COURT OF APPEAL FOR ONTARIO

CITATION: Hengeveld v. The Personal Insurance Company, 2019
    ONCA 497

DATE: 20190617

DOCKET: C65834

Hoy A.C.J.O., Lauwers and Zarnett JJ.A.

BETWEEN

Ryan Hengeveld, Susan
    Hengeveld, Matthew Hengeveld, a minor by his litigation guardian, Susan
    Hengeveld, Benjamin Hengeveld, a minor by his litigation guardian, Susan
    Hengeveld, Erin Hengeveld, a minor by her litigation guardian, Susan Hengeveld,
    Andrew Hengeveld, a minor by his litigation guardian, Susan Hengeveld, Bernard
    Hengeveld and Lutsche Bakker, plaintiffs

Plaintiffs

and

The Personal Insurance Company

Defendant
    (Appellant)

and

James
    Dallyn Virtue and Rasha Mohamed Said El-Tawil

Third Parties (Respondents)

Sandra G. Zilli and Sachin Kumar, for the appellant

David B. Williams and Jennifer P. Butkus, for the
    respondents

Heard: May 10, 2019

On appeal from the judgment of Justice Michael D.
    McArthur of the Superior Court of Justice, dated August 2, 2018, with reasons
    reported at 2018 ONSC 4712.

Zarnett J.A.:

Introduction

[1]

Individuals
    pursuing a lawsuit learn that evidence that might assist in proving their case
    has been destroyed. They start a second lawsuit against the insurance company
    they say should have preserved the evidence. The company alleges that any
    failure to preserve evidence is the result of faulty arrangements made by the
    plaintiffs lawyers. May the company bring third party proceedings for
    contribution and indemnity against the plaintiffs lawyers? That is the issue
    raised on this appeal.

[2]

The
    plaintiffs, Ryan Hengeveld and his family, sued the appellant The Personal
    Insurance Company for failing to preserve the car that Mr. Hengeveld was
    driving when he was seriously injured in a motor vehicle accident. They allege
    this might impair their ability to prove their case in a separate personal
    injury action against those the Hengevelds allege caused the accident and
    injuries.

[3]

In response to the Hengevelds action against it Personal
    Insurance brought third party proceedings for contribution and indemnity against
    the Hengevelds lawyers,
the respondents Mr. Virtue and Ms. El-Tawil,
    alleging they breached their duty to the Hengevelds to see that evidence
    necessary for their personal injury action was preserved.

[4]

The lawyers moved successfully to strike out the
    third party claim on the basis that it disclosed no reasonable cause of action.

The motion judge held that because the allegations
    in the third party claim related to conduct falling within the scope of the lawyers
    retainer by the Hengevelds, it was conduct that was attributable in law to the Hengevelds.
[1]
The lawyers alleged
    negligence could therefore be raised by Personal Insurance in its defence to
    the Hengevelds claim. The third party claim was unnecessary.

[5]

Personal Insurance appeals. In my view the
    motion judge correctly concluded that the third party claim should be struck.
    Accordingly, I would dismiss the appeal.

The Facts

[6]

The plaintiff Ryan Hengeveld was injured in a
    motor vehicle accident on January 27, 2014, while he was operating a Hyundai
    automobile insured by Personal Insurance.

[7]

Mr. Hengeveld and his spouse, children and
    parents retained the respondent lawyers to act for them in connection with
    their damages arising out of the accident.

[8]

On January 6, 2016, the Hengevelds commenced the
    personal injury action for damages as a result of the injuries Mr. Hengeveld
    suffered in the accident. Personal Insurance is not a party to that action. The
    defendants to the personal injury action are the owner and operator of the
    other vehicle involved in the accident, the persons alleged to have been
    responsible for the safety and condition of the road where the accident
    occurred, the manufacturer of the Hyundai, and the dealership at which it was
    purchased.

[9]

On October 20, 2017, the Hengevelds commenced this
    action against Personal Insurance  the action out of which the third party
    claim and this appeal arise. The thrust of the Hengevelds claim is that Personal
    Insurance agreed, in 2014, to preserve the Hyundai in safe storage knowing it
    would be important to the resolution of liability issues in the personal injury
    action, but failed to do so. The Hengevelds allege that Personal Insurance
    disposed of the Hyundai, in breach of contract and/or negligently. They allege that
    this may impair their ability to prove liability against one or more of the defendants
    in the personal injury action.

[10]

Personal Insurance defended. Its statement of defence asserts that, as
    insurer of the Hyundai, it fully indemnified the Hengevelds for the damage to
    the vehicle. In exchange, Personal Insurance became the owner of the Hyundai and
    was entitled to dispose of it for salvage. It denies that it had any obligation
    to preserve the Hyundai for any longer than it actually did, and states that
    it was the [Hengevelds] responsibility to secure and ensure the preservation
    of the vehicle as they intended to rely on it as evidence in [the personal
    injury action]. The statement of defence alleges that the Hengevelds were
    negligent in failing to ensure the preservation of the Hyundai, failing to make
    adequate inquiries of Personal Insurance to confirm whether the Hyundai was
    being preserved, failing to make a valid contract with Personal Insurance for
    preservation of the Hyundai, and failing to send an expert to inspect the
    Hyundai in a timely manner, among other things. It is alleged that this caused
    or contributed to the Hengevelds damages; Personal Insurance pleads and relies
    upon the
Negligence

Act
,

R.S.O.
    1990, c. N.1.

[11]

Personal Insurance then issued its third party claim against the lawyers.
    It claims contribution and indemnity from the lawyers for any amounts it must
    pay the Hengevelds.

[12]

The third party claim incorporates by reference Personal Insurances
    statement of defence, including the pleading of the
Negligence

Act
, and alleges that the lawyers were retained
    by the Hengevelds following the January 2014 accident to pursue the damages
    arising out of it, and that retainer included securing and preserving the
    evidence required to pursue the Hengevelds claims. It was the lawyers who
    contacted Personal Insurance in February 2014 about preserving the Hyundai, advising
    it that they had been retained by the Hengevelds; Personal Insurance told the lawyers
    where the Hyundai was so that it could be inspected, and the lawyers arranged
    an inspection in March 2014, but then secured no promises from Personal
    Insurance to keep the Hyundai. They also failed to arrange either to take possession
    of it themselves or for further inspection. Personal Insurance, having made no
    promises to preserve the Hyundai, sold it for salvage shortly after; it heard from
    the lawyers that they wanted another inspection some 19 months after the first
    inspection.

[13]

The third party claim states that if Personal Insurance is found liable
    to the Hengevelds, the lawyers are liable for contribution and indemnity
    because they breached their duties to the Hengevelds as the Hengevelds lawyers.
    The particulars of the lawyers alleged negligence include failing to take
    adequate steps to ensure preservation of the Hyundai; failing to cause it to be
    inspected by an engineer or other expert in a timely way; and failing to
    communicate adequately with, make proper inquiries of, or establish a proper
    contract with Personal Insurance about the preservation of the Hyundai. The
    particulars of negligence asserted against the lawyers in the third party claim
    overlap significantly with the particulars of the Hengevelds negligence
    asserted in the statement of defence.

The Motion Judges Decision

[14]

The lawyers moved successfully under Rule 21.01(1)(b) of the
Rules
    of Civil Procedure
, R.R.O. 1990, Reg. 194, to strike out
    the third party claim as disclosing no reasonable cause of action.
[2]
The motion judge described the
    test for striking out a claim under that rule as whether it was plain and
    obvious that the third party claim was certain to fail, assuming the facts alleged
    in it to be true. He noted that this was not a case where Personal Insurance
    and the lawyers were both involved in the initial loss (by which he appears to
    have meant the motor vehicle accident of January 2014 that is the subject of
    the personal injury action). He held that, because the negligent acts and
    omissions alleged against the lawyers fell within the scope of their agency on
    behalf of the Hengevelds, they were not the proper subject of a third party
    claim: the Hengevelds would be responsible for anything done or not done by
    their lawyers acting as their agents. He stated, at para. 24:

In such situations where the plaintiff is
    responsible, Third Party Claims are unnecessary since the defendant could plead
    those matters in defence and, if the plaintiff was found at fault, damages
    would be reduced. Any neglect on part of the solicitors would be attributable
    to the plaintiff and make a third party proceeding unnecessary.

The
    Appellants Position

[15]

Personal Insurance argues that the motion judge erred in treating
    the initial loss as the January 2014 motor vehicle accident, and therefore in
    approaching the matter on the basis that Personal Insurance and the lawyers were
    not involved in the initial loss. Both Personal Insurance and the lawyers were
    involved in the loss complained of in the Hengevelds action against Personal
    Insurance, namely the disposal of the Hyundai and whatever detrimental effect
    that may have on the Hengevelds claim in the personal injury action. Personal
    Insurance submits that this is the relevant initial loss. Since its third
    party claim is not about the lawyers failure to assist the Hengevelds in
    mitigating their damages, this courts decision in
478649 Ontario
    Ltd. v. Corcoran
(1994),

20 O.R. (3d) 28, should have been applied for the proposition that, where
    the plaintiffs lawyer and the defendant are both involved in the initial loss
    (that is, where it is alleged they each caused or contributed to the plaintiffs
    initial loss) a defendant may take third party proceedings against the lawyer.

[16]

Personal Insurance also argues that the cause of action underlying
    the Hengevelds claim against it is spoliation. Since that is a novel cause of
    action, matters related to it are not amenable to disposition on an r. 21
    motion.

