COURT OF APPEAL FOR ONTARIO

CITATION: McConnell v. Huxtable, 2014 ONCA
    86

DATE: 20140131

DOCKET: C56761

Laskin, Rosenberg and Goudge JJ.A.

BETWEEN

Judith June Barry McConnell

Applicant (Respondent)

and

Brian Wesley Scott Huxtable

Respondent (Appellant)

Bryan R.G. Smith and Lindsey Love-Forester, for the
    appellant

Bill Rogers, for the respondent

Heard: September 16, 2013

On appeal from the order of Justice Craig Perkins of the Superior
    Court of Justice, dated February 11, 2013, with reasons reported at 2013 ONSC
    948, 113 O.R. (3d) 727.

Rosenberg J.A.:

[1]

This
    appeal concerns the relationship between the
Limitations Act, 2002
and
    the
Real Property Limitations Act
in the context of a family law
    dispute. It is a matter of first impression in this court. The respondent
    Judith McConnell brings an action for unjust enrichment seeking a remedial
    constructive trust in a property owned by the appellant Brian Huxtable. In the
    alternative, she seeks a monetary award. By June 2007, the respondent was aware
    that she had claims or potential claims against the appellant including a claim
    for unjust enrichment and a remedy of constructive trust. Since she did not
    start this action until February 2012, her action may be out of time if the
    general two-year limitation period in the
Limitations Act, 2002
applies,
    but not if the ten-year limitation period in s. 4 of the
Real Property
    Limitations Act
applies. Thus, the issues in this appeal are: (1) which,
    if either, of these two limitation periods applies, or (2) whether neither Act
    applies, leaving a legislative gap such that there is no statutory limitation
    period.

[2]

The
    appellant brought a motion for summary judgment under s. 16 of the
Family
    Law Rules.
The motion judge, Perkins J., found that the
Real Property
    Limitations Act
applied. Alternatively, he found that there was a
    legislative gap and there was no limitation period for this action. I agree
    with the motion judge that the
Real Property Limitations Act
applies.
    I do not agree with the motion judges alternative conclusion that there is a
    legislative gap. Accordingly, I would dismiss the appeal.

THE FACTS

[3]

As
    indicated, this appeal arises out of a motion for summary judgment brought by
    the appellant. There are significant factual disputes between the parties as to
    the nature of their relationship and what if any contribution the respondent
    made to the properties owned by the appellant. The respondent claims that she
    made significant contributions to improving the properties, particularly the
    most recent property on Royal York Road. The appellant alleges that she made
    minimal contributions, perhaps as little as 20 hours of work, and that her
    contributions were of little value. The factual dispute is not germane to this
    motion. The facts relating to the limitation period issue are not disputed.

[4]

The parties had a relationship from 1993 or 1994 to 2007. They did
    not marry and they did not have children. During their relationship, the appellant
    bought and sold two houses and
owned
a third at the time the parties relationship ended. All properties
    were in the appellants name.
All funds to acquire the properties were
    provided by the appellant. The parties relationship ended in June 2007 when
    the police removed the respondent from the home and charged her with attempting
    to extort the appellant. She did not live at the property after that time.  The
    respondent does not admit the attempted extortion. She does admit that the
    parties relationship ended in June 2007. The parties have not shared a
    residence, had any relationship, shared any financial responsibilities or had
    any financial obligations to one another since June 2007.

[5]

Following
    the end of the parties relationship in June 2007, the respondent retained a
    lawyer who wrote to the appellant seeking an amicable settlement of issues
    arising from your joint ownership of property, cohabitation and separation.
    There was an exchange of correspondence but no settlement was reached. Nothing
    else occurred until February 2012, when the respondent learned that the
    appellant was selling his home. On February 28, 2012, the appellant was served
    with the material in this proceeding including an
ex parte
order that
    granted the respondent a Certificate of Pending Litigation (CPL) on the
    appellants home. The relevant parts of the respondents claim for the purposes
    of the appeal are the following:

(a)     A declaration that pursuant to
    the doctrines of resulting trust, constructive trust, or as a proprietary award
    for unjust enrichment, the Applicant has a 50% interest (traceable to any
    proceeds) in the house at [Royal York Road property], which is registered
    solely in the name of the Respondent;

(b)     A Certificate of Pending
    Litigation with respect to the abovementioned house, and an Order that it
    cannot be sold without the written consent of the Applicant;

(c)     In the alternative, an award to
    the Applicant of monetary damages for unjust enrichment in an amount to be
    determined;

[6]

The
    appellant brought the motion for summary judgment to have the action dismissed
    because it was out of time and to have the CPL removed. Correspondence between
    counsel on the motion for summary judgment confirmed discovery was not an
    issue. The parties included the following in an Agreed Statement of Facts:

On June 27, 2007, the Applicant Judith June Barry McConnell was
    aware that she had claims, or potential claims, against the Respondent Brian
    Wesley Scott Huxtable, in the nature of relief as against Mr. Huxtable's
    property, including but not limited to claims for unjust enrichment, and the
    remedies of constructive trust and/or damages flowing therefrom.

THE REASONS OF THE MOTION JUDGE

[7]

In
    lengthy and compelling reasons, the motion judge found that the
Real
    Property Limitations Act
governed the respondents claim. While the
Limitations
    Act, 2002
seeks to enact a comprehensive scheme for limitation periods, s.
    2(1)(a) expressly exempts

proceedings
    to which the
Real Property Limitations Act
applies. The motion judge found that the respondents claim came within s. 4
    of the
Real Property Limitations Act
, which provides as
    follows:

4.  No
    person shall make an entry or distress, or bring an action to recover any land
    or rent, but within ten years next after the time at which the right to make
    such entry or distress, or to bring such action, first accrued to some person
    through whom the person making or bringing it claims, or if the right did not
    accrue to any person through whom that person claims, then within ten years
    next after the time at which the right to make such entry or distress, or to
    bring such action, first accrued to the person making or bringing it.

[8]

The
    motion judge held that a claim for unjust enrichment in which the claimant seeks
    a remedial constructive trust in another partys property is an action to
    recover any land within the meaning of s. 4. In reaching this conclusion the
    motion judge conducted a thorough review of the authorities and engaged in the
    statutory interpretation exercise mandated by the Supreme Court of Canada in
    decisions such as
Rizzo & Rizzo Shoes Ltd. (Re),
[1998] 1 S.C.R.
    27. He considered the statutory history and the scheme and object of the
Real
    Property Limitations Act
and the
Limitations Act, 2002
.

[9]

The
    motion judge also noted an apparent anomaly that would occur if the two-year
    limitation period under the
Limitations Act, 2002
applied. In family
    law cases involving a married couple, an unjust enrichment claim seeking a
    remedial constructive trust is often paired with a claim for equalization under
    the
Family Law Act
. The two claims typically cover, in part, the same
    property and subject matter, and the equalization claim ordinarily has a
    six-year limitation period by virtue of s. 7(3) of the
Family Law Act
.
    Section 19 of the
Limitations Act, 2002
preserves those limitation
    periods set out in the Schedule to that Act, including s. 7(3) of the
Family
    Law Act
.

[10]

The motion judge also
    concluded that the respondents alternative claim for monetary compensation
    sheltered under her claim for recovery of land. Since the ten-year limitation
    period in s. 4 of the
Real Property Limitations Act
applied to the
    claim, the motion for summary judgment was dismissed.

[11]

Supposing in the
    alternative that the
Real Property Limitations Act
did not apply by
    virtue of the exemption in s. 2(1)(a) of the
Limitations Act, 2002
, the
    motion judge went on to consider whether the
Limitations Act, 2002
applied
    at all or whether there was instead a legislative gap. Again in comprehensive
    reasons in which he drew on his long experience conducting family law cases,
    the motion judge found that the
Limitations Act, 2002
could not apply
    to the respondents claim and thus there was a legislative gap. In the result,
    there was no statutory limitation period. The motion judge left open the
    question of whether the equitable doctrine of
laches
could apply. That
    issue could only be determined on a full record and would not be suitable for
    resolution on the motion for summary judgment in the form it was brought in
    this case.

THE ISSUES

[12]

The motion judge
    articulated the issues with clarity as follows:

1.       Is a claim in a family law
    case in which the claimant pleads facts to establish a constructive trust and
    asks the court to award an ownership interest in land, with an alternative
    claim for monetary compensation, governed by the ten year limitation period set
    out in section 4 of the
Real Property Limitations Act
or by the two
    year limitation period set out in section 4 of the
Limitations Act, 2002
?

2.       Is there a gap in the
    limitations legislation such that there is no applicable statutory limitation
    period for a constructive trust claim in a family law case, leaving scope for
    the court to devise a time limit using its equitable jurisdiction?

I will deal with the issues in the same order. As I
    agree with the motion judges resolution of the first issue, in these reasons I
    will rely extensively upon his reasons.

