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COURT OF APPEAL SUMMARIES (AUGUST 15, 2022 – AUGUST 19, 2022)


Good afternoon.
Following are this week’s summaries of the Court of Appeal for Ontario for the week of August 15, 2022.

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The headline decision of the week was Hudson’s Bay Company ULC Compagnie de la Baie D’Hudson SRI v. Oxford Properties Retail Holdings II Inc. HBC successfully sought relief from forfeiture of its lease at Hillcrest Mall at the beginning of the pandemic lockdowns. That order permitted HBC to only pay half its rent for a period of time in order to remain in good standing under the lease. HBC was later ordered to pay a lower amount of interest on arrears of rent than provided for under the lease. The Court disapproved, and made clear that relief from forfeiture is not an invitation to the courts to rewrite the terms of a commercial lease. It is to provide a tenant with a reasonable opportunity to come into full compliance with all of the terms of the lease.

In Urban Mechanical Contracting Ltd. v. Zurich Insurance Company Ltd., the Court ruled that it is possible for a construction performance bond issuer to seek rescission of a bond agreement on the basis of fraudulent misrepresentations and collusion, even when doing so would affect the rights of innocent third parties. As rescission is an equitable remedy focused on practical justice, the courts’ approach to rescission is flexible and it may tailor a rescission remedy based on the facts of each case. Unfortunately, in this case, there were insufficient facts in evidence, so the Court could do no more than answer a theoretical question of the possible availability of rescission. The matter must now proceed to trial for a determination of the appropriateness and nature of any rescission remedy.

In Apotex Inc. v Eli Lilly Canada Inc., the appellant generic drug company, Apotex, failed in its bid to sue Eli Lilly for damages in keeping its generic drug out of the market in reliance on an issued patent that was ultimately set aside. The Court confirmed the lower court’s ruling that the patent laws contain a complete code of remedies in such a case, and Apotex could not assert any common law claim to damages.

Wishing everyone an enjoyable weekend.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email

Table of Contents

Civil Decisions

Hudson’s Bay Company ULC Compagnie de la Baie D’Hudson SRI v. Oxford Properties Retail Holdings II Inc., 2022 ONCA 585

Keywords: Contracts, Real Property, Commercial Leases, Relief from Forfeiture, COVID-19, Damages, Interest, Commercial Tenancies Act, R.S.O. 1990, c. L.7, s. 20, Courts of Justice Act, R.S.O. 1990, c. 43, s. 101, Bosak et al. v. 3930441 Canada Inc. et al., 2014 ONSC 1138, The Second Cup Ltd. v. 2410077 Ontario Ltd., 2020 ONSC 3684, 1397633 Ontario Inc. v. Oxford Properties Group Inc., 2003 Carswell Ont. 1291 (OSC), Ontario (AG) v. 8477 Darlington Crescent, 2011 ONCA 363, Hunt’s Transport Limited v. Eagle Street Industrial G.P. Inc., 2020 ONSC 5768, Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Company, [1994] 2 S.C.R. 490, Liscumb v. Provenzano (1985), 51 O.R. (2d) 129, at 137 (S.C.), aff’d 55 O.R. (2d) 404 (C.A.), 1383421 Ontario Inc. v. Ole Miss Place Inc. (2003), 67 O.R. (3d) 161, Ross v. Eaton Co. (1993), 11 O.R. (3d) (C.A.), Ontario Inc. v. Leon’s Furniture Ltd., [2003] O.J. No. 3708, Clark Auto Body v. Integra Custom Collision Ltd., 2007 BCCA 24, Hudson’s Bay Company ULC v. Pension Fund Investment Ltd., 2020 BCSC 1959, Cherry Lane Shopping Centre Holdings v. Hudson’s Bay Company ULC, 2021 BCSC 1178, Tauro v. Yu, 2018 ONSC 7319 (Div. Ct.)

