1. Cadieux v. Cloutier, 2018 ONCA 903 (Strathy C.J.O., Hoy A.C.J.O., Feldman, Brown and Paciocco JJ.A.), December 4, 2018 and Carroll v. McEwen, 2018 ONCA 902 (Strathy C.J.O., Hoy A.C.J.O., Feldman, Brown and Paciocco JJ.A.), December 4, 2018 4. Paulus v. Fleury, 2018 ONCA 1072 (Feldman, Pardu and Roberts JJ.A.), December 21
1. Cadieux v. Cloutier, 2018 ONCA 903 (Strathy C.J.O., Hoy A.C.J.O., Feldman, Brown and Paciocco JJ.A.), December 4, 2018 and Carroll v. McEwen, 2018 ONCA 902 (Strathy C.J.O., Hoy A.C.J.O., Feldman, Brown and Paciocco JJ.A.), December 4, 2018
These two decisions, released concurrently, address the intersection of tort damages and statutory accident benefits (SABs) under section 267.8 of the Insurance Act, R.S.O. 1990, c. I.8. Both appeals, which arose from actions for damages sustained in motor vehicle accidents, required the court to determine how SABs are matched to tort damages for deduction and assignment purposes in accordance with the statute.
Two different methods of matching SABs with tort awards, reflecting different interpretations of the statute, had developed in the case law: the strict matching or “apples to apples” approach, as applied by the Court of Appeal in Gilbert v. South, 2015 ONCA 712, required temporal and qualitative matching of SABs to heads of tort damages; the “silo” approach, reflected in Basandra v. Sforza, 2016 ONCA 251, required the tort award only to match generally with the broad corresponding SABs categories or silos. This conflicting case law was most recently addressed by the court in Cobb v. Long Estate, 2017 ONCA 717 and El-Khodr v. Lackie, 2017 ONCA 716.
While Cadieux v. Cloutier concerned the deduction from the tort damages award of SABs paid before trial, Carroll v. McEwen related to the assignment of future SABs to the tort liability insurer. The appeals were heard together by a five-judge panel of the court. The Ontario Trial Lawyers Association was granted leave to intervene on the interpretation and impact of sections 224 and 267.8 of the Insurance Act on civil trials and the retrospectivity of the amendment to the Insurance Act with respect to prejudgment interest.
In two expansive decisions, the Court of Appeal affirmed the silo approach to both deductibility and assignment of SABs, holding that this approach is “consistent with the statutory language of section 267.8, is fair to plaintiffs, defendants and their insurers, and promotes efficiency in motor vehicle accident litigation”.
Cadieux v. Cloutier
The parties were involved in an altercation where the appellant pushed the respondent into the path of a truck. The respondent, who suffered brain damage and orthopaedic injuries, claimed SABs and commenced a civil action against the appellant as well as the truck driver. Prior to trial, the respondent settled both his SABs claim and his tort claim against the truck driver. The SABs settlement was comprised of past and future income replacement benefits, medical benefits, and attendant care benefits. The settlement with the truck driver’s liability insurer was a Pierringer settlement, whereby the truck driver’s insurer settled her several tort liability without a right of contribution on the part of the other tortfeasor.
The respondent then proceeded with the tort action against the appellant. A jury found in favour of the respondent, and apportioned liability equally: one-third against the respondent due to his own contributory negligence, and one-third against both the appellant and the truck driver. Subject to statutory deductions and the accounting for both pre- and post-trial SABs, the respondent was entitled to recover from the appellant one-third of the damages awarded. The trial judge then heard a motion to determine the required adjustments to the jury award and to determine costs. The issues were: (i) reduction of the jury award for statutory deductions, (ii) reduction of the jury award for SABs received prior to trial and through the SABs settlement, (iii) application of prejudgment interest, (iv) the award of a management fee, and (v) costs of the action, including consideration of Rule 49 offers to settle.
The Court of Appeal agreed with the trial judge that SABs should be deducted from tort damages using the “silo” approach, which has the benefit of simplicity and ease of application, an objective endorsed by the Supreme Court in Gurniak v. Nordquist, 2003 SCC 59. The court further held that the silo approach should apply to SABs received both before and after trial. Accordingly, the court found that the trial judge did not err in deducting the SABs received for both medical/rehabilitation benefits and attendant care benefits from the jury award for health care expenses.
The court also held that past and future SABs should be combined in each silo before deducting them from past and future tort damages, finding no basis for making a temporal distinction. It noted that amendments made to the Insurance Act since its decision in Bannon v. McNeely (1998), 38 O.R. (3d) 659 obviated the need for strict matching of past and future benefits that existed under the previous regime, and no longer required the deduction of the present value of future benefits.
