COURT OF APPEAL FOR ONTARIO

CITATION:
Savage v. Belecque, 2012
    ONCA 426

DATE: 20120621

DOCKET: C53842

Armstrong, Blair and Lang JJ.A.

BETWEEN

Amy Savage

Plaintiff

and

Michel Belecque, Lynn Belecque, Gilles Belecque, Shayne
    Poitras, Philippe Poitras, Darlene Poitras,
CGU Insurance Company of Canada and Aviva Insurance Company of Canada

Defendants (Respondents/
Appellants by way of cross-appeal
)

and

Allstate Insurance Company of Canada, added by
    Order pursuant to section 258(14) of the
Insurance
    Act
, R.S.O. 1990, c. I.8, as amended, with all
    rights which are conferred upon such party  pursuant to
    section 258(15)  of said Act

Third Party (Appellant/Respondent by way of cross-appeal)

AND BETWEEN

Michel Belecque, Lynn
    Belecque and Gilles Belecque

Plaintiffs (Respondents)

and

Allstate Insurance Company
    of Canada
and Dennis Brock

Defendants (
Appellants/
Respondents by way of cross-appeal
)

Ian D. Kirby, for the appellant/respondent by way of
    cross-appeal, Allstate Insurance Company of Canada

Kevin S. Adams, for the respondents/appellants by way of
    cross-appeal, CGU Insurance Company of Canada and Aviva Insurance Company of
    Canada

Tara M. Sweeney, for the respondents, Michel Belecque, Lynn
    Belecque, Gilles Belecque

Heard: April 25, 2012

On appeal and cross-appeal from the judgment of Justice
    M. Gregory Ellies, of the Superior Court of Justice, dated May 11, 2011, with
    reasons reported at 2011 ONSC 2330, 1 C.C.L.I. (5th) 112; and on appeal from
    the order of Justice M. Gregory Ellies, of the Superior Court of Justice, dated
    October 13, 2011, with reasons reported at 2011 ONSC 5771, 1 C.C.L.I. (5th) 139.

Lang
    J.A.:

[1]

This appeal arises from a summary judgment decision granted by the
    motion judge.  The appellant insurer argues that there was no genuine issue
    requiring a trial concerning the insurers obligation to indemnify because
    coverage was statutorily excluded on the basis that the harm or loss sustained
    was caused intentionally.  Additional challenges relate to the insurers duty
    to defend, as well as the litigation costs awarded.

BACKGROUND

[2]

Amy Savage was injured on January 4, 2001 when she was hit by a car in
    the parking lot of a skating rink.  Michel Belecque was driving the car, which
    was owned by his mother.  The accident occurred after Amy spoke to Shayne
    Poitras, a back-seat passenger in the car, apparently to ask him for a
    cigarette.  At the time the car was either stopped or was moving very slowly.
    Shayne held on to Amys jacket.  The car advanced with Amy on her skates alongside.
    She was released and fell.    Michel stopped the car, looked back, did not see
    Amy, and reversed the car sharply.  The car hit Amy, who was still on the
    ground trying to get up.

[3]

Several actions were launched following the accident. Amy sued both
    Michel and Shayne.  Allstate applied and was added as a statutory third party to
    that action pursuant to the
Insurance Act
, R.S.O. 1990, c. I.18, s.
    258(14).

[4]

In addition, Amy sued the Belecque and Poitras parents for negligent
    supervision of their children.  This claim, together with the cross-claims brought
    by the parents, were later dismissed on consent without costs.

[5]

Finally, Amy sued her parents insurer, CGU Insurance Company of Canada
    and Aviva Insurance Company of Canada, collectively referred to as CGU.  CGU
    provided uninsured and inadequately insured motorist coverage to Amy Savages
    family.

[6]

In turn, the Belecques sued their insurer, Allstate Insurance Company of
    Canada (Allstate), which denied them coverage for the accident (the coverage
    action). The Belecques sought a declaration that Allstate was obliged to
    provide coverage under their automobile and homeowners policies. Allstate
    denied coverage under the automobile policy on two bases: first, that Michel
    Belecque acted deliberately when he struck Ms. Savage while operating the
    vehicle and, second, that the Belecques failed to report the accident in accordance
    with the notification requirements of the policy.

[7]

The parties settled the main action at $450,000 for Amys compensatory
    damages, plus costs.  Effectively, the only remaining question was which
    insurer would pay those damages.  The answer turned largely on whether Michels
    conduct was negligent (in which case he would be covered by Allstate up to $1
    million) or whether his conduct was intended to cause Amys loss (in which case
    coverage would be excluded except for the $200,000 statutory minimum).    CGU,
    which was potentially liable as the excess insurer, moved for summary judgment pursuant
    to rule 20.01 of the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194.
    It sought a declaration that Allstates policy covered one or both of Michel
    and Shayne, as well as an order dismissing Amys claims against CGU. CGU filed affidavit
    and transcript evidence in support of its motion.

[8]

CGU argued that Allstates defences of lack of timely notice and of
    deliberate loss did not raise genuine issues requiring trial.  Alternatively,
    CGU took the position that Allstate was liable to indemnify Amy for her losses
    up to the minimum limits of the policy, which CGU argued would be $200,000 for
    Michel as driver, as well as $200,000 for Shayne as passenger.  CGU sought
    costs of the action against Allstate in the approximate amount of $79,220.84 on
    a partial indemnity basis.

[9]

Returnable at the same time, the Belecques sought a declaration that
    Allstate owed them a duty to defend and a duty to indemnify.   They sought
    approximately $180,168.29 in litigation costs against Allstate for the expenses
    they incurred arising from the main action, coverage action, and motion for
    summary judgment.

[10]

The
    motion judge carefully considered the primary issue before him: whether the
    Belecques had provided timely notice of their claim to Allstate. He decided
    they did so. His decision was supported by an abundance of evidence that the
    Belecques had notified their insurance agent of the accident on multiple occasions.
    Turning to the remaining issues, the motion judge concluded that Allstate had
    both a duty to defend as well as a duty to indemnify Michel Belecque, a duty to
    defend his mother under the automobile policy and a duty to defend Michels
    father under the homeowners policy.  He declined to make a ruling regarding
    coverage for the defence and indemnification of Shayne Poitras.  He dismissed
    the claims against CGU.  Finally, the motion judge awarded the litigation costs
    requested by the Belecques and CGU.

[11]

Allstate
    appeals the motion judges determination of indemnification coverage, his
    decision of a duty to defend under the automobile and homeowners policies, and
    his disposition of the litigation costs.  CGU cross-appeals, arguing that the
    motion judge erred in declining to decide Allstates obligations to Shayne
    Poitras.

[12]

As
    I will explain, in my view, Michel was entitled to coverage and Allstate owed
    all the Belecques a duty to defend.  I would not interfere with the litigation costs
    awarded by the motion judge.  Accordingly, I would dismiss the appeal.  I would
    also dismiss the cross-appeal since I am not persuaded that the motion judge
    made any error in declining to decide the issue involving Shayne.

Issues

[13]

There
    is no appeal from the motion judges decision that there was no genuine issue
    requiring a trial concerning Allstates position that the Belecques had failed
    to comply with the notice requirements of their automobile policy.

[14]

Rather,
    the appellant argues that the motion judge erred in concluding:

1.

there was no genuine issue requiring a trial with respect to Michels
    intention and Allstates duty to indemnify;

2.

Allstate owed a duty to defend Michel and his mother under the
    automobile policy and his father under their homeowners policy; and

3.

that the Belecques and CGU were entitled to the litigation costs
    awarded.

[15]

The
    cross-appeal raises a fourth issue.  It challenges the motion judges decision
    dismissing the CGUs motion for a declaration that Allstate was obliged to
    defend and indemnify Shayne under the Belecque car insurance policy.  I will
    first deal with the issues concerning the Belecques and then with the issue
    concerning Shayne Poitras.

(1)

The duty to indemnify Michel Belecque

[16]

Whether
    the insurer was obliged to indemnify depended on whether the accident was
    excluded from coverage as the result of Michels intention at the time of the
    accident.  On the summary judgment motion, CGU had the onus of establishing
    that there was no genuine issue requiring a trial of this issue.

[17]

The
    interpretation of the rule amending the test for summary judgment is the
    decision of this court in
Combined Air Mechanical Services Inc. v. Flesch,
2011 ONCA 764, 108 O.R. (3d) 1
.
Under
Combined Air,
a motion
    judge must achieve a full appreciation of the evidence and the issues before
    concluding that the moving party has established that there is no genuine issue
    requiring a trial.

[18]

The
    decision of a motion judge on a summary judgment motion is reviewed on a
    standard of correctness on the applicable principles of law and is entitled to
    deference on findings of fact and the inferences drawn from those facts:  see
Combined
    Air
at paras. 70-71.

[19]

In
    the course of argument, counsel informed the motion judge of the damages
    settlement, which was reached after the motion was filed, but before it was
    heard. In particular, counsel advised the motion judge that the settlement
    provided Amy with compensatory, not punitive damages. While counsel did not
    argue that the terms of the settlement were relevant to the question of Michels
    intent, they apparently also did not clearly explain their position that the settlement
    terms were irrelevant to whether Michel was covered under the automobile policy.
    In the end, the motion judge relied on the terms of the parties damages
    settlement in the main action as the foundation to decide that the issues
    raised in the coverage action did not require a trial.

[20]

In
    his view, the terms of the settlement were determinative because their
    provision for compensatory damages amounted to an admission that Michels
    impugned conduct, while negligent, were not intentional.  The motion judge
    concluded that the claim for punitive damages was no longer alive.  On this
    basis, he found there to be no genuine issue requiring a trial.  Allstate
    owed a duty to indemnify Michel Belecque.

[21]

On
    appeal, counsel essentially agreed in argument that the motion judge erred in
    basing his indemnification decision on the terms of the settlement of the liability
    action. However, counsel also agreed that it is unnecessary to return this
    issue for a re-hearing because the record provides ample foundation for this
    court to decide the issue.

[22]

That
    decision must be based not on the terms of settlement, but on the applicable
    exclusion.  In this case, the Belecque automobile insurance policy contained no
    exclusion for intentional acts. However, Allstate invoked s. 118 of the
Insurance
    Act
, which excludes coverage for conduct that contravenes any criminal or
    other law committed with intent to bring about loss or damage.  In arguing
    that a trial was required to determine Michels intention, Allstate relied on his
    conviction for careless driving under the
Highway Traffic Act
, R.S.O.
    1990, c. H.9.  Allstate also relied on Amys claim for punitive damages, as
    well as its argument that Michels driving was so reckless that it amounted to
    intentional misconduct.

