Ontario Court of Appeal Summaries (September 4 – 7, 2018)

Table of Contents

Civil Decisions

Nasr Hospitality Services Inc. v. Intact Insurance, 2018 ONCA 725

Keywords: Contracts, Insurance, Breach of Contract, Civil Procedure, Summary Judgment, Limitation Periods, Discoverability, “Appropriate Means”, Promissory Estoppel, Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, ss. 1, 4 and 5(1), Hryniak v. Mauldin, 2014 SCC 7, Markel Insurance Company of Canada v. ING Insurance Company of Canada, 2012 ONCA 218, Schmitz v. Lombard General Insurance Company of Canada, 2014 ONCA 88, 407 ETR Concession Company Limited v. Day, 2016 ONCA 709, Presidential MSH Corporation v. Marr Foster & Co. LLP, 2017 ONCA 325, Maracle v. Travellers Indemnity Co. of Canada, [1991] 2 S.C.R. 50

Fehr v. Sun Life Assurance Company of Canada, 2018 ONCA 718

Keywords: Contracts, Insurance, Universal Life, Breach of Contract, Duty of Utmost Good Faith and Fair Dealing, Torts, Misrepresentation, Civil Procedure, Class Actions, Certification, Common Issues, Summary Judgment, Limitation Periods, Discoverability, Fraudulent Concealment, Declaratory Relief, Limitations Act, 2002, S.O. 2002, c. 24, Sch. B., ss. 4, 5 and 16(1)(a), Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 5, Fehr v. Sun Life Assurance Company of Canada, 2016 ONSC 455, Fehr v. Sun Life Assurance Company of Canada, 2016 ONSC 7659, Fehr v. Sun Life Assurance Company of Canada, 2017 ONSC 2218, Life Assurance Company of Canada v. Metropolitan Life Insurance Company, 2010 ONSC 558, Williams v. Mutual Life Assurance Co. of Canada (2003), 170 O.A.C. 165 (C.A.), Hollick v. Metropolitan Toronto (Municipality), 2001 SCC 68, Harrison v. Antonopoulos (2002), 62 O.R. (3d) 463, 46 C.C.L.I., (3d) 89 (S.C.), The Provident Savings Life Assurance Society of New York v. Mowat (1902), 32 S.C.R. 147

Solar Power Network Inc. v. ClearFlow Energy Finance Corp., 2018 ONCA 727

Keywords: Contracts, Interpretation, Statutory Interpretation, Standard of Review, Loan Agreements, Debtors and Creditors, Interest, Interest Act, R.S.C. 1985, c. I-15, Saskatchewan (Attorney General) v. Canada (Attorney General), 1947 S.C.R. 394, Ontario (Attorney General) v. Barfried Enterprises Inc., [1963] S.C.R. 570, Royal Bank v. Stonehocker (1985), 61 B.C.L.R. (2d) 265 (C.A.), Elcano Acceptance Ltd. v. Richmond, Richmond, Stambler & Mills (1991), 3 O.R. (3d) 123 (CA), Tower Paint & Laboratories Ltd. v. 126019 Enterprises Ltd. (Stainco Edmonton) (1983), 27 Alta. L.R. (2d) 154 (Q.B.), Smith v. Canadian Tire (1994), 19 O.R. (3d) 610 (Gen. Div.) , aff’d (1995), 26 O.R. (3d) 95 (C.A.), Nanaimo Shipyard Ltd. v. Keith, 2008 BCSC 1150, Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, Mazur v. Elias Estate (2005), 75 O.R. (3d) 299 (C.A.)

Lavender v Miller Bernstein LLP, 2018 ONCA 729

Keywords: Torts, Negligence, Auditors, Duty of Care, Proximity, Anns/Cooper Test, Damages, Pure Economic Loss, Deloitte & Touche v Livent Inc (Receiver of), 2017 SCC 63, Hercules Managements Ltd. v. Ernst & Young, [1997] 2 S.C.R. 165

Public Guardian and Trustee v. Gaumont, 2018 ONCA 731

Keywords: Wills and Estates, Substitute Decisions, Capacity, Guardianship of Property and Personal Care, Civil Procedure, Adjournments, Substitute Decisions Act, 1992, S.O. 1992, c. 30

Wilson v. Fatahi-Ghandehari, 2018 ONCA 728

Keywords: Civil Procedure, Appeals, Motions to Quash, Jurisdiction, Interlocutory Orders, Courts of Justice Act, s. 19(1), Rules of Civil Procedure, Rule 3.02(1), Rizzi v. Mavros, 2007 ONCA 350

For Short Civil Decisions, click here.

For Criminal Decisions, click here.

Nasr Hospitality Services Inc. v. Intact Insurance, 2018 ONCA 725

 [Feldman, Benotto and Brown JJ.A.]

Counsel:

W. Colin Empke, for the appellant

D. LaFramboise, for the respondent

Keywords: Contracts, Insurance, Breach of Contract, Civil Procedure, Summary Judgment, Limitation Periods, Discoverability, “Appropriate Means”, Promissory Estoppel, Limitations Act, 2002, S.O. 2002, c. 24, Sched. B, ss. 1, 4 and 5(1), Hryniak v. Mauldin, 2014 SCC 7, Markel Insurance Company of Canada v. ING Insurance Company of Canada, 2012 ONCA 218, Schmitz v. Lombard General Insurance Company of Canada, 2014 ONCA 88, 407 ETR Concession Company Limited v. Day, 2016 ONCA 709, Presidential MSH Corporation v. Marr Foster & Co. LLP, 2017 ONCA 325, Maracle v. Travellers Indemnity Co. of Canada, [1991] 2 S.C.R. 50

Facts: The respondent owned commercial premises in Niagara Falls (the “Premises”) from which it intended to operate a restaurant. The Premises were insured through a commercial insurance policy (the “Policy”) issued by the appellant. On January 31, 2013, the respondent discovered water damage to the Premises caused by a ruptured bathroom pipe and called a broker, who immediately reported the water damage to the appellant. The appellant assigned a company to attend and report to any damage and the respondent signed a work authorization for emergency repairs to begin. On February 14, 2013, the appellant issued a $20,000.00 cheque to the respondent for business interruption, representing a two month loss in rent for March and April 2013. On April 17, 2013, the appellant informed the respondent it had requested the issuance of a second $20,000.00 cheque representing rent for May and June. On May 2, 2013, a $2,000.00 cheque was issued in respect of “hydro”. The parties engaged in settlement discussions and on May 13, 2013, the appellant made an offer of $65,000.00 to the respondent. On July 22, 2013, the appellant informed the respondent that its investigation revealed possible violations of the insurance policy which could lead to the appellant denying further coverage for any portion of the loss. The investigation had disclosed that the respondent never obtained a licence to operate a restaurant and that from September 12, 2012, until the date of loss, no business was operating at the premises, nor was there a tenant. The appellant rejected the proof of loss and denied any further claims due to policy violations. The letter concluded by specifying that if the respondent wished to protect its right to make a claim under the policy it was required to begin legal proceedings against the appellant before the two year period from the date of loss expired. The respondent issued its Statement of Claim on April 22, 2015. The appellant denied the claim in part on the basis of the Policy violations, but also pleaded that the claim was statute-barred.

Decision of the Motion Judge

The motion judge assumed “without deciding” that the respondent’s cause of action of breach of the Policy arose on February 1, 2013, the day after the loss occurred. He also assumed “without deciding” that on February 1, 2013, the respondent knew or ought to have known of the factors enumerated in ss. 5(1)(a)(i)-(iii), namely that the loss or damage had occurred, the injury, loss or damage was caused by or contributed to by an act or omission, and that the act or omission was that of the person against whom the claim was made. The motion judge also found that there was no issue of a promissory estoppel precluding the appellant to from relying on the Limitations Act, 2002 (the “Act”) since the respondent had conceded this point.

The motion judge concluded that the respondent did not know, nor ought it to have known that a proceeding would be an “appropriate means” to seek to remedy the injury, loss or damage until between May 2, 2013 and July 22, 2013, when the appellant denied the claim. He found it would not have been appropriate for the respondent to resort to court proceedings until the appellant had clearly repudiated its obligation to indemnify under the insurance policy, and declared that the limitation period did not begin to run until July of 2013. As such, the claim was not statute-barred.

Issues:

(1) Did the motion judge err in finding that the respondent knew or ought to have known of the matters set out in ss. 5(1)(a)(i)-(iii) of the Act on February 1, 2013?

(2) Did the motion judge err in finding that the respondent did not know, nor ought it to have known that a proceeding would be an “appropriate means” to seek a remedy until July 2013?

Holding:

Appeal allowed.

