COURT
    OF APPEAL FOR ONTARIO

CITATION: R. v. Taylor, 2013 ONCA 656

DATE: 20131031

DOCKET: C54969, C55172, C55287

Goudge, Cronk and Gillese JJ.A.

BETWEEN                                                                                C54969

Her Majesty the Queen

Respondent

and

Aubrey Taylor

Appellant

AND BETWEEN                                                                                C55172

Her Majesty the Queen

Respondent

and

Dwayne Jahton Blair

Appellant

AND BETWEEN                                                                                C55287

Her Majesty the Queen

Respondent

and

Claudiah Gooden

Appellant

Jonathan Dawe, for the appellant, Aubrey Taylor

Diana Lumba, for the appellant, Dwayne Jahton Blair

Paul Calarco, for the appellant, Claudiah Gooden

Benita Wassenaar, for the respondent

Heard: October 1, 2013

On appeal from the convictions entered by Justice Deborah
    J. Austin of the Ontario Court of Justice, sitting without a jury, on December
    22, 2011 and from the sentence imposed by Justice Austin on the appellant
    Aubrey Taylor, on January 20, 2012.

Cronk J.A.:

I.        Introduction

[1]

Following a joint trial before a judge alone, the appellants were
    convicted of importing, possessing and transporting illegal firearms into
    Canada.  The charges arose out of an incident on November 17, 2010 when alcohol
    and several handguns were smuggled from the United States to Walpole Island,
    Ontario.

[2]

The appellants Claudiah Gooden and Dwayne Jahton Blair also pleaded
    guilty to charges of unlawful importation of alcohol and possession of packaged
    alcohol on which duty had not been paid. The appellant Aubrey Taylor defended
    the same charges.  He was convicted of both offences and sentenced to six
    months imprisonment on each charge, concurrent to his effective sentence of 33
    months imprisonment on the firearms offences.  The appellant Blair was also
    convicted of resisting arrest.  He was acquitted on one count of assaulting
    police.

[3]

All three appellants appeal their firearms-related convictions.  If
    Taylors firearms conviction appeal succeeds, he seeks leave to appeal and, if
    leave be granted, appeals from sentence on his two alcohol-related
    convictions.  The appeals were heard together in this court.

II.       Facts

[4]

It is unnecessary for the disposition of these appeals to review the
    facts in detail. The following brief summary will suffice.

[5]

In the months leading up to the Walpole Island incident, Gooden
    travelled twice to Atlanta, Georgia (June 28, 2010 and November 12-14, 2010),
    each time meeting an associate, Eric Lynch.  When Gooden was detained by border
    officials on her return to Canada from the first Atlanta trip, her BlackBerry device
    was found to contain photographs of firearms, ammunition and prohibited weapons.
    As well, $1,000, wrapped in a blank receipt from a gun show in Atlanta, was
    found in her purse.  No charges were laid and Gooden was permitted re-entry to
    Canada.

[6]

On November 13, 2010, while in Atlanta during her second trip, Gooden
    was sent $2,200 from Canada.  In addition, on November 16, 2010, the day before
    the smuggling incident, Taylor, acting on instructions from Gooden, wired $1,273.06
    (U.S.) to Lynch in Georgia. He gave the receipt for this wire transfer to
    Gooden.

[7]

At trial, the Crown led evidence of extensive text messages and telephone
    calls from and to Lynch, both prior to and on November 17, 2010.  Gooden
    acknowledged that many of these messages had been sent or received on her BlackBerry
    or cell phone.

[8]

Walpole Island is located close to the United States border, between
    Sarnia and Windsor.  On November 17, 2010, the appellants travelled together to
    Walpole Island in a car rented by Taylor. When they arrived on the island, they
    made contact with a local resident, Nathan Shipman, and sought his assistance
    to obtain goods from an associate (Lynch) on the American side of the border.  Blair
    asked Shipman to obtain three boxes of liquor from their associate and bring
    them back to the appellants on Walpole Island.  According to Shipman, Blair
    said that the alcohol was intended for use at a forthcoming birthday party.

[9]

Shipman agreed to the proposal, for a fee of $150. He obtained a boat
    from another island resident, travelled the short distance to the American side
    of the St. Clair River, made contact with the appellants associate (Lynch),
    and returned with what he understood were three boxes of alcohol.

[10]

On
    Shipmans return to Walpole Island, the three boxes were loaded into the trunk
    of Taylors rental car, in the presence of the appellants. Two of the boxes
    were sealed. They contained approximately $600 worth of smuggled liquor. The
    third, unsealed box contained four firearms (two semi-automatic pistols and two
    revolvers) wrapped in a variety of clothing. Goodens DNA was subsequently
    detected on some of the clothing.

[11]

Within
    a short time, the police intercepted Taylors rental car and discovered the
    contraband in the trunk of the vehicle. Shipman and the appellants were arrested
    and charged with the alcohol and firearms-related offences mentioned above.

[12]

The
    central issue at trial was the appellants knowledge of the firearms. Shipman testified
    for the Crown. His evidence of what occurred and the activities of the three
    appellants on November 17, 2010 was an important plank in the Crowns case
    against all three accused. The Crown also relied on the pattern and content of
    the text and telephone messages to and from Lynch and the physical presence of
    the firearms in Taylors rental car, among other matters, as circumstantial
    evidence of the appellants guilt.

III.      Goodens Conviction Appeal

[13]

Gooden
    pleaded guilty to the alcohol-related charges but maintained that she had no
    knowledge of or involvement with the smuggling of the firearms. She claimed
    that she was planning a birthday party for her husband, the appellant Blair, that
    was to feature a number of exotic dancers. She said that she went to Walpole
    Island to pick up two dancers who were to perform at the party in Toronto.  She
    maintained that although she had purchased speciality alcohol in the United
    States for use at the party, she had no prior intention of arranging a meeting
    with Lynch on November 17th. Rather, the rendezvous with Lynch and the illegal
    importation of the alcohol on that day were arranged at the last minute, when
    the opportunity to engage Shipmans services arose.  She professed to have no
    knowledge as to how the firearms came to be in the trunk of Taylors rental
    car.

[14]

The
    trial judge rejected Goodens explanation for her activities on Walpole Island.
    She held that Goodens evidence was replete with contradictions and
    inconsistent with the focus of the numerous text messages to and from Lynch.
    In particular, she held that Goodens communications with Lynch were
    inconsistent with her asserted purpose for travelling to Walpole Island on
    November 17
th
, the circumstances surrounding Shipmans meeting with
    Lynch on that day, and Goodens claim of incidental arrangements for the
    delivery merely of alcohol from the United States.

[15]

The
    trial judge accepted Shipmans evidence, including his testimony that he
    obtained three boxes of what he believed contained alcohol from an associate of
    the appellants on the American side of the border that were later placed in the
    trunk of Taylors rental car, in the presence of the appellants, when Shipman returned
    to Walpole Island.

[16]

Gooden
    argues that the trial judge erred in her treatment of Shipmans evidence. Gooden
    submits that since Shipman, a co-accused, was an unsavoury Crown witness, the
    trial judge was obliged to subject his evidence to a
Vetrovec
-like
    level of careful scrutiny:
Vetrovec v. The Queen,
[1982] 1 S.C.R. 811. She contends that the trial
    judge erred:
(1) by failing to apply the correct level of scrutiny
    to Shipmans testimony; (2) by restricting her examination of the evidence
    potentially corroborative of Shipmans testimony to only that evidence
    supportive of the prosecutions case; (3) by relying on inadmissible or
    rejected evidence to bolster Shipmans credit and reliability; and (4) by
    ignoring or misapprehending evidence that undermined Shipmans credibility and
    enhanced that of Gooden.

[17]

In
    my view, Goodens attack on the trial judges treatment of Shipmans evidence
    is unsustainable.

[18]

The
    trial judge acknowledged that Shipman played a key role in the smuggling
    transaction alleged by the Crown, that he had a criminal record (including for
    crimes of dishonesty) and that, as a co-accused, he had a strong motive to
    minimize his own liability for the crimes alleged. As a result, the trial judge
    explicitly, and repeatedly, directed herself that Shipmans evidence should be
    approached with great caution and close scrutiny in accordance with the principles
    outlined in
Vetrovec
.

[19]

The
    trial judge also addressed disputed issues arising from Shipmans testimony and,
    as I describe in paragraphs 22 and 23 of these reasons, sought corroboration of
    the critical aspects of his version of events.  She ultimately concluded, After
    directing my mind to all of the factors that might impair the worth of Mr.
    Shipman as a witness and his credibility, his evidence can and is relied upon
    to support a conviction, because it is materially confirmed or corroborated by
    other sources.

[20]

In
    these circumstances, there is simply no foundation for the claim that the trial
    judge failed to appreciate the care required in assessing Shipmans evidence,
    or that she failed to exercise the requisite caution in evaluating and relying
    on his testimony.

[21]

I
    also see no basis on which to fault the trial judges use of corroborative
    evidence in relation to Shipmans evidence.

[22]

It
    is true that the trial judge relied on some aspects of Goodens testimony to
    corroborate parts of Shipmans evidence, even though she rejected Goodens
    proffered explanation for her conduct before and during her visit to Walpole
    Island.  The trial judge did not err in doing so.  She was entitled, as with
    any other witness, to reject or accept all, some or none of Goodens evidence.
    The trial judges rejection of Goodens account of her purpose for attending at
    Walpole Island and her alleged lack of knowledge of and involvement with the
    firearms did not preclude her reliance on those aspects of Goodens testimony
    that corroborated Shipmans evidence.

[23]

More
    importantly, in testing Shipmans credibility and the reliability of his
    testimony, the trial judge relied on various sources of corroborative evidence,
    in addition to pertinent aspects of Goodens testimony. These included the physical
    evidence of the firearms and alcohol found by the police in the trunk of
    Taylors rental car shortly after Shipmans return from the United States; the
    fact that all the appellants were present when the boxes obtained by Shipman
    were placed in the trunk; the extensive text messages and photographs on the BlackBerry
    and cell phone devices admittedly used by Gooden; and Goodens receipt of
    significant funds  in amounts far in excess of the value of the alcohol she
    purchased  while she was in the United States in the days leading up to the
    smuggling incident. This evidence afforded ample circumstantial corroboration
    of Shipmans testimony.

