COURT OF APPEAL FOR ONTARIO

CITATION: MacDonald v. Chicago Title Insurance Company of
    Canada, 2015 ONCA 842

DATE: 20151203

DOCKET: C59947

Cronk, Hourigan and Benotto JJ.A.

BETWEEN

Paul MacDonald and Stefanie MacDonald

Plaintiffs (Appellants)

and

Chicago Title Insurance Company of Canada

Defendant (Respondent)

Gavin Tighe and Alexander Melfi, for the appellants

Robert W. Dowhan and Catharine J. Grinyer, for the
    respondent

R. Leigh Youd, for the
    intervener Lawyers Professional Indemnity Company (LAWPRO)

Heard: September 22, 2015

On appeal from the judgment of Justice John A.B. MacDonald
    of the Superior Court of Justice, dated December 29, 2014, with reasons
    reported at 2014 ONSC 7457, 123 O.R. (3d) 789.

Hourigan J.A.:

A.

Overview

[1]

The appellants brought a motion for summary judgment seeking a
    declaration that the title insurance policy (the Title Policy) they purchased
    from the respondent, Chicago Title Insurance Company of Canada (Chicago Title),
    provided coverage and indemnification for a dangerous structural condition
    affecting their home. That condition was caused by unpermitted construction
    done by a previous owner. The motion judge dismissed the appellants motion
    and, notwithstanding that Chicago Title did not bring a cross-motion, granted
    summary judgment in Chicago Titles favour, dismissing the appellants action.

[2]

The appellants submit that the motion judge fundamentally misconceived
    the purpose and function of title insurance, made a significant evidentiary
    error, and misinterpreted the terms of the Title Policy.

[3]

For the reasons that follow, I would allow the appeal, set aside the
    order below, and grant the appellants motion for summary judgment on the issues
    of coverage and indemnification under the Title Policy.

B.

Background Facts

[4]

The appellants purchased a multi-story family home in Toronto in 2006
    (the Property). As part of the purchase, they also acquired the Title Policy,
    which provides under the heading Covered Title Risks:

This

Policy

insures

against

actual

loss

resulting

from

the

following covered

risks,

if

they

affect

your

Title

on

the

Policy

Date,
or
to

the

extent
    expressly

stated

below,

if

they

affect

your

title
[
sic
]
after

the

Policy

Date.

[5]

The term Title is defined under s. 1(f) of the Definitions section of
    the Title Policy as ...the ownership of your interest in the Land, as shown in
    Schedule A.

[6]

In 2013, the appellants discovered that load-bearing walls at the
    Property had been removed during renovation work undertaken by a previous owner
    without a building permit, rendering the second floor unsafe. The City of
    Toronto issued an Order to Remedy an Unsafe Building (the City Order),
    requiring that work be done to temporarily support the floor. The appellants
    undertook the required temporary work and made a claim under the Title Policy
    for the costs of those repairs and the permanent repairs needed to make their
    home structurally sound.

[7]

Chicago Title denied the claim based on a lack of coverage under the
    Title Policy. The appellants brought an action seeking, among other things, declarations
    of coverage and indemnification. During the course of that proceeding, Chicago
    Title amended its defence to also deny coverage on the basis that the
    appellants claim was excluded under the terms of the Title Policy.

C.

Decision of the Motion Judge

[8]

In support of their claims for coverage and indemnification, the
    appellants relied on the following Covered Title Risks in the Title Policy:

11.

Your

Title

is

unmarketable,

which

allows

another

person

to

refuse

to perform

a

contract

to

purchase,

to

lease,

or

to

make

a

mortgage

loan.

13.

You

are

forced

to

remove

or

remedy

your

existing

structure,

or

any part

of

it,

other

than

a

boundary

wall

or

fence,

or

you

cannot

use

it

for

a one

to

six

family

residential

property

or

condominium

unit

because:

(e) of

any

outstanding

notice

of

violation

or

deficiency

notice.

15.     Work

orders,

unless

you

agreed

to

be

responsible

for them.

16. You

are

forced

to

remove

your

existing

structure

-

other

than

a boundary

wall

or

fence

-

because

any

portion

of

it

was

built

without obtaining

a

building

permit

from

the

proper

government

office

or

agency.

23.

Other

defects,

liens,

hypothecs,

rights

of

priority

or

encumbrances.

[9]

The appellants also relied upon certain admissions that they submit were
    made by David Mineo, the Vice President of Claims of Chicago Title, during his
    cross-examination on two affidavits filed by Chicago Title in response to the
    motion for summary judgment.

[10]

The
    motion judge ruled that the Title Policy was unambiguous and that the Covered

Title Risks did

not

apply in the
    circumstances of the case. In so ruling, the motion judge concluded that the
    appellants

title

was

unaffected
    by the unpermitted construction because

it

remained

marketable,

even

though

it

was

marketable

for

an

amount
that was
less

than what

the
    appellants had

paid

for

the
    Property. He also held that in

order

for

coverage

to

apply,

any

demand

or

work

order

by

a

municipal

authority

to rectify

a

structural

problem

had

to be

registered

on

title.
The motion judge further held that the
    appellants had suffered no loss, as that term is defined in the Title Policy.
Finally,
    the motion judge ruled that the appellants

were

unable

to

rely

on
    any admissions

made

by

Mr.
    Mineo on

his

cross-examination, as those admissions did not bind Chicago
    Title.

[11]

The
    motion judge dismissed the appellants motion and granted summary judgment
    against them, dismissing their action, including their claim that Chicago Title
    acted in bad faith.

[12]

The
    appellants appeal the dismissal of their motion for summary judgment and the
    dismissal of their claims for coverage and indemnification. They do not appeal
    the motion judges dismissal of their bad faith claim.

D.

Issues

[13]

The
    appeal raises the following issues:

(i)

What standard of review applies to the
    interpretation of this standard form insurance contract?

(ii)

Did the motion judge err in finding that any
    admissions made by the representative of Chicago Title did not bind the
    corporation?

(iii)

Did the motion judge err in his
    interpretation of the Title Policy?

(iv)

What is the correct interpretation of the
    Title Policy?

E.

Analysis

(i)

Standard of Review

[14]

Chicago
    Title relies upon
Sattva Capital Corp. v. Creston Moly Corp.
, 2014 SCC
    53, [2014] 2 S.C.R. 633, in support of its submission that the standard of
    review on this appeal is palpable and overriding error, absent an extricable
    error of law.
Sattva
is the latest in a series of decisions from the
    Supreme Court of Canada providing guidance to provincial appellate courts on
    the appropriate standards of appellate review.

[15]

I
    pause here to note that we are not concerned, on this appeal, with the standard
    of review that applies to the motion judges determination that there was no
    genuine issue requiring a trial and that he was therefore required to grant
    summary judgment under r. 20.04. The motion judge found, at para. 7 of his
    reasons, that there were no factual disputes and that he was in a position to
    decide the issues in the case on the record before him. That discretionary decision
    is entitled to a high degree of deference:
Hryniak v. Mauldin
, 2014
    SCC 7, [2014] 1 S.C.R. 87, at para. 83.

[16]

Having
    determined that there was no genuine issue requiring a trial, the motion judge then
    interpreted the Title Policy. The issue raised squarely on this appeal is the
    standard of review that applies, following
Sattva
, to the motion
    judges interpretation of this contract.

[17]

The
    seminal case on the issue is
Housen v. Nikolaisen
, 2002 SCC 33, [2002]
    2 S.C.R. 235, which established the standard of appellate review as palpable
    and overriding error for findings of fact and inferences from facts. For
    questions of law, including extricable questions of law, the standard of
    review is correctness. Matters of mixed fact and law lie along a spectrum. Where
    the error of the first-instance decision-maker can be traced to a clear error
    in principle, for example, it may be characterized as an error of law and subjected
    to a standard of correctness. Where the legal principle is not readily
    extricable, then the matter is subject to the more stringent standard of
    palpable and overriding error.

[18]

In
Sattva
, Rothstein J., writing for a unanimous seven-member panel,
    recognized that the traditional view in England and Canada has been that the
    standard of review on an appeal from a lower court decision involving the
    interpretation of a contract is correctness. According to Rothstein J., this
    traditional view is rooted in historical concerns regarding the accuracy of
    English jury verdicts in contract cases at a time of widespread illiteracy.

[19]

Justice
    Rothstein, while noting that some Canadian courts still favoured the traditional
    approach despite the fact that the historical rationale for it no longer exists,
    determined that the historical approach should be abandoned for two primary
    reasons.

