COURT OF APPEAL FOR ONTARIO

CITATION: Fernandes v.
    Penncorp Life Insurance Company, 2014 ONCA 615

DATE: 20140902

DOCKET: C56924

Juriansz, Pepall and van Rensburg JJ.A.

BETWEEN

Avelino Fernandes

Plaintiff (Respondent)

and

Penncorp Life Insurance Company/

La Compagnie dAssurance-Vie Penncorp

Defendant (Appellant)

Paul J. Pape and Sanam Goudarzi, for the appellant

Daniel J. Fife and Maple Anne Cameron, for the
    respondent

Heard: March 5, 2014

On appeal from the judgment of Justice Peter B. Hambly of
    the Superior Court of Justice dated March 22, 2013, with reasons reported at
    2013 ONSC 1637.

Pepall J.A.:

[1]

The trial judge awarded the respondent, Avelino Fernandes, $236,773 in
    damages for failure of the appellant, Penncorp Life Insurance Company/La Compagnie
    dAssurance-Vie Penncorp, to pay disability benefits. He also awarded punitive
    damages of $200,000, aggravated damages of $100,000 (hereinafter referred to as
    mental distress damages) and full indemnity costs of $212,130.66.

[2]

The appellant does not challenge the award of damages for failure to pay
    disability benefits.  It only challenges the punitive and mental distress damages
    awards and, if successful, asks that the total cost award be halved. It submits
    that there was no reasonable basis for an award of punitive damages and
    challenges the quantum of the mental distress damages award.

[3]

For the reasons that follow, I would dismiss the appeal of the punitive
    damages award and allow the appeal of the mental distress damages award.

Facts

(i)

Personal Background

[4]

The respondent was born on a farm in Portugal and left school after the
    equivalent of grade eight in Canada.  He became a bricklayer. He operated a
    bricklaying business in Kitchener, Ontario. He worked 10 to 12 hours a day for
    six to seven days a week.  His work involved erecting and dismantling
    scaffolding, lifting heavy planks on and off the scaffolding, mixing cement,
    laying and lifting bricks and blocks and driving a fork lift.  It was very
    heavy work but he was good at it; indeed, he loved his work.  He made as much
    money as he needed and never felt the need for more.

[5]

On December 11, 2004, he fell off a scaffold from a height of about eight
    feet and injured his back.  Two days later, on December 13, 2004, he fell off a
    trailer from a distance of about three feet, again injuring his back.
    Following the accidents, he was unable to work, his successful company ceased
    operating and his employees departed.

[6]

At the time he was injured, the respondent was 40 years old.

(ii)

Insurance

[7]

The respondent had not paid into a government employment insurance or a
    provincial workers compensation plan and was therefore not entitled to employment
    insurance or workers compensation.

[8]

However, he did have disability insurance, which he had purchased from
    the appellant in July 2002 and for which he paid a premium of $908.50 semi-annually.
    The policy of insurance entitled the respondent to benefits for a period of two
    years if he was unable to work at his own occupation as a result of injuries.  Thereafter,
    the policy entitled him to benefits if he was disabled from working at any
    occupation for which he was reasonably fitted by education, training or
    experience.

[9]

The policy provided $3,000 in monthly benefits for total disability.
    Total Disability was defined in the insurance policy as:

TOTAL DISABILITY
, whenever used in this Policy,
    means that as a result of Injury the Insured is under the Regular and Personal
    Care of a Physician, and is unable to perform any of the important daily duties
    pertaining to his occupation or profession and is not gainfully employed in any
    other occupation or profession. Total disability is deemed to have begun with
    first medical treatment following Injury. After the Monthly Benefit for such
    Total Disability has been paid for twenty-four months, then thereafter during
    the remainder of such Disability, Total Disability means the complete inability
    of the Insured to engage in any and every occupation or profession for which he
    is reasonably fitted by reason of education, training or experience.

[10]

The
    policy also provided for partial disability benefits, which were payable for a
    maximum of four months.  Partial Disability was defined in the insurance
    policy:

PARTIAL DISABILITY
, whenever used in this Policy, means
    that as a result of Injury, the Insured is under the Regular and Personal Care
    of a Physician and sustains loss of salary or business income due to his
    inability to perform one or more important daily duties of his occupation or
    profession.

[11]

The
    policy also addressed the payment of Partial Disability benefits:

If Injury causes Partial Disability within ninety days after
    the date of the Accident and continues uninterrupted until the expiration of
    the Elimination Period For Injury stated in the Policy Schedule, if any, or
    immediately following a period of Total Disability for which benefits were payable
    under Part One, the Company will pay periodically an amount equal to one-half
    of the Monthly Benefit stated in the Policy Schedule (1/60 of such Monthly
    Benefit for each day of any period less than a full month) during which such
    Partial Disability continues, but not to exceed four months for Any One
    Accident.

The policy had no elimination period.

(iii)

Insurance Claim

[12]

Following
    his falls, the respondent attended at an urgent care clinic where he saw Dr.
    Kim on December 14, 2004. He also consulted his family doctor, Dr. Huth, on
    December 22, 2004.

[13]

The
    respondent submitted a claim for benefits to the appellant on January 23,
    2005.  He sought payment from December 14, 2005 when he saw Dr. Kim.

[14]

The
    claim enclosed a report from Dr. Huth dated January 21, 2005.  Next to the
    questions: How long was (or will) patient (be) partially disabled? (Able to
    perform some but not all of his/her occupational duties?), Dr. Huth wrote:
    From Dec. 11/04 to Feb. 11/05.  Next to the inquiry: If patient is still
    disabled, please indicate present physical restrictions or limitations, Dr.
    Huth wrote: Cannot work as bricklayer due to pain.

(iv)

Initial Contacts with the Insurers Representative

[15]

Janet
    Mayo, a claims advisor for the appellant, made the decisions regarding the
    payment or non-payment of the respondents claim.

[16]

On
    February 14, 2005, the respondent called Ms. Mayo.  He advised her that he had
    no other insurance and that he did not know at what point he would return to
    work.

[17]

Ms.
    Mayo testified that the respondent indicated to her that he had not worked at
    all and therefore she started payment of total disability benefits. The
    appellant made a payment of $3,700 to the respondent on February 14, 2005 for
    the period December 14, 2004 to January 21, 2005.

[18]

On
    February 14, 2005, the respondent commenced physiotherapy.

[19]

On
    March 21, 2005, the respondent signed a supplemental claim report.  In response
    to the question: What normal duties are you unable to perform? he wrote:
    bending, lifting, turning.

[20]

The
    appellant received a further report dated March 29, 2005 from Dr. Huth in which
    he stated that the respondents progress was slow and tedious and that the
    respondent had been prescribed pain medication.  Dr. Huth opined that the respondent
    would be able to resume some of his usual duties/activities prior to May 15,
    2005 and that he would recover sufficiently to resume full duties/activities
    prior to June 1, 2005.  He also stated that the respondents ability to
    repetitively lift bricks was limited.

[21]

On
    April 8, 2005, the appellant paid the respondent $6,000 for the period January
    21, 2005 to March 21, 2005.

[22]

One
    month later, on May 8, 2005, Ms. Mayo spoke with the respondent again.  He told
    her that he had not returned to work but had unsuccessfully tried to finish off
    some work from a job he had prior to his injury.  He had lasted a couple of hours
    but then had had to call someone else in to finish the work.  His back was
    getting worse and the pain was going down his leg.  He also said that he had
    started massage therapy and that his doctor had referred him for a CAT
    scan.

[23]

On
    May 10, 2005, the appellant paid the respondent $3,000 for the period March 21,
    2005 to April 21, 2005.

(v)

Pre-Surveillance Interview

[24]

In
    her notes to file, Ms. Mayo wrote that on May 13, 2005, she set up a claimant
    interview [and] pre-surveillance as we may want to do surveillance in future.
    Also do financial check.

[25]

On
    May 24, 2005, Mark Lockhart of Quality Investigative Services Ltd. interviewed
    the respondent.  The respondent told him that he was unable to do anything that
    involved bending, twisting or heavy lifting.  Mr. Lockharts report stated that
    the respondent reported that he tried to keep himself moving and doing little
    things around the house and that when asked for an estimated return to work
    date, the respondent said that he did not have one.  The report stated that one
    of his therapists/doctors had stated possibly by the end of June 2005.

(vi)

Independent Medical Examination

[26]

Thereafter,
    the appellant referred the respondent to Dr. Hupel, an orthopedic surgeon, for
    an independent medical examination.  The respondent saw him on June 2, 2005.

[27]

The
    appellant received Dr. Hupels report on July 8, 2005.  In response to the
    question: In your view, does the [respondent] suffer from a physical
    condition, which prevents [him] from returning to [his] former position at work
    on a full-time basis?, Dr. Hupel wrote: At present, I feel that in the
    absence of radiological investigations, this man should not return to his
    former employment.  Following review of the investigations suggested, I would
    be pleased to comment further on his return to work.

[28]

On
    June 10, 2005, the respondent spoke with Ms. Mayo by phone and requested a copy
    of the investigative report and Dr. Hupels report.  She told him that it was
    the appellants policy not to provide investigative reports to an insured.  She
    said that she would send Dr. Hupels report to the respondents family doctor,
    Dr. Huth, but she never did so.  Dr. Huth did receive the report from someone
    however.

[29]

On
    June 20 and July 22, 2005, the appellant paid the respondent $3,000 for each of
    the periods April 21, 2005 to May 21, 2005 and May 21, 2005 to June 21, 2005.

(vii)

Dr. Huths Report

[30]

The
    respondent attempted to work in the week of June 28, 2005 but was unable to do
    so.

[31]

On
    August 10, 2005, the appellant received a supplemental claim report from the
    respondent stating that his current activities consisted of limited household
    activities.  He attached a report dated July 21, 2005 from Dr. Huth.
[1]
In this report, Dr. Huth stated that it does not seem that this man will be
    able to work at bricklaying again.  He noted that the respondent was having
    physiotherapy and that an EMG and an MRI were pending.  The June 6, 2005 CAT
    scan showed a problem with the respondents lumbar spine.

