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False pretences by bankrupt

Defendant contravened s. 198 of Bankruptcy and Insolvency Act (Can.) by fraudulently disposing of firm assets

General contracting firm was formed by defendant in early 2006. Defendant was controlling and directing mind and had previously been bankrupt, and his wife was sole shareholder. Defendant was made aware of cash flow problems by senior managers and liens by contractors began to appear in September 2007. Defendant made clear to senior management of firm throughout 2007 that he had plans for projects in Syria and Lebanon, and that he had arranged plan with Syrian government. Defendant drafted contract of purchase and sale of firm to bookkeeper at end of November. In order to free up planned $2 million to send to Lebanon/Syria, firm had taken and kept significant amounts from company under “factoring scheme” that should have gone to subcontractors, and borrowed $500,000 from company. Total of $1.7 million was sent to bank account in defendant’s name in Lebanon. In January 2008, senior manager received phone call from defendant telling him that money was frozen, was not going to be returned to Canada and that senior manager was to call bonding companies and shut firm down. Losses arising from failure to return money to Canada amounted to approximately $3.8 million. Defendant was charged with various charges under Criminal Code and was also charged under Bankruptcy and Insolvency Act (Can.). Defendant was found guilty of all charges. Financial statements were intentionally falsified by defendant in order to misrepresent to all potential lenders, creditors, and financial institutions that firm was profitable so that he could obtain credit. It was found beyond reasonable doubt that firm was insolvent from at least July 2007. Bankruptcy was necessary for orderly management of assets of firm and competing claimants where it was clearly insolvent. Since firm became bankrupt after clearly being insolvent, he contravened s. 198 of Act when he fraudulently disposed of assets of firm that also included firm proceeds of house sale and firm receivables factored by lender. Defendant knowingly created, directed or connived at fabrication of false financial statements and false deposit slip intending that they be relied upon so as to obtain credit and bonding.
R. v. Eid (May. 2, 2016, Ont. S.C.J., Timothy Ray J., Ottawa 12-20041) 132 W.C.B. (2d) 142.



Trial judge’s finding was not based on misapprehension of evidence

After traffic stop, accused and passenger were arrested for failing to comply with their respective recognizances. Police officers returned to police car while they checked identification and to allow accused to search for letter from surety, observing movement by accused and passenger within vehicle. Accused provided forged note from surety. After accused and passenger exited car, officers observed handle of handgun sticking out from under floor mat in back of car. Accused was convicted of possession of loaded prohibited firearm, unauthorized possession of firearm in motor vehicle, careless storage of firearm, and failure to comply with weapon prohibition order while passenger was acquitted of possession charges. Accused appealed. Appeal dismissed. Trial judge found that movements of accused and passenger during traffic stop were confined to front seat of car and did not include any reaching into backseat area. Accused argued that trial judge erred in concluding evidence eliminated possibility of hastily discarded handgun and deprived him of theory that passenger hid handgun without accused’s knowledge during traffic stop. Trial judge’s finding was open to him on record and was not based on misapprehension of evidence. Police officers’ evidence was that accused and passenger moved side-to-side and that any movement forward and back was confined to front seat. There was no direct evidence that accused or passenger had ever reached into back of car. Obvious implication of trial judge’s finding was that movements were made in search for surety’s note or in forging note that was provided to police. Theory that co-accused hid gun without accused’s knowledge was both speculative and implausible.
R. v. Bonilla-Perez (Jul. 6, 2016, Ont. C.A., S.E. Pepall J.A., M. Tulloch J.A., and G. Pardu J.A., CA C59123) Decision at 112 W.C.B. (2d) 558 was affirmed. 132 W.C.B. (2d) 107.



Notional corporate tax rate was appropriate for purposes of share valuation

Company owned one-quarter interest in rental property that had apartment building. Shareholders JL, ML and P collectively owned one-third of company’s shares while their uncle, shareholder K, owned another one-third of company’s shares. K wanted to purchase other three-quarter interest in rental property. K notionally acquired shares from JL, ML and P for financing purposes pursuant to memorandum of understanding (MOU). JL, ML and P were given option of selling their shares to K once rental property transaction closed. After transaction closed, K denied owing JL, ML and P anything for their shares. JL, ML and P brought application for order requiring company to pay them outstanding dividends and requiring K to purchase their shares at fair value. Application granted. K was required to purchase shares of JL, ML and P in accordance with their expert’s valuation after it was adjusted in accordance with judgment. Value of company’s interest in rental property was to be adjusted to account for notional disposition costs, which were reduced by 50 per cent since rental property would probably be held indefinitely. K was not permitted to deduct $300,000 as deferred compensation since no such obligation had previously been brought to attention of JL, ML and P. Deduction for legal fees was reduced since some legal fees had not been paid and there was no intention to pay them. Notional corporate tax rate of 26.5 per cent was appropriate for purposes of share valuation. Actual corporate tax rate of 46.16 per cent was offset by refundable dividend tax pool. No minority discount was allowed since MOU called for “fair value” rather than fair market value, and K received benefits of financing for rental property and two-thirds interest in company.
Levine v. 1751060 Ontario Inc. (Jun. 29, 2016, Ont. S.C.J. [Commercial List], Swinton J., CV-14-10413-OOCL) 269 A.C.W.S. (3d) 681.

