CANADIAN CASES ON THE LAW OF INSURANCE

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CANADIAN CASESON THE LAW OF

INSURANCEFourth Series/Quatrieme serie

Recueil de jurisprudence canadienne en droit des assurances

[Indexed as: Saskatchewan Government Insurance v. Becker]

Saskatchewan Government Insurance, Appellant and EmiliaBecker and Automobile Injury Appeal Commission,

Respondents

Saskatchewan Court of Appeal

Docket: 1735

2011 SKCA 24

Richards, Smith, Ottenbreit JJ.A.

Heard: January 18, 2011

Judgment: February 23, 2011

Insurance –––– Automobile insurance — Government automobile insuranceplans — Entitlement to coverage — Miscellaneous issues.

Insurance –––– Automobile insurance — Government automobile insuranceplans — Removal of right of action –––– Insured, then 11 years old, sufferedbrain injury and motor disabilities in school bus accident — Representative ofinsurer felt that it would be benefit for insured to have parent involved in hercare — From October 2006 to September 2007 insured’s mother took unpaidleave from her full-time employment to look after insured — In September2007, mother negotiated with her employer to work at 35 percent of her formersalary, allowing her to work around insured’s appointments — Insurer reim-bursed mother for income lost up to fall of 2007 when insured was expected toreturn to school full time; insurer considered this to be ex gratia payment author-ized by s. 206 of Automobile Accident Insurance Act — Insurer notified motherthat it would discontinue payment at beginning of school year (decision let-ter) — Insured appealed to appeal commission seeking payment for differencebetween mother’s salary prior to collision and what she earned at reducedhours — Insurer wrote to mother claiming to withdraw decision letter and madeoffer to settle on ex gratia basis, provided that appeal be withdrawn and finalrelease be executed — At hearing, mother stated that she had not accepted set-tlement and wanted appeal to continue; insurer argued that decision letter had

CANADIAN CASES ON THE LAW OF INSURANCE 97 C.C.L.I. (4th)2

been withdrawn and therefore right of appeal no longer existed — Commissionheld that appeal was that of insured and could not be discontinued without herconsent and ordered insurer to make payment for net wage loss — Insurer ap-pealed — Appeal dismissed — Offer letter was clearly not unconditional agree-ment to settle; it required signed release and payment was on ex gratia basis —Acceptance of offer would have left insured with no basis for further claim, hadfurther need for her mother’s extended care become necessary — Mootness ofissue does not necessarily deprive adjudicator of jurisdiction over appeal, but ismatter of discretion — It was within commission’s jurisdiction to hear matterdespite settlement offer.

Insurance –––– Automobile insurance — Government automobile insuranceplans — Practice and procedure in matters involving government insur-ers –––– Jurisdiction of Appeal Commission — Insured, then 11 years old, suf-fered brain injury and motor disabilities in school bus accident — Representa-tive of insurer felt that it would be benefit for insured to have parent involved inher care — From October 2006 to September 2007 insured’s mother took unpaidleave from her full-time employment to look after insured — In September2007, mother negotiated with her employer to work at 35 percent of her formersalary, allowing her to work around insured’s appointments — Insurer reim-bursed mother for income lost up to fall of 2007 when insured was expected toreturn to school full time; insurer considered this to be ex gratia payment author-ized by s. 206 of Automobile Accident Insurance Act — Insurer notified motherthat it would discontinue payment at beginning of school year (decision let-ter) — Insured appealed to appeal commission, seeking payment for differencebetween mother’s salary prior to collision and what she earned at reducedhours — Insurer wrote to mother claiming to withdraw decision letter and madeoffer to settle on ex gratia basis, provided that appeal be withdrawn and finalrelease be executed — At hearing, mother stated that she had not accepted set-tlement and wanted appeal to continue; insurer argued that decision letter hadbeen withdrawn and therefore right of appeal no longer existed — Commissionheld that appeal was that of insured and could not be discontinued without herconsent and ordered insurer to make payment for net wage loss — Insurer ap-pealed — Appeal dismissed — Offer letter was clearly not unconditional agree-ment to settle; it required signed release and payment was on ex gratia basis —Acceptance of offer would have left insured with no basis for further claim, hadfurther need for her mother’s extended care become necessary — Mootness ofissue does not necessarily deprive adjudicator of jurisdiction over appeal, but ismatter of discretion — It was within commission’s jurisdiction to hear matterdespite settlement offer.

Cases considered by Smith J.A.:

Borowski v. Canada (Attorney General) (1989), [1989] 3 W.W.R. 97, [1989] 1S.C.R. 342, 57 D.L.R. (4th) 231, 92 N.R. 110, 75 Sask. R. 82, 47 C.C.C.

Saskatchewan Government Insurance v. Becker Smith J.A. 3

(3d) 1, 33 C.P.C. (2d) 105, 38 C.R.R. 232, 1989 CarswellSask 241, 1989CarswellSask 465, [1989] S.C.J. No. 14 (S.C.C.) — considered

Statutes considered:

Automobile Accident Insurance Act, R.S.S. 1978, c. A-35Generally — referred tos. 112(2) — considereds. 189(1) — referred tos. 193(7)(b) — considereds. 194(1) — pursuant tos. 206 — considered

Regulations considered:

Automobile Accident Insurance Act, R.S.S. 1978, c. A-35Personal Injury Benefits Regulations, R.R.S., c. A-35, Reg. 3

s. 12(e)(ii) — considereds. 12(e)(iii) — considered

APPEAL by government insurer from decision of appeal commission orderinginsurer to reimburse insured’s mother for lost wages.

Robert G. Kennedy, Q.C., for AppellantSharon H. Pratchler, Q.C., for Automobile Injury Appeal Commission

Smith J.A.:

I Introduction1 This appeal is brought by Saskatchewan Government Insurance

(“SGI”) from a decision of the Automobile Injury Appeal Commission,pursuant to s. 194(1) of The Automobile Accident Insurance Act, R.S.S.1978, c. A-35, which permits an appeal to this Court on a question oflaw. The appellant argues that the Appeal Commission lacked jurisdic-tion to hear the appeal, or, alternatively, lost jurisdiction when the appealbecame moot, or, alternatively, lacked jurisdiction to award recovery asit did, rather than referring the matter back to SGI. The Appeal Commis-sion appeared on the appeal to make submissions solely in relation to itsjurisdiction. The respondent, Emilia Becker, relied on the submissions ofthe Appeal Commission.

II Background Facts2 On October 17, 2006 the respondent Emilia Becker, then 11 years

old, was an unrestrained passenger in a school bus that failed to yield the


right of way, struck another vehicle and rolled. She was unconscious atthe scene of the accident and was initially diagnosed with a concussion.When she did not progress as expected, follow-up tests disclosed a mod-erate brain injury. She also suffered multiple abrasions and bruising, apunctured lung and a fractured thumb which healed uneventfully. Shewas entitled to personal injury benefits pursuant to The Automobile Acci-dent Insurance Act. Heather Becker and Mark Becker are her parents.

3 In November 2006, Emilia returned to school for one hour a day, pro-gressing to two hours a day by Christmas. In January and for part ofFebruary 2007, she returned to school full time. However, she exper-ienced dizziness, severe headaches, difficulty with concentration andmemory, was irritable and suffered extreme fatigue, often falling asleepat school. She also suffered motor disabilities including difficulty inwalking up the stairs, an inability to run or to ride her bicycle. Prior tothe accident she had been an excellent student and also excelled in anumber of physical activities including ballet, jazz and tap dancing at acompetitive level.

4 In February 2007, Dr. Nanson, a neuropsychologist recommendedthat Emilia attend school for half days, in the mornings only, because hersymptoms were made worse by fatigue. Dr. Nanson recommended thatshe be at home in the afternoon with parental supervision to nap and rest,and reduce the risk of falls when she was dizzy. Other medical reportsfiled with SGI discussed the role of parental involvement in careful mon-itoring of Emilia’s activities to avoid problems of fatigue, monitor hersymptoms, and to supervise regular therapy to relearn the motor andmental skills she had lost.

5 It was intended that Emilia would return to school full time in Sep-tember 2007, but in the summer of 2007 she was referred to the Chil-dren’s Program at Wascana Rehabilitation Centre that would continue toJanuary 23, 2008, to deal with continuing cognitive difficulties in motorplanning and perceptual skills that were affecting her gross and fine mo-tor skills. It is a policy of the Program for a parent to be in attendancewhen a child is at therapy in the Children’s program. It was not consid-ered to be appropriate for Emilia to be looked after by a babysitter forthis purpose.

6 Sharon Hoiland, SGI injury representative, was responsible for Emi-lia’s claim during this period. She felt that it would be a benefit for Emi-lia to have a parent involved in her care. The family lived on a farm andEmilia’s age, symptoms and behavioural difficulties made it difficult to


employ alternative care for her. Between October 2006 and September2007 Heather Becker took an unpaid leave from her full time employ-ment to look after Emilia and her two siblings, all of whom had beeninjured in the same accident. In September 2007 Heather Becker negoti-ated a contract with her employer to work at 35% of her former full timewage, allowing her to work around Emilia’s schedule of appointments,lunch time, after school and other times when Emilia was tired, confusedor had severe headache.

7 There is no express provision in the Act authorizing reimbursement ofthe parent of an injured insured minor who takes off work to care for theinjured child for lost wages, although SGI has a written policy permittingrecovery of lost income of a parent for up to 21 days when an injuredchild is hospitalized and in acute care. In the instant case, however, SGIaccepted the view of medical advisors and school officials that HeatherBecker’s presence was beneficial to Emilia’s treatment and recovery anddecided to reimburse her for the income lost for almost a year up to thefall of 2007 when Emilia was expected to return to school full time. SGIconsidered this to be an ex gratia payment, authorized by s. 206 of theAct, on the basis that parental income recovery is not a “legislatedbenefit”.

8 Section 206 of the Act provides as follows: 206 If the insurer considers that the payment of a claimant’s claim isin the interest of the insurer and the better administration of this Part,the insurer may authorize an ex gratia payment to be made to thatclaimant.

9 When almost a year had expired, SGI considered it had gone as far asit could go on an ex gratia basis, and notified Mark and Heather Becker,by letter dated August 20, 2007 that it would discontinue payment at thebeginning of the school year. This letter commented:

....As our office has pointed out in the past, salary for parents is onlycovered when the patient is in acute care. Our office did agree tocontinue Heather’s salary to provide time for alternate arrangements.As this has continued for 10 months, our office will be discontinuingthis payment upon the beginning of the school year.

10 This letter did not include notice of a claimant’s right to ask for medi-ation or to appeal the insurer’s decision as is required of a letter respect-ing the claimant’s entitlement to benefits by s. 189(1) of the Act. A more


formal decision letter was, however, provided on November 28, 2007.This letter, addressed to Heather Becker, provided, in part, as follows:

As you are aware our office did cover your full salary up to and in-cluding September 7, 2007.

As of this date our office is prepared to cover your salary for timerequired to miss to attend Emilia’s medical appointments. We are notin a position to cover your salary for any other time missed. I under-stand the school is prepared to provide taxi service for Emilia to at-tend band.

As we have previously discussed there is no legislation provision toprovide funding for your salary, but our office will provide you theappeal option for this decision.

If you don’t agree with the decision made regarding the benefits,please let me know. You can ask me to have my supervisor call youto discuss the decision.

You also have the right to apply for an appeal of our decision on thebenefits.

The letter then set out the procedure for filing an appeal. In neither of theletters did SGI suggest that it had determined that it was no longer neces-sary or desirable for Heather Becker to take time off work to look afterthe care and rehabilitation of Emilia.

11 An appeal to the Appeal Commission was brought in Emilia’s name.The appeal indicated: “We are applying for SGI to pay the differencebetween what Heather’s salary was prior to the collision and what sheearned at her reduced hours for the dates: September 5, 2007 - January24, 2008.”

III The Procedure Before the Appeal Commission12 At the appeal hearing, SGI was represented by counsel but the Beck-

ers were not. Before the Appeal Commission, SGI submitted that thepayments made to reimburse Heather Becker’s lost income (referred toby SGI as “income replacement benefits”) were gratuitous and not pro-vided for by the Act. It pointed out that the Commission cannot order itto make an ex gratia payment and argued that it must therefore dismissthe appeal. The Commission ruled that it would reserve its decision onthat issue and hear evidence on the merits of the claim, since all partiesand witnesses were already before it. At the conclusion of the hearing,the Commission requested that SGI provide a copy of its Acquired BrainInjury Guidelines. After reviewing the guidelines and the legislation, it


asked the parties to reconvene to answer questions about Emilia’s entitle-ment to rehabilitation benefits.

13 SGI replied that the Commission had no jurisdiction to adjudicate thisissue, since the payments made had, in its view, been ex gratia, andasked for the questions the Commission had to be put in writing. TheCommission complied, asking the parties to make submissions as towhether Emilia was entitled to benefits such as custodial care from hermother under s. 112(2) of the Act, and the Acquired Brain Injury Guide-lines and, as to whether, on the assumption that SGI thought compensat-ing the mother for her lost income while caring for her daughter waseither necessary or advisable, it had reasonably terminated that benefit.The Commission indicated it was prepared to receive submissions inwriting on these points.

14 Section 112(2) of the Act provides as follows: (2) Subject to the regulations, the insurer may take any measure itconsiders necessary or advisable to contribute to the rehabilitation ofan insured, to lessen a disability resulting from bodily injury and tofacilitate the insured’s recovery from the accident.

15 At this point, rather than make submissions to the Commission, onSeptember 23, SGI wrote to Heather and Mark Becker making a formaloffer to settle the matter by paying the lost wages claimed, provided thatEmilia withdraw her appeal and that Heather and Mark Becker execute a“Final Release” in relation to any economic loss arising from these cir-cumstances. This was followed up on October 31, 2008, in a letter ad-dressed to Emilia, as follows:

After further consideration, we have decided to withdraw our deci-sion letter dated November 28, 2007 (the “Decision Letter”) andmake the payment you have requested. As you well know the Deci-sion Letter was the basis of your appeal. As such, the withdrawal ofthe Decision Letter has the legal effect of rendering your appealmoot. Further, in our view, the Appeal Commission now has nofoundation to adjudicate this matter and no further jurisdiction.

We are enclosing a cheque in the amount of $10,838.62 which is thedifference between your mother’s full-time net salary in 2006 at thetime of the collision and her new contract at 35 percent minus pay-ments made by SGI for your mother accompanying yourself to medi-cal appointments, plus pre-judgment interest in the amount of$357.78 from September 17, 2007, to present.

We understand you may have out of pocket expenses related to yourappeal and would ask that you please advise us as to these costs and


provide back-up documentation so that we may reimburse you thesame to the legislated cap of $2,500.

In order to be clear this payment is made ex gratia.

Please note, it is our intention to appear at the next scheduled date forthe appeal only and solely to advise the Appeal Commission of theactions we have taken.

SGI also wrote to the Commission, reiterating its position that the Com-mission was without jurisdiction to pursue the enquiries it had raised.

16 The hearing reconvened on November 6, 2008. At this point, SGItook the position that the November 2007 decision letter had been “with-drawn”, by the letter of October 31, 2008, the payment requested hadbeen made, and the right of appeal no longer existed. Emilia and herparents stated that they had not accepted SGI’s settlement (no paymenthad in fact been made) and wanted the appeal to continue. Emilia, inparticular, stated that she believed the appeal was not just about money,but about the entitlement to the benefit, and she wanted the appeal tocontinue for the benefit for other families who might face similarsituations.

17 The Commission ruled that it was seized with the matter and wouldcontinue, giving leave to the parties to make further submissions on thenew jurisdictional point, relating to SGI’s purported withdrawal of its de-cision letter. SGI expressly declined to make any submissions as towhether s. 112(2) and the regulations entitled Emilia to the benefitclaimed. Rather, it relied on its submission that the matter was now mootand the Commission had no jurisdiction to render a decision.

III The Decision of the Commission18 On the question of whether the appeal had been rendered moot by

SGI’s purported withdrawal of its letter of decision and offer of settle-ment, the Commission took the view that the appeal was that of the in-sured, and could not be discontinued without the insured’s consent.

19 In relation to the question of whether the Commission lacked jurisdic-tion over the matter because the payments in question were ex gratia, theCommission began with the following observation:

[56] We start from the premise that no-fault benefits are a statutoryinsurance scheme funded by insureds, and we think it follows thatSGI cannot spend those monies except in accordance with the statu-tory scheme. If SGI is routinely making payments for a process orthing then it must be the money is being spent within the statutory


scheme or SGI is spending money on a regular basis for which it isnot authorized. In other words, you can’t spend money you are notauthorized to spend. SGI may, of course, make payments under s.210 at its sole and unfettered discretion but if it is using ex gratiapayments on a regular basis then, in our view, it means there is some-thing wrong with the legislation or else the interpretation of it. [2009SKAIA 006]

20 Noting its disappointment that SGI had declined to make any submis-sions on the interplay between the written acquired brain injury policy,the Act, and Emilia’s entitlement to rehabilitation benefits under the Act,the Commission then went on to analyze these aspects of the compensa-tion scheme, focusing on s. 112(2) of the Act, set out above, and s. 12(e)of the Personal Injury Benefits Regulations, which provides for funding:

(ii) to lessen the insured’s disability; and

(iii) to facilitate the insured’s recovery from an accident to improve hisor her earning capacity and level of independence.

21 Concluding that these provisions, properly interpreted, could coverincome replacement benefits for a parent of a brain injured child, wherethe parent’s presence was considered necessary or advisable to lessen theAppellant’s disability and facilitate her recovery, the Commission con-cluded as follows:

[61] The question we now must ask is whether the mother’s care wasnecessary or advisable to lessen the Appellant’s disability and facili-tate her recovery and “... to improve...her earning capacity and levelof independence”. Considering those words generally and broadly soas to have application to a young child, we interpret “improve herearning capacity” as being a long term effect. Based on the medicalreports and assessments filed respecting the Appellant’s abilities andprogress, the testimony of the occupational therapist and educator,and the parents, we are satisfied that the care the Appellant’s motherprovided was both necessary and advisable from the date of the acci-dent and gradually decreasing to when the Appellant finished therapyat WRC Children’s Program. SGI too thought the mother’s care wasnecessary and/or advisable because it funded it for almost a year.Leaving aside the question of whether it is a so-called legislated ben-efit, the only disagreement was when the payment should terminate.

[62] SGI terminated payment of the mother’s wage loss when theAppellant returned to school full-time in the fall of 2007. The Appel-lant however was just starting rehabilitative therapy WRC Children’sProgram and there was substantial evidence the Appellant still re-quired supervisory and parental care with school, tasks of daily living


and mobility. At first blush it might seem reasonable to terminatefunding when the Appellant returned to school full time, but we con-clude that it wasn’t reasonable given she had just started rehabilita-tion therapy for documented cognitive and mobility problems.

[63] Children, fortunately, tend to be resilient in recovering from in-juries, including brain injuries. This does not mean that they shouldnot get proper treatment, or that such treatment should be compro-mised because a parent is not available to maximize treatment goals,or to sound a warning if the treatment goes awry. We do not require“Cadillac” treatment: we do insist on reasonable and effective treat-ment. For children, this will require parental participation at a reason-able level. The mother’s decision to work part time during this criti-cal period was principled, responsible, and both necessary andadvisable to facilitate her daughter’s recovery.

22 The Commission concluded that funding for Emilia’s mother’s netwage loss for the period September 7, 2007 to January 23, 2008 was notreasonably terminated and ordered SGI to make that payment togetherwith pre-judgment interest.

IV Analysis23 The appeal raises three issues, all questions of law for which the ap-

pellate standard of review is correctness:

1. Did the committee err in continuing to entertain the appeal in spiteof SGI’s letters of September 23 and October 31, 2008?

2. Did the Committee err in concluding that the Act and Regulations,properly interpreted, were broad enough to authorize payment ofthe benefit in question in appropriate circumstances?

3. Assuming that the first two questions are answered in the nega-tive, did the Commission have jurisdiction to make an award pur-suant to s. 112(2) rather than referring this matter back to SGI?

24 It is our view that the Commission did not err in the exercise of itsjurisdiction and that the appeal should be dismissed.

25 SGI’s letters of September 23 and October 31, 2008 were clearly notan unconditional agreement to settle the issues raised on the appeal. Thefirst required Heather and Mark Becker to sign a release and the latterwas expressed to be solely on the basis of an ex gratia payment. Accept-ance of this offer would have left the insured with no basis for any fur-ther claim had further need for her mother’s extended care become nec-essary. Further, the settlement was clearly not accepted by Emilia or her


parents, who wanted this issue determined. Finally, mootness of an issuedoes not necessarily deprive an adjudicator of jurisdiction over an ap-peal, but is a matter of discretion. The appellant relies on Borowski v.Canada (Attorney General), [1989] 1 S.C.R. 342 (S.C.C.), but this deci-sion simply stands for the proposition that a court, as an incident of con-trol over its procedure, has discretion to decline to adjudicate a questionthat has become moot. In the instant case, the Commission clearly ac-cepted Emilia’s decision to continue the appeal to determine the point ofprinciple at issue. It was within the Commission’s jurisdiction to hearthis matter despite SGI’s settlement offer.

26 The issue of statutory interpretation raises two subsidiary issues thatshould be addressed. The first is that the appellant argues that in deter-mining the entitlement to this benefit pursuant to s. 112(2) of the Act, theCommission unilaterally “changed the appeal” from one concerning “in-come replacement” to one concerning rehabilitation benefits.

27 This argument should be soundly rejected. SGI’s characterization ofthis benefit as an ex gratia payment of “income replacement” was ex-actly what was at issue in this appeal. Nothing in the notice of appeal tothe Commission confines the issue in this way. It was, in my view,clearly within the Commission’s jurisdiction to determine whether thischaracterization of the benefit was correct in the course of determiningthe appellant’s entitlement to continuation of the benefit.

28 Secondly, the appellant argues that the Commission strayed from in-terpreting the Act, and decided, instead, on the basis of what it thoughtthe Act ought to provide. I do not agree with this interpretation of whatthe Commission did. The point made by the Commission was that thefact that SGI felt compelled to fall back on ex gratia payments to coverpayments deemed necessary or desirable for the rehabilitation of an in-sured suggested that SGI had failed to give a proper interpretation to theAct. This, in my view, is a sound point. Section 206 authorizes paymentsto be made in the interest of the insurer, for the better administration ofthe Act. Clearly this would, for example, authorize SGI to expend fundsto settle contentious but doubtful claims, for example to avoid the costsand risks of litigation. The widespread use of this provision, however,simply to fund benefits for an insured not otherwise authorized by thelegislation seems questionable, and the sense that such benefits ought, asa matter of logic, to be provided, invites a more careful scrutiny of thelegislation to determine whether it does, in fact, authorize such benefits.


29 Section 112(2), on the other hand, by its clear wording gives SGI anextremely broad discretion to make payments considered necessary oradvisable to contribute to the rehabilitation of an insured. In my view, theAppeal Commission did not err in concluding that, where a parent’s pres-ence is considered necessary or advisable for the proper recovery or re-habilitation of a child who suffered an acquired brain injury, this provi-sion is broad enough to authorize funding necessary to make thatpresence possible. I agree with the Commission that in appropriate cir-cumstances, this could include replacement of lost income to make itpossible for the parent to be available to the child. As the Commissionrightly pointed out, SGI clearly had considered Heather Becker’s pres-ence to be necessary or desirable, a determination supported by the medi-cal and other evidence, and it did not contest the point that circumstanceshad not changed to render it unnecessary at the time the funding wasdiscontinued.

30 I would conclude that the Appeal Commission did not err in its inter-pretation of the Act and the Regulations.

31 Finally, it is my view that the Commission had jurisdiction to orderthe payment of this benefit to the insured rather than refer the matterback to SGI to exercise its discretion under s. 112(2). Section 193(7)(b)expressly authorizes the Appeal Commission to “make any decision thatthe insurer is authorized to make pursuant to this Part.” SGI declined tomake any submissions as to whether the payments should be made pur-suant to s. 112(2) and did not otherwise contest the insured’s contentionthat the circumstances that justified the initial payment had not changedfor the period of the claim. In these circumstances it was not necessaryfor the Appeal Commission to refer the matter back to SGI.

32 The appeal is dismissed with costs to the Appeal Commission.

Richards J.A.:

I concur

Smith J.A.(for Ottenbreit J.A.):

I concur

Appeal dismissed.

Gablehouse v. Borza 13

[Indexed as: Gablehouse v. Borza]

Richard Darrell Gablehouse, Respondent (Plaintiff) and DerrickDodge (1980) Ltd., Appellant (Defendant) and Ryan J. Borzaand Borza Inspections Ltd., Not a Party to the Appeal (Third

Parties)

Alberta Court of Appeal

Docket: Edmonton Appeal 1003-0204-AC

2011 ABCA 102

Jean Cote, Clifton O’Brien, Patricia Rowbotham JJ.A.

Heard: March 29, 2011

Judgment: March 29, 2011

Written reasons: March 31, 2011

Insurance –––– Automobile insurance — Extent of risk — Terms of art —Miscellaneous terms –––– Van leased by business was involved in automobileaccident — Plaintiff driver of other vehicle commenced action for damages forpersonal injuries sustained in accident — Driver of van was convicted underHighway Traffic Act — Business mailed cheque as part of buy out optionshortly before accident — Cheque was received after collision — On hearing, itwas determined that title had not passed from lessor to business, and that bothlessor and business were owner of vehicle for insurance purposes — Lessor ap-pealed — Appeal dismissed — Clause of lease stated that title to van would beregistered in lessor until company notified otherwise, and it never did so beforecollision — Option and bill of sale were conditional on full payment, which wasnever tendered.

Cases considered:

Alas v. Solis (2003), 2003 ABCA 137, 2003 CarswellAlta 617, 14 Alta. L.R.(4th) 1, 226 D.L.R. (4th) 744, 39 M.V.R. (4th) 294, [2003] 9 W.W.R. 623,327 A.R. 192, 296 W.A.C. 192, [2003] A.J. No. 497 (Alta. C.A.) —considered

Archdekin v. McDonald (1912), 1 D.L.R. 664, 1 W.W.R. 1014, 1912 Car-swellMan 207 (Man. K.B.) — referred to

Delory v. Guyett (1919), 47 O.L.R. 137, 52 D.L.R. 506 (Ont. C.A.) —distinguished

Hansraj v. Ao (2004), 354 A.R. 91, 329 W.A.C. 91, 2004 ABCA 223, 2004CarswellAlta 849, 34 Alta. L.R. (4th) 199, [2005] 4 W.W.R. 669, [2004]A.J. No. 734 (Alta. C.A.) — followed


Hayduk v. Pidoborozny (1972), [1972] 4 W.W.R. 522, 29 D.L.R. (3d) 8, 1972CarswellAlta 55, [1972] S.C.R. 879, 1972 CarswellAlta 141 (S.C.C.) —considered

Kruse v. Fallows (1921), [1921] 2 W.W.R. 210, 16 Alta. L.R. 384, 59 D.L.R.169, 1921 CarswellAlta 25 (Alta. S.C. (App. Div.)) — referred to

Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co. (1992), 92D.L.R. (4th) 372, 10 C.C.L.I. (2d) 278, [1992] I.L.R. 1-2895, 127 A.R. 43,20 W.A.C. 43, 1992 CarswellAlta 382 (Alta. C.A.) — referred to

Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance Co. (1994),[1994] 2 S.C.R. 490, 1994 CarswellAlta 744, [1994] 7 W.W.R. 37, 20 Alta.L.R. (3d) 296, 168 N.R. 381, (sub nom. Maritime Life Assurance Co. v.Saskatchewan River Bungalows Ltd.) [1994] I.L.R. 1-3077, 155 A.R. 321,73 W.A.C. 321, 115 D.L.R. (4th) 478, 23 C.C.L.I. (2d) 161, 1994 Carswell-Alta 769, [1994] S.C.J. No. 59, EYB 1994-66952 (S.C.C.) — referred to


Currency Act, R.S.C. 1985, c. C-52s. 8 — referred to

Sale of Goods Act, R.S.A. 2000, c. S-2Generally — referred tos. 19 — considereds. 20(2) — considered

Traffic Safety Act, R.S.A. 2000, c. T-6Generally — referred to

APPEAL by lessor from judgment reported at Gablehouse v. Borza (2010), 72B.L.R. (4th) 198, 98 M.V.R. (5th) 253, 28 Alta. L.R. (5th) 152, 2010 ABQB294, 2010 CarswellAlta 1022, 485 A.R. 364 (Alta. Q.B.), regarding determina-tion of ownership of vehicle for insurance purposes.

K.P. Feehan, Q.C., A.E. Jarman, for Respondent / PlaintiffJ.L. Cairns, for Appellant / Defendant

Per curiam (orally):

1 Legislatures in Canada have long recognized the terrible power ofmotor vehicles to kill, maim and destroy in a moment’s inadvertence.Their toll now surpasses most diseases and wars. Our Legislature there-fore enacts a scheme for reliable compensation for those injuries. Thescheme interlocks and includes:

1. Vicarious and joint and several liability of drivers, owners, andemployees to pay compensation;

Gablehouse v. Borza Per curiam 15

2. Compulsory registration of vehicles, their owners, and their ad-dresses, and

3. Compulsory liability insurance of vehicle owners.

All three are necessary to let most innocent collision victims or theirfamilies actually collect compensation. See Hansraj v. Ao (2004), 354A.R. 91 (Alta. C.A.) (para. 114).

2 At 7:15 a.m. one morning, the respondent Gablehouse was driving onthe outskirts of Edmonton, when a van crossed the centre line and hit therespondent’s sedan head on. The respondent was severely injured, in-cluding fractures of his thigh bone and pelvis, producing much pain andongoing disability.

3 The time limit for suing was two years. Shortly before it expired, therespondent sued the van’s driver, the driver’s employer, and theowner/lessor of the van (the appellant). Two people were named on thevan’s registration certificate: the appellant and the employer (Extracts, p.A157). The respondent claimed for ongoing loss of income and cost offuture care.

4 The appellant admitted that it was the lessor of the van, but deniedthat it was still the owner of the van.

5 Just before the trial date, all parties in the suit limited its issues toone. They asked the Court to rule on that one issue in special chambers.The question is whether the lease by the appellant to the employer wasstill in force at the time of the collision, and whether the appellant lessorwas still the owner or deemed owner of the van. A Pierringer settlementalso agreed that the driver and employer were negligent and responsiblefor the collision, and would pay the injured respondent $1,000,000. Iffound still the van owner, the appellant lessor agreed then to pay an addi-tional $900,000 to the respondent.

6 The chambers judge decided (2010 ABQB 294 (Alta. Q.B.)) that thelessor was still the owner and vicariously liable (for the additional$900,000). The appellant lessor appeals.

7 The initial lease by the appellant to the employer originally wouldhave expired long before the collision. Then it was extended, to expiretwo days after the collision. The lessee employer forgot to renew its un-dertaking to insure the van.

8 The lease provided that title and registration would remain in the les-sor appellant (Extracts, p.A124, cl. 13).


9 The lease contained an option: the lessee employer could buy the van.(A later letter fixed the option price.) The lessee employer mailed acheque two days before the accident purporting to exercise that option;but there were two flaws:

(a) the cheque was not received until after the collision, and

(b) the lessee employer never made the last monthly lease payment,due about three weeks before the collision. Yet the option to buywas exercisable only if the “Lessee is not in default”. (Extracts, p.A124, cl. 6)

10 After the collision, the appellant lessor prepared a bill of sale to trans-fer title to the lessee employer, and signed it. But the bill of sale ex-pressly stated that ownership would remain with the lessor “until allsums owing are paid” (Extracts, p. A153, cl. 4). The lessee employernever signed the bill of sale.

11 At the time of the collision, the lessor of the van, publicly registeredas such with the government, was the appellant lessor. The lessee em-ployer was also shown as “registrant”.

12 Had title to the van passed before the collision? The appellant reliesheavily on the Sale of Goods Act, but it gives somewhat limited assis-tance. For transfer of ownership of specific or ascertained deliverablegoods, the Act requires both a contract, and intent of the parties about thetime that title is to be transferred. The intent is to be ascertained from theterms of the contract, the parties’ conduct, and the circumstances of thecase (s. 19). Absent a different intention, the time of transfer sometimesis the time of contracting even if the payment or delivery is postponed (s.20(2)). But that subsection is confined to unconditional contracts. Thiscontract was expressly conditional on payment.

13 Even if those sections did apply, there is an issue whether a differentintention or different contractual terms applied. The idea that an expen-sive vehicle would be sold on credit with no security is very improbable,as the chambers judge found. Obviously the lessee employer knew thatpayment was needed to exercise the option, as it sent a large cheque.

14 Clause 13 of the lease stated that title to the van would be registeredin the lessor appellant until that company notified otherwise, and it neverdid so before the collision.

15 The only contract for sale was the option. But it was conditional onfull payment, which was never even tendered. That is because onemonthly payment never occurred, in any form. The bill of sale similarly

Gablehouse v. Borza Per curiam 17

was conditional on full payment: it postponed transfer of title until thatapplied. Either the payout payment was too low, or the lease was not ingood standing as the option expressly required. Or both.

16 All that may well render academic whether exercise of the optioncould be effective on mailing, before receipt by the offeror (the lessor).In any event, we have seen no legal authority for payment ever beingeffective on mailing.

17 No one has found any authority saying that putting a cheque into themail is payment at that moment. The appellant cites Delory v. Guyett(1919), 52 D.L.R. 506 (Ont. C.A.), 519, but it is distinguishable, becauseit is not about postal acceptance at all. And the passage cited is a dissentcontrary to the majority view (p. 513). Contrary to the appellant’s pro-position is Saskatchewan River Bungalows Ltd. v. Maritime LifeAssurance Co. (1992), 127 A.R. 43 (Alta. C.A.) (paras. 18, 88, 89), revd.on other grds. [1994] 2 S.C.R. 490 (S.C.C.).

18 It is true that sometimes a contract can be formed by mailing an ac-ceptance of an offer. But it is trite law that merely communicating wordsof acceptance does not always suffice. Some offers can only be acceptedby performance, or some other act: Treitel, Law of Contract 37-38 (11thed. 2003) (“unilateral contracts”). That was plainly so here. (See Ex-tracts, pp. A124, cl. 6, ll. 3-7 and A135 and A142.)

19 In any event, a cheque is not legal tender: Currency Act, R.S.C. 1985,c. C-52, s. 8. See Archdekin v. McDonald (1912), 1 W.W.R. 1014 (Man.K.B.), 1016; Kruse v. Fallows (1921), 59 D.L.R. 169 (Alta. S.C. (App.Div.)), 174. And this one arrived after the collision.

20 The respondent submits that exercise of the option could only be ef-fective at the end of the lease, two days after the collision. That is argua-ble, but we need not pursue that. Nor need we opine upon the chambersjudge’s additional ground relating to insurable interest.

21 There is another freestanding bar to this appeal. There can be morethan one owner of a vehicle for liability purposes: Alas v. Solis, infra.Those who allow their names to be registered with the government asowner of a motor vehicle, are that vehicle’s “owner” for purposes of vi-carious liability under the Traffic Safety Act. (Consent to drive is not con-tested here.) That is clear from Hayduk v. Pidoborozny, [1972] S.C.R.879, 29 D.L.R. (3d) 8 (S.C.C.), which binds us. It points out that it is theregistered owner whom the statute requires to give proof of insurance (p.


885 S.C.R.). As the Supreme Court says, the whole reason to registerowners

is to give notice to all users of the highway the identity of an indivi-dual to whom they may look as owner in the event of an accident.

In other words to see whom to sue. That refers to the integrated schemewith which these reasons opened. Even if Hayduk is read as a rebuttablepresumption, there was no rebuttal proved here.

22 The appellant was shown on the van’s registration as the leasing com-pany of the leased vehicle. That is the owner. That the lessee was alsonamed there as “registrant” does not detract from that (Extracts, p.A157). See Alas v. Solis, 2003 ABCA 137, 327 A.R. 192 (Alta. C.A.).

23 An injured person has but two years to sue, and cannot know the pri-vate dealings between the registered owner and others, so the victim’sreliance upon the registered name as owner is vital. Without that, thevictim would need an examination for discovery about all those dealingsbefore the two years expired. Discovery of records is necessary before anexamination for discovery, so in effect that would almost halve the twoyears to sue, to one year. In the long run, thus shrinking times wouldfrustrate settlement, multiply litigation, and deprive the injured of com-pensation because of peculiar private arrangements. It would reward reg-istering vehicles in the names of cat’s paws and men of straw. And itwould reward retroactive rewriting of intra-family arrangements.

24 The appeal is dismissed.25 It helps the Court if a book of extracts has a descriptive table of con-

tents; mere exhibit numbers tell little. The key document here (the lease)is reproduced in small print from a bad faxed copy. If a better copy is notavailable, the document should be retyped. We have often complainedfruitlessly of that practice.

Appeal dismissed.

Pearlman v. Atlantic Trading Co. 19

[Indexed as: Pearlman v. Atlantic Trading Co.]

David Pearlman, Appellant (Plaintiff) and Atlantic TradingCompany Ltd. and Rebecca Lee Spence, Respondents

(Defendants)

British Columbia Court of Appeal

Docket: Vancouver CA036501

2011 BCCA 183

Saunders, Smith, Hinkson JJ.A.

Heard: February 10, 2011

Judgment: April 13, 2011

Civil practice and procedure –––– Practice on appeal — Powers and dutiesof appellate court — Miscellaneous.

Civil practice and procedure –––– Costs — Costs of particular proceed-ings — Motion for judgment –––– Plaintiff was involved in motor vehicle col-lision — Plaintiff brought four actions against various parties — Actions weredismissed — Plaintiff appealed — Plaintiff was ordered to post security forcosts — Plaintiff failed to post security in time and appeal was dismissed asabandoned — Defendants brought motion to dismiss appeal — Chambers judgedismissed defendants’ motion as moot, as appeal had already been dismissed asabandoned — Chambers judge made no comment on costs in her reasons, butwhen order resulting from proceedings before her was submitted to Registry,counsel included provision that plaintiff shall pay costs of application to defend-ants — Plaintiff brought applications for review of orders of chambers judgesunder s. 9(6) of Court of Appeal Act — Applications granted in part — Order ofchambers judge varied to remove order as to costs — As situation was not gov-erned by s. 23 of Act, defendants were not entitled to costs, unless they weredealt with by chambers judge — There was no basis upon which defendantscould be considered to have succeeded before chambers judge.

Civil practice and procedure –––– Practice on appeal — Abandonment ofappeal –––– Plaintiff was involved in motor vehicle collision — Plaintiffbrought four actions against various parties — Actions were dismissed — Plain-tiff appealed — Plaintiff applied for indigent status on appeals — Applicationfor indigent status on present appeal was dismissed — Plaintiff was ordered topost security for costs — Plaintiff failed to post security and appeal was dis-missed as abandoned — Defendants brought motion to dismiss appeal — Cham-bers judge H dismissed defendants’ motion as moot, as plaintiff’s appeal hadalready been dismissed as abandoned — Plaintiff made new application for indi-


gent status based on new evidence, which was dismissed by chambers judgeG — Plaintiff brought applications for review of chambers judges’ orders unders. 9(6) of Court of Appeal Act — Applications granted in part — Order ofchambers judge G varied to grant indigent status to plaintiff for limited purposeof permitting him to apply to reinstate his appeal — There was no basis uponwhich to interfere with substantive part of order dismissing defendants’ motionas moot on basis that appeal had been dismissed as abandoned — Plaintiff ar-gued that dismissal of his appeal as abandoned should not have occurred, asdefendants rendered matter active when they applied for dismissal pursuant toss. 10(2) and 24(2) of Act — Plaintiff’s position was not without merit — Firstground set out in leading case on granting indigent status was met with respectto narrow issue of whether plaintiff’s appeal should have been dismissed asabandoned.