[20]

First,
    the general approach in the Canadian case law to contractual interpretation has
    changed over time. The restrictive rules of contractual interpretation have
    been loosened and Canadian courts now recognize that the meaning of contractual
    terms is often derived from contextual factors, including the purpose of the
    agreement, the commercial background of the agreement, and the nature of the
    relationship created by the agreement. This modern approach directs courts to
    apply principles of contractual interpretation to the words of the contract,
    considered in light of the factual matrix or surrounding circumstances. Justice
    Rothstein noted that determining the facts surrounding a contract is a critical
    part of the analysis and that the exercise of applying the principles of
    contractual interpretation to these facts and the words of the agreement is
    closer to a question of mixed fact and law than a question of law, as those
    terms are defined in
Canada (Director of Investigation and Research) v.
    Southam Inc.
, [1997] 1 S.C.R. 748,

at para. 35, and
Housen
,
    at paras. 26 and 36.

[21]

Second,
    the purpose of the distinction drawn in the jurisprudence between questions of
    mixed fact and law and questions of law supports, as a matter of judicial economy,
    a limit on the ability of an appellate court to interfere with the
    fact-finders interpretation of a contract, given that in most cases the interpretation
    will have no impact beyond the interests of the parties to the particular
    dispute. To hold otherwise would only serve to stir up unnecessary litigation by
    permitting the parties to re-litigate their dispute on appeal.

[22]

Notwithstanding
    the foregoing, Rothstein J. recognized that it might be possible to identify an
    extricable question of law from within what was initially characterized as a
    question of mixed fact and law. He cited, by way of example, 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. He also noted that there
    were other issues in contract law that engage substantive rules of law,
    including the requirements for the formation of the contract, the capacity of
    the parties, and the requirement that certain contracts be evidenced in
    writing.

[23]

However,
    immediately after recognizing the existence of these potential extricable
    questions of law, Rothstein J. warned that courts should be cautious in
    identifying them in disputes over contractual interpretation. He stated, at
    para. 55, that the circumstances in which a question of law can be
    extricated from the interpretation process will be rare.

[24]

Sattva
has been the subject of a great deal of commentary by academics and provincial
    appellate courts across Canada. Much of this analysis has been focused on
    determining the intended scope of
Sattva

with regard to the
    standard of review in contract cases.

[25]

Appellate
    judges and commentators have pointed to the unique factual circumstances of
Sattva
as a basis for limiting its application. The appeal concerned an arbitral
    decision rendered in the context of a proceeding conducted pursuant to a
    statute that limited appeals to questions of law alone. In
Vallieres v.
    Vozniak
, 2014 ABCA 290, 580 A.R. 326, at para. 12, the Alberta Court of
    Appeal noted that:

Sattva

was decided under the British Columbia

Arbitration
    Act
,

RSBC 1996, c. 55, which limits appeals
    to questions of law. The reasons in

Sattva

must be read having regard to the context in which it
    was decided. Appeals from the Court of Queens Bench of Alberta to the Alberta
    Court of Appeal can be brought on any basis. While all appeals must be decided
    within the context of the appropriate standard of review, appeals are available
    on questions of law, mixed questions of fact and law, and questions of fact.
Some
    of the restrictive language in

Sattva

does not apply to ordinary appeals in Alberta.
[Emphasis added.]

Similar warnings about the unique factual
    circumstances of
Sattva
have been repeated in both Alberta and British
    Columbia: see
Ledcor Construction Limited v. Northbridge Indemnity
    Insurance Co.
, 2015 ABCA 121, 386 D.L.R. (4th) 482, leave to appeal
    granted, 2015 CarswellAlta 1769, 2015 CarswellAlta 1770, at para. 12;
Robb
    v. Walker
, 2015 BCCA 117 (CanLII), at para. 48, Chaisson J.A., dissenting.

[26]

Similarly,
    one commentator has stated that it is,

[A]rguable, on a strict reading of
Sattva
, that the
    decision should be read as limited to the proper interpretation of the
British
    Columbia Arbitration Act
in a case in which the appeal did involve mixed
    questions of law and fact, and that subsequent general comments on the standard
    of review applicable to arbitral and trial decisions on contractual
    interpretation were
obiter
.

Earl A. Cherniak,
Sattva
Revisited (2015)
    34:2 Adv. J. 6, at p. 7.

[27]

While
    the comments of Rothstein J. may technically be
obiter
,

as he was
    not dealing with an appeal from the interpretation of a contract by a judge, it
    would be an error to ignore the direction of the court. It is clear that, in
    the context of a unique fact scenario, Rothstein J. was endeavouring to provide
    guidance on how contractual interpretation fits into the broader standard of
    review jurisprudence, including
Southam
and
Housen
. As a
    matter of deference and respect, that guidance must be heeded.

[28]

That
    said, the limitations of the applicability of the case, given its unique
    circumstances, must also be recognized. The facts of
Sattva
did not
    afford Rothstein J. an opportunity to consider the issue of the standard of
    review as it pertains to all contracts in all circumstances.

[29]

The
    issue is whether the reasoning in
Sattva
is applicable to the Title
    Policy. In my view, considering the rationales animating the decision in
Sattva
in the context of the contract at issue in the present case, the standard of
    review to be applied to the motion judges interpretation of the Title Policy
    is not palpable and overriding error but correctness. Below, I consider the two
    justifications relied upon by Rothstein J., together with the role of a
    provincial appellate court, to explain why the interpretation of the standard
    form contract in this case remains a question of law.

[30]

First,
    Rothstein J. emphasized that determining the objective intentions of the
    parties to a contract, the goal of contractual interpretation, is a
    fact-specific goal, informed, in part, by a consideration of the surrounding
    circumstances known to the parties at the time of formation of the contract:
Sattva
,
    at paras. 47, 49.

[31]

There
    is no question that
Sattva
reflects the increasing emphasis placed by
    appellate courts and commentators over the last several years on the factual
    matrix, or the surrounding circumstances of a contract, as part of the
    interpretive process: see e.g.
Investors Compensation Scheme Ltd. v. West
    Bromwich Building Society
, [1998] 1 All E.R. 98 (H.L.), at p. 114;
Eli
    Lilly & Co. v. Novopharm Ltd.
, [1998] 2 S.C.R. 129, at para. 54;
Bell
    Canada v. The Plan Group
, 2009 ONCA 548, 96 O.R. (3d) 81, at para. 37;
    Geoff R. Hall,
Canadian Contractual Interpretation Law
, 2d ed.
    (Markham, ON: LexisNexis, 2012), at p. 22.

[32]

However,
    the relative importance of the surrounding circumstances is largely dependent
    on the nature of the contract. The circumstances surrounding the formation of a
    contract negotiated by arms-length parties may be very important in
    understanding the parties objective intent. Similarly, the determination
    whether the parties are in a special relationship, such as a fiduciary
    relationship, may also be an important factor in determining the parties
    objectively intended obligations under a contract.

[33]

The
    importance of the factual matrix is far less significant, if at all, in the
    context of a standard form contract or contract of adhesion where the parties
    do not negotiate terms and the contract is put to the receiving party as a take-it-or-leave-it
    proposition. Any search for the intention of the parties in the surrounding
    circumstances of these contracts is merely a legal fiction:
Ledcor
,
    at para. 14.

[34]

The
    Title Policy was a pre-printed contract produced by Chicago Title and provided to
    the appellants on a take-it-or-leave-it basis. Chicago Title did not sit across
    from the appellants and hammer out the details of their bargain. The terms of
    the Title Policy were simply not negotiated in any meaningful sense and it
    would be illusory to suggest that anything could be inferred about the meaning
    of the contract from the facts surrounding its formation.

[35]

Thus,
    one of the fundamental bases underlying the treatment of contractual
    interpretation as a question of mixed fact and law in
Sattva
, being
    the importance of interpreting a contract in light of the factual matrix, is
    wholly inapplicable to the Title Policy.

[36]

The
    second significant justification for treating contractual interpretation as a
    question of mixed fact and law relied upon by Rothstein J. in
Sattva
was
    that the interpretation of a contract usually has no impact beyond the interest
    of the parties:

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 courts of
    appeal in ensuring the consistency of the law, rather than in providing a new
    forum for parties to continue their private litigation. For this reason,
Southam
    Inc.

identified the degree of generality (or precedential value)
    as the key difference between a question of law and a question of mixed fact
    and law. The more narrow the rule, the less useful will be the intervention of
    the court of appeal.

Similarly, this Court in
Housen

found that
    deference to fact-finders promoted the goals of limiting the number, length,
    and cost of appeals, and of promoting the autonomy and integrity of trial
    proceedings.. These principles also weigh in favour of deference to first
    instance decision-makers on points of contractual interpretation. The legal
    obligations arising from a contract are, in most cases, limited to the interest
    of the particular parties. Given that our legal system leaves broad scope to
    tribunals of first instance to resolve issues of limited application, this
    supports treating contractual interpretation as a question of mixed fact and
    law. (
Sattva
, at paras. 51-52.) [Citations omitted.]

[37]

The
    distinguishing factor between questions of law and mixed fact and law on appeal
    is the precedential value of the appellate courts intervention. It is inarguable
    that the interpretation of many contracts would likely have very limited
    precedential value. However, standard form contracts are often highly
    specialized contracts that are sold widely to customers without negotiation of
    terms. The interpretation of the Title Policy applies equally to the appellants
    and to all of Chicago Titles other customers who purchased the same policy,
    and therefore is of general importance and has precedential value in a way that
    the interpretation of other contracts may not.

