COURT OF APPEAL FOR ONTARIO

CITATION: Aviva Insurance Company of Canada v. McKeown, 2017
    ONCA 563

DATE: 20170704

DOCKET: C62809

Juriansz, Pepall and Miller JJ.A.

BETWEEN

Aviva Insurance Company of Canada

Applicant (Appellant)

and

Fran McKeown
,
Roland Spencer
, Dolly
    Singroy,
Renelyn Agaloos
, Naoise Hefferon, and Joanne Hacker

Respondents (
Respondents
)

Eric K. Grossman, for the appellant

Valinie (Val) Chowbay, for the respondents

Heard: April 27, 2017

On appeal from the judgment of Justice Wendy M. Matheson of
    the Superior Court of Justice, dated September 26, 2016, with reasons reported
    at 2016 ONSC 6017.

Juriansz J.A.:

A.

Overview

[1]

This appeal is about the nature of the notice an insurer must give in
    order to exercise its statutory right to examine under oath an applicant who
    has claimed benefits under the
Statutory Accident Benefits Schedule
(SABS), O. Reg. 34/10, a regulation under the
Insurance Act
,
R.S.O. 1990, c. I.8
. Section 33 (2) of the SABS provides that
    an applicant for SABS benefits shall submit to an examination under oath if
    requested by the insurer. Section 33 (4) 3 requires an insurer to give the
    applicant reasonable advance notice of the reason or reasons for the
    examination.

[2]

Six applicants for benefits demanded Aviva Insurance Company of Canada provide
    a reason in the sense of a justification for its request that they attend
    examinations under oath. Aviva brought an application in the Superior Court for
    a declaration that a justification was not required to compel a person claiming
    statutory accident benefits to attend at an examination under oath, and for an order
    compelling the six applicants to attend examinations.

[3]

The application judge dismissed the application and issued a declaration
    that an insurer must provide a justification to compel an applicant for
    benefits to attend an examination under oath if the insurer requests one
    pursuant to s. 33(2) of the SABS. She denied Avivas request for an order that
    each of the six applicants for benefits attend for an examination under oath.

[4]

Aviva appeals, but only in respect of three of the six respondents to
    the application. I would allow the appeal, set aside the application judges
    declaration, and replace it with the declaration that an insurer is not
    required to provide a justification for its request that the applicant attend
    an examination under oath. I would grant an order that each of the three
    respondents to the appeal attend an examination under oath.

B.

Decision Below

[5]

The application judge began her analysis by noting the proper approach
    to statutory interpretation. The words of an Act are to be read in their entire
    context and in their grammatical and ordinary sense harmoniously with the
    scheme of the Act, the object of the Act and the intention of the legislature.

[6]

She identified the purpose of the 2003 legislative reform of the
    automobile insurance regime that created the examination under oath (EUO). She
    said the purpose was to address rising auto insurance premiums by putting
    forward a balanced reform package designed to ensure that injured people
    received the care they needed while reducing red-tape, fraud and abuse.

[7]

The application judge briefly considered the entire s. 33, but her
    principal focus was on the requirement in s. 33 (4) 3 that the insurer provide
    reasonable advance notice of the reason or reasons for the examination.

[8]

She reasoned, at para. 80, that: The ordinary meaning of reason is
why
something is happening. It is not the scope of the examination, but why the
    examination is being pursued (emphasis in original). She concluded, at para.
    79, the notice provision is not satisfied by a general statement that the examination
    will be about entitlement to statutory accident benefits or a general reference
    to the purpose and/or scope of the examination. Rather, she issued a
    declaration, at para. 90, that a justification is required to compel a SABS
    claimant to attend an examination under oath under s. 33 of the SABS,
    specifically a reason or reasons that must be disclosed under s. 33 (4) 3 of
    the SABS.

[9]

The application judge found support for her conclusion in an earlier
    decision of the Superior Court:
State Farm Mutual Automobile Insurance Co.
    v. Aslan
, 2016 ONSC 2725, 130 O.R. (3d) 474 (Ont. S.C.). She rejected the
    conclusion of the Financial Services Commission of Ontario (FSCO) arbitrator
    in
Kivell v. State Farm Mutual Automobile Insurance Co.
, [2016] O.F.S.C.D.
    No. 119 (F.S.C.O. Arb.) who found that notice of the general type of questions
    that will be asked at the EUO is sufficient.

[10]

The application
    judge reasoned that the requirement that an insurer provide the actual reason
    or justification for the examination was in keeping with the insurers
    obligation of good faith. The insurer, she said, at para. 81, must have a good
    faith reason to take this additional step and must be prepared to disclose it
    in advance of the examination. She recognized that an insurer would be
    reluctant to give a specific reason in a fraud case, thus losing a tactical
    advantage and possibly hindering the examination. But she rejected this
    concern, at para. 82, because [t]his sort of tactical advantage, based on
    surprise, has been removed from civil litigation. Continuing the analogy to
    civil litigation, she observed that a claimant in a tort action would have
    advance notice of the insurers position through a statement of defence before
    any examination for discovery would take place. And, the applicant would have a
    corresponding right to examine the insurer.

[11]

The application
    judge also found that requiring the insurer to provide its actual reason for
    the examination in advance was consistent with the overall statutory scheme. It
    ensured that insurers did not request EUOs as a matter of course. Permitting
    them to do so would increase the overall cost of the system and reintroduce a
    more adversarial process into what is intended to be an efficient, no-fault
    regime.

[12]

Another reason
    the application judge offered for concluding s. 33 (4) 3 created a substantive
    right was that the required notice should be meaningful to unrepresented
    applicants.

[13]

The application
    judge did not find persuasive the insurers argument that requiring an insurer to
    provide a justification for the examination would result in additional dispute
    and litigation over the adequacy of the reason provided. She was satisfied that
    EUOs would proceed upon insurers conveying to claimants a good faith specific
    reason for them.

[14]

She concluded,
    at para. 87, that in the case before her only general references to the
    purpose and/or scope of the examination were provided to the respondents. They
    were not given notice of the actual reason or reasons that Aviva was pursuing
    an EUO. Therefore, Avivas notices were not compliant with s. 33.

[15]

The application
    judge issued a declaration that a justification is required to compel a SABS
    claimant to attend an EUO, and denied the requested orders that each of the
    respondents attend an EUO.

C.

Fresh Evidence

[16]

The respondents
    sought to place material before this court that had not been before the application
    judge. The material consists mainly of medical reports related to the
    processing of the respondents applications for benefits. The materials do not
    meet the test for admission of fresh evidence articulated in
R. v. Palmer
,
    [1980] 1 S.C.R. 759. I would deny the motion to admit fresh evidence.

D.

Analysis

[17]

The application
    judges interpretation of s. 33 is reviewable on a correctness standard. As I explain
    below, in adopting the meaning justification for the word reason, the
    application judge drew unsupported inferences, employed extraneous
    considerations, and failed to consider the entire legislative context of s. 33
    (4) 3.

[18]

In my view,
    reading the words reason or reasons in their entire context and in their
    grammatical and ordinary sense harmoniously with the scheme of the Act, the
    object of the Act and the intention of the legislature leads to the conclusion
    that s. 33 (4) 3 does not require an insurer to include in its notice to an
    applicant a justification for its request the applicant attend an EUO.

(1)

The provision

[19]

The text of
    section 33 reads as follows:

33
(1)

An applicant shall, within 10 business days
    after receiving a request from the insurer, provide the insurer with the
    following:

1. Any information reasonably required to assist
    the insurer in determining the applicants entitlement to a benefit.

2. A statutory declaration as to the circumstances
    that gave rise to the application for a benefit.

3. The number, street and municipality where the
    applicant ordinarily resides.

4. Proof of the applicants identity.

(2) If requested by the insurer, an applicant shall
    submit to an examination under oath, but is not required,

(a) to submit to more than one examination under
    oath in respect of matters relating to the same accident; or

(b) to submit to an examination under oath during
    a period when the person is incapable of being examined under oath because of
    his or her physical, mental or psychological condition.

(3) An applicant is entitled to be represented at his
    or her own expense at an examination under oath by such counsel or other
    representative of his or her choice as the law permits.

(4) The insurer shall make reasonable efforts to schedule
    the examination under oath for a time and location that are convenient for the
    applicant and shall give the applicant reasonable advance notice of the
    following:

1. The date and location of the examination.

2. That the applicant is entitled to be represented
    in the manner described in subsection (3).

3. The reason or reasons for the examination.

4. That the scope of the examination will be
    limited to matters that are relevant to the applicants entitlement to
    benefits.

(5) The insurer shall limit the scope of the
    examination under oath to matters that are relevant to the applicants
    entitlement to benefits described in this Regulation.

(6) The insurer is not liable to pay a benefit in
    respect of any period during which the insured person fails to comply with
    subsection (1) or (2).

(7) Subsection (6) does not apply in respect of a
    non-compliance with subsection (2) if,

(a) the insurer fails to comply with subsection
    (4) or (5); or

(b) the insurer interferes with the applicants
    right to be represented as described in subsection (3).

(8) If an applicant who failed to comply with
    subsection (1) or (2) subsequently complies with that subsection, the insurer,

(a) shall resume payment of the benefit, if a
    benefit was being paid; and

(b) shall pay all amounts that were withheld
    during the period of non-compliance, if the applicant provides a reasonable
    explanation for the delay in complying with the subsection.

(9) Clause (2) (a) shall not be interpreted as
    prohibiting an additional examination of the applicant under oath, under
    Ontario Regulation 283/95 (Disputes Between Insurers) made under the Act, at
    the insurers request that is conducted for the purpose of determining who is
    liable under section 268 of the Act to pay statutory accident benefits in
    respect of the accident.

(2)

Grammatical and ordinary sense of the word reasons

[20]

The present
    appeal concerns the interpretation of s. 33 (4) 3 and the meaning of the
    phrase: The reason or reasons for the examination.

[21]

Reason is a
    simple but flexible word used in common parlance. It can mean, as the
    application judge found, a justification for some act or decision. It is used
    in this sense in s. 42 (16) of the SABS. That provision requires an insurer who
    has determined that an applicant is not eligible for attendant care benefits
    for expenses incurred more than 260 weeks after the accident to give the
    applicant notice of its determination, with reasons. In this sense it is used
    most often, as in this example, in the plural as in reasons for decision.