Civil practice and procedure –––– Institution of proceedings — Proceedingsin forma pauperis –––– Plaintiff was involved in motor vehicle collision —Plaintiff brought four actions against various parties — Actions were dis-missed — Plaintiff appealed — Plaintiff was ordered to post security forcosts — Plaintiff failed to post security and appeal was dismissed as aban-doned — Defendants served notice of motion to dismiss appeal — Defendants’motion was dismissed by chambers judge H as moot, as appeal had already beendismissed as abandoned — Plaintiff faced significant costs as result of dismissalof appeal — Plaintiff brought unsuccessful application for order that he be de-clared indigent based on new circumstances, based on new evidence regardingcosts — Chambers judge G dismissed application — Plaintiff brought applica-tions for review of orders of chambers judges, under s. 9(6) of Court of AppealAct — Applications granted in part — Order of chambers judge varied to grantindigent status to plaintiff for limited purpose of permitting him to bring hisapplication to reinstate his appeal — As his appeal stood dismissed, plaintiffcould not achieve indigent status on main appeal, even based upon new evi-dence, unless appeal was reinstated by way of successful application pursuant tos. 25(6) of Act — Plaintiff was entitled to apply to re-instate appeal under s.25(6), and to have his application for indigent status dealt with, with respect tothat limited potential application — Plaintiff’s otherwise precarious financialcircumstances were sufficiently compromised by his exposure to payment ofcosts, that he could now be said to be within that category of persons, who, byreason of financial circumstances, could be described as indigent — Review ofdismissal of application by plaintiff to reinstate his appeal would not be com-pletely unmeritorious, and his financial circumstances were such that he mightotherwise be denied access to Court to pursue application.

Cases considered by Hinkson J.A.:

Booty v. Hutton (2009), 2009 BCCA 375, 2009 CarswellBC 2247, 275 B.C.A.C.139, 465 W.A.C. 139 (B.C. C.A. [In Chambers]) — considered

Pearlman v. Atlantic Trading Co. 21

D. (M.J.) v. D. (J.P.) (2001), 2001 BCCA 155, 2001 CarswellBC 395, 149B.C.A.C. 153, 244 W.A.C. 153 (B.C. C.A. [In Chambers]) — considered

Hannigan v. Hannigan (2006), 2006 BCCA 167, 2006 CarswellBC 828, 226B.C.A.C. 100, 373 W.A.C. 100, 33 C.P.C. (6th) 205 (B.C. C.A.) — referredto

Pearlman v. American Commerce Insurance Co. (2008), 2008 BCSC 1091,2008 CarswellBC 1718 (B.C. S.C.) — referred to

Pearlman v. American Commerce Insurance Co. (2009), 2009 BCCA 78, [2009]I.L.R. I-4809, 91 B.C.L.R. (4th) 267, 267 B.C.A.C. 27, 450 W.A.C. 27, 2009CarswellBC 387, 72 C.C.L.I. (4th) 1 (B.C. C.A.) — referred to

Pearlman v. Atlantic Trading Co. (2009), 469 W.A.C. 99, 277 B.C.A.C. 99,2009 CarswellBC 2944, 2009 BCCA 482 (B.C. C.A.) — considered

Pearlman v. Atlantic Trading Co. (2010), 492 W.A.C. 81, 291 B.C.A.C. 81,2010 BCCA 362, 2010 CarswellBC 2011 (B.C. C.A. [In Chambers]) — re-ferred to

Pearlman v. Atlantic Trading Co. (2010), 410 N.R. 391 (note), 2010 Car-swellBC 2469, 2010 CarswellBC 2470, [2010] S.C.C.A. No. 176 (S.C.C.) —referred to

Pearlman v. Atlantic Trading Co. (2010), 2010 BCCA 568, 2010 CarswellBC3690 (B.C. C.A.) — referred to

Pearlman v. Insurance Corp. of British Columbia (2007), 2007 BCCA 451,2007 CarswellBC 2293, 55 C.C.L.I. (4th) 7 (B.C. C.A. [In Chambers]) —referred to

Pearlman v. Insurance Corp. of British Columbia (2007), 2007 BCCA 464,2007 CarswellBC 2365, 55 C.C.L.I. (4th) 10 (B.C. C.A.) — referred to

Pearlman v. Insurance Corp. of British Columbia (2010), 284 B.C.A.C. 14,2010 CarswellBC 622, 2010 BCCA 49, [2010] B.C.J. No. 456 (B.C.C.A.) — considered

Trautmann v. Baker (1997), 1997 CarswellBC 501, 25 R.F.L. (4th) 341n, [1997]B.C.J. No. 452 (B.C. C.A. [In Chambers]) — considered


Court of Appeal Act, R.S.B.C. 1996, c. 77s. 9(6) — pursuant tos. 10(2) — referred tos. 23 — referred tos. 24(2) — referred tos. 25(5) — referred tos. 25(6) — referred to

Rules considered:

Court of Appeal Rules, B.C. Reg. 297/2001R. 34(1) — referred toR. 34(3) — referred to


Rules of Court, 1990, B.C. Reg. 221/90R. 18A — referred to

APPLICATIONS by plaintiff for review of orders of chambers judges, pursuantto s. 9(6) of Court of Appeal Act.

Appellant, for himselfV. Critchley, for Respondent

Hinkson J.A.:

1 Mr. Pearlman brings two applications for review under s. 9(6) of theCourt of Appeal Act, R.S.B.C. 1996, c. 77. The first is to discharge orvary the order of Madam Justice Huddart in chambers, pronounced onNovember 19, 2010, and the second to discharge or vary the order ofMadam Justice Garson in chambers, pronounced on November 30, 2010.

2 Mr. Pearlman was involved in a motor vehicle accident on November25, 2004, when the vehicle he was driving was struck from the rear by avehicle owned by Atlantic Trading Company Ltd., and driven by Ms.Spence. Mr. Pearlman brought four actions following the accident:

(a) He sued the owner and operator of the other vehicle (the AtlanticTrading Company Ltd. and Rebecca Lee Spence), who were in-sured by ICBC;

(b) He sued his own automobile insurer, the American Commerce In-surance Company (“ACIC”);

(c) He brought a claim against his former family doctor, Dr. Stan Lu-bin; and

(d) He sued ICBC and Kelly Winn, the adjuster handling his claim.3 Mr. Pearlman advised us that he was granted indigent status in his

Supreme Court proceedings. The action in which we are asked to reviewthe orders of Huddart and Garson JJ.A. is Mr. Pearlman’s action againstAtlantic Trading Company Ltd. and Rebecca Lee Spence which was dis-missed at trial. The respondents were awarded double costs of the trialagainst Mr. Pearlman.

4 On October 29, 2008, Mr. Pearlman applied for indigent status beforeMr. Justice Chiasson in his appeal in these proceedings. That applicationwas refused, both on the ground that Mr. Pearlman had not establishedthat requiring him to pay the court fees would deprive him of the neces-saries of life and on the basis that there was no merit in his appeal. Mr.

Pearlman v. Atlantic Trading Co. Hinkson J.A. 23

Justice Chiasson also ordered Mr. Pearlman to post $5,000 of security forthe costs of the appeal on or before 19 December 2008. When that secur-ity was not posted as ordered, Madam Justice Newbury dismissed hisappeal as abandoned on February 18, 2009.

5 In his action against the ACIC, the insurer applied under Rule 18A tohave Mr. Pearlman’s action dismissed. That application was heard in Au-gust 2008, and Mr. Justice Meiklem declined to dismiss the action in itsentirety, but granted orders sought in the alternative, dismissing Mr.Pearlman’s claim for general damages in respect to injuries sustained inthe November 25, 2004 motor vehicle accident and his claim for funds toreimburse B.C. Medical Services Plan. The reasons for judgment are in-dexed as 2008 BCSC 1091 (B.C. S.C.). This Court allowed the insurer’sappeal in February 2009 and dismissed the action in its entirety (2009BCCA 78 (B.C. C.A.)).

6 The action against Dr. Lubin was tried before Madam Justice Morri-son in December 2008. She dismissed the claim. Mr. Pearlman subse-quently filed a notice of appeal, an application for leave to appeal, andsought a declaration of indigent status. On April 17, 2009, Mr. JusticeBauman, as he then was, ruled that leave to appeal was not required butdeclined to grant indigent status to Mr. Pearlman.

7 Mr. Pearlman’s claim against ICBC and Ms. Winn alleged bad faith,fraud, negligence and misrepresentation. That action was dismissed byMr. Justice Cullen on May 4, 2007.

8 Mr. Pearlman appealed the decision of Mr. Justice Cullen, and onJuly 25, 2007, brought an application for indigent status in that appealbefore Mr. Justice Hall. Mr. Justice Hall dismissed the application hold-ing that although Mr. Pearlman’s financial circumstances supported afinding of indigency, there was no possibility of success of his proposedappeal: Pearlman v. Insurance Corp. of British Columbia, 2007 BCCA451 (B.C. C.A. [In Chambers]).

9 Mr. Pearlman sought a review of Mr. Justice Hall’s order refusinghim indigent status. On September 20, 2007, (2007 BCCA 464 (B.C.C.A.)) this Court dismissed his application stating that:

[11] Mr. Pearlman was unable to persuade Mr. Justice Hall that therewas arguable error on the part of Mr. Justice Cullen. This panel canreview the chambers order only on the ground that the chambersjudge committed a legal error. We cannot substitute our discretionfor that of the chambers judge.


10 On July 3, 2009, Madam Justice Kirkpatrick, in chambers, refusedMr. Pearlman’s application for indigent status in his appeal from the de-cision of Mr. Justice Cullen and granted the respondents’ application foran order requiring Mr. Pearlman to post security for costs of the appeal.

11 Mr. Pearlman sought a review of the decision of Madam Justice Kirk-patrick which was dismissed by this Court on both grounds set out in D.(M.J.) v. D. (J.P.), 2001 BCCA 155, 149 B.C.A.C. 153 (B.C. C.A. [InChambers]): 1) the likelihood of success of the appeal; and 2) the finan-cial position of the appellant, holding at 2010 BCCA 49 (B.C. C.A.),paras. 11-13:

[11] I am unable to apprehend any error on the part of the chambersjudge in concluding that there was no likelihood that a division ofthis Court would be persuaded to reverse the findings of the trialjudge.

[12] As to Mr. Pearlman’s financial status, the chambers judge ex-amined his financial circumstances and reached the same conclusionas the ones reached earlier by two other justices of this court. I see noerror in her conclusion that Mr. Pearlman’s financial circumstances,although constrained, are not such that he cannot pay the necessaryfiling fees as indeed he has done on other occasions. In any event, thefirst ground, that is the question of merits, is dispositive of thisapplication.

[13] In my view Mr. Pearlman’s application for indigent status failson both grounds.

12 With this description of Mr. Pearlman’s several actions and appeals, Iturn back to this case. Mr. Pearlman sought a review of the order of Mr.Justice Chiasson dismissing his application for indigent status in theseproceedings and of the order of Madam Justice Newbury dismissing hisappeal as abandoned. The review upheld the decision of Chiasson J.A.,finding in the words of Mr. Justice Frankel in 2009 BCCA 482 (B.C.C.A.), para. 13, that:

Applying that standard of review to the order declining to grant Mr.Pearlman indigent status, and ordering him to post security for costsof the appeal, no basis has been shown that justifies interfering withChiasson J.A.’s decisions. Mr. Pearlman has been unable to showthat Chiasson J.A. made any error of fact, principle, or law in comingto the conclusions that he did. In particular, it has not been shownthat any such error was committed with respect to the determinationthat it was in the interests of justice to require that security be posted.


It is not for a division of the Court, on a review application, to con-sider the matter de novo.

13 With respect to the order of Madam Justice Newbury, Frankel J.A.said at para. 14:

This brings me to Newbury J.A.’s order. When the matter camebefore her on February 18, 2009, the deadline for the posting of se-curity for costs had expired, and it appeared that Mr. Pearlman haddone nothing to prosecute his application to review that order. In-deed, the affidavit filed by Atlantic Trading in support of the dismis-sal application makes no mention of the then outstanding review ap-plication. On the basis of what was before her, Newbury J.A.reasonably concluded that Mr. Pearlman did not have an excuse forfailing to comply with an order of a judge of this Court.

14 Frankel J.A. found, however, at para. 18 that “the failure to have thereview application heard before either December 19, 2008, or February18, 2009, does not rest with Mr. Pearlman. Having complied with therequirements of Rule 34(1), Mr. Pearlman could reasonably expect thatthe hearing date would be set by the registrar in accordance with Rule34(3). Indeed, this view is expressed in Atlantic Trading’s counsel’s let-ter of January 28, 2009”, and concluded at paras. 21-22 that:

[21] In my view, if Newbury J.A. had been made aware of the regis-try’s failure to arrange a date for the review application in accor-dance with Rule 34(3), then she would not have proceeded with thedismissal motion. When an application is brought in accordance withthe Rules of Court, the moving party has a right to have that applica-tion dealt with as provided for in those Rules. Unlike Mr. Brown inFarmers Insurance Co. of Oregon v. Brown (at para. 10), it cannot besaid that Mr. Pearlman is the victim of his own defaults.

[22] Regardless of the lack of merit in the review application, Mr.Pearlman was entitled to have the process requirements of the Courtof Appeal Rules followed on his application. Unfortunately, that didnot occur, and he is entitled to redress. In my view, he should be putin the position he would have been in had the review applicationbeen heard prior to December 19, 2008. To that end, the order dis-missing the appeal as abandoned should be discharged, and ChiassonJ.A.’s order varied only to the extent of extending the time for theposting of security for costs of the appeal to December 1, 2009.While the December 1st date gives Mr. Pearlman more time than hewould have had to post security had his review application beenheard promptly last year, the manner in which that application washandled warrants giving him this consideration.


15 Mr. Pearlman sought leave to appeal the decision in 2009 BCCA 482(B.C. C.A.) to the Supreme Court of Canada, but leave to appeal wasrefused ([2010] S.C.C.A. No. 176 (S.C.C.)).

16 On July 29, 2010, Mr. Justice Low declared Mr. Pearlman to be avexatious litigant and granted an order prohibiting him from bringing anymore appeals from any final orders without leave in any matters relatingto his motor vehicle accident of November 25, 2004. The decision ofLow J.A. is indexed as 2010 BCCA 362 (B.C. C.A. [In Chambers]).

17 Mr. Pearlman did nothing to advance his appeal, so on September 30,2010 the respondents served a notice of motion to dismiss the appeal. OnOctober 20, 2010, the respondents learned that the appeal had been dis-missed as abandoned pursuant to s. 25(5) of the Court of Appeal Act.When the respondent’s motion came on for hearing before Huddart J.A.in chambers on November 19, 2010, it was dismissed on the basis that itwas moot as the appeal had already been dismissed as abandoned. Inresponse to submissions from Mr. Pearlman, Madam Justice Huddartstated:

[2] Mr. Pearlman cannot file a cross-appeal of his own appeal. Whathe wants to do is re-instate his appeal. He can do that on a motion tothis Court to re-instate the appeal under s. 25(6) of the Court of Ap-peal Act. Until he does that, this appeal stands dismissed and thisapplication is moot.

18 On November 24, 2010, the appellant served an application for anorder that he be declared indigent, due to what he asserted were newcircumstances. He filed an affidavit setting out what he asserted to be thechange in his circumstances since his application before Chiasson J.A.The new application was heard and dismissed by Garson J.A. on Novem-ber 30, 2010, who found, at paras. 8-10 of her reasons that:

[8] Only a division of the court, hearing an application to vary ordischarge an order of a justice, pursuant to s. 9(6) may vary the orderof a justice. I have no jurisdiction, sitting as a justice in chambers, tovary the order of a justice. Mr. Pearlman has already sought a dis-charge or variation of Mr. Justice Chiasson’s order and that applica-tion in respect to the indigent status application was dismissed. Inany event, I am bound by the decision of Mr. Justice Chiasson.

[9] Mr. Pearlman has also filed a Notice of Application to Vary anOrder of a Justice which he attached to his application for indigentstatus. In that November 23, 2010, application he seeks an order va-rying or discharging an order of Madam Justice Huddart made on


November 19, 2010. As I have already said, I have no jurisdiction tohear such an application.

[10] In support of his application today, Mr. Pearlman has filed aMemorandum of Argument with about 107 pages of attachments. Iunderstand from his submissions that he considers that these docu-ments will have some bearing on the argument about the merits ofthe appeal. In particular, he drew my attention to a recently obtainedtranscript of a pre-trial conference that occurred shortly before thetrial in the within action. I have read that transcript. The remainder ofthe materials according to Mr. Critchley are medical reports and doc-uments from the trial. Mr. Pearlman has not filed an application forthe court to consider new evidence on this application. Assumingwithout deciding that such an application is available, I do not con-sider that these materials are likely to convince a court to revisit theapplication for indigent status.

19 On December 10, 2010, Mr. Justice Mackenzie, for the Court, upheldthe decision of Mr. Justice Low declaring Mr. Pearlman to be a vexatiouslitigant, and the orders flowing from that declaration: see 2010 BCCA568 (B.C. C.A.).

Analysis20 Mr. Justice Frankel addressed the standard of review on an applica-

tion to vary a chambers judge’s order on Mr. Pearlman’s earlier applica-tions at 2009 BCCA 482 (B.C. C.A.), para. 12:

The standard of review on an application to vary a chambers judge’sorder is succinctly set out in Redpath v. Redpath, 2009 BCCA 168,wherein Chiasson J.A. stated:

[3] We are guided in the exercise of this authority by theobservation of McEachern C.J.B.C. in Frew v. Roberts,[1990] B.C.J. No. 2175[44 C.P.C. (2d) 34], that a divisionof this Court should interfere with a decision of a Cham-bers judge only if it concludes the judge was wrong in thelegal sense and not merely because the division concludesthe judge incorrectly exercised discretion.

[4] Lambert J.A. further explained the test in Haldorson v.Coquitlam (City), [2000] B.C.J. No. 2532 (C.A.) [2000BCCA 672, 149 B.C.A.C. 197] as follows:

[7] It comes to this: that the review hearing isnot a hearing of the original application as if itwere a new application brought to a division ofthe court rather than to a chambers judge, but


is instead a review of what the chambers judgedid against the test encompassed by asking:was the chambers judge wrong in law, orwrong in principle, or did the chambers judgemisconceive the facts. If the chambers judgedid not commit any of those errors, then thedivision of the court in review should notchange the order of the chambers judge.

a) The review application of the order of Madam Justice Huddart21 No basis has been shown that justifies interference with the substan-

tive part of the order of Huddart J.A. Her order did nothing more thanleave matters as they stood prior to November 19, 2010: Mr. Pearlman’sappeal stood dismissed as abandoned, and he was advised that if hewished to re-instate his appeal, he could attempt to do so by bringing amotion to re-instate the appeal under s. 25(6) of the Court of Appeal Act.There is no basis upon which this division could interfere with that as-pect of her order.

22 In her brief reasons, Madam Justice Huddart made no comment oncosts, but when the order resulting from the proceedings before her wassubmitted to the Registry, counsel included the provision that “The Ap-pellant shall pay costs of this application to the Respondents”. As thesituation is not one that is governed by s. 23 of the Court of Appeal Act,the respondents were not entitled to costs, unless they were dealt with byMadam Justice Huddart. Normally a successful party is entitled to itscosts on an application before this Court, and I can think of no basisupon which the respondents could be considered to have succeeded onthe application before Madam Justice Huddart. Counsel for the respon-dents does not oppose a variation of the order of Huddart J.A. to removethe order as to costs, and I would accede to that variation in that order.

b) The review application of the order of Madam Justice Garson23 The order of Madam Justice Garson appears to be based upon a mis-

conception of Mr. Pearlman’s application. While Garson J.A. was correctto say that as a single judge in chambers she had no jurisdiction to varythe order of another justice that is not what Mr. Pearlman’s applicationrequired, in order to succeed. Mr. Pearlman was bringing a new applica-tion, based upon a new evidence in a new affidavit, and was entitled tohave the new application considered based upon that new evidence.


24 As his appeal stood dismissed, Mr. Pearlman could not achieve indi-gent status on the main appeal, even based upon new evidence, unless theappeal was reinstated by way of a successful application pursuant to s.25(6) of the Court of Appeal Act. Mr. Pearlman was, however, entitled toapply to re-instate the appeal under s. 25(6) of the Court of Appeal Act,and to have his application for indigent status dealt with, with respect tothat limited potential application.

25 The test for whether this Court will reinstate an appeal that has beendismissed was set out by Mr. Justice Tysoe, in chambers, in Booty v.Hutton, 2009 BCCA 375 (B.C. C.A. [In Chambers]):

[22] As with applications for an extension of time and applications torestore an appeal to the active list, the ultimate question on applica-tions to reinstate a dismissed appeal is whether it is in the interests ofjustice to do so. The factors to be considered in assessing the inter-ests of justice on a reinstatement application include the following:

(a) the length of the delay and, in particular, whether the delayhas been inordinate;

(b) the reason for the delay and, in particular, whether the delayis excusable;

(c) whether the respondent has suffered prejudice as a result ofthe delay; and

(d) the extent of the merits of the appeal.

See Hannigan v. Hannigan, 2006 BCCA 167, 33 C.P.C. (6th) 205(B.C. C.A.) at paras. 12-13.

26 Since the hearing of Mr. Pearlman’s applications to review the ordersof Huddart and Garson JJ.A., counsel for the respondents has filed fur-ther material addressing what he argues is the lack of any merit in theappeal that Mr. Pearlman may apply to reinstate. Mr. Pearlman has re-sponded with material that he argues shows merit in that appeal.

27 It is important to recognize that the merits of the appeal that Mr.Pearlman may apply to have reinstated are not before us at this juncture.Before us, Mr. Pearlman argued that the dismissal of his appeal as aban-doned on the inactive list should not have occurred, as the respondentshad rendered the matter active when applying for the dismissal, as theydid, pursuant to ss. 10(2) and 24(2) of the Court of Appeal Act. I find thatthis position is not without some merit. I make no comment uponwhether the appeal that he wishes to reinstate has merit, as it would bepremature to do so, but as identified by Tysoe J.A., that is only one of thefactors to be considered when Mr. Pearlman’s application pursuant to s.


25(6) of the Court of Appeal Act is heard. I conclude that the first of thetwo grounds set out in D. (M.J.) v. D. (J.P.) is met with respect to thenarrow issue of whether Mr. Pearlman’s appeal should have been dis-missed as abandoned.

28 What then of the second ground? Although he dismissed Mr. Pearl-man’s application for indigent status on the first ground in Pearlman v.Insurance Corp. of British Columbia, 2007 BCCA 451 (B.C. C.A. [InChambers]), Mr. Justice Hall found at para. 6 that:

The second matter that is before the Court is an application on behalfof the applicant Mr. Pearlman for indigent status. He has placedbefore me certain information as to his current financial situation,which I have had a chance to review. Counsel for the respondentssubmitted that he did not fit within the category of persons whoshould be found to be indigent by reason of his financial circum-stances. However, having considered the matter, I believe that Mr.Pearlman is within that category of persons, who, by reason of finan-cial circumstances, could be described as indigent.

29 That finding was not disturbed on the review by a division of thisCourt (2007 BCCA 464 (B.C. C.A.)).

30 On the other hand, Madam Justice Kirkpatrick dismissed a similarapplication; and on review in Pearlman v. Insurance Corp. of British Co-lumbia, 2010 BCCA 49 (B.C. C.A.), this Court found at para. 12:

As to Mr. Pearlman’s financial status, the chambers judge examinedhis financial circumstances and reached the same conclusion as theones reached earlier by two other justices of this court. I see no errorin her conclusion that Mr. Pearlman’s financial circumstances, al-though constrained, are not such that he cannot pay the necessaryfiling fees as indeed he has done on other occasions. In any event, thefirst ground, that is the question of merits, is dispositive of thisapplication.

31 The findings of fact made by single members of this Court in cham-bers are not binding on other members of the Court on subsequent appli-cations based upon new evidence. Thus the findings of Hall and Kirkpat-rick JJ.A., in chambers, were not binding upon Chiasson J.A. when heconsidered Mr. Pearlman’s application to him for indigent status, nor,with respect, were the findings of Chiasson J.A., in chambers, bindingupon Madam Justice Garson as she stated at para. 8 of her reasons set outin para. 18 above.

32 As I have also indicated above, Mr. Pearlman was unable to satisfyMr. Justice Chiasson that requiring him to pay the fees would deprive

Pearlman v. Atlantic Trading Co. Saunders J.A. 31

him of the necessaries of life, nor was he able to satisfy the division thatheard the application to vary the order, that Chiasson J.A. had made anyerror of fact, principle, or law in coming to that conclusion.

33 Before us, Mr. Pearlman referred to the significant costs that he nowfaces as a result of the dismissal of his appeal in these proceedings.These he said are in the range of some $65,000.00. There is no indicationthat the significant costs orders that he now faces were brought to theattention of Mr. Justice Chiasson, and I am satisfied that Mr. Pearlman’sotherwise precarious financial circumstances have been sufficiently com-promised by his exposure to the payment of costs, that he can now besaid, at least until the spectre of the payment of those costs is addressed,to again meet what Hall J.A. described: “Mr. Pearlman is within that cat-egory of persons, who, by reason of financial circumstances, could bedescribed as indigent.” In my view he has therefore met the secondground for establishing indigent status.

34 The purpose of granting indigent status was commented on by HallJ.A., in chambers, in Trautmann v. Baker, [1997] B.C.J. No. 452 (B.C.C.A. [In Chambers]) at para. 4:

... As I see it, the underlying rationale for the granting of indigentstatus is to ensure that no litigant will be denied access to the courtsby reason of impecuniosity. ... [T]he concern of the court must bethat no arguably meritorious case should be prevented from getting ahearing merely because a person is without the financial resources tocarry on with the litigation ...

35 As I have concluded that a review of the dismissal of the applicationby Mr. Pearlman to reinstate his appeal would not be completely unmer-itorious, and that his financial circumstances are such that he may other-wise be denied access to the Court to pursue this application, I wouldtherefore vary the order of Madam Justice Garson by granting Mr. Pearl-man indigent status for the very limited purpose of permitting him tobring his application to reinstate his appeal, but for no other purpose.

Conclusion36 The order of Madam Justice Huddart is varied by deleting the order

as to costs, and the order of Madam Justice Garson is varied by grantingMr. Pearlman indigent status for the limited purpose set out above.

Saunders J.A.:

I agree:


K. Smith J.A.:

I agree:

Applications granted in part.

Valente v. Personal Insurance Co. 33

[Indexed as: Valente v. Personal Insurance Co.]

Rui Valente and Angie Valente, Plaintiffs/Respondents and ThePersonal Insurance Company, Defendant/Appellant

Ontario Superior Court of Justice (Divisional Court)

Docket: Toronto 202/10

2011 ONSC 516

Ferrier, Swinton, Lederer JJ.



Insurance –––– Actions on policies — Practice and procedure — Miscellane-ous issues –––– Setting aside default judgment — Insured’s home was damagedby flood — Insurer retained restoration company to restore home — Insuredclaimed that restoration was inadequate — Insured brought action against in-surer — Insured was noted in default — Insurer’s motion to set aside defaultwas dismissed — Trial judge found settlement discussions did not take placeand that scheduling was not reason for delay in bringing motion — Insurer ap-pealed — Appeal dismissed — Explanation for not filing defence was inade-quate — No explanation existed for delay in moving to set aside default — Ex-planation of circumstances of default was insufficient — Motion judge erred infinding that affidavit by adjuster was inadequate, as adjuster who had worked onfile had left company and could not be expected to prepare affidavit — Affidavitprepared by lawyer was inadequate and did not indicate lawyer had carriage offile — Adjuster’s affidavit provided arguable defence, namely that insurer wasnot involved in arrangements and had no privity of contract — Discretion shouldnot be exercised to set aside judgment — Insurer had been granted indulgencesand did not file delay, and did not respond to warnings of intention to move forsummary judgment — Fault of delay was entirely insurer’s.

Civil practice and procedure –––– Default proceedings — Application to setaside default judgment — General principles –––– Appeals — Insured’s homewas damaged by flood — Insurer retained restoration company to restorehome — Insured claimed that restoration was inadequate — Insured brought ac-tion against insurer — Insured was noted in default — Insurer’s motion to setaside default was dismissed — Trial judge found settlement discussions did nottake place and that scheduling was not reason for delay in bringing motion —Insurer appealed — Appeal dismissed — Explanation for not filing defence wasinadequate — No explanation existed for delay in moving to set aside default —Explanation of circumstances of default was insufficient — Motion judge erredin finding that affidavit by adjuster was inadequate, as adjuster who had worked


on file had left company and could not be expected to prepare affidavit — Affi-davit prepared by lawyer was inadequate and did not indicate lawyer had car-riage of file — Adjuster’s affidavit provided arguable defence, namely that in-surer was not involved in arrangements and had no privity of contract —Discretion should not be exercised to set aside judgment — Insurer had beengranted indulgences and did not file delay, and did not respond to warnings ofintention to move for summary judgment — Fault of delay was entirelyinsurer’s.

Cases considered by Ferrier J.:

B. (R.) v. Children’s Aid Society of Metropolitan Toronto (1995), 9 R.F.L. (4th)157, 21 O.R. (3d) 479 (note), 122 D.L.R. (4th) 1, [1995] 1 S.C.R. 315, 26C.R.R. (2d) 202, (sub nom. Sheena B., Re) 176 N.R. 161, (sub nom. SheenaB., Re) 78 O.A.C. 1, 1995 CarswellOnt 105, 1995 CarswellOnt 515, EYB1995-67419, [1994] S.C.J. No. 24 (S.C.C.) — referred to

Bellenden v. Satterthwaite (1948), [1948] 1 All E.R. 343 (Eng. C.A.) — re-ferred to

Chitel v. Rothbart (1988), 29 C.P.C. (2d) 136, 1988 CarswellOnt 451, [1988]O.J. No. 1197 (Ont. C.A.) — referred to

Friends of the Oldman River Society v. Canada (Minister of Transport) (1992),[1992] 2 W.W.R. 193, [1992] 1 S.C.R. 3, 3 Admin. L.R. (2d) 1, 7 C.E.L.R.(N.S.) 1, 84 Alta. L.R. (2d) 129, 88 D.L.R. (4th) 1, 132 N.R. 321, 48 F.T.R.160, 1992 CarswellNat 649, 1992 CarswellNat 1313, EYB 1992-67211,[1992] S.C.J. No. 1 (S.C.C.) — referred to

Housen v. Nikolaisen (2002), 10 C.C.L.T. (3d) 157, 211 D.L.R. (4th) 577, 286N.R. 1, [2002] 7 W.W.R. 1, 2002 CarswellSask 178, 2002 CarswellSask179, 2002 SCC 33, 30 M.P.L.R. (3d) 1, 219 Sask. R. 1, 272 W.A.C. 1,[2002] 2 S.C.R. 235, [2002] S.C.J. No. 31, REJB 2002-29758 (S.C.C.) —referred to

Lenskis v. Roncaioli (1992), 11 C.P.C. (3d) 99, 1992 CarswellOnt 345, [1992]O.J. No. 1713 (Ont. Gen. Div.) — considered

Silver v. Silver (1985), 54 O.R. (2d) 591, 13 O.A.C. 16, 49 R.F.L. (2d) 148,1985 CarswellOnt 338 (Ont. C.A.) — referred to

Waxman v. Waxman (2004), 2004 CarswellOnt 1715, 44 B.L.R. (3d) 165, 186O.A.C. 201, [2004] O.J. No. 1765 (Ont. C.A.) — referred to

441612 Ontario Ltd. v. Albert (1995), 36 C.P.C. (3d) 198, 1995 CarswellOnt135, [1995] O.J. No. 271 (Ont. Gen. Div.) — referred to


Statute of Frauds, R.S.O. 1990, c. S.19Generally — referred to

APPEAL by insurer from dismissal of motion to set aside default judgment.

Valente v. Personal Insurance Co. Ferrier J. 35

Vanessa A. Tanner, for Plaintiffs / RespondentsRyan Naimark, for Defendant / Appellant

Ferrier J.:

1 The defendant, The Personal Insurance Company, (“the appellant”),was noted in default for failure to file a statement of defence; defaultjudgment was granted against it in favour of the plaintiffs, Rui and AngieValente (“the respondents”), for the sum of $23,529.40 plus pre-judg-ment interest and costs, for a total sum of $28,513.18.

2 The appellants moved before Madam Justice Allen, the motionsjudge, for an order to set aside the noting in default and to set aside thedefault judgment. The motions judge dismissed the appellant’s motion;the appellant appeals to this court.

Background3 The respondents’ home in Mississauga was damaged in August 2007

by a flooding incident. They were insured by the appellant under a homeinsurance policy. Under the policy, the respondents had the option of tak-ing the replacement cost for the damages to make the necessary repairsand to replace damaged goods, or the cash value based on the depreci-ated value of the damaged goods immediately before the loss. Theychose the replacement cost option.

4 The appellant retained two restoration companies to provide estimatesof damage and repair, one of which was Burke’s Restoration Inc.(“Burke’s”).

5 Burke’s was ultimately retained to undertake the repair and restora-tion of the home. Burke’s work was unsatisfactory. The respondents’ res-idence was not restored to an adequate and suitable condition.

6 The respondents sought compensation from the appellant withoutsuccess, and on August 29, 2008, commenced an action under the simpli-fied procedure rules, against the appellant, for damages.

Decision of the Motions Judge7 As found by the motions judge, the following was the sequence of

events:

(i) August 30, 2007 — flood damage occurred

(ii) August 29, 2008 — plaintiffs commenced action


(iii) September 2, 2008 — defendant served with plaintiffs’claim

(iv) September 12, 2008 — parties started settlementnegotiations

(v) November 24, 2008 — settlement negotiations failed andwaiver of defence offered by plaintiffs until December 5,2008

(vi) December 3, 2008 — defendant retained counsel and plain-tiffs, on request of defendant, gave a further 30-days waiverof defence

(vii) December 30, 2008 — by letter, defendant requested a fur-ther two-week waiver which the plaintiffs granted

(viii) January 12, 2009 — plaintiffs receive from the Registrar aNotice of Action Dismissal advising that their action wouldbe dismissed as abandoned on March 9, 2009

(ix) January 13, 2009 — Plaintiffs’ letter advising defendantthat waiver of defence was revoked effective that date

(x) January 23, 2009 — no statement of defence delivered, de-fendant noted in default

(xi) February 27, 2009 — plaintiffs wrote notifying defendantof noting in default; that Notice of Action Dismissal wasissued; and that plaintiffs were taking steps to move forjudgment

(xii) March 5, 2009 — no communication from defendant;plaintiffs brought ex parte motion and obtained defaultjudgment, four days before action to be dismissed, for dam-ages of $23,529.40; pre-judgment interest of $368.33 andcosts of $4,615.45

(xiii) March 9, 2009 — defendant received service of defaultjudgment

(xiv) March 10, 2009 — parties exchange correspondence; plain-tiffs request payment on the judgment and, on request, de-fault motion materials forwarded by plaintiffs to the defen-dant; defendant advised it will bring a motion to set asidedefault judgment; further attempt at settlement; defendantconfirmed its understanding the period of settlement nego-


tiations would not prejudice its arguments on delay on mo-tion to set aside

(xv) March 27, 2009 — plaintiffs contacted defendant to inquireabout motion to set aside and to request payment of thecosts ordered on motion for judgment; no dates for motionto set aside suggested

(xvi) April 22, 2009 — no steps by defendant to bring motion;plaintiffs demand payment of judgment and costs by April30, 2009

(xvii) June 2, 2009 — by letter, plaintiffs demand payment on thejudgment and costs by June 8, 2009

(xviii) June 9, 2009 — defendant confirms it will move to setaside default judgment

(xix) July 3 and July 6, 2009 — parties discuss dates for motion

(xx) October 19, 2009 — defendant write a letter to plaintiffsproviding its available dates in January 2010 for motion toset aside

(xxi) October 30, 2009 — defendant advises plaintiffs by letterthat the motion to set aside default judgment is set for Feb-ruary 2, 2010.

8 The motions judge correctly set out the factors to be considered in theexercise of discretion in determining whether to set aside a default judg-ment. As she correctly noted, on the authority of Lenskis v. Roncaioli,[1992] O.J. No. 1713 (Ont. Gen. Div.)), the moving party is required to:

(a) move as soon as possible to set aside the default judgmentafter becoming aware of the judgment;

(b) set out the circumstances under which the default arose thatgive a plausible explanation for the default; and

(c) set forth facts to support the conclusion that there is at leastan arguable case to present on the merits.

Delay in moving to set aside9 The motions judge carefully analyzed the progression of events from

the time of service of the default judgment on March 9, 2009. She re-jected the submission of the appellant that the waivers provided by therespondents before default judgment was obtained should be consideredas a reason for any delay in bringing the motion to set aside thejudgment.


10 She also analyzed and rejected the appellant’s submission that be-tween March 10 and June 9, 2009 there were settlement discussions. Sherejected the appellant’s position that there was a further waiver fromMarch 10 forward through to June 2009.

11 In this respect the motions judge said this: 9 I am inclined to accept the plaintiffs’ position as the plaintiffs hadobtained a judgment in their favour and I find it reasonable theymight have little motivation for prolonged negotiations. Moreover,the defendant has provided no proof that settlement talks extendedover three months. I do not accept the defendant’s argument that Ishould accept settlement negotiations during this period as a reasonfor delay.

10 The record reveals between March 9, 2009 when the defendantreceived notice of the default and October 30, 2009 when the datewas set for the motion, the plaintiffs communicated numerous timeswith the defendant attempting to move the matter along — inquiringabout the defendant’s intentions with respect to the motion to setaside, demanding payment on the judgment and costs and indicatingits intention to challenge the motion.

12 The motions judge also rejected the submission by the appellant thatscheduling difficulties prevented the matter being advanced from Juneuntil September.

13 The motions judge concluded that there was no reasonable explana-tion for the delay in launching the motion to set aside the defaultjudgment.

Explanation of the circumstances of the default14 The appellant filed two affidavits in support of its motion to set aside

the default judgment. One was that of Philip Kraynick, an adjuster for theappellant, concerning the merits of the claim. The other, that of Marni E.Miller, dealt with all three aspects of the test to set aside the default judg-ment. Ms. Miller is an associate with the law firm acting for theappellant.

15 Ms. Miller’s affidavit indicates that “as such I have knowledge of thematters to which I depose in this my affidavit, except for that which isspecified to be based on my belief in which case I verily believe the sameto be true.” Throughout her affidavit, she deposes that “I am advised by areview of this file and verily believe”, and follows with a recitation offacts.


16 The affidavit does not disclose which lawyer in the firm had carriageof the file at the relevant times. Ms. Miller does not indicate in her affi-davit that she worked on the file or performed any services in connectionwith it. One would expect in these circumstances to see an affidavit fromthe lawyer who had carriage of the file or was intimately involved withit. This seriously imperils the appellant’s position on the motion.

17 Furthermore, concerning an explanation for the default in failing tofile a defence within time, Ms. Miller deposed simply that the defaultwas through “administrative inadvertence” and due to “inadvertence ofthis firm”. No explanation is given concerning what happened with thefile in the office at the relevant points in time. No explanation is givenconcerning what is meant by the words “administrative inadvertence”and “inadvertence of this firm”.

18 Was the file lost? Was the file misfiled? Was there an error in com-munication concerning responsibility for the file? Was the lawyer whohad carriage ill? Was there miscommunication between the appellant andthe law firm? Shortly put, the explanation is so vague as to bemeaningless.

19 Although expressed differently, this is the finding of the motionsjudge, revealed in the following passage from paragraph 17 of her rea-sons:

However, the defendant in the case before me has failed to provideany facts detailing its inadvertence....I find its bare assertion as toinadvertence without establishing the facts of the inadvertence is notsufficient. Generic comments as to inadvertence are of no assistancewhen few details are provided.

20 Thus, the motions judge found that the appellant had failed to meetthe second test of providing a satisfactory explanation for the default.

