Monday, February 06, 2012

This Week at the Ontario Court of Appeal - February 6, 2012

Each week, Wise Blog analyzes recent decisions from the Ontario Court of Appeal.

This appeal followed a jury trial where the appellant was convicted of possession of cocaine for the purpose of trafficking. He was acquitted at trial on charges of possession of Canadian currency derived from the offence of possession of cocaine for the purpose of trafficking.

Two police officers claimed that they witnessed the appellant engaged in a hand-to-hand transaction with a woman, where the appellant gave the woman a plastic bag in exchange for a $50 bill. As the officers approached the scene, the appellant ran away. As he ran, the officers observed the appellant throwing objects from his pocket. The police picked up various drugs that the appellant threw away. Further, Officer Pauls testified that the appellant had a $50 bill in his possession when he was arrested.

Additionally, Officer Fletcher acknowledged during cross-examination that he made his notes in conjunction with Officer Pauls and that they discussed how the incident transpired. Moreover, he stated that he could not recall which items he picked up while following the appellant.

On appeal, the appellant raised two central issues. The appellant's position was that the guilty verdict was unreasonable and that the officers planted the drugs. In support of his position, he stated that it was obvious that Officer Fletcher fabricated portions of his evidence at trial, rendering the entirety of his evidence incapable of belief. Additionally, the appellant asserted that the verdict of not guilty on the possession of proceeds of crime charge was inconsistent with the guilty verdict on the possession for the purposes of trafficking charge, and made the latter verdict unreasonable.

The Court held that although there may have been credibility issues with Officer Fletcher's testimony concerning items that he picked up at the scene, it was open to the jury to make a finding of guilt based on the totality of evidence at trial. Regarding the appellant's submission that the drugs were planted, based on the Court's review, the Court was satisfied with Officer Fletcher's evidence at trial that he did not have any marijuana or cocaine in his pocket at the time of the appellant's arrest. Moreover, he did not seize any drugs prior to encountering the appellant.

The appellant's second central argument on appeal was that the trial judge erred in failing to provide the jury instructions explaining the importance of the independence of the police officers' notes. The appellant contended that the jury charge also failed to give a sharp warning about the potential impact of the police officers' collaboration when they prepared their notes.

The Court found that the trial judge did adequately advise the jury about the potential impact of collaboration on two occasions during the course of the charge. Therefore, the Court was content that the instructions given to the jury by the trial judge were sufficient to draw their attention to the risks arising from the fact that the two officers canvassed the incident after it happened and collaborated in formulating their notes. Moreover, the Court noted that the fact defence counsel failed to object to the juries instructions, was a reliable indicator that they perceived that the instructions were satisfactory.

The appeal was dismissed.

Dee Ferraro Limited v. Pellizzari
This case on appeal involved a review of a procedural ruling by a motions judge. The appellants, Dee Ferraro Limited appealed an order dismissing their motion for leave to amend the statement of claim.

Rule 26.01 of the Rules of Civil Procedure provides that the court shall grant leave to amend a pleading unless prejudice will result that cannot be compensated for by costs or an adjournment. The motion judge ruled that the appellants attempted to plead new facts and new causes of actions. He also held that the expiring of an intervening limitation period gave rise to a presumption of prejudice and that permitting the proposed amendments would unduly delay the trial, which would be unjust to the respondent.

After reviewing the motion judge's reasons and decision, the Court held that the motion judge erred in concluding that the proposed amendments added new causes of action. The the original pleading contained all the necessary facts to support the amendments. The purpose of the amendments was to claim additional forms of relief or to clarify the relief the appellants sought, based on the same facts as originally pleaded. The leading case that distinguished between pleading a new cause of action and pleading new or alternative remedies based on the same facts is Canadian Industries Ltd. v. Canadian National Railway Co.

The Court canvassed the broad allegations included in the statement of claim, including breach of contract, breach of fiduciary duties, fraud, negligence and a constructive trust over certain profits allegedly acquired by the respondent. The Court re-iterated that the proposed amendments did not add any material facts to those already pleaded. The most disputed amendment proposed was associated to the claims for a mandatory order, which required the respondent to transfer his one-third shareholding in Sherwood Forests Investments (Guelph) Ltd. ("SFI") to the appellant; and for the declaration of a constructive trust over proceeds and profits received by the respondent as a result of his breach of contract, as long as the claim related to the respondent's shareholding interest.

