COURT OF APPEAL FOR ONTARIO

CITATION:
Independent
    Electricity System Operator v.
DATE: 20120508
DOCKET:  C53992
Winkler C.J.O., Lang J.A. and Pattillo
    J.
(ad hoc)
BETWEEN
Independent Electricity System Operator
Applicant (Respondent)
and
Canadian Union of Skilled
    Workers, Labourers International Union of North America, Labourers
    International Union of North America, Ontario Provincial District Council,
    Labourers International Union of North America, Local 1059,
Ontario
    Labour Relations Board and Attorney General of Ontario
Respondents (
Appellants
)
and
Provincial Building and Construction Trades
    Council of Ontario and Greater Essex County District School Board
Interveners
Lorne A. Richmond, for the appellants
Richard J. Charney and Daniel R. McDonald, for the
    respondent
Leonard P. Kavanaugh, Q.C., for the intervener Greater
    Essex County District School Board
Ronald N. Lebi, for the intervener the Provincial
    Building and Construction Trades Council
Heard:  February 15, 2012
On appeal from the order of the Divisional Court (W.
    Larry Whalen, Anne M. Molloy and Katherine E. Swinton JJ.), dated February 18,
    2011, with reasons by Swinton J. and reported at 2011 ONSC 81, [2011] O.L.R.B.
    Rep. January/ February 166, reversing the decision of the Ontario Labour
    Relations Board (Caroline Rowan V-Chair) dated November 23, 2009, with reasons
    reported at [2009] O.L.R.D. 4330.
Winkler
    C.J.O.:
[1]

The appellants, a number of construction trade unions, challenge
    the constitutional validity of s. 127.2 of the
Labour Relations Act
,
    1995
, S.O. 1995, c. 1, Sched. A. (the LRA). They allege that the
    provision violates s. 2(d) of the
Canadian Charter of Rights and Freedoms
.
[2]

Section 127.2 permits a non-construction employer  essentially,
    an employer that does not sell construction services to third parties  to
    bring an application to the Labour Relations Board (the Board) for a
    non-construction employer declaration. If an employer is found to be a
    non-construction employer, two things happen. First, the Board must declare
    that any trade union that represents, or may represent, construction employees
    of the employer, no longer represents them. Second, any collective agreement
    binding the employer and the trade union ceases to apply with respect to the
    employer insofar as it relates to the construction industry.
[3]

In this case, the Independent Electricity System Operator
    (IESO) brought a non-construction employer application.  The Board concluded
    that the IESO met the statutory preconditions for a declaration that it is a
    non-construction employer:  while it performs construction work from time to
    time, it does no construction work for which it expects compensation from an
    unrelated person.  However, the Board did not make a s. 127.2 declaration;
    rather, it referred the matter for a hearing by the Board to determine the
    constitutional validity of the provision.
[4]

The Board declared s. 127.2 to be constitutionally inoperative in
    the circumstances of this case on the basis that s. 127.2 substantially
    interfered with the process of collective bargaining. The Board found that the
    provision was contrary to s. 2(d) of the
Charter
and that the
    infringement could not be justified under s. 1.
[5]

The IESO brought an application for judicial review of that
    decision.  The Divisional Court granted the application, set aside the Boards
    decision, and referred the matter back to the Board to issue a declaration in
    accordance with s. 127.2 of the LRA.
[6]

The construction trade unions in this case appeal from the
    Divisional Courts decision: the Canadian Union of Skilled Workers (CUSW);
    the Labourers International Union of North America; the Labourers
    International Union of North America, Ontario Provincial District Council; and
    Labourers International Union of North America, Local 1059 (the final three
    parties collectively referred to as the Labourers).
[7]

The Provincial Building and Construction Trades Council of
    Ontario (the Council) intervened before the Divisional Court and this court,
    advancing arguments in support of the appellants position.  The Council represents
    some 150,000 construction workers throughout Ontario.
[8]

The Greater Essex County District School Board (GECDSB), which
    has been involved in on-going s. 127.2 proceedings, also intervened before both
    courts, advancing arguments in support of the IESOs position.
[9]

I would dismiss the appeal from the decision of the Divisional Court.  In my view, there is no reason to interfere with its decision.  On the
    evidence in this case, a s. 127.2 declaration would not result in substantial
    interference with the rights of the appellants members as guaranteed by s.
    2(d) of the
Charter
.
A.

background
(1)

Legislative
    Context
[10]

Section 127.2 of the LRA provides as follows:
127.2(1) This section applies with respect to a trade
    union
[1]
that represents employees of a non-construction employer employed, or who may
    be employed, in the construction industry.
(2)  On the application of a
    non-construction employer, the Board shall declare that a trade union no longer
    represents those employees of the non-construction employer employed in the
    construction industry.
(3) Upon the Board making a declaration under
    subsection (2), any collective agreement binding the non-construction employer
    and the trade union ceases to apply with respect to the non-construction
    employer in so far as the collective agreement applies to the construction
    industry.
(4) The Board may re-define the composition of a
    bargaining unit affected by a declaration under subsection (2) if the bargaining
    unit also includes employees who are not employed in the construction industry.
[11]

Section 126(1) defines non-construction employer as

an employer who does no work in the construction industry
    for which the employer expects compensation from an unrelated person.  CUSW
    and the Labourers (together the appellants or the Unions) do not challenge
    this definition.
[12]

These provisions fall within a part of the LRA that is tailored
    to the construction industry.  Section 1 defines construction industry as
    businesses that are engaged in constructing, altering, decorating, repairing
    or demolishing buildings, structures, roads, sewers, water or gas mains, pipe
    lines, tunnels, bridges, canals or other works at the site.  Sections 126 to
    168 establish specialized rules for the construction industry that operate in
    addition to the general provisions of the LRA and which, for the most part,
    prevail over the general provisions. These provisions were enacted in
    recognition that employment in the construction industry has distinctive
    features, including that work tends to be episodic.
[13]

In 1998 and 2000, the Legislature introduced a number of
    amendments to the LRA. Prior to the amendments, the LRA stipulated that an
    employer who operates a business in the construction industry was bound by
    the construction industry provisions of the Act.  In a series of cases, the
    Board interpreted that phrase broadly so as to include anyone who effected
    construction, whether by hiring employees directly or by engaging contractors:
    see, for example,

Windsor (Board of Education for the City of)
,
    [1983] O.L.R.B. Rep. May 831;
Municipality of Metropolitan Toronto
,
    [1980] O.L.R.B. Rep. Jan. 62;
Re
City of Toronto and Carpenters
    District Council of Toronto and Vicinity

(1980), 108 D.L.R. (3d)
    141 (Ont. Div. Ct.);
Municipality of Metropolitan Toronto
, [1980]
    O.L.R.B. Rep. March 279.
[14]

This broad interpretation meant that employers who strictly
    consumed construction services, but did not provide any construction services
    to third parties, were caught by the specialized labour relations regime for
    the construction sector.  This had a number of implications for those
    employers. For instance, a number of private and public sector employers were
    bound by the province-wide collective bargaining scheme in the industrial, commercial
    and institutional (ICI) sector of the construction industry.  Collective
    agreements in the ICI sector are entered into by designated or certified
    employer and employee bargaining agents and apply on a province-wide basis. These
    agreements also invariably contain subcontracting clauses that prohibit the
    employer from subcontracting to non-union companies.
[15]

