On February 22, 2012, the Superior Court of Justice issued a decision in a matrimonial case called Decraemer v. Decraemer.  The case involved a settlement agreement between separating spouses in which a critical term was missed by both sides. 

During the course of their marriage, the parties both owned shares in a construction company.  The wife alleged that the shares resulted from her husband’s employment by the company and that some of the shares had been put into her name for tax reasons.  During the marriage, any taxes relating to the shares were paid by the husband. 

After they separated, the shares in her name were converted into an income fund.  This triggered a tax liability of about $485,000. 

Canada Revenue Agency came after the wife for payment.  She took the position that the tax liability was really that of her former husband. 

The parties agreed to arbitrate the financial issues arising upon their separation.  Ultimately, they settled the dispute.  Their agreement called for the husband to pay the wife over $1.6 million including a payment of almost $1 million for child support.  By the time that they entered into their settlement agreement, the husband was well aware that the wife expected him to take responsibility for the tax debt.

Incredibly, and even though both parties were represented by counsel, neither of them turned their minds to the tax issue when negotiating their settlement agreement.  The wife never addressed it even though she had been the one to put forward the argument with CRA that her husband ought to take responsibility for it.  The husband never addressed it in the settlement negotiations even though he knew that this was his wife’s position with CRA.  The agreement clearly specified that it was intended to settle all disputes between them.

After the settlement agreement was made, and the husband was alerted by the Department of Justice to the fact that he might be brought into the tax proceedings against the wife as a potentially liable party, he refused to complete the settlement unless the wife agreed to indemnify him with respect to the tax debt. 

Not surprisingly, the wife refused to provide any indemnity.

The husband then brought a motion asking the court to enforce the award with an Order finding that it was an implied term of the settlement that the wife indemnify him for any tax arrears that might be attributed to him by the Canada Revenue Agency.  The wife responded by asking the court to enforce the settlement agreement “as is” and without any indemnity clause.  In summary, both wanted to enforce the settlement but neither agreed to be responsible for the tax debt.  Both parties maintained that had they known at the time of the settlement that they would be responsible for the tax debt, neither would have agreed to the settlement.  Both claimed that if either one had to pay almost $500,000 in taxes, it would significantly change the compensation package to which they had agreed.

The judge hearing the motion recognized that he had the authority to enforce the agreement as it was written.  However, the judge also noted that he had the right to vary or set aside the agreement on the grounds of mistake or, in the particular case of an agreement made under Ontario’s Family Law Rules, to change the agreement to deal with the matter that had not been determined. 

After review, the judge concluded that what he had before him was a matter of mutual mistake.  He felt that the potential tax liability was so large that one would think it should have been specifically addressed.  Accordingly, he set aside the settlement agreement and left the parties to continue their lawsuit.  According to the judge, “given the facts of the case, that is the only equitable thing to do”.

He also concluded that even if the mistake was only that of the husband, who apparently did not contemplate that he would be at risk for the tax debt and never intended to bear that risk, that was sufficient to justify the settlement agreement being set aside entirely. 

It should be borne in mind that had he chosen to do so, the judge could have amended the settlement to include a provision for indemnification.  Obviously, he declined to do so because there was no evidence that the wife would have ever agreed to this settlement on that basis had it been raised in a timely way.

It is difficult to understand how the parties could have settled a matrimonial dispute involving a significant amount of money without addressing a live issue of such magnitude.  In this particular case, the husband was exceedingly fortunate because courts are very reluctant to set aside settlement agreements except in rare and unusual cases.  This was such a case.  However, the case is a good reminder of the importance, when settling cases, to make sure to cover all of the issues in dispute.

The National Automobile Dealer Arbitration Program, or NADAP, was instituted in late 2006 providing a process for dispute resolution as between manufacturers and dealers.  It specifically does not apply to disputes between one dealer and another or between one manufacturer and another.  As between a manufacturer and a dealer, however, it is mandatory that any disagreement arising out of a dealer agreement or its interpretation or application, including the question as to whether or not the dispute itself does arise under the terms of the dealer agreement, must be mediated and then arbitrated under the NADAP rules.

For the most part, dealers are fortunate to have the NADAP process available to them.

If a manufacturer or a dealer initiates a lawsuit in connection with such a disagreement, the party being sued can bring a motion to the court to have the lawsuit stopped so that the initiating party is forced to proceed under the NADAP rules.

While it is impossible to articulate every single type of dispute that might arise under the dealer agreement and thereby be subject to the NADAP rules of mediation and arbitration, the rules do list a number of examples of such disputes.  The examples suggest that to a significant extent, the rules exist to protect dealers by permitted dealers to challenge what may be arbitrary or unreasonable decisions on the part of manufacturers.  Some of these would include: Continue reading →

The Ontairo Court of Appeal recently released its decision in Combined Air Mechanical Services Inc. v. Flesch, in which it clarified the current law on summary judgments.  Its implications are significant and, no doubt, will impact on a number of smaller and simpler cases but will it have any effect on complex litigation?

