COURT OF APPEAL FOR ONTARIO

CITATION:

Hav-A-Kar Leasing
    Ltd. v. Vekselshtein, 2012 ONCA 826

DATE: 20121128

DOCKET: C54392

Cronk, Epstein and Pepall JJ.A.

BETWEEN

Hav-A-Kar Leasing Ltd.

Plaintiff (Respondent)

and

Zinovi Vekselshtein also known as Zorik Vekselshtein

Defendant (Appellant)

and

Prestige Toys Ltd. and Ghasem Gil

Third Parties

W.A. Kelly, Q.C., for the appellant

M.S. Martin, for the respondent

J.W. Chidley-Hill, for the third parties

Heard: September 4, 2012

On appeal from the judgment of Justice Sidney N. Lederman
    of the Superior Court of Justice, dated February 8, 2011.

Cronk J.A.:

[1]

This appeal concerns the enforcement of the terms of an automobile lease
    agreement entered into by the appellant, Zinovi Vekselshtein, also known as
    Zorik Vekselshtein (ZV), with the respondent, Hav-A-Kar Leasing Ltd. (HAK),
    for the lease of a used BMW vehicle.  At issue is the trial judges ruling that
    ZV is liable to HAK for accelerated rent under the lease and for damages on
    account of HAKs loss on the sale of the BMW, as well as for various costs and expenses
    incurred by HAK in connection with its recovery and disposition of the car.

I.        Facts

(1)

The Lease
[1]

[2]

In the spring of 2008, ZV negotiated an agreement for the lease of a BMW
    automobile with Ghasem Gil (Gil), a manager and salesperson with Prestige
    Toys Ltd. (Prestige), a vendor of luxury used cars.  As Prestige was not in
    the vehicle-leasing business, it was arranged that HAK, a lease financing
    company, would purchase the BMW from Prestige for the sum of $73,000 in order
    to lease the vehicle to ZV.

[3]

On March 15, 2008, ZV entered into an automobile lease agreement with
    HAK for the rental of the BMW (the Lease).  ZV is described in the Lease as
    the lessee and HAK is described as the lessor.  Prestige and Gil are not
    parties to the Lease.

[4]

Under the Lease, ZV agreed to pay HAK a total monthly rental payment of
    $1,263.34 for the BMW during the four-year term of the Lease (clause 2).  He
    also agreed to insure the BMW (clause 6).

[5]

In the event of the lessees breach of the Lease, clause 16 provided that
    the lessor was entitled: (1) to the return or the re-taking of the BMW, (2) to
    re-lease or sell the vehicle at private or public sale, and (3) to payment of
    liquidated damages by the lessee.  Clause 16 stated, in part:

After deducting Lessors expenses incurred in connection with
    such sales or leasing, the total proceeds of (i) such sale or sales, less the
    value of the Vehicle at the end of the term provided for herein, as determined
    by an independent appraiser selected by the Lessor, and (ii) such leasing with
    respect only to the balance of the term provided for herein, shall be
    subtracted from the total rentals provided for herein then remaining unpaid.  The
    remainder shall be liquidated damages for the breach hereof by Lessee and shall
    be payable by Lessee to Lessor upon demand.

[6]

Clause 16 further stipulated:

The retaking by Lessor of the Vehicle and the sale or leasing
    of the Vehicle shall not affect the right of the Lessor to recover from Lessee
    any and all damages which Lessor may have sustained by reason of the breach by
    Lessee of any of the terms or provisions of this Lease.  In the event of any
    default, Lessee will pay to Lessor any solicitors reasonable fees incurred in
    enforcing or attempting to enforce its rights under this Lease and any other
    costs and expenses incurred by Lessor in connection therewith.

[7]

Clause 12 of the Lease provided that all right, title and ownership of the
    BMW would remain vested in the lessor for the duration of the Lease.  Under
    this provision, ZV agreed not to do or perform any act prejudicial thereto,
    and ... not to do any act to encumber, convert, pledge, sell, assign, rehire,
    underlet or lease, lend, conceal or abandon, give up possession of or destroy
    the Vehicle.

[8]

The delivery and return of the BMW to HAK was addressed in clause 14 of
    the Lease.  Under this provision, ZV agreed to forthwith redeliver the BMW to
    HAK upon the cancellation or the expiration of the Lease, or upon the
    cancellation of the insurance coverage for the BMW by the insurer.  He also agreed
    that upon redelivery:

[t]he Vehicle ... shall, except for normal and reasonable wear
    and tear, be in the same order and condition as it was when it was originally
    delivered to the Lessee.  The Lessee shall pay to the Lessor as additional rent
    the Lessors cost of repairing any damage or replacing any parts to the Vehicle
    not required only by reason of normal wear and tear.

[9]

Clause 9 of the Lease concerned risk and indemnity.  It read:

The Lessee further covenants and agrees to indemnify the Lessor
    for, and hold the Lessor free and harmless from any and all claims,
    liabilities, costs, expenses and damages, including legal expenses on a
    solicitor and client basis arising out of or connected with the ownership, possession,
    use, rental, leasing or operation of the Vehicle which may be made against or
    incurred by the Lessor, on [
sic
] which the Lessor may be obligated to
    pay or suffer.

[10]

The
    Lease made no provision for the substitution of the BMW, by the lessee, for
    another vehicle during the term of the Lease.

(2)

Guaranteed Residual Contract

[11]

Also
    on March 15, 2008, ZV and HAK executed a document entitled Guaranteed Residual
    Contract No. 9137 and Guaranteed Residual Value Letter, under which ZV guaranteed,
    in favour of HAK, the residual value of the BMW upon expiration of the Lease,
    in the sum of $39,500, plus certain costs and applicable taxes.  As with the
    Lease, Prestige and Gil are not signatories to this document.

(3)

Return of the BMW to Prestige

[12]

Within
    about one month of executing the Lease, ZV contacted Gil, indicating that he
    wished to exchange the BMW for another car.  Gil testified at trial that he
    told ZV that he had just leased the car and could not return it, and that HAK
    would not permit ZV to switch his vehicle.

[13]

Several
    months later, in September 2008, in the course of other vehicle-related
    dealings with Gil, ZV learned of a 2007 Mercedes automobile that was available
    for purchase from Prestige.  On September 25, 2008, without any prior notice to
    or communication with HAK, ZV returned the BMW to Prestige and purchased the
    Mercedes for the sum of $79,900.

[14]

ZV
    made all monthly lease payments due on the BMW to HAK until September 2008.  Upon
    ZVs purchase of the Mercedes, Prestige provided ZV with cheques for the BMW
    lease payments for the next three months.  The lease payments were remitted to
    HAK up to and including the month of December, 2008.

(4)

HAKs Recovery Attempts

[15]

In
    October 2008, HAK learned from the insurer of the BMW that the insurance
    coverage on the car that ZV was required by the terms of the Lease to maintain,
    had been cancelled effective October 31, 2008.  Terry Green, the principal of
    HAK, testified at trial.  The trial judge accepted his evidence that, on
    learning of this development, Green promptly called ZV and spoke to his wife.
    During their discussion, ZVs wife confirmed that ZV had purchased a new car
    from Prestige and had left the BMW with Prestige, which would look after it.
    Green told ZVs wife that HAK owned the BMW, asked why the car had been
    returned to Prestige, and warned that ZV was responsible for insuring the BMW.
    This was the first notice to HAK that the BMW was no longer in ZVs possession.

[16]

Green
    then called Gil at Prestige.  Gil acknowledged that ZV had delivered the BMW to
    Prestige and had purchased a new car from it.  He also informed Green that
    Prestige intended to find a new lessee to assume the Lease.  Green told Gil
    that Prestige had no right to take possession of the BMW and demanded the
    immediate return of the car to HAK.

[17]

The
    BMW remained in Prestiges possession for several months.  During this period, Gil
    proposed the names of several prospective new lessees to HAK.  However, these
    candidates were unacceptable to HAK as successor lessees because they had poor
    credit ratings.

[18]

In
    March 2009, Green again demanded the return of the BMW to HAK.  Gil took the
    position that if HAK wanted possession of the car, it was required to pay
    storage fees for six and one-half months.  The following month, HAK retained a bailiff
    to recover the BMW.  However, Prestige refused to return it.

[19]

On
    April 1, 2009, HAK sued ZV for damages and the return of the BMW.  ZV defended
    the action on the sole ground that the Lease was subject to an alleged
    collateral agreement with HAK, whereby the parties agreed that if ZV entered
    into the Lease, he would be entitled to return the BMW if he were dissatisfied
    with it and, in that event, he would have no further obligations under the
    Lease (the Oral Agreement).

[20]

In
    May 2009, HAK applied to the Superior Court for an order compelling the return of
    the BMW.  No relief was specifically sought on the application as against ZV
    and he took no position on the application.

[21]

HAK
    and Prestige resolved their dispute.  HAK paid Prestige $2,205 for storage fees
    in exchange for the return of the BMW.  HAK maintained that, on its return, the
    BMW was in poor condition, with serious electronic problems.  It repaired the
    vehicle, at a cost of approximately $5,000, and eventually sold the car at
    public auction for $32,000.