The court held that the trial judge did err in failing to deduct certain pre-settlement SABs payments. In the court’s view, the SABs paid prior to the settlement should also be deducted from the jury award for corresponding past and future damages within the relevant silos.
The court further held that where a plaintiff enters into a Pierringer agreement, with the result that only one severally liable defendant remains in the proceeding, the last defendant remaining in the action should not be entitled to a deduction of all the SABs paid to the plaintiff; rather, it should only be entitled to a proportionate reduction. Reviewing sections 267.8(1), (4), and (6) of the Insurance Act, the court concluded that this interpretation is consistent with the application of the principles of statutory interpretation and considerations of practicality, fairness, and common sense. To allow otherwise would discourage settlement, under-compensate plaintiffs, and unfairly enrich non-settling defendants.
The court held that SABs should be deducted from the tort award on a gross basis, rather than net of the plaintiff’s costs. In the court’s view, the trial judge’s deduction of legal costs was inconsistent with the plain wording of sections 267.8(1), (4), and (6) of the Insurance Act, which provide that the damages to which a plaintiff is entitled shall be reduced by all payments in respect of the incident that the plaintiff has received in respect of SABs. The court also noted, however, that it may be appropriate in certain circumstances to award the plaintiff costs of recovering SABs as part of the costs of the tort action.
The court went on to address the remainder of the trial judge’s conclusions, holding that although he did not err in awarding a management fee of five percent, he did err in principle by calculating that fee on the basis of one hundred percent of the settlement and net tort award when the appellant was only entitled to a deduction of fifty percent of the SABs. With respect to prejudgment interest, the court explained that the amendments to the Insurance Act concerning the calculation of prejudgment interest on general damages were procedural in nature, and therefore applied retrospectively to causes of action that arose before the amendments came into force. Finally, the court held that the trial judge failed to account for some of the plaintiff’s disbursements and invited the parties to make further submissions on the issue of costs and interest payable on Rule 49 offers to settle.
Carroll v. McEwen
Carroll arose from catastrophic injuries suffered by Barbara Carroll after being hit by a vehicle operated by Robert McEwen and owned by Mr. McEwen’s spouse. Carroll and members of her family, the appellants, brought this action against the McEwens, Aviva Canada Inc., and Pilot Insurance Company. Carroll’s damages were approximately $4,000,000. Since the McEwens only carried $1,000,000 liability insurance through Aviva, the appellants claimed another $1,000,000 under the OPCF 44R Family Protection Coverage from Pilot. Both Aviva and Pilot denied liability.
At trial, liability was apportioned sixty-two percent to the McEwens and thirty-eight percent to the appellants. The appellants were awarded $2,610,774.32 in damages, a portion of which being a lump sum for Carroll’s “future care costs”. They were also awarded $375,000 in costs. The trial judge issued a conditional order to Aviva and Pilot that effectively reduced their total combined liability to less than $2,000,000. The trial judge’s conditional order was that if Aviva and Pilot paid the judgment in full, they would get an assignment of the future statutory accident benefits that Carroll was entitled to receive from Pilot under Part VI of the Insurance Act.
The Court of Appeal found no error in the trial judge’s granting of the conditional order, rejecting the strict matching approach suggested by the appellants and concluding that the silo approach should be applied. As the court explained in Cadieux, the language of section 267.8 of the Insurance Act does not support an interpretation permitting further subdivisions of the SABs within the three broad categories of “in respect of income loss or loss of earning capacity”, “in respect of expenses for health care”, and “in respect of pecuniary loss, other than income loss, loss of earning capacity and expenses for health care”. The future care costs and the SABs assigned by the trial judge both fell within the broad health care silo. Accordingly, the trial judge was entitled to grant the conditional assignment order to Aviva and Pilot.
The court rejected the appellants’ argument that the trial judge should not have ordered an assignment because it was unlikely that the judgment would be paid, and that since the judgment had yet to be paid, the assignment order granted by the trial judge was premature. It held that requiring damages to be paid before an assignment order can be made is impractical; allowing assignment orders to be made before payment alleviates the need for post-trial motions to obtain an assignment.
The court went on to add a condition to the trial judge’s assignment order using its power under subsection 267.8(12) of the Insurance Act. This condition required Carroll to disclose to Aviva amounts received in SABs since the order was made and provided that if Aviva and Pilot elect to proceed with the conditional assignment order, Carroll must assign to them all future payments of SABs. 2. Di Millo v. 2099232 Ontario Inc., 2018 ONCA 1051 (Rouleau, Pardu and Benotto JJ.A.) December 19, 2018
The appellant, Giuseppe Di Millo, owned a large parcel of land and severed certain lots. He sold two of them to the respondent for cash and a take-back mortgage.