Urban Mechanical Contracting Ltd. v. Zurich Insurance Company Ltd., 2022 ONCA 595

Keywords: Contracts, Construction, Surety Bonds, Performance Bonds, Payment Bonds, Fraudulent Misrepresentation, Equitable Remedies, Rescission, Restitutio in Integrum, Restitutio in Specie, Construction Act, R.S.O. 1990, c. C.30, s. 85.1, O. Reg. 304/18, s. 12, Construction Lien Act, R.S.O. 1990, c. C.3, s. 69(1) and (3), Truro (Town) v. Toronto General Insurance Co., [1974] S.C.R. 1129, Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423, Place Concorde East Ltd. Partnership v. Shelter Corp. of Canada Ltd. (2006), 270 D.L.R. (4th) 181 (Ont. C.A.), Deschenes v. Lalonde, 2020 ONCA 304, Kingu v. Walmer Ventures Ltd. (1986), 10 B.C.L.R. (2d) 15 (C.A.), Spence v. Crawford, [1939] 3 All E.R. 271, Barclays Bank v. Metcalfe & Mansfield, 2011 ONSC 5008, York University v. Markicevic and Brown, 2016, ONSC 3718, 33 C.C.E.L. (4th) 26, Moore v. Sweet, 2018 SCC 52, [2018] 3 S.C.R. 303, KBA Canada, Inc. v. Supreme Graphics Limited, 2014 BCCA 117, Zaidan Group Ltd. v. London (City) (1990), 71 O.R. (2d) 65 (C.A.), Neles Controls Ltd. v. Canada, 2002 FCA 107, 2747-3174 Québec Inc. v. Québec (Régie des permis d’alcool), [1996] 3 S.C.R. 919, Tremblar Building Supplies Ltd. v. 1839563 Ontario Limited, 2020 ONSC 6302, Valard ConstructionLtd. v. Bird Construction Co. 2018 SCC 8, Paul D’Aoust Construction Ltd. v. Markel Insurance Co. of Canada (1999), 120 O.A.C. 243 (C.A.), Tennent v. The City of Glasgow Bank (1879), 4 App. Cas. 615 (U.K.), Clough v. London and Northwestern Railway Company (1871), L.R. 7 Exch. 26 (U.K.), Society of Lloyd’s v. Leighs, [1997] E.W.C.A. Civ. 2283 (U.K.), Foy v. Royal Bank (1995), 37 C.P.C. (3d) 262 (Ont. Gen. Div.), i Trade Finance Inc. v. Bank of Montreal, 2011 SCC 26, Nesbitt v. Redican, [1924] S.C.R. 135, Spence v. Crawford, [1939] 3 All E.R. 271, Kiani v. Abdullah (1989), 70 O.R. (2d) 697 (C.A.); Carter v. Golland, [1937] O.R. 881 (C.A.), Brown & Root v. Aerotech Herman Nelson Inc. et al., 2004 MBCA 63, Canada (Attorney General) v. Collins Family Trust, 2022 SCC 26, Rick v. Brandsema, 2009 SCC 10, Kupchak v. Dayson Holdings Ltd. (1965), 53 D.L.R. (2d) 482 (B.C.C.A.), McCarthy v. Kenny, [1939] 3 D.L.R. 556 (Ont. S.C.), Trans-Canada Trading Co. v. M. Loeb Ltd., [1947] 2 D.L.R. 849 (Ont. H.C.J.), Stewart v. Complex 329 Ltd. (1990), 109 N.B.R. (2d) 115 (Q.B.), Singh v. Trump, 2016 ONCA 747, De Molestina & Ors v Ponton & Ors, [2001] E.W.H.C. 521 (Comm) (U.K.), Gerald H.L. Fridman, The Law of Contract in Canada, 6th ed. (Toronto: Carswell, 2011), Ruth Sullivan, The Construction of Statutes, 7th ed. (Markham: LexisNexis Canada Inc., 2022)

Apotex Inc. v. Eli Lilly Canada Inc., 2022 ONCA 587

Keywords: Intellectual Property, Patents, Invalidity, Trademarks, Competition Law, Monopolies, Torts, Civil Conspiracy, Civil Procedure, Costs, Statute of Monopolies, R.S.O. 1897, Ch. 323, s. 5, Trademarks Act, R.S.C., 1985, c. T-13, Patent Act, R.S.C., 1985, c. P-4, Patented Medicines (Notice of Compliance) Regulations, SOR/93-133, Food and Drugs Act, R.S.C. 1985, c. F-27, Competition Act, R.S.C., 1985, c. C-34, Apotex v. Sanofi-Sythelabo Canada Inc., 2008 SCC 61, Commissioner of Patents v. Farbwerke Hoechst Aktiengesellschaft Vormals Meister Lucius & Bruning, [1964] S.C.R. 49, AstraZeneca Canada Inc. v. Canada (Minister of Health), 2006 SCC 49, Apotex Inc. v. Schering Corporation, 2018 ONCA 890, Harris v. GlaxoSmithKline, 2010 ONCA 872, Peck v. Hindes (1898), 15 R.P.C. 113 (Q.B.D.), Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004], Restoule v. Canada (Attorney General), 2021 ONCA 779, Berry v. Scotia Capital Inc., 2010 ONSC 5489, Andersen v. St. Jude Medical, Inc. (2006), 264 D.L.R. (4th) 557 (Ont. Div. Ct.), Gratton-Masuy Environmental Technologies Inc. v. Building Materials Evaluation Commission (2003), 170 O.A.C. 388 (Div. Ct.), Moon v. Sher (2004), 246 D.L.R. (4th) 440 (Ont. C.A.), Leonard v. Zychowicz, 2022 ONCA 212, Davies v. Clarington (Municipality) et al., 2009 ONCA 722, British Columbia (Minister of Forests) v. Okanagan Indian Band, [2003] 3 S.C.R. 371