[32]

On
    August 22, 2005, the appellant paid the respondent $3,000 for the period June
    21, 2005 to July 21, 2005.  This was the last payment the respondent would
    receive from the appellant until September 2011.

(viii)

Surveillance

[33]

At
    some point, the appellant retained Quality Investigative Services Ltd. to
    conduct surveillance on the respondent.  The appellant received its report,
    dated August 17, 2005, on August 24, 2005.  The report addressed surveillance
    conducted on August 3, 10 and 11 and provided a video synopsis.  As noted by
    the appellant, the observations for the latter two days were unremarkable.  The
    respondent was not observed doing any work on those days.

[34]

The
    August 3
rd
surveillance was maintained from 6 a.m. to 4 p.m. outside
    the respondents residence.  He was observed to be working in his back yard and
    about his house from 1:35 p.m. until 3:02 p.m. He was seen shoveling what
    appeared to be a powder mixture from a van into a pail and wheeling it into the
    back yard in a wheelbarrow.  He removed tools and other work-related items from
    his backyard.  He lifted the wheelbarrow and a wooden skid into the back of a trailer.

(ix)

Decision to Terminate Benefits

[35]

After
    viewing the surveillance, Ms. Mayo decided not to pay any further disability
    benefits beyond July 21, 2005. She testified that it appeared that the
    respondents activities were inconsistent with the information he was providing
    to the appellant.  She also testified that the appellant was not receiving any
    medical reports from the respondents doctor.

[36]

She
    made the decision to terminate benefits in the absence of any medical evidence
    indicating that the respondent was other than totally disabled.  At that point,
    the medical evidence was from Dr. Huth and Dr. Hupel, who had both expressed
    the opinion that the respondent could not return to bricklaying.

[37]

Although
    she made the decision in August 2005, Ms. Mayo never directly told the
    respondent that she was terminating his benefits until close to five months
    later, when on January 17, 2006 she wrote a letter to him.

(x)

Further Report from Dr. Huth

[38]

On
    October 3, 2005, the appellant received a supplemental claim report dated
    September 23, 2005 from the respondent.  Enclosed was a report dated September
    20, 2005 from Dr. Huth.  He stated that the respondent was reporting continuing
    back pain, had problems with the discs in his lower back and could not lift
    repetitively.  Dr. Huth stated that there was no progress and the date when the
    respondent could resume some of his usual activities was unknown as was the
    date when he would be sufficiently recovered to resume full activities.

[39]

Between
    September 26 and October 28, 2005, the respondent again tried to work as a
    bricklayer but was unable to do so.

(xi)

Additional Surveillance

[40]

The
    appellant arranged for further surveillance of the respondent in the fall of
    2005. Surveillance was conducted on November 8, 9, 21 and 22, 2005 for a total
    of 21 hours.  During this time, the respondent was observed driving his vehicle
    but he was not observed doing any work.

(xii)

Request
    for Reinstatement of Benefits

[41]

On
    November 14, 2005, the respondent was involved in a motor vehicle accident in
    which he injured his left shoulder and neck.

[42]

On
    December 6, 2005, the respondent requested reinstatement of his benefits,
    retroactive to July 22, 2005, and provided the appellant with a completed form entitled
    Occupational Inquiry for Self-Employed Claimants. I will refer to this form as
    the December 6
th
questionnaire.  In it, the respondent was asked
    to outline the physical activities involved in his job.  In response, he provided
    the appellant with a completed form to which he attached a detailed description
    of his heavy work as a bricklayer.

[43]

On
    December 21, 2005, Ms. Mayo completed a claim report.  She wrote that she had discussed
    the August surveillance with the respondent and told him that it had shown him
    actively physically working.  She also wrote that she tried to close the claim.

[44]

In
    her testimony she explained this entry. She testified that she had indicated to
    the respondent that it appeared that he was partially disabled and not totally
    disabled and she discussed providing him with partial disability benefits. These
    represented a maximum of four months of benefits.

[45]

She
    testified that she felt the appellant was partially disabled based on the
    surveillance. She also relied on the fact that he had reported that he had
    tried to work on a number of occasions.

[46]

Ms.
    Mayo subsequently discussed the claim review with the appellant on December 28,
    2005. Her notes show that the appellant insisted that he remained totally
    disabled.

[47]

As
    mentioned, Ms. Mayo finally wrote to the respondent on January 17, 2006 to
    advise him that his benefits were terminated.  Her letter stated:

Total disability whenever used in this policy means that as a
    result of an injury, you are unable to perform all the important daily duties
    pertaining to your occupation or profession and are not gainfully employed in
    any other occupation or profession.

Information received from both you and your doctor and local
    investigations carried out indicate that you continued to work on a partial
    basis; therefore, you do not meet the definition of total disability as defined
    in the policy.

[48]

Further
    correspondence between the parties did not resolve the issue.

[49]

In
    February and June 2006, the appellant received additional surveillance reports
    showing the respondent engaged in various employment-related activities such as
    shovelling, unloading large boxes onto a wheelbarrow, sweeping, and pushing a
    wheelbarrow.

(xiii)

Commencement of
    Action

[50]

On
    July 17, 2007, the respondent commenced an action against the appellant.  He
    claimed that since December 13, 2004, he had been and continued to be totally
    disabled and asserted a damages claim of $1,000,000.  He also claimed the
    return of premiums paid in error, mental distress damages of $100,000 and
    punitive damages of $500,000.

[51]

In
    defense, the appellant took the position that the respondent was not, since the
    termination of benefits on July 21, 2005, totally disabled as defined  by the
    policy.  It also denied the claims for mental distress and punitive damages.

[52]

Following
    commencement of the action, the appellant received the results of additional
    surveillance of the respondent conducted on its behalf, additional medical
    information, and a vocational assessment and functional capacities evaluation.
    The medical information included an opinion from the appellants own expert, Dr.
    McGonigal, an orthopedic surgeon, stating that the respondent could not go back
    to work as a bricklayer.

[53]

At
    trial, Ms. Mayo conceded that, based on the information, the appellant knew by
    the end of 2010 that Mr. Fernandes could not go back to work as a bricklayer.

[54]

That
    said, the appellant did not make that concession and pay the respondent for the
    period July 22, 2005 to December 22, 2006 until September 19, 2011.

[55]

With
    respect to the post-December 22, 2006 period, the question at trial was whether
    the respondent was disabled from engaging in any occupation for which he was
    reasonable fitted by reason of education, training or experience.

Trial Judges Decision

(a)

Contractual Damages

[56]

At
    the trial of the action, the respondent sought $233,536 representing the post
    December 22, 2006 period plus the return of premiums he had unnecessarily paid
    while disabled.

[57]

The
    trial judge conducted a detailed review of the evidence, including that of the
    respondent and the respondents assessments and attempts at rehabilitation. He
    found the respondent to be a credible witness.

[58]

He
    also reviewed in detail the surveillance evidence conducted over 19 days
    between August 2005 and February 2010 and referenced portions of the video summary
    that highlighted some of the respondents activities during the periods of
    surveillance.  He noted that the surveillance evidence only showed light work
    for short periods and that this represented a small portion of his time.  The
    surveillance omitted periods of recuperation and bad days. The trial judge
    considered the expert medical evidence and the appellants handling of the
    respondents claim.

[59]

He
    referred to the August 27, 2012 report of Dr. Reid, the orthopedic surgeon
    called by the respondent, writing at para. 46 of his reasons:

Dr. Reid, in his report dated August 27, 2012, stated that the
    point is that he really could not do any bricklaying work of any kind as he
    does not have the physical abilities to do it.  He also stated that Avelino
    is totally and substantially disabled from duties of any occupation for which
    he has requisite education skills and experience.

[60]

The
    trial judge also referred to the reports of Dr. McGonigal, the orthopedic
    surgeon called by the appellant.  He noted at para. 47 of his reasons that Dr.
    McGonigal had testified that the respondent should not be considered physically
    capable of returning to his occupation of bricklayer on a full-time basis.  It
    was Dr. McGonigals opinion that the respondent was not at the present time
    physically capable of returning to this work either on a part-time or modified
    basis.

[61]

Having
    reviewed the evidence, the trial judge concluded that the respondent continued
    to suffer from a total disability.  He determined that the respondent was
    unable to perform substantially all of the duties of his occupation as a self-employed
    bricklayer. Additionally, the trial judge was satisfied that, given the
    respondents limitations, he was disabled from any occupation for which he was
    reasonably suited by education, training or experience. As such, the respondent
    met the definition of total disability contained in the policy and was entitled
    to damages of $236,773 for breach of contract plus the return of premiums.

(b)

Mental Distress Damages

[62]

The
    respondent sought $25,000 on account of mental distress damages arising from
    the appellants conduct.  In his written submissions filed at the trial of the
    action, the respondent acknowledged that his anger and stress were not caused
    solely by the appellants conduct.  In its written submissions, the appellant
    argued that if aggravated damages were to be awarded, they should not come
    close to the $20,000 awarded in
Fidler v. Sun Life Assurance Co. of Canada
,
    2006 SCC 30, [2006] 2 S.C.R. 3.

[63]

In
    addressing this issue, the trial judge considered the decisions of
Fidler
and
McQueen v. Echelon General Insurance Co.
, 2011 ONCA 649, 107 O.R.
    (3d) 780, and observed that those decisions had upheld mental distress damages
    awards of $20,000 and $25,000 respectively.

