COURT OF APPEAL FOR ONTARIO

CITATION: Wharry v. Wharry, 2016 ONCA 930

DATE: 20161213

DOCKET: C61297

Strathy C.J.O., Pardu and Brown JJ.A.

BETWEEN

John Wilson Wharry

Applicant (Respondent in Appeal)

and

Karen Wharry

Respondent (Appellant)

Elli Cohen, for the appellant

Ross C. McLean and John W.E. Gilbert, for the respondent

Heard: November 10, 2016

On appeal from the judgment of Justice Michael G. Emery
    of the Superior Court of Justice, dated October 16, 2015.

Pardu J.A.:

[1]

Karen Wharry appeals from a judgment rendered in matrimonial
    proceedings. She submits that the trial judge erred in the following respects:

1.

Limiting her
    monetary compensation for unjust enrichment to an amount representing one half
    the value of a bungalow on the Drumcrow farm property at the date of trial,
    rather than basing his award for her contributions to the joint family
    enterprise on the value of the whole farm;

2.

Concluding that
    the Drumcrow farm transferred to the respondent was a gift and therefore
    excluded from his net family property;

3.

Limiting
    retroactive child support to a three-year period;

4.

Limiting retroactive
    spousal support to a three-year period;

5.

Terminating
    spousal support as of December 2016, just two years after trial; and

6.

Allocating
    responsibility for various post-separation obligations.

[2]

For reasons that follow, I find that the trial judge erred in limiting
    retroactive child support to a three-year period and terminating spousal
    support in December 2016. In my view, the balance of the appeal should be
    dismissed.

A.

Background

(1)

Relationship History

[3]

The parties were married on August 25, 1992 in Northern Ireland. This
    was a 14-year relationship. They have two children, Scott (age 21) born May 13,
    1995 who is now independent, and Rebekah (age 20) born September 11, 1996 who
    is continuing her post-secondary education.

[4]

The appellant was working full time at the date of the marriage, but
    never returned to work full time after the children were born. She suffered
    from post-partum depression after the birth of each of the children. The
    respondent spent long hours working; she looked after the household and the
    children.

[5]

The respondents father, Mr. Wharry Sr., operated a dairy and cattle
    farming business with the respondent at the Drumcrow farm in Northern
    Ireland. Mr. Wharry Sr.s own father had transferred the farm to Mr. Wharry
    Sr., the oldest son. Mr. Wharry Sr. in turn transferred the farm and
    related property to the respondent, his oldest son, in 1997 during the parties
    marriage.

[6]

The deed of transfer to the respondent for Drumcrow farm reserved a
    right of residence so that the respondents parents, Mr. Wharry Sr. and Mrs.
    Wharry, could live in a bungalow located on the property for the rest of their
    lives.

[7]

The parties moved to Canada in 2002 and purchased the Kincardine farm
    in Ontario.

[8]

The parties separated on November 26, 2006. After separation, both
    children primarily resided with the appellant. However, Scott moved in with the
    respondent in March 2013.

(2)

Procedural History

[9]

The respondent brought his Application on January 23, 2007. The
    appellant filed her Answer on March 13, 2007, seeking, among other things,
    equalization, child support, and spousal support.

[10]

Shortly thereafter, the respondent was ordered to pay interim monthly
    child support in the amount of $360 for the children, effective July 11, 2007.
    The interim child support order was based on an imputed annual income of
    $25,000 to the respondent. No interim spousal support was ordered.

[11]

The respondent unilaterally reduced his child support to $200 per month
    without seeking to change the interim order when Scott moved in with him in
    March 2013.

[12]

The parties settled a number of issues in 2008, including the
    appellants equalization claim regarding the Kincardine farm. The respondent paid
    the appellant $85,000 to purchase her interest in the farm.

[13]

The remaining issues were heard by the trial judge in November 2014.

[14]

At trial, the appellant claimed that the respondent had been unjustly
    enriched and sought a remedy in relation to the Drumcrow farm and other
    property in Northern Ireland.

[15]

The respondent argued that the transfer of the Drumcrow farm and other
    property was a gift from his father, Mr. Wharry Sr., during the marriage. He
    submitted that it was therefore excluded property under s. 4(2) of the
Family
    Law Act
, R.S.O. 1990, c. F.3.

[16]

The appellant further claimed retroactive table child support and
    spousal support. She also sought retroactive payment toward the childrens
    special or extraordinary expenses of $16,891.30 incurred since separation,
    under s. 7 of the
Federal Child Support Guidelines
, SOR/97-175 (the CSG).

[17]

Both parties requested that the trial judge allocate various post-separation
    responsibilities.

B.

The Drumcrow farm

(1)

The Trial Judges Reasons

[18]

In assessing the appellants claim for compensation for unjust
    enrichment the trial judge referred to the test set out in
Kerr v. Baranow
,
    2011 SCC 10, [2011] 1 S.C.R. 269, at paras. 106-107 of his reasons:

In
Kerr v. Baranow
, the court examined the concept of
    a claim where one spouse has been unjustly enriched at the expense of the
    claiming spouse on the application of the original three-part test, or by way
    of a joint family venture. A joint family venture was identified by Justice
    Cromwell to give life to cases developed for unjust enrichment where both
    parties contribute to the overall accumulation of wealth but title or ownership
    is held only by one of them.

The Court held in
Kerr v. Baranow
that the joint
    family venture is a concept that should be introduced at the remedy stage of
    the unjust enrichment analysis. The key ingredients in a joint family venture
    remedy are identified through the use of four criteria:

1. The mutual effort made by the
    parties;

2. the economic integration of the
    parties to result in the economic interdependence and natural resources that
    characterized the relationship of the parties;

3. intention exhibited by the
    parties;

4. the priority of the family
    given by the parties.

[19]

He concluded at paras. 118-121 that the appellant was entitled to a
    monetary award amounting to one half of the value, as of the date of trial, of
    the bungalow on the Drumcrow property:

I find as a fact that the bungalow was built with the income
    stream generated by John through the operation of the dairy business. There is
    evidence that the funds to build the bungalow came directly from the farm
    account, or indirectly when funds in that account was used to repay the loan
    borrowed from the Northern Bank for its construction.

I make reference to three pieces of evidence to support a
    finding that the bungalow was the product of a joint family venture between
    John and Karen. First, the bungalow was built prior to the transfer of Drumcrow
    Farm to John while he worked diligently to provide for his family by operating
    the dairy business with his father and brother. Second, Karen made
    contributions to the joint family venture by caring for the children, helping
    with farm work when needed, and by foregoing a better lifestyle so that Johns
    wages could be applied to, or used to repay the financing to build the
    bungalow. Third, Karen testified that John told her that someday the bungalow
    would be theirs. That statement was not contested.

The role Karen played to allow for the bungalows construction
    meets with the requirements to find a joint family venture set out in
Kerr
    v. Baranow
. I find that:

1. Both John and Karen made their
    respective contributions to enable the construction of the bungalow. This was a
    mutual effort on their part.

2. At the time of the bungalows
    construction, John and Karen were economically integrated not only as a couple,
    but also with the operation of the farm. This is demonstrated through the use
    of the farm account to fund personal as well as farm expenses. The fact that
    the farm account was used to pay for the construction of the bungalow or to
    repay the mortgage to Northern Bank makes this all the more relevant.

3. Karens evidence that John told
    her that someday the bungalow would be theirs is a declaration of intent that
    he and Karen were working towards a shared future together, and that the
    bungalow would be theirs to share at that future time. No doubt Karen would
    have experienced frustration and disappointment to learn after paying off the
    mortgage to purchase Deerpark Farm for David that she would then have to forgo
    an improvement to the standard of living she and John could expect with extra
    disposable income that Johns share of farm income would be used to build and
    pay for the construction of the bungalow for the next seven years. The promise
    that the bungalow would someday be theirs was a declaration by John of an
    actual intent that he and Karen would someday receive that value.

4. The priority of the family was
    relevant to the acquisition of wealth in the form of the bungalow as Karen
    looked after home and family thereby enabling John to build the bungalow and
    pay for the cost of its construction. I therefore find that there was a joint
    decision to prioritize the family in order to realize the objective
    constructing the bungalow at Drumcrow Farm.

John would be unjustly enriched if he were to retain the
    bungalow without recognizing Karens contribution. While Karen did not
    contribute directly to its construction, the bungalow was built as a joint
    family venture that would work to Karens detriment if she were not compensated
    for the efforts made and the sacrifices she endured for the bungalows
    construction. The product of her contribution together with Johns industry
    allowed income to stream through the farm account and to pool as capital in the
    construction of the bungalow, thereby creating a capital asset. This capital is
    an accumulation of wealth in which they both should share.

[20]

The trial judge concluded at paras. 100-103 that the appellant was
    essentially detached from the farm operation on the land transferred to the respondent
    in 1997, apart from her efforts to the joint family enterprise which enabled
    construction of the bungalow in 1995:

The assets at issue in this case consist of the farm on
    Drumcrow Road, the milk quota, the cattle herd and related equipment and
    machinery that were transferred from Mr. Wharry Sr. to John in 1997. Johns
    role in the marriage involved operating the farm on Drumcrow Road and the
    Deerpark Farm for the purposes of operating the dairy business consisting of
    the production and sale of dairy products under milk quota, and the sale of
    cows and calves. The court heard evidence that all income from the dairy
    business went into the farm account. The court also heard evidence that while
    Karen would help out when asked, her role was concentrated on caring for the
    children where she and John lived in the house at Deerpark Farm.

The parties universally acknowledged at trial that John did
    the lions share of the work as between them to operate the dairy and cattle
    business.

Karen was essentially detached from the farm on Drumcrow Road.
    Karen only interacted with the dairy business John would operate with his
    father and brother on those occasions when she was asked to help out. The court
    also heard evidence that Karen was asked to forgo further income to benefit her
    family from Johns efforts in the dairy business when the farm account and the assets
    of the dairy business for used to borrow for the purposes of building the
    bungalow on Drumcrow Farm.

Karen gave evidence that she was told, and had every reason to
    believe that foregoing income from Johns efforts was worthwhile because the
    bungalow would someday be theirs. It was on this basis that Karen continued to
    contribute her time and energy to care for the children and the home she made
    for John and herself. This enabled John to concentrate on the construction of
    the bungalow, and to operate the dairy business that would systematically pay
    off the mortgage taken to build it.

