Contractual relationships often lead to lawsuits when parties to the contract disagree over their contractual obligations and rights. Traditionally, courts have held parties to the strict written terms of their contract, even in cases where the terms seemed unfair. In 2014, the Supreme Court of Canada released a ground-breaking decision that imposed a mutual obligation of good faith and honest performance on the parties to a contract. This case has broad implications for businesses as they negotiate contracts with consumers, suppliers, and vendors, as lawsuits involving contract disputes will now be viewed by the courts in this context. Here’s what you need to know. 1) Courts Recognize That Parties To A Contract Will Be Self-Interested Commercial certainty has always been a fundamental tenet of the law of contracts. Traditionally the common law has recognized that contracts usually involve a commercial transaction between two entities that are fundamentally self-interested. With this … Read More
Supreme Court Considers Oppression Remedy
In Mennillo v. Intramodal inc., 2016 SCC 51, the Supreme Court of Canada addressed the application of the oppression remedy under the Canada Business Corporations Act (“CBCA”), which applies to federally incorporated companies. (The Ontario Business Corporations Act, which applies to Ontario incorporated companies, also contains an oppression remedy). The case involved a private corporation with originally two shareholders. There was no shareholders’ agreement. The Court described the parties’ dealings as being “marked by extreme informality”. One of the two shareholders, Mennillo, eventually resigned as officer and director of the company by providing a notice of resignation. The notice did not address his status as a shareholder. There was conflicting evidence from the parties about whether Mennillo intended to cease being a shareholder. Ultimately, the trial judge accepted that Mennillo’s withdrawal from the company included his intention to no longer guarantee the company’s debts. The trial judge found that Mennillo agreed … Read More
Blockchain Technologies Create Novel Legal Issues
Blockchain technology is increasingly gaining traction in a variety of different markets and industries, including insurance, securities, and enforcing contracts, and with these new uses come new legal considerations. Blockchain is essentially a ledger, decentralized with copies maintained across numerous computers, which maintains records of transactions which can be added to in an automated and secure manner. Because the entire history of the validated blockchain ledger is incorporated into all subsequent versions of the ledger, it allows for easy verification of the completion and authenticity of a transaction, since the history of the fund or asset can be traced back to the beginning of the entire blockchain. It is also very resistant to fraud and hacking, since any attempt to create a fraudulent transaction the blockchain must simultaneously modify all previous versions of the blockchain on the majority of the computers running the ledger in order for the transaction to be validated. One of the … Read More
Family Business Dispute, Start Up Company Dispute, and Closely-Held Company Litigation
We have experience acting for, advising and representing those in closely-held company litigation, both arising from family business disputes and from start-up company disputes. Family Business Disputes Many businesses in Canada are family businesses or have evolved from family businesses. Family businesses present many unique challenges as they grow, as key members of the company or partnership leave the family business, or when personal relationships of the key members of the family business change or deteriorate. One of the most common differences between a family business and other established businesses, whether or not a shareholders’ agreement, partnership agreement and other legal documentation was used in the formation of the family business, is the informality in operation of the family business, including the often ignored distinction in fact between employees, shareholders, or partners – since family members take on multiple roles. Please see our webpage on Family and Closely Held Business Disputes. Start Up Company … Read More
Partnership Disputes & Joint Venture Litigation
Our lawyers have acted in Ontario and other jurisdictions for partners in small and mid-sized partnerships, and limited liability partnerships (LLPs) and contractual parties and partners in joint ventures. Partnership Disputes Partnership is a relationship between persons carrying on a business in common with a view to profit, which is not a corporation. It is one of the most commonly used business associations for small and medium-sized business. A partnership can be created at law and the Partnerships Act, R.S.O. 1990, c. P.5 sets out rules for determining existence of partnership, though commonly the parties enter into a partnership agreement. Joint Venture – Is it a Partnership? Joint ventures are often established to synergize what each member of the joint venture can add to the consortium. Sometimes a joint venture is the structure chosen because those members engaged in the joint venture are located in different jurisdictions. While invariably created by contractual agreement, some … Read More
Court of Appeal Upholds Finding Of Jurisdiction Based on Business Activities in Ontario
In Stuart Budd & Sons Limited v. IFS Vehicle Distributors ULC, 2016 ONCA 977, the plaintiff/respondents were eight car dealerships. Four of the eight were located outside of Ontario. The defendant/appellants were: IFS Vehicle Distributors ULC (“IFS”), a British Columbia corporation; International Fleet Sales Inc. (“International”), a California corporation, an affiliate of IFS which supplied parts and accessories to IFS; and two individuals who were officers of both IFS and International, and who resided outside of Ontario. The defendants brought a motion to stay the action, arguing that the out-of-province plaintiffs could not be part of the action, and could not sue the defendants in Ontario. However, the motion judge found that the claim was presumptively connected to Ontario based on one of the factors set out by the Supreme Court in Club Resorts Ltd. v. Van Breda: that the defendant carried on business within the jurisdiction. The motion judge found that … Read More