ANALYSIS

Application of the
Real
    Property Limitations Act

[13]

The most relevant
    parts of the
Real Property Limitations Act
are the following:

1.
In this Act,

action includes an information on behalf of the Crown and any
    civil proceeding;

land includes messuages and all other hereditaments, whether
    corporeal or incorporeal, chattels and other personal property transmissible to
    heirs, money to be laid out in the purchase of land, and any share of the same
    hereditaments and properties or any of them, any estate of inheritance, or
    estate for any life or lives, or other estate transmissible to heirs, any
    possibility, right or title of entry or action, and any other interest capable
    of being inherited, whether the same estates, possibilities, rights, titles and
    interest or any of them, are in possession, reversion, remainder or
    contingency;

4.

No person shall make an entry or distress,
    or bring an action to recover any land or rent, but within ten years next after
    the time at which the right to make such entry or distress, or to bring such
    action, first accrued to some person through whom the person making or bringing
    it claims, or if the right did not accrue to any person through whom that
    person claims, then within ten years next after the time at which the right to
    make such entry or distress, or to bring such action, first accrued to the
    person making or bringing it.

[14]

Other parts of the Act
    are also of some assistance in interpreting the legislation and I will refer to
    those provisions later in these reasons. The
Real Property Limitations Act
is, with some modifications, what used to be Part I of the
Limitations Act,
R.S.O.1990, c. L-15. I will usually refer to this latter legislation as
    the
Old Limitations Act.
When the Legislature decided to overhaul the
    law of limitations in this province, it decided to leave the law as applied to
    real property largely untouched; hence the archaic and difficult language in
    the
Real Property Limitations Act.
For example the key definition in
    s. 1 of land uses the archaic term messuages, which, as I understand it,
    means a dwelling house, its outbuildings, the area immediately surrounding the
    dwelling, and the adjacent land appropriate to its use.

[15]

To understand the
    application of s. 4, it will be helpful to remove those parts that do not directly
    apply to this case:

No person shall bring an action to recover any land, but within
    ten years next after the time at which the right to bring such action first
    accrued to the person bringing it.

Thus, s. 4 creates a ten-year limitation period for an
    action to recover land. The central question raised by this appeal is whether a
    claim for unjust enrichment in which the claimant asks the court to impose a
    constructive trust upon the respondents real property is an action to recover
    any land. The motion judge broke the issue down into three parts: (1) is the
    respondents claim an action, (2) is the action to recover, and (3) is the
    action to recover land? There is no dispute that the respondents claim is an
    action within the meaning of s. 4. I therefore turn to the other questions.

Meaning of recover

[16]

The appellant
    challenges the motion judges approach to defining recover and, of course,
    his decision. The motion judge considered both the ordinary meaning of the term
    as well as its meaning as used in legal contexts and this courts decision in
Hartman
    Estate v. Hartfam Holdings Ltd.
(2006), 263 D.L.R. (4th) 640. The
    appellant submits that the motion judge did not go far enough and subject the
    term to the full
Rizzo & Rizzo
interpretive analysis. I do not
    accept the appellants submissions on this issue, for the following reasons.

[17]

As the motion judge
    noted, the term recover in ordinary language implies the return of something
    that the person previously held. A claim for a constructive trust does not fit
    comfortably within that definition since the applicant does not have any interest
    in the property until the court makes a declaration to that effect. However,
    legal dictionaries refer to a different usage of the term as that of gaining
    through a judgment or order. This was the definition adopted by this court in
Hartman
    Estate
at para. 57:

On a plain reading of s. 43(2), the word "recover"
    appears to mean "to obtain" the trust property. Such an
    interpretation accords with the meaning given to "recover" in s. 4 of
    the Act. In
Williams v. Thomas
, [1909] 1 Ch. 713 (C.A.) at p. 730, the
    English Court of Appeal held that the expression "to recover any
    land" in comparable legislation is not limited to obtaining possession of
    the land nor does it mean to regain something that the plaintiff had and lost.
    Rather, "recover" means to "obtain any land by judgment of the
    Court". See also
OAS Management Group Inc. v. Chirico
(1990), 9
    O.R. (3d) 171 (Dist. Ct.) at 175 to the same effect.

[18]

The court in
Hartman
    Estate
was concerned with s. 43(2) of the
Old Limitations Act
,
    which has no exact equivalent in the
Real Property Limitations Act
,
    although there is some vestige of the provision in s. 42 of the
Real
    Property Limitations Act,
which I will discuss later. Section 43 was found
    in Part II of the
Old Limitations Act
, which was repealed when the
Limitations
    Act, 2002
came into force. Part II dealt with limitations in cases
    involving trusts and trustees where the trust was created by an instrument or
    an Act of the Legislature (s. 42). Section 43 allowed a trustee the benefit of
    any statutory limitation period, with some exceptions. One of those exceptions
    was to recover trust property still retained by the trustee. Having found
    that the exception applied, this court did not have to decide whether the
    limitation period in s. 4 (identical under the
Real Property Limitations
    Act
and the
Old Limitations Act
) applied.

[19]

It is therefore true,
    strictly speaking, that the
Hartman Estate
courts discussion of the
    meaning of recover in s. 4 was
obiter
, since the court was concerned
    with the exception in s. 43. However, while the

courts consideration
    of s. 4 was
obiter
, its holding on the meaning of the term recover
    in s. 43 was not. That determination was a step towards finding that the
    trustees in that case could not rely upon a statutory limitation period, such
    as the limitation period in s. 4. It would be an odd result if recover had
    one meaning in s. 43 of the Act and a different meaning in s. 4, particularly
    given that s. 43 references s. 4, albeit in general terms (any statute of
    limitations).
Hartman Estate
was a considered decision of this court
    and I see no reason to depart from the determination of the term recover in
    that case.

[20]

The appellant places
    considerable emphasis on other parts of the
Real Property Limitations Act
that he says provide context for interpreting s. 4 and which should lead to a
    different result. In particular, he relies upon s. 15, which provides as
    follows:

At the determination of the period limited by this Act to any
    person for making an entry or distress or bringing any action, the
right
    and title of such person to the land or rent
, for the recovery whereof
    such entry, distress or action, respectively, might have been made or brought
    within such period, is extinguished. [Emphasis added.]

The appellant submits that s. 15 presumes that the
    claimant had right and title that were extinguished once the limitation period
    expired. He submits that a person with nothing more than a claim for a
    constructive trust had no right or title to be extinguished. The difficulty
    with this submission is that it gives a very narrow reading to s. 15. Once the
    limitation period expires, the applicants right to recover the land through an
    action is extinguished. Section 15 does not depend upon the claimant being the
    former legal owner of the land. While it is true that the claimants title
    cannot be extinguished since the claimant never had title, the effect of s. 15
    is also to extinguish the right to the land. A claim for a constructive trust
    as a remedy for unjust enrichment is a claim for a right to the land. I see no
    inconsistency between s. 15 and the
Hartman Estate
definition of
    recover. I agree with the motion judges resolution of this issue.

Recovery of land

[21]

This brings us to the
    central question at issue in this appeal: whether the respondents claim for a
    constructive trust based on unjust enrichment is an action for recovery of
    land. The appellants broad submission is that, as developed in Canada, a
    constructive trust is merely a remedy, not an independent claim. Therefore,
    the claim in this case is for unjust enrichment and not an action for recovery
    of land.

[22]

Hartman Estate
provides some guidance on this issue but there are material differences between
    s. 43 of the
Old Limitations Act
and s. 4 of the
Real Property
    Limitations Act
. Section 43 speaks of recovery of trust property.
    Section 4 refers to recovery of any land. It is therefore necessary, as did
    the motion judge, to delve more deeply into the interpretation exercise in
    accordance with the
Rizzo & Rizzo
principles. Fortunately, I have
    the advantage of the motion judges reasons on this matter, with which I agree.

[23]

The motion judge held
    that the plain meaning of recover any land includes seeking an equitable
    interest in land through imposition of a constructive trust. As he said at
    para. 59, a case in which someone asks the court to award them ownership of
    part or all of a piece of land held by somebody else is an action to recover
    land. The motion judge then considered the entire context of s. 4 of the
Real
    Property Limitations Act
, the scheme and object of the Act and the
    intention of the Legislature. This context included the
Limitations Act,
    2002
, and the historical context of limitations law in the province. The
    motion judge reviewed at some length the historical context beginning with a
    1969
Report on Limitation of Actions
by the Ontario Law Reform
    Commission through various reports and iterations of proposed Bills that
    resulted in the 2002 legislation that came into force in 2004. The conclusion
    of his analysis is found in paras. 74-80. For present purposes it is sufficient
    to set out para. 77:

A party seeking an ownership interest by way of constructive
    trust must plead and then prove facts establishing entitlement to it. The fact
    that a claimant must prove enrichment of the other party and a corresponding
    deprivation of the claimant, with no juristic reason for the enrichment in
    order to establish a constructive trust, and must also show that damages alone
    are insufficient and only a proprietary remedy is adequate, does not alter the
    fact that the claimant has asked the court from the beginning to award an
    interest in land. To me, all this means is that the claimant has to plead and
    prove those key elements, usually called "material facts" in
    litigation, to justify the order sought. It should not matter how many material
    facts there are or whether the entitlement to land requires a two step
    analysis, so long as the application makes a claim of entitlement to ownership
    of land.