[21]

In assessing the respondents claim that the farm had been gifted to
    him, the trial judge at para. 111 relied on
McNamee v. McNamee
, 2011
    ONCA 533, 106 O.R. (3d) 401 to identify the essential elements of a gift:

In
McNamee v. McNamee
, the Court of Appeal noted
    Justice McLachlans observation in
Peter v. Beblow
, [1993] 1 S.C.R.
    980 that, the central element of a gift [is the] intentional giving to another
    without expectation of remuneration. From that observation, the court
    confirmed the three ingredients essential to find a legally valid gift are:

1. An intention to make a gift on
    the part of the donor, without consideration or expectation of remuneration;

2. an acceptance of the gift by
    the donee; and

3. a sufficient act of delivery or
    transfer of the property to complete the transaction

[22]

Only the first element was in issue at trial.

[23]

The Drumcrow farm had been owned by the respondents family for
    generations:

Johns great grandfather had come from Scotland. He had
    purchased Drumcrow Farm and handed it down to his son, Johns grandfather, who
    added more land to it. Johns grandfather then transferred it to Johns father,
    Mr. Wharry Sr., with right of resident to allow Johns grandfather and grandmother
    to live on the farm during their lifetime. (reasons for judgment para. 34)

[24]

At paras. 37-40, the trial judge explained that Mr. Wharry Sr. gave the
    Drumcrow farm to his son, the respondent, in 1997:

In December 1997, Mr. Wharry gave the Drumcrow Farm and house
    located at 28 and 30 Drumcrow Road to John, which included the bungalow. He
    also transferred the milk quota, calf and cow herd, machinery and the farm
    account to John. He made this transfer because the taxation laws in Northern
    Ireland had changed in 1997 to allow the transfer of property having a value of
    £300,000 or less without having to incur a capital gain. John explained in his
    evidence that Mr. Wharry Sr. made this transfer during his lifetime to
    avoid death taxes.

Johns father transferred Drumcrow Farm to John in 1997 with a
    right of residence reserved to him in the transfer deed so that he and Mrs.
    Wharry could live in the bungalow for the rest of their lives.

John relies upon the deed of transfer from his father as
    beneficial owner to himself entered into evidence through Mr. Richard Rountree,
    a solicitor in Ireland who gave evidence at trial by Skype. This deed of
    transfer shows the consideration for the transfer to be the natural love and
    affection. John states that he paid no money for this transfer and that his
    father placed no conditions on the transfer of land, machinery, quota or
    livestock, nor were there any side deals or collateral agreements. The right to
    residence for Mr. and Mrs. Wharry to reside in the bungalow was an interest
    reserve by Mr. Wharry Sr. in the deed of transfer itself.

In Schedule 2 of the transfer of land, the right of residence
    in the bungalow was stated as follows:

SUBJECT TO

(1) A right of residence in the dwelling house on the lands
    in Folio 13996 County Antrim in favour of the Transferor and his wife Mary
    Elizabeth worry for the terms of their natural lives.

[25]

The trial judge was ultimately not satisfied that the transfer of
    machinery, livestock and the quota were gifts, but held that the transfer of land
    was a gift, at paras. 133-138:

I do not agree that the evidence shows that the construction of
    the bungalow and the right of residence given by Mr. and Mrs. Wharry was
    consideration in exchange for the transfer of Drumcrow Farm to John. The
    bungalow was built before the land was transferred. The transfer deed
    specifically identifies a right of residence in the dwelling house at 30
    Drumcrow Road to set it apart. There was no evidence of an agreement between
    John and Mr. Wharry that one was provided for the other. The transfer deed
    states that the only consideration given was the natural love and affection
    which Mr. Wharry has for John as the transferee. Mr. Rountree testified
    that this would be consistent with his interpretation of that document.

The Court of Appeal in
McNamee
held that a transfer
    where strings are attached by the transfer or alone do not form a bargain. If a
    bargain is not formed, there cannot be consideration for the transfer of
    property.

I consider the right of residence reserved by the transfer
    document to represent similar strings to the transfer of shares by the father
    in
McNamee
. The right of residence relates only to the dwelling house
    and not to the entire farm made up of three folios. The right of residence was
    imposed by Mr. Wharry as the transferor. It was not something that John and his
    father bargained about, or something that was given back by John in exchange
    for the farm. The Farm was a gift that John would have received in any event
    upon his fathers death.

The evidence is consistent with the explanation given by John
    that Mr. and Mrs. Wharry gifted property to all of their children during their
    lifetime. David received Deerpark Farm in 1991 as a result of the sale of a
    block of 15 acres carved off from Drumcrow Farm, and the payment of a loan for
    the balance of the purchase price through the farm account. Each of Johns
    sisters received money from their parents when they got married. One sister
    received a mobile home. Drumcrow Farm was conveyed to John in 1997 when the tax
    laws in Northern Ireland changed to allow capital gain exemption for the
    transfer of a property having a value of less than £300,000. John explained
    that his father made this conveyance during his lifetime to avoid death taxes.

I do not draw an adverse inference against John for failing to
    call Mr. Wharry to testify as a witness over Skype. I accept the explanation
    that Mr. Wharry is not well. I do not know what benefit the court would have
    received from having Mr. Wharry testify by Skype when I could not observe him
    testifying in person, or how he responded with counsel directly. The transfer
    deed was not challenged as to its authenticity, admissibility or the truth of
    its contents. The document provided specific evidence of the donors intent to
    transfer the described lands to John, subject to the right of residency in the
    dwelling house reserved by his parents.

I consider on all of the evidence that the transfer of the
    Drumcrow Farm was made without the intention of either John or Mr. Wharry for
    John to pay consideration, and without expectation of remuneration for it. I
    therefore find that the transfer of the lands making up Drumcrow Farm to have
    been a gift John received from his father. The proper and fair market value of
    Drumcrow Farm is therefore excluded from the calculation of Johns net family
    property under section 4(2) of the
Family Law Act
.

(2)

The Parties Submissions

[26]

The appellant submits that the trial judge erred by limiting her
    monetary compensation for unjust enrichment to an amount representing one half
    the value of the bungalow on the Drumcrow farm property at the date of trial,
    rather than basing his award for her contributions to the joint family
    enterprise on the value of the whole farm. She further submits that he erred in
    concluding that the Drumcrow farm transferred to the respondent was a gift and
    therefore excluded from his net family property.

[27]

The respondent maintains his position that the Drumcrow farm and related
    property were a gift. He accepts and relies on the trial judges decision.

(3)

Analysis

[28]

The appellant does not suggest that the trial judge articulated an
    incorrect test for assessing her claim for compensation for unjust enrichment
    in relation to the Drumcrow farm, or the respondents claim that the farm had
    been gifted to him.

[29]

The trial judges conclusion that the transfer of Drumcrow farm to his
    son was a gift was based on findings of fact that are entitled to deference: see
Buttar v. Buttar
, 2013 ONCA 517, 116 O.R. (3d) 481, at para. 34.

[30]

On appeal, the appellant submits that the facts of this case are very
    similar to
Buttar
, that is to say, the transferor reserved the right
    of parents to occupy the property during their lifetime, and the transferee
    continued to provide his parents with income from the farm to assist with their
    living expenses after the transfer. As in
Buttar
, the appellant
    submits that there must have been consideration or an expectation of
    remuneration for the transfer.

[31]

While this case has similarities to
Buttar
, the trial judge was
    not obliged to come to the same conclusion. He accepted that the transfer was
    for natural love and affection as recited in the deed, and accepted the
    respondents evidence that his father was too fragile to testify. The appellant
    has not identified any palpable and overriding error in the trial judges
    reasoning.

[32]

The trial judges assessment of the appellants claim to unjust
    enrichment is similarly entitled to deference:
Simonin Estate v. Simonin
,
    2010 ONCA 900, 329 D.L.R. (4th) 513, at para. 13. He assessed all of the
    circumstances surrounding the acquisition of the Drumcrow Farm, the
    construction of the bungalow, and each partys contributions. Absent palpable
    and overriding error, there is no basis to intervene.

C.

Child Support & Section 7 Expenses

[33]

The following chronology is relevant to the appellants claims:

November 26, 2006

Separation

March 13, 2007

Appellant files Answer claiming child
          and spousal support.

July 11, 2007

Effective date of interim child
          support order, based on imputation of $25,000 annual income to the
          respondent. No interim spousal support was ordered.

November 28, 2011

Retroactive date to which trial
          judge ordered child and spousal support payable.

March 2013

Scott goes to live with the
          respondent.

November 2014

Trial

(1)

The Trial Judges Reasons

(a)

The Respondents Income

[34]

The trial judge calculated that the respondents income for 2013 was
    $44,870, after disallowing expenses claimed against gross farm income, pursuant
    to ss. 19(1)(f) and (g) of the CSG because they had not been broken down
    between personal and business expenses.

[35]

Sections 19(1)(f) and (g) of the CSG provide:

The court may impute such amount of income to a
    spouse as it considers appropriate in the circumstances, which circumstances
    include the following:

(f) the spouse has failed to provide income
    information when under a legal obligation to do so;

(g) the spouse unreasonably deducts expenses from
    income;

[36]

Neither party takes issue on appeal with the trial judges calculation
    of the respondents income. His reasoning is set out in paras. 156-160 of the
    reasons for judgment:

The court heard evidence that Johns gross income from the sale
    of lambs born and raised on the Kincardine farm, and his custom off farm work
    totals $49,000, being $23,236.25 in farm income and $25,941.97 in off farm
    work. From this must be deducted allowable deductions in the amount of $19,306.95,
    leaving an income from Ontario sources of $29,693.

Karen submits that there are deductions from Johns income that
    are not allowable in the amount of $19,567.09 pursuant to section 19(1)(f) and
    (g) and Scheduled III of the
Federal Child Support Guidelines
because
    they have not been broken down between personal expenses and those incurred for
    business.

To the Ontario sources of income must be added the business
    profit allocated to John from the dairy business he operates with his brother David
    in Northern Ireland in the amount of $7,726.68 each year. John also receives,
    or could receive £350 a month for the rental of the old farmhouse still
    standing on Drumcrow Farm under section 19(1) of the
Guidelines
. That
    rent translates into $7,518 a year as income from property.