Analysis

[17]

In my view, the resolution of the issue on this appeal does not turn
    upon what constitutes the initial loss. It turns upon whether the negligence
    alleged against the lawyers in the third party claim is attributable to the Hengevelds
    as plaintiffs. I begin by explaining why attributing the fault of a third party
    to a plaintiff matters to whether there is a cause of action by a defendant against
    that third party. I then discuss two situations in which the negligence of a plaintiffs
    lawyer is attributable to the plaintiff. Finally, I discuss how those
    principles apply in this case.

(1)

Where Negligence of a Third Party is
    Attributable to the Plaintiff No Cause of Action for Contribution and Indemnity
    Exists Against That Third Party

[18]

Rule 29.01(a) permits a defendant to commence a third party claim
    against any person not already a party to the action who is or may be liable
    to the defendant for all or part of the plaintiffs claim.

[19]

A third party claim, like any action, must have a substantive
    component  it must assert a cause of action. Here the third party claim does
    not rely on any duty allegedly owed by the lawyers to Personal Insurance. It relies
    on the contribution and indemnity provisions of the
Negligence Act

(ss. 1, 2 and 5) to claim that the lawyers should be
    liable to Personal Insurance for all or part of the Hengevelds claim. But Personal
    Insurance also relies on the contributory negligence provision of the
Negligence
    Act

(s. 3) to assert that the Hengevelds themselves
    are responsible for all or part of their own claimed damages. The interaction
    of those provisions is therefore important.

[20]

The
Negligence Act

provides, in s.
    1, that where damages have been caused or contributed to by the fault or
    neglect of two or more persons, each is jointly and severally liable to the
    plaintiff who has suffered those damages, but as between themselves each is
    liable to make contribution and indemnify each other in the degree in which they
    are respectively found to be at fault or negligent. Section 2 permits a
    defendant who has settled with the plaintiff for more than its proportionate
    share of the plaintiffs damages to make a claim for contribution and indemnity
    against another person
who is, or would if sued have been, liable for
    those damages
. Section 5 of the Act contemplates the situation where a defendant has been sued but
    believes there is another wrongdoer who caused or contributed to the plaintiffs
    injury and has not yet been sued. It allows a defendant to pursue a right of
    contribution and indemnity against that person by third party claim, according
    to the rules of court for adding third parties.

[21]

A third party claim based on the contribution and indemnity
    provisions of the
Negligence Act
does not
    require that the third party owe a duty of care to the defendant. It is
    sufficient that the third party owe a duty of care to the plaintiff, making the
    third party someone who, if sued by the plaintiff, would have been liable in
    respect of the damage the plaintiff suffered:
Corcoran
,
at pp. 35-36.

[22]

The contribution and indemnity provisions of the
Negligence
    Act
must be understood in light of the purpose they
    serve. As a general rule a wrongdoer who caused or contributed to a plaintiffs
    injury is liable to compensate that plaintiff in full, even if another
    wrongdoer caused or contributed to the plaintiffs injury:
Athey v.
    Leonati
,

[1996]
    3 S.C.R. 458, at para. 22. The contribution and indemnity provisions allow a
    wrongdoer not solely at fault but at risk of being held liable for 100% of the
    plaintiffs injury to recover indemnity from another wrongdoer to the extent of
    the latters relative degree of fault:
Endean v. St. Josephs General
    Hospital
, 2019 ONCA 181, at para. 48.

[23]

However, a plaintiffs own contributory negligence will reduce its
    claim for damages against a defendant. Section 3 of the
Negligence
    Act
provides:

In any action for damages that is founded upon
    the fault or negligence of the defendant if fault or negligence is found on the
    part of the plaintiff that contributed to the damages, the court shall
    apportion the damages in proportion to the degree of fault or negligence found
    against the parties respectively.

[24]

Accordingly, under the
Negligence Act
s

contributory negligence
    provision, a defendant may raise fault or negligence
on the part of the
    plaintiff
that caused or contributed to the plaintiffs damages as a
    defence. If successful, the plaintiffs claim against the defendant will be
    reduced according to the plaintiffs relative degree of fault. Under the
Negligence

Act
s
contribution and indemnity provisions, a defendant
    may raise
a third partys
fault or negligence that caused or contributed
    to the plaintiffs damages as a third party claim. If successful, the defendant
    will remain 100% liable to the plaintiff but may obtain indemnity from the
    third party according to the third partys relative degree of fault.

[25]

But a defendant may not double dip.
Where the fault or neglect which a defendant argues caused or
    contributed to the plaintiffs injury is fault or neglect that will reduce the plaintiffs
    claim, there is no risk that a defendant will have to pay 100% of the
    plaintiffs loss notwithstanding

that
fault or neglect. The basis
    for a claim under ss. 1, 2 and 5 of the
Negligence Act
 to allow a wrongdoer to obtain indemnity for a payment to the
    plaintiff that exceeded the wrongdoers degree of fault  does not exist in such
    circumstances because of the direct reduction of the plaintiffs claim.

[26]

This principle was applied in
Taylor v. Canada (Health)
,
    2009 ONCA 487, 95 O.R. (3d) 561. In that case, a defendant to a class action sought
    to add third parties from whom the defendant wished to claim contribution on
    the basis that they may have been liable for part or all of the class members
    injuries. But in order to preclude the [defendants] attempt to assert a third-party
    claim and with the intention that [t]he possibility of third party claims
    will be obviated, the plaintiff amended her statement of claim to specifically
    plead that her claim against the defendant was limited to the defendants
    proportionate share of fault: at paras. 9-10. In the circumstances, it was
    clear that she was prepared to reduce the damages claimed by the proportion of
    fault that would be attributed to the proposed third parties.

[27]

This
    court upheld the motion judges striking of the third party claim as disclosing
    no reasonable cause of action, stating at para. 20:

[C]ontribution rights arise only where a defendant is required
    to pay more than its proportionate share of a plaintiffs damages. In the
    present case, Ms. Taylor has limited her claim and those of the class members
    to those losses attributable to [the defendants] negligence. In other words,
    she is not seeking all of her damages from [the defendant]; she seeks only the
    portion of her damages attributable to [the defendants] neglect and not the
    portion of her damages that may be attributable to the neglect of the doctor or
    the hospital. ... Because she is not seeking 100% of her damages, the full
    compensation principle articulated in
Athey v. Leonati
does not apply;
    equally, resort to s. 5 of the
Negligence Act
is unnecessary.

[28]

Taylor
was a case where the attribution to the plaintiff of the proposed
    third parties negligence came about by the plaintiffs express wish.
[3]
But the same result flows from
    attributing negligence to the plaintiff as a matter of law, since s. 3 of the
Negligence
    Act
has the same effect in respect of the attributed negligence:
    it reduces the plaintiffs claim so that the defendant is only at risk of being
    held liable for the portion of the plaintiffs damages attributable to the
    defendants negligent conduct and to the distinct negligent conduct of other
    parties (i.e. negligent conduct that is distinct from the plaintiffs negligent
    conduct). This makes contribution rights against third parties in respect of the
    negligence attributed to the plaintiff inapplicable.

[29]

Accordingly, whether a claim by a defendant seeking contribution and
    indemnity from a third party for alleged negligence that caused or contributed
    to the plaintiffs damages discloses a reasonable cause of action is a function
    of whether that negligence is attributable to the plaintiff. If it is
    attributable to the plaintiff, the defendant has no cause of action against the
    third party.

(2)

When A Plaintiffs Lawyers Negligence Will Be
    Attributed to the Plaintiff

[30]

Several decisions of this court have considered the propriety of a
    third party claim under the
Negligence

Act
where the third parties are the plaintiffs lawyers: see
Corcoran
;
Davy Estate v. CIBC World Markets Inc.
,
2009 ONCA 763,
97
    O.R. (3d) 401
; and
Macchi S.P.A. v. New Solution
    Extrusion Inc.
,
2008 ONCA 586. Those cases adopt, as their starting point, the
    decision of McLachlin J.A. (as she then was) in
Adams v. Thompson,
    Berwick, Pratt & Partners
(1987),
15 B.C.L.R. (2d) 51 (C.A.).

[31]

In
Adams
,

property developers
    sued a firm of engineers alleging that their negligence in designing a
    subdivision delayed the sale of lots. The engineers issued third party
    proceedings against the plaintiffs lawyers alleging they had breached certain
    duties to the plaintiffs which, if fulfilled, would have allowed the plaintiffs
    to reduce the delays. In deciding the third party claim should be struck,
    McLachlin J.A. stated, at pp. 55-56:

It thus may be stated with confidence, in my
    view, that a third party claim will not lie against another person with respect
    to an obligation belonging to the plaintiff which the defendant can raise
    directly against the plaintiff by way of defence. Where the only negligence
    alleged against the third party is attributable to the plaintiff, there is no
    need for third party proceedings since the defendant has his full remedy
    against the plaintiff. On the other hand, where the pleadings and the alleged
    facts raise the possibility of a claim against the third party for which the
    plaintiff may not be responsible, the third party claim should be allowed to
    stand.

Generally speaking, all acts falling within
    the scope of an agency between the proposed third party and the plaintiff fall
    into the category of acts for which the plaintiff is responsible and hence are
    not the proper subject [of] third party claims.

