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November 2010

Ontario Edition

Inside this Issue: This month we have summarized what we consider to be the five most interesting cases from the Ontario C.A. in November. We highlight cases from the following areas of law: Government; Access to Information and Privacy- p.3 Pensions and Benefits- p.5 Family; Marital Property; Equalization- p.7 Education; Human Rights- p.8 Contracts; Franchising- p.9

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Liquor Control Board of Ontario v. Magnotta Winery Corporation , 2010 ONCA 681 Area of Law: Government; Access to Information and Privacy


The parties were involved in litigation between 1996 and 2003, and ultimately reached a mediated settlement. The minutes of settlement contained confidential, highly sensitive and privileged information. One of the parties to the settlement, the Liquor Control Board of Ontario (the “LCBO”), received a request from an unidentified party pursuant to the Freedom of Information and Protection of Privacy Act (“FIPPA”) seeking full copies of the minutes of settlement as well as other documents pertaining to the settlement. Some records were released to the requestor but access to others was denied. The

requestor successfully appealed to the Information and Privacy Commissioner (the “IPC”) to obtain the denied documents. The LCBO requested a reconsideration. In a further order, the IPC dismissed the reconsideration request. The Divisional Court allowed the LCBO’s appeal and restored the LCBO’s decision to withhold the denied documents.



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604.879.4280 | Liquor Control Board of Ontario v. Magnotta Winery Corporation (cont.)



he appeal was dismissed. The IPC, one of the appellants to this appeal, argued that there was no express statutory exemption in the FIPPA to justify withholding the denied documents. The Court confirmed the Divisional Court’s approach to s.19 of the FIPPA, which protects documents subject to solicitor-client privilege as well as documents prepared in contemplation of, or for use in, litigation. The second branch of s.19, pertaining to documents prepared in contemplation of, or use in, litigation, must include documents related to mediation because mediation is an integral part of the litigation process, especially where, as in this case, mandatory mediation rules require

parties to engage in mediation prior to trial. The goal of the FIPPA, according to the Divisional Court, is to promote transparency in government functioning, but this goal is trumped by the goal of promoting the settlement of litigation, and s.19 of the FIPPA operates as an explicit statutory recognition of this secondary goal. The Court rejected the IPC’s argument that the word “litigation” in s.19 of the FIPPA ought to be construed narrowly so as to exclude documents prepared for mediation. The Court endorsed a broad interpretation of the word “litigation” in accordance with the principles of statutory interpretation. Prior jurisprudence of the Court confirmed that the privilege offered by the

second branch of s.19 is significantly broader than common law litigation privilege. In light of this result, the Court declined to consider whether common law settlement privilege is a free-standing exemption under the FIPPA or whether the FIPPA is a complete code on the issue of settlement privilege.

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1.888.894.4280 | Professional Institute of the Public Service of Canada v. Canada (Attorney General), 2010 ONCA 657 Area of Law: Pensions and Benefits Under Appeal: Justice de Lotbiniere Panet



The Federal Government provides pension plans to employees of the federal public service, the RCMP and the Canadian Forces through three separate Superannuation Acts (the “Acts”), which are the same in respect of the issues on appeal (the “Plans”). The Financial Administration Act requires financial reporting on the Plans to the House of Commons on an annual basis. Since the early 1990’s, the accountings indicated that the Plans were running a surplus, so the Government began to amortize the actuarial surplus in order to reduce the annual pension expense of the Government; the Government used the surplus to make its statutorily required payments into the Plans. In 1999, Bill C-78 was enacted and changed the Acts by establishing an investment board to monitor the investments in the Plans as well as changing the mechanism by which the Government was to contribute to the Plans. Bill C-78 also altered the discretion of the Government to remove funds from the Plans. Between 2001 and 2004, Bill C-78 was used to remove $28 billion from the Plans. The appellants brought actions in an effort to require the Government to return this money to the Plans on the basis of breach of trust and breach of fiduciary duty. At trial, the judge found that the Plan members did not have any legal or equitable interest in the money in the Plans, and as such, the Government did not breach the trust of the Plan members. The trial judge also concluded that the Government did not owe a fiduciary duty to the Plan members because the obligations of the Government with respect to the Plans were set out as a complete code by the Act, leaving no room for discretion on the part of the [continued on the next page] Government.