The respondent's position was that the appellants acknowledged in their original statement of claim that the respondent held shares in SFI. As a result, he claimed that effect of the proposed amendment was to question the respondent's share ownership, for the first time. The respondent's considered the proposed amendment to fundamentally alter the nature of the claims against him.

The Court allowed the appeal. They asserted that the appellants acknowledged that the respondent had shares in SFI but did not admit the shares were for the respondent's own benefit. In addition, the appellants pleaded that the respondent's entitlement to the shares was conditional on his management services. Therefore, the Court was of the view that the respondent's entitlement to shares was properly pleaded in the original statement of claim and that unrelated causes of actions were not asserted based on new facts. As a consequence, the Court concluded that the appellant's claims were not statute-barred and the amendments should have been permitted.

Brito v. Canac Kitchens

The issues contested by the appellant on appeal followed from the appellant's wrongful termination of the respondent's employment.

The respondent was a 24-year long employee with the appellant. He was terminated without cause from his job as a kitchen cabinet and door maker and wood workshop production lead-hand. His job duties included preparing, sanding and assembling cabinets and doors, collecting reports and supervising production in the wood shop. The appellant paid the respondent the statutory minimum of 32 weeks pay of salary in lieu of notice, severance and benefits for up to eight weeks. Further, a couple of weeks after being terminated by the appellant, the respondent found new employment. However, his new employer did not provide any disability benefits. This was in contrast to the appellant, which provided short term disability (STD) as well as long-term disability (LTD) benefits to its employees under a disability benefits plan (the "Plan").

Approximately eighteen months after commencing his new employment, the respondent was diagnosed with cancer and underwent surgery for the removal of his cancer shortly thereafter. Additionally, the respondent sued the appellant for wrongful dismissal and for STD and LTD disability benefits. He claimed he would have been entitled to these benefits but for his wrongful dismissal.

At trial, the trial judge concluded that the respondent was wrongfully terminated and awarded him 22 months worth of notice pay, STD benefits for 17 weeks, and LTD benefits thereafter, to age 65. Moreover, he awarded the respondent $15,000 for ancillary damages for the appellant's wrongful conduct concerning the respondent's termination and the litigation. The appellant appealed the trial judge's award of damages for lost LTD and the award for ancillary damages.

An employee must meet the requirements of "total disability" for the purpose of LTD benefits that the Plan provides. In order to meet this standard, an employee must demonstrate that he/she was prevented by restriction or lack of ability due to illness or injury from performing the essential duties of his own occupation during the qualifying period and two years following the qualified period and any occupation for which the employee is qualified or may reasonably become qualified by training after the aforementioned two year qualified period.

The appellant's position regarding disability benefits was that the respondent was never "totally disabled" within the meaning of the Plan in order to qualify for disability benefits after November 1, 2005. Additionally, the appellant claimed that the respondent did not present evidence at trial that demonstrated that he would remain disabled until his 65th birthday, the date when LTD benefits would terminate in accordance with the provision of the Plan. The trial judge did not accept the appellant's arguments and held that the respondent successfully discharged his evidentiary burden that he was "totally disabled" by viva voce and medical evidence.
The Court reviewed medical evidence from the respondent, which demonstrated that following the removal of his tracheostomy tube in June 2005, his breathing never returned to normal, he was unable to work due to reduction of his strength, intermittent loss of his voice and exposure to work environment dust. The Court noted other instances that demonstrated the respondent's inability to work due to medical reasons. Moreover, they declared that the appellant failed to call medical or other expert evidence to counter the respondent's medical evidence. Therefore, the Court stated that the trial judge's conclusion that the respondent discharged his evidentiary burden to establish his disability within the meaning of the Plan, was justified.

The appellant's second ground of appeal concerned the appellant's mitigation efforts. The appellant claimed that the respondent failed to engage in job re-training efforts and to seek alternative employment following March 2005. The Court held, nonetheless, the evidence at trial indicated that the respondent was unable to work after March 2005 due to his condition and restrictions imposed by his treating physicians. As a consequence, the Court stated that the respondent did not have an obligation to mitigate his damages by finding alternative employment since he was incapable of working. Further, there was no evidence that the respondent refused to take part in rehabilitation or any vocational programs.