Arguable defence on the merits21 The essence of Ms. Miller’s affidavit on the merits issue is to the

effect that it is her belief that the appellant was never privy to the con-tract for repair. This belief arises from her review of the file.

22 Ms. Miller’s affidavit contains no evidence concerning who paidBurke’s for the work it did; there are no invoices or documentary evi-dence of any contract by any party with Burke’s.

23 The motions judge was critical of Ms. Miller in the context of theRules of Professional Conduct, for expressing her personal opinion orbelief concerning something that is properly subject to legal proof, cross-


examination and challenge, namely the merits of the claim. She held thatthe affidavit crossed the line as to what can properly be provided in anaffidavit by a lawyer.

24 As well, the motions judge held that because the solicitor did not havefirst-hand knowledge of the facts and had mainly relied on what the ap-pellant had told her, she was not in a position to attest to the truth of theallegations in the pleadings “as is reasonably expected of an affiant in amotion to set aside a default judgment” (para. 24).

25 In his affidavit, the adjuster Mr. Kraynick deposes that he took overcarriage of the file from a former adjuster for the company and after ithad been passed on to the law firm. The balance of his affidavit is basedon his review of the file. His affidavit sets out the course of events asreflected by the file and he deposes that he believes that the appellantwas never privy to the contract for repair. Accordingly, the adjuster de-posed that the appellant would not be responsible for any damagescaused by or contributed to by Burke’s. He offers the opinion that theappellant therefore has a meritorious defence based on the contractualagreement between the respondents and the appellant and the subsequentcontract between the respondents and Burke’s.

26 The motions judge held at para. 25 that there . . .

are no particulars in [Mr. Kraynick’s] affidavit as to the period of hisinvolvement with the plaintiffs’ claims or as to the role if any he hadin adjusting the plaintiffs’ claims. It appears from his affidavit theadjuster also lacked first-hand knowledge of the material facts withrespect to the contract with Burke’s and rather provides his beliefs oncontentious issues and what he learned through reviewing the file. Ifind this is not sufficient to establish a genuine issue for trial. TheCourt of Appeal held self-serving affidavits that merely assertdefences without providing some detail or supporting evidence arenot sufficient to create a genuine issue for trial. [Rozin (c.o.b.Grinfall Canada Co.) v. IIitchev, [2003] O.J. No. 3158 (S.C.J.) atpara. 8].

27 Accordingly, the motions judge held that the appellant had failed toprovide affidavit evidence from persons in a position to address the issueof the merits, and had failed to satisfy the test of showing a valid defenceon the merits.

28 In conclusion the motions judge held that the appellant had failed tosatisfy all three elements of the test for setting aside a default judgment.


Analysis

The Standard of Review29 On findings of fact, an appellate court will not interfere unless the

court below has made a palpable and overriding error: Housen v. Niko-laisen, [2002] 2 S.C.R. 235 (S.C.C.), at 256.

30 An appellate court will not lightly interfere with a judge’s exercise ofjudicial discretion, and will only do so if the judge proceeds on somewrong principle, misdirects himself or herself, or arrives at a decision soclearly wrong as to amount to an injustice: See, e.g. Housen, supra;Waxman v. Waxman, [2004] O.J. No. 1765 (Ont. C.A.).

Delay in moving to set aside31 There is no basis upon which this court should interfere with the mo-

tions judge’s assessment of the evidence and findings of fact on this is-sue. Her findings were amply supported by the evidence or lack thereof.Her conclusion that the appellant had not satisfied the onus upon it toshow that it had moved as soon as possible to set aside the default judg-ment is amply supported by the material before her.

32 I note particularly that in early July the respondents wrote to the ap-pellant and told the appellant to “pick any date” for the return of theirmotion.

Explanation of the circumstances of the default33 For the same reason, there is no basis upon which this court should

interfere with the motion judge’s conclusion that the appellant had failedto satisfy this test — her conclusion is amply supported by the evidence.

Arguable defence on the merits34 Without commenting on the motion judge’s observations concerning

the Rules of Professional Conduct, she correctly assessed the insuffi-ciency of the evidence in the affidavit of Ms. Miller. As noted above, heraffidavit does not indicate that she had carriage of the file or that she hadanything to do with the file during the relevant period, and it sets forthlittle evidence other than her belief that the appellant has a valid defence.The conclusion of the motions judge that the affidavit does not supportthe setting aside of the default judgment was within the discretion of themotions judge and her discretion was not exercised on a wrong principle.


35 However, the motions judge fell into error in her assessment of theaffidavit of the adjuster. While it is true that the adjuster does not indi-cate how long he has been associated with the file, it is apparent that theformer adjuster is no longer with the appellant and was unavailable toassist by deposing an affidavit. In the circumstances, the appellant wascompelled to look to another person to swear the necessary affidavit. Itwould be unrealistic to expect that an officer, director or manager of theappellant would provide such an affidavit. The person on the grounddealing with the matter would be the adjuster. If the original adjuster wasno longer available, then another adjuster who had taken over the filewould be the obvious choice to depose an affidavit. That was Mr.Kraynick. Furthermore, in these circumstances, evidence on informationand belief would be the only way the appellant could put its positionforward in an affidavit.

36 Although the evidence provided by the adjuster is based upon his re-view of the file, it provides sufficient evidence of a defence on the mer-its. Shortly put, that defence is that the respondents retained Burke’s, theappellant was not involved in any contractual arrangements with Burke’sfor the restoration, the appellant has no privity of contract with Burke’s,and there is no privity of contract between the respondents and the appel-lant for the repairs.

37 Thus, on the basis of the adjuster’s affidavit, there was evidence of anarguable defence on the merits.

Conclusion on the three-part test38 To summarize, the appellant has not satisfied the first two factors in

the test, but has satisfied the third — an arguable case on the merits.

Discretion in this court39 In holding that the affidavit of the adjuster is insufficient to support a

finding that there is an arguable defence on the merits, the motions judgeerred in law. That led directly to her finding that the appellant had notsatisfied the third element of the test. This was at the heart of the exerciseof discretion of the motions judge’s discretion, and it led to an improperexercise of discretion in dismissing the motion.

40 If a motions judge errs in the exercise of discretion, it is open to anappellate court to substitute its discretion for that of the motions judge:See, e.g. Bellenden v. Satterthwaite, [1948] 1 All E.R. 343 (Eng. C.A.),at 345; Silver v. Silver (1985), 54 O.R. (2d) 591 (Ont. C.A.), at 591; B.


(R.) v. Children’s Aid Society of Metropolitan Toronto, [1995] 1 S.C.R.315 (S.C.C.), at paras. 143-154; Friends of the Oldman River Society v.Canada (Minister of Transport), [1992] 1 S.C.R. 3 (S.C.C.), at para. 104.

41 In doing so, this court is obliged to weigh the three factors discussedabove.

Weighing the factors42 The following principles emerge from the cases:

(1) the factors should not be applied rigidly. A failure to satisfya factor, such as an adequate explanation for the default,may not prevent relief if there is an arguable case on themerits and the motion is brought promptly: See Chitel v.Rothbart (1988), 29 C.P.C. (2d) 136 (Ont. C.A.).

(2) where it is apparent that there exists a strong defence, suchas one based on the Statute of Frauds, failure to satisfy thetwo other factors may not prevent relief: See 441612Ontario Ltd. v. Albert (1995), 36 C.P.C. (3d) 198 (Ont.Gen. Div.)).

(3) clearly, the merits issue is the most significant factor. If aparty can be made whole in costs, and is not prejudiced, themerits issue will often carry the day for the defaultingparty. But, that is not necessarily so.

43 The exercise of discretion requires the court to stand back and take alook at the whole picture in order to arrive at a just result. That result, ingiven circumstances, may deny relief to a defendant even where there isan arguable defence on the merits.

44 Here, we have two homeowners who undeniably suffered loss. Fol-lowing deficient repairs by Burke’s, they unsuccessfully sought relieffrom the appellant. They issued their claims under the simplified rules inlate August 2008.

45 Three months later settlement discussions ended. Three times the ap-pellant requested and was given indulgences by the respondents in ex-tending the time for filing a defence.

46 The appellant defaulted with no reasonable explanation. The appel-lant was noted in default but did nothing. The appellant was then warnedabout the respondents’ intention to move for judgment ex parte, but didnothing. Judgment was granted.


47 The appellant delayed several months before moving to set aside thejudgment despite being invited by the respondents to “pick any date” forthe return of the appellant’s motion.

48 This appeal was argued two years and four months from the first duedate for the statement of defence.

49 The fault for the delay lies entirely with the appellant — a litigantwho can well endure the cost consequences of its delay. Furthermore, theappellant has no personal interest in the outcome, whereas the delay andthe outcome directly and personally affect the respondents in their dailylives.

50 In the circumstances above described, even if the appellant has agood defence, it is too late for the appellant.

51 This result is not based on sympathy for the respondents. It is basedon what the justice of the case requires in the circumstances.

52 Accordingly, the appeal is dismissed with costs fixed at $8,000.00including disbursements and H.S.T.

Appeal dismissed.

421205 Alberta Ltd. v. Lloyds Underwriters 45

[Indexed as: 421205 Alberta Ltd. v. Lloyds Underwriters]

421205 Alberta Ltd. operating as Schroeder Transport, Plaintiffand Lloyd’s Underwriters and Lloyd Sadd Insurance BrokersLtd. operating as Lloyd Sadd Insurance Brokers, Defendants

Alberta Court of Queen’s Bench

Docket: Edmonton 0803-05715

2011 ABQB 180

J.M. Ross J.

Heard: December 1, 2010


Insurance –––– Principles of interpretation and construction — Exclusion ofrisk clauses –––– Defendant insurer issued motor truck cargo insurance policy toplaintiff insured — Exclusion clause stated that it did not insure any losses fromunattended trucks unless truck was parked in fully enclosed yard and truck hadall openings closed and securely locked and keys removed — Unattended truckendorsement stated that irrespective of exclusion, policy extended to includelosses to cargo directly resulting from forcible entry to unattended trucks subjectto such trucks having all their openings closed, securely locked and all keysremoved — Driver of insured made temporary stop, leaving keys under floormat and locking doors of power unit — Truck was left unattended and was sto-len with cargo — Owner of cargo sued insured for loss of cargo — Insuredbrought action against insurer to recover amount paid in satisfaction of owner’sclaim — Action allowed — There was ambiguity as to whether unattended truckendorsement required that keys be removed from locks or from inside lockedtruck — Evidence regarding commercial context and parties’ dealings did notclarify reasonable expectations of parties — Contra proferentem doctrine ap-plied; policy was interpreted against insurer.

Insurance –––– Principles of interpretation and construction — Contraproferentem rule –––– Defendant insurer issued motor truck cargo insurancepolicy to plaintiff insured — Exclusion clause stated that it did not insure anylosses from unattended trucks unless truck was parked in fully enclosed yard andtruck had all openings closed and securely locked and keys removed — Unat-tended truck endorsement stated that irrespective of exclusion, policy extendedto include losses to cargo directly resulting from forcible entry to unattendedtrucks subject to such trucks having all their openings closed, securely lockedand all keys removed — Driver of insured made temporary stop, leaving keysunder floor mat and locking doors of power unit — Truck was left unattendedand was stolen with cargo — Owner of cargo sued insured for loss of cargo —


Insured brought action against insurer to recover amount paid in satisfaction ofowner’s claim — Action allowed — There was ambiguity as to whether unat-tended truck endorsement required that keys be removed from locks or frominside locked truck — Evidence regarding commercial context and parties’ deal-ings did not clarify reasonable expectations of parties — Contra proferentemdoctrine applied; policy was interpreted against insurer.

Civil practice and procedure –––– Limitation of actions — Actions in con-tract or debt — Actions on insurance policies — When time begins torun –––– Defendant insurer issued motor truck cargo insurance policy to plain-tiff insured — Policy stated that no action shall be sustainable in any court un-less it was commenced within 24 months after discovery by insured of occur-rence which gave rise to loss — Section 7(2) of Alberta Limitations Act statesthat agreements that purport to provide for reduction of limitation period pro-vided by Act is invalid — On March 1, 2006, driver of insured made temporarystop, leaving keys under floor mat and locking doors of power unit — Truckwas left unattended and was stolen with cargo — Loss was reported as claim nolater than March 2, 2006 — Owner of cargo sued insured for loss of cargo —Insurer denied claim on April 28, 2006 — On April 25, 2008, insured broughtaction against insurer to recover amount paid in satisfaction of owner’s claim —Action allowed — Insured argued that its claim was brought within limitationperiod under s. 3(1) of Act, as injury attributable to conduct of defendant wasinsurer’s denial of coverage — Section 7(2) applied because it was in forcewhen insurer denied coverage, thus, legal situation was ongoing at time Act wasbeing modified so that this was not situation of retroactive effect but immediateeffect — In absence of explicit provision dealing with retroactivity of particularsection, all sections of Act should be interpreted as applying to proceedingscommenced after section is in force, regardless of when claim arose.

Civil practice and procedure –––– Limitation of actions — Principles —Statutory limitation periods — Retroactivity –––– Defendant insurer issuedmotor truck cargo insurance policy to plaintiff insured — Policy stated that noaction shall be sustainable in any court unless it was commenced within 24months after discovery by insured of occurrence which gave rise to loss — Sec-tion 7(2) of Alberta Limitations Act states that agreements that purport to pro-vide for reduction of limitation period provided by Act is invalid — On March1, 2006, driver of insured made temporary stop, leaving keys under floor matand locking doors of power unit — Truck was left unattended and was stolenwith cargo — Loss was reported as claim no later than March 2, 2006 — Ownerof cargo sued insured for loss of cargo — Insurer denied claim on April 28,2006 — On April 25, 2008, insured brought action against insurer to recoveramount paid in satisfaction of owner’s claim — Action allowed — Insured ar-gued that its claim was brought within limitation period under s. 3(1) of Act, asinjury attributable to conduct of defendant was insurer’s denial of coverage —

421205 Alberta Ltd. v. Lloyds Underwriters 47

Section 7(2) applied because it was in force when insurer denied coverage, thus,legal situation was ongoing at time Act was being modified so that this was notsituation of retroactive effect but immediate effect — In absence of explicit pro-vision dealing with retroactivity of particular section, all sections of Act shouldbe interpreted as applying to proceedings commenced after section is in force,regardless of when claim arose.

Cases considered by J.M. Ross J.:

Angus v. Hart (1988), 65 O.R. (2d) 638n, (sub nom. Angus v. Sun AllianceInsurance Co.) [1988] I.L.R. 1-2370, 1988 CarswellOnt 966, 1988 Carswell-Ont 41, 9 M.V.R. (2d) 245, (sub nom. Angus v. Sun Alliance Insurance Co.)[1988] 2 S.C.R. 256, 52 D.L.R. (4th) 193, 87 N.R. 200, 30 O.A.C. 210, 34C.C.L.I. 237, 47 C.C.L.T. 39, EYB 1988-67473, [1988] S.C.J. No. 75(S.C.C.) — referred to

Babineau v. LeBlanc (1985), 62 N.B.R. (2d) 428, 161 A.P.R. 428, 1985 Car-swellNB 143 (N.B. Q.B.) — considered

Consolidated-Bathurst Export Ltd. c. Mutual Boiler & Machinery Insurance Co.(1979), (sub nom. Exportations Consolidated-Bathurst Ltee c. Mutual Boiler& Machinery Insurance Co.) [1980] 1 S.C.R. 888, 112 D.L.R. (3d) 49, 1979CarswellQue 157, 1979 CarswellQue 157F, 32 N.R. 488, [1980] I.L.R. 1-1176, [1979] S.C.J. No. 133, REJB 1979-109268 (S.C.C.) — considered

Doerr v. National Fire Insurance Company of Hartford (1923), 215 Mo. App.372, 253 S.W. 39 (U.S. Mo. Ct. App.) — considered

Dowhaniuk v. Western Union Insurance Co. (1976), [1977] I.L.R. 1-846, [1977]1 W.W.R. 553, 1976 CarswellAlta 147 (Alta. Dist. Ct.) — considered

Johnson v. Wunderlich (1986), 1986 CarswellOnt 66, 45 M.V.R. 184, 57 O.R.(2d) 600, 34 D.L.R. (4th) 120, 18 O.A.C. 89, 21 C.C.L.I. 248, [1987] I.L.R.1-2155, [1986] O.J. No. 1251 (Ont. C.A.) — considered

Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada (2010),[2010] 2 S.C.R. 245, (sub nom. Progressive Homes Ltd. v. Lombard GeneralInsurance Co.) [2010] I.L.R. I-5051, 406 N.R. 182, 92 C.L.R. (3d) 1, [2010]10 W.W.R. 573, 2010 SCC 33, 2010 CarswellBC 2501, 2010 CarswellBC2502, 89 C.C.L.I. (4th) 161, 73 B.L.R. (4th) 163, 9 B.C.L.R. (5th) 1, 323D.L.R. (4th) 513, 293 B.C.A.C. 1, 496 W.A.C. 1, [2010] S.C.J. No. 33(S.C.C.) — considered

Source Logistics, Inc. v. Certain Underwriters at Llyod’s of London Subscribingto Policy No. NA041790U (2010), 2010 Ark. App. 239 (U.S. Ark. App.) —considered

Stuffco v. Stuffco (2006), 384 W.A.C. 111, 397 A.R. 111, 2006 ABCA 317,2006 CarswellAlta 1483, 68 Alta. L.R. (4th) 91, 34 C.P.C. (6th) 95, 44C.C.L.T. (3d) 28, [2006] A.J. No. 1346 (Alta. C.A.) — considered

Union des consommateurs c. Dell Computer Corp. (2007), 2007 CarswellQue6310, 2007 CarswellQue 6311, 2007 SCC 34, 44 C.P.C. (6th) 205, (subnom. Dell Computer Corp. v. Union des consommateurs) 284 D.L.R. (4th)


577, (sub nom. Dell Computer Corp. v. Union des consommateurs) [2007] 2S.C.R. 801, 34 B.L.R. (4th) 155, (sub nom. Dell Computer Corp. v. Uniondes consommateurs) 366 N.R. 1, [2007] S.C.J. No. 34 (S.C.C.) —considered


Justice Statutes Amendment Act, 2002, S.A. 2002, c. 17s. 4(4) — referred tos. 4(5) — referred to

Limitations Act, R.S.A. 2000, c. L-12Generally — referred tos. 2(1) — considereds. 3(1) — considereds. 3(1)(a) — considereds. 5.1 [en. 2002, c. 17, s. 4(3)] — referred tos. 5.1(16) [en. 2002, c. 17, s. 4(3)] — considereds. 7 — referred tos. 7(2) — considered

ACTION by insured for proceeds of insurance policy.

Mr. David R. Syme, Q.C., for PlaintiffMr. Brian A. Vail, for Defendants

J.M. Ross J.:

A. Introduction1 In this summary trial, two questions have been stated by Order for

determination:

a) Is the Plaintiff’s claim for the disappearance of cargo on one of itstractor trailer units on 1 March 2006 covered by the insurance pol-icy (Policy No. AURO-501-390-3) issued by the DefendantLLOYD’S UNDERWRITERS to the Plaintiff, specifically withrespect to the Unattended Truck Endorsement therein?; and

b) Is the Plaintiff’s claim as against the Defendant LLOYD’S UN-DERWRITERS in this action statute-barred?

B. The Coverage Issue

1. Agreed Facts2 The Defendant issued a motor truck cargo insurance policy to the

Plaintiff (the “Lloyd’s Policy”).

421205 Alberta Ltd. v. Lloyds Underwriters J.M. Ross J. 49

3 The general coverage clause of the Lloyd’s Policy provided: In consideration of the premium paid hereon ... the Underwritershereby agree to indemnify the Insured, named in the schedule, forALL RISKS OF PHYSICAL LOSS OR DAMAGE FROM AN EX-TERNAL CAUSE to lawful cargo in and/or on a truck whilst in theInsured’s care, custody or control in the ordinary course of transit,including loading and unloading, within ... Canada. THIS INSUR-ANCE BEING SUBJECT TO ALL THE PROVISIONS, EX-CLUSIONS, DEFINITIONS, TERMS AND CONDITIONSCONTAINED IN THE FOLLOWING WORDING.

4 The Lloyd’s Policy contained the following exclusion clause (“Exclu-sion (k)”):

This insurance does not insure the liability of the Insured for: -

k) Any losses from unattended trucks while in the ordinarycourse of transit unless:

a) The truck is garaged in a building or parked in a fullyenclosed yard which is securely closed and locked, orthe truck is under constant surveillance, or on aguarded lot AND

b) The truck has all the openings closed and securelylocked and keys removed, in so far as local regula-tions permit.

5 “Truck” is defined in the Lloyd’s Policy as including “trailers andsemi-trailers” while “attached to or connected to a covered truck or trac-tor”. “Unattended” is defined as “a truck which has been left without aresponsible person whose duty is to drive, guard, or attend the truck be-ing either on, in or within ten yards of the truck”.

6 The Lloyd’s Policy contained an Unattended Truck Endorsementwhich provided:

In consideration of the additional premium charged, it is herebynoted and agreed that, irrespective of exclusion k, this policy is ex-tended to include losses to cargo directly resulting from forcibleand/or violent entry to unattended trucks, subject to such trucks hav-ing all their openings closed, securely locked and all keys removed,but the limit of liability under this extension shall be the sum setagainst paragraph 4 in the optional endorsements schedule pageforming page 2 of this form, any one truck.

No coverage is provided hereunder for loss of or damage to cargo inand/or on trailers or semi trailers which are detached from powerunits, unless such trailers or semi trailers are


i) garaged in a building or

ii) parked in a fully enclosed yard which is securely closed andlocked, or

iii) under constant surveillance, or

iv) on a guarded lot

ANDthe trailer or semi trailer has all the openings closed and securelylocked with keys removed and the period that the trailer or semitrailer is detached from the power unit does not exceed 72 consecu-tive hours (Sundays and holidays excluded) from the time of detach-ment from the covered truck or tractor.

7 The policy limit provided for in the Lloyd’s Policy with respect tounattended truck coverage was $100,000.00.

8 On March 1, 2006 a truck and two flatbed trailers of the Plaintiff’sinsured under the Lloyd’s Policy were stolen from the parking lot of atruck stop in Bainsville, Ontario. A cargo of electrical cable on reels wasstolen with the truck and trailers.

9 At the time of the theft, the Plaintiff was under contract to TenholdTransportation (2005) Ltd. (“Tenhold”) to deliver a cargo of electricalcable on reels from Quebec to Alberta. The reels were loaded on flatbedtrailers and contract provisions between the Plaintiff and Tenhold pro-vided that “flatbed trailers must not be left unattended for securityreasons”.

10 The driver made a temporary stop at a truck stop to have a showerand get something to eat before continuing the trip. The two trailers re-mained attached to the power unit. The driver locked the doors of thepower unit, leaving the keys under the floor mat or on the floor in thecab. He then went into the truck stop, leaving the truck unattended asdefined in the Lloyd’s Policy. When he returned after showering and eat-ing, the truck power unit, trailers and cargo were gone.

11 Tenhold brought an action against the Plaintiff for recovery for lossof the cargo. The Plaintiff paid $160,000 in satisfaction of the Tenholdclaim and now seeks to recover $100,000 of that amount under theLloyd’s Policy.


12 The Plaintiff’s driver (“Ray”) was interviewed by the Defendant’s ad-juster (“BW”) as to why he left the keys in the truck, and answered asfollows:

BW: And why, why do you leave the keys inside the truck.

What, what’s the advantage to that?

Ray: Well usually you leave the truck running.

BW: Uh hum.

Ray: Cause it, that time is was minus 29 out, so it stops it fromfreezing up.

BW: Okay. But if you are not going to leave it running, what’s theadvantage of leaving the keys in the truck.

Ray: Why I have three other spare keys.

. . .

BW: And if you did hear this, why did you leave the keys in thetruck on this particular incident then?

Ray: Because um I wouldn’t have left them in the truck if I’dknown that they had two loads stolen before I picked this upbut no body informed me of this. Not even Tenhold.

BW: Would you have even stopped in that area?

Ray: No, I wouldn’t have stopped (both talking at once)

BW: The two loads had been stolen. You would’ve just kept goinghey.

Ray: Kept going oh yeah ...

13 Prior to the issuance of the Lloyd’s Policy, the Plaintiff had made asimilar claim under a previous insurance policy with identical wordingwith respect to a cargo loss on September 29, 2005. On that occasion thedriver had locked the door of the truck, leaving a key in the ignition. TheDefendant denied the claim because of the presence of the key in theignition. The Plaintiff sued on the insurance contract. The suit was even-tually (after the commencement of the within action) settled. There wasno admission of liability.

2. Principles of Contract Interpretation14 The law in relation to interpretation of insurance contracts is not in

dispute. The Plaintiff relies on the Supreme Court of Canada decision inConsolidated-Bathurst Export Ltd. c. Mutual Boiler & MachineryInsurance Co. (1979), [1980] 1 S.C.R. 888, 112 D.L.R. (3d) 49 (S.C.C.)for two interpretive principles, first, that the interpretation must be con-


sistent with the intentions of the parties, and second, that, if the phrase isambiguous, the contra proferentem rule requires that the policy be inter-preted against the insurer.

15 The Court provided guidance regarding the search for an interpreta-tion consistent with intention, at 58-59 (D.LR.):

[L]iteral meaning should not be applied where to do so would bringabout an unrealistic result or a result which would not be contem-plated in the commercial atmosphere in which the insurance was con-tracted. Where words may bear two constructions, the more reasona-ble one, that which produces a fair result, must certainly be taken asthe interpretation which would promote the intention of the parties.Similarly, an interpretation which defeats the intentions of the partiesand their objective in entering into the commercial transaction in thefirst place should be discarded in favour of an interpretation of thepolicy which promotes a sensible commercial result. It is trite to ob-serve that an interpretation of an ambiguous contractual provisionwhich would render the endeavour on the part of the insured to ob-tain insurance protection nugatory, should be avoided. Said anotherway, the Courts should be loath to support a construction whichwould either enable the insurer to pocket the premium without risk orthe insured to achieve a recovery which could neither be sensiblysought nor anticipated at the time of the contract.

16 The Defendant refers to “last word” on the law regarding interpreta-tion of insurance policies as found a recent Supreme Court of Canadadecision, Progressive Homes Ltd. v. Lombard General Insurance Co. ofCanada, 2010 SCC 33 (S.C.C.), at paras. 21-24:

21 Principles of insurance policy interpretation have been canvassedby this Court many times and I do not intend to give a comprehen-sive review here (see, e.g., Gibbens v. Co-operators Life InsuranceCo., 2009 SCC 59, [2009] 3 S.C.R. 605 (S.C.C.), at paras. 20-28;Jesuit Fathers [2006 SCC 21], at paras. 27-30; Scalera, at paras. 67-71; Brissette v. Westbury Life Insurance Co., [1992] 3 S.C.R. 87(S.C.C.), at pp. 92-93; Consolidated Bathurst Export Ltd. c. MutualBoiler & Machinery Insurance Co. (1979), [1980] 1 S.C.R. 888(S.C.C.), at pp. 899-902). However, a brief review of the relevantprinciples may be a useful introduction to the interpretation of theCGL policies that follows.

22 The primary interpretive principle is that when the language of thepolicy is unambiguous, the court should give effect to clear language,reading the contract as a whole (Scalera [Non-Marine Underwriters,Lloyd’s of London v. Scalera, [2000] 1 S.C.R. 551], at para. 71).


23 Where the language of the insurance policy is ambiguous, thecourts rely on general rules of contract construction (ConsolidatedBathurst, at pp. 900-902). For example, courts should prefer inter-pretations that are consistent with the reasonable expectations of theparties (Gibbens, at para. 26; Scalera, at para. 71; ConsolidatedBathurst, at p. 901), so long as such an interpretation can be sup-ported by the text of the policy. Courts should avoid interpretationsthat would give rise to an unrealistic result or that would not havebeen in the contemplation of the parties at the time the policy wasconcluded (Scalera, at para. 71; Consolidated-Bathurst, at p. 901).Courts should also strive to ensure that similar policies are construedconsistently (Gibbens, at para. 27). These rules of construction areapplied to resolve ambiguity. They do not operate to create ambigu-ity where there is none in the first place.

24 When these rules of construction fail to resolve the ambiguity,courts will construe the policy contra proferentem - against the in-surer (Gibbens, at para. 25, Scalera, at para. 70; Consolidated-Bath-urst, at pp. 899-901). One corollary of the contra proferentem rule isthat coverage provisions are interpreted broadly, and exclusionclauses narrowly (Jesuit Fathers, at para. 28).

3. Arguments and Analysis17 The Plaintiff argues that it is entitled to the protection of the Unat-

tended Truck Endorsement and the fact that keys were left inside thelocked truck is immaterial. The intention of the parties is reflected in thelanguage of the Unattended Truck Endorsement, which states that thepolicy is “extended to include losses to cargo directly resulting from for-cible and/or violent entry to unattended trucks”. As all openings to thepower unit were closed and securely locked, access to the power unitmust have occurred due to forcible and/or violent entry, squarely withinthe scope of the intended protection. The requirement to remove all keys,considered in context, must refer to the removal of keys from securelylocked openings. If the requirement to remove keys is interpreted as theDefendant would have it, the result would defeat the intended protection.Alternatively, the Plaintiff argues, if the phrase “all keys removed” isambiguous, it must be construed against the insurer.

18 The Defendant observes that the contracted for protection in the Un-attended Truck Endorsement is specifically made “subject to such truckshaving all their openings closed, securely locked and all keys removed”.The Defendant argues that the phrase “all keys removed” is unambigu-ous, and means that all keys must be removed from the truck. The Defen-


dant argues that this interpretation is supported by the language of thepolicy and the intention of the parties.

19 As to the language of the policy, the Defendant compares the phrase“all keys removed” with the phrase in Exclusion (k) in relation to cover-age of garaged or guarded trucks, which requires only “keys removed”.The Defendant argues that “all keys removed” [emphasis added] indi-cates there is an “increased” key requirement under the UnattendedTruck Endorsement.

20 I do not accept this argument by the Defendant. First of all, the dis-tinction between “all keys” and “keys” has nothing to do with the rele-vant issue, which is where keys are to be removed from. Secondly, if “allkeys” is different from “keys”, that suggests that a requirement that“keys” be removed means that “not all” or only “some” keys need to beremoved. That would be a nonsensical reading of the requirement forremoval of keys in Exclusion (k).

21 The Defendant argues that the evidence indicates that the fact it hadpreviously denied coverage in similar circumstances, and the Plaintiffhad accepted the issuance of the Lloyd’s Policy knowing this, means thatthe Plaintiff accepted the Defendant’s interpretation. The Defendantnotes that in the within action, the Plaintiff has also sued its brokers forfailing to “negotiate the removal of the “unattended trucks” exclusion”,which is a further demonstration that it was aware of and accepted theDefendant’s interpretation.

22 I also do not accept this argument. The interpretation of the phrase“all keys removed” was a matter of dispute between the parties at thetime the Lloyd’s Policy was issued, and when this action was com-menced. Awareness of the dispute does not mean that the Plaintiff ac-cepted the Defendant’s interpretation, any more than it means the Defen-dant accepted the Plaintiff’s interpretation.

23 I am also of the view that the language of the Unattended Truck En-dorsement in and of itself does not resolve the issue. While the phrase“all keys removed” taken out of context might seem to be unambiguous,it must be read in the context of the other language of the endorsement,which provides protection against “forcible and/or violent entry” andwhich requires that unattended trucks have “all their openings closed, se-curely locked and all keys removed”. In this context, there is ambiguityas to whether keys are intended to be removed from the locks or fromanywhere in the trucks.


24 The first issue, then, is whether this doubt can be resolved by consid-ering which interpretation provides the more realistic result that wouldhave been in the contemplation of the parties in the commercial contextin which the insurance was contracted.

25 The Unattended Truck Endorsement was clearly added to the Lloyd’sPolicy in response to the problem that would result from the applicationof Exclusion (k) in the context of the practical realities of long distancetrucking. Drivers on long trips must stop to eat and rest, and the locationswhere they stop will not always or even typically provide parking facili-ties in an enclosed yard or under constant surveillance. The UnattendedTruck Endorsement provides for coverage in the context of this businessreality.

26 In the context of this reality, would the parties have expected thatdrivers could reasonably leave keys in locked trucks? The Defendant ar-gues that security was important to the parties, as evidenced by the provi-sion in the carriage contract between the Plaintiff and Tenhold that thecargo should not be left unattended. However, notwithstanding this pro-vision in the carriage contract, the Unattended Truck Endorsement wasclearly intended to provide protection with respect to the risk of loss ofcargo associated with an unattended truck and its attached trailers.

27 The Defendant argues that removing keys from the truck is a basicsecurity precaution, and that leaving a key in the truck, whether in theignition or not, compromises security. Once a criminal breaks into thetruck, it is vulnerable to being driven away, whether the key is left in theignition or elsewhere in the truck. The difficulty with this argument isthat I have no evidence about what is common practice in the business.Do the problems associated with having a truck freeze up mean that unat-tended trucks are often left running, with the key in the ignition, as thePlaintiff’s driver suggests? Is there a greater risk of forced entry into atruck when a key is left in it? Does this depend on whether the key isvisible or not? Apart from the Plaintiff’s driver’s statement, there is noevidence on these points. And according to the Plaintiff’s driver, it iscommon to leave unattended trucks running. Further, when asked whathis reaction would have been had he been aware of previous thefts, thePlaintiff’s driver said not only that he would not have left the keys in thetruck, but that he would not have stopped in the area at all. This suggeststhat the keys were not a significant factor.

28 In light of the lack of evidence in this regard, I cannot say whether, inthe commercial context in which the insurance policy was entered into,


the parties would or would not have expected that a driver might reason-ably leave keys in an unattended truck, whether in the ignition orelsewhere.

29 The Defendant referred to the following legal authorities:

1. Babineau v. LeBlanc (1985), 62 N.B.R. (2d) 428 (N.B.Q.B.): The plaintiff driver left his vehicle unattended tobreak up a fight on the road in front of him, impeding histravel. He turned off his car and removed the key from theignition, but left it in the vehicle so that it would not fall outof his pocket in the melee. The defendant gained entry tothe vehicle, started it with the key and ran the plaintiffdown. The defendant argued that the plaintiff had been neg-ligent in leaving his key in the vehicle, relying on a statu-tory provision which prohibited leaving a vehicle unat-tended on the road without first stopping the engine,locking the ignition and “removing the ignition key”. Thecourt held that he had complied with the statute because heremoved “the key from the ignition” (emphasis added). TheDefendant argues that, because “keys” are not specified as“ignition” keys in the Unattended Truck Endorsement, thismeans that they must be removed from the truck, as op-posed to the ignition. In my view, the case does not supportthis inference. It suggests a requirement to remove keysmust be looked at in context. Where ignition key removalwas in the context of locking the ignition, it was interpretedas meaning removal from the ignition. Under the Unat-tended Truck Endorsement, the context is the secure lock-ing of all openings. Similar reasoning would relate removalof keys to their removal from locks.

2. Couch on Insurance, Third Edition, described by the De-fendant as the American “Bible” of insurance law, providesat para. 95.40 that “a requirement that an automobile be leftlocked when unattended is not satisfied when the automo-bile is locked, but the key is left in the automobile”. Theauthority cited is Doerr v. National Fire InsuranceCompany of Hartford, 215 Mo. App. 372, 253 S.W. 39(U.S. Mo. Ct. App. 1923); 1923 Mo. App. LEXIS 186. Thecase dealt with the issue of waiver, but the denial of cover-age was based on the admitted fact by the insured that, al-


though he had locked his car, he had left the key in thelock. The case does not stand for the proposition for whichit is cited. It supports only the proposition that the key mustbe removed from the lock.

3. Source Logistics, Inc. v. Certain Underwriters at Lloyd’s ofLondon Subscribing to Policy No. NA041790U, 2010 Ark.App. 239 (U.S. Ark. App.). This case interpreted the identi-cal Unattended Truck Endorsement. The insured sued theinsurer with respect to cargo in a stolen trailer. The case didnot involve the loss of a power unit. The insurer denied theclaim because the trailer door was secured by use of ametal strip and not with locks and keys. The court held thatthe phrase “securely locked with keys removed” was unam-biguous in the context where “neither locks nor keys wereused to secure the loaded trailers”. The case thus turned onthe failure to use either locks or keys and has nothing to dowith whether there is ambiguity in the circumstances of thiscase.

30 In conclusion, I do not find any of these legal authorities to be ofassistance.

31 In my view, there is ambiguity as to whether the requirement in theUnattended Truck Endorsement that unattended trucks have “all theiropenings closed, securely locked and all keys removed” requires thatkeys be removed from the locks or from inside the locked truck. Further,the general rules of contract construction do not resolve the ambiguity inthis case. The evidence regarding the commercial context and the parties’dealings does not clarify the reasonable expectations of the parties. Caselaw does not provide a consistent, or indeed, any construction of the pol-icy in similar circumstances. This is, therefore, one of the cases where itis appropriate to resort to the contra proferentem doctrine, with the resultthat the policy must be interpreted against the insurer.

C. The Limitations Issue

1. Agreed Facts32 The loss giving rise to the Plaintiff’s insurance claim occurred on

March 1, 2006. The loss was reported as a claim under the Lloyd’s Pol-icy by no later than March 2, 2006.


33 By letter dated April 28, 2006, the Defendant LLOYD’S UNDER-WRITERS denied the claim.

34 General Condition 20 of the Lloyd’s Policy provided: CANADA

. . .

No suit, action or proceeding for the recovery of any claim under thispolicy shall be sustainable in any court of law or equity unless thesame be commenced within twenty four (24) months next after dis-covery by the Insured of the occurrence which gives rise to the lossprovided however, that if by laws of the State or Province withinwhich this Policy is issued such limitation is invalid, then any suchclaim shall be void unless such suit or proceeding be commencedwithin the shortest limit of time permitted by the laws of such Stateor Province.

35 The Statement of Claim was filed on April 25, 2008, more than twoyears after the date of loss but less than two years after the denial ofcoverage.

36 The Defendant LLOYD’S UNDERWRITERS pleaded a limitationsdefence based on General Condition 20 in its Statement of Defence. TheDefendant also specifically pleaded the Limitations Act, R.S.A. 2000, c.L-12.

2. Statutory Provisions37 The relevant provisions of the Limitations Act are:

3(1) Subject to section 11, if a claimant does not seek a remedialorder within

(a) 2 years after the date on which the claimant first knew, or inthe circumstances ought to have known,

(i) that the injury for which the claimant seeks a remedialorder had occurred,

(ii) that the injury was attributable to conduct of the de-fendant, and

(iii) that the injury, assuming liability on the part of thedefendant, warrants bringing a proceeding

... the defendant, on pleading this Act as a defence, is entitledto immunity from liability in respect of the claim.

7(2) An agreement that purports to provide for the reduction of a lim-itation period provided by this Act is not valid.


3. Arguments and Analysis

(i) Commencement of the Statutory Limitation Period38 The Plaintiff argues that its claim was brought within the limitation

period under s. 3(1) of the Limitations Act, as the “injury for which theclaimant seeks a remedial order” and “the injury ... attributable to con-duct of the defendant” is this insurer’s denial of coverage.

39 The Plaintiff relies on a comment in Johnson v. Wunderlich (1986),45 M.V.R. 184, 18 O.A.C. 89, [1987] I.L.R. 1-2155, 57 O.R. (2d) 600,34 D.L.R. (4th) 120, 21 C.C.L.I. 248 (Ont. C.A.). Finlayson J.A. ob-served, at para. 49:

While the matter is not free from doubt, it is my opinion that an ac-tion against the insurer is an action for breach of contract and thecause of action arises from the date of the breach. This breach occurswhen the insurer denies liability or the insured knows or ought toknow that his claim will not be honoured.

40 The Defendant argues that under Alberta law the limitation period be-gins to run from the date that the loss in incurred and the insured’s rightto indemnity is triggered.