[23]

To
    consider these arguments, it is necessary to review in more detail the evidence
    about the incident that was before the motion judge. In doing so, it is
    important to be mindful, since this evidence goes to the question of Allstates
    coverage obligations for indemnification purposes (as opposed to its duty to
    defend), that the motion judge was required to consider the numerous affidavits
    and the discovery excerpts filed on the motion.

[24]

The
    evidence showed that Amy, Michel and Shayne were all teenagers:  Amy was 14,
    Shayne 16 and Michel 17 years of age.  They all knew each other as members of
    the community, including through each others siblings.  Amy testified at
    discovery that, on the night the accident occurred, she had been skating at the
    rink with friends.  Still wearing skates, Amy and a friend left the rink for
    the parking lot so that Amy could find someone who would give her a smoke.

[25]

Michel
    and Shayne had been at the local rink playing hockey.  They had returned to Michels
    family car in the parking lot.  Shayne sat in the right rear passenger seat.   Shaynes
    window was rolled down.  Michel drove the car slowly between Amy and her
    friend.  While there were inconsistent recollections on whether Michel stopped or
    just slowed the car to a crawl, it was going sufficiently slowly that Amy
    apparently was able to ask Shayne for a smoke through his open window.   According
    to both Amy and Shayne, Shayne reached out his back-seat window and, in
    horseplay, grabbed Amy by her jacket.  The Belecque car moved forward and accelerated.
    According to Amy, she was dragged alongside for some distance upright on her
    skates.  She screamed.  A will-say statement from a Marc Bourdon provided his
    version of what happened.  According to that statement, when Amy was released, her
    momentum carried her forward a further 15 feet before she fell to the ground.

[26]

Michel
    then remembered he had forgotten an item at the rink.  He decided to return and
    retrieve it.  He stopped the car, looked behind him and did not see Amy, who
    was still on the ground trying to get up.  He executed what was called a
    high-speed doughnut or sharp reverse turn that caused the car to spin.  According
    to the evidence, Michel repeated this manoeuvre at least one more time.  In the
    course of doing so, the Belecque car struck and injured Amy.

[27]

All
    the parties who were questioned under oath, including Amy, testified about Michels
    intention.  Michels unshaken testimony was that he had absolutely no intention
    to harm Amy.  He was not aware that she had been grabbed by Shayne and was towed
    beside the car or that she had fallen.  He testified that, before reversing the
    car, he looked behind and believed his path was clear. Shayne testified to the
    same effect: that he did not believe Michel had an intention of hurting Amy.
    Amy testified that she did not know Michels intention and did not know whether
    he knew Shayne had forcibly towed her alongside the car.  All the participants
    testified that there was no animosity between any of them and there was no
    reason why either Michel or Shayne would cause harm to Amy.

[28]

The
    only evidence relied on by Allstate was the affidavit of its solicitor.   That
    affidavit referred to the potential evidence of Marc Bourdon.  Since no
    affidavit was filed from Mr. Bourdon, his version could not be tested. Counsel
    simply read the will-say in at Amys discovery.  In any event, Mr. Bourdons potential
    evidence did not assist with the core question of Michels intention because the
    statement was restricted to what Mr. Bourdon witnessed concerning the mechanics
    of the accident, and his perception of the number of manoeuvres.  He could not
    and did not give evidence about Michels intention in carrying out those manoeuvres.

[29]

Allstate
    also relied on Michels conviction for careless driving under the
Highway
    Traffic Act
as evidence of his allegedly intentional conduct. Since that
    conviction only related to Michels execution of the impugned manoeuvres, in
    light of the other evidence no inference could be drawn that Michel had any
    intention to cause damage or loss to Amy.

[30]

While
    there was also some conflicting evidence among those present concerning the
    speed and acceleration of the vehicle, the number of reverse manoeuvres and other
    details, the resolution of those issues would not reasonably have affected the
    question of Michels intention to bring about loss or damage to Amy.

[31]

Finally,
    Allstate relied in part on Amys pleading for punitive damages. However, that
    pleading did not allege that Michel intended to cause Amy any harm.  Moreover,
    none of the evidence reviewed above supported a conclusion of intentional
    harm.

[32]

The
    motion record is sufficient to allow for a full appreciation of the evidence
    and the issues surrounding Michels intent.  In my view, CGU successfully established
    that there was no genuine requiring a trial of Michels intention and his
    consequent coverage under the automobile policy.  For these reasons, I agree
    with the result arrived at by the motion judge.  Under the Belecque automobile
    insurance policy, Allstate was required to indemnify Michel as the driver.

(2)

The
    duty to defend

[33]

Allstate argued that it had no duty to defend Michel and his mother
    on the basis of the same issue of Michels intention at the time of the
    accident.  Allstate also argued that it had no duty to defend Michels father
    under the homeowners policy because that policy excluded coverage both for
    matters arising from the ownership, use of operation of a vehicle as well as
    for intentional acts.

[34]

Counsel agree that an insurers duty to defend is broader than its
    duty to indemnify. The existence of a duty to defend is discerned by
    consideration of the provisions of the policy, the pleading, and the documents incorporated
    by reference in the pleading.

[35]

In my view, the motion judge correctly decided the duty to defend
    issue vis-à-vis Michel and his mother on the basis of the pleading in the main
    action. While that pleading included a claim for punitive damages, at its
    highest, it alleged deliberate acts on the part of Michel and Shayne. Nowhere
    did the pleading allege an intention on the part of either Michel or Shayne to cause
    Amy any damage.

[36]

Allstate challenges its duty to defend Michels father under the
    homeowners policy, which excluded claims arising from the ownership, use or
    operation of the vehicle. However, the pleaded allegation against Michels father
    had nothing to do with the ownership, use or operation of the vehicle, but
    rather with the allegation of negligent supervision of Michel. Accordingly, I
    would not give effect to this argument.

[37]

In addition, I agree with the motion judges rejection of Allstates
    alternative argument based on the homeowners policy exclusion of intentional
    acts. There was no allegation of intentional acts on the part of Michels father,
    only of negligence.  Finally, in my view, Michels mother was also owed a duty
    to defend, whether under the automobile or the homeowners policy.

(3)

The costs of the
    actions

[38]

After
    addressing Allstates duty both to defend and indemnify the Belecque defendants,
    and dismissing the action against CGU for excess coverage, the motion judge turned
    to the Belecques claim for compensation for their litigation costs of the main
    action, the coverage action and the summary judgment proceedings.  In all these
    proceedings, the Belecques were required to retain their own counsel in light
    of Allstates denial of coverage.

[39]

The
    motion judge concluded that the Belecques were entitled to compensation for
    their resulting legal expenses on a full indemnity basis.  Even so, he recognized
    that the amount of costs must be reasonable.

[40]

The
    motion judge gave careful consideration to the question of the appropriate
    award for the Belecques litigation costs. He reviewed in detail the bill of
    costs submitted, examined and compared hourly rates for counsel involved, and
    considered the time spent in connection with the three proceedings, including
    the main action, the coverage action and the motion for summary judgment. He
    specifically considered and explained why counsels hourly rates charged to the
    Belecques as individual litigants might reasonably be higher than those charged
    by counsel to a corporate insurer. He gave cogent reasons for refusing to
    reduce the amount of the Belecques compensation on the basis of a comparison
    to CGUs costs.  In his view, the lower amount of CGUs costs reflected the
    different issues and the importance of those issues to the different parties.
    He also properly rejected the Belecques argument that the amount of costs
    should be increased as some kind of sanction against Allstate for its conduct
    in refusing coverage.

[41]

Allstate
    argues that the motion judge simply accepted an accounting of the bill of costs
    without considering the overall amount of the bill. However, this is not so.
    After reviewing the particulars of the costs, the motion judge specifically
    considered the claimed costs on the whole and concluded they were not
    unreasonable. There is no principle of law requiring a judge to reduce a
    requested costs award automatically or by a certain percentage on an unfounded
    assumption that the claimed amount must be inherently excessive.

[42]

In
    my view, this is not a case where the motion judge simply acceded to a
    particular number put forward by counsel without giving any consideration to
    the relevant factors.  I see no basis to interfere with the motion judges
    exercise of his discretion in awarding the Belecques $180,168.29 for litigation
    costs.

[43]

The
    motion judge awarded CGU its costs on the appropriate partial indemnity basis. In
    fixing the amount of those costs, the motion judge was alert to the factors in rule
    57.01(1), including the importance of the issue to insurers. He rejected the
    argument that costs should be increased as a result of Allstates conduct.  He
    observed that Allstates conduct in the litigation was unfortunate, but not unreasonable.
    He also noted he had no information about the amount charged by counsel to
    Allstate. After taking into account the proper considerations, the motion judge
    concluded that CGU should be awarded the claimed amount of $79,220.84. In his
    view, this amount was both fair and reasonable.

[44]

Allstate
    argues simply that CGUs costs award was excessive. There is no explanation
    to support that position. The costs awarded by the motion judge are entitled to
    a high degree of deference. In the absence of any error in principle, a
    misapprehension of the facts, or an award that is clearly wrong, there is no
    basis to interfere with his exercise of discretion.

[45]

Accordingly,
    I would dismiss the appeal of the award for litigation costs.

(4)

The cross-appeal by CGU

[46]

I
    turn to the final issue of the cross-appeal in which CGU argues that the motion
    judge ought to have declared that Shayne was entitled to coverage as a
    passenger in the Belecque vehicle. While Shayne delivered a statement of defence
    in the main action, he did not bring a coverage action against Allstate and did
    not respond to the motions. There was no evidence about whether Shayne had been
    denied coverage under the Belecque policy.  In its motion, CGU sought a
    declaration that one or both of Michel and Shayne were covered under the
    policy, Shayne as an occupant. In particular, CGU argued that, absent full
    coverage, Allstate was still required to pay the $200,000 statutory minimum for
    each of Michel and Shayne. Allstate resisted on the basis that Shayne did not
    have any coverage under the Belecque policy, even though he was an occupant of
    the vehicle, because his conduct in towing Amy alongside the car disentitled
    him to coverage.

[47]

The
    motion judge concluded that it was not either appropriate or possible to
    determine Allstates duty to defend and indemnify Shayne Poitras.  He
    specifically declined to make any ruling on this issue.

[48]

I
    see no error in this conclusion, particularly in light of the paucity of information
    before the motion judge. The lack of information was compounded on appeal by Allstates
    failure to file a responding factum and failure to respond to the issues raised
    by CGUs cross-appeal.

[49]

Moreover,
    in light of the result of the appeal upholding the motion judges decision that
    Allstate must indemnify the Belecques, there does not appear to be any need to
    address the question of Shaynes coverage under the Belecque automobile policy.
    Nonetheless, out of an abundance of caution, the dismissal of CGUs cross-appeal
    is made without prejudice to its right to bring a fresh motion for summary
    judgment on this point if so advised.