Court Refuses to Enforce Forum Selection Clause
In McMillan McGee Corp. v Northrop Grumman Canada, 2016 ONSC 6334, the Plaintiff sued the Defendants (“Northrop”) for damages arising from work done by the Plaintiff for the Northrop in Ontario. Northrop’s Request for Proposals included “Purchase Order Terms and Conditions” (the “RFP Terms and Conditions”). The RFP Terms and Conditions contained: a forum selection clause, stating that “either Party may only bring suit in federal or state court in the state from which this Order is issued”; and a choice of law clause, stating that “his Order will be construed and interpreted according to the law of the state from which this Order is issued, as identified in the Order”. “Order” was defined as “The instrument of contracting including this Purchase Order and all referenced documents”. The parties’ relationship involved three Purchase Orders, and many change orders. The lawsuit involved invoices delivered after the Second Purchase Order. The First Purchase Order … Read More
Cross-Border Ship Mortgage Enforcement
In an admiralty action in rem and in personam, Lakeland Bank v. Never E Nuff (Ship), 2016 FC 1096, the Federal Court dismissed the action in personam on a US mortgage, registered in New York State, against the mortgagor, a U.S.based former owner of a 38-foot pleasure craft and against its innocent purchaser for value without notice in Canada and dismissed the purchaser’s counterclaim for abuse of process, but ordered the return of a trailer and other personal items, which had been arrested in Canada with the pleasure craft, but were not covered by the mortgage. The Federal Court did however order that the action in rem be maintained and provided that the plaintiff shall promptly move for sale of the pleasure craft. The plaintiff, an American bank, held a first preferred mortgage registered at the National Vessel Documentation Center, United States Coast Guard. The bank had instituted proceedings in personam and in rem in the United States District Court, Northern District of New York, but it could … Read More
Court of Appeal Upholds Stay Based on Contractual Choice of Forum/Arbitration Clause Against Non-Contracting Parties
In Novatrax International Inc. v. Hägele Landtechnik GmbH, 2016 ONCA 771, the plaintiff and the defendant Hägele were parties to an Exclusive Sales Agreement (“ESA”). Hägele terminated the ESA. The plaintiff sued Hägele, its individual principals and Cleanfix, a North American company related to Hägele. The defendants collectively moved to stay the Plaintiff’s claim, relying on a forum selection clause in the ESA which stated: “The contractual parties agree that German law is binding and to settle any disputes by a binding arbitration through the “Industrie und Handelskammer” (Chamber of Commerce) in Frankfurt.” The motion judge granted the stay, despite the fact that only Hägele, and not the other defendants, was a party to the ESA. The plaintiff appealed on two grounds: that the motion judge erred in i) interpreting the scope of the forum selection clause and ii) staying the action against the defendants who were not party to the … Read More
Ontario Court of Appeal Finds Misrepresentation and Breaches of OSC Rulings Against Trump Hotel Developer
In the recently released decision of Singh v. Trump, the Ontario Court of Appeal has reversed a lower court decision and granted summary judgment in favour of two investors in the Trump International Hotel & Tower in Toronto, on the basis that the developer made representations to purchasers that purchasing the hotel condominium units would result in highly profitable rental income. The court found those representations to have been false, and that making those representations was in contravention of a previous Ontario Securities Commission ruling which prohibited the developer from marketing the hotel condominium units as a profit-making investment. The Court of Appeal also reversed the motion judge’s dismissal of claims of oppression, collusion, and breaches of fiduciary duty as against current US presidential candidate Donald Trump and other invidiual defendants, on the basis that those issues were not properly put before the summary judgment motion judge at the motion. The … Read More
Toronto Lawyers for Victims of Investment Fraud: When Investing in a Toronto Business Goes Bad
A bad investment may not be the result of market fluctuations. A false representation inducing and leading to an investment loss may be actionable at law. Often there is a promised high-yield on an investment in a company, project or property. Sometimes a loss occurs from a scheme where there is no intention by those entrusted with an investment to make the promised purchase or transfer. In Ontario, civil lawsuits for the victims of investment fraud have often been framed as claims for deceit, fraudulent misrepresentation, civil conspiracy, breach of contract, unjust enrichment and restitution. Increasingly though, plaintiffs in lawsuits simply claim damages for losses arising directly from the tort of civil fraud. The leading case on civil fraud in Canada is the Supreme Court of Canada decision in 2014 in Hryniak v. Mauldin, 2014 SCC 7, and in that case civil fraud is defined this way “… the tort of … Read More
Business Dirty Tricks: Unfair Competition: Intentional Interference, Inducing Breach of Contract, Conspiracy and Defamation