Short Civil Decisions

Mugizi v. Ngo,, 2022 ONCA 595

Keywords: Torts, MVA, Civil Procedure, Dismissal for Delay, Sickinger v. Krek, 2016 ONCA 459

Blackwell v. Genier, 2022 ONCA 599

Keywords: Civil Procedure, Costs

Beaudoin v. Beaulieu, 2022 ONCA 598

Keywords: Family Law, Spousal Support, Child Support, Section 7 Expenses, Financial Disclosure, Civil Procedure, Orders, Enforcement, Striking Pleadings, Federal Child Support Guidelines, SOR/97-175, Colucci v. Colucci, 2021 SCC 24

Lee v. Magna International Inc., 2022 ONCA 600

Keywords: Torts, Negligence, Civil Procedure, Amending Pleadings, Orders, Setting Aside or Varying, Stay Pending Appeal, Reasonable Apprehension of Bias, RJR-MacDonald Inc. v. Canada (Attorney General), [1994] S.C.R. 3110, Livent Inc. v. Deloitte & Touche, 2016 ONCA 395

CIVIL DECISIONS

Hudson’s Bay Company ULC Compagnie de la Baie D’Hudson SRI v. Oxford Properties Retail Holdings II Inc., 2022 ONCA 585

[Doherty, Harvison Young and George JJ.A.]

Counsel:

J.C. Lisus and C. Liebzeit, for the appellant/respondent
D.E. Palter and A. Soutter, for the respondents/cross-appellants

Keywords: Contracts, Real Property, Commercial Leases, Relief from Forfeiture, COVID-19, Damages, Interest, Commercial Tenancies Act, R.S.O. 1990, c. L.7, s. 20, Courts of Justice Act, R.S.O. 1990, c. 43, s. 101, Bosak et al. v. 3930441 Canada Inc. et al., 2014 ONSC 1138, The Second Cup Ltd. v. 2410077 Ontario Ltd., 2020 ONSC 3684, 1397633 Ontario Inc. v. Oxford Properties Group Inc., 2003 Carswell Ont. 1291 (OSC), Ontario (AG) v. 8477 Darlington Crescent, 2011 ONCA 363, Hunt’s Transport Limited v. Eagle Street Industrial G.P. Inc., 2020 ONSC 5768, Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Company, [1994] 2 S.C.R. 490, Liscumb v. Provenzano (1985), 51 O.R. (2d) 129, at 137 (S.C.), aff’d 55 O.R. (2d) 404 (C.A.), 1383421 Ontario Inc. v. Ole Miss Place Inc. (2003), 67 O.R. (3d) 161, Ross v. Eaton Co. (1993), 11 O.R. (3d) (C.A.), Ontario Inc. v. Leon’s Furniture Ltd., [2003] O.J. No. 3708, Clark Auto Body v. Integra Custom Collision Ltd., 2007 BCCA 24, Hudson’s Bay Company ULC v. Pension Fund Investment Ltd., 2020 BCSC 1959, Cherry Lane Shopping Centre Holdings v. Hudson’s Bay Company ULC, 2021 BCSC 1178, Tauro v. Yu, 2018 ONSC 7319 (Div. Ct.)

facts:

The appellant, Hudson’s Bay Company (“HBC”), leases retail property in Richmond Hill from the respondent/cross-appellant, Oxford Properties (“Oxford”). The property is part of Hillcrest Mall, which is owned by an affiliate of Oxford (“Hillcrest”). Due to the government lockdowns related to the COVID-19 pandemic, HBC began withholding rent payments in April 2020. In October 2020, HBC sought a declaration that Hillcrest breached the lease agreement for failure to maintain “first-class shopping centre standards.” HBC sought a further declaration that it was not required to pay rent unless Oxford remedied its breaches of the lease. Oxford responded to HBC’s action by serving it with a Notice of Intention to forfeit the HBC lease.