[24]

Gooden
    especially challenges the trial judges reliance on the text messages for
    corroboration of Shipmans testimony, arguing that they are inadmissible
    hearsay.  In my opinion, this argument fails for two reasons.

[25]

First,
    at trial, Gooden conceded the admissibility of the text messages. During his
    final submissions, Goodens trial counsel confirmed his position that only the
    reliability of the text messages was suspect.  In these circumstances, I agree with
    the Crown that it is not open to Gooden to challenge the admissibility of this
    evidence on appeal.

[26]

Second,
    Goodens counsel acknowledged during the appeal hearing that the text messages
    sent by Gooden do not constitute hearsay. This was a proper concession. The
    text messages sent by Gooden herself were not hearsay. The content, frequency
    and timing of those messages afforded powerful inculpatory evidence of Goodens
    knowledge of and involvement with the smuggling of the firearms.

[27]

At
    the end of the day, the Crowns case against Gooden on the firearms charges was
    overwhelming. The fresh evidence sought to be filed by Gooden on appeal does
    not affect the strength of the Crowns case against her. I see no basis for
    appellate interference with Goodens convictions on the firearms offences.

IV.     Blairs and Taylors
    Conviction Appeals

[28]

I
    reach a different conclusion, however, concerning Blairs and Taylors firearms
    convictions.  In light of the similarity of their grounds of appeal, I will
    address their conviction appeals together.

[29]

Blair
    appeals from his firearms convictions on two grounds. First, he submits that
    the trial judges reasons are insufficient on the critical issue whether Blair
    knew or was wilfully blind about the firearms.  Second, he argues that the
    verdicts on the firearms charges are unreasonable.

[30]

Like
    Blair, Taylor argues that the trial judges reasons for convicting him on the
    firearms charges are flawed. He submits that the reasons are fatally deficient
    because: (1) they are silent on the key issue of his state of mind concerning
    the firearms.  As a result, it cannot be said that the trial judge lent her
    mind to the requisite
mens rea
for the firearms offences; (2) in the
    alternative, even if the trial judge did address the question of Taylors
mens
    rea
, the reasons do not explain how she resolved the issue of his
    knowledge of or wilful blindness concerning the smuggled firearms; and (3) in
    any event, the reasons fail to address exculpatory evidence pointing away from
    the inference of his guilty knowledge of the firearms. Again like Blair, Taylor
    further submits that his convictions on the firearms charges are unreasonable.

[31]

Blairs
    and Taylors main contention is that the trial judges reasons fail to meet the
    standard for sufficiency of reasons set out in
R. v. Sheppard
, 2002
    SCC 26, [2002] 1 S.C.R. 869,
R. v. R.E.M.
, 2008 SCC 51, [2008] 3
    S.C.R. 3 and their progeny. That standard requires that a trial judges reasons:
    (1) be reasonably intelligible to the parties; (2) reveal the foundations of
    the trial judges decision when viewed in the context of the particular
    circumstances of the case and the trial record; and (3) provide the basis for
    meaningful appellate review of the correctness of the trial judges decision:
Sheppard
,
    at para. 55;
R.E.M.
, at para. 17;
R. v. Vuradin
, 2013 SCC 38,
    [2013] S.C.J. No. 38, at paras. 10 and 19.

[32]

The
    trial judges reasons for convicting Blair and Taylor of the firearms offences
    are brief (three paragraphs). In their entirety, they read as follows:

With respect to Mr. Blair and Mr. Taylor, given the independent

sources

of

corroboration

of

Nathan
    Shipmans evidence that he was merely the courier for all items in the trunk of
    the vehicle, including the general corroborative nature of Ms. Goodens own
    evidence about the matter, Mr. Shipmans evidence about the relative roles of
    the three parties during the day is generally reliable and accurate in the view
    of the Court. It was clear in the evidence of both Mr. Shipman and Ms. [Gooden]
    that Mr. Blair and Mr. Taylor were there to assist Ms. Gooden as active
    participants rather than as passive passengers in the course of this
    transaction that was taking place. Mr. Blair had direct discussions and made
    arrangements with Mr. Shipman, including the fee for his work, the actual
    details of what was expected and it was clear that Mr. Blair took a leadership

role

in
    those instructions and communications with Mr. Shipman about what was to be
    done that day.

The evidence not only of Mr. Shipman, but independent evidence
    supports the conclusion that Mr. Taylor also played an active role by aiding
    and abetting Ms. Goodens offence in sending the Western Union money transfer
    of $1,273.06 in US dollars to Eric in Georgia on 16th of November just before
    the Walpole Island rendezvous. He also rented the vehicle that was driven to
    the Walpole Island connection and although that car was rented some 10 days
    earlier, on the evidence of Ms. Gooden it was at the disposal of the parties
    generally leading up to this date, according to her, and it was made available
    for the trip. Mr. Taylor attended the trip and this was the day after he had
    sent a large sum of money directly to Eric in Atlanta.

It is reasonable and supported to conclude, in all of the
    circumstances, that Mr. Taylor allowed himself to be used by Ms. Gooden and to
    play a role in this transaction, perhaps for the purpose of reducing the risk
    that the others identities would be traced to this trip and the illegal nature
    of the transaction, or perhaps for purposes unknown, but it is clear that he
    played an active role in aiding and abetting the offences.

[33]

At
    trial, it was the Crowns theory that each of the appellants played a role in
    knowingly planning and committing the offences related to the smuggling of the
    firearms and the alcohol.  Blair maintained that the only scheme in which he
    knowingly participated was the plan to smuggle alcohol.  In contrast, Taylor
    denied any knowledge of or involvement with the smuggled alcohol.  Both men
    denied any knowledge of the firearms or any plan to smuggle them into Canada.

[34]

The
    Crowns case against Blair and Taylor was entirely circumstantial. In these
    circumstances, the trial judge was obliged to consider the possibility that they
    knew of and participated only in the smuggling of the alcohol, and not the
    smuggling or presence of the firearms. She was required to be satisfied beyond
    a reasonable doubt that the only reasonable conclusion available on the whole
    of the evidence was that Blair and Taylor knew or were wilfully blind about the
    firearms. As the Supreme Court confirmed in
R. v. Charemski
, [1998] 1
    S.C.R. 679, at paras. 3 and 4, even where the Crowns case rests entirely on
    circumstantial evidence, [t]he Crown must adduce
some
evidence of
    [the accuseds] culpability for every essential definitional element of the
    crime for which the Crown has the evidential burden (emphasis in original).

[35]

In
    this case, the Crown invoked party liability against the appellants, under s.
    21(1) of the
Criminal Code
. The Crown maintained that all the
    appellants had entered into a joint enterprise or venture to involve themselves
    in the illegal importation of handguns and alcohol into Canada, using Shipman
    as a courier. Crown counsel put it this way in his final submissions at trial:

It is the Crowns theory that the defendants aided and abetted
    each other in a variety of means [
sic
] to achieve their intended end
    and that was to secure from the United States the four handguns that were
    subsequently found in the trunk of the vehicle that was stopped by the police
    on the evening of November 17, 2010.

.

I am obviously inviting you to find as a fact that what did
    occur in this particular instance is that the weapons were in a box that was
    brought across by Nathan Shipman and that it was done at the behest of the
    defendants before the court.

[36]

Thus,
    the Crown sought to establish that Blair and Taylor participated, together with
    Gooden, in a plan to smuggle firearms into Canada by aiding and abetting that
    joint enterprise.

[37]

The
    trial judge relied on Shipmans evidence, the independent sources of
    corroboration that he was merely the courier for the items found in the trunk
    of Taylors car, and the general corroborative nature of Ms. Goodens own
    evidence about the matter, to ground her acceptance of the Crowns theory.
    She found that Blair and Taylor were both present to assist Ms. Gooden as
    active participants  rather than as passive passengers in the course of this
    transaction.

[38]

Section
    21(1) of the
Criminal Code
makes perpetrators, aiders, and abettors of
    a crime equally liable. Section 21(1) provides:

21.(1)  Everyone is a party to an offence who

(a)   actually commits it;

(b)   does or omits
    to do anything for the purpose of aiding any person to commit it; or

(c)   abets any person in committing it.

[39]

In
R. v. Briscoe
, 2010 SCC 13, [2010] 1 S.C.R. 411, at para.
    13, the Supreme Court explained that the
actus reus
and
mens rea
for aiding or abetting are distinct from those of the principal offence. The
actus
    reus
of aiding or abetting is doing (or, in some circumstances, omitting
    to do) something that assists or encourages the perpetrator to commit the
    offence:
Briscoe
at para. 14. The aider or abettor must also have the
    requisite mental state or
mens rea
. To establish the
mens rea
of aiding or abetting, the Crown must prove: (1) that the accused intended to
    assist the principal in the commission of the offence; and (2) the accuseds
    actual knowledge or wilful blindness that the perpetrator intends to commit the
    crime:
Briscoe
at paras. 14-21.

[40]

The
actus reus
component of the firearms charges is not in issue on
    Blairs and Taylors appeals.  The trial judge found that both accused assisted
    Gooden and were present when the firearms were placed in the trunk of Taylors
    car. In Blairs case, the trial judge held that he had directly discussed the
    smuggling arrangements with Shipman and that he took a leadership role in
    [the] instructions and communications with Shipman. With respect to Taylor,
    the trial judge held that he wired money to Lynch in the United States on
    November 16; that he rented the vehicle used to transport the appellants to
    Walpole Island and to take eventual delivery of the contraband; and that he
    attended the trip for the events in question. There was ample evidence
    accepted by the trial judge to support these factual findings. They establish
    the
actus reus
for Blairs and Taylors party liability on the
    firearms offences.

[41]

The
    key issue is whether the trial judge also examined whether Blair and Taylor had
    the requisite
mens rea
for any of the firearms offences. Based on her
    reasons, I am unable to conclude that she considered and resolved this crucial question
    in respect of either Blair or Taylor.