[38]

In
    addition to the incompatibility of the reasoning in
Sattva
with the contract
    at issue in the current case, there is an important public policy argument that
    supports the adoption of a correctness standard for appeals involving the
    interpretation of standard form contracts such as the Title Policy. As Rothstein
    J. recognized in
Sattva
, at para. 51, provincial appellate courts play
    an important role in ensuring consistency in the law. They must be vigorous in
    fulfilling that mandate and must always be mindful of the line between
    deference to the trial court and the abdication of their statutorily-imposed
    duties.

[39]

Correction
    of legal errors lies at the heart of the responsibilities and the capabilities
    of provincial appellate courts. The standard of review analysis must respect
    the roles of both the trial and appellate courts in order for the civil justice
    system to function effectively. As Slatter J.A. wrote in
Northwest
    Territories (Attorney General) v. Association des parents ayants droit de
    Yellowknife
, 2015 NWTCA 2 (CanLII), at paras. 22-23:

In short, the standard of review analysis should not be seen as
    a competition between recognizing the legitimate role of trial courts, and
    recognizing the legitimate role of appeal courts. The two levels of court are
    equally important components of one system. It is equally important to
    recognize that appeal courts need deference in their role as much as first
    instance courts need deference in theirs. Tipping the balance too far either
    way effectively compresses the system into a single rank of court. Doing so
    undermines both the capacity of the system to give individual justice and also
    the capacity of the system to ensure equal justice under law to everyone.

The law is ultimately an honour system in the sense that its
    authority depends on the integrity and credibility of the justice system, and
    self-discipline by each level of court in staying within its mandate. A system
    that effectively transfers the fact finding role of the first instance court to
    an appeal court could essentially reduce the first instance court to an
    expensive decoration. A system that effectively puts findings of fact or mixed
    fact and law by the first instance court beyond review has the similar
    potential for analogous damage to the ability of the appeal court to play its
    role. Appeal courts are expected to operate at a higher level of legal
    generality and, crucially, are to review outcomes for legality and
    reasonableness. If the appeal court is ineluctably confined to a structure of
    findings by the first instance court, there would be little or no real review
    for legality at the level of generality of appeal courts. The confidence of
    the enlightened public in a justice system with only one real level of judicial
    authority within and for each province or territory would soon wither.

[40]

It
    is untenable for standard form insurance policy wording to be given one meaning
    by one trial judge and another by a different trial judge: see
Ledcor
,
at para. 18. Unpredictable outcomes in
    litigation only serve to encourage litigation because the more a given result
    depends on the particular trial judge, the greater the chance that litigants
    will risk going to trial. Appellate courts have a valuable role to play in
    ensuring consistency in the law and greater predictability in litigation
    outcomes: see
Northwest Territories
, at para. 28.

[41]

In
    summary, the standard of review that applies to a standard form insurance
    contract like the Title Policy is correctness. The rationales in
Sattva
that support adopting a deferential standard of review do not apply to contracts
    of this type, as the factual matrix does not meaningfully assist in interpreting
    them and their construction has broad application. For these reasons, adopting
    the correctness standard of review for these contracts best ensures that
    provincial appellate courts are able to fulfill their responsibility of
    ensuring consistency in the law.

(ii)

Admissions

[42]

As
    referenced above, in support of their motion for summary judgment the
    appellants relied upon certain admissions they said were made by Mr. Mineo on
    his cross-examination. According to the appellants, those admissions are an
    important part of their case and include the following concessions: that
    Chicago Title has no evidence that the appellants would have been able to get a
    retroactive building permit; that a potential purchaser of the Property would
    be able to refuse to close a purchase on the basis of the City Order; and, had
    the City Order made clear on its face that it was being issued due to the fact
    that the construction was unpermitted, there may have been coverage.

[43]

The
    motion judge held, at para. 39 of his reasons, that the appellants could not
    rely on Mr. Mineos admissions:

I conclude this part of my Reasons by addressing the applicants
    assertion that Mr. Mineo conceded coverage in his cross examination. I conclude
    that he did not do that. In his affidavits, Mr. Mineo deposes that he is the
    respondents Vice President of Claims. However, he states that the contents of
    his affidavits are based upon his personal information and belief. He was cross
    examined on that basis and I see nothing in either his affidavits or cross
    examination which indicates that his personal information and belief bind the
    respondent. In essence, the applicants submission is that Mr. Mineos personal
    information and belief vary the contractual terms. The purpose of this plain
    language policy is to speak for itself about the insurance coverage it
    provides.

[44]

To the extent that this paragraph can be understood to
    mean that Mr. Mineos personal
information and belief was not
    binding on the motion judge to vary clear contractual terms, it is correct. The
    motion judge was not obliged to accept Mr. Mineos understanding of the
    contract, and indeed, to the extent that Mr. Mineos evidence described strictly
    his (and by extension, Chicago Titles) subjective view of what the terms of
    the Title Policy meant, or Chicago Titles subjective intention in drafting the
    Title Policy, it was inadmissible for the purposes of contractual
    interpretation: see Hall, at p. 30.

[45]

What
    the appellants take issue with is the finding of the motion judge that Mr.
    Mineos answers on cross-examination do not bind Chicago Title. They submit
    that the answers given by Mr. Mineo bind the corporation in the same way that they
    would bind Chicago Title if he were a witness produced on an examination for
    discovery.

[46]

Counsel
    for Chicago Title does not argue that the motion judges ruling is correct. He
    concedes that the evidence of Mr. Mineo binds his client and that the motion
    judge erred. However, he argues that the appellants are misinterpreting that
    evidence and that Mr. Mineo made no admissions on his cross-examination.

[47]

Despite
    this concession and the fact that, in my view, the evidence in issue is not
    necessary to undertake the appropriate contractual analysis, I believe that it
    is necessary to address the motion judges error. Summary judgment motions are
    taking on greater prominence in our civil justice system. It is important that
    there be no confusion on issues as fundamental as whether an affiants answers on
    cross-examination bind a corporate party.

[48]

It
    has long been the law of Ontario that, where a corporation is a party to an
    action, an officer of the corporation examined for discovery under the
Rules
    of Civil Procedure
, R.R.O. 1990, Reg. 194, literally speaks for the
    corporation and what he says by way of admission on behalf of the corporation
    may be used against the corporation:
Royal Bank of Canada v. Paul Pogue
    Companies Ltd
.
(1972), 11 O.R. (2d) 171 (C.A.).

[49]

Should
    the situation be different where, as here, the officer was cross-examined under
    r. 39.02 on affidavits tendered in support of Chicago Titles position on a
    motion for summary judgment? In my view, it should not.

[50]

Sub-rule
    20.02(2) states that, in response to a summary judgment motion, a responding
    party may not rest solely on the allegations or denials in the partys
    pleadings, but must set out, in affidavit material or other evidence, specific
    facts showing that there is a genuine issue requiring a trial. As Perell and
    Morden note, [a] deponent may be cross-examined on the evidence contained in
    his or her affidavit and on any fact in his or her knowledge that is relevant
    to the determination of the motion: Paul M. Perell & John W. Morden,
The
    Law of Civil Procedure in Ontario
, 2d ed. (Markham, ON: LexisNexis, 2014),
    at para. 8.45.

[51]

In
    the present case, the affidavits filed by Chicago Title included Mr. Mineos
    views on the scope of the Title Policy and the meaning of various clauses
    therein. It would be inequitable for a corporate party to be permitted to rely
    on the evidence of one of its corporate officers in support of its position that
    there is a genuine issue requiring a trial while at the same time being
    sheltered from admissions made by that same corporate officer under cross-examination
    that could tend to undermine that position.

[52]

This
    view is supported by the Supreme Courts decision in
Hryniak
where
    Karakatsanis J. held, at para. 5, that, summary judgment rules must be
    interpreted broadly, favouring proportionality and fair access to the
    affordable, timely and just adjudication of claims. None of these goals is
    served if the party cross-examining a corporate officer produced by a corporation
    cannot rely on evidence obtained on that cross-examination in support of its
    position on the motion.

[53]

In
    conclusion, I am of the view that where a corporate officer is cross-examined
    on an affidavit filed in support of the corporations position on a motion for
    summary judgment, that officer speaks for the corporation and his or her
    admissions on cross-examination may be used against the corporation in the same
    way that admissions on an examination for discovery could be. It was an error in
    law for the motion judge to conclude otherwise.

(iii)

The Motion Judges Interpretation of the Title Policy

[54]

The
    motion judge

stated twice

in his reasons that the City Order did
    not affect the appellants ownership of the Property because it had not been
    registered on title. At para. 34, the motion judge commented:

There

is

no

evidence

capable

of

supporting an

assertion
that

the
applicants

ownership

of

the

lands

and

premises

(the

definition

of

title)
    was

affected

by

the

order,

or

by

the

compulsion

thereby

created.