[64]

He
    determined that the respondent had purchased disability insurance from the
    appellant so as to provide peace of mind.  The appellant had not paid him for
    six years from August 2005 until September 2011.  At para. 63 of his reasons,
    the trial judge wrote:

The failure of Penncorp to pay Avelino what it contracted to
    pay him, both from being disabled from doing bricklaying and from doing any
    other occupation for which he is reasonably suited by education, training and
    experience, has humiliated Avelino.  It has made him dependent on Tracy
    financially.  He was a proud, self-reliant man who always worked to the fullest
    extent possible.  He has suffered great mental distress as a result of the
    failure of Penncorp to pay him what it contracted to pay him.  I find that this
    would have been in the reasonable contemplation of the parties as the likely
    result of Penncorps failure to honour its obligations to Avelino under the
    contract of insurance when they entered into the contract.
[2]

[65]

Later
    in his reasons, the trial judge awarded $100,000 in aggravated damages to the respondent.
    He gave no reasons for the quantum.

(c)

Punitive Damages

[66]

In
    his written submissions filed at the trial of the action, the respondent sought
    $500,000 in punitive damages.  The appellant argued that an award of punitive
    damages was unwarranted.

[67]

In
    addressing this issue, the trial judge considered the decisions of both
Whiten
    v. Pilot Insurance Co.
, 2002 SCC 18, [2002] 1 S.C.R. 595, and
Fidler
.

[68]

He
    noted that the surveillance did not remotely establish that the respondent was
    able to do the heavy continuous labour he had done as a bricklayer.
    Additionally, the appellant had received Dr. Huths report dated August 10,
    2005 in which he opined that the respondent would not be able to work at
    bricklaying again. The appellant never received a contrary opinion.  After
    viewing the surveillance, the appellants own expert, Dr. McGonigal, wrote that
    it was impossible to say whether [the respondent] could return to work on a
    full time basis as a bricklayer.

[69]

The
    trial judge commented that there was no evidence that Ms. Mayo ever considered
    the detailed description of the heavy nature of the bricklaying work that the
    respondent submitted with his completed December 6
th
questionnaire
    and she tried to settle the claim on the basis that he was partially disabled
    when, in the trial judges opinion, there was never any doubt based on the
    information the appellant had that the respondent was totally disabled.  Later
    in his reasons, he wrote that Ms. Mayo ignored the detailed job description of
    his occupation of bricklaying that he had provided along with the December 6
th
questionnaire.

[70]

He
    concluded that the appellants handling of the claim demonstrated bad faith. Citing
702535 Ontario Inc. v. Lloyds of London, Non-Marine Underwriters
(2000), 184 D.L.R. (4
th
) 687, he found that the appellants efforts
    to settle the claim on the basis of partial disability and its denial of
    benefits for six years amounted to a denial of coverage or delay of payment in
    order to take advantage of the insureds economic vulnerability or to gain
    bargaining leverage in negotiating a settlement.

[3]
Ms. Mayo took an adversarial approach and did not deal with the claim fairly
    and in a balanced way.  The conduct constituted an independent actionable wrong
    and met the test for punitive damages.  It was highhanded, malicious,
    arbitrary or highly reprehensible misconduct.  He then awarded $200,000 in
    punitive damages.

Punitive Damages Award

A.      Grounds of Appeal

[71]

First,
    on the issue of punitive damages, the appellant submits that its conduct did
    not depart markedly from ordinary standards of decency and did not require
    punishment.  There was no high-handed conduct or bad faith.  The trial judge
    erred by failing to appreciate that coverage for partial disability was a
    component of the insurance policy and Ms. Mayos efforts to settle the claim on
    the basis of partial disability were reasonable in light of what the policy
    contemplated and the information she had, including the surveillance videos
    that were inconsistent with the respondents reporting. The trial judge never addressed
    the appellants defence to that effect and never asked himself whether the
    decision was made in good faith.

[72]

The
    appellant also submits that the trial judge made palpable and overriding errors
    in his punitive damages analysis.  It submits that there was no evidence that
    the December 6
th
questionnaire was ignored by the appellant: Ms.
    Mayo was not cross-examined on the issue and her notes of her claim review of
    December 21, 2005 refer to this document and to the medical information she had
    and demonstrate that she considered both during her review of the claim.

[73]

Additionally,
    the appellant submits that the trial judge focused on whether the surveillance
    evidence established that the respondent could continue bricklaying. Instead,
    he should have asked whether it was reasonable to conclude, based on the August
    3, 2005 and video evidence, that the respondent was either partially disabled or
    a malingerer.

B.      Analysis

[74]

The
    law relating to punitive damages was canvassed in detail by the Supreme Court
    in
Whiten
and addressed again more recently in
Fidler
.  The
    key applicable principles may be summarized as follows.

·

Punitive damages are designed to address the objectives

of

retribution,

deterrence and denunciation, not to
    compensate the plaintiff:
Whiten
, at paras. 43 and 94, and
Fidler
,
    at para 61.

·

They are awarded only where compensatory damages are insufficient
    to accomplish these objectives:
Whiten
, at para. 94.

·

They are the exception rather than the rule:
Whiten
, at
    para. 94.

·

The impugned conduct must depart markedly from ordinary standards
    of decency; it is conduct that is malicious, oppressive or high-handed and that
    offends the courts sense of decency:
Whiten
, at paras. 36 and 94; and
Fidler
, at para. 62.
[4]

·

In addition to the breach of contract, there must be an
    independent actionable wrong:
Whiten
, at para. 78, and
Fidler
,
    at para. 63.

·

In a case of breach of an insurance contract for failure to pay
    insurance benefits, a breach by the insurer of its contractual duty to act in
    good faith will constitute an independent actionable wrong:
Whiten
, at
    para. 79, and
Fidler
, at para. 63.

[75]

In
    considering the issue of good faith, it must be emphasized that disputing or
    refusing a meritorious claim does not, in itself, constitute a breach of a duty
    to act in good faith:
Fidler
, at para. 63.

[76]

The
    decision of
702535 Ontario Inc. v. Lloyds of London, Non-Marine
    Underwriters

(2000), 184 D.L.R. (4
th
) 687 (Ont. C.A.),
    which was approved by the Supreme Court in
Fidler
, describes the
    parameters of an insurers duty at para. 29:

The duty of good faith also requires an insurer to deal with
    its insureds claim fairly.  The duty to act fairly applies both to the manner
    in which the insurer investigates and assesses the claim and to the decision
    whether or not to pay the claim.  In making a decision whether to refuse
    payment of a claim from its insured, an insurer must assess the merits of the
    claim in a balanced and reasonable manner.  It must not deny coverage or delay
    payment in order to take advantage of the insureds economic vulnerability or
    to gain bargaining leverage in negotiating a settlement.  A decision by an
    insurer to refuse payment should be based on a reasonable interpretation of its
    obligations under the policy.  This duty of fairness, however, does not require
    that an insurer necessarily be correct in making a decision to dispute its
    obligations to pay a claim.  Mere denial of a claim that ultimately succeeds is
    not, in itself, an act of bad faith.

[77]

Applying
    these principles to this appeal, the trial judge considered the applicable
    jurisprudence and concluded that, in addition to its breach of the insurance
    contract to pay disability benefits, the appellant had also breached its duty
    of good faith.  He heard the evidence over the course of an eight-day trial and
    had the opportunity to observe the witnesses, including the respondent, whom he
    found to be credible, and Ms. Mayo, and to review the documentary evidence. The
    trial judge found that the appellant had not dealt with the respondent in a
    fair and balanced manner and that the appellants representative, Ms. Mayo, had
    taken an adversarial approach to the respondents claim and met the test for an
    award of punitive damages.

[78]

There
    was evidence to support this conclusion:

·

Ms. Mayo stopped coverage in a vacuum of medical evidence that
    would support her position.  The benefits were terminated contrary to the
    medical evidence; indeed, there was no medical evidence, including that of the
    insurers own independent doctor, Dr. Hupel, that supported termination.  At
    the time the benefits were terminated, the appellant had opinions from both Dr.
    Huth and Dr. Hupel supporting the respondents claim that he was disabled from
    his own occupation of being a bricklayer.

·

The surveillance evidence did not reasonably support the
    appellants decision to terminate benefits.

·

The appellant failed to formally advise the respondent of the
    termination of his benefits until about five months after the fact. It simply
    ceased sending the disability benefit cheques.

·

Ms. Mayo attempted to shut down the respondents claim in
    December 2005 on the basis of a four- month payment of partial disability
    benefits.  Moreover, if she did believe that partial disability benefits were
    payable, she nonetheless never paid any such benefits to the respondent.

·

After terminating his benefits effective July 2005, the appellant
    only paid the respondent the remainder of his two years of benefits in
    September 2011, five years after they had been terminated, even though the
    appellant knew that the respondent could not go back to being a bricklayer.

[79]

As
    for the appellants allegations of palpable and overriding error, at paras. 44
    and 64 of his reasons, the trial judge wrote that there was no evidence that
    Ms. Mayo considered the detailed description of the heavy work required of the
    respondents work as a bricklayer, which was submitted with his completed
    December 6
th
questionnaire. In para. 65, he stated that she ignored
    the detailed job description of his occupation as bricklayer.

[80]

In
    my view, these comments do not amount to palpable and overriding errors of
    fact. Based on the record before him, it was open to the trial judge to make
    the findings and conclusions he did.  While Ms. Mayo clearly received the
    respondents completed December 6
th
questionnaire, there indeed was
    no evidence that she considered the details of the physical activities involved
    in his job that were attached to the form. Furthermore, she terminated his
    benefits before she received the completed form.  In these circumstances, it
    was reasonable for the trial judge to conclude that she ignored the detailed
    job description that had been provided by the respondent.

[81]

The
    appellant also takes issue with the trial judges finding in his reasons that
    the August 3, 2005 surveillance video did not establish that the respondent was
    able to do the heavy labour of bricklaying. The appellant submits that the
    trial judge ought to have asked whether, based on the video, it was reasonable
    to conclude that the respondent was partially disabled or a malingerer.