[24]

The appellant argues
    that the motion judge erred in his treatment of the context in which s. 4 is
    found and the history of the
Real Property Limitations Act
. He makes
    two important points. First, s. 4, when it was found in Part I of the
Old
    Limitations Act,
tended to be used for adverse possession cases. Second,
    other parts of the
Real Property Limitations Act
suggest that Act was
    not intended to apply to constructive trusts.

[25]

I begin with the
    adverse possession point. Resolution of that issue requires a discussion of the
    Legislatures intent when it revised the limitation period scheme in this
    province. As the motion judge noted, originally the intent was to deal with
    limitation periods for all claims. However, this approach was abandoned
    apparently as a result of consultations that resulted in the March, 1991,
Recommendations
    for a New Limitations Act - Report of the Limitations Act Consultation Group
, published by the Ontario Ministry of the Attorney
    General
. The Group reported that it did not have the necessary
    expertise to deal with actions to recover land. Thus, language in earlier
    drafts of the new limitation legislation dealing with limitations of actions to
    recover real property was stripped out of what eventually became the
Limitations
    Act, 2002.
This history strongly suggests that actions to recover land are
    outside the
Limitations Act, 2002
.

[26]

The Legislatures
    inability to deal with real property claims unfortunately detracts from the
    clarity that was a paramount objective of the new approach to limitation
    periods as represented by the
Limitations Act, 2002
.  However, the
    fact that the Legislature did retain Part I of the
Old Limitations Act
demonstrates that the Legislature has not wholly abandoned the field of claims
    for recovery of real property. And, in my view, the objective of clarity should
    not be abandoned by a narrow reading of s. 4 to place artificial limits on its
    scope when the plain words of the section cannot fairly bear that
    interpretation. There is nothing in s. 4 to suggest it is limited to claims for
    adverse possession. The fact that the section itself refers to recovery of
    rent, not just land, tells against a narrow interpretation of the provision to
    adverse possession claims.

[27]

The appellant also
    relies upon other parts of the
Real Property Limitations Act
,
    particularly s. 42, which is as follows:

42.

Where land or rent is vested in a trustee upon an express trust, the
    right of the beneficiary of the trust or a person claiming through the
    beneficiary to bring an action against the trustee or a person claiming through
    the trustee to recover the land or rent, shall be deemed to have first accrued,
    according to the meaning of this Act, at and not before the time at which the
    land or rent has been conveyed to a purchaser for a valuable consideration, and
    shall then be deemed to have accrued only as against such purchaser and any
    person claiming through the purchaser.

[28]

The appellant argues
    that since the legislation only refers to express trusts, the Legislature could
    not have intended the Act to apply to other types of trusts, particularly
    constructive trusts. I do not accept this submission, primarily because of the
    legislative history. The
Old Limitations Act
dealt in Part II with trusts
    created by instrument and by legislation. When the new legislation repealed
    Part II (and Part III) of the
Old Limitations Act,
it left no express
    provision for real property held by trustees. The Legislature apparently
    believed that in the case of express trusts there was the need for some
    clarification. At this point it is impossible to know why the Legislature did
    not deal more broadly with all kinds of trust. One can only guess that given
    the consultation groups lack of expertise and the constant, indeed, rapid
    evolution of equitable trusts, the Legislature was of the view that the area
    was not ripe for codification. I see nothing in the
Real Property
    Limitations Act
that suggests that the Legislature intended to
    exhaustively deal with trust cases involving land. To the contrary, the
    legislative history suggests that the Legislature intended to leave the area
    largely as it was. Thus, if s. 4 can fairly bear the interpretation of applying
    to recovery of real property through a constructive trust then I see no reason
    to impose an artificial and narrow interpretation on the sections very broad
    language.

[29]

In
Hartman Estate
,
in dealing with s. 43 of the
Old
    Limitations Act
, Gillese J.A. speaking for the court did hold that the
    term trust property not only applies to express trusts but includes
    constructive trusts granted as a remedy for unjust enrichment as discussed in
    cases such as
Pettkus v. Becker
, [1980] 2 S.C.R. 834, which was the
    genesis of the modern principle of unjust enrichment discussed in
Kerr v.
    Baranow
, 2011 SCC 10, [2011] 1 S.C.R. 269, which I will discuss more fully
    below
.
In doing so, she adopted a plain reading of the section. She
    left open the broader question of application of statutory limitation periods
    for claims to land based on resulting or constructive trusts, at para. 85:

It is apparent that there is no clear, general answer to the
    question of whether claims to land based on resulting or constructive trust are
    subject to a statutory limitation period and, if so, whether the exceptions in
    s. 43(2) apply to all trustees who hold property by way of resulting or
    constructive trust. In the case at bar, however, if the statutory limitation
    period does apply to such claims, for the reasons already given, I am not bound
    to apply
Taylor v. Davies
. I would give a plain reading to s. 43(2)
    with the result that the proposed trust claims fall within the second
    exception.

[30]

I adopt a similar
    approach to the interpretation of s. 4. Its plain language is broad enough to
    encompass an equitable claim for property based on the remedy of constructive
    trust. Thus I agree with the motion judges conclusion on this point, at para. 79:

It seems odd, more than a century after the abolition of the
    common law forms of action and the merger of common law and equitable
    jurisdiction, more than 40 years after the debate on limitations reform began
    in Ontario and more than a decade since the enactment of a new limitations
    scheme, that we would be constrained to adopt the "traditional"
    approach of limiting section 4 of the
Real Property Limitations Act
to
    adverse possession claims. The plain words of the section, "action to
    recover any land", seem to apply comfortably to the applicant's claim in
    this case. The rest of the
Real Property Limitations Act
talks about
    various kinds of claims other than trust claims but does not indicate any
    intention that constructive trust claims are not properly within the meaning of
    section 4. The repeal of the former Parts II and III of the old
Limitations
    Act
, RSO 1990, c L.15, does not shed light on the meaning of section 4. A
    ten year period for constructive trust claims seeking ownership of land is not
    inconsistent with the rest of the
Real Property Limitations Act
or
    with the general scheme of the
Limitations Act, 2002
, which expressly
    defers to the
Real Property Limitations Act.

[31]

The appellant also relies heavily on the judicial history of the
    treatment of constructive trust in Canadian courts and particularly on the most
    recent Supreme Court decision on the issue,
Kerr
, which
    emphasizes the nature of the constructive trust as a remedy and the preference
    for a monetary award for all unjust enrichment claims, even those where the
    claimant is seeking a constructive trust in identified property.

[32]

Kerr
was
    decided after this courts decision in
Hartman Estate
.  It deals with some
    issues that are not germane to this appeal, such as the common intention
    resulting trust. The court held at para. 24 that the common intention resulting
    trust no longer has a role in resolving domestic cases. The respondent
    originally brought a claim based on resulting trust. The parties agreed that
    the respondent did not have the evidence to support a claim for resulting trust
    and that claim was dismissed.

[33]

In
Kerr
, the
    court dealt at length with unjust enrichment. At para. 33, Cromwell J. held
    that there is no separate line of authority for family cases developed within
    the law of unjust enrichment and reaffirmed the statement in
Peter v.
    Beblow
, [1993] 1 S.C.R. 980, at p. 997, that the basic principles
    governing the rights and remedies for unjust enrichment remain the same for all
    cases. I refer to this point because, although this is a family law case, the
    determination of the limitation period issue will have ramifications beyond
    family law. The resolution of the limitation period issue cannot turn on the
    fact that this is a family law case. Thus, in my view, the fact that the
Family
    Law Act
prescribes a limitation period for claims under that Act cannot be
    determinative of the limitation period issue.

[34]

I recognize that
    Cromwell J. went on to hold at para. 34, again referring to
Peter
, at p.997,

that the courts must
    exercise flexibility and common sense applying equitable principles to family
    law issues with due sensitivity to the special circumstances that can arise in
    such cases.  Indeed, the family law context was front and centre when
    considering the remedy for unjust enrichment in such cases. But, in my view, the
    resolution of the strictly legal question as to the application of the
Limitations
    Act, 2002
and the
Real Property Limitations Act
turns on the
    interpretation of the relevant provisions of those Acts. The issue of whether
    the
Real Property Limitations Act
applies to a claim for a
    constructive trust will be the same whether the equitable claim for an interest
    in land arises out of a domestic relationship or a purely business transaction.

[35]

In
Kerr
,
at para. 32, the court reiterated the
    by now well-known elements of a claim for unjust enrichment as developed in
    Canadian law: an enrichment of or benefit to the defendant, a corresponding
    deprivation of the plaintiff and the absence of a juristic reason for the
    enrichment. At this stage of the proceeding, those elements are not in issue.
    The motion judge was asked to deal with the legal issue on the assumption that
    the respondent could make out those elements: see para. 13 of the motion
    judges reasons. This case turns rather on the remedy for the unjust enrichment
    and how the remedies should be characterized.