The agreement of purchase and sale included an option clause providing that the respondent was to build a specified industrial building within thirty months of closing, failing which the appellant would have the option to buy back the land at the original purchase price. Once the option was exercised, the sale back to the appellant was to be completed within thirty days after notice of exercise of the option was given to the respondent. The agreement was silent as to when the notice of exercise of the option had to be given. It did include a clause whereby the respondent agreed not to sell, assign or transfer its interest in the agreement without the prior written consent of the appellant.
By the end of the thirty month period, the respondent had not taken any steps to build on the property, and at the end of a one-year extension granted by the appellant the respondent still had not taken steps to build. Six months after the end of one-year extension, the appellant’s lawyer sent a letter to the respondent and the respondent’s lawyer exercising the option. Upon receipt of this notice, the respondent asked for another one-year extension under the option clause. The appellant refused and insisted on a re-conveyance, and also demanded that two additional mortgages placed by the respondent on the property be discharged prior to closing.
The appellant’s lawyer sent an email to the respondent’s lawyer stating that if the respondent refused to re-convey the property, the appellant would commence an application. The respondent’s lawyer advised that they had instructions to accept service of any originating process on behalf of the respondent.
The appellant then started an application requesting specific performance and discharge of the mortgages. After learning that the mortgages were legitimate, the appellant purchased the second mortgage and said that he did so to provide evidence that he had the funds to close and to solve the issue of how to recover the excess of the amount of the encumbrances on the property. By the time the application was heard, the appellant simply requested specific performance of the option, with credits for the encumbrances.
The application judge dismissed the application, concluding that the appellant did not meet the requirements of the option because notice was given outside the notice period contemplated by the agreement, and did not comply with the “time is of the essence” clause. The application judge also found that the appellant was not “ready, willing and able” to close, and that his failure to tender was fatal to his claim for specific performance.
The Court of Appeal allowed Di Millo’s appeal from this decision.
Writing for the court, Benotto J.A. held that the application judge misunderstood the nature of the application. Specifically, his statements that the appellant was requesting a mandatory injunction requiring the respondent to discharge the mortgages on the property, and that there was no admissible evidence concerning the appellant’s purchase of the second mortgage, were incorrect. The latter statement infected his analysis of whether the appellant was ready, willing and able to close.
Benotto J.A. found that the application judge further erred in finding that the option had expired, and noted that this error flowed from his misapprehension of the nature of the “time is of the essence” clause. She explained that “time is of the essence” clauses do not impose a time limit, but rather dictate the consequences that flow from failing to comply with a time limit stipulated in an agreement. While the “time is of the essence” clause applied to the option clause, it only applied insofar as the option clause stipulated time limits. The option clause did not stipulate a time limit for exercising the option, and the application judge accordingly erred in finding that the “time is of the essence” clause was engaged with respect to giving notice to exercise the option. Benotto J.A. went on to conclude that the option was indeed exercised within a reasonable period of time, in accordance with the court’s decision in SBS Sealants Inc. v. Robroy Industries Ltd. (2002), 59 O.R. (3d) 257 (C.A.)
Benotto J.A. further held that the appellant’s claim for specific performance was not defeated by his failure to tender. As the court explained in McCallum v. Zivojinovic (1977), 16 O.R. (2d) 721 (C.A.), while tender is the best evidence that a party is ready, it is not required from an innocent party enforcing its contractual rights when the other party has clearly repudiated the agreement or has made it clear that it has no intention of closing the deal. The appellant was relieved of the obligation to tender when the respondent clearly communicated a decision not to proceed with the transaction. In Benotto J.A.’s view, the appellant was ready, willing and able to close. She concluded that appellant was entitled to specific performance based on the facts of the case in accordance with Semelhago v. Paramadevan, [1996] 2 S.C.R. 415. Upon her review of the record, Benotto J.A. found that the impugned land was sufficiently unique to satisfy the test from Semelhago from both a subjective and objective standpoint. Specific performance was the only adequate remedy.
3. Mason v. Perras Mongenais, 2018 ONCA 978 (Watt, Miller and Nordheimer JJ.A.), December 5, 2018
The appellant, Michael Mason, retained the defendant, Scott Chambers, to act for him in matrimonial proceedings. As part of resolving the issue of equalization, the appellant was going to buy the shares owned by his spouse in their jointly owned company. Chambers and his law firm, Blumberg Segal LLP, were not in a position to provide the tax advice that the appellant required, and advised the appellant to obtain tax advice from another lawyer.
