Canada: Top 5 Civil Appeals From The Court Of Appeal – May 2018

1. Nodel v. Stewart Title Guaranty Company, 2018 ONCA 341 (Epstein, Paciocco and Nordheimer JJ.A), April 9, 2018

In this case, a title insurer sought to avoid coverage for a mortgage fraud on the basis of a provision that excluded coverage for funds paid to any person other than the registered title holder.

The respondent, Karl Nodel, was a private mortgage lender. He agreed to loan $1,100,000 to a man posing as John Colarieti (the borrower). The loan was secured with a second mortgage on a valuable residential property registered in Colarieti's name.

Nodel hired a lawyer, Isaac Singer, to arrange mortgage security and to close the transaction. He instructed Singer to acquire mortgage insurance. Singer, an "Examining Counsel" authorized to assist in the purchase of mortgage insurance from the appellant, Stewart Title Guaranty Company, arranged mortgage insurance from Stewart Title that included coverage for mortgage fraud. At closing, Singer paid the mortgage money to the borrower's lawyer, Bryan Dale, in trust. After he received the money, Dale did not transfer it to his client, but instead transferred the funds to third parties under his client's direction. The money and the client then disappeared.

At Nodel's direction, Singer made a claim against Stewart Title for coverage under the policy because of the mortgage fraud. Stewart Title refused to pay, relying on the following clause in the policy:

Since Nodel's lawyer had paid the mortgage proceeds to the borrower's lawyer, in trust, rather than directly to the borrower, Stewart Title said the exception applied.

Nodel sued Singer, who commenced a third party claim against Dale and Stewart Title. LawPro, the insurer for both Singer and Dale, settled with Nodel and took over the claim against Stewart Title. LawPro and Stewart Title agreed to resolve the dispute about insurance coverage through an application by LawPro, in Nodel's name, for a declaration that the title insurance provided coverage for the losses incurred.

The application judge concluded that the exclusion did not apply and that the policy provided coverage for Nodel's loss. In her view, the registered title holder was paid when the borrower's lawyer received the mortgage proceeds in trust.

The Court of Appeal dismissed Stewart Title's appeal, holding that the application judge was correct in her finding.

Writing for the court, Paciocco J.A. acknowledged that the impugned provision was ambiguous: the exclusion applied either where money was paid beneficially to someone other than the borrower, or where money was handed over or delivered to someone other than the borrower. He held, however, that when it was interpreted in context, in light of the reasonable expectations of the parties and in a commercially sensible manner, the ambiguity was resolved. Properly interpreted, the exclusion enabled Stewart Title to deny coverage if the proceeds of the mortgage were transferred beneficially to any person or entity other than the borrower. This did not happen here. The payment was made in trust to the borrower's lawyer for the benefit of the borrower. It was, in law, a payment to the borrower. Paciocco J.A. also noted that payment of mortgage money to a borrower's lawyer in trust is a routine practice. Disqualifying coverage where payment is made to the borrower's lawyer in trust would not produce a reasonable commercial result.

In dissent, Nordheimer J.A. held that the wording of the exclusion was unambiguous and, by its plain terms, applied to this situation. The mortgage funds were not handed over or transferred to the registered title holder, or the person everyone assumed was the registered title holder, and thus the funds were not paid in accordance with the terms of the insurance contract. If they had been, and the person posing as the registered title holder had managed to take off with the funds, then undoubtedly Stewart Title would have had to provide coverage. In this case, however, the mortgage funds were paid in breach of the express terms of the insurance policy and, as a result, Stewart Title was entitled under the terms of the policy to deny coverage.

The appeal was dismissed.

2. Wallbridge v. Brunning, 2018 ONCA 363 (Juriansz, Lauwers and Miller JJ.A.), April 13, 2018

The respondent Williams Litigation Lawyers is a partnership of lawyers located in Ottawa. The respondent Fay Brunning, a lawyer, practiced "in association" with Williams. This case raised the question of whether Williams could be vicariously liable for defamatory statements allegedly made by Brunning and, as the Court of Appeal has pointed out, has potentially far-reaching implications for lawyers and firms practicing in this fashion.

Brunning's practice was separate from that of Williams, but she shared the same office address, telephone number, fax number, and front desk receptionist. She paid Williams a monthly fee for the space and facilities she used in its office.

