September 2013 Newsletter

Babin Bessner Spry Newsletter

Top Patio Spots for Early Fall

Ed's Pick:

Scallywags (see – St. Clair and Yonge – this is a hidden gem.   There is a small entrance on St. Clair, then three floors up some grubby stairs to a great roof top patio, with lots of heaters!  Quite busy but manageable and fun.  Good food, lots of screens (if you want to watch a sporting event).  The beer is cold.  What more could you ask for?   

Cynthia's Pick:

Bellwoods Brewery on Ossington.  This may seem like kind of a strange pick for me since I'm not much of a beer-drinker and couldn't care less that they brew their own beer and sell it out of the bottle shop next door.  But I love the food and the ambiance.  It's casual and friendly and feels a little like you're at a backyard barbeque (except the food is better).  The quickest way to my heart is a platter of small bites (cheese, meat, olives) and Bellwoods does it well.  Try the duck hearts – they are a must.  Get there early, as the patio is small and fills up quickly.

Tim's Pick:

Blake House at Jarvis and Wellesley.  I first visited the Blake House when I had guests staying with me at the beginning of the summer.  Since then I have been back more times than I can remember.  The patio is great – it is spacious and in a central location without being right downtown.  It has a glass fence around it that keeps out the noise without impeding the view.  There are also a number of permanent heaters so you can be sure that you will still be able to enjoy the patio in the fall.  The Blake House also holds an interesting place in Toronto's legal history.  It was designed by the renowned architects Knox & Elliot and built in 1891 for the Honourable Edward Blake, the second premier of Ontario and leader of the federal liberal party between 1878-1887.  He was also the founder of the law firm that still bears his name.

Carla's Pick:

I am a huge fan of roof-top patios and seek them out wherever I go!  The Roof Lounge at the Park Hyatt is by far my favourite in Toronto.  The ambiance, spectacular views and cocktails are to die for!  Whether it be a hot summer day or a crisp fall evening, this patio does not disappoint.

Marc's Pick:

Hemingway's in Yorkville is my pick for best patio. Sit out the front where you can watch the well-dressed locals pass by or move to the covered area when the sky opens up and reminds you that life is not all about sunshine and sunbathing. The bar has three floors so if you're not feeling the vibe in one area you don't have far to go for a different atmosphere. Huge but always busy, arrive early to make sure you get a seat!

Eden's Pick:

The tiny patio at The Green Room at Bloor and Brunswick is kind of a secret treasure – you have to go up a dark alley to get there, and it's tucked between buildings and covered with vines and twinkly lights.  The food and drinks are impossibly cheap and pretty tasty, and as long as you don't go on a Friday or Saturday night, it's quiet and there's always a table free.

Competition Tribunal Dismisses Allegations of Price Maintenance by Visa / Mastercard: Commissioner of Competition v. Visa Canada Corporation and Mastercard International Incorporated (CT-2010-10)

In Commissioner of Competition v. Visa Canada Corporation and Mastercard International Incorporated, the Competition Tribunal dismissed the Commissioner's application for an order under section 76 of the Competition Act.  No decision will be released until a determination of the information that must remain confidential is made; however, the Tribunal released a summary with a public version of the decision to follow.

The Commissioner filed an application with the Tribunal against Visa and MasterCard under section 76 of the Competition Act (price maintenance).  Section 76 states that the Tribunal may make an order if it finds that (among other things) a credit card provider by agreement, threat, or promise, has influenced upward, or has discouraged the reduction of, the price at which the credit card provider's customer, or any other person to whom the product comes for resale, supplies or offers to supply or advertises a product within Canada, causing an adverse effect on competition in a market.

The Commissioner alleged that Visa and Mastercard each requires its merchants to pay a fee each time a customer uses a credit card, and that they have each implemented agreements preventing merchants from encouraging customers to use lower-cost methods of payment (cash or debit or cards with lower fees) and from declining to accept credit cards with high acceptance fees, which costs are then passed onto customers in the form of higher retail prices for goods and services.

The Tribunal held that section 76 of the Competition Act (price maintenance) was not applicable to the Commissioner's claim because it requires a resale and the Commissioner had failed to establish that the Respondents' customers resell the Respondents' products.  The Tribunal dismissed the Commissioner's proposed interpretation of section 76, holding that it is not supported by the legislative history of the provision or other decisions.

If the Tribunal had erred and the Commissioner's proposed interpretation was valid, and the Respondents had engaged in price maintenance by preventing merchants from applying a surcharge for customers paying with credit cards, the Tribunal would have found that there had been an adverse effect on competition.  However, even under the alternative analysis, the Tribunal held that no order would be appropriate, as experience in other jurisdictions indicates that customer concerns regarding surcharging would be dealt with by regulation.