The appellant chose to use the services of Pierre Perras, of the respondent firm Perras Mongenais.
Perras advised Chambers that the purchase could be carried out via redemption of the spouse’s shares with no adverse tax consequences to the appellant and minimal tax obligations for his spouse. Chambers sent Perras draft minutes of settlement for review, noting that the appellant’s spouse had refused to accept this approach because she wanted to receive all cash and did not want to assume the tax burden. Chambers advised Perras that he negotiated a “tax discount” on the share purchase price to take into account the negative tax outcome caused by the appellant buying the shares personally. Chambers then advised Perras that he and the appellant were in a settlement conference ready to sign the minutes of settlement, but needed advice on a portion of the settlement that provided for a spousal rollover of the family corporation’s shares. Under the settlement terms proposed, the appellant was assuming all liability for taxes on any future disposition of the shares. Perras replied via email explaining that the parties were electing to take a tax-free rollover, explained how the tax attribution rules would apply, and concluded that from the appellant’s perspective this was “fine”.
As a result of the settlement, the appellant incurred a large amount of tax. He consequently sued the respondent, Perras, as well as Chambers and Blumberg Segal.
The motion judge concluded that summary judgment should be granted dismissing the claim against Perras, finding that he had given correct advice regarding the potential tax consequences to the appellant if the payment was made in the way it ultimately was. The motion judge also found that any concern regarding whether the appellant understood the advice was an issue between the appellant and Chambers, since the appellant had directed Chambers to deal with Perras.
Writing for the Court of Appeal, Nordheimer J.A. held that the motion judge erred in principle in granting partial summary judgment in the context of the litigation as a whole, and failed to consider the risks of partial summary judgment which the court outlined in Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450 and Butera v. Chown, Cairnes LLP, 2017 ONCA 783. As Nordheimer J.A. explained, potential liability of the respondent to the appellant was not an issue that could readily be bifurcated from the rest of the appellant’s claim. The nature of the appellant’s claim against Perras was such that it was inextricably linked to the claim against the other defendants, especially Chambers. He further noted that there were serious issues raised in this case about the duties of a lawyer in advising his client, including whether a lawyer can rely on another lawyer to communicate the advice.
Nordheimer J.A. found that the motion judge also made a palpable and overriding error in failing to reconcile his conclusions with the evidence of an expert opinion that Perras had breached the standard of care he owed to the appellant by failing to make inquiries about the tax discount and its implications as they related to his advice.
He also held that proceeding summarily in this case would not achieve the fundamental purposes of the summary judgment process, which is to provide a “more expeditious and less expensive means to achieve a just result”. Moreover, by removing one part of the tripartite agreement from review and consideration at trial, the motion judge had undermined the “interest of justice” element.
Nordheimer J.A. observed that the motion judge seemed to believe that Hryniak v. Mauldin, 2014 SCC 7 represented a “culture shift” in which not only are trials not the preferred method for the resolution of claims, but also that they should be viewed as the option of last resort. Nordheimer J.A. recognized that Hryniak encourages a more expansive application of summary judgment, but emphasized that nothing in that case detracts from the overriding principle that summary judgement is only appropriate where it leads to “a fair process and just adjudication”. Summary judgment therefore remains the exception, not the rule.
The appeal was accordingly allowed.
4. Paulus v. Fleury, 2018 ONCA 1072 (Feldman, Pardu and Roberts JJ.A.), December 21
The appellants appealed from the decision of the motion judge refusing to enforce a settlement reached at a pretrial conference in their action for damages arising from a motor vehicle accident. At that conference, their counsel stated that he had “independent” witnesses to the collision. He described these witnesses as “good people … independent … solid … good witnesses”.
The respondent’s counsel agreed to settle the claim for $850,000.
Immediately after the pretrial, however, counsel for the respondent learned that it was likely the witnesses’ son lived across the street from the appellants. He wrote to the appellants’ counsel to repudiate the settlement.
The appellants submitted that when their counsel described the witnesses as “independent”, he simply meant to indicate that they could give evidence extrinsic to their own.
The motion judge rejected this interpretation, concluding that counsel had given the impression that the witnesses were “neutral witnesses, who had no connection to anyone involved in the case, and therefore had no reason to favour either side with their evidence, and would be credible and reliable witnesses at trial.” He found that the appellants’ counsel knew that the statement was untrue or was reckless as to its truth, and held that counsel had a duty to opposing counsel not to knowingly make misleading statements. The motion judge concluded that the statement made by the appellants’ counsel amounted to civil fraud and that the respondent was induced to settle the case in reliance on the false representation. He accordingly refused to enforce the settlement.
That decision was reversed on appeal.