Another situation where a third party claim
    cannot be raised because the obligation is essentially that of the plaintiff is
    where the claim is one that the proposed third party should have advised or
    assisted the plaintiff to mitigate his damages. In that situation, like the
    situation of agency, third party proceedings are redundant because the
    defendant can obtain any relief to which he may be entitled by reduction of the
    plaintiffs claim if he makes out the defence of failure to mitigate.

[32]

McLachlin J.A. describes two situations in which a lawyers negligence
    will be attributed in law to the plaintiff.
[4]
One is where the alleged negligence is committed by the lawyer as agent for the
    plaintiff, within the scope of the agency. A second, and different, situation
    is where the lawyers alleged negligence relates to advice about the plaintiffs
    duty to mitigate a loss that has already occurred. Although both situations
    share the same result  the negligence will be attributed to the plaintiff and
    can be raised directly against the plaintiff by the defendant, making a third
    party claim redundant  it is important not to conflate them.

[33]

The bulk of the third party claim in
Adams
was found to reflect an agency situation.

The defendant engineers argued that the plaintiffs lawyers
    had been negligent in filing and amending, on the plaintiffs behalf, the
    prospectus required to qualify lots for sale. McLachlin J.A. said, at p. 57:

Insofar as the solicitors were retained to file
    and amend the prospectus and otherwise deal with others on the [plaintiffs]
    behalf, they were clearly acting as the plaintiffs agents, given that agency
    arises where one person expressly or impliedly consents that the other, the
    agent, similarly consenting, should represent him or act on his behalf. [Citations
    omitted.]

[34]

The agency situation also applied in
Macchi
.
There the plaintiff sued to recover a loan
    and added as defendants persons it said had provided inaccurate information on
    which the plaintiff had relied in registering a
financing statement,
    undermining its validity
. The defendants issued third party
    proceedings against the lawyer who made the registration, alleging that he
    failed in his duties to make proper searches and enquiries required to effect a
    proper registration. The defendants also claimed that the plaintiff was
    contributorily negligent due to those same failures.

[35]

Wilton-Siegel
    J. struck the third party claim, finding that the lawyer had acted as agent for
    the plaintiff in the registration:
Macchi

s.p.a. v. New
    Solution Extrusion Inc
.
,
2007 CanLII 48653 (Ont. Sup.
    Ct.). At para. 21, he stated:

First,
[the plaintiff]
retained [the lawyer] to act as its agent in filing a valid registration
    statement in respect of a security interest under the PPSA.
[The plaintiff]
did not cease to bear the consequences of
    any negligence on the part of [the lawyer] by engaging him as its agent to
    attend to the registration. It remained responsible for the consequences of an
    invalid registration under the PPSA even if it resulted from negligence on the
    part of [the lawyer].

[36]

This court upheld that decision, stating, at para. 1:

On the pleadings as they stand, any negligence alleged against
    the proposed third party is attributable to the plaintiff. The statement of
    claim shows that [the plaintiff] has not distanced itself from responsibility
    for, or the consequences of, any negligence on the part of its counsel.

(3)

In This Case the Lawyers Alleged Negligence Was
    Committed as Agent for the Hengevelds

[37]

In my view, the agency situation described in
Adams
is also
    present in this case. Here, the Personal Insurance pleadings make clear that
    the retainer of the lawyers included taking steps, on behalf of the Hengevelds,
    to preserve evidence, and that the lawyers dealings with Personal Insurance  what
    they did and failed to do  were dealings undertaken on the Hengevelds behalf.
    Personal Insurance specifically pleads the scope of the lawyers agency as
    embracing the lawyers alleged negligent conduct. There is no pleaded
    negligence arising from acts outside of the lawyers retainer. Personal
    Insurance itself attributes the lawyers conduct to the Hengevelds by alleging that
    the Hengevelds were negligent in making and failing to make arrangements about
    the Hyundais preservation and inspection: arrangements they allege were
    actually made by the lawyers on the Hengevelds behalves. Nor have the Hengevelds
    distanced themselves from responsibility for, or the consequences of, any
    negligence on the part of their counsel:
Macchi
(C.A.), at para. 1.

[38]

On a fair reading of the motion judges decision, he found that this
    was a situation of agency. Whether or not his comment about the initial loss
    was correct, it does not affect the result. Even if the initial loss for these
    purposes is the disposal of the Hyundai and the alleged negligence is that the respondent
    lawyers, acting as the Hengevelds agents, caused or contributed to that loss
    the same loss that Personal Insurance allegedly caused or contributed to  that
    negligence (i) is attributable to the Hengevelds, (ii) may be raised (as it has
    been) by Personal Insurance to obtain a reduction of the Hengevelds claim, and
    (iii) cannot support a third party claim.

(4)

The Appellants Arguments Do Not Take This Case
    Outside of the Agency Situation

[39]

The arguments of Personal Insurance that it and the respondent lawyers
    were involved in the initial loss do not distinguish this case from the agency
    situation. They could only distinguish it from the second situation described in
Adams,
in which the plaintiffs lawyer is alleged to have
    provided negligent advice respecting mitigation
.
[5]

[40]

Even if Personal Insurance is right that this case does not involve
    a
claim of negligent advice resulting in a failure to mitigate
, that does not assist it. In
Adams
, McLachlin J.A. (as she then was) considered the consequence
    of an allegation of negligent mitigation advice
only
    as an alternative, on the assumption that the situation was not one of agency:
Adams
, at p. 57. This underscores the point that where there is an agency
    situation, it bars the third party claim on its own.

[41]

Davy Estate
does not stand for the
    proposition that a third party claim falling outside of the negligent
    mitigation advice category will be allowed to proceed. In
Davy
    Estate

the
    issue was whether a third party claim against the plaintiffs lawyers for
    failing to give proper advice

concerning mitigation could give rise to a
    claim for contribution and indemnity under the
Negligence

Act
. The court held that it could not. In that context, the court
    distinguished the situation where two wrongdoers are involved in causing or contributing
    to the plaintiffs initial loss from
a claim of negligent advice resulting
    in a failure to mitigate
, where the defendant who caused the
    initial loss wishes to third party the plaintiffs lawyers on the basis that
    they failed to properly advise the plaintiff to minimize the loss
after
the initial loss was incurred. The court emphasized the importance of the
    distinction, at paras. 18-19:

A plea of failure to mitigate is of an entirely different
    character. Such a plea arises after the loss has been suffered and relates to
    events or conduct unrelated to the cause of the initial loss. In my view, the
    defendant has no claim in law against the plaintiffs solicitor for advice
    given to the plaintiff as to how to mitigate the loss caused by the defendants
    own wrong.

The
Negligence

Act
does not diminish
    the amount that the plaintiff can recover from either wrongdoer on account of
    the fault of the other, but allows the wrongdoer named as a defendant to claim
    contribution by way of third party proceedings against the other wrongdoer
    based upon their respective degrees [of] fault. A plea that the plaintiff
    failed to mitigate is not embraced by [s. 1 of the
Negligence Act
]. It
    is a defence to the plaintiffs initial claim that reduces the amount that the
    plaintiff may recover from the defendant by shifting some portion of the
    responsibility for the wrong to the plaintiff.

[42]

It was in that context, namely, to identify why an allegation of
    negligent mitigation advice cannot support a third party claim, that the
    distinction was drawn between that type of claim and claims for contribution
    and indemnity against a party alleged to have been implicated in the events
    giving rise to the initial loss and who is therefore jointly and severally
    liable with the defendant for the entire loss:
Davy Estate
, at para. 23. In drawing that distinction, the court in
Davy

Estate

was not suggesting that a third party claim
    falling outside of the negligent mitigation advice category will necessarily be
    allowed to proceed.
Davy

Estate

reaffirmed
    the principle set out in
Macchi
,
that where the plaintiff has not
    distanced itself from responsibility for, or the consequences of, any
    negligence on the part of its counsel in the course of its agency, the agency situation
    in
Adams

applies such

that no
    third party claim can be brought against counsel: at para. 23. Because the
    agency situation is present here, the argument of Personal Insurance must fail.

[43]

The argument that the reasoning in
Corcoran

applies therefore also fails. In
Corcoran
,
a realtor was sued for
    negligently misrepresenting the value and development potential of commercial
    property. The realtor commenced a third party claim against the plaintiffs
    lawyer on the transaction, alleging that he was negligent in advising the
    plaintiff about the contents of the agreement of purchase and sale. In allowing
    the third party claim to stand, the court said, at p. 35:

This may not be a case where the fault alleged
    against the third party is in fact the fault of the plaintiff, but rather a
    case where the plaintiff may not be responsible for the negligence alleged
    against its solicitorThe plaintiff may be able to say it acted reasonably in
    retaining the third party to advise it on the terms of the agreement and
    accordingly should not be responsible for any negligence on the part of its
    solicitor[.]

[44]

In
Corcoran

the plaintiff
    retained and received advice from two professionals  its lawyer and its
    realtor. There was no finding of the type of agency situation described in
Adams
, making the lawyers allegedly negligent conduct
    attributable to the plaintiff
. There was no
    suggestion that the lawyer acted on behalf of the plaintiff in dealing with
    others in a manner analogous to filing a prospectus (as in
Adams
), filing a financing statement (as in
Macchi
), or dealing with Personal Insurance about the preservation of
    evidence (as in this case). Unlike in

Corcoran
,

Personal Insurance here
    has not pointed to any alleged act of negligence which the Hengevelds could say
    was, although committed by their lawyers, not their responsibility vis-à-vis Personal
    Insurance.

Corcoran
was distinguished
    in
Macchi
,
an
    agency situation case, and it is similarly distinguishable here.