In November 2020, Hainey J. granted an interim injunction enjoining Hillcrest from terminating the HBC lease. He also ordered HBC to pay 50% of unpaid rent arrears, as well as 50% of the monthly rent as it came due on a go-forward basis. In June 2021, the motion judge, Justice C. Gilmore, held that (a) Oxford did not breach the terms of the lease and that HBC was in default for non-payment of rent; (b) HBC was entitled to relief from forfeiture pursuant to s. 20 of the Commercial Tenancies Act (“CTA”), but the remedial power in s. 20 did not extend to orders abating or reducing the rent agreed upon by the parties in the lease; and (c) HBC was to pay all arrears of rent in accordance with a fixed payment schedule, which attracted interest at TD’s prime rate plus two percent.

issues:

(1) What is the scope of the relief available under s. 20 of the CTA?

(2) Did the motion judge err in not ordering HBC to pay all arrears of rent forthwith?

(3) Did the motion judge err in ordering interest on the arrears of the rent owed at a rate less than the amount agreed upon in the lease?

holding:

Appeal dismissed. Cross-appeal allowed.

reasoning:

(1) Section 20 of the CTA aims to preserve the relationship between the parties as reflected in the lease. The broad discretion in s. 20 allows the Court to impose terms that will bring and keep the tenant in compliance with the existing lease: Clark Auto Body v. Integra Custom Collision Ltd., at para 30. The Court stated that to order that a tenant is not required to pay the agreed upon rent does not grant relief from forfeiture of the lease, but rather, it grants relief from compliance with the terms of the lease. Furthermore, the abatement or reduction of the rent agreed upon in the lease does not serve to preserve the lease. Instead, it alters a basic and fundamental term of the lease.

The parties referred the Court to two British Columbia cases for the proposition that the Courts have accepted that rent abatements or reductions can be ordered as a term of granting relief from forfeiture: see Hudson’s Bay Company ULC v. Pension Fund Investment Ltd. and Cherry Lane Shopping Centre Holdings v. Hudson’s Bay Company ULC. The Court of Appeal disagreed and stated that the impact of COVID-19 and the resulting restrictions on retail businesses can be taken into account when setting the terms of relief for forfeiture, however, the Court did not accept that the economic impact of COVID-19 can be taken as a basis for fundamentally altering the remedy from one of relief from forfeiture to one imposing new terms in the lease. The Court also noted that it would be erroneous to do so in this case because of the importance of commercial certainty.

(2) Yes.

An order under s. 20 of the CTA must provide the tenant a reasonable time to comply with its terms. Otherwise, the relief would be illusory. The time needed to comply with the terms of the order will depend on the entirety of the circumstances, particularly the nature of the term with which the tenant must comply: see Tauro v. Yu. The payment schedule fixed by the motion judge was not intended to give HBC time to pay the rent arrears, but was rather intended to mitigate the economic harm suffered by HBC as a result of COVID-19 and the restrictions on the retail sector. However, there was no evidence that HBC was unable to comply with the terms of the lease.

Therefore, the motion judge erred in deferring HBC’s rent obligations for reasons unrelated to HBC’s ability to bring itself into compliance with the terms of the lease relating to rent payment.

(3) Yes.

Under the terms of the lease, HBC was required to pay interest on arrears of rent at the rate of TD’s prime rate plus 4%. The motion judge made no reference to interest in her reasons for decision. The Court stated that changing the interest rate as a term of granting relief from forfeiture was fundamentally the same as changing the rent owing. There was therefore no justification for changing the interest rate.


Urban Mechanical Contracting Ltd. v. Zurich Insurance Company Ltd., 2022 ONCA 595

[Fairburn A.C.J.O., Thorburn and Favreau JJ.A.]