Karen also seeks to include the difference of £1,644 each year
    between what John could obtain for land rent at Drumcrow Farm and what he
    receives from the partnership with his brother that operates the family dairy
    business.

I accept the submission Karen has made with respect to the
    evidence before the court of all sources of Johns income, and those deductions
    that should not be made upon the application of section 19 of the
Federal
    Child Support Guidelines
. The only exception I would make is for the
    difference in what John could obtain for renting the land at Drumcrow Farm to a
    third party and what he receives from the operation of the dairy business with
    his brother David. I consider it to be double counting to impute a source of
    income based on this difference while at the same time including the income he
    receives from the dairy business each year as income. Therefore, I impute an
    income to John for 2013 in the amount of $44,870.

[37]

I calculate the respondents income for 2013, based on the trial judges
    reasons as follows:

Off farm work

$25,941.97

Profit from farm in Northern
          Ireland

$7,726.68

Potential rental income from
          farmhouse

$7,518.00

Gross farm income from Ontario

$23,236.25

Total

$64,422.90

[38]

I infer that the trial judge concluded that $19,552.90, or about 50%, of
    the expenses the respondent claimed against his Ontario farm income were
    properly deducted, leading to his conclusion that the respondents income was
    $44,870.

(b)

The Appellants Income

[39]

The appellants income over the years since separation was as follows:

Appellant

2008

$15,646

2009

$1,600

2010

$1,109

2011

$1,030

2012

$1,360

2013

$7,935

[40]

The trial judge imputed annual income of $8,000 to the appellant. He
    indicated that the appellant elected to operate an equestrian business rather
    than seek paid employment. He imputed $8,000 to her on the ground that her
    personal choices reduced her income from what she might reasonably earn.

[41]

As will be discussed in more detail below, the trial judge awarded
    spousal support of $239 per month, or $2,868 per year.

[42]

Therefore, the appellants total income for the purposes of s. 7
    expenses under the CSG is $10,868, which is about 20% of the parties combined total
    income.

[43]

Neither party takes issue with the trial judges determination of the
    appellants income.

(c)

Retroactive and Ongoing Child Support

[44]

The trial judge noted that the 2007 interim support order was based on
    $25,000 annual income imputed to the respondent, nearly $20,000 less than the
    annual income determined at trial. He noted that the appellant had claimed
    child support in her Answer of March 13, 2007 and concluded that the appellant
    was entitled to retroactive child support.

[45]

The trial judge held at para. 165 of his reasons that
D.B.S. v.
    S.R.G.
, 2006 SCC 37, [2006] 2 S.C.R. 231 provided for a judicially
    imposed three-year limitation on retroactive child support and awarded that
    amount, less credit for amounts paid pursuant to the interim order.

[46]

He allocated the table support amount for two children of $662 per month
    at $405 for Rebekah and $257 for Scott. He credited the interim child support
    order at $200 for Rebekah and $160 for Scott. Support for Scott terminated when
    he went to live with the respondent in March 2013.

[47]

Therefore, the trial judge ordered retroactive child support of $7,380
    for Rebekah, being the retroactive monthly amount of $405 for 36 months, less
    the monthly $200 the respondent had been paying pursuant to the interim order.
    The trial judge ordered retroactive child support of $1,552 for Scott, being
    the monthly amount of $257 for 16 months, less the monthly $160 the respondent
    had been paying pursuant to the interim order. The retroactive amounts totalled
    $8,932, payable for the period November 28, 2011 to November 30, 2014.

[48]

Effective December 1, 2014, the trial judge ordered that the respondent
    pay ongoing monthly table child support of $405 for Rebekah while she completed
    her post-secondary education.

(d)

Retroactive and Ongoing Section 7 Expenses

[49]

The trial judge found that s. 7 expenses for the children between April
    4, 2007 and February 23, 2014 totalled $16,891.30. Based on the appellants
    counsels submissions, he ordered that these be shared equally, although s. 7
    of the CSG provides that these expenses be shared by the parents in proportion
    to their respective incomes. The respondent acknowledges that equal division
    of these expenses cannot be justified under the CSG.

[50]

On a go forward basis, the trial judge ordered that the respondent pay
    80% and the appellant pay 20% of Rebekahs s. 7 expenses, which is proportionate
    to their respective incomes.

(2)

The Parties Submissions

[51]

The appellant submits that the trial judge erred in interpreting
D.B.S.
as imposing a three-year limit to retroactive child support claims from the
    trial date. She contends that she ought to have received support retroactive to
    the date of separation, or at least to the date she filed her Answer on March
    13, 2007.

[52]

The respondent submits that the trial judge did not err. His reasons and
    conclusions were supported by the evidence.

(3)

Analysis

[53]

The trial judge erred when he concluded that
D.B.S.
mandated a
    three-year limit from the trial date for retroactive child support.

[54]

The Supreme Court in
D.B.S.
at para. 118 provided that, having determined
    that a retroactive award is appropriate, the court must choose a date of
    retroactivity. Among the four main options are (i) the date of effective notice
    and (ii) the date of formal notice.

[55]

D.B.S.
at paras. 121-122 established that the date of effective
    notice will generally serve as a default option when choosing a date of
    retroactivity; this serves as a fair balance between certainty and flexibility.
    The date of effective notice refers to any indication by the recipient that
    child support should be paid or renegotiated. It does not require the recipient
    to take any legal action; all that is required is that the topic be broached.

[56]

Despite this general default to effective notice, the Supreme Court in
D.B.S.
added at para. 123 that it will usually be inappropriate to make a support
    award retroactive to a date more than three years
before
    formal notice was given
: see also
Gray v. Rizzi
, 2016 ONCA 152,
    129 O.R. (3d) 201, at paras. 45 and 61. One of the reasons for this general
    rule was to ensure that recipients move discussions forward after providing
    effective notice. The Supreme Court stated at para. 123:

Once the recipient parent raises the issue of child support,
    his/her responsibility is not automatically fulfilled. Discussions should move
    forward. If they do not, legal action should be contemplated. While the date of
    effective notice will usually signal an effort on the part of the recipient
    parent to alter the child support situation, a prolonged period of inactivity after
    effective notice may indicate that the payor parents reasonable interest in
    certainty has returned. Thus, even if effective notice has already been given,
    it will usually be inappropriate to delve too far into the past. The federal
    regime appears to have contemplated this issue by limiting a recipient parents
    request for historical income information to a three-year period:  see s.
    25(1)(a) of the Guidelines. In general, I believe the same rough guideline can
    be followed for retroactive awards:
it will usually be
    inappropriate to make a support award retroactive to a date more than three
    years before formal notice was given to the payor parent
. [Emphasis
    added.]

[57]

On March 13, 2007, the appellant filed her Answer, claiming child
    support for the children. This appears to be the date of both effective and
    formal notice. Therefore, the three-year rule in
D.B.S.
is not at
    issue in this case, as the appellant gave effective and formal notice at the
    same time, and less than four months after separation.

[58]

However, as the trial judge noted at para. 162 of his reasons, the issue
    of retroactive support is complicated by the interim order effective July 11,
    2007 for child support of $360 per month based on an imputed income to the
    respondent of $25,000. In
D.B.S.
, the Supreme Court distinguished
    between situations in which there is an existing support order versus
    situations in which there has not already been a court order for child support
    to be paid. A payor parents interest in certainty is more compelling in the
    former situation, where he has been following a court order.

[59]

Nevertheless, as the Supreme Court stated in
D.B.S.
at para.
    64, parents should not have the impression that child support orders are set
    in stone. A court should consider four main factors before making a
    retroactive child support order: (i) the reason for the delay by the recipient
    parent; (ii) the conduct of the payor parent (e.g., any blameworthy behaviour);
    (iii) the circumstances of the child; and (iv) any hardship occasioned by a
    retroactive award:
D.B.S.
, at paras. 94 to 116.
The
    Supreme Court cited
Tedham v. Tedham
, 2003
    BCCA 600, 20 B.C.L.R. (4th) 56 for the proposition that [n]one of the factors
    is decisive. For instance, it is entirely conceivable that retroactive support
    could be ordered where a payor parent engages in no blameworthy conduct:
D.B.S.
, at para. 99.

[60]

In
Tedham
, the British
    Columbia Court of Appeal ordered retroactive child support where an interim
    support award was based on incorrect financial information, even though the
    initial underestimate was honestly made. The court provided the following
    reasons for their decision at paras. 59-60:

An interim order is just that  one made pending trial, with
    the expectation that the full financial circumstances of the parties will be
    forthcoming and available to the trial judge. In most cases, interim orders are
    made in circumstances where there has not been full financial disclosure and
    the parties are well aware that some adjustment may have to be made once all of
    the relevant financial information is available. In this case, for example, Mr.
    Tedhams income was heavily dependent on bonuses, and determining his yearly
    income for Guidelines purposes was not simply a matter of multiplying his
    monthly paycheque by 12

Children cannot be deprived of their entitlement to the
    Guidelines provisions for child support simply because the judicial officer
    making the interim order was not in possession of all of the relevant facts at
    the time the interim order for support was made. Similarly, the parent with
    day-to-day care of the children should not be made to bear more than her/his
    proportionate share of their support simply because the payor does not have, or
    has not produced, all of the information required to make a final determination
    of that issue.

[61]

The British Columbia Court of Appeal continued at para.
    62:

Nor, in my view, was Ms. Tedham required to go to the time and
    expense of one or more variation applications as Mr. Tedhams financial picture
    unfolded pending trial in order to succeed on an application for retroactive
    support. Had she done so, any gains she may have made in obtaining an increase
    in child support may well have been offset by the expense to her of so doing,
    even if she were awarded the costs of such applications. In my view, she was
    entitled in these circumstances to make do with the support payable under the
    interim order in the short-term until she had the opportunity to canvass the
    parties full financial picture before the trial judge. The interim order,
    although deemed to be correct at the time it was made (in the absence of an
    appeal or a variation), was not the final word on the amount of child support
    payable by Mr. Tedham pending trial.

