Canada: Top 5 Civil Appeals From The Court Of Appeal (February 2013)

Last Updated: February 26 2013
Article by William E. Pepall
  1. El Dali v. Panjalingam, 2013 ONCA 24 (Laskin, MacPherson and Gillese JJ.A.), January 18, 2013
  2. Fifth Third Bank v. O'Brien, 2013 ONCA 5 (MacPherson, Cronk and Lauwers JJ.A.), January 10, 2013
  3. 1003280 Ontario Inc. v. Canac, A Kohler Company, 2013 ONCA 69 (Epstein, Pepall and Tulloch JJ.A.), January 31, 2013
  4. Martin v. 2064324 Ontario Inc. (Freeze Night Club), 2013 ONCA 19 (Cronk, Epstein and Pepall JJ.A.), January 17, 2013
  5. Steen v. Islamic Republic of Iran, 2013 ONCA 30 (Winkler C.J.O., Armstrong and Watt JJ.A.), January 21, 2013

1. El Dali v. Panjalingam, 2013 ONCA 24 (Laskin, MacPherson and Gillese JJ.A.), January 18, 2013

This case demonstrates the type of circumstances in which a jury verdict will be set aside as unreasonable.

The appellant was injured in an automobile accident on an icy road in Ottawa. The accident occurred when the respondent driver lost control of his car, crossed the centre line of the road, and collided with the appellant's car.

The appellant sued the respondent in negligence. The respondent did not testify about his driving and defence counsel provided no other evidence to explain it. Nonetheless, when the jury was asked "Was there any negligence on the part of the defendant...which caused or contributed to the motor vehicle accident...?", it answered in the negative.

The appellant appealed on both liability and damages.

The appeal turned on whether the jury's verdict on liability was reasonable. Writing for the Court of Appeal, Laskin J.A. held that in the absence of any explanation for the respondent's driving or evidence that he exercised reasonable care, the jury's verdict was unreasonable.

Citing the standard of appellate review as articulated in McCannell v. McLean, [1937] S.C.R. 341, Laskin J.A. explained that appellate courts are to treat jury verdicts with deference, only setting a verdict aside where it is "so plainly unreasonable and unjust as to satisfy the Court that no jury reviewing the evidence as a whole and acting judicially could have reached it." At the same time, however, juries "are not infallible" and if and when they are in error, an appellate court should intervene. According to Laskin J.A., this is one such case.

Simply by crossing the centre line of the road, the respondent breached s. 148(1) of the Highway Traffic Act, R.S.O. 1990, c. H.8. When a driver is in breach of that provision and an accident occurs, he is held to be prima facie negligent. As was explained in Levesque v. Levesque (2001), 151 O.A.C. 227, the driver bears the onus of explaining that the accident could not have been avoided by the exercise of reasonable care.

Laskin J.A. clarified that that explanation "need not come from the defendant driver, but it must come from someone." In the absence of any such explanation, the defendant will be found negligent and at least partially responsible for the accident. Moreover, as the court found in Graham v. Hodgkinson (1983), 40 O.R. (2d) 697 (C.A.), where an explanation is required and the explanation fails to demonstrate that the party was not acting in a negligent manner, a jury verdict that the party was not negligent may be set aside as unreasonable.

In this case, where absolutely no evidence or explanation was offered with respect to the respondent's driving, Laskin J.A. concluded that the jury's verdict that the respondent was not negligent must be set aside.

Pursuant to s. 134(6) of the Courts of Justice Act, R.S.O. 1990, c. C.43, an appeal court may order a new trial in the case of a "substantial wrong" or "miscarriage of justice". In light of the jury's unsupported finding that the respondent was not negligent, Laskin J.A. held that a new trial should be held on liability.

2. Fifth Third Bank v. O'Brien, 2013 ONCA 5 (MacPherson, Cronk and Lauwers JJ.A.), January 10, 2013

In this decision, the Court of Appeal considered a bank's duty to forbear from calling its loans.

The appellants guaranteed loan facilities provided by the respondent, Fifth Third Bank, to MPI Packaging Inc. When MPI defaulted on its loan obligations, the bank obtained a court order appointing a receiver, which then sold MPI's assets and remitted the net proceeds to the bank. The bank then sued the appellants for satisfaction of the shortfall between the amounts recovered by the receiver and the amount of MPI's debt.