[22]

The word
    reason used in the singular can also simply mean an account or explanation of
    something or some state of affairs. It is used in this sense in s. 64 (17) of
    the SABS. That provision allows an alternative to personal service where for
    any reason, it is not possible to personally deliver the document to the person.

[23]

Due to the
    different meanings associated with the word reason, the grammatical and
    ordinary sense of the word is only the starting point. The word must be
    understood in harmony with the scheme of the Act, the object of the Act and the
    intention of the legislature.

(3)

Purposive analysis

[24]

As outlined in section
    B of this decision, the application judges conclusions were driven by what she
    believed best attained the statutory objective of controlling the cost of
    automobile insurance premiums and providing for benefits to accident victims
    regardless of fault. She concluded, at para. 84, that requiring an insurer to
    give a justification for requesting an EUO ensures that insurers do not
    simply request these examinations as a matter of course, increasing the overall
    cost in the system and re-introducing a more adversarial process into what is
    intended to be an efficient, no fault regime.

[25]

I
    see several problems with this reasoning. In part, this reasoning rests on
    inferences unsupported by the record. In part, this reasoning employs
    extraneous considerations. In the sub-sections that follow, I review the object
    of the Act and intention of the legislature, and identify the errors in the
    application judges conclusions in this regard.

(a)

Object of the Act and the intention of the legislature

[26]

There is no
    dispute that the two main overall objectives of the Ontario automobile
    insurance regime are consumer protection and guaranteed compensation of
    victims:
Smith v. Co-Operators General Insurance Co
.
, 2002 SCC
    30, [2002] 2 S.C.R. 129, at para. 11;
Peixeiro v. Haberman
, [1997] 3
    S.C.R. 549, at paras. 22-24.

[27]

The parties are
    agreed that the legislatures specific purpose in introducing the 2003
    legislative changes, which included the EUO, was to protect consumers from
    rising automobile insurance premiums.

[28]

The legislative
    concern of protecting consumers from rising insurance premiums is manifested by
    the passage of the
Automobile Insurance Rate Stability Act, 1996
, S.O.
    1996, c. 21 and the
Automobile Insurance Rate Stabilization Act, 2003
,
    S.O. 2003, c. 9, and its several amendments.

[29]

After the
    government enacted the
Automobile Insurance Rate Stability Act, 1996
,
    regulations introduced what is now s. 33 (1) of the SABS. Section 33 (1) placed
    a positive obligation on a claimant to provide to an insurer any information
    reasonably required to assist in determining the claimants entitlement to
    benefits and, if requested, to furnish a statutory declaration.

[30]

A
    few years later, the government again addressed increasing insurance premiums
    in Bill 198,
Keeping the Promise for a Strong Economy Act, (Budget
    Measures)
, 2002
, S.O. 2002, c. 22. This omnibus statute introduced
    changes to the automobile insurance system that, again, were primarily intended
    to realize cost savings within the industry. Ontario Regulation 281/03, which
    accompanied Bill 198, introduced the EUO in s. 12. This provision took its
    place as s. 33 (2) of the 2003 version of the SABS.

[31]

The parties
    offered different views of why the legislature introduced the EUO. The
    respondents, in their factum, assert the EUO was introduced specifically as a
    mechanism to allow insurers to gather information directly from claimants in
    cases where it [
sic
] suspected fraud and that the intention of the
    legislature as to the use of the EUO was not only specific to reasons of fraud
    but intended to be limited and specific to questionable or suspicious cases
    rather than broad and general in its application under the SABS.

[32]

The appellant
    offers the broader view that the EUO was created as a distinct mechanism to
    achieve the legislatures goals of reducing insurance costs, addressing fraud
    and increasing accountability.

[33]

The Governments White Paper entitled Automobile Insurance
    Affordability Plan for Ontario: Next Steps (Toronto: Ministry of Finance, July
    2003), the debates in the legislature, and FSCO bulletins do not support the
    respondents narrow view. That said, these materials do show that concern about
    fraud and abuse of the system was a significant factor in the legislative
    changes.
[1]
For example,
FSCO Bulletin No. A-10/03 identifies the EUO as one of the
    measures intended to result in the
[i]ncrease of
    accountability within the automobile insurance system and reduction of
    potential for abuse of the SABS process and occurrence of fraud. This
    statement accurately reflects what was said in the legislature when Bill 198
    was being enacted.

[34]

I accept the appellants view that

the
    legislative objectives in creating the EUO were to reduce insurance costs,
    address fraud and increase accountability within the system.

(b)

No evidence to support the reasoning that EUOs
    might result in increased costs

[35]

The application
    judge was quite properly concerned with the overall cost of the system. As we
    have seen, reducing costs was a key objective of the legislative changes that
    introduced the EUO.

[36]

However, there
    was no basis in the record that enabled the application judge to draw any
    inferences about the overall cost of the system. Certainly, as respondents
    counsel points out, it may be inferred that the hourly rate of a lawyer who
    conducts an EUO will be greater than that of an adjuster who processes a claim.
    On the other hand, conducting an EUO may well result in quicker and more
    efficient determinations of entitlement by eliminating a prolonged course of claims
    handling by an adjuster.

[37]

The more
    important observation is that the application judge had no basis whatsoever for
    assessing how potential savings from the detection and deterrence of fraud and
    abuse of the system would factor into the overall costs of the system.

[38]

The court is
    ill-equipped to make assessments of this nature, and certainly without evidence
    before it. What can be said is that the overall costs of the system was of
    great concern to the legislature, and that the legislature created the EUO as
    one mechanism in a major initiative to control the overall costs of the regime.
    The court must give effect to this object of the legislature and the evident
    legislative perspective that EUOs are a mechanism to reduce the overall cost of
    the system. Interpreting the provision on the supposition that EUOs increase
    costs, seems to me to run counter to the legislative objective for creating the
    provision to reduce costs.

[39]

The application
    judge erred by reasoning that the use of EUOs might result in an increase in
    the overall costs of the system.

(c)

Analogies to civil litigation are unhelpful in a statutory regime meant
    to replace tort law

[40]

The application
    judge was correct in observing Ontarios automobile insurance system was and is
    intended to be an efficient, no-fault regime and as non-adversarial as
    possible. However, I do not share her apprehension that unless an insurer is
    required to provide a justification for an EUO, the process would become more
    adversarial. I see the opposite as more likely. If an insurer is required to
    provide a justification for an EUO, claimants could contest the validity of the
    proffered justification. An apt illustration is the application that gives rise
    to this appeal, which involves six claimants who contested the validity of the
    insurers reason for requesting an EUO.

[41]

When engaged in statutory
    interpretation the court must remain focused on the legislative intent. The
    SABS uses a non-adversarial tone in setting out a number of mechanisms to
    facilitate an insurer obtaining the information necessary to determine
    entitlement. The SABS provides the insurer may request a disability
    certificate, a medical examination, and so forth. That same non-adversarial word
    request is used in s. 33 (2). The legislative history reviewed above makes
    clear the EUO was created as an additional mechanism to accomplish the
    legislative objective of the quick and expeditious determination of claims and
    of increasing accountability within the system.

[42]

While
    recognizing the SABS process is intended to be non-adversarial, the application
    judge seemed to reason the civil litigation process should be a model for it. As
    noted above, the application judge considered the argument that an examination
    may be hindered by providing specific reasons, especially in cases of fraud.
    However, she rejected this concern because [t]his sort of tactical advantage,
    based on surprise, has been removed from civil litigation.

[43]

I regard the
    application judges analogy to civil litigation to be misplaced. It does not
    matter that a claimant in a tort action would have advance notice of the
    insurers position through a statement of defence before any examination for
    discovery would take place. Analogies to civil litigation are unhelpful in a
    statutory regime meant to replace tort law because the legislative object of
    the automobile insurance regime is to replace the tort resolution of disputes
    arising from automobile accidents with the process it prescribes. That an
    applicant shall submit to an examination under oath on a proper request of the
    insurer is clearly set out in the regulation. Effect must be given to the
    provision as written rather than attempting to make it comport with the civil
    litigation process.

[44]

Requiring
    insurers to provide justification for EUOs is not in keeping with the non-adversarial
    process intended by the legislature.

(4)

The provision in the context of the scheme of the Act and regulations

[45]

A
    large part of the application judges reasoning was not based on textual
    analysis of s. 33 (4) 3 in its entire context. Rather, in large measure, she
    made her conclusions after engaging in a purposive approach. In the modern
    approach to statutory interpretation, a purposive approach is mandated, but it
    must be applied to the text considered in its entire context:
Bell
    ExpressVu Ltd. Partnership v. Rex
,

2002 SCC
    42, [2002] 2 S.C.R. 559, at para. 26.

[46]

In the
    sub-sections below, I engage in a more complete review of s. 33 (4) 3 in the
    context of the scheme of the Act and regulations.

(a)

The SABS generally requires applicants to provide information to their
    insurers to obtain statutory benefits

[47]

Section 268 of the
Insurance Act

says
    that every motor vehicle liability policy provides specified benefits that are
    set out in the SABS. The SABS requires that every motor vehicle liability
    policy provide certain benefits.

[48]

There is a wide range of benefits: income replacement benefits,
    non-earner and caregiver benefits, medical, rehabilitation and attendant care
    benefits, lost educational expenses, expenses of visitors visiting an insured
    person during treatment or recovery, housekeeping and home maintenance, damage
    to clothing, prescription eyewear, dentures, hearing aids, prostheses and other
    medical or dental devices, fees for preparing disability certificates and
    approving treatment plans, death and funeral benefits, and certain optional
    benefits.

[49]

Each of the many
    different benefits available under the SABS could potentially require much
    detailed information for the insurer to determine entitlement to the benefit.
    The administration of some benefits can continue over a substantial period of
    time.
The specific pre-accident and post-accident information
    required in any particular case will depend on the type of benefit claimed and
    may be extensive and ongoing.

[50]

One theme of the procedures for claiming benefits set out in the
    SABS is that the insured person must cooperate with the insurer so that the
    insurer has the information necessary to determine the entitlement. For
    example, s. 36 (2) of the SABS provides that an applicant for income
    replacement, non-earner, or caregiver benefits, or payments for housekeeping or
    home maintenance services, must provide a disability certificate to the
    insurer.