41 In Dowhaniuk v. Western Union Insurance Co. (1976), [1977] 1W.W.R. 553, [1977] I.L.R. 1-846 (Alta. Dist. Ct.), Stevenson D.C.J. (ashe then was), citing Bilan v. Western Union Insurance Co., unreported,Alta.C.A., held that “a cause of action under an insurance contract ariseswhen the insured is entitled to payment, assuming that he has duly com-plied with all conditions precedent as to notice and proof of loss”.

42 The limitation period under s. 3(1) of the Limitations Act is not ex-pressed to run from the date the cause of action arose, but from the datethe claimant knew or ought to have known of the three elements set outin subsection (a). The Alberta Law Reform Institute, in Final Report No.90, Limitations Act: Standardizing Limitation Periods for Actions on In-surance Contracts (August 2003), expressed the firm view that this limi-tation period runs from the denial of coverage:

[73] Under the present Limitations Act, it is inconceivable that thelimitation period for an action against an insurer would commence onthe date of the loss. As the defendant is the insurer, it cannot be saidthat the conduct of the insurer caused the injury which the claimantsuffered as a result of the peril (pursuant to s. 3(1)(a)(ii) of the Limi-tations Act). The insurer (presumably) had nothing to do with caus-ing the peril itself. The only conduct of the insurer which causes in-jury that warrants bringing a proceeding is the failure to honour the


terms of the policy. Therefore, the cause of action which a claimanthas against the insurer arises on the date upon which the insurer de-nies the claim.

43 In my view, Dowhaniuk and Bilan no longer govern, given thechange in approach to the commencement of limitation periods under theLimitations Act. The interpretation of the Plaintiff and the Alberta LawReform Institute best reflects the language of s. 3(1), and means that thelimitation period runs from the date that the insured knew or ought tohave known that coverage was denied. That date is agreed for purposesof this summary trial to be the date of the denial of coverage letter, April28, 2006. The Plaintiff’s claim was brought within two years of that date.

(ii) Invalidation of the Policy Limitation Period44 It is common ground that the action was not started within two years

of the discovery of the occurrence giving rise to the loss as required byGeneral Condition 20 of the Lloyd’s Policy.

45 The Plaintiff argues that s. 7(2) of the Limitations Act renders GeneralCondition 20 invalid.

46 The Defendant argues that s. 7(2) is inapplicable because it came intoeffect on April 1, 2006, after the March 1, 2006 loss involved in thiscase. It was enacted by the Justice Statutes Amendment Act, 2002, S.A.2002, c. 17, ss. 4(4) - (5) to come into effect on proclamation which wason April 1, 2006. The Defendant further argues that s. 7(2) should not beapplied retroactively so as to deprive the Defendant of a limitations de-fence. Statutes are presumed not to have retroactive effect with respect tosubstantive changes to the law and limitations provisions are substantive.

47 While s. 7(2) was not in force when the loss occurred, it was in forcewhen the Defendant denied coverage and when the Plaintiff’s action wascommenced. Further, the Limitations Act provides in s. 2(1) that the “Actapplies where a claimant seeks a remedial order in a proceeding com-menced on or after March 1, 1999 whether the claim arises before, on orafter March 1, 1999” (the date the Act was proclaimed in effect). ThePlaintiff argues that, as s. 7(2) was in force when the Plaintiff’s actionwas commenced, and as s. 2(1) provides that the Limitations Act has ret-roactive effect in respect of claims arising before it was enacted, s. 7(2)is applicable.


48 There is no specific provision in the Limitations Act regarding appli-cability of s. 7(2). In contrast, s. 5.1, which was also added to the Act byamendment, contains ss.(16):

(16) This section applies where a claimant seeks a remedial order in aproceeding commenced after this section comes into force, regardlessof when the claim arises, except that a defendant who would havehad immunity from liability for a claim if the proceeding had beencommenced immediately before this section came into force contin-ues to have immunity from liability for that claim.

49 The Plaintiff and Defendant draw different inferences from this. ThePlaintiff argues that this is the only section of the Act which provides adefendant relief from retroactivity, and that the absence of such a provi-sion means that other sections of the Act apply to proceedings com-menced after the section comes into force, regardless of when the claimarose. The Defendant argues that, as s. 7 unlike s. 5.1 does not expresslyaddress the issue of retroactive application, the common law presumptionapplies.

50 The Supreme Court of Canada considered immediate and retroactiveapplication of legislation in Union des consommateurs c. Dell ComputerCorp., 2007 SCC 34, 44 C.P.C (6th) 205, 366 N.R. 1, 34 B.L.R. (4th)155, 284 D.L.R. (4th) 577, [2007] 2 S.C.R. 801 (S.C.C.). Justice Des-champs J., for the majority, stated at paras. 113-114:

Professor P.-A. Cote writes in The Interpretation of Legislation inCanada (3rd ed. 2000), at p. 169, that “retroactive operation of a stat-ute is highly exceptional, whereas prospective operation is the rule”.He adds that “[a] statute has immediate effect when it applies to alegal situation that is ongoing at the moment of its commencement:the new statute governs the future developments of this situation” (p.152). A legal situation is ongoing if the facts or effects are occurringat the time the law is being modified (p. 153). A statute of immediateeffect can therefore modify the future effects of a fact that occurredbefore the statute came into force without affecting the prior legalsituation of that fact.

To make it clear what is meant by an ongoing situation and onewhose facts and effects have occurred in their entirety, it will behelpful to consider the example of the obligation to warrant againstlatent defects ... This obligation comes into existence upon the con-clusion of the sale, but the warranty clause does not produce tangibleeffects unless a problem arises with the property sold. The warrantycomes into play either when the vendor is put in default or when aclaim is made. Once all the effects of the warranty have occurred, the


situation is no longer ongoing and the new legislation will not applyto the situation unless it is retroactive.

51 As to whether a law has retroactive effect, this is a matter of statutoryinterpretation: Dell Computer, para. 157, per Bastarache, LeBel JJ., dis-senting on other grounds.“[S]tatutes should not be given retrospectiveoperation in the absence of an intention to do so that is either expressedin, or is necessarily implied by the statute”: Angus v. Hart (1988), 9M.V.R. (2d) 245, 47 C.C.L.T. 237, 87 N.R. 200, 52 D.L.R. (4th) 193,[1988] I.L.R. 1-2370, [1988] 2 S.C.R. 256 (S.C.C.).

52 In Stuffco v. Stuffco, 2006 ABCA 317, 34 C.P.C. (6th) 95, 44C.C.L.T. (3d) 28, 68 Alta. L.R. (4th) 91, 397 A.R. 111 (Alta. C.A.), atparas. 28-29, the Alberta Court of Appeal concluded that the LimitationsAct was intended to affect rights that have arisen in the past, and there-fore the presumption against retroactive effect does not apply.

53 I conclude that s. 7(2) of the Limitations Act does apply, for two rea-sons. First, while s. 7(2) was not in force when the loss occurred, it wasin force when the Defendant denied coverage. Thus, the legal situationwas ongoing at the time the Limitations Act was being modified, so thatthis is not a situation of retroactive effect, but immediate effect as de-scribed in Dell Computer.

54 Alternatively, as held in Stuffco v. Stuffco, the Limitations Act as awhole was intended to have retroactive effect in regard to pre-existingclaims. I can see no reason why this general purpose would not apply tos. 7(2). I agree with the Plaintiff that, in the absence of an explicit provi-sion dealing with retroactivity of a particular section, all sections of theAct should be interpreted as applying to proceedings commenced afterthe section is in force, regardless of when the claim arose.

55 As s. 7(2) of the Limitations Act applies, General Condition 20 of theLloyd’s Policy is rendered invalid.

D. Conclusion56 The questions for determination are answered as follows:

a) The Plaintiff’s claim for the disappearance of cargo on oneof its tractor trailer units on 1 March 2006 is covered underthe Unattended Truck Endorsement of the insurance policy(Policy No. AURO-501-390-3) issued by the DefendantLLOYD’S UNDERWRITERS to the Plaintiff.


b) The Plaintiff’s claim as against the Defendant LLOYD’SUNDERWRITERS is not statute-barred.

57 The parties may speak to me regarding costs if they are unable toagree.

Action granted.


[Indexed as: Stanley Mutual Insurance Co. v. Shepherd]

Stanley Mutual Insurance Company, Applicant and JuneYvonne Shepherd, Respondent

New Brunswick Court of Queen’s Bench

Docket: N/M/67/2010

2011 NBQB 57

Thomas Riordon J.



Insurance –––– Claims — Payment of insurance proceeds — Entitlement toproceeds — Miscellaneous issues –––– Entitlement of common-law spouse —Intestacy of insured — Respondent owner and her common-law spouse werejoint owners of house insured by applicant insurer — House and personal pro-perty were damaged by fire — Spouse died of his injuries from fire — Spousewas intestate — Spouse had children from previous marriage, with whom he hadno contact for many years — Insurer paid out mortgage and paid owner her halfof insurance proceeds — Insurer brought application for court approval of pay-ment of remaining insurance proceeds to owner, or alternatively payment intocourt, and release of insurer from any further liability — Application for alterna-tive relief was granted — Approval was given for insurer to pay insurance pro-ceeds into court — Insurer was discharged from all liability once proceeds paidinto court — Payment of proceeds to owner was not approved until attempt wasmade to locate spouse’s children — Devolution of Estates Act applied becausespouse died intestate — Act provided for distribution of intestate’s estate to in-testate’s widow and children — Spouse’s children and heirs at law had no noticeof insurer’s application — It was proper and fair to allow spouse’s children andheirs opportunity to be heard — Owner’s counsel was instructed to attempt tolocate spouse’s children.

Estates and trusts –––– Estates — Intestate succession — Inheritance byspouse — Common law spouse –––– Insurance proceeds — Respondent ownerand her common-law spouse were joint owners of house insured by applicantinsurer — House and personal property were damaged by fire — Spouse died ofhis injuries from fire — Spouse was intestate — Spouse had children from pre-vious marriage, with whom he had no contact for many years — Insurer paid outmortgage and paid owner her half of insurance proceeds — Insurer brought ap-plication for court approval of payment of remaining insurance proceeds toowner, or alternatively payment into court, and release of insurer from any fur-ther liability — Application for alternative relief was granted — Approval was

Stanley Mutual Insurance Co. v. Shepherd 65

given for insurer to pay insurance proceeds into court — Insurer was dischargedfrom all liability once proceeds paid into court — Payment of proceeds to ownerwas not approved until attempt was made to locate spouse’s children — Devolu-tion of Estates Act applied because spouse died intestate — Act provided fordistribution of intestate’s estate to intestate’s widow and children — Owner andspouse lived together for 28 years but never married — Spouse’s children mightbe entitled to proceeds — It was proper and fair to allow spouse’s children andheirs opportunity to be heard.

Estates and trusts –––– Estates — Intestate succession — Inheritance bychildren — General principles –––– Location of children unknown — Respon-dent owner and her common-law spouse were joint owners of house insured byapplicant insurer — House and personal property were damaged by fire —Spouse died of his injuries from fire — Spouse was intestate — Spouse had chil-dren from previous marriage, with whom he had no contact for many years —Insurer paid out mortgage and paid owner her half of insurance proceeds — In-surer brought application for court approval of payment of remaining insuranceproceeds to owner, or alternatively payment into court, and release of insurerfrom any further liability — Application for alternative relief was granted —Approval was given for insurer to pay insurance proceeds into court — Insurerwas discharged from all liability once proceeds paid into court — Payment ofproceeds to owner was not approved until attempt was made to locate spouse’schildren — Devolution of Estates Act applied because spouse died intestate —Act provided for distribution of intestate’s estate to intestate’s widow and chil-dren — Spouse’s children might be entitled to proceeds — Spouse’s childrenand heirs at law had no notice of insurer’s application — It was proper and fairto allow spouse’s children and heirs opportunity to be heard — Owner’s counselwas instructed to attempt to locate spouse’s children.

Insurance –––– Claims — Payment of insurance proceeds — Payments intocourt — General principles –––– Respondent owner and her common-lawspouse were joint owners of house insured by applicant insurer — House andpersonal property were damaged by fire — Spouse died of his injuries fromfire — Spouse was intestate — Spouse had children from previous marriage,with whom he had no contact for many years — Insurer paid out mortgage andpaid owner her half of insurance proceeds — Insurer brought application forcourt approval of payment of remaining insurance proceeds to owner, or alterna-tively payment into court, and release of insurer from any further liability —Application for alternative relief was granted — Approval was given for insurerto pay insurance proceeds into court — Insurer was discharged from all liabilityonce proceeds paid into court — Insurer met onus of establishing that it was notable to obtain discharge of remaining insurance money payable under policy —Payment of proceeds to owner could not be approved until attempt was made to


locate spouse’s children — Spouse’s children might be entitled to proceedsunder Devolution of Estates Act.

Insurance –––– Claims — Settlement and release — General principles ––––Respondent owner and her common-law spouse were joint owners of house in-sured by applicant insurer — House and personal property were damaged byfire — Spouse died of his injuries from fire — Spouse was intestate — Spousehad children from previous marriage, with whom he had no contact for manyyears — Insurer paid out mortgage and paid owner her half of insurance pro-ceeds — Insurer brought application for court approval of payment of remaininginsurance proceeds to owner, or alternatively payment into court, and release ofinsurer from any further liability — Application for alternative relief wasgranted — Approval was given for insurer to pay insurance proceeds intocourt — Insurer was discharged from all liability once proceeds paid intocourt — Insurer met onus of establishing that it was not able to obtain dischargeof remaining insurance money payable under policy — Payment of proceeds toowner could not be approved until attempt was made to locate spouse’s chil-dren — Spouse’s children might be entitled to proceeds under Devolution of Es-tates Act.

Cases considered by Thomas Riordon J.:

Lloyd’s of London, Re (1991), (sub nom. Lloyd’s of London v. National Bank ofCanada) 115 N.B.R. (2d) 241, (sub nom. Lloyd’s of London v. NationalBank of Canada) 291 A.P.R. 241, 1991 CarswellNB 233, [1991] A.N.B. No.409, [1991] N.B.J. No. 409 (N.B. Q.B.) — considered

Royal Insurance Co. of Canada v. Gallant (1990), 1990 CarswellNB 363, 105N.B.R. (2d) 47, [1990] I.L.R. 1-2603, 264 A.P.R. 47, [1990] A.N.B. No. 40,[1990] N.B.J. No. 40 (N.B. Q.B.) — considered

Winchester v. McCullough (2000), 2000 CarswellNB 33, 30 R.P.R. (3d) 5, 31E.T.R. (2d) 321, [2000] N.B.J. No. 26 (N.B. Q.B.) — followed


Devolution of Estates Act, R.S.N.B. 1973, c. D-9Generally — referred tos. 1 “personal representative” — considereds. 3 — considereds. 22(1) “marital property” — considereds. 22(2) — considereds. 22(2.1) [en. 1991, c. 62, s. 1(1)] — considereds. 22(3) — considereds. 23 — considereds. 24 — considered

Stanley Mutual Insurance Co. v. Shepherd Thomas Riordon J. 67

Insurance Act, R.S.N.B. 1973, c. I-12s. 106 — considered

APPLICATION by insurer for court approval of payment of insurance proceedsto respondent owner, or alternatively payment into court, and release of insurerfrom any further liability.

Amanda J. Evans, for ApplicantJanice E. Smith, for Respondent

Thomas Riordon J.:

Introduction and Issues1 The present Application arises as a result of a fire loss involving a

dwelling insured by the Applicant, Stanley Mutual Insurance Company(Stanley Mutual). That building was owned by the Respondent and hercommon-law spouse Vernon Pell, who died a day after the fire. StanleyMutual now asks for directions in regard to insurance benefits payableunder the Homeowners fire insurance policy.

2 Stanley Mutual is asking for Court approval of the payment of theremaining insurance proceeds payable under the terms of the policy tothe Respondent. Upon payment it is asking that they be released and dis-charged from any further liability or obligations arising as a result of thefire loss in question. In the alternative, Stanley Mutual wishes to pay theremaining proceeds of the policy payable as a result of the loss intoCourt. Upon payment it asks to be released from any further obligationsunder the Homeowners Policy of insurance.

Background Facts3 Stanley Mutual carries on business in the Province of New Brunswick

and issued a Homeowners Insurance policy to Vernon Pell and JuneShepherd insuring their dwelling at 9222 Route 11, St. Margarets, NewBrunswick.

4 Vernon Pell and the Respondent, June Yvonne Shepherd owned theproperty in question and on which the dwelling home was located asjoint tenants. On September the 18th, 2009, a fire occurred at the resi-dence of Mr. Pell and Ms. Shepherd resulting in substantial damage tothe building as well as to the personal property of the Respondent andMr. Pell. The loss was covered by the Homeowner’s Insurance Policywith Stanley Mutual.


5 Unfortunately and tragically, Mr. Vernon Pell died on September19th, 2009. He suffered serious burns to his body in the fire. At the timeof his death Mr. Pell was 75 years of age, he died intestate. Vernon Pelland June Shepherd were not married but had lived in a long-term, com-mon-law relationship of approximately 28 to 30 years.

6 Mr. Pell was previously divorced prior to his relationship with theRespondent, Ms. Shepherd, and has children of that prior relationship.Vernon Pell and Janet Pell were divorced by Divorce Decree Absolutedated the 22nd of April, 1980, issued out of the Superior Court of Justiceof the Province of Ontario.

7 The Respondent believes that Mr. Pell did have children from his pre-vious relationship and marriage but says that he had no contact with hischildren for many years. Their whereabouts and that of his former spouseare not at this time known. In her Affidavit, Ms. Shepherd believes thatMr. Pell had five children from his previous marriage, one of whom diedin infancy and another at the age of 35. She does not know their names,where they live, whether they are still living and whether the child, whodied at around 35 years of age, had any children.

8 Since the tragic and unexpected death of Mr. Pell in September of2009, the Respondent has not had any contact with the children of Mr.Pell. She does not think that they even are aware that he died. She doesnot know where to begin to try and track them down but believes he didhave a daughter living in Western Canada. She says that Mr. Pell neverdiscussed his children with her in all the years that they were togetherand that he never so much as had a Christmas or Birthday card from hischildren in the last 30 years. She also says that he never tried to contacthis children and to the best of her knowledge his children never tried tocontact him. She also mentions that he never put pictures or keepsakes ofhis children around the house and that certainly she would not have ob-jected to that if he had done it.

9 The Respondent, Ms. Shepherd was also divorced prior to her rela-tionship with Mr. Pell. She has a daughter, Lori Seyffert, who lives inMississauga, Ontario. After the fire loss and the death of Mr. Pell theRespondent had no reason to remain living in New Brunswick andmoved to Mississauga, Ontario, to live with her daughter.

10 June Yvonne Shepherd is now 72 years of age and has a number ofhealth issues. She struggles with the cost of medical supplies and medi-cation and is barely getting by financially.


11 In or around 2001, Mr. Pell and Ms. Shepherd moved to New Bruns-wick from Ontario and purchased the house in St. Margarets. They heldthe property as joint tenants and they insured the dwelling with StanleyMutual Insurance Company in both names. Loss, if any, under the policywas payable to the Royal Bank of Canada as holder of the Mortgage onthe property as their interest might be. On acquiring the property theymade a down payment out of savings that had been accumulated and thebalance was financed with a mortgage loan from the Royal Bank of Can-ada. Because of their advanced age at the time, they did not qualify forlife insurance on the mortgage loan. Prior to moving to New Brunswickboth Mr. Pell and Ms. Shepherd worked in Ontario. He retired in 1999and Ms. Shepherd became disabled around 1987. As a result of her con-dition she qualified for a CPP Disability Pension.

12 The Respondent and Mr. Pell did not have any life insurance policies.They always had joint bank accounts and identified each other as com-mon-law spouses on their tax returns.

13 Mr. Pell died the day after the fire from a massive heart attack, hesuffered extensive burns to 45% of his body in the fire. So very quicklytheir life together was over. Ms. Shepherd was devastated by the death ofher common-law spouse and her health has deteriorated steadily since thefire. She says she is unable to look after herself without help from herdaughter. Finances are a struggle and medical supplies are costly.

14 By Proof of Loss dated November 6, 2009, Ms. Shepherd and StanleyMutual agreed to the following amounts payable under the policy:

Building: $ 81,124.45Personal Property: $ 38,000.00Additional Living Expenses: $ 6,699.95

Total $125,824.40

15 Because of the uncertainties caused by the situation, including thefact that Mr. Pell did not have a Will and that he and the Respondentwere not married, resolution of the claim for the loss has been difficult.The situation being as it is and as above described, Stanley Mutual is notable to complete the agreed payouts in full.

16 At the request of the Respondent, June Shepherd and under the termsof the policy the Applicant, Stanley Mutual paid out the mortgage to theRoyal Bank in full in January 2010, in the amount of $25,105.48. A Dis-charge of the Mortgage was obtained.


17 In addition, the Applicant, Stanley Mutual paid June Shepherd addi-tional living expenses of $6,699.95 and advanced to her payments on thePersonal Property loss and the building loss. One-half of these amountshave been paid.

18 A summary of the total insurance proceeds and payments made todate and remaining insurance proceeds as a result of the fire are asfollows:

Building — Total: $81,124.45:Less debris removal: $ 3,124.45Less Mortgage Discharge: $25,105.48

SUBTOTAL: $52,894.52Less 1/2 paid to Ms. Shep- $26,447.26herd:Remaining Insurance Pro- $26,447.26ceeds:Personal Property Loss: $38,000.00TotalLess 1/2 paid to Ms. Shep- $19,000.00herd:

Remaining Insurance Pro- $19,000.00ceeds:

Total Balance Remaining $45,447.26to be Paid:

19 The Applicant, Stanley Mutual wants to honour its obligations underthe contract of insurance by paying to the surviving person named as theinsured person on the insurance policy the remaining insurance proceeds.It requests that this Court approve payment of the remaining insuranceproceeds to the Respondent, Ms. Shepherd. Stanley Mutual does notwish to become involved in any possible or potential dispute of estatematters or leave itself open for claims from potential heirs of Mr. Pell.As an alternative remedy it asks that the proceeds of the insurance mon-eys be paid into Court and that they be discharged with respect to anyfurther liability under the policy of insurance. In this regard it relies onprovisions of the Insurance Act, R.S.N.B. 1973, c.1-12, and in particulars. 106 of that Act.


Decision on the Application20 The issue that must eventually be addressed is whether June Shepherd

is the sole person entitled to the proceeds payable under the Home-owner’s Policy arising from the fire loss or whether these proceedsshould be shared with or paid to others. That determination, as I see it,will have to be made at another time.

21 It is argued on behalf of June Shepherd that she is entitled to the re-maining proceeds as the surviving named insured, long-time common-law spouse and because the insured real property, including the dwelling,was owned by her and Mr. Pell as joint tenants. It is maintained on herbehalf that as the property was held as joint tenants, title to the house andland by operation of law vested in her on the death of Mr. Pell. After thefire loss if the house had been rebuilt the insurance proceeds would havehad to used to rebuild it and she would have been the sole owner. In thecircumstances it is said that she is entitled to the insurance proceedswhich compensate her for the loss and that the children of Mr. Pell haveno interest in the insurance proceeds which essentially replaces the pro-perty that was lost.

22 It is submitted on behalf of Stanley Mutual that given the law of jointtenancy and the right of survivorship that potential heirs of Vernon Pellhave no claim to the remaining one-half of the building portion of theinsurance proceeds, that is the amount of $26,447.26.

23 With respect to the remaining one-half of the personal property lossof $19,000.00, Stanley Mutual submits that the evidence available sup-ports that the co-insured, June Shepherd and not the unknown heirs ofVernon Pell, who he had no contact with for some 30 years, is entitled tothe remaining proceeds of this insurance. Mention is made of the follow-ing:

• The insured persons lived together since 1981;

• On 2001, they bought the insured property (which insured-property included “personal property”) using joint savings;

• They did everything together jointly, and Ms. Shepherd wasthesole beneficiary of Mr. Pell’s CPP pension;

• Although not married, they lived together as husband andwifefor many years and accumulated property together; and

• Mr. Pell had no contact with his children or family.

24 Alternatively, if payment of the remaining balance cannot be paid toMs. Shepherd then Stanley Mutual requests an Order that the remainder


of the insurance proceeds be paid into Court. On payment Stanley Mu-tual wants to be discharged of any further obligations.

25 This matter is indeed complicated by the intestacy of Mr. Pell and thefact that he and Ms. Shepherd, although they lived as common-lawspouses for many years, never married.

26 On the evidence before me it is evident that the real property includ-ing the dwelling at St. Margarets were owned by Mr. Pell and Ms. Shep-herd as joint tenants. There is no question that as Ms. Shepherd and Mr.Pell held title to this property as joint tenants, on the death of Mr. Pellshe became the owner of this property. There was without question theright of survivorship. As was said by Justice Glennie in Winchester v.McCullough, [2000] N.B.J. No. 26 (N.B. Q.B.) the defining essential ofjoint tenancy is the right of survivorship.:

12. “A joint tenancy arises by the act of the person who creates theestate. It is distinguished by what are known as the four unities: unityof title, unity of interest, unity of possession and unity of time. Thedefining essential of a joint tenancy is the right of survivorship. Asstated in Anger & Honsberger Law of Real Property (2d) at page793:

The most important incident of a joint tenancy is the rightof survivorship, called since ancient times, the jus ac-crescendi-the right of surviving joint tenants to have theirundivided interests progressively increased by the deathsof other joint tenants, although the survivors continue asjoint tenants with the last survivor taking the entirety.”

27 Section 3 of the Devolution of Estates Act, R.S.N.B. 1973, c. D-9,provides:

3(1) All real and personal property that is vested in anyperson,without a right in another person to take bysurvivorship, shallon his death, notwithstanding anytestamentary disposition,devolve upon and become vested in hispersonal representa-tive from time to time as trustee for thepersons entitledthereto, and subject to the payment of hisdebts and so far assuch property is not disposed of by deed,will, contract orother effectual disposition, shall be administered, dealt withand distributed as if it were personalproperty not so disposedof.

3(2) This section applies to property over which a person executesby will a general power of appointment, as if it were propertyvested in him.


28 Personal representative under the Act is defined as: “personal representative” means the executor and includesanadministrator and an administrator with the will annexed.

29 In the present matter before me there is no executor and no adminis-trator of the Estate of Mr. Pell has been appointed.

30 The applicable provisions of the Devolution of Estates Act, whicharise on an intestacy are as follows:

22(1) In this section

“marital property” means marital property as defined in the MaritalProperty Act.

22(2) If an intestate dies leaving a widow and one child, thefollowingshall go to the widow:

(a) any interest of the intestate in property that is marital propertyof the intestate and the widow; and

(b) one-half of the residue of the intestate’s estate.

22(2.1) If an intestate dies leaving a widow and children, thefollow-ing shall go to the widow:

(a) any interest of the intestate in property that is marital propertyof the intestate and the widow; and

(b) one-third of the residue of the intestate’s estate.

22(3) If a child dies leaving issue and such issue is alive atthe date ofthe intestate’s death, the widow shall take the sameshare of the estateas if the child had been living at that date.

R.S., c.62, s.21; 1963, c.6, s.2; 1991, c.62, s.1.

23 If an intestate dies leaving issue, his estate shall bedistributed,subject to the rights of the widow, if any, per stirpes among suchissue.

R.S., c.62, s.22.

24 If an intestate dies leaving a widow but no issue his estateshall goto his widow.

R.S., c.62, s.23; 1956, c.33, s.1; 1963, c.6, s.3; 1973, c.30, s.1.

31 I can understand and appreciate the arguments advanced on behalf ofthe Respondent, Ms. Shepherd. However, considering that Mr. Pell diedintestate, that he and Ms. Shepherd were not married and that he hadchildren and the provisions of the Devolution of Estates Act, I am notprepared at this time to approve payment of the remaining insurance pro-ceeds to Ms. Shepherd. Particularly so when the children and/or heirs atlaw of Mr. Pell have no notice of this Application. It is only proper and


fair that they be given the opportunity to be heard. They should have thatopportunity before this issue is finally determined.

32 Although it is said that it is difficult to ascertain the identity of thechildren and heirs at law of Mr. Pell and locate where they might be, itshould be possible to find some of them. The Divorce Judgment of JoanJanet Pell and Mr. Pell was completed on April 22, 1980. It should bepossible to locate this file in the Records of the Superior Court of Justicein Ontario. A copy of the Divorce Judgement was obtained and is one ofthe documents filed in this Application. Some information concerningthe children should most likely be found in that file. If one of Mr. Pell’schildren are located or the mother of these children is found the otherscould likely be found and notified of the present matter.

33 It is therefore my decision to not approve, at this time, payment of theremaining insurance proceeds arising from this loss under the policy tothe Respondent, Ms. Shepherd. The issue or issues as to who should bepaid this money and related matters can be addressed at a later time. Itshould only be determined after interested parties are notified and havean opportunity to be heard.

34 I am prepared to approve payment of the remaining insurance pro-ceeds into Court and discharge Stanley Mutual of its obligations underthe insurance policy for the loss insured.

35 Section 106 of the Insurance Act makes provision for payment of in-surance money into Court when a Discharge cannot be obtained. It reads:

“106(1) Where an insurer cannot obtain a sufficient dischargefor in-surance money for which it admits liability, the insurermay apply tothe court ex parte for an order for the paymentthereof into court, andthe court may order the payment intocourt to be made upon suchterms as to costs and otherwise asthe court directs, and may provideto what fund or name theamount shall be credited.

106(2) The receipt of the registrar or other proper officer ofthe courtis sufficient discharge to the insurer for the insurance money so paidinto court, and the insurance moneyshall be dealt with according tothe orders of the court.

1968, c.6, s.106.

36 The purpose of Section 106 of the Insurance Act was commented onin a case of Lloyd’s of London, Re, [1991] N.B.J. No. 409 (N.B. Q.B.):

The statutory authority for payment of insurance into court isset outin section 106 of the Insurance Act, R.S.N.B. 1973, c.1-12 ...


This remedy is available to an insurer faced with competing claimstothe insurance money for which it admits liability in additionto thegeneral remedy of an application for relief by way of interpleaderunder Rule 43.01.

The advantage to an insurer in proceeding under Section 106 oftheInsurance Act is obvious in that by a simple ex parte applicationitcan pay proceeds into court and obtain a discharge and avoidthe nui-sance and concurrent costs involved with sorting out thelegal inter-ests of competing claimants. The disadvantage to thosewho claim en-titlement to the proceeds is that they must initiateand bear theconcurrent cost of applying to have the money paidout to those enti-tled at law.

The fact remains that the legislature has provided the remedy whichhas been well established in insurance law. See MacGillivray &Parkington, Insurance Law, 7th Ed., 1981 (Sweet & Maxwell), pp.545-549.

However, since the remedy is statutory it should be strictly con-strued. For the Applicant to succeed it must meet the onus ofsatisfy-ing the court that it cannot obtain a sufficient dischargeof the insur-ance money.

37 In that case the insurer’s application was dismissed as the requiredonus of satisfying the Court that it could not obtain a sufficient dischargewas not met.

38 In the case of Royal Insurance Co. of Canada v. Gallant, [1990]N.B.J. No. 40 (N.B. Q.B.), I allowed a similar Application. The insurerin that matter admitted liability to pay Section B Accident Benefits.There was an unresolved dispute between two children of the deceasedand his estranged spouse. The deceased and his spouse had separatedbefore his death.

39 Stanley Mutual has met the onus of establishing that it is not able toobtain a discharge of the remaining insurance money payable under thepolicy issued to Ms. Shepherd and Mr. Vernon Pell. I therefore approvepayment of the remaining funds payable for the loss by Stanley Mutualin the amount of $45,447.26 into Court. This sum is broken down asfollows:

Building Insurance proceeds: $26,447.26Personal Property Loss: $19,000.00

TOTAL: $45,447.26


40 Upon payment into Court by Stanley Mutual a proper receipt shall begiven by the Clerk or other officer of the Court. Payment of the sum intoCourt shall discharge Stanley Mutual of all liability for monies payableunder the provisions of the Homeowners Policy of insurance that is thesubject of this Application. A claim that is payable as a result of the fireloss that occurred on September the 18th, 2009.

41 I think some provisions should be made so as to minimize cost andexpense to eventually determine if the funds paid into Court should bepaid to the Respondent, June Shepherd or shared with others. In so doingand making these provisions the question can hopefully be determinedexpeditiously at reduced cost and hopefully this can avoid expense andthe necessity of another Application to have the funds paid out of Court.

42 I therefore direct that this matter and the issue as to how the fundsshould be paid out of the Court be adjourned to a future date. The filewill be reviewed by the Court on Motion’s Day, June 6, 2011 at 1:30. Atthat time, after review and consideration by the Court, if matters are notresolved by that time directions can be given to establish some timelinesand procedures to address payment of the funds to the persons entitled tothem. A date for hearing of issues if necessary and feasible can be set.Legal Counsel for Stanley Mutual are not required to take part in anyfurther proceedings on this issue.

43 In the meantime, the solicitor for the Respondent, Ms. Shepherd willendeavour to determine and locate the heirs at law of Mr. Vernon Pell.Assuming all or some of them can be located they will be served with acopy of the Record on this Application along with a copy of thisdecision.

44 Assuming that all or some of the heirs are located prior to June 6,2011, they will have the opportunity to be heard at that time as to theirintentions, they may either appear personally or have a solicitor representthem at that time. If they oppose payment of the funds to Ms. Shepherdthey should advise her solicitor prior to June 6, 2011, as to theirintentions.

45 If the heirs at law are served with a copy of the Record and this Deci-sion prior to the scheduled review date and either oppose payment of thefunds to Ms. Shepherd or wish to be heard, the Court can give directionsand schedule a Hearing date to address all issues. If they are served withall documents and do not appear to contest the Application on June 6 orfail to give notice of their intention by that time the matter can be ad-dressed in their absence. Those issues being in regard to payment of the


remaining proceeds of the insurance monies that I anticipate will be paidinto Court by Stanley Mutual.

46 In the circumstances, I make no Order as to costs of the presentApplication.

Application granted.


[Indexed as: Insurance Corp. of British Columbia v. Wiese]

Insurance Corporation of British Columbia, Plaintiff andRandall Robert Wiese, Defendant

British Columbia Supreme Court [In Chambers]

Docket: New Westminster M99484

2011 BCSC 238

Schultes J.


Judgment: February 1, 2011*

Insurance –––– Claims — Fraud and misrepresentation — Recovery of pro-ceeds by insurer –––– Hearings on damages — Insurer achieved default judg-ment against defendant for fraud claims — Hearing held regarding damages —Damages set — Forty seven instances of fraud or fraudulent statements oc-curred — As defendant made no submissions insurer’s assertions were taken asfact — Damages for amounts paid by insurer amounted to $102,855.48 — In-vestigation and adjusting expenses awarded in amount of $1,148.51 — Punitivedamages awarded in amount of $70,000 — Fraud was on public — Conduct wasat least quasi-criminal and several instances occurred — Conduct wasdeliberate.

Remedies –––– Damages — Exemplary, punitive and aggravated dam-ages — Grounds for awarding exemplary, punitive and aggravated dam-ages — Fraud –––– Insurance claims — Hearings on damages — Insurerachieved default judgment against defendant for fraud claims — Hearing heldregarding damages — Damages set — Forty seven instances of fraud or fraudu-lent statements occurred — As defendant made no submissions insurer’s asser-tions were taken as fact — Damages for amounts paid by insurer amounted to$102,855.48 — Investigation and adjusting expenses awarded in amount of$1,148.51 — Punitive damages awarded in amount of $70,000 — Fraud was onpublic — Conduct was at least quasi-criminal and several instances occurred —Conduct was deliberate.

*A corrigendum issued by the Court on March 14, 2011 has been incorporatedherein.

Insurance Corp. of British Columbia v. Wiese Schultes J. 79

Cases considered by Schultes J.:

Insurance Corp. of British Columbia v. Akers (2003), 2003 BCSC 1407, 2003CarswellBC 2268, 3 C.C.L.I. (4th) 76 (B.C. S.C. [In Chambers]) —followed

Insurance Corp. of British Columbia v. Hoang (2002), 2002 BCSC 1162, 2002CarswellBC 1888, 29 M.V.R. (4th) 204, 42 C.C.L.I. (3d) 235, [2002] B.C.J.No. 1818 (B.C. S.C.) — followed

Insurance Corp. of British Columbia v. Hoang (2003), 2003 BCSC 1139, 2003CarswellBC 1815, 2 C.C.L.I. (4th) 201, 42 M.V.R. (4th) 183 (B.C. S.C.) —distinguished

Insurance Corp. of British Columbia v. Husseinian (2008), 2008 BCSC 241,2008 CarswellBC 363, 59 C.C.L.I. (4th) 200, [2008] B.C.J. No. 333 (B.C.S.C.) — distinguished

Insurance Corp. of British Columbia v. Le (1997), 1997 CarswellBC 3040, 40M.V.R. (3d) 235, 11 C.C.L.I. (3d) 40, [1997] B.C.J. No. 3135 (B.C. S.C.) —distinguished

Insurance Corp. of British Columbia v. Phung (2003), 2003 BCSC 1281, 2003CarswellBC 2026, 3 C.C.L.I. (4th) 83 (B.C. S.C.) — distinguished

Mintie v. Iverson (1963), 45 W.W.R. 403, 1963 CarswellBC 176 (B.C. S.C. [InChambers]) — referred to


Criminal Code, R.S.C. 1985, c. C-46Generally — referred to

Rules considered:

Supreme Court Civil Rules, B.C. Reg. 168/2009Generally — referred toApp. B, s. 2(2)(b) — referred to

HEARING regarding damages for insurance fraud.

R.N. Hamilton, for PlaintiffNo one for Defendant

Schultes J. (orally):

1 THE COURT: This is an application to have damages assessed in thisaction. It is a civil fraud involving Mr. Wiese, the defendant, mak-ing knowingly false representations in obtaining insurance fromthe plaintiff, firstly that he was at the relevant times a resident of


British Columbia, and second, less frequently, that he was goingto use the vehicle for pleasure only for a certain period of days.

2 The plaintiffs have given notice of this application to Mr. Wiese atthe addresses at which he was permitted to be substitutionally servedprior to the obtaining of the default judgment, and for two of those threeaddresses their notice has not been returned. The third, the address of Mr.Wiese’s father, the plaintiff has received some indication that the fatherhas moved. I am satisfied that the plaintiff has made all reasonable ef-forts, in fact gone beyond what was strictly necessary, in order to try tobring to Mr. Wiese’s attention to this matter proceeding today.

3 The damages, in overview, consist first of amounts paid out by theplaintiff in relation to numerous accident claims advanced by Mr. Wiese.Second, the cost of investigation and adjusting, which is a relatively min-imal amount, associated with those various claims and determining theirfraudulent nature. Third, punitive damages for what is said to be repre-hensible conduct on Mr. Wiese’s part. In addition, the plaintiff seeks in-terest on the punitive damages and its costs of the matter.

4 I am also satisfied, notwithstanding the change in the Supreme CourtCivil Rules from the previous rule that there is a deemed admission of allmatters when a statement of defence is not filed, that the common law tothat effect is as stated in Mintie v. Iverson (1963), 45 W.W.R. 403 (B.C.S.C. [In Chambers]), and in the subsequent authorities. Therefore, I cantreat the facts asserted by the plaintiff as having been admitted by thedefendant.

5 The material is very well organized, and I compliment counsel forthat. I have relied principally on the affidavit of Mr. Booth, the adjuster,who summarizes the various claims. In essence between 1997 and 2005there were an ongoing series of fraudulent acts and representations byMr. Wiese to ICBC, both directly asserting certain facts to be true re-garding his residence and also providing statements and other updatedinformation through which that pretence was maintained.

6 Counsel has set out a history of ongoing claims, policy renewals,statements to ICBC adjusters and other representations by Mr. Wiese tothe effect that he is a BC resident, notwithstanding strong evidence thathe was at all relevant times a resident of Alberta.