There

is
    no

evidence

that

the

order

was

registered

against

the

applicants

title.

They complied

with

it,

which

probably

is

why

the

city

did

not

register

it

against title.

[55]

At

para.

40,

the motion judge

further

stated:

The

applicants

rely

in

particular

on

Mr.

Mineos

statement

in

cross
    examination

that

an

order

for

temporary

remediation

could

be

a

title
    defect. It

can

be, if

registered

on

title.

[56]

This
    conclusion, that in order for a municipal work order to affect an owners
    interest in their property under the terms of the Title Policy, it must be
    registered on title, was reached by the motion judge entirely of his own
    volition. It was not supported by any evidence regarding the registration of
    municipal work orders in the appropriate land registration systems.

[57]

On
    appeal, both parties agree that the motion judge erred in reaching this
    conclusion. LAWPRO intervened in the appeal to ensure that the motion judges error
    does not cause confusion in the profession regarding the purpose and scope of
    title insurance.

[58]

I
    agree with the parties and the intervener that the motion judges understanding
    that municipal work orders are routinely registered against title is incorrect.
    Municipal

work

orders

are not

registered

in

either

the

Registry

or

Land

Titles

systems in Ontario. They are a defect that can only be discovered by
    what are commonly known as off-title

searches.
    These searches are described by Marguerite E. Moore and Janet M. Globe in
Title
    Searching and Conveyancing in Ontario
,

6th

ed. (Markham, ON: LexisNexis,

2010), at p.

500, as follows:

There

is

a

multitude

of

potential

off-title,

land-related inquiries
which
    may be completed on behalf of a purchaser
,

lender,

or

any

other interested

person.

A
law clerk/
conveyancer

will

check

for

liens,

work orders
,
restrictions

on

use,

compliance or non-compliance

with
federal
,
provincial,
and

municipal

(by-laws)

regulations,

and

information

on

land

and government

regulation

and

programs

in

general. [Emphasis added.]

[59]

In
    an affidavit filed on appeal, LAWPRO describes a 2005 agreement among the Law
    Society of Upper Canada and major title insurers, including Chicago Title. The
    agreement provides that the title insurers release, indemnify, and save
    harmless Ontario lawyers for any claims arising under a title insurance policy
.
Pursuant to the agreement, LAWPRO was able to pass on the costs of
    defending claims and indemnifying against potential settlements or judgments in
    title-insured transactions to the title insurers in exchange for LAWPRO
    agreeing to waive the real estate transaction levy surcharge that would
    otherwise be payable in any transaction not covered by title insurance.

[60]

According
    to its affidavit, LAWPRO understood that title meant more than just those
    claims/impediments/documents that are registered against title, and also included
    defects that would only be discoverable through off-title searches. LAWPRO
    submits that unless the decision of the motion judge is overturned, the agreement
    with the title insurance companies would not cover any claims that arise off-title.
    Consequently, those claims will be the responsibility of LAWPRO,
    notwithstanding that it has already agreed to waive the surcharge.

[61]

I
    accept the position advanced by the parties and the intervener that the motion
    judge erred in his conclusion that title insurance only responds to defects
    registered against title. That conclusion, if accepted, would undermine one of
    the fundamental purposes of title insurance, being coverage of off-title defects.
    The restrictive scope of title insurance contemplated by the motion judge would
    cause chaos in the real estate bar as, no doubt, purchasers of title insurance
    throughout the province had instructed their solicitors not to conduct
    off-title searches on the understanding that such defects were covered by their
    title insurance.

[62]

While
    Chicago Title has conceded that the motion judge erred in his conclusion
    regarding the requirement that work orders be registered, it maintains that the
    motion judges finding that there is no coverage is correct and that his
    reasoning is sound.

[63]

I
    disagree. On a review of the motion judges reasons, it is apparent that his misapprehension
    of the scope of title insurance permeated his analysis of the Title Policy. For
    example, the motion judge explicitly rejected the applicability of Covered
    Title Risks 13 and 15 on the basis that nothing was registered on title. More
    broadly, when considering his reasons as a whole, the motion judges approach was
    plainly that title insurance offers very limited coverage and that the claim
    asserted by the appellants clearly falls outside of his understanding of the
    purpose of title insurance and the risks it is designed to cover. This caused
    the motion judge to adopt an unduly restrictive interpretation of the coverage
    provisions in the Title Policy.

[64]

In
    my view, the decision of the motion judge is not correct. Leaving aside the impact
    of the evidentiary error regarding Mr. Mineos admissions, it contains numerous
    legal errors. Fundamentally, as described below, the motion judge failed to
    properly apply the governing principles of interpretation for contracts of
    insurance. Further, as I will also explain, he interpreted clause 11 of the
    Title Policy in a manner that is inconsistent with the actual wording of the
    clause. These errors are distinct from, and compound, his factual error regarding
    the registration of municipal work orders.

[65]

In
    light of these errors, it is clear that the motion judges interpretation of
    the Title Policy cannot stand. Below, I consider the general rules of
    construction of insurance contracts and provide my analysis of the correct interpretive
    approach to, and interpretation of, the Title Policy.

(iv)

Interpretation of the
    Title Policy

[66]

The
    following principles of interpretation for insurance contracts cited by the
    appellants in their factum are well settled in Canadian law and are not
    disputed by Chicago Title:

·

The

court

must

search

for

an

interpretation

from

the

whole

of

the contract

and

any relevant

surrounding

circumstances

that
    promotes the true intent and

reasonable

expectations

of

the

parties

at

the

time

of

entry

into

the
    contract;

·

Where

words

are

capable

of

two

or

more

meanings,

the

meaning

that

is
    more

reasonable

in

promoting

the

intention

of

the

parties

will

be

selected;

·

Ambiguities

will

be

construed

against

the

insurer

having

regard

to

the reasonable

expectations

of

the

parties;

·

An

interpretation

that will result in either

a

windfall

to

the

insurer

or an

unanticipated

recovery

to

the

insured

is to

be

avoided;

·

Coverage

provisions

are

to

be construed broadly, while exclusion clauses

are

to

be

construed

narrowly;

·

The

contract

of

insurance

should

be

interpreted

to

promote

a

reasonable
    commercial

result;

and

·

A

clause should

not

be

given

effect
    if to
do

so
would
nullify

the
coverage

provided

by

the

policy.

See e.g.
Amos v. Insurance Corp. of British
    Columbia
, [1995] 3 S.C.R. 405, at para. 19;
Non-Marine Underwriters,
    Lloyds London v. Scalera
, 2000 SCC 24, [2000] 1 S.C.R. 551, at paras.
    67-71;
Derksen v. 539938 Ontario Ltd
., 2001 SCC 72, [2001] 3 S.C.R.
    398, at para. 49;
Zurich Insurance Co. v. 686234 Ontario Ltd
. (2002), 62
    O.R. (3d) 447 (C.A.), leave to appeal refused, 189 O.A.C. 197 (note), at paras.
    23-28;
Tannahill v. Lanark Mutual Insurance Co
., 2010 ONSC 3623, 86
    C.C.L.I. (4th) 69, at para. 26; and,
Sams Auto Wrecking Co. v. Lombard
    General Insurance Co. of Canada
, 2013 ONCA 186, 114 O.R. (3d) 730, at
    para. 37.

[67]

Responsible
    consumers purchase insurance policies for indemnification. Canadian courts have
    developed these fundamental principles of interpretation as a means of ensuring
    that these consumers are treated fairly and that their reasonable expectations
    are protected. The principles are to be applied rigorously in the
    interpretation of insurance contracts. It is not sufficient, as the motion
    judge did in this case, to cite the principles and then move on to an
    interpretation of a contract of insurance that is free from any analysis of how
    the principles apply to the contract in issue.

[68]

As
    mentioned above, the appellants rely upon several Covered Title Risks under the
    Title Policy. For the purpose of this appeal, it is sufficient to focus on
    clause 11, which provides for coverage in circumstances where Your

Title

is

unmarketable,

which

allows

another

person

to

refuse

to perform

a

contract

to

purchase,

to

lease,

or

to

make

a

mortgage

loan.

[69]

Contrary
    to Chicago Titles submission before this court, in order to understand the
    meaning of the term unmarketable in clause 11, it is unnecessary to look
    beyond the wording of the clause. This is a standard form contract and Chicago
    Title defined within the clause those circumstances that would constitute an
    unmarketable title. Chicago Title is fixed with the language it chose to
    include in its contract. That language must be interpreted broadly as this is a
    coverage provision.

[70]

The
    motion judge found that the Title Policy provided coverage for the specific risks
    as described therein, but only if they affect the appellants title.  According
    to the motion judge, the appellants title has not been affected because it is
    as marketable now as it always was, although it is now subject to a duty to
    disclose the nature of the structural problems, and the Property would therefore
    be sold for an amount that is less than what the appellants paid for it.
    Chicago Title adopts this analysis on this appeal.