[42]

Early
    in her reasons, the trial judge identified the live issues regarding the
    firearms offences in these terms: who put [the firearms] in the trunk, whether
    they were already in that box or not, who knew about them.  However, apart
    from this brief initial reference to knowledge of the firearms, the trial
    judge never addresses the issue of the
mens rea
required for party
    liability for the firearms offences in her reasons.

[43]

Nothing
    in the trial judges reasons specific to Blair and Taylor, quoted above,
    adverts to the necessary mental element for the firearms offences. The balance
    of the trial judges reasons contains no mention, express or implied, of
    Blairs or Taylors
mens rea
or state of mind concerning the smuggling
    or presence of firearms.  Importantly, the trial judge made no finding that
    Blair and/or Taylor knew of Goodens intention to smuggle the firearms or that
    either or both of them was wilfully blind to this plan.  Nor did she make any  finding
    that they intended to assist Gooden in the commission of the firearms offences,
    as opposed to only the alcohol-related offences.

[44]

Blairs
    and Taylors necessary
mens rea
for the aiding or abetting of Gooden
    in the commission of the firearms offences cannot be assumed. Nor can it be
    extrapolated from Goodens state of mind. The
mens rea
component of
    aiding or abetting is an essential element of party liability under ss.
    21(1)(b) or 21(1)(c) of the
Criminal Code
. It is unclear from the
    trial judges reasons that she considered whether Blair and Taylor intended to
    assist Gooden in the smuggling of firearms and alcohol, or just alcohol. It is
    similarly unclear whether she considered and concluded that Blair and Taylor
    both knew or were wilfully blind about Goodens intention to smuggle firearms.

[45]

Blair
    and Taylor characterize these uncertainties as material deficiencies in the
    trial judges reasons,
i.e.
as
Sheppard
errors. They
    essentially contend, not that the trial judges reasoning is defective, but
    rather that her reasons are fatally  silent or unclear on the mental element
    required to fix Blair and Taylor with party liability for the firearms offences
    under s. 21(1) of the
Code
.

[46]

I
    agree.  In my view, the trial judges failure to address and come to grips with
    Blairs and Taylors requisite mental states or
mens rea
regarding the
    firearms is an error of law.  Her failure to consider and resolve the issue of
    Blairs and Taylors knowledge or wilful blindness of Goodens intention to
    commit the firearms offences constitutes a legal error that necessitates a new
    trial for Blair and Taylor on the firearms charges.

[47]

I
    have considered whether the trial judges findings about Blair indicate that she
    found him culpable of the firearms offences as a perpetrator or principal.  There
    is some support for this conclusion in the trial judges reasons  she refers expressly
    to aiding and abetting only in relation to Taylor.

[48]

However,
    I am compelled to reject this reading of the trial judges reasons. The trial
    judge refers to Blair as having been present to assist Ms. Gooden as an
    active participant. This is the language of aiding or abetting.  Moreover, neither
    at trial nor before this court did the Crown contend that Blair was liable as a
    principal for the firearms offences.

[49]

I
    am also cognizant of the Crowns argument that at least two of the
    incriminating text messages sent to Lynch on November 12, 2010, asking him to Look
    4 one named S & W bodyguard and See if u can get one like that, came
    from a cellphone or other device used by Blair, thus affording some evidence of
    Blairs intention to smuggle guns.

[50]

I
    would not accede to this submission. During oral argument before this court,
    Blairs counsel pointed out that there was no proof at trial of Blairs actual
    use of the device in question, as distinct from Gooden, his spouse, at the
    relevant times. The record supports this claim and I did not understand Crown
    counsel to dispute it. In any event, the trial judge did not rely on these text
    messages to ground any finding regarding Blairs mental state in relation to
    the firearms offences. She made no finding that the device in question had been
    used by Blair at the relevant times.  Nor, it appears, was she asked to do so.

[51]

For
    similar reasons, I would reject the Crowns submission that the numerous text
    and telephone messages exchanged with Lynch on the day of the smuggling
    incident, and the money sent by Taylor to Lynch in the United States on the day
    prior to this incident, established Taylors
mens rea
in relation to
    the firearms offences.

[52]

The
    trial judge made no finding that the incriminating text and telephone messages
    were sent by Taylor or that the device employed to send these messages was used
    by him at the relevant times. The fact that Taylor wired money to Lynch at
    Goodens request does not establish that he knew or was wilfully blind to the
    fact that Gooden intended to use the money to purchase firearms, as opposed to
    alcohol. Certainly, the trial judge made no such finding.

[53]

I
    therefore conclude that the firearms convictions against Blair and Taylor
    cannot stand. A new trial is required to determine whether either or both of
    these accused had the requisite
mens rea
to establish their guilt on
    the firearms charges.

V.      Taylors Sentence Appeal

[54]

Taylor
    was sentenced, on the basis of a joint submission, to a total effective
    sentence of 33 months imprisonment, as required by the mandatory minimum
    sentence provided under the
Criminal Code
in respect of two of his
    firearms offences, after three months credit for pre-sentence custody. As I
    have said, as part of this global sentence, the trial judge sentenced Taylor to
    six months imprisonment for each of his two alcohol-related convictions,
    concurrent to his sentences on the firearms offences.

[55]

Taylor
    argues that if his conviction appeal on the firearms offences is allowed, he
    should be granted leave to appeal against sentence on the alcohol offences and
    his sentences on those offences should be varied to time served.  The Crown concedes
    that if Taylors conviction appeal succeeds, leave to appeal sentence should be
    granted and Taylors sentences on the alcohol-related charges should be
    adjusted. She submits that, in those circumstances, a $500 fine is an
    appropriate disposition for Taylors alcohol-related convictions.

[56]

As
    I have already explained, I would allow Taylors conviction appeal on the
    firearms offences.  In light of the Crowns concession, described above, it therefore
    falls to this court to fashion a fit sentence on Taylors two alcohol-related
    convictions.

[57]

I
    am satisfied that a custodial sentence for these convictions is not warranted.
    At the sentencing hearing, defence counsel and provincial Crown counsel made submissions
    only on the appropriate global sentence to be imposed on Taylor. Federal Crown
    counsel, who appeared separately, made no submissions in support of his
    position that Taylors alcohol-related convictions should attract six-month
    custodial sentences.

[58]

Nor
    do the sentencing reasons provide any justification for these sentences.
    Rather, they suggest that the six-month custodial sentences derived from
    counsels joint submission regarding an appropriate global sentence of 36
    months imprisonment (before credit for pre-sentence custody).  In effect, at
    the time of imposition, the concurrent custodial sentences on the
    alcohol-related charges had no practical significance.

[59]

I
    also agree with Taylors submission that if he had been charged and convicted
    only on the alcohol-related offences, it is most unlikely that any custodial sentences
    would have been imposed, let alone six-month terms of imprisonment.

[60]

Further,
    I do not accept that a fine is warranted for this offender and these offences
    in the circumstances now applicable.

[61]

At
    the time of sentencing, Taylor was a first offender.  He also had a favourable
    pre-sentence report and he complied with his bail provisions between his
    release date and his remand into custody for sentencing.  He has served a total
    of 62 days in pre-trial custody and 24 days in post-sentence custody.  Moreover,
    the offences at issue (possession of contraband alcohol on which duty was owed
    to the state) are not extremely serious, the quantities of alcohol involved are
    not large (18 bottles in total), and the loss to the treasury occasioned by
    their unlawful importation and the non-payment of duty was less than $500.
    Finally, the trial judge found that Taylor had the most peripheral
    involvement of any of the three appellants in the offences at issue.

[62]

Given
    these factors, including the time already spent by Taylor in custody, I regard time
    served as a fit sentence for his alcohol-related offences.

VI.     Disposition

[63]

For
    the reasons given, I would dismiss Goodens conviction appeal. I would allow
    Blairs and Taylors conviction appeals, set aside the verdicts on their
    firearms convictions and direct new trials on the firearms charges for each of
    these appellants. Finally, I would grant Taylor leave to appeal sentence on his
    alcohol-related convictions, allow his sentence appeal on those convictions,
    set aside the sentences imposed, and vary his sentences on the alcohol-related
    charges to time served.

Released:

EAC                                                E.A.
    Cronk J.A.

OCT 31 2013                                   I agree
    S.T. Goudge J.A.

I
    agree E.E. Gillese J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Reichert v. Stanbarr Services
    Limited, 2013 ONCA 602

DATE: 20131002

DOCKET: C57013

Gillese, Juriansz and Strathy JJ.A.

BETWEEN

Hans Jorg Reichert and Marianne Reichert

Defendants (Appellants)

and

Stanbarr Services Limited, Kempston Grove Corp.,
    617695 Ontario Inc. and Eddy Goldberg

Plaintiffs (Respondents)

Hans Jorg Reichert and Marianne Reichert, appellants
    appearing in person

Martin Greenglass, for the respondents

Heard: September 27, 2013

On appeal from the judgment of Justice Thomas A. Bielby
    of the Superior Court of Justice, dated April 18, 2013.

ENDORSEMENT

[1]

The second mortgagee in this mortgage action brought a motion for
    summary judgment, in which it sought possession of the mortgaged premises
    municipally described as 13610 11
th
Concession, Schomberg, Ontario
    L0G 1To (the Property).

[2]

The defendants were self-represented both at the motion below and before
    this court.  They acknowledged that the mortgage was valid and that they were
    in default.  However, they denied that they owned the Property, maintaining
    that since 2001 the Property has been owned by the Jorg Trust.

[3]

By order dated April 18, 2013 (the Order), Bielby J. granted the
    motion for summary judgment and, among other things, ordered that possession of
    the Property go to the second mortgagee.  In concluding that the second
    mortgagee was entitled to possession, the motion judge found that:

1.

the mortgage
    sued on was valid, and had matured and become due in February of 2012;

2.

the mortgage
    sued on was in default;

3.

the defendants
    and their children were not then residing in the Property;

4.

the evidence
    filed by the defendants did not meet the burden of proof in demonstrating that
    a trust owned the Property; and,

5.

the thrust of
    the defendants argument was to delay the matter.

