Most Ontarians fortunate enough to own cottage property, and particularly property fronting on water, will be familiar with the desirability of reasonable cooperation with their neighbours.  After all, cottage owners typically look at their recreational properties as sources of stress relief.  However, sometimes the spirit of neighborliness is misinterpreted and disputes begin.  In my experience, these disputes can often be laden with emotion and, therefore, hard fought.  So much for stress relief!

In the Court of Appeal decision in Kubiniec v. Dy, the Court dealt with an appeal from a judgment after a five-day trial in a case between neighbouring cottage owners on Lake Erie.

The parties owned lands next to each other.  Both parties’ lands included waterfront access, but the plaintiff’s waterfront was rocky and marshy and lacked a sand beach.  For that reason, the plaintiff’s access to the lake from his property was less convenient.

As a result, from about 1970, the plaintiff and his family had accessed the lake using a footpath and other land area on the defendants’ property, for the purpose of swimming and boating and, according to the plaintiff, to enjoy his cottage property generally.  The plaintiff claimed to have done so continuously until 2016 without any specific permission from the defendants.  The plaintiff insisted that this use was necessary for his better enjoyment of his own property and, in fact, the plaintiff tendered an evidence that he had maintained the area on the defendants’ property which he was using. 

In 2016, the defendants put a stop to it and even called the police to try to get the plaintiff charged with trespassing.  This led to the commencement of this lawsuit in 2017 in which the plaintiff asked the Court to order, among other things, that he had a prescriptive easement over that part of the defendants’ property that he and his family had been using for decades.  The plaintiff argued that the defendant had acquiesced to the plaintiff’s use of the lands for a period of at least 20 years, as required by the law on the subject, and that the easements were necessary to the plaintiff for the reasonable use of his own property. 

These arguments were all dismissed by the trial judge. 

To establish a prescriptive easement, the plaintiff must show that for a period of 20 years he has demonstrated use as of right that is open and without permission.  He must establish that the defendant must have known about that use and acquiesced to it. The entire 20-year period must have been completed prior to the conversion of the property in issue into the Land Titles system.

In this case, the trial judge concluded that the plaintiff’s use was with the tacit permission of the defendants’ predecessors-in-title as an act of good neighbourliness consistent with the local community culture and a long-standing tradition.  The trial judge specifically stated “I failed to see how such permissive use in these circumstances can lead to a proprietary right”.  Lack of objection, in other words, will not always amount to acquiescence.

In terms of necessity, whether an easement is reasonably necessary will depend on the nature of the property and the purpose of the easement.  A purpose that consists of recreation or amusement is not going to suffice and convenience is not the test.  In this case, the plaintiff’s property was not landlocked and while his own access to the lake was less convenient, he still had some access.  He could also use another route not involving the defendants’ property that would only add a few minutes to the process.

The Court of Appeal accepted all of these findings of fact, as it inevitably will do. The Court of Appeal has stated, many times, that it will not readily interfere with a judge’s findings of fact except in rare instances.

Accordingly, the appeal was dismissed.

I have been involved a number of cottage property disputes of this nature.  These cases are always completely fact specific but in my experience it is fair to say that if the Court concludes that a party is being a good neighbour, that party is almost certainly not going to be punished for it.

The recent Court of Appeal decision in Winona Park Towns Ltd. and Alleghe Mortgage Fund Ltd. provides a useful judicial assessment of the current state of the duty of good faith as it applies to mortgage lenders.

In this case, Alleghe Mortgage Fund Ltd. loaned $2 million to Winona Park Towns Ltd. for a seven month term with interest at 12% per annum for the first 6 months and 18% thereafter.  Winona provided security in the form of a second mortgage on land being developed by Winona.

The loan was intended to cover some of the development costs, and about $1.76 million of the $2 million was paid directly to the City of Toronto to cover the cost of building permits.

Winona signed a document at the outset authorizing Alleghe to cancel the building permits and having the money that had been paid to the City refunded to Alleghe, presumably in the event of default.

The mortgage agreement also included a term allowing Alleghe to pay out any encumbrance on title and add the amount paid to the encumbrancer to the principal owing under its loan.

Three months after the loan was made, Winona breached the agreement by missing an interest payment.  Alleghe delivered a Notice of Sale and started a lawsuit against Winona.  Winona asserted a counterclaim.

As Alleghe had the right to pay out any encumbrancers, it elected to pay about $6.2 million to the 1^st mortgagee to discharge the first mortgage on the property.

The matter went before the Court by way of summary judgment.  The motion judge granted summary judgment to Alleghe in the amount of the original loan, the amount paid to the 1^st mortgagee, and interest at 18% per year.