Reasoning:

Justice Brown, speaking for the majority, began the analysis by identifying the fact-finding steps that must be taken to determine when a claim is first discovered in accordance with the provisions of s. 5(1)(a) of the Act on a summary judgment motion. Where there is insufficient evidence on the record, a genuine issue for trial may exist.

The Court found that for a motion judge to grant summary judgment dismissing a plaintiff’s action, or to grant a declaration about when the limitation period begins to run, the motion judge is required to evaluate the record to determine the following matters:  (i) the date the plaintiff is presumed to know the matters listed in ss. 5(1)(a)(i)-(iv), namely the day on which the act or omission on which the claim is based occurred (ii) the date of actual knowledge of the loss or injury; (iii) the objective knowledge date, based on the reasonable person analysis; and (iv) which of the actual knowledge or objective knowledge dates is earlier.  The earliest date is the date the limitation period commences.

The motion judge did not make express findings of many of these matters and instead proceeded on the basis of two “assumptions”. These assumptions were that the respondent’s cause of action arose on February 1, 2013, and that this was also the date the respondent knew of the matters described in ss. 5(1)(a)(i)-(iii).  There was no factual support for his ultimate order that the basic limitation period did not begin to run until July 2013.  Nevertheless, because the parties treated the assumptions as being actual findings of fact, the Court treated those findings in the same manner.

(1) No. It was proper for the motion judge to conduct his analysis on the basis that the respondent knew or ought to have known the matters set out in ss. 5(1)(a)(i)-(iii) of the Act on the day after the respondent had reported to loss to its insurer.

The Court found that the parties’ agreement as to the fact that the respondent’s cause of action for breach of the insurance contract had arisen on February 1, 2013, constituted an admission of that fact. Moreover, the Court had held in Markel Insurance Company of Canada v. ING Insurance Company of Canada (Markel Insurance) and Schmitz v. Lombard General Insurance Company of Canada that for the purposes of s. 5(1)(a)(ii) and (iii) of the Act, a party claiming indemnification under or in respect of a policy of insurance knew there was a loss caused by an omission of the insurer the day after the request or claim for indemnification was made.

(2) Yes. The motion judge erred in ignoring the effect of the respondent’s concession that there was no issue of promissory estoppel. The concession operated in this case to make the day the respondent knew or ought to have known an action was an appropriate means to remedy the loss the day of the loss, namely February 1, 2013.

The meaning of “appropriate” in s. 5(1)(a)(iv) has been confined to “legally appropriate”. In Markel Insurance, and in 407 ETR Concession Company Limited v. Day, the Court has found that “legally appropriate” signified that a plaintiff could not claim it was appropriate to delay the start of the limitation period for tactical reasons, or in circumstances that would later require the court to decide when settlement discussions had become fruitless.

The Court found that although the motion judge had not expressly addressed s. 5(2) of the Act, he had taken the view that the respondent had displaced the presumption that a person with a claim knows of the act or omission on the day it takes place. To do so, the motion judge had relied on the negotiations between the respondent and appellant and on the three payments made by the appellant. The Court found that the motion judge had acknowledged that the respondent had conceded a promissory estoppel argument was foreclosed to it based on those same facts, and in light of that concession it was not open to the trial judge to rely on the same conduct to displace the s.5(2) presumption. To do so would amount to treating the appropriate means element of s. 5(1)(a)(iv) as a form of watered-down promissory estoppel, and would ignore the caution given by Sharpe J.A. in Markel Insurance that courts should not be required to assess tone and tenor of communications in search of a clear denial. The motion judge had not found that the appellant had promised not to rely on the limitation period, and as a result it was not open to him to recast the conduct by the appellant which the respondent had conceded could not support a finding of promissory estoppel for the purposes of the appropriate means analysis.

Feldman J.A. (Dissenting):

In dissent, Justice Feldman was of the view the appellant had not proved that the action was statute-barred and was therefore not entitled to have the action against it dismissed on summary judgment. The action was a claim against the insurer for breach of the insurance policy. Therefore, the triggering event for the discoverability analysis and for the two-year limitation to begin running is the date the insurer breached its obligation under the policy to indemnify the insured for the loss. The question of when the cause of action arose is one of mixed law and fact, and the legal part requires the court to determine when the insurer became legally obligated to pay under the policy. The factual part is the determination of when the insurer did not pay in accordance with that obligation. The insurance policy was not in evidence. By not providing the insurance policy, which would have stated when the insurer is obliged to pay the claim, Justice Feldman was of the view the appellant did not provide the court with a record sufficient to determine the relevant components of s. 5 of the Act. As a result, the summary judgment should be dismissed and the action sent on for trial.

Fehr v. Sun Life Assurance Company of Canada, 2018 ONCA 718

[Strathy C.J.O., Hourigan and Miller JJ.A.]

Counsel:

W. J. Kim, M.C. Spencer, M.B. McPhee, and A. Gyamfi, for the

appellants/respondents by way of cross-appeal

F.P. Morrison, D.M. Peebles, G.P. Burt, H. Afarian, and

J.L. Cole, for the respondent/appellant by way of cross-appeal

Keywords: Contracts, Insurance, Universal Life, Breach of Contract, Duty of Utmost Good Faith and Fair Dealing, Torts, Misrepresentation, Civil Procedure, Class Actions, Certification, Common Issues, Summary Judgment, Limitation Periods, Discoverability, Fraudulent Concealment, Declaratory Relief, Limitations Act, 2002, S.O. 2002, c. 24, Sch. B., ss. 4, 5 and 16(1)(a), Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 5 Fehr v. Sun Life Assurance Company of Canada, 2016 ONSC 455, Fehr v. Sun Life Assurance Company of Canada, 2016 ONSC 7659, Fehr v. Sun Life Assurance Company of Canada, 2017 ONSC 2218, Life Assurance Company of Canada v. Metropolitan Life Insurance Company, 2010 ONSC 558, Williams v. Mutual Life Assurance Co. of Canada (2003), 170 O.A.C. 165 (C.A.), Hollick v. Metropolitan Toronto (Municipality), 2001 SCC 68, Harrison v. Antonopoulos (2002), 62 O.R. (3d) 463, 46 C.C.L.I., (3d) 89 (S.C.), The Provident Savings Life Assurance Society of New York v. Mowat (1902), 32 S.C.R. 147

Facts: The appellants commenced the proposed class action in 2010, alleging misrepresentation in the sale of insurance policies and breach of contractual and other duties relating to premiums and fees charged to policy holders. The action involved four variations of “universal life” policies sold by MetLife in Canada, the Interest Plus, Universal Plus, Flexiplus and Optimet policies. Universal life policies are not without risks because premiums are not fixed. Poor investment returns due to low interest rates or market declines can cause premiums to increase and reduce the value of the accumulation fund. If the fund is depleted, the insured will have to pay increased premiums or see the entire policy lapse. Many of the policies in question were sold during times of high interest rates, and most projections given to policyholders were based on those rates continuing. When interest rates began to fall in the mid-1990s and into the 2000s, MetLife’s profits also fell, as did the income on policyholders’ accumulation funds. Correspondingly, premiums and administration costs charged by MetLife and its successors went up.

The policies provided that the insurer could adjust the monthly rate for the cost of insurance (COI) from time to time, “based on the primary Insured's sex, issue age, underwriting class, policy year and the Specified Face Amount of Insurance”. The appellants alleged that this provision was breached when the respondent notified policyholders of premium increases in 2001, 2006 and 2015 for the Flexiplus policy, and 2007 for the Optimet policy. The appellants relied on correspondence from the respondent’s predecessor announcing an increase of the COI which was to be increased “to better reflect current interest rates”, a factor not mentioned in the COI provision of the policies.

When policyholders complained to MetLife’s successors that MetLife sales agents had misrepresented the anticipated performance of their policies, the respondent established remedial programs to provide relief to some policyholders and sued MetLife for misrepresentations in the sale of insurance policies. In the sale of MetLife’s book of business, it had agreed to indemnify the purchaser for “market conduct” claims, but there was a $1 million threshold which had not been met, and the action was dismissed on a summary judgment motion. In the present action, the appellants alleged that the respondent had breached its duty of good faith and fair dealing by failing to disclose MetLife’s and its own misconduct to policyholders.

The appellants brought a motion to certify the proceeding as a class action and the respondent brought a cross-motion for summary judgment on the basis that the claims were time-barred. The proposed class action advanced three central claims:

(1) Misrepresentation: the appellants alleged that they were misled by MetLife sales agents to believe that their policies would provide guaranteed interest and would become self-sustaining. Some of the appellants also alleged they were told that their cost of insurance and premiums would not increase.

(2) Breach of contract (COI and Administrative Fee increase): the appellants claimed that increases in the COI were in breach of their contracts because the increases were not based on criteria identified in the insurance policies. They also claimed that increases in Administrative Fees were not based on increases in administrative costs, but were really additional COI increases in disguise.