[71]

Again,
    I disagree. It is entirely irrelevant and speculative to postulate, as the
    motion judge did and Chicago Title invites us to do, that the appellants might
    be able to sell the Property to someone else at some undetermined lower price.
    The fact that someone might be willing to purchase a dangerously defective
    building does not mean that it is marketable under the Title Policy.
    Marketability must be determined in accordance with the language of clause 11.

[72]

The
    motion judges interpretation of clause 11 is overly restrictive and violates
    the principle that coverage provisions must be construed broadly. It also
    imports a definition of unmarketable that is inconsistent with the wording of
    clause 11. The correct approach to the issue of coverage is to determine, first,
    whether the defect in issue has rendered the Property unmarketable as that term
    is defined in clause 11 (i.e. can a potential purchaser refuse to close an agreement
    of purchase and sale on learning of the defect). The next question is whether
    coverage is excluded under the exclusions or limitations of liability
    provisions of the Title Policy. In my view, for the reasons that follow, clause
    11 of the Title Policy provides coverage for the appellants and is not caught
    by any contractual exclusion or limitation.

[73]

Chicago
    Title does not contest that the discovery of the dangerous condition of the
    Property would permit a potential purchaser to refuse to close a purchase
    transaction. However, it submits that the structural condition of the Property
    is a latent defect that is not subject to coverage under the Title Policy. It
    argues that the failure of the previous owner to obtain the necessary permit
    from the City of Toronto was not the cause of the problem; it was the improper
    construction that caused the problem.

[74]

I
    would not give effect to this argument. There is no issue that the unpermitted
    work led to the issuance of the City Order. It is clear that had the necessary
    approval for this dangerous construction been sought from the City of Toronto
    it never would have been granted. The dangerous condition of the Property, therefore,
    flows directly from the failure of the previous owner to attempt to obtain the
    necessary municipal approval. That failure has made the appellants title
    unmarketable within the meaning of clause 11 of the Title Policy.

[75]

Chicago Title also contends that the Title Policy was never
    intended to cover the type of loss suffered in the present case, and had it
    been so, the premium would have been much higher. There are two problems with this
    contention. First, as I mentioned earlier, a partys subjective intentions are
    not relevant to the exercise of contractual interpretation. Second, if this
    argument were accepted it would, in effect, reverse the business relationship
    between the parties such that the appellants become the insurers of Chicago
    Title, with the appellants bearing the loss caused by Chicago Titles failure
    to properly draft the coverage provisions and properly price the policy. This is
    a commercially absurd result.

[76]

In
    my view, there is coverage under Covered Title Risk 11. The analysis now shifts
    to whether the coverage is negated by any exclusions or limitations of
    liability in the Title Policy.

[77]

Chicago
    Title relies upon the following language from the exclusions section of the
    Title Policy to deny coverage on the basis that coverage is excluded for
    defects discovered after the policy date:

In

addition

to

the

Exceptions

in

Schedule B,

you

are

not

insured

against loss, costs,

legal

and/or

notarial

fees,

and

expenses

resulting

from:

3. Title risks:

(d) that first affect your Title after the policy date
    this does not limit the coverage in items 3, 20 and 21 of the Covered Title
    Risks.

[78]

Chicago
    Titles position is that the unpermitted construction was discovered many years
    after the policy date and, consequently, there is no coverage. I would decline
    to give effect to this argument for the following reasons.

[79]

This
    is an exclusion provision and must be restrictively interpreted. There is
    nothing in the Title Policy indicating that a defect rendering title
    unmarketable under clause 11 that is extant at the time of the policy date is
    not covered unless the insured discovers the defect as at the policy date. The
    introduction of this discoverability concept is a significant broadening of the
    exclusion provision that is not supported by the language of the Title Policy.
    The fact is that the unpermitted construction affected the appellants title on
    the date of purchase; in other words, their title was unmarketable within the
    meaning of the Title Policy from the moment they acquired the Property, even if
    they were not yet aware of that fact.

[80]

This
    conclusion is supported by this courts decision in
Krawchuk v. Scherbak
,
    2011 ONCA 352, 106 O.R. (3d) 598, leave to appeal refused, 297 O.A.C. 395
    (note). In that case, t
he
purchaser
    of a home discovered serious latent structural and plumbing defects after
    closing. She was successful in claiming under her title insurance policy and
    then sued the vendors, her real estate agent and the real estate brokerage. The
    court was focused on her ability to assert claims against these parties and not
    on the issue of coverage under the title policy. Nonetheless, Epstein J.A.s
    comments, at para. 105, are instructive:

In my view, title insurance is a contract of indemnity,
    designed to compensate for actual loss:  see
Grunberger v. Iseson
, 75
    A.D. (2d) 329, 331 (N.Y. App. Div. 1980).  While title insurance is different
    from most insurance products in that it has not traditionally insured against a
    future event but has been used only to insure against loss from a title defect
    in existence at the date of the policy, it is nonetheless designed to respond
    as well to a future loss.  Ms. Krawchuks loss from the existing defects in the
    house crystallized when it became necessary for her to spend the money to do
    the repairs required by the Citys order to comply, an event that took place
    after the policy was in place.

[81]

Similarly,
    in the present case, the unpermitted construction was an existing defect that
    crystalized when the appellants became aware of the defect.

[82]

Chicago Title also relies upon the motion judges finding that
    the appellants have not suffered any actual loss. The motion judge held that,
under clause (a) of the Limitation of the Companys Liability
    section of the Title Policy, the appellants are entitled only to their actual
    loss. Having made no permanent repairs, their actual loss does not include
    unincurred expenditures.

[83]

To
    the extent that the motion judge held that the loss has not been incurred
    because the City Order was restricted to temporary repairs, he is incorrect
    because logically an order that is explicitly marked as temporary means that
    other permanent work is required. It appears that the motion judge meant that
    the appellants would only be compensated after they went into their own pockets
    to pay for the repairs. This would be a remarkable interpretation that would
    mean that only those insureds who had the financial resources to cover their
    loss would receive compensation. In either case, this is a highly restrictive
    interpretation of this limitation of liability and it cannot stand.

[84]

I
    conclude that clause 11 provides coverage and indemnification regarding the
    defect at issue in this case, being the unpermitted construction, and it is not
    caught by any exclusion or limitation of liability under the Title Policy.

F.

Disposition

[85]

I
    would allow the appeal, set aside the order below, and grant the appellants
    motion for summary judgment on the issues of coverage and indemnification under
    the Title Policy.

[86]

The
parties agree that the successful party on appeal is entitled to costs
    of the appeal in the amount of $18,000 on a partial indemnity basis.
    Accordingly, I would award the appellants $18,000 in costs of the appeal,
    inclusive of all fees, disbursements and applicable taxes.

[87]

On the motion below, the motion judge awarded no costs. The
    appellants submit that, if successful on the appeal, they are entitled to their
    costs of the motion on a partial indemnity basis, in the amount of $32,809.79,
    including fees, disbursements and applicable taxes. Chicago Title argues that,
    if the appellants are successful on the appeal, this court should direct the
    parties to make further submissions on the appropriate costs to be awarded on
    the motion.

[88]

I would decline this request. The relief requested by the appellants
    in their notice of appeal includes the costs of the summary judgment motion.
    Parties are expected to come to this court ready to argue all issues on the
    appeal, including costs. I am also cognizant of the significant disparity in resources
    between the appellants and Chicago Title. Simply put, Chicago Title, a large
    insurance corporation, can easily afford to continue making submissions,
    whereas the appellants do not have unlimited resources to continue litigating
    this matter indefinitely.

[89]

In
    my view, there is no reason to deprive the appellants, who should have been
    successful on their summary judgment motion, of their costs. This case involved
    the interpretation of Chicago Titles standard form contract. Chicago Titles
    interpretation of that contract was incorrect and, to the extent there was any
    confusion about its terms, the responsibility lies with Chicago Title as the drafter
    of the Title Policy.

[90]

I
    am also satisfied that the quantum of costs sought, which is less than what
    Chicago Title claimed on the motion, is entirely reasonable, fair, and
    proportionate. Therefore, I would order that Chicago Title pay the appellants their
    costs of the motion below, fixed in the amount of
$32,800, inclusive of all fees, disbursements and
    applicable taxes.

Released: December 3, 2015 EAC                       C.
    W. Hourigan J.A.

I
    agree E. A. Cronk J.A.

I
    agree M. L. Benotto J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: McIlvenna v. 1887401 Ontario Ltd., 2015 ONCA 830

DATE: 20151202

DOCKET: C59704

Weiler, van Rensburg and Roberts JJ.A.

BETWEEN

Ryan McIlvenna, Stacey Holmes

Plaintiffs

(Appellants)

and

1887401
    Ontario Ltd.,

Maher Khalil, Daniel
    Joseph-Paul Abdel-Nour, Eric Ashley DAmour

Defendants

(Respondents)

Ryan McIlvenna and Stacey Holmes, in person

Spencer Ball, for the respondents

Heard: September 10, 2015

On appeal from the order of Justice R. Dan Cornell of the
    Superior Court of Justice, dated November 3, 2014, with reasons reported at
    2014 ONSC 6043.

van Rensburg J.A.:

A.

