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

2.  Goodyear Canada Inc. v. American International Companies (American Home Assurance Company), 2013 ONCA 395 (Laskin, Cronk and Hoy JJ.A.), June 13, 2013 

3.  Ontario College of Pharmacists v. 1724665 Ontario Inc. (Global Pharmacy Canada), 2013 ONCA 381 (Gillese, Epstein and Lauwers JJ.A.), June 10, 2013

1.  Aviva Insurance Company of Canada v. Lombard General Insurance Company of Canada, 2013 ONCA 416 (Blair, Tulloch and Lauwers JJ.A.), June 20, 2013

 

In this decision, the Court of Appeal assessed the responsibility of two insurance companies to cover losses which resulted from a 1995 Toronto apartment fire.

 

Among the defendants held liable for the fire were Axes Investments, the owner of the building, and Tandem Group Management, the property manager. Jointly represented at trial, they were found liable for a portion of the plaintiffs' damages as a single defendant. Axes and Tandem were insured under three policies: a primary policy from Lombard General Insurance Company of Canada, with limits of $1 million, insuring both Axes and Tandem; a Lombard umbrella policy, with limits of $9 million, insuring both Axes and Tandem; and a policy issued by Aviva Insurance Company of Canada, with limits of $5 million, insuring only Tandem.

 

The insurers' peculiar responses to the tort actions, with Lombard defending Axes and Tandem as a single defendant represented by one counsel and Aviva declining to participate, set off a long and complex legal battle. The central dispute between them was which policy would respond to the losses in excess of the first million dollars covered by Lombard's primary policy, and in what amount.

 

Ultimately Aviva paid the entire amount of the excess claim to the tort plaintiffs. It then brought a motion for recovery from Lombard for half of the payment.

 

Aviva submitted that Lombard should be responsible for half of the payment on the theory that the Lombard umbrella policy covered Axes and Tandem, and Tandem and Axes were each liable to pay the portion of the damages assessed against them in the tort actions. Lombard premised its argument on the fact that a previous proceeding had determined that Aviva was required to respond next after the Lombard primary policy to the liability of their joint insured, Tandem.  As Aviva's payment satisfied the liability claim in full, Lombard argued it had no responsibility under its excess umbrella coverage.

 

Grace J. agreed with Aviva and ordered judgment against Lombard in the amount of $1,086,195.70, representing half of the amount paid by Aviva.  Lombard appealed.

 

Blair J.A. found a resolution of the appeal in the principles of equitable contribution. Citing the decision of the Supreme Court of Canada in Family Insurance Corp. v. Lombard Canada Ltd., 2002 SCC 48, [2002] 2 S.C.R. 695, Blair J.A. outlined the criteria for applying the doctrine between insurers:

 

(i)   All policies concerned must comprise the same subject-matter.

(ii)  All policies must be effected against the same peril.

(iii) All policies must be effected by or on behalf of the same assured.

(iv) All policies must be in force at the time of the loss.

(v)  All policies must be legal contracts of insurance.

(vi) No policy must contain any stipulation by which it is excluded from contribution.

 

As Blair J.A. explained, the doctrine of equitable contribution has traditionally been applied to prevent over-recovery by an insured with more than one insurer covering the same risk, by requiring all insurers of the risk to share pro rata in payment of the loss.  

 

Having chosen the single defendant strategy in the tort action, Lombard and Aviva were each equally obliged to respond to the plaintiffs' claims in full. The fact that Aviva "blinked" first and paid for the excess of the claim does not relieve Lombard of its obligation.

 

Blair J.A. went on to find that Lombard's responsibility to contribute to the damages awarded against Axes and Tandem could be grounded in the principle of unjust enrichment. The trial judge awarded damages against Axes and Tandem as a single tortfeasor and the plaintiffs had the right to pursue either or both of them. Both Axes and Tandem were obliged to pay the portion of the damages awarded against them. When Aviva covered that obligation, it conferred a benefit on Lombard and suffered a corresponding deprivation. Blair J.A. concluded that there is "no reason in law or justice" for Lombard's retention of the benefit conferred by Aviva.

 

The Court concluded that Lombard was required to reimburse Aviva for one-half of its payment to satisfy the tort claims. The appeal was dismissed. 

2. Goodyear Canada Inc. v. American International Companies (American Home Assurance Company), 2013 ONCA 395 (Laskin, Cronk and Hoy JJ.A.), June 13, 2013

 

In this decision, the Court of Appeal considered whether the Stonewall Principle should be adopted in Ontario.