[51]

Similarly, the SABS creates a number of mechanisms that allow the
    insurer to request information and documentation from the applicant. Generally,
    when the insurer makes a request pursuant to one of these mechanisms the
    applicant is obligated to comply. Section 33, itself, contains one such
    mechanism. Section 33 (1) requires the applicant, within 10 days of a request
    by the insurer, to provide information reasonably required to determine
    entitlement and a statutory declaration of the circumstances giving rise to the
    application for the benefit.

[52]

Read as a whole,
    the SABS creates statutory benefits and
requires applicants to
    take steps to facilitate an insurers determination whether they are entitled
    to the benefits claimed or to their continuation. Thus, requiring an insurer to
    provide a justification for its request for an EUO is not in keeping with the
    cooperative approach to information sharing throughout the SABS.

(b)

In other provisions, the SABS qualifies an insurers
    right to make requests of an applicant

[53]

While a theme throughout the SABS is that an applicant for benefits
    must cooperate with insurers to provide information reasonably necessary to
    determine entitlement, the insurers right to obtain information is
    specifically qualified in some provisions.

[54]

Section 44 allows insurers to require an applicant to be examined by
    a health professional or an expert in vocational rehabilitation. The insurer
    must give the applicant notice of the required examination, which under s. 44
    (5) must include the medical and any other reasons for the examination. The granting
    section, which gives the insurer the right to require an examination, however,
    has a built in qualification that the proposed examination must be reasonably
    necessary. Section 44 (1) allows an insurer to require an insured person to be
    examined by a health professional or vocational rehabilitation expert for the
    purposes of assisting an insurer to determine if an insured person is or
    continues to be entitled to a benefit but cannot do so more often than is
    reasonably necessary. This qualification applies to the first such examination
    required by an insurer, according to the case law developed by FSCO
    arbitrators. See, for example,
Augustin
    v. Unifund Assurance Co.
, [2013]
    O.F.S.C.D. No. 211 (F.S.C.O. Arb.),
at
    para. 37.

[55]

Section 37 allows insurers to request an applicant to submit a new
    disability certificate if an insurer wishes to determine if an insured person
    is still entitled to a specified benefit. Like s. 44 (1), the provision that
    grants this right to insurers has the built-in qualification that the insurer
    may not make the request more often than is reasonably necessary. This
    qualification, too, applies to the first request made for new disability
    certificate.

[56]

These provisions
    may be contrasted with s. 33 (2). If the legislative intention were to require
    an insurer to provide a justification for its request, one would expect the
    granting provision to limit the right to circumstances where an examination is
    reasonably required. This is especially so since s. 33 (2) has two built-in
    qualifications: An applicant is not required to submit to more than one EUO,
    and is not required to submit to an EUO during a period when physically,
    mentally or psychologically incapable of being examined.

[57]

It is
    significant that other provisions require requests the insurer makes to be
    reasonably necessary, but s. 33 (2) does not.

[58]

The mechanism
    provided by s. 33 (2) of the SABS seems akin to the right of an insurer to
    examine an insured person under oath that is provided by O. Reg 777/93. The
    regulation sets out statutory conditions for the purpose of s. 234 of the
Insurance
    Act
that are included in all contracts of automobile insurance. Section 6
    (4) of the regulation provides that the insured shall submit to examination
    under oath. While there are some textual differences, s. 33 (2) also provides
    an applicant shall submit to an examination under oath.

(c)

The notice requirement is set out in a list of other procedural requirements

[59]

I find it
    significant that the requirement to provide notice of the reason or reasons
    for the examination is included in s. 33 (4) and is not included as one of the
    qualifications in s. 33 (2). The other requirements set out in s. 33 (4) are
    what may be described as procedural in nature. The insurer must make reasonable
    efforts to schedule the EUO for a time and at a location that are convenient
    for the applicant. Also, the insurer must provide reasonable advance notice of
    the date and location of the examination, that the applicant is entitled to be
    represented at the EUO, and that the scope of the EUO will be limited to
    matters relevant to the applicants entitlement to benefits. That notice of the
    reason or reasons for the examination is embedded in s. 33 (4) with these
    other matters may be taken as some indication they are of a similar nature.

[60]

Section 33 (4),
    taken as a whole, is not structured to qualify the mandatory language in s. 33
    (2). This implies the reason or reasons an insurer must include in its notice
    are of a procedural nature.

[61]

This does not
    mean the notice provided may be
pro forma

and that an applicant
    cannot contest the adequacy of the notice. An applicant can contest the
    adequacy of the notice in the same way as he or she can contest the convenience
    of the date and location of the examination. However, the room for dispute is
    much reduced from what would be possible if the insurer were required to
    provide a justification for its request.

(d)

There is no redundancy between the requirement for reasons under s. 33
    (4) 3 and the scope of examination under s. 33 (4) 4

[62]

The application
    judge was also concerned that unless an insurer were required to provide the actual
    reason or justification for requesting an EUO, there was the potential for
    redundancy between the reason for the examination addressed under s. 33 (4) 3
    and the scope of the examination under s. 33 (4) 4. I do not share the concern.
    The reasons for the EUO provided under s. 33 (4) 3 may well indicate what is
    within the intended scope of the examination. Section 33 (4) 4, on the other
    hand, bears on what must be excluded from the scope of the examination.

(e)

The scheme already addresses potential abuse of EUOs

[63]

Another reason
    the application judge offered for requiring insurers to provide a justification
    for requesting EUOs is to prevent them from abusing the system by requesting needless
    EUOs as a matter of course. There was no basis in the record to support the
    application judges premise. This was merely a submission by respondents
    counsel. Before us respondents counsel submitted: Today, it is commonly
    discussed and reluctantly accepted by the Plaintiffs bar that blanket EUO
    requests without reason have become standard practice.

[64]

The
    unsupported premise should not have played a role in arriving at the proper
    meaning of reason. When looking at the scheme of the Act and regulations as a
    whole, it is clear that a dissatisfied applicant can allege the insurer lacks
    good faith in processing a claim in a manner already prescribed by the
    legislature.

[65]

The insurers duty to act in good faith applies throughout its
    processing of an application for benefits, and the practices of an insurer are
    subject to the general supervision by the Superintendent:
Financial
    Services Commission of Ontario Act
, 1997
, S.O. 1997, c. 28, s. 5(2)(c). Among the Superintendents broad
    powers in respect of the
Insurance Act
, is the
    power to investigate and sanction Deceptive Acts and Practices (s. 440 of the
Insurance Act
).

[66]

Deceptive acts and practices are proscribed by s. 439 of the
Insurance
    Act
. The list of Deceptive Acts and Practices is set out
    in O. Reg. 7/00, which is entitled
Unfair or Deceptive Acts or
    Practices
. Included in the list is Any examination or
    purported examination under oath that does not comply with the requirements
    under the Act or the regulations. Therefore, this is the legislated route to
    address non-compliant EUOs.

[67]

I might add that the vulnerability of an applicant to a needless and
    abusive EUO is truncated by the legislation. The only possible consequence to
    an applicant who fails to attend an EUO is a suspension of benefits for the
    period of non-compliance (s. 33 (6) of the SABS). The applicant could still
    claim the benefits at arbitration before a FSCO arbitrator at the time these
    disputes arose, or now before the License Appeals Tribunal. See FSCO decisions:
Salah v. State Farm Mutual Automobile Insurance Co
.
,
2005
    CarswellOnt 8338 (F.S.C.O. Arb.)
, and
Balanki v.
    Zurich Insurance Co
.
,
2005 CarswellOnt 2670 (F.S.C.O. Arb.)
.

[68]

I should not be taken to diminish the plight of an applicant whose
    benefits are suspended, but consequences of noncompliance with s. 33 (2) are
    much less onerous than of noncompliance with s. 44 of the SABS, for example. Recall
    that under this provision, an insurer may require an insured person undergo an
    examination by regulated health professionals or vocational rehabilitation
    experts. Section 55 prevents an insured person from proceeding to arbitration
    if they have not complied with an insurers request that they undergo an
    independent medical or vocational rehabilitation examination per s. 44.

[69]

I point this out merely to show an applicant can refuse to attend an
    EUO they regard as needless and abusive and still proceed to arbitration.

[70]

In summary on this point, the scheme already addresses potential
    abuse of EUOs by insurers. Reading in an additional requirement to provide
    notice of justification is not necessary to promote fairness in the scheme.

(f)

FSCO has not interpreted the provision to
    require notice of a justification for an EUO

[71]

As a final note,
    the application judge considered but was not persuaded by the reasoning in
Kivell
    v. State Farm Mutual Automobile Insurance Co
.
, [2016] O.F.S.C.D.
    No. 119 (F.S.C.O. Arb.). In
Kivell
, Arbitrator Mongeon found that s.
    33 (4) 3 did not provide a substantive right to be provided with the reasons as
    to why the insurer wishes to conduct an EUO. He stated that: The reason or
    reasons do not have to be detailed, they merely have to give the Applicant
    notice about the general type of questions that will be asked.

[72]

At the time this
    application was brought, the court and a FSCO arbitrator had coordinate, or
    shared, jurisdiction to determine disputes of this nature. A
n
    insured person could either refer the dispute over claimed benefits for
    mediation and arbitration by FSCO, or could commence an action in the courts under
    s. 281 of the
Insurance Act
.
The court
    need not defer to a tribunal in interpreting the relevant legislation when
    jurisdiction over the legislation is shared:
Rogers Communications
, 2012 SCC 35.
That said, when exercising
    coordinate jurisdiction, a court should proceed with a full appreciation of the
    expertise of the tribunal, especially where the issues to be determined are
    confined to matters of process under the tribunals home statute. The tribunal
    will have institutional expertise concerning such issues and may have developed
    a body of case law that will be of considerable assistance to the court. In
    this case, the application judge took no note of the tribunals expertise in
    the process for determining disputed claims under the SABs.

