Canada: Top 5 Civil Appeals From The Court Of Appeal (July 2015)

Last Updated: July 23 2015
Article by Peter W. Kryworuk and Yola S. Ventresca

1. Shantry v. Warbeck, 2015 ONCA 395 (Cronk, Pepall and Benotto JJ.A.), June 4, 2015

2. Unifund Assurance Company v. D.E., 2015 ONCA 423 (MacPherson, Cronk and Gillese JJ.A.), June 11, 2015

3. Roberts v. Roberts, 2015 ONCA 450 (Feldman, Hourigan and Benotto JJ.A.), June 19, 2015

4. Ziebenhaus v. Bahlieda, 2015 ONCA 471 (MacFarland, Rouleau and Lauwers JJ.A.), June 24, 2015

5. Korea Data Systems (USA), Inc. v. Aamazing Technologies Inc., 2015 ONCA 465 (Hoy A.C.J.O., Cronk and Watt JJ.A.), June 24, 2015


 

1. Shantry v. Warbeck, 2015 ONCA 395 (Cronk, Pepall and Benotto JJ.A.), June 4, 2015

Twenty-two year old Shane Miller was admitted to the Thunder Bay Regional Health Sciences Centre with severe back pain on the evening of July 14, 2007. When intravenous morphine administered throughout the night and the next day failed to provide Miller any relief, the respondent physician prescribed Dilaudid, a stronger opioid. His pain finally subsided early the following morning. Shortly thereafter, hospital staff found Miller not breathing. They were unable to resuscitate him.

Shane Miller was pronounced dead on the morning of July 16, less than 35 hours after he arrived at the hospital. The investigating coroner cited "mixed drug overdose" as the cause of death.

Miller's family brought an action in negligence, alleging that the respondent physician failed to meet the standard of care by prescribing an excessive dose of Dilaudid and that this caused Miller's death.

Competing expert witnesses disagreed as to whether Miller was "opioid naïve" or "opioid tolerant". The appellants led expert evidence that he was opioid naïve and that the dosage of Dilaudid was therefore too high. In contrast, the respondent's experts testified that although Miller did not meet the strict definition of "opioid tolerant" in that it was unlikely that he could have become tolerant in such a short time, he nonetheless exhibited resistance to morphine such that the dosage of Dilaudid ordered by the respondent was appropriate. The experts also disagreed as to the cause of death: while the appellants' experts agreed with the coroner's conclusion, the respondent's experts testified that if Miller's death was indeed due to an overdose of opioids, he would have exhibited symptoms of overdose when he was last observed alive by hospital staff.

The trial judge accepted the evidence of the respondent's experts on both issues. He concluded that the dosage of Dilaudid was appropriate in the circumstances and that the respondent's conduct did not fall below the standard of care. He also rejected the coroner's finding as to the cause of death.

Miller's family appealed, submitting that the trial judge's approach to liability was flawed because he addressed the question of standard of care before causation. They argued that he further erred in law and in fact when he rejected their evidence as to the cause of death. The appellants also claimed that the trial judge's error with respect to causation led him to further err in determining the standard of care with respect to the appropriate dosage of Dilaudid.

Writing for the Court of Appeal, Benotto J.A. held that the trial judge did not err in addressing standard of care prior to causation. In so doing, Benotto J.A. noted that the Supreme Court has outlined the requirements that must be met to establish negligence. Specifically, the plaintiff must demonstrate - separately and sequentially - that the defendant owed a duty of care, that the defendant's conduct breached the standard of care, that the plaintiff sustained damage and that the damage was caused, in fact and in law, by the defendant's breach. Benotto J.A. observed that the trial judge's reasons addressed each of these requirements in their proper sequence.

With respect to the standard of care, Benotto J.A. rejected the appellants' submission that the trial judge erroneously conflated opioid tolerance with analgesic affect, observing that the trial judge did not refer to opioid tolerance in its "strict definition'. The trial judge recognized that a person cannot become opioid tolerant in the amount of time that Miller had received morphine, but accepted the evidence of the respondent's experts that prior doses of morphine should inform the starting dosage of Dilaudid. As a result, and based on Miller's lack of response to morphine, the respondent's prescription of a starting dose of 5 mg of Dilaudid met the standard of care of a prudent and diligent hospitalist. In fact, all of the medical witnesses agreed that the proper opioid dose is one which relieves pain. Benotto J.A. held that there was no error in the trial judge's conclusion that the respondent physician had met the standard of care and that the dosage of Dilaudid prescribed was appropriate.