RESULT

[50]

In
    the result, the appeal and cross-appeal are dismissed.

COSTS OF THE APPEAL

[51]

Allstate
    has been unsuccessful on the appeal.  As well, the cross-appeal turned in part
    on Allstates failure to file a responding factum.  In these circumstances, I
    would award the Belecques and CGU their costs of the appeal.  I would fix the
    Belecques costs at $20,000 and the CGU costs at $15,000, both inclusive of
    disbursements and applicable taxes.

Released: RPA June 21, 2012                    S.E. Lang
    J.A.

I
    agree Robert Armstrong J.A.

I
    agree R.A. Blair J.A.


COURT OF APPEAL FOR ONTARIO

CITATION:
Sikh
    Cultural Society of Metropolitan Windsor v. Kooner, 2012
ONCA 401

DATE:  20120613

DOCKET: C54645

Rosenberg, MacPherson and Cronk JJ.A.

BETWEEN

Sikh Cultural Society of Metropolitan Windsor,
    Mohinder Singh Kandola, Gurbax Singh Wahid, Harjinder Singh Kandola, Kulbir
    Kaur Bhola, Balwinder Kaur Mann, Gian Singh Chandan and Pritam Kaur Chandan

Applicants (Respondents on Appeal)

and

Sukhdev
    Singh Kooner, Avtar Singh Kooner, Gurfateh Singh Kooner, Manjinder Singh
    Kooner, Inderpal Singh Dhanoa, Gurjit Singh Gill, Ravinder Singh (Mavi),
    Amarjit Singh Nijjar, Jatinder Singh Rai, Harpreet Singh Labana, Gurmeet Singh,
    Satnam Singh Matharu, Lehmber Singh Pahl, Surinder Kaur Matharu, Manjinder Kaur
    Kooner, Rajinder Kaur Kooner, Kamaljit Singh Sidhu, Sukhpreet Kaur Sidhu,
    Gurbaksh Singh Sidhu, Sattya Kaur Bath, Baldev Singh Brar, Rajveer Kaur Nijjar,
    Surjit Singh Riyat, Daljit Singh Sidhu, Govinder Singh Sarao
and

Giacomo Ramieri

Respondents (
Appellants
)

Matthew Wilton and Gregory Graham, for the appellants

Edwin G. Upenieks and Kiran Gill, for the respondents

Heard: June 6, 2012

On appeal from the judgment of Justice Mary-Jo Nolan of
    the Superior Court of Justice, dated November 1, 2011.

ENDORSEMENT

[1]

The appellants raise only two issues on this appeal from the judgment of
    Nolan J. First, the appellants submit that the application judge erred in her
    interpretation of
bona fide
member. Second, they submit that she
    erred in upholding the August 2010 freezing order. It is unnecessary to set out
    the factual background. The application judge has fully set out the background
    of this unfortunate dispute, including the history of the litigation between
    the two factions.  Her reasons can be found at 2011 ONSC 5513. For the
    following reasons the appeal is dismissed.

Bona Fide
Member

[2]

This issue turns on the interpretation of Articles II and III of the
    Constitution of the Sikh Cultural Society of Metropolitan Windsor and, in
    particular, on Article III(1), which sets out the voting privileges of members:

Right to vote at all meetings/elections of the Society provided
    he/she is a
bona fide
member of the Society. A
bona fide
[member] is a member who has paid his/her annual membership dues for the last
    two years.

[3]

In accepting that the list of 301
bona fide
voting members (the 301
    list) was valid, the application judge implicitly accepted that a member could
    be a
bona fide
member if he or she had paid dues for the last two calendar
    years. The appellants submit that the application judge erred in her
    interpretation and that the phrase paid his/her annual membership dues for the
    last two years means that the member must have been a member for the past 24
    months. They say that a contextual approach leads to this interpretation.  That
    context includes the fact that this is a religious organization and it is only
    by being in the organization for two years that the member demonstrates a sufficient
    commitment to the values and objectives of the organization to be eligible to
    vote and be on the Executive Committee. In effect, the appellants argue for a
    type of probationary membership.

[4]

We do not accept this submission. In our view, neither the plain wording
    of the Constitution nor the context requires such an interpretation. To the
    contrary, the objectives set out in the Constitution are entirely consistent
    with the principle that the Society welcomed new members and did not intend to
    discriminate between new members and members who had been members for longer
    times on the basis suggested by the appellants. The only commitment set out in
    the Constitution, to distinguish
bona fide
members from other members,
    is the financial commitment of having paid annual membership dues for the last
    two years.

The Freezing Order

[5]

A short review of the chronology is necessary to understand the purpose
    of the freezing order and why we agree with the trial judges disposition of
    this issue. In December 2009, seven members of the Society were acclaimed as
    the new Executive Committee (the NEC). Notwithstanding that the election had
    been uncontested, the former Executive Committee (the FEC) failed to hand
    over the books, records, keys, and other official documents of the Society to
    the NEC. In December, other disputes began to emerge. In particular, the FEC
    purported to expel two of the recently elected members of the NEC. The
    resolution to expel the two members was subsequently quashed by Rogin J. on
    June 11, 2010. In the meantime in January 2010, the NEC began an application
    seeking, among other things, an order requiring the FEC to immediately transfer
    control of the Society to the NEC. By the end of February 2010, most of the
    records and other documents had been turned over to the NEC.

[6]

However, beginning in January persons believed to be supporters of the
    appellants disrupted services and threatened members of the NEC. One of the
    members of the NEC was ambushed by assailants and bullets were fired into the
    living room of another NEC member. As a result of these incidents, the NEC
    installed surveillance cameras in various areas of the Societys premises.

[7]

The appellants then took steps to organize a non-confidence motion.
    There were irregularities in the process for this non-confidence motion,
    centring in part on the membership list. In particular, rather than using the
    301 list that had been approved by the NEC, the appellants used their own
    membership list, referred to in the proceedings as the 248 list. The
    non-confidence motion was held August 21, 2010 and succeeded.  At this same
    meeting, a new Executive Committee was purportedly elected.  The members of
    this 2010 new Executive Committee and their supporters entered the Gurdwara on
    August 22 and purported to take control of the Society.  They broke locks on
    the Societys office and dismantled the security system.

[8]

After learning of the takeover, the NEC passed a resolution on August
    22, 2010 freezing memberships in the Society. This resolution forms the basis
    for the appellants other ground of appeal.  The operative part reads as
    follows:

Executive Committee has decided to freeze the membership of
    Sikh Cultural Society of Metropolitan Windsor with effect from August 21, 2010
    until further notice and/or until the matter of forcible seizure,
    non-confidence motion and other related issues, is finally decided in Court as
    per constitution of SCSMW.  All the congregation will be informed as soon as
    possible that after August 21, 2010 until further notice, no new membership
    applications and/or membership fee/dues will be accepted and donations paid
    will not be counted towards membership fees/dues.

[9]

Following the takeover, the respondents brought a second application.
    On August 31, 2010, Quinn J. declared that the non-confidence motion was void
    and of no effect. He also granted an interim injunction that restrained the appellants
    from going within 1,000 metres of the Society building and ordered them to give
    to the respondents immediate and unfettered access to and possession of the
    premises, including all business and financial records, locks, keys, access
    codes, cameras, wiring, DVRs, electronic records relating to the security cameras,
    all other electronic records belonging to the Society, collection boxes,
    ballots and voting records. The balance of this second application was
    adjourned to October 15, 2010, to allow the respondents to file responding
    material.

[10]

On
    October 15, 2010, Thomas J. ordered that the injunction continue with some
    amendments that permitted the appellants to attend the Gurdwara on Sundays to
    attend services. On December 6, 2010, Thomas J. continued the injunction
    essentially on the same terms and adjourned the hearing of the application to
    March 2011. Nolan J. heard the application for several days in March and June
    2011 and then reserved her decision. While the decision was under reserve, the
    application judge requested further written submissions. All this occurred
    against the backdrop that the Constitution required a further election in
    December 2011. The application judge delivered her reasons for judgment on
    October 31, 2011.

[11]

The
    appellants have never moved to set aside the freezing order.  They nevertheless
    argue that the validity of that order was before the application judge. That
    appears to be the case because the application judge dealt with the freezing
    order and upheld it. She wrote as follows:

The issue of membership has also been complicated by the
    resolution of the NEC on August 22, 2010 to freeze memberships and to not
    permit persons making donations to attribute those funds to their membership
    obligations. I find that this resolution was a validly passed resolution in
    accordance with the Constitution and the
Corporations Act
. As well,
    there is no application before the court which seeks to set aside that
    resolution on the grounds that it is invalid or
ultra vires
the powers
    of the Executive Committee. Even if there was such an application, given the
    turmoil at the Gurdwara between various factions, there were reasonable grounds
    on which a responsible Executive Committee could make such a decision.

[12]

In
    argument before us, the appellants did not take the position that the NEC did
    not have the power to make the freezing order.  Rather, they submit that once
    Quinn J. made his order on August 31, 2010, there was no further need for the freezing
    order and that its effect was anti-democratic because it froze out any new
    members from taking part in the 2011 election and could interfere with the
    voting in the 2013 election. Further, any other matters, such as a new
    non-confidence motion, would be based on the frozen membership.

[13]

We
    agree with the application judge.  The NEC had the power to make the freezing
    order and it was justified at the time it was made. As indicated, the
    appellants have never moved to set aside the order. By the time the application
    judge came to deal with the many issues involved in the application, the 2011
    election was on the horizon. It was eminently sensible to leave matters as they
    were. The freezing order, and the injunction, had restored calm to the Society.
    There is no basis for interfering with the application judges decision.

[14]

That
    said, unless the appellants now seek leave to appeal from this courts
    disposition of this appeal, it seems to us that by its own terms the freezing
    order is now spent.  The matter of forcible seizure, non-confidence motion and
    other related issues referred to in the freezing order has now been dealt with
    by the application judge and by this court. In view of our decision upholding
    the application judges decision as to the interpretation of
bona fide
members, there remains ample time for new members to now become
bona fide
members before the December 2013 election.

[15]

Accordingly,
    the appeal is dismissed with costs fixed at the agreed sum of $35,000,
    inclusive of disbursements and all applicable taxes.

Signed:        M. Rosenberg J.A.

J. C. MacPherson J.A.

E. A. Cronk J.A.

Released: MR JUNE 13, 2012


COURT OF APPEAL FOR ONTARIO

CITATION: Spencer v. Riesberry, 2012
    ONCA 418

DATE: 20120619

DOCKET: C54366

MacPherson, Gillese and Ducharme JJ.A.

