DIGEST
OF RECENT DECISIONS FROM CANADA’S COURTS
Michael Hamilton, LL.B. E-mail: jandm@hfx.eastlink.ca
BANKRUPTCY
& INSOLVENCY
CLAIMS – All monetary liabilities
arising from a collective agreement
were included in the employees’ entitle-
ment to wage protection under the Wage
Earner Protection Program Act and the
Bankruptcy and Insolvency Act.
Appeal by a secured creditor from an
order regarding entitlement to wage protection under the Wage Earner Protection Program Act (WEPPA) and the
Bankruptcy and Insolvency Act (BIA). A
receiver was appointed in respect of T Ltd.
The WEPPA established a scheme whereby
employees could recover a portion of
wages owed by a bankrupt employer. In
addition, the BIA provided a limited priority to wages, salaries, commissions or compensation owed by an employer for services rendered in the six months prior to
bankruptcy. Respondent union contended
that all monetary liabilities arising from
the collective agreement were included in
an employee’s entitlement, regardless of
whether the sums were payable directly to
the employee, or to a third party, such as
the union or a third party benefits or services provider. The receiver rejected the
union’s claim on the basis that an employee’s entitlement was limited to certain
wages paid directly to an employee and
did not include monies paid on an employee’s behalf to third parties. The chambers
judge determined that the entitlement
extended to third party payments. The
judge found that the definition of “wages”
in the WEPPA encompassed all compensation earned by an employee. The secured
creditor appealed.
HELD: Appeal dismissed. The absence
of any reference to third party payments
did not detract from the consideration of
benefits as part of an employee’s compensation package and part of the labour costs
regularly incurred by an employer. It was
always intended that employees had a
measure of benefit over secured creditors.
It was an overstatement to suggest that
such benefit seriously compromised the
rights of creditors given the statutory limitations on an employee’s recoverable
quantum and the extent to which that
quantum was secured. The chambers
judge did not err in the inclusion of third
party benefit payments as wages.
Ted Leroy Trucking Ltd. v. Century
Services Ltd., [2010] B.C.J. No. 821,
B.C.C.A., per Chiasson J.A. (Hall and
Garson JJ.A. concurring), May 06/10.
Digest No. 3005-001 (Approx. 9 pp.)
LEAVE TO COMMENCE ACTION –
Defendants were granted leave under s.
215 of the Bankruptcy and Insolvency
Act to commence an action against the
trustee in bankruptcy.
Motion for an order granting leave to
issue a third-party action against the
trustee in bankruptcy of a bankrupt nunc
pro tunc, or alternatively, for an order
granting leave to issue a fresh action pur-
suant to s. 215 of the Bankruptcy and
Insolvency Act. In the underlying action,
the trustee claimed $400,000 in damages
for breach of trust relating to the unauthor-
ized retention of the accounts receivable of
the bankrupt plus a tracing order. The
corporate defendants argued the bankrupt
was a separate legal entity carrying on
business independently of the corporate
defendants. The third-party claim was in
essence a counterclaim, where the corpor-
ate defendants alleged they had suffered
damages due to the trustee’s actions,
including the collection of receivables and
the seizure of inventory and equipment,
which they allegedly owned.
TRUSTEES – On appeal by a secured
creditor, the appellate court adjusted
the fees and disbursements claimed by
the trustee in bankruptcy.
Appeal by the unsecured creditors, M
Group, from variation of a registrar’s order
on the taxation of the fees of the trustee in
bankruptcy. The bankrupt was the owner
of lands related to a proposed retirement
development that never came to fruition.
M Group provided architectural services
for the project and was the bankrupt’s lar-
gest unsecured creditor. When the finan-
cing became jeopardized, M Group took
control of the bankrupt’s board of direc-
tors and made an assignment into bank-
ruptcy. M Group intended to purchase the
lands from the bankrupt estate to continue
the development. In a contested tender,
the lands were sold to a third party. M
Group’s claim against the estate was con-
tested and reduced in arbitration. M
Group complained of the trustee’s role in
the arbitration, but no regulatory action
was taken. Before the registrar, the trustee
claimed fees of $240,000. The registrar
was critical of the trustee’s conduct. The
registrar disallowed a portion of the trust-
ee’s fees due to questionable dockets, and
reduced the remainder to $1 due to mis-
conduct. The registrar also disallowed cer-
tain disbursements, the most significant
being a reduction in the fees of the estate
solicitor from $206,547 to $20,000. The
registrar awarded solicitor and client costs
against the trustee personally. The regis-
trar’s decision left the trustee with $1 in
income and $478,760 in personal liabil-
ities. On the trustee’s application for varia-
tion, the Superior Court reinstated the
solicitor’s fees, as they had previously been
taxed. The costs award was set aside. The
decision left the trustee with net income of
$59,934 resulting from taxed fees of
$87,664, and one disallowed disburse-
ment of $27,729. The judge awarded the
trustee $55,000 in party and party costs of
the appeal.