THE ISSUES

[4]

On appeal, the defendants ask that the Order for possession be set
    aside.  Their arguments can be summarized into essentially two submissions.

[5]

First, the defendants contend that the motion judge failed to recognize
    that the Jorg Trust is the true owner of the Property.

[6]

Second, the defendants submit that the motion judge failed to appreciate
    their concerns that the second mortgagee was not acting in good faith, and that
    it would sell the Property for too low a price or not to the right person.
    They ask this court to order that they be present for all inspections done by
    prospective purchasers and that they be permitted to pre-screen prospective purchasers
    for their suitability to buy the Property.

[7]

At the oral hearing of the appeal, the defendants brought with them a
    conditional offer for the purchase and sale of the Property (the Offer).
    They made a further request, namely, that no matter how the appeal is decided,
    that the Offer be declared to be valid and that they are entitled to proceed
    with in accordance with it.

ANALYSIS

The Jorg Trust Submission

[8]

We see no basis for interfering with the motion judges determination
    that the evidence before him was insufficient to establish that the Property
    was owned by the Jorg Trust.

[9]

However, for the purposes of this appeal, the panel will assume that the
    Jorg Trust is the beneficial owner of the Property.  This makes no change to
    the second mortgagees right to possession of the Property.  The defendants
    (appellants) claim to represent the Jorg Trust and they have acknowledged that
    the mortgage is in default and that they are not residing in the Property.

The Defendants Concerns about
    the Actions of the Second Mortgagee and the Sale of the Property

[10]

Concerns
    over a possible improvident sale are not a legal defence to a claim for
    possession where there is an admitted mortgage default.

[11]

Further,
    there is no legal basis on which to make the orders sought in relation to
    prospective purchasers.

[12]

Finally,
    we cannot accede to the defendants request in respect of the Offer as that
    matter is not properly before us.  We would note, however, that it is in
    everyones interest that a sale be concluded as soon as possible and that the
    sale price be a fair one.

DISPOSITION

[13]

Accordingly,
    the appeal is dismissed.

[14]

The
    panel dealt with costs of the appeal and costs of motion M42788 in the
    associated proceeding,
The Jorg Trust v. Stanbarr Services Limited et al
.,
    after concluding the hearing on both.  In relation to the appeal, costs are
    ordered in favour of the respondent, fixed at $9,230.85, all inclusive.  In
    relation to the motion, costs are ordered in favour of the moving party, fixed
    at $3,516.48, all inclusive.

E.E. Gillese J.A.

R.G.
    Juriansz J.A.

G.R.
    Strathy J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Royal Bank of Canada v. Prime
    Printex Ltd, 2013 ONCA 625

DATE: 20131016

DOCKET: C56980

Weiler, Gillese, Lauwers, JJ.A.

BETWEEN

Royal Bank of Canada

Respondent (Applicant)

and

Prime
    Printex Ltd., Ali Makary aka Ali Markary

and
Shahin
    Hendi

Appellant (Respondent)

Patrick Di Monte, for the appellant Shahin Hendi

C.J. Khanlarbig, for the respondent Ali Makary

Heard: October 15, 2013

On appeal from the order of Justice Geoffrey B. Morawetz
    of the Superior Court of Justice, dated March 27, 2013.

APPEAL BOOK ENDORSEMENT

[1]

In our opinion, the appellant would have been, as conceded by the Bank,
    partially successful on appeal at least. In these circumstances, although Mr.
    Di Monte agreed to pay the Bank $3,000 in costs, we are of the opinion that the
    Bank is not entitled to any costs, and paragraph two of the draft order
    submitted for approval is deleted. We are further of the opinion that Mr.
    Makary is not entitled to any costs, no relief were sought against him and the
    settlement improved his position vis-à-vis the Bank.

[2]

On consent, the appeal is dismissed.


COURT OF APPEAL FOR ONTARIO

CITATION: Seiler-Kent v. Kent, 2013 ONCA 634

DATE: 20131017

DOCKET: C55399

Feldman, MacPherson and Epstein JJ.A.

BETWEEN

Mayumi Seiler-Kent

Applicant

(Appellant in Appeal)

and

David Kent

Respondent

(Respondent in Appeal)

Valois P. Ambrosino, for the appellant

Herschel L. Fogelman and Jennifer S. Shuber, for the
    respondent

Heard and released orally: October 3, 2013

On appeal from the order of Justice Mary Lou Benotto of
    the Superior Court of Justice, dated March 22, 2012.

ENDORSEMENT

[1]

The parties, formerly husband and wife, settled issues arising out of
    their marriage including child and spousal support, by way of a Divorce
    Judgment in 2005, amended on consent in August 2010.

[2]

This appeal arises under the appellants motion to change child and
    spousal support and parenting terms as well as for disclosure.  The respondent responded
    to the appellants claims and sought termination of spousal support.  The
    motion judge, after denying the appellants adjournment request, dismissed both
    the appellants motion and the respondents request to end any obligation for
    him to pay spousal support.

[3]

The appellant submits the motion judge erred in refusing to grant the
    adjournment she requested at the commencement of the hearing.  The request was
    based on allegations that the respondent failed to provide proper financial
    disclosure. The difficulty with this argument is the same as it was when made
    to the motion judge.  It is not supported by the record.

[4]

We agree with the motion judges view that further delay was not in the
    interests of justice and find no error in the exercise of her discretion to
    deny the appellants adjournment request.  We therefore reject this argument.

[5]

The appellants submission that the motion judge erred in dismissing her
    motion to change appears to be linked to the adjournment argument.  The
    appellant contends that there was an insufficient evidentiary basis for the
    motion to be adjudicated upon.

[6]

We disagree.  The motion judges determination of the respondents
    income for child support purposes was supported by evidence the motion judge was
    entitled to accept.  The same can be said about her conclusion that, at the
    time the motion was heard, the respondents child support payments were
    actually in excess of the guideline amount.

[7]

We add a final comment and that is to endorse the motion judges
    admonition at the conclusion of her reasons.  This motion, like most motions to
    change, is straightforward and designed to be expeditious. The parties and
    counsel should be prepared to participate within these confines.

[8]

Because the respondent has breached the child support order of Justice
    Benotto, it is not appropriate for the respondent to have his costs of this
    appeal despite his success.  We therefore order no costs.

K. Feldman J.A.

J.C. MacPherson J.A.

Gloria Epstein J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Suvajac v. A-1 Siding and Windows (Niagara) Ltd.,
    2013 ONCA 617

DATE: 20131010

DOCKET: C56688

Hoy A.C.J.O., Laskin and Tulloch JJ.A.

BETWEEN

Goran Suvajac

Applicant (Respondent in Appeal)

and

A-1 Siding and Windows (Niagara) Ltd., Jakov
    Ojvan and Mary Ojvan (aka Maria Ojvan)

Respondents (Appellants)

John A. Crossingham, for the respondents (appellants)

Peter Anderson, for the applicant (respondent)

Heard:  October 7, 2013

On appeal from the judgment of Justice C.S. Glithero of
    the Superior Court of Justice, dated January 14, 2013.

APPEAL BOOK ENDORSEMENT

[1]

Appeal abandoned.

[2]

Costs to the respondent in the agreed upon amount of $6,000, all
    inclusive.


COURT OF APPEAL FOR ONTARIO

CITATION: Aldo Group Inc. v. Moneris Solutions Corporation, 2013
    ONCA 725

DATE:
20131129

DOCKET: C55533

Blair, Juriansz and Tulloch JJ.A.

BETWEEN

The Aldo Group Inc.

Plaintiff (Respondent)

and

Moneris Solutions Corporation and
MasterCard International Inc.

Defendants (Respondent/
Appellant
)

Chris G. Paliare and Robert A. Centa, for the appellant

George J. Pollack and Michael H. Lubetsky, for the
    respondent The Aldo Group Inc.

Peter H. Griffin and Melanie K. Baird, for the
    respondent Moneris Solutions Corporation

Heard: April 11-12, 2013

On appeal from the order of Justice David M. Brown of the
    Superior Court of Justice, dated May 1, 2012, with reasons reported at 2012
    ONSC 2581.

Tulloch J.A.:

OVERVIEW

[1]

It is a well-established principle that a contract binds only the
    parties to the bargain. Yet in this appeal, the appellant MasterCard
    International Inc. asks that the respondent The Aldo Group Inc.s claim against
    it be stayed pursuant to s. 106 of the
Courts of Justice Act
, R.S.O.
    1990, c. C.43, on account of forum selection clauses in agreements to which
    Aldo was not a party. Given the nature of Aldos claim and the existing
    jurisprudence in Canada and the United States on the application of forum
    selection clauses to non-signatories, is the non-signatory Aldo bound by forum
    selection clauses in favour of New York? For the reasons that follow, I would
    not bind Aldo to MasterCards forum selection clauses and would accordingly
    dismiss the appeal.

II

FACTS

(1)

The Contractual Matrix

[2]

This appeal concerns several parties governed by multiple agreements.
    Together, these contracts support the way in which customers at Aldo stores
    conduct credit card transactions and govern the consequences of credit card
    transactions that give rise to fraud. Given the significance of the contractual
    relationships to the disposition of the appeal, it is necessary to review them
    in some detail.

[3]

MasterCard is a credit card association incorporated in Delaware with
    its principal place of business in the State of New York and an office in
    Toronto. It is at the top of the contractual chain implicated in this appeal.
    MasterCard transacts with financial institutions which issue its credit cards
    (Issuing Banks) and which acquire merchants willing to accept MasterCards
    credit cards as a method of payment (Acquiring Banks). MasterCard enters into
    licence agreements with financial institutions (Members), pursuant to which
    these institutions are entitled to use MasterCard trademarks and service marks
    provided they comply with MasterCards standards.

