COURT OF APPEAL FOR ONTARIO

CITATION: High Tower Homes Corporation v. Stevens, 2014 ONCA
    911

DATE: 20141218

DOCKET: C58783

Hoy A.C.J.O., Epstein and Hourigan JJ.A.

BETWEEN

High Tower Homes Corporation

Appellant

and

Brett Jeremy David Stevens and Brett Jeremy David
    Stevens, Trustee

Respondents

Ronald Allan, for the appellant

Christopher E. Reed, for the respondents

Heard: November 7, 2014

On appeal from the judgment of Justice Jamie K. Trimble
    of the Superior Court of Justice, dated April 16, 2014.

Hoy A.C.J.O.:

INTRODUCTION

[1]

A vendor was mistaken as to the terms of an agreement of purchase and
    sale. Completion of the sale transaction would result in the purchasers acquisition
    of the property at an unintended price below market value. Did the motion judge
    err in concluding that the vendor could avoid completing the sale transaction
    by relying on the purchasers failure to give notice of its waiver of
    conditions personally to the vendor?

[2]

The purchasers arguments do not persuade me that there is a basis for
    this court to intervene with the motion judges conclusion. I would accordingly
    dismiss this appeal.

BACKGROUND

[3]

Brett Stevens, in his capacity as trustee (and in his personal capacity,
    the Vendor) owned a property (Blue Water) in Burlington. He and his then
    spouse owned the adjacent property (Avondale). It was their principal
    residence. Stevens and his spouse concluded that selling the two properties
    together would maximize their value. For tax planning purposes, they wished to
    allocate as much of the aggregate purchase price for the properties as possible
    to Avondale.

[4]

High Tower Homes Corporation (the Purchaser) expressed interest in the
    properties and submitted offers for both. The offers were not simply standard
    form documents. The Purchaser added Schedule A  consisting of two typed pages
    of additional provisions  to the Ontario Real Estate Association standard form
    of Agreement of Purchase and Sale. The added provisions superseded the standard
    terms to the extent of any conflict or discrepancy.

[5]

The Purchasers first offers for the two properties were presented
    together.

[6]

Schedule A to each of the Purchasers first offers included a clause
    entitled CONDITION FOR SALE OF ADJACENT PROPERTY to the effect that the sale
    of each property was conditional on the sale of the other. A series of further
    offers and counter-offers ensued. In a subsequent, fully re-typed offer for
    Blue Water, the Purchaser revised the text of the clause under the heading CONDITION
    FOR SALE OF ADJACENT PROPERTY to provide that the sale of Blue Water was
not
conditional on the sale of Avondale. The change was not black-lined and the
    Purchaser did not otherwise draw the change to the Vendors attention. No
    change was made to the corresponding clause in the Avondale offer.

[7]

On January 25, 2013, the Vendor accepted the Purchasers counter-offers
    to sell the properties. The agreement of purchase and sale for Blue Water (the
    Agreement) was in the form prepared by the Purchaser  that is, without the
    clause making the closing of the sale of Blue Water conditional on the purchase
    of Avondale.

[8]

All price increases in the course of the negotiations were made with
    respect to Avondale. Throughout, the price offered by the Purchaser for Blue
    Water remained at $1 million  an amount less than what Stevens had paid for
    Blue Water in 2008. Over the course of the negotiations, the price offered for
    Avondale increased from $3.5 million to $4.5 million.

[9]

Clause 7
[1]
to Schedule A of the Agreement contained a clause  entitled CONDITION FOR
    BUYERS BENEFIT  outlining conditions for the Purchasers benefit that could
    be waived
by notice
in writing
to the Seller
, within the
    time period stated herein (on or before February 22, 2013) [emphasis added].
    If the conditions were not so waived, the Agreement would become null and void.

[10]

Clause
    3 of the standard terms of the Agreement, entitled Notices, provided, in relevant
    part:

In addition to any provision contained herein and in any
    Schedule hereto, this offer, any counter-offer, notice of acceptance thereof or
    any notice to be given or received pursuant to this Agreement or any Schedule
    hereto (any of them, Document) shall be deemed given and received when
    delivered personally or hand delivered to the Address for Service provided in
    the Acknowledgment below, or where a facsimile number or email address is
    provided herein, when transmitted electronically to that facsimile number or
    email address, respectively, in which case, the signature(s) of the party
    (parties) shall be deemed to be original.

[11]

No
    Address for Service was specified in the part of the Agreement entitled
    Acknowledgment and no facsimile number or email address was specified in the
    spaces in the Agreement immediately following the notice clause labelled FAX
    No. (For delivery of Documents to Seller) and Email Address (For delivery of
    Documents to Seller).

[12]

On
    Friday, February 22, 2013, the Purchasers solicitor gave notice to the Vendors
    solicitor, by fax, purporting to waive the conditions for the Purchasers
    benefit in clause 7 of Schedule A to the Agreement and seeking an extension of
    time for the waiver of conditions with respect to its purchase of Avondale.

[13]

According
    to Ivan Curic  an officer, director and principal of the Purchaser  the
    Purchasers solicitor also told him that he had to deliver the waiver to Blue
    Water and he allegedly did so (he thinks in the evening of February 22, 2013). Mr.
    Curic admits that he did not deliver the notice to the Vendor personally and
    the Vendors evidence was that nothing was left at Blue Water. The notice
    waiving the conditions was never delivered to the Vendor personally.

[14]

The
    Vendor was stunned when he learned of his mistake, and the Purchasers attempt
    to take advantage of it to buy only Blue Water, at a bargain price.

[15]

On
    February 25, 2013, the Vendors lawyer responded by fax to the Purchasers
    solicitor. The Vendors lawyer advised that the Agreement was at an end because
    the Purchaser had not given notice waiving the conditions for its benefit
    within the required time period in the manner required by the Agreement.

[16]

The
    Purchaser sued for specific performance and, in the alternative, damages in the
    amount of $5 million for breach of contract. The Vendor counter-claimed for a
    judgment rectifying the Agreement and a declaration that the Agreement and the
    agreement of purchase and sale for Avondale were both null and void. The
    Purchaser brought a motion for partial summary judgment declaring the Vendor
    liable for breach of the Agreement.

[17]

The
    motion judge declared the Agreement unenforceable and dismissed the Purchasers
    motion. He found that the Agreement was clear: notice should have been
    delivered personally to the Vendor and the Purchaser did not deliver its notice
    personally. Further, the entire agreement clause in the Agreement precluded
    the implication of terms to the contrary
[2]
and was a complete answer to the Purchasers argument that the Vendor had
    waived the requirement that notice be given by personal delivery.

[18]

The
    motion judge also concluded that the Vendor was not entitled to rectification
    of the Agreement.

[19]

The
    Purchaser appeals the dismissal of its motion. The Vendor cross-appeals, asking
    that if the Purchasers appeal be allowed, all issues, including his claim to
    rectification, be sent to trial.

ARGUMENTS ON APPEAL

[20]

The
    Purchaser makes five arguments on appeal:

1.

The Purchasers solicitors fax number was provided in the Agreement.
    The signed Agreement was faxed by the Vendors solicitor to the Purchasers
    solicitor and the Vendors solicitors fax number therefore appears on the top
    of each page. In this way, the Vendors solicitors fax number was provided
    herein, within the meaning of the notice provision. Therefore, fax delivery to
    the Vendors solicitor complied with the express notice provision in the
    Agreement.

2.

The motion judge should have found that by leaving the notice at Blue
    Water, Mr. Curic satisfied the requirement for personal delivery, as was found
    in
1376273 Ontario Inc. v. Knob Hill Farm Ltd.
(2003)
, 34 B.L.R. (3d) 95 (Ont. S.C.).

3.

A term that notice waiving the conditions in favour of the Purchaser
    could be given by fax to the Vendors solicitor and by hand delivery to Blue
    Water is necessary to give business efficacy to the Agreement and should be
    implied as a matter of presumed intention:
Canadian Pacific Hotels Ltd. v.
    Bank of Montreal
, [1987] 1 S.C.R. 711. And, as in
CivicLife.com Inc.
    v. Canada (Attorney General)
(2006)
,
    215 O.A.C. 43, the wording of the entire agreement clause does not preclude the
    implication of a term. The motion judge erred in concluding otherwise.

4.

The Vendor waived the personal delivery notice requirement, through his
    conduct or that of his solicitor. Alternatively expressed, the Vendor and the
    Purchaser amended the provisions of the Agreement by their actions during the
    course of the Agreement, as in
Colautti Construction Ltd. v. Ottawa (City)
(1984)
, 46 O.R. (2d) 236 (C.A.). An
    entire agreement clause does not necessarily preclude a party from asserting
    waiver, or that the Agreement was subsequently amended. The motion judge erred
    in concluding that the entire agreement clause in the Agreement did so.

5.

The motion judge failed to consider and apply the doctrine of promissory
    estoppel. The Vendor through his conduct waived strict compliance with the
    provisions in the Agreement regarding how notice was to be given, leading the
    Purchaser to suppose that he would not insist on strict compliance with the
    notice provision. This is an appropriate circumstance for equity to intervene
    and estop the Vendor from strict reliance on his rights.

[21]

Below,
    I address each of these arguments in turn. However, I first outline the
    standard of review that the Supreme Court held in
Sattva Capital Corp. v.
    Creston Moly Corp.,
2014 SCC 53, 373 D.L.R. (4th) 393 is to be applied to questions
    of contractual interpretation.

CONTRACTUAL INTERPRETATION: STANDARD OF REVIEW

[22]

In
Sattva
, Rothstein J., for the Supreme Court, wrote at para. 50:

Contractual interpretation involves issues of mixed fact and
    law as it is an exercise in which the principles of contractual interpretation
    are applied to the words of the written contract, considered in light of the
    factual matrix.

[23]

He
    explained at para 51:

One central purpose of drawing a distinction between questions
    of law and those of mixed fact and law is to limit the intervention of
    appellate courts to cases where the results can be expected to have an impact
    beyond the parties to the particular dispute. It reflects the role of the
    courts of appeal in ensuring the consistency of the law, rather than in
    providing a new forum for parties to continue their private litigation.

[24]

[D]eference
    [is owed] to first instance decision-makers on points of contractual
    interpretation:
Sattva
,

at para. 52.

[25]

There
    may be instances where a question of law  which attracts a correctness
    standard  can be extricated from the interpretation process. However, as
Sattva
cautions at para. 55, such instances will be rare.