 

This appeal arose from the multitude of claims brought in the United States against Goodyear Canada arising from damages allegedly sustained over many years due to exposure to asbestos contained in materials manufactured and exported by the company. Goodyear sued the respondents, which had issued occurrence-based insurance policies to Goodyear for the period 1969-1980, seeking a declaration that they are obliged to defend and indemnify it in respect of the U.S. claims.

 

The central dispute between the parties concerned the allocation of liability under the insurance policies for injuries occurring after 1985. Goodyear claimed that due to a decision by the insurance industry to cease underwriting risks related to asbestos, it was unable to obtain insurance coverage at commercially-reasonable rates in the United States from 1985 onward. At issue on a motion to determine certain interpretive questions was how the alleged losses should be allocated, applying the pro-rata allocation and the "continuous trigger theory". The pro-rata allocation method and "continuous trigger theory" provide a method to calculate how an insured loss should be allocated during periods of insurance and self-insurance. Goodyear relied on the US decision of Stonewall Insurance Co. v. Asbestos Claims Management Corp., 73 F.3d 1178 (2d Cir. 1995), to support its submission that the respondents should be held responsible for any asbestos injuries found to have occurred after 1985. In Stonewall, the Second Circuit Court of Appeals held insurers who had provided coverage for asbestos-related risks prior to an industry-wide cut-off were responsible for claims for continuing asbestos injuries after the cut-off.

 

The motion judge disagreed, holding that Goodyear was obligated to self-insure for any asbestos-related injury found to have been suffered by claimants after the cut-off. Goodyear appealed, submitting that the Stonewall Principle should be adopted in Ontario on the grounds of fairness and contractual interpretation.  If the Stonewall Principle did not apply, the pro rata theory of allocation might spread the monetary value across so many years that it would not exceed Goodyear's deductible.  Goodyear would have, in effect, no coverage.

 

Writing for the Court of Appeal, Cronk J.A. rejected Goodyear's contractual interpretation argument that the coverage grants in the policies were ambiguous because they did not address the allocation of liability where alleged losses spanned several policy periods as may be the case with continuous asbestos injuries.  According to Cronk J.A., the language of the grants demonstrated "a clear and unambiguous expression of the parties' intentions" with regard to the scope of the coverage, namely that the insurer had a duty to indemnify the insured for losses caused by or arising out of each occurrence during the policy period. Nothing implied an intention by the parties to extend the insurer's indemnity obligation to occurrences following that period. Rather, the parties expressly agreed on time-limited liability coverage.

 

Cronk J.A. went on to address Goodyear's argument that fairness necessitated the adoption of the Stonewall Principle as a means of relieving insureds of the responsibility for losses occurring during periods of involuntary non-coverage, and to effect a true risk transfer between the parties. Cronk J.A. noted that there were four fundamental problems with the notion that the Stonewall Principle should be adopted in Ontario.

 

First, Cronk J.A. found the Stonewall Principle to be inconsistent with the express terms of the coverage grants, which specified that the respondents' obligations were undertaken with respect to occurrences that happened during the policy period. Applying the Stonewall Principle would unjustifiably expand the scope of the grants, requiring the respondents to compensate parties for injuries sustained long after the expiration of the policies, a period for which the insurers did not receive premiums. Cronk J.A. noted that the unfairness of this result has been acknowledged by various American courts.

 

Second, the fact that the Stonewall Principle has not been universally accepted in the United States led Cronk J.A. to conclude that the appropriateness of the Principle is controversial, and its adoption in the United States far from unanimous.  The motion judge's reluctance to adopt it in Ontario was supported.

 

Thirdly, Cronk J.A. rejected the adoption of the Stonewall Principle on the grounds of public policy considerations. Importation of the Principle would essentially relieve Goodyear of its own risks in marketing products containing asbestos. "There is no contractual foundation, or consideration, for this deemed transfer of risk." To allow such a transfer of risk would promote uncertainty in commercial affairs and in the insurance market, contrary to the public interest in stability and predictability.

 

Finally, Cronk J.A. also noted that the pro-rata allocation method and the continuous trigger theory agreed upon by the parties are themselves "judicially-conceived constructs... designed to promote fairness." The adoption of the Stonewall Principle in Ontario is therefore "neither appropriate nor necessary" to achieve a fair allocation of loss among the parties with respect to the claims.

 

The Court also rejected Goodyear's appeal to have its deductibles pro-rated. 

 

The appeal was dismissed.