[62]

As stated by the British Columbia Court of Appeal, an
    interim order is often no more than a rough estimate of a payors income. This
    is particularly true in this case, where an accurate calculation of the
    respondents income depended on various sources of self-employment income, and adding
    back a personal component of expenses he had deducted from his income for tax
    purposes. The respondent should have been aware that retroactive adjustments
    could occur at trial once all of the financial information was available and
    fully canvassed.

[63]

While the interim support period in
Tedham
was shorter
    than this case, the appellant cannot be faulted for
failing to
    try to vary the interim support as more information became available about the
    respondents income, given the cost and difficulty associated with such a step.
    The appellant was on public assistance for a time following separation. She has
    earned limited income over the years. Both children resided with her after
    separation and beyond November 28, 2011, the date to which the trial judge made
    support retroactive.

[64]

The appellant
should not have to bear
    more than her proportionate share of support for the children simply because
    the respondent did not have, or had not produced, all of the information
    required to make a final determination of that issue when the interim order was
    made in 2007. This is particularly true given
the significant
    disparity between the parties incomes and assets. The respondent submitted
    that the Drumcrow farm was worth $984,500 at the date of trial.
[1]
The appellant had received
    $85,000 to purchase her interest in the Kincardine farm, pursuant to the 2008
    consent order.

[65]

Considering all these factors, and the early
    effective and formal notice of the claim for child support on March 13, 2007,
    the trial judge should have made support retroactive to that date.

[66]

The trial judges denial of retroactive support
    put a premium on inaccurate calculations of income for CSG purposes, whether
    inadvertent or intentional. While the father may have relied on the interim
    order, this was based on a rough and inaccurate calculation of his income. Any
    prejudice resulting from expanding the time span of retroactive support can,
    where appropriate, be dealt with by denying interest on the payments that
    should have been made, and by allowing a payor to make up the payments over
    time. If a payor can show hardship, this may also factor into the decision
    whether to order retroactive payments.

[67]

Neither party provided evidence of the
    respondents 2007 income. The table below illustrates what would have been
    payable from January 2008 to November 2014, based on the respondents Line 150
    income, as adjusted by adding $7,518 for notional farmhouse rent and 50% of the
    farm expenses claimed, as done by the trial judge. Had he paid the table amounts
    based on his adjusted income, he would have paid $45,054 in child support from January
    2008 to November 2014.

[68]

Instead, based on the interim order and the
    trial judges retroactive order, the respondent was liable to pay only $35,612
    from January 2008 to November 2014. He paid no support for the first six months
    after separation, when both children were in the appellants care.

Respondent

Line 150 Income (including
          N. Ireland income)

Adjusted income
          adding notional rental income of $7,518 & 50% of farm expenses deducted

Annual Table
          support payable

Annual support
          paid, including retroactive support ordered

2008

$21,135

$35,960

$6,444

($537 x 12 months)

$4,320

($360 x 12 months)

2009

$12,050

$36,492

$6,540

($545 x 12 months)

$4,320

($360 x 12 months)

2010

$11,624

$38,285

$6,876

($573 x 12 months)

$4,320

($360 x 12 months)

2011

$13,793

$42,286

$7,680

($640 x 12 months)

$4,622

($360 x 11 months &

$662 x 1 month)

2012

$12,759

$42,295

$7,428

($619 x 12 months)

$7,944

($662 x 12 months)

2013

$44,870

$5,631

($662 x 3 months &

$405 x 9 months)

$5,631

($662 x 3 months &

$405 x 9 months)

2014

$44,870

$4,455

($405 x 11 months)

$4,455

($405 x 11 months)

Total

$45,054

$35,612

[69]

The foregoing calculations are imprecise, but
    without assistance from counsel, no more than an approximation is possible, in
    light of the state of the record. For the purposes of calculating support
    payable, the above table applies the CSG in force at the applicable time.

[70]

The retroactive support ordered by the trial
    judge ($8,932) should be increased by $9,442, representing the shortfall
    between what the respondent should have paid ($45,054) from January 2008 to
    November 2014 based on his adjusted income and what the respondent was liable
    to pay ($35,612) as a result of the trial judges order. Therefore, the
    respondent must pay $18,374 in retroactive child support to the appellant for
    the children.

D.

Spousal support

(1)

The Trial Judges Reasons

[71]

The trial judge determined that the appellant had a compensatory
    entitlement to spousal support. She had sacrificed career opportunities in
    order to raise the children. Her time and attention to the home and children
    also enabled the respondent to concentrate on his farming business.

[72]

The trial judge awarded 36 months of retroactive spousal support at the
    rate of $239 per month, to terminate on December 31, 2016. He stated the
    following at para. 172 of his reasons:

Karen has chosen the entrepreneurial path of pursuing a career
    to be self-employed in her own business. By definition, Karen has chosen not to
    upgrade her office or computer skills that formed the foundation of any claim
    for compensatory support. I therefore order John to pay spousal support to
    Karen in the amount of $239 a month until December 31, 2016 at which time she
    is expected to be self-sufficient.

(2)

The Parties Submissions

[73]

The appellant submits that the trial judge erred in two ways. First, he erred
    by imposing a three-year limit to her retroactive spousal support claim from
    the trial date. She contends that she ought to have received support retroactive
    to the date of separation, or in the alternative to March 13, 2007. Second, he
    erred by terminating spousal support on December 31, 2016. She submits that
    this termination date is unreasonable given the trial judges findings of her
    dependency.

[74]

The respondent submits that the trial judge did not err. First, the
    duration of five years is appropriate given that this was a 14-year marriage. Second,
    the trial judge limited retroactive support to three years to offset the low
    imputed income to her of just $8,000. The respondent contends that the
    appellant has the capacity to earn a higher income. For example, in 2008 she
    earned $15,646. She has chosen to forego a higher income so she can operate her
    equestrian business. In limiting retroactive spousal support to three years,
    the trial judge properly recognized that the respondent should not be
    responsible for this choice.

(3)

Analysis

(a)

Retroactivity Date

[75]

In limiting retroactive spousal support to three years, it is unclear if
    the trial judge mistakenly interpreted
D.B.S.
as imposing a three-year
    limit (as he did with retroactive child support) or if he was exercising judicial
    discretion. The trial judge simply stated at para. 172, [t]he higher range for
    that support is $239 per month for a total of $8,604 for 36 months of
    retroactive spousal support to make it commensurate in time with the
    retroactive child support ordered. There is no reference to
D.B.S.
in
    this section of the trial judges reasons.

[76]

I consider it unnecessary to determine this issue, given the analysis
    below regarding the termination of spousal support. As will be explained in
    more detail, regardless of when spousal support commences, it should continue
    indefinitely for a period of seven to 14 years, in accordance with the duration
    provisions of the
Spousal Support Advisory Guidelines
(Ottawa:
    Department of Justice Canada, 2008) (the SSAG) by Carol Rogerson and Rollie
    Thompson.

[77]

Without determining the issue, I will make two observations. First, in
Kerr
at para. 208, the Supreme Court stated that concerns about notice, delay, and
    misconduct will generally carry more weight in the context of a claim for
    retroactive spousal support. This is because there is no presumptive
    entitlement to spousal support and, unlike child support, the payor is
    generally not under any legal obligation to look out for the recipients legal
    interests. The 2007 interim order provided that no temporary spousal support
    was payable based on the respondents imputed income of $25,000. The respondent
    therefore had an interest in the certainty provided by the order.

[78]

Second, there would be minimal spousal support payable, if any, for the
    period that the trial judge did not order retroactive support. Neither party
    provided their 2007 income information. The following table shows the SSAG
    ranges each year from January 2008 to November 2011, the month to which the
    trial judge made support retroactive. The SSAG ranges are based on the
    respondents adjusted income and the appellants Line 150 income in 2008 and
    imputed income of $8,000 thereafter, as ordered by the trial judge given her
    choice to operate an equestrian business.

Spousal Support

Respondents
          adjusted income

Appellants income

Monthly table child
          support payable for both children

SSAG range under
          with child support formula

2008

$35,960

$15,646

$537

Low:  $0

Mid:   $0

High:  $0

2009

$36,492

$8,000

$545

Low:  $0

Mid:   $0

High:  $75

2010

$38,285

$8,000

$573

Low:  $0

Mid:   $0

High:  $112

2011

$42,286

$8,000

$640

Low:  $0

Mid:   $62

High:  $186

[79]

The trial judge ordered retroactive support of $239, effective November
    2011, based on the parties up-to-date circumstances and 2013 financial
    information, rather than factoring in the parties circumstances in 2011 and
    2012. Neither party takes issue with this approach. The retroactive monthly
    award of $239 exceeds the high end of the SSAG range for 2011 and 2012, which
    is $186 and $192 respectively.

(b)

Termination Date

[80]

The trial judge erred by terminating spousal support on December 31, 2016.
    He applied the SSAG in determining the amount of spousal support, but ignored
    the SSAG in establishing duration without explanation. There is nothing in the
    record supporting the conclusion that the appellant would be self-sufficient by
    December 31, 2016.

[81]

I begin by reiterating ss. 15.2(4) and (6) of the
Divorce Act
,
    R.S.C., 1985, c. 3 (2nd Supp.) governing spousal support:

Factors

(4) In making an order under subsection (1) or an
    interim order under subsection (2), the court shall take into consideration the
    condition, means, needs and other circumstances of each spouse, including

(a) the length of time the spouses cohabited;

(b) the functions performed by each spouse during
    cohabitation; and

(c) any order, agreement or arrangement relating
    to support of either spouse.

Objectives of spousal support order

(6) An order made under subsection (1) or an interim
    order under subsection (2) that provides for the support of a spouse should

(a) recognize any economic advantages or
    disadvantages to the spouses arising from the marriage or its breakdown;

(b) apportion between the spouses any financial
    consequences arising from the care of any child of the marriage over and above
    any obligation for the support of any child of the marriage;

(c) relieve any economic hardship of the spouses
    arising from the breakdown of the marriage; and

(d) in so far as practicable, promote the economic
    self-sufficiency of each spouse within a reasonable period.

[82]

While a court is not required to apply the SSAG to determine spousal
    support, it appears that the trial judge chose to rely on the SSAG when he indicated
    that $239 was at the higher range.