The non-construction employer provisions were originally
    introduced by Bill 31, the
Economic and Development Workplace Democracy
    Act, 1998
.  Bill 31 defined a non-construction employer as a person who
    is not engaged in a business in the construction industry or whose only
    engagement in such a business is incidental to the persons primary business.  The
    Bill provided a mechanism by which those non-construction employers who were
    already unionized in the construction industry could apply to the Board to end
    their collective bargaining obligations with the trade unions in respect of
    their construction industry employees.
[16]

In introducing Bill 31, the Minister of Labour, the Honourable Jim
    Flaherty, described the purposes of the proposed non-construction employer provisions:
Passing the
Economic Development and Workplace Democracy
    Act
would also address a long-standing issue. It would ensure that only
    employers in the construction industry are covered by the special construction
    provisions of the
Labour Relations Act
.  This means that employers
    whose primary business is not construction, for example, retail employers,
    municipalities and school boards, can negotiate agreements specific to the
    circumstances of their sector. This corrects the situation of these employers
    being bound by the province-wide agreements that they have little opportunity
    to influence: Ontario, Legislative Assembly,
Official Report of Debates
    (Hansard)
,

36
th
Parl., 2
nd
Sess., (4 June 1998), at p. 1116 (Hon. Jim Flaherty).
[17]

At the Bills third reading, the Labour Minister noted that the
    Bill did not exempt those [non-construction] employers from the
Labour
    Relations Act
.   It just treats them the same as other employers in the
    province:  Ontario, Legislative Assembly,
Official Report of Debates
    (Hansard)
,
36
th
Parl., 2
nd
Sess., (23 June 1998), at p. 1785 (Hon. Jim Flaherty).
[18]

The Minister also noted that one of the objectives of the non-construction
    employer provisions was to open up the tendering process so that both non-union
    and union contractors could bid on work, thus increasing economic
    competitiveness: Ontario, Legislative Assembly,
Official Report of Debates
    (Hansard)
,
36
th
Parl., 2
nd
Sess., (23 June 1998), at p. 1785 (Hon. Jim Flaherty).
[19]

The non-construction employer provisions of the LRA were  subsequently
    amended by Bill 139, the
Labour Relations Amendment Act, 2000
.
[20]

During second reading of Bill 139, Joseph N. Tascona, the Member
    of Provincial Parliament for Barrie-Simcoe-Bradford, highlighted the problems
    that the amendments were meant to address:  non-construction employers were
    unfairly bound by construction agreements over which they have no control and
    which do not relate to their businesses.  The proposed changes were aimed at
    prior labour relations decisions and were meant to clarify the true intent
    of the construction industry (regime), which is to deal with construction companies
    that are paid for their work because of the construction work they do:  Ontario,
    Legislative Assembly,
Official Report of Debates (Hansard)
,
37
th
Parl.,
    1
st
Sess., (14 November 2000), at p. 5420-5421 (Joseph N. Tascona).
(2)

Factual
    Context
[21]

The evidentiary record in this case focuses on the impact of s.
    127.2 on the IESO and the Unions, and to a lesser extent the GECDSB.
[22]

The IESO was established by the
Electricity Act
, 1998
,
    S.O. 1998, c. 15, Sched. A., as part of the restructuring and break-up of
    Ontario Hydro into separate entities.  The IESOs primary functions are to
    operate the wholesale electricity markets in Ontario and to direct the
    operation of the provinces high-voltage transmissions system.
[23]

The IESO acquired the employees, assets, liabilities, rights and
    obligations of Ontario Hydro that were related to the activities previously
    carried out by Ontario Hydros Central Market Operator business unit.
[24]

Following the restructuring of Ontario Hydro, the IESO recognized
    the bargaining rights of the Power Workers Union and the Society of
    Professional Engineers for all non-management employees that were transferred
    from Ontario Hydro.  The collective bargaining relationships with the two
    unions are regulated by the LRAs general provisions, not the construction
    industry provisions.
[25]

The IESO refused to recognize the bargaining rights of the two appellant
    construction Unions.  CUSW had acquired its bargaining rights in 1999 through a
    displacement application.  It displaced the International Brotherhood of
    Electrical Workers, which had acquired bargaining rights for a unit of
    electricians and related classifications at Ontario Hydro in 1949.  The
    Labourers acquired bargaining rights for a bargaining unit of construction
    labourers and related classifications of Ontario Hydro in 1949.
[26]

The IESO refused to recognize the long-standing bargaining rights
    enjoyed by the Unions on the basis that it was strictly a consumer of
    construction services and employed no members of either union.
[27]

In 2004, the IESO brought non-construction employer applications
    pursuant to s. 127.2.  The Unions brought, in turn, successor rights
    applications pursuant to s. 69 and s. 1(4) of the LRA.
[28]

The Board heard the Unions applications first.  It concluded
    that there had been a sale of business and that the IESO was bound by the
    collective agreements that had been binding on Ontario Hydro:
Ontario
    Electricity Financial Corp. and Independent Electricity System Operator
,
    [2006] O.L.R.B. Rep. July/August 594.
[29]

As a result of the Boards decision, the IESO became bound to two
    province-wide agreements negotiated by employer bargaining agencies:  one
    negotiated by the Electrical Power Systems Construction Agency and the
    Labourers Provincial Collective Agreement in the ICI sector of the construction
    industry.
[30]

The IESO and the Unions also entered into direct negotiations for
    new collective agreements in respect of construction work performed by the IESO
    in the Electrical Power System sector, which accounts for the majority of the
    IESOs construction work.  During bargaining, the IESO stated that it did not
    intend to hire construction workers but rather intended to contract out all of
    its construction work. It wanted the flexibility to use the contractor of its
    choice.
[31]

The IESO reached an agreement with CUSW and the Labourers.  Both agreements
    permitted the IESO to use contractors or subcontractors, provided that the
    subcontractors and contractors were in contractual relations with the Unions or
    agreed to be bound by the terms of the applicable agreements when performing
    such work.
[32]

Contracting and subcontracting provisions such as these are
    commonly found in collective agreements in the construction industry.  Hiring
    hall provisions are also common.  These provisions are designed to ensure work
    opportunities for union members, who typically go from job to job and project
    to project as their services are required.  On this appeal, the Unions and the
    Provincial Building and Construction Trades Council emphasized the importance
    of such provisions as the economic lifeline for construction workers.
[33]

Since the collective agreements were reached, the IESO has never
    employed any members of CUSW or the Labourers directly.  Rather, members of the
    Unions have performed work for the IESO as employees of IESO subcontractors.  The
    amount of worked performed by the Unions members has been minimal.
B.

Decisions below
(1)     Boards Decision
[34]

In a 62-page decision, the Board concluded that s. 127.2
    substantially interferes with the process of collective bargaining contrary to
    s. 2(d) of the
Charter
and the infringement cannot be justified under s.
    1.
[35]

The Board described the effect of s. 127.2 as interfering with
    past and future collective bargaining:
160

In the
    present case, sections 127.2(2) and (3) of the Act have the effect of
    invalidating all provisions of collective agreements negotiated by the Unions
    in the past on behalf of their members. In addition, the provisions affect
    future collective bargaining by terminating the Unions' existing right to
    engage in collective bargaining on behalf of their members with the IESO after
    the declarations contemplated thereunder are made. The challenged provisions
    therefore both repudiate past collective bargaining processes relating to all
    issues negotiated between the parties by nullifying all gains achieved in
    bargaining to date and also affect future processes by stripping the Unions of
    their right to have their representations considered by the IESO in a process
    of good faith bargaining following the issuance of the declarations mandated
    thereunder.
161
While the legislation does not prevent
    future representations from being made, as noted at paragraph 114 of
Health
    Services
, "the right to collective bargaining cannot be reduced to a
    mere right to make representations."  Without any obligation on the IESO
    to listen in future to the Unions' representations regarding its members'
    shared workplace goals and the nullification of all terms of past collective
    agreements negotiated by the Unions on their behalf, the effect of section
    127.2 is to interfere both with past collective bargaining processes and future
    ones.