BETWEEN

Sandra Lynn Spencer

Applicant
    (Respondent in Appeal)

and

Derek Lawrence Riesberry

Respondent
    (Appellant in Appeal)

and

Linda Spencer and the Spencer Family Realty Trust

Added
    Respondents (Respondents in Appeal)

Robert Ballance, for the appellant

Jean Marentette, for the respondent Sandra Spencer

Marcela Aroca and Thomas MacKay, for the respondents Linda
    Spencer and the Spencer Family Realty Trust

Heard: May 11, 2012

On appeal from the order of Justice Scott K. Campbell of
    the Superior Court of Justice, dated August 10, 2011, with reasons reported at
    2011 ONSC 3222.

Gillese
    J.A.:

[1]

A woman bought a house (the property) and settled it on trust for
    herself and her four children.  She later settled an additional three
    properties on the trust (the other trust properties).  One of her daughters
    married and had two children.  During the marriage, the daughter and her family
    lived in the property.  Each of the other three children and their families
    were treated similarly by being permitted to live in one of the other trust
    properties.

[2]

Section 18(1) of the
Family Law Act
, R.S.O. 1990, c. F.3 (the
FLA
)
    reads as follows:

18.(1)  Every property in which a person has an
    interest and that is or, if the spouses have separated, was at the time of
    separation ordinarily occupied by the person and his or her spouse as their
    family residence is their matrimonial home.

[3]

Does the daughter have an interest in the property within the meaning of
    s. 18(1) of the
FLA
?  The trial judge held that the answer to that
    question is no.

[4]

The court agrees with the trial judge.  After hearing the appellant, the
    court dismissed the appeal and promised that reasons would follow.  These are the
    promised reasons.

OVERVIEW

[5]

Linda Spencer has four children, one of whom is Sandra Lynn Spencer, the
    respondent in this appeal.

[6]

On March 18, 1993, Linda Spencer bought the property, 14146 Riverside
    Drive in St. Clair Beach, Ontario.  That same day, she executed a trust
    agreement (the Trust Agreement) in which she established the Spencer Family
    Realty Trust (SFRT) in favour of herself and her four children.  She was the
    named trustee.  The preamble to the Trust Agreement stated that Linda Spencer
    bought the property in trust for the benefit of herself and her four children.
    Article 1.1 defined the trust property as the property plus any additional
    property that might be contributed to the SFRT.  It also provided that any distribution
    pursuant to the Trust Agreement was not to form part of the recipients net
    family property (the Proviso to art. 1.1).

[7]

The respondent married Derek Lawrence Riesberry (the appellant) in
    1994.  They had two children.  After the property was purchased in 1993, the
    parties resided in it, apart from a two-year period during which a new house
    was built on the property.  They did not pay rent during the time they resided
    in the property but they did pay expenses associated with it, such as taxes,
    insurance, utilities and maintenance.

[8]

On December 1, 2005, the Trust Agreement was amended to change the
    trustee from Linda Spencer to her daughters, Lori Fisher and the respondent.
    At various times, Linda Spencer purchased three other properties and made them
    part of the subject-matter of the SFRT.  Just as the respondent and her family
    were permitted to live in the property, so too each of the respondents three
    siblings and their families were permitted to live in one of the other trust
    properties.

[9]

After the appellant and respondent separated in August of 2010, Linda
    Spencer gave notice to vacate, as she intended to take possession of the
    property.  The respondent and one child vacated but the appellant and the other
    child remained in the property.

[10]

The
    respondent began divorce proceedings.  Questions about the Trust Agreement and
    the respondents interest in the property arose in the course of those
    proceedings.  The appellant added Linda Spencer and the SFRT as respondents in
    the matrimonial proceedings (the SFRT respondents).

[11]

In
    April of 2011, in the course of two endorsements, Quinn J. directed the trial
    of an issue to determine whether the Trust Agreement excluded the property from
    the respondents net family property (the Quinn J. endorsements).

[12]

Justice
    Scott K. Campbell (the trial judge) conducted the trial on May 24, 2011.  By
    order dated August 10, 2011, he ordered that: (1) the property is not a
    matrimonial home within the meaning of the
FLA
; (2) the Proviso to
    art. 1.1 is a condition subsequent that is void for uncertainty; (3) the
    respondents interest in the SFRT is an asset within the meaning of the
FLA
;
    and, (4) evaluations of the respondents interest in the SFRT shall be
    undertaken as part of the equalization calculation.

[13]

In
    this appeal, the appellant challenged only the first determination, namely,
    that the property is not a matrimonial home within the meaning of the
FLA
.

[14]

The
    court dismissed the appeal.

THE QUINN J. ENDORSEMENTS

[15]

The
    appellant challenged the jurisdiction of the trial judge to make the first
    determination in the order under appeal.  Thus, it is necessary to carefully
    consider the Quinn J. endorsements.

[16]

On
    April 14, 2011, Quinn J. directed the trial of an issue to determine whether
    the Trust Agreement excluded the property from the net family property
    definition of the
FLA
.  Paragraph 8 of his reasons contains his ruling
    on this matter.  It reads as follows.

Counsel for the [respondent] and Linda Spencer and the Spencer
    Family Realty Trust have argued that the trust agreement and its amendment
    excludes the trust property from the net family property definition of the
Family
    Law Act
. The [appellant], Derek Riesberry, has argued that the trust
    agreement and its amendment does not exclude the trust property (family
    residence or interest in trust) from the net family property definition of the
Family
    Law Act
. This application will not move forward until this court rules on
    the trust agreement. The
Family Law Rules
(16(1)) provide for a motion
    for summary judgment on part of a claim.
The Family Law Rules
16(8)
    and (9) provide for the court deciding a question of law and giving directions
    if necessary. In my judgment, the trust agreement interpretation is a pure
    question of law. The trust agreement and the amendment should be all that is
    necessary for the interpretation. The question to be answered by the court is
    set out in Article 1.1 of the trust agreement. Once this court makes a ruling
    on the trust, valuations, if necessary, can be conducted and any other motions
    flowing from the courts ruling can be launched.

[17]

In
    reasons dated April 29, 2011, Quinn J. reiterated that the trial was to resolve
    whether the Trust Agreement excludes the property from the provisions of the
FLA
and whether the respondent had a property interest in the SFRT that should be
    included in her net family property.

THE TRIAL DECISION

[18]

The
    trial judge first considered the Quinn J. endorsements.  He stated that the
    trial had begun with a discussion of what issues were to be decided by it.  He
    noted that the parties factums all stated the issues differently.

[19]

The
    trial judge concluded that there were two issues to be resolved, namely:

i.

Does the Trust Agreement exclude the property from the provisions of
    the
FLA
?

ii.

Does the respondent have a property interest in the SFRT that should be
    included in her net family property?

[20]

In
    deciding the first issue, the trial judge focussed on s. 18(1) of the
FLA
.
    He noted that there is no question that the property was a family residence: it
    was regularly occupied by the appellant and the respondent and their children,
    and it was their home at the time of their separation.  There was no suggestion
    that they occupied any other residence as their family home.  Thus, the issue
    was whether the respondent had an interest in the property within the meaning
    of s. 18(1).

[21]

The
    trial judge held that the respondent has a contingent beneficial interest in
    the SFRT, whatever that might be on the death of Linda Spencer.  She has,
    however, no interest in any specific property held by the SFRT.  Therefore, he
    concluded, she did not have an interest in the property within the meaning of
    s. 18(1) of the
FLA
.  In reaching this conclusion, the trial judge
    relied on the decision of Panet J. in
Clarke v. Read Estate

(2000),
    12 R.F.L. (5th) 305 (Ont. S.C.J.).

[22]

The
    trial judge then considered the second issue, namely, whether the respondents
    interest in the SFRT is to be included in her net family property.  In
    concluding that it is, he relied on s. 4(1) of the
FLA
, which defines
    net family property, and caselaw in which the courts have held that a beneficial
    interest in a trust, whether vested or contingent, is property and to be
    included when determining a persons net family property.

[23]

Thereafter,
    the trial judge ruled on the nature of the Proviso to art. 1.1 of the Trust
    Agreement.  This part of the order below has not been appealed, so there is no need
    to recount the trial judges reasoning on this point.

[24]

The
    trial judge concluded by stating that the property is not a matrimonial home
    within the meaning of the
FLA
.

THE ISSUES

[25]

This
    appeal raises two issues:

1.

Did the trial
    judge err in finding that, at the date of separation, the respondent did not
    have an interest in the property within the meaning of s. 18(1) of the
FLA
?

2.

In determining
    that the property was not a matrimonial home within the meaning of the
FLA
,
    did the trial judge exceed the scope of the issue to be decided?

THE RELEVANT PROVISIONS OF THE TRUST AGREEMENT

[26]

The
    preamble to the Trust Agreement reads as follows:

WHEREAS the Settlor has acquired certain real property in trust
    for the benefit of herself and her children, WILLIAM GREGORY SPENCER of the
    Town of St. Clair Beach, in the County of Essex and Province of Ontario and
    SANDRA SPENCER of the Town of St. Clair Beach, in the County of Essex and
    Province of Ontario and LORI SOROKOPAS of the Town of LaSalle, in the County of
    Essex and Province of Ontario and CONNIE JEFFERY of the Municipality of
    Metropolitan Toronto, in the Province of Ontario, (hereinafter called the
    Beneficiaries), and has taken title to the real property listed in Schedule
    A annexed hereto, and may hereafter transfer or cause to be transferred to
    the Trustee other real or personal property, all of which is to be held by the
    Trustee, upon the trusts, and subject to the powers and provisions hereinafter
    declared and contained.

[27]

Article
    1.1 of the Trust Agreement defines the subject matter of the trust as the property
    and any other property vested in the trustee.  The Proviso to art. 1.1 states
    that any distribution shall not form part of the recipients net family property
    for the purposes of the
FLA
.  Article 1.1 reads as follows:

1.1  Trust Property shall [be] the land [and] premises
    described in Schedule A annexed hereto and form a part of this Declaration of
    Trust, and any further or additional real or personal property which the
    Settlor, or any other person may donate to or vest or cause to be vested in the
    Trustees, to be held upon the trusts, and with and subject to the powers and
    provisions hereof and any property substituted therefor. PROVIDED however, that
    any benefit whether as to income or capital or both, or income from capital or
    proceeds to which any person shall become entitled in accordance with the
    provisions of this Trust Agreement shall not fall into any community of
    property which may exist between any such person and his or her spouse, and
    shall not form part of his or her net family property for the purpose or
    purposes of the
Family Law Act
(Ontario), and any amendments thereto
    or any successor legislation thereto, but shall only be paid by the Trustee to
    such person on the condition that the same shall remain separate property of
    such person, free from the control of his or her spouse and the separate
    receipt of such person shall be a discharge to the Trustee of such payment.