 

3. Ontario College of Pharmacists v. 1724665 Ontario Inc. (Global Pharmacy Canada), 2013 ONCA 381 (Gillese, Epstein and Lauwers JJ.A.), June 10, 2013

 

The retail sale of prescription drugs in Ontario is regulated pursuant to a number of statutes concerning pharmaceuticals, pharmacies and prescription drugs. Pursuant to its authority under the Drug and Pharmacies Regulation Act, R.S.O. 1990, c. H.4 and the Health Professions Procedural Code, the Ontario College of Pharmacists, entrusted "with policing violations of the legislation", initiated an action against parties which, under the trade name Global Pharmacy Canada ("GPC"), market and sell generic prescription drugs sourced in India over the Internet to consumers in the United States.  

 

The College alleged that these parties, none of which are authorized to sell prescription drugs in Ontario, were in breach of various statutory provisions regulating the sale of prescription drugs in Ontario, including operating a pharmacy without accreditation and performing acts reserved to pharmacists and accredited pharmacies. It brought an application to enjoin the appellants from retail selling of prescription drugs from any location in Ontario and to cease using the terms "pharmacy", "pharmacist" and "drug" in connection with its business.

 

At issue was whether GPC was indeed selling prescription drugs, by retail, in Ontario, and whether its activities fell within the jurisdiction of the College.

 

The company had recently reorganized its structure and operations in a way it claimed would remove the jurisdiction of the College.  A new Ontario-based company RXP, ran the call centre and GPC was sold to a Belize company which continued to operate under the same name.  GPC did not market pharmaceuticals to Canadians or allow drugs to enter Canada. Rather, staff members who took customer orders and processed payments were located at a call centre in Mississauga.

The customer service representatives ensured that the orders were filled in India and shipped directly to the United States.  In addition to the corporate restructuring, technical measures were taken to block the sale of drugs to Canadians and their shipment to Canadian addresses. Nonetheless, by February 2011, the website, which featured a maple leaf and Canadian flag, still referred to the company as GPC and to its staff located in Toronto. It continued to direct all customer interactions to its facility in Mississauga.

 

Based on her view of the sales scheme, the application judge concluded that GPC was selling prescription drugs by retail in Ontario. She also held that there was a sufficient connection between these activities and Ontario, such that the company fell within the College's jurisdiction. She granted the injunction until the company could demonstrate that it was in compliance with the governing legislation.

 

Two groups of appellants, the Belize corporation carrying on business as GPC and RXP, appealed to the Court of Appeal, submitting that the application judge erred in both conclusions.

 

Citing Celgene Corp. v. Canada (Attorney General), 2011 SCC 1, [2011] 1 S.C.R. 3, in which the Supreme Court held that, in a regulatory context, words such as "place of sale", "sold" and "selling" may not necessarily be "given their strict commercial law meanings," Gillese J.A. held that a purposive approach to determining the meaning of sale was appropriate. It was the substance, not the form, which was relevant when determining whether the sale of prescription drugs took place in Ontario.

 

Gillese J.A. agreed with the application judge's finding that, despite the restructuring, the substance of the sale transactions, including its most critical aspects, continued to take place through RXP, an Ontario corporation which is located in and operates in the province. Without the staff in Mississauga, no prescription drugs would flow from GPC to its customers.

 

As to the issue of jurisdiction, there was no dispute as to the underlying principles.  As the Supreme Court explained in Unifund Assurance Co. v. Insurance Corp. of British Columbia, 2003 SCC 40, [2003] 2 S.C.R. 63:

 

1. The territorial limits on the scope of provincial legislative authority prevent the application of the law of a province to matters not sufficiently connected to it.

 

2.  What constitutes a "sufficient" connection depends on the relationship among the enacting jurisdiction, the subject matter of the legislation and the individual or entity sought to be regulated by it.   

 

The application judge had noted that determining whether a sufficient connection exists is largely a contextual exercise. Gillese J.A. noted that there was support for many of the findings of fact which had grounded the application judge's conclusion that there was a sufficient connection between the appellants and Ontario such that they fell within the College's jurisdiction.  Most significant of these findings was that the RXP facility in Mississauga housed the only staff that dealt with GPC's customers.

 

Given the College's duty to protect the public interest, Gillese J.A. rejected the appellant's claim that the College was overreaching by assuming jurisdiction over their conduct.  Gillese J.A. clarified that the territorial limits of the College's authority relate to the conduct that it can regulate, not to Ontario consumers only.

 

The appeals were dismissed.

 

4. Peel Law Association v. Pieters, 2013 ONCA 396 (Cronk, Juriansz and Pepall JJ.A.), June 13, 2013

 

This case arose from an alleged human rights violation committed against two black lawyers.