The appellants further submitted that the trial judge erred in fact and in law when he rejected the coroner's determination as to the cause of Miller's death. Citing the decision of the Supreme Court in Ediger v. Johnston, 2013 SCC 18, they argued that because they tendered extensive evidence to support their theory and the respondent did not lead sufficient evidence to support an alternative, the trial judge was required to accept the appellants' theory of causation.

Benotto J.A. rejected this claim, noting that in Ediger, the Supreme Court held that the drawing of inferences against a defendant is permissive, not mandatory. The evidence in this case provided an adequate basis for the trial judge to conclude that the appellants had failed to prove causation on a balance of probabilities. The trial judge was entitled to prefer the evidence of the respondent's experts on causation and reject the appellants' theory.

Benotto J.A. also dismissed the appellants' submission that the trial judge made two factual errors which undermined his findings with respect to causation. In his decision, the trial judge incorrectly stated that Miller came to the hospital after two days of acute pain, when he was actually in pain for less than two hours when he arrived at the hospital. The appellants argued that this factual error was the basis for the trial judge's suggestion that Miller died from a pre-existing medical condition. Benotto J.A. noted, however, that the respondent's theory of causation, namely an unidentified condition, was not dependent on a finding that Miller was in pain for days prior to his arrival at the hospital.

The trial judge also wrote that Miller's clinical presentation did not accord with death by overdose. The appellants submitted that this comment suggested that the trial judge ignored or forgot the last dose of Dilaudid. Benotto J.A. observed, however, that the trial judge's statement was supported by the respondent's expert witness, who rejected the suggestion that an adverse reaction to Dilaudid could have taken place after 3 a.m. on the day of Miller's death.

The appeal was therefore dismissed.

2.  Unifund Assurance Company v. D.E., 2015 ONCA 423 (MacPherson, Cronk and Gillese JJ.A.), June 11, 2015

The respondents, D.E. and L.E., are defendants in a lawsuit in which the underlying claim is that their minor daughter and two other girls bullied a fellow student, causing her physical and psychological injuries. The action alleges that the respondents were negligent, in that they knew or ought to have known that their daughter was bullying her classmate, and failed to discipline her or otherwise attempt to prevent or remedy her conduct.

The respondents sought to have the appellant, Unifund Assurance Company, defend and indemnify them in the lawsuit pursuant to their homeowner's insurance policy, which includes liability coverage if their personal actions cause unintentional bodily injury or property damage. Unifund refused, asserting that the claims made in the action fell outside the policy's scope of coverage.

The respondents subsequently brought a successful application for a declaration that Unifund had a duty to defend and indemnify them. Unifund appealed. The appeal turned on whether either of the two exclusion clauses in the insurance policy saved Unifund from having to defend and indemnify the respondents in the underlying action.

Writing for the Court of Appeal, MacPherson J.A. identified and applied the three-part test for interpreting insurance policies in the context of the duty to defend and indemnify, which the Supreme Court set out in Non-Marine Underwriter, Lloyd's of London v. Scalera, 2000 SCC 24: first, the court must determine which of the plaintiff's allegations are properly pleaded; it should then determine if any of these claims are entirely derivative; and, finally, the court must decide whether any of the properly pleaded, non-derivative claims could potentially trigger the insurer's duty to defend.

MacPherson J.A. found that the plaintiffs' claims against the respondents were properly pleaded and not derivative of the intentional tort claim against the respondents' daughter. Considering the language of the Amended Statement of Claim, together with that of the coverage and exclusion clauses of the insurance policy, however, he concluded that these properly pleaded, non-derivative claims did not trigger Unifund's duty to defend.

MacPherson J.A. observed that the claims fell within the dictionary definition of negligence as the "failure to take proper care over something". The Amended Statement of Claim alleged a series of failures: the respondents "failed to investigate", "failed to take steps to remedy", "failed to take reasonable care to prevent", "failed to take disciplinary action" and "failed to discharge their duty to prevent the continuous physical and psychological harassment." Unifund's exclusion clause 7(b) mirrored this language, precluding coverage for the "failure of any person insured by this policy to take steps to prevent sexual, physical, psychological or emotional abuse, molestation or harassment or corporal punishment".

Contrary to the application judge, MacPherson J.A. found the language of this clause to be unambiguous: "failure", the heart of the definition of negligence, was the foundation of the allegations against the respondents and of the exclusion clause. Exclusion clause 7(b) was clear on its face, and applied to the negligence claim against D.E. and L.E. Unifund could therefore rely on that clause to preclude its duty to defend and indemnify them.

The appeal was allowed.