Significantly, Williams authorized Brunning to use its letterhead, without supervision.

This letterhead referenced Brunning as "Practicing in Association, not in Partnership". Brunning's name was listed with other lawyers' names in the header of the letterhead, with an asterisk beside her name – the only one with an asterisk. The footer of the letterhead listed Brunning's name again, along with her contact information. Similarly, Brunning's email signature indicated that she was "Practicing in Association with Williams". Williams' website included a photo of Brunning, along with photos of the Williams lawyers, under the titles "Our Lawyers" and "Meet Our Team". The other lawyers were identified as Counsel, Partner or Associate, as applicable, while Brunning was identified as "Lawyer, Practicing in Association".

One area of Brunning's practice included the representation of former Indian Residential School students claiming compensation for historical mistreatment at various residential schools.

The appellant law firm Wallbridge, Wallbridge issued a Statement of Claim alleging that Brunning made a series of defamatory comments, misrepresentations and allegations about or directed at it related to its representation of former Indian Residential School students. Wallbridge named Williams as a defendant, claiming that it was vicariously liable.

Williams brought a motion for summary judgment seeking dismissal of the action as against it, arguing that it had no knowledge of the allegedly defamatory correspondence (which was not filed in evidence on the motion). It further argued that since the evidence established that Brunning was never an employee, agent or partner of Williams and was never held out to be the same, there was no basis upon which it could be found vicariously liable.

The motion judge granted summary judgment and held that Williams could not be vicariously liable for Brunning's allegedly defamatory correspondence.

On the appeal by Wallbridge, Williams argued that the appeal should be dismissed on the basis that Wallbridge led no evidence establishing defamation on the motion.

Juriansz J.A. disagreed, noting that Wallbridge was not required to provide evidence of defamation on the motion for summary judgment. There was no denial in Williams' evidence that Brunning sent the correspondence, and the court knew from having heard another motion in the proceeding that Brunning was advancing certain defences which were based on having written the correspondence. The motion judge was entitled to take judicial notice of what was in the court file, namely, that Brunning conceded writing the correspondence alleged to be defamatory.

Had the motion judge dealt with this argument, it would have been properly rejected. Williams defended the action as against it on the basis that it was not liable for any of Brunning's acts or omissions. Williams' Statement of Defence did not deny or otherwise address the paragraphs of the Statement of Claim that set out Brunning's allegedly defamatory correspondence. Accordingly, Williams brought its summary judgment motion solely on the basis that it could not be found to be vicariously liable for that correspondence. Given that Williams' summary judgment motion was brought solely on the ground of vicarious liability, Wallbridge was only obliged to respond to that issue.

Juriansz J.A. held that the motion judge erred, however, in granting summary judgment on the issue of vicarious liability. The question of whether Williams was liable for Brunning's alleged defamation was without precedent and involved the application of policy rationales. It was not in the interests of justice to decide the question on a summary judgment motion, given the importance and novelty of the question and the existence of much evidence supporting the appellant's position. The question would be better determined on a full evidentiary record, where the factual and legal issues and the consequences of imposing liability on the respondent could be carefully considered.

Juriansz J.A. further noted that the motion judge did not attach weight to the fact that the publication of most of the allegedly defamatory correspondence was on Williams' letterhead. This could reasonably be seen as Williams placing its reputation behind the alleged defamation. While the motion judge found that Williams never held Brunning out as a "Partner" or "Associate" of the firm, she never considered the import of the fact that Williams held Brunning out as being "associated" with it. Given the strength of the evidence that could support a finding that Williams should be found liable for Brunning's allegedly defamatory correspondence, and given the novelty and importance of the question, the motion judge should have refused to grant summary judgment and allowed the matter to proceed to trial.

3. Zafar v. Saiyid, 2018 ONCA 352 (Strathy C.J.O., Roberts and Paciocco JJ.A.), April 11, 2018; Ojeikere v. Ojeikere, 2018 ONCA 372 (Laskin, Feldman and Miller JJ.A.), April 17, 2018

These two decisions both concern jurisdiction over custody and access.

In Ojeikere v. Ojeikere, the respondent, Mr. Ojeikere, argued and the motion judge agreed that the Nigerian court had jurisdiction to decide who should have custody of, and access to, the Ojeikeres' three adolescent children. The appellant, Mrs. Ojeikere, and the Office of the Children's Lawyer both argued that the Ontario court had jurisdiction.

