Canada: Court Of Appeal Summaries (September 2 To September 5)

Last Updated: September 15 2014
Article by John Polyzogopoulos

Hello again. Topics in this week's three decisions include punitive damages for bad faith claims in the insurance context, summary judgment, and an interesting estates law decision on the tension between the claims of beneficiaries under a will and the claims of living spouses under the Succession and Law Reform Act.

Fernandes v Penncorp Life Insurance Company, 2014 ONCA 615

[Juriansz, Pepall and van Rensburg JJ.A.]
Counsel:
P.J. Pape and S. Goudarzi for the appellant
D.J. Fife and M.A. Cameron for the respondent

Keywords: Disability insurance, total disability, punitive damages, aggravated damages, mental distress damages, Fidler v Sun Life Assurance, Pilot v Whiten Insurance, duty of good faith, appellate review of damage awards

Facts:

The respondent operated a bricklaying business. In December 2004 he injured his back, rendering him unable to work. He submitted a claim to the appellant insurer under a disability insurance policy. The policy entitled the respondent to two years of total disability benefits if he was unable to perform any of the important daily duties of his occupation and was not gainfully employed in any other occupation or profession. After two years, he was entitled to total disability benefits if he was unable to work in any and every occupation for which he was reasonably fitted by education, training or experience. The policy also entitled the respondent to four months of partial disability benefits.

The respondent asserted that he could not perform his duties as a bricklayer. This was corroborated by both parties' medical evidence. However, after seven months of making payments, the appellant terminated the respondent's benefits on the basis of a surveillance report showing the respondent working in his back yard and around his house. This report, the appellant contended, showed that the respondent did not meet the definition of total disability as defined in the policy. The appellant did not tell the respondent that his benefits had been terminated until five months later.

The trial judge found that the respondent met the definition of total disability and awarded damages for breach of contract plus the return of premiums. The trial judge also found that the appellant had not dealt with the respondent in a fair and balanced manner and that the appellant's claims advisor had taken an adversarial approach to the respondent's claim. This met the test for punitive damages and $200,000 was awarded. Finally, the trial judge considered the respondent's claim for aggravated damages (referred to as "mental distress damages") and awarded $100,000, but gave no reasons for the quantum.

Issues:

  1. Did the trial judge err in awarding punitive damages?
  2. Did the trial judge err in the quantum of the mental distress damages award?

Holding:

The appeal of the punitive damages award was dismissed and the appeal of the mental distress damages award was allowed.

Reasoning:

  1. No. Pepall J.A. rejected the appellant's arguments with respect to the punitive damages award. There was evidence to support the trial judge's conclusion that punitive damages were warranted. It was reasonable on the evidence to conclude that the appellant's claims advisor ignored the detailed job description that had been provided by the respondent. It was also reasonable for the trial judge to conclude that the surveillance video did not establish the respondent's ability to work as a bricklayer, and reasonable to conclude that the respondent was totally disabled from working as a bricklayer. Implicit in these findings is that the trial judge considered it unreasonable to conclude that the respondent was partially disabled or a malingerer. Lastly, the trial judge did not err in failing to appreciate that the claims advisor tried to settle the respondent's claim on the basis of partial disability. The trial judge made an express finding that the appellant's conduct demonstrated bad faith. There was no medical evidence to dispute the respondent's full disability.
  2. Yes. There was no explanation of how the trial judge arrived at the figure of $100,000 or what facts justified such an amount. The award was inordinately high and entirely disproportionate, where the evidence was that circumstances apart from the appellant's conduct contributed to the respondent's psychological distress. Mental distress damages are to be compensatory, not punitive. Moreover, the respondent had only sought $25,000 in mental distress damages. The aggravated damages award was reduced from $100,000 to $25,000, and the costs of trial, which had been awarded on a full indemnity basis in the amount of $212,130.66, were reduced by $30,000.

York Trafalgar Corporation v. Symphony Golf Inc., 2014 ONCA 619

[Doherty, Laskin and Epstein JJ.A.]
Counsel:
Paul H. Starkman, for the appellants
James A. LeBer, for the respondent Philips Engineering Ltd.

Keywords: Summary Judgment, Negligence, Liability, Planning and Re-zoning, Breach of Contract, Real Estate, Diminution in Value

Facts:

This appeal arises from a decision of Morgan J. in which he granted summary judgment dismissing the action against the respondent, Philips Engineering Ltd. ("Philips").Two families, the Gruehls and the Comarins, put two parcels of land together to develop a golf course. For the purpose of developing the golf course, a limited partnership, Piper's Heath Golf Links Limited Partnership, ("Piper's LP") was formed.

Philips performed planning and re-zoning services in connection with the golf course and the appellants alleged that such actions were performed negligently and in breach of their contract with Piper's LP. Philips brought a motion for summary judgment seeking a dismissal of the action against it on the basis that even if Philips were found negligent and/or in breach of contract, any resultant decrease in the value of the land caused no loss to the appellants.