II.       The Trial

[22]

HAKs
    action against ZV proceeded to trial in January 2011.  HAK maintained that ZV
    had breached the Lease by failing to make the post-December 2008 monthly rental
    payments for the BMW, by defaulting on his obligation to insure the BMW, and by
    delivering possession of the car to Prestige without HAKs consent.  HAK claimed
    accelerated rental payments and damages for the costs and expenses incurred by
    it in recovering and disposing of the BMW, as well as for its loss on the sale
    of the vehicle.

[23]

As
    I have said, ZV defended the action and denied any liability to HAK based on
    the alleged Oral Agreement.  He also commenced third party proceedings against
    Prestige and Gil, claiming contribution and indemnity from them for any damages
    found owing by him to HAK.

[24]

Although
    not pleaded in his statement of defence, ZV also challenged, on several
    grounds, HAKs entitlement to and the quantum of the damages claimed.  Among
    other matters, he argued that: (1) the accelerated rent provision of the Lease
    (clause 16, quoted above) constituted a penalty clause rather than an agreement
    on liquidated damages and, hence, that it was unenforceable; (2) HAK had failed
    to mitigate its damages; and (3) he had no responsibility for various costs and
    expenses incurred by HAK to recover the BMW, or for HAKs loss on the sale of
    the BMW.

[25]

The
    trial judge rejected ZVs assertion that there was an Oral Agreement between ZV,
    HAK and Prestige.  He held that there was no evidence of such an agreement
    between HAK and ZV directly.  Moreover, there was no evidence of an agency or
    any actual authority given by HAK to Prestige to enter into a collateral agreement
    of the type asserted by ZV on HAKs behalf.  Further, there was no evidentiary
    basis for any claim that HAK held out or represented an agency relationship
    between HAK and Prestige to ZV.  Consequently, the trial judge held that HAK
    was not bound by any representations made to ZV by Gil or Prestige.

[26]

The
    trial judge also rejected ZVs challenges to HAKs damages claims, including his
    assertion that HAK failed to mitigate its damages and incurred recovery costs
    or expenses for which ZV was not responsible.

[27]

However,
    the trial judge accepted ZVs claim that he had concluded an arrangement with Prestige
    whereby Prestige assumed responsibility under the Lease for the BMW in
    consideration for ZVs purchase of the Mercedes.

[28]

Accordingly,
    by judgment dated February 8, 2011, the trial judge held that ZV was liable to
    pay HAK the amount of $72,358.80 on account of the accelerated rental payments
    due under the Lease and damages for the difference between the agreed
    guaranteed residual value of the BMW and the sale proceeds realized by HAK on
    its disposition, plus damages for various costs and expenses incurred by HAK in
    recovering and disposing of the BMW.  The trial judge also granted ZVs third
    party claim as against Prestige, but not as against Gill, for the full amount
    of ZVs liability to HAK.

III.      Discussion

[29]

Before
    this court, ZV challenges the trial judgment in two respects.  First, he attacks
    the trial judges liability finding, arguing that the trial judge erred by
    concluding that Gil or Prestige had no authority from HAK to negotiate the Oral
    Agreement with ZV, in addition to the Lease.

[30]

Next,
    ZV renews his attack on the trial judges holding that he is liable to HAK for
    certain of the damages claimed, namely, the damages associated with HAKs loss
    on the sale of the BMW and those damages related to the storage fees, repair
    costs and legal fees incurred by HAK in recovering and disposing of the BMW.

[31]

In
    my view, absent the alleged agency relationship between HAK and Prestige and/or
    Gil, the trial judges liability finding against ZV is unassailable.  In other
    words, if, as the trial judge found, the claim that Gill and/or Prestige had
    HAKs authority to negotiate the terms of the Oral Agreement is unsustainable,
    it follows that ZV is bound by the terms of the Lease.  Accordingly, I turn
    first to ZVs assertion that the Oral Agreement was entered into by ZV with Gil
    and/or Prestige, with HAKs authority.

(1)

Liability: Alleged Agency Relationship

[32]

ZVs
    argument on appeal concerning the Oral Agreement proceeds as follows.  First, he
    contends that the trial judge did not reject the existence of the Oral
    Agreement.  Rather, in effect, the trial judge erred by misapprehending or
    ignoring the evidence of Gils and/or Prestiges authority from HAK to enter
    into the Oral Agreement.  ZV argues that as Gil and/or Prestige had HAKs
    authority to negotiate the Oral Agreement, HAK is bound by that contract.  As
    the Oral Agreement was performed  ZV returned the BMW to Prestige  HAK has no
    claim against ZV for any payment or damages under the Lease.

[33]

I
    would reject this argument.

[34]

I
    note, first, that ZV continued to pay monthly rental payments on the BMW for at
    least three months after he returned the car to Prestige in September 2008.
    The fact that Prestige provided ZV with the funds necessary to make these
    payments does not alter the fact that they were made by and to the credit of
    ZV.  These payments are inconsistent with ZVs claim that his obligations under
    the Lease came to an end once he returned the BMW to Prestige and purchased the
    Mercedes as a substitute.  The trial judge does not comment on this
    inconsistency in his reasons.

[35]

That
    said, it is true that the trial judge did not reject the existence of the Oral
    Agreement, as between ZV and Gil and/or Prestige.  He held that there was no
    evidence of the existence of any collateral agreement entered into between [ZV]
    and [HAK]
directly
 (emphasis added).  Later in his reasons, when
    addressing ZVs third party claim against Gil and Prestige, the trial judge
    also held:

[52]    It is more likely than not that an arrangement was made
    directly between Prestige and [ZV] that if [ZV] was unhappy with the BMW it
    could be exchanged for another vehicle and that [ZVs] obligations under the
    Lease would be taken over initially by Prestige and then passed over to one of
    its customers.

...

[54]    Even with some minor inconsistencies in [ZVs]
    testimony, I accept [ZVs] evidence over Gils that an arrangement was entered
    into between him and Prestige whereby Prestige would take responsibility for
    the BMW under the Lease in return for his purchasing a newer Mercedes.  It does
    not make sense that [ZV] would continue with his obligations under the BMW
    Lease and at the same time purchase a newer Mercedes, both vehicles for his own
    personal use, unless Gil, in fact, made the representations in question and
    [ZV] relied upon them.

[36]

Thus,
    on my reading of his reasons, the trial judge found that while Prestige (acting
    through Gil) agreed, in its own interests, to step into ZVs shoes under the
    Lease, HAK was not a party to that agreement or arrangement.  I did not
    understand ZV to attack this finding on appeal.  Indeed, ZV acknowledged in his
    trial testimony that he never discussed the Oral Agreement with HAK and that
    Green, on HAKs behalf, never said anything to him similar to what ZV alleged
    Prestige had committed to under the Oral Agreement.

[37]

That,
    however, does not end the matter.  In his statement of defence, ZV alleged that
    HAK entered into the Oral Agreement with him.  He did not allege that an agent
    of HAK concluded, and thereby bound HAK to, the Oral Agreement.  Nonetheless,
    the trial judge expressly considered ZVs assertion that Prestige and/or Gil
    entered into the Oral Agreement with the authority of HAK.  This constituted a
    claim of agency between Prestige and/or Gil and HAK.

[38]

The
    trial judge noted, correctly, that the burden of proof to establish agency
    rests with the party who asserts its existence.  He then made the following
    factual findings:

[41]    There is no evidence of an agency or that any actual
    authority was given to Prestige by [HAK].  Moreover, there is no evidence that
    [HAK] ever held out to [ZV] that there was an agency relationship.  In the
    circumstances of this case, there was no conduct or statements of [HAK], the
    alleged principal, that clearly and unequivocally establish that the alleged
    agent, Prestige, was represented to [ZV] as possessing [HAKs] authority in respect
    of the lease transaction in issue.

[39]

There
    is nothing in the record before us, and ZV was unable to point to any evidence,
    establishing that these findings are tainted by palpable and overriding error
    or that the trial judges appreciation of the evidence was flawed.

[40]

On
    the contrary, the trial judges rejection of the alleged agency relationship
    between HAK and Prestige and/or Gil is supported by the following:

(1)

HAK and ZV were the only parties to the Lease and the Guaranteed
    Residual Contract. Neither Prestige nor Gill is mentioned in either document;

(2)

clause 12 of the Lease stated, in unambiguous and clear language, that
    HAK was the owner of the BMW.  Under the same provision, ZV expressly
    covenanted and agreed not to give up possession of or abandon the BMW;

(3)

on the trial judges uncontested findings, ZV knew that Green was the
    President of HAK, that HAK and Prestige were separate entities, and that HAK,
    rather than Prestige, owned the BMW and leased it to ZV;

(4)

according to Green, ZV never suggested to him that the BMW could be
    returned if ZV was unhappy with the car, or that ZV could be released from his
    obligations under the Lease; and

(5)

ZV did not plead any agency relationship between HAK and Prestige and/or
    Gil, or any representations by any party indicating that ZV was entitled, in
    effect, to unilaterally cancel the Lease and exchange the BMW for another
    vehicle if he were dissatisfied with it. These allegations appear to have first
    been raised at the close of trial, after HAK had presented its case and all
    evidence had been tendered.  At no time did ZV seek to amend his statement of
    defence to advance an agency or misrepresentation defence to HAKs claims.