[73]

The coordinate jurisdiction of the court and the FSCO Tribunal no
    longer exists. Bill 15,
Fighting Fraud and Reducing Automobile
    Insurance Rates Act, 2014
,
S.O. 2014, c. 9,
amended the
Insurance Act
. The former
    s. 281 has been repealed and the present s. 280 (3), which came into force on
    April 1, 2016,
now provides that no person may bring a proceeding in any
    court with respect to the resolution of disputes in respect of an insured
    persons entitlement to statutory accident benefits or in respect of the amount
    of statutory benefits to which an insured person is entitled. Since April 1,
    2016, the License Appeal Tribunal has the exclusive jurisdiction to resolve
    such disputes, subject to appeal or judicial review in the courts. In those
    appeals or judicial reviews the courts will accord the License Appeal Tribunal
    due deference.

[74]

In any event, I regard
    Arbitrator Mongeons interpretation of s. 33 (4) 3 in
Kivell

as
    persuasive. It is consistent with the statutory interpretation analysis that I
    have undertaken in these reasons.

(5)

Conclusion

[75]

For these reasons, I conclude s. 33 (4) 3 does not require an
    insurer to include in its notice of an EUO a justification for its decision to
    request an EUO. A general statement of the purpose of the EUO that gives the
    applicant notice of the general type of questions that will be asked is
    sufficient.

E.

Application to the Present Appeals and Disposition

(1)

Renelyn Agaloos

[76]

Renelyn Agaloos applied for accident benefits from Aviva on May 19,
    2015, arising from an accident on April 25, 2015. A disability certificate (Form
    OCF-3), dated June 12, 2015 was submitted on her behalf stipulating she met the
    disability test for income replacement benefits, non-earner benefits, and
    housekeeping and home maintenance benefits, with an anticipated recovery period
    of more than 12 weeks. Ms. Agaloos did not respond to Avivas request for
    information pursuant to s. 33 (1) of the SABS. Counsel for Aviva wrote to
    counsel for Ms. Agaloos seeking to arrange an EUO. Eventually, Ms. Agaloos provided
    the information Aviva had requested under s. 33 (1). A further course of
    correspondence followed that culminated with Aviva sending a formal notice of
    an EUO on January 7, 2016, informing counsel for Ms. Agaloos that it had
    unilaterally set the EUO for January 27. In part, Aviva stated:

An examination under oath is required in order
    to assist [Aviva], your insurer, in determining entitlement to specified
    benefits, medical and rehabilitation benefits, attendant care benefits,
    housekeeping and home maintenance expenses and costs of examination arising
    from the loss of April 25, 2015. The scope of the examination will be limited
    to matters that are relevant to your entitlement to said benefits.

[77]

Counsel for Ms. Agaloos took the position that the EUO was not
    reasonable and/or necessary. Ms. Agaloos did not attend the examination.

[78]

In my view, the notice satisfied the requirements of s. 33 (4) 3. I
    would issue an order that Ms. Agaloos attend an EUO.

(2)

Fran McKeown and Roland Spencer

[79]

Fran McKeown and Roland Spencer were injured in a motor vehicle
    accident on January 13, 2015, and separately applied for accident benefits on
    February 17, 2015. Aviva sought to arrange an EUO for each of them and their
    solicitor resisted on the basis that they had not been provided with a proper
    reason for the EUOs. The exchange culminated with Aviva providing a formal
    Notice of Examination on November 20, 2015 that stated that the purpose of the
    EUO was to:

evaluate your potential entitlement to
    accident benefits, and specifically your application for Non-Earner Benefits,
    Attendant Care Benefits, Medical Expenses, and the Cost of the Examinations
    including In-Home Assessment and Chronic Pain Assessment.

[80]

The respondents maintained their position that Aviva had not
    provided an adequate reason for the EUO and failed to attend the EUO.

[81]

In my view, the notice satisfied the requirements of s. 33 (4) 3. I
    would issue an order that Fran McKeown and Roland Spencer attend an EUO.

F.

Costs

[82]

The appellants costs of the appeal are fixed in the amount of
    $20,000.00, inclusive of disbursements and applicable taxes. The appellant is
    also entitled to costs of the application, however, as the appeal involved only
    three of the respondents below, I would fix those costs of the application in
    the amount of $5000.00, all inclusive.

Released: SEP July 4, 2017

R.G. Juriansz J.A.

I agree. S.E. Pepall J.A.

I agree. B.W. Miller J.A.

[1]
The legislatures continuing concern about the cost of automobile insurance and
    fraud within the system is indicated by the passage in 2014 of Bill 15,
Fighting
    Fraud and Reducing Automobile Insurance Rates Act, 2014
, S.O. 2014, c. 9.


COURT OF APPEAL
    FOR ONTARIO

CITATION: Bell v. Ontario Power Generation Inc., 2017 ONCA
    587

DATE: 20170710

DOCKET: C61509

MacPherson, Cronk and Benotto JJ.A.

BETWEEN

Sylvia Bell

Appellant

and

Ontario Power Generation Inc.

Respondent

Kyle Armagon, for the
    appellant

Frank Cesario and Stephanie
    Kalinowski, for the respondent

Heard: July 5, 2017

On appeal from the judgment of Justice John McCarthy of
    the Superior Court of Justice, dated November 25, 2015.

REASONS FOR DECISION

[1]

At issue in this appeal is the
    nature of the relationship between the appellant and Michael
Shestowsky
in the three years before his retirement
    from the respondents employ.

[2]

Mr. Shestowsky was an employee of the
    respondent. He retired in February 2003 and received a pension until his death
    in May 2011. The pension was calculated in accordance with his representation
    that he did not have an eligible spouse.

[3]

After Mr. Shestowskys death, the
    appellant claimed an entitlement to survivor pension benefits on the basis that
    she was a spouse pursuant to the
Pension Benefits Act
, R.S.O. 1990, c.
    P.8, (the Act) s. 1(1),
which defines spouse as a
    person who, at the date of retirement, has been living together with the
    employee in a conjugal relationship for at least three years.

[4]

The trial judge dismissed the
    appellants claim having concluded that she was not living together with Mr.
    Shestowsky for three years before his retirement.

[5]

She appeals on numerous grounds,
    including on the basis that the trial judge erred by disbelieving the
    uncontradicted evidence that a flood had destroyed cards and photos that
    supported her claim and by finding her evidence and that of her daughter and
    friends unreliable.

[6]

The appellant does not identify
    any error of fact or misapprehension of the evidence. The issues raised
    challenge findings of fact, which are amply supported by the evidence and accorded
    deference from this court.

[7]

The appellant further alleges that
    the trial judge misapplied the law with respect to the nature of a conjugal
    relationship. She says he erred in: (1) relying on a cohabitation agreement
    signed by the parties in 2002; (2) focusing on the subjective intent of Mr.
    Shestowsky; and (3) relying on Mr. Shestowskys pension election form. The
    appellant submits that, by doing so, the trial judge misapplied the law set out
    in
M. v. H.
, [1999] 2 S.C.R. 3, which held that the elements to consider
    as generally accepted characteristics of a conjugal relationship may be present
    to varying degrees and are not all necessary. The approach must be flexible,
    and subjective intent is not required.

[8]

The trial judges reasons, read as
    a whole, disclose a consideration of multiple factors which, taken together,
    led him to conclude that the appellant and the deceased were not living
    together in a conjugal relationship for the three years before the deceaseds
    retirement. The trial judge used the non-exhaustive criteria set out in
Molodowich v. Penttinen
(1980), 17 R.F.L. (2d) 376 (Ont. Dist. Ct.), as a
    guideline. Consistent with the jurisprudence, which confirms an emphasis on the
    objective, contemporaneous evidence, he relied on the following facts:

·

The
    cohabitation agreement signed by the parties in September 2002 stating that the
    parties intend to commence cohabiting
[1]
;

·

Mr.
    Shestowskys change of address notifications in September 2002;

·

The
    respondents letter of December 17, 2002, advising Mr. Shestowsky that his
    pension records showed he had no eligible spouse and inviting him to contact
    the respondent if this information was not correct;

·

The
    pension election form signed by Mr. Shestowsky on January 15, 2003, confirming
    that he had no eligible spouse. By making this election, Mr. Shestowsky
    confirmed that he knew the definition of eligible spouse, and his pension
    entitlement was calculated at a higher rate than if he identified an eligible
    spouse;

·

The
    letter sent by the respondent to Mr. Shestowsky on January 16, 2003 confirming
    the election;

·

Mr.
    Shestowsky received pension benefits until his death and never sought to amend his
    election  despite the fact that, in 2005, he inquired about changing his
    designation to include an eligible spouse. He was provided with the appropriate
    procedure to follow but did not do so; and

·

The
    income tax returns filed by both the appellant and Mr. Shestowsky, which
    indicated divorced until 2002, when it converted to common law.

[9]

It was open to the trial judge to
    rely on this evidence. It fully supported his conclusion that the appellant was
    not an eligible spouse for the purpose of the Act or the pension plan
    administered by the respondent.

[10]

We therefore conclude that the
    appeal must be dismissed. In light of this conclusion, it is not necessary to
    consider the appellants submissions with respect to the trial judges
    alternative finding under s. 45 of the Act
.

[11]

The appeal is dismissed with costs
    payable to the respondent in the amount of $10,000, inclusive of disbursements
    and HST.

J.C. MacPherson J.A.

E.A. Cronk J.A.

M.L. Benotto J.A.

[1]

The terms of the
    cohabitation agreement also provide for a release of the appellants claims to
    Mr. Shestowskys pension entitlements.


">

COURT OF APPEAL FOR ONTARIO

CITATION: Callidus Capital Corporation v. McFarlane, 2017
    ONCA 626

DATE: 20170728

DOCKET: C62330

Feldman, Gillese and Pepall JJ.A.

BETWEEN

Callidus Capital Corporation

Plaintiff

(Respondent)

and

Jeffrey McFarlane

Defendant

(Appellant)

Symon Zucker and Melvyn L. Solmon, for the appellant

Lisa S. Corne and John D. Leslie, for the respondent

Heard: February 1, 2017

On appeal from the judgment of Justice Frank J.C. Newbould
    of the Superior Court of Justice, dated May 24, 2016, with reasons reported at
    2016 ONSC 3451.

PEPALL J.A.:

A.