[82]

Again,
    based on the record before him, it was open to the trial judge to conclude that
    the August 3, 2005 video did not remotely establish the respondents ability
    to perform the work of a bricklayer and that there was never any doubt that
    the respondent was totally disabled from performing any of the important daily
    duties pertaining to his occupation of bricklayer.  It is implicit in these
    findings that the trial judge considered that it was unreasonable to conclude
    that the respondent was partially disabled or a malingerer based on the video
    evidence.

[83]

I
    also would not give effect to the appellants submission that the trial judge
    erred by failing to appreciate that Ms. Mayos efforts to settle the claim on
    the basis of partial disability were reasonable and that the trial judge made
    an error in law in failing to ask whether the appellants decision was made in
    good faith. The trial judge made an express finding that the appellants
    handling of the respondents claim demonstrated bad faith. There was no doubt as
    to the respondents full disability; there was no medical evidence to the
    contrary.

[84]

For
    all of these reasons, I would not interfere with the trial judges findings and
    conclusion relating to punitive damages.

Mental Distress Damages Award

A.      Grounds of Appeal

[85]

On
    the issue of mental distress damages, the appellant concedes that there is some
    entitlement to damages but takes issue with the quantum.  A reading of the
    evidence as a whole does not, in the appellants submission, support the
    conclusion that the respondents mental distress merited a compensatory award
    in the amount of $100,000.

[86]

The
    appellant submits that the trial judges reasons on this issue were also
    deficient. He provided no explanation for the quantum, and failed to reference
    any of the psychiatric evidence that pointed to bases other than the
    appellants failure to pay benefits as contributors to the respondents mental
    distress.  Nor did he explain why the facts of this case justified a higher
    award than those in comparable cases or why he departed from the respondents
    requested quantum of $25,000 and the appellants suggestion of $20,000.

[87]

The
    appellant submits that a reasonable range for mental distress damages was
    between $20,000 and $25,000 and the amount awarded constituted an error in
    principle.

B.      Analysis

[88]

In
Fidler
, at paras. 51-53, the Supreme Court observed that the
    jurisprudence speaks of two different types of aggravated damages.  The court
    clarified that the term aggravated damages is misplaced in a case of mental
    distress damages arising out of a contractual breach.  This was the nature of
    the damages claimed and awarded in the case under appeal.

[89]

In
Fidler
, the Supreme Court held that damages for mental distress for
    breach of contract may be awarded where they are established on the evidence
    and shown to have been within the reasonable contemplation of the parties at
    the time the contract was made: para. 45.

[90]

This
    does not obviate the need to prove the loss. The court stated at para. 47:

The court must be satisfied: (1) that an object of the contract
    was to secure a psychological benefit that brings mental distress upon breach
    within the reasonable contemplation of the parties; and (2) that the degree of
    mental suffering caused by the breach was of a degree sufficient to warrant
    compensation.

[91]

In
    that case, the Supreme Court determined that the plaintiffs distress and
    discomfort arising out of the loss of disability coverage was amply supported
    by the evidence, which included extensive medical evidence.  The court did not
    disturb the award of $20,000.

[92]

In
    the case under appeal, it is common ground between the parties that an
    objective of the insurance policy was to secure a psychological benefit and
    that, at the time, the parties reasonably contemplated that a failure to pay
    benefits could cause the respondent mental distress.

[93]

As
    mentioned, on appeal the appellant concedes that there was some entitlement to
    mental distress damages but takes issue with the quantum of the award.

[94]

In
    his reasons, the trial judge relied on
Fidler
and
McQueen v.
    Echelon
,

noting
    that these decisions had upheld mental distress damages awards of $20,000 and $25,000
    respectively.

[95]

In
    the case under appeal, the trial judges reasoning on the issue of mental distress
    damages consisted of one paragraph, which is reproduced at para. 64 of these
    reasons.

[96]

Later
    in his reasons, without elaboration, the trial judge wrote that the respondent
    was to have judgment for $100,000.

[97]

The
    applicable principles for appellate review of damage awards are described by
    Viscount Simon in
Nance v. British Columbia Electric R. Co.
,
[1951] 3 D.L.R. 705, at p. 713:

The principles which apply under this head are not in doubt.
    Whether the assessment of damages be by a Judge or a jury, the Appellate Court
    is not justified in substituting a figure of its own for that awarded below
    simply because it would have awarded a different figure if it had tried the
    case at first instance.  Even if the tribunal of first instance was a Judge
    sitting alone, then, before the Appellate Court can properly intervene, it must
    be satisfied either that the Judge, in assessing the damages, applied a wrong
    principle of law (as by taking into account some irrelevant factor or leaving
    out of account some relevant one); or, short of this, that the amount awarded
    is either so inordinately low or so inordinately high that it must be a wholly
    erroneous estimate of the damage [citations omitted].

[98]

This
    decision has been repeatedly affirmed by this court. See for example,
Barrick
    Gold Corporation v. Lopehandia
(2004), 71 O.R. (3d) 416.

[99]

In
Lumsden v. Manitoba
,
2009 MBCA 18, 236 Man. R. (2d) 130, the Manitoba Court of Appeal reduced the
    trial judges mental distress damages award from $45,000 to $35,000 on the
    basis that it was excessive.  The court stated at para 72:

[I]n assessing the reasonableness of the award of damages, the
    trial judge is entitled to significant judicial discretion; only if she erred in
    principle or if the award is completely out of line and truly excessive (or
    inordinately low, as the case may be) may an appellate court interfere.

[100]

In the case
    under appeal, there was no explanation of how the trial judge arrived at the
    figure of $100,000 or what facts justified such an amount. The award appears
    inordinately high and entirely disproportionate, where the evidence was that
    circumstances apart from the appellants conduct contributed to the
    respondents psychological  distress.  Mental distress damages are to be
    compensatory, not punitive:
Pate Estate v. Galway-Cavendish and Harvey
    (Township)
, 2013 ONCA 669, 117 O.R. (3d) 481.  An award of four times that
    requested by the respondent can only be described as punitive.

[101]

Moreover,
    although not determinative, the parties were also of the view that $100,000 was
    not an appropriate measure.  As noted, the respondent sought $25,000 and the
    appellant suggested $20,000 in mental distress damages.

[102]

In my view, the
    evidence properly supported the award requested by the respondent, that is,
    $25,000.

Disposition

[103]

In conclusion, I
    would dismiss the appeal of the punitive damages award.  I would allow the
    appeal of the mental distress damages award and replace the award of $100,000 with
    an award of $25,000.

[104]

In light of the
    divided success, I would order that the parties each bear their own costs of
    the appeal.  I would also reduce the full indemnity trial costs award by
    $30,000.

Released:

SEP                                       S.E. Pepall
    J.A.

SEP -2 2014                           I agree Russell
    Juriansz J.A.

I agree
    K. van Rensburg J.A.

[1]
The appellant states in its factum that it received an undated medical report
    from Dr. Huth on July 8, 2005.  That said, the trial judge does not refer to
    this report in his reasons and Ms. Mayos evidence on this report is not
    definitive.  Among other things, the undated report states that Dr. Huth had
    advised the respondent that he must consider another line of work.

[2]
Tracy is the respondents common law spouse.

[3]
He reiterated this finding in his May 14, 2013 costs award at para. 19 where he
    wrote: Penncorp tried mightily to get rid of Avelino.  It used his
    vulnerability in doing so.

[4]

Whiten
refers to malicious, oppressive
and
highhanded conduct
    at para. 36 but high-handed, malicious, arbitrary
or
highly
    reprehensible conduct at para. 94.
Fidler
refers
to
malicious,
    oppressive
or
high-handed conduct

at

para. 62
.
Given
    that
Fidler
is a more recent decision, the use of or reflects the
    proper description of actionable conduct.


COURT OF APPEAL FOR ONTARIO

CITATION: Gray v. Gray,
    2014 ONCA 659

DATE: 20140925

DOCKET: C57675

Hoy A.C.J.O., Gillese and Lauwers JJ.A.

BETWEEN

James David Gray

Applicant (Respondent in Appeal)

and

Kathleen Janet Gray

Respondent (Appellant in Appeal)

Bryan R. G. Smith and Sarah Conlin, for the appellant

Carol A. Allen and Megan L. Celhoffer, for the
    respondent

Heard: July 16, 2014

On appeal from the order of Justice Clayton Conlan of the
    Superior Court of Justice, dated August 26, 2013, with reasons reported at 2013
    ONSC 5478.

Lauwers J.A.

A.

introduction

[1]

The respondent, James David Gray, brought a motion to change to
    eliminate child support for the children of the marriage since they are all now
    adults, with retroactive effect. Mr. Gray also sought to eliminate the
    obligation to pay spousal support, and in the alternative, a continuation of spousal
    support at $800 per month, indexed, as set by Thompson J. in the 1998 divorce
    judgment.

[2]

The appellant, Kathleen Janet Gray, sought an increase in spousal
    support from $800 per month to $4,302 per month, also with retroactive effect. The
    interim order of Herold J. on April 30, 2012, terminated child support, but
    increased spousal support to $3,000 per month.

[3]

The motion judge conducted a trial. He terminated child support, and
    found that Mr. Gray had overpaid child support in the amount of $75,044.00. By
    order dated August 26, 2013, he ordered spousal support to continue at $800 per
    month, indexed, and found that Mr. Gray was in arrears of spousal support in
    the total amount of $79,807.32. He ordered Ms. Gray to pay $5,000 in costs. The
    result was a virtual offset.

[4]

Ms. Gray appeals. I would allow the appeal and, in particular, require
    Mr. Gray to pay spousal support at the low end of the range established by
    the Spousal Support Advisory Guidelines (SSAG), for the reasons set out below.

B.

BACKGROUND

(1)

Relevant facts

[5]

The appellant and respondent were married in June 1980. They had four
    children: a daughter, K, born April 9, 1981; a son, A, born February 18, 1983,
    a son, W, born October 27, 1988, and a son, J, born November 9, 1990.