Overview

[1]

The appellants commenced an action seeking damages for their treatment
    by the respondents during the evening of July 26, 2014 into the early morning hours
    of July 27, 2014, when they were ejected from a bar in Sudbury because they
    smelled of marijuana. According to their claim, the appellants are authorized
    users of medical marijuana.

[2]

The respondents brought a motion under rule 21 of the
Rules of Civil
    Procedure
to dismiss the action for failure to disclose any reasonable
    cause of action and on the basis that the claim is frivolous, vexatious or
    otherwise an abuse of the process of the court. In the alternative, the
    respondents asked that certain paragraphs of the statement of claim be struck
    under rule 25.

[3]

Before the motion was heard, the plaintiffs delivered an amended
    statement of claim. At the hearing of the motion, Stacey Holmes was not present
    in court. Ryan McIlvenna asked for permission to speak on her behalf and
    stated: if its deemed and determined that I cant [represent her interests in
    this matter] she will discontinue her portion of the claim. The motion judge
    did not permit Mr. McIlvenna to argue on Ms. Holmes behalf, and dismissed
    her claim.

[4]

The motion judge considered the amended statement of claim. He dismissed
    the action for failure to disclose a cause of action, without leave to amend.
    He also observed that the action was an abuse of process and frivolous. He
    awarded costs against Mr. McIlvenna on a substantial indemnity basis in the sum
    of $5,905.90.

B.

Analysis

[5]

The appellants advance five arguments on appeal. First, they contend
    that the motion judge ought to have permitted Mr. McIlvenna to speak on Ms.
    Holmes behalf when no objection was taken by the respondents, and that her
    claims should be allowed to proceed. Second, they say that the order dismissing
    the action should be set aside because the motion judge demonstrated bias in
    certain comments he made in the course of the hearing. Third, they argue that
    the motion judge did not accept the allegations in their pleading as true, and erred
    in striking the claim on the basis that it disclosed no reasonable cause of
    action. Fourth, if the claim was deficient, the motion judge erred in refusing
    leave to amend. Finally, the appellants assert that the motion judge erred in concluding
    that the claim was an abuse of process and frivolous.

(1)

Did the motion judge err in not permitting Mr. McIlvenna to speak on
    Ms. Holmes behalf?

[6]

With respect to the first ground of appeal, in the particular
    circumstances that were before the motion judge, I would not interfere with the
    motion judges decision refusing Mr. McIlvenna permission to speak on Ms.
    Holmes behalf.

[7]

I disagree with the motion judges view that he had no discretion to
    permit Mr. McIlvenna to speak on Ms. Holmes behalf, where Mr. McIlvenna was a
    party to the proceedings, the interests of both plaintiffs were substantially
    identical, and the moving parties (the respondents here) did not object. That
    said, Mr. McIlvenna offered the court a choice  if he was not permitted
    by the judge to speak for Ms. Holmes, she wanted to discontinue her claim. In
    the course of argument he agreed that the claim could be dismissed if he were
    not permitted to speak for her. The motion judge followed the alternate course
    of conduct proposed by Mr. McIlvenna. In the circumstances, it is not open to
    the parties to appeal the dismissal of Ms. Holmes claim.

(2)

Was the motion judge biased?

[8]

I also would not give effect to the second ground of appeal, asserting
    bias on the part of the motion judge.

[9]

The appellants have not met the high threshold to establish bias, which
    requires that an informed person viewing the matter realistically and
    practically  and having thought the matter through  [would] conclude that it
    is more likely than not that [the decision-maker], whether consciously or
    unconsciously, would not decide fairly:
Committee for Justice and Liberty

v.

National Energy Board
, [1978] 1 S.C.R. 369, at pp. 394-95;
    see also
R. v. S.(R.D.)
, [1997] 3 S.C.R. 484, at para. 31.

[10]

The
    transcript of the hearing discloses that the motion judge took an active role
    in exploring Mr. McIlvennas arguments. References to his own allergy to smoke
    and to the odour of marijuana which he described as noxious do not mean that
    he prejudged the question of whether the amended statement of claim disclosed a
    reasonable cause of action. By making these references, the motion judge was
    pointing out that in their place of business the respondents would have to be
    concerned with balancing Mr. McIlvennas rights with the rights of other
    persons such as himself. The motion judge recognized that the issue was not to
    determine the outer limits of the appellants claim to be able to smoke marijuana
    anywhere and at any time (a position that Mr. McIlvenna at times advanced in
    argument), but whether the allegations in the amended statement of claim
    respecting the appellants treatment, on the evening in question, disclosed a
    cause of action in law.

[11]

The
    motion judges frequent interruptions of Mr. McIlvennas argument reflected his
    attempts to exercise control over the court proceedings, including trying to
    keep the arguments focused and on point. While several such interruptions may
    well have been unnecessary, Mr. McIlvenna had the opportunity to advance his
    arguments and to respond to the various concerns expressed by the motion judge.
    Contrary to the appellants assertion, the motion judges conduct, in all the
    circumstances, did not demonstrate bias.

(3)

Did the motion judge err in striking out the entirety of the appellants
    claim?

[12]

The
    events giving rise to the claim are pleaded as follows in the amended statement
    of claim.

[13]

The
    appellants are authorized users of medical marijuana as treatment for their
    medical conditions (paras. 4, 7 and 8). Mr. McIlvenna uses medical marijuana
    pursuant to a federal exemption that allows him to use cannabis for medical
    purposes anywhere at any time (para. 5). The appellants frequented two bars
    located next door to one another that were owned and operated by the respondent
    1887401 Ontario Ltd., whose principals are the individual respondents (paras. 9
    and 25). They had previously been permitted to smoke their marijuana in the
    smoking area in an alleyway between the bars, after showing their medical
    exemptions.

[14]

On
    the night in question, the appellants were not permitted to smoke in the
    alleyway (para. 17). They were told to smoke outside on the sidewalk, and they
    began to do so. The doorman of the second bar told the appellants to move
    across the street because of the smell of the marijuana (para. 20). They
    refused to do so (para. 24). When they entered the second bar, Mr. McIlvenna was
    tapped on the shoulder by the respondent Khalil and confronted by all three
    owners of the bar (para. 25). Mr. Khalil was acting in a furious and out
    of control manner, took up a fighting stance, and told Mr. McIlvenna they
    had stunk up his whole bar with the smell of marijuana (para. 27). After Mr.
    McIlvenna tried to explain their rights, Mr. Khalil pointed at the door and
    yelled at them to leave (para. 34). The appellants left the premises (para.
    38).

[15]

The
    appellants identify three principal causes of action in the amended statement
    of claim. First, they claim discrimination on the basis of disability
    constituting a breach of the
Ontario Human Rights Code
, R.S.O. 1990,
    c. H.19

(the
OHRC
).

[16]

Before
    the motion judge, the claim based on breach of the
OHRC
was abandoned,
    as the appellants had decided to pursue this complaint in human rights proceedings.
    The references to discrimination and the claim for damages for discrimination
    in the amended statement of claim are therefore properly struck for the purpose
    of this action. These are contained in paragraphs 10, 12, 19 and 37, which I
    would strike in their entirety, and in paragraphs 9 and 11, which I would
    strike with leave to amend to plead these paragraphs with the references to
    discrimination removed.

[17]

The
    appellants assert that the amended statement of claim also pleads the torts of intimidation
    and intentional infliction of mental suffering. The relevant key paragraphs to
    support these pleadings are as follows. The appellants were asked to go to the
    opposing sidewalk to smoke their medical marijuana, which was a deliberate attack
    against their worth and dignity (para. 22). When the appellants returned inside
    the bar, Mr. Khalil was acting furious and took up a fighting stance (para.
    27). Mr. Khalil yelled at the appellants to leave and pointed at the door (para.
    34). Further, when Mr. Khalil demanded that the appellants leave the nightclub
    due to the smell of their medicine, he intended to inflict mental pain and
    suffering on them (para. 13). After this altercation, the appellants left
    without being physically removed (para. 38).

(a)

Did the motion judge accept the allegations in the statement of claim as
    true?

[18]

In
    a motion under rule 21, the court must accept that the allegations in the
    statement of claim are true, unless patently ridiculous or incapable of proof.
    The statement of claim must be read generously, allowing for inadequacies due
    to drafting deficiencies:
Hunt v. Carey Canada Inc.
, [1990] 2 S.C.R.
    959, at p. 280; see also
Falloncrest Financial Corp. v. Ontario
(1995)
,
27 O.R. (3d) 1 (C.A.)
,
at p. 7. The motion judge in this
    case correctly identified the test; however, he made certain errors in its
    application.