[26]

Therefore,
    the motion judges conclusions that the Purchaser was required to deliver its
    written notice of waiver to the Vendor personally and that the manner by which
    the Purchaser gave notice in this case did not amount to personal delivery to the
    Vendor are entitled to deference, absent an extricable question of law.

ARGUMENTS 1 AND 2

[27]

I
    am not persuaded that either of the Purchasers first two arguments provides a
    basis for this court to interfere with the motion judges conclusions.

[28]

As
    for its first argument, there is no indication from the Purchasers factum
    below on the motion for partial summary judgment that the Purchaser argued at
    first instance that fax delivery to the Vendors solicitor constituted fax
    delivery in accordance with the Agreement. In any event, the Agreement included
    a specific spot where a fax number
if any
 at which the Vendor could be given notice was to be specified. No fax number
    was specified in the spot in the Agreement designated for that purpose. Faxing
    the notice to the Vendors solicitor did not constitute notice via facsimile
    transmission in accordance with the Agreement.

[29]

As
    to its second argument, the Purchasers evidence that it had delivered the
    notice to Blue Water was contradicted by the Vendor and his former spouse. The
    motion judge did not make a finding that the Purchaser had delivered the notice
    to Blue Water, and I would be reluctant to make such a finding on this record.

[30]

In
    any event, the facts in this case are very different from those in
Knob
    Hill
. In that case, the notice clause required that notice to the
    corporate seller be delivered in person
at a specified address
. The
    court found that a notice  delivered by the hand of an individual  and
    addressed to and placed between the locked doors of the specified address,
    where it would surely be found when the doors were unlocked by a responsible
    person, was delivered in accordance with the notice provision: see
Knob
    Hill
, at para. 143. Here, clause 7 of Schedule A to the Agreement specifies
    that the conditions can only be waived by notice in writing
to the

Seller

    [emphasis added]. And clause 3 of the standard terms refers to a notice
    delivered personally or hand delivered to the Address for Service provided in
    the Acknowledgement below As noted above, no Address for Service was
    specified in the Acknowledgement. Further, the Vendor in this case is an
    individual, not a corporation as in
Knob Hill
, and Blue Water was not
    a place of business, as in the case of
Knob Hill
, where the notice
    would be surely found by a responsible person. The Vendor did not live at
    Blue Water and the Vendors evidence was that no notice was found at Blue
    Water.

ARGUMENT 3: IMPLIED TERMS

[31]

In
    my view, there is no basis for interfering with the motion judges conclusion
    that other provisions as to notice should not be implied. His interpretation of
    the entire agreement clause is entitled to deference. Moreover, I would not imply
    the term regarding notice that the Purchaser seeks to have implied. Therefore,
    even if the motion judge erred in his interpretation of the entire agreement
    clause, the Purchasers argument based on implied terms fails.

[32]

The
    entire agreement clause in the Agreement provided as follows:

This Agreement including any Schedule attached hereto, shall
    constitute the entire Agreement between Buyer and Seller. There is no
    representation, warranty, collateral agreement or
condition
, which
    affects this Agreement other than as expressed herein [emphasis added].

[33]

While
    the word condition was not modified by a phrase such as express or implied,
    in my view it was nonetheless open to the motion judge to find that the entire
    agreement precluded the implication of an implied term as to notice.

[34]

CivicLife
did not preclude the motion judge from coming to that conclusion.

[35]

The
    issue in
CivicLife
was whether the contract included a duty of good
    faith performance. Weiler J.A., writing for the court, concluded that it did,
    using the device of an implied term. At para. 52, she held that the wording of
    the entire agreement clause did not preclude the implication of such a term
    because it was already part of the contract. She further held that even if the
    entire agreement clause precluded such an implication on its face, the court
    had the discretion not to enforce the clause when to do so would be
    unconscionable, unfair, unreasonable or otherwise contrary to public policy.

[36]

In
Bhasin v. Hrynwew
, 2014 SCC 71, 27 B.L.R. (5th) 1  a decision released
    after this appeal was argued and on which the parties subsequently made written
    submissions  Cromwell J., writing for a unanimous court, clarified that the
    duty of good faith should not be thought of as an implied term. He recognized a
    new duty of honest contractual performance as a general doctrine of contract
    law that operates irrespective of the intentions of the parties. As such, the
    parties cannot exclude it by an entire agreement clause:
Bhasin
, at
    para. 74.

[37]

Seen
    in the light of
Bhasin
,
CivicLife
is about the importance of
    acting in good faith in contractual dealings, and not about the general ability
    to imply terms  whatever their nature  notwithstanding an entire agreement
    clause.

[38]

Because
    he was of the view that the entire agreement clause precluded the Purchaser
    from asserting that there were implied terms as to the manner of giving of
    notice, the motion judge did not expressly address whether a term should be
    implied that notice waiving the conditions in favour of the Purchaser could be
    given by fax to the Vendors solicitor and by hand delivery to Blue Water.

[39]

I
    would decline to imply such a term. As Cory J.A. (as he then was) held in
G.
    Ford Homes Ltd. v. Draft Masonry (York) Co.
(1983), 43 O.R. (2d) 401
    (C.A.), at p. 403: no term will be implied that is inconsistent with the
    contract. As mentioned above, the Agreement expressly provided a way in which
    the Vendor could be served: personally. There was no indication that the Vendor
    was evading personal service of the notice, and the Purchaser made no effort to
    serve the Vendor personally. To imply other terms in relation to notice would
    run contrary to the express notice provisions in the Agreement. The device of
    implying contractual terms is to be used sparingly and with caution: John D.
    McCamus,
The

Law of Contracts
, 2nd ed. (Toronto: Irwin Law,
    2012) at p. 774. Finally, I agree with the Vendor that implying the terms
    sought by the Purchaser is not necessary to give business efficacy
[3]
to the Agreement. Therefore, these terms should not be implied as a matter of
    presumed intention.

ARGUMENT 4: WAIVER

[40]

While
    the motion judge noted the Purchasers argument that the Vendor, through his
    lawyers course of conduct, had waived the requirement that any notice given
    pursuant to the Agreement be given in accordance with its express terms, the
    motion judge did not make a finding as to whether or not the Vendor had waived
    compliance with the notice provision. Rather, he concluded that the Purchasers
    waiver argument was defeated by the entire agreement clause in the Agreement.

[41]

At
    para. 58 the motion judge wrote, [w]aiver is nothing more than a representation
    by conduct or a collateral agreement affecting the [Agreement], both of which
    the [entire agreement clause] prohibits.

[42]

I
    would be inclined to agree with the Purchaser that this clause does not necessarily
    bar a claim that the Vendor waived a provision of the Agreement
after
the
    Agreement was concluded. However, as I explain below, I am not persuaded that
    the evidence in the record establishes waiver or amendment of the Agreement by
    post-agreement conduct. Therefore, if the motion judge erred in concluding that
    the entire agreement clause bars a claim asserting waiver, such error is of no
    moment.

[43]

In
Technicore Underground Inc. v. Toronto (City)
, 2012 ONCA 597, 354
    D.L.R. (4th) 516, at para. 63, Gillese J.A., writing for the court, summarized
    the essentials of waiver as set out by the Supreme Court of Canada in
Saskatchewan
    River Bungalows Ltd. v. Maritime Life Assurance Co.
, [1994] 2 S.C.R. 490:

Waiver occurs when one party to a contract (or proceeding)
    takes steps that amount to foregoing reliance on some known right or defect in
    the performance of the other party. It will be found only where the evidence
    demonstrates that the party waiving had (1) a full knowledge of the deficiency
    that might be relied on and (2) an unequivocal and conscious intention to
    abandon the right to rely on it. The intention to relinquish the right must be
    communicated. Communication can be formal or informal and it may be inferred
    from conduct. The overriding consideration in each case is whether one party
    communicated a clear intention to waive a right to the other party.

[44]

The
    Purchaser argues that negotiations had always or almost always been conducted
    through counsel and that through this course of conduct the Vendor waived his
    right to insist upon the prescribed method of notice.

[45]

The
    Purchaser points to the fact that the parties made offers and counter-offers by
    fax to their respective lawyers in the course of their negotiation of the
    Agreement and that the Vendor accepted the offer resulting in the Agreement by fax
    to the Purchasers solicitor.

[46]

The
    Purchaser also points to correspondence exchanged between its counsel and the
    Vendors counsel on February 20 and 21, 2013. The Purchasers lawyer faxed a
    letter to the Vendors lawyer on February 20, 2013 requesting confirmation that
    the $50,000 deposit had been received and that the conditional period expired
    on February 23, 2013. On or about February 21, 2013, the Vendors lawyer
    responded by fax, acknowledging receipt of the deposit and confirming that the
    conditional date was February 22, 2013 (February 23 landed on a Saturday).

[47]

In
    my view, the evidence does not demonstrate that the Vendor had an unequivocal
    and conscious intention to abandon his right to insist on strict compliance
    with the requirement that the Purchaser give notice in writing of its waiver of
    notice of conditions personally to the Vendor. I conclude this for several
    reasons.

[48]

First,
    it is important to recall that the Agreement contained two provisions governing
    the giving of notice of waiver of conditions for the benefit of the Purchaser:
    clause 7 of Schedule A and clause 3 of the standard terms. Clause 7 is a
    separate and specific obligation to give notice in writing to the [Vendor] in
    the case of a waiver of conditions for the benefit of the Purchaser. There is
    no equivalent stand-alone provision in respect of the delivery of offers or
    counter-offers, or communications regarding the deposit, or the condition
    waiver date. Any waiver resulting from the conduct that the Purchaser relies on
    could only be with respect to clause 3 of the standard terms  as that was the
    only clause applicable to such conduct  and not the independent requirement in
    clause 7 of Schedule A. It therefore cannot be said that the conduct relied on
    by the Purchaser demonstrates that the Vendor had an unequivocal and conscious
    intention to abandon his right to rely on the specific notice of waiver of
    conditions provision in clause 7.

[49]

Second,
    not only did the Agreement not contain a separate provision requiring notice
    in writing to the [Vendor] in the instances that the Purchaser seeks to rely
    on (i.e. the making of offers and counter-offers, the delivery of the deposit,
    and the discussion of the condition waiver date), in two of those instances the
    Agreement actually contemplated communication with a person other than the
    Vendor. The Agreement required the Purchaser to deliver the deposit to the
Vendors
    solicitor
within 2 business days of the acceptance of the Agreement. It did
    not require notice to the Purchaser confirming receipt of the deposit. Given
    that the deposit was to be paid to the Vendors solicitor, it is logical that
    the Purchasers lawyer would seek confirmation from the Vendors solicitor that
    it had been received. Similarly, in the case of the communication between
    counsel regarding the date when the conditional period expired, clause 20 of
    the Agreement permitted the Vendors and the Purchasers respective counsel to
    extend or abridge time on their behalf.