Introduction

[1]

A personal guarantee of corporate indebtedness
    should only be given after serious deliberation. Here the guarantor turned his
    mind to the language of the guarantee in the expectation that his exposure
    would be limited. That expectation was not met. The lender obtained summary
    judgment against the guarantor in an amount equal to US$3 million plus interest
    at the rate of 21% and costs. The guarantor now appeals from that judgment. For
    the reasons that follow, I would allow the appeal and reduce the summary
    judgment from an amount in Canadian currency sufficient to purchase the sum of US$3
    million to US$250,000.

B.

Facts

[2]

Xchange Technology Group LLC (the Company)
    carried on business as a supplier of information technology products and
    hardware rentals.
The appellant, Jeffrey McFarlane, was
the President and CEO of the Company.

[3]

Royal Bank of Canada and PNC Bank provided
    financing to the Company.

[4]

In support of the financing given by PNC Bank, McFarlane
    provided that bank with a limited guarantee of the Companys debt. The
    guarantee was limited to US$3 million plus interest and costs.

[5]

The respondent, Callidus Capital Corporation, is
    a high risk distressed debt lender. On October 11, 2012, Callidus purchased the
    Companys debt from PNC Bank. It paid PNC Bank US$11.6 million.  It also charged
    a facility fee to the Company of US$2.25 million.  McFarlane stated that his
    interest cost went from 4 to 6% per annum before the purchase to 18 to 21% per
    annum after the purchase. The Loan Agreement between the Company and PNC Bank and
    McFarlanes personal guarantee were transferred to Callidus as part of the
    purchase transaction and were amended to so provide on October 11, 2012.

[6]

The original guarantee as amended in favour of
    Callidus stated that:

The undersigned hereby jointly and severally
    (if more than one) guarantees payment to the Lender, upon demand therefore being
    made upon the undersigned, of all Obligations (as defined in the Loan
    Agreement) now or at any time and from time to time hereafter due to or owing
    to the Lender from or by the Borrowers or by any successor corporation of the
    Borrowers, limited to the amount of Three Million and 00/00 Dollars (US$3,000,000.00)
    in total; plus interest thereon, at the rate of interest applicable to such Obligations.

[7]

The Company defaulted on its obligations to
    Callidus. McFarlane blamed Callidus for the Companys increased difficulty in
    servicing its debt. He stated in his affidavit filed in subsequent court proceedings
    that Callidus was engaging in a loan to own strategy by which it consumed the
    equity value of the Companys business through debt and fees with a view to ultimately
    owning the company.

[8]

In June 2013, the Company negotiated a
    forbearance agreement with Callidus. This would avoid immediate enforcement of remedies
    under the Loan Agreement including repayment of the Companys debt. In
    conjunction with that agreement, McFarlanes guarantee was amended; he provided
    Callidus with mortgage security on property he owned; and he agreed to withdraw
    from management of the Company. McFarlane stated that he was alarmed by
    Callidus lending tactics and practices and was particularly alarmed by its
    high fees and accumulating charges to the Company. He recognized that upon his
    withdrawal from management, he would no longer be able to mitigate past fees or
    influence future fees. He insisted that he would not be responsible for any
    portion of the Company debt that arose from Callidus fees, past or future, and
    that his guarantee be amended to reflect that concern. As of the date of the
    amended guarantee, a US$2.25 million facility fee was one such charge.

[9]

The June 6, 2013 amended guarantee provided:

2.1     Section 1 of the Guarantee is amended
    entirely to read:

1.
The
undersigned (
Guarantor

) hereby jointly and severally (if more than one)
guarantees payment to the Lender
, upon
    demand therefore being made upon the undersigned,
of
    all Obligations
(as defined in the Loan Agreement) now
    or at any time and from time to time hereafter due or owing to the Lender from
    or by the Borrowers or by any successor of the Borrowers
excluding however the $2,250,000 Facility Fee as defined in the
    Loan Agreement or any forbearance fee charged by Lender in connection with any
    forbearance agreement with Borrowers, limited to the lesser of
:

(x)
the
    Limited Principal Amount or

(y)     provided that Guarantor is in compliance with the terms of
    the letter agreement dated June 6, 2013, by which Guarantor suspended and
    relinquished powers and authorities over the Borrowers (
Letter Ceding Authority
),
the Deficiency Amount
,

in each case as defined below,
plus interest
thereon at the rate of
    interest applicable to such Obligations (or the applicable rates of interests
    if different rates of interest apply to different parts of such Obligations),
    from and including the date of demand until payment, and legal or other costs,
    charges and expenses. [Emphasis added.]

[10]

Obligations was very broadly defined in the Loan
    Agreement:

[A]ll loans, advances, indebtedness,
    obligations and liabilities of Borrowers to Lender under this Agreement and the
    Notes, together with all other indebtedness, obligations and liabilities
    whatsoever of Borrowers to Lender, whether matured or unmatured, liquidated or
    unliquidated, direct or indirect, absolute or contingent, joint or several, due
    or to become due, now existing or hereafter arising.

[11]

Limited Principal Amount was defined in the
    amended guarantee as meaning US$3 million reduced by certain sums that are immaterial
    to this appeal.

[12]

Deficiency Amount was defined in the amended guarantee
    as meaning:

[T]he amount of the Obligations, excluding
    however the $2,250,000 Facility Fee as defined in the Loan Agreement or any
    forbearance fee charged by the Lender in connection with any forbearance
    agreement with Borrowers, that remains outstanding at the end of the Collateral
    Liquidation Period.

[13]

Collateral Liquidation Period was defined in the
    amended guarantee as meaning:

the 90 day period after:

(i)      Lender commences (either by exercise
    of self-help remedies or judicial proceeding) collection in a commercially
    reasonable manner of collateral constituting payments receivable by the
    Borrowers located in the United States and/or Canada including without
    limitation accounts receivable and lease receivables; and

(ii)      Lender commences (either by exercise
    of self-help remedies or judicial proceeding) sale in a commercially reasonable
    manner of collateral constituting inventory of the Borrowers located in the
    United States and/or Canada.

The amended guarantee was stated to
    be a continuing guarantee that would cover and secure any ultimate balance owing.
    It went on to state that except to the extent required by s. 1 of the amended
    guarantee, Callidus was not obliged to seek recourse against the Borrowers or
    other persons or the securities it held.

[14]

On
    July 26, 2013, Callidus demanded payment of all indebtedness from the Company
    and gave notice to McFarlane in his capacity as guarantor.

[15]

On August 3, 2013, Callidus, the Company, and
    McFarlane entered into another forbearance agreement. Callidus extended the
    date of debt enforcement to August 15, 2013, and charged the Company a
    forbearance fee of US$250,000. The Company and McFarlane provided Callidus with
    a broad release of claims against Callidus. McFarlane also signed a letter in
    which he confirmed that he had relinquished his powers as an officer and
    director of the Company.

[16]

On October 29, 2013, after the expiry of the
    period stipulated in the forbearance agreement, Callidus commenced court
    proceedings for the appointment of a receiver and the approval of both a
    stalking horse asset purchase credit bid agreement and a sale process. The
    proposed order also declared Callidus nominee company to be the successful
    bidder absent a better offer being generated from the sale process.

[17]

In support of the request, Callidus filed a
    report of the proposed receiver. Among other things, the stated purpose of the
    report was to provide background information about the Company, summarize the
    proposed sale process and the reasons the proposed receiver believed the sale
    process maximized the value of the business and assets and was in the best
    interests of stakeholders. The proposed receiver also recommended the proposed
    order.

[18]

The report stated that as at October 24, 2013,
    the Company was indebted to Callidus in the amount of $36.97 million. In its
    description of the purchase price, the proposed receiver wrote: Will be paid
    by credit bid and calculated as follows: Callidus debt on closing (less $3
    million) plus the Priority Payables. The Priority Payables represented
    approximately $790,000 in payables that potentially took priority over the debt
    to Callidus.

[19]

The report did not include any description of
    the purpose of the $3 million. It did include as an appendix a June 6, 2013
    letter from McFarlane that stated that he had guaranteed the Obligations as
    defined in the Loan Agreement pursuant to an October 11, 2012 guarantee subject
    to the limitations set forth therein. The letter confirmed that he had
    relinquished the exercise of his powers as an officer and director of the
    Company and had provided Callidus with a release.

[20]

McFarlane did not object to approval of the proposed
    order. On October 29, 2013, Morawetz J. granted the order requested. The order
    contemplated that if a superior bid to that of the stalking horse bid was not
    received, no further court approval was required and a nominee company owned by
    Callidus would become the new purchaser of the Company.  The receiver would be
    obliged to apply later for a vesting order.

[21]

In his endorsement granting the October 29, 2013
    receivership order, Morawetz J. noted that the purchase price was the amount
    owing to Callidus plus priority payables less $3 million. The price would be
    satisfied by the credit bid and by payment or assumption of the priority
    payables. Morawetz J. also wrote in his endorsement that nothing in the order
    was to affect any defences McFarlane had with respect to his personal
    guarantee.

[22]

On November 19, 2013, the receiver advised Callidus
    that it was the successful bidder. It also filed a receivers report dated
    November 19, 2013, on the progress of the receivership with the court.

[23]

The purchase price was described in the approved
    asset purchase agreement dated October 25, 2013:

The purchase price payable to the Vendor for
    the Purchased Assets (such amount being hereinafter referred to as the
    Purchase Price) will be the aggregate of: (a) the amount of the obligations
    of the Debtors to Callidus as at the Closing Date less CDN$3,000,000 and (b)
    the [Priority Payables Amount].

[24]

The Closing Date was the Business Day two days
    following the date on which the U.S. Order was granted, or such earlier or
    later date as may be agreed to in writing by the Parties. The U.S. Order was in
    the nature of a recognition order and the receiver was to file and serve an
    application with the U.S. court for entry of the order as soon as practicable
    following the granting of the Canadian approval and vesting order.

[25]

A vesting order was subsequently granted on
    November 22, 2013.  The recognition order was granted by the U.S. court on
    November 25, 2013.  The receivers certificate was delivered on January 2,
    2015. The Companys September 30, 2015 financial statements recorded its assets
    held for sale as having a value of US$66.902 million.  It was acknowledged that
    the assets held for sale refers to the assets of the Company acquired by
    Callidus.