[41]

ZV
    argues that Prestige and Gil, with HAKs knowledge and authority, negotiated
    the purchase price for the BMW, the monthly rental payments and the guaranteed
    residual value of the BMW with ZV.  ZV also emphasizes that he had no contact
    with HAK until the day the Lease was signed.  In these circumstances, he submits,
    Prestige and/or Gil had the authority to negotiate the Lease and the Oral
    Agreement on behalf of HAK.

[42]

I
    disagree.  It is well-established that the actual authority of an agent requires
    a manifestation of consent by the principal to the agent that the agent
    should act for or represent the principal:
Monachino v. Liberty Mutual Fire
    Insurance Co.
(2000), 47 O.R. (3d) 481 (C.A.), at para. 33.  Further,
    apparent or ostensible authority in favour of an agent only arises where the
    alleged principal has impliedly represented that another person has the
    authority to act on the principals behalf.  The implied representation must be
    that of the principal, not that of the agent.  See
Monachino
, at
    paras. 35-36;
Hunters Square Developments Inc. v. 351658 Ontario Ltd.
(2002), 60 O.R. (3d) 264 (S.C.), at para. 23, affd (2002), 62 O.R. (3d) 302
    (C.A.), at para. 9.

[43]

There
    is no evidence in this case that HAK authorized Prestige  impliedly or
    otherwise  to act on its behalf in respect of any collateral agreement with ZV
    concerning the Lease, or the rental of the BMW.  The absence of such evidence
    is fatal to ZVs agency claim.  ZV failed to establish at trial the legal
    requirements for a finding of agency, on any basis, between HAK and Prestige
    and/or Gil with respect to the Oral Agreement.

[44]

I
    therefore see no justification for appellate interference with the trial
    judges holding that HAK is not bound by any representations made to ZV by Gil and/or
    Prestige.  In my view, the appellants arguments to the contrary are designed
    to displace the trial judges factual findings on appeal.  As I have already
    said, the challenged findings are firmly anchored in the evidentiary record.

[45]

I
    would dismiss ZVs appeal from the trial judges liability finding.

(2)

ZVs Attack on the Damages Awards

[46]

In
    the absence of the alleged Oral Agreement binding HAK, it is my view that the
    trial judges damages awards are unassailable.  The provisions of the Lease
    govern the relations between ZV and HAK and ZV is bound by its terms.  I will
    comment briefly on ZVs grounds of appeal from the damages awarded to HAK.

[47]

In
    his factum, ZV renewed his argument, advanced at trial, that the accelerated
    rent provision of the Lease constitutes a penalty clause and, consequently,
    that it is unenforceable as against ZV.  Again, I disagree.

[48]

I
    note that this defence to HAKs claim for accelerated rent was not pleaded by
    ZV.  Nonetheless, as with the other unpleaded defences raised by ZV at trial, the
    trial judge fully considered, and rejected, this argument.  In doing so, the
    trial judge properly identified the controlling legal principles and applied
    them to the terms of the Lease entered into by the parties.  As he observed,
    there is considerable contemporary precedent for the enforcement of contractual
    rent acceleration clauses upon default of automobile leases: see for example,
Keneric
    Tractor Sales Ltd. v. Langille
, [1987] 2 S.C.R. 440;
Peachtree II
    Associates  Dallas LP

v. 857486 Ontario Ltd.
(2005), 76 O.R.
    (3d) 362 (C.A.), leave to appeal to S.C.C. refused, [2005] S.C.A.A. No. 420.
    This reflects the reluctance of the courts to interfere with freedom of
    contract, including the right of contracting parties to agree on the
    consequences of a contractual breach.

[49]

The
    trial judge concluded in this case that the accelerated amount provided for in
    the challenged provision of the Lease, clause 16, is not excessive or
    unconscionable and that it merely puts [HAK] in the position it would have
    been in if [ZV] had performed his obligations under the contract (at para. 48).
    These findings accord with the standard measure for compensatory damages in
    contract, under which the plaintiff is entitled to the value of the promised
    performance of the contract.  As held in the seminal case of
Wertheim v.
    Chicoutimi Pulp Co.
, [1911] A.C. 301, at p. 307, the damages awarded to
    the plaintiff for breach of contract should place the plaintiff in the same
    position as if the contract had been performed.

[50]

That
    is what occurred in this case.  The accelerated rent provision in clause 16 of
    the Lease reflects the parties bargain at the time the Lease was entered into regarding
    the reasonably anticipated damages that HAK would probably suffer if ZV were to
    breach the terms of the Lease.  This is consistent with the basic principles
    underlying expectation damages in contract set out in
Hadley v. Baxendale
(1854), 9 Exch. Rep. 341, 156 E.R. 145 (Eng. Ex. Div.), at p. 151.

[51]

I
    note that ZV pointed to no evidence at trial suggesting that the accelerated rent
    provision of the Lease was unfair or unconscionable, or that it did not reflect
    the parties reasonable estimate, at the time the Lease was executed, of the probable
    damages that would arise upon ZVs breach of the Lease.

[52]

I
    therefore agree with the trial judge that the challenged provision is
    enforceable as against ZV.

[53]

ZV
    next contends that the trial judge erred by finding that HAK attempted, acting
    reasonably, to mitigate its damages.  I would not accede to this contention.

[54]

ZV
    complains that HAK sold the BMW at a loss instead of re-leasing the vehicle to
    a prospective lessee identified by Gil or another lessee.  He also complains
    that HAK allowed the BMW to remain in Prestiges possession for many months
    after HAK learned, in October 2008, that ZV had returned the vehicle to
    Prestige in breach of his obligations under the Lease and also defaulted on his
    contractual obligation to maintain insurance on the BMW.  ZV says that in the
    months prior to HAKs recovery of the BMW, the market value of the vehicle
    diminished, a loss that HAK could have avoided if it had recovered the BMW
    earlier and re-leased it.

[55]

There
    are several difficulties with this failure-to-mitigate argument.  First, although
    ZV did not advance these complaints in his statement of defence, the trial
    judge addressed ZVs failure-to-mitigate argument on its merits.  He held, at
    para. 50, that on the evidence HAK took reasonable steps to mitigate its
    damages when it first learned that the BMW was no longer insured by [ZV] and in
    the possession of Prestige.  He found that HAKs mitigation efforts included
    repeated demands for the return of the BMW, investigation of the
    creditworthiness of the prospective successor lessees proposed by Gil, and the
    expenditure of appropriate costs in recovering, repairing and selling the BMW
    at a commercially reasonable price.  The trial judge also found that HAK took
    reasonable steps in disposing of the BMW at public auction, as it was entitled
    to do under clause 16 of the Lease, and that HAK realized the most reasonable
    return on its disposition.  The trial judge put it this way, at para. 49: [HAK]
    took reasonable steps in disposing of the automobile at a reputable auction
    house that exposed the vehicle for sale on the market and achieved the most
    reasonable return on its disposition.

[56]

Second,
    and importantly, as the trial judge noted, there was no evidence at trial that
    re-leasing the BMW would have been more favourable than selling it.

[57]

These
    findings by the trial judge were open to him on the evidence.  They attract
    deference from this court.  In particular, whether HAKs mitigation efforts
    were reasonable in all the circumstances was a question squarely within the
    trial judges adjudicative domain.  Absent palpable and overriding error, there
    is no basis for appellate interference with the trial judges mitigation
    findings.

[58]

Third,
    I emphasize that this is not a case where the respondent was inactive and
    failed to take any reasonable steps to mitigate its losses.  Rather, on the
    trial judges findings, HAK took reasonable, proactive steps to recover the
    BMW, to repair it for resale and to obtain a commercially reasonable sale price
    in the open market, all as permitted by the agreed terms of the Lease.

[59]

As
    the Supreme Court recently confirmed in
Southcott Estates Inc. v. Toronto
    Catholic District School Board
, 2012 SCC 51, at para. 24, where it is
    alleged that a plaintiff failed to mitigate, the defendant bears the burden of
    establishing that the plaintiff failed to make reasonable efforts to mitigate
    and that mitigation was possible.  See also
Red Deer College v. Michaels
,
    [1976] 2 S.C.R. 324, at p. 331;
Asamera Oil Corporation Ltd. v. Sea Oil
    & General Corporation
, [1979] 1 S.C.R. 633, at pp. 647-648
;
and
Evans v. Teamsters Local Union No. 31
, 2008 SCC 20, [2008] 1 S.C.R. 661,
    at para. 30.  ZV failed to discharge his burden under both branches of this
    test.

[60]

Accordingly,
    I would reject ZVs claim that the trial judge erred in his mitigation analysis
    and findings.

[61]

Finally,
    ZV submits that certain of the other losses suffered by HAK, for which it was
    awarded damages at trial, were not caused by ZV.  He points to the $7,500 loss
    sustained by HAK on the sale of the BMW (measured against its residual value as
    agreed by the parties), the legal fees incurred by HAK to recover the vehicle
    ($7,852.31), and the costs incurred by HAK to repair the car before it was sold
    at auction ($4,946.30).  I would reject these submissions.

[62]

As
    I have indicated, it was open to the trial judge to conclude, as he did, that
    HAKs conduct in selling, rather than re-leasing, the BMW was reasonable in the
    circumstances.  Clause 16 of the Lease expressly confirmed HAKs right to re-lease
    or sell the BMW at public sale on its return to HAK, at HAKs option.