(3) Breach of contract (maximum premiums): Certain policies made reference to a “minimum premium” and a “maximum premium”. There was some evidence that, at some future date, the respondent would charge a premium higher than the “maximum premium”. The appellants admitted that no putative class member has yet been charged a premium greater that the maximum premium, but sought a declaration interpreting this provision.

The Motion and Cross-Motion

The motions judge found that the claims for misrepresentation, deceit, breach of duty of good faith, and rescission failed the common issues requirement and dismissed the motion for certification of these claims. The motions judge found that further evidence was required in order to determine whether the claims for breach of contract were capable of certification and adjourned the motion with respect to those common issues. The certification motion was continued after submission of further evidence and the motions judge dismissed the motion for certification of the breach of contract claims, finding there was no “basis in fact” for the appellants’ allegations.

The motions judge found that the appellant’s misrepresentation claims were barred by the applicable limitation periods and that the “maximum premium” claims were premature, since there was no evidence that any of the appellants had been charged premiums greater than a stated  maximum premium. The breach of contract claims were barred for certain time periods, but not for others. The motions judge awarded the respondent $1 million in costs of the certification and summary judgment motions on a partial indemnity basis.

Issues:

Appeal on the certification motion

(1) Did the motions judge err in failing to certify the negligent misrepresentation common issues?

(2) Did the motions judge err in failing to certify the breach of contract common issues?

(3) Did the motions judge err in failing to certify any other common issues?

(4) If the answer to any of these questions is “yes”, should the proposed class action be certified?

Appeal and respondent’s cross-appeal of the summary judgment motion

(1) Did the motions judge err in granting summary judgment with respect to the misrepresentation claims?

(2) Did the motions judge err in granting summary judgment with respect to the claims for breach of contract?

(3) Did the motions judge err in dismissing the maximum premium claim as premature?

Appeal of the costs award

(1) Did the motions judge err in awarding Sun Life its costs of the motions in the amount of $1 million on a partial indemnity basis?

Holding:

Appeal allowed.

Reasoning:

Appeal on the certification motion

(1) No. The motions judge was correct in finding that the misrepresentation claims fail for want of a common issue that would materially advance the case at trial.

The Court first addressed the proper standard of review and found that substantial deference was owed to the motions judge’s application of the test for certification and his determination of the common issues. The Court’s intervention should be restricted to matters of general principle.

The Court found that the principles relevant to this appeal were the common issues criterion and the application of the “some basis in fact” test. The motions judge was correct in noting that the test sets a low standard and that it is not for the court to resolve conflicting facts or to opine on the strength of the plaintiff’s case. To be a common issue, an issue had to be a substantial ingredient of each Class Member’s claim and its resolution had to be necessary to the resolution of each Class Member’s claim.

The key misrepresentation was common issue was common issue 4, which asked whether MetLife had engaged in a repeated practice of misrepresenting the nature, provisions, financial elements, and benefits of the policies. The individual proposed representative plaintiffs had testified that they had been misled by MetLife’s agents about the features and benefits of the policies. However, each plaintiff’s claim for misrepresentation is unique.

The motions judge was correct in ruling that statements by the respondent in its litigation against MetLife were not admissions and could not be used to establish a common issue related to systemic misrepresentation. Moreover, the resolution of the proposed common issues based on “systemic” misrepresentations would not materially advance the claims of the class members, because the experiences of the appellants were idiosyncratic rather than common. The Court found that a trial of each individual claim of misrepresentation would be required in order to fairly determine, not just whether the representations were relied upon, but what representations were actually made to each class member and whether those representations were false.

(2) Yes. The motions judge erred in failing to certify the breach of contract common issues. It was for the common issues trial judge, and not the certification judge, to determine whether the insurance contract had been breached. There was “some basis in fact” for a breach of contract common issue, and this was sufficient to grant certification.

The Court stated that the issue at the certification stage is not whether a claim is likely to succeed, but whether the suit is appropriately prosecuted as a class action. The Court found that although the motions judge had recognized that there was “some basis in fact” to establish a common issue that would have been “standard fare” for a breach of contract common issue, namely the interpretation of a provision of a standard form contract that was common to all class members and the determination of whether the adjustment of the COI, on a basis common to all class members, was in breach of the contract, he had proceeded with a determination of whether a breach had actually occurred, which was not an issue for the certification judge. The Court found that by requiring the parties to file additional evidence and analyzing that evidence to assess whether the respondent had actually breached the contract, the motions judge had gone beyond determining whether there was “some basis in fact” and had made a finding that there was no breach. This constituted an error in principle, as it was a determination for the judge at the common issues trial.

The Court found that there was “some basis in fact” that the COI adjustment had been calculated on a common basis for all class members who owned Flexiplus policies, and “some basis in fact” to establish that the adjustment had been calculated, for all policyholders, in a manner that was inconsistent with the express terms of the policy. Moreover, there was an appropriate common issue of contractual interpretation concerning the meaning of “Administrative Fee” (a term that was not defined in the policies) and the basis on which the insurer was entitled to adjust that fee. There was some evidence that the respondent had used adjustments in the Administrative Fee to avoid making additional increases to the COI. This was sufficient to satisfy the “some basis in fact” test.

Moreover, the motions judge erred in finding that the claims for declaratory relief were premature. There was “some basis in fact” for the existence of a common issue regarding the meaning the terms in the contracts and this was sufficient to grant certification.

The Court stated that the purpose of declaratory relief in commercial matters is to help parties define their rights, as a means to settle matters amicably where reasonable people would otherwise disagree on their mutual obligations, and wish to resolve the matter in order to avoid future disputes. (Harrison v. Antonopoulos)

The Court found that there was “some basis in fact” for the existence of a common issue as there was an existing dispute about the meaning of an arguably ambiguous term. Declaratory relief in this case would be in the interests of both the respondent and its affected policyholders, and that knowing whether the stated maximum premiums could be exceeded would avoid future disputes.

(3) Yes. Several additional common issues should have been certified, namely common issues 1, 9 and 10.

The Court reviewed common issues 1, 2, 9 and 10, which the motions judge had not certified.

Common issue 1 asked whether the respondent is liable for the actions of its predecessors. The motions judge had not considered it necessary to address it because he had not certified either the misrepresentations or the breach of contract common issues. Since the Court found the breach of contract common issues should be certified, this common issue became relevant. The Court stated that since the first two COI increases had occurred while the policies were being administered by Clarica, the resolution of common issue 1 would determine whether the respondent is liable in the event that those increases constituted breaches of contract. It would also determine whether the appellants are entitled to rely on the actions of MetLife and Clarica in response to the respondent’s limitation defences. Accordingly, common issue 1 should be certified.

Common issue 2 asked whether the respondent was estopped by positions it took in its litigation against MetLife. The Court found that this issue related primarily to the proposed misrepresentation common issues, and the motions judge had been correct in declining to certify it.

Common issues 9 and 10 related to claims that the respondent owed policyholders a duty of good faith and that the policies had been administered in a deceitful and fraudulent manner. Common issue 9 asked whether the respondent owed class members a duty of good faith and fair dealing, and whether such a duty had been breached. Common issue 10 asked whether the respondent had administered the policies in a fraudulent manner, including engaging in fraudulent concealment, or in a manner that violated s. 439 of the Insurance Act.

The Court found that to the extent that this issue related to a claim for damages, it broke down into individual issues and was not suitable for certification, and found common issue 9 should not be certified. However, as the motions judge had noted in his reasons, the allegations of breach of the duty of good faith, deceit, and fraud were asserted in two ways: as causes of action against the respondent and as a bar to the respondent’s limitation period defences, based on the doctrine of fraudulent concealment. The Court, having concluded that the action should be certified with respect to the breach of contract common issues, found that the fraudulent concealment aspect of common issue 10 was pertinent to the limitation period defences advanced by the respondent, which could be raised as individual issues after a common issues trial. The motions judge had accepted that the parties were in a relationship of “utmost good faith” but had found that there was nothing in the respondent’s administration of the policies that concealed the appellants’ causes of action such that the doctrine of unconscionability or fraudulent concealment was engaged. The Court found that the motions judge had failed to consider whether other communications by the respondent to the appellants, particularly those based on the increases in COI rates and Administrative Fees, could have had the effect of concealing the claims. Those represented that the respondent had an entitlement to make these adjustments and had potentially delayed their discovery of a breach of contract claim, if one did exist. The Court found that there was some basis for the assertion that the respondent had concealed or misrepresented to affected policyholders the manner in which the COI was adjusted and misrepresented its entitlement to do so. This would be a relevant determination to a limitation period defence and could be substantially or partially resolved within the common issues trial. Accordingly, resolution of this issue could impact whether or to what extent the respondent was entitled to raise any limitation period defences to these breach of contract claims.