The motion court judge has to fully appreciate the evidence and issues in a way that permits a fair adjudication of the dispute.

In a decision released on January 19, 2012 called Honest Art Inc. v. Decode Entertainment Inc., Mr. Justice Belobaba heard a motion for summary judgment in which the parties filed 16 volumes of material.  The material was filled with conflicting evidence across a range of interconnected and complex issues.  The key issue in the case related to discoverability.  The Plaintiff commenced its action soon after receiving an auditor’s report detailing the nonpayment of monies allegedly owned by the Defendant.  The Defendant argued that the cause of action had materialized many years before, when the Plaintiff had received one of the Defendant’s accounting reports in which it should have noticed allegedly improper deductions which would have been “obvious” to any reader.  As the Plaintiff waited for a number of years before suing, the Defendant argued that the claim was now statute barred.  Continue reading →

The Superior Court of Ontario recently dealt with a case in which a former mayoralty candidate brought a motion to force the operators of a web blog to identify people who had made anonymous postings, in order to sue them for defamation.

It might be assumed at first blush that anyone authoring a post on an anonymous basis can consider himself or herself to be free of any possible liability of defamation. That assumption would be incorrect.

The Plaintiff, Phylis Morris, had been the mayor of the Town of Aurora until 2010.  She ran for re-election at the end of that year and lost. 

The dispute revolved around a website called auroracitizen.ca which the Court described as a forum for political speech by way of web postings.  People choosing to post on that site were free to determine their level of privacy by identifying themselves, signing under a pseudonym, or remaining anonymous. 

Ms. Morris evidently felt that certain posts, placed on the website anonymously during the campaign, were defamatory.  Since she had no way of identifying the authors of those posts, she brought a motion against several individuals said to be in control of the website for an Order that they identify those authors.  Continue reading →

On January 18, 2012, the Ontario Court of Appeal released its decision in Jones v. Tsige conclusively recognizing invasion of privacy as an actionable tort in Ontario.

Ms. Jones and Ms. Tsige both worked for the Bank of Montreal, at different branches.  They did not know or work with each other.  However, Tsige became involved in a relationship with Jones’ former husband and for four years, Tsige used her workplace computer to access Jones’ personal accounts maintained at the Bank of Montreal at least 174 times.  In doing so, she obtained information concerning the details of transactions as well as personal information. 

Tsige did not publish, distribute or record the information, but she maintained that she had become involved in a financial dispute with Jones’ former husband and accessed the accounts to confirm what he was saying about how much he was paying to Jones in child support.  Jones did not accept that explanation, saying that it was inconsistent with the timing and frequency of Tsige’s snooping. 

Tsige admitted that her behaviour was improper, and the Bank disciplined her for breaching the Bank’s internal rules.  Nevertheless, Jones sued Tsige for damages for invasion of privacy as well as punitive damages.  Continue reading →

Several weeks ago, the Ontario Superior Court of Justice issued a ruling on a case entitled In the Matter of the Sandra Thompson Family Trust dealing with a private dispute and an associated complaint to the Law Society of Upper Canada. 

The case involved the administration of a family trust set up by one Elizabeth Thompson who subsequently died.  The beneficiaries of the trust were her daughters, Sandra and Nancy.  After her mother’s death, Sandra Thompson filed a complaint with the Law Society concerning what she believed to be serious mismanagement of the trust by one of the trustees, a lawyer. 

Before the complaint to the Law Society could be the dealt with, litigation arose between the lawyer/trustee and his co-trustee on the one hand, and the Thompson daughters on the other.  The essence of the dispute had to do with the fees being charged by the two trustees.  Continue reading →

Courts are normally very careful about preventing Plaintiffs from obtaining anything that looks like a double recovery.  However, a case decided by the Ontario Court of Appeal a few months ago called Krawchuk v. Scherbak is a rare example of exactly that. 

In this case, Mrs. Krawchuk bought a house in Sudbury in 2004 for about $110,000.  At the time that she completed the transaction, as was frequently done at that time and as is almost always done today, she purchased title insurance. 

Soon after she moved in, she discovered serious structural problems.  The City of Sudbury was contacted and it issued a work order requiring the rectification of the structural problems which were discovered.  The work to be done was extensive.  It required the removal of the house from its foundation, the excavation of its cement floor, the replacement of the subsoil and installation of new footings, foundation and cement floor, and then the replacement of the house on its new foundation.  Additional repair work was required because of the damage caused by moving the house to the extent necessary to make the repairs.  In fact, the cost of rectifying the problem amounted to over $191,000, almost double the amount she had paid for the house.

This represents yet another excellent reason to purchase title insurance whenever it is available.

Continue reading →