The Lawyers Weekly - June 10, 2011

subsequently overturned. The Fund’s actions in and of themselves indicated that it did not feel bound by the 90-day limitation period. The Fund relied to its detriment on the existing common law authority at the time of its investigation involving appellant. As a result, the Fund was deemed not to have been bound by the notice provisions in the Regulations.

Ontario (Minister of Finance) v. Lom-
bard General Insurance Co. of Canada,
[2011] O.J. No. 2049, Ont. S.C.J., Ker-
shman J., May 2/11. Digest No. 3106-017
(Approx. 6 pp.)

LABOUR RELATIONS
ARBITRATION – Arbitrator exceeded
jurisdiction by considering issues that had
not been raised by the parties.

Appeal from a decision quashing a condition placed on an arbitral award. An employee of respondent city was dismissed for repeated unauthorized absenteeism. Appellant union took the employee’s unjust dismissal grievance to arbitration. The arbitrator told counsel that the grievance was likely to fail unless there was a basis, such as mental disability, to support the employer’s duty to accommodate. The arbitrator urged the union’s counsel to elicit evidence of mental disability, although neither side had raised this as an issue. The hearing was adjourned to permit a psychological assessment of the employee. By the resumption of the hearing, no assessment had been held and no evidence of the employee’s mental disability was presented.

The arbitrator issued an award that there was just cause for dismissal, with a condition subsequent which could render the dismissal defeasible giving the union 30 days to say whether it would adduce evidence of mental disability, and if it did so, the arbitrator retained jurisdiction to consider whether there was mental disability and whether the city had a duty to accommodate the employee. On judicial review, the reviewing judge found that the arbitrator lacked jurisdiction to issue such a defeasible award. He quashed the condition subsequent, with the result that the employee was held dismissed with cause.

HELD: Appeal dismissed. The arbitrator exceeded his jurisdiction by injecting into the proceedings the issue of the employee’s mental state, something neither party had raised. The arbitrator was required to consider the arguments of the parties as presented. The condition subsequent was an apparent attempt to transform what should have been a final order into a message with ongoing trial advice for the union. That was an unreasonable departure from the arbitrator’s duty.

Halifax (Regional Municipality) v.
Canadian Union of Public Employees,
Local 108, [2011] N.S.J. No. 230, N.S.C.A.,
per Fichaud J.A. (Hamilton and Farrar
JJ.A. concurring), May 12/11. Digest No.
3106-018 (Approx. 16 pp.)

to properly insure premises in breach
of the lease.

Appeal from the dismissal of appellant’s application for a declaration that it validly exercised its right to renew a commercial lease with respondent landlord. In 1999 the tenant leased a service station from the landlord. The lease provided the tenant with an option to renew for an additional five-year period after the initial term provided that the tenant was not in default. As part of its obligations under the lease the tenant was responsible for insuring the property and indemnifying the landlord against all loss, claims, actions, damages, liability and expense arising out of any personal injury occurring on the property. The tenant operated the business for eight months and then sub-leased the property pursuant to the terms of the head lease. The tenant continued to maintain insurance on the property for a year. Thereafter a subtenant took out its own policy of insurance for the property. In 2007 the landlord learned that the subtenant’s insurance policy was defective as it did not name the landlord as an insured as required by the lease. In 2009 the tenant attempted to renew the lease. The landlord rejected the request citing various breaches of the lease during the term of the tenancy including failure to properly insure the premises in accordance with the provisions of the lease. The tenant brought an application seeking a declaration that its renewal request was validly exercised. After the application was commenced, the parties learned that a slip-and-fall injury occurred on the property the day before the insurance was made good. The application judge found that the tenant breached the lease by its failure to properly insure the property and that, although the insurance was later rectified, the breach continued to subsist at the renewal date because the slip-and-fall action represented an ongoing issue surrounding the failure to have proper insurance in place as required by the lease. Consequently, the application judge found that the option to renew was lost.

HELD: Appeal dismissed. The tenant failed to provide the insurance as required as a result of which the landlord faced a personal injury lawsuit. The breach subsisted and the tenant forfeited its right to renew.

1290079 Ontario Inc. v. Beltsos,
[2011] O.J. No. 1970, Ont. C.A., per Mac-
Pherson J.A. (O’Connor A.C.J.O. and
Laskin J.A. concurring), May 2/11. Digest
No. 3106-019 (Approx. 7 pp.)

due to the lack of interior protective coating. Consequently, defendant was negligent and had breached the implied warranty set out in subs. 15(1) of the Sale of Goods Act (Ont.) as the tank was not fit for its intended purpose. Plaintiff was awarded damages of $71,589. However, the judge held that each party should bear its own costs as the matter in issue was sufficiently novel and there was a public interest component.

HELD: Appeal dismissed. Cross-appeal allowed. Defendant was in breach of the implied condition of merchantability in subs. 15( 2) of the Act. As the expert witnesses were unable to identify the cause of the internal corrosion that led to the tank’s failure, the judge misapprehended the evidence when she found that the lack of protective coating was the defect. There was no reason why costs at trial should not follow the event. Plaintiff was entitled to its partial indemnity costs to the date of its offer to settle and to substantial indemnity costs thereafter.

Muskoka Fuels v. Hassan Steel Fabri-
cators Ltd., [2011] O.J. No. 2058, Ont.
C.A., per Juriansz J.A. (Rosenberg and
Feldman JJ.A. concurring), May 6/11.
Digest No. 3106-020 (Approx. 6 pp.)

SALE OF LAND
LANDLORD & TENANT

COMMERCIAL LEASES – Tenant
lost its option to renew lease by failing

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MERCHANTABLE QUALITY –
Defendant breached implied condi-
tion of merchantability when it sup-
plied oil tank that lacked interior
protective coating.

Appeal by defendant from an award of damages for negligence and breach of implied warranty. Cross-appeal by plaintiff from the costs award. Defendant manufactured a fuel oil tank which it sold to plaintiff. Plaintiff took delivery of the tank in November 1999, but did not put it into service until September 2001. The tank leaked within five months of being put into service. As a result of the containment and cleanup for the diesel oil that leaked from the tank, plaintiff suffered damages totalling $71,589. The leak resulted from a small hole in the bottom of the tank which was due to a microbally induced internal corrosion process of unknown explanation. The trial judge concluded that the tank failed

NEW HOME WARRANTIES –
Appellate court upheld acquittal of
respondent on charges under Ontario
New Home Warranties Plan Act.

Appeal from an order upholding the acquittal of respondent on charges under the Ontario New Home Warranties Plan Act of acting as a builder of a new home without being registered by appellant and commencing construction of a new home without enrolling the home with appellant. Respondent’s wife acquired a property and her intention was to build a home on the property that she and respondent would occupy. The Act did not apply to them because they were owners intending to build for their own occupation. However, that intention changed at some point. Ultimately, respondent’s wife entered into an agreement of purchase and sale to sell the home to third parties.

HELD: Appeal dismissed. While respondent clearly undertook the performance of all of the work and the supply of all of the materials necessary for the construction of a completed home, there was no evidence that he undertook the construction for the purpose of sale. He undertook the performance and supply for the purpose of building a home in which he would live with his family. When respondent began construction, up until the time his intention changed, the Act did not apply to him. The wording of the Act was geared toward those who began the construction of a completed home with the intention of selling it to others. It was not geared toward those who, like respondent, began with the intention of building a home for their own use and occupation and then, when circumstances changed, decided to sell to others. Respondent did not meet the definition of “builder” because he did not undertake all the work and supply of all the materials necessary to construct a completed home for the purpose of sale.