Bankruptcy and Insolvency

Administration of estates

Creditor’s claims were lienable

Creditor provided materials and services pursuant to lawn maintenance contracts. Creditor filed two construction liens. Creditor filed proof of claim claiming secured claim. Monitor provided notice of revision and disallowance. Monitor allowed creditor’s claim as unsecured pre-filling claim. Creditor delivered dispute notice. Parties disputed whether materials and services provided by creditor could be subject of lien under Construction Lien Act (Ont.). Monitor referred creditor’s dispute to claims officer. Dispute allowed. Creditor’s claims were lienable. Creditor’s claim was allowed as secured pre-filling claim. Black soil and mums added to land were improvements by way of alteration and addition to land and fell within definition of improvement in Act. Addition to land that enhanced land by vegetation control was improvement by way of alteration and addition to land. Removal of vegetation and dirt was alteration and repair to land and supply of gravel and cloth amounted to supply of materials to effect improvement by way of alteration to land. Grounds keeping was improvement by way of alteration and repair of land.
U.S. Steel Canada Inc., Re (May. 24, 2016, Ont. S.C.J. [Commercial List], Julian Polika Claims O., CV-14-10695-00CL) 269 A.C.W.S. (3d) 621.


Income tax

Taxpayer’s appeal regarding redetermination of returns was granted

Taxpayer mother had primary custody of son and daughter after separation from children’s father. Pursuant to temporary order in October 2012, father obtained access to both children every other weekend, and two overnight visits per week for son and one overnight visit per week for daughter. Pursuant to second temporary order in February 2014, father obtained expanded access to daughter. Final order in September 2014 provided that parties would have joint custody of children, that father would continue to have access largely according to February 2014 order, and that parties had consented to roughly equal sharing of children’s care. Minister of National Revenue concluded that taxpayer and father met definition of shared-custody parents of son since January 2013 and of daughter since March 2014, and redetermined taxpayer’s returns for 2011 through 2013 on basis that she was only entitled to 50 per cent of Canada Child Tax Benefit and Goods and Services Tax Credit after those dates. Taxpayer appealed. Appeal allowed. Taxpayer and father had been shared-custody parents of both children since March 2014. Both parents fulfilled responsibility for upbringing of children when they resided with them. Prior to March 2014, conflict between taxpayer and father was such that taxpayer assumed more than her share of responsibility for picking-up children at daycare and that, for weekdays, father’s access was only for overnight period and not full 24-hour day. Children were in care of taxpayer for time periods exceeding 60 per cent up to March 2014, but after that date, taxpayer and father shared parenting responsibilities on equal basis.
Rubinov-Liberman v. R. (Aug. 29, 2016, T.C.C. [Informal Procedure], Guy Smith J., 2015-3461(IT)I) 269 A.C.W.S. (3d) 797.

Industrial and Intellectual Property


Copyright holders had right to have identity of subscriber revealed and disclosed

Copyright holders claimed that internet users had engaged in file sharing over internet, and thereby infringed copyright holders’ copyrights in several films. Applicants initiated proposed class proceeding claiming, amongst other things, declaratory and injunctive relief against subscriber of internet service provider (ISP), whose identity was presently unknown to them. Copyright holders brought motion for order compelling ISP to disclose any and all contact and personal information of subscriber associated with identified internet protocol address at various times and dates. Motion granted. Copyright holders adduced sufficient evidence to show that they had bona fide claim that unknown persons were infringing copyright in their films. Consequently, copyright holders had right to have identity of subscriber revealed and disclosed for purpose of pursuing their proposed class proceeding. Copyright holders were only entitled to disclosure by ISP of subscriber’s name and address as recorded in ISP’s records. Release of information was to remain confidential and not be disclosed to any other parties without further court order and could only be used by copyright holders in connection with their proposed class proceeding. ISP was entitled to payment of $100 per hour to assemble information and costs fixed at $500.
Voltage Pictures, LLC v. John Doe No. 1 (Jul. 28, 2016, F.C., Keith M. Boswell J., T-662-16) 269 A.C.W.S. (3d) 648.