3.  Roberts v. Roberts, 2015 ONCA 450 (Feldman, Hourigan and Benotto JJ.A.), June 19, 2015

This decision highlights the importance of disclosure in family law proceedings.

The parties separated in 2012 after eleven years of marriage. The respondent commenced an application for divorce and equalization, alleging that the appellant was using his companies to hide funds. The appellant meanwhile claimed a deduction for property owned at the date of marriage, an equitable interest in property owned by the respondent and spousal support.

The claims and cross-claims required extensive documentary disclosure.

After the appellant failed to comply with three separate orders from the court to produce documents, the motion judge granted the respondent's motion to strike out the appellant's pleadings for "persistent and ongoing failure to provide court ordered disclosure".

The appellant sought to have the order overturned. The single issue on appeal was whether the motion judge erred in striking the appellant's pleadings.

Writing for the Court of Appeal, Benotto J.A. emphasized that the most basic obligation in family law is the duty to disclose financial information. Failure to disclose impacts the administration of justice. It impedes the progress of the action, causes delay and disadvantages the opposing party. Benotto J.A. added that the requirement of financial disclosure is immediate and ongoing, and should not require a court order - much less three - to obtain production.

Benotto J.A. noted that the power to strike out pleadings pursuant to Rule 1(8) of the Family Rules is to be used sparingly and only in exceptional cases. The appellant's conduct in repeatedly ignoring court orders and in failing to adhere to the most basic principles of family law litigation made this one such "exceptional" case. The motion judge's discretion to strike the appellant's pleadings was reasonably exercised.

4.  Ziebenhaus v. Bahlieda, 2015 ONCA 471 (MacFarland, Rouleau and Lauwers JJ.A.), June 24, 2015

In this decision which will be of particular interest to personal injury lawyers, the Court of Appeal clarified the law on an important issue: whether the Superior Court of Justice has inherent jurisdiction to order that a party undergo an assessment by someone who is not a "health practitioner" as defined in the Courts of Justice Act.

The appellant, Alexander Ziebenhaus, was injured while skiing on a school trip. He commenced an action against a number of defendants, claiming damages for loss of future income and loss of competitive advantage in the workplace arising from an alleged brain injury.

When a neuropsychological and psychovocational assessment arranged by the appellant's lawyer found that his vocational potential and ability to pursue competitive work were "guarded", the respondent, Mount St. Louis Moonstone Ski Resort Ltd., brought a motion for an order that Ziebenhaus undergo an additional vocational assessment by an assessor of its choosing.

The motion judge granted the order. The Divisional Court affirmed the order, agreeing with the motion judge that the court has inherent jurisdiction to order assessments and examinations not specifically addressed by section 105 of the Courts of Justice Act, R.S.O. 1990, c. C.43 ("CJA").

Section 105 of the CJA permits a court to order a party to undergo a physical or mental examination by a "health practitioner". The parties agreed that a vocational assessor is not a "health practitioner", defined in section 105(1) as "a person licensed to practice medicine or dentistry in Ontario or any other jurisdiction, a member of the College of Psychologists of Ontario or a person certified or registered as a psychologist by another jurisdiction". They also agreed that no provision in the CJA or in the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, empowers a court to order that a party submit to an examination by a vocational assessor.

At issue before the Court of Appeal was whether the motion judge exceeded his jurisdiction when, relying on the court's inherent jurisdiction, he allowed the respondent's request for an order that Ziebenhaus be examined by a vocational assessor. The appellants argued that in enacting section 105 of the CJA, the legislature defined the category of persons who may conduct an examination. The court, therefore, cannot order an examination by someone who is not a "health practitioner", as this would conflict with the statute's intent.

Writing for the Court, Rouleau J.A. noted the conflicting case law on the issue of the court's jurisdiction to order an examination by an individual who is not a "health practitioner": one line of cases interprets section 105 of the CJA and Rule 33 (which governs the administration of section 105 of the CJA) narrowly, allowing courts to order such an examination only if a health practitioner requires it as a diagnostic assist, while the other suggests that a court can exercise its inherent jurisdiction to order such an assessment in order to ensure that justice between the parties is done.

Rouleau J.A. observed that the Divisional Court addressed this jurisprudence before concluding that section 105 does not "occupy the field". The lower court noted the evolution of health sciences and patient care to include a wide range of physical and mental assessments by experts who are not "health practitioners" as defined in the CJA. Section 105 makes no provision for such examinations, despite their routine use in the care and treatment of injured persons and in personal injury litigation. While these assessments cannot universally be characterized as diagnostic aids to assist the opinion of a "health practitioner", precluding their use would be contrary to "good public policy".