CIVIL PROCEDURE
COSTS – A mortgagee was not
entitled to its costs of a deficiency claim
because of its own negligence.
Appeal from an award of solicitor-client
costs to the corporate respondent from the
date it made its first offer to settle with
appellants. Respondent commenced proceedings against the appellants to recover a
mortgage deficiency after the sale of their
property. That action was abandoned after
three days of trial. Appellants’ counterclaim for damages for negligence and a
breach of the duty of good faith was subsequently dismissed. The judge found
respondent was negligent in accepting an
appraisal for respondent’s property without question, and that the abandonment of
respondent’s deficiency claim was a sufficient remedy for appellants. Orders for the
payment of costs were made. The first costs
order awarded appellants party and party
costs up to the withdrawal of respondent’s
deficiency claim, and awarded respondent
party and party costs thereafter. On an
action for Rule 20A costs, respondent was
awarded solicitor-client costs from the date
of their offer to settle.
HELD: Appeal allowed. Respondent
was not entitled to any costs award because
it was its negligence that resulted in the
deficiency, as well as the ultimate dis-
missal of its deficiency claim and the insti-
tution of negligence and breach of duty
claims by appellants.
DELAY – The court refused to set
aside the order of the Registrar dis-
missing plaintiff’s action for delay.
Plaintiff failed to explain the delay.
Motion to set aside an order dismissing
the action for delay. Plaintiff disputed
defendant insurer’s denial of an application for long-term disability benefits. The
claim arose out of injuries allegedly sustained in an October 2003 motor vehicle
accident. The insurer did not receive the
claim until November 2005. In May 2006,
the insurer advised plaintiff that the claim
was denied as she was not insured under
the policy as of the accident date. Plaintiff’s appeal was denied in January 2007.
There was no evidence of any communication between the parties after April 2007.
The statement of claim was issued in July
2007 but was not served. Plaintiff changed
counsel and the new counsel purported to
serve the statement of claim in April 2009.
In August 2009, the Registrar issued an
order dismissing the action.
HELD: Motion dismissed. The order
ought not to be set aside. There was no
explanation for the litigation delay. The
only conclusion to be drawn from the evidence was that plaintiff and her counsel
took no steps to advance the litigation. The
evidence on inadvertence of counsel was
weak, and at best would only slightly
favour setting aside the dismissal order.
The prejudice to defendant if the dismissal
order was set aside strongly militated
against setting aside the order. Had plaintiff taken any steps to pursue the claim,
defendant might have had the opportunity
to assist her with treatment and provide
an opportunity to mitigate damages.
Haynes v. RBC Life Insurance Co.,
[2010] O.J. No. 1800, Ont. S.C.J.,
Glustein (Master), Apr. 29/10. Digest
No. 3005-005 (Approx. 10 pp.)
JURY NOTICE – A motion judge did
not err in granting plaintiff leave to issue
a jury notice after the close of pleadings.
Appeal from a decision granting leave
to plaintiffs to file a jury notice after the
close of pleadings. In November 2002 a
tragic house fire claimed the lives of plaintiff’s wife and two of his children. A third
child was seriously injured. The action was
commenced in November 2004. The
house had been leased from defendants.
The statement of claim alleged that
defendants were negligent in failing to
provide adequate heating or proper or
working smoke/fire detectors and the
house was a safety hazard. Counsel for
plaintiff moved to change the venue of the
trial and file a jury notice. In September
2009 plaintiff’s motion to file a jury notice
was permitted. Defendants appealed.
HELD: Appeal dismissed. After plead-
ings were closed, a jury notice could only
be delivered with leave of the court. A jury
notice could not be delivered initially