Administrative Law


There was no concern about court encroaching into areas of executive or legislative policy

Minister of Health restricted importation of drugs from two of manufacturers’ facilities. Minster’s decision in issue varied terms and conditions of manufacturers’ drug and establishment licences in respect of facilities. Minister had since issued decision where it removed all terms and conditions on establishment licences for facilities. Manufacturers applied for judicial review. Application granted. Judicial review was moot, as decision and restrictions on import it imposed ceased to exist. There was no live controversy between parties. Court exercised discretion to hear matter on merits as there was still adversarial context, and outcome of judicial review might impact any action for damages brought by manufacturers related to import ban. Decision on merits would have practical effect on parties’ rights, which mitigated concerns over judicial economy. There was no concern about court encroaching into areas of executive or legislative policy.
Apotex Inc. v. Canada (Minister of Health) (Jun. 15, 2016, F.C., Michael D. Manson J., T-1653-15) 269 A.C.W.S. (3d) 602.

Constitutional Law

Charter of Rights

Assessment tools administered to Aboriginal inmates breached ss. 7 and 15 of Charter

Defendant Correctional Service of Canada (CSC) used certain psychological tests or assessment tools to assess risk of criminal recidivism and psychopathy in inmates, which impacted institutional decisions such as those relating to parole eligibility and security classifications. Plaintiff Aboriginal inmate brought action against CSC and wardens of institutions, alleging that assessment tools were unreliable when administered to Aboriginal inmates such that their use breached his rights, including under ss. 7 and 15 of Canadian Charter of Rights and Freedoms. Action was allowed on basis that CSC’s use of assessment tools breached s. 7 of Charter and s. 24(1) of Corrections and Conditional Release Act (Can.), with issuance of interim relief while remedy hearing was set to determine terms of final order. Defendants appealed. Appeal allowed. Trial judge did not expressly consider whether plaintiff established on balance of probabilities that scores and conclusions generated by assessment tools were inaccurate and unreliable when assessment tools were administered to Aboriginal persons. Trial judge relied on expert testimony that there was no evidence that scores and conclusions predicted recidivism in Aboriginal offenders as accurately as they did when administered to non-Aboriginal offenders. By relying on absence of evidence proving reliability of assessment tools, trial judge erred in law by failing to require plaintiff to establish his claim on balance of probabilities. Expert evidence was, as matter of law, insufficient to establish that assessment tools generated results that were inaccurate or unreliable in material way. Trial judge erred by failing to conclude that plaintiff failed to establish violation of his rights under s. 7 of Charter on balance of probabilities.
Canada (Commissioner of Correctional Service) v. Ewert (Aug. 3, 2016, F.C.A., Marc Nadon J.A., Eleanor R. Dawson J.A., and Wyman W. Webb J.A., A-421-15) Decision at 258 A.C.W.S. (3d) 320 was reversed. 269 A.C.W.S. (3d) 686.

Civil Procedure


Plaintiff’s acceptance of defendants’ offer was unconditional

Plaintiff sued defendants with respect to trademark issues arising from use of word Pinnacle in connection with sale of alcoholic beverages. Defendants made offer to settle pursuant to which claim and counterclaim in Federal Court action would be discontinued with each party to bear its own costs. Offer was accepted but dispute arose as to whether offer also included discontinuance of Superior Court action. Each party brought motion seeking to have its position ratified. Federal Court judge concluded that there was settlement of Federal Court action and counterclaim but that Superior Court action was not settled. Permanent stay of proceedings was ordered with respect to defendants’ counterclaim. Defendants appealed. Appeal dismissed. Federal Court judge did not make any error that could justify intervention. Arguments resting on notion that defendants intended to make offer to settle which included Superior Court action could not succeed. Words of offer to settle were unambiguous while evidence of surrounding circumstances including operation of R. 420 of Federal Courts Rules (Can.), did not support defendants’ position. Defendants’ settlement offer was intended to satisfy conditions of R. 420 and as result it dealt only with Federal Court action. Plaintiff’s acceptance of defendants’ offer was unconditional.
Beam Suntory Inc. v. Domaines Pinnacle Inc. (Aug. 31, 2016, F.C.A., J.D. Denis Pelletier J.A., Johanne Gauthier J.A., and A.F. Scott J.A., A-272-15) Decision at 254 A.C.W.S. (3d) 802 was affirmed. 269 A.C.W.S. (3d) 662.



Standard of review for interpretation of standard form contracts was correctness

Window cleaners improperly cleaning building windows, causing scratches and necessitating replacement of windows. Building owner and general contract entitled to claim cost of replacing windows against builders’ risk insurance policy. Trial judge finding insurers liable, determining that exclusion clause for “cost of making good faulty workmanship” applied against insurers. Court of Appeal reversing trial judge’s decision. Standard of review applicable to interpretation of standard form contracts was correctness.
Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co. (Sep. 15, 2016, S.C.C., McLachlin C.J.C., Abella J., Cromwell J., Moldaver J., Karakatsanis J., Wagner J., Gascon J., Côté J., and Brown J., 36452) Decision at 251 A.C.W.S. (3d) 490 was reversed. 269 A.C.W.S. (3d) 753.

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