[19]

The
    appellants contend that the motion judge erred in not accepting the facts
    pleaded in the amended statement of claim as true. In this regard, I observe
    that at times in his decision, the motion judge appears to have approached the
    motion as a motion for summary judgment, and not as a rule 21 motion. This
    occurred in para. 7 of his reasons, when he said that although not put into
    evidence before [him], he accepted that the appellant had a license to possess
    and use marijuana. It also occurred in his recitation of the facts not in
    dispute commencing at para. 13, and at para. 26, where he indicated that there
    was no evidence of a visible and provable injury.

[20]

As
    this court has noted, it is essential to keep separate the function of the
    court in a rule 21 motion (where what is pleaded in a claim is assumed to be true
    and capable of proof), and a summary judgment motion or trial, where evidence
    is weighed and considered. The test on a rule 21 motion is whether it is plain
    and obvious that the claim cannot succeed, not whether it is likely or unlikely,
    on the evidence that may be led, that the claim will succeed:
Miguna v.
    Ontario (Attorney General)
, 2008 ONCA 799, 301 D.L.R. (4th) 540, at para.
    34.

[21]

While
    the motion judge made the comments I have referred to, which might suggest that
    he considered evidence and failed to assume the pleadings to be true, on the
    whole of his reasons, it appears that he accepted the appellants pleading as
    true. Although he greeted the claim with some scepticism, he approached his
    task as determining whether, assuming the facts were as pleaded, the amended
    statement of claim disclosed a cause of action.

[22]

I
    turn then to consider whether the motion judge erred in his assessment of the
    pleading, and whether it disclosed a cause of action in intimidation and
    intentional infliction of mental suffering.

(b)

The tort of intimidation

[23]

The
    tort of intimidation consists of the following elements: (a) a threat; (b) an
    intent to injure; (c) some act taken or forgone by the plaintiff as a result of
    the threat; (d) as a result of which the plaintiff suffered damages:
Score
    Television Network Ltd. v. Winner International Inc.,
2007 ONCA 424, [2007] O.J. No. 2246, at para. 1;
    see also
Central Canada Potash Co. v. Saskatchewan
, [1979] 1 S.C.R. 42.
    Although the pleading of intimidation is most frequently seen in the context of
    economic torts, the business context is not an essential element of the tort.

[24]

The
    motion judge concluded that none of the requirements for the tort of
    intimidation were present, and that it was plain and obvious that this claim
    could not succeed.

[25]

I
    disagree. Contrary to the motion judges conclusion, all elements of the tort of
    intimidation are pleaded in the amended statement of claim. The claim is that
    the appellants were prevented from doing something they claim they had a legal
    right to do  to remain in a bar, although they smelled of marijuana after smoking
    marijuana as a medication, in accordance with a license that permitted them to
    do so. The appellants claim that the respondents were wrong to tell them to
    leave because they had refused to smoke on the other side of the street, and
    further that they were threatened with violence. They plead that the conduct of
    the respondents was a deliberate attack against [their] worth and dignity. As
    a result of the conduct of the respondents, they left the bar.

[26]

The
    question is not whether the allegations, if true, would give rise to
    substantial damages, or whether the respondents would have a defence to the
    claim. In
Hunt,
at p. 975, the Supreme Court referred with approval to
    an English decision,
Drummond-Jackson v. British Medical Association
,
    [1970] 1 All E.R. 1094 (C.A.), which stated that it is not permissible to anticipate the defence or defences -- possibly
    some very strong ones -- which the defendants may plead and be able to prove at
    the trial, nor anything which the plaintiff may plead in reply and seek to rely
    on at the trial.
[27]

The
    function of the court in a pleadings motion is to determine whether the test in
    rule 21 has been met, and not to determine whether all of what has been pleaded
    in the action can be proven, whether the action will succeed, or for that
    matter, if successful, whether the plaintiff will recover damages for the
    alleged wrong. To the extent that the motion judge appears to have concluded
    that the harm to the appellants was
de minimis
, this conclusion was
    premature and ought not to have informed his rule 21 determination.
[28]

For
    these reasons, I would not strike the action, which discloses a cause of action
    in intimidation.
(c)

The tort of intentional infliction of mental suffering
[29]

As
    for the tort of intentional infliction of mental suffering, this cause of
    action is comprised of the following elements: (a) flagrant and outrageous
    conduct; (b) calculated to produce harm; (c) which results in visible and
    provable injury:
Prinzo v. Baycrest Centre for Geriatric Care
(2002),
    60 O.R. (3d) 474 (C.A), at para. 43.
[30]

The
    tort of intentional infliction of mental suffering is not actionable without proof of actual harm. This is because the basis
    of liability for this tort is not rooted in the trespass action, but is a
    descendant of the action on the case. A plaintiff must prove that he or she has
    suffered a recognized psychiatric illness to establish a cause of action: see A.
    Linden and B. Feldthusen,
Canadian Tort Law
, 9th ed. (Markham:
    LexisNexis, 2011), at p. 55. See also
Frame v. Smith
, [1987] 2 S.C.R. 99
    at para. 46, referring to the need to establish recognizable physical or
    psychopathological harm.
[31]

There
    is no pleading here that the conduct of the respondents was flagrant and
    outrageous. Although the motion judge referred to there being no
evidence
of a visible and provable injury, I note that no such injury is pleaded. There
    is no suggestion in the lengthy and detailed facts pleaded by the appellants
    that the respondents conduct caused any mental suffering, in the sense of a
    psychiatric illness or injury. Rather, the alleged harm is to the appellants
    dignity and sense of self-worth.
[32]

In
    my view, the amended statement of claim does not disclose a cause of action for
    intentional infliction of mental suffering, and accordingly para. 13 must be
    struck. I see no benefit in granting leave to amend the pleading of this tort, as
    there is no indication that mental suffering occurred, or that there was any
    harm other than to the appellants dignity and sense of self-worth.
(4)

Did the motion judge err in concluding the action was an abuse of
    process and frivolous?
[33]

The
    motion judge concluded that the action was an abuse of the justice system and
    frivolous. He observed that the action was a second battle in the appellants
    crusade to assert the rights of those who have the right to use medical
    marijuana. He referred to another action commenced by Mr. McIlvenna:
McIlvenna
    v. The City of Greater Sudbury,
2014 ONSC 2716, [2014] O.J. No. 2578. That
    action involved a claim for damages following Mr. McIlvennas alleged threat of
    arrest for smoking marijuana on courthouse property. The defendants brought a
    motion to strike under rule 21, which was granted, but with leave to amend. The
    motion judge here stated that Mr. McIlvenna had failed to amend his claim and
    that the earlier proceeding was at an end. This was incorrect, and it appears
    that this error may well have informed the motion judges conclusion that the
    action before him was frivolous and an abuse of process of the court.
[34]

In
    her decision in
McIlvenna v. The City of Sudbury
, Gauthier J.
    considered whether the action disclosed a cause of action. The moving parties
    specifically did not allege that the claim was frivolous or otherwise an abuse
    of process. Gauthier J. dismissed on their merits claims under sections 7 and 15
    of the
Canadian Charter of Rights and Freedoms
. However, the balance
    of the claim was dismissed with leave to amend. In particular, there were
    deficiencies in the pleadings of intimidation and intentional infliction of
    mental suffering. As appears from the face of the Amended, Amended Statement of
    Claim in that action, the pleading was amended in June 2014.
[35]

It
    is not clear why the motion judge believed that Mr. McIlvenna had not amended
    the statement of claim in his earlier action. This does not appear from the
    transcript to have been argued, and is not disclosed in the record that was before
    him. Indeed, there was no evidence in the record before the motion judge that
    spoke to the alternative ground of abuse of process; the only affidavit filed
    in the motion was that of Mr. McIlvenna, explaining the basis for his claim.
[36]

Accordingly, I would find that there was a palpable
    and overriding error of fact that informed the motion judges conclusion that
    the action was an abuse of process, and that there were no reasonable grounds
    before the court to dismiss the action as an abuse of process.
C.

disposition
[37]

For these reasons, I would
allow the appeal as
    follows. I would set aside the order of the motion judge except with respect to
    the dismissal of claims by Ms. Holmes. I would strike paragraphs 10, 12, 13, 19
    and 37 of the amended statement of claim, without leave to amend. I would
    strike paragraphs 9 and 11, with leave to amend these paragraphs only as
    necessary to remove the references to discrimination. I would set aside the
    costs order in the court below.
[38]

I
    would grant Mr. McIlvenna his costs of the appeal in the sum of $700,
    representing his expenses of travel and accommodation to argue the appeal.
Released: (K.M.v.R.) December 2, 2015
K. van Rensburg J.A.
I agree K.M. Weiler
    J.A.
I agree L.B. Roberts
    J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: McLellan (Re) 2015 ONCA 888

DATE: 20151214

DOCKET: C60333

Feldman, Gillese and Watt JJ.A.