[28]

Article
    3.1 stipulates that: the trust property is to be held in trust for the benefit
    of Linda Spencer and her four children; Linda Spencer has the right to use the
    trust property during her lifetime; and, on Linda Spencers death, the trust
    property is to be divided into equal shares for the children alive at her
    death.  It reads as follows:

3.1  The Settlor gives the Trust Property to the Trustee upon
    the following trust:

(a)

The Trustee shall hold the Trust
    Property in trust for the Beneficiaries subject to a life interest in favour of
    Linda Spencer to use the Trust Property during her lifetime;

(b)

Upon the death of Linda Spencer,
    the Trustee shall divide the Trust Property into a number of equal parts so
    that there is one part for each Beneficiary living at the death of Linda Spencer.

[29]

Article
    6.1 makes the trust irrevocable.  It reads as follows:

6.1 The Settlement hereby made shall be irrevocable by the
    Settlor and notwithstanding anything herein expressed or implied, no part of
    the capital or income of the Trust Property shall be paid or lent or applied
    for the benefit of the Settlor in any manner or in any circumstances
    whatsoever.

A PRELIMINARY COMMENT

[30]

As
    has been noted, the trial judge interpreted the Proviso to art. 1.1 of the
    Trust Agreement as having created a condition subsequent whose intent was to
    defeat the effect of the
FLA
.  He struck down the condition subsequent
    as being void for uncertainty.

[31]

This
    aspect of the order below has not been appealed.  Nothing in these reasons is
    to be taken as approving this aspect of the decision below.

AT THE DATE OF SEPARATION, DID THE
    RESPONDENT HAVE AN INTEREST IN THE PROPERTY WITHIN THE MEANING OF S. 18(1) OF
    THE
FLA
?

[32]

The
    appellant submits that the trial judge erred in finding that the respondent did
    not have an interest in the property within the meaning of s. 18(1) of the
FLA
.
    He makes the following three arguments in support of this submission:

(1)

the respondents interest as a
    beneficiary of the SFRT was sufficient to establish an interest in the property
    within the meaning of s. 18(1);

(2)

the respondents role as a trustee
    of the SFRT, combined with her beneficial interest in the SFRT, was sufficient
    to establish an interest in the property within the meaning of s. 18(1); and

(3)

enforcing the notion of the separate
    entities of trustee and beneficiary will defeat the desired effect of the
FLA
and the special treatment afforded a matrimonial home in that legislation.

[33]

As
    I will explain, I do not accept this submission or any of the arguments
    advanced in support of it.

1.
The Respondents Interest as a Beneficiary of the SFRT

[34]

The
    trial judge held that the respondent has a contingent beneficial interest in
    the SFRT trust property as a whole, whatever that might be on the death of
    Linda Spencer.  While the four residences are currently the subject matter of
    the SFRT, the respondent as a beneficiary has no property interest in any
    specific trust asset.  Therefore, she has no specific legal interest in the
    property within the meaning of s. 18(1) of the
FLA
.

[35]

I
    agree with the trial judge.

[36]

The
    Preamble to the Trust Agreement defines the beneficiaries as Linda Spencer and
    her four children.  Article 3.1 of the Trust Agreement provides that on the
    death of Linda Spencer, those of her children who are alive will be entitled to
    equal shares in the trust property.  As the respondents entitlement under the
    SFRT is conditional on her being alive at the time of her mothers death, the
    trial judge correctly found that the respondent has a contingent beneficial
    interest in the assets of the SFRT.

[37]

Unless
    the terms of the trust expressly provide otherwise, a beneficiary has no
    property interest in any specific asset of the trust, prior to or absent an
    appropriation of such asset to the beneficiary by the trustee: see
Gennaro v
.
Gennaro
(1994), 111 D.L.R. (4th) 379 (Ont. Unif. Fam. Ct.).

[38]

In
Gennaro
, Vita Gennaro owned a house on Case Street.  Under her will, she
    named her son Angelo the trustee of her estate.  As trustee, Angelo was given
    wide powers of sale and administration.  Angelo and his two siblings were the
    residuary beneficiaries of their mothers testamentary trust.  After Ms. Gennaro
    died, Angelo and his wife lived in the Case Street property until they
    separated.

[39]

Justice
    Steinberg held that the will did not vest any specific property in any of the
    heirs. No beneficiary under the trust, including Angelo, could rely on
    receiving a conveyance of any interest in the Case Street property.
    Accordingly, Angelo did not have an interest in the Case Street property within
    the meaning of s. 18(1) of the
FLA
.

[40]

Justice
    Panet reached the same result in
Clarke
.  In
C
larke
,
    prior to her marriage, a woman conveyed title to her personal residence to a
    trust of which she and her daughter were beneficiaries.  Her intent was to
    ensure that ownership of the home and her ability to transfer it to her
    daughter would be unaffected by her marriage.  The terms of the trust provided
    that on her death, all the trust property would go to her daughter.

[41]

The
    woman and her husband occupied the residence.  After she died, her husband
    claimed an equalization payment, alleging that the family residence was a
    matrimonial home within the meaning of s. 18(1) of the
FLA
or,
    alternatively
,
a property owned by the wife at the time of her death.

[42]

At
    para. 37 of his reasons, Panet J. held that the family residence was an asset
    of the trust throughout the marriage and that the wife did not have an interest
    in the home within the meaning of s. 18(1) of the
FLA
.

[43]

In
    the present case, the Trust Agreement gives the trustees broad powers to manage
    and administer the trust property.  There is no provision in the Trust
    Agreement giving the respondent or any of her siblings the right to call for
    the transfer or delivery of any particular item of property held by the SFRT,
    either prior to or following the death of Linda Spencer.  The Trust Agreement
    places no obligation on the trustees to transfer any asset
in specie
.
    Indeed, we cannot even know what the trust property will consist of at Linda
    Spencers death.  There will be no automatic conveyance of one property to each
    of the four children on the death of Linda Spencer, as the appellant contends.

[44]

The
    respondents interest as a beneficiary of the SFRT is not an interest in the property
    within the meaning of s. 18(1) of the
FLA
.

2.
The Respondents Role as a Trustee of the SFRT

[45]

The
    respondent and her sister, Lori Fisher, are co-trustees of the SFRT.  As such,
    they have joint legal control of, and authority over, the subject matter of the
    SFRT.  As trustee, the respondent has the powers and duties given to her by the
    Trust Agreement and legislation.  It is self-evident that the respondents duties
    and powers as trustee are not an interest in the property within the meaning of
    s. 18(1) of the
FLA
.  How could they be?  She possesses those powers and
    duties not in her personal capacity but in her fiduciary role as trustee, a
    role that requires her to act solely in the best interests of the
    beneficiaries.

[46]

Moreover,
    the court cannot combine or conflate the respondents powers and duties as
    trustee with her position as a contingent beneficiary under the SFRT, as the
    appellant contends, to create an interest in the property within the meaning of
    s. 18(1).  As I explain more fully below, the roles of trustee and beneficiary
    are distinct and must be maintained as separate and distinct in order for the
    trust to be workable.

3.
The Separate Entities Argument

[47]

The
    appellant argues that the court should not enforce the separate entities of
    trustee and beneficiary. He points to
Debora v. Debora
(2006), 83 O.R.
    (3d) 81, a decision of this court, in which the corporate veil was pierced to
    find that a cottage owned by the appellants company was the parties
    matrimonial home for the purposes of equalization.  The separate entities of
    corporation and shareholder were not maintained in
Debora
because, in
    the words of the court at para. 24 of the reasons, it would yield a result too
    flagrantly opposed to justice, convenience or would defeat the desired effect
    of [the] legislation.  The appellant contends that maintaining the separate
    entities of trustee and beneficiary in the present case would similarly
    undermine the intent of the
FLA
and the special treatment it affords a
    matrimonial home.

[48]

Two
    significant distinctions between
Debora
and the present case are a
    complete answer to this argument.

[49]

The
    first relates to s. 18(2) of the
FLA
, which reads as follows:

18(2)  The
    ownership of a share or shares, or of an interest in a share or shares, of a
    corporation entitling the owner to occupy a housing unit owned by the
    corporation shall be deemed to be an interest in the unit for the purposes of
    subsection (1).

[50]

In
Debora
, title to the property in question was held by a corporation.
    The appellant was described as the corporations alter ego.  He was its sole shareholder;
    he controlled it.  He had provided all of the funds for the purchase,
    maintenance and repair of the property.  Based on s. 18(2), the court pierced
    the corporate veil, saying that the appellant could not hide behind the
    corporate veil to defeat his wifes legitimate claim.

[51]

It
    was s. 18(2) of the
FLA
that gave the court the power to pierce the
    corporate veil in
Debora
.  There is no comparable provision in the
FLA
in respect of trusts.

[52]

Second,
    to ignore or conflate the separate roles of trustee and beneficiary would be contrary
    to the fundamental nature of a trust and would render the trust unworkable.

[53]

A
    trust is a form of property holding.  It is not a legal entity or person.  A
    trust does not hold title to property nor can it.  It is the trustee who holds
    legal title to the trust property.

[54]

A
    trust is also a type of relationship, namely, the fiduciary relationship that
    exists between trustee and beneficiary.  The foundation of the trust relationship
    is the separation of roles between the trustee and beneficiary with the trustee
    being the legal owner of the trust property and the beneficiary being the
    equitable owner of the trust property.  The trustee holds legal title to the
    trust property so that it can manage, invest and dispose of the trust property
    solely for the benefit of the beneficiaries.  A trust can only exist when there
    is a separation between legal ownership in the trustee and equitable ownership
    in the beneficiaries.

[55]

If
    the court were to ignore or conflate the separate entities, it would destroy
    the foundation of the trust relationship.  Put another way, absent the separate
    entities, there is no trust relationship and, therefore, no trust.  That is not
    the case when the corporate veil is pierced.  In that situation, the corporation
    as a separate legal entity remains  it is simply that the court can look
    through the veil, in very limited circumstances, to attribute ownership to the corporations
    alter ego.

DID THE TRIAL JUDGE EXCEED THE SCOPE OF THE ISSUE TO BE DECIDED
    AT TRIAL?

[56]

In
    a word, the answer to this question is no.

[57]

In
    para. 61 of his reasons, the trial judge states that the property is not a
    matrimonial home within the meaning of the
FLA
.  This sentence is
    repeated as para. 1 of the order under appeal.  It follows the trial judges analysis
    of why the respondents interest in the SFRT is not an interest within the
    meaning of s. 18(1).

[58]

There
    are two conditions in s. 18(1) that must be satisfied for a property to be a
    matrimonial home: (1) a person must have an interest in the property; and (2)
    at the time of separation, the property must be ordinarily occupied by the
    person and his or her spouse as their family residence.  The trial judge recognized
    that the second condition had been met because the parties had used the
    property as their family residence.  However, as has already been explained, he
    held that the first condition had not been met because the respondents
    interest is in the SFRT, not the property.