Common issue 11 asked whether the releases signed by some class members were subject to rescission. The Court agreed with the motions judge that this turned on individual issues and was not suitable for certification.

(4) Yes. The class action should be certified with respect to common issues 1, 6, 7, 8 and 10. The Court directed that the proceeding be remitted to the Superior Court of Justice for certification in accordance with the Court’s reasons and for such further directions as may be necessary.

Appeal and respondent’s cross-appeal of the summary judgment motion

(1) Yes. The motions judge erred in principle as he failed to give consideration to important individual and contextual factors in his analysis of the limitation period issues.

The Court stated that absent a palpable and overriding error in his assessment of the evidence, or an error of law, the exercise of the motions judge’s powers to grant summary judgment was entitled to deference, and that this standard typically applied to the question of whether a limitation period had expired.

Section 4 of the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. states that, unless the Act otherwise provides, there is a two-year limitation period commencing from the day on which the claim was “discovered”.

Section 5 of the Act provides that:

(1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

The Court found that the motions judge had made errors in principle that vitiated his decision. Although the motions judge had pointed to the idiosyncratic nature of the appellants’ claims, which made them unsuitable for resolution as common issues, when it came to assessing the limitation period defences applicable to the individual plaintiffs, the motions judge did not engage in a detailed examination of these idiosyncrasies. He failed to engage in an individualized and contextual analysis, and instead applied a broad presumption as to when they ought to have known of certain alleged misrepresentations. An individualized and contextual analysis was necessary in this case for the very reason that misrepresentation claims are not generally amenable to class actions: people receive, process, and act upon written and verbal statements in different ways. The Court found that an individualized and contextual analysis was particularly important in this case because (a) there was a relationship of vulnerability between insurer and insured; (b) many of the appellants were unsophisticated with respect to the insurance industry; (c) the insurance policies were complicated and not easily understood; (d) misrepresentations had been made to some consumers and not others; (e) some or all of these misrepresentations were made by individuals on whom the appellants might reasonably have relied; (f) there was no evidence that the insurer had expressly corrected the misrepresentations; and (g) the respondent may have reinforced or made further misrepresentations, to some or all of the appellants, during the life of the policies.

In dismissing both the misrepresentation claims and portions of the breach of contract claims, the motions judge applied a presumption that once an insurance policy is delivered to an insured, the insured is taken to have read the policy and accepted its terms. He therefore concluded that the plaintiffs ought to have discovered the insurer’s misrepresentations when they received their insurance policies. This resulted in an analysis that was divorced from the plaintiffs’ individual circumstances and knowledge, which forms the heart of the discoverability analysis. His analysis also should have taken into consideration the special relationship between the parties, which the motions judge had acknowledged contained a duty of utmost good faith. The motions judge failed to consider the objective aspect of the discoverability test which asks what a “reasonable person with the abilities and circumstances of the person with the claim” ought to have known. In making his determination on the limitation issues, he failed to give due consideration to each appellants’ abilities and circumstances.

(2) Yes. The motions judge erred in principle as he failed to give consideration to important individual and contextual factors in his analysis of the limitation period issues.

The Court found that as with the misrepresentation claims, the issue of whether the individual appellants knew or ought to have known of the matters set out in s. 5(1)(a) of the Act with respect to the breach of contract claims required a much more individualized and contextual analysis. That analysis should have considered whether the individual appellant, or a reasonable person with his or her abilities and in his or her circumstances, would have understood, from reading the policy, how the COI would be adjusted and whether that was different from what had been represented by the respondent. It would also have considered whether any subsequent communications sent to the appellants by the respondent accurately described the basis of the adjustment and the respondent’s contractual entitlement to adjust the COI on that basis. Moreover, the Court found that the analysis should have considered the content of the insurer’s communications in relation to the appellants’ abilities and circumstances

(3) Yes. The Court found that the motions judge erred in finding that the claim for declaratory relief was premature.

The Court found that although the statement of claim sought damages for the alleged breach, in addition to a declaration, the appellants acknowledged that no damages had yet been sustained and that they were seeking prospective relief. Accordingly, the claim for declaratory relief was not premature. The appellants reasonably apprehended that at some future date the contract would be breached when some policyholders would be charged more than the “maximum premium” stated in their policies. As stated earlier, declaratory relief was appropriate in this case and fits the scope of s. 16(1)(a) of the Limitations Act, 2002, which provides that there is no limitation period in respect of a proceeding for a declaration if no consequential relief is sought. The motions judge erred in finding that the declaration was ancillary to a claim for damages that are barred by a limitation period. Rather, the claim requested a pronouncement on the legal rights of the parties, without any order for enforcement or execution.

Appeal of the costs award

(1) The Court found that since success had been divided it would not be appropriate to address costs of the proceedings below and the appeal without further submissions.

Solar Power Network Inc. v. ClearFlow Energy Finance Corp., 2018 ONCA 727

[Sharpe, Brown and Trotter JJ.A.]

Counsel:

B. H. Bresner and G. Splawski, for the appellant/respondent by cross-appeal

S. Bieber and N. Read-Ellis, for the respondents/appellants by cross-appeal

P.D.S. Jackson and D. Outerbridge, for the intervener, The Canadian Bankers’ Association

Keywords: Contracts, Interpretation, Statutory Interpretation, Standard of Review, Loan Agreements, Debtors and Creditors, Interest, Interest Act, R.S.C. 1985, c. I-15, Saskatchewan (Attorney General) v. Canada (Attorney General), 1947 S.C.R. 394, Ontario (Attorney General) v. Barfried Enterprises Inc., [1963] S.C.R. 570, Royal Bank v. Stonehocker (1985), 61 B.C.L.R. (2d) 265 (C.A.), Elcano Acceptance Ltd. v. Richmond, Richmond, Stambler & Mills (1991), 3 O.R. (3d) 123 (CA), Tower Paint & Laboratories Ltd. v. 126019 Enterprises Ltd. (Stainco Edmonton) (1983), 27 Alta. L.R. (2d) 154 (Q.B.), Smith v. Canadian Tire (1994), 19 O.R. (3d) 610 (Gen. Div.) , aff’d (1995), 26 O.R. (3d) 95 (C.A.), Nanaimo Shipyard Ltd. v. Keith, 2008 BCSC 1150, Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, Mazur v. Elias Estate (2005), 75 O.R. (3d) 299 (C.A.)

Facts:

This appeal involves complex commercial agreements between two sophisticated parties. The appellant made a number of loans to the respondent and its affiliated companies. After the appellant made two initial loans to the respondent, the parties signed a Loan Agreement that provided for two types of loans: Construction Loans for up to 90 days and Warehouse Loans with terms of up to 180 days. The parties also negotiated a number of additional loans by way of Promissory Notes. The respondent defaulted on the loans and disputed the amount of interest owing.

At the core of the dispute is a term in the loan agreements requiring the respondent to pay the “discount fee” of .003% of the outstanding loans on the repayment date and for every day thereafter while the loan remained outstanding. The respondent contended that the discount fee failed to comply with the Interest Act, R.S.C., s. 4 (the “Act”), which requires that any written agreement for the payment of interest at a rate or percentage per day, week, month or any period less than one year contain “an express statement of the yearly rate or percentage of interest to which the other rate or percentage is equivalent.” Section 4 of the Act provides that where an agreement fails to comply with this requirement, “no interest exceeding the rate or percentage of five per cent per annum shall be chargeable”

The application judge accepted the respondent’s arguments and held that the appellant was entitled only to interest at the rate of 5% per annum in total despite the fact that the loan agreements provided for interest to accrue at 12% per annum before maturity, and 24% thereafter in addition to the .003% discount fee.

The appellant appealed to the Court of Appeal, arguing: that the “discount fee” is not interest; in any event, the loan agreements contained an annualizing formula that satisfied s. 4 of the Act; the respondent entered forbearance agreements acknowledging its indebtedness, and could not now dispute the interest owing; and in the alternative, the appropriate remedy was to limit the application of s. 4 of the Act to the discount fee rather than reduce the interest payable on the entire agreement to 5%.

The respondent cross-appealed the application judge’s finding that certain “administration fees” provided for in the loan agreements do not constitute interest within the meaning of s. 4 of the Act.

Section 4 of the Act provides as follows:

Except as to mortgages on real property or hypothecs on immovables, whenever any interest is, by the terms of any written or printed contract, whether under seal or not, made payable at a rate or percentage per day, week, month, or at any rate or percentage for any period less than a year, no interest exceeding the rate or percentage of five per cent per annum shall be chargeable, payable or recoverable on any part of the principal money unless the contract contains an express statement of the yearly rate or percentage of interest to which the other rate or percentage is equivalent.

Issues:

(1)  Did the application judge err in finding that the administration fees are not interest?

(2)  Did the application judge err in finding that the discount fee is interest?