[36]

In
    the Boards view, s. 2(d) protects the process by which the Unions members
    seek to achieve their goals of employment security as well as the process by
    which they negotiate terms and conditions of employment if they are employed.  At
    para. 175, the Board stated
:
In the present case, the evidence indicates that one of the
    most significant goals of the Unions members is achieving employment security
    through the negotiation of contracting and subcontracting protections in their
    collective agreements with all those employers, including the IESO, with whom
    they have existing bargaining rights.  The scope of the constitutional
    right to collective bargaining protects the
process
by which the
    Unions seek to achieve such goals on behalf of their members as well as the
process

by which they negotiate terms and conditions of employment in the event
    their members are employed. [Emphasis in original.]
[37]

The Board rejected the argument that there was no denial of
    freedom of association because the IESO employed no Union members directly:
165
The fact that the IESO does not now employ any of
    the Unions' members directly, nor has it ever employed them directly since the
    re-organization of its predecessor, Ontario Hydro, does not further affect my
    finding that the provisions in issue interfere with the process of collective
    bargaining in the circumstances before me. It is, in my view, far too narrow a
    conception of the right to a process of collective bargaining to suggest that
    what is protected is only the ability of trade union members to negotiate terms
    and conditions of employment with their direct employer.
[38]

The Board found that s. 127.2 discourages the Unions members from
    coming together to pursue common goals:
180
Given the importance of the collective agreement
    and the significant job security protections contained within it to the scheme
    of collective bargaining, the legislative nullification of every single
    provision negotiated by the Unions during past processes of collective
    bargaining as is contemplated under s. 127.2, in my view, affects matters of
    sufficient importance to be likely to discourage the Unions' members from
    coming together to pursue common goals.

182
The legislation in this case,
    in any event, also goes a step further by ending the Unions' existing right to
    negotiate on behalf of their members in future processes unless bargaining
    rights can be re-established through certification or voluntary recognition. In
    the circumstances,
it is difficult to imagine what could be more
    discouraging to the Unions' members' interest in coming together to pursue
    common goals than the challenged provisions, which both annihilate all of the
    gains made by their chosen representatives in respect of their workplace goals
    to date and strip the Unions of the right to represent and bargain with the
    employer in future
. The Unions members are thereby required to start all
    over again at square one by first re-establishing their right to even have
    their voices heard, and listened to, by the IESO. [Emphasis added.]
[39]

The Board noted that the question to be decided was whether there
    was substantial interference with the process of collective bargaining. The
    question was not whether the Unions members continued to have access to an
    adequate collective bargaining regime under the general provisions of the LRA:  para.
    183.
[40]

Moreover, a Board hearing to determine whether the IESO met the
    statutory definition of a non-construction employer was hardly the same as
    good faith negotiation or consultation, since the provisions eliminate any
    possibility of meaningful consultation:  para. 190.
[41]

Finally,
    the Board found that the breach of s. 2(d) was not justified under s. 1 of the
Charter
.
    The objective of the legislation was not of sufficient importance to override
Charter
rights. And, even if it were, s. 127.2 did not satisfy the minimal impairment
    test and its salutary effects did not outweigh its deleterious effects.

(2)     Divisional
    Courts Decision
[42]

In reasons written by Swinton J., the Divisional Court defined
    the issue to be decided as whether s. 127.2, either in its purpose or effect,
    substantially interferes with the process of collective bargaining:  para. 53.
[43]

The court concluded that the purpose of s. 127.2 is not to
    prevent collective bargaining, nor is it meant to break the Unions.  Rather,
    the purpose is to remove non-construction employers from the labour relations
    regime tailored for the construction industry. As the purpose of s. 127.2 is
    valid, the provisions validity turns on whether its effect is to substantially
    interfere with the process of collective bargaining.
[44]

The court found that, on the facts, it was difficult to find a
    violation of s. 2(d): para. 68.  The IESO has never had employees working in
    the construction industry.  At no time has any person employed by, or engaged
    by, the IESO ever participated in any vote to have CUSW or the Labourers
    certified as collective bargaining agents in respect of dealings with the IESO.
     Had the Board granted a s. 127.2 declaration, no employees of the IESO would
    have been affected by the termination of the collective agreements and the
    Unions bargaining rights.  Furthermore, the IESO has indicated that it does
    not intend to carry on construction in the future using its own employees.  Accordingly,
    no employees or potential employees will be denied access to the process of
    collective bargaining or lose the benefits of a collective agreement.  The fact
    that the IESO
may
employ construction workers in the future does not constitute a sufficient
    evidentiary basis for finding substantial interference with the
Charter
rights of IESO employees.
[45]

While the IESO argued that employment was a condition precedent
    for s. 2(d) protection of the collective bargaining process, the court found
    that it was unnecessary to decide that issue.  Rather, the Divisional Court
    considered the effect a s. 127.2 declaration would have on the Unions members
    in the circumstances of the case:
78
A declaration in this case would not nullify other
    collective agreements that the Unions have with construction contractors and
    subcontractors. Members of the Unions will continue to be either direct
    employees of construction industry contractors or subcontractors, or they will
    be hired from Union hiring halls by those entities. Moreover, a declaration
    does not prevent the Unions from seeking to organize the employees of other
    construction industry contractors.
79
The individuals who will be detrimentally
    affected by the declaration sought are the Unions' members employed by
    contractors who seek contracts with the IESO to do construction work. If the
    Unions' collective agreements continue to apply, only Union members will be
    allowed to do the construction work.
80
The effect of the Board's decision is to protect
    the collective agreements and acquired bargaining rights of the Unions and
    their members
under the construction industry provisions
. In doing so,
    the Board protected their access to their preferred bargaining structure and
    the particular outcomes of bargaining. That was an error in law, as the
    guarantee of freedom of association in s. 2(d) of the
Charter
does not
    extend Constitutional protection to a preferred process or a particular
    substantive outcome; rather, it protects the collective bargaining process from
    substantial interference. [Emphasis in original.]
[46]

The Divisional Court concluded, at para. 83, that there was no
    substantial interference with s. 2(d) rights in this case:
the effect of the declaration is to terminate collective
    agreements and bargaining rights under a particular statutory regime. However,
    employees of the non-construction employer continue to have the right to
    organize and bargain with their employer under the general provisions of the
LRA
.
    While the IESO has no construction employees, in workplaces where construction
    employees are affected by a declaration, they continue to have the right to
    organize under the
LRA
and to bargain collectively (as in
Greater
    Essex
, for example). Therefore, I conclude that there has not been
    substantial interference with the process of collective bargaining.
[47]

Even if there were substantial interference with the collective
    bargaining process, the court still would have declined to find a violation of
    s. 2(d).  In
Health Services and Support-Facilities Subsector Bargaining
    Assn. v. British Columbia
,
the Supreme Court held that s. 2(d) would not be violated,
    despite substantial interference with collective bargaining, if there were good
    faith negotiations or consultation with the unions before the legislation was
    enacted:
2007 SCC 27,
    [2007] 2 S.C.R. 391
.  Relying on that principle, the Divisional
    Court affirmed, at para. 86, that there was no breach of s. 2(d):
86
In the present case, we are not dealing with legislation
    changing particular collective agreements with known bargaining agents. Here,
    the legislation covers employers who come within the definition of
    "non-construction employer" and provides a process for removing them
    from the construction industry bargaining regime only if there has been a
    determination by the Board that a particular employer is a non-construction
    employer. Therefore, the acquired rights of unions and their members can be
    terminated only after an adjudicative process before the Board to determine
    whether labour relations in the place of employment are properly subject to the
    specialized regime. The Board's case law shows that the test for removal is a
    rigorous one, and a number of employers have failed to meet it. This is further
    evidence that the legislation does not substantially interfere with the process
    of collective bargaining; rather, it regulates the process of bargaining and
    allows some employers to move into the general provisions because of the nature
    of their business.
In the view of the court, the legislation regulates
    the process of collective bargaining and allows employers that do not do business
    in the construction industry to operate under the general LRA scheme.
[48]

Finally, the court concluded that, even if there were a violation
    of s. 2(d) of the
Charter,
the infringement was justified under s. 1.
C.