[6]

The parties separated, either in December 1994, when, according to Mr. Gray,
    they ceased to be in a conjugal relationship, or in July 1996, when Mr. Gray
    served Ms. Gray with a petition for a divorce. There was a protracted battle
    about spousal and child support, which was complicated when Mr. Gray filed for
    bankruptcy in 1998. He is still an undischarged bankrupt.

[7]

Mr. Gray is now re-married and has three young children with his new
    wife. He lives in Indiana, U.S.A. He owns two homes, one in Indiana and one in
    Collingwood, Ontario, both with substantial mortgages. The Collingwood home is
    listed for sale at $684,000. Since 2005, his employment income has been
    $144,500 gross plus a bonus that has averaged about $25,000. Mr. Grays
    remuneration was paid in Canadian funds until July 2012 when he began working
    in Indiana. At the time of trial he had almost $90,000.00 in investments and
    savings.

[8]

Ms. Gray has not worked out of the home since she was admitted to the
    hospital for a suspected heart attack on December 31, 1994. She was ultimately
    diagnosed with leukemia and her health remains fragile. She receives long-term
    disability benefits and CPP benefits. Her annual income is currently about $33,500.
    She lives in the former matrimonial home in Meaford, which has about $67,000 in
    equity. She owns other assets, such as a timeshare in Hawaii and title to a
    cottage in Ontario.  She has admitted that her current financial situation is affected
    by the fact that she paid to send the children of the marriage to private
    schools.

(2)

The Litigation History

[9]

I set out only the elements of the litigation history relevant to this
    appeal. Thompson J. issued the Final Order/Divorce Judgment on May 21, 1998.
    Paragraph 4 of the Judgment required Mr. Gray to provide spousal support:

This court orders and
    adjudges
that the Petitioner shall pay spousal support to the Respondent
    in the amount of $800 per month commencing May 20, 1998. This quantum of
    support is less than is required by the Respondent but is ordered in accordance
    with  15.3(2) of the
Divorce Act
. This spousal support shall be
    indexed in accordance with section 34(5) of the
Family Law Act
.

[10]

Thompson
    Js reasons did not surface until after the argument of the motion to change,
    although they are reported at
Gray v. Gray,
68 O.T.C. 217. With respect
    to the spousal support award, he explained, at para. 39:

Mrs. Gray is entitled to spousal support. I have concluded that
    an appropriate amount would be the sum of $800 per month commencing May 20,
    1998. This is less than I would have awarded but the needs of the children must
    take precedence.

[11]

Paragraph
    5 of the Judgment required Mr. Gray to pay child support:

THIS COURT ORDERS AND ADJUDGES that commenc[ing] on May 20, 1998,
    and on the 20th day of each subsequent month, the Petitioner shall pay to the
    Respondent child support in the amount of Two Thousand Three Hundred and One
    Dollars ($2,301.00) for the four (4) children of the marriage, being One
    Thousand Nine Hundred and Fifty-One Dollars ($1,951.00) as base child support,
    and Three Hundred and Fifty Dollars ($350.00) per month towards the childrens
    special and extraordinary expenses. The base quantum of child support is based
    on the Petitioners base annual income of One Hundred and One Thousand, Nine
    Hundred and Eighty-Two Dollars and Ninety-Two Cents ($101,982.92).

[12]

Thompson
    J. clearly intended that child support take into account both Mr. Grays base
    salary and his bonus. He elaborated, at para. 49 of his reasons:

In the event that the husband receives a bonus from his
    employer over and above his base salary of $101,982 per annum, he shall
    forthwith advise the wife, in writing, of this event. Child support shall then
    be determined on a retroactive basis for the 12 month period immediately
    preceding the receipt of the bonus. Child support shall be determined by adding
    the base salary received by the husband and the bonus received, to ascertain
    the gross annual income from employment for the 12 month period preceding receipt
    of the bonus. The Child Support Guidelines shall be applied using the gross
    annual income figure to determine the child support payable for the 12 months
    preceding the payment of the bonus. Any support arrears created by this
    calculation shall be payable effective the date the bonus was received.

[13]

The
    parties came before Thompson J. again years later. On November 10, 2004, he
    issued a complex order relating to spousal support arrears, child support
    arrears, and ongoing child support obligations. The order was silent about
    ongoing spousal support but did not alter the 1998 Judgment which required such
    support.

[14]

Thompson
    J. issued another order on January 7, 2005 providing that Mr. Gray shall
    pay to [Ms. Gray] as child support the sum of $3,429 per month.

[15]

The
    record is clear that Ms. Gray ignored Mr. Grays efforts to have the child
    support obligation adjusted as the children aged. He then brought the motion to
    change. Herold J. issued a temporary order on April 20, 2012 terminating child
    support, on consent. He increased spousal support, not on consent, to $3,000
    per month effective May 1, 2012. He noted in his endorsement that:

It is clear from the material filed that Mother is just getting
    by while receiving over $3,000/month in child supportI am completely satisfied
    that Mother needs, and father has the ability to pay interim spousal support of
    $3,000 per month.

C.

The decision below

(1)

Child Support

[16]

There
    is no dispute between the parties that the child support ought to have been
    reduced over time. K graduated from university in 2005, and child support for her
    should have terminated September 1, 2005. Their eldest son, A, graduated from university
    in spring 2007 and the motion judge set May 1, 2007 as a reasonable date to
    terminate child support for him. He added, at para. 87, that for W and J, the
    safest, most reliable and most fair termination date to use is that decided by
    Herold J. - April 30, 2012. As noted, the motion judge did the calculations
    and found that Mr. Gray had overpaid child support in the amount of $75,044.
    The parties do not dispute the motion judges determination of this issue or
    his calculation.

(2)

Spousal Support

[17]

The
    motion judge rejected Ms. Grays request for spousal support on a compensatory
    basis, at para. 66. He found, however, at para. 67, that she was entitled to
    spousal support on a needs basis:

But I am satisfied on balance that there remains currently an
    entitlement to spousal support by Ms. Gray on a need basis. Her current income
    is a small fraction of what the marital standard of living was prior to
    separation. Her current income is a small fraction of Mr. Gray's. Her health remains
    precarious. I have no reason to impute any income to her. And she has very
    limited assets of a known value.

[18]

The
    motion judge went on at para. 76:

Ms. Gray's need for spousal support is no greater today than it
    was in May 1998. In fact, with the recent increase in her LTD benefits and the
    ages and stages of her children, it is arguable that her need is somewhat less.

[19]

The
    motion judge ordered, at para. 77, that the $800 per month in spousal support,
    indexed, as ordered by Thompson J. in his May 20, 1998 judgment, be continued.

[20]

The
    motion judge found that Mr. Grays arrears of spousal support were $79,807.32.
    These arrears accrued because of confusion as to whether the 2005 order of
    Thompson J. for $3,429 included the $800 per month in spousal support.  The
    motion judge found that spousal support was not included in that order, so that
    the spousal support ordered in the 1998 divorce judgment continued in force.  The
    parties do not dispute the calculation of this number, which was derived with
    the assistance of the Family Responsibility Office, taking into account the
    indexing provided for in the original order.

D.

The issue

[21]

The
    sole issue is whether the spousal support ordered by the motion judge was
    adequate in light of the law as applied to the facts.

E.

The Standard of Review

[22]

This
    court should not overturn a support order unless the reasons disclose an error
    in principle, a significant misapprehension of the evidence, or unless the
    award is clearly wrong:
Hickey v. Hickey
, [1999] 2 S.C.R. 518, at para.
    11.

F.

Analysis

[23]

In
    my view, on the evidence accepted by the motion judge, the spousal support
    amount of $800 per month, indexed, is clearly wrong, due to a number of errors
    in principle and a significant misapprehension of some of the evidence.

[24]

In
    the circumstances, using the logic of Lang J.A. in
Cassidy v. McNeil
2010
    ONCA 218,  99 O.R. (3d) 81, at para. 39, in my view, the record is sufficient
    to permit this court to arrive at an appropriate result without the need to
    order a new trial with its resulting costs and delay.

[25]

Consistent
    with the
Divorce Act,
R.S.C., 1985, c. 3, (2
nd
Supp.) the
    trial judge considered two distinct conceptual bases for entitlement to spousal
    support: on the basis of need and on a compensatory basis. (The contractual
    basis is not relevant.)

The Needs Basis

[26]

I
    would agree with the motion judge that Ms. Gray is entitled to spousal support
    on a needs basis. But the motion judges determination of her actual need was
    wrong in fact and in principle.

[27]

One
    of the objectives of the
Divorce Act
is to relieve economic hardship.
    Need is not measured solely to ensure a subsistence existence, but rather
    should be assessed through the lens of viewing marriage as an economic
    partnership.  As stated by this court in
Marinangeli v. Marinangeli
(2003),
    66 O.R. (3d) 40 at para. 74
,
in determining need, courts ought to be
    guided in part by the principle that the spouse receiving support is entitled
    to maintain the standard of living to which she was accustomed at the time
    cohabitation ceased. The analysis must consider the recipients ability to
    support herself, in light of her income and reasonable expenses.

[28]

In
    the case before us, Ms. Grays health prevents her from working.  This is
    relevant to the assessment of her needs.  As stated by the Supreme Court in
Bracklow
    v. Bracklow,
[1999] 1 S.C.R. 420, in some circumstances the law may
    require that a healthy party continue to support a disabled party, absent
    contractual or compensatory entitlement. Justice and consideration of fairness
    may demand no less. (at para. 48).

[29]

In
    fixing monthly spousal support at $800, indexed, the motion judge made the
    following comments, at paras. 34-35:

Ms. Gray testified that the $800.00 per month in spousal
    support ordered by Thompson J. in May 1998 was less than what she was entitled
    to but ordered nonetheless so that more money went to the children for their
    support.

It is noteworthy that paragraph 4 of the said Judgment in May
    1998 does include these words: "this Court orders and adjudges that the
    Petitioner shall pay spousal support to the Respondent in the amount of $800.00
    per month commencing May 20, 1998. That quantum of support is less than is
    required by the Respondent but is ordered in accordance with 15.3(2) of the
Divorce
    Act
".