[59]

Therefore,
    when the trial judge stated that the property was not a matrimonial home within
    the meaning of the
FLA
, he was simply saying that it was not a
    matrimonial home within the meaning of s. 18(1) of the
FLA
. Understood
    in this way, the trial judge did not exceed the scope of the issue to be
    decided.

DISPOSITION

[60]

It
    is for these reasons that I would dismiss the appeal with costs to the respondent
    fixed at $10,000 and to the SFRT respondents fixed at

$20,000,
    disbursements and all applicable taxes included.

Released: June 19, 2012 (E.E.G.)

E.E. Gillese J.A.

I
    agree. J.C. MacPherson J.A.

I
    agree. Ducharme J.A.


COURT OF APPEAL FOR ONTARIO

CITATION:
Sunset
    Inns Inc. v. Sioux Lookout (Municipality), 2012 ONCA 416

DATE: 20120615

DOCKET: C55051

Goudge, Juriansz and Ducharme JJ.A.

BETWEEN

Sunset Inns Inc.

Plaintiff (Appellant)

and

The Corporation of the Municipality of Sioux
    Lookout

Defendant (Respondent)

Morris J. Holervich, for the appellant

Allan D. McKitrick, for the responent

Heard: June 14, 2012

On appeal from the order Justice D. C. Shaw of the
    Superior Court of Justice, dated January 17, 2012.

APPEAL BOOK ENDORSEMENT

[1]

We read the appellants pleading as follows: the essence of the
    appellants claim is that the respondent breached its duty in 1986 to provide a
    workable sewer system requiring the appellant to take measure to repair the
    deficiency in 2003.  In essence the claim is about recovery of the appellants
    repair costs.

[2]

We see no basis to interfere with the decision below that the claim is
    statute barred. The appeal is dismissed. Costs to the respondent of $5000
    inclusive of disbursements and applicable taxes.


COURT OF APPEAL FOR ONTARIO

CITATION: Taylor
    Made Advertising Ltd. v. AtlificInc., 2012 ONCA 459

DATE: 20120628

DOCKET: C54584

MacPherson and Juriansz JJ.A., and Pattillo J. (
ad
    hoc
)

BETWEEN

Taylor Made Advertising Ltd.

Plaintiff (Appellant)

and

Atlific
    Inc.
and Royal Host Corp.

Defendants (
Respondent
)

Tara L. Lemke, for the appellant

Katherine J.
Menear
,
    for the respondent Atlific Inc.

Heard: March 19, 2012

On appeal from the order of Justice David
Salmers
of the Superior Court of Justice, dated October
    13, 2011.

Pattillo J.
(
ad hoc
):

Introduction

[1]

Taylor Made Advertising Ltd. (Taylor Made),
    appeals from an order dated October 13, 2011 (the Order) dismissing its
    action (the Action) against the respondent Atlific Inc. (Atlific) as an
    abuse of process.

[2]

In 1999, Taylor Made commenced an action against
    Venture Inns Inc. (Venture Inns) claiming $73,031.25 plus pre-judgment
    interest for promotional services rendered by Taylor Made in late 1998 and
    early 1999 (the First Action). In August 2000, following an undefended trial,
    Taylor Made obtained judgment against Venture Inns for the full amount of its
    claim plus costs. The judgment remains unpaid.

[3]

Taylor Made commenced the Action against Atlific
    and Royal Host Corp. on February 10, 2005 and claimed the same principal amount
    plus pre-judgment interest in respect of the same services which were the
    subject of the First Action. The Action has subsequently been dismissed against
    Royal Host.

[4]

Atlific moved to dismiss the Action as an abuse
    of process on the ground that Taylor Made had a contract with Venture Inns and
    had sued it and obtained judgment in the First Action for exactly the same
    amount.

[5]

The motion judge found that the president of
    Taylor Made purposely withheld evidence from the trial judge during the trial
    of the First Action concerning Taylor
Mades
relationship with
Atlific
. As a result, the motion
    judge held it would be an abuse of the process of the court to permit Taylor
    Made to present evidence at the trial of the Action which had been knowingly
    and purposely withheld by it in the First Action.

[6]

For the reasons that follow, I would allow the
    appeal. In my view, the motion judge erred in his conclusion that the Action
    was an abuse of process. The evidence does not support the motion judges
    finding that Taylor
Mades
president purposely
    withheld evidence from or misled the court in the First Action. Further, and
    absent that error, I do not consider that the Action otherwise constitutes an
    abuse of process as that concept has been developed by the courts.

Background

[7]

Taylor Made is in the advertising business. It
    was formed by Alistair Taylor in the fall of 1998. In the period 1998 to 1999,
    Atlific owned and managed hotels, one of which was Venture Inns. Atlific was a
    client Mr. Taylor had done work for at his previous firm. Mr. Taylor had also
    previously done work for Venture Inns under the direction of Atlific. In
    December 1998, Atlific retained Taylor Made to do a marketing program promotion
    for Venture Inns.

[8]

Taylor Made carried out the work under the
    direction and approval of Atlific employees. The first invoice was addressed to
    the National Director Sales & Marketing of Atlific at Venture Inns/Atlific
    Hotel & Resorts. At
Atlifics
request, it was
    reissued to Venture Inns at the same address. Atlific noted that there was a
    sale taking place of Venture Inns and it wanted to ensure Taylor Made was paid
    in a timely manner. The remaining two invoices were similarly addressed to
    Venture Inns. The invoices totalled $74,951.25.

[9]

The First Action was commenced on November 10,
    1999. Venture Inns filed a defence pleading there was no contract because the
    work was subject to approval of Venture Inns purchaser and no such approval
    was ever granted. In the alternative, Venture Inns pleaded a number of the
    charges on the invoices were improper, excessive and that the materials were
    deficient and of no use to it.

[10]

The trial of the First Action took place on
    August 14, 2004. Although Venture Inns had been represented by counsel up to
    that time, no one appeared at trial on its behalf. Mr. Taylor testified briefly
    on behalf of Taylor Made.

[11]

Although Mr. Taylor initially said that his
    client was Venture Inns, he subsequently corrected that and said his client was
    Atlific Hotel & Resorts and Venture Inns was a chain of hotels owned by
    Atlific. On occasion, they would work directly for the Atlific chain and on
    other occasions, they would work directly for Atlific Hotels, but he said the
    two were inseparable.

[12]

The trial judge inquired about the sale of
    Venture Inns which was raised in the statement of defence. Mr. Taylor
    responded:

At the time of rendering the first invoice, which we
    traditionally did to Atlific Resort Hotels/Venture inns, we were subsequently
    asked to change the invoice to Venture Inns Inc. and we were, at that point,
    told the hotel was being sold; that, you know, the transaction would happen as
    time went by, not to worry, you know, everythings under control, you know,
    Youre part of the sale. Youll be paid, not to worry. The hotel was then
    subsequently sold to Roy Host, a group out in Calgary.

[13]

Mr. Taylor said that he received the assurance
    Taylor Made would be paid by the controller of Venture Inns or Atlific. He also
    said Atlific was an ongoing client at the time of the trial. The trial judge
    asked some additional questions concerning the amount claimed which was less
    than the amount of the invoices.

[14]

At the conclusion of Mr. Taylors evidence, the
    trial judge granted judgment against Venture Inns for the full amount claimed
    of $73,031.25 plus $4,888.49 for pre-judgment interest and $5,974.17 in costs.

[15]

In its statement of claim in the Action, Taylor
    Made pleaded that Atlific and Royal Host either jointly or individually
    engaged it to do the work. In its defence, Atlific, among other things, denied
    that it entered into any agreement with Taylor Made either jointly with Royal
    Host or on its own behalf. It pleaded the First Action and Taylor
Mades
judgment against Venture Inns. In the alternative,
    if invoices were delivered to it, it was for convenience and not as an agent
    for Venture Inns. Finally, it pleaded in the further alternative that if it is
    liable, the amount claimed is excessive, unreasonable and does not reflect the
    value of the work.

The Reasons of the Motion Judge

[16]

The motion judge concluded that the Action was
    an abuse of process because in order for Taylor Made to obtain judgment in the
    Action, it would have to adduce evidence that had been purposely withheld from
    the court by Mr. Taylor during his testimony at the trial of the First Action.

[17]

In order to reach this conclusion, the motion
    judge made a number of findings arising from Mr. Taylors testimony at the
    trial in the First Action.

[18]

In particular the motion judge found that the
    trial judge was concerned about whether Taylor
Mades
contract for advertising services was with Venture Inns and/or with Atlific;
    that Mr. Taylor was concerned Atlific was still an ongoing client; that Mr.
    Taylor understood that the trial judge was concerned about whether liability
    for payment of the invoices rested with Venture Inns or Atlific; and that as a
    result of Mr. Taylors testimony, the trial judge was reasonably satisfied and
    persuaded that Venture Inns was liable for payment of the invoices.

[19]

Based on these findings, the motion judge went
    on to state at paragraph 16 of the reasons:

During his testimony, in order to preserve the plaintiffs then
    ongoing business relationship with Atlific, Mr. Taylor purposely avoided
    testifying that, with respect to these particular invoices, the plaintiffs
    contract for advertising services was with Atlific or that Atlific was somehow
    liable for payment of the invoices. He intentionally and successfully persuaded
    and satisfied that trial judge that the plaintiffs contract for the invoices
    was with Venture and not Atlific; and that it was Venture, not Atlific that was
    liable for payment of the invoices.

Discussion

[20]

In my view, Mr. Taylors evidence at the trial
    of the First Action does not support the findings the motion judge made in
    reaching his conclusion that Mr. Taylor purposely avoided testifying that the
    contract was with Atlific or that he intentionally and successfully persuaded
    the trial judge that it was Venture Inns that was liable for payment of the
    invoices.

[21]

As noted, the trial proceedings were brief. Mr.
    Taylor was the only witness. The transcript of his evidence is all of nine
    pages in length. During his evidence, he responded to questions asked by his
    counsel and the trial judge. In addition, a brief of documents was filed as an
    exhibit.

[22]

While the trial judge asked a few questions
    during Mr. Taylors evidence, they were for clarification and did not, in my
    view, indicate any concern on the part of the trial judge as to whom Taylor
Mades
contract was with.

[23]

As noted by the motion judge, Mr. Taylor did not
    testify that Atlific was primarily or jointly responsible for the invoices in
    question. He was never asked that question. He did, however, explain how the
    contract came about and referred to Atlific as the client, its role in the
    formation of the contract, its request to re-address the first invoice and its
    assurances that Taylor Made would be paid.