Issues on appeal
[49]

The appellants raise two main issues on appeal:  does s. 127.2
    comply with s. 2(d) of the
Charter
and, if not, is the breach
    justified by s. 1 of the
Charter
?
[50]

In arguing that there is a breach of s. 2(d), the appellants make
    three main submissions.  First, they contend that the Divisional Courts
    decision is inconsistent with the Supreme Court of Canadas decisions in

B.C.
    Health Services, and in Ontario (Attorney General) v. Fraser
, 2011 SCC 20,
    [2011] 2 S.C.R. 3.  In particular, they submit that nullifying collective
    agreements and terminating bargaining rights constitutes substantial
    interference with collective bargaining.
[51]

Second, and central to the appellants argument that s. 127.2
    breaches s. 2(d) of the
Charter
,
is their contention
    that the Divisional Court erred in restricting s. 2(d) constitutional
    protection to direct employment relationships.  In their view, s. 2(d) should
    be interpreted broadly and generously to protect the Unions members who are
    not employed by the IESO.
[52]

Third, the appellants submit that the Divisional Court erred in
    finding that there was no substantial interference with the process of
    collective bargaining on the basis that any future direct-hire IESO
    construction employees could seek to organize under the general provisions of
    the LRA.
[53]

If there is a breach of s. 2(d), the appellants submit that the
    breach is not justified under by s. 1.
D.

Analysis
[54]

All of the parties agree that the standard of review of the
    Boards decision is correctness, since the Board was applying the
Charter:
    Cuddy Chicks Ltd. v. Ontario (Labour Relations Board)
,
[1991] 2 S.C.R. 5.
(1)

Is the
    decision inconsistent with
B.C. Health Services
and
Fraser
?
[55]

In my view, the Divisional Court committed no error in
    articulating and applying the governing principles from
B.C. Health
    Services
to this case. The decision below is also consistent with the
    decision of the Supreme Court in
Fraser
, which was released after the Divisional Courts decision, as the majority decision in
Fraser
reaffirms the
    Supreme Courts earlier decision in
B.C. Health Services
.
[56]

The Divisional Court recognized that s. 2(d) protects the right
    of employees to associate in a process of collective action to achieve
    workplace goals, but does not ensure a particular outcome in a labour dispute
    or guarantee access to any particular statutory regime:
B.C. Health
    Services
, para. 19.  I agree with the Divisional Court that freedom of
    association, as guaranteed by s. 2(d), is enjoyed by individuals, not by unions.
[57]

As
Fraser
clarifies, at para. 54,
B.C. Health
    Services

affirms a derivative right to collective bargaining,
    understood in the sense of a process that allows employees to make
    representations and have them considered in good faith by employers, who in
    turn must engage in a process of meaningful discussion.
[58]

For there to be a breach of s. 2(d) there must be substantial
    interference with associational activity.  The Divisional Court relied on the
    articulation of the substantial interference test as set out at paras. 92-93 of
B.C. Health Services
:
To constitute
substantial interference

with
    freedom of association, the intent or effect must seriously undercut or
    undermine the activity of workers joining together to pursue the common goals
    of negotiating workplace conditions and terms of employment with their employer
    that we call collective bargaining.
Generally speaking, determining whether a government measure
    affecting the protected process of collective bargaining amounts to substantial
    interference involves two inquiries. The first inquiry is into the
    importance of the matter affected to the process of collective bargaining, and
    more specifically, to the capacity of the union members to come together and
    pursue collective goals in concert.  The second inquiry is into the manner
    in which the measure impacts on the collective right to good faith negotiation
    and consultation. [Emphasis in original.]
[59]

The substantial interference test is spelled out in
Fraser
,
at para. 47, in the following terms:
What is protected is associational activity, not a particular
    process or result. If it is shown that it is impossible to meaningfully
    exercise the right to associate due to substantial interference by a law (or
    absence of laws: see
Dunmore
) or by government action, a limit on the
    exercise of the s. 2(
d
)
right is established, and the onus shifts to the state to justify the limit
    under s.1 of the
Charter
.
[60]

The threshold for establishing substantial interference with the
    process of collective bargaining is a high one. In every case, writes the
    majority
Fraser

at para. 46, the question is whether the
    impugned law or state action has the effect of making it impossible to act
    collectively to achieve workplace goals.
[61]

The Divisional Court determined that, on the evidentiary record
    before the court, there was no substantial interference with the Union members
    s. 2(d) rights.  In its view, the facts in this case are distinguishable from
    those in
B.C. Health Services
.  I agree.
[62]

As explained by the Divisional Court at para. 81, a key
    difference is that in
B.C. Health Services
there was a prohibition on
    future bargaining with respect to important issues:
What was significant to the Supreme Court of Canada in that
    case was the legislated interference with the terms of existing collective
    agreements between the employers in the health sector and the unions with which
    they had negotiated those terms, as well as the prohibition on bargaining
    important issues such as contracting out, bumping and layoff.  The annulment of
    existing terms and the prohibition on future bargaining with respect to these
    important issues caused substantial interference with the process of collective
    bargaining.
[63]

While s. 127.2 requires the termination of collective agreements
    and bargaining rights acquired under the construction industry provisions if an
    employer is found to be a non-construction employer, the bargaining rights and
    rights under the agreements are terminated because the employer is no longer a
    construction employer.
[64]

The Legislature has determined that the specialized construction
    provisions are not appropriate for a non-construction industry employer. Were
    the Unions not already certified to represent IESO construction employees under
    the construction provisions of the LRA, they would be ineligible to do so under
    current LRA provisions.  However, without s. 127.2, the Unions would be entitled
    to remain under the construction regime in perpetuity.
[65]

Employees of a non-construction employer are still free to seek
    certification or voluntary recognition under the general provisions of the LRA.
B.C. Health Services and Fraser
make it clear that s. 2(d) does not
    guarantee access to any particular statutory regime.
[66]

That construction employees of non-construction employers are
    still able to engage in a process of collective bargaining is evidenced by the
    GECDSBs experience.  In 2004, the GECDSB brought a s. 127.2 application,
    seeking to terminate the bargaining rights of the United Brotherhood of
    Carpenters and Joiners of America, Local 44 (the Carpenters) under the
    construction regime. The Board allowed the application, finding the GECDSB to
    be a non-construction employer.  However, the school board chose to voluntarily
    recognize the Carpenters bargaining rights under the general LRA regime on
    behalf of carpenters employed by the GECDSB.
[67]

Moreover, as I explain below, the Unions members will continue
    to enjoy other aspects of the freedom of association.
(2)

Are
    non-employees entitled to a constitutional right to bargain collectively?
[68]