(3) Did the application judge err by concluding that the discount fee failed to satisfy the requirements of s. 4 of the Act?

(4)  Did the application judge err by concluding that the appropriate remedy is to limit all interest payable to 5%?

(5) Did the application judge err in finding that the forbearance agreements do not preclude the respondent from challenging the interest payable?

Holding:

Appeal allowed. Cross-appeal dismissed.

Reasoning:

The court applied a deferential standard of review to the contractual interpretation issues in this case, as they were issues of mixed fact and law (Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633). However, in relation to matters of statutory interpretation of the Interest Act, the court applied a standard of correctness (Mazur v. Elias Estate (2005), 75 O.R. (3d) 299 (C.A.)).

(1) No. First, the respondent submitted that while the primary effect of the administrative fee may be to compensate for administrative work, the application judge failed to consider that it had a secondary effect of incentivizing repayment which is a hallmark of compensation for the use of money. Second, the respondent argued that as the administrative fee recurs when the loan is renewed, it accrued over time and therefore qualified as interest.

The Court of Appeal did not find either submission persuasive.

The respondent did not challenge the legal test used by the application judge:

1. Interest is the return or consideration or compensation for the use or retention of money that is owed to another person;

2. interest must relate to a principal amount or an obligation to pay money; and,

3. interest must accrue over time: Saskatchewan (Attorney General) v. Canada (Attorney General), 1947 S.C.R. 394 at para. 47.

The application judge’s findings on this issue were firmly rooted in the evidence about the nature and purpose of the administrative fees and the work that the appellant had to perform to set up and administer the loans. While the administrative fees were charged each time the loan was renewed, the incentive effect on repayment was negligible. The application judge was entitled to find that the administrative fees did not amount to “compensation for the use or retention of money that is owed to another person”.

(2) No. The appellant submitted that the evidence showed that the effect of the discount fee was to discount the upfront administrative fee over the term of the loan, making further administrative costs payable only so long as the loan remained outstanding. The application judge found that the discount fee was not linked to the creation or renewal of a loan, the amount of the fee did not vary according to the administrative work required by the loan as in the case of the administrative fee, and the fee was charged at a daily fixed rate unrelated to any ongoing or specific events.

The Court of Appeal held that it was open to the application judge to conclude that the discount fee bore all the hallmarks of the test for interest: it was consideration or compensation for the use of money, it related to the principal amount, and it accrued over time.

(3) Yes. There are two aspects to this issue. First is the adequacy of the annualizing formula to satisfy the requirement in s. 4 of the Act. Second is the question of compound interest.

The annualizing formula

The annualizing formula provided a relatively simple arithmetic method to calculate the yearly rate to which the daily rate is equivalent: multiply 0.003% by 365 days to produce a yearly rate of 1.095%. The appellant submitted that formulas of this nature are regularly used in complex commercial loan agreements and that the case law supported their validity as a means to provide borrowers with the kind of information required by s. 4 of the Act. The respondent supported the application judge’s conclusion that unless the agreement explicitly provided the yearly interest, s. 4 of the Act was not satisfied.

Turning to the actual language of the Act, the Court of Appeal noted that s. 4 requires “an express statement of the yearly rate or percentage of interest to which the other rate or percentage is equivalent”. By requiring an equivalent “rate or percentage” instead of just employing the word “percentage”, the Court of Appeal held that Parliament has used language indicating that the effective annual interest need not be expressed as a numerical percentage. Accordingly, the Court of Appeal concluded that the mathematical formula in the Loan Agreement provided a “rate” for the purpose of s. 4 of the Act.

Compound interest

The application judge concluded that the formula failed to provide an “equivalent rate or percentage of interest” because it failed to take into account the fact that the discount fee would be compounded if the loan was not paid at term and subsequently renewed.

The case at bar involved short term loans for which the discount fee did not compound during the term of the loan. When the Loan Agreement and Promissory Notes were made, the parties could not know whether the loan would be paid on the due date. It was therefore impossible for them to know whether interest would ever compound. In these circumstances, it was sufficient for the purposes of s. 4 of the Act to provide, through the annualizing formula, an equivalent nominal rate. The parties can only know the existence and extent of compounding of the discount fee after the due date. It cannot be the case that s. 4 of the Act is engaged when a lender fails to provide information that is impossible to provide.

(4) Yes. The appellant argued that even if the discount fee runs afoul of s. 4 of the Act, the appropriate remedy is not to limit all interest payable under the loan documents to 5% but rather to limit the amount of interest payable on account of the offending provision - the discount fee - to 5%. The Court of Appeal interpreted the phrase “any interest” in s. 4 of the Act to refer only to interest that is not stated as a “yearly rate or percentage.” In the circumstances of this case, that would mean that the only rate of interest to which s. 4 of the Act applied was the discount fee. As the discount fee was less than 5%, s. 4 of the Act would have no impact on the amount of interest payable.

Since the Loan Agreement did not violate s. 4 of the Act, the Court of Appeal found that it was not strictly necessary to deal with the issue of remedy in relation to the Loan Agreement. However, the issue of remedy did arise in relation to the Promissory Notes. Because the discount fee provision in those agreements did not contain an annualizing formula, the Promissory Notes failed to satisfy the requirements of s. 4 of the Act. However, the Court of Appeal held that that s. 4 of the Act had no effect on the Promissory Notes because s. 4 of the Act imposes a 5% annual cap on non-annualized interest but does not affect an interest rate that is already less than 5% when annualized.

(5) Issue not considered. The Court of Appeal held that it was not necessary to consider this issue since it found that the Loan Agreement complied with s. 4 of the Act and that s. 4 of the Act had no impact of the rate of interest charged under the Promissory Notes. 

Lavender v. Miller Bernstein LLP, 2018 ONCA 729

[Epstein, van Rensburg, and Brown JJ.A.]

Counsel:

R. Staley, G. Finlayson, P. Bell, and N. Shaheen, for the appellant

P. Bates, D. Bach, and S. Kalloghian, for the respondent

Keywords: Torts, Negligence, Auditors, Duty of Care, Proximity, Anns/Cooper Test, Damages, Pure Economic Loss, Deloitte & Touche v Livent Inc (Receiver of), 2017 SCC 63, Hercules Managements Ltd. v. Ernst & Young, [1997] 2 S.C.R. 165

Facts:

The respondent was an investor in Buckingham Securities, a now-defunct securities dealer. In 2001, the Ontario Securities Commission (the “OSC”) suspended Buckingham’s registration and an order was made placing it into receivership because it breached regulatory requirements by failing to segregate investor assets and maintain a minimum level of net free capital. Its clients, who held investment accounts with the firm, lost millions.

The appellant was Buckingham’s auditor, and in that capacity audited its annual registration renewal requirement with the OSC. One component of that requirement was the submission of “Form 9 Reports”, which were submitted to the OSC to assist it in policing securities dealers and protecting investors. During that time, Buckingham’s Form 9 Reports falsely stated that it was in compliance with the regulatory requirements. After the respondent audited the Form 9 Reports, Buckingham filed them with the OSC. Several of the appellant’s principals later admitted that they made materially untrue statements in the 1999 and 2000 Form 9 Reports.

The respondent commenced a class action on behalf of every person who had an investment account with Buckingham when it was placed into receivership (the “Class”). The respondent alleged that in each of fiscal years 1998 to 2000, the appellant negligently audited the Form 9 Reports. After obtaining certification for a class proceeding, the respondent moved for summary judgment on five of the six certified common issues.

The issue directly relevant to this case was whether the appellant owed the respondent a duty of care. Noting that the respondent’s claim was properly characterized as one of negligence simpliciter rather than negligent misrepresentation, the motion judge engaged in a traditional Anns/Cooper analysis to determine whether a duty of care existed here. Relying on the duty of care for auditors already recognized in Hercules Managements Ltd. v. Ernst & Young, the motion judge found that the appellant owed the class members a duty of care in conducting the audits, and that the respondent fell below the requisite standard of care. The motion judge therefore granted summary judgment in favour of the respondent.

The appellant appealed.

Issues:

(1) Did the motion judge err in finding that the Auditor owed the class members a duty of care in respect of its audit of Buckingham’s Form 9 Reports?

Holding:

Appeal allowed.

Reasoning:

(1) Yes. Given that the Supreme Court released its decision for Deloitte & Touche v Livent Inc (Receiver of) after the motion for summary judgment on this case, the Court of Appeal began its analysis here with a discussion of Livent’s impact on the law of an auditor’s duty of care.

The Court of Appeal stressed that, per the majority judgment in Livent, courts should be careful to avoid treating established categories of duty of care in an overly broad manner; the mere fact that proximity has been recognized as existing between an auditor and its client for one purpose is insufficient to conclude that proximity exists between the same parties for all purposes.