Guidance on Jurisdiction and Forum Non Conveniens after Van Breda: 2249659 Ontario Ltd. v. Sparkasse Siegen, 2013 ONCA 354

In 2249659 Ontario Ltd. v. Sparkasse Siegen, the Ontario Court of Appeal considered whether it had jurisdiction to hear a dispute between two manufacturing companies where the facts demonstrated a strong connection to Germany. In overturning the decision of the Superior Court of Justice, the Ontario Court of Appeal found that it did.

The decision offers a useful illustration of the jurisdictional issues raised in a dispute with international dimensions, as well as guidance on the effect of a forum selection clause.

A dispute arose between Rohwedder Canada Inc. ("RCI"), a company incorporated in Ontario but with a German parent company, and Thomas Magnete GmbH ("TMG"). TMG and RCI entered into an agreement related to the purchase and installation of assembly lines in Ontario in the form of a purchase order. The negotiations were conducted between RCI's parent company and TMG, which were both based in Germany. The purchase agreement in dispute was signed in Ontario. According to the respondents, the English translation specified that the contract contained a forum-selection clause in favour of Germany and was governed by German law. TMG and its German bank, Sparkasse Siegen ("Sparkasse"), gave guarantees to RCI in relation to the purchase agreement.

RCI brought proceedings against TMG in Ontario for negligent misrepresentation and breach of contract in relation to the guarantees given by TMG and Sparkasse. Before the merits of the claim could be heard, TMG argued that the Ontario Superior Court did not have jurisdiction simpliciter to consider the dispute (that the court could not assert jurisdiction against an out-of-province defendant who had not submitted to an action against it in Ontario), and alternatively, that Ontario was forum non conveniens.

Jurisdiction Simpliciter

In determining whether the court had jurisdiction simpliciter to hear the claim, the motion judge addressed the factors set out in the decision of the Supreme Court of Canada in Club Resorts Ltd. v Van Breda, 2012 SCC 17. In that case, the Court held that where a Van Breda factor is present, it creates a rebuttable presumption that a court can assume jurisdiction.  The Van Breda factors include: the defendant carries on business in the province; the tort was committed in the province; and, a contract connected with the dispute was made in the province. After comparing the case against these factors, the motion judge concluded that she did not have jurisdiction to hear the dispute.

The Court of Appeal held that the motion judge had erred on three grounds. First, the motion judge had ruled that the forum selection clause in the purchase agreement stated that the German courts were the most appropriate forum to hear any disputes related to the agreement, and that this clause meant the Ontario courts did not have jurisdiction simpliciter. The Court of Appeal noted that a forum selection clause, even if applicable, cannot deprive Ontario of jurisdictionsimpliciter.  Its existence is relevant to whether an Ontario court should exercise jurisdiction, not whether it may.

Second, the judge erred in deciding that RCI's pleadings on its tort claim were inadequate. The Court of Appeal stressed that the adequacy of the pleadings for trial should not be considered in a jurisdictional motion, unless they preclude an accurate characterization of the nature of the claims advanced in the proceeding (which would support the claim that the pleadings do not show an adequate connection between Ontario and the claim in order for the plaintiff to assert jurisdiction).

Finally, the motion judge mischaracterised RCI's claim as being made in relation to the purchase agreement. In fact, the claim was made in relation to the guarantees given by Sparkasse and TMG to RCI. This mischaracterisation had caused the motion judge to incorrectly determine that there were no Van Breda factors present. Further, the alleged forum-selection clause was contained in the purchase agreement, not the guarantees, and was therefore irrelevant.

On its own consideration of the Van Breda factors, the Court of Appeal found that Ontario had jurisdiction simpliciter, as the appellants had a strong claim that the respondents were carrying on business in Ontario, the tort of negligent misrepresentation was committed in Ontario, and the contracts (the guarantees) relied on in the Statement of Claim were made and breached in Ontario.

Forum Non Conveniens

In the alternative, TMG argued that Ontario was forum non conveniens, or not the most appropriate forum to hear the dispute.

The Court of Appeal noted that forum selection clauses in an agreement between sophisticated commercial parties will normally be enforced by Ontario courts.  A party disputing such a clause must show strong cause for departing from the terms of the agreement.

In this case, although there was a clear forum selection clause in a confidentiality agreement between the parties, the claims advanced had nothing to do with this agreement and the clause was therefore not applicable.  Even assuming that the purchase orders contained the forum selection clause as alleged by the Respondents, they were still required to demonstrate that the claims against them fell within the language of the forum selection clause.  The claims, properly characterised, were pursuant to guarantees given by the alleged guarantors of the payments required under the purchase orders, not pursuant to the purchase orders themselves.  Accordingly, neither of the forum selection clauses relied upon by the Respondents were applicable.