Because Nigeria is not a signatory to The Hague Convention, the issues on appeal were decided under the provisions of Ontario's Children's Law Reform Act, R.S.O. 1990, c. C.12 (CLRA).

Writing for a majority of the Court of Appeal, Laskin J.A. held that the motion judge did not err in ruling that under s. 22 of the CLRA the Ontario court did not have jurisdiction. The Ojeikeres' three children were habitually resident in Nigeria, despite their time in boarding schools and despite their abduction to Ontario. Therefore, s. 22(1)(a) of the CLRA provided no basis for an Ontario court to assume jurisdiction over the children. Section 22(1)(b) of the CLRA provides that an Ontario court may assume jurisdiction if six criteria are met. Laskin J.A. noted, however, that s. 22(1)(b) afforded no basis for an Ontario court to assume jurisdiction in this case because one of the criteria could not be satisfied. An Ontario court cannot assume jurisdiction to make a custody order if, at the time of the application in Ontario, an application for custody is pending in another place where the child is habitually resident. Mr. Ojeikere filed a petition for custody of the three children in Abuja, Nigeria three months before Mrs. Ojeikere brought her application in Ontario. At the time Mr. Ojeikere filed his petition, the three children were habitually resident in Abuja.

Laskin J.A. went on to find, however, that despite s. 22 of the CLRA an Ontario court should exercise jurisdiction under s. 23 because the children were physically present in Ontario and, based on fresh evidence, would suffer serious harm if ordered to return to Nigeria to await a custody and access determination in the Nigerian court.

In concurring reasons, Miller J.A. held that while he agreed that the appeal should be allowed, he took issue with the majority's conclusion that the children were at risk of psychological harm arising from their objections to returning to Nigeria. In Miller J.A.'s view, Laskin J.A. incorrectly characterized mere disappointment as psychological harm. The disappointment of the children at being returned to Nigeria did not constitute the requisite serious harm. Miller J.A. also took issue with Laskin J.A.'s reliance on s. 6 of the Charter as an "added consideration" regarding the risk of psychological harm.

Zafar v. Saiyid arose from orders of the application judge requiring the appellant mother to return the parties' children to their habitual residence in England for custody and access to be determined there. The orders were made pursuant to Article 12 of The Hague Convention, as incorporated in s. 46(2) of the CLRA. Under Article 12, where the court determines that a child has been wrongfully removed or retained, the court shall order the return of the child forthwith. The appellant argued that the application judge erred in (i) awarding custody to the respondent as a consequence of her breach of the application judge's order, (ii) ordering that she return to England with the children, and (iii) declining to assess whether the grave risk of harm override provision in Article 13(b) was engaged.

The Court of Appeal agreed with each of these submissions. To award custody of the children to one parent as a consequence of the other parent's failure to obey a court order is an error, as it fails to consider or prioritize the children's best interests. Further, the application judge was without jurisdiction to order the appellant to return to England with the children. Finally, the application judge erred in stating that he could not determine whether the children were at grave risk of serious harm and then delegating this matter to the English courts.

Article 13(b) of The Hague Convention requires the court to consider the possibility of grave risk of physical or psychological harm to the children arising from an order returning them to their country of habitual residence. The Court of Appeal pointed out that a grave risk of harm to a child's mother can establish a risk to the child as well. In the court's view, it was an error for the application judge to explicitly decline to decide whether he believed allegations that, if accepted, could engage the protective function of the court to decline to order the children's return. Having found that the issue of risk could not be determined on the existing record of conflicting affidavit evidence, it was incumbent on the application judge to consider whether oral evidence was required to allow him to complete his risk analysis or whether he could make a decision based on the sufficiency of the record and the appellant's evidentiary onus. He erred in doing neither and instead delegating the risk assessment to the English courts.

4. Walsh Energy Inc. v. Better Business Bureau of Ottawa-Hull Incorporated, 2018 ONCA 383 (Hoy A.C.J.O., Huscroft and Paciocco JJ.A.), April 19, 2018

Walsh Energy Inc. and Waltek Energy Services Inc., both controlled by Barry Walsh, brought an action against the Better Business Bureau (BBB) in defamation.