[26]

Callidus then sued McFarlane on his guarantee
    and subsequently brought a motion for summary judgment. It was McFarlanes
    position that the amount of the facility and forbearance fees of US$2.75
    million was included in the Companys total debt of $37 million. While the
    Company may have been obliged to Callidus for US$37 million, his exposure
    (subject to the cap on the guarantee) was to a debt that was US$2.75 million
    lower, or in this scenario, US$34.25 million. As the credit bid satisfied US$34
    million, his guaranteed debt was limited to US $250,000.

[27]

More than two years after the vesting order, Callidus
    nominee brought a rectification motion as a result of which the asset sale
    agreement reference to CDN$3 million was rectified by court order on January
    14, 2016 to reflect US$3 million.

C.

Reasons of Summary Judgment Motion Judge

[28]

In his reasons granting summary judgment to
    Callidus, the motion judge observed that the guarantee provision restricting
    the liability of McFarlane to exclude liability for the $2.75 million facility
    and forbearance fees was inserted at McFarlanes insistence.  The motion judge wrote:

The amended Guarantee provides that Mr.
    McFarlane will be liable for all of the Obligations [approximately $37
    million], excluding however the facility and forbearance fees [$2.75
    million], limited to the lesser of the Limited Principal Amount [$3 million] or
    the Deficiency Amount [$37 million less $2.75 million, or $34.25 million]. In
    dollar terms, Mr. McFarlane guaranteed $34.25 million with his liability
    limited to $3 million.

[29]

He noted that the purchase price in the asset
    purchase agreement was the amount of the Companys obligations to Callidus at
    the closing date less $3 million, that is, $37 million less $3 million, or $34
    million.

[30]

The motion judge determined that there was no
    ambiguity in the amended guarantee.  The obligations of the Company included
    $2.75 million in facility and forbearance fees. Moreover, the Companys
    obligations were not extinguished by the credit bid as $3 million continued to
    be owing by the Company to Callidus. In his view, the $3 million carve out in
    the asset purchase agreement was intended to maintain McFarlanes guarantee
    obligation by Callidus and that sum was still outstanding.  He noted that a
    surety who has given a continuing guarantee for a stated amount is not entitled
    to a discharge if, after payment of the stated amount, the principal remains
    indebted to the creditor.  There was no general legal principle that required all
    payments received from a debtor to be applied to the guaranteed portion of a
    debt.

[31]

The motion judge held that Callidus acquired
    title to the Companys assets under the November 22, 2013 vesting order. Although
    the interim financial statements of Callidus as at September 30, 2015, records
    assets held for sale in the amount of $66.902 million, it was unclear what gave
    rise to that figure, but as at December 2014, there was no amount recorded in
    Callidus financial statements for assets held for sale. In any event, an increase
    in value of the assets after the asset purchase agreement would not accrue to
    McFarlanes benefit.

[32]

The motion judge accordingly granted judgment to
    Callidus on the guarantee in an amount in Canadian currency sufficient to
    purchase the sum of US$3 million plus interest at 21%.

D.

Issues

[33]

Before us, McFarlane did not advance any argument
    based on ambiguity. Rather, he focused on the motion judges failure to
    consider all of the terms of the guarantee and to calculate the amount due in
    the correct order based on what McFarlane and the Company each owed to Callidus.
    Although he advanced additional arguments in his factum, given my conclusion, it
    is unnecessary to address them.

[34]

In disputing McFarlanes appeal, among other
    things, Callidus relies on
Sattva Capital v. Creston Moly
, 2014 SCC 53, [2014] 2 S.C.R. 663.  It
submits that the motion judge and his decision should be reviewed on
    a deferential basis.  He made no palpable and overriding error. It also argues
    that under section 4, the guarantee was continuing in nature and that under the
    Loan Agreement, payments made in respect of the loan could be applied to such
    part of the debt as Callidus saw fit. The carve out of $3 million was to
    preserve Callidus ability to enforce the guarantee. Lastly, it also submits
    that the fact that as at September 30, 2015, Callidus valued the assets it
    acquired from the receiver at $66.902 million is irrelevant to McFarlanes
    liability under his guarantee.

[35]

I
    do not accept Callidus position.  For the reasons that follow, I would allow
    the appeal and reduce the amount in the summary judgment from US$3 million to US$250,000.

E.

Analysis

[36]

Contractual interpretation involves issues of
    mixed fact and law:
Sattva
,
    at para. 50.  The interpretation of
a non-standard
    form guarantee, which is a contract, is therefore a question of mixed fact and
    law:
Toronto-Dominion Bank v. Konga
, 2016 ONCA
    976. In the absence of an extricable error of law or a palpable and overriding
    error of fact, deference is owed to a motion judges decision.  The failure to
    consider a relevant factor may amount to an extricable error of law:
Sattva
at para. 53.

[37]

In my view, the motion judge erred in law by
    failing to consider that s. 2.1 of the amended guarantee served to reduce the
    Companys obligations that were guaranteed.  He then made a further palpable
    and overriding factual and mathematical error in calculating the amount owing
    under the guarantee.

[38]

The amended guarantee was to accomplish three
    things: (1) McFarlane would personally commit to paying the Obligations of the
    Company to Callidus; (2) his exposure would be limited to the lesser of US$3
    million plus interest and Callidus deficiency less facility and forbearance
    fees; and (3) to the extent the Obligations included facility or forbearance
    fees, his guarantee would not extend to cover those amounts. On this last point,
    the motion judge stated that McFarlane had insisted that he not be responsible
    for any portion of the Companys debt that arose from fees and the guarantee
    was amended to reflect that concern.

[39]

The Companys total Obligations amounted to
    approximately $37 million (not including priority payables of $750,000).  These
    Obligations included the $2.75 million in facility and forbearance fees.  The
    purchase price that was the subject matter of the credit bid was calculated
    under the asset purchase agreement as the debt on closing ($37 million which
    included the $2.75 million) less $3 million plus priority payables of
    approximately $790,000.  Accordingly, $34.25 million of debt was extinguished through
    the credit bid, leaving $3 million of debt outstanding.

[40]

Callidus position is that the $34.25 million of
    debt that was extinguished included the facility and forbearance fees, leaving
    $3 million of debt, all of which was covered by McFarlanes guarantee.  However,
    there is no basis for that position.  The debt was treated as a whole; there
    was no issue of allocation.  The whole debt was $37 million, $34.25 of which
    was extinguished.

[41]

The amended guarantee was based on a formula.   McFarlane
    guaranteed the Companys debt limited to the lesser of $3 million or the Deficiency
    Amount, a defined term.  The date for calculation of the Deficiency Amount as
    described in the amended guarantee was the end of the Collateral Liquidation
    Period.  Based on the motion judges finding, Callidus acquired title to the
    assets on November 22, 2013.  No real issue was taken with $37 million
    representing the quantum of the obligations to be reduced by the sales price.  The
    Deficiency Amount was comprised of two elements.  First, the amount of the
    Obligations outstanding at the end of the Collateral Liquidation Period and
    second, the exclusion of the $2,250,000 facility fee and any forbearance fees.
    The Obligations amounted to $3 million.  The forbearance fees amounted to
    $500,000.  Forbearance and facility fees to be excluded therefore totaled
    $2,750,000.  $3 million less $2,750,000 left an amount of $250,000 owing from
    McFarlane on his amended guarantee.

[42]

Counsel for McFarlane submits that Callidus is
    the author of its own misfortune. He argues that in essence Callidus could have
    structured its loan to own strategy in a manner that reflected a purchase price
    of $30 million which would have left room to recover $7 million, which
    necessarily includes $3 million more than the amount of the facility and
    forbearance fees.  That would have left McFarlane liable for the full $3
    million on the guarantee.  He argues that, being a public company, Callidus
    refrained from doing so so that it would not have to show a loss to its
    investors.  Moreover, the facility and forbearance fees would appear as profit.
    Indeed, counsel argues that Callidus made a windfall on the acquisition of the
    Company as evident from the $66.902 million value set forth in the Companys
    September 30, 2015 financial statements.

[43]

While it is the case that Callidus might have
    structured the transaction by negotiating or stipulating a purchase price less
    than $34.25 million, the fact is that it neglected to do so.  There is no need
    to draw any conclusion on its motivation.  Nor is such a determination
    necessary for the purposes of identifying McFarlanes obligations under the
    guarantee.

[44]

In addition, the continuing nature of the
    guarantee as described in section 4 of the amended guarantee is immaterial to the
    calculation.  That provision in the amended guarantee was in part made subject
    to s. 1 of the amended guarantee which expressly excluded the facility and
    forbearance fees from the debt guaranteed.  More importantly, however, while under
    the Loan Agreement, payments made in respect of the loans could be applied to
    such part of the debt as Callidus saw fit, under the guarantee, those
    obligations were to exclude the facility and forbearance fees.  McFarlane did
    not guarantee $3 million.  He guaranteed the Companys debt excluding facility
    and forbearance fees.  Although Callidus obviously tried to preserve its claim
    under the guarantee, whatever its maturation, its unilateral action was
    inadequate and failed to accomplish its objective.  Moreover, this purpose was
    not addressed in the preliminary report or reports of the receiver, the court
    orders approving the sale, the vesting order, or in Morawetz J.s endorsement
    in support of the sale approval order.  The after the fact subsequent amendment
    of the order to reflect US dollars and the ancillary endorsements cannot serve
    to assist Callidus position.

Disposition

[45]

Accordingly, I would allow the appeal and vary the
    summary judgment to substitute US$250,000 for US$3 million in paragraph 1 of
    the May 24, 2016 judgment.  As McFarlane has been successful on this appeal, I
    would order Callidus to pay his costs of the appeal as agreed, fixed in the
    amount of $27,500 inclusive of disbursements and applicable taxes and would vacate
    the order below of $86,817.30 in favour of Callidus.  I would also order
    McFarlane to deliver his written costs submissions, not exceeding five pages in
    length, on the appropriate disposition for the costs below to the Registrar of
    this court within 15 days from the date of the release of these reasons and
    that Callidus deliver its responding costs submissions, not exceeding five
    pages in length, on the appropriate disposition for the costs below to the
    Registrar within 15 days thereafter.

Released:

SEP                                                 S.E.
    Pepall J.A.

JUL 28 2017                                    I
    agree K. Feldman J.A.