[63]

Clause
    16 also provided that ZV would pay HAKs reasonable legal fees incurred in
    enforcing or attempting to enforce its rights under the Lease, as well as any
    other associated costs and expenses incurred by HAK in that regard.  Clause 9
    of the Lease imposed liability on ZV for HAKs legal expenses arising out of or
    connected with the ownership or possession of the BMW.  As I have said, the
    Lease also prohibited ZV from relinquishing possession of or abandoning the BMW
    (clause 12).

[64]

Moreover,
    under clause 14 of the Lease, ZV agreed to return the BMW to HAK in the same
    condition as it was on delivery of the car to him, save for normal wear and
    tear, and to pay HAKs costs of repairing any damage or replacing any parts to
    the BMW not required only by reason of normal wear and tear.

[65]

Thus,
    it was well within the contemplation of the parties at the time of the
    formation of the Lease that, in the event of ZVs default under the Lease, he
    would be responsible for the types of losses that he now disputes.

[66]

Nor,
    in the circumstances, can any complaint regarding the quantum of HAKs
    challenged losses succeed. The trial judge addressed the reasonableness of
    HAKs damages claims for its loss on resale of the BMW, legal fees incurred to
    recover the vehicle, and the costs of repairs to the BMW prior to resale.  He
    held that the losses in question were reasonably sustained and that the terms
    of the Lease permitted HAK to recover those losses from ZV.  I see no basis on
    which to disturb these factual findings.

[67]

In
    all the circumstances, I conclude that ZVs challenges to the trial judges
    damages awards must fail.  It remains open to ZV, in accordance with the trial
    judges ruling in the third party proceeding, to seek full reimbursement from
    Prestige for all damages owed by ZV to HAK.

(3)

The Pleadings Issue

[68]

In
    light of my proposed disposition of this appeal, it is unnecessary to consider
    whether ZV is precluded from relying on defences that he failed to plead.
    However, as this matter was fully argued, I make the following observations.

[69]

The
    failure to raise substantive responses to a plaintiffs claims until trial or,
    worse, until the close of trial, is contrary to the spirit and requirements of
    the
Rules of Civil Procedure
and the goal of fair contest that
    underlies those Rules.  Such a failure also undermines the important principle
    that the parties to a civil lawsuit are entitled to have their differences
    resolved on the basis of the issues joined in the pleadings.  I endorse in this
    regard, the concerns expressed by MacPherson J.A. of this court in
Strong
    v. M.M.P.
(2000), 50 O.R. (3d) 70 (C.A.), at paras. 33-40.

[70]

Thus,
    in my opinion, where a defence to a civil action is not pleaded and no
    pleadings amendment is obtained, judges should generally resist the inclination
    to allow a defendant to raise and rely on the unpleaded defence if trial
    fairness and the avoidance of prejudice to the plaintiff are to be achieved.

IV.     Disposition

[71]

For
    the reasons given, I would dismiss the appeal.  I would award HAK its costs of
    the appeal, fixed in the amount of $10,000, inclusive of disbursements and all
    applicable taxes.  I would award no costs to the third parties, who took no
    position on this appeal.

Released:

Nov 28 2012                                    E.A.
    Cronk J.A.

EAC                                                I
    agree Gloria Epstein J.A.

I
    agree S. Pepall J.A.

[1]
The materials filed on appeal include several written riders to the Lease.  The
    parties were unable to confirm whether these riders formed part of the Lease,
    they placed no reliance on the riders on appeal, and the trial judges reasons
    contain no mention of the riders.  In these circumstances, my interpretation of
    the Lease does not extend to the riders, the pertinent contents of which
    appear, in any event, to be consistent with the relevant terms of the Lease.


COURT OF APPEAL FOR ONTARIO

CITATION:
Heydary
    Hamilton PC v. Bay St. Documents Inc., 2012 ONCA 832

DATE: 20121128

DOCKET: C54945

Blair, Rouleau and Tulloch JJ.A.

BETWEEN

Heydary Hamilton PC

Plaintiff (Respondent)

and

Bay St. Documents Systems Inc., Xerox Canada Ltd.
    and
De Lage Landen Financial Services Canada Inc.

Defendants (Appellant)

AND BETWEEN

De Lage Landen Financial Services Canada Inc.

Plaintiff by Counterclaim

(Appellant)

and

Heydary Hamilton PC and
    Heydary Hamilton Professional Corporation

Defendants to
    the Counterclaim

(Respondents)

Micheal Simaan, for the appellant De Lage Landen
    Financial Services Can. Inc.

David K. Alderson, for the respondent Heydary Hamilton
    PC

Heard and released orally: November 19, 2012

On appeal from the judgment of Justice J. Wilson of the Superior
    Court of Justice, dated December 22, 2011.

ENDORSEMENT

[1]

The appellant appeals the dismissal of its summary judgment motion
    whereby it sought dismissal of the respondents claim and judgment on its
    counterclaim. The appellant also appeals the dismissal of its counterclaim.

[2]

In the present action, the respondent alleges that it was sold defective
    equipment by Xerox and its agent, Bay St. Documents Inc. The appellant financed
    the respondents purchase by way of an equipment lease (the lease agreement).
    It counterclaimed, alleging default under the lease agreement.

[3]

The motion judge held that no contract had been entered into between the
    appellant and respondent, either because the offer to lease had elapsed or was
    vitiated by events that intervened between the offer and acceptance. The
    respondent signed the proposed lease agreement on November 19, 2008, but the
    appellant did not sign and return it until sometime in January or February
    2009. The motion judge considered this to have been an unreasonable length of
    time. Additionally, during the period between November 19, 2009 and February
    2009, the equipment had come to appear defective. In the motion judges view, these
    defects vitiated the respondents offer before it was accepted by the appellant.

[4]

We disagree with the motion judges conclusion. On the issue of delay,
    although the appellant did not sign the lease agreement upon receipt and did
    not promptly return a signed copy by the respondent, there remains at minimum a
    triable issue as to whether the contract was accepted by conduct. At common
    law, an offer can be accepted by conduct if a) the conduct was performed with a
    view to acceptance of the offer and not for some other motive and b) the
    conduct was intended to serve as acceptance of the offer in question: G.H.L.
    Fridman,
The Law of Contracts in Canada
at p. 52.

[5]

In the present case, the funds advanced pursuant to the lease agreement
    were used to finance part of the buyout of the respondents equipment lease for
    the Ricoh equipment being replaced, and to finance the purchase and delivery of
    Xerox equipment selected by the respondent. The advances were made before the
    respondent signed the lease. It is tenable that these acts were done with a
    view to accepting the offer and were, indeed, intended to be an acceptance of
    the offer.

[6]

With respect to the submission that the offer had been vitiated due to
    an intervening event, we also disagree. There is at least a triable issue as to
    whether there was a change in the condition of the goods after the respondent
    signed the lease agreement.

[7]

Unilateral mistake and unconscionability were also raised by the
    respondent as constituting a defence to the appellants contractual claims. The
    motion judge was satisfied that there was sufficient conflicting evidence that
    a trial was the most suitable medium for resolving these issues. We would not
    interfere with that finding.

[8]

Although we agree that the existence of a contract may, generally, be an
    issue suited for summary judgment, we do not think the present matter
    constitutes such a case. The arguments raised in this appeal indicate that
    there might be a valid and enforceable contract, thus presenting a chance of
    success to the counterclaim. However, this issue can only be fairly and justly
    resolved by means of a trial. In the present case, the allegations impugn the
    role and involvement of Bay St. Documents Inc. in the transactions. Whether
    there was an offer and acceptance turns on an assessment of the parties
    intentions at various points in the negotiations. Such an assessment is a
    matter best determined at trial.

[9]

For these reasons, we would allow the appeal, set aside the judgment and
    substitute a dismissal of the appellants summary judgment motion.

[10]

Costs
    of the motion below are in the cause, in an amount to be determined by the
    trial judge. The appellant is entitled to its costs of the appeal fixed in the
    amount of $12,500 inclusive of disbursements and all applicable taxes payable
    forthwith.

R.A.
    Blair J.A.

Paul
    Rouleau J.A.

M.H.
    Tulloch J.A.


COURT OF APPEAL FOR ONTARIO

CITATION:
Hectare Inc. (Hectare GMAC Real
    Estate) v. Goodman, 2012
ONCA 820

DATE: 20121126

DOCKET: C55320

Winkler C.J.O., Pepall J.A., and Smith J. (
ad
    hoc
)

BETWEEN

Hectare Inc., o/a Hectare GMAC Real Estate

Plaintiff (Appellant)

and

Hugh Goodman, 1517418 Ontario Inc.,
David Burn
,
Bennett Burn LLP
,
Carman McLelland
, and
McLelland
    Law

Defendants (
Respondents
)

Chris J. Cosgriffe and A. Blackwood, for appellant

Michael R. Kestenberg, for the respondents

Heard and released orally: November 21, 2012

On appeal from the judgment of Justice Matlow of the Superior
    Court of Justice, dated January 26, 2012.

ENDORSEMENT

[1]

While the motion judges reasons are brief and not detailed, we are
    satisfied that he reached the correct result. The plaintiff has already obtained
    the judgment for the full amount of their loss in a separate lawsuit.

