contract exercises its discretion in a manner not connected to the underlying purposes of the discretion granted by the contract, such that it is in breach of the duty to exercise contractual discretionary powers in good faith, is a matter of contractual interpretation. The Court held that the motion judge erred in quantifying the Professional Allowances received by Shoppers at $955 million. Shoppers had duties of good faith in the performance of the 2002 Agreement.

First, it had a special statutory duty to deal fairly and in good faith in the performance and enforcement of this franchise agreement and a similar common law duty of honest performance of the 2002 Agreement with the Associates to refrain from knowingly misleading the Associates about matters linked to its performance of the 2002 Agreement.

Second, Shoppers had the authority pursuant to the Agreement and the Legislation, to collect and report monies received on behalf of the Associates and had the discretion pursuant to its authority to collect and report, to allocate Professional Allowances. Shoppers had an obligation to exercise its contractual discretion to allocate those monies in good faith. In allocating $129 million as rebates in other parts of Canada where rebates were allowed, Shoppers diverted revenue from Ontario, while purporting to act on behalf of the Associates. Shoppers thereby diverted revenue otherwise eligible as Professional Allowances to enrich itself.

The failure of the motion judge to consider what he called the effect of Shoppers “cooking the books” constituted a palpable and overriding error. While the 2002 Agreement permitted Shoppers to retain volume rebates, and while Shoppers labelled the $129 million as rebates in the rest of Canada, a “rebate” in excess of 100% of the cost of a product is not really a rebate. The motion judge’s quantification of Professional Allowances received by Shoppers at $955 million was set aside and replaced by $1.084 billion.

6. No.

The motion judge held that aggregate damages were not appropriate, and the Court saw no error in his conclusion. The test to allow aggregate damages is set out in s. 24(1) of the Class Proceedings Act, 1992 (“CPA”). The Court held that the motion judge correctly found that under s. 24(1) of the CPA he needed to determine whether “the aggregate or a part of the defendant’s liability to some or all class members can reasonably be determined without proof by individual class members.” The Court held that aggregate damages were inappropriate here and that there was no evidence that individual damage assessments would jeopardize the goals of access to justice.

The Court declined to certify aggregate damages as a common issue for two reasons. First, because of the idiosyncratic effects of the profit-sharing arrangement, individual damage assessments under s. 25 of the CPA are more appropriate than an aggregate damage assessment under s. 24. Second, s. 24(1)(c) requires that the defendant’s liability to some or all class members can “reasonably be determined without proof by individual class members.” The Court saw no error in the motion judge’s solution to order individual damage assessments. Section 25 of the CPA gives considerable latitude in crafting efficient procedures and dispensing with unnecessary formalities to assess individual damages in the most cost-effective way possible.

Thomas v. Thomas, 2024 ONCA 646

[Nordheimer, J.A.]

Counsel:

M. Mehra and A. Malinowska, for the appellant

A.S. Zaslavsky, for the respondent

facts:

This appeal arises from a child custody dispute. The respondent mother, a Canadian citizen, met and married an American from Balch Springs, Texas. The marriage produced one child. Shortly after the birth of the child, the mother and child relocated to Texas to be with the father. Approximately two years later, the mother and child returned to Ontario without the father’s knowledge. Upon her arrival in Ontario, the mother informed the father that she intended to live here with the child. Some months later the father commenced an application under the Convention of the Civil Aspects of International Child Abduction (“Hague Convention”) for the return of the child.

The application judge found that the mother had established on “clear and cogent evidence” that the father had unequivocally acquiesced to the relocation of the child to Toronto. The father appealed.

issues:

Did the application judge err in applying the Hague Convention principles?

holding:

Appeal allowed.

reasoning:

Yes.

The Court held that while the application judge correctly cited the applicable legal principles under the Hague Convention, she failed to properly apply those principles. In particular, she failed to understand the degree of proof required for a proper determination of whether the acquiescence exception under Article 13(a) could be relied upon by the mother.

The object of the Hague Convention is to deter abductions and secure the prompt return of children where abductions occur. In addition, the Court reiterated that acquiescence is a question of subjective intention of the wronged parent with the onus on the abducting parent to establish acquiescence on clear and cogent evidence. The Court further noted that it must be shown that acquiescence was unequivocal and the standard for finding acquiescence is high. The application judge’s finding that the appellant did not explicitly state that he did not consent to the child’s removal was contradicted by the judge’s own statement that “it is clear that the father did not consent to the [child’s] relocation to Ontario” and evidence before the judge, including that the father had informed the Toronto Police on his visit that there was a custody dispute and commenced an application in Texas requesting the right to decide the child’s primary residence. Further, the Court held that such a finding reversed the burden of proof because it is the abducting parent who must prove consent or acquiescence. The Court held that the clear and cogent evidence standard does not require a balancing of evidence as with the balance of probabilities standard, nor is it established by a finding that the appellant “implicitly consented.” Thus, the application judge’s decision did not fulfil the objective of the Hague Convention, nor did it accord with the presumption thereunder for the summary return of a child in accordance with its Article 12.

SHORT CIVIL DECISIONS

Malhotra (Re), 2024 ONCA 640

[Nordheimer, Gomery and Wilson JJ.A.]

Counsel:

M. Harris, for the appellant

C. Linthwaite, for the respondent

Keywords: Bankruptcy and Insolvency, Claims Provable in Bankruptcy, Proofs of Claim

Janzen v. Cook, [2024 ONCA 654]

[Pepall J.A. (Motion Judge)]

Counsel:

A. Snelius, for the moving party

J. Brown, for the respondent

O’Regan v. Carleton Condominium Corporation No. 169, 2024 ONCA 647

[Nordheimer, Gomery and Wilson JJ.A.]

Counsel:

J. O., acting in person

R. Escayola and G. Macpherson, for the respondents

Keywords: Real Property, Condominiums, Common Elements, Special Assessments, Liens, Oppression, Civil Procedure, Summary Judgment, Reasonable Apprehension of Bias

Hanson Crossborder Tax Inc. v. Bazar McBean LLP, 2024 ONCA 645

[Trotter, Thorburn and Dawe JJ.A.]

Counsel:

M. Girard, for the appellants

O. Niedzviecki, for the respondents

Keywords: Civil Procedure, Appeals, Costs, Offers to Settle, Rules of Civil Procedure, r. 49

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