I
    agree E.E. Gillese J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Canadian Northern Shield Insurance Company v.
    2421593 Canada Inc., 2017 ONCA 570

DATE: 20170705

DOCKET: C62793

LaForme, van Rensburg and Huscroft JJ.A.

BETWEEN

Canadian Northern Shield Insurance Company and
    Royal & Sun Alliance Insurance Company of Canada

Plaintiffs (Appellants)

and

2421593 Canada Inc., The Co-operators Group
    Limited, Federated Agencies Limited, Vancouver City Savings Credit Union and
    7081332 Canada Ltd.

Defendants (Respondents)

Marg A. McKillop and J. Anthony Caldwell, for the
    appellants

Geoff R. Hall and Jacqueline L. Cole, for the
    respondents, 2421593 Canada Inc. and Vancouver City Savings Credit Union

Barry H. Bresner, for the respondents, The Co-operators
    Group Limited, Federated Agencies Limited and 7081332 Canada Ltd.

Heard: May 15, 2017

On appeal from the order of Newbould J. of the Superior
    Court of Justice, dated September 19, 2016, with reasons reported at 2016 ONSC
    5843.

By the Court:

A.

Overview

[1]

The appellants appeal the summary dismissal of their action against the
    respondents. The parties principal dispute is about contract formation and
    interpretation.

[2]

Canadian Northern Shield Insurance Company
    (CNS) and Royal & Sun Alliance Insurance Company of Canada (RSA)
    (together CNS/RSA or the appellants) commenced an action against 2421593
    Canada Inc. (Vancity Insurance) and Vancouver City Savings Credit Union
    (together the Vancity respondents) for damages and other relief following the
    alleged breach of an oral agreement. They also sued The Co-operators Group
    Limited (Co-operators), Federated Agencies Limited and 7081332 Canada Ltd.
    (together the Co-operators respondents) for damages for inducing breach of contract.

[3]

There were two motions for summary judgment
    brought by the Vancity respondents and the Co-operators respondents.

[4]

The motion judge dismissed the action, primarily
    because he concluded on his review of the evidence that the parties expected
    and required there to be a signed written agreement in order for there to be a
    binding contractual agreement (referred to on appeal as his finding that there
    was a Precondition). This disposed of the claims for breach of contract and
    for inducing breach of contract. He also determined that in any event the
    decision of the Vancity respondents not to proceed with the alleged contract
    with CNS/RSA could not have been induced by Co-operators several months later.

[5]

The appellants seek an order setting aside the
    dismissal and sending the entire action to trial.

[6]

For the reasons that follow, we allow the appeal
    with respect to the action against the Vancity respondents, which we direct to
    trial. We dismiss the appeal with respect to the Co-operators respondents.

B.

Background

[7]

Vancity Insurance had non-exclusive broker agreements with CNS and RSA.
    In February 2008, it issued a request for interest (RFI) seeking expressions
    of interest from insurers in developing an exclusive supplier arrangement.  In
    June 2008, RSA/CNS were selected to enter exclusive negotiations to become
    Vancity Insurances sole insurer. Various things took place in the following
    months, including a press release announcing the parties relationship, notice
    by Vancity terminating its relationships with other insurers, and meetings and
    negotiations.  By July 2009, when Vancity Insurance was purchased by
    Co-operators, no written agreement had been signed between RSA/CNS and Vancity.

[8]

RSA/CNS asserted that the parties had concluded an oral agreement at meetings
    on July 3, 2008 and September 11, 2008. They claimed the parties had taken
    various actions in performance of their contractual obligations after the oral
    contract formed despite the absence of a written contract, actions that
    confirmed they had an agreement. Vancity Insurance asserted that no oral
    agreement was reached at those meetings on all essential matters and that, in
    any event, a signed written agreement was required, which never occurred.

C.

The Decision Below

[9]

In granting summary judgment in respect of the appellants claims
    against the Vancity respondents, the motion judge determined that it was not
    necessary to decide whether an oral agreement on essential terms came into
    existence. He found a Precondition: on a review of the evidence, it was clear
    to him that the parties expected and required there to be a signed, written
    agreement in order for there to be a binding contractual relationship, and that
    the understanding or intention of the parties was that their legal obligations
    were to be deferred until a formal contract had been approved by both sides and
    executed. The motion judge stated that, if it had been necessary to resolve
    whether the parties had an oral agreement and the terms of any such agreement,
    he would have ordered a trial of that issue.

[10]

As for the action against the Co-operators respondents for inducing
    breach of contract, the motion judge concluded that the claim was untenable in
    light of his conclusion on the first issue. He went on to provide alternative
    reasons for dismissing the claim for inducing breach of contract, including
    that there was no evidence that Co-operators deliberately sought to get the
    alleged oral contract terminated; that, on the evidence, Co-operators acted
    reasonably and did not turn a blind eye to any putative contract; and that,
    in any event, the decision of the Vancity respondents to explore the market to
    sell Vansity Insurance, and therefore not to settle the contract terms,
    predated Co-operators involvement, and so could not have been induced by Co-operators
    several months later.

D.

Appeal of Dismissal of Claims Against Vancity Respondents

[11]

The central issue in this appeal relates to whether the motion judge
    erred in finding the Pre-condition  in his determination that CNS/RSA and
    Vancity Insurance had agreed that no binding contractual relationship would
    come into existence without a written, signed agreement.

[12]

The appellants submit the motion judge made palpable and overriding
    errors in making this finding: he drew the wrong inferences from the documents
    and other evidence he assessed, and made this finding in the absence of any
    evidence to support it. Further, the appellants submit the motion judge erred
    in law when he concluded that the conduct of the parties was irrelevant to the
    Pre-condition question.

[13]

For their part, the Vancity respondents urge deference. They say the
    motion judge made no error in assessing the extensive record on the summary
    judgment motion, including draft agreements, discovery evidence, affidavits and
    cross-examinations. Nor did he hold that conduct evidence was irrelevant.
    Rather, he expressly considered the parties conduct, and simply disagreed with
    the inferences the appellants wished to draw from it.

(1)

Analysis

[14]

This court owes considerable deference to the motion judges interpretation
    of the parties agreement:
Sattva Capital Corp. v. Creston Moly Corp
.,
    2014 SCC 53, [2014] 2 S.C.R. 633. Here, the motion judges finding that there
    was a Pre-condition, that the parties intended and agreed that their legal
    obligations were to be deferred until a formal contract had been approved by
    both sides and executed, was a palpable and overriding error. As we explain,
    the evidence reviewed by the motion judge was not capable of supporting that
    conclusion.

[15]

The Vancity respondents point to the following 11 pieces of evidence
    referred to by the motion judge at paras. 22  34 of his reasons, evidence they
    say supports his conclusion about the Pre-condition:

(a)      CNS/RSA admitted in their pleading that the agreement
    needed to be memorialized in writing, which indicated that the plaintiffs
    understood that the agreement had to be in writing in a form agreed by both
    sides;

(b)      Mr. Hayes (RSA/CNSs representative on examination for
    discovery) admitted that the relationship between a broker and an insurer is
    invariably documented by an agreement in writing and that it would be very
    foolish to have a situation where a broker could issue policies without having
    some sort of signed document indicating the scope of their authority;

(c)      CNS/RSAs written proposal to Vancity Insurance
    indicated that the parties intended to reach a non-binding Letter of Intent,
    followed by a period of exclusive, detailed negotiations which would result in
    a full legal contract;

(d)      CNS/RSAs written proposal for discussion on June 10,
    2008 contained a list of terms and conditions, one of which was formal
    agreement;

(e)      The minutes of the meeting of July 3, 2008  at which
    CNS/RSA assert a binding contract was formed  state that CNS/RSA was to
    provide boiler plate contract for review/discussion;

(f)       CNS/RSAs own affiant, Mr. Pentland, gave evidence on
    cross-examination that the discussions at the July 3, 2008 meeting were at a
    more conceptual level, that CNS/RSA was to provide a form of document to be
    further considered following the meeting, and that it was contemplated that
    there would be a written agreement between the parties;

(g)      Prior to the parties meeting of September 11, 2008,
    Mr. Pentland prepared a memorandum which expressly referred to the anticipated
    written contract;

(h)      Mr. Hayes affidavit expressly indicated that the
    agreement at the September 11th meeting was that CNS/RSA would draft a written
    agreement;

(i)       The minutes of the September 11, 2008 meeting,
    circulated by Vancity Insurance, state that Vancity would wait until draft
    comes back from counsel  review, reflecting that they intended to receive a
    draft of a written agreement;

(j)       An email of December 1, 2008 from Mr. Hayes to Mr.
    Terry Taciuk, president of Vancity Insurance, enclosed a draft written
    agreement and stated that it would serve as a solid first draft for us to work
    on and that it had been drafted with the ability to add addendums for
    specific contract items such as service level agreements or claims satisfaction
    surveys; and

(k)      Mr. Hayes evidence on discovery was that he did not
    expect Vancity Insurance to sign the draft contract delivered on December 1,
    2008, and that the draft contained a number of points that had not been agreed.

[16]

The difficulty for the Vancity respondents is that, whether considered
    individually or cumulatively, these aspects of the evidence only go so far as
    to support the conclusion the parties intended and agreed to eventually set out
    their agreement in writing, and that they were taking steps to negotiate the
    terms of their contract  what the Vancity respondents counsel referred to as
    the contract track. This evidence does not, in our view, support the motion
    judges conclusion, on which he based his disposition of the Vancity motion,
    that they had established that both sides acted on the understanding and
    intent that there was to be a formal executed written contract in order to be
    legally bound: at para. 21.

[17]

The motion judge was tasked with answering two separate questions: (i)
    did the parties agree that they would set out their contractual arrangements in
    writing? and (ii) if so, did the parties agree that execution of a written
    contract was a precondition to the creation of legal obligations between them?
    It was not in dispute that the answer to the first question was yes;
    nonetheless, the motion judge appears to have treated the evidence providing an
    answer to the first question as dispositive of the second.

