1196303 Ontario Inc. v. Glen Grove Suites Inc. et al., (2015) 337 O.A.C. 85 (CA)

• Judge: Weiler, Laskin and Epstein, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: Wednesday February 11, 2015
• Jurisdiction: Ontario
• Citations: (2015), 337 O.A.C. 85 (CA);2015 ONCA 580

1196303 Ont. v. Glen Grove Suites (2015), 337 O.A.C. 85 (CA)

MLB headnote and full text

Temp. Cite: [2015] O.A.C. TBEd. AU.021

1196303 Ontario Inc. (plaintiff/respondent) v. Glen Grove Suites Inc., Spendthrift Developments Limited, Firm Capital Mortgage Fund Inc., Nelly Zagdanski and Linda Darer, Estate Trustees of Sylvia Hyde, deceased, 1297475 Ontario Inc., Montreal Trust Company of Canada and Royal Trust Corporation of Canada (defendants/appellants)

(C58149; 2015 ONCA 580)

Indexed As: 1196303 Ontario Inc. v. Glen Grove Suites Inc. et al.

Ontario Court of Appeal

Weiler, Laskin and Epstein, JJ.A.

August 26, 2015.

Summary:

In 1990 and 1991, a group of investors loaned Edwin Hyde, husband of Sylvia Hyde, several million dollars. Glen Grove Suites Inc. owned valuable long-term leases on a Yonge Street property. In 1993 and 1994, Edwin transferred his beneficial interest in the property and 100% of the Glen Grove shares to Sylvia, who also owned 100% of the shares of 1297475 Ontario Inc. (129), a shell company. Edwin operated Glen Grove and 129 on Sylvia's behalf. In 1996, 1196303 Ontario Inc. (119) was formed to represent the investors. In 1997, 119 petitioned Edwin into bankruptcy. It had a proof of claim for over $10.9 million. Edwin's creditors regarded the transfers to Sylvia as reviewable transactions in the bankruptcy. In 2002, 129 offered to purchase 119's proof of claim. The purpose was to neutralize any claims against Sylvia. 119 and 129 entered into a settlement agreement that purported to place guarantee and security obligations on Glen Grove. Edwin died an undischarged bankrupt before the settlement agreement was approved by the court in 2004. 129 took no steps to fulfill its obligations under the settlement agreement. 119 sought judgment in accordance with the settlement from 129, Sylvia, Glen Grove and Spendthrift (another Sylvia-owned corporation).

The Ontario Superior Court, in a decision reported at [2013] O.T.C. Uned. 7284, held that the settlement was binding on Glen Grove and Spendthrift, but not Sylvia, personally. Glen Grove and Spendthrift appealed.

The Ontario Court of Appeal dismissed the appeal as it related to Glen Grove and allowed the appeal as it related to Spendthrift.

Agency - Topic 301

Creation of relations - General - What constitutes - In 1990 and 1991, a group of investors loaned Edwin Hyde, husband of Sylvia Hyde, several million dollars - Glen Grove Suites Inc. owned valuable long-term leases on a Yonge Street property - In 1993 and 1994, Edwin transferred his beneficial interest in the property and 100% of the Glen Grove shares to Sylvia, who also owned 100% of the shares of 1297475 Ontario Inc. (129), a shell company - Edwin operated Glen Grove and 129 on Sylvia's behalf - In 1996, 1196303 Ontario Inc. (119) was formed to represent the investors - In 1997, 119 petitioned Edwin into bankruptcy - It had a proof of claim for over $10.9 million - Edwin's creditors regarded the transfers to Sylvia as reviewable transactions in the bankruptcy - In 2002, 129 offered to purchase 119's proof of claim - The purpose was to neutralize any claims against Sylvia - 119 and 129 entered into a settlement agreement that purported to place guarantee and security obligations on Glen Grove - Edwin died an undischarged bankrupt before the settlement agreement was approved by the court in 2004 - 129 took no steps to fulfill its obligations under the settlement agreement - 119 sought judgment in accordance with the settlement - Glen Grove asserted that it had no knowledge of the settlement and no dealings with 129 or 119 in respect of it - The Ontario Court of Appeal held that Glen Grove was bound by the settlement agreement - Glen Grove and 129 intended to create an agency relationship - Glen Grove authorized 129 to act as its agent in negotiating and providing security under the settlement - The settlement had to be interpreted in light of the agency relationship and of 129's authority to offer security and a guarantee on Glen Grove's behalf - While Edwin controlled Glen Grove, he caused it, through 129, to enter into the settlement - When Edwin died, Glen Grove's position changed - It no longer considered itself bound - Glen Grove was not entitled to resile from the settlement - The fact that Sylvia was unhappy with the obligations that Edwin had caused Glen Grove to incur was irrelevant - Where parties had made an agreement that was subject to court approval, they did not have any power to resile from that agreement prior to the obtaining of court approval - See paragraphs 67 to 77.