[36]

Remedies for unjust
    enrichment are restitutionary and the court in
Kerr
affirmed that
    proprietary and monetary remedies are available for unjust enrichment. At para.
    46, Cromwell J. described the two available remedies in these terms:

A successful claim for unjust enrichment may attract either a
    "personal restitutionary award" or a "restitutionary proprietary
    award". In other words, the plaintiff may be entitled to a monetary or a
    proprietary remedy (
Lac Minerals Ltd. v. International Corona Resources
    Ltd.
, [1989] 2 S.C.R. 574, at p. 669,
per
La Forest J.).

Further, Cromwell J. also noted that the court should
    first consider whether a monetary award is sufficient; in most cases it is:
    para. 47. Most of
Kerr
is concerned with calculating the monetary
    award. The case does, however, refer to the proprietary award in several
    contexts. The first context is where the plaintiff, like this respondent, seeks
    a constructive trust. Justice Cromwell explains as follows at para. 50:

The Court has recognized that, in some cases, when a monetary
    award is inappropriate or insufficient, a proprietary remedy may be required.
Pettkus
is responsible for an important remedial feature of the Canadian law of unjust
    enrichment: the development of the remedial constructive trust. Imposed without
    reference to intention to create a trust, the constructive trust is a broad and
    flexible equitable tool used to determine beneficial entitlement to property (
Pettkus
,
    at pp. 843-44 and 847-48).
Where the plaintiff can demonstrate a link or
    causal connection between his or her contributions and the acquisition,
    preservation, maintenance or improvement of the disputed property, a share of
    the property proportionate to the unjust enrichment can be impressed with a
    constructive trust in his or her favour
(
Pettkus
, at pp. 852-53;
Sorochan
,
    at p. 50).
Pettkus
made clear that these principles apply equally to
    unmarried cohabitants, since "[t]he equitable principle on which the
    remedy of constructive trusts rests is broad and general; its purpose is to
    prevent unjust enrichment in whatever circumstances it occurs" (pp.
    850-51). [Emphasis added.]

[37]

Kerr
also
    makes the point that there must be a significant link between the plaintiffs
    contribution and the property that she seeks to have impressed with the trust.
    As Cromwell J. said at para. 51:

As to the nature of the link required between the contribution
    and the property, the Court has consistently held that the plaintiff must
    demonstrate a "sufficiently substantial and direct" link, a
    "causal connection" or a "nexus" between the plaintiff's
    contributions and the property which is the subject matter of the trust (
Peter
,
    at pp. 988, 997 and 999;
Pettkus
at p. 852;
Sorochan
, at pp.
    47-50;
Rathwell
, at p. 454). A minor or indirect contribution will not
    suffice (
Peter
, at p. 997). As Dickson C.J. put it in
Sorochan
,
    the primary focus is on whether the contributions have a "clear
    proprietary relationship" (p. 50, citing Professor McLeod's annotation of
Herman
    v. Smith
(1984), 42 R.F.L. (2d) 154, at p. 156). Indirect contributions of
    money and direct contributions of labour may suffice, provided that a
    connection is established between the plaintiff's deprivation and the
    acquisition, preservation, maintenance, or improvement of the property (
Sorochan
,
    at p. 50;
Pettkus
, at p. 852).

[38]

With that background I
    return to the interpretive issue and specifically to the question of whether an
    application for the equitable remedy of a constructive trust in real property
    is an application for recovery of any land.
In my view, the respondent
    is making a claim for recovery of land in the sense that she seeks to obtain
land
    by judgment of the Court. That the court might provide her with the alternative
    remedy of a monetary award does not take away from the fact that her claim is
    for a share of the property. The repeated references to constructive trust as a
    remedy for unjust enrichment in
Kerr
demonstrate that a proprietary
    remedy is a viable remedy for unjust enrichment where there is a link or causal
    connection between her contributions and the acquisition, preservation,
    maintenance or improvement of the property.

[39]

In sum, I agree with
    the motion judges conclusion at para. 80 of his reasons:

From the plain meaning of the words "action to recover any
    land" in section 4 of the
Real Property Limitations Act
, in their
    "entire context" as described above, I find that the applicant's
    claim in this case for an ownership interest in the house in question is an
    "action to recover any land" within the meaning of section 4 of the
Real
    Property Limitations Act.
It is subject to a ten year limitation period.
    Based on the record before me, it is not possible for me to conclude that the
    applicant's claim in this case is barred by the ten year limitation.
    Accordingly, this part of her claim is entitled to proceed.

[40]

I also agree with the
    motion judge that her alternative claim for a monetary award can shelter under
    s. 4 for the reasons he gave at para. 88:

My analysis of the question begins with the words of the
    section: "... bring an action to recover any land ...". In contrast
    to the
Limitations Act, 2002
, which deals with individual
    "claims", this provision deals with an "action" (extended
    by section 1 of the
Real Property Limitations Act
to include "any
    civil proceeding"). An action or application can and frequently does
    include a principal claim with an alternative claim, as in this case. Here the
    damages claim is an alternative or fallback position to the first claim
    advanced by the applicant, which is for an ownership interest. The statute does
    not say "action to recover
only
land". Further, it would not make sense to interpret section 4 of the
Real
    Property Limitations Act
as a sort of all or nothing proposition, forcing
    the court either to award a proprietary interest on what it finds to be a
    meritorious claim, when a monetary award would otherwise be an adequate and
    appropriate remedy, or to award nothing at all, because a shorter limitation
    period for a damage award bars that kind of remedy. To interpret the section as
    not protecting an alternative damage award would mean that a claimant would
    never be able to rely on the section in determining when to launch a court case
    involving land and would always have to meet the limitation period for a
    damages claim, for fear of being locked out at the end of the case.

[41]

The appellant also
    submits that the motion judges interpretation of s. 4 will result in absurdity
    because there will be a different limitation period for unjust enrichment
    claims depending on the remedy sought. For example, the claimant may be seeking
    an interest in a pension or a business to which s. 4 does not apply. The
    decision of this court in
Equitable Trust Co. v. Marsig
, 2012 ONCA 235,
    109 O.R. (3d) 561, is instructive in resolving that issue. In that case, the
    plaintiff brought an action against the guarantors of a mortgage loan. The loan
    was given in respect of real property and the guarantee was included in the
    mortgage document. One of the defendants sought summary judgment on the basis
    that the limitation period under the
Limitations Act, 2002
had expired
    because of s. 2(5) of the Act, which provides that the day on which the loss
    occurs in relation to a demand obligation is the first day on which there is a
    failure to perform the obligation. The defendant argued that the demand
    obligation was made when the plaintiff issued a notice of sale under the
    mortgage in December 2007. The action to recover the deficiency from the
    guarantors was not commenced until September 2010, more than two years after
    demand. This court agreed with the motion judge that, despite the broad
    language in the
Limitations Act, 2002
, the limitation period under s.
    43 of the
Real Property Limitations Act
applied. That section provides
    for a 10-year limitation period for actions on a covenant contained in a
    mortgage. Speaking for the court, Perell J. (
ad hoc
) dismissed the
    argument that all guarantees should be treated the same. As he said at para.
    30:

It is true that it may not always be easy to determine whether
    a particular guarantee, like the guarantee in
Bank of Nova Scotia v.
    Williamson
, is subject to the
Limitations Act, 2002
or, like the
    guarantee in the case at bar, is subject to the
Real Property Limitations
    Act
. However, it does not follow that all guarantees should be treated the
    same way.
It has been the case historically that guarantees associated with
    land transactions have different limitation periods from guarantees associated
    with contract claims.
Moreover, as already noted, it is my view that the
    Legislature intended that all limitation periods affecting land be governed by
    the
Real Property Limitations Act
. [Emphasis added.]

[42]

Despite the advances
    in the application of constructive trust claims and unjust enrichment
    generally, it is open to the Legislature to prescribe different limitation
    periods for unjust enrichment actions where the claim is for a proprietary
    remedy. I would not give effect to the appellants arguments. Accordingly, I
    would dismiss the appeal.

Is there a legislative gap?

The motion judges reasons

[43]

Given my conclusion on
    the application of s. 4 of the
Real Property Limitations Act
, it is
    not strictly necessary to deal with the legislative gap argument. However, the
    matter was dealt with fully by the motion judge and his decision has potential
    application to other claims that may not be covered by the
Real Property
    Limitations Act
. In my view, it would be helpful to deal with that issue.

[44]

In short, the motion
    judge held that if s. 4 of the
Real Property Limitations Act
did not
    apply to the respondents claim, there was no statutory limitation period
    because the
Limitations Act, 2002
could not apply to an unjust
    enrichment case in the family law context. The motion judge reached this
    conclusion because of the difficulty of applying ss. 4 and 5 of the
Limitations
    Act, 2002
to an unjust enrichment claim in the family law context. The motion
    judge dealt with this issue at length but I have reluctantly concluded that I
    cannot agree with his decision.

[45]

To appreciate the
    issue, it is necessary to consider the wording of ss. 4 and 5, especially the
    latter:

4.  Unless this Act provides
    otherwise, a proceeding shall not be commenced in respect of a claim after the
    second anniversary of the day on which the claim was discovered.

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

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

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

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

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

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

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

(2)  A person with a claim
    shall be presumed to have known of the matters referred to in clause (1) (a) on
    the day the act or omission on which the claim is based took place, unless the
    contrary is proved.