[30]

In
    my view, the motion judges observations in these paragraphs are logically
    inconsistent. It is plain from the wording of the 1998 order of Thompson J. that
    he was awarding an amount of spousal support that was lower than he might
    otherwise have ordered, because the child support payments were so high. He
    recognized, consistent with s. 15.3 of the
Divorce Act
, which is cited
    in his order, that there is financial synergy that benefits the spouse who has
    custody of the children and receives child support.

[31]

The
    spousal support amount in 1998 was plainly not based on Ms. Grays actual need
    in 1998. It was therefore wrong for the motion judge to conclude that her need
    in 2014 is no greater than it was in May 1998 and that her need now is properly
    measured by that amount of $800 per month, as indexed.

[32]

In
    determining the need of the recipient, it was also incumbent on the motion
    judge to make a finding as to the appellants income.  The motion judge found
    that, according to Ms. Grays June 2013 Financial Statement, her 2012 gross
    income was $49,563.00. This number was comprised of $1,022.70 per month in CPP,
    plus $1,315.31 gross per month in LTD benefits and a small amount of investment
    income. Her disability income discontinued shortly after trial when she began
    receiving her pension of $1,600 per month. She says the figure used by the
    motion judge mistakenly includes her $20,966.99 in spousal support.

[33]

I
    would agree with the appellant that the motion judge erred, at para. 78, in
    finding Ms. Grays income to be $49,563 annually, since that figure included
    spousal support. There is no evidence to suggest that her disability payments
    are tax-free. I would accept the appellants calculation of Ms. Grays income
    at approximately $33,500 per year.

[34]

By
    overstating the appellants income, the motion judges analysis of need was
    faulty.  The needs of Ms. Gray can only be ascertained if measured against an
    accurate picture of her income.  Ms. Grays budget, as found in her financial
    statement, is not extravagant, nor does it reflect the lifestyle the parties
    enjoyed prior to separation.  She has reasonable expenditures relating to
    housing, utilities and groceries.  Her personal and health related expenses are
    modest.

[35]

The
    only portion of her budget on which the appellant was cross-examined, related
    to her payment of the parties sons credit card, and her charitable donations.
    The respondent also notes that Ms. Grays debts, including the mortgage, might
    be significantly less had she not spent improvidently on private schools.

[36]

Ms.
    Grays budget shows monthly expenditures of $5,571. The motion judge noted at
    para. 67 that Ms. Grays income provides a small fraction of what the marital
    standard of living was prior to separation, and that Mr. Grays income far
    exceeds hers.  While some of her monthly expenses may have been diminished had
    she not incurred debt associated with paying for private schools or otherwise
    supporting adult children, her need is well beyond a spousal support award of $800.00
    per month. Setting apart her mortgage payment and her payment on her sons
    credit card, her budget shortfall would be more than $2,000 per month.

The Compensatory Basis

[37]

I
    would also disagree with the motion judges conclusion, at para.66, that Ms.
    Gray is not entitled to spousal support on a compensatory basis. His reasoning
    is simply conclusory. His statement, at para. 80, that the marriage was
    anything but traditional does not offer any analysis of the economic
    consequences of the marriage or its breakdown, as the Supreme Court  intended
    in
Moge v. Moge,
[1992] 3 S.C.R. 813

at paras. 41- 42 .

[38]

The
    purpose of compensatory support is to share the economic advantages and
    disadvantages that accrued because of the marriage and its subsequent
    breakdown. In
Moge v. Moge,
at p. 861, para. 70, the Supreme Court
    explained the principle behind the compensatory model of support as follows:

Today, though more and more women are working outside the home,
    such employment continues to play a secondary role and sacrifices continue to
    be made for the sake of domestic considerations. These sacrifices often impair
    the ability of the partner who makes them (usually the wife) to maximize her
    earning potential because she may tend to forego educational and career
    advancement opportunities. These same sacrifices may also enhance the earning
    potential of the other spouse (usually the husband) who, because his wife is
    tending to such matters, is free to pursue economic goals.

[39]

The
    evidence in this case supports an entitlement to compensatory support. The
    appellant was employed as a flight attendant at the time of marriage.  The
    parties had four children between 1981 and 1990. Ms. Gray gave evidence that
    her employment as a flight attendant functioned well for her family because she
    would only get paid for the hours she worked.  She enjoyed her work and felt it
    offered the best benefits to the family as well as time at home.  This meant
    that she could arrange her schedule to accommodate childcare responsibilities.
    Both parties acknowledge that she planned her schedule to fly on weekends, when
    Mr. Gray was available for child care.   In addition, she took frequent unpaid
    leaves of absence, some related to giving birth, and others to have time off at
    home.

[40]

At
    the time of separation, the children were 15, 13, 8 and 5 years old.  Ms. Gray
    had custody of the children, while Mr. Gray had access one evening a week and
    every other weekend.  Post separation, Ms. Gray was unable to return to work
    for health reasons.  However, it is clear that she undertook the bulk of the
    responsibilities relating to the children.  Her labour on the home front during
    these years enabled Mr. Gray to pursue his career without undue concern for the
    day-to-day realities of child rearing. During this time, Mr. Grays income
    increased substantially.

[41]

As
    noted, the trial judges reasons are conclusory. He does not appear to account
    fully for the factors set out above. On the evidence, her career choices and
    her work schedule were taken to further family needs. An award of compensatory
    support is warranted based on the responsibilities undertaken by both parties
    during the marriage, and post-separation.

The Application of the SSAG

[42]

The
    SSAG are neither legislated, nor binding.  However they are a useful tool with
    which to measure the quantum and duration of spousal support. The motion judge
    referred to the SSAG but did not advert to them when he set the amount of
    spousal support. He seemed to see his task as setting the SSAG numbers for the
    next review of spousal support, but not the review that he was engaged in.

[43]

This
    court commented in
Fisher v. Fisher,
2008 ONCA 11, 88 O.R. (3d) 241, at
    para. 96 that the SSAG only apply to initial support applications, and not to
    variation proceedings.
Fisher
was not a variation proceeding that
    entailed consideration of s. 15.3 of the
Divorce Act
. At the time of
Fisher
the final publication of the SSAG had not been released. The July 2008 SSAG
    publication contemplates that the guidelines have a role to play on variation.
    The SSAG expressly comment that it should be possible for either spouse to
    apply to cross over from the with child support formula to the without child
    support formula, to affect the amount of spousal support ordered.

[44]

The
    approach taken by Cohen J. in
Abernathy v. Peacock,
2012 ONCJ 145,
    [2012] O.J. No. 1203

is appropriate in the current case
.
As in
Abernathy
, Ms. Gray is entitled to support on a need and compensatory
    basis.  The 1998 support order was deliberately lower than it ought to have
    been in recognition of her receipt of child support, as permitted by s.15.3 of
    the
Divorce Ac
t. In such circumstances, the SSAG offer a valuable tool
    in assessing a reasonable amount of spousal support, and should be routinely
    consulted. The motion judge erred in failing to do so.

[45]

In
    some cases, there are complicating factors that must be considered before a
    court applies the SSAG wholesale. Complicating factors that courts ought to
    consider include variations based on the post-separation income increase of the
    payor, or situations with second families. In such cases, the court must conduct
    an analysis of the facts of the specific case to assess whether the SSAG ranges
    are appropriate.

[46]

There
    is no basis on which to interfere with the motion judges finding that the
    figure of 16 years should be used as the length of the marriage/cohabitation. But
    the motion judge then made errors in identifying the incomes of both parties.
    As discussed above, Ms. Grays spousal support ought not to have been included
    in her income. Her annual income is therefore approximately $33,500.

[47]

As
    for Mr. Grays income, I would agree with the appellant that the motion judge
    erred, at para. 78, in not including Mr. Grays regular bonus in the calculation
    of his income. While the figure of $144,500 is appropriate for Mr. Grays
    base pay, the figure of $25,000 should be added to account for his regular and
    predictable bonus. Mr. Grays annual income for the purpose of calculating
    support is $169,500.

[48]

The
    result of those inputs would be to set the range of spousal support under the
    SSAG at somewhere between $2,720 to $3,627 per month.

[49]

The
    duration of support is also an issue that ought to be contemplated under the
    SSAG.  For a 16 year marriage, with the incomes of these parties, the SSAG
    suggest support for a duration of 8 to 16 years from the date of separation,
    subject to variation and possibly review.  The motion judge declined to
    terminate spousal support, and instead granted an indefinite award, subject to
    review.  He noted that Ms. Gray continued to need support, based on her income
    and precarious health. I agree in this instance, that support ought to be
    indefinite, until a review occurs as a result of a material change in
    circumstance.

G.

Disposition

[50]

Mr.
    Grays income has increased since the time of separation.  This increase was
    facilitated in part by Ms. Gray having primary responsibility for the children
    following separation. Typically, an entitlement to compensatory and needs based
    support would result in an award at the high end of the SSAG ranges.  Despite
    the SSAG range, I would agree with Mr. Gray that it is not appropriate in this
    case to simply adopt and apply the SSAG to set spousal support. In this case,
    there are factors that should keep support towards the low end of the range.

[51]

First,
    Mr. Gray has responsibilities to his second family that must be considered in the
    overall context. Mr. Grays second wife is unemployed because Mr. Gray had to
    move to the United States to keep his job.

[52]

Second,
    in light of
Bracklow v. Bracklow,
Ms. Grays ill health necessitates
    extending the duration of spousal support beyond the time frame suggested by
    the SSAG, although I observe that

she has only received the spousal
    support to which she is entitled since the interim order of Herold J. in April
    2012.  Before that, she received only $800 per month of spousal support, an
    amount much lower than the amount to which she was entitled; she may not
    ultimately get spousal support for a longer period than is suggested by the
    SSAG
.