[2]

Furthermore, based upon the record before us, we are not persuaded there
    is a genuine issue requiring a trial because the plaintiff has not established
    damages as against these defendants.

[3]

Accordingly, the appeal is dismissed. Costs to the respondents in the
    amount of $10,000 inclusive of disbursements and applicable taxes.

Winkler C.J.O.

S.E. Pepall J.A.

Patrick Smith J. (
ad hoc
)


COURT OF APPEAL
    FOR ONTARIO

CITATION:
Holmes v. Lerners
    LLP, 2012 ONCA 829

DATE: 20121128

DOCKET: C55537

Simmons, Cronk and Rouleau JJ.A.

BETWEEN

Scott Paul Holmes, The Scott Holmes Living Trust
    and the Corporation Controlled by Scott Holmes

Applicants (Respondents)

and

Lerners LLP

Respondent (Appellant)

Liza C. Sheard and Andrea M. Hill, for the appellant

Marc A. Munro, for the respondents

Heard: November 13, 2012

On appeal from the judgment of Justice J.A. Ramsay of the
    Superior Court of Justice, dated April 27, 2012.

By the Court:

[1]

The appellant solicitors appeal from the judgment of the application
    judge who directed the assessment of their legal accounts pursuant to the
Solicitors
    Act
. The respondents seek leave to cross appeal from the application judges
    decision denying them their costs of the application.

[2]

Because the accounts had been delivered more than 12 months before the
    application was brought and the accounts had already been paid, the respondents
    were required to show that special circumstances existed which warranted
    granting the application for an assessment. The application judge concluded
    that special circumstances existed because the bills were large, the delay in
    seeking an assessment order was relatively short, the bills had been paid by a
    court-appointed receiver rather than by the respondents themselves and,
    finally, any prejudice the appellant might suffer could be compensated by an
    appropriate direction for costs.

[3]

The appellant argues that the application judge misapprehended material
    evidence, failed to apply the principles that should have guided his exercise
    of discretion and failed to give sufficient weight to the relevant
    considerations.

[4]

We would not give effect to this submission. Sections 4 and 11 of the
Solicitors
    Act
, R.S.O. 1990, c. S. 15 give the court a broad discretion to determine
    whether special circumstances exist such that an assessment ought to be
    allowed. As stated by Doherty J.A., at para. 4 of
Guillemette v. Doucet
,
    2007 ONCA 743, A finding of special circumstances turns on a fact driven
    exercise of judicial discretion. This court will defer to that discretion absent
    an error in principle or a clearly unreasonable result. Although we agree with
    the appellant that certain parts of the application judges reasons could have
    supported a conclusion that the assessment of the appellants accounts was not
    justified, in the end, after weighing all the relevant factors, the application
    judge reached the conclusion that special circumstances existed in this case.

[5]

The application judges analysis and rejection of many of the grounds
    advanced by the respondents demonstrates that he was alive to all the arguments
    placed before him. This does not, however, take away from the application
    judges conclusion that special circumstances existed. As he found, the amount
    of the accounts was very significant, a total of about $650,000 in less than a
    year. In addition, although the accounts had been paid, they were paid by a
    court-appointed receiver who, in reviewing the accounts, would have had a
    different perspective and different concerns than those of the respondents.

[6]

The appellant further argues that, by concluding that the absence of
    prejudice to the appellant was relevant and supported his conclusion that
    special circumstances existed, the application judge, in effect, imposed an
    onus on the appellant to demonstrate prejudice.

[7]

We disagree. The application judge did not conclude that the absence of
    prejudice constituted special circumstances. It was simply one of a
    constellation of factors he considered in reaching his conclusion.

[8]

With respect to the cross appeal on costs, the respondents argue that,
    since they were successful on the application, they ought to have been awarded their
    costs.

[9]

The application judge exercised his discretion not to award costs to the
    respondents due in large part to his conclusion that a significant part of the
    application was devoted to dealing with the respondents numerous and serious
    allegations of bad conduct said to have been committed by the appellant. These
    allegations were all rejected by the application judge.

[10]

These
    unfounded and serious allegations not only consumed an inordinate length of
    time at the hearing, they had previously been considered and rejected by a
    judge, as well as the Law Society of Upper Canada.

[11]

Costs
    awards are entitled to a high degree of deference and, in our view, the
    application judge did not err in principle in fashioning his costs award. Nor
    is the costs award plainly wrong. See
Hamilton v. Open Window Bakery Ltd.
,
    [2004] 1 S.C.R. 303. Finally, it was within the application judges discretion
    to decline to award costs in the circumstances of this case.

[12]

For
    these reasons, both the appeal and the cross appeal are dismissed.

[13]

The
    respondents were successful on the appeal and are entitled to their costs. The
    amount awarded, however, needs to take into account the fact that they were
    unsuccessful on their cross-appeal. In the circumstances, therefore, we award
    the respondents costs on a partial indemnity scale fixed at $8,500, inclusive
    of disbursements and applicable taxes.

J.M.
    Simmons J.A.

E.A Cronk J.A.

Paul Rouleau J.A.

Released: November 28, 2012


COURT OF APPEAL FOR ONTARIO

CITATION:
Hurst v. Aviva
    Insurance Company, 2012 ONCA 837

DATE: 20121129

DOCKET: C55032, C55033, C55044, & C55087

Simmons, Juriansz and Epstein JJ.A.

BETWEEN

Karen
    Hurst, Gillian Cornie, Devinder Singh,

and Elizabeth Clark

Plaintiffs (Respondents)

and

Aviva Insurance Company, Security National Insurance
    Company o/a TD Meloche Monnex, Aviva Canada Inc. and State Farm Mutual
    Automobile Insurance Company

Defendants (Appellants)

and

Insurance
    Bureau of Canada and Ontario Trial Lawyers Association

Interveners

Eric K. Grossman, for the appellants State Farm Mutual
    Automobile Ins. Co.

David Silverstone and Jennifer Matic, for the appellants
    Security National Insurance Company

Catherine Korte, Pamela Quesnel and Matthew Dugas, for
    Aviva Insurance Company

Bruce Kelly, for the respondents Karen Hurst, Gillian
    Cornie, Devinder Singh and Elizabeth Clark

John Craig and Vivian Bercovici, for the intervener Insurance Bureau of Canada

M. Steven Rastin and Stanley Pasternak, for the
    intervener Ontario Trial Lawyers Association

Heard: July 19, 2012

On appeal from the judgment of Justice J.W. Sloan of the
    Superior Court of Justice, dated February, 8, 2012.

Juriansz
    J.A.:

A.

introduction

[1]

These appeals were heard together because they raise a common question
    related to the functioning of the provinces no-fault system of automobile
    insurance. The question is when insured persons can commence court actions
    against their own insurers to claim benefits under the
Statutory Accident
    Benefits Schedule
, O. Reg. 34/10 (SABS). This is a pure question of law
    depending on the interpretation of the statutory scheme under the
Insurance
    Act
, R.S.O. 1990, c. I.8 (the Act).

B.

background facts

[2]

The respondents are four individuals who were victims of motor vehicle
    accidents in which they sustained serious injuries. The facts for each
    respondent followed a similar pattern.

[3]

At the time of their respective accidents, the respondents each held a
    valid policy of insurance issued by one of the appellants. Disputes
    subsequently arose between each of the respondents and their respective
    insurers concerning their entitlement to statutory accident benefits. Those
    disputes, as stipulated in s. 279(1) of the Act, must be resolved in
    accordance with sections 280 to 283 [of the Act] and the
Statutory Accident
    Benefits Schedule
.

[4]

Subsection 281(2) of the Act prevents insured persons from resorting to
    court actions against their insurers unless they first sought mediation and
    mediation failed. Accordingly, the respondents applied to the Financial
    Services Commission of Ontario (FSCO) for mediation of their disputes. FSCO is
    the administrative agency responsible for administering Ontarios statutory
    scheme regulating auto insurance.

[5]

The respondents took the position that mediation must be completed
    within 60 days of their applications to FSCO. In support of their position,
    they relied on several provisions in the Act, the
Automobile Insurance
    Regulations
, R.R.O. 1990, Reg. 644 (the regulations), and FSCOs Dispute
    Resolution Practice Code (DRPC).

[6]

The respondents waited at least 60 days after the date of their
    applications for FSCO to appoint a mediator and for mediation to take place.
    However, no mediator was appointed during that time period and mediation had
    not commenced in any of the respondents cases.

[7]

The respondents submitted that mediation had failed because the
    prescribed time for mediation set out under the Act and the regulations had
    expired. Each of the respondents wrote a letter to FSCO requesting a mediators
    report declaring that the time for mediation had elapsed and that mediation had
    failed for the purpose of s. 281(2) of the Act.

[8]

FSCO refused the respondents requests. In a letter to each of the
    respondents, FSCO took the position that the prescribed time limit for
    conducting mediation did not begin to run until an application for mediation had
    been assessed by FSCO staff and found to be complete. Given that this had not
    occurred in any of the respondents cases, FSCO refused to provide a report declaring
    that mediation had failed.

[9]

Each of the respondents then commenced a court action against his or her
    insurer claiming the disputed statutory accident benefits. In response, the insurers
    brought motions to strike or stay the respondents actions, arguing they were barred
    by s. 281(2) of the Act. The insurers motions were heard together by Sloan J.,
    who dismissed the motions. The insurers appeal that decision to this court.