 

The appellants were counsel in a proceeding at the Brampton Courthouse. They were accompanied by a black articling student who, along with one of the appellants, was wearing his hair in dreadlocks. When the parties retired to the Peel Law Association lawyer's lounge, which is reserved strictly for lawyers and law students, the personal respondent, the library's administrator, approached them and requested that they provide identification to show that they were lawyers or law students. No one else in the lounge was asked to produce ID.

 

The appellants brought applications to the Human Rights Tribunal of Ontario ("HRTO"), alleging an infringement of their rights under s. 1 of the Human Rights Code, R.S.O. 1990, c. H.19 to equal treatment with respect to services, goods and facilities without discrimination because of race and colour.

 

HRTO Vice-Chair Whist held that there were sufficient facts to support a prima facie case of discrimination and shifted the onus onto the respondents to show that the appellants' race and colour were not factors in the librarian's conduct. He found that "the respondents have failed to provide a credible and rational explanation for why the personal respondent stopped to question the applicants when she did" and inferred that her decision to question them and the manner in which she did so "was, in some measure, because of their race and colour". The Vice-Chair held that the appellants' rights under s. 1 of the Human Rights Code had been infringed.

 

The Divisional Court allowed the respondents' application for judicial review. Finding that the Vice-Chair erred both in determining that a prima facie case of discrimination had been established and in requiring the respondents to then disprove discrimination, the Divisional Court quashed the decision.

 

Writing for the Court of Appeal, Juriansz J.A. first considered whether the Divisional Court applied the correct test for discrimination in stating that, to prove a prima facie case of discrimination, a claimant must prove differential treatment, arbitrariness based on a prohibited ground, a disadvantage and a "causal nexus" between the arbitrary distinction and the disadvantage suffered. Noting that the term "nexus" did not appear in the statements of the test for discrimination found in Moore v. British Columbia (Education), 2012 SCC 61, 351 D.L.R. (4^th) 451 or in the Shaw v. Phipps, 2012 ONCA 155, 289 O.A.C 163, Juriansz J.A. held that it is preferable to use the words "connection" and "factor" more commonly used in the relevant jurisprudence. All that is required in order to meet the test for discrimination is a connection between the ground of discrimination and the adverse treatment, or that the prohibited ground is a factor in the adverse treatment.

 

Juriansz J.A. found that the Divisional Court's use of the modifier "causal" to "nexus" rendered the test more stringent than what the law demands. The requirement of a "causal nexus" between the adverse treatment and a prohibited ground is "counter to the evolution of human rights jurisprudence, which focuses on the discriminatory effects of conduct, rather than on intention and direct cause." Thus, the Divisional Court applied the incorrect test.

 

Turning to the issue of whether the Divisional Court erred in finding that the Vice-Chair reversed the burden of proof, Juriansz J.A. held that the Divisional Court failed to distinguish between the legal burden of proof and the evidential burden.

 

Having found that a prima facie case existed, the Vice-Chair correctly looked to the respondent for an explanation.

Juriansz J.A. next considered whether the Vice-Chair erred in analyzing evidence in a compartmentalized fashion, first considering the evidence called only by the claimant to determine whether a prima facie case of discrimination had been established and then considering only the evidence called by the respondent to determine if the inference had been refuted. Respondents' counsel argued that this approach led the Vice-Chair to disregard important evidence and that he should have considered all of the evidence before it at every stage of the analysis. Juriansz J.A. rejected this notion, holding that "[t]he only thing that matters is that at the end of the day, the tribunal must take into consideration all the evidence". The tribunal should be left to structure its analysis of the evidence as it sees fit.

 

Juriansz J.A. noted that it is not, therefore, a matter of whether the Vice-Chair disregarded evidence at a particular stage of its analysis, but whether he disregarded evidence before reaching his final conclusion. He then addressed the Divisional Court's finding that the Vice-Chair had disregarded two items of evidence, and held that it was "beyond doubt" that this evidence had been considered. 

 

Lastly, Juriansz J.A. considered whether the Vice-Chair erred in referring to social science not in evidence. The respondents submitted that it was improper for the Vice-Chair to do so and that it was the sole basis upon which he found a nexus between the adverse treatment and the appellants' race and colour. Juriansz J.A. rejected this argument, noting that Vice-Chair cited long-established propositions of law.  As for the proposition that "racial stereotyping will usually be the result of subtle unconscious beliefs, biases and prejudices," the Court noted that this had been recognized by the Court of Appeal and the Supreme Court as a sociological fact. Juriansz J.A. went on to find that the Vice-Chair's reference to social science evidence addressed in Nassiah v. Peel Regional Police Services Board, 2007 HRTO 14 (CanLII) related not to his first inference that the librarian's decision to question the appellants was in some measure due to their race and colour but rather to his second inference as to the manner in which she interacted with them.