[18]

Nor does the motion judges conclusion take into account evidence of the
    parties conduct that pointed to the existence of some type of contractual
    relationship between the parties, while they negotiated a formal contract
    what the Vancity respondents counsel referred to as the operational track.
    Referring to evidence that the parties pursued the roll-over of the business
    from Vancity Insurances other insurers to CNS and continued to work on the
    program, as evidence they had a binding agreement, the motions judge, at para.
    36, discounted that conduct on the basis that it ignores the need for a signed
    written contract that the parties pursued for many months. He pointed to the
    fact that the parties persisted in seeking a final written agreement while they
    were performing the actions relied on by the appellants. But as we have already
    observed, the parties pursuit of a written contract could not furnish a basis
    to infer an intention that execution of a written agreement was to be a
    precondition to contractual obligations.

[19]

Consequently, the motion judge provided no reasonable explanation for
    rejecting the appellants arguments regarding the significance of the parties
    conduct in performing on the terms of the deal. The Vancity respondents concede
    that such evidence is relevant in contractual interpretation, but say the
    motion judge considered and interpreted the evidence and, as he was entitled to
    do, reached a conclusion other than the one advanced by the appellants. In our
    view, however, the motion judges treatment of the conduct evidence in para. 36
    is tantamount to disregarding it: having concluded that the parties agreed the
    execution of the written agreement was a precondition to contractual
    obligation, he determined he did need to consider conduct that arguably
    undermined that view. Since, as we have said, the evidence the motion judge
    adverted to was not capable of supporting the inference for which it was relied
    upon, it also cannot be a basis for disregarding evidence that had a clear
    bearing on the very question he had to consider.

[20]

For these reasons, we conclude that the motion judge erred in concluding
    that there was no issue requiring a trial on the question of a Precondition,
    and that therefore this permitted him to dismiss the action against the Vancity
    respondents.

(2)

Remedy and Conclusion Regarding Claim Against Vancity Respondents

[21]

The Vancity respondents submit that, even if the motion judge erred in
    granting summary judgment on the basis that there was a Precondition, the
    dismissal of the action against them should be upheld on the basis that there is
    no genuine issue requiring a trial. The Vancity respondents assert there was
    insufficient certainty of terms for there to be an enforceable contract between
    the parties. However, the motion judge stated, at para. 16, that if he had
    considered it necessary to decide whether an oral agreement had come into
    being, he would be inclined to order a trial of the issue in spite of the
    agreement of the parties that the case can be decided on a motion for summary
    judgment without the need for a trial. We see no reason to interfere with this
    conclusion. There are considerable unresolved factual disputes that this court
    is not in a position to adjudicate.

[22]

As a result, we conclude that the motion judge erred in determining, on
    a summary judgment motion, that the parties intended and agreed that their
    legal obligations were to be deferred until a formal written contract had been
    approved by both sides and executed. We therefore allow the appeal in respect
    of the appellants claims against the Vancity respondents.

E.

Appeal of Dismissal of claims against co-operators respondents

[23]

The motion judges dismissal of the action against the Co-operators
    respondents for inducing breach of contract followed automatically from his
    decision on the Precondition. If there was no agreement between the appellants
    and the Vancity respondents, because one could not come into existence without
    a written contract, then there could be no inducement of a breach of contract.
    The focus of the appellants submissions on appeal was on the motion judges
    conclusion that there was a Precondition.

[24]

However, the motion judge articulated a reasonable, alternative basis
    for dismissing the claim against the Co-operators respondents that did not rely
    on his conclusions with respect to whether a binding contract had formed: see
    paras. 41-59 of his reasons. Essentially, he found that while Co-operators,
    through its due diligence, was aware of the nature of the business that was
    being conducted by CNS/RSA with Vancity Insurance, and that the parties were
    taking opposite positions as to whether there was a binding contract,
    Co-operators was in no position to make a determination as to which of the
    parties was correct in their positions. Further, there was no evidence that
    Co-operators deliberately sought to get the alleged oral contract terminated.
    In any event, since the Vancity respondents had decided to explore the market
    to sell Vancity Insurance and therefore not to settle the contract terms with
    the appellants by sometime in December 2008, the decision of the Vancity
    respondents not to proceed with the alleged contract with the appellants could
    not have been induced by Cooperators several months later.

[25]

On appeal, the appellants did not attack these findings that were
    available to the motion judge on the evidence, and fully supported his
    alternative basis for dismissing the claim against the Co-operators
    respondents. Accordingly, there is no basis to interfere with the order
    dismissing the action against the Co-operators respondents.

F.

Disposition

[26]

For these reasons we allow the appeal in part. We set aside the
    dismissal of the action against the Vancity respondents.

[27]

Success on appeal was divided. The Co-operators respondents were
    entirely successful and the Vancity respondents were entirely unsuccessful,
    while the appellants succeeded against Vancity only. The Co-operators
    respondents are therefore awarded costs in the agreed upon amount of $10,000
    plus HST payable by the appellants. The appellants are in turn awarded costs in
    the agreed upon amount of $15,000 plus HST payable by the Vancity respondent.

Released: HSL JUL 5 2017

H.S. LaForme J.A.

K. van Rensburg J.A.

Grant Huscroft J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Childs v. Childs, 2017 ONCA 608

DATE: 20170720

DOCKET: C61581 & C62716

Gillese, Huscroft and Trotter JJ.A.

BETWEEN

Michael Childs and Andrew Childs

Applicants

(Respondents)

and

Peter Childs
,
Caroline
    Childs
and the Public Guardian and Trustee

Respondents (Appellants)

AND BETWEEN

Peter Childs and
Caroline Childs

Applicants

(Appellant)

-and-

Michael Childs, Andrew Childs, Eileen Vera Childs
    and the Ontario Public Guardian and Trustee

Respondents

(Respondents)

Peter Childs and Caroline Childs, in person

Michael Childs and Andrew Childs, in person

Alexandra V. Mayeski, for BMO Trust Company

Debra Stephens and Kaylie Handler, for the intervener
    Wendy Griesdorf

Richard Coutinho, for the Public Guardian and Trustee

Heard: May 4, 2017

On appeal from the decision of Justice Gary W. Tranmer of
    the Superior Court of Justice, dated June 25, 2015, and the judgment dated December
    16, 2015, with reasons reported at 2015 ONSC 4036 and at 2015 ONSC 6616.

COSTS ENDORSEMENT

[1]

By reasons dated June 20, 2017, this court
    dismissed the review motion and within appeals heard on May 4, 2017. The
    parties were invited to make written submissions on costs of the appeals and
    the review motion, if they were unable to agree on those matters.

[2]

The court was advised that the parties agreed on
    the costs in respect of the following:

1.

The Public Guardian and Trustee sought no costs
    and there shall be no costs ordered payable to it.

2.

The costs of the Intervenor, Ms. Griesdorf, related
    to the review motion and appeals heard May 4, 2017, in the amount of
    $28,057.35, inclusive of fees, disbursements and HST shall be paid by BMO Trust
    Company, as guardian of property of Eileen Childs, from Eileen Childs current
    assets, to WELPartners LLP, counsel for the Intervenor from the current assets
    of Eileen Childs.  This includes the $5,000 amount ordered to be paid to the
    Intervenor pursuant to the Order of Justice McLeod dated November 10, 2016.
    The amount of $28,057.35 shall be offset against any inheritance that Peter
    Childs and Caroline Childs are to receive on the death of Eileen Childs, equally,
    or as Peter Childs and Caroline Childs otherwise agree in writing.

3.

The costs of BMO Trust Company, related to the
    review motion and appeals heard May 4, 2017, in the amount of $18,996.93
    inclusive of fees, disbursements and HST, shall be paid by BMO Trust Company,
    as guardian of the property of Eileen Childs, to Mayeski Mathers LLP, counsel
    for BMO Trust Company, from the current assets of Eileen Childs.  The amount of
    $18, 996.93 shall be offset against any inheritance that Peter Childs and
    Caroline Childs are to receive on the death of Eileen Childs, equally or as Peter
    Childs and Caroline Childs otherwise agree in writing.

[3]

The court was asked to include the agreed on
    terms, set out in para. 2 above, in this endorsement and we are content that
    such an order should go.

[4]

Andrew Childs advised the court that he sought
    no costs but supported the position of Michael Childs on the matter of costs.

[5]

Michael Childs sought costs of approximately
    $50,000, on a full indemnity basis, for the appeals and review motion. He also
    asked that other outstanding costs orders be paid from Eileen Childs assets
    conditional on BMO Trust Company advising that such a payment was compatible
    with Eileen Childs ability to finance it from her guardianship plan of care.
    He asked that any amounts not immediately paid from Eileen Childs assets
    should be paid from her estate, on her death. He further asked that any costs
    payments made from Eileen Childs assets should be set off against any
    inheritance that Peter Childs and Caroline Childs are to receive on Eileen
    Childs death.

[6]

Peter Childs and Caroline Childs say that
    Michael Childs claim for costs is unreasonable. They ask that the court take
    into consideration the fact that Caroline Childs had the role of a full time
    live-in caregiver of an incapable person with dementia for over five years and
    that their actions truly benefitted Eileen Childs. They ask that all appeal
    costs be paid by the estate of Eileen Childs.

[7]

We see no reason to depart from this courts
    normal practice of awarding costs on a partial indemnity basis to the
    successful party. Accordingly, we order costs of the review motion and appeals
    in favour of Michael Childs in the amount of $24,400, inclusive of fees,
    disbursements and HST. Such costs shall be paid by BMO Trust Company, as
    guardian of property for Eileen Childs, from the current assets of Eileen
    Childs and that amount shall be offset against any inheritance that Peter
    Childs and Caroline Childs are to receive on the death of Eileen Childs,
    equally.

[8]

Further, we order that any unpaid costs orders
    in these proceedings in favour of Michael Childs, payable by Peter Childs
    and/or Caroline Childs, shall also be paid by BMO Trust Company, as guardian of
    property for Eileen Childs, from the current assets of Eileen Childs and those
    amounts shall be offset against any inheritance that Peter Childs and Caroline
    Childs are to receive on the death of Eileen Childs, equally.

[9]

We appreciate the concern that Michael Childs
    expressed about depleting Eileen Childs estate and possibly compromising her
    ability to finance her guardianship of care plan. However, we decline to make a
    conditional costs order of the sort sought by Michael Childs as it is not
    workable.

[10]

Order to go in accordance with these reasons.

Eileen E.
    Gillese J.A.

Grant Huscroft
    J.A.

Gary T. Trotter
    J.A.