604.879.4280 | Professional Institute of the Public Service of Canada v. Canada (Attorney General), (cont).



he appeal was dismissed. The Court agreed with the trial judge that the Plans had no actual assets and that the contributions by Plan members to their pensions was actually going into the consolidated revenue fund, as required by the Acts. Although accounting was conducted on the Plans annually, this was for monitoring and bookkeeping purposes and did not reflect the existence of actual assets held by the Plans. This is unlike private-sector pensions where pension contributions are held in trust for plan members. The Court disagreed with the trial judge’s

finding that the Acts constituted complete codes governing the Government’s responsibilities as they relate to public pensions. However, the Court declined to find a fiduciary relationship between the Government and Plan members. Although the Government had discretion over the Plans, including the discretion to amortize the Plans, prior to Bill C-78 the discretion was not exercised over the property of the Plan members, a required finding in order to conclude the Government owed a fiduciary duty to the Plan members. Because the Plans had no actual assets, the Government’s


amortization of the surplus did not in actuality deal with assets belonging to the Plan members. Finally, the Court rejected the appellant’s argument that a constructive trust over the withdrawn surplus should be imposed. The Court concluded that there was no equitable obligation on the part of the Government to justify such an order, that the Government was not unjustly enriched by the withdrawal of the surplus, and if they were, Bill C-78 provided the juristic reason for the enrichment.

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Greenglass v. Greenglass, 2010 ONCA 675 Areas of Law: Family law; Marital property; Equalization


Under Appeal: Justice Allen



The parties were married for 30 years and separated in 2001. At the conclusion of their divorce trial, the trial judge ordered the husband to pay just over one million dollars to the wife as an equalization payment in the division of family property. The trial judge also ordered retroactive spousal support and ongoing spousal support. ble.

The appeal was allowed in part. The Court reduced the equalization payment, the retroactive spousal support, and the amount of the ongoing spousal support. The Court identified one error on the part of the trial judge that gave rise to the adjustments allowed by the appeal. The trial judge began her evaluation with retroactive and ongoing spousal support rather than the equalization of family assets. The Divorce Act requires spousal support orders to be made in consideration of the means of the parties, and in order to ascertain the means of a party, all pecuniary resources including capital assets must be evaluated. The Court stated that the trial judge should have commenced her evaluation with the equalization of family property. Relying in part of the Supreme Court’s 2004 decision in Hartshorne, the Court confirmed that awarding spousal support prior to reapportioning family assets is erroneous because it causes the court to consider a respondent’s need to become and remain economically independent and self-sufficient twice. The Court reapportioned the family assets between the parties and then adjusted retroactive and ongoing spousal support to reflect the means of the parties in light of the apportionment of the family assets.


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Jaffer v. York University, 2010 ONCA 564 Areas of Law: Education; Human Rights Judge Under Appeal: Justice Pitt BACKGROUND


he appellant enrolled in York University and began his studies in 2006. Because of his Down’s Syndrome, the appellant communicated with York prior to and after commencing his studies to discuss what accommodations he should receive. No agreement was reached. In the spring of his first year, one of the appellant’s professors gave him the opportunity to resubmit a paper and indicated that he would not receive a failing grade but instead his record would

show a deferred status with respect to that course. When he attempted to register for second year, he learned that he failed and had no credit from his first year. The appellant brought an action against York alleging breach of contract, negligence, negligent misrepresentation and a breach of a duty of good faith arising from York’s failure to accommodate him as a student with a disability. The respondent brought a motion under Rule 21 of the Rules of Civil Procedure to strike the

pleadings as disclosing no cause of action or a lack of jurisdiction on the part of the court. The motions judge determined that the matter fell outside the court’s jurisdiction because the issue of expulsion ought to be dealt with by the University, and the issue of accommodation by the Ontario Human Rights Commission.



The appeal was allowed in part. On the issue of whether the Superior Court has jurisdiction to deal with academic matters, the Court relied on its recent decision in Gauthier c. Saint-Germain, 2010 ONCA 309 to find that the Superior Court may have jurisdiction to hear an action against a university in relation to academic activities. According to Gauthier, the remedy sought will be determinative of the jurisdiction of a claim, with judicial review being the appropriate course of action to reverse an internal academic decision of a university. However, the court will have jurisdiction if the claim is based in contract or tort and the claimant seeks an award of damages. The Court evaluated the appellant’s pleadings and found them insufficient to ground a claim against York. In accordance with established jurisprudence, a breach of the Human Rights Code is not an actionable tort but may be relevant to a cause of action in contract or negligent misrepresentation. The Court also concluded that the contractual relationship between the appellant and respondents did not imply a duty on the part of the respondent to accommodate the appellant’s disability. Instead of striking the pleadings, the Court allowed the appellant to amend his pleadings to include facts that would demonstrate an agreement with York that gave rise to a duty to accommodate. Likewise, the Court allowed the appellant to amend his pleadings in respect of the negligent misrepresentation claim to plead facts that would link the conduct of the professor in making representations to him to the damages the appellant claimed.