IN THE MATTER OF: Daniel McLellan

AN APPEAL UNDER PART XX.1 OF THE
CODE

Anita Szigeti, for the appellant Daniel McLellan

Philippe Cowle, for the Crown

Kathryn Hunt, for the Centre for Addiction and Mental
    Health

Heard: December 3, 2015

On appeal against the disposition of the Ontario Review
    Board, dated March 23, 2015.

ENDORSEMENT

[1]

On March 23, 2012 the appellant was found NCRMD on counts of criminal
    harassment and uttering death threats. The offence of criminal harassment
    included a variety of conduct extending over a period of nearly three years.
    The targets were his ex-wife and children. The object of the death threats was
    his ex-wife.

[2]

In March, 2015 the Review Board ordered that the appellant be discharged
    subject to conditions. One condition required the appellant to report not less
    than once per month to the person in charge of the Centre for Addiction and
    Mental Health (CAMH).

[3]

The appellant seeks an absolute discharge. He says that he is not now
    and was not at the Review Board hearing a significant threat to the safety of
    the public.

[4]

The appellant contends that the Review Board erred in concluding that he
    was a significant threat to the safety of the public. Its conclusion, he says,
    was the product of several errors:

i.

an incorrect interpretation and
    application of the significant threat standard;

ii.

a failure to adhere to its inquisitorial mandate;

iii.

an improper shift in the onus of proof; and

iv.

an uncritical acceptance of the evidence of Dr. Ian Swayze, which
    amounted to an abdication of its obligations.

The appellant argues further that the Boards finding
    of significant threat is unreasonable.

[5]

For the reasons that follow, we are not prepared to interfere on any
    ground advanced by the appellant.

Ground #1: Incorrect
    Interpretation and Application of the Significant Threat Standard

[6]

The appellants current diagnoses are Delusional Disorder, Persecutory Subtype;
    and Polysubstance Dependence in sustained remission. His differential diagnosis
    is Antisocial Personality Traits/Disorder. He is competent to consent to
    psychiatric treatment and has declined psychiatric medication for over two and
    one half years.

[7]

The reasons of the Board belie any misinterpretation or misapplication
    of the significant threat standard in reaching its conclusion that the
    standard had been met. The issue of significant threat was almost the exclusive
    focus of the hearing and the submissions of the parties. The Board recognized
    the inherent difficulty of this task of risk assessment but expressed no
    uncertainty about its conclusion. Nothing said, or left unsaid, during the
    hearing or in the reasons for disposition reflects any departure from the
    rigorous standard to be met to establish significant threat.

[8]

This standard is a concept with which the Board grapples on a daily
    basis. Nothing here persuades us that the Board diluted or lost sight of the standard.
    Nor are we persuaded that its comment about the uncontradicted evidence on
    the issue is indicative of an impermissible shift of the onus of proof to the
    appellant or a failure to be faithful to its inquisitorial mandate. The unanimous
    nature of the expert evidence was a factor the Board could consider in reaching
    its conclusion. That it did so does not reflect the imposition of any burden on
    the appellant or an abdication of its inquisitorial mandate.

[9]

The basis upon which the Board reached its conclusion extended beyond
    the
viva voce
testimony of Dr. Swayze. The Board had before it, in
    accordance with its usual practice, a lengthy Hospital Report and an Addendum
    to that report to ensure currency. The report chronicled the appellants
    lengthy history of harassing behaviour towards his family. It also described
    his refusal to take any medication and his longstanding lack of insight into
    his illness. It acknowledged some recent recognition by the appellant of his
    illness but queried its authenticity.

[10]

When
    read as a whole, the reasons negate the claim advanced by the appellant that
    the Board simply deferred uncritically to the opinion of Dr. Swayze.

Ground #2: The Unreasonableness of the Finding of Significant
    Threat

[11]

The
    appellant also contends that the finding of the Board that he was a
    significant threat to the safety of the public was unreasonable.

[12]

In
    our view, this ground of appeal fails.

[13]

The
    Board heard evidence that the appellant suffers from a Delusional Disorder, Persecutory
    Subtype. His delusions led him to engage in a campaign of criminal harassment
    against his ex-wife and children over a period of nearly three years. He
    threatened to burn down their house and kill his ex-wife.

[14]

As
    a result of his delusions, the appellant became heavily preoccupied with the
    well-being of his children and a connection he was convinced existed between
    his ex-wife, motorcycle gangs and drug cops.

[15]

The
    appellant continued to display symptoms of delusional thinking until at least
    2014. He refuses to take medication recommended by the clinical team. Dr.
    Swayze testified that, in the absence of medication, the symptoms of the
    appellants delusional disorder
will
return. The appellant has a low
    level of ability to recognize the recurrence of symptoms, especially because of
    his denial that he suffers from a major mental illness.

[16]

It
    was against the background just described that the Board was required to
    evaluate the appellants recent expression of insight. Its conclusion is
    entitled to deference and is not unreasonable. It did not, as the appellant
    argues, proceed from the presence of a delusional disorder to a finding of
    significant threat.

Conclusion

[17]

For
    these reasons, the appeal is dismissed.

K. Feldman
    J.A.

E.E.
    Gillese J.A.

David
    Watt J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Mardonet v. BDO Canada LLP, 2015 ONCA 883

DATE: 20151211

DOCKET: M45501 (C60578)

Simmons, LaForme and Huscroft JJ.A.

BETWEEN

Ontario Psychological Association

Plaintiff

and

Charlotte (Carla)
    Mardonet
, Sarah Esaafi,
Gabrial Bensusan
,

2181420 Ontario Inc.
,
BDO Canada LLP
,
Vern E. Penner
and Dr. John Service

Defendants (
Appellants
)

Defendants (
Respondents
)

Paul D. Stern and Peter-Paul E. du Vernet, for the
    appellants

Andrew MacDonald, for the respondents

Heard: December 7, 2015

ENDORSEMENT

[1]

The issue before us is whether the motion judge's order
    quashing notices of examination is final or interlocutory.

[2]

The Ontario Psychological Association
    ("OPA") sued the appellants, Mardonet, Benusan and 2181420 Ontario
    Inc., to recover funds it alleges were misappropriated between 2003 and 2013 by
    its former employee, Mardonet. In the same action, the OPA alleges that the
    moving parties, BDO Canada LLP and Penner, were negligent in conducting audits
    of the OPA's financial statements during the same period and in failing to
    detect the misappropriation of funds.

[3]

After the action was commenced, the OPA
    moved for a
Mareva
injunction against the
    appellants. The appellants, in turn, served notices of examination on BDO and
    Penner.

[4]

The motion judge quashed the notices of
    examination, holding that the appellants failed to demonstrate that Penner
    could provide evidence relevant to the
Mareva
injunction motion and that, in all the circumstances, the notices of
    examination were an abuse of process.

[5]

The moving parties submit that the order under
    appeal is fundamentally interlocutory because it relates to an examination for
    the purposes of an interlocutory order.

[6]

In response, relying on

Smerchanski
    v. Lewis
(1980), 30 O.R. 2d 370 (C.A.), and other similar
    authorities, the appellants submit that the order is final. In
Smerchanski
, this court held that at an order quashing a summons to a non-party
    witness during a trial was final because the order finally disposed of the
    rights of the party who issued the summons and the non-party in the issue
    raised between them.

[7]

In this case, to date, the OPA has not required
    that BDO and Penner file a defence. Further, BDO and Penner are not responding
    parties to the
Mareva
injunction motion. The
    appellants submit that, in these circumstances, the moving parties are the
    effective equivalent of non-parties. The motion judge's order, which would
    otherwise be final, should not become interlocutory simply because of the
    happenstance that the OPA named BDO and Penner as parties to the action. In any
    event, the motion judge's order finally determines a significant issue: the
    question whether the moving parties can be examined  and their evidence
    obtained  in relation to the
Mareva
injunction.

[8]

We conclude that the order under appeal is
    interlocutory and that the appeal must be quashed. The key factor in this
    court's decision in
Smerchanski
was that the
    summons was issued to a non-party. That is not this case. The moving parties
    are parties to the action. The reasoning in
Smerchanski
does not apply. The order under appeal does not finally determine
    whether the moving parties can be examined in the action.

[9]

Further, the fact that the motion judges
    decision may finally determine whether the moving parties can be examined in
    relation to the
Mareva
injunction does not
    make the motion judges order final. The motion judges order does not terminate
    the underlying action or resolve a substantive claim or defence of one of the
    parties. To hold that the motion judges order is final because it determines
    whether parties to an action can be examined in relation to an interlocutory
    motion would effectively eliminate the distinction between interlocutory and
    final orders: see
Waldman v. Thomson Reuters Canada Limited
, 2015 ONCA 53, [2015] O.J. 395, at para 22.

[10]

The appeal is quashed without prejudice to the
    appellants' right to seek an extension of the time for applying for leave to
    the Divisional Court. Costs of the motion are to the moving parties on a
    partial indemnity scale fixed in the amount of $2,500 inclusive of
    disbursements and applicable taxes.

Janet Simmons J.A.

H.S. LaForme J.A.

Grant Huscroft J.A.