M.A. Penny J. granted summary judgment in favour of the bank. Before the Court of Appeal, the appellants argued, as they had on the motion, that the bank failed to act in a commercially reasonable manner by failing to allow the sale of MPI as a going concern. They also submitted that their liabilities under the guarantees were discharged when, without their consent, variations were made to the terms of MPI's loan facilities with the bank.

The court held that the motion judge correctly applied the new summary judgment test outlined in Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, 108 O.R. (3d) 1, leave to appeal to S.C.C. granted, [2012] S.C.C.A. No. 48, [7], and was able to determine the bank's summary judgment motion on its merits without the necessity of a trial. Further, the court found that M.A. Penny J,'s findings were dispositive of the appeal.

The court agreed with the motion judge's conclusion that the bank's conduct in realizing on its security was not commercially unreasonable: "absent express contractual obligations to the contrary....[the bank] has no duty to forbear from calling its loans when it has the legal right to do so."

The court rejected the appellants' submission that the bank had an obligation to them to preserve MPI's assets, a duty which required the bank to refrain from enforcing on its security and to advance credit to MPI until it could be sold as a going concern. Unlike the scenario in Bank of Montreal v. Wilder, [1986] 2 S.C.R. 551, there was no agreement between the appellants and the bank whereby the bank would continue to finance MPI.

The court further agreed with the motion judge's holding that the appellants' liabilities were not discharged under the material variation rule outlined in Manulife Bank of Canada v. Conlin, [1996] 3 S.C.R. 415. The changes made to the loan facilities were authorized by the principal loan agreements. Moreover, the appellants were aware of the agreements and their terms and were "intimately involved" in the efforts to save MPI.

The court therefore dismissed the appeal, concluding that there was no genuine issue requiring a trial with respect to the commercial reasonableness of the bank's dealings or the appellants' liability under the terms of their guarantees.

3. 1003280 Ontario Inc. v. Canac, A Kohler Company, 2013 ONCA 69 (Epstein, Pepall and Tulloch JJ.A.), January 31, 2013

In this brief endorsement, the Court of Appeal confirmed the expiry of a limitation period on appeal of a Rule 21 motion.

The parties to this dispute are in the business of custom kitchens. The appellants claimed damages for breach of contract by the respondent, alleging that at around the end of 2008, the respondent advised them, without prior notice, that it was closing its business.

The respondent requested particulars from the appellants, including the exact contractual terms that were alleged to be breached. In their response, the appellants claimed that in 1987, they entered into an exclusive contract with the respondent whereby they would install the respondent's products on a commission basis. The appellants further stated that the respondent ceased distribution of its products without notice or explanation, contrary to a term which provided that the respondents would provide the appellants with sufficient notice to secure another supplier and compensate them for any losses resulting from the termination of the relationship.

The respondent moved pursuant to Rule 21.01(1)(a) of the Rules of Civil Procedure to dismiss the appellants' claim on the ground that the action was out of time. The parties agreed on a two-year limitation period; however, they disagreed on when that period started to run.

Sloan J. held that discoverability was not at issue and dismissed the action on the grounds that it was commenced after the expiry of the limitation period. The appellants appealed.

The court agreed with the motion judge that, on all of the evidence, the cause of action for breach of contract arose no later than the end of 2008 when the respondent advised the appellants that it was closing its business. The action was commenced on July 29, 2011, more than two years later, and the limitation period had therefore expired.

The court dismissed the appeal.

4. Martin v. 2064324 Ontario Inc. (Freeze Night Club), 2013 ONCA 19 (Cronk, Epstein and Pepall JJ.A.), January 17, 2013

In this decision, the Court of Appeal returned to the issue it recently addressed in Downer v. Personal Insurance Co., 2012 ONCA 302, leave to appeal to S.C.C. refused, [2012] S.C.C.A. No. 332: the entitlement of an injured party to no-fault statutory accident benefits from his automobile insurer.

The respondent Martin was attacked while loading his car after work at a Toronto night club. Alleging that he suffered ongoing injuries and loss of income as a result of the assault, Martin claimed against his insurer Certas for SABs and indemnity under the unidentified, uninsured and underinsured coverage provisions of his standard car insurance policy. When Certas denied both claims, Martin sued the company.