1.888.894.4280 | Salah v. Timothy’s Coffees of the World Inc., 2010 ONCA 673 Areas of Law: Contracts; Franchising Under Appeal: Justice Metivier BACKGROUND

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head lease with the mall when the current lease Records and Documentation If you up, are carrying on a business, you was the respondent’s are required to keep adequate records franchise agreement would that provide sufficient details and be renewed withhow a new support to determine much tax you owe. Estimates and incomplete sub-lease. The respondent information are not acceptable to CRA. assigned the franchise In this regard, I refer you to CRA’s agreement, and Guide RC4409 sublease Keeping Records, which can security be found on CRA’s Website. general agreement his newly incorporated AtoCompany Another way tocompany do businessbut, is through numbered aincompany. A company is a separate accordance with the legal entity that can undertake to appellant’s policy, the in its do business and own property own name. A company has its own assignment and guarantee requirements to file tax returns, pay expressly stipulated that taxes, and meet other obligations. respondent Athe company pays tax remained at different rates than does an individual personally liable forproprietor. franchise obligations the There may under be circumstances where it is tax-efficient to doBefore business franchise agreement. through a company or where liability the head with the mall issues makelease incorporation a prudent expired, the appellant entered choice. a new lease in the mall, for There are costs associated witha incorporation, however. and Before making different location, signed a decision, you should carefully a new franchise agreement consider the costs of incorporating and for thatonlocation with another carrying an incorporated business and compare them the benefits that franchisee. Thetoappellant would be gained by doing so. advised the respondent that, Professional is lease, at the end of advice the head recommended to assist you in making his assessment. franchise agreement this would terminate. The Caution respondent was successful This article is not intended to provide aatcomplete summary of issues and trial and was awarded requirements relating to individuals damages for breach of the in business; it highlights a few franchiseconsiderations. agreement and preliminary The comments herein based breach ofprovided the duty ofare good on information available at the faith mandated by s.3 oftime the of writing and are general in nature. Arthur Wishart (Franchise We recommend thatAct individuals consult their own tax advisors before Disclosure), 2000 (the “Act”). acting on information contained in The trial judge found that the this article, to ensure that their own breachcircumstances of the dutyand of good specific current tax legislation into account. s faith wasareantaken independent actionable wrongCA, and Kathryn G. Edwards, is a Partner with Pagnanini Edwards Lam awarded damages for Chartered the Accountants. breach and the imposition of mental distress it caused. Volume 19 Number 2 Summer 2010

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Salah v. Timothy’s Coffees of the World Inc., (cont.) APPELLATE DECISION

The appeal was dismissed. The appellant argued that only the numbered company to whom the franchise agreement was assigned could bring an action, but the Court agreed with the trial judge that both the respondent personally and his numbered company were franchisees of the appellant. As a result, they could be treated as one entity for the purpose of enforcing the agreement. This conclusion was strengthened by the appellant’s insistence that the respondent remain personally liable for obligations pursuant to the franchise agreement despite the assignment. The Court then addressed the duty of good faith imposed by the Act, and agreed with the trial judge’s factual findings that the appellant deliberately kept the respondent in the dark about its intentions regarding a new location for the coffee shop in the mall, withheld critical information, and did not return phone calls. The appellants argued that the trial judge erred by awarding non-pecuniary damages to the respondent arising from its breach of the Act, however, the Court concluded that the Act is remedial legislation and requires a broad and liberal interpretation. The goal of the Act is to redress the imbalance of power inherent in franchise relationships and to provide a remedy to franchisees when the franchise relationship is abused. As such, restricting damage awards to proven pecuniary losses would be inconsistent with this approach, and the Court concluded that the trial judge correctly awarded damages for the breach of the duty of good faith in addition to compensation for pecuniary losses.

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Ontario Take Five November 2010  

The November 2010 Ontario edtion of OnPoint Legal Research's monthly newsletter, summarizing the top five cases from the Ontario Court of Ap...

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