Where a previously-established duty of care cannot be found, a court must then undertake a full examination of the relationship between plaintiff and defendant in order to determine whether there exists a sufficiently proximate relationship. Relevant considerations may include expectations, representations, reliance, and the property or other interests involved, as well as any statutory obligations.

In cases of pure economic loss arising from negligent misrepresentation or performance of a service, two factors are “determinative” of the proximity analysis: (i) the defendant’s undertaking; and (ii) the plaintiff’s reliance. However, the plaintiff’s reliance must be within the scope of the defendant’s undertaking – that is, the purpose for which the representation was made or the service was undertaken. Anything outside that scope will fall outside the scope of the proximate relationship and the defendant’s duty of care.

Turning to its determination of this case, the Court of Appeal found that while the harm to the respondent might have been foreseeable to the appellant, there was insufficient proximity between the two parties to ground a duty of care. Noting first that the relationship in this case did not fall within a recognized category of relationship where proximity had been found, the Court of Appeal then undertook a full proximity analysis.

First, the Court of Appeal found that there was an insufficient connection between the appellant’s undertaking and the respondent’s loss. The appellant made no representations to members of the Class, most of whom never even knew of the respondent’s existence. The appellant did not undertake to assist the respondent in making investment decisions. In short, the interposition of the OSC and Buckingham between the respondent and the appellant rendered the relationship between the parties too remote to ground a duty of care.

Second, the respondent did not rely on or even review any of the Form 9 Reports, meaning that there was a total absence of reliance on the relevant documents. Third, the Court of Appeal found that the motion judge committed several palpable and overriding errors of fact that mistakenly gave him the impression that there was a greater connection between the parties than was actually the case. Fourth, the relevant statutory scheme (i.e. the regulations under the Securities Act) did not create a proximate relationship. Fifth and last, the Court of Appeal acknowledged the Supreme Court’s caution that significant scrutiny is warranted when deciding whether to recognize a duty of care in a claim for pure economic loss. Taken together, these findings weighed conclusively against finding that the requisite proximity existed in this case.

Given its finding at this stage of the Anns/Cooper analysis, the Court of Appeal declined to discuss the issues of reasonable foreseeability and residual policy considerations.

Public Guardian and Trustee v. Gaumont, 2018 ONCA 731

[Sharpe, van Rensburg, and Brown JJ.A.]

Counsel:

R. M. Rodé, for the appellant

J.M. de Souza, for the respondent

Keywords:  Wills and Estates, Substitute Decisions, Capacity, Guardianship of Property and Personal Care, Civil Procedure, Adjournments, Substitute Decisions Act, 1992, S.O. 1992, c. 30

Facts:

The Public Guardian and Trustee (the “PGT”) applied and was appointed as guardian of the property and personal care of the appellant’s daughter, Monica, pursuant to the Substitute Decisions Act, 1992, SO 1992, c 30. Monica suffered from a form of epilepsy that leads to seizures, as a result of which her cognitive development had regressed. Since 2014, she had lived in an assisted living home, and before that, lived with the appellant.

The application judge refused a request for an adjournment.  Proceeding on the basis of the PGT’s evidence, he concluded that Monica lacked capacity and the circumstances were such that she needed a guardian. He accepted the PGT’s evidence about the difficulties that arose when Monica was visiting the appellant. He concluded that the appellant had very little chance of success in claiming that, with more time and by providing updated information, she could show she was a proper guardian. He noted that Monica was vulnerable, and that the appellant had been unable in the past to make appropriate decisions for her. Accordingly, the application judge refused to make a temporary order and he granted the judgment appointing the PGT as Monica’s guardian of property and personal care. The judgment provided that the appellant could “apply to be appointed guardian … on the grounds of an important change in her circumstances and/or the circumstances of Monica”. It also provided that the PGT was to encourage maximum access between Monica and the appellant to the extent that such access was in Monica’s best interest.

The appellant appealed, raising four arguments.

Issues:

(1) Was the appellant denied procedural fairness when the application judge refused to adjourn the hearing or to make a temporary order only, so that she could bring forward evidence?

(2) Did the application judge err in making a finding of incapacity without a formal assessment?’

(3) Did the application judge err by failing to consider whether a power of attorney signed by Monica in 2010 in favour of the appellant was valid?

(4) Did the application judge err by refusing to consider whether there was any other suitable person who was available and willing to be appointed as Monica’s guardian?

Holding:

Appeal dismissed.

Reasoning:

(1) No. The matter was outstanding for several months and had been adjourned on a peremptory basis. This application judge considered whether there would be any benefit in adjourning the matter or making only a temporary order. He observed at the outset that there was no competing application for the appointment of the appellant as Monica’s guardian. As arguments progressed, and it appeared that the appellant might put herself forward as a suitable guardian, the application judge concluded that there was very little chance of success of such an application. The application judge’s decision reflected a fair assessment of the circumstances that existed at the time the parties were before him.

(2) No. There was evidence to support the finding that Monica lacked capacity, and no evidence to the contrary. Moreover, although the appellant’s counsel suggested that a more detailed assessment would be desirable, Monica’s lack of capacity was not challenged at the time of the hearing, and there was no basis for the appellant to raise this issue for the first time on appeal. 

(3) No. The existence of this document, which was raised at the very end of the hearing before the application judge, had no effect on the outcome. Whether or not the power of attorney was valid, the evidence before the application judge was that Monica required someone other than the appellant to make decisions for her.

(4) No. The matter had been outstanding for several months, and no one had come forward as an alternative guardian for Monica. There was no evidence that any other suitable person was willing to act in this capacity. The Court of Appeal noted that in any event, should circumstances change and an alternative guardian wish to make an application in the future, this would not be precluded by the judgment under appeal. In fact, it was expressly contemplated.

Wilson v. Fatahi-Ghandehari, 2018 ONCA 728

[Lauwers, Miller and Nordheimer JJ.A.]

Counsel:

A. Mohammed, for the respondent

S.W., acting in person

Keywords: Civil Procedure, Appeals, Motions to Quash, Jurisdiction, Interlocutory Orders, Courts of Justice Act, s. 19(1), Rules of Civil Procedure, Rule 3.02(1), Rizzi v. Mavros, 2007 ONCA 350

Facts:

The appellant served four notices of appeal (each referred to as a “Notice”). The first Notice was in respect of Price J.’s decision, in which he found the appellant in contempt. This Notice was not filed with the court. The second and third Notices were filed late, and the appellant did not seek an extension of time to appeal under Rule 3.02(1) of the Rules of Civil Procedure, or the principles outlined in Rizzi v. Mavros. The fourth Notice asked that Price J.’s orders be set aside, and made reference to two January 2018 orders finding the appellant in contempt. Neither order found the appellant in contempt.

The respondent moved to quash the appeal. The appellant moved to adjourn this motion to a date when his previous counsel would be available.

Issues:

(1) Should the motion be adjourned?

(2) Should the appeal be quashed?

Holding:

Motion granted.

Reasoning:

(1) No. The appellant made several procedural mistakes in this case, as he was non-compliant with the rules, civil procedure timelines and customary practices. Granting an appeal after such a long passage of time would be procedurally abusive.

(2) Yes. The operative Notice was expressly limited to an interlocutory order, not from an actual finding of contempt. The Court of Appeal does not have jurisdiction over interlocutory orders and thus must quash the appeal.

Short Civil Decisions

Bouragba v. Conseil Scolaire de District de L’Est de L’Ontario, 2018 ONCA 732

[Sharpe, Rouleau and van Rensburg JJ.A.]

Counsel:

A. Bouragba and T. Bouragba, in person

R. Sinclair (by telephone), for Ottawa-Carleton District School

P. Marshall (by telephone), for Conseil Scolaire de District de l’Est de l’Ontario

C. Malischewski, for the Ontario College of Teachers, RL and PM

J. Claydon, for the Attorney General (Ontario)

S. Fiacco, for the Ontario Human Rights Tribunal

Keywords:  Civil Procedure, Appeals, Jurisdiction, Extension of Time to Appeal, Interlocutory Orders

Criminal Decisions

R. v. Vassel, 2018 ONCA 721

[Feldman, Watt and Paciocco JJ.A.]