Regarding the judge's award of ancillary damages to the respondent, the Court accepted the appellant's argument that the trial judge erred in granting this award. The trial judge utilized words such as "cavalier, malicious, reckless and outrageous" to describe the appellant's conduct in its treatment of the respondent on termination and during litigation. The Court noted that the respondent did not claim punitive damages in his statement of claim and that the respondent did not seek this relief in issue at trial. Therefore, the Court set aside the trial judge's $15,000 award for punitive damages to the respondent.

R. v. Morgan

The Crown appealed the respondent's acquittal and sought a new trial on the basis that the trial judge erred in his ruling that the respondent's (Calvin Morgan) s.8 Charter rights had been violated and that the evidence obtained pursuant to a search warrant should be excluded pursuant to s.24(2) of the Charter.

In late December 2008, masked and armed perpetrators invaded an apartment in Brampton. They carried a gun as well as machetes. There were three victims present at home during the invasion. One of the victims, Mr. Northcott suffered several wounds. The assailants stole cell phones, electronic equipment and various pieces of identification belonging to the victims. The police arrived at the scene and conducted an investigation.

In January 2009, the police obtained and executed a search warrant to search a residence on Abelard Avenue in Brampton. In the respondents' bedrooms, the police found the stolen property taken from the apartment in Brampton, the pieces of identification belonging to the victims and clothing stained with blood containing the DNA of Mr. Northcott.

At the conclusion of trial, the trial judge held that the information to obtain ("ITO"), which formed the foundation for the issuance of the search warrant, contained "extensive misinformation, misleading information and incomplete evidence" and affected the core of the evidence required for the issuing judge's decision. As a result, the trial judge concluded that the ITO only contained four relevant facts:
  1. The Respondent, Calvin Morgan, phoned Ms. Caines on one occasion prior to the date of the date of the robbery from a phone number registered to the Abelard Avenue address;
  2. There were fresh footprints found in the snow at approximately 10:45 p.m. on the night of the robbery, at the intersection of Pearson Road and Abelard Avenue; 
  3. Ms. Caines received a phone called registered to the Abelard residence, the morning after the robbery; and
  4. One of the victims' cellular phones was located by Bell Canada within a half hour of the robbery at the intersection of Abelard Avenue and Pearson Road.
The trial judge concluded that the execution of the search warrant was in breach of the respondent's s.8 Charter right. The foregoing facts did not give the issuing judge the opportunity to find reasonable and probable grounds to believe that evidence of the home invasion would be found at the Abelard residence. Additionally, the trial judge held that as a result of the seriousness of the police's misconduct combined with the respondent's privacy interests in his home, the admission of the evidence obtained would bring the administration of justice into disrepute under s. 24(2) of the Charter.

The appellant's primary issue on appeal was that even after removing any misstatements in the ITO, there remained sufficient evidence supporting issuance of the search warrant.
In allowing the appeal, the Court noted much evidence, beyond the four facts listed by the trial judge, demonstrating a connection between the Abelard residence and the robbery. Bell Canada was able to place the cell phone near the Abelard residence. There were fresh footprints in the snow located directly in front of the Abelard Residence. The respondent matched the general description provided by the victims. The victims knew the respondent as one of only two African American men to have visited their apartment to purchase a small amount of marijuana. There was a connection between the respondent and the Abelard Residence. The respondent placed a phone call registered to the Abelard Residence prior to the robbery. The morning after the robbery, Ms. Caine received a phone call from the same number but was not home at the time. She notified the police because she found it odd that the respondent was aware that she worked during that time. The police did their due diligence and discovered that the telephone number provided by Ms. Caine was in fact registered to the Abelard residence.