Writing for the Court of Appeal, Pardu J.A. quoted from and applied the decision of the Supreme Court of Canada in Groia v. Law Society of Upper Canada, 2018 SCC 27, which she also noted had not been released at the time of the motion judge’s decision. In Groia, which reversed a number of decisions below including the decision of a majority of the Court of Appeal, the Supreme Court discussed a lawyer’s duty of resolute advocacy on behalf of a client. This is relevant to an assessment of whether submissions by counsel amount to civil fraud.
As part of the discussion of Groia, Pardu J.A. observed that counsel owe no duty to resolutely advance the interests of an opposing party. She also noted that, in virtually every trial, at least one counsel’s submissions will be rejected as unsustainable. “By definition”, she held, “a losing party’s counsel will have made factual or legal arguments that are rejected by the judge”. “The notion that judicial disagreement with an opinion expressed by counsel in the course of judicial proceedings makes that counsel guilty of civil fraud is incompatible with the duty of counsel to advocate on behalf of his or her client”.
Again the background of the above principles, Pardu J.A. found that there was a reasonable basis for counsel’s statement in this case, and the statement was made in good faith. She emphasized that the fact that a lawyer is mistaken is not a basis, in and of itself, for a finding of misconduct. Statements or submissions made by counsel do not amount to civil fraud if either there is a reasonable basis for them, or counsel is not knowingly misleading the court. In this case, the impugned statement was an expression of opinion for which there was a reasonable basis, given counsel’s knowledge at the time it was made. There was no familial relationship between the plaintiffs and the witnesses, no indication of any criminal record that might undermine the witnesses’ credibility, or any other history of dishonesty. There was also no basis to conclude that counsel did not sincerely and in good faith describe the witnesses in the manner he did.
The court accordingly ordered that the settlement be enforced.
5. York (Regional Municipality) v. McGuigan, 2018 ONCA 1062 (MacFarland, Watt and Paciocco JJ.A.), December 21, 2018
This appeal, which arose from the issuance of fifty-dollar speeding ticket, raised the issue of disclosure obligations in speeding prosecutions under the Provincial Offences Act, and the availability of certiorari with respect to disclosure orders made in provincial offence prosecutions.
On November 6, 2015, a York Regional Police officer charged the appellant, James McGuigan, with speeding under the Highway Traffic Act, R.S.O. 1990, c. H.8, s. 128. Measuring the speed of the appellant’s vehicle with a handheld radar device owned by the police service, the officer charged McGuigan with driving seventy-five kilometres per hour in a sixty kilometre per hour zone and issued a fine of $52.50.
McGuigan contested the ticket. He hired a paralegal who made a written request to the office of the Director of Prosecutions for the Regional Municipality of York for disclosure of the “testing and operating procedures” from the user manual for the radar device. The prosecutor refused to provide copies of the requested pages.
The justice of the peace presiding at the appellant’s trial ordered the prosecutor to make the disclosure. The prosecutor obtained an order for certiorari quashing the disclosure order.
The appeal from the certiorari order was carried by the Ontario Paralegal Association, with McGuigan as appellant.
In an expansive decision written by Watt and Paciocco JJ.A. The Court of Appeal concluded that the application judge erred in granting the order.
As the court explained, even if the justice of the peace had been wrong to order disclosure, the error would not have been jurisdictional in nature, noting that section 140(1) of the Provincial Offences Act, R.S.O. 1990, c. P.33 confines certiorari orders in POA matters to situations were an applicant would be entitled to such relief at common law. For parties to a proceeding, certiorari orders are confined to jurisdictional errors. The court also pointed out that certiorari should not have been granted in the course of ongoing proceedings. Nor was there a substantial wrong or miscarriage of justice to address, a prerequisite to certiorari under section 141(4) of the POA.
The court went on to add that contrary to the application judge’s decision, the justice of the peace in fact did not err in making the disclosure order. As the court explained, where a prosecutor is relying on a speed measuring device to prosecute an offence, it must, on request, disclose the testing and operating procedures set out in the user manual for that device. This is first party disclosure, not third party disclosure: the person charged need not bring an application or obtain a court order for the information. It is incumbent on the prosecutor to provide such information on request, and the charging police force has a corresponding duty to furnish the relevant passages from the user manual to the prosecutor to enable the prosecutor carry out its first party disclosure obligations.
The court pointed out that the disclosure obligation was not “a crushing administrative task”, noting that it was not case-specific and could be discharged simply by posting the relevant content from the user manual online and providing the person charged with the link.
The court accordingly allowed the appeal, set aside the certiorari order, and reinstated the disclosure order made by the justice of the peace.
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