[83]

Although neither party takes issue with it, I am unable to replicate the
    trial judges calculation. As I explain in more detail below, on my
    calculations using the trial judges figures the monthly amount of spousal
    support should be significantly higher than $239.

[84]

The SSAG are a useful tool in calculating the appropriate amount and the
    duration of spousal support. Neither counsel provided this court with that
    information. Nevertheless, as pointed out in
Fisher v. Fisher
, 2008
    ONCA 11, 88 O.R. (3d) 241, at para. 98:

[The SSAG] suggest a range of both amount and duration of
    support that reflects the current law. Because they purport to represent a
    distillation of current case law, they are comparable to counsels submissions
    about an appropriate range of support based on applicable jurisprudence.

[85]

This court in
Fisher
continued at paras. 102-103:

Now that [the SSAG] are available to provide what is
    effectively a range within which the awards in most cases of this kind should
    fall, it may be that if a particular award is substantially lower or higher
    than the range and there are no exceptional circumstances to explain the
    anomaly, the standard of review should be reformulated to permit appellate
    intervention.

[86]

At para. 97 of
Fisher
, this court cautioned that the SSAG must
    be considered in context and applied in their entirety: see also
Mason v.
    Mason
, 2016 ONCA 725, at para. 121. At para. 109 of
Fisher
, this
    court pointed out that [a]mount and duration are interrelated parts of the
    formula  they are a package deal. Using one part of the formula without the
    other would undermine its integrity and coherence.

[87]

In the recently released
Spousal Support Advisory Guidelines: The
    Revised Users Guide
(Ottawa: Department of Justice Canada, 2016),
    Rogerson and Thompson again remind courts to remember duration. Section 3(e) states,
    [d]uration is often forgotten in the SSAG analysis. The formulas generate
    ranges for amount
and
duration. Amount cannot be considered alone.

[88]

Here, although the trial judge seemed to rely on the SSAG to determine
    the amount of support, he ignored them when he limited duration to five years.

[89]

While a recipients achievement of self-sufficiency could conceivably be
    a reason to depart from the SSAG duration provisions or restructure support, there
    was nothing in the record to indicate that the appellant would or should be
    self-sufficient by December 31, 2016. It is apparent that her ability to
    achieve self-sufficiency has been adversely affected by the role she played
    during marital co-habitation.

[90]

The with child support formula applies while the respondent continues
    to pay table child support plus s. 7 expenses for Rebekah. Based on income of
    $44,870 for the respondent; imputed income of $8,000 to the appellant; 14 years
    of cohabitation; and monthly table child support for Rebekah of $405 while she
    is under the age of 18, the with child support formula indicates a spousal
    support range of $364 to $624, with a mid-range of $492 for a period of seven
    to 14 years.

[91]

Based on the exact same figures, but after Rebekah turns 18 years of
    age, the with child support formula indicates a spousal support range of $716
    to $979, with a mid-range of $849 for a period of seven to 14 years. The
    increase in quantum after Rebekah turns 18 is mainly because the appellant no
    longer receives child tax benefits and other child credits. These benefits had
    a significant impact on the appellants income for spousal support purposes
    while Rebekah was under the age of 18: see SSAG, s. 6.3.

[92]

Rebekah is on the cusp of independence. At the time of trial in November
    2014, she was embarking on a one-year educational program leading to
    qualification as a dental assistant which should be completed, or nearly
    completed by now. Once Rebekah is independent, the without child support
    formula will apply: SSAG, s. 14.5.

[93]

Based on the respondents income of $44,870; the appellants income of
    $8,000; and the 14-year cohabitation, the without child support formula of
    the SSAG produces a range for spousal support of $645 to $860, with a mid-range
    of $753, for a period of seven to 14 years. This is a case where the SSAG
    suggest that spousal support be reduced when crossing over from the with child
    support formula to the without child support formula: see SAGG, s. 14.5.

[94]

In addition to the factors and objectives listed under the
Divorce
    Act
above, s. 9 of the SSAG provides a number of considerations when
    choosing a location within the range. Given the trial judges unchallenged
    finding of a compensatory basis for support, the most relevant factors in this
    case are the strength of the appellants compensatory claim; the respondents
    needs and ability to pay; and self-sufficiency incentives.

[95]

The appellant has a strong compensatory claim that would suggest support
    in the higher end of the ranges for both amount and duration. During the
    marriage, she sacrificed career opportunities in order to devote her time and
    attention to the home and children. Her sacrifices enabled the respondent to
    concentrate on his farming business. The appellant suffered a disadvantage arising
    from her role during the marriage and its breakdown.

[96]

Section 15.2(4) of the
Divorce Act
provides that, in making a
    spousal support order, the court
shall
take into
    consideration the condition,
means
, needs, and
    other circumstances of each party (emphasis added). The respondents means and
    ability to pay spousal support broadly include all pecuniary resources,
    capital assets, income from employment or earning capacity, and other sources
    from which the person receives gains or benefits:
Leskun v. Leskun
,
    2006 SCC 25, 1 S.C.R. 920, at para. 29, citing
Strang v. Strang
,
    [1992] 2 S.C.R. 112, at p. 119. The respondents annual income is $44,870. T
he Drumcrow farm was valued at $1,863,905 as of the separation date
    in 2006, although there was evidence that it had decreased in value by the date
    of trial to $984,500.

[97]

It is also relevant that the respondent has remarried, and his new
    spouse is contributing to his expenses:
Underwood v. Underwood
(1994),
    3 R.F.L. (4th) 457 (Ont. Gen. Div.), varied (1995), 11 R.F.L. (4th) 361 (Ont.
    Div. Ct.). At the time of trial, his new wife, a veterinarian, was earning
    $76,293.46 each year and contributing about $2,000 per month towards their
    household expenses.

[98]

Turning to self-sufficiency considerations, the appellant is now 46
    years old. She has no up-to-date skills that would enable her to obtain
    significant employment. During the marriage, the appellant looked after the
    household and children and assisted on the family farm, skills that do not
    necessarily translate well to paid employment. Furthermore, she resides in a
    rural environment where finding a job may be more challenging.

[99]

It must also be remembered that the trial judge imputed income to the
    appellant in an attempt to partially address self-sufficiency concerns, which
    is an approach recognized by ss. 9.7 and 13.2 of the SSAG. He awarded spousal
    support in an amount significantly less than suggested by the SSAG.

[100]

Given the
    foregoing considerations, I would vary the trial judges spousal support order
    to eliminate the termination date of December 31, 2016, and to increase support
    to the mid to high range of the SSAG of $900 per month, effective January 1,
    2016 until Rebekah is no longer a child of the marriage within the meaning of
    the
Divorce Act
. Given the respondents reliance on the existing
    orders, I do not correct the spousal support payable before that date.

[101]

Beginning on the
    first day of the month following the last month in which the respondent is
    obligated to pay child support for Rebekah or January 1, 2017, whichever is the
    later date, spousal support will continue at a decreased monthly rate of $800,
    in accordance with the mid to high range of the without child support
    formula.

[102]

It is important
    to clarify that the suggested duration of seven to 14 years includes the
    retroactive support period starting on November 28, 2011: SSAG, s. 3.2.5.

[103]

Keeping in mind
    the suggested duration of seven to 14 years, it is not possible to assess on
    this record when the appellant will have had a reasonable opportunity to
    recover from the economic disadvantage resulting from the role she played
    during marriage, and resulting from the breakdown of the marriage. Accordingly,
    I do not fix a termination date for the support. That will have to be dealt
    with by a variation application at some future point which will take into
    account the duration of support suggested by the SSAG, and the amount of
    support paid by the respondent since November 28, 2011. The appellants child
    care responsibilities following separation and the insufficient spousal support
    paid when she was at an age more conducive to retraining, likely mean that
    support will have to be paid for the longer duration suggested by the SSAG, 14
    years.

E.

Post separation obligations

[104]

The appellant
    also challenges the allocation of responsibility to her of $1,280 in tractor
    lease payments payable after separation, reimbursement to the respondent for
    one half the balance on a line of credit in the sum of $2,160, and payment for
    hay in the sum of $3,300 during a time when she operated the Kincardine family
    farm after separation. I see no error in the trial judges conclusions on these
    points.

F.

Conclusions

[105]

The order of the
    trial judge shall be varied to provide the following:

·

Paragraph 4 regarding the respondents obligation to pay a total
    of $8,932.00 in retroactive child support to the appellant for both children
    shall be replaced as follows: The Applicant, John Wilson Wharry, shall pay the
    Respondent, Karen Wharry, the sum of $18,374.00 in retroactive child support
    for the children, Scott Wharry and Rebekah Wharry.

·

Paragraph 5 providing that the respondent pay $8,445.65 for
    retroactive s. 7 expenses shall be varied to $13,512.80, which is 80% of
    those expenses.

·

Paragraph 7 shall be amended to delete up to December 31, 2016,
    at which time the respondent Karen Wharry has an obligation to become self-sufficient
    under section 17 of the
Divorce Act
. The following shall be added to
    paragraph 7: Commencing January 1, 2016, spousal support shall be increased to
    $900 per month. Commencing on the first day of the first month following the
    last month in which the respondent is obligated to pay child support for
    Rebekah or January 1, 2017, whichever is the later date, spousal support shall
    be decreased to $800 per month.

·

The following paragraph shall be added: Any arrears created by
    this order on the date of release of this judgment for child or spousal support
    shall be paid at the rate of $300 per month without interest commencing on
    January 1, 2017 until the arrears are paid in full, and shall be applied first
    to arrears of child support and s. 7 expenses. In the event of any default in
    payment of these arrears, the whole balance shall become due and owing and
    shall bear interest in accordance with the
Courts of Justice Act
,
    R.S.O. 1990 c. C.43.

[106]

The balance of
    the appeal is dismissed. Counsel may make brief written submissions as to the
    costs of the trial and the appeal, within 30 days following the release of
    these reasons.

Released: G.S. December 13, 2016

G. Pardu J.A.

I agree George R.
    Strathy C.J.O.

I agree David Brown
    J.A.

[1]
Respondents Written Submissions following Trial, Appellants Appeal Book and
    Compendium, Vol. 1, Tab 13, p. 141.