[4]

In this case, MasterCard entered into licence agreements with the Bank
    of Montreal (BMO) and Harris National Association (Harris) (Licence
    Agreements). The Licence Agreements require that BMO and Harris, as Acquiring
    Banks, comply with certain standards established by MasterCard, including the
    MasterCard Rules. The MasterCard Rules include the following choice of law and
    choice of forum provision in section 3.4:

The substantive laws of the State of New York govern all
    disputes involving the Corporation, the Standards, and/or the Members and
    Activity without regard to conflicts. Any action initiated by a Member
    regarding and/or involving the Corporation, the Standards and/or any Member and
    Activity must be brought, if at all, only in the United States District Court
    for the Southern District of New York or the New York Supreme Court for the
    County of Westchester, and any Member involved in any action hereby submits to
    the jurisdiction of such courts and waives any claim of lack of personal
    jurisdiction, improper venue, and
forum non conveniens
.

[5]

BMO and Harris, as Acquiring Banks, entered into agreements with a third
    party processor, Moneris Solutions Corporation, to support their MasterCard
    activity. BMO and Harris effectively used Moneris as their service provider for
    processing MasterCard credit card transactions. MasterCard permits such
    arrangements provided the third party processor agrees to comply with
    MasterCards standards. In this case, Moneris agreed, in a third party
    processing agreement with MasterCard (Third Party Processing Agreement or
    TPP Agreement), to comply with all applicable MasterCard standards. The TPP
    Agreement between Moneris and MasterCard contained the following choice of law
    and choice of forum clause in section 10:

This Agreement shall be governed by, and construed in
    accordance with, the laws of the State of New York, United States of America.
    Any dispute between MasterCard and Processor arising in connection with this
    Agreement shall be resolved in federal or state court in New York court, or
    Westchester county, New York.

[6]

Moneris entered into a contract with Aldo, an international footwear
    retailer with its head office in Montreal and a substantial retail presence in
    Ontario (the Merchant Agreement). Moneris entered into the Merchant Agreement
    for itself and on behalf of BMO. MasterCard was not a party to the Merchant
    Agreement, but MasterCard required that agreements between Acquiring Banks and
    merchants incorporate certain terms, including compliance with data security
    standards called the Payment Card Industry Data Security Standards (PCI DSS).
    The terms which MasterCard required to be included in the Merchant Agreement
    did not include a forum selection clause. The Merchant Agreement nevertheless
    contained, in section 11.9 of Schedule A, the following choice of forum and
    choice of law clause in favour of Ontario:

This Agreement will be governed by the laws of the province of
    Ontario. The parties agree that the courts of the province of Ontario will have
    exclusive jurisdiction over any matters arising from this agreement.

[7]

The contractual network can be summarized as follows. MasterCard signed
    Licence Agreements with BMO and Harris, and these incorporated a choice of law
    and choice of forum clause in favour of New York. BMO and Harris contracted
    with Moneris; Moneris agreed to comply with MasterCards standards and
    expressly agreed to a choice of law and choice of forum clause in favour of New
    York. Aldo was not a party to the Licence Agreements or Third Party Processing
    Agreement. Finally, Moneris and BMO contracted with Aldo, and their Merchant
    Agreement included a choice of law and choice of forum clause in favour of
    Ontario.

(2)

The Underlying Dispute

[8]

The Merchant Agreement between BMO, Moneris and Aldo imposed on Aldo the
    following data security obligations, which form the basis of the dispute:

3.6 Data Security, Protection of Cardholder Information
    and Card Association Rules and Regulations

You are responsible for complying with the Data Security
    Standards and all applicable laws related to Cardholder and Transaction
    Information. It is your responsibility to ensure that you obtain and are in
    compliance with the most recent version of the PCI DSS...

You and any of your third party service providers will adhere
    to the Card Association Rules and Regulations from time to time in effect. You
    must obtain all publicly available Card Association Rules and Regulations...

You are responsible for any fines, fees, assessments, costs,
    including Card re-issuing costs and charges levied by the Card Associations,
    the Bank and/or us as a result of your non-compliance with the Data Security
    Standards and all other Card Association Rules and Regulations applicable to
    you.

[9]

According to Aldo, the objective of the data security obligations is the
    prevention of theft of account data, which can be used to facilitate fraudulent
    transactions. Also according to Aldo, merchants must undergo annual PCI DSS compliance
    assessments by an independent party. When a merchant breaches the PCI DSS, the
    Acquiring Bank is accountable to MasterCard. In the event of unauthorized
    access to, or disclosure of, account data, which is classified as an Account
    Data Compromise Event (ADC Event), the MasterCard Security Rules provide that
    an Acquiring Bank responsible for the ADC Event may have to reimburse the
    issuer of MasterCards credit cards for their resulting costs and fraud losses.
    MasterCards security rules therefore appear to be directed at preventing the
    compromise of account data, which may in turn result in fraudulent
    transactions.

[10]

Aldos
    claim against Moneris and MasterCard arises from transactions at Aldo stores
    which allegedly resulted in fraudulent transactions. According to Aldo, it
    successfully completed PCI DSS compliance assessments in 2007 and 2008. It was
    alerted by Moneris in April 2010 that Visa and MasterCard had identified a
    potential breach of its computer system that allegedly led to fraudulent
    transactions. An initial report by Verizon Business found that Aldo had been
    the victim of a cybercrime attack on its computer system. The report also found
    that Aldo had failed to comply with one of its data security obligations.
    Subsequent versions of the report found that Aldo had failed to comply with
    multiple of its obligations. In March 2011, despite Aldos objections,
    MasterCard confirmed its preliminary position that it considered the security
    breach an ADC Event. The banks financial liability was approximately US $4.87
    million (the Assessments). On April 4, 2011, Moneris informed Aldo that it
    intended to debit Aldos account to reimburse the banks the amounts to be
    debited by MasterCard. On April 17, 2011, MasterCard debited the banks
    accounts in the amount of the Assessments and, two days later, Moneris debited
    Aldos account in the amount of US $4.929 million.

(3)

The Pleadings

[11]

Aldo
    initiated an action against MasterCard and Moneris. The motion judge summarized
    Aldos allegations, at para. 33, as essentially falling into two categories of
    complaint:

First, Aldo alleges that MasterCard wrongfully imposed and
    collected from the Banks assessments in connection with the Intrusion. Aldo
    contends that the Assessments were illegal, invalid and directly violated the
    MasterCard Standards and were not authorized by the MasterCard 2010 Security
    Rules. Second, the plaintiff contends that Moneris, acting as processor,
    wrongfully imposed and collected from Aldo such assessments allegedly
    pursuant to terms of the [Merchant Agreement] and that Moneris was not
    entitled under the [Merchant Agreement] to debit Aldo That is to say, in its
    claim as pleaded, Aldo seeks a judicial determination of the legality of the
    conduct of MasterCard in imposing the Assessments and the conduct of Moneris in
    collecting them. The primary thrust of Aldos claim is that both MasterCard and
    Moneris acted wrongfully in imposing and collecting the Assessments.

[12]

The
    nature of Aldos claims against MasterCard is critical to the outcome of this
    appeal. Aldo pleads multiple tort claims against MasterCard, including claims
    in negligence, interference with contractual relations and conspiracy. In its
    fresh as amended statement of claim served after the motion judges decision,
    Aldo also pleads unlawful interference with economic relations and conversion.

[13]

With
    respect to its negligence claim, Aldo pleads that MasterCard owes a duty to
    merchants such as Aldo in imposing and calculating assessments under its
    standards; that MasterCard could foresee that its failure to exercise
    reasonable care in imposing assessments would result in a merchant having to
    make unwarranted payments; and that MasterCard breached its duty in imposing
    the Assessments.

[14]

With
    respect to interference with contractual relations, Aldo pleads that, by
    imposing the Assessments, MasterCard wrongfully interfered with Aldos rights
    under its Merchant Agreement with Moneris. Aldo pleads that MasterCard knew or
    ought to have known that, when the Acquiring Banks were debited, Moneris would in
    turn debit Aldo.

[15]

Aldo
    pleads an unjust enrichment claim, alleging that MasterCard unjustly enriched
    itself by imposing the Assessments, to which it was not entitled. The
    imposition of the assessments caused Aldo to be wrongfully deprived of US
    $4.929 million. Aldo also seeks a variety of declaratory relief including a
    declaration that MasterCard was not entitled, under its rules, policies and
    procedures, to impose the Assessments; a declaration that certain of
    MasterCards security rules are illegal and constitute an unenforceable penalty
    clause; a declaration that the Assessments constitute an illegal and
    unenforceable penalty against the Acquiring Banks; a declaration that
    MasterCard was not entitled to retroactively apply its 2010 security rules to
    the security breach; and a declaration that the security breach did not
    constitute an ADC Event for the purposes of MasterCards standards.

[16]

Finally,
    Aldo pleads an alternative claim seeking the following declaration:

In the further alternative, in the event that it is held that
    Moneris is entitled to the Debit under the [Merchant Agreement], a declaration
    that Aldo is subrogated to the rights of the Banks and/or Moneris and is
    entitled to assert whatever causes of action that the Bank and/or Moneris have
    against MasterCard by reason of its having wrongfully debited the Banks as a
    result of the Intrusion.

[17]

In
    support of its pleaded causes of action, Aldo alleges that it did not violate
    the PCI DSS. Aldo alleges that there is no evidence that the security breach
    resulted in the theft of account data or the use of the data in fraudulent
    transactions. According to Aldo, MasterCard retroactively applied to the 2008
    security breach standards that were amended in 2010. Aldo also alleges that
    Visa intervened, on MasterCards encouragement, in the investigation by Verizon
    Business and directed Verizon Business to reach conclusions about Aldos PCI
    DSS compliance that Verizon Business would not otherwise have reached.