The appellants submit that the Divisional Court erred in failing
    to recognize constitutional protection for the process of collective bargaining
    between the IESO and the Unions on behalf of their members who are not, and may
    never be, employed by the IESO.  I cannot accede to this submission.
[69]

The Divisional Court found it difficult to see how there would be
    interference with any associational activity if a s. 127.2 declaration were to
    be granted, since the IESO has never had any employees working in the
    construction industry and given the following additional facts:
·

While the IESO is bound to collective agreements negotiated under
    the construction provisions of the LRA, those agreements arose as a result of a
    successor rights application and a decision by the Board. At no time has any
    person employed by, or engaged to provide services to, the IESO ever
    participated in any vote to have CUSW or the Labourers certified as collective
    bargaining agents. Therefore, if the IESO were declared to be a
    non-construction employer, no employee would be affected by the termination of
    the collective agreements and the Unions bargaining rights.
·

The IESO has indicated that it does not intend to carry on
    construction using its own employees, and so no future employees will be denied
    benefits under the collective agreements.
·

The interests of the Unions members could be negatively affected
    because of the potential loss of future employment opportunities. However, s.
    2(d) protects the process of collective bargaining, not the fruits of
    bargaining or a particular bargaining method.
·

If a non-construction employer declaration were granted, the
    Unions members could still come together and pursue common goals. They will
    continue to be either direct employees of construction contractors or
    subcontractors, or they will be hired from union hiring halls by those
    entities. A declaration in this case would not nullify other collective
    agreements with construction contractors and subcontractors.
·

The Unions can still seek to organize the employees of other
    construction industry contractors.
[70]

The Unions submit that the Divisional Court accorded diminished
    value to its members s. 2(d) rights because they were achieved under a
    successor rights provisions.  However, as I read the Divisional Courts
    reference to successor rights, the point the court was making was that s. 2(d)
Charter
rights are enjoyed by individuals.  Here, the appellants cannot point to any
    individuals who have joined together to have CUSW or the Labourers certified as
    their bargaining agent with respect to the IESO.
[71]

As noted above, the Divisional Court found that it was
    unnecessary to address the IESOs submission that employment is a necessary
    pre-condition for constitutional protection of the collective bargaining
    process.
[72]

I agree that it was unnecessary for the Divisional Court to
    decide whether employment is a necessary pre-condition to engage s. 2(d)
    protection of collective bargaining in all cases.  This courts task is not to
    consider issues in the abstract but to decide whether, on the facts before it,
    the Divisional Court erred in finding that there was no substantial
    interference with the s. 2(d) rights of the Unions members who are not
    employed by the IESO.
[73]

The appellants point to two cases in making the argument that s.
    2(d) protection should extend to the Unions members, none of whom are employed
    by the IESO:
International Longshoremens Assn., Local 273 v. Maritime
    Employers Assn.
,

[1979] 1 S.C.R. 120;
Blouin
    Drywall Contractors v. United Brotherhood of Carpenters and Joiners of America,
    Local 2468
(1975), 8 O.R. (2d) 103 (C.A.).  Relying on these cases, the appellants
    submit that the Divisional Court failed to recognize the protections afforded
    to union members who are not direct-hire employees.
[74]

These cases do not, in my view, assist the appellants
    submission.  Both cases turn on their particular facts.
[75]

In the
Longshoremens
case, the question was whether
    there could be said to be a strike when union members requisitioned by the
    employer from the union hiring hall refused to cross a picket line set up by
    another group of unionized workers.  The union took the position that the union
    members were not employees and thus the refusal to report did not constitute an
    unlawful strike.
[76]

The court held that the union members did not technically become
    employees until they reported for work.  However, the set-up under the hiring
    hall regime agreed to by the parties overcame this so that the failure to
    honour the call to report amounted to a strike.  The court was satisfied that
    references in the collective agreement to employees referred to those workers
    covered by the agreement, commencing from the effective date of the agreement.  In
    determining that the union members were employees for strike purposes, the court
    considered the intentions of the parties in the context of the particular circumstances
    of that case:  that the employer could only employ union members and that the
    union would supply them when requisitioned.
[77]

Blouin Drywall
arose in the construction industry
    context.  Under the collective agreement between the parties, preference in
    hiring was given to union members who were made available through the unions
    hiring hall. The union brought a grievance claiming damages after the company
    hired non-union carpenters when there were union members available.
[78]

The arbitration board awarded the union damages for lost earnings

suffered by the non-employee
    members of the union as a result of the companys breach of the collective
    agreement.  On appeal before this court, the issue was whether the arbitration
    board exceeded its jurisdiction in making the award, since the LRA does not
    extend the binding effect of a collective agreement or award beyond
    employees.
[79]

The court concluded that the arbitration board had not exceeded
    its jurisdiction under the LRA since the relevant provisions did not preclude
    the parties from agreeing to confer rights or benefits on non-employee union members
    and such rights may be the subject of the grievance procedure.
[80]

In my view, it is wrong to read these two cases too broadly.  They
    do not stand for the proposition that all workers who are members of a
    construction union are employees of all employers in that industry,
    notwithstanding that the workers have never been and never will be employed by
    a particular employer. Nor do they support the appellants argument that the
    benefits enjoyed by unionized employees in a hiring hall setting necessarily
    extend to all fellow union members.
[81]

Rather, as I have stated, the cases turn on their particular
    facts and, more specifically, on the terms of the collective agreements in
    question. The agreements obligated the union to supply and the employer to
    obtain employees through a hiring hall.  The court in each case was satisfied
    that the parties intended to bind and benefit the union members in question,
    even though they were not employed by the employer at the relevant time.  The
    courts had to provide remedies in the context of circumstances in which  agreements
    were breached.  The decisions did not create employment relationships where
    none existed.
[82]

Moreover, it is significant that the two decisions are labour
    relations cases, not constitutional cases.  As
Fraser
reminds us, this
    different context is significant.  In
Fraser
,
the court was careful
    to distinguish between what is meant by a process of collective bargaining for
    s. 2(d)
Charter
purposes from what collective bargaining entails in a
    statutory labour relations context.
[83]

The appellants submission that its members should enjoy s. 2(d)
    protection for collective bargaining with the IESO does not, however, strictly
    rely for support on these labour relations decisions.  The appellants submit
    that the Divisional Court erred in restricting its inquiry to, and focusing
    solely on, the impact of s. 127.2 on direct hires, thus adopting a
    non-contextual, technical and unduly narrow approach to the s. 2(d) issue.  In
    their submission, the Divisional Courts decision ignores the reality of the
    construction industry in which workers are dependent for their employment
    opportunities on the industry as a whole rather than on a particular employer.  The
    ability of such workers to freely negotiate hiring hall and subcontracting
    provisions is fundamental to the process of collective bargaining in the
    construction industry.
[84]

In my view, there is no merit to this submission.  It is clear
    from the Divisional Courts reasons that it was mindful of the unique features
    of labour relations in the construction sector and considered the effect a s.
    127.2 declaration would have on the Unions members:  see paras. 78-79.
[85]

The court simply found that the appellants had not demonstrated
    that s. 127.2 makes it impossible to meaningfully exercise the freedom to
    associate due to substantial interference.  As recognized by the Divisional
    Court, the Unions members are able to continue to bargain with their
    construction employers and to seek to organize more construction employers.  They
    are free to organize under the general provisions of the LRA.  The Divisional
    Court recognized that the interests of the Unions members could be negatively
    affected because of the loss of future employment opportunities were a s. 127.2
    declaration to be made. However, s. 2(d) does not extend constitutional protection
    to employment opportunities.
[86]