Counsel:

E. Bisceglia and F. Souza, for the appellants Urban Mechanical Contracting Ltd. and Oakdale Drywall & Acoustics Ltd.

M. Tamblyn and M. P. Falco, for the appellant OZZ Electric Inc.

S. Astolfo and P. Cho, for the appellant NORR Limited

H. Borlack and B. Tustain, for the appellant WSP Canada Group Limited

H. Wise and J. Rosenthal, for the appellant Noram Building Systems Inc.

A. Wainstock, for the appellant Safway Services Canada, Inc.

H. Chaiton, S. Schwartz and D. Marr, for the appellant Bank of Montreal, as Administrative Agent

M. Lerner, B. Kolenda, J. McDaniel and S. Bittman, for the respondent Zurich Insurance Company Ltd.

M. Wiffen, for the respondent, Zurich Insurance Company Ltd. (in respect of NORR Limited).

Keywords: Contracts, Construction, Surety Bonds, Performance Bonds, Payment Bonds, Fraudulent Misrepresentation, Equitable Remedies, Rescission, Restitutio in Integrum, Restitutio in Specie, Construction Act, R.S.O. 1990, c. C.30, s. 85.1, O. Reg. 304/18, s. 12, Construction Lien Act, R.S.O. 1990, c. C.3, s. 69(1) and (3), Truro (Town) v. Toronto General Insurance Co., [1974] S.C.R. 1129, Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423, Place Concorde East Ltd. Partnership v. Shelter Corp. of Canada Ltd. (2006), 270 D.L.R. (4th) 181 (Ont. C.A.), Deschenes v. Lalonde, 2020 ONCA 304, Kingu v. Walmer Ventures Ltd. (1986), 10 B.C.L.R. (2d) 15 (C.A.), Spence v. Crawford, [1939] 3 All E.R. 271, Barclays Bank v. Metcalfe & Mansfield, 2011 ONSC 5008, York University v. Markicevic and Brown, 2016, ONSC 3718, 33 C.C.E.L. (4th) 26, Moore v. Sweet, 2018 SCC 52, [2018] 3 S.C.R. 303, KBA Canada, Inc. v. Supreme Graphics Limited, 2014 BCCA 117, Zaidan Group Ltd. v. London (City) (1990), 71 O.R. (2d) 65 (C.A.), Neles Controls Ltd. v. Canada, 2002 FCA 107, 2747-3174 Québec Inc. v. Québec (Régie des permis d’alcool), [1996] 3 S.C.R. 919, Tremblar Building Supplies Ltd. v. 1839563 Ontario Limited, 2020 ONSC 6302, Valard ConstructionLtd. v. Bird Construction Co. 2018 SCC 8, Paul D’Aoust Construction Ltd. v. Markel Insurance Co. of Canada (1999), 120 O.A.C. 243 (C.A.), Tennent v. The City of Glasgow Bank (1879), 4 App. Cas. 615 (U.K.), Clough v. London and Northwestern Railway Company (1871), L.R. 7 Exch. 26 (U.K.), Society of Lloyd’s v. Leighs, [1997] E.W.C.A. Civ. 2283 (U.K.), Foy v. Royal Bank (1995), 37 C.P.C. (3d) 262 (Ont. Gen. Div.), i Trade Finance Inc. v. Bank of Montreal, 2011 SCC 26, Nesbitt v. Redican, [1924] S.C.R. 135, Spence v. Crawford, [1939] 3 All E.R. 271, Kiani v. Abdullah (1989), 70 O.R. (2d) 697 (C.A.); Carter v. Golland, [1937] O.R. 881 (C.A.), Brown & Root v. Aerotech Herman Nelson Inc. et al., 2004 MBCA 63, Canada (Attorney General) v. Collins Family Trust, 2022 SCC 26, Rick v. Brandsema, 2009 SCC 10, Kupchak v. Dayson Holdings Ltd. (1965), 53 D.L.R. (2d) 482 (B.C.C.A.), McCarthy v. Kenny, [1939] 3 D.L.R. 556 (Ont. S.C.), Trans-Canada Trading Co. v. M. Loeb Ltd., [1947] 2 D.L.R. 849 (Ont. H.C.J.), Stewart v. Complex 329 Ltd. (1990), 109 N.B.R. (2d) 115 (Q.B.), Singh v. Trump, 2016 ONCA 747, De Molestina & Ors v Ponton & Ors, [2001] E.W.H.C. 521 (Comm) (U.K.), Gerald H.L. Fridman, The Law of Contract in Canada, 6th ed. (Toronto: Carswell, 2011), Ruth Sullivan, The Construction of Statutes, 7th ed. (Markham: LexisNexis Canada Inc., 2022)

facts:

In 2011, a Hospital entered into a public-private redevelopment project with Infrastructure Ontario. The Construction Contract was awarded to P.C., a subsidiary of B.C. Co. Ltd. A syndicate of lenders financed the project by way of a loan, memorialized in a Credit Agreement. Both the Construction Contract and Credit Agreement required P.C. to obtain and maintain surety bonds—a Performance Bond and a Payment Bond (collectively, the “Bonds”). The respondent, Z.I. Co. Ltd., issued the Bonds. B.C. Co. Ltd. struggled to meet payment deadlines, while the respondent funded the project. In 2020, a consultant for the respondent uncovered email communications between B.C. Co. Ltd and Hospital representatives disclosing allegedly fraudulent misrepresentations and collusion to ensure B.C. Co. Ltd secured the project contract. Z.I. Co. Ltd began an action seeking a declaration that the Bonds be rescinded due to fraud in the construction procurement process.

issues:

(1) As a matter of law, can an order for rescission ever be made where an innocent party was induced to enter a contract by virtue of fraudulent misrepresentation and where there are third parties who assert their rights?

holding:

Appeal dismissed.

reasoning:

(1) Yes.

Rescission is an equitable remedy that is meant to put the contracting parties back in the positions they were in before entering into the contract (restitutio in integrum). Rescission is available to a party that has been improperly induced to enter into a contract, for instance, by a fraudulent misrepresentation. However, it requires proof that the misrepresentation was material and was relied on by the party seeking to rescind the contract. A “material misrepresentation” is one that a reasonable person would consider to be relevant to the decision to enter the agreement, though it need not be the only reason to enter into the agreement.

Whether a contracting party relied on the misrepresentation, at least in part, to enter into the agreement is a “question of fact to be inferred from all the circumstances of the case and evidence at trial.” It is well established that when property is purchased by an innocent third party for value without notice, the pre-existing equitable interests of other parties are extinguished. The property cannot be wrested from a party with a superior interest and restored to the original owner. As a result, the original owner cannot be restored to the pre-contracting position.

Although the court cannot return specific property to its original owner (restitutio in specie) because a third party has acquired a superior interest in it, the court may award the original owner alternate relief aimed at restoring its precontractual position. Even when the parties cannot be restored precisely to the state they were in before the contract was signed, courts may still grant and tailor the rescission remedy because rescission is an equitable remedy focused on practical justice, not rigid technicalities. The court may therefore order rescission so long as it avoids injustice between the parties. Accordingly, where a third party is entitled to keep the property originally owned by one of the contracting parties, the court may still exercise its equitable power to do what is practically just and order a remedy that makes the original owner whole. Therefore, while rescission “may be refused” if third party rights are significantly adversely affected, the bars to rescission are a “flexible criteria.”

The question referred by the case management judge on this application was simply whether rescission is ever available as a matter of law when the rights of innocent third parties intervene and restitutio in integrum is impossible. For the reasons set out above, the answer is yes.

However, it was not possible to say, at this stage of the litigation and in the absence of a full factual record, whether rescission could be crafted to achieve practical justice for the appellants and respondents.

The Court therefore took no view on whether, in the event that rescission is ordered, the appellants have acquired interests under the Bond that they might be entitled to retain by virtue of being purchasers for value or because they acquired a beneficial interest in the Bond Amount. Nor did the Court take a view on whether the Trades acquired a statutory cause of action that was fully accrued before Zurich asserted its claim for rescission. If they have acquired and are entitled to retain such interests, a constellation of facts will need to be considered to determine how the contracting parties, deprived of the value of these interests, should be made whole. Finally, the Court also took no view on whether rescission would be able to achieve practical justice between the parties in the circumstances. These are fact-laden questions that are more appropriate for trial than an application.

In sum, the application judge correctly concluded that, as a matter of law, the rights of innocent third parties are not an absolute bar to rescission in all cases where there is an allegation of fraudulent misrepresentation. The applications were permitted to be brought in the midst of an ongoing action only to determine this narrow issue of law.

With the benefit of hindsight, it was unfortunate that this issue was addressed without a full record at trial as the full factual context is necessary to enable the court to make a final determination as to whether rescission is possible.

Courts exercise flexibility in determining whether rescission can and should be ordered where it is alleged that fraudulent misrepresentation induced the innocent contracting party to enter into an agreement. In making this determination, courts take into account all the facts and circumstances of the particular case in order to do practical justice between the parties.