[53]

In
    setting the quantum of support, I am cognizant of the need to balance competing
    interests.  At his current income, Mr. Gray is well positioned to provide for
    his second family, while still paying support at the low end of the SSAG range
    to Ms. Gray.  This would not necessarily be the case if he had a more limited
    income. Another factor affecting Mr. Grays means is that he is paid in US
    dollars.  Counsel in this case did not suggest that his income should be
    adjusted for SSAG purposes, to reflect foreign currency.  In the absence of
    evidence, I would decline to make any adjustments to Mr. Gray on this basis,
    but I note that the exchange rate is currently in Mr. Grays favour. Nor is
    there any evidence to address the tax differences, but I infer that these do
    not prejudicially affect Mr. Gray.  It is also apparent that for years, the
    quantum of spousal support was lower than it otherwise would have been as a
    result of having given priority to child support, as contemplated by s.15.3 of
    the
Divorce Act
.

[54]

Taking
    all of the factors together, I would set spousal support at the monthly amount
    of $2,720, which is at the lowest end of the SSAG range, to be indexed annually
    in accordance with s. 34(5) of the
Family Law Act
. This figure will
    plainly require Ms. Gray to make some lifestyle choices.

[55]

The
    financial synergy enjoyed by Ms. Gray as a result of the receipt of ongoing
    child support was terminated when the motion judge ordered that child support
    for the two youngest children end on April 30, 2012. The obligation to pay
    spousal support in the amount of $2,720 will therefore be deemed to have
    commenced on May 1, 2012. Although the motion judge ended child support for the
    eldest two children in 2005 and 2007 respectively, I would decline to order spousal
    support arrears back to this time on the basis that it would cause hardship to
    Mr. Grays new family.  Any payments made pursuant to the interim spousal
    support order of Herold J., or the final order of the motion judge will be credited
    to Mr. Gray.  The calculation of spousal support arrears and child support overpayment
    as outlined in paragraphs 3, 4 and 5 of the motion judges final order, are not
    affected by this disposition.

[56]

The
    motion judge ordered a review of spousal support in August, 2016 regardless of
    whether there has been a material change in circumstances. I see no basis on
    which to adopt an approach in this case that would be different from the norm.
    Either party should be able to seek a variation if there is a material change
    in circumstances.  Examples of a change of circumstance could include a change
    in Mr. Grays employment or an inheritance by Ms. Gray that would affect her
    needs.

[57]

Consequently,
    I would allow the appeal and make the following changes to the Order:

·

Para 2(a) shall be amended to provide that the respondent, Mr.
    Gray, shall pay spousal support to Ms. Gray in the amount of $2,720 per month
    subject to indexing in accordance with s. 34(5) of the
Family Law Act
.

·

The payment of $2,720 per month in spousal support is effective
    as of May 1, 2012.  This means that Mr. Gray shall pay arrears in support for
    the months elapsed between May 1, 2012 and the release of this judgment
    (approximately 28 months).  Mr. Gray shall be given credit for any payments
    made after May 1, 2012 on account of the interim order of Herold J., or the
    final order of the motion judge.

·

Para 7 shall be deleted, so that either party can bring an
    application to vary this spousal support order if there is a material change in
    circumstances.

·

All other terms of the Order remain unchanged.

H.

Costs

[58]

I
    would order the costs of this appeal be paid by the respondent to the appellant
    in the amount of $15,000 all-inclusive, and reverse the $5,000 all-inclusive costs
    order below.

Released:  September 25, 2014  AH

P.
    Lauwers J.A.

I
    agree Alexandra Hoy, A.C.J.O

I
    agree E.E. Gillese J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Graydon v.
    Burton, 2014 ONCA 674

DATE: 20140930

DOCKET: C58306

Epstein, van Rensburg and Benotto JJ.A.

BETWEEN

Roy Thomas Graydon

Plaintiff (Respondent)

and

Leanne Burton
and
    SGI Search Group Inc.

Defendants (
Appellant
)

No one appearing for the appellant

Tudor B. Carsten, for the respondent

Heard and released orally: September 25, 2014

On appeal from the order of Justice James M. Spence of
    the Superior Court of Justice, dated January 7, 2014.

ENDORSEMENT

[1]

The respondent is suing the appellant and her corporation SGI Search
    Group Inc. for, among other things, defamation.  The action arises out of a
    brief sexual relationship between the appellant and respondent that ended in
    acrimony. In his claim, the respondent alleges that following the end of the
    relationship, the appellant engaged in a campaign of persistent disparaging
    communication about him - to him directly, to third parties and, more broadly,
    through the social media network.  The appellant has counterclaimed for sexual battery
    and intentional infliction of mental distress. By order dated, January 7, 2014,
    Spence J. allowed the respondents motion to strike the claim in battery as
    well as several factual allegations from the counterclaim. The appellant
    appeals only that part of the order striking her claim in battery, a claim that
    does not involve SGI.

[2]

Until the order of Juriansz J.A. of June 19, 2014 the appellant, who
    resides in California, was represented by counsel.  Since then she has
    represented herself.  A few days after her counsel was removed from the record,
    the appellant, primarily on the basis of alleged emotional difficulties, sought
    an adjournment of the hearing of the appeal scheduled for August 11, 2014.
    Counsel for the respondent agreed to the request on the basis that the appeal
    proceed peremptory to the appellant.  On August 11, 2014, the panel adjourned
    the appeal to today.

[3]

On September 16, 2014 the appellant contacted this courts scheduling
    office and requested an adjournment indicating she was booked to have an MRI at
    a hospital in Toronto, which would interfere with her ability to argue the
    appeal.  Counsel for the respondent refused to agree to another adjournment. On
    September 18, 2014 the court office advised the appellant she would have to
    attend today and argue her case for an adjournment but that she also must be
    prepared to proceed with the appeal, if the adjournment were denied.  On
    September 19, 2014 the appellant contacted the court scheduling office and
    again tried to secure an adjournment.  Counsel for the respondent refused to
    consent.  On September 23, 2014 the court office again advised the appellant
    that she would have to appear today: she could request an adjournment but must
    be prepared to proceed with the appeal.

[4]

Later that day the appellant advised that she would not be attending at
    the hearing scheduled for today.

[5]

The appellant did not appear in court and counsel for the respondent
    made submissions that the matter ought to proceed: the appeal should be
    considered and be dismissed.

[6]

In all of the circumstances, the request for an adjournment and the
    appeal are dismissed.

[7]

The appellants adjournment requests have focused on emotional issues
    arising out of a number of circumstances in her life that she claims prevent
    her from arguing the appeal.  Given the history of this appeal and the fact
    that the appellant has not provided any evidence in support of her claims
    supporting her request for an adjournment of todays hearing (notwithstanding
    her undertaking to do so), we conclude that the appellant has been given ample
    opportunity to make her case in favour of an adjournment and has failed to do
    so.

[8]

Second, in the light of the allegations in the counterclaim with respect
    to the tort of sexual battery, on the record before us, the appeal has little
    chance of success.

[9]

For these reasons, the appeal is dismissed.

[10]

The
    respondent is entitled to costs of the appeal fixed in the amount of $10,000
    inclusive of disbursements and HST.

Gloria
    Epstein J.A.

K. van
    Rensburg J.A.

M.L.
    Benotto J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Kim v. The Manufacturers Life Insurance Company,
    2014 ONCA 658

DATE: 20140924

DOCKET: C58540

Juriansz, LaForme and Lauwers JJ.A.

BETWEEN

Du-Won Kim and New Seoul Insurance Corporation

Plaintiff (Appellant)

and

The
    Manufacturers Life Insurance Company, c.o.b. as

Manulife Financial

Defendant (Respondent)

Du-Won Kim, acting in person

M. Blair Anderson, for the respondent

Heard and released orally: September 19, 2014

On appeal from the order of Justice Frances P. Kiteley of
    the Superior Court of Justice, dated February 25, 2014.

ENDORSEMENT

[1]

The motion judge extensively reviewed several issues but ultimately
    granted summary judgment on the basis that the limitation period began to run
    on September 28, 2008. She rejected Mr. Kims argument that he was incapable of
    commencing an action because of his psychological condition. She noted that his
    own medical records indicated that he was capable of managing his own personal
    affairs, financial matters, and making decisions for himself.

[2]

Before us, Mr. Kim submits that the limitation period should be
    suspended because of the fraudulent concealment of documents by the respondent.

[3]

This argument does not change the analysis. Any fraudulent concealment
    of documents, whether it existed or not would not prevent Mr. Kim from knowing
    he had a cause of action.

[4]

Mr. Kims letter dated September 28, 2008, indicates that Mr. Kim
    possessed the requisite knowledge to satisfy the requirements of s. 5 of the
Limitations
    Act
.

[5]

Under the heading Inaccurate Report of Manulife Final Analysis, he concludes
    with the statement, this is my final analysis and conclusion. Mr. Kim knew
    that loss or damage had occurred, that the loss was caused by or contributed to
    by an act or omission, and that the act or omission was that of Manulife. He also
    knew or ought to have known that a proceeding would be the appropriate means to
    seek to remedy his loss.

[6]

Mr. Kim again outlined his concerns to Manulife in a letter dated May
    12, 2008, stating, I believe that this is fraud and illegal. This letter
    further demonstrates that Mr. Kim discovered his claim in 2008, roughly four
    years before he eventually commenced his action.

[7]

The appeal is therefore dismissed.

[8]

Costs to the respondent are fixed at $6,000, all inclusive.

R.G. Juriansz J.A.

H.S. LaForme J.A.

P.
    Lauwers J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Korea Data Systems (USA), Inc. v. Aamazing
    Technologies Inc. (Ajay Amazing Technologies Inc.), 2014 ONCA 652

DATE: 20140925

DOCKET: M43880, M43941, M44009,

M44015 and M44059 (C55916)

Watt, Tulloch and Benotto JJ.A.

BETWEEN

Korea Data Systems (USA), Inc.