(5)

The Novelty of the Hengevelds Cause of Action
    Against Personal Insurance Is Immaterial

[45]

Finally, Personal Insurance argues that the foundation of the action
    against it is spoliation, a cause of action which has been described as not
    fully settled in the jurisprudence and not something which should be dealt with
    under r. 21:
Spasic Estate v. Imperial Tobacco Ltd
.
(2000),
49 O.R. (3d) 699
, at para. 12. That submission is not germane. Regardless of how
    well-founded or novel the

Hengevelds
cause of action against Personal
    Insurance may be,
Personal Insurances ability to

bring a third party
    claim
is foreclosed under fully established legal principles. It is plain
    and obvious that the third party claim discloses no reasonable cause of action
    it has no reasonable prospect of success and was properly struck:
R.
    v. Imperial Tobacco Canada Ltd.
, 2011 SCC 42, [2011] 3
    S.C.R. 45, at para. 17.

Conclusion

[46]

In
Davy

Estate
, at para.
    28, the court referred to the obvious mischief that could arise from allowing
    one party to sue another partys lawyer. That concern will not prevail where
    the defendant has a valid legal claim against the lawyer. Here, for the
    foregoing reasons, there is no valid legal claim. The policy discouraging such
    mischief coincides with the result the law requires.

[47]

I would dismiss the appeal with costs to the respondents fixed at $7500.00,
    inclusive of disbursements and applicable taxes.

Released: AH JUN 17, 2019

B. Zarnett J.A.

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

I agree. P. Lauwers
    J.A.

[1]
Conduct that is attributed to a plaintiff by some applicable principle of law
    is also referred to as conduct that is imputed to the plaintiff: see David
    Cheifetz,
Apportionment of Fault in Tort
(Aurora, Ont.: Canada Law Book, 1981) at 212.

[2]
The lawyers also moved to have the third party claim dismissed or stayed under
    Rule 21.01(3)(d) as an abuse of process of the court. In light of the motion
    judges ruling that the third party claim should be struck as disclosing no
    reasonable cause of action under r. 20.01(1)(b), he concluded that it was not
    necessary to make a determination as to abuse of process.

[3]
Attributing a proposed third partys negligence to the plaintiff can also come
    about through a settlement in which a plaintiff agrees with the settling party
    that any negligence that would have been attributed to the settling party at
    trial will be attributed to the plaintiff. This can occur through a Pierringer agreement
    or order, which requires the plaintiff to restrict its claim to the damages
    arising from the allegedly negligent acts of the defendants who are
not
part of the settlement, among other things: see
Endean
, at paras. 52-53.

[4]
These two situations may not be exhaustive. It is not necessary to decide the
    point here.

[5]

There are certain duties a plaintiff has that cannot be
    avoided by delegating them to another party such as its lawyers, including the
    duty to mitigate. Where the plaintiff did not fulfill its duty to mitigate its
    loss, that failure will be attributed to the plaintiff even if the failure was
    because it received poor advice about how to do so from its lawyers. Deficient
    advice about how to mitigate a loss cannot form the basis of a third party
    claim against the plaintiffs lawyers by the party who caused the loss:
Adams
, at p. 56
; Corcoran
,
at p. 34;
Davy

Estate
,
at para. 18.


COURT OF APPEAL FOR ONTARIO

CITATION: Hunt v. Worrod, 2019 ONCA 540

DATE: 20190627

DOCKET: M49150 (C65477)

Sharpe, Pepall and Roberts JJ.A.

BETWEEN

Kim Kevin Hunt
c/o Bradley James Hunt and Justin Abraham Hunt

Applicant
(Respondent/Responding Party)

and

Kathleen A. Worrod

Respondent (Respondent/Responding Party)

and

D. Andrew Thomson

Non-Party (Respondent/Responding Party)

and

Legal Aid Ontario

Non-Party (Appellant/Moving Party)

Gideon Forrest and Mitch Stephenson, for the appellant/moving
    party Legal Aid Ontario

Michael E. Barrack, Andrea McEwen and Kimberly A.
    Whaley, for the respondent/responding party Kim Kevin Hunt c/o Bradley James
    Hunt and Justin Abraham Hunt

Rose Muscolino, for the respondent/responding party D. Andrew
    Thomson

No one appearing for the respondent Kathleen A. Worrod

Jodi Martin and Elizabeth Rathbone, for the Intervener
    Ontario Association of Child Protection Lawyers

John Phillips and W. Cory Wanless, for the Intervener
    Family Law Association

Heard: May 16, 2019

On appeal from the order of Justice Edward J. Koke of the
    Superior Court of Justice dated April 17, 2018, with reasons reported at 2018
    ONSC 2133, 9 R.F.L. (8th) 199, and the order dated May 24, 2018, with reasons
    reported at 2018 ONSC 3093, 9 R.F.L. (8th) 212.

Pepall J.A.:

Introduction

[1]

This appeal concerns an award of costs of
    $192,639.77 ordered to be paid by a non-party, Legal Aid Ontario (LAO), due
    to its role in funding a party in a family law dispute. The application judge
    concluded that by failing to adequately monitor and assess the merits of the
    defence it was funding, LAO engaged in an abuse of process. For the reasons
    that follow, I would set aside that award of costs.

Background

[2]

In June 2011, Kim Hunt suffered a catastrophic
    brain injury as a result of an ATV accident. He remained in hospital care until
    October 21, 2011. His sons, Justin Abraham Hunt and Bradley James Hunt, were
    appointed as Kims guardians of property and personal care (collectively, the
    Hunt respondents).

[3]

Kim had an on-and-off relationship with Kathleen
    Worrod for several years prior to his accident. They had jointly purchased a
    home in Novar, Ontario in June 2010. In December 2010, they had entered into a
    signed Property Settlement Agreement pursuant to which Kim paid Kathleen for
    her share of the down payment on the home. However, title to the property was
    never transferred into Kims name alone. Three days after Kims release from
    hospital in October 2011, he married Kathleen.

[4]

In their capacity as Kims litigation guardians,
    Justin and Bradley commenced an application against Kathleen seeking a
    declaration that the marriage was void
ab initio
, and that Kim was the
    sole owner of the Novar property. They also requested an order prohibiting
    contact between Kim and Kathleen. They took the position that Kim did not have
    capacity to marry, that Kathleen had no interest in the property, and that
    further contact with Kathleen would be detrimental to Kims health.

[5]

LAO granted Kathleen a legal aid certificate
    and funded her legal fees throughout the proceedings. Kathleen hired the
    respondent, Andrew Thomson, to be her counsel in the litigation.

[6]

Thomson requested and received authorization
    from LAO to obtain a report from a clinical neuropsychologist to opine on
    whether Kim had the cognitive competence to provide direction regarding the
    issue of his guardianship. The report is dated January 12, 2015 and is based
    on assessments conducted in September and November 2014. The reports authors
    concluded that based on his emotional desire to have a relationship, Kim wanted
    to live with Kathleen. However, he lacked the understanding of his need for
    guardianship, and ultimately did not have the cognitive competency to make a
    decision regarding his guardianship. The report did not support the position on
    Kims capacity that Kathleen had taken in the application. She did not call the
    authors of the report at trial nor did she adduce any medical evidence to
    support her allegation that Kim had capacity to marry in October 2011.

[7]

The trial lasted over 10 days. LAO was not a
    party to the application and did not participate in the trial.

[8]

The Hunt respondents succeeded on all claims:
    see
Hunt v. Worrod
, 2017 ONSC 7397, 32 E.T.R. (4th) 232. The application
    judge found that Kim lacked capacity to marry and that the marriage was void
ab
    initio
. He concluded that the Property Settlement Agreement was
    enforceable, and that Kim held the sole equitable title to the Novar property.
    The application judge also granted an order permanently prohibiting all contact
    between Kim and Kathleen. In his subsequent reasons for decision on the issue
    of costs, the application judge characterized Kathleens claims as meritless:
Hunt v. Worrod
, 2018 ONSC 2133, 9 R.F.L. (8th) 199, at para. 49 (costs
    reasons).

(1)

April 17, 2018 Costs Order

[9]

The application judge held a hearing to consider
    the issue of the costs of the proceedings.

[10]

Prior to the costs hearing, counsel for the Hunt respondents had
    written to Thomson and LAO advising that their clients intended to seek costs
    from both Kathleen and Thomson personally, and from LAO.

[11]

In his costs reasons, the application judge observed, at para. 12,
    that Kathleen had moved to British Columbia in 2015 where she was now working
    at a Tim Hortons and that it did not appear that she had any assets. He ordered
    Kathleen to pay the Hunt respondents costs of $385,279.54 on a full recovery
    basis. He stated that the evidence strongly suggested that Kathleen would never
    be in a financial position to pay any of Kims legal costs: at para. 30.

[12]

The application judge turned next to the Hunt respondents request
    for costs against Thomson personally. Their request was based on Thomsons
    alleged failure to meet his reporting requirements to LAO. They submitted that
    had Thomson properly reported to LAO, LAO would not have continued to fund Kathleens
    defence. The application judge was not prepared to make an order of costs
    against Thomson stating, at para. 35:

I am not privy to Mr. Thomsons discussions
    with Legal Aid or with his client, which were privileged, and therefore I have
    no basis for finding that he acted improperly in his reporting requirements to
    Legal Aid. He presented himself as organized, efficient and courteous
    throughout the trial.