Rouleau J.A. found no error in the Divisional Court's analysis or its conclusion that an order for an assessment by an individual who is not a "health practitioner" as defined in section 105 of the CJA would not be contrary to the provision's intent.

As the Supreme Court explained in R. v. Rose, [1998] 3 S.C.R. 262, the inherent jurisdiction of superior courts can only be removed by "clear and precise statutory language". In Rouleau J.A.'s view, the language of section 105 of the CJA and Rule 33 does not constitute such language: the provisions are permissive in nature and do not convey that a court cannot order an examination by an individual who is not a "health practitioner".

Rouleau J.A. further held that the conclusion that a superior court judge has the inherent jurisdiction to order such an examination neither conflicts with section 105, nor extends the reach of the provision. Inherent jurisdiction should be exercised only "sparingly and in clear cases", when the moving party demonstrates that it is necessary to ensure justice and fairness.

Rouleau J.A. rejected the appellant's alternative submission that, even if the court does have the inherent jurisdiction to make such an order, it should not have exercised that jurisdiction in this case. He noted that the motion judge found that invoking the court's inherent jurisdiction was necessary "in the interest of fairness" in order for the defendants to meet the plaintiffs' case.

5.  Korea Data Systems (USA), Inc. v. Aamazing Technologies Inc., 2015 ONCA 465 (Hoy A.C.J.O., Cronk and Watt JJ.A.), June 24, 2015

The Bankruptcy and Insolvency Act provides that an order of discharge releases the bankrupt from all claims provable in bankruptcy. Section 178(1) of the statute creates limited exceptions to this rule in order to prevent wrongdoers from taking advantage of the protections afforded by the bankruptcy regime. This appeal concerned the scope of one such exception; it is one piece of a complex case which has long history in the courts of Ontario and California.

Korea Data Systems USA ("KDS USA") and Korea Data Systems Korea ("KDS Korea") commenced an action in California against Amazing Technologies Corp. ("ATC"), Aamazing Technologies Inc. ("Aamazing") and brothers Julius and Jay Chiang, claiming damages for breach of a settlement agreement and amounts owed on unpaid invoices. The California court found the Chiang brothers personally liable to the KDS companies. Significantly, however, the court did not find that either Julius or Jay Chiang owed a fiduciary duty to KDS Korea or to KDS USA, or that they had breached such a duty.

The KDS companies obtained judgment against ATC, Aamazing and the Chiang brothers personally for nearly $10 million. Default judgment was entered against Jay Chiang, who did not appear at trial.

Jay Chiang meanwhile filed for bankruptcy in Ontario, declaring the California judgment as a liability. He remains an undischarged bankrupt.

KDS Korea and KDS USA commenced proceedings in Ontario, seeking to enforce the California judgment. Among other relief, they sought a declaration that Jay Chiang's debt under the judgment would survive his discharge from bankruptcy under s. 178(1)(d) of the Bankruptcy and Insolvency Act, R.S.C., 1985, chapter B-3 ("BIA"), which provides that an order of discharge does not release the bankrupt from "any debt or liability arising out of fraud, embezzlement, misappropriation or defalcation while acting in a fiduciary capacity or, in the Province of Quebec, as a trustee or administrator of the property of others."

The KDS companies obtained leave under the BIA to continue their enforcement action against Jay Chiang and to enforce any judgment obtained, on the basis that Chiang's judgment debt to them was grounded in fraud. The enforcement action was tried together with another action against Jay Chiang and other parties for alleged conspiracy and fraudulent conveyances.

KDS USA, to which KDS Korea assigned its interest in both actions, was partially successful in the enforcement action. The trial judge found that it was entitled to enforce the California judgment against Jay Chiang. He declined to issue a declaration that the debt to it survived Jay Chiang's eventual discharge from bankruptcy, however, concluding that KDS USA could not avail itself of the protection afforded by section 178(1)(d) of the BIA. The trial judge held that this exception applies only if the bankrupt owed a fiduciary duty to the creditor who seeks relief under the provision. Since Jay Chiang owed no fiduciary duty to KDS USA, section 178(1)(d) was not available to the company to obtain a declaration that his debt to it under the California judgment would survive his discharge from bankruptcy. KDS USA's appeal turned on the trial judge's interpretation of this provision.