III

THE MOTION JUDGES REASONS

[18]

MasterCard
    moved before Brown J. for a stay of Aldos Ontario action pursuant to s. 106 of
    the
Courts of Justice Act
. MasterCard submitted that Aldos claim
    pleads that MasterCard was not entitled to impose the assessments on BMO and
    Harris under the Licence Agreements. Because Aldo lacks privity of contract
    with MasterCard, Aldo could only assert its claims as an equitable subrogee of the
    Acquiring Banks. However, as an equitable subrogee of the Acquiring Banks, Aldo
    would be subject to MasterCards applicable contractual rights, including the
    Licence Agreements choice of law and choice of forum clause. Similarly, to the
    extent that Aldo asserts claims against MasterCard as an equitable subrogee of
    Moneris, it would be subject to the choice of law and choice of forum clause in
    the Third Party Processing Agreement between MasterCard and Moneris. On this
    basis, MasterCard submitted that Aldo should be bound by the New York forum
    selection clauses.

[19]

Aldo
    opposed the requested relief on the basis that its causes of action were
    grounded in tort and unjust enrichment rather than contract or the doctrine of
    equitable subrogation. Aldo also argued that BMO and Harris, along with any of
    their equitable subrogees, were not bound by the forum selection clause contained
    in the Licence Agreements. Aldo further submitted that, in any event, the forum
    selection clause in the Licence Agreements did not extend to claims asserted by
    an equitable subrogee.

[20]

Moneris
    also opposed the requested stay. Moneris submitted that MasterCard has no
    contractual relationship with Aldo, so MasterCard cannot limit Aldos choice of
    forum. Aldo and Moneris agreed, in their Merchant Agreement, that the Ontario
    courts would have exclusive jurisdiction over any matters arising from the
    Merchant Agreement. Moneris also submitted that MasterCard is a necessary and
    proper party for the resolution of the dispute, that the court had jurisdiction
simpliciter
and that Ontario is the most convenient forum.

(1)     Characterization of Aldos
    Claims

[21]

The
    motion judge considered whether Aldos claim, with an eye to its essential
    character, is based on equitable subrogation:
Weber v. Ontario Hydro
,
    [1995] 2 S.C.R. 929. Recognizing the fair and liberal reading to which Aldos
    pleading was entitled on a s. 106 stay motion, and the limited scope of
    argument available to MasterCard without submitting to the courts
    jurisdiction, the motion judge found that Aldos plea involving subrogation is
    not its primary plea. Aldos claims could not be reduced to claims by a subrogee
    against MasterCard. Rather, Aldos primary claims against MasterCard are
    asserted as a stranger to the Licence Agreements and Third Party Processing
    Agreement.

[22]

The
    motion judge stated as follows, at paras. 83, 85:

In sum, I do not read Aldos Claim as reducing itself to claims
    by a subrogee against MasterCard. Quite the contrary. Aldos primary claims
    against MasterCard are made by it as a stranger to the License Agreement and
    TPP Agreement. Whether those claims as a stranger are tenable at law or on the
    facts is a matter for adjudication on the merits. I think it clear that Aldo
    has cast itself as a stranger to contracts to which MasterCard is privy and
    advances its direct claims against MasterCard on that basis.

I therefore conclude that the essential character of the
    claims pleaded by Aldo is not one of equitable subrogation, but they are direct
    claims advanced by a stranger to the contracts to which MasterCard is privy,
    although some claims for declaratory relief arguably rest on the incorporation
    by reference of the Security Rules in the [Merchant Agreement].

(2)

Application of Forum Selection Clauses to Non-signatories

[23]

Having
    characterized Aldos claims, the motion judge proceeded to consider whether
    Aldo was bound by the forum selection clause contained in the Licence
    Agreements or Third Party Processing Agreement.

[24]

In
    the absence of Canadian authority squarely on point, the motion judge reviewed
    three strands of U.S. cases dealing with the application of a forum selection
    clause to a non-signatory to the contract. The first strand of cases, dealing
    with equitable subrogation, generally supported the proposition that a
    non-signatory asserting a subrogated claim would be bound by a forum selection
    clause in the primary contract. However, given the motion judges conclusion
    that Aldos claim is not one of subrogation, these cases were of no
    application.

[25]

The
    second strand of cases arose in the context of a successor in interest. The
    motion judge noted the United States Second Circuit Court of Appeals holding in
Aguas Lenders Recovery Group LLC v. Suez, S.A.
, No. 08-1589 (2nd Cir.
    2009), that where an entity stands as a successor in interest to a contractual
    arrangement, it is bound by a forum selection clause in the original contract.
    This principle was also of limited relevance given that Aldo did not stand as a
    successor in interest to any contract with MasterCard.

[26]

Finally,
    the motion judge considered MasterCards submission that the court should adopt
    the closely related doctrine applied by courts in New York and elsewhere.
    According to this doctrine, a forum selection clause may be applied to a
    non-signatory to a contract if the non-signatory is so closely related to the
    dispute that enforcement of the forum selection clause against it is foreseeable.
    The motion judge focused in particular on
Coastal Steel Corp. v. Tilghman
    Wheelabrator Ltd.
, 709 F.2d. 190 (3rd Cir. 1983), in which Coastal Steel
    contracted with Farmer Norton, a British corporation. Their contract contained
    an arbitration clause in favour of New Jersey. Farmer Norton executed a supply
    contract with Tilghman, also a British corporation, and that agreement
    contained an English forum selection clause. Farmer Norton went bankrupt and Coastal
    Steel subsequently sued Tilghman and its parent company alleging defects in the
    material supplied. Tilghman moved to dismiss on the basis of the English forum
    selection clause in its contract with Farmer Norton. The court enforced the
    English forum selection clause:

Coastal chose to do business with Farmer Norton, an English
    firm, knowing that Farmer Norton would be acquiring components from other
    English manufacturers. Thus it was perfectly foreseeable that Coastal would be
    a third-party beneficiary of an English contract, and that such a contract would
    provide for litigation in an English court.

[27]

The
    court rejected Coastal Steels argument that the forum selection clause did not
    extend to its claims sounding in tort. The Tilghman-Farmer Norton contract was
    the basic source of any duty to Coastal Steel. The court held that where the
    relationship between the parties is contractual, the pleading of alternative
    non-contractual theories of liability should not prevent enforcement of the
    contractual bargain.

[28]

The
    motion judge declined to follow the closely related doctrine as applied in
Coastal
    Steel
. He noted that
Coastal Steel
did not describe in detail the
    claims asserted by the plaintiff, even though forum selection clauses turn on
    their specific facts. In addition, the court in
Coastal Steel
found no
    evidence to suggest that the forum selection clause was not intended to apply
    to all claims arising out of the contractual relationship. The motion judge
    could not reach a similar conclusion in this case, since MasterCard did not
    cause the Merchant Agreement to incorporate a New York forum selection clause,
    and the Merchant Agreement in fact contained a broad forum selection clause in
    favour of Ontario. Accordingly, it was not foreseeable to Aldo that some other
    forum selection clause would apply to its claims.

[29]

The
    motion judge dismissed MasterCards stay motion.

IV

ANALYSIS

(1)

Standard of Review

[30]

Section
    106 of the
Courts of Justice Act
provides that a court may stay any
    proceeding on such terms as are just. In general, the discretion to stay
    proceedings should be exercised sparingly, in the clearest of cases:
Navionics
    Inc. v. Nautical Data International Inc.
, [2006] O.J. No. 5397 (S.C.), at
    para. 29. The court should interfere with a decision under s. 106 only if the
    exercise of the motion judges discretion is based on a wrong principle, a
    failure to consider a relevant principle or a misapprehension of the evidence:
BTR
    Global Opportunity Trading Ltd. v. RBC Dexia Investor Services Trust
, 2011
    ONCA 518, [2011] O.J. No. 3250, at para. 3.

(2)

The Motion Judges Characterization of Aldos Claim

[31]

MasterCard
    argues that the motion judge erred in his characterization of Aldos claim.
    According to MasterCard, the motion judge was required, by virtue of
Weber
,
    to characterize Aldos claim by examining the facts underlying the dispute
    rather than the legal characterization of the alleged wrongs. Had the motion
    judge done so, MasterCard submits, he would have concluded that the essential,
    contractual character of Aldos claim requires that it be governed by the New
    York forum selection clauses. Aldo does not appear to take issue with
    MasterCards reliance on the test set out in
Weber
, which decided
    whether a claim arose under a collective agreement for the purposes of
    determining whether it should be heard by a labour tribunal or the courts.

[32]

In
    my view, the motion judge did not err in his approach to the characterization
    of Aldos claim. The motion judge expressly stated and applied the
Weber
test, adapted to the circumstances. He began with a plain reading of Aldos
    pleading. Consistent with
Weber
, having considered the alleged wrongs
    as pleaded, the motion judge also considered the underlying factual dispute.
    The motion judge specifically acknowledged that Aldos claim engages the
    imposition and collection of the Assessments by MasterCard. He considered that
    Aldos claim against Moneris engages the question of whether the security
    breach constituted an ADC Event for the purposes of the Assessments, and that
    the claim against MasterCard draws on the same events. In so doing, the motion
    judge turned his mind to the contractual context giving rise to the conduct
    Aldo impugns. It is true that the motion judge did not consider the underlying
    facts in a vacuum, but I do not believe that the essential character of Aldos
    claim can be discerned
solely
by reference to the facts; some
    attention must also be paid to the legal context.

[33]

The
    motion judge was also alive to the concern of artful pleading, which, according
    to MasterCard, is addressed by

a consideration of the underlying
    dispute rather than the legal wrongs as pleaded. The motion judge stated, at
    para. 61, that the court must remain alive to any attempt by the plaintiff to
    plead in a manner simply designed to get around the terms of a forum selection
    clause to which it had agreed. The motion judge considered and rejected the
    possibility that Aldo had pleaded claims in tort, unjust enrichment and for
    declaratory relief in order to circumvent a forum selection clause. Aldo was
    not privy to any contract with MasterCard containing a forum selection clause,
    meaning it was not subject to any clause that it had to avoid using artful
    pleading.