[50]

Third,
    the notice at issue is specifically required by clause 7 of Schedule A and is
    of critical importance. If the conditions in clause 7 were not waived by
    notice in writing to the [Vendor] within the applicable time period, the
    agreement would become null and void.

[51]

Fourth,
    this is not a case where a particular kind of notice (such as a notice of
    renewal of a lease
[4]
)
    had always been given in a particular manner, and accepted by the other party
    as having been validly given, despite not conforming to the notice provisions
    of the governing agreement.

[52]

Finally,
    the Purchasers lawyer did not seem to be of the view that sending a fax to the
    Vendors lawyer satisfied the requirement that notice in writing be given to
    the Vendor. According to Mr. Curic, the Purchasers lawyer instructed him to
    deliver the notice to Blue Water as well.

[53]

As
    to the Purchasers argument based on
Colautti
, whether the Purchaser
    waived the right to insist on strict compliance with the notice provisions and
    whether the Vendor and the Purchaser varied the notice provisions in the
    Agreement by post-agreement conduct essentially involve the same analysis, at
    least in this case.

[54]

In
Colautti
, after difficulties in the construction of a sewer line
    arose, the parties agreed that the proposed sewer line should be relocated. The
    contractor later sued for the additional costs it incurred in doing so. The
    contract  which the court described as one drawn by a municipality to protect
    taxpayers and as being so rigid and restricting  required that extra costs
    be authorized in writing. The court noted that over the course of the contract
    the city ordered several significant changes and additions. While none were
    authorized in writing, the city paid for all of them. At pp. 242-243, Cory J.A.
    (as he then was), writing for this court, wrote that the parties, by their
    conduct, have varied the terms of the contract which require extra costs to be
    authorized in writing. As a result, the City cannot rely on its strict
    provisions to escape liability to pay for the additional costs authorized by it
    in the event the contractor incurred those costs as a result of the citys
    error. The court did not make a determination as to whether the changes stemmed
    from an error by the city. Instead, it ordered a new trial.

[55]

For
    the same reasons that I am not satisfied that the Vendor waived the right to
    insist on strict compliance with the notice provisions, I am not satisfied that
    the parties by their conduct waived the terms of the Agreement that required
    that notice of waiver of conditions pursuant to clause 7 of Schedule A be
to
    the Vendor
.

ARGUMENT 5: PROMISSORY ESTOPPEL

[56]

Nor
    am I persuaded that the doctrine of promissory estoppel precludes the Vendor
    from requiring notice in writing to
him
that the Purchaser waived the
    conditions.

[57]

The
    Supreme Court set out the principles of promissory estoppel in
Maracle v.
    Travelers Indemnity Co. of Canada
, [1991] 2 S.C.R. 50 at p. 57:

The principles of promissory estoppel are well settled. The
    party relying on the doctrine must establish that the other party has, by words
    or conduct, made a promise or assurance which was intended to affect their
    legal relationship and to be acted on. Furthermore, the representee must
    establish that, in reliance on the representation, he acted on it or in some
    way changed his position.

[58]

The
    promise can be inferred from the circumstances, but must be unambiguous: see
Engineered
    Homes Ltd. v. Mason
, [1983] 1 S.C.R. 641.

[59]

Promissory
    estoppel is equitable relief. Therefore, the party seeking to invoke it must
    show that its past record
in the transaction
is clean: see
Toronto
    (City) v. Polai
, [1970] 1 O.R. 483 (C.A.), at pp. 493-494; see also
Servello
    v. Servello
, 2014 ONSC 5035, 245 A.C.W.S. (3d) 330, at paras. 107-108, 117.

[60]

For
    the same reasons that I am not convinced that the evidence makes out a basis
    for the Purchaser to assert waiver or variance of the Agreement by
    post-agreement conduct, I am not satisfied that an unambiguous promise or
    assurance which was intended to affect the Vendors right to require notice in
    compliance with the express terms of the Agreement can be inferred from the
    circumstances.

[61]

And
    even if one could be inferred, I would decline to grant relief to the Purchaser
    on the basis of promissory estoppel.  While  in the course of addressing the
    Vendors plea for rectification  the motion judge concluded that the
    Purchasers conduct was not equivalent to fraud, he also found that the
    Purchaser must have known that it was important to the Vendor that the
    properties be sold together. The motion judge characterized the Purchasers
    conduct as hard and pointed. In my view, the Purchasers past record in the
    transaction would be sufficient to deny relief on this equitable basis.

DISPOSITION

[62]

I
    would accordingly dismiss the appeal, and order costs in favour of the Vendor
    in the amount of $18,000, inclusive of HST and disbursements. Since I would
    dismiss the Purchasers appeal, I see no reason to address the Vendors
    cross-appeal.

Released:  AH                                  Alexandra
    Hoy A.C.J.O.

DEC 18 2014                                   I agree
    Gloria Epstein J.A.

I
    agree C. W. Hourigan J.A.

[1]
This clause appears as clause 4 of the agreement of purchase and sale for
    Avondale.

[2]
At para. 52 of
High Tower Homes v. Stevens et al.
, 2014 ONSC 2309, the
    motion judge in this case wrote: In this case, the contract was clear. Notice
    should have been delivered personally, and, given [the entire agreement
    clause], there can be no waiver or agreement contrary to the terms of the [Agreement].
    Given the issues before the motion judge, I interpret the words or agreement
    as responding to the Purchasers argument that the Agreement includes implied
    terms regarding the giving of notice.

[3]
In
Canadian Pacific Hotels
, Le Dain
    J. characterized the test for implied terms in fact at p. 775 as being the
    implication of a term as necessary to give business efficacy to a contract or
    as otherwise meeting the officious bystander test as the term which the
    parties would say, if questioned, that they had obviously assumed.

[4]
See
DW Squared Ltd. Partnership v. Oxford
    Properties Canada Ltd.
(2001)
, 43 R.P.R. (4th) 155 (Ont. S.C.),
    where the two prior notices of renewal of lease had been given by the same
    tenant and accepted by the same landlord in the same manner as the notice of
    renewal at issue.


COURT OF APPEAL FOR ONTARIO

CITATION: Holley v. Northern Trust Company, Canada, 2014 ONCA
    857

DATE: 20141201

DOCKET: C58493

Strathy C.J.O, Rouleau and Hourigan JJ.A.

BETWEEN

Jennifer Holley

Appellant (Plaintiff)

and

The
    Northern Trust Company, Canada and

The Royal Trust Company

Respondent (Defendant)

Joel Rochon, for the appellant

Jeff Galway, for the respondent The Northern Trust
    Company, Canada

Christine Lonsdale, for the respondent The Royal Trust
    Company

Heard: October 6, 2014

On appeal from the order of Justice Paul M. Perell of the
    Superior Court of Justice, dated February 11, 2014, with reasons reported at
    2014 ONSC 889.

COSTS ENDORSEMENT

[1]

By reasons issued October 31, 2014, we dismissed the appellants appeal
    on the basis that the proposed class action was statute-barred. The respondent Northern
    Trust Company, Canada seeks costs in the amount of $36,966.55 and the
    respondent Royal Trust Company seeks costs in the amount of $25,000. Both are
    inclusive of disbursements and applicable taxes.

[2]

The appellant submits that there should be no order as to costs. In the
    appellants submissions, no costs should be ordered as the class action was
    brought in the public interest and raised a new point of law, thus engaging the
    provisions of s. 31(1) of the
Class Proceedings Act, 1991
. The
    appellant further argues that the appeal was reasonably brought and that it was
    founded on improper conduct by the respondents in their administration of trust
    assets. Taking these factors into account, it is appropriate that no costs be
    awarded. In any event, the appeal was relatively straight forward and this
    lends further support to her submission that costs as sought by the respondents
    are unwarranted.

[3]

In our view, costs should follow the event. In his reasons on costs in the
    decision under appeal, Perell J. dealt with and rejected the appellants
    submission that s. 31(1) of the
Class Proceedings Act
had been engaged.
    He ordered costs in the ordinary course. We reach the same conclusion.

[4]

The respondents had to deal with all of the issues raised by the
    appellant in her appeal. The amounts involved were significant and the time
    devoted by the respondents was warranted. In our view, the amount of costs
    being sought by the respondents is reasonable.

[5]

As to the appellants submission that the alleged improper conduct of
    the respondents justified bringing the claim and should result in a cost
    sanction, we disagree. This court made no finding of improper conduct. The
    appeal was dismissed strictly on the basis that the claim was statute-barred.

[6]

As a result, we award the respondent Northern Trust Company, Canada
    their costs in the amount of $36,966.55 and the respondent Royal Trust Company
    their costs in the amount of $25,000. These sums are inclusive of disbursements
    and applicable taxes.

G.R.
    Strathy C.J.O.

Paul
    Rouleau J.A.

C.W.
    Hourigan J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Jaeger (Re)
    2014 ONCA 861

DATE: 20141201

DOCKET: C58352

Doherty, Feldman and Epstein JJ.A.

IN THE MATTER OF:  Christopher Brett Jaeger

AN APPEAL UNDER PART XX.1 OF THE
CODE

Christopher Brett Jaeger, acting in person

Lucy Saunders, appearing as
amicus curiae

Amanda Rubaszek, for the Attorney General

Janice Blackburn, for Waypoint Centre for Mental Health
    Care

Melanie de Wit, for Ontario Shores Centre for Mental
    Health Sciences

Heard: November 28, 2014

On appeal against the disposition of the Ontario Review
    Board dated, January 7, 2014.

APPEAL BOOK ENDORSEMENT

[1]

The appellant conceded that he represented a significant threat to the
    safety of the public and the need for a custodial order. The sole issue before
    the Board was whether the appellant should remain at Ontario Shores or be
    transferred to Waypoint.

[2]

The Board considered whether the appellant could continue to be managed
    and treated at Ontario Shores and implicitly, if not explicitly, concluded that
    he could not.

[3]

The Board went on to recognize that the appellants continued detention
    in Ontario Shores was more restrictive than would be a transfer to Waypoint.
    The Boards decision to have the appellant transferred to Waypoint was
    reasonable and was based on a correct application of the appropriate legal
    test. It is entitled to considerable deference. We see no basis to interfere.
    The appeal is dismissed.


COURT OF APPEAL FOR ONTARIO

CITATION: Kara v. Arnold, 2014 ONCA 871

DATE: 20141205

DOCKET: C58860

Blair, Pepall and Lauwers JJ.A.