COURT OF APPEAL FOR ONTARIO

CITATION:
1250264 Ontario Inc. v. Pet Valu Canada Inc., 2015 ONCA
    5

DATE: 20150107

DOCKET: M44521 & M44540

Pardu J.A. (In Chambers)

BETWEEN

1250264 Ontario Inc.

Plaintiff (Moving Party/

Responding Party by way of cross-motion)

and

Pet Valu Canada Inc.

Defendant (Responding Party/

Moving Party by way of cross-motion)

Jean-Marc Leclerc, for the moving party/responding party
    by way of cross-motion

Derek Ronde and Stefanie Holland, for the responding
    party/moving party by way of cross-motion

Heard: December 23, 2014

On motion for an extension of time to file a notice of
    appeal and for an extension of time to perfect the appeal.

ENDORSEMENT

[1]

1250264 Ontario Inc. (125) seeks an order extending the time to file
    its notice of appeal and to extend the time to perfect the appeal. According to
    its notice of motion, it failed to file its notice of appeal on time because of
    an administrative error, although it was served in time. It wants the time to
    perfect this appeal extended so that appeals from related orders in this action
    can be dealt with at the same time as this appeal.

[2]

Pet Valu Canada Inc. brought a motion to strike the notice of appeal on
    the basis that the generic grounds of appeal give no hint of any alleged errors
    committed by the motion judge. If this appeal is permitted to proceed, Pet Valu
    seeks an order for security for costs on the ground that the appeal is
    frivolous and vexatious, and on the ground that 125 has insufficient assets to
    satisfy any judgment for costs.

[3]

This appeal arises from the summary dismissal of two common issues
    raised in this class proceeding. Pet Valu successfully moved to dismiss the
    following claims defined as common issues:

·

Has the defendant breached its contractual duty to the Class
    Members at any time during the Class Period by failing to share Volume Rebates
    with them?

·

If the conduct described in common issues 1 and 2 above did not
    constitute a breach of the Franchise Agreement, has the defendant been unjustly
    enriched by such conduct, if so found?

[4]

The motion judge found that Pet Valu was contractually obliged to share
    Volume Rebates with franchisees in a reasonable manner, but found as a fact
    that all of the Volume Rebates were passed on and shared with franchisees,
    subject to reasonable mark-ups by Pet Valu, the franchisor. The second common
    issue failed as a result of the factual findings on the first.

[5]

The motion judges decision was released on October 31, 2014. According
    to 125s notice of motion, as a result of an administrative error, no effort to
    file the notice of appeal was made until December 10, 2014. It was not accepted
    for filing because it was defective. The notice of appeal states the following
    grounds of appeal:

1. The court below made palpable and overriding errors of fact;

2. The court below made errors of mixed fact and law;

3. The court below made errors of law; and

4. Such further and other grounds as counsel may advise and
    this Honourable Court may permit.

[6]

As Gillese J.A. observed in
Enbridge Gas Distribution Inc. v. Froese
,
    2013 ONCA 131, 114 O.R. (3d) 636, at para. 15:

The test on a motion to extend time is well-settled.  The
    overarching principle is whether the justice of the case requires that an
    extension be given.  Each case depends on its own circumstances, but the court
    is to take into account all relevant considerations, including:

(a)

whether the moving party formed a
bona fide
intention to appeal
    within the relevant time period;

(b)

the length of, and explanation for, the delay in filing;

(c)

any prejudice to the responding parties, caused, perpetuated or exacerbated
    by the delay; and

(d)

the merits of the proposed appeal.

[7]

Here, the delay is short, an explanation has been provided for the
    delay, and there is no prejudice to Pet Valu. However, I am unable to find any
    scintilla suggesting that the appeal has merit. The affidavit filed in support
    of the motion to extend time is silent on the issue of the merits. The notice
    of appeal is so general that I am unable to construct any basis for an arguable
    appeal from the motion judges factual findings. Very little would be required
    to show that there is some basis for an appeal in these circumstances, but I
    can find nothing.

[8]

The motion judge accepted the appellants argument that the contract
    required the respondent to share volume rebates with its franchisees, but made
    the purely factual finding that the respondent had in fact shared all of the
    volume rebates with the franchisees, subject only to a reasonable markup. This
    factual conclusion will be entitled to a high degree of deference. There is no
    hint of anything in the material before me which undermines that finding. I
    conclude therefore that the appeal does not have merit. Under these
    circumstances, the justice of the case does not require granting an extension.

[9]

For these reasons, the motion to extend time to file the notice of appeal
    is dismissed. As a result of this conclusion, there is no need to address the
    cross-motion, or the motion to extend the time to perfect the appeal. The
    appellant proposes to appeal from other decisions made more recently by the
    motion judge, and these reasons do not foreclose those steps.

[10]

Accordingly,
    the motion to extend the time to file the notice of appeal and to extend the
    time to perfect the appeal is dismissed with costs to the respondent fixed at
    $2000, including disbursements and HST.

[11]

Pet
    Valus motion is dismissed as it is now moot.

G. Pardu J.A.


COURT OF APPEAL
    FOR ONTARIO

CITATION: Abarca v. Vargas, 2015 ONCA 4

DATE: 20150107

DOCKET: C57916

Laskin, Rouleau and Lauwers JJ.A.

BETWEEN

Teodoro
    Abarca, Magaly Abarca,

Jorge Leiva by his Trustee in Bankruptcy, Mathew &
    Associates Ltd.,

Maria Leiva by her Trustee in Bankruptcy, Mathew &
    Associates Ltd.
,

and
    Brunilda Munoz

Plaintiffs (Appellants)

and

Sandra
    Vargas, The Wawanesa Mutual Insurance Company and

Economical Mutual Insurance Company

Defendants (Respondent)

and

The Wawanesa Mutual Insurance Company, added by order
    pursuant to

s. 258(14) of the
Insurance Act
, R.S.O. 1990, c. I.8

Third Party

William G. Scott, for the appellants

George Kanellakos and Kevin Lasko, for the respondent

Heard: April 28, 2014

On appeal from the order of Justice Wendy M. Matheson of
    the Superior Court of Justice, dated October 18, 2013, with reasons reported at
    2013 ONSC 6499.

Lauwers J.A.:

[1]

Jorge Leiva and Maria
    Leiva were passengers in Teodoro Abarcas car when it collided with the car operated
    by Sandra Vargas. Ms. Vargas is insured by Wawanesa Mutual Insurance Company,
    but in the circumstances she is potentially underinsured. The Leivas insurer
    for the purpose of underinsured automobile coverage is Economical Mutual
    Insurance Company.

[2]

The motion judge
    ordered that para. 12 of the Leivas statement of claim, in which they claimed
    underinsured automobile coverage from Economical Mutual, be struck out. The
    effect of doing so was to potentially deprive the Leivas of up to $800,000 in insurance
    coverage, which is the difference between the limited proceeds of $200,000 that
    the Leivas might be able to access from Wawanesa and the underinsured automobile
    coverage of $1,000,000 they purchased from Economical Mutual.

[3]

The motion judge concluded
    this was the appropriate consequence for what she found to be an abuse of
    process committed by the Leivas lawyer.

[4]

For the reasons set out
    below, I would allow the Leivas appeal. The unreasonable result of the motion
    judges order, which risked the elimination of the Leivas underinsured automobile
    coverage, is disproportionate to the abuse of process that it seeks to punish. Further,
    the decision is not consistent with the principles by which the
Rules of
    Civil Procedure
, R.R.O. 1990, Reg. 194 (ROCP), are to be interpreted and
    applied, or with the principles underpinning motor vehicle accident insurance
    law.

[5]

Since the fresh
    evidence application establishes that the Leivas released all claims to
    statutory accident benefits (SABs) from Economical Mutual, I would dismiss as
    moot the appeal from the motion judges decision striking the paragraphs of the
    statement of claim related to SABs.

A.

Background Facts

[6]

The accident happened
    in the Town of Innisfil on August 26, 2007. The allegation is that Ms. Vargas
    ran a red light at a high rate of speed and collided with Mr. Abarcas car. The
    Leivas and the other plaintiffs, Magaly Abarca and Brunilda Munoz, were Mr.
    Abarcas passengers.

[7]

The coverage limit under
    Ms. Vargas policy with Wawanesa is $1,000,000. Wawanesa took an off-coverage
    position against Ms. Vargas on the basis that her licence was suspended when the
    accident occurred. If Wawanesas off-coverage position is sustained at trial,
    its insurance payment on Ms. Vargas behalf will be limited to the statutory
    minimum limit for automobile liability insurance of $200,000. This payment
    would be allocated to the various claimants on a
pro rata
basis.

[8]

The Leivas insurance
    policy with Economical Mutual includes underinsured automobile coverage in the
    form of the OPCF 44R Family Protection Coverage Endorsement, which obliges
    Economical Mutual to respond if the defendant, Ms. Vargas, is underinsured. In
    the circumstances of this case, Economical Mutuals obligation is only
    triggered if Wawanesas off-coverage position is ultimately determined to be valid
    and the various claims against Ms. Vargas exceed $200,000.

B.

Procedural History

[9]

The Leivas counsel
    started a tort action against the responsible driver, Ms. Vargas,
[1]
on behalf of the Abarcas and the Leivas in Newmarket, which is the judicial
    district where the accident took place.

[10]

When
    Wawanesa took an off-coverage position with respect to Ms. Vargas, it had
    itself added to the Newmarket action as a statutory third party under s.
    258(14) of the
Insurance Act
, R.S.O. 1990, c. I.8.

[11]

In
    September 2010 the Leivas counsel brought a motion in writing, without notice,
    for a court order granting leave to amend the Statement of Claim by adding
    Wawanesa Mutual Insurance Company and Economical Insurance Group as party
    defendants. This would allow the Leivas to access the underinsured automobile coverage
    from Economical Mutual, if necessary. The potential application of the
Limitations
    Act, 2002
, S.O. 2002, c. 24, Sched. B, to bar the claim against Economical
    Mutual was in issue because the accident had occurred in August 2007. In the
    notice of motion, counsel therefore asserted that he relied on the Discoverability
    Rule as my office only learned of the defendant, Vargas licence suspension on
    March 22, 2010.