The Court of Appeal noted that, unlike the determination of jurisdiction simpliciter, whether Ontario is forum conveniens is a matter of judicial discretion. The Court must consider all the facts before deciding whether Ontario is the most appropriate forum to hear the dispute. The motion judge found that Germany was clearly the most appropriate forum, as the parties had chosen German law under the forum selection clause of the purchase orders. For the reasons outlined above, the Court of Appeal held that the purchase orders did not govern the appellants' claims, and that German law would not necessarily govern the dispute.  The respondents were unable to demonstrate that Germany was a clearly more appropriate forum for resolving these claims, and accordingly, the appeal was allowed.

In this case, the inquiry came down to a characterization of the commercial activity giving rise to the litigation.  The commercial activities in dispute were business decisions made by Germans in Germany about doing business in Ontario.  Both jurisdictions had meaningful connections to that commercial activity. TMG, as the party claiming Ontario was forum non conveniens, had the onus of showing that a German court was in a better position to hear the claim than an Ontario court. TMG had demonstrated that Germany was forum conveniens, but not that Germany was "clearly more appropriate for disposing of the litigation" than Ontario. The Court of Appeal held that the Ontario proceedings should therefore not have been stayed on this basis.


This case demonstrates the approach that an Ontario court will take in determining its jurisdiction to hear a claim with international dimensions. The Court of Appeal stressed the importance of the Van Breda factors in deciding the issue of jurisdiction simpliciter, as well as offering guidance on the correct interpretation of parties' commercial activities for the forum non conveniensanalysis.

Developments in the Doctrine of Repudiation and Privity of Contract: Brown v. Belleville (City), 2013 ONCA 148

In Brown v. Belleville, the Ontario Court of Appeal affirmed the decision of the Ontario Superior Court of Justice on a stated case under Rule 22 of the Rules of Civil Procedure.  The Court held that a 1953 agreement by the Township of Thurlow (now the City of Belleville) to perpetually maintain and repair a drainage system on and near land owned by Roy W. Sills, a farmer, enured to the benefit of subsequent purchasers.  This was so despite allegations by the respondent that it had twice repudiated the agreement and the claim was statute-barred.

Six years after entering into the agreement, the Township ceased all repair work on the drainage system.  Mr. Sills died in 1980 and the new owners of the property, the Pleiziers, sought to hold the Township to its obligations under the agreement, but the Township unilaterally repudiated it.

In the late 1990s, pursuant to a corporate amalgamation, the Corporation of the City of Belleville stepped into the shoes of the Township.  Upon amalgamation the City acknowledged its obligations under the agreement; however, after the property was purchased from the Pleiziers by the Browns in 2003, the City refused to honour those obligations. 

In 2011, the Browns sued the City for specific performance or damages in the alternative.  After the pleadings were exchanged, the parties stated a Special Case under Rule 22 of the Rules of Civil Procedure.  At first instance, various declarations were granted on consent, and the remainder were granted in favour of the Browns.  The City appealed the following three findings:

  • There was no statutory limitation period that acted to bar an action by the Browns;

  • The Browns, as successors of the agreement, were entitled to enforce the agreement without an express assignment; and

  • The agreement was not void as against public policy in that it fettered the City's discretion with respect to future uses of public roads and road allowances.

The Court of Appeal dismissed the appeal.  In doing so, it conducted a thorough review of the doctines of repudiatory breach and privity of contract.  This case provides a revised understanding of both of these doctrines.

The Limitation Period

The City submitted that the limitation period began to run either when the Township repudiated the agreement in 1980, or when the City repudiated it in 2004 (having acknowledged its obligations under the agreement after the amalgamation with the Township).

In the first instance, the limitation period would have expired in 1986 pursuant to the Limitations Act, R.S.O. 1980 c. 240.  In the second instance, the limitation period would have expired in 2006 pursuant to the Limitations Act, R.S.O. 1990, c. L.15, or in 2010 pursuant to the Limitations Act, 2002, S.O., 2002, c.24.  In either instance, the appellants argued the proceedings commenced by the Browns in 2011 should be statute-barred.

The motion judge held that no limitation statute applied.  He based this decision on two questions posed by the Browns in their stated case and answered in the affirmative by the City on consent, as follows:

  • The agreement, properly interpreted, imposes a perpetual obligation on the Township to maintain the drainage system it installed in good working condition at all times and to make good any and all damage caused to the property owner whoever that may be from time to time as a result of lack of repair or of acts done at any time by the corporation in maintaining and repairing the system; and 

  • As a result of the amalgamation of the Township and the Defendant City in 1998, the Defendant City is bound by the contractual obligations of the former Township which are found to have been created by the agreement.