7 Counsel has helpfully listed the number of separate incidents of fraudand/or fraudulent statements. There are 47 of them over that eight yearperiod. I am satisfied that there was a very protracted, repetitive process


under which Mr. Wiese maintained this facade that he was in fact resid-ing in British Columbia, often in Coquitlam.

8 A core representation of an insured in obtaining coverage from theplaintiff is residency in the province of British Columbia, and but for thatrepresentation insurance would not have been available to the defendant.

9 Mr. Wiese had numerous accidents. He appears, in addition to being aperson who was not honest with the plaintiff, to also be a person who hasa proclivity for poor driving. Set out in the affidavit in detail are 14 sepa-rate accidents involving seven different vehicles over that same period,resulting in payments out from the plaintiff of $102,855.48.

10 I am satisfied that the plaintiff’s damages are accurately summarizedin the affidavit. The damages in relation to amounts paid out by theplaintiff are therefore properly assessed at $102,855.48.

11 I am also satisfied, based on the hourly rates available to adjustersduring the material times from 1998 to 2004 as set out by the plaintiffand on the basis of what appear to me to be reasonable and conservativeestimates of the amount of time spent in ferreting out these fraudulentclaims, that a further award of damages for adjusting and investigatingexpenses of $1,148.51 is appropriate.

12 The only issue on which I have some concern has to do with punitivedamages.

13 Counsel has very helpfully provided some other cases involving theplaintiff over the last few years, in which awards of punitive damageshave been made. These cases are cited both for their practical applicationand for the principles involved.

14 The cases come back repeatedly to a very succinct and helpful sum-mary of the law relating to punitive damages in the decision of MadamJustice Sinclair Prowse in Insurance Corp. of British Columbia v.Hoang, 2002 BCSC 1162 (B.C. S.C.). I am just going to read a couple ofkey passages, but I have considered the entire excerpt from that judg-ment. Beginning at para. 50:

[50] Punitive damages are a separate head of damages. Their purposeis to punish the defendant through specific and general deterrenceand denunciation... [citation omitted]

[51] Punitive damages may be granted in situations in which the de-fendant has committed an actionable wrong; that wrong has injuredthe plaintiff; and the conduct of the defendant in committing thatwrong is deserving of the condemnation of the court [citation omit-ted]. Conduct that is deserving of the condemnation of the court in-


cludes conduct that is extreme in the sense that it is harsh, malicious,high-handed, oppressive, vindictive, and/or reprehensible.

15 And then I am going to skip down to a further quote: [56] As far as the determination of the quantum of these punitivedamage awards is concerned, the proper approach is to focus on thedefendant’s misconduct and not the plaintiff’s loss. A formulaic ap-proach, such as imposing a fixed ratio between compensatory andpunitive damages, does not permit a consideration of the many vari-ables necessary to reach a fair award. The facts of each case shouldbe related to the underlying purposes of punitive damages. The quan-tum of the damages should be the lowest award that will serve thosepurposes. Proportionality is the governing rule for quantum.

16 The decision then goes on to identify certain factors that might beconsidered. I will just quote the ones that I consider relevant to this case:

1) Whether the claims pertain to a fraud on the public and, ifso, the public interest, and, in particular, to the multipliedeffect of those fraudulent claims on that public body andthe public taxpayers;

2) Whether the defendant’s conduct includes criminal con-duct. If it does, the criminal penalty for that conduct andthe amount of the punitive damage award should be consis-tent with it. If the defendant has been charged criminally,that fact should be taken into account;

3) All of the circumstances of the conduct. If, for example, theconduct is based on the commission of fraudulent acts, con-sideration should be given to such facts as whether: the actswere planned, organized, and/or deliberate; specializedknowledge was used; persons were recruited for profit;families and children were used; and/or the defendants par-ticipated in multiple claims;

17 Counsel has provided some helpful example cases, and I will just in-dicate that I have read them and considered them, but I will not be quot-ing from them directly. Those are Insurance Corp. of British Columbia v.Le, [1997] B.C.J. No. 3135 (B.C. S.C.); Insurance Corp. of BritishColumbia v. Hoang, 2003 BCSC 1139 (B.C. S.C.); Insurance Corp. ofBritish Columbia v. Phung, 2003 BCSC 1281 (B.C. S.C.); and InsuranceCorp. of British Columbia v. Husseinian, 2008 BCSC 241 (B.C. S.C.).

18 I am going to group those together because they are all cases involv-ing staged accidents. They are helpful in assessing the appropriateness of


punitive damages in deliberate, protracted and relatively remunerativefrauds. However, I think there is a distinction to be drawn between indi-viduals who set out to create fraudulent events which did not otherwiseexist for the purposes of recouping damages for injuries that never oc-curred, on the one hand, and individuals who deliberately lie to the in-surer in relation to a precondition of their insurance, then just go on andconduct themselves in their usual reckless way and later seek to recovertheir losses from accidents that ensue.

19 I am not suggesting that the latter type of fraud is insignificant orlacks seriousness. It is also deserving of the court’s condemnation, but Ido not find, at the end of the day, that the analogy between it and stagedaccidents is particularly apt. Staged accidents are a world unto them-selves in terms of the gross and outrageous nature of that conduct. Mr.Wiese’s conduct is deserving of condemnation, but I think it falls into aslightly different category.

20 The case that I found of the most assistance in that regard, also veryfairly provided by plaintiff’s counsel, is Insurance Corp. of BritishColumbia v. Akers, 2003 BCSC 1407 (B.C. S.C. [In Chambers]), a deci-sion of Mr. Justice Rogers. In that case there was an accident in whichthe actual driver had no driver’s licence and three of the occupants, in-cluding the driver (the fourth one was not involved in the fraud), repre-sented that a different one of them, a licensed driver, was in fact driving.Mr. Akers obtained benefits for damage to his truck and received wageindemnity payments while he was off of work. He benefited personallyand the plaintiff suffered directly from the fraud.

21 Although it was found that Mr. Akers did not set out on that nightwith the purpose of defrauding the plaintiff:

[21]... It came into his mind not long after that it would be to hisbenefit to concur with the ladies’ plan to say Ms. Regier was driving.That is because Ms. Jeck did not have a driver’s license. I infer thatMr. Akers knew this was the case before the crash, but even if he didnot know before, he knew soon after. His overheard conversationwith Ms. Regier at the hospital confirms this. I conclude that Mr.Akers knew that difficulties with Ms. Jeck’s driver’s license wouldcomplicate his claim for damage to his pickup truck. That is the rea-son he confirmed to the RCMP and I.C.B.C. that Ms. Regier wasdriving and not Ms. Jeck.

22 I consider this to be somewhat analogous to the kind of fraud in thepresent case. Mr. Wiese’s conduct is worse because he made a total of 14accident claims and 47 fraudulent representations.


23 Applying the factors identified in Hoang: first, this is a fraud on thepublic.

24 Second, the defendant’s conduct was at least quasi-criminal. It is anoffence against the insurance legislation at the very least and, whether ornot it would ever be prosecuted as such, it could amount potentially to aCriminal Code fraud as well.

25 Next, it was repetitive. It went on over eight years and it involved notjust one opportunistic lie as in Akers, but a concerted ongoing decision tomaintain the false position that Mr. Wiese was a BC resident.

26 The conduct was deliberate. I cannot say that specialized knowledgewas used or that anyone was recruited for profit, but certainly Mr. Wieseparticipated in multiple claims.

27 Mr. Akers was subject to a punitive damage award of $5,000, whichseems an appropriate reflection of a single incident of this kind, and whatI am going to do in the present case is multiply that by 14, to reflect thenumber of times that, whether claims were paid or not, the plaintiff wasplaced at risk by this fraudulent conduct. Therefore, I award punitivedamages in the amount of $70,000.

28 I am sorry, it was prejudgment interest you were looking for on that?

29 MR. HAMILTON: Yes.

30 THE COURT: Two percent. I am satisfied of those authorities. And or-dinary costs at Scale B.

31 I thank counsel for doing what is required for service of the client butdoing so in a way that is very fair to the individual who is not before ustoday.

32 MR. HAMILTON: Actually I just also was going to inquire about pre-judgment interest on the general damages that were awarded.

33 THE COURT: Yes, that will go as well. Thank you very much, Mr.Hamilton.

34 MR. HAMILTON: Thank you.

Order accordingly.

Fitzgerald v. Royal & Sun Alliance Insurance 85

[Indexed as: Fitzgerald v. Royal & Sun Alliance InsuranceCo. of Canada]

Jody Fitzgerald, Plaintiff v. Royal Sun Alliance InsuranceCompany of Canada, Defendant

Nova Scotia Supreme Court

Docket: SYDJC332089

2011 NSSC 132

Frank Edwards J.



Insurance –––– Actions on policies — Practice and procedure — Summaryjudgment –––– Insured suffered accident after falling from tailgate of truck afterbeing struck in parking lot — Insured could not identify other driver — Insurerdenied claim on basis of not providing required information and not makingclaim in timely manner — Insured brought action for coverage against in-surer — Insurer brought motion for summary judgment — Motion dismissed —Discretion under s. 33 of Insurance Act exercised to allow non-compliance withpolicy conditions — Insured had honest but mistaken belief that she had noclaim as she could not indentify the vehicle, and took immediate steps to bringclaim once she realized it was possible — Prejudice to insurer caused by delaywas minimal — Insured’s credibility in relating circumstances of accident wasgenuine issue for trial — As genuine issue of material fact existed, whetherclaim had real chance of success was unnecessary to determine — Insured didnot report accident to peace officer, judicidial officer or administrator within 24hours, as required, or at all — Insured did not report accident to insurer within30-day period or as soon as practicable, as required — Insured did not provideproof of claim form within 90 days as required — Insured could not producetruck for inspection as required — Truck had been involved in second unrelatedaccident, and insured did not know its whereabouts.

Insurance –––– Actions on policies — Practice and procedure — Miscellane-ous issues –––– Insured suffered accident after falling from tailgate of truck afterbeing struck in parking lot — Insured could not identify other driver — Insurerdenied claim on basis of not providing required information and not makingclaim in timely manner — Insured brought action for coverage against in-surer — Insurer brought motion for summary judgment — Motion dismissed —Unfair to apply two-year limitation period set out in policy — Insured made in-surer aware of claim shortly after expiration of limitation period — Applicablelimitation period was three-year limit set out in Limitation of Actions Act.


Cases considered by Frank Edwards J.:

Binder v. Royal Bank (2003), 2003 NSSC 174, 2003 CarswellNS 309, 216N.S.R. (2d) 363, 680 A.P.R. 363, 37 C.P.C. (5th) 47, [2003] N.S.J. No. 304(N.S. S.C.) — followed

Canadian Equipment Sales & Service Co. v. Continental Insurance Co. (1975),[1975] I.L.R. 1-680, 9 O.R. (2d) 7, 59 D.L.R. (3d) 333, 1975 CarswellOnt349 (Ont. C.A.) — referred to

Guarantee Co. of North America v. Gordon Capital Corp. (1999), [2000] I.L.R.I-3741, 126 O.A.C. 1, 247 N.R. 97, 49 B.L.R. (2d) 68, [1999] 3 S.C.R. 423,15 C.C.L.I. (3d) 1, 178 D.L.R. (4th) 1, 1999 CarswellOnt 3171, 1999 Cars-wellOnt 3172, 39 C.P.C. (4th) 100, [1999] S.C.J. No. 60 (S.C.C.) —followed


Insurance Act, R.S.N.S. 1989, c. 231s. 33 — considered

Limitation of Actions Act, R.S.N.S. 1989, c. 258s. 1 — referred tos. 2(1)(f) — considereds. 3(2) — considereds. 3(2)(b) — considereds. 3(4) — considereds. 3(4)(a) — considereds. 3(4)(a)-3(4)(g) — referred tos. 3(4)(c) — considereds. 3(4)(f) — considereds. 3(4)(g) — considered

Rules considered:

Civil Procedure Rules, N.S. Civ. Pro. RulesR. 13 — consideredR. 13.01 — consideredR. 13.04(1) — consideredR. 13.04(2) — consideredR. 13.04(3) — consideredR. 13.04(4) — considered

Fitzgerald v. Royal & Sun Alliance Insurance Frank Edwards J. 87


Insurance Act, R.S.N.S. 1989, c. 231Uninsured Automobile and Unidentified Automobile Coverage Regulations,N.S. Reg. 94/96

Generally — referred to

MOTION by insurer for summary judgment in action for coverage under policyof insurance.

Hugh McLeod, for PlaintiffKevin Quigley, for Defendant

Frank Edwards J.:

A. Overview

This is a motion by the Defendant for Summary Judgment.1 The action arises out of an incident which occurred on February 26,

2008 in which the Plaintiff, Jody Fitzgerald (“Fitzgerald”), has allegedshe suffered personal injury as a result of a fall from the tailgate of hertruck (the “Incident”). Fitzgerald alleges that the Incident occurred in theparking lot of a Wal-Mart store located on Spar Road in Sydney, NovaScotia and was caused by an unknown vehicle striking the front of herChevrolet Silverado (the “Truck”) while parked in the parking lot.

2 The Defendant, Royal and Sun Alliance Insurance Company of Can-ada (Royal), was at all material times the insurer of the Plaintiff. Fitzger-ald has commenced the within action against Royal pursuant to SectionD of the policy of insurance held by the Plaintiff with Royal (the “Pol-icy”), which provides Uninsured and Unidentified Automobile Coverage.

3 Royal has filed the within motion for summary judgment seeking thedismissal of the Plaintiff’s claim on the basis of the following three argu-ments:

(I) there is insufficient evidence for the Plaintiff to prove, on abalance of probabilities, that the negligence of an unidentifieddriver caused the Incident;

(ll) further, or in the alternative, the Plaintiff’s claim pursuant tothe Policy has been forfeited due to the Plaintiff’s failure tocomply with the notice requirements of Section D of thePolicy;

(lll) further, or in the alternative, the Plaintiff is precluded frompursuing the within action due to the Plaintiff’s failure to


commence this action within the applicable 2-year limitationperiod.

B. Background4 The Incident was not reported by Fitzgerald to Royal until April 13,

2010. Royal first received notice of the Incident on or about April 13,2010, which was more than 2 years after the Plaintiff alleges the Incidentoccurred. On that date, Royal received a letter from Hugh McLeod,Counsel for the Plaintiff, addressed to Bluenose Insurance wherein Mr.McLeod advised that Fitzgerald had been injured on February 21, 2010and wanted to open up a “Section B and Section D claim.”

5 Upon obtaining notice of the Incident, Royal retained an adjuster tomeet with the Plaintiff on May 13, 2010 and obtain a written statementwith respect to the Incident.

6 In her statement, dated May 13, 2010, Fitzgerald provided the follow-ing with respect to the Incident:

With regard to my accident the time of day was about 8:15 or8:30am. The accident happened in the parking lot of the Wal-Mart onSpar Road in Sydney. I was alone at the time the accident happened.The truck involved was my 2004 Chev Silverado. The truck was reg-istered to my [sp]. I no longer have that truck. The truck did not sus-tain any damage besides some scratches on the front. On the morningof this incident I went to Wal-Mart to exchange a battery. I pulledinto one of the parking spaces close to the front of the store. After Istop my truck and just as I am getting out of my truck the car that isahead me backs out and pulls away. I next make my way to the backof the truck and get up into the bed of the truck to get the battery thatis in the back of the truck. As I am just about to get down off of thebed of the truck, the truck moves backwards and this knocks me offof the bed of the truck onto the ground. I was on the tailgate of thetruck upon impact and was knocked off when I was going to stepdown...

I did not see what vehicle bumped my truck. I did not hear any noisefrom another vehicle hitting my truck. The police were not at thescene and I never reported the accident to them...

I felt a jolt to my truck upon impact and I felt the truck move. [em-phasis added]

Reference: Statement of Fitzgerald, dated May 13, 2010 - Affidavitof Anne Gallant at paragraph 6 and Exhibit “3”.


7 The Plaintiff was discovered on September 30, 2010. During the dis-covery the Plaintiff testified that she did not see (either before or afterher fall) the unidentified automobile she alleges hit the Truck and did nothear any impact between the alleged unidentified automobile and theTruck. A review of the most relevant portion of the Plaintiff’s discoveryrelating to how she says the Incident occurred is outlined as follows:

Q. No, I understand. Did you notice anybody with shoppingcarts, somebody pushing a shopping cart in your area?

A. No.

Q. Did you notice anybody on a, on a bike or on some othervehicle of some kind?

A. It was in the winter. There weren’t people around on bikes.

Q. Yeah. So I guess there weren’t anybody around on bikes thatyou know of.

A. No, and when I first pulled in, there was a car ahead of me.

Q. Yes.

A. And as I was getting into the tail, the back of my truck, thatcar pulled out.

Q. And left.

A. And left.

Q. Do you know what kind of car that was, any ...

A. It was a small one. I’m not sure, I just remember it beingsmall because I remember when I pulled in with my truck, I,it was, like I was scared that I might bump it but I pulled in,no problem, and they pulled out just as I was getting out ofmy truck.

. . . . .

Q. All right. In any event that car left before ...

A. They ...

Q. ... anything happened.

A. Exactly. They left before anything happened and left the spotin front of me vacant which is where ...

Q. All right. And did you notice any I guess you were, you wereparked somewhere near one of those cart corrals, were you?

A. Uh-huh.

Q. Yes?

A. Yes.


Q. Did you notice any ice on top of the car corral?

A. No.

Q. And did ...

A. The pavement was dry.

Q. Uh-huh. Did you notice any moving vehicles around youprior to you falling?

A. There was one that drove by me as I was ...

Q. Yes.

A. Like, they drove around to the front of the store as I was get-ting into the back of the truck.

Q. All right. Do you remember any specifics about that vehicle?

A. I know it was a car but that’s all I remember about it.

Q. All right. But it went past your vehicle, did it?

A. It went past me and went towards the front of the store.

Q. All right. Do you remember seeing any other moving vehiclesbefore you fell?

A. That’s the only one I remember seeing.

Q. All right. Do you remember hearing any horn sound?

A. No.

Q. Do you remember hearing any brakes, ...

A. No.

Q. ... the squealing of brakes?

A. No.

Q. Do you remember hearing any sounds of impact of a vehicle?

A. No. I just felt, just felt it.

Q. You felt your vehicle move.

A. Yes.

Q. And afterwards, after you fell, do you remember seeing anyother moving vehicle?

A. No. I looked around because where I was, where I fell, I wasright directly behind my truck.

Q. Yeah.

A. And I tried to look around to see what was going on ahead ofme but I, I couldn’t see anything.

Q. All right. So you didn’t, you couldn’t see any vehicle ...


A. The next vehicle that I Seen pull in was the guys that came tohelp me and that was, oh, it had to be three to five minutesthat I was there.

Q. All right. And did they pull into the spot that the other vehiclevacated?

A. No. They pulled into a spot that was, the park ... Where I wasparked was here. They pulled into a spot on the opposite lanea couple of cars up.

Q. All right. And so for the three to five minutes that you wereon the ground after the, after you fell, you, you couldn’t tell ifthere was any vehicle, any other vehicle that was in the spotwhere the small car vacated ...

A. No.

Q. ... prior to you falling.

A. I couldn’t tell. I, I, I felt the car, the truck move and then aftera couple of seconds when I, when I fell, I was there and Icould hear a car but I couldn’t see a car.

Q. Okay.

A. I could hear like a car moving on the gravel, well, the pave-ment which had rocks and everything in it but I couldn’t seeit. So I’m assum ... I’m thinking that when they, they bumpedthe truck, they pulled out and went back towards the Wal-Mart store. They didn’t go out towards the exit.

Q. Okay. but I guess the, the spot that you’re talking about wasvacated ...

A. Uh-huh.

Q. ... the moment you got out of your truck.

A. Within a few seconds, yes.

Q. And then you got into the back cab of your truck.

A. Uh-huh.

Q. And then you think ...

A. Someone ...

Q. I guess, the theory is that somebody ...

A. Pulled in.

Q. ... pulled in and then pulled right back out again.

A. Yes.

Q. All right. But you don’t know that for sure but that’s yourtheory.


A. Yes.

Q. Okay. And did anybody ever indicate to you that they sawany vehicle strike your vehicle?

A. No. Because the two guys that came to help me, they pulledin after the fact and they had asked me what was going on,like what happened and I told them and they, they were like,oh, I wish I had’ve been here to see what happened but.

Q. All right. And I guess you didn’t see what happened either.

A. I didn’t even see what happened.

[emphasis added]

Reference: Discovery Transcript at pages 31-36 - Affidavit of KevinQuigley at paragraph 4 and Exhibit “1”.

8 The Plaintiff went on to provide the following during her discovery: A. I was returning a battery to Wal-Mart and, of course, as you

know, with a truck how everything slides to the front. I wasinto the box. I pulled the battery down to the back. I wasstanding on the tailgate getting ready to get down out of thetruck and that’s when the truck moved.

Q. So you’re on the tailgate and the tailgate’s flat down, is it?

A. It’s, it’s flat down, yes.

Q. And you drag the battery to the, ...

A. To the end.

Q. ... towards the tailgate.

A. Uh-huh. The battery’s sitting there on the end. Well, actuallyit’s not sitting on the end. It’s sitting like up where the joiningpart of the bed and tailgate is. I left the battery there and I wasgetting ready to step down. The front, the truck moved. I feltthe jolt, the truck moved, I fell, landed right down. Oh, mygod, it was, it was a lot of pain.

Q. All right. And what direction were you facing in term ...

A. I was facing the front of the truck.

Q. All right. With your head down.

A. Yes, with my head down getting ready to step down because Ihad, I was getting ready to put my hand down so that I canlower myself down.

Q. And you’re motioning with your right hand.

A. Uh-huh.


Q. So you’re facing forward. You’ve pulled the battery towardsthe back of the truck.

A. Yes.

Q. You’re standing on the tailgate.

A. Uh-huh. Yes.

Q. And you’re about to put your right hand down on the tailgateso then you can kind of jump down.

A. Right.

Q. And when, just before you fell, in the moment that you beganto fall, did you see any vehicle then?

A. No.

Reference: Discovery Transcript at pages 43-44 - Affidavit of KevinQuigley at paragraph 4 and Exhibit “1”.

9 Fitzgerald did not take any photographs of where the Incident oc-curred until sometime in 2010. A copy of the photographs of the areawhere the Plaintiff says the Incident occurred can be found at Exhibit “2”of the Affidavit of Kevin Quigley.

Reference: Discovery Transcript at pages 23-25 - Affidavit of Ke-vin Quigley at paragraph 4 and Exhibit “1” and Photographs - Af-fidavit of Kevin Quigley at paragraph 5 and Exhibit “2”.

10 During her discovery, the Plaintiff was referred to the photographsnoted above in paragraph 9. She advised that at the time the Incidentoccurred the Truck was parked in the empty parking space adjacent tothe silver car in photograph No. 2 with the front of the Truck facing tothe left side of the photograph.

Reference: Photograph No. 2 - Affidavit of Kevin Quigley at para-graph 5 and Exhibit “2” and Discovery Transcript at pages 92-95 -Affidavit of Kevin Quigley at paragraph 4 and Exhibit “1”.

11 The Plaintiff did not report the Incident to the police at any time nordid the Plaintiff report the Incident to Royal (her insurance company),Wal-Mart (where the Incident occurred) or any other person until 2010when she spoke with her Counsel, Mr. McLeod.

Reference: Discovery Transcript at pages 23 and 27 - Affidavit ofKevin Quigley at paragraph 4 and Exhibit “1”.

12 Fitzgerald did not take any photographs of the Truck following theIncident. Unfortunately, the Truck was damaged and written off in an


accident that occurred in 2009. The Plaintiff is unaware of the wherea-bouts of the Truck.

Reference: Discovery Transcript at pages 23-25 - Affidavit of Ke-vin Quigley at paragraph 4 and Exhibit “1”.

13 The Plaintiff advised as follows with respect to the damage the Plain-tiff claims may have been caused to the Truck as a result of the Incident:

Q. Did you take any photographs of any damage to the truck,like a closeup of damage to the truck anywhere?

A. No.

Q. All right.

A. There wasn’t really any damage to the, to the truck.

Q. Okay.

A. It was just like a little,...

Q. Well. That explains why.

A. ... like a little tiny pain [sp] scrape on the bumper. That was it.

Q. Was it a coloured paint scrape or do you remember?

A. There was a pain scrape. I don’t remember. I don’t rememberif there, if it had colour to it or it was just black.

Q. Did you get it fixed?

A. No. It was just like a little cosmetic thing.

Q. All right. And I take it with regards to the scratches on thefront of your vehicle, you don’t know what caused those, doyou?

A. No. Like I said, it’s just like they weren’t really scratched.Like they were more like a, almost like a paint rub or some-thing along that lines.

Q. But in terms of what caused them, you don’t know.

A. No.

Reference: Discovery Transcript at pages 25-26 and 39 - Affidavit ofKevin Quigley at paragraph 4 and Exhibit “1”.

14 The Plaintiff claims that upon falling from the tailgate of the Truckshe landed directly on her buttocks area/tailbone and twisted her ankle.Immediately following the Incident the Plaintiff complained of lowerback pain and swelling of her ankle.



15 The Plaintiff claims she missed approximately seven (7) months fromher employment beginning immediately after the Incident, as a result ofthe injuries suffered by the Plaintiff in the Incident. The Plaintiff col-lected short-term and long-term disability benefits during this timeperiod.


C. Issues on the CPR 13 Motion

(l) Is there sufficient evidence to prove, on a balance of probabilitiesthat the negligence of an unidentified driver caused the accident.

16 In determining whether I should exercise discretion under Rule 13and grant summary judgment in favour of the Defendant Royal, I mustconsider two issues:

(a) Is there a genuine issue of material fact requiring trial? If the an-swer is no, than I must consider;

(b) Can Fitzgerald establish that her claim has a real chance ofsuccess?

D. The Law on Summary Judgment17 Nova Scotia Civil Procedure Rule 13 governs summary judgment

proceedings. Civil Procedure Rule 13.01 reads as follows: 13.01 Scope of Rule 13

(1) This Rule allows a party to move for summary judgment onthe pleadings that are clearly unsustainable and to move forsummary judgment on evidence establishing that there is nogenuine issue for trial.

(2) A frivolous, vexatious, scandalous, or otherwise abusivepleading may be dealt with under Rule 88 - Abuse of Process.

18 Civil Procedure Rule 13.04 specifies that: 13.04(1) A judge who is satisfied that evidence or the lack of evi-

dence, shows that a statement of claim or defence fails toraise a genuine issue for trial must grant summary judgment.

(2) The judge may grant judgment for the Plaintiff, dismiss theproceeding, allow a claim, dismiss a claim, or dismiss adefence.

(3) On a motion for summary judgment on evidence, the plead-ings serve only to indicate the laws and facts in issue, and the


question of a genuine issue for trial depends on the evidencepresented.

(4) A party who wishes to contest the motion must provide evi-dence in favour of the party’s claim or defence by affidavitfiled by the contesting party, affidavit filed by another party,cross examination, or other means permitted by a judge.

19 The purpose of a summary judgment motion is to allow a party toapply to the court for a determination that a trial is not required in orderto dispose of some or all of the issues between the parties.

20 In order to succeed, the applicant must first establish that there are noarguable issues of material fact requiring trial. Once it is shown that thereare no arguable issues of fact, the onus is on the responding party toprove that its defence or claim, as the case may be, has a real chance ofsuccess based upon the undisputed material facts.

21 The leading case that outlines the analysis to be undertaken upon anapplication for summary judgment is Guarantee Co. of North America v.Gordon Capital Corp., [1999] 3 S.C.R. 423 (S.C.C.) (“Guaran-tee”)(Defendant’s Book of Authorities - TAB 5). In Guarantee, the Su-preme Court of Canada, at paragraph 27, set forth the following test:

The appropriate test to be applied on a motion for summary judgmentis satisfied when the applicant has shown that there is no genuineissue of material fact requiring trial, and therefore summary judg-ment is a proper question for consideration by the court. Once themoving party has made this showing, the respondent must then “es-tablish his claim as being one with a real chance of success”

[emphasis added].

22 This test was adopted by the Nova Scotia Supreme Court in Binder v.Royal Bank, 2003 NSSC 174 (N.S. S.C.) (“Binder”)(Defendant’s Book ofAuthorities - TAB 1) at paragraph 7:

... The applicant must meet a threshold. Generally, that threshold ismet when the case is such that the Court should properly inquire intothe presence or absence of a genuine issue (Hercules, para. 5 and 15),which I would equate with a reasonably arguable issue. Specifically,the threshold is met in cases where “there is no genuine issue of ma-terial fact requiring trial” (Guarantee Co. of North America, para. 27,emphasis added). Once the threshold is met, the respondent is re-quired to show a real chance of success in its claim or defence.


(a) Is there a genuine issue of material fact requiring trial?23 In its Statement of Claim, Fitzgerald has alleged that:

(a) an unknown driver struck the front end of the Truck causing thePlaintiff to fall from the tailgate of the Truck resulting in personalinjury to the Plaintiff; and

Reference: paragraph 3 of the Statement of Claim.

(b) the injuries suffered by the Plaintiff were caused by the negli-gence of the unknown driver.

Reference: paragraph 4 of the Statement of Claim.

24 Although it is not clear from the pleadings, the claim put forward bythe Plaintiff against Royal is pursuant to Section D of the Policy, whichprovides that Royal is required to pay all sums for bodily injury resultingfrom an accident involving an automobile that Fitzgerald is entitled torecover from the owner or driver of an uninsured or unidentified automo-bile. Section D of the Policy further provides that the insurer may contestthe issue of the legal entitlement of the Plaintiff to recover damages andthe amount of damages payable in an action commenced by an insuredagainst Royal pursuant to Section D of the Policy.

Reference: Standard Automobile Policy at paragraphs 2(1) and5(3) - Affidavit of Anne Gallant at paragraph 4 and Exhibit “1”.

25 The legal issues to be determined in this matter include the following:

(a) whether the Plaintiff can meet her burden to prove that the negli-gence of an unidentified vehicle/driver caused the Incident;

(b) whether the Plaintiff can meet its burden to prove that Incidentcaused the Plaintiff’s injuries, as alleged (which issue does notform part of the within motion); and

(c) the quantification of the Plaintiff’s injuries arising from the Inci-dent, if any (which issue does not form part of the within motion).

26 The summary judgment motion is limited to a determination as towhether an unidentified vehicle was present at the time of the Incidentand, if so, whether the Incident was caused by the negligent actions ofthe unidentified vehicle as alleged. In other words, can the Plaintiff es-tablish that the unidentified vehicle/driver is liable for the Incident.

27 It is clear that there is a genuine issue of material fact requiring trial.Fitzgerald’s evidence is that she was standing on the tailgate of her truckwhen she felt a bump which caused her vehicle to move. The bumpcaused her to lose her balance and fall. She thereby sustained injury.Fitzgerald says that when she fell she could hear but could not see a car.


28 At trial, the case will hinge upon Fitzgerald’s credibility. If she isbelieved, then her evidence amounts to more than a theory (as suggestedby the Defendant’s Counsel) of what occurred. Her testimony would becircumstantial evidence that an unidentified driver struck her stationaryvehicle. In the circumstances, if the trier is satisfied that an unidentifieddriver/vehicle struck the Plaintiff’s vehicle and thereby caused her to fall,then it will be open to the trier to infer negligence on the part of theunidentified driver.

29 Accordingly, I have concluded that there is a genuine issue of mate-rial fact requiring trial. I need not proceed further. In other words, I donot have to consider whether Fitzgerald has established that her claimhas a real chance of success.

(II) Is the Plaintiff’s Claim forfeit due to her failure to comply with theNotice Requirements of Section D of the Policy?

30 Section D of the Policy provides certain terms and conditions for Un-insured and Unidentified Automobile Coverage (which terms and condi-tions are derived from the Uninsured Automobile and Unidentified Auto-mobile Coverage Regulations, N.S. Reg. 94/96 (Defendant’s Book ofAuthorities - TAB 13)).

31 Section 9 of Section D outlines the limitations of coverage as follows,9. Limitations

(1) No person shall commence an action to recover the amount ofa claim provided under this policy and under subsection139(2) of the Insurance Act unless the requirements underthis section have been complied with.

(2) Every action or other legal proceeding against an insurer forthe recovery of an amount of damages shall be commencedwithin two years after the date on which the cause of actionagainst the insurer arose and not afterward.

(Emphasis added)

Reference: Standard Automobile Policy - Affidavit of Anne Gallantat paragraph 4 and Exhibit “1”.

32 The pertinent requirements under Section D of the Policy, as referredto in section (9)(1) above, fall specifically under section 4 and 6 of Sec-tion D of the Policy, which provides:

4. Accidents Involving Unidentified Automobiles


Where bodily injuries to or the death of a person insured under thispolicy results from an accident involving an unidentified automobile,the claimant or a person acting on behalf of the claimant shall

(1) report the accident within twenty-four hours after the accidentor as soon after that period as practicable to a peace officer, ajudicial officer or an administrator of motor vehicle laws,

(2) deliver to the Insurer within thirty days after the accident oras soon after that period as practicable a written notice, stat-ing that the claimant has a cause of action arising out of theaccident for damages against a person whose identity cannotbe ascertained and setting out the facts in support of the causeof action, and

(3) at the request of the Insurer, make available for inspection bythe Insurer, where practicable, any automobile involved in theaccident in which the person insured under this policy was anoccupant at the time of the accident.

6. Notice and Proof of Claim

(1) A person claiming damages for bodily injury to or the deathof a person resulting from an accident involving an uninsuredautomobile or unidentified automobile or a person acting onbehalf of the claimant shall

(a) within thirty days after the date of the accident or assoon after that period as practicable, give written no-tice of the claim to the insurer by delivering it person-ally or by sending it by registered mail to the chiefagent or head office of the insurer in Nova Scotia;

(b) within ninety days after the date of the accident or assoon after that period as practicable, deliver to the in-surer as fully detailed a proof of claim as is reasonablypossible in the circumstances respecting the eventssurrounding the accident and the damages resultingfrom it;

(c) provide the insurer, at the insurer’s request, with thecertificate of a medical practitioner legally qualified topractice medicine, describing the cause and nature ofthe bodily injury or death to which the claim relatesand the duration of any disability resulting from theaccident; and

(d) provide the insurer with details of any policies of in-surance, other than life insurance, to which the claim-ant may have recourse. [emphasis added]


(2) Subsection 4 of Section F - Mandatory Conditions applieswith the necessary modifications where a claimant claimsdamages for accidental damage to an insured automobile orits contents or to both an insured automobile and its contents.

Reference: Standard Automobile Policy - Affidavit of Anne Gallantat paragraph 4 and Exhibit “1”.

Failure of the Plaintiff to Report the Incident

33 Sections 4 and 6 of Section D of the Policy outline certain time-sensi-tive reporting requirements that must be complied with in order for thePlaintiff to recover her alleged loss pursuant to the Policy.

34 As noted in the text Insurance Law in Canada, by Craig Brown andThomas Donnelly (Defendant’s Book of Authorities - TAB 7), at page 9-3:

It is a condition precedent to recovery under a policy that notice re-quirements be met. It is therefore a ground of forfeiture of the claimif notice is not filed in time in accordance with the relevant policy orstatutory provision.

35 First, Section 4(1) of Section D of the Policy states that where bodilyinjury to a person insured results from an accident involving an “uniden-tified automobile” the Plaintiff shall report the accident to a “peace of-ficer, a judicial officer or an administrator of motor vehicle laws” within24 hours after the accident “or as soon after that period as practicable”.

36 The Plaintiff’s discovery evidence clearly provides that the Plaintiffdid not report the accident in question to a peace officer, a judicial officeror an administrator of motor vehicle laws within 24 hours of the acci-dent. In fact, there is no evidence that the Plaintiff reported the Incidentto a peace officer, a judicial officer or an administrator of motor vehiclelaws at any time following the Incident.

37 Second, Section 4(2) of Section D of the Policy states that where bod-ily injury to a person insured results from an accident involving an “un-identified automobile” the Plaintiff shall deliver to her insurer (Royal),within thirty days after the accident or “as soon after that period as prac-ticable”, a written notice stating that she has a cause of action arising outof the accident for damages against a person whose identity cannot beascertained and setting out the facts in support of the cause of action.

38 Fitzgerald did not provide written notice of the Incident to Royalwithin 30 days of the Incident or “as soon after that period as practica-ble”. In fact, Fitzgerald did not report the Incident to Royal, in writing orotherwise, until April 13, 2010 when Fitzgerald’s Counsel, Hugh Mc-


Leod, wrote to Bluenose Insurance and advised that Fitzgerald had beeninjured on February 21, 2010 and wanted to open up a “Section B andSection D claim.” This “written notice” was, therefore, not received byRoyal until over 770 days after the Incident occurred, which in Royal’ssubmission, cannot be construed in any way to be within the time periodrequired by the Policy.

Reference: Affidavit of Anne Gallant at paragraph 5.39 Third, Section 6(1)(b) of Section D of the Policy states that a person

claiming damages for bodily injury resulting from an accident involvingan unidentified automobile shall within ninety days after the date of theaccident or “as soon after that period as practicable”, deliver to the in-surer a proof of claim form.

40 Fitzgerald did not provide a proof of claim form within 90 days of theIncident or “as soon after that period as practicable”. As noted above,Royal did not receive any written notice of the Incident until approxi-mately 770 days after the Incident occurred, which in Royal’s submis-sion, cannot be construed in any way to be within the time period re-quired by the Policy.

41 Fourth, Section 4(3) of Section D of the Policy states that where bod-ily injury to a person insured results from an accident involving an “un-identified automobile” the Plaintiff shall make available for inspectionby the insurer any automobile involved in the accident.

42 Fitzgerald was unable to produce the Truck for inspection as by thetime the Incident was reported to Royal on or about April 13, 2010, theTruck was no longer in the possession of the Plaintiff nor did the Plain-tiff have any idea where the Truck was located. In fact, the Plaintiff ad-vised during her discovery that the Truck had been involved in a motorvehicle accident in 2009 (which was unrelated to the Incident) that re-sulted in the Truck being written off.

Reference: Discovery Transcript at page 25 - Affidavit of KevinQuigley at paragraph 4 and Exhibit “1”.

43 The Plaintiff failed to comply with all of the above-noted statutoryconditions of the Policy that were required, as a condition precedent, forrecovery pursuant to Section D of the Policy. Royal submits that as aresult of the Plaintiff’s failure to comply with these conditions precedent,the Plaintiff’s claim pursuant to the Policy should be forfeited. Royalsubmits that, given all of the circumstances, this is not a case where theCourt should use its discretion, pursuant to section 33 of the Insurance


Act, to relieve the Plaintiff against the forfeiture of coverage pursuant tothe Policy. Section 33 of the Insurance Act, R.S.N.S. 1989, c. 231 (De-fendant’s Book of Authorities - TAB 6) states:

Court may relieve against forfeiture

33 Where there has been imperfect compliance with a statutory con-dition as to the proof of loss to be given by the insured or other mat-ter or thing required to be done or omitted by the insured with respectto the loss, and a consequent forfeiture or avoidance of the insurancein whole or in part, and the court considers it inequitable that theinsurance should be forfeited or avoided on that ground, the courtmay relieve against the forfeiture or avoidance on such terms as itconsiders just. R.S., c. 231, s. 33. [Emphasis added]

44 I disagree with Royal’s position. In the particular circumstances ofthis case, it would be inequitable that the insurance should be forfeitedbecause of imperfect compliance with the statutory conditions. This isnot a case where the insurance contract was broken by the Plaintiff with... “a careless disregard for the rights of the insurer so as to cause actualor potential injury to the insurer’s position.” [See Canadian EquipmentSales & Service Co. v. Continental Insurance Co. [1975 CarswellOnt349 (Ont. C.A.)] at para.30 where the opposite was the case].