[24]

While Mr. Taylor indicated during his evidence
    that Atlific was an ongoing client, there was never any indication Taylor Made
    was suing Venture Inns to preserve its relationship with Atlific. Even if such
    an inference can be drawn from the evidence, that fact, by itself, is not
    sufficient to support the finding that Mr. Taylor purposely avoided testifying
    that the contract was with Atlific given his other testimony. As noted, Mr.
    Taylor testified that the contract was initially with Atlific but the invoices
    were changed to Venture Inns at
Atlifics
request.
    The documents filed with the court further support Mr. Taylors evidence
    concerning the involvement of Atlific in the contract.

[25]

Mr. Taylor answered the questions he was asked
    both by counsel and the trial judge. There is no evidence in the record to
    suggest that any of his answers were untruthful or misleading in any way. To
    the contrary, the evidence supports what Mr. Taylor testified to.

[26]

This court may only interfere with the motion
    judges findings of fact where there is a palpable and overriding error and
    such error affected the result. A palpable and overriding error has been
    described as one that is clearly wrong. Findings of fact by a lower court
    which can be characterized as unreasonable or unsupported by the evidence
    are clearly wrong and entitle an appellate court to intervene.
L.(
H.) v. Canada (Attorney General)
,
    [2005] 1 S.C.R. 401 (S.C.C.)
paras
. 55  56.

[27]

In my view, the motion judges finding that Mr.
    Taylor purposely withheld evidence from the court at the trial in the First
    Action is clearly wrong. It simply cannot be supported by Mr. Taylors evidence
    in the First Action. In addition, that finding clearly affected the result in
    the motion. It was the basis for the motion judges conclusion that the Action
    was an abuse of process.

[28]

In the circumstances, therefore, it is my view
    the motions judge committed a palpable and overriding error which entitles this
    court to intervene.

[29]

Notwithstanding the absence of any evidence to
    conclude that Taylor Made misled the court in the First Action, is the Action otherwise
    an abuse of process?

[30]

Courts have an inherent and residual discretion
    to dismiss or stay an action on the grounds of abuse of process. As Arbour J.
    stated in
Toronto
    (City) v. Canadian Union of Public Employees (C.U.P.E.), Local 79
,
    [2003] 3 S.C.R. 77 (S.C.C.) at
para
. 35:

Judges have an inherent and residual discretion to prevent an
    abuse of the court's process. This concept of abuse of process was described at
    common law as proceedings "unfair to the point that they are contrary to
    the interest of justice" (R. v. Power, [1994] 1 S.C.R. 601, at p. 616),
    and as "oppressive treatment" (
R. v. Conway
, [1989] 1 S.C.R.
    1659, at p. 1667). McLachlin J. (as she then was) expressed it this way in
R.
    v. Scott
, [1990] 3 S.C.R. 979, at p. 1007:

abuse
of process may be established
    where: (1) the proceedings are oppressive or vexatious; and, (2) violate the
    fundamental principles of justice underlying the community's sense of fair play
    and decency. The concepts of oppressiveness and
vexatiousness
underline the interest of the accused in a fair trial. But the doctrine evokes
    as well the public interest in a fair and just trial process and the proper
    administration of justice.

[31]

In
Foy
    v. Foy (No. 2)
(1979), 26 O.R. (2d) 220 (C.A.) at p. 237, Blair
    J.A., in dissent, referred to the purpose of the doctrine of abuse of process:

The concept of abuse of process protects the public interest in
    the integrity and fairness of the judicial system. It does so by preventing the
    employment of judicial proceedings for purposes which the law regards as
    improper. These improper purposes include harassment and oppression of other
    parties by multifarious proceedings which are brought for purposes other than
    the assertion or defence of a litigant's legitimate rights. Such abuse of
    process interferes with the business of the Courts and tarnishes their image in
    the administration of justice.

[32]

The doctrine of abuse of process has been
    utilized by the courts in various ways in order to maintain the integrity of
    the adjudicative function. In particular, it has been invoked in civil
    proceedings in circumstances where the courts procedure has been misused in
    such a way that the administration of justice would be brought into disrepute.
    As was further stated by Arbour J. in
Toronto (City) v. C.U.P.E., Local 79
at
para
. 37:

In the context that interests us here, the doctrine of abuse of
    process engages "the inherent power of the court to prevent the misuse of
    its procedure, in a way that would ... bring the administration of justice into
    disrepute" (
Canam
Enterprises Inc.
    v. Coles
(2000), 51 O.R. (3d) 481 (C.A.), at
para
.
    55, per Goudge J.A., dissenting (approved [2002] 3 S.C.R. 307, 2002 SCC 63)).
    Goudge J.A. expanded on that concept in the following terms at
paras
. 55-56:

The doctrine of abuse of process engages the inherent
    power of the court to prevent the misuse of its procedure, 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.
It is a flexible doctrine unencumbered by the specific
    requirements of concepts such as issue estoppel
. See
House of Spring
    Gardens Ltd. v. Waite
, [1990] 3 W.L.R. 347 at p. 358, [1990] 2 All E.R.
    990 (C.A.).

One circumstance in which abuse of
    process has been applied is where the litigation before the court is found to
    be in essence an attempt to
relitigate
a claim which
    the court has already determined
. [Emphasis added.]

As Goudge J.A.'s comments indicate, Canadian courts have
    applied the doctrine of abuse of process to preclude
relitigation
in circumstances where the strict requirements of issue
estoppel
(typically the
privity
/mutuality requirements) are
    not met, but where allowing the litigation to proceed would nonetheless violate
    such principles as judicial economy, consistency, finality and the integrity of
    the administration of justice.
(See, for example,
Franco v. White
(2001), 53 O.R. (3d) 391
    (C.A.);
Bomac
Construction Ltd. v.
    Stevenson
, [1986] 5 W.W.R. 21 (Sask. C.A.); and
Bjarnarson
v. Government of Manitoba
(1987), 38 D.L.R. (4th) 32 (Man. Q.B.),
aff'd
(1987), 21 C.P.C. (2d) 302 (Man. C.A.).)
This
    has resulted in some criticism, on the ground that the doctrine of abuse of
    process by
relitigation
is in effect non-mutual issue
    estoppel by another name without the important qualifications recognized by the
    American courts as part and parcel of the general doctrine of non-mutual issue
    estoppel (
Watson, supra
, at pp. 624-25).

[33]

In the circumstances of this case, I do not
    consider the Action to be an abuse of process. In my view, it is not a misuse
    of the courts procedure which is manifestly unfair to Atlific or otherwise so
    serious that it brings the administration of justice into disrepute.

[34]

The facts surrounding the formation of the
    contract at issue give rise to the argument that Atlific is jointly and
    severally liable for the work done. In circumstances of joint and several
liability
under a contract, judgment against one party does
    not bar further action against another for the same cause of action.
Campbell Flour Co. Ltd. v. Bowes
(1914), 32 O.L.R. 270 (C.A.) at pp. 279-80;
Courts of Justice Act
, R.S.O. 1990, c. C-43, s.
    139(1).

[35]

As Goudge J.A. noted in
Canam
Enterprises
, as referred to above, courts have applied the
    doctrine of abuse of process in circumstances where a party is attempting to
relitigate
a claim which has been determined. That,
    however, is not the case here. There has been no determination of whether
    Atlific is liable to Taylor Made for the work done.

[36]

While it no doubt would have been better if Taylor
    Made had joined Atlific in the First Action so that the issue of liability for
    the work done could have been determined in one proceeding, failure to do so in
    the circumstances of this case does not in my view constitute an abuse of
    process as the courts have defined that term. The Action is not a misuse of the
    courts procedure that is so serious that it brings the administration of
    justice into disrepute. While s. 138 of the
Courts
    of Justice Act
provides that multiplicity of legal proceedings is to be
    avoided, where possible, failure to do so may give rise to cost consequences
    but not to the dismissal of an action.

[37]

Nor in my view can it be said that the Action is
    unfair to Atlific. It was not involved in the First Action. The record clearly
    indicates that it had some involvement at the time of the formation of the
    contract and thereafter. It has denied in the Action that it was acting as an
    agent for Venture Inns. Whether it is liable to Taylor Made for the services
    rendered remains to be determined in the Action.

Conclusion

[38]

The appeal is therefore allowed and the Order is
    set aside.

[39]

Taylor Made is entitled to its costs, both of
    the motion and the appeal, which are fixed at $5,000 in each case, inclusive of
    disbursements and applicable taxes.

Released: June 28, 2012 (J.C.M.)

L.A. Pattillo J. (ad hoc)

I agree. J.C. MacPherson
    J.A.

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


COURT OF APPEAL FOR ONTARIO

CITATION:
Tedford v. TD
    Insurance Meloche Monnex, 2012 ONCA 429

DATE: 20120622

DOCKET: C54479

Lang, Epstein and Hoy JJ.A.

BETWEEN

Damon Tedford

Applicant (Respondent)

and

TD Insurance Meloche Monnex

Respondent (Appellant)

Marc D. Isaacs and Bonnie Huen, for the appellant

Danesh Rana, for the respondent

Heard: April 5, 2012

On appeal from the judgment of Justice Roydon J. Kealey
    of the Superior Court of Justice dated September 22, 2011, with reasons
    reported at 2011 ONSC 5500, [2011] I.L.R. I-5197.

Hoy J.A.:

Overview

[1]

TD Insurance Meloche Monnex appeals the application judges September
    22, 2011 decision that it has a duty to defend the respondent, Damon Tedford,
    in an action alleging he made negligent misrepresentations in the Seller
    Property Information Statement completed in connection with the sale of his
    home. In that action, the plaintiff purchaser pleaded that, as a result of the
    misrepresentations, she has incurred and will continue to incur repair costs,
    and has suffered anxiety, sleep disturbances, fatigue, stress, headaches and
    symptoms of depression (the Health Consequences).

[2]

At the time of the alleged misrepresentations, the respondent held a
    homeowners insurance policy issued by the appellant, which provides coverage
    for damages the respondent is obligated to pay because of Bodily Injury or Property
    Damage. The application judge concluded that the Health Consequences amounted
    to Bodily Injury, a duty to defend therefore arose, and that duty extended to
    the entire action. It is common ground that the damages the respondent may have
    to pay with respect to the repair costs do not constitute Property Damage under
    the policy. But for the alleged Bodily Injury, a duty to defend would not have
    arisen.

[3]

The appellant advances two arguments on this appeal.

[4]

First, it renews the argument made to the application judge that the
    true nature of the plaintiffs claim is one for economic loss arising out of a
    commercial transaction, the claim for Health Consequences is derivative of that
    claim and, as such, based on
Non-Marine Underwriters, Lloyds of London v.
    Scalera
, 2000 SCC 24, [2000] 1 S.C.R. 551, should not be determinative of
    whether the appellant has a duty to defend.