Rather, the guarantee of freedom of association under s. 2(d)
    provides protection against substantial interference with the freedom to
    associate to achieve collective goals. Section 2(d) is said to protect a right
    to collective bargaining in a derivative sense in that [l]aws or government
    action that make it impossible to achieve collective goals
have the effect
of limiting freedom of association, by making it pointless (emphasis in
    original):  see
Fraser
, at para. 46.  The court in
Fraser

reiterated
    the description of good faith bargaining from
B.C. Health Services
as
    requiring the parties to meet and engage in meaningful dialogue, and, while not
    dictating any particular model or process, requiring an employer to consider
    employee representations in good faith.
[87]

It is difficult to see why a constitutional obligation should be
    placed on the IESO to bargain workplace issues with the Unions on behalf of its
    members, who are not employed by the IESO and who are employed by other
    employers.
[88]

The Board, in the instant case, found that the scope of the
    constitutional right to collective bargaining protects the
process
by
    which the Unions seek to achieve their key goals of achieving employment
    security through the negotiation of contracting and subcontracting protections
    in their collective agreements as well as the process

by which they
    negotiate terms and conditions of employment in the event their members are
    employed.
[89]

Fraser
,
however, makes it clear
    that s. 2(d) does not protect access to a particular statutory process or the
    fruits of bargaining.  I agree with the Divisional Courts observation that the
    effect of the Board's decision is to protect the collective agreements and
    acquired bargaining rights of the Unions and their members
under the
    construction industry provisions
.  In doing so, the Board protected their
    access to their preferred bargaining structure and the particular outcomes of
    bargaining:  para. 80 (emphasis in original).
(3)

Is there substantial interference where
    there is access to the general LRA regime?
[90]

In the appellants submission, the effect of a s. 127.2
    declaration  the nullification of the current collective agreements between
    the Unions and the IESO and the termination of the Unions bargaining rights  constitutes
    a breach of s. 2(d).  The appellants further contend that the fact that any
    future construction workers employed by the IESO are able to seek to organize
    under the general provisions of the LRA does not negate the
Charter
breach.
[91]

In effect, the appellants say that the Divisional Courts
    reasoning is that no constitutional right will be found to exist (and there
    will be no breach) where there is a possibility that an individual can mitigate
    the effect of challenged statutory provisions or government action.  I disagree
    with this submission.
[92]

In
B.C. Health Services
, the Supreme Court did not find
    that every challenged statutory provision breached s. 2(d).  Rather, it took
    issue with those provisions that both nullified significant collective
    provisions and then prohibited future bargaining on specific important issues.
[93]

In this case, the Divisional Court recognized that the Unions
    members have access to the construction labour relations regime when working
    for construction employers and the general LRA regime when working for
    non-construction employers.  The issue is not that the Unions members ought to
    mitigate the effects of a s. 127.2 declaration.  Rather, the point is that s.
    127.2 only restricts access to the construction industry regime, which is not
    protected by the
Charter
.
[94]

The appellants argue that this reasoning is flawed.  If the IESO
    hires construction workers in the future, they will be a different group of
    employees entirely, because the Unions members will have lost access to work
    with the IESO.  In effect, only non-union employees can possibly re-certify.
[95]

I do not accept this submission.  Construction contractors bound
    to the Unions bargaining rights (the actual employers of the Unions members)
    maintain the right to bid on construction services required by the IESO, if
    any.  If the Unions members are hired by the IESO in the future, there is a
    collective bargaining process open to them.
[96]

In conclusion, a s. 127.2 declaration would not make it
    impossible for the Unions members to meaningfully exercise the freedom to
    associate.  There is no breach of s. 2(d) based on the evidentiary record in
    this case.
(4)

Is the Board process
    a substitute for good faith consultation/negotiation?
[97]

The appellants assert that the Divisional Court erred in holding
    that a process of adjudication before the Board is a substitute for good faith
    negotiation.
[98]

It is unnecessary to decide this issue given my conclusion that
    the appellants have failed to demonstrate substantial interference with s. 2(d).
(5)

If there is a
    breach, is it justified under s. 1?
[99]

While I have found that there is no breach of s 2(d), for the
    sake of completeness I will briefly consider whether, if there were a breach, it
    would be justified under s. 1 of the
Charter
.
[100]

The Supreme Court of Canada articulates the s. 1
Oakes
test at para. 138 of
B.C. Health Services
:
A limit on
Charter
rights must be prescribed by law to
    be saved under s. 1.  Once it is determined that the limit is prescribed by
    law, then there are four components to the Oakes test for establishing that the
    limit is reasonably justifiable in a free and democratic society (
Oakes
,
    at pp. 138-40).  First, the objective of the law must be pressing and
    substantial.  Second, there must be a rational connection between the pressing
    and substantial objective and the means chosen by the law to achieve the
    objective.  Third, the impugned law must be minimally impairing.  Finally,
    there must be proportionality between the objective and the measures adopted by
    the law, and more specifically, between the salutary and deleterious effects of
    the law.
[101]

The appellants submit that in this case:  (i) there is no
    evidence of a pressing and substantial objective; (ii) s. 127.2 does not
    minimally impair
Charter
rights; and (iii) there is no proportionality
    between the effects of s. 127.2 and its objectives.
[102]

Section 127.2 was part of a larger package of reforms intended
    to modernize Ontarios construction industry labour relations regime.  According
    to the legislative debates, a primary purpose of the non-construction employer
    provisions was to reverse a line of Board cases.  In its view, the Board had
    unduly expanded the scope of the construction industry regime to include
    employers who did not operate in the construction industry or provide
    construction services but instead utilized construction services for their own
    purposes.  The Legislature determined that the specialized labour relations
    scheme had, because of this Labour Board jurisprudence, become too broadly
    applied and over-inclusive.
[103]

The non-construction amendments were meant to permit employers
    whose primary business was not construction  for example, retail employers,
    municipalities and school boards  to negotiate agreements specific to the
    circumstances of their sector.  A related purpose was to free these employers from
    being bound by province-wide agreements that they had little opportunity to
    influence.
[104]

The Legislative debates reveal that another goal was to
    facilitate economic competition and work opportunities for unionized and
    non-unionized workers by opening up the tendering process.
[105]

I reject the appellants argument that the Divisional Court
    owed deference to the Boards determination that the evidence did not support a
    finding that the purpose of s. 127.2 is pressing and substantial.  Rather, as
    noted by the Divisional Court, deference is owed to the policy choices made by
    a legislature in designing a labour relations regime, where there are difficult
    policy choices to be made between the interests of employers and employees and
    different unions.  In my view, the legislative record supports the Divisional
    Courts conclusion that the objectives of s. 127.2 are pressing and
    substantial.
[106]

The appellants do not dispute that the rational connection test
    is met.
[107]

Moving then to the next prong of the
Oakes
test, the appellants
    contend that the Divisional Court erred in holding that s. 127.2 meets the
    minimal impairment test, as s. 127.2 not only removes non-construction
    employers from the construction industry regime but it also terminates its
    members bargaining and collective agreements.  Recertification under the
    general provisions of the LRA is illusory, say the appellants, since
    certification is not possible without direct hires.
[108]

As noted by the Divisional Court, legislation will meet the
    minimal impairment test, in cases involving complex social issues, if the
    legislature has chosen one of several reasonable alternatives:
R.J.R.-MacDonald
    Inc. v. Canada (Attorney General)
, [1995] 3 S.C.R. 199.
[109]