In 2007, the BBB changed Walsh's website rating from "satisfactory" to "unsatisfactory". Two years later, the BBB adopted a new rating system which generated a grade of "B" for Waltek and "D-" for Walsh, and posted these grades on its website. Walsh and Waltek sued the BBB, claiming that the grades posted on its website caused substantial damages. At trial, the judge found that the postings were not defamatory.

The companies appealed to the Divisional Court. Waltek abandoned its appeal prior to the hearing. The Divisional court allowed Walsh's appeal, concluding that the "D-" grade was defamatory and ordering a new trial on the issues of fair comment, malice, and damages.

The BBB sought and obtained leave to appeal to the Court of Appeal. Walsh cross-appealed, arguing that a new trial was not necessary as the factual record allowed an appellate court to decide all the issues.

Writing for the Court of Appeal, Huscroft J.A. held that the Divisional Court properly concluded that the trial judge erred in principle by failing to make a finding as to the plain and ordinary meaning of the grade. The focus of the trial judge's analysis was on the context in which the grade was assigned and its connection to the prior "unsatisfactory" rating Walsh received. The context in which words are used is relevant to determining meaning, but it need not be established that an impugned statement is worse than prior statements made by a defendant in order for that statement to be defamatory. The plain and ordinary meaning must also be considered. In Huscroft J.A.'s view, it was open to the Divisional Court to find that the plain and ordinary meaning of the "D-" grade the BBB assigned to Walsh was defamatory.

Huscroft J.A. held that the lower court did err, however, in ordering a new trial on the issue of fair comment. It was open to the Divisional Court to determine whether the fair comment defence was made out on the record before it, and the court ought to have done so rather than remit the matter back to trial. The issue of determining whether there was a factual basis for the BBB's opinion was not so complex that it required a new trial, nor was the issue of whether a person could honestly express the opinion. In Huscroft J.A.'s view, the fair comment defence was established on the record.

The appeal by the BBB was allowed and the cross-appeal by Walsh dismissed. The trial judge's order dismissing the action was restored.

Huscroft J.A. did allow Walsh's cross-appeal on the matter of trial costs, concluding that the trial judge's award of partial indemnity costs in the amount of $348,135.96 should be set aside. He noted that counsel for the BBB billed over three times as many hours in defending this action as the appellant's counsel billed in bringing it, stating that Walsh could not reasonably have expected that it would be faced with a costs award of this magnitude. In Huscroft J.A.'s view, the trial judge failed to consider the fairness and reasonableness of the costs awarded and did not provide an adequate justification for the striking disparity in the costs incurred by the parties, resulting in a costs award that was contrary to the fundamental objective of access to justice. The costs were accordingly reduced by about half.

5. 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2018 ONCA 407 (Sharpe, Rouleau and Fairburn JJ.A.), April 30, 2018*

In this appeal, which arose from a class action brought by Mr. Sub franchisees against Maple Leaf Foods as a result of a listeria outbreak at a Maple Leaf plant, the Court of Appeal considered the extent of Maple Leaf's duty of care to Mr. Sub franchisees in light of the Supreme Court's recent decision in Deloitte & Touche v. Livent Inc. (Receiver of).

In August 2008, certain Maple Leaf brand ready-to-eat (RTE) meats became contaminated with listeria monocytogenes. Some people became seriously ill after eating the meat and, in some cases, the contamination was fatal. Maple Leaf recalled meats that were produced at the production plant where the infected meat originated, and the plant was temporarily closed.

The recall and plant closure affected the supply of two of the RTE meats used by the franchisees of Mr. Submarine Ltd.

A class action was certified on behalf of Mr. Sub franchisees against the appellants, Maple Leaf Foods Inc. and Maple Leaf Consumer Foods Inc. The representative plaintiff and respondent in this appeal, 1688782 Ontario Inc., claimed damages against the appellants on the basis that Maple Leaf (a) negligently manufactured and supplied potentially contaminated meat and (b) negligently represented that the supplied meats were fit for human consumption. While there was no evidence that any Mr. Sub customer was harmed by any contaminated product, the representative plaintiff alleged that the franchisees suffered economic losses arising in large part from the reputational harm they say they experienced from being publicly associated with Maple Leaf in the aftermath of the listeria outbreak. The representative plaintiff claimed damages for loss of past and future sales, past and future profits, and capital value and goodwill. It also claimed damages for clean-up costs and other costs related to the disposal, destruction and replacement of the RTE meats.