On motion brought by Certas, the motion judge found in favour of Martin. Certas appealed.

The appeal turned on the meaning of "accident" as defined in s. 2(1) of the Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996 to the Insurance Act, R.S.O. 1990, c. I.8 and on the interpretation of "directly or indirectly from the use or operation of...[his] automobile" within the meaning of s. 239(1)(a) of the Insurance Act.

Writing for the Court of Appeal, Cronk J.A. found that in his interpretation of "accident" in s. 2(1) of the 1996 Schedule, the motion judge improperly applied the causation test in Amos v. Insurance Corp. of British Columbia, [1995] 3 S.C.R. 405, instead of the modified causation test as outlined by the Court of Appeal in Chisholm v. Liberty Mutual Group (2002), 60 O.R. (3d) 776 and Greenhalgh v. ING Halifax Insurance Co. (2004), 72 O.R. (3d) 338, leave to appeal to S.C.C. refused, [2004] S.C.C.A. No. 461. Considering the Chisholm approach, as clarified by Greenlagh, Cronk J.A. stated the relevant questions as follows:

  1. Was the use or operation of the vehicle a cause of the injuries?
  2. If the use or operation of a vehicle was a cause of the injuries, was there an intervening act or intervening acts that resulted in the injuries that cannot be said to be part of the "ordinary course of things"? ...[C]an it be said that the use or operation of the vehicle was a "direct cause" of the injuries?

Since it was not the use or operation of his vehicle that caused Martin's injuries, but rather the assault on him, Cronk J.A. found that the first branch of the test was not met.

With respect to the second branch of the modified causation test, Cronk J.A. found that the motion judge failed to appreciate the effect of the recent decision of the Court of Appeal in Downer, which required that he determine whether an intervening act or acts, not part of the "ordinary course of things" caused the respondent's injuries. Applying Downer, Cronk J.A. held that the use or operation of Martin's vehicle could not be said to have caused his injuries; it was in fact the assaults, "which were distinct acts independent from the use of operation of his vehicle", which caused them. Downer made clear that "it is not enough to show that an automobile was somehow involved in the incident giving rise to the injury. Rather, the 'use or operation' of the automobile must have directly caused the injury."

Cronk J.A. concluded that, with the exception of an injury to the respondent's right foot which occurred when his assailants ran over it with his car, Martin's injuries were not caused by an "accident" within the meaning of s. 2(1) of the 1996 Schedule.

On the matter of Martin's indemnity claim against Certas, Cronk J.A. considered whether Martin's injuries arose "directly or indirectly from the use or operation of his automobile" under s. 239(1)(a) of the Insurance Act. Citing the twin decisions of Citadel General Assurance Co. v. Vytlingam, 2007 SCC 46, [2007] 3 S.C.R. 373 and Lumbermens Mutual Casualty Co. v. Herbison, 2007 SCC 47, [2007] 3 S.C.R. 393, Cronk J.A. held that the causation requirement was not met. As Justice Binnie explained in Vytlingam and Herbison, "there must be an unbroken chain of causation linking the conduct of the motorist as a motorist to the injuries in respect of which the claim is made." Cronk J.A. found that, aside from the injury to Martin's foot, his injuries did not arise from the conduct of the assailants as motorists. The involvement of the respondent's car was "merely ancillary or fortuitous to the injuries inflicted." Therefore, with the exception of the foot injury, Martin's injuries did not arise within the meaning of s. 239(1)(a).

Cronk J.A. also noted that s. 239(1)(a) of the Insurance Act limits the scenarios under which an insurer may be expected to indemnify an insured. As the Supreme Court held in Vytlingam, insurance policies must be interpreted such that they give effect to the "reasonable expectations of both insured and insurer" [emphasis in original]. Cronk J.A. concluded that to suggest that Certas reasonably expected to indemnify the respondent for injuries that only incidentally involved his car would, as Binnie J. cautioned in Vytlingam, "[stretch] the intended coverage until it snaps."

In the result, the court allowed the appeal in part, finding in favour of Certas in all matters except for the injury to Martin's right foot. Cronk J.A. dismissed Martin's action except for his SABS and indemnification claims with respect to the foot injury, and declared that a trial is required to determine whether that injury was sustained in an "accident" pursuant to s. 2(1) of the 1996 Schedule.