 

While he agreed with the respondents that a tribunal must exercise care in considering social science not in evidence, Juriansz J.A. found that "social science can deepen the understanding of interactions between individuals generally, thus assisting the adjudication of a particular case." Moreover, no unfairness resulted from the Vice-Chair's consideration of social science.

 

Juriansz J.A. wrote that the question of discrimination turned on whether the Vice-Chair was satisfied that the appellants' race and colour were factors in their adverse treatment. There was ample evidence, much of it supported by the evidence of an independent witness, to ground the inference that the appellants' race and colour were indeed factors in the librarian's questioning of them. The Vice-Chair's conclusion fell within the range of reasonable outcomes.

 

The Court allowed the appeal, set aside the decision of the Divisional Court and reinstated the decision of the Vice-Chair.

5. Williams-Sonoma Inc. et al. v. Oxford Properties Group Inc. et al., 2013 ONCA 441 (Weiler, Gillese and Hoy JJ.A.), June 26, 2013

 

In this decision, the Court of Appeal considered the doctrine of privity of contract and whether a third party could benefit from a waiver of liability.   

 

The appellants are tenants at Toronto's Yorkdale shopping centre. Their landlord contracted with the respondent independent contractor, Ellis Don Corporation, to perform construction work at the mall. The tenants' premises suffered an alleged seven million dollars in water damage when a vandal opened a fire hose in the area used by the respondent.

 

The lease between the appellants and the landlord required that the appellants have insurance covering water damage. It also contained a provision whereby the tenant waived all claims against the landlord and against those for whom the landlord was "in law responsible" with respect to occurrences for which the tenant was required to be insured.

 

The tenants sued the contractor, claiming that it breached common law and statutory duties owed them. The contractor brought a motion for summary judgment, submitting that the landlord was "in law responsible" for it and that it therefore enjoyed the benefit of the limitation of liability provision in the lease. The motion judge agreed, finding that the tenants were barred from bringing their claim.  The tenants appealed.   

 

Writing for the Court of Appeal, Hoy J.A. noted that the Supreme Court has recognized that the doctrine of privity of contract can be relaxed so that a third party can enforce contractual provisions made for its benefit. In London Drugs Ltd. v. Kuhne & Nagel Ltd., [1992] 3 S.C.R. 299, the Supreme Court held that an employee was entitled to benefit from a limitation of liability clause found in a contract between his employer and a plaintiff, provided certain conditions were met. Later, in Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd. [1999] 3 S.C.R. 108, the Court clarified that the London Drugs approach was not limited to employer-employee relationships, and re-framed the test as follows:

 

1. Did the parties to the contract intend to extend the benefit in question to the third party seeking to rely on the contractual provision?

 

2. Are the activities performed by the third party seeking to rely on the contractual provision the very activities contemplated as coming within the scope of the contract, as determined by reference to the intentions of the parties?

 

Hoy J.A. found that the lease provided the parties to whom the waiver of subrogation was extended were those for whom the landlord was "in law responsible". The inquiry would therefore begin with a consideration of whether the respondent contractor was such a person.

 

Noting that the exercise should be carried out with reference to the ordinary principles of contractual interpretation, Hoy J.A. first considered the plain meaning of the words "in law responsible" and found that its meaning was not limited to responsibility arising through vicarious liability but included persons for whom it is "liable, accountable in law, or is legally responsible". Hoy J.A. concluded that the landlord was "in law responsible" for the respondent within the meaning of the lease as the landlord had become legally responsible for the actions of the contractor through an indemnity provision in the lease.

 

Turning to the Fraser test, Hoy J.A. explained that because the respondent was a person for whom the landlord was "in law responsible" pursuant to the lease provision, the parties did intend the benefit of that provision to extend to the respondent. Therefore, the first prong of the Fraser test was met. With respect to the second part of the test, Hoy J.A. found that the activities performed by the respondent fell within the scope of the lease provision because contractor services were specifically contemplated by the lease.

 

Holy J.A. concluded that the respondent met the Fraser test and was entitled to enforce the limitation of liability provision of the lease as a defence to the tenants' claim.

 

The appeal was dismissed.