(3)  For the purposes of
    subclause (1) (a) (i), the day on which injury, loss or damage occurs in
    relation to a demand obligation is the first day on which there is a failure to
    perform the obligation, once a demand for the performance is made.

[46]

The
    motion judges concern was with the exhaustive statutory definition of
    discoverability in s. 5(1)(a). He found that it was problematic as to when the
    injury, loss or damage occurred within the meaning of para. (i). He appears to
    have rejected the suggestion that in a family law case, ordinarily the separation
    date would be the date when the loss occurred. He was also concerned that the
    plaintiff would not know that
the act or omission was that of
    the person against whom the claim was made. In his view, in many family law
    cases the defendant has done nothing more than be passively enriched by the
    plaintiffs actions.  As he said at paras. 122-23:

On the third element, as set out in section 5(1)(a)(iii), I
    find that there will often, in fact usually, be constructive trust claims in
    family law where there is no act or omission of the respondent that caused or
    contributed to the claimant's loss. This could be true even where the claimant
    has made a request (direct or indirect) for a change in title or for
    compensation, which the respondent has neither accepted nor rejected. There is
    no duty to say yes.

With no act or omission of the respondent, the claimant could
    not reasonably have knowledge of suffering a loss caused or contributed to by
    an "act or omission" of the respondent. Without that knowledge, the
    third element is not satisfied, the claim has not been "discovered"
    and the limitation period never starts to run. I conclude that section
    5(1)(a)(iii) simply does not work for family law constructive trust claims.

[47]

Finally,
    the motion judge considered the fourth element,
that, having
    regard to the nature of the injury, loss or damage, a proceeding would be an
    appropriate means to seek to remedy. As I read his reasons, although he had
    some concerns, the motion judge found that, even in a family law case, a claimant
    would know whether the nature of an injury, loss or damage was such that a
    proceeding would be appropriate.

Analysis

[48]

I
    take a different approach to the application and interpretation of the
Limitations
    Act, 2002.
In my view, the starting point must be whether the Act was
    intended to apply to equitable claims. To resolve this issue it is necessary to
    consider the various sections of the legislation and in my view they point
    unequivocally to the Legislatures intent to apply the Act to such claims, unless
    the claim falls within one of the exceptions. For example, s. 2(1) not only
    excludes proceedings to which the
Real Property Limitations Act
applies (para. (a)), but proceedings based on
equitable
claims by
    aboriginal peoples against the Crown (para. (f)) [emphasis added]. Section 13
    of the Act, which deals with acknowledgments states in para. (7):

An acknowledgment of liability in respect of a claim to recover
    or enforce
an equitable interest
in personal property by a person in
    possession of it is an acknowledgment by any other person who later comes into
    possession of it. [Emphasis added.]

[49]

These references to equitable claims show that the Act was intended
    to be comprehensive and to apply to equitable claims, at least to claims other
    than for land that may be covered by the
Real Property Limitations
    Act
or other claims expressly exempted from application
    by the Act. The few cases that have considered the issue have held that
    equitable claims were intended to be covered by the
Limitations Act,
    2002
. See for example:
Bouchan v. Slipacoff
, 2010 ONSC 2693 and
Schneider v. State Farm Mutual
    Automobile Insurance Co.
, 2010 ONSC 4734. This courts
    decision in
Placzek v. Green,
2009 ONCA 83, 307
    D.L.R. (4th) 441, would also seem to support the view that the Act was intended
    to cover equitable claims.

[50]

A
    claim for equitable relief, including a claim based on unjust enrichment, fits
    within the broad definition of claim in s. 1 of the
Limitations
    Act, 2002
as a claim to remedy an injury, loss or damage that occurred as
    a result of an act or omission.
Since equitable claims are
    covered by the Act, there is no statutory gap. Thus, s. 4 of the Act applies
    and a proceeding shall not be commenced in respect of a claim after the second
    anniversary of the day on which the claim was discovered.

[51]

The motion judge did
    find, at para. 109 of his reasons, that the definition of claim in s. 1 of
    the
Limitations Act, 2002
fits comfortably enough in a family law
    constructive trust case. However, he also found, in the same paragraph (and
    again in para. 122), that ordinarily the only act or omission giving rise to a
    family law constructive trust claim is an act by the claimant, namely, the
    claimants contributions directly or indirectly to the property of another
    person. As the motion judge spelled out in his analysis, this latter finding
    raises a problem for the application of the s. 1 definition of claim to
    family law constructive trust claims, because the act or omission referred to
    in that definition must be that of the person against whom the claim is
    brought. This is made clear, for instance, in s. 5(1)(a)(iii), quoted above,
    which states that a claim is not discovered until, among other things, the
    claimant knows that the act or omission giving rise to injury, loss or damage
    is the act or omission  of the person against whom the claim is made.

[52]

I do not agree with
    the motion judge that a remedial constructive trust claim does not require any
    act or omission by the person against whom the claim is brought. Generally speaking,
    a claim of unjust enrichment requires that the defendant retain a benefit
    without juristic reason in circumstances where the claimant suffers a
    corresponding deprivation. In other words, the relevant act of the defendant is
    simply the act of keeping the enrichment (or the omission to pay it back) once
    the elements of the unjust enrichment claim have crystallized. In the family
    law context, this may typically occur on the date of separation, when shared
    assets, including real property, are divided and the possibility therefore
    arises of one party holding onto more than a fair share.

[53]

I agree with the motion judge that in some cases it may be difficult
    to apply the s. 5 definition of discoverability to equitable claims, including
    claims for unjust enrichment. But, that does not mean that the Act does not
    apply. It may well mean that the claim has not been discovered within the
    meaning of s. 5 and so the two-year limitation period does not run. This does
    not mean there is a gap in the legislation and there is no limitation period.
    Rather, the plaintiff will be able to pursue his or her claim until the
    ultimate limitation period in s. 15 applies, in most cases the period
    established by subsection (2):

No proceeding shall be commenced in respect of
    any claim after the 15th anniversary of the day on which the act or omission on
    which the claim is based took place.

[54]

That said, I would think that ordinarily the claim should be taken
    not to have been discovered until the parties have separated and there is no
    prospect of resumption of cohabitation, see: Maddaugh and McCamus,
The
    Law of Restitution
, loose-leaf,
    release no. 11 (Toronto: Canada Law Book, 2013),

at 3:500.30, and
Wilson v. Fotsch,
2010 BCCA 226, at para. 10.

DISPOSITION

[55]

Accordingly, I would dismiss the appeal. The respondent is entitled
    to her costs, which I would fix at $15,000 inclusive of taxes and
    disbursements.

Released:

JAN 31 2014                                    M.
    Rosenberg J.A.

JL                                                    I
    agree John Laskin J.A.

I
    agree S.T. Goudge J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Melanson v. Controlchem Canada
    Ltd., 2014 ONCA 82

DATE: 20140128

DOCKET: C57376

Sharpe, Watt and Benotto JJ.A.

BETWEEN

Stephen Melanson

Plaintiff (Appellant)

and

Controlchem Canada Ltd., Douglas Fast and Josip
    Saric

Defendants (Respondents)

John H. McNair, for the plaintiff (appellant)

Thomas J. Gorsky and Jennifer Hodgins, for Controlchem
    Canada Ltd.

Gordon Bobesich, for Josip Saric

Heard: January 27, 2014

On appeal from the order of Justice A.J. Goodman of the Superior
    Court of Justice, dated June 25, 2013.

APPEAL BOOK ENDORSEMENT

[1]

We are not persuaded that there is any basis for us to interfere with
    the decision of the motion judge dismissing the appellants motion to set aside
    the Registrars order dismissing the action for delay.

[2]

It is acknowledged that the motion judge applied the correct legal test
    and that the decision was discretionary. We are not persuaded that there was a
    palpable and overriding error or that he failed to consider the explanation for
    the delay up to the point of the Registrars order.

[3]

Moreover, the explanation for the very significant delay in bringing the
    motion after the administrative dismissal is unsatisfactory.

[4]

Accordingly, the appeal is dismissed.

[5]

Costs to Controlchem and Fast fixed at $11,000 and to Saric fixed at $6,000
    both inclusive as per the agreement of counsel.


COURT OF APPEAL FOR ONTARIO

CITATION:
R. v. Olumide, 2015 ONCA 18

DATE: 20150113

DOCKET: C59347

Doherty, Rouleau and Watt JJ.A.

BETWEEN

Her Majesty the Queen in Right of Ontario

Respondent

and

Ade Olumide

Applicant

Ade Olumide, in person

Mark Wiffen,
amicus curiae

Domenic Polla, for the respondent

Heard: January 7, 2015

On appeal from the order of Justice Lynn D. Ratushny of the
    Superior Court of Justice, dated September 10, 2014.

[1]

Assuming that the Justice of the Peace erred in not receiving the
    information, we agree with the Crown that the procedural error caused no harm
    to the appellant.  The subject matter was essentially the same as in a previous
    matter that was stayed by the Crown.  That proceeding had also been brought by
    the appellant albeit against a different person.  That stay was upheld by the
    Superior Court and by in this court in C59279.  The Justice of the Peace would
    inevitably have refused to issue process in these circumstances or
    alternatively the Crown would have stayed this proceeding.