The parties here had not completed examinations for discovery and there is therefore no full factual record available. The facts and circumstances of the case may determine important issues such as: (a) when Zurich knew or ought to have known of the fraud; (b) whether the Ratification Agreements with the Trades, the Credit Agreement, and the Bonds are inseparably related agreements; (c) if the Ratification Agreements are not inseparably connected to the Payment Bond, whether the Ratification Agreements are void for mutual mistake on the mistaken assumption the Payment Bond was in force and not void for fraud; (d) what knowledge, if any, the appellants had of the fraud; (e) whether some or all of the appellants are indeed third parties, beneficiaries or assignees and if so, whether they are innocent third parties; (f) whether any of the Trades participated in the alleged fraud; (g) whether any of the claims are derivative of the Obligee ProjectCo; and (h) whether the remedy of rescission is practical and just in cases such as this.
Because there is no complete factual record, the application judge’s findings of fact are not binding on the trial judge.

The narrow question of whether, as a matter of law, rescission may be available where an innocent party was induced to enter a contract by virtue of fraudulent misrepresentation and there are innocent third parties who assert their rights is answered in the affirmative.


Apotex Inc. v. Eli Lilly Canada Inc., 2022 ONCA 587

[Strathy C.J.O., Roberts and Sossin JJ.A.]

Counsel:

H. Radomski, A. Brodkin, N. De Luca and J. Topolski, for the appellants

M. Richard, A. Gloor and R. Johnston, for the respondents

Keywords: Intellectual Property, Patents, Invalidity, Trademarks, Competition Law, Monopolies, Torts, Civil Conspiracy, Civil Procedure, Costs, Statute of Monopolies, R.S.O. 1897, Ch. 323, s. 5, Trademarks Act, R.S.C., 1985, c. T-13, Patent Act, R.S.C., 1985, c. P-4, Patented Medicines (Notice of Compliance) Regulations, SOR/93-133, Food and Drugs Act, R.S.C. 1985, c. F-27, Competition Act, R.S.C., 1985, c. C-34, Apotex v. Sanofi-Sythelabo Canada Inc., 2008 SCC 61, Commissioner of Patents v. Farbwerke Hoechst Aktiengesellschaft Vormals Meister Lucius & Bruning, [1964] S.C.R. 49, AstraZeneca Canada Inc. v. Canada (Minister of Health), 2006 SCC 49, Apotex Inc. v. Schering Corporation, 2018 ONCA 890, Harris v. GlaxoSmithKline, 2010 ONCA 872, Peck v. Hindes (1898), 15 R.P.C. 113 (Q.B.D.), Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004], Restoule v. Canada (Attorney General), 2021 ONCA 779, Berry v. Scotia Capital Inc., 2010 ONSC 5489, Andersen v. St. Jude Medical, Inc. (2006), 264 D.L.R. (4th) 557 (Ont. Div. Ct.), Gratton-Masuy Environmental Technologies Inc. v. Building Materials Evaluation Commission (2003), 170 O.A.C. 388 (Div. Ct.), Moon v. Sher (2004), 246 D.L.R. (4th) 440 (Ont. C.A.), Leonard v. Zychowicz, 2022 ONCA 212, Davies v. Clarington (Municipality) et al., 2009 ONCA 722, British Columbia (Minister of Forests) v. Okanagan Indian Band, [2003] 3 S.C.R. 371

facts:

In 1998, Eli Lilly Canada Inc (“Eli Lily) patented a drug called Olanzapine (the “113 Patent”) and held a Form IV pursuant to the PM(NOC) Regulations. Apotex was unable to bring to market the generic version of Olanzapine under its own label due to Eli Lilly’s proceedings in the Federal Court of Canada, and its patent listing. In 2011, Eli Lilly’s patent over Olanzapine was declared invalid. The central issue on appeal was whether the invalidation in 2011 of Eli Lilly’s 1998 pharmaceutical patent registration for Olanzapine gave rise to a claim by Apotex for damages from its generic pharmaceutical being kept out of the market. Apotex’s claims for damages arose from the finding that Eli Lilly’s patent was invalid and void ab initio. On November 7, 2013, Apotex commenced the present action. In response to Apotex’s action, Eli Lilly brought a motion for summary judgment in 2020. The motion judge determined that there was no genuine issue requiring a trial and granted summary judgment to Eli Lilly, dismissing Apotex’s action.

issues:

(1) Did the motion judge err in finding the Patent Act and its Regulations formed a complete code?

