The Lawyers Weekly - November 19, 2010

DIGEST
OF RECENT DECISIONS FROM CANADA’S COURTS
Michael Hamilton, LL.B. E-mail: jandm@hfx.eastlink.ca

ARBITRATION
JURISDICTION OF COURT –
Appellant insurer entitled to a stay of
proceedings because of an arbitration
clause in an insurance policy.

Appeal from the denial of a stay of proceedings. Respondents owned and operated a barge insured by appellant. In 2007 the barge listed and lost deck cargo while under tow by another vessel and it was let go because of the list. The owner of the lost cargo commenced an action against respondents for damages for the loss of the cargo, and respondents’ vessels were arrested and not permitted to trade. Appellant refused to provide a letter of undertaking for the release of the ships or to defend respondents in the action. Respondents and the cargo owners eventually reached a settlement and respondents sought payment from appellant under its policy. Appellant did not pay and respondents sued for recovery under the policy. Appellant commenced arbitration proceedings in the United Kingdom pursuant to the contract of insurance. Respondents refused to participate as the matter was already before the courts in Canada. Appellant sought a stay of the action until the completion of the arbitration. The application judge held that the arbitration clause in the insurance policy was not an exclusive jurisdiction clause requiring a dispute to be submitted to arbitration in London, and that respondents had the right to litigate the matter in Canada.

HELD: Appeal allowed. The arbitration clause expressed the intention and agreement of the parties to refer disputes in the first instance to an English arbitration board supervised exclusively by the English High Court of Justice and neither the clauses of the policy nor the contra proferentem rule required an interpretation that conflicted with that agreement. The application judge made an extricable error in principle in finding that the conduct of the insurer regarding a prior policy established that it waived the arbitration clause or interpreted it as a non-exclusive jurisdiction provision as in English law a failure to invoke an arbitration or exclusive jurisdiction clause for practical and commercial reasons did not constitute a waiver of the right to rely upon the arbitration or exclusive jurisdiction clause in a subsequent dispute relating to the same policy. In addition, the judge erred in determining that claims based on restitution, unjust enrichment, collateral contract and punitive damages were not covered by the arbitration clause. A stay of proceedings was granted.

Midnight Marine Ltd. v. Oppenheim,
[2010] N.J. No. 323, Nfld. & Lab. C.A.,
per Barry J.A., separate reasons con-
curring by Green C.J.N.L. and Rowe
J.A., Oct. 22/10. Digest No. 3027-001
(Approx. 31 pp.)
ASSESSMENT
VALUATION – Assessing two office
towers as if they were vacant would
undervalue them and undermine the
purpose of the Assessment Act (Ont.).

BANKRUPTCY
& INSOLVENCY
LIMITATION OF ACTIONS –
Motion by trustee in bankruptcy chal-
lenging the collapse of an RRSP by the
bankrupt and payment of the pro-
ceeds to a credit union was brought
out of time.
Motion to dismiss a trustee’s motion for
an order declaring that payments made by
the bankrupt to a credit union were
fraudulent and void and requiring the
credit union to return those payments to
the trustee. The bankrupt prepared his
statement of affairs as at April 6, 2006 and
filed his assignment into bankruptcy the
following day. On the statement of affairs,
the bankrupt indicated that he had
$14,000 in an RRSP with the credit union.
In response to the trustee’s request that
the RRSP be collapsed and the funds
remitted to the trustee, the credit union
advised the trustee that the RRSP had
been fully depleted. The withdrawal sched-
ule showed that the funds had been with-
drawn on three separate days just prior to
the assignment into bankruptcy and
applied to a loan due to the credit union
from the bankrupt. The RRSP had been
collapsed on the instructions of the bank-
rupt. Six months later the trustee came to
the conclusion that the credit union had
received a fraudulent preference and
demanded repayment. A year later, coun-
sel for the trustee sent a demand letter.
The motion was served on the credit union
in late May 2008.

POWERS OF TRUSTEE – Trustee in
bankruptcy not entitled to transmit an
undivided interest in the non-exempt
portion of a bankrupt’s home to itself.

Appeal from a decision restoring to the bankrupt title to her home free of the trustee’s interest. The bankrupt had been petitioned into bankruptcy in 1995 by a creditor. The bankrupt was to receive an automatic, absolute discharge the following year because she had never been bankrupt before and because she had insufficient earnings to warrant a conditional discharge. The bankrupt was only earning $1,173 per month and her only asset was her home, valued at $200,000. Her net equity in the home was approximately $165,000. No creditors filed objections to her discharge. The trustee filed an application to have 82 per cent of the home transmitted to it. Title to the home was modified accordingly. The bankrupt received her absolute discharge in March 1996, but the trustee did not move to obtain its discharge. The bankrupt ultimately paid off the mortgage. The value of the home increased to $332,700. The trustee had paid $2,000 each year since 2003 to insure the property. The judge found that the trustee had acted inappropriately in delaying its discharge to await a future accumulation of equity in the property in the event that it was someday sold.

HELD: Appeal dismissed. The trustee
was not entitled to transmit an undivided
interest in the non-exempt portion of the
bankrupt’s home to itself. The trustee had
no greater power than an execution
creditor, thereby lacking a mechanism to
seize and sell the non-exempt portion of
the bankrupt’s home. The trustee could
realize only in the event of a voluntary sale
of the home by the bankrupt. The trans-
mission of an 82 per cent interest effect-
ively created a tenancy in common between
the trustee and the bankrupt, which ran
contrary to the law prohibiting the trustee
from obtaining an interest in the exempt
portion of the property’s value.

CHARTER OF RIGHTS
& FREEDOMS
FREEDOM OF EXPRESSION – City
bylaw prohibiting structures to be con-
structed on streets infringed on the
freedom of expression of members of
Falun Gong.

Appeal from the dismissal of appellants’ application for a constitutional exemption from the application and enforcement of a city bylaw. Appellants were practitioners of Falun Gong. In August 2006, respondent city petitioned for an injunction requiring the practitioners to remove a billboard and a meditation hut for contravening a bylaw prohibiting structures to be constructed on city streets. Section 71 of the bylaw precluded the use of a structure for any political expression on city streets but left city council with discretion to make exceptions. The structures at issue supported the values of democratic discourse and self-fulfillment. The messages posted on the structures expressed the Falun Gong practitioners’ opposition to some actions of the Chinese government, and the hut expressed their commitment to the practice of meditation as part of their religious identity. The city successfully applied for an injunction requiring the Falun Gong to remove the structures based on violation of the bylaw. The chambers judge held that the manner of expression was incompatible with the fundamental purpose of the street and was therefore not protected by the Charter.

HELD: Appeal allowed. Section 71 of the bylaw was declared to be of no force and effect. The declaration was suspended for a period of six months. The chambers judge correctly found that the billboard and meditation hut were part and parcel of the manner in which the Falun Gong members chose to express themselves and was deserving of protection. The function of public streets was compatible with open public expression. The messages had a political nature, and political expression was at the heart of the values sought to be protected by the freedom of expression guaranteed by subs. 2(b) of the Charter. Section 71 of the bylaw constituted a limit on the Falun Gong members’ freedom of expression because its enforcement prevented them from expressing themselves in the manner of their choice, thereby infringing subs. 2(b). The bylaw was not saved by s. 1 of the Charter.