BETWEEN

Shafik Kara, Ireme Kara, Madatali Kara and
    Brothers Collision & Refinishing

Plaintiffs

(Appellants)

and

Roland Arnold
,
Highway Pharmacy
    Inc., Rashid Keshavjee and Gulshan Keshavjee

Defendants

(
Respondent
)

Paul R. Sweeny and Adam J. Huff, for the appellants

Kosta Kalogiros, for the respondent, Roland Arnold

Heard: November 26, 2014

On appeal from the order of Justice Douglas K. Gray of
    the Superior Court of Justice dated April 22, 2014, with reasons reported at
    2014 ONSC 2647.

Blair J.A.:

Background

[1]

The appellant plaintiffs seek to set aside the Status Court order of
    Gray J. dated April 22, 2014, dismissing their action for delay pursuant to rule
    48.14.

[2]

The appellants had sued the respondent Dr. Arnold and others claiming
    medical malpractice, as a result of an over-prescription of medication as part
    of a medical regime established by Dr. Arnold for the appellant, Shafik Kara.
    The claims of the other appellants, with the exception of Brothers Collision
    & Refinishing, are derivative claims under the
Family Law Act.

[3]

At the time of the Status Court hearing the action was more than 14
    years old.  The facts underpinning the claim had occurred from 1997 to 1999, more
    than 16 years before the hearing.

[4]

Rule 48.14 of the
Rules of Civil Procedure
, R.R.O. 1990, Reg.
    194, provides that if an action is not set down for trial or terminated by
    other means within two years after the first defence is filed, the registrar
    shall serve a status hearing notice advising that the action will be dismissed
    for delay if not set down for trial or otherwise terminated within 90 days. Upon
    receipt of the notice, a party may request that the registrar arrange a status
    hearing, as the appellants did here.  At that hearing, the onus is on the
    plaintiff to show cause why the action should not be dismissed for delay.  The
    hearing judge may make an order dismissing the action if he or she is not
    satisfied the action should proceed.

[5]

The appellants commenced their action in February 2000.  A year later
    the action was dismissed against all defendants other than Dr. Arnold.  In
    April 2002 Dr. Arnold served his statement of defence, and in June 2003 he served
    his affidavit of documents.

[6]

The action proceeded at a somewhat leisurely pace on the part of both
    camps  it meandered, as the hearing judge put it.  Although the appellants
    delivered a draft affidavit of documents in April 2004, they did not deliver a
    sworn version until August 2006.  Dr. Arnold was slow in providing a
    transcribed version of his notes, but finally did so in June 2006.  In 2007 a
    potential witness, one of Mr. Karas treating physicians, died.

[7]

In the meantime, discoveries of Mr. Kara were scheduled and
    re-scheduled, adjourned on consent but most often at the appellants request
    (sometimes on neutral grounds such as illness or counsels conflicting
    engagements).  They finally commenced in December 2006 and were completed in
    December 2010.  The appellants have taken no steps to examine Dr. Arnold for
    discovery and apparently  somewhat surprisingly  do not intend to do so.  The
    last contact received by Dr. Arnolds counsel from the appellants counsel
    prior to the status hearing was in December 2010.  The appellants say they
    spent those more than three years obtaining experts reports, but they took no
    steps to set the action down for trial between the receipt of the status
    hearing notice and the hearing.

Analysis

[8]

The decision of a judge presiding at a status hearing under rule 48.14
    is discretionary and is entitled to considerable deference.  The test is
    two-fold and conjunctive: the plaintiff has the onus of demonstrating both that
    there was an acceptable explanation for the delay and that, if the action were
    allowed to proceed, the defendant would suffer no non-compensable prejudice:
    see
Khan v. Sun Life Assurance Co. of Canada
, 2011 ONCA 650, 1
    C.C.L.I. (5th) 183, at para. 1;
1196158 Ontario Inc. v. 6274013 Canada Ltd.
,
    2012 ONCA 544, 112 O.R. (3d) 67, at para. 32;
Faris v. Eftimovski
,
    2013 ONCA 360, 363 D.L.R. (4th) 111, at para. 32.  The hearing judge applied
    that test and determined that the appellants had not provided an acceptable
    explanation for the delay in proceeding with the action.

[9]

Dismissals for delay involve a careful balance between two competing
    values.  On the one hand, the
Rules of Civil Procedure
need to be
    enforced in a way that ensures timely and efficient justice, in the interests
    of plaintiffs, defendants, and society in general.  On the other hand, society
    in general, and the parties, have an interest in the resolution of disputes on
    their merits and in the availability of flexibility to avoid potentially
    draconian results, by providing the opportunity for parties to offer a
    reasonable explanation for delay when it takes them beyond established
    timelines.

[10]

The
    courts do not take a rigid or purely formalistic and mechanical approach to
    the application of timelines in the
Rules
that would penalize the parties for technical non-compliance and frustrate the
    fundamental goal of resolving disputes on their merits:
1196158 Ontario Inc. v. 6274013 Canada Ltd.
, at
    para. 19.  That said, rule 48.14 was designed to have some teeth, in my view.  As
    Sharpe J.A. noted, in
Marché dAlimentation Denis Thériault Ltée v. Giant
    Tiger Stores Ltd.,
2007 ONCA 695, 87 O.R. (3d) 660, at para. 23:

Rule 48.14 is one of many rules of civil procedure designed to
    promote the timely resolution of disputes, to discourage delay in civil
    litigation and to give the courts a significant role in reducing delays.
    Before the promulgation of rule 48.14, parties had total control over when
    cases were placed on the trial list.  Rule 48.14 establishes a procedure which
    gives the court a degree of control over the speed at which litigation proceeds
    to a conclusion. . . . In essence the rule provides for a very limited form of
    case management. Garry D. Watson & Craig Perkins,
Holmested and
    Watson: Ontario Civil Procedure
, vol. 4 supplement (Toronto: Carswell,
    1984) [at] 48§15.  The case management regime, for which rule 48.14 was a
    precursor, was introduced in part to reduce unnecessary cost and delay in
    civil litigation: rule 77.02.

[11]

Later,
    in
1196158 Ontario Inc. v. 6274013 Canada Ltd.
, at paras. 39, 41 and
    42, Sharpe J.A. reinforced the importance of the rule for purpose of promoting
    timely justice.  He said:

[The] cases quite properly reflect and reinforce the strong
    public interest in promoting the timely resolution of disputes.  The notion
    that justice delayed is justice denied reaches back to the mists of time . . . .
    For centuries, those working with our legal system have recognized that
    unnecessary delay strikes against its core values and have done everything
    within their power to combat it:
Marché dAlimentation Denis Thériault
    Ltée v. Giant Tiger Stores Ltd.
(2007), 87 O.R. (3d) 660, [2007] O.J. No.
    3872, 20007 ONCA 695, at para. 25, quoting
Blencoe v. British Columbia
    (Human Rights Commission)
, [2000] 2 S.C.R. 307, [2000] S.C.J. No. 43, 2000
    SCC 44, at para. 146.  Excusing significant delay risks undermining public
    confidence in the administration of justice:
Marché,
at para. 32.
    The timelines the rules impose are relatively generous and there is a heavy
    price to be paid when they are not respected.

The civil justice regime should deliver timely justice to both
    plaintiffs and defendants.  Unless the basic ground rules of litigation
    including time requirements  are enforced in a principled way, counsel cannot
    provide reliable advice and clients cannot plan their affairs in an orderly
    manner.

If flexibility is permitted to descend into toleration of
    laxness, fairness itself will be frustrated.   [E]ven if there is no actual
    prejudice, allowing stale claims to proceed will often be unfair to the
    litigants.  Disputes are more likely to be resolved fairly if they are resolved
    in a timely fashion and, accordingly, the enforcement of timelines helps
    achieve the ultimate goal of fair resolution of disputes.

[12]

The
    appellants argue that the hearing judge erred by failing to apply the
    contextual approach enunciated by Goudge J.A. in
Scaini v. Prochnicki
,
    2007 ONCA 63, 85 O.R. (3d) 179, at para. 23, and referenced by Sharpe J.A. in
Marché
    dAlimentation,
at para. 20.  They say he did not consider and weigh all
    relevant factors to determine the order that is just in the circumstances of
    the particular case, as called for by that approach.  I disagree.

[13]

In
    my view, little is to be gained by debating whether there is a bright line
    between the contextual approach and the approach enunciated in later
    authorities such as
Faris
and
1196158 Ontario Inc. v. 6274013
    Canada Ltd.
It seems to be evident that, in considering the reasonableness
    of any explanation for the delay in question, a status hearing judge will
    almost invariably engage in a weighing of all relevant factors in order to reach
    a just result.

[14]

Here,
    the judge at the status hearing considered all of the pertinent factors
    relevant to a contextual approach (as in
Scaini
) and the approach
    taken to rule 48.14 dismissals in later cases (
1196158 Ontario Inc.
and
Faris).

I do not see these authorities as inconsistent.
    While I would not characterize the latter two authorities as representing a
    fundamental change in this Courts approach to delay in the processing of
    civil cases, as the hearing judge did  the courts have been addressing the
    need for timely compliance with the rules in this context for many years  I agree
    that they underline the need for timely compliance, as outlined in the passage
    from
1196158 Ontario Inc.
cited above.

[15]

The
    hearing judge considered the inordinate length of the delay, the explanations
    offered by the appellants for that delay, the contribution of the respondent to
    the delay, the appellants delay in obtaining expert reports (and the lack of
    explanation for that delay), and the issue of prejudice.  He properly took the
    date of delivery of the statement of defence as a starting point for the delay
    that required an explanation. He concluded that the appellants had failed to
    provide a satisfactory or reasonable explanation for a delay of almost 11 years
    (from delivery of Dr. Arnolds statement of defence to the date of the status
    hearing).

[16]

This
    finding was open to him on the record, and I see no basis for interfering with
    it.

[17]

The
    appellants also argue that the trial judge raised the bar too high when he
    stated that the longer the delay, the more cogent the explanation must be.  I
    see this as simply a common sense observation.

[18]

In
    addition, the appellants say that the hearing judge failed to take into account
    the time and expense the parties have devoted to the case and the fact that it
    is ready for trial.  While he did not say specifically that he was dealing with
    those factors, I am satisfied that he was alive to them.  He analysed the
    history of the discovery process and the process of documentary production as
    well as the appellants submissions regarding the preparation of expert
    reports. It is self-evident that these steps involved considerable time and
    expense.  In any event, it is debatable whether the action is, indeed, ready
    for trial.  If that were so, one would have expected the appellants to have
    taken steps to list the action for trial in the period of almost a year that
    elapsed between the receipt of the status hearing notice and the hearing
    itself.