[13]

The application judge then focused his attention on the Hunt respondents
    request for costs against LAO.

[14]

He commented that he had not been directed to any cases where a
    court in Ontario had ordered LAO to pay the costs of a successful party: at
    para. 43. He acknowledged that in ordering costs against a non-party, a court
    should exercise caution and that the circumstances meriting such an award must
    be exceptional and clearly constitute an abuse of the courts process: at
    para. 45.

[15]

The application judge then considered the circumstances of this
    case. He found that LAO knew that Kim was a vulnerable individual. He explained
    that when LAO registered its lien against Kims property (i.e. the Novar
    property), it would have had notice of the Public Guardian and Trustees (PGT)
    Certificate of Incapacity to Manage Property that was registered on title. In
    addition, he reasoned that LAO presumably would have received a copy of the neuropsychological
    report because LAO had paid for the assessment and report: at para. 47. He
    concluded that LAO had failed to properly carry out its mandate to monitor the
    proceedings, contributed significantly to the hardships and challenges faced by
    Kim and his family, and needlessly wasted judicial resources: at para. 50. The
    application judge held that LAOs actions (or failure to act) constitute[d] an
    abuse of process, in that they undermined the public interest in a fair and
    just trial process and the proper administration of justice: at para. 52.
    Relying on the courts inherent jurisdiction, he ordered LAO to pay $192,639.77
    to the Hunt respondents. This represented 50 percent of the full indemnity
    costs of $385,279.54 that the application judge had ordered Kathleen to pay. He
    also ordered LAO to pay the costs of the costs hearing to the Hunt respondents
    fixed in the amount of $21,281.47.

(2)

Subsequent Proceedings before the Application
    Judge

[16]

On receipt of the application judges reasons for costs, LAO brought
    a motion to reopen the evidence relating to costs and to vary the application
    judges April 17, 2018 costs decision. LAO sought to tender two affidavits that
    maintained that LAO had not received the neuropsychological report until
    shortly before the commencement of the trial and that it was unaware of the PGTs
    restriction on title to the Novar property until about six months prior to the
    trial. Days before the hearing of LAOs motion, Kathleen waived her right to
    privilege.

[17]

The application judge dismissed LAOs motion on May 24, 2018: see
Hunt
    v. Worrod
, 2018 ONSC 3093, 9 R.F.L. (8th) 212. He sought cost submissions
    from counsel but these were never filed.

(3)

Appeal Proceedings

[18]

On appeal, LAO challenges the application judges April 17, 2018 costs
    order against LAO, and his May 24, 2018 order refusing to reopen the evidence and
    to vary his costs award.

[19]

Prior to the hearing of this appeal, LAO brought a motion for
    directions before a single judge of this court. In accordance with Paciocco
    J.A.s procedural endorsement on the motion for directions, dated September 12,
    2018, LAO also seeks leave to admit fresh evidence consisting of the same two
    affidavits the application judge had refused to consider on the motion to vary
    the costs order. In addition, if necessary, it seeks leave to appeal the April
    17, 2018 costs order.

Analysis

(1)

Leave to
    Appeal is not Required

[20]

The first issue to address is whether LAO is required to obtain
    leave to appeal the costs order pursuant to s. 133(b) of the
Courts of
    Justice Act
, R.S.O. 1990, c. C.43 (CJA).

[21]

LAO argued that, with the exception of the person of straw
    category of awards under s. 131(1) of the CJA, non-party cost awards are made
    pursuant to the inherent jurisdiction of the court and as such, leave to appeal
    is not required. The respondents took no position on this issue.

[22]

Section 131(1) of the CJA provides:

Subject to the provisions of an Act or rules
    of court, the costs of and incidental to a proceeding or a step in a proceeding
    are in the discretion of the court, and the court may determine by whom and to
    what extent the costs shall be paid.

[23]

Section 133(b) provides:

No appeal lies without leave of the court to
    which the appeal is to be taken,

(b) where the appeal is only as to costs that
    are in the discretion of the court that made the order for costs.

[24]

In
1318847 Ontario Limited v. Laval Tool & Mould Ltd.
,
    2017 ONCA 184, 134 O.R. (3d) 641, Strathy C.J.O. confirmed that s. 131(1) authorizes
    cost awards against parties only. He explained that the person of straw
    exception permits a court to look behind a named party (i.e. the person of
    straw) to order costs against the true instigator or promoter of the litigation:
    at para. 46. As such, there are occasions when the real litigant is not named
    as a party to the proceeding but may be exposed to an adverse costs award under
    s. 131(1). Strathy C.J.O. held that apart from this statutory jurisdiction, the
    court has inherent jurisdiction to order costs against a non-party. Leave to
    appeal is required for costs awards made pursuant to statutory jurisdiction
    under s. 131(1) by virtue of the language of s. 133(b). There is no such
    requirement for an award of costs that relies on inherent jurisdiction.

[25]

Before the application judge, the parties agreed that the person of
    straw category was inapplicable. The application judge in making the costs
    award against LAO as a non-party expressly did not rely on statutory authority
    under s. 131(1) but on the courts inherent jurisdiction. In light of the jurisdictional
    basis for the award, the panel was satisfied that LAO was not required to
    obtain leave to appeal under s. 133(b) of the
CJA
.
    At the hearing of the appeal, counsel were so advised.

(2)

Appeal of the Costs Order Against LAO

[26]

This brings me to the appeal from the April 17, 2018 costs order
    against LAO. LAO anchors its appeal on two grounds. First, it submits that the
    application judge denied LAO procedural fairness. Second, LAO challenges both
    the legal and evidentiary basis for the costs award against it. The Hunt
    respondents resist LAOs costs appeal. Thomson takes no position.

[27]

The Family Lawyers Association and the Ontario Association of Child
    Protection Lawyers intervened on the appeal. They both provided submissions on
    the principle of cost awards against LAO in its capacity as a government
    sponsored funder of legal aid.

[28]

The interveners submit that the effect of the application judges
    decision will be to require LAO to independently and continuously scrutinize the
    factual and legal basis for opinion letters provided by private bar lawyers
    representing legal aid funded clients. They submit that this would require a
    diversion of LAOs limited resources away from providing funding, toward
    administrative costs of monitoring. They further submit that the decision will
    require LAO to seek or require waivers of privilege from legal aid clients in
    order to defend against potential claims for non-party costs. In sum, this
    precedent will cause a chill in the availability of legal aid funding, a
    reduction in the number of lawyers willing to accept legal aid certificates, a chill
    on advocacy by lawyers on LAO funded files, and an erosion of solicitor-client
    privilege.

[29]

As mentioned, LAO also seeks to set aside the application judges
    refusal to reopen the evidence and to vary his costs order, and brings a fresh
    evidence motion in support. In light of my conclusion on LAOs argument
    regarding the legal and evidentiary basis for the costs award, there is no need
    to address the procedural fairness ground of appeal, LAOs appeal from the
    refusal to reopen the evidence and vary the costs order, or its motion to admit
    fresh evidence.

Basis for the Costs Award against LAO

[30]

In my view, the costs order against LAO cannot stand. Fundamentally,
    the application judge misconstrued the role of LAO and there was no evidentiary
    support for his conclusion that there was an abuse of process by LAO due to its
    alleged failure to monitor the litigation that it was funding. Moreover, the
    application judges findings were inconsistent with his conclusions relating to
    the claim for costs against Thomson personally.

LAOs Role in the Litigation

[31]

LAOs role in the proceedings was limited to the provision of
    funding pursuant to a legal aid certificate issued to Kathleen, who then
    retained Thomson as counsel. In their costs submissions before the application
    judge, the Hunt respondents confirmed that they were not alleging bad faith by
    LAO. Their focus was on LAOs alleged failure to consider Kims vulnerability,
    and LAOs alleged failure to monitor the proceeding including its failure to
    consider the neuropsychological report that undermined Kathleens position and
    supported that of the Hunt respondents on the issue of capacity. They argue
    that LAOs liability for costs flowed from the inadequacy of LAOs ongoing
    assessment of the merits of the case it was funding, which involved a
    vulnerable party.

[32]

LAO is an independent and publicly accountable non-profit
    corporation:
Legal Aid Services Act, 1998
, S.O. 1998, c. 26, s. 3(4)
    (LASA). The Government of Ontario created LAO to establish and administer a
    cost-effective and efficient system for providing high quality legal aid
    services to low-income individuals in Ontario: LASA, s. 4. As stated in s. 14(2)
    of the LASA, LAO shall provide legal aid services in the areas of criminal and
    family law having regard to the fact that the private bar is the foundation for
    the provision of legal aid services in those areas. LAO does not represent the
    client nor does it direct the litigation. Rather, it provides the funding to
    the client to retain counsel from the private bar. The legal aid system in
    Ontario permits LAO to rely on the opinions of the private bar lawyers who have
    carriage of their clients files subject to a legal aid certificate. The system
    is not established on the basis that LAO is required to engage in a detailed factual
    and legal analysis independent of and disconnected from counsels legal opinion.
    The costs award against LAO based on its failure to adequately monitor the
    litigation is inconsistent with and would frustrate that statutory scheme.

[33]

An award of costs against LAO based on abuse of process must be
    viewed within this context.

[34]

As Strathy C.J.O. explained in
Laval Tool
, the courts
    inherent jurisdiction to order non-party costs is grounded in the courts
    inherent jurisdiction to deter abuse of process and when exercising inherent
    jurisdiction to award costs against a non-party, courts must do so sparingly
    and with caution: at paras. 68 and 72.