[34]

In
    any event, the motion judges approach led to an accurate characterization of
    Aldos claim. There can be no doubt that the underlying conduct giving rise to
    Aldos claim occurred in the context of a contractual relationship between
    MasterCard, the Acquiring Banks and Moneris. However, MasterCard has not
    established that this context transforms Aldos pleading into an essentially
    contractual claim. Plaintiffs have long been entitled to maintain an action in
    tort even when the underlying facts involve a contract to which the plaintiff
    is not party:

see e.g.
Haig v. Bamford
, [1977] 1
    S.C.R. 466; and
Edgeworth Construction Ltd. v. N.D. Lea & Associates
    Ltd.
, [1993] 3 S.C.R. 206. The possibility, in general, of concurrent
    liability in contract and tort demonstrates that a claim is not necessarily
    grounded in contract even when it relates to a contractual relationship.

[35]

I
    agree with the motion judge that Aldo pleads direct claims against MasterCard
    as a stranger to the Licence Agreements and Third Party Processing Agreement.
    Aldo is not a party to these agreements and does not purport to assert any
    contractual claim against MasterCard. Whether Aldos pleaded claim succeeds is
    a matter for merits adjudication, but its essential character does not require
    that it be litigated in accordance with the New York forum selection clauses.

[36]

For
    the same reason, I would reject MasterCards related argument that Aldo brings
    its claim as an equitable subrogee. MasterCard submits that, if Aldos claim is
    contractual and it is not privy to any contract with MasterCard, it must rely
    for its standing on the doctrine of equitable subrogation. Equitable
    subrogation allows one party to stand in the shoes of another and advance any
    claims held by the original party:
Alberta (Treasury Branches) v. Baker
    Estate
, 2002 ABQB 781, [2002] A.J. No. 1055, at para. 46; and
Ontario
    New Home Warranty Program v. Grant
(2001), 10 C.L.R. (3d) 230 (Ont. S.C.),
    affd (2002), 4 R.P.R. (4th) 56 (Ont. C.A.). According to MasterCard, if Aldo
    pleads as an equitable subrogee, it must accept the original partys
    limitations, including the New York forum selection clause. However, because
    the essential character of Aldos claim is not contractual, Aldo does not
    require an exception to the doctrine of privity, such as equitable subrogation,
    in order to bring its claims against MasterCard. Nor does Aldo purport to rely
    on such an exception. Aldo alleges that it was harmed in its own right by
    MasterCards imposition of the Assessments. It seeks to avail itself of causes
    of action grounded in tort, unjust enrichment and declaratory relief. To do so,
    it need not wear any shoes but its own.

[37]

I
    would therefore reject MasterCards position as it relates to the motion
    judges characterization of Aldos claim.

(3)

The Motion Judges Analysis of the Application of the Forum Selection
    Clauses

[38]

MasterCard
    submits that the motion judge erred in failing to rely on relevant and
    analogous case law regarding the application of forum selection clauses to
    non-signatories. MasterCards primary argument is that the U.S. cases dealing
    with this issue are persuasive and should have been applied. As the motion
    judge recognized, the U.S. cases relied on by MasterCard set out a closely
    related test to determine whether a non-signatory to a contract is
    nevertheless bound by that contracts forum selection clause based on its
    foreseeable application to the non-signatory. In other words, for a non-party
    to be bound by a forum selection clause, it must be closely related to the
    dispute such that it becomes foreseeable that it will be bound:
Weingrad v.
    Telepathy, Inc.
, 2005 WL 2990645 (S.D.N.Y.). MasterCard also shepherds a
    number of Canadian cases in support of its submission that the New York forum
    selection clauses apply to Aldo on the facts of this case.

(a)

The Canadian Authorities

[39]

I
    begin with a review of the Canadian authorities relied on by MasterCard in
    support of its argument that Aldo is bound by the New York forum selection
    clauses. Consideration of these authorities reveals that none is dispositive of
    this case.

[40]

Kates
    v. Wyant
(2002), 27 B.L.R. (3d) 273 (Ont. S.C.), involved a forum
    selection clause to which the plaintiff had agreed. Certain of the defendants
    were not party to the subscription agreement containing the forum selection
    clause, but do not appear to have objected to its application. The plaintiff
    argued that the action did not arise out of the subscription agreement, but the
    court concluded otherwise. The court held that the forum selection clause
    applied to all of the defendants; the issues in dispute were interrelated and
    best addressed by the same court. Unlike the plaintiff in
Kates
, Aldo
    is not a signatory to any forum selection clause the defendant seeks to
    enforce. Unlike the non-party defendants in
Kates
, Aldo strenuously
    objects to the application of the New York forum selection clauses.

[41]

Crown
    Resources Corp. S.A. v. National Iranian Oil Co.
(2006), 273 D.L.R. (4th)
    65 (Ont. C.A.), leave to appeal refused, [2006] S.C.C.A. No. 412, involved
    claims of breach of contract, breach of fiduciary duty and tort against two
    Iranian state-owned corporations. The relevant agreement contained a forum
    selection clause in favour of Iran. Although the plaintiffs  creditors and
    assignees in bankruptcy of one of the parties to the agreements  pleaded claims
    other than in contract against one of the Iranian corporations, these claims
    were so intertwined with the contract so as to justify them being heard
    together. This result was in the interests of avoiding a multiplicity of
    proceedings and inconsistent results. The court did not specifically address the
    issue of whether the plaintiffs, as creditors and assignees in bankruptcy
    rather than signatories to the original agreement, should be bound by the forum
    selection clause. In the present case, Aldo does not plead breach of contract
    along with its other claims. Moreover, adopting MasterCards use of
Crown
    Resources
would promote, rather than avoid, a multiplicity of proceedings
    since Aldo is entitled to proceed against Moneris in Ontario.

[42]

Momentous.ca
    Corp. v. Canadian American Assn. of Professional Baseball Ltd.
, 2010 ONCA
    722, 103 O.R. (3d) 467, affd 2012 SCC 9, [2012] 1 S.C.R. 359, concerned claims
    in contract and tort against a baseball league, its principals and the City of
    Ottawa. The plaintiffs agreements with the league required disputes to be
    arbitrated and enforced in the courts of North Carolina. Laskin J.A. considered
    whether the plaintiffs claims should be allowed to proceed in Ontario against
    two defendants who were not party to these agreements. Laskin J.A. concluded
    that, given the plaintiffs pleading that these defendants were necessary
    parties and that joinder would promote the convenient administration of
    justice, the plaintiffs could not proceed separately against them in Ontario.
    The claims against these defendants were so intertwined with the claims against
    the league that the forum was governed by [t]he choice of forum clause
agreed
    to by the plaintiffs
 (emphasis added). Unlike the plaintiff in
Momentous.ca
,
    Aldo has not agreed to litigate in the forum advanced by the defendant
    MasterCard.

[43]

MasterCards
    Ontario cases dealing with arbitration clauses
Donaldson International
    Livestock Ltd. v. Znamensky Selekcionno-Gibridny Center LLC
, 2008 ONCA
    872, 305 D.L.R. (4th) 432; and
Dalimpex Ltd. v. Janicki
(2003), 64
    O.R. (3d) 737 (C.A.)  are distinguishable on the same basis. In each, the
    court stayed proceedings against multiple defendants notwithstanding that not
    all were parties to the particular arbitration clause at issue. Notably, and in
    contrast to the present case, each involved an arbitration clause to which the
    plaintiff had agreed.

[44]

Taken
    together, the Canadian cases stand for the proposition that, where a plaintiff
    has accepted a forum selection clause, it will not necessarily escape its
    bargain by pleading causes of action other than in contract or against multiple
    parties only some of which are subject to the clause. Courts are properly
    vigilant in ensuring that pleadings do not defeat contractual provisions, exclusions
    or limitations
to which the plaintiff has agreed
. An important
    motivating factor in these cases is the convenient administration of justice
    if a plaintiff must proceed elsewhere in respect of some of its claims,
    allowing it to proceed in Ontario in respect of others wastes judicial
    resources and violates the principle of comity. In my view, these authorities
    do not compel the conclusion that a plaintiff is bound by a forum selection
    clause to which it did not agree simply because its claim arises in the context
    of another partys contractual relationship that includes the clause.

(b)

The Closely Related Doctrine

[45]

The
    closely related doctrine operates to bind non-signatories to a forum
    selection clause where they are so closely related to the dispute that it is
    foreseeable that they would become bound by the clause. A non-party is closely
    related to a dispute if its interests are completely derivative of and
    directly related to, if not predicated upon, the signatory partys interests or
    conduct:
Weingrad
.

[46]

It
    bears mention that there are good reasons to limit the scope of forum selection
    clauses to those parties who have bargained for their application. Litigating
    in a particular forum has real consequences that parties must evaluate, as the
    court recognized in
Crown Resources
, at para. 27, quoting
ECS
    Educational Consulting Services Canada Ltd. v. Al Nahyan
, [2000] O.J. No.
    211 (S.C.), affd (2000), 3 C.P.C. (5th) 76 (Ont. C.A.):

In this age of the global economy, business will increasingly
    be faced with the prospect of dealing with different judicial systems in
    different parts of the world. I assume that business people accept that fact as
    a consequence of doing business in different parts of the world. I also assume
    that business people assess those different judicial systems before agreeing to
    attorn to their jurisdiction or that they are prepared to take the risks, if
    such be the case, of so doing.

[47]

Sophisticated
    parties are deemed to have informed themselves about the risks of foreign legal
    systems and are deemed to have accepted those risks in agreeing to a forum
    selection clause:
Crown Resources
, at para. 27. It is precisely
    because signatories to a forum selection clause have weighed and accepted the
    forum and its risks that these clauses should be enforced. Non-signatories have
    not necessarily engaged in this weighing exercise.

[48]

Of
    course, the foreseeability component of the closely related doctrine attempts
    to accommodate this concern. The doctrine only operates to bind a non-signatory
    where it is foreseeable that the non-party would become bound. Arguably, this
    protects against the binding of those who truly failed to assess the advantages
    and disadvantages of litigating in the forum. Yet the foreseeability inquiry is
    uncertain. It injects significant flexibility into the scope of application of
    forum selection clauses. In so doing, it runs contrary to well-established
    policy rationales for enforcing forum selection clauses, including certainty
    and security in commercial transactions:
Z.I. Pompey Industrie v. ECU-Line
    N.V.
, 2003 SCC 27, [2003] 1 S.C.R. 450, at para. 20.