[19]

The
    appeal is accordingly dismissed.  The respondent is entitled to his costs of
    the appeal, fixed in the amount of $10,000, all inclusive, in accordance with
    the agreement of counsel.

Released: R.A.B.  December 5, 2014

R.A.
    Blair J.A.

I
    agree S.E. Pepall J.A.

I
    agree P. Lauwers J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Kassburg v. Sun Life Assurance Company of Canada,
    2014 ONCA 922

DATE: 20141229

DOCKET: C58593

Watt, van Rensburg and Pardu JJ.A.

BETWEEN

Karen Kassburg

Plaintiff
    (Respondent/

Appellant by way of cross-appeal)

and

Sun Life Assurance Company of Canada

Defendant
    (Appellant/

Respondent by way of cross-appeal)

Duncan McDuff, for the appellant

Geoffrey Larmer, Andrew Wray and Niiti Simmonds, for the
    respondent

Heard: December 3, 2014

On appeal from the order of Justice M. Gregory Ellies of
    the Superior Court of Justice, dated March 7, 2014, with reasons reported at 2014
    ONSC 1523, 119 O.R. (3d) 620.

van Rensburg J.A.:

Overview

[1]

The respondent Karen Kassburg, an employee of the North Bay Police Service,
    was insured under a group policy issued by the appellant Sun Life Assurance
    Company of Canada to the North Bay Police Association, of which she was a
    member. The respondents claim for long-term disability benefits, submitted to
    the appellant in 2008, was denied.

[2]

The respondent started an action claiming entitlement to the disability
    benefits in February 2012. The appellant brought a motion for summary judgment,
    asserting that the action was out of time, as both of the potentially
    applicable limitation periods, either under the insurance contract or the
Limitations
    Act, 2002
, S.O. 2002, c. 23, Sched. B, had expired.

[3]

The appellant relied on a one year limitation period under the insurance
    contract, which it contended had been grandfathered as a pre-January 1, 2004
    contract limitation period (s. 22(2) of the
Limitations Act, 2002
) or
    as a limitation period provided under a business agreement (s. 22(5) of the
Limitations
    Act, 2002
). If the contractual limitation period was unenforceable, the
    appellant relied on the general two year limitation period under the
Limitations
    Act, 2002
.

[4]

The appellants motion was dismissed, and the motion judge granted a
    declaration that the respondents action was commenced within the applicable limitation
    period.

[5]

Sun Life appeals. For the reasons that follow, I would dismiss the
    appeal.

Facts

[6]

The parties agree that the contract consists of a group insurance policy
    entered into between the appellant and the North Bay Police Association (the NBPA)
    in 2003, which was amended once, in June 2007, before the respondent stopped
    working (the Contract Document), as well as an employee benefit booklet (the
    Booklet).

[7]

On October 22, 2007, the respondent stopped working, allegedly due to
    physical and psychological disabilities. In April 2008, five months before the
    expiry of the elimination period under the policy, she submitted her long-term
    disability (LTD) claim with the assistance of Susan Cousineau, a civilian employee
    of the NBPA.

[8]

After receiving the application, the insurer wrote to the respondent
    twice, in May and September 2008, asking for additional medical information to
    assess her claim. Additional medical information was forwarded on her behalf by
    Ms. Cousineau and the respondents physicians.

[9]

By letter dated December 4, 2008, the appellant informed Ms. Kassburg
    that the medical information was insufficient, and that it was unable to
    approve her claim based on the medical information received to date. The letter
    also stated that her claim for LTD benefits was declined. The letter advised the
    respondent, Should you wish to appeal our decision, you need to submit new
    medical information. The letter cautioned that [b]y considering an appeal, we
    are not nor do we intend to waive any of our rights under the policy, including
    our right to apply any available contractual or statutory limitation periods.

[10]

On
    January 20, 2009, Ms. Cousineau wrote to Sun Life acknowledging that the LTD
    claim was denied based on the information provided. She also set out two
    questions: first, if Ms. Kassburg submitted further medical information, would
    the application process start over again, and second, requesting the insurer to
    advise as to the procedure for the appeal process, as it was not described in
    the policy. The appellant did not answer these questions, despite a follow-up
    email and letter from Ms. Cousineau.

[11]

What
    followed during the next two years was correspondence between the appellant and
    respondent or her representatives. Additional medical information was provided.
    The insurer advised that the medical information was not sufficient to support
    total disability. The appellants letters invited the respondent to continue
    to appeal by submitting further medical information, which she did. Two of the
    letters repeated the caution that, by considering an appeal, the insurer did
    not intend to waive its rights under the policy, including the right to apply
    any available contractual or statutory limitation periods.

[12]

The
    letters advised that Ms. Kassburgs claim for LTD benefits would be given
    further consideration upon receipt of further medical information, and
    specified the type of information the insurer required.

[13]

On
    January 20, 2011, the appellant wrote to Ms. Kassburg, requesting additional
    medical information for her third and final appeal. This letter stated: we
    have determined that additional medical information is required to fully assess
    your claim for Long-Term Disability benefits. The medical information was
    provided.

[14]

On
    February 24, 2011, the appellant advised the respondent by letter that the
    information submitted was insufficient and did not support total disability.
    The appellant noted that her claim for benefits was declined at the third and
    final appeal level, and stated that Ms. Kassburg could either initiate a
    complaint with Sun Lifes Ombudsmans Office, or she could seek independent
    legal advice.

[15]

The
    respondent retained counsel and issued a statement of claim on February 21,
    2012.

[16]

The
    appellant brought a motion for summary judgment seeking a dismissal of the
    action based on expiry of the limitation period. In its motion the appellant relied
    first on the limitation period under the contract, alleging that it expired on
    December 11, 2009. The appellant calculated that claim forms for LTD benefits
    had to be submitted not later than 90 days after the end of the elimination
    period, that is, no later than December 11, 2008, and tied the one year
    limitation period to this deadline for the receipt of the documents. In the
    alternative, the appellant asserted that the statutory limitation period would
    run, at the latest, from December 4, 2008, the date of its first letter
    informing the respondent that her claim for benefits had been declined. All of
    the communications between the parties were before the motion judge as exhibits
    to affidavits. The respondent stated in her affidavit that, until Sun Lifes
    February 24, 2011 letter, she did not know that the insurer had made a final
    determination on her LTD benefits claim. There were no cross-examinations on
    the materials filed on the motion.

Decision of the Motion Judge

[17]

The
    motion judge first considered whether there was an effective contractual
    limitation period of one year.

[18]

Section
    22(2) of the
Limitations Act, 2002
provides that a limitation period
    under the Act may be varied or excluded by an agreement made before January 1,
    2004. The appellant argued that the contract in question, having been entered
    into in 2003, fell within that exception to the general limitation period. The
    respondent relied on a variation to the policy effective June 1, 2007. The
    question was whether this amendment took the contract outside the scope of s.
    22(2).

[19]

The
    motion judge concluded that it was unnecessary to decide the issue, because
    even if the amendment gave rise to a new contract, the policy would fit within
    the business agreement exception to contracting out of the statutory
    limitation period. Section 22(5) provides for the variation or exclusion of a
    limitation period by a business agreement made on or after October 19, 2006.
    A business agreement is defined to mean an agreement made by parties none of
    whom is a consumer as identified in the
Consumer Protection Act, 2002
,
    S.O. 2002, c. 30. The motion judge concluded that, because the parties to the
    insurance contract at issue were the NBPA and the appellant, the contract was
    not entered into by an individual acting for personal, family or household
    purposes. The contract, if newly formed following the 2007 variation as the
    respondent argued, would therefore qualify as a business agreement made after
    October 19, 2006. Whether or not the amendment resulted in a new contract, the
    parties had met the requirements under the
Limitations Act, 2002
, to contract
    out of the statutory limitation period.

[20]

The
    motion judge then considered whether the appellant met the requirements set out
    at para. 20 of
Boyce v. The Co-Operators General Insurance Co
., 2013
    ONCA 298, 116 O.R. (3d) 56, at para. 20, leave to appeal to S.C.C. refused,
    [2013] S.C.C.A. No. 296, that any contractual term purporting to shorten a
    statutory limitation period must in clear language describe the limitation
    period, identify the scope of its application, and exclude the operation of
    other limitation periods.

[21]

The
    Contract Document provides for a one year limitation period from the end of
    the time period in which proof of the claim is required. The Booklet provides
    for a one year limitation period from after the date [the insurer] must
    receive [the insureds] claim forms.

[22]

After
    reviewing the language in the Contract Document and the Booklet together, the
    motion judge concluded that the contractual limitation period was not clear,
    and that the appellant had not effectively contracted out of the statutory
    limitation period.

[23]

The
    Booklet tied the limitation period to receipt of claim forms, whereas the
    Contract Document tied the limitation period to receipt of proof of claim. It
    was unclear whether claim forms are the same thing as proof of claim. The
    motion judge noted that, reading the contract as a whole, it appears that proof
    of claim is broader than claim forms. Proof of claim is the entire process
    of providing information to the insurer to enable it to decide whether to pay
    benefits. As indicated by the language in the Booklet, filling out the claim
    forms is only one step in providing proof of claim.

[24]

The
    motion judge stated, it would not be unreasonable to interpret the limitation
    period in the contract as providing that the limitation period of one year
    begins to run once Sun Life receives sufficient proof of the claim, and not
    simply the claim forms. He found that it would be reasonable to believe, as
    did the respondent, that the appeal procedure formed part of the application
    process. In support of his conclusion on ambiguity, he noted that the appeal
    procedure was confusing to the respondents representative, who had not
    received a response to her questions about the process.

[25]

The
    motion judge then turned to the statutory limitation period. He held that,
    because of the language in the policy referring to proof of the claim
    acceptable to Sun Life, the respondent only knew that she was out-of-pocket
    when the insurer denied the claim after receiving proof acceptable to it. He
    also concluded that the respondent would not have known that it was legally
    appropriate to start an action until she received a clear denial of the claim,
    which occurred when she was advised that the appeal procedures had been
    exhausted. That is when the two year statutory appeal period began to run.

[26]

The
    motion judge granted a declaration that the limitation period had not expired
    when the respondent commenced her action. He concluded that, although the
    respondent had not brought her own motion for determination of the limitation
    period, such a declaration was consistent with the Supreme Courts call for
    proportional, timely and affordable access to justice in
Hryniak v. Mauldin
,
    2014 SCC 7, [2014] 1 S.C.R. 87.