The Court of Appeal agreed with the motion judge, noting that, by answering these two questions in the affirmative, the City severely undercut its limitation arguments.  Specifically, the City agreed that the agreement imposed "a perpetual obligation … to make good any and all damage caused to the property owner whoever that may be from time to time".  This was not the language of a finite or terminable obligation.


The City argued that it had repudiated the agreement, first with the Pleizers and then with the Browns, bringing the City's obligations to an end and triggering the limitation period.  The Court of Appeal found that these repudiations were irrelevant, as the repudiations were not accepted by the Pleiziers or the Browns.

The Court, citing the Supreme Court of Canada in Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423, explained that repudiation does not, in itself, discharge a contract.  If the innocent party adopts or accepts the repudiation, the contract is terminated.  If, however, the innocent party chooses to affirm the contract, it denies the repudiation and treats the contract as subsisting and ongoing.  For a court to find acceptance of repudiation, the innocent party's acceptance must be clearly and unequivocally communicated to the repudiating party within a reasonable time.  This election may be done orally, in writing or inferred by conduct.  Passive acquiescence will generally not be sufficient, but there may be circumstances in which a continuing failure to perform will be sufficiently unequivocal to constitute acceptance of a repudiation.  It depends on the particular contractual relationship and the particular circumstances of the case, and the burden of proof lies on the party alleging acceptance.

In this case, there was no evidence that the Pleizers or the Browns had accepted the City's repudiation, either by overt act or by failing to honour the terms of the contract.

The City also argued that a commercially reasonable interpretation of the agreement required an implied term that it could be terminated on notice.  The Court held that there was no basis to imply such a term, as it was inconsistent with the intentions of the parties. 

While the Court of Appeal noted that it is no longer a presumption that an indefinite term contract is perpetual, the specific terms of a contract as well as the relationship between the parties and the surrounding circumstances may dictate the enforcement of an indefinite term contract on a perpetual basis.  When a contract is indefinite and there is no provision for termination on reasonable notice, a court may choose to treat the contract as perpetual, or it may imply a provision of unilateral termination on reasonable notice.  In this case, the City had agreed that the agreement imposed perpetual obligations, which was inconsistent with its position that the contract was terminable on notice.

Privity of Contract and Standing to Sue

The common law doctrine of privity of contract dictates that no one but the parties to a contract can be bound by it or entitled under it.  The Browns conceded that they lacked privity of contract with the City in respect of the agreement, as they were not signatories and there was no explicit assignment or transfer of the agreement made in their favour.

The Browns claimed that despite their lack of privity, they had standing to sue because:

  • The agreement contained an enurement clause, pursuant to which the benefit of the agreement flowed to the Browns;

  • The benefit of the City's covenants in the agreement runs with the lands to the benefit of the Browns, as Mr. Sills' successors in title; and

  • They met the principled exception to privity of contract established by the Supreme Court in London Drugs Ltd. v. Kuehne & Nagel International Ltd., [1992] 3 S.C.R. 299 

The Court of Appeal noted that the doctrine of privity of contract is of considerably diminished force in Canada and has been the subject of repeated criticism and calls for reform.

In respect of the enurement clause, the Court of Appeal found that the original signatories had clearly contemplated subsequent owners of the property like the Browns.  This clause did not create a recognized exception to privity, such as trust or agency, but it did create a class of persons that were entitled to benefit under the agreement (successors of Mr. Sills).  The Browns were not strangers to the agreement; they stepped into the shoes of Mr. Sills as if they were the original covenantees.  The Court held that relaxing the doctrine of privity in this case would not frustrate the intentions of the parties, but give effect to them.

In respect of exceptions to the doctrine of privity, the Court of Appeal reviewed and applied the decisions of the Supreme Court in London Drugs, supra and Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd., [1999] 3 S.C.R. 108.

In Fraser River, the Supreme Court held that to invoke the principled exception to privity of contract there must be evidence that: (1) the contracting parties intended to extend the benefit of the contractual provision to the third party seeking to rely on it (the threshold question); and (2) the actions of the third party beneficiary fall within the scope of the contract in general, or the provision in particular, between the initial contracting parties (without which the intention to extend the benefit of the contractual provision to the actions of a third-party beneficiary is irrelevant).

The Court of Appeal found that, based on the enurement clause, there was no question that the initial contracting parties intended the benefits of the contract to extend to Mr. Sills' successors.  Since Mr. Sills and his successors always provided the City with access across the property to maintain the drainage system, the actions of the third party beneficiary fell within the scope of the contract in general, and the Browns were entitled to rely on the principled exception to the doctrine of privity.


This case demonstrates that a party seeking to repudiate a contract must ensure the innocent party elects to accept the repudiation, as mere silence by the innocent party will not be sufficient.

This case also demonstrates that the force of the doctrine of privity has been considerably undermined, and is instructive as to the circumstances under which a third party will have standing to sue on a contract.