[49]

That
    is not to say that the doctrine should be rejected wholesale by Ontario courts.
    The U.S. cases illustrate a number of circumstances in which the closely
    related doctrine has been sensibly applied. For example, in
Firefly
    Equities LLC v. Ultimate Combustion Co.
, 736 F. Supp. 2d 797 (S.D.N.Y.
    2010), the court applied the doctrine to bind the corporate defendants
    president, who had signed, on the companys behalf, an agreement containing a
    New York forum selection clause. In
Lipcon v. Underwriters at Lloyds,
    London
, 148 F.3d 1285 (11th Cir. 1998), the court applied the doctrine to
    bind guarantor plaintiffs whose spouses had signed an agreement containing
    English forum selection and choice of law clauses. The interests of the
    guarantors were completely derivative of the interests of their spouses.

[50]

Although
    the U.S. experience suggests that there may well be circumstances in which an
    Ontario court would seek to apply the closely related doctrine to a
    non-signatory plaintiff, the present case is not one of them. In this case, the
    application of the closely related doctrine would not assist MasterCard. Given
    the substance of its claim as pleaded, Aldos interests are not completely derivative
    and directly related to the interests of any signatory to the New York forum
    selection clauses. Moreover, the motion judge found that MasterCard exercised significant
    control over the contractual terms governing the issuance and processing of its
    credit cards. MasterCard surely contemplated that the banks with which it
    contracted would, in turn, contract with processors and merchants outside of
    the State of New York. In fact, MasterCard required that certain terms be
    included in the Acquiring Banks downstream contracts with processors and
    merchants. It was open to MasterCard to do the same for forum selection, yet it
    did not. Moneris was permitted to enter into an agreement with Aldo that
    contained a broad forum selection clause in favour of the Ontario courts. On
    this basis, the motion judge found that it was not foreseeable to Aldo that
    MasterCards New York forum selection clauses would apply to its claims, and I
    see no reversible error in this regard. Accordingly, it is unnecessary at this
    juncture to determine the availability, in general, of the closely related
    doctrine.

(4)

The Motion Judges Approach to the Strong Cause Test

[51]

To
    succeed in displacing an applicable forum selection clause, a plaintiff must
    show strong cause that it should not be enforced:
Harster Greenhouses
    Inc. v. Visser International Trade & Engineering B.V.
, 2011 ONSC 2608,
    334 D.L.R. (4th) 481, at para. 67; and
Expedition Helicopters Inc. v.
    Honeywell Inc.
, 2010 ONCA 351, 100 O.R. (3d) 241, at paras. 6, 11. MasterCard
    submits that if Aldo is bound by a New York forum selection clause, the clause
    should be enforced absent strong cause not to enforce. However, the motion
    judge correctly concluded that Aldo is not bound by any applicable New York
    forum selection clause. Accordingly, there is no clause to displace, and the
    motion judge did not err in failing to conduct a strong cause analysis.

[52]

In
    light of my conclusion that Aldo is not bound by either of the New York forum
    selection clauses, it is unnecessary to consider Aldos further submission that
    the language of the forum selection clause in the Licence Agreements does not extend
    to its claims because it is limited to claims initiated by a Member, and Aldo
    is not a Member of the MasterCard credit card association.

[53]

In
    all the circumstances, I would dismiss the appeal.

[54]

The
    respondents are entitled to the costs of this appeal. If the parties cannot
    agree on the quantum of costs, they may make brief written submissions within
    15 days of the release of these reasons.

Released: RAB November 29, 2013

M.H. Tulloch J.A.

I agree. R.A. Blair
    J.A.

I agree. R.G.
    Juriansz J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Bawden v. Wawanesa Mutual Insurance
    Company, 2013 ONCA 717

DATE: 20131126

DOCKET: C56916

Doherty, Goudge and Lauwers JJ.A.

BETWEEN

Elizabeth Bawden

Applicant (Respondent)

and

Wawanesa Mutual Insurance Company

Respondent (Appellant)

AND BETWEEN

David Bawden

Applicant (Respondent)

and

Wawanesa Mutual Insurance Company

Respondent (Appellant)

A. Charles Gluek and Troy E. Asselin, for the appellant

Todd J. McCarthy, Andrew Suboch and Tessa E. Warmelink,
    for the respondent Elizabeth Bawden

Alastair J. McNish and Gargi Chopra, for the respondent
    David Bawden

Heard: November 5, 2013

On appeal from the order of Justice Mary A. Sanderson of
    the Superior Court of Justice, dated March 22, 2013, with reasons reported at
    2013 ONSC 1618.

By
    the Court:

[1]

On August 7, 2003, eight-year-old Kelly Bawden was struck and injured by
    a motor vehicle owned by Randal Wilson and driven by Joyce Wilson. Kellys
    mother, Elizabeth Bawden, in her capacity as Kellys litigation guardian, sued
    the Wilsons, seeking damages on Kellys behalf for her injuries.  The Wilsons
    defended the action.  They also issued a third party claim against Elizabeth
    and David Bawden, Kellys father, claiming contribution and indemnity because
    of their negligence in failing to properly instruct and supervise their
    daughter Kelly.

[2]

The respondents Elizabeth and David Bawden held a homeowners insurance
    policy issued by the appellant Wawanesa Mutual Insurance Company.  When the
    appellant declined to defend them on the third party claim, they commenced an
    application seeking a declaration that the appellant was obliged to do so.

[3]

The application judge found that the applicable coverage provision in the
    Wawanesa policy encompassed the Wilsons third party claim against the
    respondents, and that it was not excluded by the applicable exclusion provision.
    She therefore granted the order sought by the Bawdens.  This is the appeal from
    that order.

[4]

The critical coverage provision in the Wawanesa policy is as follows:

You are insured
    for claims made or actions brought against you for:

(1)

Personal Liability:
    bodily injury or property damage
arising out of
your personal activities anywhere in the world. [Emphasis added.]

[5]

The critical exclusion provision is the following:

Exclusions
:
    you are not insured for claims made or actions brought against you
for
:

(3) bodily injury to you or to any person residing in your
    household other than a residence employee.  [Emphasis added.]

[6]

The appellants argument is that the exclusion clause removes all claims
    for bodily injury by the insured and those residing in their household from the
    general coverage for claims against the insured for bodily injury.  In other
    words, claims for bodily injury by anyone against the insured are covered,
    except for those by family members.  The appellant says that the coverage
    provision and the exemption provision differ only in the identity of the
    claimants.  As the appellant acknowledged in argument, this requires equating
    arising out of in the coverage provision with for in the exclusion
    provision.

[7]

In our view, this argument fails.  The coverage provision must be
    interpreted broadly.  Read this way, it clearly encompasses the Wilsons third
    party claim for contribution and indemnity which arises out of the insureds
    personal activities in negligently failing to supervise their daughter, thus
    resulting in her bodily injury.  Indeed the application judge found that the appellant
    conceded that the coverage provision is broad enough to encompass the third
    party claim.

[8]

On the other hand, the exclusion clause must be read narrowly.  Read
    that way, it cannot encompass the third party claim in this case, which is not
    a claim on behalf of Kelly for her bodily injury, but a claim by the Wilsons against
    the Bawdens for contribution and indemnity for negligent supervision.

[9]

Put another way, we do not view arising out of and for as
    interchangeable terms in these two provisions.  Indeed it appears that the
    appellant did not do so either.  Looking at the entirety of the exclusion
    clause, the appellant appears to have deliberately used the term for in the
    exclusion clause at issue, but the term arising out of in a number of other
    specific exclusion provisions.  There appears to be a careful differentiation
    on the part of the appellant in the use of those two terms.

[10]

There
    is also a sound policy explanation for differentiating the two terms.  By
    reading them differently as we have decided, the exclusion clause serves the
    policy objective, which is reflected in the authorities, of removing from
    coverage those claims that raise a risk of collusion between the claimant and
    the insured.  The exclusion provision only catches claims by a family member
    directly against the insured.  Such claims among family members clearly raise a
    risk of collusion that is simply not present in this third party claim by the
    Wilsons against the respondents.

[11]

In
    the end, we cannot improve on the application judges analysis:

[73]    Viewing the Policy as a whole, I have noted the absence
    of "arising out of" language in this exclusion clause, and contrasted
    it to the specific language in the grant of coverage that
does
include
    "arising out of your personal activities."  I have noted the repeated
    use of "arising out of" language in other exclusion clauses in the
    same Policy. The exclusion did not contain the words "directly or
    indirectly" It appears from its use of differing wording in the coverage
    provision and exclusion clause that Wawanesa may not have intended the words in
    the exclusion to have the same scope and meaning as the words used in the grant
    of coverage.

[74]    In the exclusion clause here, it was open to Wawanesa
    to have used the broader wording it used in the grant of coverage, the "
arising
    out of
" language.

[75]    To be effective, the wording of an exclusion clause
    must clearly and unequivocally restrict the extent and scope of the coverage.

[76]    In the exclusion Wawanesa chose not to track the broad
    "arising out of" language it used in the broad Grant of Coverage and
    repeatedly in other exclusions in the Policy.

[77]    It chose not to use words clearly extending the
    coverage to direct or indirect actions. Exclusions must be interpreted
    narrowly.

[78]    The wording of the exclusion clause, when compared to
    the wording of the grant of coverage and in the context of the Policy wording
    as a whole, is consistent with an intent to exclude
only direct claims
between or among family members and to leave coverage for
indirect
claims by third parties against household members intact. Such an
    interpretation would recognize an insurer's apparent intent to protect against
    collusion between and among family members, but would not in the absence of wording
    evidencing such a clear intent to exclude indirect claims, not deprive family
    members of insurance protection for indirect claims for bodily injury arising
    from their actions brought against them by third parties.  [Emphasis in
    original.]

[12]

The
    appeal must therefore be dismissed.  The parties will have three weeks to file
    written costs submissions of no more than five pages each.

Released: November 26, 2013 (D.D.)

Doherty J.A.

S.T. Goudge J.A.

P. Lauwers J.A.