Issues on Appeal

[27]

The
    appellant raises the following broad issues on appeal:

1.

Did the motion judge err in finding that the contractual limitation
    period was ambiguous and therefore unenforceable?

2.

Did the motion judge err in concluding that the statutory limitation
    period did not begin to run until after the respondent had exhausted the appellants
    internal appeal process?

3.

If the motion judge did not err in dismissing the summary judgment
    motion, did he err in granting judgment in favour of the respondent, and not
    directing to trial the issue of when the limitation period expired?

Analysis

Issue One: Interpretation of the Contract

[28]

As
    I will explain, regardless of whether the contract was formed before January 1,
    2004, or whether it constitutes a business agreement pursuant to s. 22(5), the
    motion judge did not err in concluding that the contractual limitation period
    was ambiguous. The parties therefore did not validly contract out of the
    statutory limitation period.

[29]

The
    parties agree that the insurance policy consists of the Contract Document and
    the Booklet, which is incorporated by reference into the contract. The
    limitation period is expressed in different terms in each.

[30]

The
    appellant contends that the motion judge erred in finding that there was an
    ambiguity in the insurance contract. It argues that there was no ambiguity if
    the Booklets wording is considered on its own. At the same time, the appellant
    urges the court to apply the interpretive principle of reading the words of the
    limitation period in the context of the contract as a whole:
Progressive
    Homes Ltd. v. Lombard General Insurance Co. of Canada
, 2010 SCC 33, [2010]
    2 S.C.R. 245, at para. 22.

[31]

Contrary
    to the appellants argument, that is exactly what the motion judge did. He considered
    the wording of the entire contract, including the Contract Document, and he found
    an ambiguity. Because the limitation period was not clear, as required under
Boyce,
it was not capable of being enforced against the respondent.

[32]

The
    motion judge considered all of the relevant terms employed in the contract with
    respect to claims and proof of claim in arriving at his conclusion that the
    contractual limitation provisions were ambiguous.

[33]

The
    interpretation of a contract involves questions of mixed fact and law. An
    appellate court should not interfere with the interpretation of a contract by a
    lower court, in the absence of a palpable and overriding error of fact or an
    extricable legal error, including the application of an incorrect principle,
    the failure to consider a required element of a legal test or the failure to
    consider a relevant factor:
Sattva Capital Corp. v. Creston Moly Corp.
,
    2014 SCC 53, 373 D.L.R. (4th) 393, at para. 53. The appellant has not
    demonstrated any legal error in the motion judges interpretation of the
    contract in this case.

[34]

I
    would therefore not give effect to this ground of appeal.

Issue Two: The Statutory Limitation Period and Discovery
    of the Claim

[35]

In
    the absence of an enforceable contractual limitation period, the applicable
    limitation period is the two year general limitation period under s. 4 of the
Limitations
    Act, 2002,
which runs from the day on which the claim was discovered.

[36]

Section
    5 provides:

5. (1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or
    damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person
    against whom the claim is made, and

(iv) that, having regard to the
    nature of the injury, loss or damage, a proceeding would be an appropriate
    means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and
    in the circumstances of the person with the claim first ought to have known of
    the matters referred to in clause (a).

[37]

In
    its second ground of appeal, the appellant invites the court to revisit the
    motion judges conclusions with respect to when the claim was discovered by
    the respondent under s. 5 of the
Limitations Act, 2002
.

[38]

The
    motion judge made a determination, based on the evidence, as to when the
    respondent discovered her claim in this particular case. He concluded that the
    claim was discovered on February 24, 2011, the date of the letter in which the appellant
    advised the respondent that her final appeal had failed.

[39]

The
    appellant contends that, if the statutory limitation period applies, the claim
    was discovered by the respondent on December 4, 2008 when her claim for LTD
    benefits was initially denied. The claim was discovered because the respondent
    knew the material facts giving rise to her cause of action. The fact that there
    was an appeal process did not extend the limitation period. The fact that the
    respondent may have believed that the limitation period had not expired is
    irrelevant to the legal analysis; in any event her attention was repeatedly
    drawn to the potential application of limitation periods to her claim in the
    insurers correspondence.

[40]

Whether
    a limitation period expired prior to the issuance of a statement of claim is a
    question of mixed fact and law:
Longo v. MacLaren Art Centre Inc.
,
    2014 ONCA 526, [2014] O.J. No. 3242, at para. 38. The question of when the
    respondent discovered her claim for the purposes of s. 5 is, in the
    circumstances here, essentially a question of fact.

[41]

The
    appellant asserts that the motion judge failed to consider certain evidence
    that it put forward on the motion. In particular, the appellant points to
    various passages in the correspondence between the parties where the insurer
    communicated that the claim had been denied and reserved its rights to rely on
    limitation defences.

[42]

I
    would not give effect to this argument. There is no indication in his reasons
    that the motion judge ignored the parts of the correspondence referred to by
    the appellant. Indeed, he was aware of the appellants position with respect to
    the statements respecting the limitation periods in the correspondence and the
    fact that certain letters communicated that the respondents claim for LTD
    benefits was declined. Since the appellant relied on the December 4, 2008
    letter as providing the date on which the respondent discovered her claim, it
    was appropriate for the motion judge to consider what was in fact communicated
    to the respondent at that time, and whether the claim had been clearly and
    unequivocally denied, as asserted by the appellant. His conclusion that the
    denial was not clear was open to him on the evidence, which included the
    contract wording and the communications between the parties.

[43]

The
    fact that the motion judge extracted certain passages from the correspondence
    and included them in his reasons does not mean that he disregarded or ignored
    other parts. To the contrary. In other parts of his reasons he cited some of
    the passages relied on by the appellants. It cannot be said the motion judge
    was unaware of or ignored these passages in rejecting the appellants arguments
    with respect to both the denial of the claim and the reservation of rights contained
    in a number of the letters sent by the insurer.

[44]

The
    appellant is inviting this court to reweigh the evidence that was considered by
    the motion judge to arrive at a different factual conclusion. That is not our
    function. Where the evidentiary record on a Rule 20 motion permits the motion
    judge to resolve the issues justly and fairly, his exercise of discretion in
    making factual determinations is entitled to considerable deference.

[45]

In
Hryniak
, Karakatsanis J. for the Supreme Court stated that the
    exercise of a power under the summary judgment rule attracts deference and that
    when the motion judge exercises the fact-finding powers under Rule 20.04(2.1)
    and determines whether there is a genuine issue requiring a trial, this is a
    question of mixed fact and law (at para. 81). Where there is no extricable
    error in principle, findings of mixed fact and law should not be overturned,
    absent palpable and overriding error (at para. 81).

[46]

Finally,
    I note that three cases relied on before the motion judge and in this court do
    not assist the appellant, either because in those cases, the date from which
    the limitation period ran was not at issue, or because they involve different
    factual findings. In
Maracle v. Travellers Indemnity Co. of Canada
,
    [1991] 2 S.C.R. 50, while the case involved the denial of a claim for LTD
    benefits and an appeal process, the issue was whether a limitation period was
    extended by the insurers actions constituting promissory estoppel. The date
    from which the limitation period ran was clear and not at issue.

[47]

In
Esau v. Co-Operators Life Insurance Company
, 2006 BCCA 249, 55
    B.C.L.R. (4th) 11, leave to appeal to S.C.C. refused, [2006] S.C.C.A. No. 307, the
    applicable contractual limitation period ran from one year of the date of proof
    of loss. The fact that the limitation period had commenced and expired was
    conceded at trial, and the only issue was whether the limitation period was
    extended by virtue of promissory estoppel. On appeal, the insured attempted to
    reassert the limitations issue, but the British Columbia Court of Appeal held
    that the insured was precluded from doing so (at paras. 26-27 and 31). Further,
    the court held that, to the extent it was necessary to consider an alternative
    limitation period, on the whole of the evidence the appellant understood the
    notice of termination of benefits and that she was involved in an appeal
    process (at para. 35). In the present case, the motion judge reached a
    different conclusion on the facts about what the respondent understood from the
    appellants communications.

[48]

Similarly,
Halter v. Standard Life Assurance Co. of Canada
, 2013 ABQB 99, 557
    A.R. 353, affd on other grounds, 2014 ABCA 57, 569 A.R. 148, is another case
    where the trial judge concluded that the claimant had received clear notice of
    the denial of benefits both from his lawyer and the insurer, notwithstanding
    that he was offered and pursued an internal appeal process (at para. 18). In
    the present case the motion judge found otherwise. This he was entitled to do
    on the evidence before him.

[49]

Accordingly
    I would reject this ground of appeal.

Issue Three: Granting
    Summary Judgment in the Respondents Favour

[50]

The
    appellant asserts that the motion judge, having decided to dismiss its motion
    for summary judgment, and in the absence of a motion by the respondent, erred
    in granting a declaration that determined the limitations question on a final
    basis. The appellant contends that it should have the opportunity of exploring
    at trial the question of when the respondent discovered the claim.

[51]

The
    appellant points to the clinical notes and records of one of the respondents
    physicians, which contain a reference to something the respondent said to her
    doctor. The appellant says this reference indicates that she understood that her
    LTD claim had been denied before the receipt of the February 24, 2011 letter,
    notwithstanding her participation in the internal appeal process. According to
    the appellant, this suggests that there is a triable issue respecting the expiry
    of the limitation period. This was argued before the motion judge and rejected.

[52]

I
    would not give effect to this ground of appeal. Consistent with the decision of
    the Supreme Court in
Hryniak
and the clear wording and purpose of the
    summary judgment rule, it was open to the motion judge to determine the issue
    of the limitation defence on a final basis on the record before him in this
    case. The parties put a comprehensive record before the court, which the
    appellant considered sufficient for the limitation period issues to be able to
    be determined. The appellant could have cross-examined on the respondents
    affidavit filed on the motion, but chose not to do so. It is in the interests
    of justice that the issue was determined on a final basis by the motion judge
    at this stage. In my view, the motion judge did not err in making the
    declaration he did as part of his disposition of the summary judgment motion.

Cross-Appeal

[53]

Dismissal
    of the appeal would render the cross-appeal moot, as the statutory limitation
    period, and not the contractual period, applies. However, I would not want this
    courts judgment to be interpreted as endorsing the motion judges conclusion
    that the insurance policy in this case is a business agreement for the
    purpose of ss. 22(5) and (6) of the
Limitations Act, 2002
. As the
    issue was fully argued before us and as it involves an important issue that may
    recur, it is appropriate for this court to consider it.