Winona appealed to the Court of Appeal.  Winona’s argument was that Alleghe had breached its duty of good faith by failing to exercise its right to cancel the application for building permits and require the City to return the funds paid to it for those permits, amounting to all but about $250,000 of the original loan.  Winona’s argument was that had Alleghe done so, Winona would have been in a position to pay the relatively nominal balance owing under the mortgage to Alleghe and solve the problem.  Instead, Alleghe chose to pay out over three times the amount of the original loan to the 1^st mortgagee which increased the amount of the debt exponentially, thereby ending up with an enormous judgment bearing interest at a high rate.

The Court of Appeal dismissed the appeal.  It declined to interfere with the conclusion of the motion judge that the lender was not under any duty of good faith in the performance of its contractual duties to act in a manner that was in the best interest of the borrower, rather than pursuing what it reasonably believed to be its own best interest.  In this case, if Alleghe concluded that it made the most sense to sell the property with building permits attached, it was at liberty to do so.

The Court of Appeal observed that while Alleghe could have obtained partial repayment by cancelling the building permits, that cancellation would have reduced the value of the property, thereby putting at risk its prospects of obtaining repayment of the balance of its loan from a sale under power of sale.

This is a remarkable conclusion given that on the evidence before the Court, the property had substantial value and this was apparently Alleghe’s belief given that it had been attempting to sell it for at least $8.5 million.  While this type of valuation might well put Alleghe at risk in terms of recovering the balance under its own loan together with the amount paid out to the 1^st mortgagee, one could easily conclude that the value of the property would have been more than enough to cover the approximately $250,000 that would have remained owing had Alleghe cancelled the building permits.

In any event, and notwithstanding these points, the Court of Appeal determined that the motion judge had every right to conclude that Alleghe’s conduct in exercising its rights did not demonstrate bad faith and given that there was evidence upon which that conclusion could be reached, the Court of Appeal declined to interfere with it.

This is a case in which, on a business basis, it would be easily to sympathize with Winona’s position.  Without a doubt, it would have been reasonable for Alleghe to cancel the permits and reduce the amount outstanding by substantial margin.  Nevertheless, it made the business decision not to do so.  That decision was open to it under the documentation and that ended the matter.  The fact that other lenders might have acted differently in these circumstances is simply not relevant.  This is an important consideration for borrowers to bear in mind.

The Ontario government’s legislation arising out of the COVID pandemic has given rise to a number of business disputes.  Many of them, for example, relate to commercial leases and the question of whether or not a tenant can rely on the government’s requirement that the tenant close its business for various periods of time as a basis for refusing to pay rent.

The legislation has also given rise to more fundamental questions, including its impact on the freedoms guaranteed to Canadian citizens in our Charter of Rights and Freedoms.

This was addressed in a constitutional challenge presented by former MPP, Randy Hillier in his application against the Province of Ontario in which he challenged the constitutionality of certain government regulations restricting the rights of Ontario citizens to gather outdoors. 

The Court of Appeal addressed this question in a recent decision worth considering.

As we will all recall, after the outset of the pandemic the Ontario government passed regulations prohibiting people from attending gatherings outdoors.  The regulation included exceptions for weddings, funerals and religious services provided that the number of people involved was limited to 10.

No exception was provided for any other peaceful assembly, such as political protests. 

Mr. Hillier attended several such protests between April and May 2021, made illegal by the COVID legislation, and allegedly acted as their host or organizer.  As a result of two of them, he was charged with provincial offences under which, had he been found guilty, he would have faced a substantial fine and possible imprisonment. 

Mr. Hillier challenged the constitutionality of those regulations on the basis that they contravened his right under section 2(c) of the Canadian Charter of Rights and Freedoms to peaceful assembly.

The Charter provides, in its section 1, that the rights and freedoms set out in it are subject to such reasonable limits prescribed by law as can be demonstrably justified.  Mr. Hillier’s argument was that the restrictions on his right to peaceful assembly could not be justified and that therefore, they were unconstitutional and unenforceable.

The judge at first instance disagreed with Mr. Hillier and ruled that the gathering limits were demonstrably justified.  Mr. Hillier appealed to the Court of Appeal.

The Court of Appeal observed that government decisions attempting to balance competing interests during the health crisis was deserving of a measure of deference.  As the Court said, Ontario should not be held to a standard of perfection.  Furthermore, hindsight is not the proper lens through which to view the necessity of the gathering limits of which Mr. Hillier complained.  Instead, the Court should contextually consider what was known and considered by the government at the time it imposed the limits. 

The Court pointed out, quoting an earlier text, that in principle, freedom of assembly works in concert with other fundamental freedoms. It forms part of an interrelated system that serves core democratic functions, such as freedom of expression.  Assemblies can leverage a message of protest or dissent, forcing the community to pay attention.  Assemblies with a political message (such as those attended by Mr. Hillier) should receive a “heightened level of accommodation and protection”.

Accordingly, as a form of peaceful assembly, political protests are given constitutional protection.  In this case, the ban on such activities was absolute.  There was no exception for gatherings of 10 or less.  They were simply prohibited.