Under s. 127.2, an employer seeking a declaration that it is a
    non-construction employer must bring an application to the Board and show that
    it does no construction work for compensation from an unrelated person.  I note
    that in a number of cases decided under the current definition of
    non-construction employer, the Board has refused the employers s. 127.2
    application on the basis that it did not satisfy that definition.
[110]

If a declaration is made, the specialized provisions of the
    construction industry regime cease to apply; the collective agreement bargained
    under that regime by a construction trade union on behalf of construction
    workers ceases to apply in so far as that employer is concerned; and the
    bargaining agent no longer has bargaining rights on behalf of the employers
    construction employees.  However, any employees of the non-construction
    employer are entitled to seek access to statutory protection for collective
    bargaining under the general LRA regime.  Union members employed by other
    construction employers maintain their rights under the construction industry
    provisions.  In my view, the minimal impairment test is met.
[111]

Finally, the appellants submit that the Divisional Court erred
    in concluding that the salutary effects of the provision outweigh its deleterious
    effects.  I see no reason to interfere with the Divisional Courts analysis on
    this point, at para. 98:
While the Unions will lose the right to bargain with the IESO
    in the construction industry regime, they maintain their right to compete for
    any work opportunity created by the construction needs of the IESO or other
    consumers. Moreover, in the absence of s. 127.2, it appears that the IESO and
    other consumers of construction services would be bound forever by construction
    industry bargaining rights without any democratic mechanism to remove them.
[112]

In conclusion, if there is a breach of s. 2(d), the
Oakes
test is satisfied.
E.

disposition
[113]

The appeal is dismissed.  The respondents may make submissions
    as to costs in writing within 10 days of the release of these reasons.  The appellants
    have 10 days to respond.  There shall be no costs for or against the
    interveners.
Released: May 8, 2012 (WKW)
W.K. Winkler CJO
I agree S.E. Lang
    J.A.
I agree L.A. Pattillo J.
(ad hoc)
.

[1]
Section 126(1) of the LRA defines trade union for the purposes of ss. 126.1
    to 168 as being a trade union that according to established trade union
    practice pertains to the construction industry.


COURT OF APPEAL FOR ONTARIO

CITATION:
Jacques v. Hipel
Estate
, 2012
    ONCA 371

DATE: 20120531

DOCKET: C54429

Goudge, Simmons and Rouleau JJ.A.

IN THE MATTER OF the Estate of George Garfield Hipel, late of
    the City of Cambridge, in the Regional Municipality of Waterloo, deceased

AND IN THE MATTER OF the Estate of Norman Otto Hipel, late of
    the City of Cambridge in the Regional Municipality of Waterloo, deceased

AND IN THE MATTER OF the Estate of Olive Victoria Hipel, late
    of the City of Kitchener in the Regional Municipality of Waterloo, deceased

AND IN THE MATTER OF the Estate of Mabel Helen Hipel, late of
    the City of Cambridge in the Regional Municipality of Waterloo, deceased

BETWEEN

Norma Irene Jacques

Plaintiff (Appellant)

and

The Canada Trust Company,
    Executor and Trustee of the Estate of Norman Otto Hipel, deceased
, and
    the Estate of George Hipel, deceased

Defendants (Respondent)

Ian Hull and David M. Smith, for the appellant

Ross Earnshaw, for the respondent

Heard: May 30, 2012

On appeal from the judgment of Justice Parayeski of the Superior
    Court of Justice, dated September 7, 2011.

APPEAL BOOK ENDORSEMENT

[1]

The appellant argues that the respondent, by not distributing on the
    death of the life tenant, engaged in fraudulent concealment and that the trial
    judge erred in not so finding.

[2]

We do not agree. Each case must turn on its own facts. The appellant
    quite properly acknowledges that the trial judge correctly found that
    unconscionable conduct by the respondent is essential if she is to succeed. The
    trial judge went on to find that on these facts the appellant had not
    established unconscionable conduct. There was ample evidence to support this
    finding, particularly that in 1978 the appellant knew of her entitlement and
    with reasonable efforts could have discovered what assets were included in the
    estate. Moreover there was no evidence of how or why the non distribution
    occurred or that the respondents conduct went beyond mere negligence.

[3]

There is no basis for the court to interfere with the finding that
    unconscionable conduct by the respondent had not been established and the
    appeal must be dismissed.

[4]

Costs to the respondent fixed at $8000 all inclusive.


COURT OF APPEAL FOR ONTARIO

CITATION:

Kereluik v. Jevco
    Insurance Company, 2012 ONCA 338

DATE: 20120522

DOCKET: C54466

Cronk, Juriansz and Epstein JJ.A.

BETWEEN

Paul Kereluik

Applicant

(Respondent in Appeal)

and

Jevco Insurance Company

Respondent

(Appellant in Appeal)

W. Colin Empke, for the appellant

James E.S. Allin, for the respondent, Paul Kereluik

Jerry F.
    OBrien, for the interveners, Concetta Deabreu, Antonio Deabreu and Adriano
    Deabreu

John A. Nicholson, for the intervener, AXA Insurance
    (Canada)

Heard: May 7, 2012

On appeal from the order of Justice H.A. Rady of the
    Superior Court of Justice, dated July 14, 2011.

Cronk
    J.A.:

[1]

This appeal concerns the narrow issue whether the phrase authorized by
    law in s. 4(1) of O. Reg. 777/93, enacted under the
Insurance Act
,
    R.S.O. 1990, c. I-8 (the Act), extends to a personal undertaking given by an
    insured to a police officer as a condition of release from custody on an
    impaired driving charge.  By operation of s. 234(1) of the Act, s. 4(1) of O.
    Reg. 777/93 constitutes statutory condition number four (Condition Four) to the
    standard form automobile insurance policy in use in Ontario.

I.        Background

[2]

The pertinent background facts are undisputed.

[3]

On February 26, 2003, the respondent, Paul Kereluik, was arrested for
    impaired driving causing bodily harm following a motor vehicle accident.  He
    was released from custody subject to his undertaking, given to a peace officer,
    to abstain from the possession and consumption of any alcoholic beverages (the
    Undertaking).  A breach of the Undertaking constituted a criminal offence.

[4]

On December 12, 2003, the respondent was involved in a second motor
    vehicle accident in which he allegedly injured the intervener, Concetta
    Deabreu.  At the time of the second accident, the respondent was impaired.  He
    was charged with impaired driving and breach of his Undertaking.  He was
    subsequently convicted of both charges, as well as the impaired driving charge
    from the earlier accident.

[5]

On the date of the second accident, the respondent was insured under a
    valid, standard motor vehicle insurance policy (the Policy) issued by the
    appellant, Jevco Insurance Company (Jevco).  He also held a valid Ontario
    drivers licence, issued by the Ministry of Transportation of Ontario.  No
    express conditions attached to his licence.

[6]

Following the second accident, Ms. Deabreu and various family members
    commenced a negligence action against the respondent, claiming damages for
    losses allegedly occasioned by the accident.  For several years, Jevco provided
    the respondent with a defence to the action.

[7]

However, after Jevco learned of the respondents breach of the
    Undertaking, it notified him that it would no longer fund his defence or
    indemnify him in respect of any damages that might be awarded against him in
    the Deabreu action.  Jevco took the position that the respondents breach of
    the Undertaking constituted a breach of Condition Four of the Policy, resulting
    in the forfeiture of his automobile insurance coverage under the Policy.  In
    particular, Jevco maintained that, by reason of his breach of the Undertaking,
    the respondent was not authorized by law to drive at the time of the second
    accident, within the meaning of Condition Four.

[8]

Condition Four of the Policy states:

The insured shall not drive or operate or permit any other
    person to drive or operate the automobile unless the insured or other person is
    authorized by law to drive or operate it.