[5]

Second, it argues that, if it has a duty to defend, it should not be
    responsible for 100 per cent of the defence costs. Of the plaintiffs $185,000
    damages claim, at least $150,000 relate to repair costs. The plaintiff seeks
    damages of approximately $25,000 for Health Consequences. Since the amount of
    damages related to Health Consequences is small in comparison to the claim for
    repair costs, the appellant argues it would be unreasonable for it to bear the
    cost of defending the entire claim.

[6]

For the reasons that follow, I am not persuaded that the plaintiffs
    claim for Health Consequences is a derivative claim within the meaning of
    that term in
Scalera.
I do, however, conclude that, on the facts of
    this case, the appellant should not be responsible for 100% of the defence
    costs. To that extent, I would allow the appeal.

The Policy

[7]

The homeowners insurance policy issued by the appellant applies to
    accidents or occurrences that take place during the term of the policy.

[8]

In Coverage F, the appellant agrees:

To pay on behalf of the Insured all sums which the latter shall
    become obligated to pay by reason of the liability imposed by law upon the
    Insured ... as damages ... because of Bodily Injury or Property Damage.

[9]

Bodily Injury is defined as physical injury, sickness or disease,
    including death resulting therefrom, sustained by any person.

[10]

Property
    Damage is defined as loss of or physical damage to or destruction of tangible
    property, including loss of use thereof resulting therefrom, and includes loss
    of use of tangible property which has not been physically damaged or destroyed
    provided such loss of use is caused by an accident.

[11]

In
    the policy, the appellant also agrees:

With respect to such insurance as is afforded by this
    Policy under coverage F, the insurer shall

(1) defend any suit against an Insured alleging
    such Bodily Injury or Property Damage and seeking damages on account thereof,
    even if such suit is groundless, false or fraudulent; but the Insurer may make
    such investigation, negotiation and settlement of any claim or suit as it deems
    expedient;

[12]

The
    policy contains various specific exclusions from coverage. None are argued to
    be relevant.

[13]

The
    policy does not provide for allocation of defence costs where an insured is subject
    to both covered and uncovered claims and the same costs are incurred in the
    defence of both covered and uncovered claims.

Legal principles governing an insurers duty to defend

[14]

The
    following principles emerge from the case law governing the duty to defend:

1.

The insurer has a duty to defend if the pleadings filed against the
    insured allege facts which, if true, would require the insurer to indemnify the
    insured:
Monenco Limited v. Commonwealth Insurance Company
, 2001 SCC
    49, [2001] 2 S.C.R. 699, at para. 28.

2. If there is any
    possibility that the claim falls within the liability coverage, the insurer
    must defend:
Nichols v. American Home Assurance Co.
, [1990] 1 S.C.R.
    801, at p. 810.

3. The court must look
    beyond the labels used by the plaintiff to ascertain the substance and true
    nature of the claims. It must determine whether the factual allegations, if
    true, could possibly support the plaintiffs legal claims:
Monenco
, at paras. 34-35; Scalera, at
    para. 79.

4.  The court should
    determine if any claims plead are entirely derivative in nature, within the
    meaning of that term as set out in
Scalera
.
    A derivative claim will not trigger a duty to defend.

5.  If the pleadings are
    not sufficiently precise to determine whether the claims would be covered by
    the policy, the insurers obligation to defend will be triggered where, on a
    reasonable reading of the pleadings, a claim within coverage can be inferred:
Monenco
, at para. 31.

6. In determining whether
    the policy would cover the claim, the usual principles governing the
    construction of insurance contracts apply, namely: the
contra proferentem
rule and the principle
    that coverage clauses should be construed broadly and exclusion clauses
    narrowly:
Monenco
, at para. 31;
    Scalera, at para. 70.  As well, the desirability, where the policy is
    ambiguous, of giving effect to the reasonable expectations of the parties:
    Scalera, at para. 71.

7. Extrinsic evidence that
    has been explicitly referred to in the pleadings may be considered to determine
    the substance and true nature of the allegations:
Monenco
, at para. 36; see
1540039
    Ontario Limited v. Farmers' Mutual Insurance Company (Lindsay)
,
    2012 ONCA 210.

The derivative claim issue

[15]

The
    appellant argues that the claim fo
r Health Consequences
    is derivative in
the sense that it flows from the economic loss
    allegedly sustained by the plaintiff as a consequence of the alleged
    misrepresentations, and not from the misrepresentations themselves.  The
    appellant bases this argument on
Scalera.

[16]

Scalera
, however,

is quite different from
    this case.
In
Scalera
, the plaintiff brought a civil suit for sexual
    assault. She claimed sexual battery, negligence and breach of fiduciary duty.
    The defendants homeowners insurance policy excluded coverage for bodily
    injury caused by any intentional or criminal act. The Supreme Court of Canada
    held that there was no duty to defend. Iacobucci J. described the negligence
    claim as merely derivative of the claim for sexual battery, and held that a
    derivative claim will not trigger a duty to defend.

[17]

What
    Iacobucci J. meant by derivative is important. He explained, at para. 85, that
    when the court is faced with a situation where both an intentional tort, which
    is excluded from coverage, and a non-intentional tort, are pleaded:

... a court construing an insurers duty to defend must decide
    whether the harm allegedly inflicted by the negligent conduct is derivative of
    that caused by the intentional conduct. In this context, a claim for negligence
    will not be derivative if the underlying elements of the negligence and of the
    intentional tort are sufficiently disparate to render the two claims unrelated.
    If both the negligence and intentional tort claims arise from the same actions
    and cause the same harm, the negligence claim is derivative, and it will be
    subsumed into the intentional tort for the purposes of the exclusion clause analysis.
    If, on the other hand, neither claim is derivative, the claim of negligence
    will survive and the duty to defend will apply ...
A claim should only be
    treated as derivative, for the purposes of this analysis, if it is an
    ostensibly separate claim which nonetheless is clearly inseparable from a claim
    of intentional tort.
[Emphasis added.]

[18]

In
    this case, only one cause of action  negligent misrepresentation  was advanced.
    The plaintiff does not allege that the respondent committed an intentional tort.
    The general damages for Health Consequences sought by the plaintiff represent a
    different category of damages resulting from the negligent misrepresentation,
    and not a derivative claim as contemplated by
Scalera.
I therefore see
    no error in the application judges assessment of the true nature of the bodily
    injury portion of the action.

The issue of apportionment of defence costs

[19]

Having
    regard to
Hanis v. Teevan
,

2008 ONCA 678, 92 O.R. (3d) 594, in
    my view, the application judge erred in requiring the appellant to defend the
    entire action without making provision for apportionment of the defence costs.

[20]

In
Hanis
, at para. 2, Doherty J.A. addressed how the costs of defending a
    lawsuit should be apportioned between the insurer and the insured when some,
    but not all, of the claims made in the lawsuit are covered by the policy:

Where there is an unqualified obligation to pay for the defence
    of claims covered by the policy, as in this case, the insurer is required to
    pay all
reasonable
costs associated with the defence of those claims
    even if those costs further the defence of uncovered claims. The insurer is not
    obligated to pay costs related solely to the defence of uncovered claims. [Emphasis
    added.]

[21]

In
Hanis
, the insured had denied its duty to defend and the defendant
    retained its own counsel and proceeded to trial. The issue of the insurers
    obligation to defend, and the apportionment of costs, was determined following
    trial. In this case, the respondent seeks to have the appellant assume the
    conduct of the defence, and the covered claims represent a small portion of the
    total damages claimed. Considerations not addressed in
Hanis
arise.

[22]

Hanis
establishes that an insurer is responsible for

all
reasonable
costs associated with the defence of a covered claim. As Doherty J.A.
    commented, at para. 23, the approach in
Hanis
is not unfair to the
    insurer: it does not result in an increase in the insurers liability for
    defence costs.

[23]

The
    respondent urged this court to follow
RioCan Real Estate Investment Trust
    v. Lombard General Insurance Co. of Canada
(2008), 91 O.R. (3d) 63 (S.C.),
    where the insurer was ordered to defend the entire action, although not all the
    claims were covered by the policy, and no order was made with respect to the
    allocation of costs.
RioCan
was decided before
Hanis
and is
    therefore not of assistance. Moreover, the facts in
RioCan
are
    different than those in this case. In
RioCan,
multiple theories of
    liability were advanced to support a claim for the same damages. The potential
    liability in respect of the covered claim was the same as that in respect of
    the uncovered claims.

[24]

I
    would direct, unless the parties otherwise agree, that the appellants counsel be
    instructed to defend both the covered and the uncovered claims, in a manner
    commensurate with the aggregate amount claimed, and that the respndent bear the
    costs of the defence, to the extent they exceed the reasonable costs associated
    with the defence of the covered claims. In determining the reasonable costs
    associated with the defence of the covered claims, it is appropriate to
    consider the quantum of the covered claims. It would be unfair to the insurer
    to fix it with defence costs that are disproportionate to the extent of its
    potential liability for the covered claim.

[25]

If
    the parties are unable to agree on an allocation of the costs, the appellant insurer
    shall be entitled to apply to the Superior Court of Justice for a determination
    of the allocation, in accordance with
Hanis
, after the matter is
    concluded or at such other time as the parties agree.

Costs

[26]

The
    appellant was unsuccessful on the derivative claim issue and successful on the issue
    of allocation of costs. In these circumstances, I would award the appellant costs
    of the appeal, inclusive of disbursements and taxes, in the amount of $5,000. I
    would set aside the costs order of the application judge and substitute the
    amount of $2,500, inclusive of disbursements and applicable taxes, payable to
    the appellant.

Released: June 22, 2012                              Alexandra
    Hoy J.A.

SEL                                                                  I
    agree S.E. Lang J.A.

I
    agree G.J. Epstein J.A.


COURT OF APPEAL FOR ONTARIO

CITATION:
Thurston (Re), 2012 ONCA 436

DATE: 20120621

DOCKET: C54946

Goudge, Watt and Hoy JJ.A.

IN THE MATTER OF: Stephen Thurston

AN APPEAL UNDER PART XX.1 OF THE CRIMINAL CODE

Stephen Thurston, appearing in person

Suzan E. Fraser,
amicus curiae

Jean Buie, for the Centre for Addiction and Mental
    Health

Grace Choi, for the respondent

Heard: June 18, 2012

On appeal against the disposition of the Ontario Review
    Board dated, October 28, 2011.

APPEAL BOOK ENDORSEMENT

[1]

It is clear that the Board misunderstood the joint submission of the
    parties. It imposed a condition more restrictive than that jointly submitted,
    although it clearly intended to impose the conditions jointly submitted.

[2]

We would correct this error by removing condition 2(e) in the
    disposition and substituting the condition that was jointly submitted and that
    the Board intended to impose, namely when residing in the General Forensic
    Unit to live in the community in accommodations approved by the person in
    charge.

[3]

Appeal allowed in accordance with these reasons.