Counsel:

N. Gorham and B. Vandebeek, for the appellant

K. Papadopoulos, for the respondent

Keywords: Criminal Law, Second Degree Murder, Drug Trafficking, Possession of Firearms, Evidence, Relevance, Materiality, Admissibility, Expert Opinion Evidence, Cross-Examination, Post-Offence Conduct, Out-of-court Statements, Recent Fabrication, Jury Charges, Vetrovec Cautions, Mohan Criteria, Eyewitness Identification, R v. Mohan, [1994] 2 S.C.R. 9, Browne v. Dunn (1893), 6 R 67 (HL), R. v. Sekhon, 2014 SCC 15, R. v. Luciano, 2011 ONCA 89, R. v. Zeolkowski, [1989] 1 S.C.R. 1378, White Burgess Langille Inman v. Abbott and Haliburton Co., 2015 SCC 23, R. v. Quansah, 2015 ONCA 237, R. v. Yumnu, 2010 ONCA 637, R. v. W.(D.), [1991] S.C.R. 742, R. v. Hay, 2013 SCC 61

Facts:

This decision is summarized because it provides very useful summaries of the law of evidence relating to relevance, materiality, admissibility, including the admissibility of expert evidence, and in relation to the Rule in Browne v Dunn, all of which are general principles applicable to all court proceedings.

HD was a drug dealer who sold marijuana. Through a middle man, he agreed to meet buyers near a shopping centre in Mississauga. The buyers were TP and MA, who were planning to steal one-quarter pound of marijuana from him. Since none of them had a car, they knocked on the appellant’s door on the night in question and asked to borrow his girlfriend’s car. She agreed, provided TP drove, since the appellant did not have a driver’s licence. According to the appellant, he remained in his townhouse complex, in the vacant unit they all used as a place to smoke marijuana and listen to music. According to MA, the appellant drove him and TP to the parking lot where the deal was to take place. Three cars met for the deal: the middle man with some friends in one car, TP, MA and allegedly the appellant in his girlfriend’s car, and finally HD and his wife and their van. TP and the middle man approached HD’s van to examine the drug. Two additional men came out of the appellant’s girlfriend’s vehicle, approached HD’s van, and one of them shot HD to death with a .40 calibre Glock.

After the shooting, the appellant and his girlfriend cleaned up her vehicle. They were later pulled over by the police and the appellant gave a fake name. His girlfriend drove him to his mother’s home. The appellant got rid of his cellphone, registered a new phone under a fictitious name, and cut off the braids he had been wearing for the past eight years. The appellant was one of the men arrested for the unlawful killing of HD. The central issue at trial was the identity of the killer. A jury found him guilty of second degree murder. The trial judge sentenced him to imprisonment for life without eligibility of parole until he had served at least 16 years of his sentence.

The trial

At trial, MA testified that he saw the appellant pull out a .40 calibre Glock and shoot HD. None of the others present at the shooting identified the appellant as the shooter, but each indicated that the shooter was the driver of the appellant’s girlfriend’s vehicle, and gave a physical description that fit the appellant.

The appellant testified he had not participated in the robbery or the shooting, and had remained in the vacant unit. His counsel advanced the theory that either MA or DG, a friend of the appellant, could have committed the shooting. DG’s evidence that he had never left the townhouse was contradicted by the appellant and his girlfriend. According to the appellant, both MA and DG were members of a gang and had a reputation for violence. At the time of trial, DG was in custody for robbing a drug purchaser while armed with a .40 calibre Glock.

An employee from Rogers Wireless was called by the defence and was qualified as an expert in interpreting records kept by her employer and in explaining how cellphone towers interact when calls are made by cellphones. She testified to the fact that the cellphone the appellant was using at the time was in fact in the townhouse complex that night. The Crown sought to cross-examine the witness on whether drug dealers registered cellphones in their own name, on the call patterns revealed on drug dealers’ “drug” phones, and on whether those patterns were evident on the “883 phone”. The witness testified as to the use of a “family and friends” phone and several “drug” phones, the latter revealing a large number of minutes of phone use consisting of brief calls with few repeat contacts. When she reviewed the 833 phone she found a large number of minutes but none of the other indicia and characterized it as a “family and friends” phone. The purpose of the evidence adduced by the Crown was to rebut an alibi advanced by the appellant that he had only been using one cellphone on that evening, had it with him at all material times, and spoke with friends and relatives at the material time.

The appellant’s girlfriend told the police that the appellant had several phones, but at trial she maintained that at the time of the robbery and shooting he only had the 833 phone, and explained that her statement references to multiple phones related to an earlier period of time. Her explanation included a reference to things the appellant had said to her, and the Crown objected to that evidence. Defence counsel applied to re-open the defence case so that the appellant could testify about the other phone numbers in his girlfriend’s log at which she had previously contacted him and whether those were operable at the time of the robbery and shooting. The trial judge dismissed the application.

In his final instruction to the jury, the trial judge told the jurors that they were to apply the same test and consider the same factors in assessing the appellant’s testimony as they would any other witness. However, he continued to specify that the evidence of the appellant that may tend to show that either DG or MA was the shooter as he was not at the scene of the crime should be considered with particular care as the appellant may have been more concerned about protecting himself than about telling the truth. The appellant submitted that this amounted to a Vetrovec caution.

Two witnesses present at the robbery and shooting were singled out for specific instructions. They both had provided descriptions of the shooter, and said he had been the driver of the car. Neither knew the shooter, but each expressed confidence that he could identify him in a line-up. Both viewed a photo line-up including a photograph of the appellant and none picked out the photograph. Each identified MA as a participant in the robbery but said he was not the shooter. The witnesses described the shooter as a young, black man who wore dark clothing, a hoodie, a toque or hat and had braided hair. This description fit the appellant but also DG. In his instructions to the jury, the judge reminded them of the frailties of eyewitness identification evidence in light of the circumstances of this case. He reminded them that honest witnesses could be mistaken in their identification of an accused and that the degree of certainty expressed by a witness about the correctness of their identification was not an indicium of its accuracy or reliability.

The appellant appeals both his conviction and his sentence, and submits that the trial judge made several errors involving the admissibility of evidence and in his final instructions to the jury.

Issues:

(1) Did the trial judge err in admitting what was said to be expert opinion evidence about cellphone usage by drug traffickers?

(2) Did the trial judge err in failing to admit evidence of the appellant’s prior out-of-court statements?

(3) Did the trial judge err in refusing to permit the appellant to re-open the defence case to respond to a breach of the rule in Browne v Dunn?

(4) Did the trial judge err in instructing the jury to consider the appellant’s evidence with caution or particular care?

(5) Did the trial judge err in failing to instruct the jury correctly about the use of the exculpatory evidence provided by eyewitnesses to the robbery and shooting?

Holding:

Appeal allowed.

Reasoning:

(1) Yes. The evidence elicited by Crown counsel in cross-examination of the expert witness should not have been received. The witness had not been properly qualified to give that evidence, and the evidence should have been excluded on that basis.

The Court stated first stated the basic principles of the law of evidence which informed the decision on this ground of appeal.

1. Relevance: An item of evidence is relevant if it renders the fact it seeks to establish by its introduction slightly more or less probable than that same fact would be without that evidence. Relevance is a matter of everyday experience and common sense. It is assessed in the context of the entire case and the positions of counsel (R. v. Luciano, 2011 ONCA 89).

2. Materiality: An item of evidence is material if it is offered to prove or disprove a fact in issue (Luciano). Here, whether an accused said to have committed an offence as a principal was present at the scene of the offence is a fact in issue.

3. Admissibility: Relevant and material evidence is admissible if it satisfies all the existing tests and extrinsic policies of the law of evidence, whether based on common law principles, statutory provisions or constitutional precepts (R. v. Zeolkowski, [1989] 1 S.C.R. 1378).

The admissibility rule at play here is the opinion rule. The opinion rule is exclusionary by nature, and insists that witnesses give evidence of facts, not make statements of opinions or inferences drawn from those facts. As a general rule, evidence of a witness’ opinion is not admissible. (White Burgess Langille Inman v. Abbott and Haliburton Co., 2015 SCC 23). However, there are matters that require special knowledge, in which case triers of fact may not be equipped to draw true inferences from the facts stated by witnesses. Witnesses are permitted to state their opinions about these subjects, provided they are shown to be experts in them. (White Burgess)

When the opinion rule is put forward as the ground upon which evidence proposed for admission should be excluded, the judge embarks on a two-step inquiry into admissibility: (1) threshold requirements of admissibility, which are the four Mohan factors of relevance, necessity, absence of exclusionary rule, and a properly qualified expert and (2) gatekeeping step (R v. Mohan, [1994] 2 S.C.R. 9).

The relevance factor refers to logical relevance. The necessity requirement endeavours to ensure that the potential of expert opinion evidence to distort the fact-finding process is not lightly tolerated. As a result, the opinion evidence is unnecessary if on the facts established by other evidence the trier of fact can reach their own conclusion about the issue to which the proposed opinion evidence is directed without that opinion. What is required is that the opinion proposed for admission provide information that is likely to be outside the experience and knowledge of a jury. Under Mohan, a duly qualified expert is a witness who by study or experience has acquired special or peculiar knowledge of a subject about which a party proposes the witness will testify. The extent of knowledge of the proposed expert must exceed the knowledge and experience of the trier of fact about the same subject.