5. Steen v. Islamic Republic of Iran, 2013 ONCA 30 (Winkler C.J.O., Armstrong and Watt JJ.A.), January 21, 2013

This case raises the interesting issue of jurisdiction with respect to incidences of international terrorism.

Alann Steen and David Jacobson are American citizens who were kidnapped in Lebanon at the behest of the Iranian government for the purpose of collecting a ransom. They, along with members of their family, sued the respondents, the Islamic Republic of Iran, the Iranian Ministry of Information and Security and the Iranian Revolutionary Guard, in the United States District Court for the District of Columbia, for damages arising from their abduction, captivity and abuse.

The appellants were awarded judgments against the respondents, who did not appear, but those judgments have not been satisfied.

The appellants then commenced an action in Ontario seeking to enforce the American judgments. The respondents successfully moved under rule 21.01(2) of the Rules of Civil Procedure to dismiss the action on the basis that they are immune from the jurisdiction of any court in Canada pursuant to s. 3(1) of the State Immunity Act, R.S.C. 1985, c. S-18. ("SIA")

The appellants appealed.

The appellants argued that the respondents' conduct constituted "commercial activity" under the SIA and was therefore not immune from the court's jurisdiction. Section 5 of the SIA states that "[a] foreign state is not immune from the jurisdiction of a court in any proceedings that relate to any commercial activity of the foreign state." In the alternative, they argued that the respondents were caught under a common law exception to state immunity for acts of terrorism committed by or on behalf of sovereign states. They also submitted that the respondents lost the benefit of state immunity under the doctrine of jus cogens.

Writing for the Court of Appeal, Armstrong J.A. rejected the appellants' submission that the respondents' conduct was "commercial activity" pursuant to s. 5 of the SIA. The appellants had argued that the exchange of hostages for money and weapons constitutes a commercial activity. Citing the decision of the Court of Appeal in Bouzari v. Iran (2004), 71 O.R. (3d) 675, Armstrong J.A. explained that the exchange of a person for weapons or money does not fall within the ordinary meaning of commercial activity. A "mere nexus to commercial activity" is not sufficient to invoke the exception. The nature of the act itself, namely the kidnapping, must be commercial.

Armstrong J.A. also dismissed the appellants' argument that the motion judge failed to apply the decision of the Supreme Court in Kuwait Airways Corp. v. Iraq, 2010 SCC 40, [2010] 2 S.C.R. 571, which they claim suggested a common law exception to state immunity for acts of terrorism, kidnapping, torture and hostage-taking committed by or on behalf of sovereign states. Armstrong J.A. explained, however, that as the Court of Appeal found in Bourzari, the exceptions to state immunity listed in the SIA are exhaustive. The language of s. 3(1) of the SIA is clear and does not permit the application of a common law exception to state immunity.

Finally, Armstrong J.A. addressed the appellants' submission that the respondents lost the benefit of state immunity due to the principle of jus cogens, or by committing acts in violation of peremptory norms of international law. The appellants argued that when a state engages in activity that violates higher forms of customary international law, like torture and terrorism, it cannot reap the benefits of the SIA because, in committing such acts, it is not acting in a sovereign capacity. Armstrong J.A. noted that this notion is contrary to trends in international jurisprudence, including the decision of the Court of Appeal in Bourzari, the more recent decisions of the International Court of Justice in Jurisdictional Immunities of the State (Germany v. Italy: Greece Intervening), Judgment (3 February 2012), ICJ General List No. 143 and the decision of the Quebec Court of Appeal in Islamic Republic of Iran v. Hashemi, 2012 QCCA 1449. In Hashemi, Morissette J.A. held that the ICJ's judgment in Germany v. Italy "provides a conclusive refutation of the arguments against jurisdictional immunity...based on customary international law and on a jus cogens protection of human rights."

Armstrong J.A. noted that, after the decision below was released, the Justice for Victims of Terrorism Act, S.C. 2012, c. 1, s. 2 came into force and the SIA concomitantly was amended to provide a list of countries –including Iran—not immune from the jurisdiction of a court in proceedings against it for its support of terrorism. The court dismissed the appeal without prejudice to the appellants' right to take steps to have their judgments recognized under the new legislative regime.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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William E. Pepall
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