45 Here, I am satisfied that the Plaintiff honestly but mistakenly believedthat she had no cause of action because she could not identify the vehiclewhich caused her injury. She has Grade XII education but is unsophisti-cated with respect to insurance law or her responsibilities under a con-tract of insurance. This is not to say that everyone can avoid their respon-sibilities under the statutory conditions merely by saying they were notaware. Each situation has to be assessed on a case by case basis.

46 This situation is quite unusual. As soon as the Plaintiff became awarethat she might have a cause of action, she took immediate steps to ad-vance her position. Plaintiff’s Counsel gave notice to the Insurer on April13, 2010 - i.e., less than two months after the expiry of the two year timelimit. (The action itself was commenced on July 28, 2010).

47 I am satisfied that any prejudice to the insurer caused by the delay orfailure to comply with the statutory conditions is minimal or highly spec-ulative. I accept the Plaintiff’s argument that it is highly unlikely thatimmediate notification would have produced any witnesses to the allegedevent. It is also unlikely that, had she inevitably reported the matter topolice, a police investigation would have produced any tangible results.The Plaintiff would have been unable to give even a vague description of


the vehicle she claims had bumped her truck. It is unlikely that anyone inthe parking lot would have noticed such a low impact collision. Ms. Fitz-gerald says she was lying on the ground for three to four minutes and noone came forward to say they had witnessed what had happened. TheDefendant put forward no evidence that the parking lot had been undervideo surveillance which had since been destroyed.

48 Further, the fact that the Plaintiff’s vehicle is no longer available isinconsequential. At most, an inspection at the time would have revealeda scrape on the paint of the front bumper. Such evidence would be use-less in the absence of a run vehicle with which to match it. Defendant’sCounsel argued that perhaps they would have found no paint scrape.Again, that would not have assisted the Defendant given the Plaintiff’sdescription of “a little tiny paint scrape on the bumper”. Whether or notsuch a scrape existed would probably be of no assistance to the insurer.The bump described by the Plaintiff may have caused no damage.

49 The Defendant also contended that an inspection would have deter-mined whether the tailgate or its hinges were faulty or whether the park-ing brake was faulty. The incident occurred in a relatively level parkinglot. (See photos referred to in paragraph 9). In that circumstance, it isdifficult to understand the relevance of the condition of the parkingbrake. The point about the condition of the tailgate is speculative. Insum, the Defendant speculates on areas of possible prejudice but is una-ble to point to real (or even probable) prejudice.

50 In short, I am exercising my discretion pursuant to section 33 of theInsurance Act to relieve the Plaintiff against forfeiture or avoidance ofher insurance.

(III) Two Year Limitation Period51 Section 9(2) of Section D requires that any action against the insurer

pursuant to Section D “shall be commenced within two years after thedate on which the cause of action against the insurer arose and notafterward.”

52 As I have noted, the Defendant was put on notice less than twomonths after the expiration of the two year time limit. In the circum-stances, it would be unfair to deprive the Plaintiff of her cause of actionby insisting upon strict compliance with Section 9(2) of Section D of thePolicy. In any event, the policy provisions are trumped by the provisions


of the Limitation of Actions Act, R.S. c.258, s.1. Section 2(f) of the Actcontains a three year limitation period. It reads:

(f) actions for recovery of damages on account of injury to persons ordamage to property occasioned by or arising out of the ownership,maintenance, operation or use of a motor vehicle, within three yearsafter the cause of action arose.

53 Section 3(2) reads: 3. (2) Where an action is commenced without regard to a time limita-tion, and an order has not been made pursuant to subsection (3), thecourt in which it is brought, upon application, may disallow a de-fence based on the time limitation and allow the action to proceed ifit appears to the court to be equitable having regard to the degree towhich

(a) the time limitation prejudices the Plaintiff or any personwhom he represents; and

(b) any decision of the court under this Section would prejudicethe Defendant or any person whom he represents, or anyother person. [Emphasis added]

54 Section 3(4) (a) to (g) read: 3. (4) In making a determination pursuant to subsection (2), the courtshall have regard to all the circumstances of the case and in particularto

(a) the length of and the reasons for the delay on the part of thePlaintiff;

(b) any information or notice given by the Defendant to thePlaintiff respecting the time limitation;

(c) the extent to which, having regard to the delay, the evidenceadduced or likely to be adduced by the Plaintiff or the Defen-dant is or is likely to be less cogent than if the action had beenbrought or notice had been given within the time limitation;

(d) the conduct of the Defendant after the cause of action arose,including the extent, if any, to which he responded to requestsreasonably made by the Plaintiff for information or inspectionfor the purpose of ascertaining facts which were or might berelevant to the Plaintiff’s cause of action against theDefendant;

(e) the duration of any disability of the Plaintiff arising after thedate of the accrual of the cause of action;

(f) the extent to which the Plaintiff acted promptly and reasona-bly once he knew whether or not the act or omission of the


Defendant, to which the injury was attributable, might be ca-pable at that time of giving rise to an action for damages.

(g) the steps, if any, taken by the Plaintiff to obtain medical, legalor other expert advice and the nature of any such advice hemay have received.

[Emphasis added]

55 With respect to Section 3(2)(b), it is obvious from what I have al-ready written that I believe the prejudice suffered by the Defendant hasbeen minimal to non-existent. Accordingly, I am satisfied that it wouldbe equitable to disallow a defence based on the time limitation in thepolicy. In making this determination I have had regard to the provisionsof Section 3(4) and, in particular, the provisions of subparagraphs 3(4)(a), (c), (f) and (g). That consideration will be apparent from what I havewritten earlier in this decision. As I have noted previously, the Defendantis not prejudiced by the delay and the Plaintiff acted immediately aftershe learned that she had a possible cause of action.

(IV) Conclusion:

The Defendant’s motion is dismissed. Costs shall be in the cause.

Order Accordingly.

Motion dismissed.


[Indexed as: Cohn v. Calovic]

Eduardo Cohn, Lori Cohn, Jordan Cohn and Benson Cohn,Plaintiffs and John J. Calovic and John J. Calovic Insurance

Agency Ltd., Defendants

Ontario Superior Court of Justice

Docket: CV-09-383826

2011 ONSC 1398

Whitaker J.



Insurance –––– Contract of indemnity — Primary and excess coverage ––––Broker told insureds they had maximum of $1.3 million in underinsured motor-ist coverage under auto and umbrella insurance — Limit of auto policy was$300,000; umbrella policy had limit of liability of $1 million — Following auto-mobile collision with underinsured motorist, insureds brought and settled claimagainst insurer — Underinsured at-fault motorist had $20,000 of insurance;therefore limit coverage under auto policy was $280,000 — Insureds settledtheir claim against insurer for $980,000 on basis of advice from insurer as tolimits of their insurance coverage — Insureds then brought action in negligenceagainst broker claiming that limit of their coverage was $1 million less coverageof underinsured motorist and not $1.3 million less coverage of underinsured mo-torist as originally advised — If position taken by insureds was correct matterwould proceed to trial — Submissions were made regarding coverage — In-sureds were correct, combined limit of underinsured motorist coverage was$980,000 — Matter to proceed to trial — Condition two of underinsured motor-ist coverage (Option W) stated that retained limit for Option W was total amountreceived for loss from liable party, plus amount received from underlying cover-age but not less than amount of insured’s required underlying limit — Firstamount was $20,000 — Second amount, amount received from underlying cov-erage was $280,000 — Third amount, amount of required underlying limit was$300,000 — Retained limit for Option W was $300,000 — Condition 3 statedthat it would only pay amount in excess of retained limit up to Option W limit;Option W limit was $1 million — Difference in amount payable was$700,000 — Combined total coverage was $280,000 from auto policy plus$700,000 from umbrella policy, and thus $980,000 as insureds asserted.

Insurance –––– Automobile insurance — Uninsured automobile coverage —Limit and extent of liability — General principles –––– Broker told insuredsthey had maximum of $1.3 million in underinsured motorist coverage under auto

Cohn v. Calovic 107

and umbrella insurance — Limit of auto policy was $300,000; umbrella policyhad limit of liability of $1 million — Following automobile collision with un-derinsured motorist, insureds brought and settled claim against insurer — Un-derinsured at-fault motorist had $20,000 of insurance; therefore limit coverageunder auto policy was $280,000 — Insureds settled their claim against insurerfor $980,000 on basis of advice from insurer as to limits of their insurance cov-erage — Insureds then brought action in negligence against broker claiming thatlimit of their coverage was $1 million less coverage of underinsured motoristand not $1.3 million less coverage of underinsured motorist as originally ad-vised — If position taken by insureds was correct matter would proceed totrial — Submissions were made regarding coverage — Insureds were correct,combined limit of underinsured motorist coverage was $980,000 — Matter toproceed to trial — Condition two of underinsured motorist coverage (Option W)stated that retained limit for Option W was total amount received for loss fromliable party, plus amount received from underlying coverage but not less thanamount of insured’s required underlying limit — First amount was $20,000 —Second amount, amount received from underlying coverage was $280,000 —Third amount, amount of required underlying limit was $300,000 — Retainedlimit for Option W was $300,000 — Condition 3 stated that it would only payamount in excess of retained limit up to Option W limit; Option W limit was $1million — Difference in amount payable was $700,000 — Combined total cov-erage was $280,000 from auto policy plus $700,000 from umbrella policy, andthus $980,000 as insureds asserted.

Insurance –––– Agents, brokers and adjusters — Liability of agent to in-sured — Negligence of agent — Failure to provide adequate coverage.

Cases considered by Whitaker J.:

Despotopoulos v. Jackson (1991), 1991 CarswellOnt 3175, [1992] I.L.R. 1-2793, [1991] O.J. No. 1472 (Ont. Gen. Div.) — considered

Heuvelman (Litigation Guardian of) v. White (2004), 16 C.C.L.I. (4th) 1, 2004CarswellOnt 4320, 9 M.V.R. (5th) 186, (sub nom. Heuvelman v. White)[2005] I.L.R. l-4347, (sub nom. Heuvelman v. White) 191 O.A.C. 194,[2004] O.J. No. 4342 (Ont. C.A.) — considered

Keelty v. McDonald Estate (2002), 2002 CarswellOnt 64, 23 M.V.R. (4th) 1, 35C.C.L.I. (3d) 256, (sub nom. Keelty v. Bernique) [2002] I.L.R. I-4074, (subnom. Keelty v. Bernique) 155 O.A.C. 20, (sub nom. Keelty v. Bernique) 209D.L.R. (4th) 648, (sub nom. Keelty v. Bernique) 57 O.R. (3d) 803, [2002]O.J. No. 83 (Ont. C.A.) — considered

Romas v. Prudential Insurance Co. of Canada (1996), 1996 CarswellOnt 4605,[1996] O.J. No. 4185 (Ont. C.A.) — considered

Torrance v. Torrance (1989), 41 C.C.L.I. 218, [1989] I.L.R. 1-2498, 1989 Cars-wellOnt 667, [1989] O.J. No. 1412 (Ont. H.C.) — considered


Rules considered:

Rules of Civil Procedure, R.R.O. 1990, Reg. 194R. 22 — pursuant to

RULING on threshold issue determining combined limit of underinsured motor-ist coverage.

Bryan Rumble, for PlaintiffsThomas J. Donnelly, Sarah L. Jones, for Defendants

Whitaker J.:

What is This Case About?1 The case is about the limits of underinsured motorist insurance cover-

age where the insured have both State Farm Insurance “Auto” and “Um-brella” policies.

2 This dispute is before the court as a Special Case pursuant to Rule 22.This Rule permits the court to determine a question of law where thefacts are agreed and the determination of the issue will shorten or disposeof the case and/or may result in costs savings.

3 The Plaintiffs (the “Cohns”) purchased both State Farm Auto andUmbrella policies from their insurance broker, the defendant John J.Calovic.

4 At the time of purchase, Mr. Calovic told the Cohns they had a maxi-mum of 1.3 million dollars in underinsured motorist coverage under thetwo policies. In the event of a collision, their benefits would equal 1.3million dollars less the amount of coverage held by the at-fault underin-sured motorist.

5 Following an automobile collision with an underinsured motorist inFlorida, the Cohns brought and then settled a claim against State Farm.The underinsured at-fault motorist had $20,000 dollars of insurance.

6 During settlement discussions, State Farm told the Cohns they onlyhad a maximum of 1 million dollars under the two policies (not 1.3 mil-lion as Mr. Colavic had advised) less the insurance held by the underin-sured motorist.

7 The Cohns settled their claim against State Farm for $980,000 on thebasis of the advice from State Farm as to the limits of their insurancecoverage.

Cohn v. Calovic Whitaker J. 109

8 The Cohns then initiated the present action in negligence against Mr.Calovic.

9 The Cohns take the position in this action that the limit of their cover-age is 1 million less the coverage of the underinsured motorist - as theywere told by State Farm. Mr. Calovic (and now State Farm) asserts thatthe limit of coverage under the two policies is as Mr. Calovic had origi-nally advised - 1.3 million less the coverage of the underinsuredmotorist.

10 The parties have agreed that if the position taken by Mr. Calovic (andnow State Farm) is correct, the action will be dismissed. If the positiontaken by the Cohns is correct, the matter will proceed to trial.

11 The question for the court to answer and set out in the Special Caseagreed to by the parties is the following:

Was the combined limit of underinsured motorist coverage for theMarch 13, 2004 motor vehicle accident under the State Farm AutoPolicy and the State Farm PLUP:

(a) $980,000 (the position of the Cohns);

(b) $1,280,000 (the position of Calovic); or

(c) another amount?

12 For reasons which follow, I find that the position of the Cohns — (a)- is correct. The limit of the policy in this claim is $980,000.

What Happened?13 Beyond what I have already described, the balance of undisputed sig-

nificant facts are set out in paragraph 7 of the defendants’ factum: (a) The Cohns obtained an automobile policy (“State Farm Auto

Policy”) and a personal liability umbrella policy (“State FarmPLUP”) through the defendant insurance agent, Calovic.

(b) The State Farm Auto Policy was written on the standard On-tario automobile insurance policy form. It had a limit of lia-bility of $300,000.

(c) The State Farm PLUP is an “umbrella policy”. Umbrella poli-cies issued to homeowners typically provide excess coveragefor home and auto insurance policies. In this case, the StateFarm PLUP had a limit of liability of $1 million.

(d) Prior to the motor vehicle accident at issue, Calovic told Mr.Cohn that he had $1.3 million in underinsured coverage, lessthe insurance limit of the at-fault driver.


(e) The Cohns were involved in an accident in Florida in 2004and were injured in that accident. The at-fault driver, Mr. El-lis, only had $20,000 of insurance.

(f) After obtaining the $20,000 from the Florida driver’s insurer,the Cohns sued State Farm in Ontario (the “UnderinsuredMotorist Coverage Action”). Calovic was not a party to thataction.

(g) State Farm advised the Cohns at the July 2008 mediation ofthe Underinsured Motorist Coverage Action that the applica-ble limit of underinsured motorist coverage was $980,000,plus costs and interest.

(h) The Cohns settled the Underinsured Motorist Coverage Ac-tion with State Farm.

(i) The Cohns then brought this action against the agent,Calovic, seeking damages for negligent misrepresentation.They allege that the applicable limit was $980,000, and not$1.28 million (as represented by Calovic).

What Does The State Farm Auto Policy Say?14 In Ontario, underinsured motorist insurance is optional. It can be pur-

chased under the OPCF 44R “Family Protection Coverage” endorsementas part of the State Farm Auto policy. This endorsement is intended toprovide an injured insured with the same financial protection they wouldhave, had the at-fault motorist held the same limit of liability as theinsured.

15 The parties agree that the limits of insurance under the Auto policyare set out in the OPCF 44R and more particularly in Clauses 4 and 5 ofthat endorsement:

LIMIT OF COVERAGE UNDER THIS CHANGE FORM

4. The insurer’s maximum liability under this change form, regard-less of the number of eligible claimants or insured persons injured orkilled or the number of automobiles insured under this Policy, is theamount by which the limit of family protection coverage exceeds thetotal of all limits of motor vehicle liability insurance ... of the inade-quately insured motorist and of any person jointly liable with thatmotorist.

5. Where this change form applies as excess, the insurer’s maximumliability under this change from is the amount calculated under sec-tion 4 of this change form less the amounts available to eligible


claimants under any first loss insurance referred to in Section 18 ofthis change form.

16 With regard to the application of these provisions to the facts, theparties agree:

(a) the limit of Family Protection Coverage in the State Farm AutoPolicy is $300,000;

(b) the amount held by Mr. Ellis, the at-fault underinsured Floridadriver, was $20,000; and

(c) the Cohns’ $300,000 minus Ellis’ $20,000 results in a limit ofcoverage of $280,000 under the State Farm Auto Policy.

What Does The State Farm PLUP Say?17 As the Cohns did, an insured under an Auto policy may purchase ad-

ditional underinsured motorist coverage under the State Farm PLUP.This coverage is provided by an endorsement identified as “Option W”,and part of the PLUP: Option W is as follows:

UNDERINSURED MOTORIST COVERAGE

You have this option if it is listed with a coverage amount on theDeclaration Page.

DEFINITION — The term “underinsured automobile” means:

An automobile for which no liability bond or insurance applies or aliability bond or insurance policy applies at the time of the loss whichprovides total limits of liability less than the Option W limit of liabil-ity per accident.

Option W - Underinsured and Uninsured Motorist

We will pay, up to the Option W limit, the amount which you andyour passengers are legally entitled to recover as damages from theowner or driver of an underinsured automobile.

These conditions apply:

1. You must maintain underlying limits of at least $100,000 perperson and $300,000 per loss for underinsured and uninsured.

2. The retained limit for Option W is the total amount receivedfor the loss from or on behalf of the liable party plus theamount received from your underlying coverage, but not lessthan the amount of your required underlying limit.

3. We will pay only the amount in excess of the retained limitup to the Option W limit.


4. Option W will apply only when damages are paid by or onbehalf of the liable party or there is payment by your underly-ing coverage.

5. Option W will apply in accordance with the terms and condi-tions of your underlying Uninsured and Underinsured Motor-ist Coverage.

18 Condition 1 of the State Farm PLUP requires underlying Auto cover-age to be eligible for the additional PLUP coverage.

19 Endorsement FE-5757, also part of the PLUP, contemplates that cov-erage under the PLUP may be broader than under the Auto policy. Notethe first paragraph which uses the terms “further broadenings”. The FE-5757 is as follows:

POLICY ENDORSEMENT

In the event of a loss resulting from the ownership, maintenance, op-eration, use, loading or unloading of an automobile insured under thispolicy, coverage under this policy will apply in accordance with theliability coverage provided by the required underlying automobile li-ability policy, subject to any further broadenings under this policy.

This provision also applies to Underinsured Motorist Coverage iflisted as a coverage on the Declarations of this policy.

All other provisions of this policy apply.

What Have the Courts Said about Option W?20 The parties acknowledge that the State Farm Option W has been con-

sidered by this court in a number of cases. These deal, however, withthree issues not raised in the present case and are of limited assistanceother than by way of context and background. These cases stand for thefollowing propositions:

1. Option W is not a policy of auto insurance (Keelty v. McDonaldEstate, 2002 CarswellOnt 64 (Ont. C.A.));

2. Option W is not deductable from the OPCF-44R coverage(Heuvelman (Litigation Guardian of) v. White, 2004 CarswellOnt4320 (Ont. C.A.)); and

3. Option W cannot be stacked on top of liability limits under thesame or other policies (Despotopoulos v. Jackson, 1991 Carswell-Ont 3175 (Ont. Gen. Div.)); Romas v. Prudential Insurance Co. ofCanada, 1996 CarswellOnt 4605 (Ont. C.A.); Torrance v. Tor-rance, 1989 CarswellOnt 667 (Ont. H.C.).


What Are the Limits of Coverage Under the Two Policies?21 The Cohns argue that the issue of the limits of coverage between the

two policies turns narrowly on the meaning of Option W. Further, theysuggest that the words used in Option W (particularly Conditions 2 and3), which describe the limits of coverage, need only be given their plainlanguage meaning.

22 Mr. Calovic agrees that the issue here turns on the correct interpreta-tion of Option W but suggests that this must be understood and construedin the context of the entirety of the two interacting policies.

23 To bring such context to the construction exercise, Mr Calovic makestwo further arguments.

24 Firstly, he suggests that the meaning of Option W can be understoodin part by contrasting the terms of the PLUP with those of the Auto pol-icy. More particularly, he relies on the reference to “further broadenings”in FE5757 in the PLUP. He also attaches significance to the presence ofa “claw back” provision in paragraph 5 of the OPCF 44R in the Autopolicy, absent in the PLUP.

25 The second point made by Mr. Calovic, is the proposition that courtsshould be reluctant as a matter of policy, to interpret contracts of insur-ance so as to limit and narrow the scope of coverage where two compet-ing equally plausible outcomes are possible.

26 I will now address the two particular arguments raised by Mr. Calovicand noted in the last four paragraphs.

27 I accept the submission that FE-5757 in Option W permits broaderPLUP coverage than the underlying Auto policy. The fact that the PLUPcoverage may be broader than the Auto coverage in a particular claimdoes not lead to the conclusion that more rather than less coverageshould exist generally when applying the terms of the policy to deter-mine the value of a claim. This point is of no assistance in interpretingthe provisions of Option W.

28 I also accept the assertion by Mr. Calovic that the PLUP does nothave a “claw back” provision as does paragraph 5 of the OPCF 44R inthe Auto policy. Similarly however, I fail to see how this assists in theinterpretation of the provisions of Option W. That the Auto policy has aclawback provision and the PLUP does not, sheds no light on the mean-ing of the terms of Option W.

29 Finally, even if I were to accept the proposition that courts should bereluctant to interpret contracts of insurance so as to narrow coverage,


where two competing but equally plausible outcomes are available — thetwo proposed outcomes here are not equally compellable.

30 No other portions of the Auto or PLUP policies were relied upon byMr. Calovic in support of his position on the merits.

31 I accept the submission of the Cohns’ that the issue in this case turnson the correct interpretation of Option W. Indeed, I find that the calcula-tion of the total coverage is very much a mathematical computationbased on the particular formula contemplated by Conditions 2 and 3 ofOption W. Condition 2 provides for the calculation of the “retained limitfor Option W”. Condition 3 provides for the calculation of the amountwhich will be paid under the PLUP. I now turn to these calculations.

32 To reiterate, Condition 2 of Option W states: “The retained limit forOption W is the total amount received for the loss from or on behalf ofthe liable party, plus the amount received from your underlying coveragebut not less than the amount of your required underlying limit”. Condi-tion 2 describes three amounts needed to calculate the “retained value forOption W”.

33 The parties agree that the first amount, the “total amount received forthe loss from or on behalf of the liable party” is $20,000.00.

34 The parties agree that the second amount, the “amount received fromyour underlying coverage” is $280,000.00.

35 The parties agree that the third amount, the “amount of your requiredunderlying limit” is $300,000.00.

36 As the first two amounts together are equal to the value of the re-quired underlying limit, the retained limit for Option W is $300,000.

37 Condition 3 of Option W contemplates the determination of twoamounts. It states: “We will pay only the amount in excess of the retainedlimit up to the Option W limit”.

38 The parties agree that the Option W limit referred to in Condition 3 is$1,000,000.00.

39 The amount which the insurer will “pay only” under Option W is theamount above the retained limit ($300,000) and up to the Option W limit($1 million).

40 In other words, the amount payable under the PLUP is the differencebetween the Option W retained limit calculated under Condition 2(300,000.00) and the Option W limit (1,000,000.00). The difference andthe amount payable then is $700,000.00.


41 I find the combined total coverage under both policies is $280,000.00from the Auto policy plus $700,000.00 from the PLUP. This is equal to$980,000.00 as the Cohns assert.

42 The answer to the question asked of the court is (a) “$980,000 (theposition of the Cohns)”.

Outcome43 The plaintiffs are entitled to a declaration that the combined limit of

underinsured motorist coverage under State Farm Auto policy no. 02-5537-F04-60 and State Farm PLUP no. 60-EY-8229-5 for the motor ve-hicle accident which took place in Florida on March 13, 2004 was$980,000.

44 Further, the action is to proceed to trial on the other issues raised inthe pleadings.

45 The parties may make and cost submissions in writing within tendays.

46 Order accordingly.

Order accordingly.


[Indexed as: Shaeen v. Meridian Insurance Group Inc.]

Lillian Shaeen, Plaintiff and Meridian Insurance Group Inc.,Arthur Peterson, Lombard Insurance Company, Lloyd’s Under

Writers, Lloyd’s Under Writers, Omega General InsuranceCompany, Kingsway General Insurance Company and Scottish

& York Insurance Co. Limited, Compagnie D’AssuranceScottish Limitee, Defendants


Docket: 10-47896

2011 ONSC 1578

Stanley Kershman J.



Insurance –––– Actions on policies — Practice and procedure — Summaryjudgment –––– Insured owned rental properties which she had operated sinceher husband’s death — Property was damaged by water — Property had beenvacated by renters and insured was conducting renovations when damage oc-curred — Insurer denied claim on basis that insured did not advise that propertyhad become vacant and vacant property not covered in policy — Insuredbrought action against insurer, agent, and agent’s employee for breach of con-tract, breach of duty and negligence — Defendants brought motion for summaryjudgment — Motion dismissed save with respect to agent’s employee — Genu-ine issues existed for trial — Whether agent had fully discharged duty to warn ofpotential gaps in coverage required trial — Property was not clearly vacated orunoccupied — Terms vacant and unoccupied not defined in policy — Whetherdwelling is vacant or unoccupied is fact driven and dependent on circum-stances — Insured visited property regularly, and had clear intention to rent pro-perty — Parties agreed that agent’s employee covered by doctrine of vicariousliability, and that action against him personally should be dismissed.

Insurance –––– Extent of risk (exclusions) — Casualty insurance — Pro-perty insurance — Vacant property –––– Insured owned rental propertieswhich she had operated since her husband’s death — Property was damaged bywater — Property had been vacated by renters and insured was conducting reno-vations when damage occurred — Insurer denied claim on basis that insured didnot advise that property had become vacant and vacant property not covered inpolicy — Insured brought action against insurer, agent, and agent’s employeefor breach of contract, breach of duty and negligence — Defendants broughtmotion for summary judgment — Motion dismissed save with respect to agent’s

Shaeen v. Meridian Insurance Group Inc. 117

employee — Genuine issues existed for trial — Whether agent had fully dis-charged duty to warn of potential gaps in coverage required trial — Propertywas not clearly vacated or unoccupied — Terms vacant and unoccupied not de-fined in policy — Whether dwelling is vacant or unoccupied is fact driven anddependent on circumstances — Insured visited property regularly, and had clearintention to rent property — Parties agreed that agent’s employee covered bydoctrine of vicarious liability, and that action against him personally should bedismissed.

Cases considered by Stanley Kershman J.:

Fine’s Flowers Ltd. v. General Accident Assurance of Canada Co. (1977), 2B.L.R. 257, [1978] I.L.R. 1-937, 81 D.L.R. (3d) 139, 17 O.R. (2d) 529, 1977CarswellOnt 54, [1977] O.J. No. 2435 (Ont. C.A.) — considered

Fletcher v. Manitoba Public Insurance Corp. (1990), 1990 CarswellOnt 1009,(sub nom. Fletcher v. Manitoba Public Insurance Co.) [1990] I.L.R. 1-2672,1990 CarswellOnt 56, 5 C.C.L.T. (2d) 1, (sub nom. Fletcher v. ManitobaPublic Insurance Co.) 75 O.R. (2d) 373 (note), (sub nom. Fletcher c.Manitoba Public Insurance Co.) [1990] R.R.A. 1053 (headnote only), (subnom. Fletcher v. Manitoba Public Insurance Co.) 74 D.L.R. (4th) 636,[1990] 3 S.C.R. 191, (sub nom. Fletcher v. Manitoba Public Insurance Co.)116 N.R. 1, (sub nom. Fletcher v. Manitoba Public Insurance Co.) 44O.A.C. 81, 1 C.C.L.I. (2d) 1, 71 Man. R. (2d) 81, 30 M.V.R. (2d) 260, EYB1990-67585, [1990] S.C.J. No. 121 (S.C.C.) — considered

Harnden Estate v. Farmers’ Mutual Fire Insurance Co. (Lindsay) (1998), (subnom. Harnden Estate v. Farmers’ Mutual Fire Insurance Co.) [1998] I.L.R.I-3535, 37 O.R. (3d) 745, 1998 CarswellOnt 136, [1997] O.J. No. 4412 (Ont.Gen. Div.) — considered

Wu v. Gore Mutual Insurance Co. (2009), 2009 CarswellOnt 7577, 100 O.R.(3d) 131, 79 C.C.L.I. (4th) 269, [2010] I.L.R. I-4931 (Ont. S.C.J.) — re-ferred to

528852 Ontario Inc. v. Royal Insurance Co. (2000), 2000 CarswellOnt 4332,[2001] I.L.R. I-3908, 24 C.C.L.I. (3d) 116, 51 O.R. (3d) 470, [2000] O.J.No. 4448 (Ont. S.C.J.) — considered

Rules considered:

Rules of Civil Procedure, R.R.O. 1990, Reg. 194R. 20.01(3) — consideredR. 20.04(2)(a) — consideredR. 57.01 — consideredR. 57.01(1)(0.b) [en. O. Reg. 42/05] — considered


Words and phrases considered

vacant

whether a dwelling was “vacant” or “unoccupied” within the meaning of an in-surance policy is fact-driven and will depend on the unique facts of each case.

unoccupied

whether a dwelling was “vacant” or “unoccupied” within the meaning of an in-surance policy is fact-driven and will depend on the unique facts of each case.

MOTION by defendants for summary judgment in action by insured arising outof damage to property.

Miriam Vale Peters, Leanna Olson, for PlaintiffPasquale Santini, for Meridian Insurance Group Inc., Arthur PetersonRory Barnable, for Remaining Defendants

Stanley Kershman J.:

Introduction1 The Defendants, Meridian Insurance Group Inc. and Arthur Peterson

(collectively known as Meridian) and the Defendants, Lombard Insur-ance Company, Lloyd’s Underwriters, Lloyd’s Underwriters, OmegaGeneral Insurance Company, Kingsway General Insurance Company andScottish & York Insurance Co. Ltd and Compagnie d’Assurance ScotishLimitee (collectively known as the Insurers) both bring motions for sum-mary judgment against the Plaintiff to dismiss the action as against eachof them.

2 At the end of the motion, Plaintiff’s counsel agreed that the actionagainst Arthur Peterson could be dismissed since he was an employee ofMeridian resulting in Meridian being vicariously liable for his actions.

3 Accordingly, the action against Mr. Peterson is dismissed.

Factual Background

The Parties4 The Plaintiff is an 85 year old woman who is the registered owner of

375 Madison Ave., Ottawa, Ontario (“Madison” or “Property”). The Pro-perty has been a rental since at least 1983. The Plaintiff has managed thisand seven other rental properties since her husband passed away in 1986.The Plaintiff was responsible for the management of all aspects of theeight properties.

Shaeen v. Meridian Insurance Group Inc. Stanley Kershman J. 119

5 The former Defendant, Arthur Peterson, was an employee of the De-fendant, Meridian Insurance Group, who at the material times was thePlaintiff’s insurance broker for the Property.

6 The Insurer Defendants are the subscribing insurers pursuant to a pol-icy of insurance bearing policy number CCI105618. The allegations inthe Amended Statement of Claim, as against the Insurer Defendants, re-late to the denial of a claim for indemnity made by the Plaintiff in rela-tion to water damage that occurred at the Property.

7 With respect to Meridian, the allegations in the Amended Statementof Claim are that it was negligent and/or in breach of contract in relationto its professional duties towards the Plaintiff.

Material Facts8 Over the years, the Plaintiff was provided with copies of insurance

policies for the Property. The Plaintiff admits that she did not read them.In lieu or reading the materials, the Plaintiff deferred entirely to the ad-vice of Mr. Peterson. According to the Plaintiff, she knew little aboutinsurance so accepted all of Mr. Peterson’s recommendations.

9 Since 1992, Mr. Peterson had been assisting the Plaintiff with ob-taining insurance for her various properties. They developed a profes-sional relationship and Plaintiff relied exclusively on Mr. Peterson forinsurance coverage and advice.

10 The Plaintiff had submitted five claims for indemnity in relation toher insured properties between 1995 and 2009. Mr. Peterson representedthe Plaintiff’s interests in these claims against the insurance company.

11 Included in these eight properties was a commercial property at 1542Bank Street. In the past, that property had been vacant for a period oftime and the Plaintiff obtained a vacancy insurance policy. The Plaintiffadmitted on her cross-examination that she is aware that there was a dif-ference between a vacant building and an occupied building; that a va-cant building needed distinct insurance and that there is a different in-sured risk for a vacant property than an occupied property. However, thePlaintiff claims that she was unaware that these same issues arose withrespect to residential versus commercial property.

12 The loss occurred on or about August 3, 2009. The tenants of theproperty vacated the property by the end of May 2009. Thereafter, thePlaintiff began renovations to the property which commenced at the end


of June 2009 and continued until early August when the home sustainedwater damage as a result of a suspected act of vandalism.

13 The property had not been rented since the end of May 2009. It wasthe Plaintiff’s intention to rent the property again in August 2009 follow-ing the completion of the renovations.

14 While the renovations were taking place, the property was not occu-pied by tenants. The Plaintiff’s evidence is that she visited the propertyon a regular basis while the renovations were taking place. The Plaintiffwas aware that the property was empty but failed to advise the DefendantInsurers of the vacant state of the property.

15 On August 3, 2009, the Plaintiff discovered water damage at the pro-perty and notified Mr. Peterson the following day. The Plaintiff allegesthat the water damage was caused as a result of vandalism.

16 The policy obtained for the property was a Named Perils policy thatprovided indemnity for loss or damage due to specifically insured perils.The policy contains 7 Named Perils, described as:

1. Fire or lightening;

2. Explosion;

3. Impact by aircraft;

4. Spacecraft or land vehicle;

5. Riot, vandalism or malicious acts;

6. Smoke;

7. Leakage from fire protective equipment;

8. Windstorm or hail.17 The policy contains clause 6(a) titled “Excluded Property”, which

states: This form does not insure loss of or damage to: (a) property at loca-tions which, to the knowledge of the insured, are vacant, unoccupiedor shutdown for more than 30 consecutive days”.

18 Pursuant to Statutory Condition 4, which attaches to the policy, theoperation of the contract may be voided where there has been a materialchange in risk:

4. Any change material to the risk and within the control and knowl-edge of the Insured avoids the contract as to the part affected therebyunless the change is promptly notified in writing to the Insurer or itslocal agent [...]


Issues19 On behalf of the Defendant Meridian, the issue is:

1. Is there a genuine issue requiring a trial with respect to whetherMeridian acted negligently and/or in breach of contract?

20 On behalf of the Defendant Insurers, the issue is whether a trial isrequired to determine the following:

1. At the time of the loss, was the property vacant, unoccupied orshut down for more than 30 days, and if so, does the exclusionclause 6(a) exclude coverage for this loss?;

2. Was the change to the property a material change to the risk?

The Law21 Rule 20.01(3) of the Rules of Civil Procedure allows a defendant to

move for summary judgment after delivering a defence.22 Rule 20.01(3) reads as follows:

A defendant may, after delivering a statement of defence, move withsupporting affidavit material or other evidence for summary judg-ment dismissing all or part of the claim in the statement of claim.

23 Rule 20.04(2)(a) of the Rules of Civil Procedure reads as follow: 20.04(2) The court shall grant summary judgment if,

(a) the court is satisfied that there is no genuine issue requiring a trialwith respect to a claim or defence.

24 On a motion for summary judgment, each side is required to put itsbest foot forward. A respondent on a motion for summary judgment isrequired to “lead trump or risk losing.”

Position of the Plaintiff25 The Plaintiff maintains that the Property was never “vacant” or “un-

occupied” within the meaning of the Policy. Although the tenants left theProperty in late May 2009, the Plaintiff visited the Property on a dailybasis in order to supervise the work of various contractors who werecompleting extensive renovations on the Property. The Plaintiff neverabandoned the Property and planned on renting it again once the renova-tions were complete. The Plaintiff’s position is that the insurance Policywas in force at all times.

26 With respect to Meridian and Mr. Peterson, the Plaintiff claims thatthey were negligent in providing her with insurance advice. Mr. Peterson


understood that the Plaintiff was exclusively relying on him for all of herinsurance needs. Mr. Peterson knew that the Property was a rental andmay be empty for periods of time, and according to the Plaintiff, he wasaware that she was completing renovations on the Property. The Plaintiffclaims that Mr. Peterson never advised her that she required additionalcoverage, either at the time she purchased the policy or when she toldhim of the renovations. Further, Mr. Peterson, although being aware thatrenovations were being undertaken at the Property, never asked thePlaintiff about whether the Property was vacant.

Position of the Defendants, Meridian

1. Contract of Insurance27 Meridian argues that statutory condition 4 of the Plaintiff’s insurance

policy states that the insured must promptly advise the insurer of anymaterial change in the risk. Failure to comply with this statutory condi-tion will cause the contract to be void.

28 Section 6(a) of the policy provides that there is no coverage onproperties that are vacant or unoccupied more than 30 consecutive days.

2. Vacancy of the Property29 The Meridian defendants argue that the Plaintiff never told either Mr.

Peterson or Meridian that the property was vacant and that the tenantshad moved out. The Plaintiff recalls telling Mr. Peterson that she was“renovating,” but Mr. Peterson did not recall the conversation.

30 Meridian relies on the fact that in December 2007, there was a va-cancy in a commercial property at 1542 Bank Street which created anexclusion of insurance. The Plaintiff had obtained additional coverage toaccount for the vacancy. Meridian argues that because of this experience,the Plaintiff knew that she had to purchase a different policy of insurancefor vacant property.

31 The Plaintiff is 85 years old and claims that she has no memory is-sues, although she acknowledges that her memory has gone “a bit down-hill” and is not as good as it used to be. The Plaintiff did not record anynotes on her meetings with Mr. Peterson.

3. Vicarious Liability of the Employer32 As this issue has now been resolved, nothing further will be

mentioned.


Position of the Defendant Insurers33 The Insurers claim that at the time the damage to the Property was

sustained, the Property had been “vacant” or “unoccupied” for a periodexceeding 30 days, and as such coverage could be legitimately deniedunder the policy. In support of their position, the Insurers highlight thatthere were no individuals residing at the Property, there were no prospec-tive tenants, and the Property was uninhabitable due to there being noappliances or working bathrooms.

34 Further, the Insurers argue that the change to the property was a “ma-terial change” in risk which placed an onus on the Plaintiff to advise theInsurers of the change. A failure to do so permits the Insurers to avoidtheir obligations under the policy.

35 Like the Defendant Meridian, the Insurers argue that the Plaintiff wasaware that the tenants had left the property, and because of her previousexperience she was aware that she had to purchase additional coverage toaccount for the vacancy.

Analysis

1. Is there a genuine issue for trial with respect to whether Meridianwas negligent or in breach of contract, or both, in its professionaldealings with the Plaintiff?

2. Is there a genuine issue for trial with respect to whether the Insur-ers breached the insurance policy by denying the Plaintiff’s claimfor reimbursement?

36 For the reasons that follow, I find that there are genuine issues requir-ing a trial in respect of the Plaintiff’s claims against both Meridian andthe Insurers. I will deal first with the claim against Meridian.

(i) Meridian37 The Plaintiff alleges that Meridian was negligent or in breach of con-

tract, or both, when it failed to provide her with and advise her aboutproper insurance. As such, the Plaintiff’s claims depend greatly on thescope of the duty of care owed by insurance agents to their clients.