[9]

The intervener, AXA Insurance (Canada) (AXA), provided underinsured
    automobile insurance coverage to Ms. Deabreu.  When Jevco denied coverage to
    the respondent, AXA applied to the Superior Court of Justice for declarations
    that Jevco was required to defend and to indemnify him under the Policy, up to
    the $1 million limits of the Policy, in connection with the Deabreu action.

II.       Application Judges Decision

[10]

The
    application judge granted the declarations sought.  She concluded that on the
    date of the second accident, the respondent was authorized by law to drive
    within the meaning of Condition Four since: (1) he held a valid Ontario
    drivers licence; (2) he was in compliance with the terms of that licence; (3)
    the licence contained no alcohol-related condition or prohibition; and (4) his
    licence was in good standing.

[11]

Jevco
    appeals.

III.      Discussion

[12]

I
    agree with the application judges interpretive analysis and with her ruling
    that the respondent is entitled to a defence and to indemnification from Jevco
    in respect of the Deabreu negligence action.

[13]

As
    the application judge noted, there is considerable jurisprudential support for
    the proposition that the phrase authorized by law as used in Condition Four
    is concerned with the validity and terms of an insureds licence to drive at
    the time of the relevant motor vehicle accident.  See for example,
Vanderwal
    v. State Farm Mutual Automobile Insurance Co.
(1994), 20 O.R. (3d) 401 (Div.
    Ct.);
Northover v. Regier
, [2001] I.L.R. 1-3889 (Ont. S.C.);
Peet
    v. Ethier
, [1988] I.L.R. 1-2261 (Sask. Q.B.), affd [1988] I.L.R. 8865 (Sask.
    C.A.).  These authorities suggest that the legal authority to drive, at any
    given time, depends on the existence of a valid licence issued by the
    responsible regulatory authority and compliance with the conditions attaching
    to the licence.

[14]

In
    this case, the respondent held a valid drivers licence, issued by the
    appropriate Ontario licensing authority, at the time of the second accident.  His
    licence was unconditional.  In particular, it contained no term regarding the
    possession or consumption of alcohol similar to the prohibition contained in the
    Undertaking.

[15]

In
    my view, nothing in the language or legislative history of Condition Four
    suggests that the phrase authorized by law, as used in Condition Four, is
    intended to apply to breaches of the law not directly connected with violations
    of driving licence conditions.

[16]

Jevco
    points out, correctly, that the regulation of driving behaviour in Ontario,
    including drinking and driving, is governed both by provincial law (the
Highway
    Traffic Act
, R.S.O. 1990, c. H.8) and federal law (the
Criminal Code
).
    It therefore submits that driving conditions imposed under either body of law
    come within the intended scope of the phrase authorized by law in Condition
    Four.

[17]

I
    would not accede to this argument.  If Jevcos urged interpretation of
    Condition Four was to be accepted, the breach of any driving-related
    prohibition or restriction imposed under any law, including the criminal law,
    would result in the forfeiture of automobile insurance coverage because the
    breach would render an insured unauthorized at law to drive or operate a
    vehicle within the meaning of Condition Four.  For example, on Jevcos
    interpretation of Condition Four, if terms of bail applicable to an insured who
    has been charged with impaired driving included the imposition of a curfew, the
    breach of the curfew terms  even a minor or technical breach  could trigger
    the loss of the insureds automobile insurance.  Such a sweeping interpretive
    result should not be countenanced absent a clear expression of such intention
    by the legislature.

[18]

I
    also regard Jevcos proposed construction of Condition Four as inconsistent
    with s. 118 of the Act.  That provision, as applicable to motor vehicle
    insurance policies, provides that unless the relevant insurance contract
    otherwise stipulates, the commission of a criminal offence, by that fact
    alone, does not render unenforceable an indemnity claim under the contract,
    except where the contravention of the law is committed with the intent to bring
    about loss or damage.  There is no suggestion that this exception is engaged on
    the facts of this case.  Further, the Policy contains no specific exclusion
    clause for losses occasioned by criminal acts.

[19]

In
    my view, s. 118 of the Act signals a clear legislative intent to allow for the
    possibility of compensation for innocent tort victims beyond the statutory
    minimum amounts provided for under the Act, notwithstanding that the losses in
    respect of which compensation is sought may have been occasioned by a
    tortfeasors criminal wrongdoing.  I agree with AXAs submission that s. 118 is
    also designed to provide insurance protection for negligent tortfeasors who do
    not intend to cause harm.

[20]

These
    public policy choices by the legislature stand in stark contrast to former
    versions of the Ontario standard automobile insurance policy, which expressly
    prohibited the use of an automobile by an insured while incapable of the proper
    control of the automobile by reason of the influence of intoxicating liquor or
    drugs: see for example, former Statutory Condition 2(1)(a),
Insurance Act
,
    R.S.O. 1970, c. 224, s. 205.

[21]

The
    legislatures policy choices regarding the availability of compensation for
    tort victims injured in motor vehicle accidents require respect from the
    courts.  By enacting s. 118 of the Act, by repealing former statutory conditions
    under the Act that expressly precluded the operation or use of an automobile
    while under the influence of alcohol (
i.e.
, former Statutory Condition
    2(1)(a), above-cited), and by not incorporating a coverage exclusion in the
    current standard form automobile insurance policy pertaining to drunk drivers,
    the legislature must be taken as having elected to protect the potential of
    tort compensation for innocent victims of drinking and driving.  I see nothing
    in Condition Four that suggests that this protection is intended to extend only
    to the minimum amounts of coverage provided for under the Act.

[22]

Jevco
    relies on several cases, including
Gipson v. Pilot Insurance Co.
(2005), 74 O.R. (3d) 133 (S.C.), to argue that the breach of a specific
    driving-related undertaking, particular to a specific insured and given to a law
    enforcement official as a condition of release from custody on a
    driving-related offence, constitutes a condition precedent to the insureds
    lawful authority to drive.

[23]

I
    disagree.  Condition Four is concerned with an insureds legal entitlement to
    drive or operate a motor vehicle.  This entitlement depends on the insureds
    possession of a valid drivers licence and his or her compliance with the terms
    of the licence at the time of the incident giving rise to the challenge to the
    insureds lawful authority to drive or operate the vehicle.  Unlike this case,
    each of the authorities relied on by Jevco, including
Gipson
, involved
    the violation of one or more specific conditions attaching to the insureds
    drivers licence.  The conditions imposed therefore constituted conditions
    precedent to the lawful authority to drive.  That is not this case.

[24]

I
    reach a similar conclusion concerning Jevcos contention that there is a
    parallel between the position of the insured in this case and that of a novice
    driver under Ontarios graduated automobile licensing scheme.  In my view, the
    suggested parallel does not exist.  It is true, as Jevco points out, that
    novice drivers in Ontario are prohibited from consuming alcohol while driving.
    This prohibition, however, forms an express part of the licence conditions
    imposed on novice drivers.  Again, that is not this case.

IV.     Disposition

[25]

For
    the reasons given, I would dismiss the appeal.  I would award costs of the
    appeal, as agreed by counsel: to the respondent, Paul Kereluik, in the total
    amount of $12,000; to the Deabreu interveners in the total amount of $11,000;
    and to AXA in the total amount of $5,000, each inclusive of disbursements and
    all applicable taxes.

Released:

MAY 22 2012                                   E.A.
    Cronk J.A.

EAC                                                I
    agree Russell Juriansz J.A.

I
    agree G.J.  Epstein J.A.