Sometimes businesses and their stakeholders act wrongfully in seeking to advance their interests and / or harm competitors. There are often reports of the “dirty tricks” used by those in business to seek to destroy, defeat or diminish the effectiveness of a competitor. These are often unethical tactics, but sometimes such conduct is also wrongful and has been recognized by the common law as actionable in the courts for damages or injunctive or other urgent equitable relief, or prohibited by a statute which provides for a civil monetary remedy or grounds for an injunction. These causes of action have been recognized and provide the basis of lawsuits for harm, loss and damage, and in suitable circumstances, grounds for an immediate injunction or mandatory order prohibiting the further commission of the wrongful acts. In short, wrongful intentional acts causing harm, loss or damage to businesses or their stakeholders may give rise to a cause of action in common law business torts (the so-called … Read More
Court Stays Arbitration but Denies Costs to Successful Party for “Blameworthy Conduct”
In Gorman v Kosowan, 2016 ONSC 5085, the applicant commenced a proceeding regarding a business dispute. The applicant and individual respondent were joint owners of a transportation and warehouse business. A dispute arose between them. The respondents subsequently terminated the applicant’s employment and excluded him from the business. The applicant sought relief from the allegedly oppressive conduct under the Canada Business Corporations Act and the Ontario Business Corporations Act. The respondents brought a motion to stay the oppression application based on an arbitration clause in the parties’ Unanimous Shareholders’ Agreement (“USA”). The USA arbitration clause required arbitration for “disputes under” the USA. The Judge found that the applicant’s claims were covered by the arbitration clause and granted the respondents’ motion to stay the application. In the Judge’s subsequent costs decision, here, the Judge denied the respondents’ request for costs of the motion. While a winning party is typically entitled to its costs … Read More
Joint Venture Disputes and International Joint Venture Arbitration
Joint ventures are often established to synergize what each member of the joint venture can add to the consortium. Sometimes a joint venture is the structure chosen because those members engaged in the joint venture are located in different jurisdictions, a consideration which may be pivotal for its success. While invariably created by contractual agreement, some joint ventures have been held by the courts to be a partnership, while others have been determined to be merely contractual, without comprising a partnership. A myriad of considerations have been used by the courts in determining whether a joint venture is a partnership. Issues have also arisen concerning the management and operational structure of a joint venture and whether such structure necessarily results in the joint venture being found to comprise a partnership. Historically the distinction between partner and contractor has been important, since the law only imposed a fiduciary duty upon partners, and not … Read More
Court of Appeal Provides Guidance on “Forum of Necessity” Doctrine
In Arsenault v. Nunavut, 2016 ONCA 207, the Plaintiff commenced a lawsuit in Ontario regarding an employment dispute with the defendant, the government of the Canadian territory of Nunavut. The motion judge concluded that Ontario did not have jurisdiction over the dispute because the dispute did not have a “real and substantial connection” with the province of Ontario, and that Nunavut was clearly the more appropriate forum to hear the dispute. The Plaintiff appealed, arguing that the motion judge had not properly considered whether Ontario was the “forum of necessity” – i.e. the doctrine allowing the Court to assume jurisdiction over a dispute, even though there is no “real and substantial connection” with Ontario, because there is no other forum in which the plaintiff can reasonably seek relief (see our previous posts regarding the doctrine of “forum of necessity” here and here). The Court of Appeal dismissed the Appeal. The Court of Appeal noted … Read More
Ontario Court Provides Jurisdiction Analysis of Place of Contract and Carrying on Business in Ontario
In Re: Essar Steel Algoma Inc. et al, 2016 ONSC 595, an Ontario steel company, Essar, entered into a plan under Canada’s Companies’ Creditors Arrangement Act (“CCAA”, a Canadian corporate bankruptcy proceeding). As part of its restructuring, Essar entered into a contract with a U.S. supplier, Cliffs. A dispute arose between Essar and Cliffs regarding the contact. Essar brought a motion in the CCAA proceedings seeking, among other things, a declaration that Cliffs had to continue supplying under the contract. In response, Cliffs brought a motion seeking to dismiss Essar’s motion on the basis that the Ontario did not have jurisdiction or that Ontario was not a convenient forum. The Ontario Court applied “real and substantial connection” test set out by the Supreme Court of Canada in Van Breda, and considered i) whether the contract was made in Ontario and ii) whether Cliffs carried on business on Ontario. With respect to i), the Court … Read More
In Jurisdiction Dispute, Court of Appeal Confirms Contract Made Where Acceptance Received
In Eco-Tec Inc. v. Lu, the Plaintiff Ontario company researched, developed and manufactured proprietary technology and products. The Defendants were Lu, a Canadian citizen, his BVI company and three Chinese companies owned by him or his parents. The Defendant companies were the Plaintiff’s consultant, agent or distributor in China. In the course of their relationship, the Plaintiffs and Defendants signed a number of agreements. The Plaintiff ended its relationship with the Defendants in 2012, alleging that the Defendant’s Chinese companies were selling clones of the Plaintiff’s product in China. The Plaintiff brought a claim for breach of confidence, breach of contract, breach of fiduciary duty, conspiracy, unjust enrichment and/or unlawful interference with its economic interests. The Defendants brought a motion to dismiss the Ontario action on the basis that the Ontario Court did not have jurisdiction. The motion judge dismissed the motion, finding, among other reasons, that the dispute was connected … Read More