Further, the Court noted that with the search warrant in hand, the burden on the police was not to prove, beyond a reasonable doubt, that evidence of the robbery would be recovered at the Abelard Residence. Instead, the relevant test to be applied when authorizing a search warrant, was set out in Araujo, where the Court stated:
... The question is simply whether there was at least some evidence that might reasonably be believed on the basis of which the authorization could have issued.
The additional facts, combined with the four reliable facts in the ITO, must be viewed in the totality of the circumstances. As a result, the Court held that the judge could have issued the search warrant on this basis. and the respondent failed to meet his burden to prove that on a balance of probabilities, the warrant could not have been issued.

Mady Development Corp. v. Rossetto

The appellant, Mr. Rossetto, worked as an executive with the respondent, Mady Developments Corp. During a three month period in 2007, the appellant allegedly diverted labour and materials, and used the respondent's funds to renovate his home. Upon discovering the appellant's wrongdoing, the respondent terminated his employment in late 2008.
The respondent subsequently commenced an action for damages of conversion, breach of employment contract, unjust enrichment and breach of fiduciary duty. The appellant counterclaimed in respect of the bonuses he was entitled to for 2007 and 2008. In order to resolve the parties' issues, they submitted their dispute to arbitration.

Following the conclusion of an arbitration hearing, the arbitrator awarded the respondent $546,452. Specifically, it received $315,452 for the misappropriated labour, materials and funds and $231,000 for the delay to one of the respondent's projects caused by the appellant's diversion of resources and labour. Furthermore, regarding the appellant's claim for bonuses, the arbitrator found that he was a trusted member of the respondent's small executive group. Since the appellant's employment contracted stated that he was entitled to an annual bonus equal to 30% of the respondent's profits after overhead, the arbitrator found that their relationship operated as a "true partnership". The arbitrator noted:
Rossetto's entitlement to an annual bonus was clearly an integral part of his contract with Mady from the very first day he entered into his employment.
Accordingly, the arbitrator awarded the appellant $364,661.33 in satisfaction of his unpaid bonuses for 2007 and 2008. The respondent subsequently appealed the arbitrator's decision that the appellant was entitled to his bonuses.
The appeal judge held that the arbitrator erred in law by failing to apply the remedies governing a breach of fiduciary duty, having found that the appellant and respondent were involved in a fiduciary relationship. The principal case that the appeal judge referred to was McBride Metal Fabricating Corp. v. H.W. Sales Company Inc. She stated,
The overriding principle is that a fiduciary is not entitled to compensation for the period of their wrongdoing.
Moreover, the appeal judge had held that the respondent should be returned to the position it would have been if the breach had not occurred. The only way this could be accomplished was to deny the appellant his bonus from the date of the breach onward. Further, she stated that had the respondent been aware of the appellant's wrongdoing at the time it occurred, it would have terminated his employment immediately.

In its review of the appeal judge's decision, the Court noted that she erroneously concluded that in all circumstances fiduciaries forfeit entitlement to compensation in the form of bonuses. The appeal judge overlooked the fact that equitable remedies are considered discretionary and a fiduciary's entitlements are dependent upon the facts before the court. Further, the Court stated that fiduciary relief aims to achieve two main goals: restitution and deterrence. Regarding the former, it is aimed at returning the beneficiary to the position it would have been in but for the fiduciary's breach. The purpose of deterrence is to prevent fiduciaries from benefiting from their wrongdoing and to maintain the integrity of the fiduciary relationship.

In analyzing the law concerning fiduciaries' right to compensation in the form of bonuses after committing faithless acts, the Court noted that the jurisprudence reinforces the common principle that equitable relief is discretionary and fact specific. The Court cited Mark Ellis' book, Fiduciary Duties in Canada, where he described the entitlement to compensation in the employment context:
It is well accepted that a principal will not be required to pay his agent a commission for transactions that are in breach of fiduciary duty. However, an employer is not free to withhold payment of wages due for past performance, even where the past performance may have involved a time when the employee was acting in breach of his fiduciary duty.
Further, the Court discussed the nature of bonuses, and noted the appellant's bonuses were significant and non-discretionary. As a result, the Court agreed with the arbitrator's decision that the appellant's bonuses were an integral part of his compensation under the employment contract. As such, the arbitrator's decision achieved the two main goals of fiduciary relief, restitution and deterrence.

The Court reversed the prior appeal ruling and reinstated the arbitrator's award.

- Alim Ramji, Toronto
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