(2) Did the motion judge err in finding that Apotex’s damages are not recoverable because they arose by operation of law?

(3) Did the motion judge err in rejecting Apotex’s claim under the Statute of Monopolies?

(4) Did the motion judge err in concluding that Apotex’s Trademark Act claims were not available?

(5) Did the motion judge err in rejecting Apotex’s claim based on civil conspiracy?

(6) Did the motion judge err in awarding $700,000 for Eli Lilly’s partial indemnity costs?

holding:

Appeal dismissed.

reasoning:

(1)

No. The motion judge accurately held that the Patent Act and its Regulations formed a complete code for the purposes of determining whether damages were available to Apotex outside of the patent regulatory scheme in which Apotex had voluntarily participated and the operation of which Apotex claimed caused its damages. Accordingly, Apotex did not meet the requirements for a s. 8 compensation claim. Having unsuccessfully challenged Eli Lilly’s patent registration and unsuccessfully pursued a remedy under the PM(NOC) Regulations, it was not now open to Apotex to effectively seek the same relief under the auspices of other statutory and common law claims.

(2)

No. Apotex’s delay in bringing its drug to market was caused by the statutory stay mechanism provided for under the PM(NOC) Regulations and the order that determined Apotex was not entitled to early market access or compensation under s. 8. Eli Lilly is not liable for actions that were authorized by law and was entitled to pursue the legal process provided for under the PM(NOC) Regulations.

(3)

No. Monopolies flowing from patents for new inventions are explicitly excluded from liability under s. 5 of the Statute of Monopolies. There was nothing illegitimate or unlawful in the granting of Eli Lilly’s 113 Patent.

(4)

No. Eli Lilly’s listing that it owned the validly registered 113 Patent at that time, and the information it provided in support of that listing, was not a misrepresentation. Apotex led no evidence to indicate that there was a misrepresentation.

(5)

No. There was nothing unlawful in Eli Lilly applying for and then protecting a validly registered patent under the Patent Act and its Regulations, notwithstanding that the 113 Patent was later invalidated. Apotex relied on nothing else to support its claim for conspiracy.

(6)

No. In assessing what was reasonable, fair, and proportionate for the losing party to pay in the particular circumstances, the motion judge properly considered the relevant factor of the reasonable expectations of the parties. The Court held that the costs award was the product of the motion judge’s reasonable exercise of his discretion. Apotex failed to meet its burden on appeal to show that the motion judge erred in principle or that his costs award was “plainly wrong”.


SHORT CIVIL DECISIONS

Mugizi v. Ngo, 2022 ONCA 595

[Huscroft J.A, Harvison Young J.A, Sossin J.A]

Counsel:

S.J. Petrillo for the appellant

A. Reyes for the respondent

Keywords: Torts, MVA, Civil Procedure, Dismissal for Delay, Sickinger v. Krek, 2016 ONCA 459

Blackwell v. Genier, 2022 ONCA 599

[Lauwers, Benotto and Paciocco JJ.A.]

Counsel:

N. Abraham for the appellants

G.A. Wainwright and J.A. Wainwright for the respondents

M.F.N., acting in person

Keywords: Civil Procedure, Costs

Beaudoin v. Beaulieu, 2022 ONCA 598

[Pardu, Harvison Young and Favreau JJ.A.]

Counsel:

P.B., acting in person

L.B., acting in person

Keywords: Family Law, Spousal Support, Child Support, Section 7 Expenses, Financial Disclosure, Civil Procedure, Orders, Enforcement, Striking Pleadings, Federal Child Support Guidelines, SOR/97-175, Colucci v. Colucci, 2021 SCC 24

Lee v. Magna International Inc., 2022 ONCA 600

[Huscroft, Harvison Young and Sossin JJ.A.]

Counsel:

D.L., acting in person

L.J. Freitag, for the respondents

Keywords: Torts, Negligence, Civil Procedure, Amending Pleadings, Orders, Setting Aside or Varying, Stay Pending Appeal, Reasonable Apprehension of Bias, RJR-MacDonald Inc. v. Canada (Attorney General), [1994] S.C.R. 3110, Livent Inc. v. Deloitte & Touche, 2016 ONCA 395


The information contained in our summaries of the decisions is not intended to provide legal advice and does not necessarily cover every matter raised in a decision. For complete information or for specific advice, please read the decision or contact us.



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