Agency - Topic 6705

Liability of principal and agent to third party - General - Liability of both for same debt - In 1990 and 1991, a group of investors loaned Edwin Hyde, husband of Sylvia Hyde, several million dollars - Glen Grove Suites Inc. owned valuable long-term leases on a Yonge Street property - In 1993 and 1994, Edwin transferred his beneficial interest in the property and 100% of the Glen Grove shares to Sylvia, who also owned 100% of the shares of 1297475 Ontario Inc. (129), a shell company - Edwin operated Glen Grove and 129 on Sylvia's behalf - In 1996, 1196303 Ontario Inc. (119) was formed to represent the investors - In 1997, 119 petitioned Edwin into bankruptcy - It had a proof of claim for over $10.9 million - Edwin's creditors regarded the transfers to Sylvia as reviewable transactions in the bankruptcy - In 2002, 129 offered to purchase 119's proof of claim - The purpose was to neutralize any claims against Sylvia - 119 and 129 entered into a settlement agreement that purported to place guarantee and security obligations on Glen Grove - Edwin died an undischarged bankrupt before the settlement agreement was approved by the court in 2004 - 129 took no steps to fulfill its obligations under the settlement agreement - 119 sought judgment in accordance with the settlement - The Ontario Court of Appeal held that Glen Grove was bound by the settlement agreement - The court rejected Glen Grove's argument that judgment could not be obtained against Glen Grove because 119 had elected to obtain a default judgment against 129 - 119 was entitled to judgment against both 129 and Glen Grove - Neither election nor merger arose - The rationale underlying both doctrines was that there was only one cause of action - Here, there were distinct obligations owed by 129 and Glen Grove - There was no joint cause of action - Even if there had been one cause of action and Glen Grove and 129 were jointly liable to 119 under the settlement, the common law rule that judgment against one person jointly liable released the other had been abrogated in Ontario by s. 139(1) of the Courts of Justice Act - See paragraphs 78 to 86.

Agency - Topic 6761

Liability of principal and agent to third party - Contracts - Election by third party - [See Agency - Topic 6705].

Company Law - Topic 4801

Contracts by companies - Contracts by agents - General - [See Agency - Topic 301].

Contracts - Topic 7406

Interpretation - General principles - Interpretation by context - [See Agency - Topic 301].

Courts - Topic 2103

Jurisdiction - Appellate jurisdiction - Issues - In 1990 and 1991, a group of investors loaned Edwin Hyde, husband of Sylvia Hyde, several million dollars - Glen Grove Suites Inc. owned valuable long-term leases on a Yonge Street property - In 1993 and 1994, Edwin transferred his beneficial interest in the property and 100% of the Glen Grove shares to Sylvia, who also owned 100% of the shares of 1297475 Ontario Inc. (129), a shell company - Edwin operated Glen Grove and 129 on Sylvia's behalf - In 1996, 1196303 Ontario Inc. (119) was formed to represent the investors - In 1997, 119 petitioned Edwin into bankruptcy - It had a proof of claim for over $10.9 million - Edwin's creditors regarded the transfers to Sylvia as reviewable transactions in the bankruptcy - In 2002, 129 offered to purchase 119's proof of claim - The purpose was to neutralize any claims against Sylvia - 119 and 129 entered into a settlement agreement that purported to place guarantee and security obligations on Glen Grove - Edwin died an undischarged bankrupt before the settlement agreement was approved by the court in 2004 - 129 took no steps to fulfill its obligations under the settlement agreement - 119 sought judgment in accordance with the settlement - The trial judge held that the settlement was binding on Glen Grove - The Ontario Court of Appeal dismissed Glen Grove's appeal on the basis that 129 had acted as Glen Grove's agent - Although the case was not argued on the basis of agency, it was appropriate for the court to dismiss the appeal on that basis - The question of agency was argued at first instance and the evidentiary record was sufficient to decide the issue - Agency was neither a new issue raised on appeal nor a new issue raised by the court - See paragraphs 87 to 93.

Equity - Topic 4706

Election - Judgments - Effect of judgment against alternatively liable defendants - [See Agency - Topic 6705].

Equity - Topic 5041

Merger - Judgments - General - [See Agency - Topic 6705].

Practice - Topic 9854

Settlements - Enforceability - General - [See Agency - Topic 301].

Practice - Topic 9864

Settlements - Interpretation - [See Agency - Topic 301].

Cases Noticed:

Welham v. Director of Public Prosecutions (1960), 44 Cr. App. R. 124 (H.L.), refd to. [para. 45, footnote 3].

R. v. Vallillee (1974), 15 C.C.C.(2d) 409 (Ont. C.A.), refd to. [para. 45, footnote 3].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [para. 50].