38 In Fletcher v. Manitoba Public Insurance Corp., [1990] 3 S.C.R. 191(S.C.C.), the Court confirmed that insurance agents owe a duty of care totheir clients. Such duty arises when a customer reasonably relies on in-formation provided by an agent, in circumstances where the agent knewor ought to have known that the client would rely on the information


(para. 45). On the facts before the Court, it appears that the Plaintiff re-lied on the information provided by Mr. Peterson and that the high levelof deference she paid to his advice was known to him. Therefore, it ap-pears that Meridian owed a duty of care towards the Plaintiff when pro-viding her with insurance advice and subsequent coverage.

39 This case turns on what specific duties were owed by Meridian, andwhether it fulfilled those obligations. With respect to the scope of theduty owed by insurance agents, the Court in Fletcher approved of thefollowing passage in an earlier decision of the Ontario Court of Appealin Fine’s Flowers Ltd. v. General Accident Assurance of Canada Co.(1977), 17 O.R. (2d) 529 (Ont. C.A.):

In many instances, an insurance agent will be asked to obtain a spe-cific type of coverage and his duty in those circumstances will be touse a reasonable degree of skill and care in doing so or, if he is una-ble to do so, “to inform the principal promptly in order to preventhim from suffering loss through relying upon the successful comple-tion of the transaction by the agent”.

But there are other cases, and in my view this is one of them, inwhich the client gives no such specific instructions but rather reliesupon his agent to see that he is protected and, if the agent agrees todo business with him on those terms, then he cannot afterwards,when an uninsured loss arises, shrug off the responsibility he has as-sumed. [Emphasis added.]

40 The Supreme Court noted that the agent in Fine’s Flowers had beenasked to provide “full coverage” and would have fulfilled his duty to theclient had he informed the client that certain losses were not covered.The agent owed a “positive duty” to the client to warn him of potentialgaps in coverage. Moreover, the Court accepted that private insuranceagents “owe a duty to their customers to provide not only informationabout available coverage, but also advice about which forms of coveragethey require in order to meet their needs” (para. 54). The Court con-cluded with the following:

57 In my view, it is entirely appropriate to hold private insuranceagents and brokers to a stringent duty to provide both informationand advice to their customers. They are, after all, licensed profession-als who specialize in helping clients with risk assessment and in tai-loring insurance policies to fit the particular needs of their customers.Their service is highly personalized, concentrating on the specificcircumstances of each client. Subtle differences in the forms of cov-erage available are frequently difficult for the average person to un-


derstand. Agents and brokers are trained to understand these differ-ences and to provide individualized insurance advice. It is bothreasonable and appropriate to impose upon them a duty not only toconvey information but also to provide counsel and advice. [Empha-sis added.]

41 It is clear from the Supreme Court’s comments that Meridian owedthe Plaintiff a duty to provide detailed advice tailored to her specificneeds. In addition, using the words of the Court, Meridian owed thePlaintiff a “positive duty” to inform her about potential gaps in coverage.In my view, the determination of whether Meridian met its obligationsrequires a trial. The determination of whether Meridian breached its du-ties depends upon the nature of the relationship between the Plaintiff andMr. Peterson, what specific information was conveyed to Mr. Peterson,when that information was given, and what advice Mr. Peterson providedin response, if any. Because many of these facts are in dispute, I find thata trial is necessary.

(ii) The Insurers42 The Plaintiff argues that the Insurers breached the insurance policy

when they denied her claim for reimbursement following the water dam-age to the Property. Both parties agree that the success of the Plaintiff’sclaim depends on whether, at the time the damage was sustained, theproperty had been “vacant” or “unoccupied” for over 30 days. The onuson this motion is on the Insurers to establish that there is no genuineissue for trial with respect to whether the property was “vacant” or “un-occupied” within the meaning of the policy. For the following reasons, Ifind the Insurers have failed to meet this burden.

43 The insurance contract entered into by the parties does not define theterms “vacant” or “unoccupied”; therefore, reference must be made tothe relevant case law to assign meaning to these terms.

44 In Harnden Estate v. Farmers’ Mutual Fire Insurance Co. (Lindsay)(1998), [1997] O.J. No. 4412 (Ont. Gen. Div.), the Court adopted thefollowing definition of the terms “vacancy” and “unoccupied”:

Vacant: deprived of contents, without animate object. It implies en-tire abandonment, non-occupancy for any purpose.

Unoccupied: not used as a residence, when it is no longer used forthe accustomed and ordinary purpose of a dwelling or place of abode,or when it is not the place of usual return and habitual stoppage,hence, a mere temporary absence.


45 In Harnden, after entering into an agreement for purchase and sale,the plaintiffs moved in anticipation of the closing date, taking with themmost of their possession. The deal eventually fell through and the homewas destroyed by fire 40 days after the plaintiffs had left the property.Applying the above definitions to the facts, the Court found that thehome had not been “vacant” or “unoccupied.” The owners had made reg-ular visits to the property, and never had any intention of abandoning thehome. Further, the Court held that if the home had not been “vacant” or“unoccupied,” there was no material change which required notificationto the insurers.

46 A similar fact scenario arose in 528852 Ontario Inc. v. RoyalInsurance Co. (2000), 51 O.R. (3d) 470 (Ont. S.C.J.). After a fire com-pletely destroyed the plaintiffs’ building, the insurer denied coverage be-cause it claimed that the property had been “vacant” or “unoccupied” forover 30 days before the fire. The Court accepted the following Black’sLaw Dictionary of “vacant”:

Vacant: empty, without inanimate objects, deprived of contents; any-thing is vacant when there is nothing in it; “vacant” means aban-doned and not used for any purpose.

47 The Court held that the building had not been “vacant” because anumber of chattels (e.g. filing cabinets, desks, chairs) had remained inthe building. The Court went on to consider whether the dwelling hadbeen “unoccupied” and again cited the Black’s Law Dictionary of theterm:

Unoccupied: when it is not used as a residence, when it is no longerused for the accustomed and ordinary purposes of a dwelling or placeof abode, or when it is not the place of usual return and habitual stop-page. Hence a mere temporary absence of occupants of a dwellinghouse from such premises, with intention to return thereto does notrender the dwelling unoccupied.

48 The Court held that the building had been “unoccupied” resulting in alack of coverage. Notably, the owners lived in another city with no inten-tion of returning, and they had only returned to the property once duringa five-month period.

49 Other cases dealing with the application of the terms “vacancy” and“unoccupied” in relation to insurance claims considered the frequency ofthe visits to the property, any evidence of renovations undertaken on theproperty, and the length of the vacancy: see Wu v. Gore Mutual


Insurance Co. (2009), 100 O.R. (3d) 131 (Ont. S.C.J.); Saavedra v GoreMutual Insurance Company (2008, unreported).

50 I take from these cases that whether a dwelling was “vacant” or “un-occupied” within the meaning of an insurance policy is fact-driven andwill depend on the unique facts of each case. The following is a non-exhaustive list of factors to be considered:

• Non-residence is not a determinative factor. It does not automati-cally result in the property being “vacant” or “unoccupied”: seeHarnden.

• The frequency of visits to the property: see 528852 Ontario Inc.,Harnden.

• Intention or lack of intention to abandon the property.

• The length of the vacancy.51 Given that the Plaintiff visited the property on an almost daily basis

with the clear intention of continuing to rent the property when the reno-vations were completed, I cannot conclude on this motion that the pro-perty was “vacant” or “unoccupied.” She clearly had no intention ofabandoning the property and made extensive and frequent, if not daily,visits to the property. For these reasons, summary judgment is dismissedin respect of the Plaintiff’s claim against the Insurers.

Costs

(i) Defendant Insurers52 The Insurer Defendants were not successful on the motion for sum-

mary judgment. According to their costs outline they were seeking costsof $27, 373.31 on the motion on a partial indemnity basis and $28,543.07on a full indemnity basis, including disbursements and HST.

(ii) Defendant Meridian53 The Defendant Meridian was unsuccessful on the motion for sum-

mary judgment save and except at the end of the motion when the Plain-tiff consented to dismissing the claim against Mr. Peterson. According totheir costs outline, they were seeking costs of $15,043.60 on a partialindemnity basis and $21,980.04 on a substantial indemnity basis, includ-ing disbursements plus HST.


(iii) The Plaintiff54 The Plaintiff was successful on the motion, save and except that at the

end of the motion, when counsel consented to the dismissal of the actionagainst Mr. Peterson. Their claim for costs was $38,013.00 on a partialindemnity basis.

Analysis55 Taking into consideration the factors set out in Rule 57.01 of the

Rules of Civil Procedure and in particular, Rule 57.01(0.b), the costs thatan unsuccessful party could reasonably expect to pay, the Court fixescosts payable by the Defendant Meridian at $7,500.00 inclusive of dis-bursements and HST.

56 The Court fixes the costs payable by the Defendant Insurers at thesum of $10,000.00 inclusive of disbursements and HST.

57 These costs are to be paid within 30 days, failing which the party whohas not paid its costs shall not be able to take any fresh step in the litiga-tion until such costs have been paid.

58 Order accordingly,

Motion granted in part.

Elliott v. Industrial Alliance Pacific Insurance Co. 129

[Indexed as: Elliott v. Industrial Alliance Pacific InsuranceCo.]

Tammy Elliott, Plaintiff and Industrial Alliance PacificInsurance Company and First Line Mortgage, Defendants


Docket: C-9309-06

R.D. Gordon J.

Heard: April 1, 2011

Judgment: April 5, 2011

Insurance –––– Actions on policies — Practice and procedure — Costs —General principles –––– In February 2003, plaintiff and her husband took outlife and disability insurance — On application, both responded “no” to query asto “whether within the past 24 months either of them had attended a medicalfacility, consulted a physician, been diagnosed with, taken prescribed medica-tion or been treated for alcohol or drug abuse” — In December 2004, husbanddied from injuries sustained in motor vehicle accident — On January 19, 2003husband attended hospital and was diagnosed with ingestion of alcohol anddrugs, loss of consciousness secondary to ingestion of drugs, and laceration toforehead — Insurer opined that husband misrepresented his true medical historyand declined plaintiff’s request for payment — Plaintiff commenced action forpayment on policy and moved for summary judgment — After exchange of affi-davits and cross-examination of deponents of insurer’s affidavits, plaintiff aban-doned her motion for summary judgment — Insurer sought its costs of motionon substantial indemnity basis — Judge ruled that insurer was entitled to itscosts on substantial indemnity basis — Plaintiff did not point to any informationdiscovered subsequent to bringing motion for summary judgment that causedher to reassess its veracity, rather, she pointed to information that was not re-ceived from insurer as reason for abandonment — If plaintiff was unhappy withrefusals given by insurer’s representatives on cross-examination, or its refusal toprovide documents, she could have brought motion to compel answers and pro-duce requested documents — Plaintiff’s failure to pursue her remedy could notnow be used to excuse her abandonment of motion — It ought to have beenclear to plaintiff that there was genuine issue for trial, namely, whether husbandmade material misrepresentation in his insurance application — At very least,doctor’s diagnosis that husband lost consciousness due to ingestion of drugmight reasonably be construed as diagnosis that he had abused that drug — In-surer was entitled to $4,000 as costs relative to motion for summary judgment,on substantial indemnity basis, and $3,000 as costs relative to issue of costs ofabandoned motion, on partial indemnity basis.


Civil practice and procedure –––– Costs — Costs of particular proceed-ings — Miscellaneous –––– Abandoned motion — In February 2003, plaintiffand her husband took out life and disability insurance — On application, bothresponded “no” to query as to “whether within the past 24 months either of themhad attended a medical facility, consulted a physician, been diagnosed with,taken prescribed medication or been treated for alcohol or drug abuse” — In De-cember 2004, husband died from injuries sustained in motor vehicle accident —On January 19, 2003 husband attended hospital and was diagnosed with inges-tion of alcohol and drugs, loss of consciousness secondary to ingestion of drugs,and laceration to forehead — Insurer opined that husband misrepresented histrue medical history and declined plaintiff’s request for payment — Plaintiffcommenced action for payment on policy and moved for summary judgment —After exchange of affidavits and cross-examination of deponents of insurer’s af-fidavits, plaintiff abandoned her motion for summary judgment — Insurersought its costs of motion on substantial indemnity basis — Judge ruled that in-surer was entitled to its costs on substantial indemnity basis — Plaintiff did notpoint to any information discovered subsequent to bringing motion for summaryjudgment that caused her to reassess its veracity, rather, she pointed to informa-tion that was not received from insurer as reason for abandonment — If plaintiffwas unhappy with refusals given by insurer’s representatives on cross-examina-tion, or its refusal to provide documents, she could have brought motion to com-pel answers and produce requested documents — Plaintiff’s failure to pursue herremedy could not now be used to excuse her abandonment of motion — It oughtto have been clear to plaintiff that there was genuine issue for trial, namely,whether husband made material misrepresentation in his insurance applica-tion — At very least, doctor’s diagnosis that husband lost consciousness due toingestion of drug might reasonably be construed as diagnosis that he had abusedthat drug — Insurer was entitled to $4,000 as costs relative to motion for sum-mary judgment, on substantial indemnity basis, and $3,000 as costs relative toissue of costs of abandoned motion, on partial indemnity basis.

Rules considered:

Rules of Civil Procedure, R.R.O. 1990, Reg. 194R. 20.06 — consideredR. 37.09 — referred toR. 37.09(3) — considered

RULING on costs.

Christopher D. McInnis, for PlaintiffRobert C. Dunford, for Industrial Alliance Pacific Insurance CompanyNo one for First Line Mortgage

Elliott v. Industrial Alliance Pacific Insurance Co. R.D. Gordon J. 131

R.D. Gordon J.:

Overview1 The Plaintiff’s claim in this action is for payment on a policy of insur-

ance taken with the Defendant in February of 2003. The policy providedlife and disability insurance to cover a loan taken out by the Plaintiff andher spouse Mark Fitzgerald. Mr. Fitzgerald died in December of 2004 asa result of injuries suffered in a motor vehicle accident a few weeksearlier.

2 When the Plaintiff and her spouse applied for the insurance they wererequired to respond to various questions including whether within thepast 24 months either of them had attended a medical facility, consulteda physician, been diagnosed with, taken prescribed medication or beentreated for alcohol or drug abuse. They both answered “no” to this ques-tion. When the Defendant was reviewing the deceased’s medical recordsin support of the Plaintiff’s claim, it discovered that Mr. Fitzgerald hadbeen treated on January 19, 2003 at the Sudbury General Hospital atwhich time Dr. Robert S. Lepage had diagnosed: 1. Ingestion of alcoholand drugs; 2. Syncope secondary to ingestion of drugs; 3. Laceration toforehead. Syncope means a loss of consciousness. The drug referred towas gamma hydroxybutrate (GHB) known colloquially as the date rapedrug. In light of this information, the Defendant took the position thatMr. Fitzgerald misrepresented his true medical history when answeringthe question set out above and declined the Plaintiff’s request for pay-ment. This action ensued.

3 Prior to affidavits of documents being exchanged or discoveries beingconducted, the Plaintiff brought a motion for summary judgment. Fol-lowing the exchange of affidavits and after the solicitor for the Plaintiffhad cross-examined the deponents of the Defendant’s affidavits, thePlaintiff abandoned her motion for summary judgment. The Defendantnow seeks its costs of the motion on a substantial indemnity basis.

Applicable Legal Principles4 Rule 20.06 provides that the court may fix and order payment of the

costs of a motion for summary judgment by a party on a substantial in-demnity basis if the party acted unreasonably by making or responding tothe motion, or the party acted in bad faith for the purpose of delay.

5 Rule 37.09(3) provides that where a motion is abandoned or isdeemed to have been abandoned, a responding party on whom the notice


of motion was served is entitled to the costs of the motion forthwith,unless the court orders otherwise.

6 Counsel have provided me with several conflicting cases on the issueof costs arising from the abandonment of a motion for summary judg-ment, however, all of the cases referenced were from prior to January 1,2010 when Rule 20.06 underwent revision to eliminate the presumptionin favour of substantial indemnity costs.

7 Having regard to the new provisions of Rule 20.06 and having re-viewed the authorities cited by counsel, it is my view that costs of anabandoned summary judgment motion should be approached as follows:

(1) The Respondent on the motion for summary judgment is pre-sumed to be entitled to costs payable forthwith on a partial indem-nity basis under Rule 37.09, however this presumption may bedisplaced in the court’s discretion.

(2) The Moving Party may ask the court to make some other order,such as no costs or partial costs, payment other than forthwith, orcosts in the cause. Where any such request is made, the onus willrest with the Moving Party.

(3) The Respondent on the motion may ask the court to order costs ona substantial indemnity basis. If it does so it may, in addition toany other grounds for the request, seek to establish under Rule20.06 that the moving party acted unreasonably by making themotion or acted in bad faith for the purpose of delay. In such aninstance, the onus will rest with the Respondent.

8 In the case before me, the Respondent (the Defendant) is seeking anorder for costs on a substantial indemnity basis. The Plaintiff asks forcosts in the cause.

Analysis9 The Plaintiff’s motion for summary judgment was brought on the ba-

sis that the question asked of Mr. Fitzgerald was not whether he had usedalcohol or drugs, or even if he had abused alcohol or drugs, but whetherhe had “attended a medical facility, consulted a physician, been diag-nosed with, taken prescribed medication or been treated for” alcohol ordrug abuse. According to the Plaintiff, Mr. Fitzgerald was not treated forabuse of alcohol or drugs during his visit to the hospital in January of2003, but was treated for injuries which may have arisen from his use ofalcohol or drugs. The Plaintiff maintains that it was reasonable to have


brought the motion and that its abandonment arose because of the Defen-dant’s deponents refused to answer certain questions posed during thecross-examination and refused to produce certain documents which wererequested. Without those answers and documents, the Plaintiff made atactical decision to abandon the motion for summary judgment. Counselsuggests that in the fullness of time those answers will be made and thosedocuments provided, and if the Plaintiff is successful at trial it should bepaid the costs it has incurred on this motion.

10 The Defendant takes the position that its refusals to answer and pro-duce documents as requested at the cross-examination of its client’s rep-resentatives were entirely appropriate and if the Plaintiff disagreed, herremedy was to bring a motion to compel. Her failure to do so and herelection to abandon her motion for summary judgment should not be thebasis for an award of costs as requested by her.

11 In addition, the Defendant argues that the Plaintiff was in possessionof the hospital records of January 2003 when she brought the motion forsummary judgment. She therefore knew that Mr. Fitzgerald had been di-agnosed with ingestion of alcohol and drugs and loss of consciousnessdue to ingestion of drugs. As such, she had to have known that there wasa genuine issue for trial and it was unreasonable for her to have broughtthe motion for summary judgment. Counsel argues that nothing changedafter the motion was brought that might entitle the Plaintiff to argue thatshe had reassessed the veracity of the motion and determined that itshould be abandoned.

12 I agree with the Defendant. The Plaintiff has not pointed to any infor-mation discovered subsequent to bringing the motion for summary judg-ment that caused her to reassess its veracity. Rather, she has pointed toinformation that was not received from the Defendant as the reason forabandonment. If the Plaintiff is unhappy with refusals given by the repre-sentatives of the Defendant on cross-examination, or its refusal to pro-vide documents, she has a remedy — to bring a motion to compel theanswers and produce the requested documents. Her failure to pursue herremedy cannot now be used to excuse her abandonment of the motion.

13 In my view, it ought to have been clear to the Plaintiff that there wasa genuine issue for trial, namely, whether Mr. Fitzgerald made a materialmisrepresentation in his application for insurance. At the very least, Dr.Lepage’s diagnosis that Mr. Fitzgerald lost consciousness due to inges-tion of GHB might reasonably be construed as a diagnosis that he hadabused that drug.


14 I am of the view that the Defendant is entitled to its costs on a sub-stantial indemnity basis.

Quantum of Costs15 The Defendant has filed a costs outline for the motion for summary

judgment and a separate costs outline for dealing with the issue of costs.He has conceded that the costs outline for the motion for summary judg-ment is overstated by about $2,000 due to inclusion of work relative tothe Plaintiff’s motion to have the Defendant’s deponents discovered inOntario.

16 The work on the motion for summary judgment included receipt andreview of the Plaintiff’s two page affidavit and exhibits, the preparationof responding affidavits and the attendance at cross-examinations.

17 I have reviewed the affidavits filed by the Defendant in the summaryjudgment motion. Although they contain the information necessary to ar-gue the motion, they are also replete with evidence and exhibits chroni-cling efforts made to obtain the medical records of Mr. Fitzgerald. In thecontext of the motion for summary judgment I am unable to discern therelevance of this evidence, which makes up a substantial portion of thedocumentation.

18 The attendance at cross-examination of the Defendant’s deponents in-volved less than two hours.

19 Having regard to the above an appropriate amount for costs relative tothe motion for summary judgment, on a substantial indemnity basis, is$4,000.00.

20 The Defendant’s costs outline relative to the issue of costs indicates aclaim for $6,683.08 on a substantial indemnity basis or $5,085.03 on apartial indemnity basis. In support of its position the Defendant filed afour page affidavit and 170 pages of exhibits most of which chronicledthe history of the action and the motion for summary judgment. Again, Ido not see the evidentiary value of the bulk of the supplementary motionrecord which was prepared and filed. I also have some difficulty with thedisbursement claim of $1,855.03 for a return flight from Toronto toSudbury and one night accommodation. In all, it is appropriate to assesspartial indemnity costs of $3,000.00 relative to the issue of costs of theabandoned motion.


Other21 The Plaintiff is of limited means. No doubt this costs award of

$7,000.00 will represent a significant amount for her to pay. Presumably,she alone continues to be responsible for the loan which she and Mr.Fitzgerald took out and which was the genesis of the insurance in ques-tion. Given these circumstances, it is appropriate that the costs be or-dered paid within 60 days of the issuance of any order which finally dis-poses of this action.

Order accordingly.


[Indexed as: Essa v. Panontin]

Jonathon Essa and Reginald Essa, Plaintiffs and Larry Panontin,Robert Panontin and Mills Manufacturing Acrylic Products

Limited, Defendants


Docket: Thunder Bay CV-07-0276

2011 ONSC 884

D.C. Shaw J.

Heard: December 21, 2010


Insurance –––– Miscellaneous issues –––– Interest in life insurance policy wastransferred to defendant, who transferred beneficial interest to brother — Plain-tiff brought action against defendants — Plaintiff obtained order extending timefor service — Defendant brought motion to set aside order extending time forservice — Motion dismissed — Discussions regarding policy had been ongoingbetween parties and plaintiff did not wish to worsen situation by filing statementof claim — As lawyer involved in transfer of interest in proceeds had acted forboth parties, he did not wish to be involved and therefore certain informationwas unavailable — Defendants had made inquiries regarding proceeds — Mate-rial facts before issuing judge were not wrong, and cross-examination would nothave changed order — Extension of time for service would advance just resolu-tion of dispute without prejudice or unfairness — Defendants’ details were lack-ing regarding claim that evidence would not be available — Fact that defendantcould not access insurance proceeds was not prejudice in terms of extension oftime.

Civil practice and procedure –––– Service of originating process — State-ment of claim — Manner of service — Time for service –––– Interest in lifeinsurance policy was transferred to defendant, who transferred beneficial interestto brother — Plaintiff brought action against defendants — Plaintiff obtained or-der extending time for service — Defendant brought motion to set aside orderextending time for service — Motion dismissed — Discussions regarding policyhad been ongoing between parties and plaintiff did not wish to worsen situationby filing statement of claim — As lawyer involved in transfer of interest in pro-ceeds had acted for both parties, he did not wish to be involved and thereforecertain information was unavailable — Defendants had made inquiries regardingproceeds — Material facts before issuing judge were not wrong, and cross-ex-amination would not have changed order — Extension of time for service wouldadvance just resolution of dispute without prejudice or unfairness — Defend-

Essa v. Panontin D.C. Shaw J. 137

ants’ details were lacking regarding claim that evidence would not be availa-ble — Fact that defendant could not access insurance proceeds was not prejudicein terms of extension of time.

Cases considered by D.C. Shaw J.:

Chiarelli v. Wiens (2000), 2000 CarswellOnt 280, 43 C.P.C. (4th) 19, 46 O.R.(3d) 780, (sub nom. Chiarelli v. Weins) 129 O.A.C. 129, [2000] O.J. No. 296(Ont. C.A.) — considered

Coupey v. Hamilton Police Services Board (2005), 2005 CarswellOnt 2220,[2005] O.J. No. 2223 (Ont. S.C.J.) — followed

Kalantzis v. Cameron (2008), 2008 CarswellOnt 7531, [2008] O.J. No. 4951(Ont. S.C.J.) — considered

Rules considered:

Rules of Civil Procedure, R.R.O. 1990, Reg. 194R. 37.14(1) — pursuant toR. 39.01(6) — considered

MOTION by defendant to set aside extension of time to file plaintiff’s claim.

Morris Holervich, for PlaintiffsChantal Brochu, for Defendants, Larry Panontin, Mills Manufacturing Acrylic

Products LimitedTerry-Lynn Miettinen, for Defendant, Robert Panontin

D.C. Shaw J.:

1 On September 18, 2009, Smith J. granted an order on a motion with-out notice, extending the time for service of the statement of claim. Thisis a motion by the defendants, Larry Panontin and Mills ManufacturingAcrylic-Productions Limited (“MMA”), brought pursuant to Rule37.14(1) to set aside that order. The defendant, Robert Panontin, supportsthe motion.

Background:2 This matter arises out of business dealings between the plaintiff,

Jonathon Essa (“Mr. Essa”), and the defendant Larry Panontin (“Mr. Pa-nontin”). The plaintiffs allege that the two men entered into a contractarising out of a proposal made by Mr. Panontin on July 13, 2005. Theplaintiffs allege that Mr. Panontin breached the contract. The defendantsdeny there was a contract or that they breached any of the provisions ofthe proposal of July 13, 2005. The claim relates to a life insurance policy


in the amount of $1,000,000.00 on the life of Demetre Chronopoulos.Mr. Essa was initially the owner and sole beneficiary of the policy. Theinterests in the policy changed as follows:

• July 6, 2004: Mr. Essa transferred 50% of both the ownership andthe beneficial interest of the insurance policy to Mr. Panontin.

• June 3, 2005: Mr. Essa transferred 80% of the beneficial interestin the policy to Mr. Panontin; 20% remaining with Mr. Essa.

• June 10, 2005: Mr. Essa transferred 100% of the beneficial inter-est in the insurance policy to Mr. Panontin.

• August 5, 2005: Mr. Essa transferred 100% of the ownership andconfirmed the 100% beneficial interest in the insurance policy toMr. Panontin.

• August 13, 2009: Mr. Panontin transferred 100% of the beneficialinterest in the life insurance policy to his brother, Robert Panontin,and retained 100% of the ownership.

3 On August 31, 2009, the insured, Demetre Chronopoulos, died.4 The plaintiffs commenced this action against the defendants, Mr. Pa-

nontin and MMA, by way of notice of action issued on June 29, 2007.The statement of claim was filed on July 26, 2007. No steps were takento serve the statement of claim until the plaintiffs brought their motionwithout notice before Smith J. on September 18, 2009, requesting an or-der extending the time for service. Smith J. ordered that the time for ser-vice of the statement of claim be extended to October 31, 2009. Thestatement of claim was served on September 18, 2009.

5 On September 28, 2009, the defendants brought the within motion,initially returnable October 8, 2009, to set aside the September 18, 2009,order of Smith J. Cross-examinations on affidavits filed in this motionwere not completed until the Fall of 2010.The motion was heard by meon December 21, 2010. On October 15, 2009, 50% of the proceeds of theinsurance policy, totalling $500,000.00 were frozen pursuant to anotherorder of Smith J.

6 The statement of claim was amended on March 10, 2010, pursuant tothe order of Fregeau J. dated January 29, 2010. These amendments addedthe defendant, Robert Panontin, as a party to these proceedings and ad-ded a claim that the transfer of the beneficial interest in the life insurancepolicy on August 13, 2009, to Robert Panontin be set aside as a fraudu-lent conveyance.


7 The evidence before Smith J. on September 18, 2009, was in an affi-davit sworn September 17, 2009, by Linda Boulter, a legal assistant forChristopher Hacio, the plaintiffs’ present solicitor whom they had re-tained shortly before the September 18, 2009, motion was brought. Theplaintiffs had previously been represented by another law firm which hadcommenced the action. Ms. Boulter deposed that all of the information inher affidavit had been provided to her by Mr. Essa. The information fromMr. Essa set out in some detail the basis for the plaintiffs’ claim, infor-mation about the transfer of his interest in the life insurance policy to Mr.Panontin and the fact that Demetre Chronopoulos had passed away onAugust 31, 2009. Mr. Essa was not aware at the time of the affidavit thatLarry Panontin had transferred 100% of the beneficial interest in the lifeinsurance policy to Robert Panontin on August 13, 2009.

8 The evidence as to the delay in serving the statement of claim, as setout in Ms. Boulter’s affidavit can be summarized as follows:

The plaintiffs attempted to negotiate a resolution of their ongoingdispute with the defendants after the notice of action had been issuedand the statement of claim had been filed. Mr. Essa was optimisticthat the plaintiffs could work out an arrangement with Mr. Panontin.Laird Scrimshaw, a lawyer in Thunder Bay, had done most of thelegal work for the parties in the matter and he had been retained bythe plaintiffs to assist them in trying to work out with the defendantsa mutually agreeable resolution to the dispute. Mr. Scrimshaw sentthe defendants several letters in hope that the matter could be re-solved. A letter from Mr. Scrimshaw, dated January 9, 2006, ad-dressed to Mr. Essa and Mr. Panontin was attached as an exhibit. Theplaintiffs wanted to give the defendants a reasonable period of timeto fulfill their contractual obligations. They did not want to servetheir statement of claim and make a bad situation worse. As timepassed, it became apparent to the plaintiffs that the defendants had nointention of satisfying the contract. There was no urgency until thedeath of Mr. Chronopoulos on August 31, 2009, following which thedefendants were in the process of obtaining the proceeds of the lifeinsurance policy.

Submissions:9 The defendants submit that the order of Smith J. extending the time

for service of the statement of claim should be set aside because theplaintiffs failed to make full and fair disclosure in the affidavit of Ms.Boulter.


10 The defendants submit that the facts before Smith J. would have ledhim to believe that there were ongoing negotiations between the partiesafter the notice of action was issued in June 2007. The defendants submitthat Mr. Essa has made only bald allegations in this regard, with no par-ticulars to substantiate these assertions. The defendants emphasize thatMr. Panontin denies that he had any negotiations with Mr. Essa in 2007,2008 and 2009. Mr. Panontin asserts that all negotiations occurredthroughout 2006 and that all communications ended in January 2007.

11 Mr. Essa was cross-examined on the statement in Ms. Boulter’s affi-davit that the plaintiffs attempted to negotiate a resolution of their dis-pute with the defendants after the notice of action was issued in June2007. He testified that during 2007, he had contact with Mr. Panontin onthree occasions which he could specifically recall, and on not more than8 occasions in total that year. He testified that in 2008 he could recall onemeeting at a Tim Horton’s restaurant with Mr. Panontin and that hecould recollect calling Mr. Panontin on three occasions in 2009, includ-ing in August 2009. He testified that Mr. Panontin would always saywords to the effect “Don’t worry about it, we’ll solve the problem, we’llfigure out a way to make it square, we have the guarantee but we won’tgo after your father.” Mr. Essa was unable to produce any documents toverify this evidence. In answer to an undertaking to produce his cellphone records, he responded that his cell phone records were at 450 Me-morial Avenue, Thunder Bay, which was closed. He testified that he wasnot allowed to enter the building.

12 Mr. Essa was also cross-examined on the involvement of Mr. Scrim-shaw in the dispute. Mr. Scrimshaw had been jointly retained by the par-ties. In his letter of January 9, 2006, attached as an exhibit to Ms.Boulter’s affidavit, Mr. Scrimshaw stated:

The Larry/Jon deal in respect to the payment of $107,000 to Prime inexchange for the balance of the life insurance policy of Mr. Chrono-poulos has apparently broken down or gone by the wayside. The in-surance has apparently been transferred to Larry and he has placed usin trust funds of $30,000.00 but is now seeking return of those funds(less costs incurred) at this time. It would appear to me that if thetransaction is going to be unwound, Larry should be returning theportion of the insurance policy to Jon to put the parties back wherethey were. This is for the parties to determine however. My immedi-ate concern is the RBC motion, and returning Mr. Panontin’s fundsto him, subject to the anticipated costs of this potentially explosiveand dangerous exercise.


13 Mr. Essa testified that he believed that Mr. Scrimshaw was involvedwith the matter between himself and Mr. Panontin in 2007. He testifiedthat he spoke to Mr. Scrimshaw after the claim had been issued, in gen-eral terms that he was pursuing a lawsuit based on Mr. Panontin not liv-ing up to his agreement. He could not recall the details of the conversa-tion, or when or where. He testified that he most likely had othercommunications with Mr. Scrimshaw concerning the lawsuit. He testi-fied that Mr. Scrimshaw had conversations with Mr. Panontin concerningthe claim, but he could provide no other details. In answer to an under-taking, he responded that he had not found any documents in his posses-sion regarding correspondence from Mr. Scrimshaw concerning the ne-gotiation between the parties. He testified that Mr. Scrimshaw hadinformed him that he did not want to get involved on any level with ei-ther party until he had to.

14 It appears that neither party has requested that Mr. Scrimshaw pro-duce his files on the matter.

15 The defendants take issue with the assertion in Ms. Boulter’s affidavitthat there was no urgency until Mr. Chronopoulos passed away and thatthe defendants were in the process of obtaining the life insuranceproceeds.

16 Mr. Essa testified on cross-examination that he spoke to the insurerafter the death of Mr. Chronopoulos and was advised that there had beena series of phone calls and correspondence inquiring about the policy.The insurer would not provide him with further particulars.

17 The defendants also submit that they have been prejudiced by the de-lay in service of the statement of claim. They point to the problem offading memories, difficulty in obtaining evidence and the lapse of timeprescribed for service of the statement of claim. They submit that thegreatest prejudice is that Mr. Panontin had no notice of the claim whenhe transferred his beneficial interest in the policy to his brother on Au-gust 13, 2009. The defendants submit that Mr. Panontin is now exposedto liability to his brother.

18 The defendants also submit that to allow the plaintiffs to extend thetime for service of the statement of claim, after they had made a deliber-ate decision not to serve it, for no justifiable reason, would defeat thepurpose of limitation periods.

19 The defendant, Robert Panontin, refers to Chiarelli v. Wiens, [2000]O.J. No. 296 (Ont. C.A.) which sets out the proposition that in decidingwhether to extent the time for service of a statement of claim, the basic


consideration for the court is whether the extension will advance the justresolution of the dispute, without unfairness or prejudice to the parties.

20 Robert Panontin also refers to Kalantzis v. Cameron, [2008] O.J. No.4951 (Ont. S.C.J.), at para. 23, where Bielby J. draws the following fiveprinciples from Chiarelli:

1. the court should not extend the time for service if to do sowould prejudice the defendant.

2. the plaintiff bears the onus of demonstrating that the defen-dant would not be prejudiced by the extension.

3. the defendant has an evidentiary obligation to provide somedetails of the prejudice that would flow from the extension oftime for service.

4. the defendant cannot create prejudice by its failure to dosomething that it reasonably could have or ought to havedone.

5. prejudice that will defeat an extension of time for servicemust be caused by the delay.

21 Robert Panontin submits that the extension of time for service of thestatement of claim granted by Smith J. does not advance the just resolu-tion of the dispute, without prejudice or unfairness to him, because not-withstanding his position as beneficiary of the policy and his entitlementto the proceeds following the death of Mr. Chronopoulos, he has beenprevented from receiving 50% of the proceeds of the insurance policythat have been frozen by the order of Smith J. on October 15, 2009.

22 Robert Panontin submits that he has been prejudiced by the delay andthe extension of time for service. He submits that he accepted the changeto the beneficiary designation in satisfaction of debts owing to him by hisbrother. He submits that had the statement of claim been served in accor-dance with the time prescribed by the Rules, he would have been awareof the claim to the policy and would not have accepted the beneficiarydesignation in satisfaction of the debts owing by his brother.

23 Robert Panontin also submits that he has been prejudiced by beingadded as a party to the litigation, which he would not have been if he hadnot accepted the beneficiary designation.

24 Robert Panontin submits that the expiry of a limitation period sup-ports or creates a presumption that he has been prejudiced.

25 The plaintiffs submit that the defendants have not shown that the factsset out in Ms. Boulter’s affidavit misled Smith J. when he made his order


extending the time for service of the statement of claim or that there arematerial facts missing from the affidavit. The plaintiffs submit that al-though the statements of Mr. Essa as to his attempts to negotiate a resolu-tion of the dispute with Mr. Panontin may be “bald assertions”, so too areMr. Panontin’s statements that Mr. Essa did not contact him after thenotice of action was issued to attempt to negotiate a resolution. Whetheror not there were any negotiations between the parties is a live issue. Theplaintiffs submit that the affidavit of Ms. Boulter shows that the plaintiffsmade a deliberate decision to refrain from serving the statement of claimin order to keep from making a bad situation worse, so as to allow nego-tiations to take place. As such, the plaintiffs submit that it is not materialwhether or not Mr. Essa told Mr. Panontin that an action had been com-menced. In any event, the plaintiffs submit that there was nothing in thematerial before Smith J. that would lead the court to believe that Mr.Panontin had knowledge of the action.

26 With respect to the allegation that the court was misled about the ur-gency of the matter and that the defendants were in the process of ob-taining the life insurance proceeds, the plaintiffs submit that it was rea-sonable for Mr. Essa to make this statement because Mr. Chronopouloshad just recently died and inquiries had been made of the insurer imme-diately thereafter.

27 The plaintiffs submit that the evidence of Mr. Panontin as toprejudice is purely speculative. The plaintiffs state that the relevant docu-ments will be available in the files of the solicitors involved, that wit-nesses are available, that the defendants are free to raise any limitationdefences and that Mr. Panontin has been aware from the outset of thedispute that it has never been resolved to the plaintiffs’ satisfaction. Theplaintiffs also submit that there has been no prejudice to Robert Panontin.Prejudice, the plaintiffs contend, means that the parties have been hin-dered from effectively carrying on the litigation, for example that wit-nesses or documents have disappeared, or that a party has closed its filesand has lost the ability to investigate a claim. The plaintiffs submit thatbeing made a party to an action does not constitute prejudice. The plain-tiffs point out that the transfer of the beneficiary designation was fromLarry Panontin to Robert Panontin, personally, whereas the alleged debtsfor which the transfer was said to be consideration, are from Larry Pa-nontin’s company to Robert Panontin’s company.


Discussion:28 The defendants’ rely, firstly, on Rule 39.01(6):

(6) Where a motion or application is made without notice, the mov-ing party or applicant shall make full and fair disclosure of all mate-rial facts, and failure to do so is in itself sufficient ground for settingaside any order obtained on the motion or the application.

29 In Coupey v. Hamilton Police Services Board, [2005] O.J. No. 2223(Ont. S.C.J.), Spies J. reviewed the case law interpreting Rule 39.01(6). Iadopt her reasoning. At para. 22, Spies J. stated:

“The requirement to make full disclosure is mandatory and for goodreason given the nature of ex parte motions. The wording of the ruleis clear however, that although a finding that there has been a failureto make “full and fair disclosure of all material facts” is in itself asufficient ground to set aside the order, the rule does not mandate thisresult. The court retains the discretion with respect to whether theorder ought to be set aside. The rule also leaves open the question ofwhat is a “material” fact.

30 Spies J. found, at paras. 23-40, that the question to be considered indetermining what are “material facts” is whether or not disclosure of theomitted facts might have had an impact on the granting of the order inthat it could be said that the order may well not have been made if properdisclosure had been given.

31 Did the plaintiffs make full and fair disclosure of all facts material tothe decision of Smith J.?

32 The defendants focus on the first sentence of paragraph 10 of the affi-davit of Ms. Boulter:

The Plaintiffs attempted to negotiate a resolution of their ongoingdispute with the Defendants after they issued the Notice of Actionand Statement of Claim.