[12]

The
    motion came before Quinlan J. on October 1, 2010 as a basket motion, to be
    handled in writing in chambers along with other administrative orders, consent
    orders, and so on. She refused the Leivas motion, stating in her endorsement
    that the statutory limitation period, subject to discoverability, has expired.
    This motion is to be brought in open Court on notice to the parties and
    proposed [defendants].

[13]

Counsel
    did not pursue the motion in the Newmarket action on notice to Wawanesa and
    Economical Mutual, despite Quinlan J.s direction. Instead, he started a new
    action in Toronto on May 9, 2011. The Toronto statement of claim largely
    duplicated the Newmarket pleading, but added three parties: Brunilda Munoz,
    another passenger in the Abarca car, as a plaintiff; Wawanesa, as the defendant
    responsible for the Abarcas underinsured automobile coverage; and Economical
    Mutual, as the defendant responsible for the Leivas underinsured automobile coverage.

[14]

After
    some skirmishing, Economical Mutual brought the motion that is the subject of
    this appeal. The other defendants named in the Toronto action did not join Economical
    Mutuals motion.

C.

The Decision under Appeal

[15]

The
    motion judge found that it was an abuse of process for the Leivas to start a
    separate action in Toronto against Economical Mutual instead of bringing a
    motion on notice to add it as a defendant in the Newmarket action. She struck out
    the Leivas claim against Economical Mutual for underinsured automobile coverage,
    taking the view that this courts decision in
Maynes v. Allen-Vanguard
    Technologies Inc
., 2011 ONCA 125, was the ruling precedent.

[16]

Since
    Economical Mutual was the only defendant that moved for relief against the
    Toronto action, the motion judges decision left two lawsuits pending related
    to the car accident: one in Newmarket and the other in Toronto. In due course
    the Superior Court will be required to determine the place of the trial at the
    instance of one of the parties.

[17]

The
    most significant result of the motion judges order, from the Leivas
    perspective, is the potential loss of their OPCF 44R underinsured automobile coverage
    from Economical Mutual by the operation of the limitation period.

D.

The Positions of the Parties

[18]

The
    Leivas argue that it was not an abuse of process for them to start the Toronto
    action against Economical Mutual as their insurer for the purpose of
    underinsured automobile coverage. In their view, doing so was a legitimate
    alternative to moving on notice to add Economical Mutual to the Newmarket
    action. Even if starting the Toronto action was technically an abuse of process,
    they argue that the motion judge did not pay due regard to the principles
    underlying the ROCP, and that the order to strike was a disproportionate
    punishment. The Leivas concede the fresh evidence shows they settled their SABs
    claim.

[19]

Economical
    Mutual argues the Leivas should have brought a motion on notice to add it as a
    defendant in the Newmarket action under rule 26.02(c) of the ROCP, as directed
    by Quinlan J. Economical Mutuals position is that the appellants improperly
    circumvented this rule by starting the Toronto action, and deprived it of the
    advantage of the onus under rule 26.02(c), which requires the moving party to persuade
    the court that adding the new party is necessary. Economical Mutual submits
    that the motion judge properly struck out the Leivas claim against it as an
    abuse of process, consistent with this courts decision in
Maynes
.

E.

Analysis

[20]

I agree with the motion judge that the Leivas abused the
    courts process by disregarding Quinlan J.s direction to bring the motion on
    notice in the Newmarket action, but I do not agree that starting a new action was
    necessarily abusive, as I explain below. More importantly, the motion judges decision
    left the Leivas to pursue adding Economical Mutual to the Newmarket action, which
    put them at risk of losing their underinsured automobile coverage by operation
    of the limitation period. This result was not, in my opinion, consistent with
    the principles by which the ROCP are to be interpreted and applied, nor with
    the principles underpinning motor vehicle accident insurance law.  Further,
    this result was not compelled by this courts decision in
Maynes
.

I
    consider each of these points in turn.

(1)

Failing to Follow Quinlan J.s Direction was an Abuse of the
    Courts Process

[21]

Case law offers many examples of the various ways parties can
    abuse the courts process. The cases commonly involve the use of the courts
    process in a way that would be manifestly unfair to a party to the litigation
    before it or would in some other way bring the administration of justice into
    disrepute. (
Behn v. Moulton Contracting Ltd
.
, 2013 SCC 26, [2013]
    2 S.C.R. 227, at para. 40, quoting Goudge J.A., in dissent

in
Canam
    Enterprises Inc. v. Coles
(2000), 51 O.R. (3d) 481 (C.A.), at para. 55) The
    motion judge, quite fairly in my view, took umbrage at what she considered to
    be counsels cavalier and recalcitrant attitude, which extended to his
    explanation for his actions. (Paras. 2(e), 8) She did not err in finding that the
    Leivas had abused the courts process by failing to follow the direction set by
    Quinlan J.

(2)

Starting the New Action was not an Abuse of the Courts Process

[22]

However,
    the motion judge erred in finding that, absent the direction by Quinlan J., it
    was an abuse of process for the Leivas to start a new lawsuit against
    Economical Mutual in relation to the underinsured automobile coverage issue,
    for the reasons that follow.

[23]

Automobile
    accident claims can be quite complex. Factual complexities, legal complexities,
    and procedural complexities all interrelate. These inherent complexities make
    automobile accident lawsuits a case management task for the trial courts. They
    must corral the lawsuits and the lawyers, set a common venue, and marshal into
    logical order the pre-trial steps in order to get the related cases to trial in
    the manner that best responds to the circumstances, the fair application of s.
    138 of the
Courts of Justice Act
,

R.S.O. 1990, c. C.43 (
CJA
)
,
and the joinder rules.

[24]

In
    cases involving two or more motor vehicles, the factual complexities can
    accumulate quickly. There are different parties and can be different insurers, all
    of whom have a legitimate stake, and who are represented by different lawyers.
    This often leads to multiple lawsuits about the same set of occurrences. In
    many cases the full range of potential claims is not entirely clear at the
    outset and almost invariably evolves. The evolution of the Leivas claims
    against the various defendants in both the Newmarket and Toronto actions is not
    unusual.

[25]

The
    legal complexities stem from the intersection of tort law, contract law, and
    insurance law, which can also lead to multiple lawsuits. The procedural
    complexities build on the factual and legal complexities. While the tort claim
    frequently takes pride of place, the public policy considerations and the
    different procedural paths for obtaining SABs also play a role. This leads to
    lawsuits and claims procedures that are related but can be out of sequence.

[26]

Because
    the parties are obliged to mediate SABs claims before bringing an action, the
    timing of any Financial Services Commission of Ontario dispute resolution
    process from the beginning to the end can be completely out of sync with the
    tort action. Consequently, it is impractical and unnecessary, from the timing
    standpoint, for the court to insist that any lawsuit over SABs must always be
    joined with the related tort action. To the extent that the motion judges
    decision implies such mandatory joinder, it is incorrect.

[27]

In
    view of the fairly advanced state of progress of the Newmarket action, in my
    opinion it would have been appropriate, and therefore not abusive, for the
    Leivas to start a new lawsuit against Economical Mutual alone in relation to
    the underinsured automobile coverage issue.

(3)

The Penalty is Disproportionately Prejudicial to the Appellants

[28]

I
    agree with the motion judge that, having concluded the Leivas committed an
    abuse of process, her next task was to determine the appropriate remedy. The
    abuse of process to be sanctioned was the Leivas failure to follow the
    direction of Quinlan J.

[29]

There
    is no law supporting the conclusion that an abuse of process must lead
    inevitably to the dismissal of the associated claim. In each case the court
    must assess the gravity of the abuse in determining the severity of its
    response, bearing in mind the principle of proportionality. This approach is
    not surprising, since instances of abuse of process fall across the spectrum
    from egregiously contemptuous conduct to relatively minor breaches of
    procedural rules. In view of my finding that starting an action against
    Economical Mutual was not abusive, I would place the Leivas disregard of
    Quinlan J.s direction towards the minor end of this spectrum.

[30]

In
    considering how it will respond to an abuse of its process, the court should
    take into account the entire litigation context of the matter in issue. With
    respect, the motion judge failed to do so in this case.  The abuse at issue in
    this case was minor. The motion judge made an error in principle by failing to
    fully consider and balance the parties competing interests in light of the
    degree of that abuse.

(i)

The Full Litigation Context

[31]

The
    underlying motion in this case had special saliency because of Economical
    Mutuals possible limitation defence. This issue was raised by the Leivas
    counsel and noted by the motion judge, at para. 17, but she appears to have disregarded
    it in crafting the remedy.

[32]

Some
    of the steam may have gone out of this issue with the release of this courts
    decision in
Schmitz (Litigation guardian of) v. Lombard General Insurance
    Co. of Canada
, 2014 ONCA 88, 118 O.R. (3d) 694, at para. 20, where it was
    determined that the applicable limitation period only starts to run the day
    after a demand for indemnity is made. I note that the precise application of
Schmitz
to the facts in this case was not fully argued by the parties, and counsel
    asserts that some uncertainty remains.

[33]

The
    impact of a limitation defence on the plaintiff is one of the burdens to be
    balanced by the court in considering how it should respond to an abuse of
    process. In my view, the motion judge did not give due consideration to this
    factor in striking the Leivas claim for underinsured automobile coverage.

(ii)

The Penalty is not Consistent with the Principles of the ROCP

[34]

The
    general objectives of the ROCP reflect a balancing approach, as this court
    explained in
1196158 Ontario Inc. v. 6274013 Canada Ltd
.
, 2012
    ONCA 544, 112 O.R. (3d) 67. This court has taken a similar balancing approach
    to the application of s. 138 of the
CJA
, which provides that the
    multiplicity of legal proceedings should be avoided. While the provisions of
    the ROCP related to joinder, consolidation, and pleading amendments (Rules 5,
    6, and 26) reflect a preference for minimizing the number of proceedings
    related to a particular claim, this court has not interpreted s. 138 of the
CJA

as inevitably requiring dismissal of an action where a party has not
    complied rigorously with the section. See
Taylor Made Advertising Ltd. v.
    Atlific Inc
.
, 2012 ONCA 459, 111 O.R. (3d) 221, at para.36.

[35]

In
    striking the Leivas claim against Economical Mutual, the motion judge failed
    to balance the technical procedural requirements of the ROCP and the
CJA
in the interests of justice.