[35]

Abuse of process is a flexible doctrine:
Toronto (City) v.
    C.U.P.E
.
,
Local 79
, 2003 SCC 63, [2003] 3 S.C.R. 77, at
    para. 37;
Behn v. Moulton Contracting Ltd.
, 2013 SCC 26, [2013] 2 S.C.R.
    227, at paras. 40-41. The concept has been described as involving proceedings
    that are unfair to the point that they are contrary to the interest of justice,
    oppressive or vexatious, and violate the fundamental principles of justice
    underlying the communitys sense of fair play and decency:
C.U.P.E.
,
at para 35.

[36]

In examining costs against LAO for an alleged abuse of process, a
    distinction must be made between LAO as a party to litigation and LAO as a
    non-party statutory funder of litigation. When LAO is a party to litigation, as
    with any other party, it may be exposed to a costs award. By way of example, in
    an employment or civil action in which LAO is an unsuccessful party, it would
    be open to a judge to grant an adverse costs award: see e.g.
Legal Aid Ontario
    v. Gertler
,
2010 ONSC 6556.

[37]

In contrast, as a non-party, LAOs conduct must be viewed in the
    context of its statutory mandate and the regime of legal aid services in
    Ontario as it is set up by the LASA. Without evidence of something more, such
    as bad faith or a collateral or improper purpose in granting funding to a
    litigant, LAOs conduct in funding litigation pursuant to its statutory
    purpose, and any conduct incidental thereto, including its monitoring of the
    litigation it funds, cannot support a finding of abuse of process and a
    resulting adverse costs award.

[38]

Contrary to the submissions of the Hunt respondents, the LASA scheme
    is wholly unlike the framework that supports third-party funders in class
    proceedings. The legal framework governing third-party litigation funding is concerned
    with the potential harm to the administration of justice that may arise from a non-party
    profiting unduly from or unreasonably controlling anothers litigation: see
Houle
    v. St. Jude Medical Inc.
,

2018 ONSC 6352, 429 D.L.R. (4th) 739 (Div.
    Ct.), at para. 51. LAOs mandate is to administer government funding for low-income
    litigants, without any financial or other interest in the outcome of the
    proceedings. While it is true that pursuant to s. 46(4) of the LASA, any cost
    awards payable to the legal aid funded litigant are deemed the property of LAO,
    the decision to fund a litigant is driven by LAOs statutory mandate and associated
    funding criteria, not by the prospect of economic return to LAO.

Invasion of Solicitor-Client Privilege

[39]

Furthermore, even if a failure by LAO to monitor could anchor a
    finding of abuse of process, any conclusion of improper or inadequate conduct
    by LAO in its funding role would require the impermissible review of the
    reporting and opinion letters of the lawyer holding the legal aid certificate.
    The LASA sets up a tripartite relationship of solicitor-client privilege
    between the client, the lawyer, and LAO. Section 93 provides that the
    relationship between the lawyer providing legal aid services and the client is
    governed by solicitor-client privilege. Section 89 provides that communication
    between LAO and the client, and the lawyer and LAO is privileged to the same
    extent as solicitor-client communication. Thus, s. 89 allows for the legal aid
    funded lawyer to report to LAO on the progress of the case and on the clients
    continued eligibility for legal aid funding, and to provide opinion letters,
    without such reporting amounting to a waiver of solicitor-client privilege: s.
    89(3). The privilege over the reporting and opinion letters belongs to the
    client being funded, not to LAO. Put differently, the privilege over the
    letters is not LAOs to waive. The impermissible scrutiny of privileged
    territory which would be required to support a finding of failure to monitor
    runs counter to the scheme and regime of Legal Aid as it is constituted in
    Ontario. As LAO and the interveners submit,  allowing this scrutiny would risk
    putting LAO in a position where it must seek a waiver of privilege from clients
    in order to a mount a defence to claims against it for non-party costs.

Lack of Evidentiary Support

[40]

Quite apart from misconstruing LAOs role in litigation, there was
    also no evidentiary basis for such an award in this case. As mentioned, the
    gravamen of LAOs alleged conduct in this case was its continued funding in the
    face of knowledge of the vulnerability of the opposing party coupled with its
    failure to monitor. The application judge determined that this conduct amounted
    to an abuse of process. It was conceded by the Hunt respondents that they were
    not alleging bad faith on the part of LAO or that LAO had acted vexatiously.

[41]

Regardless of its knowledge of the PGT certificate registered on
    title, there is no question that LAO would have known about Kims vulnerable state
    based on an appreciation of the nature of the dispute, and the role of Kims
    sons as his litigation guardians. However, this fact standing alone could not
    serve as a foundation for a finding of abuse of process. Many an action
    involves a vulnerable party. One must then determine whether that fact coupled
    with knowledge of the neuropsychological report could anchor a finding of abuse
    of process. The application judge determined that upon receiving the report,
    LAO should have terminated its funding: costs reasons, at para. 52. The problem
    here is that while the report was arguably fatal to the issue of the validity
    of the marriage, it did not speak to the other two issues in play in the
    litigation: ownership of the Novar property and the merits of a no contact
    order. Further, as mentioned, the impact of the neuropsychological report on LAOs
    appreciation of the merits of the case would be subject to the opinion of
    counsel with conduct of the defence on behalf of Kathleen, an opinion that was
    privileged and not before the application judge when he made the costs award. The
    finding of abuse of process made by the application judge was not available on
    the evidence.

Inconsistent Findings

[42]

There is also the issue of the application to the costs award
    against LAO of the judges finding relating to the request for costs as against
    Thomson personally. The application judge considered the costs allegations asserted
    against Thomson to be serious in that they impugned Thomsons professional
    reputation and integrity. The Hunt respondents argued that Kathleens claim was
    without merit, and Thomson failed to meet his obligation to fully and properly
    report to LAO. They argued that had Thomson properly reported to LAO, LAO would
    not have continued to fund Kathleens defence. The application judge concluded
    that there was an absence of a factual foundation on which to base the
    allegations against Thomson.

[43]

The crux of the allegations against Thomson were substantially the
    same as those asserted against LAO. The application judge implicitly concluded
    that Thomson did not cause costs to be incurred without reasonable cause. He
    also recognized that Thomsons communications with Kathleen were privileged and
    therefore he had no basis for finding that Thomson acted improperly in his
    reporting requirements to LAO. He then proceeded to find LAO at fault.

[44]

His findings against LAO were inconsistent with his findings in
    favour of Thomson. There was nothing in the record that would permit the application
    judge to exonerate Thomson on the one hand and penalize LAO on the other.
    Moreover, as mentioned, he failed to consider that LAO had no ability to waive
    privilege over the opinions received from Thomson.

Disposition

[45]

For these reasons I would allow the appeal and set aside the costs
    order against LAO. I would dismiss the motions for leave to appeal and to admit
    the public importance affidavits to the extent they were filed in support of
    the leave motion, as being unnecessary. I would similarly dismiss the motion to
    set aside the application judges refusal to reopen the evidence and vary his
    costs order, and dismiss the motion to admit the two LAO affidavits as fresh
    evidence.

[46]

Counsel for the respondents ably argue that this is a unique case
    involving a vulnerable individual. Kims circumstances are most unfortunate.
    However, his misfortune does not render the award against LAO sustainable either in
    law or in fact.

[47]

That said, in light of the novel nature of the issues in dispute, I
    would temper the costs awards in favour of LAO. I would order the Hunt respondents
    to pay LAO $15,000 in costs on a partial indemnity scale inclusive of
    disbursements and applicable tax on account of the main appeal; I would reverse
    the award below for the costs of the costs hearing and order the Hunt respondents
    to pay LAO $4,621 for that hearing on a partial indemnity scale inclusive of
    disbursements and applicable tax. I would make no order for costs of the appeal
    of the refusal to reopen the evidence and vary the costs order. The interveners
    do not seek costs nor are they liable for any costs.

Released: RJS JUN 27, 2019

S.E. Pepall J.A.

I agree. Robert J. Sharpe J.A.

I agree. L.B. Roberts J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Hurst v. Hancock, 2019 ONCA 483

DATE: 20190611

DOCKET: C66121/M50368

Feldman, Paciocco and Fairburn JJ.A.

BETWEEN

Craig Hurst

Plaintiff (Respondent/Moving Party)

and

James Hancock, Darwin Productions Inc.
and
    Tradepoint 360 Inc.

Defendants (
Respondents/Responding Parties
)

and

Graham Partners LLP, Graham, Wilson & Green,
    and HGR Graham Partners LLP

Intervenors (Appellants)

Tim Gleason and Rebecca Glass, for the appellants

Katrina Marciniak, for the respondents/responding
    parties

Manjit Singh and Eric Cheng (Sheung Chi), for the
    respondent/moving party

Heard: May 16, 2019

On appeal from the judgment of Justice Peter J. Cavanagh
    of the Superior Court Justice, dated October 5, 2018, with reasons reported at
    2018 ONSC 5919.

REASONS FOR JUDGMENT

[1]

The plaintiff, Craig Hurst, was an employee of the respondent Darwin
    Productions Inc. (Darwin). The respondent, James Hancock, was the principal
    of Darwin. Mr. Hurst consulted a law firm, the intervenors Graham Partners LLP,
    Graham, Wilson & Green and HGR Graham Partners LLP (collectively Graham
    or the appellants) when he was not being paid extra salary he claimed was
    agreed upon together with a percentage interest in the respondent company.