33 The defendants contend that this sentence would have led Smith J. tobelieve there were ongoing negotiations between the parties, continuingover the years until Mr. Chronopoulos died, at which time a situation ofurgency arose.

34 I do not agree with the defendants’ interpretation of this sentence.35 There is no necessary implication in this sentence of ongoing negotia-

tions, spanning the years between the initiation of the lawsuit and thedeath of Mr. Chronopoulos. Mr. Essa maintained under cross-examina-tion that he was in communication with Mr. Panontin about the parties’dispute on at least three occasions in 2007, plus once in 2008 and three


times in 2009. If this is what Mr. Essa believes, and one assumes that hisposition is taken in good faith, and if it is true, then the sentence is accu-rate — the plaintiffs did attempt to negotiate a resolution of their ongoingdispute after the notice of action was issued. I fully appreciate that Mr.Essa does not have documents to corroborate that he did communicatewith Mr. Panontin in 2007, 2008 and 2009. I also appreciate that Mr.Panontin is as emphatic in stating that the communications did not hap-pen as Mr. Essa is that they did. However, I am not prepared to find, onthe basis of the affidavits, the transcripts of cross-examination and Mr.Panontin’s denials, that the communications did not occur. Mr. Essacould not be expected to tell Smith J. something which he did not be-lieve, namely, Mr. Panontin’s version of events.

36 It would have been apparent to Smith J., from the letter of Mr. Scrim-shaw, dated January 9, 2006, that as of that date the solicitor who hadbeen acting jointly for Mr. Essa and Mr. Panontin and who was familiarwith the issues in dispute in this action was of the view that the dealbetween Mr. Essa and Mr. Panontin involving the balance of the life in-surance policy had broken down and, if the transaction was going to beunwound, that Mr. Panontin should be returning that portion of the insur-ance policy to Mr. Essa to put the parties back to their previous position.From this, Smith J. would reasonably conclude, since the balance of thepolicy was not returned to Mr. Essa, that there was in fact an ongoingdispute as stated in the affidavit. An “ongoing dispute” is not the same asthe “ongoing negotiations” which the defendants ask me to read into Ms.Boulter’s affidavit.

37 Mr. Essa had a reasonable explanation as to why there was no furtherinformation from Mr. Scrimshaw — Mr. Scrimshaw, as lawyer for bothparties, did not want to get involved for one side or the other. Further, ifMr. Panontin believed that Mr. Scrimshaw had essential information onthis issue he could, himself, as a former client, have asked Mr. Scrim-shaw for the information. Alternatively, he could have asked Mr. Essa toundertake to request that information. He did neither.

38 Although the statement in Ms. Boulter’s affidavit that “The Defend-ants are in the process of obtaining the Insurance proceeds from the LifeInsurance on the life of Demetre Chronopoulos” was not entirely accu-rate, the fact that the defendants had made inquiries of the insurer aboutthe policy shortly after the death of Mr. Chronopoulos could reasonablylead to that inference. Mr. Panontin was the beneficiary, Mr. Chrono-


poulos had died. It is difficult to see the inquiries as other than part of theprocess of obtain the proceeds of the policy.

39 I also approach the question of whether there was a failure to makefull and fair disclosure of material facts from this perspective: if, in addi-tion to Ms. Boulter’s affidavit, Smith J. had the advantage of the cross-examination of Mr. Essa and the affidavit of Larry Panontin, may he wellnot have made the order extending the time for service? I am unable toconclude that a different order may well have been made. The materialfacts that were placed before Smith J. have not been proved to be wrong,even though the defendants believe them to be wrong, nor are there factsmaterial to the decision of Smith J. that have been shown to have beenomitted.

40 I am also of the view that the extension of time for service of thestatement of claim will advance the just resolution of the dispute withoutprejudice or unfairness to the defendants. The letter of January 9, 2006,from Mr. Scrimshaw evidences an unresolved dispute about the insur-ance proceeds that the original defendants have known about since atleast 2006. As stated by the Court of Appeal in Chiarelli v. Wiens, supra,at para. 14, although the onus remains on the plaintiffs to show that thedefendants will not be prejudiced by an extension, the plaintiffs cannotbe expected to speculate on what witnesses or records might be relevantto the defence and then attempt to show that these witnesses and recordsare still available or that their unavailability will not cause prejudice. Mr.Panontin deposes that the defendants will be “highly prejudiced” by anextension, because of difficulty in obtaining evidence, because of fadingmemories, because of limitation periods that may have lapsed on claimsthat could have been advanced by the defendants against the plaintiffs ontheir guarantee and because the defendants believed that matters wereresolved and proceeded accordingly.

41 Mr. Essa’s evidence is that the documentary evidence will be availa-ble in files of solicitors and that witnesses are available to testify.

42 As noted in Chiarelli, supra, the defendants have at least an eviden-tiary burden to provide some details when they raise general statementsof prejudice such as difficulties in obtaining evidence and fading memo-ries. Those details are lacking. Details are also lacking on the question ofexpired limitation periods.

43 Mr. Panontin’s submission that he is prejudiced because 50% of theinsurance proceeds are not available to him at this time and because he is


now forced to participate in the litigation is not the type of prejudice thatis contemplated by the principles set out in Chiarelli v. Wiens.

44 The defendants allege prejudice arising from the transfer of the bene-ficial interest in the life insurance policy from Larry Panontin to RobertPanontin at the time when they were unaware of the lawsuit. At the timeof the transfer, Larry Panontin and his companies were allegedly in-debted to Robert Panontin and his companies. Some of the debts go backto 2003. Robert Panontin states that he would not have taken the assign-ment of the beneficial interest if he had known of the lawsuit. In thatevent, he or his companies would have had a claim against his brother forapproximately $997,000 of debts. Presumably the $500,000 of the lifeinsurance policy proceeds that have not been frozen have been applied tothe debt. If Robert Panontin is not entitled to the balance of the life insur-ance proceeds, he or his companies will have a claim against his brotherfor $497,000. If he is required to bring an action against his brother forthe collection of this debt, it would be similar to any action that he wouldhave had to bring against his brother in the event he had refused to acceptthe transfer of the beneficial interest in the life insurance policy becauseof his knowledge of the lawsuit, albeit an action for $500,000 less. I failto see the prejudice to Robert Panontin, or the unfairness, arising fromthe possibility that a court might find that Larry Panontin was not able toassign 100% of the beneficial interest. As noted, some of this debt goesback to 2003. There does not appear to have been any urgency for repay-ment of that debt at the time of the transfer of the beneficial interest.

45 In balancing the interests of a just resolution of the dispute and thequestion of prejudice or unfairness, I do not see that there is prejudice orunfairness to the defendants that requires the order of Smith J. to be setaside.

Conclusion:46 For the reasons given, the defendants’ motion is dismissed.47 If the parties are unable to agree on costs, the plaintiffs shall file writ-

ten submissions, within 30 days, not to exceed five pages, exclusive oftheir Bill of Costs. The defendants shall file their written submissions,not to exceed five pages, exclusive of any Bill of Costs they may wish tofile for comparative purposes, within 20 days after service of the plain-tiffs’ submissions.

Motion dismissed.


[Indexed as: Bazan v. Assiniboine South School Division]

William Patrick Bazan, plaintiff and The Assiniboine SouthSchool Division (amalgamated and named as the Pembina Trails

School Division) and the North American Life AssuranceCompany (amalgamated with The Manulife Financial

Corporation), defendants

Manitoba Master

Docket: Winnipeg Centre CI 03-01-35102

2011 MBQB 30

Master J.M. Cooper


Civil practice and procedure –––– Disposition without trial — Dismissal fordelay — Defences to application — Delay fault of solicitor –––– Plaintiff wasinsured under group policy as spouse of insured employee of defendant schooldivision — Plaintiff asserted that, due to incorrect information provided to himby school’s administration in 1995 after he separated from his spouse, plaintifflost benefit of life insurance coverage he could otherwise have obtained —Plaintiff filed statement of claim against school division and insurer in 2003 —Claim against insurer was settled — Plaintiff had health issues and alleged thatin 2005 he turned matter over to lawyer, who did not properly advance actionand then retired in 2007 — Plaintiff did nothing to advance claim for fiveyears — School division brought motion to dismiss for delay in 2010 — Motiongranted; action dismissed — Plaintiff relinquished his right to have his claim de-termined on merits by allowing it to sit stagnant for unreasonable length of time,with no reasonable excuse for his complete inaction during that period — Itwould be unjust to school division to allow claim to proceed — There was seri-ous inherent prejudice — Pivotal issue of fact and credibility in present case wasoral statement allegedly made by employee over 15 years ago, and there hadbeen no discoveries — Evidence regarding lawyer’s involvement was weak,and, even assuming plaintiff’s assertions were correct, it did not excuse himfrom taking no action after lawyer was clearly out of picture in 2007.

Civil practice and procedure –––– Disposition without trial — Dismissal fordelay — Requirement to show prejudice — Miscellaneous –––– Plaintiff wasinsured under group policy as spouse of insured employee of defendant schooldivision — Plaintiff asserted that, due to incorrect information provided to himby school’s administration in 1995 after he separated from his spouse, plaintifflost benefit of life insurance coverage he could otherwise have obtained —Plaintiff filed statement of claim against school division and insurer in 2003 —

Bazan v. Assiniboine South School Division Master J.M. Cooper 149

Claim against insurer was settled — Plaintiff had health issues and alleged thatin 2005 he turned matter over to lawyer, who did not properly advance actionand then retired in 2007 — Plaintiff did nothing to advance his claim for fiveyears — School division brought motion to dismiss for delay in 2010 — Motiongranted; action dismissed for delay — Plaintiff relinquished his right to have hisclaim determined on merits by allowing it to sit stagnant for unreasonable lengthof time, with no reasonable excuse for his complete inaction during that pe-riod — On balance, it would be unjust to school division to allow claim to pro-ceed — There was serious inherent prejudice — Pivotal issue of fact and credi-bility in present case was oral statement allegedly made by employee over 15years ago, and there had been no discoveries — Evidence presented by plaintiffdid not establish that his health prevented him from taking any action in presentmatter over five year period — It did not prevent him from litigating other mat-ters during same period.

Cases considered by Master J.M. Cooper:

Fegol v. National Post Co. (2007), 389 W.A.C. 294, 212 Man. R. (2d) 294, 2007CarswellMan 64, 2007 MBCA 27, [2007] 8 W.W.R. 493, 40 C.P.C. (6th)213, [2007] M.J. No. 52 (Man. C.A.) — considered

Fritschij v. Bazan (2006), 2006 CarswellMan 113, 2006 MBQB 82, 26 C.P.C.(6th) 146, 203 Man. R. (2d) 291 (Man. Q.B.) — considered

Law Society (Manitoba) v. Eadie (1988), [1988] 6 W.W.R. 354, 29 C.P.C. (2d)278, 54 Man. R. (2d) 1, 1988 CarswellMan 157, [1988] M.J. No. 342 (Man.C.A.) — followed


Freedom of Information and Protection of Privacy Act, S.M. 1997, c. 50Generally — referred to

Rules considered:

Queen’s Bench Rules, Man. Reg. 553/88R. 24.01 — consideredR. 24.01(2) — considered

MOTION by defendant school division to dismiss action for delay.

Plaintiff, for himselfCurran P. McNicol, for Defendant, Assiniboine South School Division (amalga-

mated and named as the Pembina Trails School Division)

Master J.M. Cooper:

1 This is a motion to dismiss for delay. The claim relates to insurancecoverage the plaintiff had through his former wife’s employment. The


plaintiff, who is self-represented, filed the statement of claim on October10, 2003. The named defendants are his former wife’s employer, TheAssiniboine South School Division (amalgamated and named as thePembina Trails School Division) (“the school division”) and the insurer,The North American Life Assurance Company (amalgamated with TheManulife Financial Corporation) (“Manulife”).

2 It is unnecessary in these reasons to describe his claim in detail. Suf-fice it to say that essentially the plaintiff asserts that, but for incorrectinformation provided to him by the “administration” in July 1995 afterhe separated from his spouse, he essentially lost the benefit of the cover-age he could otherwise have obtained.

3 The claim reads in part: 5. The plaintiff was an insured under Group Policy #21370 as thespouse of an insured employee, a teacher, of the Assiniboine SouthSchool Division.

In June of 1995, the plaintiff separated from his spouse. In July of1995, the plaintiff was informed during his preliminary family courtproceedings that this coverage on him had been terminated due to thelegal separation. Based on this information the plaintiff contacted theAssiniboine South School administration to confirm the actual datethat his coverage ended and to obtain the necessary forms to exercisehis option to convert the coverage to a whole life insurance policy.The administration informed the plaintiff that the time period withinwhich to covert the said coverage to some other form of personalinsurance had expired. The plaintiff relied on the information and ad-vice provided to him by the administration to his detriment, for hadhe contacted the Insurer directly he would have learned that the cov-erage was not terminated. The plaintiff had no reason to believe thathe would be provided with false or misleading information.

4 Pursuant to Queen’s Bench Rule 24.01(2), the court may dismiss anaction for delay, and on hearing a motion under the Rule, the court mayconsider: whether the plaintiff has unreasonably delayed the prosecutionof the action, whether there is a reasonable justification for any delay,any prejudice to the defendant, and any other relevant factor.

24.01(1) The court may on motion dismiss an action for delay.

24.01(2) On hearing a motion under this rule, the court may con-sider,

(a) whether the plaintiff has unreasonably delayed theprosecution of the action;


(b) whether there is a reasonable justification for anydelay;

(c) any prejudice to the defendant; and

(d) any other relevant factor.

5 The principles to be applied, as set out by Twaddle J.A. in LawSociety (Manitoba) v. Eadie (1988), 54 Man. R. (2d) 1 (Man. C.A.), andrepeated in numerous cases since, are as follows:

It seems to me the fundamental principle is this: A litigant is entitledto have his case decided on its merits unless he is responsible forundue delay which has prejudiced the other party.

... I prefer to put all relevant considerations into a balance and decide,as a single question, whether it is just to take away from the litigantresponsible for the delay the right to have his case determined on itsmerits. This involves, of course, the difficult task of balancing thebasic right of that litigant with the right of the other party not to havehis rights prejudiced by undue delay.

Amongst the matters which should be taken into account on a motionsuch as this are:

(i) the subject matter of the litigation;

(ii) the complexity of the issues between the parties;

(iii) the length of the delay;

(iv) the explanation of the delay;

(v) the prejudice to the other litigant.

6 In a more recent case, Fegol v. National Post Co., 2007 MBCA 27(Man. C.A.), the Court of Appeal again confirmed these principles, andfurther commented on the considerations in Rule 24.01(2):

8 In addition, the case law, such as Mauer and the often cited LawSociety of Manitoba v. Eadie (1988), 54 Man.R. (2d) 1 (C.A.), pro-vides more guidance by explaining, and expanding upon, these con-siderations. Briefly stated, a judge must balance considerations suchas the subject matter of the litigation, the complexity of the issues,the length of the delay, the explanation for the delay and theprejudice to the other litigant. In the end, the fundamental principle,as explained by Twaddle J.A. in Eadie is that “[a] litigant is entitledto have his case decided on its merits unless he is responsible forundue delay which has prejudiced the other party” (at para. 13).

9 As stated in Mauer “the issue of prejudice is often decisive” (atpara. 11). Prejudice can be actual or inherent in nature and both mustbe assessed as to whether it is significant or minor in nature. Depend-


ing on all of the circumstances, inherent prejudice alone can justifythe dismissal of a claim. See also Pankhurst v. Matz et al. (1991), 71Man.R. (2d) 271 (C.A.) and Jacobson Estate v. Freed et al. (1994),97 Man.R. (2d) 197 (C.A.).

7 The claim is not complex. One of the main issues, if not the mainissue, is the alleged oral misrepresentation made by representatives of thedefendant in 1995. The plaintiff says that this is not an issue and that thedefendant has basically admitted as much. It is true that a copy of anemail which is part of exhibit I to the Affidavit of Craig Stahlke swornSeptember 28, 2010, filed by the defendant on this motion, contains acomment which could be construed as an admission. In the email, anemployee of the defendant, Patty Antoniak, comments that “the problemrelates to the fact that in 1995 he was misinformed by Payroll staff recancelling the policy or transferring the policy...” Nevertheless, the state-ment of defence denies that the allegedly false information was given,and that remains the position of the defendant. As such, this will be anissue of fact to be decided primarily on the evidence of witnesses basedon their memories of what occurred over fifteen years ago.

8 There is no question there has been undue delay. The alleged misrep-resentation, as noted, was made over fifteen years ago. The statement ofclaim was filed on October 10, 2003, over seven years ago.

9 The defendant school division was noted in default on October 31,2003; default was ultimately set aside by consent and the school divisionfiled a statement of defence on November 24, 2003. By letter dated Janu-ary 13, 2004, the school division provided its affidavit of documents, andon February 11, 2004 the plaintiff provided his affidavit of documents.On April 19, 2004, the plaintiff made an appointment for a pre-trial con-ference and notified the school division of this. The school divisionasked him to cancel the pre-trial on the basis it was premature, and whenhe did not agree, the school division filed a motion to set the date for thepretrial conference aside.

10 This motion was heard by Jewers, J. on April 23, 2004, and he ad-journed the pre-trial conference sine die. He also ordered that a new datefor pre-trial could not be set until a certain process was followed. In par-ticular, he required that, if the plaintiff wanted a further and better affida-vit of documents from the school division, he had to bring a motion forthat within two weeks. After the motion, if brought, was dealt with, hethen was to advise the school division if he wanted to conduct interroga-tories or examine for discovery. Once his discovery was completed, the


school division was to set a date to examine him for discovery. After thata date for the pre-trial conference could be set by either party. The orderreads:

THIS COURT ORDERS that the pre-trial conference originallyscheduled by the Plaintiff for May 3, 2004, and later adjourned bythe Plaintiff to June 3, 2004, be adjourned sine die. The plaintiff mustmake a notice of motion to a master within two weeks from April 23,2004, if he wishes a further and better affidavit of documents fromPembina Trails. If no motion for a further and better affidavit is madewithin the two week period, or if such notice of motion is made bythe Plaintiff and dealt with, the Plaintiff must then advise PembinaTrails whether he wishes to conduct interrogatories and/or examina-tion for discovery of a representative of Pembina Trails. Followingany interrogatories and/or examination for discovery by the Plaintiff,Pembina Trails will make arrangements for a date for the Plaintiff tobe examined for discovery. Once the process specified herein is com-plete, a pre-trial conference may be scheduled by either party.

11 On August 20, 2004, the plaintiff filed a motion to compel the schooldivision to produce documents. In his affidavit in support, he indicatedthat he planned to conduct interrogatories. The school division providedcertain documents by letter dated September 7, 2004, and the plaintiffdid not proceed with his motion. The plaintiff did not provide the inter-rogatories. Counsel for the school division requested the interrogatoriesby letters dated September 7, 2004, September 14, 2004, and November15, 2004.

12 Subsequently the plaintiff and Manulife had settlement discussionsand on June 3, 2005, the plaintiff discontinued the action as againstManulife.

13 On August 20, 2005, the plaintiff made a settlement offer to theschool division, which was rejected by letter dated September 22, 2005.At the same time, the school division again requested the plaintiff’s inter-rogatories. The plaintiff, in the meantime, had submitted requests to theschool division for information pursuant to The Freedom of Informationand Protection of Privacy Act. He submitted three requests, on Septem-ber 6 and September 13, 2005, asking for information related to hisclaim. The school division provided certain responses but by letter datedSeptember 26, 2005, the school division’s counsel advised the plaintiffthat the school division was not obliged to provide the information underThe Freedom of Information and Protection of Privacy Act as it per-tained to ongoing litigation, requested that he refrain from communicat-


ing directly with the school division, and again requested theinterrogatories.

14 For the next five years, the plaintiff did nothing whatsoever to ad-vance his claim: he never responded to the September 26th letter, neverprovided the interrogatories, and never communicated with counsel forthe school division.

15 On September 20, 2010, the school division filed this motion. In hisdefence, the plaintiff blames his health and a lawyer who acted for him inhis family proceedings.

16 He states, in his affidavit sworn November 12, 2010, that although hewas self-represented, Phillip Cramer, who represented him in his familymatter from November 2004 until June 2007, offered to assist him withthis claim. He says that Mr. Cramer told him in or about May 2005 thathe would contact the school division’s lawyer to arrange discoveries andthat he would prepare interrogatories. He says that he discussed the issueof the interrogatories with Mr. Cramer in November 2005 and that Mr.Cramer told him he would advise the school division that he would notbe pursuing interrogatories. The plaintiff says that he provided his entirefile to Mr. Cramer in March 2005 and that Mr. Cramer did not return allthe material when he returned the file to him in July 2007.

17 He says that he was hospitalized several times in 2007 and had anumber of medical tests in 2007 and 2008. He says:

8. I was hospitalized several times in 2007 for internal problems withmy kidneys and liver. I was not able to instruct counsel during thisperiod. Cramer retired from the practice of law in or about July 2007.

9. I underwent a number of medical tests in 2008 and 2009 to deter-mine what was causing my condition. I was unable to obtain newcounsel due to my health and financial circumstances. I began takingnew medication in June 2009 and my physical and psychologicalhealth began to improve. I conducted a review of my legal mattersand I obtained new counsel in August 2009. I was advised by mynew counsel to initiate a claim against Cramer for negligence.

10. On May 28, 2010 I filed a claim for damages against Cramer. Atthat time I did not know that Cramer had not been in contact withPembina Trails. It was not until I was served with Pembina Trailsmotion [sic] in early October 2010 that I realized Cramer had takenno steps in this litigation. Cramer was difficult to locate for an ex-tended period although I tried to obtain his contact information fromseveral sources including the Law Society.


18 In a supplementary affidavit sworn January 11, 2011, the plaintiffsays that he was under the continuous care of physicians from January 1,2005 to November 10, 2010, and was unable to see to his affairs “for anextended period due to his condition”. He says:

5. I have been under the continuous care of physicians and receivednumerous tests during the above noted period and I was not able tosee to my personal affairs for an extended period due to my condi-tion. My physician was unable to advise me of the reasons that myhealth was deteriorating.

6. The ongoing litigation of the claims noted in the Affidavit of Ms.Dittberner were [sic] conducted by Phillip Cramer or Norm Cuddyon my behalf. I did not have an active role and I was not able toparticipate in several hearings that occurred during that period.

7. I recall that Phillip Cramer called Mr. Simpson, counsel to Pem-bina Trails, in February 2006. I do not know the exact date although Iwas present in Phillip Cramer’s office when he made the call. PhillipCramer stated that he would be assisting me, off the record, as I washaving medical difficulties and that Mr. Simpson should direct corre-spondence in this matter to Phillip’s attention.

8. I have not conducted any court actions on my own behalf sincehanding my files over to Phillip Cramer in January and March of2005.

9. My claim against Phillip Cramer is being litigated by Mr. HafeezKhan. There have been periods of time that I have been unable toprovide Mr. Khan with information because I have not been feelingwell enough to leave my residence.

10. I am taking morphine as prescribed by my physician which hasimpaired my ability to think clearly at times. Attached and marked as“Exhibit B” to this my Affidavit is a copy of an official receipt formedications that have been prescribed to me for the period of No-vember 1, 2010 to December 28, 2010.

19 The plaintiff also filed an affidavit by Nancy Thomas, sworn Decem-ber 21, 2010. Ms Thomas describes herself as a friend of the plaintiff andhis address for service is her home. The purport of her affidavit is tosupport the plaintiff’s claims of ill-health and his allegations relating toMr. Cramer. Ms Thomas says:

4. I am aware that Mr. Bazan has been ill for a number of years and Ihave observed him, at various times, having difficulty focusing onimportant issues. I attended meetings with Mr. Bazan and his formercounsel, Phillip Cramer. Mr. Cramer was retained by Mr. Bazan in orabout November 2004 for an ongoing family matter. Mr. Cramer


subsequently began acting for Mr. Bazan on various other legal mat-ters, including the within claim. I worked for Mr. Cramer in his lawoffice from approximately January-May 2006. I am aware that Mr.Bazan provided his claim file with the Pembina Trails School Divi-sion and Manulife Financial to Mr. Cramer in March 2005.

5. Mr. Cramer advised me that he would be contacting counsel forthe School Division and counsel for Manulife Financial to discussMr. Bazan claim [sic]. I do not know if Mr. Cramer contacted eithercounsel. I am aware that Mr. Cramer wrote to counsel on Mr.Bazan’s behalf on another claim CI03-01-31358 involving Mr.Bazan. Mr. Bazan provided me with a copy of a letter dated February9, 2006 that Mr. Cramer had sent to Curtis Knudson. Attached andmarked as Exhibit “A” to this my Affidavit a copy of the said lettersent by Mr. Cramer [sic].

6. I advised Mr. Cramer that Manulife had made an offer of settle-ment to Mr. Bazan and that Mr. Bazan had initially rejected the offer.In early April 2005 Mr. Bazan requested me to contact counsel forManulife Financial on his behalf to determine if their offer of settle-ment was still open. I sent an email to Brock T. Howie counsel forManulife. Attached and marked as Exhibit “B” to this my Affidavitis a copy of the email respecting the settlement.

7. On June 3, 2005 Mr. Cramer prepared and filed a Notice of Dis-continuance of the claim as against Manulife Financial. Mr. Bazanadvised me that he paid Mr. Cramer $500.00 at that time.

8. Mr. Bazan advised me that he was not satisfied with Mr. Cramer’srepresentation. Mr. Cramer advised Mr. Bazan in or about January2007 that he was leaving the practice of law. Mr. Cramer had Mr.Bazan sign several Notices of Intention to Act in Person on February7, 2007. Mr. Bazan had been hospitalized and was very ill during thistime period. I visited Mr. Bazan when he returned home from hospi-tal and he told me that he was unable to instruct counsel and that hewas unsure of what was happening with his legal proceedings.

9. In August 2008, I went with Mr. Bazan to see a lawyer at BoothDennehy. Mr. Bazan retained the services of Mr. Hafeez Khan topursue a claim against Philip Cramer. I helped Mr. Bazan get his filestogether and we provided them to Mr. Khan. Mr. Bazan was ill for anextended period. The draft Statement of Claim against Mr. Cramerwas prepared on November 21, 2008. Mr. Bazan told me that he washaving various medical tests and procedures during that time and thathe was not up to instructing to counsel.

10. Mr. Bazan told me that he was starting to feel a little better inearly June 2009. Mr. Bazan told me he was anxious to deal with his


legal matters and asked me to go to a meeting with him and Mr.Khan. Mr. Bazan told me that he wished to review his legal mattersand obtain the appropriate advice. At that time, both Mr. Bazan and Itold Mr. Khan that Mr. Cramer had been involved with the claimagainst Pembina Trails School Division. Mr. Bazan told me that hewanted to pursue the claim against the School Division and anotherclaim CI03-01-31358. Mr. Bazan and I made plans to organize hismaterial and provide it to Mr. Khan. Mr. Bazan became ill again afew weeks later.

11. The claim against Mr. Cramer was filed on May 28, 2010. Wewere able to provide most of the file respecting the school divisionand other evidence to Mr. Khan on July 30, 2010. Some of Mr.Bazan’s material was not returned by Mr. Cramer.

12. In August 2010, Mr. Bazan told me that he had another kidneystone and that we would not be able to meet with Mr. Khan againuntil Mr. Bazan felt better. Mr. Bazan advised me that his doctor hadprescribed morphine for pain relief.

20 I will deal first with the issue of his health. I accept that the plaintiffhas had health problems but the extent to which these health problemsaffected his ability to deal with litigation is not at all clear. For example,he refers to hospitalization but there is no evidence of the duration ofthis. Apart from his assertions of ill-health, and Ms Thomas’s supportiveallegations with respect to his health, the only evidence he presents isManitoba Health records of tests, procedures and the like. These recordsmay suggest high utilization of the health system, but, without expertevidence to interpret them, they are not in themselves evidence ofdebilitation which would prevent him from being able to deal with thislegal matter. In argument, he referred to a medical report by MichaelStambrook that was filed in his family proceeding. That report is notbefore me on this motion, but even if it had been, I do not think it wouldbe of much, if any assistance to the plaintiff on this motion, given it is anaffidavit sworn December 29, 2005.

21 The evidence presented by him has not persuaded me that his healthprevented him from taking any action in this matter over the five years. Itdid not prevent him from litigating other matters during this period. Hishealth was apparently not an impediment to him actively litigating in2006 and 2007. For example, in Fritschij v. Bazan [2006 CarswellMan113 (Man. Q.B.)] (Queen’s Bench File No. FD 95-01-41826) the registryshows 66 documents were entered in 2006. He was up to legal businessin August 2008 (August 2008, according to the Thomas affidavit; August


2009, according to the plaintiff’s affidavit) when he retained counsel todeal with his issues with Mr. Cramer, but did nothing with respect to thisclaim. On May 28, 2010, he filed a statement of claim against Mr.Cramer, but did nothing with respect to this action.

22 With respect to Mr. Cramer’s alleged negligence, the case law is clearthat a lawyer’s delay does not excuse delay in a proceeding. In this case,it is even more difficult for the plaintiff to use this as a shield, because heis self- represented and has been throughout.

23 Moreover, the plaintiff’s evidence regarding Mr. Cramer’s involve-ment is weak. The plaintiff in his affidavits suggests that Mr. Cramerrepresented him until June 2007; while Ms Thomas’s evidence suggeststhat Mr. Cramer represented him until February 2007. The plaintiff saysthat he was present when Mr. Cramer called the school division’s lawyerin February 2006, yet Ms Thomas says that she worked for Mr. Cramerfrom January to May 2006, attended meetings with the plaintiff and Mr.Cramer, but says she does not know if Mr. Cramer contacted either coun-sel. The plaintiff did not file a single document, such as an email or aletter, showing that Mr. Cramer had any communication with the schooldivision’s counsel or gave him the advice the plaintiff claims. Even as-suming his assertions in this respect are correct, it does not excuse himfrom taking no action after Mr. Cramer was clearly out of the picture in2007. The plaintiff is no stranger to litigation. The court registry showsnumerous actions involving him as a party.

24 The plaintiff also complains in his affidavit sworn November 12,2010, that the school division did not send the September 22, 2005 letterto his “correct address for service”. He says that he did not receive thisletter. I would note that it is true that the letter is addressed to a differentaddress that had appeared latterly on his court documents, but it is ad-dressed to the same address he put on his requests for information underThe Freedom of Information and Protection of Privacy Act. In any event,whether or not he received this particular letter does not excuse his inac-tion. The defendant is not obliged to continually remind him to proceedwith his claim.

25 The school division submits that there is actual prejudice to the defen-dant as the two witnesses who could have given out information withrespect to the conversion of life insurance in 1995 are no longer em-ployed by the school division. These two persons were Rick Turko, whowas then Senior Payroll clerk and Peter Gordon, who was the Secretary-Treasurer. Mr. Gordon retired in 2000, eleven years ago, and Mr. Turko


resigned in 2005 and the defendant is not aware of his current address.Another potential witness, an individual who met with the plaintiff in2003, is also retired. I have not given great weight to this factor as thereis no evidence that these witnesses are no longer available or able totestify.

26 There is however serious inherent prejudice: a pivotal issue of factand credibility in this case is an alleged oral statement allegedly made byan employee of the plaintiff in 1995, over 15 years ago, and there havebeen no discoveries.

27 In my view, the plaintiff has relinquished his right to have his claimdetermined on the merits by allowing it to sit stagnant for an unreasona-ble length of time, with no reasonable excuse for his complete inactionduring that period. Putting all relevant considerations in the balance, itwould be unjust to the defendant school division to allow the claim toproceed and accordingly the claim is dismissed for delay with costs tothe defendant school division.

Motion granted; action dismissed.


[Indexed as: D’Ettorre v. Coachman Insurance Co.]

Coachman Insurance Company, Appellant and Alex D’Ettorre,Respondent

Financial Services Commission of Ontario (Appeal Decision)

Docket: P09-00029

David Evans Dir. Delegate


Judgment: January 24, 2011

Insurance –––– Automobile insurance — No-fault benefits — General prin-ciples –––– Insured was injured in collision between two motor vehicles — In-sured claimed income replacement benefits under Statutory Accident BenefitsSchedule – Accidents on or after November 1, 1996 (SABS) from C Co., hisinsurer — Insured also commenced tort action against other driver, who was in-sured by N Co. — Insured settled tort action with N Co. and assigned to it hisfuture collateral benefits claims against C Co. — Subsection 65(1) of SABS pro-vides that assignment of right to pursue arbitration proceeding, such as here, isvoid but subject to s. 267.8(12) of Insurance Act — N Co. obtained consent or-der for assignment — Arbitrator held that s. 267.8(12) of Act applied, so N Co.could continue with arbitration in insured’s name — On appeal by C Co., it wasdetermined that exception did not apply, and that, while N Co. could not con-tinue proceeding in insured’s name, insured retained right to obtain further re-covery from C Co. on his own behalf — Parties made submissions concerningcosts of appeal — C Co. was entitled to $4,700 in legal fees and disbursementsfor appeal hearing — Argument in appeal focused on validity of assignment,and N Co. was unsuccessful and C Co. successful on this point — Parties agreedmatter was novel — Two hours were allowed for appeal hearing — Bill of costsincluded additional arbitration expenses, and only issue was appeal expenses —Time for preparation of bill of costs was reduced by half — C Co.’s calculationregarding disbursements included arbitration disbursements, but there weremore disbursements for appeal than arbitration — Two-thirds of amount claimedfor disbursements was allowed.

Cases considered by David Evans Dir. Delegate:

Stokes v. Desjardins Groupe d’assurances generales (2009), 2009 CarswellOnt5166, 78 C.C.L.I. (4th) 106, 97 O.R. (3d) 634, 310 D.L.R. (4th) 413, (subnom. Stokes v. Desjardins Groupe d’Assurances Generales) [2009] I.L.R. I-4876, [2009] O.J. No. 3608 (Ont. S.C.J.) — considered

D’Ettorre v. Coachman Insurance Co. David Evans Dir. Delegate 161


Insurance Act, R.S.O. 1990, c. I.8s. 267.8(12) [en. 1996, c. 21, s. 29] — referred tos. 282(10)-282(11.2) — referred tos. 282(11) — referred tos. 283 — referred tos. 283(7) — referred to


Insurance Act, R.S.O. 1990, c. I.8Automobile Insurance, R.R.O. 1990, Reg. 664

s. 12(2) — referred tos. 12(2) ¶ 1 — referred tos. 12(2) ¶ 3 — referred to

Statutory Accident Benefits Schedule — Accidents on or after November 1,1996, O. Reg. 403/96

Generally — referred tos. 65(1) — referred to

ADDITIONAL REASONS to judgment reported at D’Ettorre v. CoachmanInsurance Co. (2010), 2010 CarswellOnt 6039, 88 C.C.L.I. (4th) 292 (F.S.C.O.App.), concerning costs.

H. Jason Hickman, for Coachman Insurance CompanyChantal Brochu, for Mr. D’Ettorre

David Evans Dir. Delegate:

1 Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, asamended, it is ordered that:

1. The Nordic Insurance Company of Canada shall pay CoachmanInsurance Company its legal fees and disbursements of this ap-peal, fixed in the amount of $4,700.

I. Nature of the Appeal2 In a decision dated July 28, 2010, I allowed the appeal by Coachman

Insurance Company (Coachman) of the arbitral decision dated July 7,2009. Coachman now seeks its legal fees and disbursements of theappeal.


II. Background3 Mr. D’Ettorre was injured in a collision between two motor vehicles

on November 7, 2001 and claimed income replacement benefits underthe SABS — 19961 from Coachman, his insurer. Mr. D’Ettorre also com-menced a tort action against the other driver, an insured of The NordicInsurance Company of Canada (The Nordic).

4 Mr. D’Ettorre settled the tort action with The Nordic and assigned toit his future collateral benefits claims against Coachman. Subsection65(1) of the SABS provides that the assignment of the right to pursue anarbitration proceeding, such as here, is void but subject to s. 267.8(12) ofthe Insurance Act. This in turn provides that future collateral benefits canbe assigned to tort defendants by “[t]he court that heard and determinedthe action ... after the trial of the action.” The Nordic obtained a consentorder for the assignment. The Arbitrator held that s. 267.8(12) applied, soThe Nordic could continue with the arbitration in Mr. D’Ettorre’s name.

5 On appeal, I determined that a consent order is not the same as a courtdetermination after the trial of an action, so the exception did not apply.However, while The Nordic could not continue the proceeding in Mr.D’Ettorre’s name, I also found that Mr. D’Ettorre retained the right toobtain further recovery from Coachman on his own behalf.

III. Analysis6 Pursuant to s. 282(11) of the Insurance Act, an arbitrator “may award,

according to criteria prescribed by the regulations, to the insured personor the insurer, all or part of such expenses incurred in respect of an arbi-tration proceeding as may be prescribed in the regulations, to the maxi-mum set out in the regulations.” Subsection 283(7) of the Act providesthat ss. 282(10) to (11.2) apply with necessary modifications to appeals.Subsection 12(2) of Ontario Regulation 664, R.R.O. 1990, as amended,in turn provides that an arbitrator or delegate shall consider only the cri-teria set out therein for “the purposes of awarding all or part of the ex-penses incurred in respect of an arbitration proceeding.”

7 The parties agree that the relevant criteria of s. 12(2) are paragraph 1,“Each party’s degree of success in the outcome of the proceeding,” andparagraph 3, “Whether novel issues are raised in the proceeding.”

1The Statutory Accident Benefits Schedule — Accidents on or after November 1,1996, Ontario Regulation 403/96, as amended.

D’Ettorre v. Coachman Insurance Co. David Evans Dir. Delegate 163

8 The parties disagree on Coachman’s “degree of success.” The Nordicsubmits that Coachman did not achieve all it asked for in its Notice ofAppeal. The actions it sought in the appeal were both a quashing of theorder dated July 7, 2009, as well as an order entirely dismissing the arbi-tration proceeding. Coachman was not successful on that latter point.However, the request to dismiss the proceeding played little role in theappeal. Instead, the argument focused on the validity of the assignment.The Nordic was unsuccessful and Coachman was successful on thispoint.

9 The parties agree that the matter was novel. In that regard, after thearbitrator made his order, the decision in Stokes v. Desjardins Grouped’assurances generales, 2009 CanLII 45320, [2009] O.J. No. 3608 (Ont.S.C.J.) was issued. This decision played an important role in the appeal.There was also no appeal case on point, so one of the grounds Coachmanraised for acknowledging an appeal from a preliminary issue was to seekappellate-level guidance to clarify the law governing the assignment ofstatutory accident benefits. In turn, The Nordic advised me that it will beseeking further guidance on the issue by pursuing judicial review of mydecision.

10 Novelty favours Coachman, as it took the risk of taking this novelpoint to appeal. If it had lost, I would have been inclined to let each partybear its own expenses. Since it won, I find that Coachman is entitled toits legal expenses of the appeal.

11 Little was in dispute between the parties about the quantum of Coach-man’s expenses. Regarding legal fees, by my calculation Coachman isclaiming $4,580 inclusive of GST for the appeal. The Nordic submitsthat the time allotted for the appeal hearing should be reduced becausethe hearing did not take 2.8 hours. It submits that the preparation of theBill of Costs should be reduced because the Bill includes additional arbi-tration expenses, whereas the only issue is appeal expenses. I agree. Iallow 2 hours for the appeal hearing, and reduce the time for the prepara-tion of the Bill by half. Accordingly, I award $4,425 in legal fees inclu-sive of GST (the GST was in effect at the time the services were pro-vided) for the appeal hearing.

12 As for disbursements, Coachman’s calculation includes arbitrationdisbursements. However, I accept Coachman’s submission that therewere more disbursements for the appeal than for arbitration and allowtwo thirds of the amount claimed, namely $275.


13 Accordingly, I find that Coachman is entitled to $4,700 in legal feesand disbursements for the appeal hearing.

Order accordingly.

CANADIAN CASES ON THE LAW OF INSURANCE

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