[54]

Section
    22(5) provides that a limitation period under the Act may be varied or excluded
    by a business agreement made on or after October 19, 2006. Business agreement
    is defined in s. 22(6) to mean an agreement made by parties none of whom is a
    consumer as defined in the
Consumer Protection Act, 2002
. Consumer
    is defined in s. 1 of that statute as an individual acting for personal,
    family or household purposes and does not include a person who is acting for
    business purposes.

[55]

Citing
Boyce
, the motion judge concluded that the group insurance policy is a
    business agreement based on the fact that it was entered into by the NBPA and
    the appellant, neither of whom is an individual.

[56]

The
    respondent asserts that the motion judge erred in failing to consider the
    purpose of the contract, which is to provide personal insurance coverage for loss
    of income in the event of disability. The insurance contract clearly had a
    personal, and not a business purpose.

[57]

The
    appellant contends that the only parties to the group insurance policy were the
    NBPA, which is an association, and the appellant itself, and that the
    respondent was simply a beneficiary of the policy.

[58]

The
    clear wording of s. 22(5) permits contracting out of the statutory limitation
    period, unless the parties to the contract include an individual,
and
the
    contract was for personal, family or household purposes. There are therefore
    two requirements for a business agreement to exist: the parties must not
    include individuals, and the contract must not have been for personal, family
    or household purposes.

[59]

The
    literal reading of the parties aspect of the section that appears to have
    been accepted by the motion judge, in my view, is inconsistent with the
    objective of s. 22 of the
Limitations Act, 2002
, which is to restrict
    the circumstances in which the statutory limitation periods under the Act can
    be altered by contract. In my view, the word parties in s. 22(6) should be
    given a broader, purposive reading to accord with the objective of s. 22.

[60]

In
    this action, the respondent is asserting a personal claim for LTD benefits
    provided under a group policy. She is entitled to assert the claim directly
    against the insurer under s. 318 of the
Insurance Act
, R.S.O. 1990, c.
    I.8
.
Although the group insurance contract under which she is making
    her claim was entered into between the NBPA and the appellant, the appellant relies
    on a limitation period contained in that contract to exclude her claim. The
    respondent is in effect deemed to be a party for the purpose of asserting her
    claim, and for the purpose of the appellants limitations defence.

[61]

With
    respect to the purposes requirement, the contract is for personal purposes,
    and accordingly is not a business agreement under s. 22(5).

[62]

Accordingly
    while I would dismiss the cross-appeal as moot, it is my view that the motion
    judge erred in concluding that the disability policy in this case constituted a
    business agreement for the purpose of s. 22(5) of the
Limitations Act, 2002
.
Boyce
is properly distinguished by the respondent, as the insurance
    policy in that case was for business purposes.

Disposition

[63]

For
    these reasons, I would dismiss the appeal and the cross-appeal, with costs to
    the respondent fixed at $15,000, inclusive of disbursements and applicable
    taxes.

Released: (DW) DEC 29 2014

K. van Rensburg J.A.

I agree David Watt J.A.

I agree G. Pardu J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Kayani v. Toronto-Dominion Bank, 2014 ONCA 862

DATE: 20141203

DOCKET: C58265, C58266

Hoy A.C.J.O., Epstein and Hourigan JJ.A.

BETWEEN

Raza Kayani LLP

Plaintiff/Respondent

and

The
    Toronto-Dominion Bank
, Amaras Gem and Jewel

and
    Nithiyakalyaani Jewellers

Defendants/
Appellant

AND

BETWEEN

Jack Sheldon Zwicker

Plaintiff/Respondent

and

The Toronto-Dominion
    Bank

Defendant/Appellant

Martin Greenglass, for the appellant

Martin Sclisizzi, for the respondents

Heard:  November 5, 2014

On appeal from the judgment of Justice Susan Greer of the
    Superior Court of Justice, dated December 27, 2013, with reasons reported at
    2013 ONSC 7967.

Hourigan J.A.:

Introduction

[1]

The
    appellant, The Toronto Dominion Bank appeals the judgment of the trial judge
    awarding damages for conversion to the respondents, Raza Kayani LLP and Jack
    Sheldon Zwicker.

[2]

The respondents
    commenced separate actions against the Bank. However, given the similar facts
    and legal issues between the two cases, the actions were heard together at
    trial and the appeals were also heard together in this court.

[3]

For
    the following reasons, I conclude that the trial

judge erred in law in finding that the Bank was
    liable in conversion to the respondents. I would allow the appeal, except as it
    relates to the counterclaim, and set aside the judgment below on the main
    action.

Facts

[4]

Both
    actions arose out of a fraud perpetrated against the respondents, who are lawyers.
    The scheme worked as follows.

[5]

The
    respondents were each retained to act on a rush commercial transaction on
    behalf of a purchaser and a finance company that was providing funding for the
    transaction. In each transaction, the vendor was identified as Nithiyakalyaani
    Jewellers, with an address of 1487 Gerrard Street East in Toronto.

[6]

On
    the eve of the closing, the finance company provided each respondent with a
    counterfeit certified cheque to be deposited into their respective trust
    accounts for the purpose of funding the transaction. The finance company
    directed the respondents in writing to issue a trust cheque or obtain a bank
    draft made payable to Nithiyakalyaani Jewellers for the amount of the
    transaction.

[7]

Mr.
    Zwicker and Kayani respectively released a trust cheque and a bank draft (the
    instruments) payable to Nithiyakalyaani Jewellers to their purchaser client,
    on the understanding that the client would hand deliver it to the vendor as
    payment for the goods being purchased.

[8]

The
    instruments were deposited into an account the Bank maintained under the name
    Nithiyakalyaani Jewellers. The account had been opened by an individual named
    Alaudeen Shaik, who provided the Bank with a Master Business Licence issued by
    the Province of Ontario, indicating that he had registered, as a sole
    proprietorship, the name Nithiyakalyaani Jewellers.

[9]

In
    essence, the fraud consisted of inducing the respondents to issue a trust
    cheque or obtain a bank draft on the strength of a counterfeit cheque deposited
    into their trust accounts. As part of the scheme, the fraudsters had
    appropriated the descriptive portion of the name and address of a corporation
    that had previously carried on business but was no longer doing so at the date of
    the fraud. That company was Nithiyakalyaani Jewellers Ltd., as opposed to the
    named payee, Nithiyakalyaani Jewellers.

[10]

The respondents sued the
    Bank in negligence and conversion. At trial, the case proceeded only on the
    conversion allegation. The Bank counterclaimed for monies held in accounts
    maintained by its co-defendants, Nithiyakalyaani Jewellers and Amaras Gem and
    Jewel.

Decision of the Trial Judge

[11]

The trial judge
    was satisfied that the Bank committed the tort of conversion. She noted that
    the tort is one of strict liability and that it was no defence that the Bank exercised
    the appropriate degree of care in negotiating the instruments or that the
    respondents may have been negligent in the manner in which they handled the
    transactions.

[12]

The focus of the trial
    judges analysis was whether the Bank could avail itself of the defence in s.
    20(5) of the
Bills
of Exchange Act
, R.S.C. 1985, c. B-4, (the
    Act) which provides that where the payee is a fictitious or non-existing
    person, the bill may be treated as payable to the bearer.  Pursuant to s.
    20(2) of the Act, where an instrument is payable to the bearer, a bank may
    validly negotiate the instrument delivered to the bank, and the bank has no
    liability for its negotiation.

[13]

The trial judge found
    that the payee was not fictitious as both Mr. Zwicker and Kayani made their instruments
    payable to Nithiyakalyaani Jewellers, which they believed was an existing
    entity, and which was an existing entity at the time the instruments were
    negotiated.

[14]

The trial judge went
    on to rely upon
Rouge Valley Health System v. TD Canada Trust
, 2012
    ONCA 17, 108 O.R. (3d) 241, for the proposition that a payee will not be found
    to be non-existing if the payee name is similar to the name of an actual person,
    such that the drawer of an instrument might plausibly maintain that it believed
    it was paying a real entity.

[15]

The trial judge found
    that Mr. Zwicker and Kayani honestly believed that the instruments were being
    made out for an existing obligation to a real company, despite the fact that
    the name of the payee was not precisely accurate as it did not include the abbreviation
    Ltd.. They were fraudulently induced to believe these were real transactions.
    The trial judge concluded, therefore, that the defence in s. 20(5) of the Act
    was not available to TD, making it liable for damages in conversion.

Positions of the Parties

[16]

The appellant submits
    that the trial judge made five significant errors.

[17]

First, the trial judge
    erred in failing to find that the payee was non-existing pursuant to s. 20(5)
    of the Act. The appellant submits that the payee must be non-existing because
    the respondents had no knowledge of Nithiyakalyaani Jewellers Ltd. at the time
    the instruments were created.

[18]

Second, the trial
    judge erred in failing to find that a bank is entitled to assume the drawer of
    an instrument intended that the named payee receive the proceeds of the instrument.
    The Bank cannot be faulted for effecting payment to an entity that is a licensed
    business and whose name matches the name of the payee.

[19]

Third, the trial judge
    erred in failing to find that the payee was fictitious pursuant to s. 20(5) of
    the Act. Since the respondent lawyers followed their clients directions, the
    client (i.e. the fraudster) was the true maker of the instruments. Accordingly,
    it is the clients intention  that the instruments be paid to Nithiyakalyaani
    Jewellers  that governs.

[20]

Fourth, the trial
    judge erred in failing to find that an essential element of the tort of
    conversion was not established, namely, that the Bank dealt with the
    plaintiffs chattel in a manner inconsistent with the respondents right of
    possession. Here, the Bank did as the respondents asked and, therefore, acted
    in a manner consistent with the respondents right of possession.

[21]

Fifth, in her judgment
    on the counterclaim, which was made on consent, the trial judge improperly
    allocated the damages as between Mr. Zwicker and Kayani.

[22]

The respondents take
    the position that the trial judge made no error in concluding that the elements
    of the tort of conversion had been established and that the payee was neither
    non-existing nor fictitious.

[23]

The respondents submit
    that the Bank, as the collecting financial institution, is liable for
    conversion if it credited the instruments to someone other than the intended
    payee. Therefore, the issue is who the respondents, as the drawers of the
    instruments, intended to pay.

[24]

According to the respondents,
    the trial judge made clear findings of fact on this issue, which are subject to
    review on the standard of palpable and overriding error. In particular, she
    found that the respondents believed an entity called Nithiyakalyaani Jewellers (with
    or without Ltd.) existed at the address where Nithiyakalyaani Jewellers Ltd.
    had previously operated. On this basis, the respondents submit that it can be
    inferred that Nithiyakalyaani Jewellers Ltd. was the entity the respondents
    intended to pay.