The Court went on to consider whether that prohibition could be justified under section 1 of the Charter.  The Court determined that in order to justify its position, Ontario simply had to establish a reasoned apprehension that such assemblies would run contrary to the objective of preventing the spread of COVID-19 to some extent.  The Court of Appeal had no difficulty agreeing with the motion judge that restricting the gathering of people, even outdoors, was a rational means of reducing the transmission of COVID-19.

However, that was not the end of the story.  Where Charter rights are restricted, it is also necessary to demonstrate that the deprivation is limited to what is reasonably necessary to achieve the government’s objective.  In other words, Ontario had to demonstrate that the less drastic means were unavailable.

This led the Court to analyze the extent to which the ban on peaceful assembly actually mitigated the risk of the spread of COVID-19.  This in turn led to the conclusion that there was no evidence as to the increase in risk that would have been posed by an exemption for outdoor peaceful assembly or protests that matched the exemption for other types of gatherings. 

Furthermore, the Court was clearly troubled by the fact that there was no evidence of the Ontario government that even considered this possibility.

Ultimately, the Court allowed the appeal on the basis that the negative effects of the absolute ban on peaceful assembly exceeded the benefits with respect to the spread of COVID-19.  The Court determined that the outright ban could not meet the minimal impairment test.

This had to be a close and difficult call to make.  As the Court had observed, this was not an assessment to be made with the benefit of hindsight.  In that sense, the Court was really saying the Ontario government should have considered the impact of an absolute ban on peaceful assembly, and perhaps carved out a 10-person exemption for all gatherings.  And it should have done so while grappling with an unprecedented, life-threatening situation.

The Court was clearly concerned to protect gatherings that involved political protests. Perhaps there was a concern that with an absolute ban, the government was preventing people opposed to the government’s programs in response to the pandemic from making their views known.  Having said that, how many political rallies involve 10 people or less?

As a commercial litigator and a mediator, occasionally I am reminded that all too often, people disregard Court orders in the sincerely held belief that they will get away with it.  Unfortunately, they sometimes do.

For that reason alone, I appreciate those instances in which such people are actually held to account for their sins. 

The recent decision of the Court of Appeal in Canadian Western Bank v Canadian Motor Freight Ltd. et al. is such a case.

In this case, a Receiver was appointed over the assets of a debtor, which was a trucking company.  The Receivership Order required the debtor to turn over its assets, principally a fleet of trucks, to the Receiver without interference.

Instead of doing so, the debtor and its management moved the fleet of trucks to a yard owned by a different entity, United Group.

After unsuccessful negotiations with United Group to recover the trucks, the Receiver obtained an Asset Recovery Order requiring United Group to provide the Receiver with access to its yard so that the Receiver could remove the trucks.  United Group and its management failed to do so and the Receiver made an application to the court to enforce the Order.

The motion judge found that the debtor and its management, and United Group and its management, were in civil contempt of the Receivership Order as well as the Asset Recovery Order.  In a separate hearing, the motion judge sentenced the directing mind of the United Group to four days in prison.  He also ordered others involved to pay significant costs awards.

United Group appealed from the decision, suggesting the motion judge had failed to take into account that there had been negotiations between United Group and its management with the Receiver concerning the Asset Recovery Order.  However, United Group put forward no evidence to contradict the evidence of the Receiver that it had come to United Group’s yard where the trucks were located for the purpose of removing them, but that United Group had refused to allow the Receiver to do so.

For its part, the debtor and its management argued before the Court of Appeal that the movement of the trucks to United Group was undertaken in the normal course of business because there was no room at its own premises to house the trucks.  The Court of Appeal observed that the motion judge, in an earlier Order, had referred to the fact that the implementation of the Receivership Order was being delayed specifically in order to give the debtor’s management time to assemble the trucks at its own premises to allow the Receiver to take possession of them.  At that time, the debtor’s management had made no reference to any need to deliver the trucks to United Group’s yard. 

The Receivership Order had clearly stated that immediate and continued access to the debtor’s property was to be provided and that all such property was to be delivered to the Receiver upon request.  The debtor and its management did not comply with that Order even though the implementation of the Receivership Order had been delayed for that express purpose.

The debtor’s management indicated to the Court that it had not intended to breach the Receivership Order.  The Court of Appeal made it clear that this was not an excuse.  It confirmed well settled law that in order to establish civil contempt, all that is required is proof beyond a reasonable doubt of an intentional act that is in fact a breach of a clear Order of which the person committing the act had knowledge.

In conclusion, the Court of Appeal pointed out that “it is a fundamental principle that orders of a court are to be obeyed.  There are not to be stalled, and they are not to be negotiated.  Serious consequences are to be expected by anyone who willfully fails to obey a Court Order”.  The Appeal was dismissed and presumably, someone spent 4 days in jail.

Call me old fashioned but to me, this was a win for the good guys!