After certification of the class action, Maple Leaf brought a summary judgment motion seeking dismissal of certain claims on the basis that it owed no duty of care to the class.

The motion judge concluded that Maple Leaf owed a duty to care to the franchisees "in relation to the production, processing, sale and distribution of the RTE Meats" as well as "with respect to any representations made that the RTE Meats were fit for human consumption and posed no risk of harm."

Maple Leaf appealed, arguing that the motion judge erred in (i) finding that it supplied the representative plaintiff with a defective product dangerous to public health, (ii) concluding that this case fell within a recognized duty of care, (iii) failing to consider and properly apply the Anns/Cooper test, and (iv) finding that damages for pure economic loss were recoverable in this case.

The Court of Appeal allowed the appeal, concluding that while Maple Leaf may well have had liability for personal injury suffered by anyone who consumed the contaminated meat, it did not have a duty not to harm the reputation or profits of Mr. Sub franchisees who sold it the meat.

Writing for the court, Fairburn J.A. first addressed Maple Leaf's submission that the motion judge made a key finding of fact that was unsupported by the evidence and that this error led to her erroneous conclusion that a duty of care was owed. Maple Leaf took issue with the motion judge's comment that it "supplied the plaintiff ... a defective product dangerous to public health", arguing that there was no evidence that any contaminated meats reached the representative plaintiff's franchise or that either of the two core menu items that were recalled ever tested positive for listeria. Fairburn J.A. dismissed this submission, finding that, when reading the impugned comment in context, the motion judge was merely saying that there was a risk that the two core menu items could compromise public health, given that they had been produced at the same plant as the tainted meat.

Turning to the duty of care, Fairburn J.A. acknowledged that it was unclear exactly what the motion judge decided on the established/analogous category point in the Anns/Cooper analysis. She found, however, that any ambiguity as to whether the motion judge determined that the relationship between the parties fell within an established category was resolved by the costs ruling. There, the motion judge concluded that the certification and summary judgment motions did not raise a novel issue of law, noting that "the relationship between the parties fell within a recognized duty of care".

Fairburn J.A. noted that the motion judge did not have the benefit of the Supreme Court's decision in Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63 when she decided the motion. The majority in Livent warned that courts should be cautious in finding proximity based upon a previously established or analogous category. In this case, the motion judge improperly relied on certain decisions to conclude that Maple Leaf's relationship with the representative plaintiff fell within a recognized duty of care to supply a product fit for human consumption. In Fairburn J.A.'s view, the decisions were distinguishable from this case where it was alleged that Maple Leaf should be held liable for damages for reputational harm to the franchisees as a result of a recall and their public association with Maple Leaf.

While she took no issue with the motion judge's factual findings, Fairburn J.A. held that the motion judge erred in failing to consider the scope of the proximate relationship and any duty arising from it. As the Supreme Court noted in Livent, "the proximity analysis not only determines the existence of a relationship of proximity, but also delineates the scope of the rights and duties which flow from that relationship" (emphasis in original).

In Fairburn J.A.'s view, to conclude that Maple Leaf owed the duty alleged in this case would go beyond the duty to safeguard the health and safety of consumers to include an additional and very different duty to franchisees to protect them against economic harm. To do so would constitute "an unwarranted expansion" of a duty owed to one class of plaintiffs and extend it to the fundamentally different claim advanced by the franchisees.

Fairburn J.A. held that the motion judge also erred in concluding that Maple Leaf owed a separate duty of care to franchisees "with respect to any representations made that the RTE Meats were fit for human consumption and posed no risk of harm". The motion judge's failure to consider the scope of the proximate relationship between the parties affected her foreseeability analysis. While Maple Leaf undoubtedly undertook to supply meat safe for human consumption by Mr. Sub customers, the nature and purpose of this undertaking was to ensure that Mr. Sub customers who ate RTE meats would not become ill or die as a result of eating the meats; it was not to protect the reputational interests of the franchisees. The alleged reputational damage fell outside the scope of Maple Leaf's undertaking to the franchisees. Therefore, the court held, the alleged injury was not reasonably foreseeable.

* Lerners acted for the respondent.

http://lernersappeals.ca/netletters

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