[25]

Further, the
    respondents submit that the trial judge correctly concluded that the payee was
    not fictitious, as both Mr. Zwicker and Kayani believed the payee was an
    existing entity.

[26]

As for the
    counterclaim, the respondents submit that the trial judge simply made a technical
    error that is of no consequence, and therefore, the appeal of the judgment with
    respect to the counterclaim should be dismissed.

Analysis

(i)      Legal Principles

[27]

The tort of conversion
    involves a wrongful interference with the goods of another, such as taking,
    using or destroying these goods in a manner inconsistent with the owners right
    of possession:
Boma Manufacturing Ltd. v. Canadian Imperial Bank of
    Commerce
, [1996] 3 S.C.R. 727, at para. 31;
373409 Alberta Ltd.
    (Receiver of) v. Bank of Montreal
, 2002 SCC 81, [2002] 4 S.C.R. 312, at
    para. 8.

[28]

An authorized interference
    is not wrongful and, therefore, cannot amount to conversion. As Major J. stated
    in
373409 Alberta Ltd.
, at para. 9,

An owners right of possession includes the right to authorize
    others to deal with his or her chattel in any manner specified. As a result,
    dealing with anothers chattel in manner authorized by the rightful owner is
    consistent with the right of possession, and does not qualify as wrongful
    interference.

[29]

Section 20(5) of the
    Act protects a bank from fraud committed by a third party on the drawer of an
    instrument. Pursuant to that section, an instrument payable to a payee that is
    either non-existing or fictitious may be treated as payable to the bearer and
    not to order. The bearer is deemed to be the rightful payee and, consequently,
    the bank is not liable for negotiating the instrument:
Rouge Valley
, at
    para. 10.

[30]

Given that the tort is
    one of strict liability, banks sued in conversion frequently rely upon the defence
    available in s. 20(5). Not surprisingly, the critical issue in such cases is
    whether a payee is non-existing or fictitious. Justice Laskin summarized the
    case law on this point in
Rouge Valley
,

at paras. 22-23
:

A good deal of case law and commentary has considered the
    meaning of a non-existing person and a fictitious person for the purpose of s.
    20(5) of the
Bills
    of Exchange Act
. The main authority remains the majority
    judgment of Iacobucci J. in
Boma Manufacturing Ltd. v. Canadian Imperial
    Bank of Commerce
. There, with some modification, he approved of four
    propositions taken from John D. Falconbridge's
Banking and Bills of Exchange
,
    6th ed. (Toronto: Canada Law Book, 1956), at pp. 468-69. The four propositions -
    of which propositions 1 and 4 are relevant to my analysis - are as follows:

(1) If the payee is not the name of any real person known to
    the drawer, but is merely that of a creature of the imagination, the payee is
    non-existing, and is probably also fictitious.

(2) If the drawer for some purpose of his own inserts as
    payee the name of a real person who was known to him but whom he knows to be
    dead, the payee is non-existing, but is not fictitious.

(3) If the payee is the name of a real person known to the
    drawer, but the drawer names him as payee by way of pretence, not intending
    that he should receive payment, the payee is fictitious, but is not
    non-existing.

(4) If the
    payee is the name of a real person, intended by the drawer to receive payment,
    the payee is neither fictitious nor non-existing, notwithstanding that the
    drawer has been induced to draw the bill by the fraud of some other person who
    has falsely represented to the drawer that there is a transaction in respect of
    which the payee is entitled to the sum mentioned in the bill.

Two important principles structure these
    propositions:

* Whether the payee is non-existing is a simple question of
    fact not depending on anyone's intention.

*Whether the
    payee is fictitious depends upon the intention of the drawer of the instrument,
    that is, the drawer of a bill or cheque or the maker of a note.

[31]

Justice Laskin then explained,
    at para. 26, that Iacobucci J.s reasons in
Boma
imported the notion of
    plausibility as a modification to or gloss on the four propositions. He
    elaborated on the plausibility doctrine, at para. 30:

In his text,
The Law of Banking and
    Payment in Canada
(Aurora: Canada Law Book, 2008), Bradley Crawford
    summarizes the effect of Iacobucci J.'s gloss on
Boma
:

[T]he law appears to be that if the name of the payee is a
    pure invention of the drawer of a cheque (or the maker of a note), the payee
    may be "non-existing" within the meaning of BEA, s. 20(5), but only
    if it is also true that the name is of a person having no real connection with
    the drawer's business, or
semble
, is not a name that
plausibly
might be identified by the drawer as being a real creditor of his business. [Emphasis
    in original]: at p. 22-34.

(ii)    Non-existing
    Payee

[32]

The trial judge
    concluded, at para. 72, that in my view this case comes surely within
    Falconbridges fourth proposition.  Both Mr. Zwicker and Kayani saw their
    transactions as legitimate.  I have found that the tort of conversion
    applies.

[33]

In my view, the trial
    judge erred in failing to find that the payee of the instruments was a
    non-existing person and thus concluding that this case comes within Falconbridges
    fourth proposition. I reach this conclusion for the following reasons.

[34]

With respect, the
    trial judge did not conduct a proper analysis of the respondents knowledge of Nithiyakalyaani
    Jewellers Ltd. at the time the instruments were drawn.

[35]

In an agreed statement
    of facts filed at trial, both Mr. Zwicker and Junaid Kayani, the principal of
    Kayani, admitted that, prior to the matters in issue, they had no dealings with
    and no knowledge of Nithiyakalyaani Jewellers Ltd. or Nithiyakalyaani Jewellers.

[36]

Mr. Zwicker conducted
    a Canada 411 search prior to closing but all he knew as a result of that search
    was that there was a business with that name at the address, whether incorporated
    or not. He did not keep a copy of the search.  According to Mr. Zwicker, he
    did not direct his mind to whether it was a limited company and, at the time of
    preparing the instrument, it was not significant to him whether the payee was
    incorporated.

[37]

Mr. Kayani candidly
    testified that, Im not going to say that my cheque was intended to be paid to
    Nithiyakalyaani Limited. My cheque was clearly payable to Nithiyakalyaani
    Jewellers and upon instruction of the financing corporation. He went on to
    state that, at the time of drawing the instrument, he did not know whether Nithiyakalyaani
    Jewellers was a sole proprietorship or an incorporated entity.

[38]

Mr. Kayani also
    testified that he relied upon the invoice provided to him by the finance
    company to support his assertion that his bank draft should have gone to Nithiyakalyaani
    Jewellers Ltd. However, the name on that invoice was Nithiyakalyaani Jewellers
    and not Nithiyakalyaani Jewellers Ltd.

[39]

Based on this
    evidence, the respondents could not possibly establish that the payee is the
    name of a real person, intended by the drawer to receive payment, as required
    to bring themselves within Falconbridges fourth proposition.

[40]

As Laskin C.J. noted in
Royal Bank of Canada v.
Concrete Column Clamps (1961) Ltd.
, [1977]
    2 S.C.R. 456, at p. 472, in Falconbridges fourth proposition, the drawer of
    the instrument must have knowledge of the payee, at least in the sense of the
    awareness of the payee and who he is.

[41]

There is no evidence
    that the respondents knew of the existence of Nithiyakalyaani Jewellers Ltd. at
    the time the instruments were drafted. At its highest, the evidence establishes
    that the respondents knew of an entity they believed operated at the address
    listed on the invoice and in the Canada 411 directory. Neither respondent
    testified that they had actual knowledge of Nithiyakalyaani Jewellers Ltd.
    until after the fraud was discovered.

[42]

The respondents submit
    that the intended payee was Nithiyakalyaani Jewellers Ltd. However, this was
    not the name of the payee on the respondents instruments. The trial judge
    appears to have relied on the plausibility doctrine to find that the payee was
    not non-existing, although she makes no explicit statement to that effect. Under
    that doctrine, an incorrectly named payee will not be found to be non-existing if
    it could plausibly be identified by the drawer of the instrument as being a
    real creditor.

[43]

However, resort to the
    plausibility doctrine does not negate the requirement that the drawer must have
    knowledge of the payee. Justice Laskin described the knowledge requirement in
Rouge
    Valley
, at para. 34:

[T]he gloss on Falconbridge based
    on the notion of plausibility is limited to cases where the payee named on the
    cheque is factually non-existing, in other words is not a real entity known to
    the drawer, but has a name
similar to the name of an actual person with whom
    the drawer has done business
. In those situations, the drawer might
    plausibly maintain that it believed it was writing a cheque to a real creditor
    of its business. [Emphasis added.]

[44]

Here, the respondents
    had no previous business relationship with Nithiyakalyaani Jewellers Ltd. Therefore,
    it cannot be said that when they prepared the instruments naming Nithiyakalyaani
    Jewellers as the payee, they plausibly believed they were paying Nithiyakalyaani
    Jewellers Ltd. How could they when they did not even know that company existed
    until after the fraud was discovered?

[45]

This situation is
    factually distinct from that in
Boma
, where the drawer had an existing
    business relationship with a party with a name similar to the payee and had
    actually considered the name of the payee when the instruments were drawn.

[46]

The respondents have
    not pointed to a single case where the plausibility doctrine or Falconbridges
    fourth proposition has been found to apply where the drawer of the instrument discovered
    the existence of the proper payee only after the fraud had been disclosed.

[47]

For these reasons, I
    conclude that the trial judge erred in finding that this case fits within Falconbridges
    fourth proposition. The payee is not the name of any real person known to the
    respondents at the time they drew the instruments. The payee is, therefore, non-existing.
    Accordingly, this case fits within Falconbridges first proposition and the
    defence in s. 20(5) of the Act is available to the Bank.

[48]

Given my finding that Nithiyakalyaani
    Jewellers is a non-existing entity, it is unnecessary to consider the other
    arguments raised by the Bank regarding the trial judges reasons on the main
    action. It is also unnecessary to consider the Banks counterclaim, as it is only
    relevant in the event the main appeal was dismissed.

Disposition

[49]

I would allow the
    appeal on the main action, set aside the judgment and dismiss the actions
    against the Bank.

[50]

The parties agreed
    that, if the appeal is allowed, the Bank is entitled to $18,749.31 for the
    costs of the appeal and to costs of the trial in the same amount fixed by the
    trial judge in favour of the respondents: $47,500 for each action.  I would fix
    costs in accordance with this agreement.

Released: December 3, 2014 AH

C.
    William Hourigan J.A.

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

I
    agree Gloria Epstein J.A.