[2]

Mr. Hurst sued the respondents more than two years after Grahams
    initial correspondence with them and after they declined to acknowledge the
    terms of their agreement. When the respondents moved for summary judgment
    claiming that the action was statute-barred, Mr. Hurst commenced an action
    against Graham for negligence. Graham was permitted to intervene on the summary
    judgment motion, because if the claim against the respondents was dismissed as
    statute-barred, the plaintiff would use that finding as the basis to recover
    against Graham.

[3]

The motion judge granted the summary judgment motion, dismissing the
    plaintiffs claim against the respondents as statute-barred. The plaintiff takes
    no position on the appeal from that decision. Only Graham appeals the motion
    judges decision. For the reasons that follow, the appeal will be allowed and
    the summary judgment set aside.

Background facts

[4]

The plaintiff began working for Darwin, the respondent software company,
    in January 2007 on a consulting contract. In or around June 2007, he became an
    employee of Darwin. The plaintiffs position in the action was that his
    agreement with Darwin was that his salary was to be $15,000 per month, $10,000
    of which would be deferred for 24 months and applied toward a 12% share
    ownership interest in the company. The plaintiff also contended that following the
    24-month period he would continue to earn $15,000 per month. The evidence of
    both parties was that due to budget constraints, the plaintiff and other
    employees full wages were deferred to a future date when the respondent
    company had the funds to pay them.

[5]

In November 2009, the plaintiff retained the appellants to assist him in
    confirming that the wages he claimed had been agreed would be paid and that he
    would be receiving the 12% share interest in the company. The appellants wrote
    a letter to the respondents on November 16, 2009. That letter claimed that the
    plaintiff had earned $127,377.30 in unpaid compensation and expenses together
    with a 12% ownership interest in the company. Attached schedules showed the
    unpaid amounts beginning in February 2009. The letter asked for confirmation of
    the amount owing plus a payment plan, provision of the share certificate, and
    confirmation of ownership by Darwin of certain intellectual property.

[6]

Following this letter, Mr. Hurst and Mr. Hancock had meetings as well as
    telephone and email correspondence about the terms on which Mr. Hurst would
    continue his employment with the company, but they did not come to a resolution.
    Nor did they agree on what was earned to date. As a result, the appellants sent
    a further letter dated December 10, 2009, with the same three requests as in
    the November 16 letter, and ending by stating that while a negotiated
    settlement would be preferable, if there was no satisfactory response Mr.
    Hurst will pursue his legal remedies.

[7]

By letter dated January 11, 2010, lawyers for the respondents, Darwin
    and Mr. Hancock, responded to each of the claims. With respect to the salary,
    the respondents denied that there was an agreement to pay more than $5,000 per
    month, and stated that any other amounts would only be paid when the company
    was financially able to do so. With respect to the share certificate, there was
    a dispute about the plaintiffs entitlement because of some actions that he had
    taken, but willingness to discuss the issue further. It was confirmed that the
    intellectual property was owned by Mr. Hancock personally and licensed to the
    company. The letter concluded with a request for further documentation from the
    plaintiff.

[8]

While the plaintiff commenced a Small Claims Court action for some
    expenses in the fall of 2010, he did not commence the claim for the amounts
    referred to in the two letters of November and December 2009 until January 10,
    2012.

The decision of the motion judge

[9]

The plaintiffs position on the motion was that his unpaid salary was a
    demand obligation. He took that position for the first time in a clarifying
    affidavit following his cross-examination on his original affidavit. The respondents
    position was that any salaries over $5,000 were theoretical debts on the
    company that would only be actualized when the company was able to pay them,
    and they were not a demand obligation or an obligation at all: see
Hurst v.
    Hancock
, 2018 ONSC 5919, at para. 24.

[10]

The
    motion judge rejected the plaintiffs position. He found that there was no
    evidence of an agreement that any unpaid wages were a demand obligation of the
    company.

[11]

The
    motion judge also rejected the plaintiffs position that he only discovered
    that the respondents were denying his entitlement to salary or a share in the
    company from the January 11, 2010 lawyers letter, and that his cause of action
    only arose at that time. He concluded that by no later than December 10, 2009,
    the plaintiff knew that the respondents were disputing his entitlement to the
    salary and share certificate he claimed. Therefore, the claim was commenced out
    of time.

The intervenors appeal

[12]

The
    issue that had to be decided in order to determine whether the plaintiffs
    claim was statute-barred was when the plaintiffs cause of action against the
    respondents arose and when he discovered it. Because this is a breach of
    contract claim, the question is did the respondents breach their contract with
    the plaintiff and, if so, when.

[13]

The
    appellants position is that the motion judge erred in law by failing to
    address and properly analyze the issue of anticipatory breach of contract. They
    say that the respondents position in December 2009 could be characterized as notice
    that they intended to breach the agreement to pay the unpaid salary in the
    future when the company could afford to do so. In law, the plaintiff could
    accept that anticipatory breach (or repudiation) and sue, or choose to wait
    until performance was due: see
Ali v. O-Two Medical Technologies Inc.
,
    2013 ONCA 733, 118 O.R. (3d) 321, at para. 24.

[14]

In
    this case, the appellants contend that the plaintiff chose to wait until he
    sued in January 2012. That suit constituted acceptance of the repudiation. The
    appellants argue that the motion judge therefore erred in law by finding that
    the claim was statute-barred, or in the alternative, the question of when the
    claim was discovered constituted a genuine issue for trial.

[15]

In
    rejecting the submission that the unpaid salary was a demand obligation, the
    motion judge concluded that the salary became due and owing when it was earned,
    but that there was a practical agreement to defer payment. He stated, at para.
    32:

The obligation by Darwin to
pay unpaid salary that was earned by the plaintiff was owed
    each month that the salary was earned and unpaid. The plaintiffs evidence is
    that he knew that he had a claim for unpaid salary each month from June 2007 to
    December 2009, even though the plaintiff and Hancock may have agreed that, as a
    practical matter, unpaid wages would not be paid until Darwin was financially
    able to do so. When I consider the plaintiffs evidence and Hancocks evidence
    in relation to the plaintiffs contract of employment and the nature of
    Darwins obligation to pay any wages owed to the plaintiff, I conclude that
    this was not a demand obligation, and no demand was required before it could be
    enforced.

[16]

While the motion judge was entitled to reject the plaintiffs
    late-blooming position that the extra salary was a demand obligation, there was
    no basis on the evidence to make the finding that the extra salary became due
    and owing as it was earned. Both parties agreed that any extra salary was
    deferred to a future time when the company was financially able to pay it.
    There was no evidence by either party that the salary earned became due and
    owing each month when it was earned.

[17]

The motion judge made no other finding regarding the terms of the
    agreement between the parties. Nor did he find when that agreement was
    breached.

[18]

The appellants submit that the motion judge erred by failing to address
    the anticipatory breach argument in his reasons for decision. We were told that
    this argument may not have been raised directly in oral submissions by the
    appellants because of time constraints at the hearing of the motion, but that
    it was raised in the appellants factum before the motion judge, which was
    referred to in oral submissions. That factum was provided to this court during
    oral argument.

[19]

We agree with the appellants that the motion judge erred in law by
    failing to address this legal argument and by failing to find whether any
    repudiation or anticipatory breach by the respondents, either in December 2009
    or in January 2010 by the lawyers letter, was accepted by the plaintiff before
    he commenced this action. If there was anticipatory breach or repudiation, then
    until the appellant accepted that breach, no cause of action accrued: see
Ali
,
    at para. 26.

[20]

With respect to the 12% share interest claim, the plaintiff sought a
    declaration that he was entitled to that interest. He argued that no limitation
    period applies to a claim for a declaration without a claim for consequential
    relief, relying on s. 16(1)(a) of the
Limitations Act, 2002
, S.O.
    2002, c. 24, Sched. B. The motion judge rejected that submission because the
    plaintiff also sought as consequential relief a mandatory order for the respondent
    company to issue the 12% share certificate. Since the agreement alleged was
    that the plaintiff became entitled to the share interest 24 months after June
    2007, if the respondents denied the plaintiffs right to the share interest,
    the cause of action for breach of the agreement to grant it would have arisen.

[21]

The appellants submit that the respondents position as to the
    plaintiffs share interest was equivocal even in the lawyers letter of January
    2010. That leads to the issue of whether the record was sufficient for the
    motion judge to decide this factual issue, among others relating to the terms
    of the plaintiffs employment.

[22]

The motion judge determined that the evidentiary record was sufficient
    to allow him to make the necessary findings of fact and to apply the law to
    reach a just result and that there was no genuine issue that required a trial.
    We disagree. The primary issue between the parties was the terms of the
    agreement. The motion judge did not make a finding on that critical issue, or
    whether and if so when the respondents breached that agreement. There is a
    basic disagreement on what was agreed and no written contract. In our view,
    there was a genuine issue requiring a trial. The limitation issue will turn on
    that finding.

[23]

The appeal is therefore allowed, meaning the summary judgment in favour
    of the respondents, including the costs awarded, is set aside, with costs of
    the appeal to the appellants, fixed at $9000 inclusive of disbursements and
    HST.