[10]

The
    common legal question raised in these appeals is when, for the purposes of s.
    281(2), mediation has failed so that an insured person may bring an action in
    court.

C.

statutory scheme

[11]

Ontario
    has adopted a comprehensive statutory scheme regulating automobile insurance. An
    integral part of this scheme is the process for resolving disputes between
    insured persons and their insurers set out in ss. 280 to 283 of the Act and in the
    regulations.  Central to this process is the mandatory mediation of such
    disputes. Subsection 281(2) of the
Act
    prevents insured persons from commencing court actions unless they have first
    sought mediation and it has failed
.

[12]

The
    full text of s. 281(2) provides:

281. (2) No person may bring a
    proceeding in any court, refer the issues in dispute to an arbitrator under
    section 282 or agree to submit an issue for arbitration in accordance with the
Arbitration
    Act, 1991
unless mediation was sought, mediation failed
    and, if the issues in dispute were referred for an evaluation under section
    280.1, the report of the person who performed the evaluation has been given to
    the parties.

[13]

Section
    280 deals with how the statutory mediation process should take place. Subsection
    280(2) specifies that the process is started when any party files an
    application for mediation with FSCO. Once a party has filed for mediation, s.
    280(3) requires the Director of Arbitrations under the Act to promptly appoint
    a mediator. Subsection 280(4) states that the mediator is required to attempt
    to effect a settlement within the time prescribed in the regulations.  The
    entire provision states:

280.(4) The mediator shall inquire into the issues in
    dispute and attempt to effect a settlement of as many of the issues as possible
    within the time prescribed in the regulations for the settlement of the type of
    dispute in question.

[14]

Particularly
    relevant for this appeal is s. 280(7) of the Act, as it deals with when
    mediation has failed. It states the following:

280.(7) Mediation has failed when the mediator has
    given notice to the parties that in his or her opinion mediation will fail, or
when the prescribed or agreed time for
    mediation has expired and no settlement has been reached
.

[15]

Pursuant
    to s. 280(6), a mediator, at any time before settlement is effected, may notify
    the parties of his or her opinion that mediation will fail.

[16]

Section
    10 of the regulations requires a mediator to attempt to effect a settlement of
    a dispute within 60 days after the date on which the application for the
    appointment of a mediator is filed.

[17]

The
    DRPC also sets out time limits for the mediation process. Under the heading Time
    Limits for Mediation, Rule 19 provides that mediation must be concluded within
    60 days of the filing of a properly completed application for mediation,
    unless the parties agree otherwise.

[18]

The
    parties may extend the time for the completion of the mediation process by
    agreement, pursuant to s. 280(5).

[19]

Finally,
    in the event that mediation fails, s. 280(8) requires the mediator to give the
    parties a report setting out the insurers last offer, a description of the
    issues that remain in dispute, a list of materials that, though requested, were
    not produced and which were required to discuss settlement, and recommending
    whether or not the issues in dispute should be referred for a neutral
    evaluation under s. 280.1. The neutral evaluation process allows the parties
    jointly, or the unsuccessful mediator, to refer the issues in dispute to a
    person appointed by the Director for an evaluation of the probable outcome of
    a proceeding in court or an arbitration.

[20]

Having
    set out the statutory scheme, I now turn to the issue of when mediation has failed
    for the purposes of s. 281(2) of the Act.

D.

analysis

[21]

On
    a first reading of the Act, the regulations, and the DRPC, it would seem that an
    insured person may commence a proceeding in court 60 days after filing an
    application for mediation with FSCO.

[22]

This
    was the conclusion of the motions judge, who refused to dismiss or stay the
    respondents actions as being barred by s. 281(2). The motions judge noted that
    s. 281(2) allows a person to commence a court proceeding after mediation has
    been sought and has failed. Subsection 280(7) states that mediation has failed
    when the prescribed time for mediation has expired. The motions judge found
    that the only prescribed time in either the regulations or in the DRPC is 60
    days. Section 10 of the regulations requires a mediator to attempt to effect a
    settlement of a dispute within 60 days after the application for the
    appointment of a mediator is filed. Rule 19.1 of the DRPC also provides that
    mediation must be concluded within 60 days after the filing of an application
    for mediation. The motions judge concluded that it made perfect sense that
    these provisions created a 60-day time limit to deal with disputes, after which
    the respondents are free to commence a court action or proceed to arbitration.

[23]

Such
    a reading is strenuously contested by the insurance company appellants, supported
    by the intervener, the Insurance Bureau of Canada (IBC).

[24]

They
    urge the court to undertake a purposive analysis of the legislative framework.
    In so far as the language of the text permits, the court should strive to
    arrive at an interpretation that is consistent with and promotes the
    legislative purpose and should avoid interpretations that defeat or undermine
    the legislative purpose.

[25]

Put
    simply, their position is that an interpretation that permits insured persons
    to commence court actions without waiting for FSCO to actually attempt
    mediation of their disputes would effectively gut the statutory scheme for the
    resolution of such disputes. The overarching purpose of the statutory scheme of
    no-fault automobile insurance is intended to remove from the court system disputes
    arising from motor vehicle accidents. The statute assigns FSCO the
    responsibility of providing a dispute resolution process, particularly a
    mediation service, to provide the parties with an efficient and economical
    process to resolve disputes about entitlement to accident benefits. The Act, as
    s. 281(2) sets out, makes the failure of mediation a precondition to commencing
    a court action. The legislative purpose in making mediation mandatory is to
    reduce costs for the parties and, in doing so, reduce the cost of insurance for
    all Ontario motor vehicle owners.

[26]

The
    appellants support their argument by examining the functioning of FSCO. FSCOs
    services resolve some 75% of cases mediated. FSCO also eliminates from the
    system claims that are incomplete, vexatious, or barred by statutory limitation
    periods. Fresh evidence tendered by the IBC indicates that FSCO received a
    total of 36,492 applications for mediation in 2011. As of April 1, 2012, 21,023
    of 26,240 active applications that had not yet been referred to mediation were
    more than 60 days old. Dismissing the appeal would allow these disputes to
    proceed in court or arbitration, when 75% of them would have been resolved by
    mediation before FSCO. The resulting costs could be immense.  Insurers pay a
    filing fee of $500 for mediation, and $3,000 for arbitration. If all of the
    claims that would have otherwise gone to mediation are forced into arbitration,
    the cost to the insurance industry from the additional filing fees alone could amount
    to $83 million.  When one considers the additional costs of court proceedings
    and legal fees, which are not so easily calculated, it is inevitable that there
    would be upward pressure on insurance premiums.

[27]

The
    appellants and intervener submit that upholding the lower court decision would
    adversely affect the statutory system for resolving automobile accident benefit
    disputes, the civil court system, and the system for establishing automobile
    insurance premiums.

[28]

Relying
    on this characterization of the purpose of the legislative framework, the
    appellants urge that the words of the various relevant provisions be
    interpreted to hold that insured persons cannot commence a court action until mediation
    between the parties has actually been attempted and failed, and a mediators
    report has been issued.

[29]

In
    my view, the appellants identification of the statutes purpose is incomplete.
    No doubt it is an important purpose of the legislative framework to make
    mediation mandatory. That, though, is not the whole story. Reading the
    provisions in their entire context makes clear that the purpose of the
    legislation is to make mandatory a mediation process
that is timely and
    effective
. The timeliness aspect of the mandatory mediation process is
    evident from s. 280(4)s requirement that mediation be conducted within the
    time prescribed by regulation and s. 280(7)s provision that mediation has
    failed when the prescribed time for mediation has expired.

[30]

The
    purpose of the legislative scheme of dispute resolution is to mandate a speedy mediation
    process, conducted and completed on a strict timetable, in order to settle
    disputes quickly and economically. The speedy mediation process enables insured
    persons to receive the benefits to which they are entitled without delay. When
    the legislative purpose is properly characterized to include the timely
    resolution of disputes, there is no reason to resist the grammatical and
    ordinary sense of the legislation. Therefore, I do not accept the premise on
    which the appellants entire argument is based. Nevertheless, I now turn to the
    specific arguments they put forward regarding the interpretation of the
    relevant statutory and regulatory provisions.

[31]

First,
    the appellant insurers suggest that there is no time limit prescribed for the
    purposes of s. 280(7) of the Act. It will be recalled that s. 280(7) states
    that mediation has failed when the prescribed or agreed time for mediation has
    expired. The appellants point out that the prescribed time limit in s. 10 of the
    regulations only refers to s. 280(4) and not to s. 280(7). The full text of s.
    10 is as follows:

10. A mediator is required, under subsection 280 (4)
    of the Act, to attempt to effect a settlement of a dispute within sixty days
    after the date on which the application for the appointment of a mediator is
    filed.

[32]

The
    appellants position is that the 60-day time limit set out in s. 10 only
    applies to s. 280(4) and no time limit has been prescribed for s. 280(7). In
    the absence of any prescribed time limit for s. 280(7), the appellants contend
    that mediation should not be deemed to have failed upon the expiration of 60
    days.