H.L. v. Canada (Attorney General) et al., [2005] 1 S.C.R. 401; 333 N.R. 1; 262 Sask.R. 1; 347 W.A.C. 1; 2005 SCC 25, refd to. [para. 50].

Salomon v. Salomon & Co., [1897] A.C. 22 (H.L.), refd to. [para. 56].

Martinez De Morales v. Lafontaine- Rish Medical Group Ltd. et al., [2009] O.T.C. Uned. E44; 178 A.C.W.S.(3d) 36 (Sup. Ct.), affd. [2010] O.A.C. Uned. 26; 184 A.C.W.S.(3d) 373; 2010 ONCA 59, refd to. [para. 59].

Applewood Place Inc. v. Peel Condominium Corp. No. 516 et al., [2003] O.T.C. 752; 11 R.P.R.(4th) 253 (Sup. Ct.), refd to. [para. 69].

Francis v. Dingman (1983), 2 D.L.R.(4th) 244 (Ont. C.A.), leave to appeal denied (1984) 23 B.L.R. 234n (S.C.C.), refd to. [para. 71].

Ogdensburg Bridge and Port Authority v. Edwardsburg (Township) (1966), 59 D.L.R.(2d) 537 (Ont. C.A.), leave to appeal denied (1967), 59 D.L.R.(2d) 546n (S.C.C.), refd to. [para. 71].

Creston Moly Corp. v. Sattva Capital Corp., [2014] 2 S.C.R. 633; 461 N.R. 335; 358 B.C.A.C. 1; 614 W.A.C. 1; 2014 SCC 53, refd to. [para. 74].

Wu Estate v. Zurich Insurance Co. et al. (2006), 211 O.A.C. 133 (C.A.), leave to appeal denied (2006), 362 N.R. 399 (S.C.C.), refd to. [para. 77].

Bridges & Salmon v. Ship Swan (Owner) et al., [1968] 1 Lloyd's Rep. 5 (H.C.), refd to. [para. 81].

Chartwell Shipping Ltd. v. Q.N.S. Paper Co., [1989] 2 S.C.R. 683; 101 N.R. 1; 26 Q.A.C. 81, refd to. [para. 81].

CFGM 1320 Radio Broadcasting Ltd. v. Doyle (1987), 17 C.P.C.(2d) 65 (Ont. Dist. Ct.), refd to. [para. 85].

R. v. Perka, Nelson, Hines and Johnson, [1984] 2 S.C.R. 232; 55 N.R. 1, refd to. [para. 87].

R. v. Mian (M.H.), [2014] 2 S.C.R. 689; 462 N.R. 1; 580 A.R. 1; 620 W.A.C. 1; 2014 SCC 54, refd to. [para. 87].

Brown v. Belleville (City) (2013), 302 O.A.C. 354; 359 D.L.R.(4th) 658; 2013 ONCA 148, refd to. [para. 96].

Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd., [1999] 3 S.C.R. 108; 245 N.R. 88; 127 B.C.A.C. 287; 207 W.A.C. 287, refd to. [para. 97].

Seip & Associates Inc. v. Emmanuel Village Management Inc. et al. (2009), 247 O.A.C. 78; 2009 ONCA 222, refd to. [para. 98].

Chan et al. v. City Commercial Realty Group Ltd. et al., [2011] O.T.C. Uned. 2854; 90 C.C.E.L.(3d) 235; 2011 ONSC 2854, refd to. [para. 98].

Smith v. National Money Mart Co. et al. (2006), 209 O.A.C. 190; 80 O.R.(3d) 81 (C.A.), leave to appeal denied (2006), 359 N.R. 398 (S.C.C.), refd to. [para. 98].

Gasparini et al. v. Gasparini et al. (1978), 20 O.R.(2d) 113 (C.A.), refd to. [para. 98].

Authors and Works Noticed:

Beale, H.G., ed., Chitty on Contracts (31st Ed. 2012) vol. 1, p. 18-003 [para. 95].

Fridman, Gerald, Canadian Agency Law (2nd Ed. 2012), pp. 4 [paras. 69, 70]; 5 [para. 70]; 41 to 43, 53 to 55 [para. 70, footnote 4].

Harvey, Cameron and MacPherson, Darcy, Agency Law Primer (4th Ed. 2009), pp. 111 to 115 [para. 80].

McCamus, John D., The Law of Contracts (2nd Ed. 2012), p. 324 [para. 97].

Watts, Peter and Reynolds, F.M.B., Bowstead & Reynolds on Agency (20th Ed. 2014), p. 8-115 [para. 80].

Counsel:

Micheal Simaan, for the appellants;

Fred Tayar, for the respondent.

This appeal was heard on February 11, 2015, by Weiler, Laskin and Epstein, JJ.A., of the Ontario Court of Appeal. On August 26, 2015, the court released its decision, including the following opinions:

Weiler, J.A. - see paragraphs 1 to 112;

Epstein, J.A., concurring - see paragraphs 113 and 114.