[2]

The appeal is dismissed.


COURT OF APPEAL FOR ONTARIO

CITATION: Ontario (Labour) v. Flex-N-Gate Canada
    Company, 2014 ONCA 53

DATE: 20140123

DOCKET: C52732

Laskin, Tulloch and Strathy JJ.A.

BETWEEN

Her Majesty the Queen in Right of Ontario
(Ministry of Labour)

Appellant

and

Flex-N-Gate Canada Company

Respondent

Gráinne McGrath and Jason Tam, for the appellant

Gino Morga, for the respondent

Heard:  June 27, 2013

On
    appeal from the order of Justice Micheline A. Rawlins of the Ontario Court of
    Justice, dated April 15, 2009, allowing the appeal in part from the sentence
    entered by Her Worship Justice of the Peace Maureen Ryan-Brode, dated July 6,
    2006.

Laskin J.A.:

A.

introduction

[1]

An
    employer breaches a provision of the
Occupational Health and Safety Act
(
OHSA
), R.S.O. 1990, c. O.1, resulting in a workplace accident.  A
    government inspector investigates the accident and orders the employer to
    comply with the provision.  The employer does so.  In sentencing the employer
    for breach of the
Act
, should the court treat the employers
    corrective action as a mitigating factor?  If the employer breaches more than
    one provision of the
Act
, does the court have jurisdiction to impose
    concurrent fines?

[2]

These
    two important questions came to this court with leave, following the sentencing
    of the respondent Flex-N-Gate for two breaches of the
Act
.  These two
    breaches led to an accident in which a worker badly injured her foot.
    Flex-N-Gate was fined $50,000  $25,000 for each offence.  However, the appeal
    court judge ordered that the fines be paid concurrently  effectively reducing
    Flex-N-Gates obligation by half  to reward the company for its compliance.
    The Crown was granted leave to appeal both on the question whether required
    compliance might be a mitigating factor on sentence, and on the question
    whether the court has jurisdiction to impose concurrent fines.

B.

background

(a)

The Accident: January 28, 2004

[3]

Flex-N-Gate
    produces automobile parts at its factory in Tecumseh, Ontario.  It processes
    metal sheets into vehicle bumpers.  When the accident occurred in January 2004,
    Flex-N-Gate had 500 employees; with the downturn in the automotive industry, by
    the time of trial in July 2006, Flex-N-Gates workforce was down to 250
    employees.

[4]

Two
    production lines process the metal sheets.  On each line are bundles, each containing
    120 to 170 sheets.  An entire bundle weighs between 5000 and 5200 pounds.  When
    the bundles are received from a supplier, they are held together by four bands.

[5]

To
    get the sheets to the production lines, a forklift operator retrieves the
    bundles from the storage area and places them in a cradle in the production
    area.  The accident occurred when the forklift operator was bringing a bundle
    of sheets to the production line.  He first placed the bundles on the floor
    near the cradle.  Then, the worker who was injured, Louisa Sarkisian, cut three
    of the bands, leaving only one band to secure the bundle.  At the time she was
    following the companys standard procedure.

[6]

Unfortunately,
    when the forklift operator tried to load the bundle into the cradle, the bundle
    slipped off the fork and fell to the factory floor.  The sheets scattered like
    a deck of cards across the floor.  One of the sheets struck Ms. Sarkisians
    foot.  She was taken to the hospital, and underwent surgery to repair several
    broken bones in her foot.  She was off work for 4 ½ months, and on crutches for
    two months.  She took physiotherapy for about a year, but she still has residual
    pain in her foot.

(b)

The Compliance Orders

[7]

A
    Ministry of Labour inspector investigated the accident and issued two orders
    for each of the two production lines.  The first order required Flex-N-Gate to
    comply with the regulatory provision for the safe movement of material.  The
    second order  a stop work order  prohibited Flex-N-Gate from using the
    equipment involved in the accident until it complied with the first order.

(c)

Flex-N-Gate Complies with the Orders

[8]

Flex-N-Gate
    immediately complied with the order for the safe movement of materials.  It introduced
    a new procedure for moving bundles of sheets.  This new procedure required that
    all four bands securing a bundle be kept in place until the bundle is in the
    cradle.  Once the bundle is in the cradle, a worker can cut and remove all four
    bands.  Significantly, there was no evidence that this corrective action taken
    by Flex-N-Gate went beyond what the compliance orders required.

(d)

The Trial Proceedings

[9]

After
    a three day trial before a Justice of the Peace in July 2006, Flex-N-Gate was
    convicted of two offences under the
Act
:  failing to ensure that
    material was moved in a manner that did not endanger the safety of a worker as prescribed
    by s. 45(a) of the Industrial Establishments Regulation 851/90, and contrary to
    s. 25(1)(c) of the
Act
;
[1]
and failing to provide information, instruction and supervision to protect the
    health and safety of workers, contrary to s. 25(2)(a) of the
Act.
[2]

[10]

The Justice of the
    Peace imposed a $50,000 fine on Flex-N-Gate, $25,000 for each offence.

[11]

In imposing this fine,
    the Justice of the Peace noted that the maximum fine on a corporation for each
    of these offences was $500,000.  She also noted that Flex-N-Gate is a
    significant operation but not huge, and that this court is familiar with many
    graver workplace injuries.  She found expressly that this accident did not
    occur from wilful disregard of a known hazard and, finally, she acknowledged
    the steps taken by Flex-N-Gate to establish a safe working environment.

(e)

Appeal Proceedings

[12]

Flex-N-Gate appealed
    both its convictions and its sentence to the Ontario Court of Justice.  On
    April 15, 2009, in brief reasons, the appeal court judge dismissed the
    conviction appeal, but allowed the sentence appeal.  She did not change the
    amount of the fine for each offence  $25,000  but she made the fines
    concurrent, meaning that Flex-N-Gate was required to pay only $25,000,
    instead of the $50,000 fine ordered by the Justice of the Peace.

[13]

In reducing the amount
    of the fine to be paid, the appeal court judge relied on the corrective action
    taken by Flex-N-Gate.  She said:

and I would find that general deterrence is the paramount
    consideration. But, little weight was given to the corrective action taken by
    the appellant.  The ameliorating action was taken prior to trial, even though
    it could have been construed as consciousness of guilt or wrong-doing.

For those reasons, because the same way we like to punish with
    respect to general deterrence we also, as courts are concerned, like to reward
    with respect to people doing what I consider to be the right thing, I will not
    interfere with the sum of $25,000 but I will make it concurrent on counts one
    and three.

(f)

The Motion for Leave to Appeal

[14]

The Crown sought leave
    to appeal under s. 131 of the
Provincial Offences Act
, R.S.O. 1990, c. P.33
.  In a short
    endorsement dated September 20, 2010, Armstrong J.A. granted leave to appeal on
    the two issues I referred to in the introduction:  (1) [t]he issue of mitigation
    after an order has been made by an inspector under the
Occupational Health
    and Safety Act
; and (2) the issue of concurrent fines under provincial
    legislation.

C.

ANALYSIS

First Issue:  Should the court treat Flex-N-Gates
    corrective action as a mitigating factor on sentence?

[15]

Once the Ministry
    inspector issued compliance and stop work orders, Flex-N-Gate had two choices:
    appeal the orders to the Ontario Labour Relations Board, or comply with them.
    Failure to comply with an inspectors order is itself an offence under the
Act.
[3]

[16]

Flex-N-Gate did not
    appeal the orders.  It chose to comply with them.  It put in place a new
    procedure for the safe movement of bundles of sheets.  Its corrective action
    rectified the flaws in its existing procedures.

[17]

The Justice of the
    Peace gave no weight to Flex-N-Gates compliance with the inspectors orders.
    The appeal court judge, however, considered Flex-N-Gates compliance to be a
    mitigating factor on sentence:  she held that Flex-N-Gate ought to be
    rewarded for doing the right thing.

[18]

The Crown submits that
    the appeal court judge erred in treating Flex-N-Gates compliance  which was
    required by the
Act
 to be a mitigating factor.  Flex-N-Gate submits
    that the appeal court judge was entitled to take Flex-N-Gates compliance into
    account in exercising her discretion to impose an appropriate fine.

[19]

I agree with the
    Crowns position. The court should not have discretion to treat an employers
    post-offence compliance, though statutorily required, as a mitigating factor on
    sentence.  Doing so would undermine one of the most important goals of the
OHSA
 accident prevention  and the statutes most important sentencing principle
    deterrence.

[20]

This court discussed
    the objectives of the
OHSA
in
R. v. Ellis-Don Ltd.
(1990), 1
    O.R. (3d) 193 (C.A.).  At paras. 81-82 of his reasons, Carthy J.A. emphasized
    the objective of accident prevention:
[4]

The preceding analysis of the statute and the defence of due
    diligence leaves me in no doubt of the pressing and substantial objective of
    the Act, generally, to prevent accidents in the workplace, and, as to s. 37(2)
    specifically, that the balance of probabilities test furthers that objective.
    The Act is directly focused on accident avoidance through measures taken in
    advance of mishaps and because it applies to a segment of commercial society
    where there is necessarily a dependence upon profits, measures are needed to
    assure that workers safety is not forgotten.