(iii)

The Penalty is not Consistent with Insurance Law Principles

[36]

In
    seeking to balance the respective interests of the parties in the circumstances,
    the court must advert to the interests at stake in the underlying action  in
    this case, to insurance principles. In my view, the motion judge failed to give
    due consideration to this requirement. Automobile insurance is well understood
    to be a form of consumer protection. The Supreme Court of Canada has endorsed
    the observation of Professor Craig Brown that "[i]n one way or another,
    much of insurance law has as an objective the protection of customers." (
Smith
    v. Co-Operators General Insurance Co
.
, 2002 SCC 30, [2002] 2 S.C.R.
    129, at para. 11)

[37]

Automobile
    insurance policies are, consequently, more than mere commercial contracts. The
    entire regulatory structure of automobile insurance has become part of the
    social contract, and forms part of an integral social safety net that attempts
    to balance economic feasibility with sound risk management principles for not
    just drivers and partner insurers, but anyone injured by an automobile
    accident. (Erik Knutsen, Auto Insurance as Social Contract (2010-2011) 48
    Alta. L.R. 715 at 716-17, 739)

[38]

The
    automobile insurance system has recognized that some drivers will inevitably be
    uninsured or underinsured, and that this risk too must be accommodated. Underinsured
    automobile coverage began in Ontario in 1981 in an effort to provide financial
    relief for insureds and their families from the hardships and inequities of any
    shortfalls in insurance compensation, (
Despotopoulos v. Jackson
, [1992]
    I.L.R. 1645 (Gen. Div.), at para. 8, affd
sub nom Romas v. Prudential
    Insurance Co. of Canada
, [1996] O.J. No. 4185 (C.A.)). This court further
    explained the purpose of this type of coverage in
Beausoleil v. Canadian
    General Insurance Co
.
(1992), 8 O.R. (3d) 754 (C.A.):

The responsible citizen insures himself for
    the amount he considers adequate and expects other motorists to do the same. He
    obtains the special endorsement (and pays the additional premium) to insure
    himself against the eventuality of an injury caused by an irresponsible
    motorist who has not so conducted himself.
(Para. 9)

[39]

Unlike
    uninsured automobile coverage, which is a statutory entitlement, underinsured
    automobile coverage is created by contract between the insurer and the insured.
    The OPCF 44R endorsement provides a back-up source of liability coverage, and entitles
    the injured policyholder to claim against his or her own insurer for the
    compensatory damages he or she is "legally entitled to recover" from
    the inadequately insured, at-fault driver (
Chomos v. Economical Mutual
    Insurance Co
.
(2002), 61 O.R. (3d) 28 (C.A.), at para. 22).

[40]

By
    buying underinsured automobile coverage from Economical Mutual, the Leivas were
    behaving as responsible motorists seeking to protect themselves and others. The
    corollary of the insurance principles at issue, particularly the objective of
    consumer protection, is that the Leivas should only be deprived of this
    coverage for the very gravest of reasons.

(4)

Conclusions on Balancing the Interests of the Parties

[41]

While
    I agree with the motion judge that, by evading the direction in Quinlan J.s
    endorsement, the Leivas abused the courts process, the motion judge erred in
    principle by failing to fully consider and balance the competing interests of
    the parties before striking the claim against Economical Mutual. With respect,
    the Leivas minor abuse of process does not justify the potential loss of
    underinsured coverage.

[42]

The
    potential loss of this coverage by operation of the limitation period could be
    catastrophic for the Leivas. By contrast, aside from the legal fees associated
    with the two proceedings, which could be compensated by a costs award, there is
    no real prejudice to Economical Mutual in being obliged to provide the
    underinsured insurance coverage for which the Leivas paid.

[43]

As
    the Supreme Court observed in
Sommersall v. Friedman
,
2002 SCC
    59, [2002] 3 S.C.R. 109, at para. 74, the court leans away from a result that
    would grant the insurer a windfall in escaping its presumed obligations while
    depriving the insured of the amount she would have expected to have been paid
    to her in the normal course of business.

[44]

The
    principles by which the ROCP are to be interpreted and applied and the
    principles underlying automobile accident insurance law suggest that the
    Leivas potential loss of underinsured automobile coverage is disproportionate
    to the minor abuse of process. The balance plainly favours the Leivas, not
    Economical Mutual, and the motion judge erred in failing to take this into
    account.

[45]

In
    my view, cost consequences would strike the appropriate balance in the
    circumstances.

(5)

Maynes
is Not the Ruling Precedent

[46]

The
    motion judge concluded that, in principle, this courts decision in
Maynes
was on all fours with the motion before her. With respect, I disagree.

[47]

In
Maynes
, the plaintiffs were senior executives of Med-Eng Systems Inc.
    They acquired shares in Med-Eng through the companys stock option plan.
    Med-Eng was entitled under certain circumstances to repurchase these shares.
    When Med-Eng exercised the share repurchase option, the plaintiffs claimed that
    the repurchases were invalid. Mr. Maynes and Mr. Robichaud collectively started
    an action against Med-Eng and its directors in 2006, while Mr. Gingrich did so
    in 2007, seeking declaratory relief and an order directing Med-Eng to
    repurchase their shares at a price equal to fair market value.

[48]

Later
    in 2007 Med-Eng was the subject of a successful takeover bid by Allen-Vanguard
    Corporation (AVC). AVC offered to purchase the outstanding shares of certain
    Med-Eng shareholders holding a combined interest of 70 per cent of Med-Engs
    stock (the Offeree Shareholders). The Offeree Shareholders accepted and
    compelled the minority shareholders to sell their shares to AVC.

[49]

AVC
    then merged Med-Eng with one of its subsidiaries to form Allen-Vanguard
    Technologies Inc. An escrow fund was also established, to which AVC would have
    recourse if Med-Engs representations or the representations of the Offeree
    Shareholders were incorrect. Otherwise, the escrow fund would be released to
    the Med-Eng shareholders who tendered their shares to AVC.

[50]

After
    the close of pleadings in the original actions, the plaintiffs sought to combine
    their two actions and to add the Offeree Shareholders, AVC and the escrow agent
    as defendants. The prospective defendants refused to consent to being added.
    Instead of bringing a motion to add them with leave of the court under rule 26.02(c)
    of the ROCP, the plaintiffs started a new action against both the original and some
    additional defendants. This court affirmed the motion judges decision that the
    new action constituted an abuse of process, and upheld the decision to strike
    both the plaintiffs' statement of claim in the new action and the plaintiffs'
    cross-motion seeking to join the new claim to the pre-existing actions.

[51]

At
    paras. 36-46 of this courts decision, Weiler J.A. discussed the law relating
    to abuse of process. She found, at para. 46, that issuing the new statement of
    claim was an abuse of process because it duplicates claims in the two Ongoing
    Actions with respect to the Original Defendants and undermines the integrity of
    the administration of justice by circumventing rule 26.02(c) with respect to the
    Added Defendants.

[52]

There
    are a number of distinguishing features that, in my view, render
Maynes
an inapt decision to apply to this case. First, the Leivas seek relief from
    Economical Mutual that is distinct from the relief claimed against the other
    defendants. They assert a claim against Economical Mutual for underinsured automobile
    coverage, which they cannot assert against any of the original defendants. This
    was not the case in
Maynes
, where five of the six claims asserted in
    the plaintiffs new action were virtually identical to the original claims,
    and the sixth claim was for declaratory relief alone. With respect to the new
    claim in
Maynes
for declaratory relief, this court relied on the
    principle that a court should refuse to grant a declaration when other remedies
    are available. This court also concluded that the sixth claim disclosed no
    reasonable cause of action. Here, the claim against Economical Mutual is not
    for declaratory relief alone, and there is no suggestion that the claim fails
    to disclose a reasonable cause of action.

[53]

Second,
    the Toronto action involved a claim against Economical Mutual, which was not
    named as a defendant in the original Newmarket action. The Leivas point out
    that the claim against Economical Mutual had not even been discovered at the
    time the Newmarket action was commenced. By contrast, at para. 28 in
Maynes
,
    this court noted the motion judges finding that key representatives of the
    new defendants were already involved in the original actions. Further,
    Med-Engs successor corporation remained a defendant in the original action. In
Maynes
the new defendants were not so new at all  a fact that is
    not present in the appeal before the court.

[54]

Third,
    there is a real possibility that the claim against Economical Mutual would be
    out of time if it were necessary to add it to the Newmarket action, a factor
    that I have found to be relevant to the motion judges selection of a
    proportional remedy for the abuse of process in failing to follow the direction
    of Quinlan J. A limitations argument was also made in
Maynes
 the
    plaintiffs justified commencing a new action on the basis that a potential
    limitation period was approaching (para. 30). But in
Maynes
, the
    significance of this fact would have been minimal given the courts conclusion
    that the sole new claim disclosed no reasonable cause of action. Moreover,
    there was no apparent risk that the plaintiffs in
Maynes
would not be
    able to recover from the original defendants if the new claim was struck. In
    contrast, the risk that the Leivas will experience a shortfall in insurance
    coverage  the precise risk that they paid premiums to Economical Mutual to
    avoid  is very real.

[55]

I
    do not quarrel in the slightest with the legal principles discussed in
Maynes
,
    but they do not compel the result reached by the motion judge.

F.

Disposition

[56]

I
    would allow the appeal and set aside paragraph one of the motion judges order.
    This will leave the two actions in place. The parties will eventually have to determine
    the location of the trial, which will then affect the case management process.

[57]

The
    parties submitted that the costs for the appeal should be $9,000 in total for
    the victor, with the motion costs of $6,700 following the result in this court.

[58]

In
    my view, as a form of penalty for the Leivas abuse of process, they should not
    recover the costs of the motion in the court below. I would therefore decline
    to set aside paragraph two of the motion judges order. For the same reason, I
    would not award the Leivas the costs of this appeal.

Released: January 7, 2015 JL

P.
    Lauwers J.A.

I
    agree John Laskin J.A.

I
    agree Paul Rouleau J.A.

[1]
The Manufacturers Life Insurance Company was also named as a defendant because
    Jorge Leiva had filed a claim for long-term disability benefits under a policy
    that does not appear to be related to any motor vehicle. It plays no role in
    this decision.