The motion judge held that a claim to recover diminished value of land can only be claimed by the owner of that land. The land was owned not by Piper's LP but by Comarin. However, Comarin had no claim against Philips as it purchased the land from the previous owners, Lina and Flavio Comarin, after the alleged diminution of value took place.

Issues:

Did the motion judge err in finding that the appellants have no claim against Philips?

Holding:

No. Appeal Dismissed.

Reasoning:

Comarin purchased its 100 acres from Lina and Flavio for fair market value after the alleged diminution in value took place. Any loss suffered due to Philips' services was incurred by Lina and Flavio. Piper's LP does not own the lands said to have suffered a diminution of value. Comarin bought the lands in issue for its already diminished value. The contractual relationship between Philips and Piper's TP does not change this.

Cowderoy v. Sorkos Estate, 2014 ONCA 618

[Blair, Watt and Lauwers JJ.A.]
Counsel:
K.F. Stevens and R. Birkan-Bradley, for the appellant E. Sorkos
T.L. Wynne and C. Muir, for the respondent, the Estate of K. Sorkos
J.D. Virtue and D.W. Wozniak, for the respondents, P. and M. Cowderoy

Keywords: Statute of Frauds, Part Performance, Proprietary Estoppel, Fresh Evidence on Appeal, Dependant's Relief under the Succession Law Reform Act, Section 71

Facts:

This appeal concerns two claims against the Estate of K. Sorkos ("The Estate") that the trial judge declined to consolidate.

The first claim was made by the grandsons of the testator's previous common law partner of 40 years who predeceased him ("The Cowderoys"). They claimed entitlement to The Estate's farm and cottage properties, and also for $350,000 each for upkeep of the properties. The trial judge found as a fact that the testator promised the properties to the Cowderoys when they were teenagers in exchange for their manual labour on the properties, but found that the monetary promise lacked proof. The trial judge ordered The Estate to convey the properties, and pay all transfer costs and taxes, on the basis of part performance and proprietary estoppel.

The second claim was an application by the testator's widow, E. Sorkos, for dependant's relief under the Succession Law Reform Act ("SLRA"). The will left E. Sorkos a lump-sum payment and divided The Estate's assets between her and the testator's siblings. She was also the named beneficiary of the testator's Registered Retirement Income Fund. The trial judge determined E. Sorkos was entitled to dependant's relief in priority to the siblings. He directed The Estate to purchase a lifetime annuity to fund her dependant's relief claim.

The Cowderoys appeal the trial judge's refusal to enforce the testator's monetary promise. The Estate appeals the Cowderoy order for conveyance. E. Sorko was granted intervener status in this appeal. She seeks a new trial where both claims can be consolidated to allow for a proper assessment of priority.

In this appeal, the Court granted a motion to adduce fresh evidence about the value of The Estate, which showed that the liabilities of The Estate would exceed its assets after giving effect to the Cowderoy judgment and purchasing the annuity to fund the dependant's relief claim.

Issues:

  1. Did the trial judge err in refusing to consolidate the claims against The Estate?
  2. Did the trial judge err in ordering The Estate to convey the farm and cottage properties to the Cowderoys?
  3. Are the farm and cottage properties available to satisfy an order for dependant's relief under the SLRA?

Holding:

The Estate's appeal is allowed. The Cowderoy appeal is dismissed. E. Sorkos' application is remitted to trial on the narrow issue of entitlement to dependant's relief, taking into account the value of The Estate with the farm and cottage properties. Costs of all parties are to be borne by The Estate because the problems with The Estate were caused by the testator.

Reasoning:

  1. The trial judge's exercise of discretion to refuse to consolidate proceedings led to errors of law in assessing the priority between the claims of E. Sorkos and the Cowderoys.
  2. Yes. The trial judge erred in classifying the Cowderoys as creditors of The Estate. Because the trial judge found as a fact that the late Sorkos made a promise to bequeath the properties, the trial judge ought to have enforced the promise by deeming the properties to be bequeathed. By ordering The Estate to convey the properties, the Cowderoys were left in a better position than if the late Sorkos fulfilled his promise of bequeathing the properties under his will.
  3. Partially. The Trial Judge failed to consider section 71 of the SLRA, which governs contracts to dispose of property by will. Section 71 states that, to the extent the value of the properties exceeds the value of the labour performed by the Cowderoys, the excess value is available to satisfy claims under the SLRA. The balance of the value of the properties is to be bequeathed to the Cowderoys.

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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Authors
John Polyzogopoulos
Events from this Firm
8 Nov 2018, Conference, Toronto, Canada

This year’s program is entitled “An Analysis of Fidelity Claims for the Modern World.” The program will address important substantive and practical issues germane to today’s fidelity claims handling.

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