The plaintiffs motion respecting costs

[24]

The plaintiff, who took no position on the appeal, brought a motion
    before the panel asking the court to effectively declare that r. 63.01(1) of
    the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194 stays the costs
    order made against the plaintiff on the summary judgment motion, by virtue of
    this appeal by the appellants. The plaintiff filed a factum. The respondents filed
    no responding material. The affidavit filed by the plaintiff indicates that following
    the summary judgment there were ongoing proceedings in the Superior Court
    between the plaintiff and the respondents and that this costs enforcement issue
    was raised in a motion in the Superior Court where the respondents took the position
    that there is no automatic stay in favour of the plaintiff. The status of that
    motion is not revealed in the material.

[25]

In oral submissions, counsel for the plaintiff advised that on the
    morning of the appeal counsel for the respondents said that they would not
    enforce the costs order pending the outcome of the appeal. The plaintiff sought
    his costs of bringing this issue before the court.

[26]

We are not prepared to order any costs of the plaintiffs motion. The
    plaintiff chose not to appeal and took no position on the intervenors appeal.
    The issue of the enforceability of the costs award pending the appellants appeal
    was raised before the Superior Court before this motion was brought. There is
    no suggestion that the respondents have taken steps to collect the awarded costs
    from the plaintiff. There is therefore no live issue before this court. The
    plaintiffs motion in this court, essentially asking the court to interpret a
    rule for the assistance of the parties, is ill-conceived, and at this stage, it
    is moot.

K.
    Feldman J.A.

David
    M. Paciocco J.A.

Fairburn
    J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Ince (Re), 2019 ONCA 491

DATE: 20190613

DOCKET: C66190

Doherty, Watt and Pardu JJ.A.

IN THE
    MATTER OF MELVILLE INCE

AN
    APPEAL UNDER PART XX.1 OF THE
CODE

Anita Szigeti, for the appellant, Melville Ince

Holly Loubert, for the respondent

Heard: June 11, 2019

On appeal from the disposition of the Ontario Review
    Board, dated November 7, 2018.

APPEAL BOOK ENDORSEMENT

[1]

We see no basis upon which to interfere with the order of the Board. The
    Board declined to provide a term allowing for community living at the
    discretion of the Hospital. It did, however, include a very generous daily pass
    provision, again at the discretion of the Hospital.

[2]

In our view, the order reflected the evidence of the treating
    psychiatrist and the Hospital team. The daily pass provision addresses concerns
    that the appellant might lose hope with the process and deteriorate. The order
    is not unreasonable.

[3]

The appeal is dismissed.


COURT OF APPEAL FOR ONTARIO

CITATION: Jacobs v. Leboeuf Properties Inc., 2019 ONCA 551

DATE: 20190628

DOCKET: C65921

Huscroft, Trotter and Zarnett JJ.A.

BETWEEN

David Jacobs

Plaintiff/Appellant

and

Leboeuf Properties Inc.

Defendant/Respondent

Robert J. Kennaley, for the appellant

Andrew Rance, for the respondent

Heard: June 28, 2019

On appeal from the order of Justice Bernadette Dietrich
    of the Superior Court of Justice, dated August 30, 2018.

APPEAL BOOK ENDORSEMENT

[1]

In our view, this was not a proper case for the application of rule
    21(a). The contractual provision at issue, a covenant to insure, could not be
    properly interpreted in isolation from the contract as a whole, or in a factual
    vacuum. Indeed, the contract itself was not provided to the motion judge. In
    these circumstances, it is not possible to determine the objective intentions
    of the parties in accordance with the principles of contract interpretation.

[2]

Accordingly, the appeal is allowed and the order of the motion judge is
    set aside. The appellant is entitled to costs of $2,500 on the appeal, and
    $10,000 on the motion, both figures inclusive of taxes and disbursements.


COURT OF APPEAL FOR ONTARIO

CITATION: Kagan v. Brown, 2019 ONCA 495

DATE: 20190617

DOCKET: C65004

Tulloch, Roberts and Miller JJ.A.

BETWEEN

Jennifer Laura Kagan
    (Brown)

Appellant (Respondent)

and

Robin Allan McLean Brown

Respondent (Applicant)

Robert Karrass
,
    for the appellant

Elliot Vine, for the respondent

Heard: June 3, 2019

On appeal from the order of Justice Douglas Gray of the
    Superior Court of Justice, dated January 24, 2018.

REASONS FOR
    DECISION

[1]

The appellant appeals from the parenting schedule set out in the final
    order of the trial judge.  The appellant takes no issue with the other
    provisions of the final order in relation to custody, equalization and child
    support.

[2]

After an 11-day trial, the trial judge ordered that the respondent have
    greater contact with the parties now four-year-old daughter, K., including
    extended overnight visits during weekends and holidays.

[3]

The appellants main submission is that the trial judge erred in failing
    to follow the recommendations of the expert assessor respecting the parenting
    schedule, specifically, the gradual increase of overnight and holiday access.
    The appellant submits that their daughter is distressed by the present schedule
    because it provides for too much time away from her mother while she is very young.
    In support of this submission, the appellant seeks to file new opinion evidence
    from a clinical psychologist.  The appellant submits that the trial judge
    imposed the parenting schedule to punish her for moving a fair distance away from
    the respondent after the marriage breakdown.

[4]

We do not accept these submissions.

[5]

We start from the well-established principle that the trial judges
    determination of the appropriate parenting schedule is firmly within his
    discretion and that absent palpable and overriding error or error in principle,
    appellate intervention is unjustified:
DAngelo v. Barrett
, 2016 ONCA
    605, at para. 7.  We see no such error here.

[6]

The trial judge thoroughly reviewed the relevant evidence and carefully
    crafted a reasonable parenting schedule that took into account the particular
    circumstances of the parties and, most important, the best interests of their
    child.  The latter required that he give effect to the maximum contact
    principle under s. 16(10) of the
Divorce Act
, R.S.C. 1985, c. 3, that
    a child of the marriage should have as much contact with each spouse as is
    consistent with the best interests of the child.

[7]

We disagree that the trial judges order disregards the assessors
    recommendations or is punitive against the appellant.  While he could accept
    all, none or part of the assessors recommendations, it was the trial judges
    ultimate responsibility to fashion an appropriate parenting schedule in the
    best interests of the parties daughter, which reflected his consideration of
    all relevant circumstances:
DAngelo
, at para. 8.  That is precisely
    what he did here.

[8]

The trial judge recognized that the unfortunately toxic relationship
    between the parties made communications and co-operation between the parties very
    difficult, such that the 50/50 parenting model recommended by the assessor
    would not work.  As a result, he granted decision-making authority to the
    appellant and created a parenting schedule that has the parties daughter spend
    most of her time in her mothers care.   The trial judge nevertheless
    appreciated, as the assessor also observed, that the parties are excellent
    parents who are devoted to their daughter.  As a result, he determined that granting
    increased access to the respondent, including overnight and holiday access,
    would be in the best interests of their young child.  His parenting schedule properly,
    fairly and thoughtfully reflects all of these considerations.  These
    considerations had not materially changed by the time of the September 21, 2018
    review.  There is no basis to interfere with the parenting schedule on appeal.

[9]

As fresh evidence regarding the current effect of the parenting schedule
    on the parties daughter, the appellant seeks to rely on the report of Dr. Liza
    Weiser, dated February 8, 2019.  We would admit the fresh evidence given that
    it is tendered in relation to the issue of the best interests of K. As Benotto
    J.A. observed in
Goldman v. Kudelya
, 2017 ONCA 300, at para. 25:

The
Palmer
criteria are
    more flexible where an appeal involves the best interests of a child, and it is
    important to have the most current information possible when determining the
    childs best interests [g]iven the inevitable fluidity in a childs
    development:
Childrens Aid Society of Owen Sound v. R.D.
(2003),
    2003 CanLII 21746 (ON CA), 178 O.A.C. 69, at para. 21.

[10]

Dr.
    Weiser is a clinical psychologist who has seen the parties daughter on eight
    occasions between September 26, 2018 and February 4, 2019.  The report mostly
    describes Dr. Weisers observations and summary of K.s feelings when she is
    with her parents and makes recommendations as to how communications between her
    and her parents can be improved when K. is away from each of them.
    Importantly, Dr. Weiser notes that K. has been able to express how she misses
    both parents when she is not with either one of them, but she struggles more
    with missing her mother during her time with her father; often worrying if her mother
    knows where she is when she is not with her.  While Dr. Weiser does opine that
    K. will become distressed when away from her mother, she also notes that this
    distress can be alleviated by contact with her mother.  She forecasts that K. will
    become tremendously distressed if she has to endure a prolonged separation from
    her mother, by which at her age would be no more than five consecutive days.

[11]

In
    our view, Dr. Weisers report would not have changed the parenting schedule
    ordered by the trial judge.  It is important to remember that Dr. Weisers
    observations were made when K. was three years old and speaks to the effect of
    separation from her mother as at that age.  She gives no opinion as to the
    effect of such a separation when K. is 6, when the first month holiday with her
    father is proposed to occur under the parenting schedule.  Moreover, any
    concern about distress appears to be mitigated by the communication and other
    techniques that Dr. Weiser advocates for K.s comfort.

[12]

Finally,
    the appellant seeks leave to appeal the trial judges costs orders.  We see no
    error in the trial judges orders that holistically took into account the
    parties respective successes over the entirety of these hard-fought and
    protracted proceedings.

[13]

For
    these reasons, we dismiss the appeal.

[14]

The
    respondent is entitled to his partial indemnity costs in the amount of $10,000,
    inclusive of disbursements and applicable taxes.

M.
    Tulloch J.A.

L.B.
    Roberts J.A.

B.W.
    Miller J.A.