[33]

I
    cannot accept this argument. It is generally presumed that when the legislature
    uses the same words in a statute they are to be given the same meaning. In my
    view, the entire section cannot reasonably be read so that the prescribed
    time in s. 280(4) is different than the prescribed time in s. 280(7). As
    noted by the motions judge, the only prescribed time for mediation in the
    regulations is 60 days. If the appellants interpretation is accepted, it would
    render meaningless the part of s. 280(7) requiring mediation to be completed in
    a prescribed time period.

[34]

Second,
    the appellants focus on the meaning to be attributed to the word filed in s.
    10 of the regulations. The time limit for mediation set out in s. 10 is sixty
    days after the date on which the application for the appointment of a mediator
    is filed. The appellants submit that an application is not filed until FSCO
    has examined it and concluded that it is properly completed and ready to be
    assigned to a mediator.

[35]

The
    Manager of Mediations at FSCO took this position in written refusals of the respondents
    requests for mediator reports declaring that the mediations had failed. The
    Manager explained that the requests for mediator reports were premature because
    FSCO had not yet registered the respondents applications as complete, and
    hence they were not yet considered filed.  Therefore, in the Managers view,
    the 60-day time period had not yet begun to run.  The appellants submit that
    the court should give weight to the interpretation adopted by those charged
    with administering a home statute.

[36]

The
    appellants submit that the Managers position is supported by the DRPC. Rule 19
    of the DRPC provides that, unless the parties agree otherwise, mediation must
    be concluded within 60 days of the filing of an Application for Mediation,
    completed in accordance with the requirements of Rule 12. Rule 12 of the DRPC
    specifies what must be included in a completed Application for Mediation. The
    requirements include names and addresses, descriptions of each issue in
    dispute, listings of available documents and requested documents, and other
    such items. Rule 12.3 provides that, if an application appears to be incomplete,
    the dispute resolution group may hold the application in abeyance for 20 days
    from the delivery of the notice. The appellants also point out that, in
    accordance with Rule 13, the Dispute Resolution Group does not send to the
    insurer a copy of the insured persons application for mediation until that
    application is assessed as complete, and it is only then that a mediator is
    promptly appointed.

[37]

The
    appellants submit that the legislative framework must be interpreted to allow
    FSCO to correct technical deficiencies in the application before the period set
    for mediation begins to run.

[38]

I
    do not accept that the 60-day clock does not begin to run until FSCO has assessed
    an application as complete. Such an interpretation, which would allow FSCO to
    accumulate a backlog of any length, would ignore the legislative purpose of
    providing a speedy mediation process. As noted in s. 10 of the regulations, a
    mediator is required to attempt to effect a settlement of a dispute within 60 days
after the date on which the application for the appointment of a mediator is
    filed
. Rule 6 of the DPRC provides that a document that is required to be
    filed must be delivered to the Dispute Resolution Group by one of several
    methods of delivery permitted under Rule 7. Clearly, the word filed is used
    in the legislative scheme in its ordinary sense.

[39]

All
    these provisions indicate that the expectation of the legislative scheme is
    that FSCOs assessment of applications filed with it will be done with
    sufficient dispatch to meet the prescribed time limit. It is not necessary on
    this appeal to decide whether the 60-day time period for the completion of
    mediation is reset when an incomplete application is re-filed.

[40]

In
    reaching this conclusion, I have placed no weight on FSCOs interpretation of
    the Act as the appellants have submitted l should. Any deference that is due is
    not owed to FSCO, but to an arbitrator appointed under the Act, or to a
    Directors Delegate on an appeal of an arbitrators decision. The issue of when
    an application is filed was directly addressed by Arbitrator Jeffrey Rogers
    in
State Farm Mutual Automobile Insurance v. Leone
(2012), FSCO
    A11-002196. The arbitrator noted that Rule 4.1 of the DRPC defines filed to
    mean filed with the Dispute Resolution Group. This definition does not
    require any action by the Commission for a document to be filed. The
    arbitrator concluded that filed means delivered to the Dispute Resolution
    Group. This finding was affirmed on appeal to a Directors Delegate. I agree
    with the analysis of the arbitrator and the Directors Delegate.

[41]

The
    appellants next submission is that the 60-day time frame to conduct mediation
    is not mandatory but directory. They submit that, in cases where a statutory
    duty is characterized as directory, non-compliance with the duty will not
    render an action or proceeding invalid. To determine whether a condition is
    mandatory or directory, they say, one must consider whether it would be
    seriously inconvenient to regard the performance of the statutory direction
    as imperative. In support of this principle, they rely upon the remarks of the
    Alberta Court of Appeal in
Alberta Teachers Assn. v. Alberta (Information
    and Privacy Commissioner)
, 2010 ABCA 26, 316 D.L.R. (4th) 117, revd on
    other grounds 2011 SCC 61, [2011] 3 S.C.R. 654, at para. 23:

Where the legislation is silent "it is left to the courts
    to determine whether non-compliance [with a statutory duty] can be
    cured.": see [
Ruth Sullivan,
Sullivan on
    the Construction of Statutes
, 5th ed. (Markham:
    LexisNexis Canada, 2008).]
Sir Arthur Channell in
Montreal Street
    Railway Co. v. Normandin
, [1917] A.C. 170 (P.C.), at pp. 174-75 wrote
    that:

When the Provisions of a statute relate to the performance
    of a public duty and the case is such that to hold null and void acts done in
    neglect of this duty would work serious general inconvenience, or injustice to
    persons who have no control over those entrusted with the duty, and at the same
    time would not promote the main object of the Legislature, it has been the
    practice to hold such provisions to be directory only, the neglect of them,
    though punishable, not affecting the validity of the acts done.

[42]

The
    Supreme Court of Canada has expressed doubt as to the usefulness of the
    distinction between mandatory and directory provisions, noting that the
    principle is vague and expedient: see
British Columbia (Attorney General)
    v. Canada (Attorney General)
, [1994] 2 S.C.R. 41, at p. 123. However, even
    accepting the test put forward by the appellant, the serious inconvenience in
    this case falls on both sides of the debate. While the appellants submit that
    it would cause serious inconvenience to require that mediation be completed
    within 60 days, the respondents submit it would also cause serious
    inconvenience for insured persons to wait to receive statutory benefits to
    which they are entitled because FSCO has failed to meet the statutory time
    limits.

[43]

I
    would not give effect to the appellants argument that the 60-day time limit is
    merely directory. Nor do I accept their argument that the failure to adhere to
    the 60-day time limit is merely a technical or procedural breach. The 60-day
    time limit, as I see it, is an integral part of the legislative scheme that
    aims to provide a speedy mediation process.

[44]

The
    appellants next submission is that other provisions of the legislative
    framework are not consistent with a mandatory time limit for mediation. For
    example, they argue that if mediation is deemed failed after 60 days, there can
    be no mediators report as contemplated by s. 280(8). Subsection 280(8) requires
    that, if mediation fails, the mediator must prepare and give to the parties a
    report setting out the insurers last offer, a description of the issues that
    remain in dispute, a list of relevant materials that should have been produced
    by the parties but were not, and a recommendation as to whether the issues in
    dispute should be referred to an evaluation. The appellants note that none of
    this information would be available in cases where actual mediation had not
    occurred.

[45]

In
    his thoughtful reasons, the motions judge suggested there is no reason why FSCO
    could not issue a report stating that mediation had failed because the
    prescribed time period had expired. The report could set out the information
    listed in s. 280(8), to the extent that such information is available at the
    time of the report. I, however, would approach the matter from a different
    perspective.

[46]

The
    legal question before the court in these cases is whether the motions judge should
    have granted the appellants motions to dismiss or stay the actions commenced
    by the appellants as being barred by s. 281(2). I set out again the text of the
    statutory bar to commencing an action in s. 281(2):

281. (2) No person may bring a
    proceeding in any court, refer the issues in dispute to an arbitrator under
    section 282 or agree to submit an issue for arbitration in accordance with the
Arbitration
    Act, 1991
unless mediation was sought, mediation failed and, if the issues
    in dispute were referred for an evaluation under section 280.1, the report of
    the person who performed the evaluation has been given to the parties.

[47]

As
    can be seen, the section does not require that a person await the receipt of a
    mediators report before commencing a proceeding. All that is required is that
    mediation has been sought and mediation has failed. I reiterate that s. 280(7)
    provides that one of the ways in which mediation can fail is that the 60 days
    prescribed for mediation expire.

[48]

Subsection
    280(8), it seems to me, has no bearing on the operation of s. 281(2). Whether
    s. 280(8) applies when mediation fails by the expiration of time, and what FSCO
    must or may do upon the expiration of the 60-day time period are not questions
    before the court on these appeals. I find it sufficient to observe that the
    failure of a statutory actor to perform a statutory duty does not eliminate a
    persons rights granted by the statute. Even if there is a breach of s. 280(8),
    that breach does not affect the operation of s. 281(2).

[49]

Finally,
the appellants claim that the absence of a mediators report
would have the effect of negating the
    limitation periods in ss. 281.1(1) and 281.1(2)(b) of the Act. It is necessary
    to review these limitation periods
before

discussing
this claim.