Vigilance, expense, effort, attention and record-keeping are an
    absolute mandate to keep such incidents to a minimum.  The odds of an accident
    happening are inevitably reduced by the time, attention and expense devoted to
    avoidance.

[21]

The philosophy of the
OHSA
is to promote a health and safety system that relies on the internal
    responsibility and voluntary compliance of individual employers.  In other
    words, workers are best protected when their employers install procedures in
    their workplaces that will prevent accidents from occurring.  Rewarding an
    employer for taking corrective action only in response to an inspectors order
    reduces an employers incentive to take this action before an accident occurs.

[22]

Rewarding post-offence
    compliance with an inspectors order also reduces the deterrent effect of
    sentences for breach of the
OHSA
.  Deterrence has long been regarded
    as the most important sentencing principle for
OHSA
offences.  This
    courts decision in
R. v. Cotton Felts Ltd.
(1982), 2 C.C.C. (3d) 287
    (Ont. C.A.) remains the leading decision on the sentencing of
OHSA
offenders.  At paras. 19-20 and 22, Blair J.A. discussed the relevant
    considerations and stressed the paramount importance of deterrence:

The Occupational Health and Safety Act is part of a large
    family of statutes creating what are known as public welfare offences.  The Act
    has a proud place in this group of statutes because its progenitors, the
    Factory Acts, were among the first modern public welfare statutes designed to
    establish standards of health and safety in the work place.  Examples of this
    type of statute are legion and cover all facts of life ranging from safety and
    consumer protection to ecological conservation.  In our complex interdependent
    modern society such regulatory statutes are accepted as essential in the public
    interest.  They ensure standards of conduct, performance and reliability by
    various economic groups and make life tolerable for all.  To a very large
    extent the enforcement of such statutes is achieved by fines imposed on
    offending corporations.  The amount of the fine will be determined by a complex
    of considerations, including the size of the company involved, the scope of the
    economic activity in issue, the extent of actual and potential harm to the
    public, and the maximum penalty prescribed by statute.  Above all, the amount
    of the fine will be determined by the need to enforce regulatory standards by
    deterrence.

The paramount importance of deterrence in this type of case has
    been recognized by this Court in a number of recent decisions.

Without being harsh, the fine must be substantial enough to
    warn others that the offence will not be tolerated.  It must not appear to be a
    mere licence fee for illegal activity.

See also
R. v. Inco Ltd
. (2000), 132 O.A.C. 268.

[23]

Deterrence is
    undermined by treating statutorily required compliance as a mitigating factor
    on sentence.  Rewarding an employer for action that it should have taken before
    an accident happened creates an incentive to put off compliance.

[24]

In a comparable regulated
    field, the environmental field, several sentencing courts have rejected the
    argument that a companys remedial action after a mishap has occurred should be
    mitigating.  For example, in
R. v. Echo Bay Mines Ltd.
(1980), 12
    C.E.L.R. 38, a judge of the Territories Court held, at para. 13:

Similarly, while the response to the spill and the subsequent
    plans and efforts to upgrade and change the fuel handling system show a serious
    concern to prevent any future occurrences such as this, they are after the fact,
    as it were.  This legislation is not intended to encourage compliance after an
    environmental mishap but rather to demand compliance before those mishaps occur
    so as to prevent them.

[25]

And, in
R. v. Van
    Waters & Rogers Ltd.
(1998), 220 A.R. 315 (Prov. Ct.), Fradsham J. of
    the Alberta Provincial Court wrote, at para. 45:

The fact that there were things that could have been done to
    prevent the spill, and that they were capable of being discerned and
    implemented, may well aggravate, and not mitigate, the offence.  In my view,
    the expenditures made by Van Waters for remedial action are monies it should
    have spent before the spill.  I do not consider those expenditures particularly
    mitigating.  The best that can be said is that Van Waters has not evidenced
    recalcitrance in acknowledging its previous failures.

[26]

The reasoning in these
    two cases is persuasive.  Indeed, in this province, the legislature has
    expressly prohibited courts from treating compliance with an order under the
Environmental
    Protection Act,
R.S.O. 1990
,
c. E.19

as a
    mitigating factor on penalty.  Section 188.1(4) of that
Act
now
    states:

Subject to subsection (5), in determining a penalty under
    section 187, the court shall not consider compliance with an order issued under
    this Act in response to the offence to be a mitigating factor.

[27]

This provision puts
    the issue beyond debate for environmental offences.  However, for the reasons I
    have discussed, even without a legislative prohibition, the same principle
    should apply to the sentencing of employers for
OHSA
offences.  For
    these reasons, I do not agree with the sentencing decision of the appeal court
    judge.

[28]

In my opinion, the
    appeal court judge erred because, in rewarding Flex-N-Gate for doing the right
    thing, she seemed to equate sentencing for the commission of a crime with
    sentencing for the commission of a regulatory offence.  However, the two
    contexts are quite different.  Criminal law is concerned with the moral blameworthiness
    of an accuseds conduct; regulatory law is concerned not with the defendants
    conduct but with the results of its conduct.

[29]

If, after having
    committed a crime, an offender does some laudable act that he or she is not
    statutorily required to do  in other words, does the right thing  a court may
    take that act into account in sentencing the offender.  The act may be seen as
    mitigating the offenders moral blameworthiness or as a step towards the offenders
    rehabilitation.

[30]

If, after having
    contravened a safety standard, an employer then acts to correct the problem, it
    is not doing the right thing; it is doing what the statute requires it to
    do.  It ought not to be rewarded for its compliance.

[31]

Accordingly, I would
    allow the Crowns appeal on this first issue and hold that an employers
    corrective action taken in response to an inspectors order is not a mitigating
    factor on sentence.

[32]

I would, however, add
    two points.  First, if an employer takes corrective action that goes beyond
    what was required by an inspectors order, then a court may take that
    additional action into account in sentencing the employer.  Rewarding
    remedial steps not required by an inspectors order would be consistent with
    the goal of accident prevention.

[33]

Second  and perhaps
    this is an obvious point  in sentencing an employer for breach of the
OHSA
,
    action taken to promote health and safety before an accident occurs should be
    treated differently from corrective action taken only in response to an
    inspectors order.  Action taken beforehand is an appropriate mitigating factor
    on sentence.  Treating it as one is consistent with the goal of accident
    prevention and with the principle of deterrence.

[34]

In this case, in
    November 2003, just months before the accident, Flex-N-Gate retained a health
    and safety consultant to do an independent audit of the companys health and
    safety program and compliance with
OHSA
standards.  The consultant
    reviewed Flex-N-Gates procedures, inspected its factory and then prepared a
    report, which listed safety concerns and recommended changes to some of the
    companys procedures.  Flex-N-Gate implemented the recommendations.  In
    sentencing Flex-N-Gate, the Justice of the Peace acknowledged, appropriately in
    my view, the steps taken by Flex-N-Gate to establish a safe working
    environment.

Second Issue:  Does the court have jurisdiction to impose
    concurrent fines?

[35]

The Justice of the
    Peace ordered Flex-N-Gate to pay a total fine of $50,000, $25,000 for each of
    the two offences.  The appeal court judge did not disturb the amount of each
    fine but made them concurrent, effectively reducing Flex-N-Gates obligation by
    half.  The second question on this appeal is whether the court has jurisdiction
    to impose concurrent fines for a contravention of the
OHSA
.  I
    conclude that it does not have jurisdiction.  I rest my conclusion on the case
    law that governs the imposition of fines in criminal proceedings.

[36]

The
OHSA
and
    the
Provincial Offences Act
are silent on the question.  So too is the
Criminal Code
.  However, our court has held that in proceedings under
    the
Code
, the court has no jurisdiction to impose concurrent fines.
    It may impose concurrent custodial sentences for two or more counts, but if the
    sentence is a fine, it must impose separate fines for each count, but ensuring that
    the overall fine is appropriate.
[5]
Martin J.A. set out those principles in
R. v. Ward
(1980), 56 C.C.C.
    (2d) 15 (Ont. C.A.), at para. 9:

We observe, firstly that there is no authority to impose a
    concurrent fine as the learned trial judge did, in respect of separate
    offences:  see
R. v. Dedarin et al
., [1966] 1 C.C.C. 271.  Where it is
    appropriate to impose a fine, either in lieu of or in addition to, a custodial
    sentence, a separate fine must be imposed on each count in respect of which it
    is intended to impose a fine taking care, of course, that the total amount of
    the fines does not exceed what is appropriate.

[37]

I would apply these
    principles in
Ward
to proceedings under the
OHSA
.  I see no
    rational basis to do otherwise.

[38]

Accordingly, I would
    allow the appeal, set aside the appeal court judges order making the fines
    concurrent, and reinstate the total fine of $50,000 ordered by the Justice of
    the Peace.  That fine is fit.  It is consistent with the principles and case
    law for sentencing employers for breach of the
OHSA
.