KDS USA argued before the Court of Appeal that a creditor of a bankrupt may rely on section 178(1)(d) in any case in which the debt in question arose out of one of the activities enumerated in the provision while the bankrupt was acting in a fiduciary capacity, even if the bankrupt did not owe a fiduciary duty directly to the creditor bringing the claim. It submitted that the trial judge's interpretation of the provision undermines the policy objective of section 178, to deny wrongdoers the protections of the bankruptcy regime, and that a proper reading of section 178(1)(d) compels the conclusion that Jay Chiang's debt to it will survive his eventual discharge from bankruptcy.

The Court of Appeal rejected this submission, finding the trial judge's interpretation of section 178(1)(d) to be consistent both with the purpose of the BIA regime in general - to balance the financial rehabilitation of insolvent debtors against the interests of creditors who have lost money due to the bankrupt's conduct - and with that of section 178 in particular.

Recalling the Court's decision in Simone v. Daley (1999), 43 O.R. (3d) 511 (C.A.), Cronk J.A. observed that section 178 of the BIA has two components. Section 178(2) sets out the controlling principle that a bankruptcy discharge "releases the bankrupt from all claims provable in bankruptcy". Section 178(1) meanwhile outlines specific exceptions to this principle which, while designed to ensure that certain wrongdoers do not benefit from the protections afforded by the bankruptcy regime, must be construed with a view to the societal aim of encouraging the financial rehabilitation of debtors.

The Supreme Court endorsed this assessment of section 178 in Schreyer v. Schreyer, 2011 SCC 35, concluding that "the interpretation of the BIA requires the acceptance of the principle that every claim is swept into the bankruptcy and that the bankrupt is released from all of them upon being discharged unless the law sets out a clear exclusion or exemption".

Proceeding from this principle, Cronk J.A. held that the exception set out in section 178(1)(d) ought to be construed narrowly. In a bankruptcy scheme where "the cardinal rule is the release of a bankrupt's debts upon discharge", section 178(1)(d) offers an exceptional remedy to creditors. Cronk J.A. observed that the appellant's proposed interpretation of the provision was inconsistent with the policy objective of section 178(2) and with the approach to section 178(1) adopted by the Court in Simone.

As the Court held in Simone, a bankrupt's wrongdoing or improper conduct is not itself sufficient to bring a debt within the ambit of section 178(1)(d). The provision is designed to protect the creditor that was vulnerable to the bankrupt when the claim arose; accordingly, the impugned conduct must occur in the context of a fiduciary relationship between the claiming creditor and the bankrupt. Cronk J.A. held that a creditor cannot bring its claim within the exception set out in section 178(1)(d) when that claim arose out of the bankrupt's breach of a fiduciary duty to a third party. To hold otherwise would expand the reach of the provision beyond what it exists to protect. Under the appellant's suggested interpretation of section 178(1)(d) - where the provision applies to any debt or liability arising out of a bankrupt's wrongdoing as long as the bankrupt was in a fiduciary relationship with someone when the debt arose through the wrongful activity - the relationship between the creditor and the bankrupt becomes "virtually irrelevant".

Properly read, the purpose of section 178(1)(d) is to prevent a bankrupt from avoiding his just debts and liabilities to a vulnerable creditor where the bankrupt was entrusted, in a fiduciary capacity, with money or property belonging not to any creditor, but to that creditor. The trial judge's interpretation of section 178(1)(d) was consistent with this purpose.

Cronk J.A. further held that the trial judge's interpretation of section 178(1)(d) respected the scheme of the BIA as a whole in ensuring that dishonest debtors do not benefit from their dishonesty. Section 178(1)(d) is available to a creditor of a bankrupt if the bankrupt has abused his fiduciary position with the claiming creditor by incurring a debt to the creditor through fraud, embezzlement, misappropriation or defalcation, in violation of the bankrupt's fiduciary duty to the claiming creditor.

Cronk J.A. also rejected KDS USA's submission that, on the findings of the California court, the requisite elements of section 178(1)(d) were met and that the trial judge accordingly erred by declining to grant the requested declaratory relief under that provision. Cronk J.A. noted that a successful claim under section 178(1)(d) requires two elements: the debt at issue must be linked to the bankrupt's fraud, embezzlement, misappropriation or defalcation, and the fraud, embezzlement, misappropriation or defalcation must occur in the context of a fiduciary relationship. In this case, the latter requirement was not satisfied. Neither the California court nor the judge below made any finding that Jay Chiang owed or breached any fiduciary duty in respect of either KDS company. Without a fiduciary relationship between the appellant and Jay Chiang, and wrongdoing by Chiang in the context of such a relationship, Chiang's judgment debt to the appellant could not fall within section 178(1)(d).

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