[50]

As a general rule, s. 281.1(1) provides
    that a court proceeding or arbitration must be commenced within two years after
    the insurers refusal to pay the benefit claimed. However, the legislative
    scheme recognizes that, since the parties may agree to extend the time for
    mediation, it is possible that mediation will not be completed within two
    years. Subsection 281.1(2)(b) deals with this eventuality by extending the
    limitation period where mediation has failed. Subsection 281.1(2)(b) states that,
    despite the two-year limitation period in s. 281.1(1), a court proceeding or
    arbitration may be commenced within 90 days after the mediator reports to the
    parties under s. 280(8).
Subsection 280(8), it will be recalled,
    requires that the mediator provide a report to the parties upon the failure of
    mediation.

[51]

The appellants argue that, if there is no mediators report, the
    limitation period of 90 days after the mediator reports to the parties
would
never be reached and there
would be
no final limitation
    period. A claim, they say, could be brought in perpetuity. This problem of a
    perpetual limitation period, they submit,
would be a consequence of
deeming mediation to have failed after 60 days even though a mediators
    report has not been prepared. They say that to avoid this problem, the
    legislative scheme should be interpreted so that mediation cannot be said to
    have failed until a mediators report is provided to the parties.

[52]

I
    see the problem as more imaginary than real. Without a mediators report, s.
281.1(2)(b) could not apply and
there
    could be no extension of the limitation period set by s. 281.1(1)
.
Without a mediators report,
s.

281.1(1)
    would always apply to bar an action commenced two years after the insurers
    refusal to pay the benefits claimed.

[53]

The
    problem the appellants imagine could only arise if FSCO were to issue a mediators
    report at some distant time in the future without mediation having taken place.
It is not known what changes FSCO may make to
    its practice or rules as a result of this decision.
Any
    future limitations issues are better addressed in the particular circumstances
    of the cases in which they may arise. No limitations issue arises in these
    appeals.
In any event,
I regard as
    unlikely in the extreme the prospect that FSCO would issue reports of failed
    mediation long after the expiration of the prescribed time without an agreement
    by the parties to extend the time limit.

[54]

What
    can be said is that in light of the decision in these appeals, insured persons will
    either agree to extend the time for mediation beyond the time prescribed or
    they will not. It is a fair inference that those who refuse to extend the time
    for mediation do so because they wish to commence court actions or apply for
    arbitration. If they neglect doing so and commence an action two years after the
    refusal of benefits, s. 281.1(1) would apply to bar the action.
On the other hand,
those who agree to extend the time for
    mediation would eventually have their cases mediated by FSCO. If mediation
    subsequently fails, a mediators report would be issued, and the parties would
    quite properly be able to rely on s.
281.1(2)(b).
In
    either eventuality, there would be no prospect of a perpetual limitation period.

[55]

This submission of the appellants, like the others
    discussed above, provides no reason to depart from
the ordinary meaning
    of the legislation.

E.

Conclusion

[56]

The
    legislative scheme for resolving disputes about statutory accident benefits requires
    that insured persons resort to a mandatory mediation process before commencing
    a court proceeding or submitting their disputes to arbitration.
The Act, the regulations and the DRPC make it clear
    that this process is intended to be completed within 60 days from the filing of
    an application for mediation with FSCO, unless the parties agree to an
    extension of time. The scheme postpones
the right of insured
    persons to commence civil actions against their insurer in order to allow the
    mediation process to be completed within the time prescribed, but leaves them
    free to commence actions once that period has expired.

F.

disposition

[57]

I
    would dismiss these appeals, and fix costs in favour of the respondents in the
    amount of $10,000 against the appellants and in the amount of $6,584 against
    the Insurance Bureau of Canada, inclusive of disbursements and applicable taxes.

R.G. Juriansz J.A.

I agree J.M. Simmons
    J.A.

I agree Gloria Epstein
    J.A.

Released: November 29, 2012


COURT OF APPEAL FOR ONTARIO

CITATION:
Keparutis v. Canamould
    Extrusions Inc., 2012 ONCA 844

DATE: 20121130

DOCKET: C55387

Laskin, MacPherson and Gillese JJ.A.

BETWEEN

Kestutis Keparutis

Plaintiff (Respondent)

and

Canamould Extrusions Inc., 888804 Ontario Limited,
    Amadri Cutting Inc., Amadri Machining Inc. and Ned Santarossa

Defendants (Appellants)

Michael Reid, for the appellants

Marc Munro, for the respondent

Heard and released orally: November 28, 2012

On appeal from the judgment of Justice James A. Ramsay of
    the Superior Court of Justice, dated March 21, 2012.

ENDORSEMENT

[1]

The appellants, Canamould Extrusions Inc. (Canamould) and related
    companies and Nedo Santarossa, appeal from the judgment of Ramsay J. of the
    Superior Court of Justice dated March 21, 2012. In that judgment, the motion
    judge dismissed the appellants request for an adjournment of the motion
    hearing, granted the appellants request to amend some of the paragraphs in its
    Statement of Defence, refused the appellants request to amend other paragraphs
    in the same document, and awarded the respondent costs of $5,000. The
    appellants appeal the components of this judgment relating to the motion
    judges refusal to grant an adjournment and his refusal to allow amendments to
    some paragraphs in the Statement of Defence.

[2]

Canamould is in the business of manufacturing and selling decorative
    foam moulding pieces for buildings. Between April 2004 and February 2007, Mr.
    Keparutis performed services for Canamould with respect to fireplace moulding
    pieces only. There is an agreement in writing for the services provided by Mr.
    Keparutis for the first two weeks of this period, but no written agreement for
    the rest of the term.

[3]

The services provided by Mr. Keparutis included designing moulds,
    creating a sculptured three-dimensional casting mould that could be used as the
    template for the decorative moulding pieces manufactured by Canamould, and
    advising Canamoulds employees regarding the pouring of foam material into the
    template that he had sculpted.

[4]

Mr. Keparutis invoiced Canamould daily for the services he provided
    after the initial two week period. The majority of the invoices were for $300
    per day.

[5]

In February 2007, Canamould informed Mr. Keparutis that his services
    were no longer required. He commenced an action seeking damages for breach of
    contract and breach of copyright.

[6]

After pleadings and discoveries, after consenting to the action being
    set down for trial, and indeed on the eve of trial, the defendants sought to
    amend their Statement of Defence. The motion judge allowed some amendments and
    refused others. Specifically, he denied leave to plead,
inter alia
,
    that Mr. Keparutis was an employee of Canamould rather than an independent
    contractor and that there was a licence permitting Canamould to use Mr.
    Keparutis design and template. The appellants appeal these components of the
    motion judges order.

(a)

The Request for an Adjournment

[7]

The appellants contend that the motion judge erred by not granting their
    request for an adjournment of the motion hearing to cross-examine Mr. Keparutis
    on his affidavit and to file reply materials.

[8]

The granting of an adjournment is a discretionary matter. The motion
    judge gave reasons for refusing the adjournment. We see nothing in those
    reasons that would call into question the motion judges exercise of discretion
    on this issue.

(b)

The Proposed Amendments to the Statement of Defence

[9]

The appellants submit that the motion judge erred by not permitting them
    to amend their pleadings to plead that the respondent was an employee of
    Canamould, not an independent contractor.

[10]

We
    disagree. In his Statement of Claim, the respondent said that he performed
    sculpting and consulting services. In their Statement of Defence, the
    appellants accepted this description. Throughout the relationship, the
    respondent sent invoices to Canamould and remitted GST. We agree with the
    motion judge that the appellants proposed pleading on this issue does not meet
    the test for withdrawal of an admission.

[11]

The
    appellants contend that the motion judge erred by not permitting them to amend
    their pleadings to include a counterclaim for damages.

[12]

We
    agree with the motion judge that this claim was statute barred by the relevant
    limitation period and that, in any event, set-off is the appropriate way to
    deal with potential successful claims by both sides.

[13]

Finally,
    the appellants submit that the motion judge erred by not permitting them to
    plead that the respondent had assigned his copyright in his mould design to
    them.

[14]

We
    disagree. The bald pleading on this issue, with no description of any
    documentation or conduct giving rise to the claim, and on the eve of trial, was
    properly rejected by the motion judge.

[15]

The
    appeal is dismissed. The respondent is entitled to his costs fixed at the
    agreed upon amount of $14,000, inclusive of disbursements and applicable taxes.

John Laskin J.A.

J.C. MacPherson J.A.

E.E. Gillese
    J.A.


COURT OF APPEAL FOR ONTARIO

CITATION:
Kopyto v. The
    Law Society of Upper Canada, 2012 ONCA 833

DATE: 20121128

DOCKET: C55760

Laskin, MacPherson and Gillese JJ.A.

BETWEEN

Harry Kopyto

Plaintiff (Appellant)

and

The Law Society of Upper Canada

Defendant (Respondent)

Harry Kopyto, appearing in person

Helen A. Daley and Simon Bieber, for the respondent

Heard: November 26, 2012

On appeal from the order of Justice Darla A. Wilson of
    the Superior Court of Justice, dated July 11, 2012.

APPEAL BOOK ENDORSEMENT

[1]

We see no reversible error in the reason of Wilson J.  Further, we see
    no possibility that the appellants attack on the constitutionality of the
    legislation can succeed.

[2]

Finally, this is not a case in which leave to amend the claim should be
    granted.  It is plain and obvious that this claim, no matter how drafted, is
    doomed to fail.

[3]

The appeal is dismissed, with costs fixed at $3,000, inclusive of
    disbursements and applicable taxes.