Plaintiff (Appellant)

and

Aamazing Technologies Inc. carrying on business
    as Ajay Amazing Technologies Inc.,
Jay Chiang, a.k.a. Jay
    Tien Chiang a.k.a. Tienchieh Chiang
, Julius Chiang and Christina Chiang
    a.k.a. Christian Chiang a.k.a. Suh Mei Tasi, a.k.a. Suh Mei Tsai a.k.a.
    Christina Suh Mei Tsai, a.k.a. Suh Mei Tasi Chiang, a.k.a. Christina Suh-Mei
    Chiang a.k.a. Suh-Mei Chiang, and Dong Liang a.k.a. Tung Liang

Defendants (
Respondents in Appeal
)

AND BETWEEN:

Mendlowitz &
    Associates Inc. in its capacity as Trustee in bankruptcy of Jay Tien Chiang,
    and
Korea Data Systems (USA), Inc.

Plaintiffs (
Appellant
)

and

Jay
    Tien Chiang, a.k.a. Jay Chiang, a.k.a. Tienchieh Chiang, Christina Chiang, also
    known as Suh Mei Tasi, a.k.a. Christian Chiang a.k.a. Suh Mei Tsai, a.k.a.
    Christina Suh Mei Tsai, a.k.a. Suh Mei Tasi Chiang, a.k.a. Christina Suh-Mei
    Chiang a.k.a. Suh-Mei Chiang
, Chun Chun Wu, Jie Chu Wu, Chen Cheng-Yueh
    Tsai, Yu Chang Chiang also known as Y.C. Chiang, En Fu Chiang, Brenda Chang,
    Samson Chang, David Cheng, Everview Inc., 961266 Ontario Inc., 1204360 Ontario
    Inc., 1243723 Ontario Inc., Aamazing Technologies Inc., Wen Wang Chiang a.k.a.
    Wen Chiang a.k.a. Wen Wang, Crystalview Technology Corp., E.C. Holdings Ltd.,
    Telepower International (Canada), Inc., Best Buy Electronics Inc., Su Feng Tsai
    a.k.a. Tsai Su Feng, Tsai Zheng Li, Tsai Zheng Ying, Asia Pacific Gateway
    (H.K.) Ltd., Century Group Holdings Ltd., Albany Investments Ltd., Mei Huang,
    Winner International Group Limited, Huang Chi Lung, Min Huang, Wainwright
    Ventures Ltd., New Global Investment Limited and Floratino Limited

Defendants (
Respondents in Appeal
)

Scott Hutchison, for the moving party Korea Data Systems
    (USA), Inc. on M44059

Hilary Book, for the moving party Christina Chiang on
    M43941 and M44015

Catherine Francis and Mark A. Freake, for the moving
    party Mendlowitz & Associates Inc. on M43880

J.T. Curry and K.M. Pentney, for moving party Jay Chiang
    on M44009

Heard: August 25, 2014

On motion for directions on the appeal from the order of Associate
    Chief Justice Frank N. Marrocco of the Superior Court of Justice, dated July 9,
    2012.

ENDORSEMENT

[1]

The motions before the court arise out of a proposed appeal by Korea
    Data Systems (USA), Inc. of an order for costs made in favour of Christina
    Chiang. A summary of the background is necessary to put the motions in context.

Brief History of Litigation

[2]

The parties have been embroiled in a complex commercial dispute since
    the early 1990s.  It has occupied courts in California, Taiwan, Hong Kong and
    Ontario.

[3]

The litigation arose between Aamazing Technologies Inc. and KDS and its
    affiliates.  KDS sued Aamazing and its alter egos Jay Chiang and Julius
    Chiang to enforce a settlement agreement and to obtain damages for computer
    monitors that were shipped but not paid for. The California Superior Court gave
    judgment against Aamazing, Jay Chiang personally, and Julius Chiang personally
    for US$9, 678, 832. Jay Chiang then filed for bankruptcy in Ontario, declaring
    the California Judgment to be a liability. He is currently an undischarged
    bankrupt, with his property vested in his Trustee. KDS filed proofs of claim in
    the bankrupt's Estate in the amount of the California Judgment.

[4]

In 1998, KDS started an action in Ontario against Jay Chiang, Julius
    Chiang, and Aamazing to enforce the California Judgment and to obtain a
    declaration that the judgment debt should survive bankruptcy pursuant to s.
    178(1)(d) of the
Bankruptcy and Insolvency Act
, RSC 1985, c. B-3.

[5]

In 2000, KDS started another action in Ontario against Jay Chiang and
    his wife Christina Chiang, as well as some of their relatives and associated
    corporations, for conspiracy and fraudulent conveyance (the fraudulent
    conveyance action). The Trustee later joined this action as a co-plaintiff.

[6]

KDS then obtained a default judgment from a California court against
    Christina Chiang on the basis that she had fraudulently conveyed assets to
    defeat the earlier California Judgment. In 2006, the Ontario Superior Court of
    Justice ordered that this judgment of more than US$5,000,000 be enforced (the
    enforcement action).

[7]

Notwithstanding its success against Christina Chiang in California, KDS
    continued to pursue the fraudulent conveyance action against her in Ontario.

[8]

The enforcement action and the fraudulent conveyance action were heard
    together by Marrocco J. in 2011. His judgment was released on July 9, 2012. In
    a separate ruling, dated May 28, 2014, Marrocco A.C.J.S.C. ordered the Estate
    and KDS jointly and severally liable for the costs of the fraudulent conveyance
    action to Christina Chiang. He refused to allow a set-off of the costs for the
    amount by which Christina Chiang was indebted to KDS. The reasons for the May
    28, 2014 orders were provided on April 29, 2014.

[9]

In August 2012, KDS and the Trustee issued a Notice of Appeal against
    the trial judgment. The appeal has yet to be perfected. KDS would now like to
    appeal the costs order against Christina Chiang, which arose from the
    fraudulent conveyance action. But for costs, KDS has settled the fraudulent
    conveyance appeal.

[10]

After
    the trial decision was released, the Trustee reached an agreement with Jay and
    Christina Chiang settling all the remaining issues between them. Prior to
    deciding the costs order, the trial judge was advised by the Trustee of its
    position that Christina Chiang was entitled to reasonable costs. The Trustee
    supports Ms. Chiangs position on the motions.

Motions before this Court

[11]

The
    motions concern the means  if any  by which KDS can appeal the costs order.

[12]

These
    are the issues to be determined:

1.

Is leave
    required to appeal the costs order and, if so, should this court grant leave?

2.

Should the costs
    appeal be separated from the main appeal?

3.

Should KDS be
    required to post security for costs?

4.

Costs of the
    motions.

Is leave required to appeal the costs order?

[13]

Christina
    Chiang and the Trustee argue that leave is required for all appeals as to
    costs, pursuant to s. 133(b) of the
Courts of Justice Act
.

[14]

KDS
    argues that the order goes beyond the usual quantum and entitlement
    determination with respect to costs; the order alters legal rights not related
    to the costs of the fraudulent conveyance action.

[15]

The
    costs order provides that:

1.

Christina Chiang
    is entitled to her costs fixed in the amount of $665,990.96;

2.

to the extent
    that the costs are paid by the Estate, the Trustee is entitled to seek recovery
    from KDS;

3.

counsel for
    Christina Chiang is entitled to a solicitors lien on the costs, which shall
    have priority over the claims of the Estates unsecured creditors;

4.

all of KDSs
    reasonable costs  arising from KDSs efforts to sell the Chiangs house at 10
    Cortina Court, and an outstanding costs order for $15,000 made against
    Christina Chiang, have been satisfied from surplus funds realized from the sale
    of the house;

5.

outstanding
    costs orders made against Jay and Christina Chiang are to be satisfied out of
    funds received by the Trustee from Winner International Group Ltd. after the
    trial decision.

Is the order more than a costs
    order?

[16]

There
    appear to be few, if any, Ontario cases that consider this question. The
    British Columbia Court of Appeal considered a similar situation in
Jamieson
    v. Loureiro
, 2009 BCCA 254, [2009] B.C.J. No. 1426. There, the costs order
    specified that the costs would be set-off against a judgment debt. Neilson J.A.
    found that the order for set-off is in effect a variation of the earlier
    division of family assets. As a result, leave was not required because the
    costs order was not an order respecting costs only under s. 7(2)(b) of the
Court
    of Appeal Act
, R.S.B.C. 1996, c. 77.

[17]

Here,
    the trial judge's decision not to allow set-off has a substantive effect on the
    legal rights of KDS. The decision effectively eliminates the ability of KDS to
    set-off this debt against the much larger judgment debt owed to it by Christina
    Chiang.

[18]

In
    our view, the order is not a straightforward determination of who should pay
    the costs and how much those costs should be. The order determines rights that
    extend beyond the entitlement to and quantum of the costs. As such, the appeal
    is not only as to costs. Thus, leave is not required under s. 133(b) of the
Courts
    of Justice Act
. However, if leave were required, we would have granted
    leave.

Should the costs appeal be separated from the main appeal?

[19]

The
    complexity of the issues involved and the commonality of the history make it
    necessary to have the costs appeal heard with the enforcement appeal.  In
    addition, the claim for set-off can only be fully evaluated in the context of
    the past judgments and costs orders issued against Jay and Christina Chiang. The
    appeals will be heard together.

[20]

KDS
    will have 45 days to perfect the appeals.

Security for Costs

[21]

Christina
    Chiang asks that KDS be required to pay the costs order, as well as security
    for costs of the appeal, into this court. She contends that KDS has no assets
    in Canada.

[22]

The
    appeal is not frivolous or devoid of merit. In addition, it is Ms. Chiang who
    has been found in contempt of court and who has failed to pay costs ordered
    against her. This would not be an appropriate case for security for costs.

Costs of this Motion

[23]

The
    parties shall exchange and provide written submissions of no more than three
    pages. The submissions shall be filed by October 15, 2014.

David Watt J.A.

M. Tulloch J.A.

M.L. Benotto J.A.