The party who seeks to elicit expert opinion evidence has the responsibility of qualifying the witness as an expert in the subject-matter about which the opinion is to be elicited. It is the obligation of opposing counsel to object where appropriate and the task of the trial judge to ensure that the expert stays within the scope of his or her expertise.

At the gatekeeping step, the trial judge must balance the risks and benefits of admitting the evidence, to determine whether the proposed evidence is sufficiently beneficial to the trial process to warrant its admission despite the potential harm that may flow from the admission of the expert evidence. Relevance, necessity, and reliability, as well as the expert’s independence and impartiality, continue to play a role in weighing the overall competing considerations in admitting the evidence. If in giving evidence an expert gives opinions that extend beyond the subjects on which he or she has been qualified, the opinions are to be disregarded by the trier of fact. Where the trier of fact is a jury, the trial judge should instruct them accordingly. Finally, anecdotal evidence is not legally relevant, is not necessary and lacks probative value. It is inherently prejudicial and tends to shift the onus of proof to an accused.

The Court found that in the present case, the Crown should have qualified the witness as an expert on the matters he intended to cross-examine her on. Crown counsel had made no effort to do so, and to the extent that the witness offered her opinion about the character of the phone, “family and friends” vs “drugs”, her testimony reflected an opinion that she had not been properly qualified to give. Accordingly, the trial judge should have excluded this evidence.

(2) No. The cross-examination did not support a finding of the appellant’s evidence being challenged as a recent fabrication.

The appellant submits that it was apparent from the Crown’s cross-examination of his girlfriend that the appellant’s claim that he only had one cellphone at the time was a recent fabrication, and seeks to have previous out-of-court statements admitted to rebut this suggestion.

An allegation of recent fabrication need not be explicit, it is sufficient if it is evident from the circumstances of the case. However, it does not arise from an allegation of a fabrication simpliciter, or where the allegation is that an accused, as the person who committed an offence, is lying to avoid conviction. A bald allegation of fabrication does not amount to an allegation of recent fabrication because essential to the latter is an assertion that at some identifiable point in time the witness began to make the claim being challenged.

The Court found that a careful canvassing of the cross-examination of the appellant did not support a finding that his evidence denying access to multiple cellphones at the material time was challenged as a recent fabrication. The implication was that as the person who shot the deceased, the appellant was lying to avoid conviction. Since no point in time when he would have decided to lie to avoid conviction was suggested to him, any alleged prior consistent statement would therefore have nothing to rebut.

(3) No. There was confrontation on matters of substance, and it was apparent from the tenor of the cross-examination that the Crown did not believe the appellant’s evidence as to his possession of only one cellphone. This was sufficient to comply with the rule.

The appellant submits that the Crown breached the rule in Browne v Dunn by failing to put the specifics of other cellphone use to him in cross-examination.

The rule in Browne v. Dunn is one of fairness, it is not a fixed or invariable rule, and much less a rule of admissibility. The extent of its application is in the discretion of the trial judge, which is subject to significant deference on appeal. Compliance with the rule requires a cross-examiner to confront the witness with matters of substance, not inconsequential detail, on which the cross-examining party seeks to impeach the witness and call contradictory evidence. When it is apparent from the tenor of counsel’s cross-examination of a witness that the cross-examiner does not accept the witness’ version of events, the confrontation is general and known to the witness, and the witness’ view on the contradictory matter is apparent, specific confrontation of the witness is not necessary.

No fixed relation exists between a breach of the rule in Browne v Dunn and the remedy available for that breach. It is for the trial judge to say what remedy is best suited to maintain the fairness in the trial process: recall the witness, a jury instruction about the impact of the failure to cross-examine on the jury’s assessment of credibility and reliability, or something else entirely. A remedy also attracts deference on appeal.

The Court stated that putting each exquisite detail upon which the cross-examiner proposes to contradict the witness by other evidence is not required to ensure compliance with the rule. Confrontation on matters of substance is what is required, and occurred here. The Court found it was apparent from the tenor of the Crown’s cross-examination of the appellant that the Crown did not accept the single-phone version proffered by the appellant. In this case, this was sufficient compliance with the requirements of the rule. Although the cross-examiner could have descended into greater detail, it does not follow that a breach occurred.

(4) Yes. Although the instruction did not amount to a Vetrovec caution, it added a level of scrutiny to the alibi evidence which was not warranted and constituted error.

The Court started by examining the standard of review for jury instructions. Parties in a criminal trial are entitled to a properly instructed jury, no less but no more. No party can stake a claim to a perfectly instructed jury. Appellate courts asked to scrutinize a jury charge are to take a functional approach in their assessment to determine whether the instructions read as a whole fulfill their function of equipping the jury with the necessary tools to render a true verdict. What counts is the overall effect of the charge, not whether a particular formula or word choice was used.

The Court then turned to the features of Vetrovec cautions: (i) identification of the witness whose evidence is subject to the caution, (ii) the reasons for the caution, (iii) the caution, noting that it would be dangerous to convict on unconfirmed evidence of this sort, and (iv) the advisability, characteristics and illustrations of confirmatory evidence.

A Vetrovec caution is to be given only for unsavoury witnesses who testify for the Crown and whose evidence is tendered in proof of guilt. It is not to be given in relation to defence witnesses who give evidence favourable to the defence. Although as a general rule, a trial judge must not give a Vetrovec warning in connection with defence witnesses, a caution may be required in connection with an accused’s testimony, for example in a joint trial involving cutthroat defences or where the accused introduces disposition evidence against a co-accused. Moreover, it does not follow from the prohibitions against Vetrovec cautions for defence witnesses that nothing can be said about the credibility and reliability determinants of an accused’ testimony, and the common sense proposition that a witness’ interest in the proceedings may have an impact on his or her credibility applies equally to an accused who testifies in his or her own defence. A trial judge is entitled to express his or her own view of the facts or the credibility of the witnesses, including the accused, provided that the judge does not use such language which leads the jury to think they must find the facts as the judge indicates and provided that the charge taken as a whole does not deprive the accused of a fair presentation of his case to the jury.

The Court found the impugned instruction did not amount to the functional equivalent of a Vetrovec caution. Although the first two characteristics of such cautions were present, the two last ones were not. Moreover, the jurors had heard a Vetrovec caution in relation to the evidence of MA and DG and would have recognized the difference in the level of scrutiny. However, the instruction was uncomfortably close to a Vetrovec caution in its suggestion of the need for special scrutiny, and Vetrovec cautions do not apply to exculpatory defence evidence. The Court found that the real problem with this instruction was its impact on the instruction on alibi and the jury’s consideration of the appellant’s testimony in support of alibi, his principal defence. If the jury found that MA and DG had left along with TP, it could then find that the appellant was at the vacant unit with the 833 phone and thus could not have been the shooter, that MA, DG and TP were at the scene of the robbery, and that one of them had shot and killed the deceased. The jurors were told that they were to approach that aspect of the alibi that had MA and DG leave in the appellant’s girlfriend’s car with “particular care”, which added a level of scrutiny to the alibi evidence that was unwarranted and constituted error.

(5) Yes. The Court stated that when the case of the Crown depends in whole or in significant part on the correctness of eyewitness identification of an accused, the jury should be instructed on the inherent frailties of eyewitness identification evidence. This need arises because of the danger of wrongful conviction. That danger does not exist where the eyewitness evidence tends to exculpate an accused. Since the typical instruction of the frailties of eyewitness identification evidence may leave the jury with an erroneous impression about the quality of evidence that could leave them with a reasonable doubt, the traditional instruction should be avoided.

The Court found that in this case, the only person who identified the appellant as the shooter was MA, a witness whose evidence was subject to a Vetrovec caution. The evidence of the two other eyewitnesses provided a generic description of the shooter, but neither identified the appellant as the shooter despite the inclusion of his photograph in the line-up they had viewed. The danger of wrongful conviction was not present in this case, and the instruction should not have been given.

R. v. John, 2018 ONCA 702

[Watt, Pardu and Roberts JJ.A.]

Counsel:

G. Chan, S. Aylward and J. Shanmuganathan, for the appellant

J. Barrett, for the respondent

Keywords: Criminal Law, Possession of Child Pornography, Unreasonable Search and Seizure, Sentencing, Mandatory Minimum Sentences, Proportionality, Canadian Charter of Rights and Freedoms, ss. 1, 8, 12 and 24(2), R. v. Spencer, 2014 SCC 43, R. v. Vu, 2013 SCC 60, R. v. Jones, 2011 ONCA 632, R. v. Morrison, 2017 ONCA 582, R. v. Sharpe, 2001 SCC 2, R. v. Inksetter, 2018 ONCA 474, R. v. Lynch-Stauton, 2012 ONSC 218

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.

Any article or other information or content expressed or made available in this Section is that of the respective author and not of the OBA.