D.

conclusion

[39]

Leave to appeal to
    this court was granted on two issues:  whether an employers compliance with an
    inspectors order after an
OHSA
offence has been committed should be a
    mitigating factor on sentence; and whether the court has jurisdiction to impose
    concurrent fines for breaches of the
Act
.

[40]

I would allow the
    Crowns appeal on both issues and reinstate the fines of $25,000 for each
    offence ordered by the Justice of the Peace.

[41]

First, the appeal
    court judge erred by rewarding Flex-N-Gate for simply complying with the
    inspectors orders.  Second, the appeal court judge had no jurisdiction to
    impose concurrent fines.

[42]

In oral argument, we
    were advised that Flex-N-Gate paid the $50,000 fine years ago, and that after
    the appeal court judges decision, received a $25,000 refund.  Assuming that to
    be so, I would not require Flex-N-Gate to repay $25,000 to the Crown.  The
    Crown took this appeal not because of the money in question, but because of the
    sentencing principles at stake.

Released: January 23, 2014 (JL)

John Laskin J.A.

I agree.  M. Tulloch J.A.

I agree.  G.R. Strathy J.A.

[1]
Section 25(1)(c) of the
OHSA
provides:  (1) An employer shall ensure
    that, (c) the measures and procedures prescribed are carried out in the
    workplace.

[2]
Section 25(2)(c) of the
OHSA
provides:  (2) Without limiting the
    strict duty imposed by subsection (1), an employer shall, (a) provide
    information, instruction and supervision to a worker to protect the health or
    safety of the worker.

[3]
Section 66(1) of the
OHSA
provides:  Every person who contravenes or
    fails to comply with(b) an order or requirement of an inspector or a Director
    is guilty of an offence

[4]

Ellis-Don
dealt with the constitutionality of the due diligence
    defence in s. 37 of the
OHSA
.  The majority of this court held that
    the section was unconstitutional because it was not justified under s. 1 of the
Charter
.  Carthy J.A. in dissent held that s. 37 was constitutional.
    The Supreme Court of Canada allowed the Crowns appeal and also upheld the
    constitutionality of the section.  See
R. v. Ellis-Don Ltd.,
[1992] 1
    S.C.R. 840.

[5]
Under the
Code
, if sentences are intended to be consecutive, the court
    must so direct.  Otherwise, sentences will be treated as concurrent, since they
    begin when they are imposed.


COURT OF APPEAL FOR ONTARIO

CITATION: Pagliaroli v. Industrial
    Alliance Insurance and Financial Services Inc., 2014 ONCA 16

DATE: 20140109

DOCKET: C56447

Rosenberg, MacPherson and LaForme JJ.A.

BETWEEN

Barbara Pagliaroli

Plaintiff (Respondent)

and

Industrial Alliance Insurance and Financial
    Services Inc.

Defendant (Appellant)

Amelia M. Leckey, for the appellant

Eric Gionet, for the respondent

Heard: January 6, 2014

On appeal from the judgment of Justice Susan E. Healey of
    the Superior Court of Justice, sitting with a jury, dated December 5, 2012.

ENDORSEMENT

[1]

The appellant, Industrial Alliance Insurance and Financial Services
    Inc., appeals from the judgment of Healey J. of the Superior Court of Justice,
    sitting with a jury, dated December 5, 2012.  In that judgment, the trial judge
    awarded the respondent (plaintiff), Barbara Pagliaroli, damages of $280,000, in
    accordance with the jury verdict, under a contract of life insurance between
    her deceased husband and the appellant.

[2]

The appellant contends that the trial judge erred in her instructions to
    the jury on how to interpret s. 180(1)(c) of the
Insurance Act
, R.S.O.
    1990, c. I. 8, which provides:

180(1) Subject to any provision to the contrary in
    the application or the policy, a contract does not take effect unless,

(c) no change has taken place in the insurability of
    the life to be insured between the time the application was completed and the
    time the policy was delivered.

[3]

The trial judge instructed the jury:

The first question that you must ask yourselves is: looking at
    the objective facts that you know about Frank Pagliarolis health, was there a
    change in his health that affected his insurability between January 16 and
    February 17, 2009? You are to ask, what was the state of Frank Pagliarolis
    health on January 16, 2009 and what was the state of his health on February 17,
    2009?  If you find that objectively there has been no change in the health of
    Frank Pagliaroli between these two dates, then there has been no change in
    insurability.

[4]

The appellant contends that the trial judge erred by linking the word insurability
    in s. 180(1)(c) of the
Insurance Act
to the insureds state of
    health.  The appellant submits that these are different factors so that the
    insureds health might not have changed at all between the two relevant dates
    but his insurability could have radically changed because of emerging medical
    information between the same dates.

[5]

We do not accept this submission.  It is common ground that the insured
    answered all questions about his health honestly when he completed the
    application form on January 16, 2009.  When the policy was delivered to him on
    February 17, 2009, the insured signed a Receipt for Delivery of Contract
    form, which included this section:

CHANGE OF INSURABILITY

Notice to agent: Has
the state of health
or occupation
    of any of the insureds changed since the application was signed?

þ

No

¨

Yes (if yes, send the contract, with duly        completed
    form F3A and authorization to your  service team.)                                                                                [Emphasis
    added.]

[6]

While this receipt is not part of the policy neither the
Act
nor the policy define insurability.  As Ish Singh, the appellants Director of
    Underwriting, testified:

Q.      is there anywhere else in the insurance contract that
    refers to the phrase, Change of Insurability?

A.      No, I dont think so.

Q.      And youll agree with me that that phrase is not
    defined anywhere in the insurance contract, is that correct?

A.      Correct.

Q.      So, when we speak of change of insurability as it
    pertains to Mr. Pagliaroli, what we are looking at is the state of health of
    Mr. Pagliaroli, is that correct?

A.      Correct.

Q.      Okay.  We are not looking at anything else, its his
    state of health that we are looking at when we deal with change of
    insurability.

A.      Correct.

Q.      And youll agree with me that in fact there was no
    change in Franks health between the time of the application and the time of
    delivery, that Franks health was the same in that period of time, would you
    agree with me on that?

A.      I will agree.

[7]

In our view, the appellants core argument founders on the wording of
    its own documents and the testimony of one of its principal witnesses.  The
    factual reality in this case is a simple one: in its contractual document, the
    appellant does not define change of insurability; in the document it requires
    an insured to sign, it directly links change of insurability to a potential
    insureds state of health and occupation; and, in this case, the appellant
    concedes that the insureds state of health did not change in the relevant time
    period.  In these circumstances, the trial judges charge was correct and the
    jurys verdict was reasonable.

[8]

The appeal is dismissed.  The respondent is entitled to her costs of the
    appeal fixed at $10,500, inclusive of disbursements and HST.

M.
    Rosenberg J.A.

J.C.
    MacPherson J.A.

H.S.
    LaForme J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Pasquale Doldo (Canadian Construction and Trucking)
    v. 1497601 Ontario Limited (Weston Gate Gardens), 2014 ONCA 73

DATE: 20140127

DOCKET: M42236 (C56591)

Weiler, Rouleau and Strathy JJ.A.

BETWEEN

Pasquale
    Doldo c.o.b. as

Canadian Construction and
    Trucking

Plaintiff (Respondent)

and

1497601
    Ontario Limited c.o.b. as

Weston Gate Gardens

Defendants (Appellant)

Kevin Sherkin for the moving party

J. Richard Forget for the respondent

Heard and released orally: January 16, 2014

Motion to quash the appeal from the Judgment of Justice
    Andra Pollak of the Superior Court of Justice, dated January 9, 2013, the order
    of Justice Andra Pollak, dated March 22, 2012, and the order of Master Dash,
    dated June 21, 2013.

ENDORSEMENT

[1]

This is a motion to quash on the basis that the court has no
    jurisdiction. The appellants statement of defence and counterclaim were struck
    by the Master. He initially sought leave to appeal that decision to the
    Divisional Court but then abandoned that request.

[2]

At trial, the appellant was allowed to make submissions but the trial
    judge found that the respondent had proved its damages. The appellant appealed
    to this court.

[3]

The appellant submits that the decision below was not a default
    judgment. In addition, he submits that the order striking his counterclaim was
    a final order and that the appeal lies to this court.

[4]

We disagree. The decision below was a default judgment: See
National
    Bank of Canada v. Royal Bank of Canada
(1999), 44 O.R. (3d) 533. The
    appellants proper remedy is a motion to set aside the default judgment.

[5]

With respect to the dismissal of the counterclaim, an appeal lies from a
    final order of a Master to the Divisional Court: s. 19(1)(c)
Courts of
    Justice Act
, R.S.O. 1990, c. C 43.

[6]

The court was also advised at the conclusion of submissions that in any
    event as this was a construction lien action the appeal from a final order is
    statutorily mandated to the Divisional Court. See ss. 70 and 71
Construction
    Lien Act
R.S.O. 1990 c. C 30

[7]

For these reasons the appeal is struck.

[8]

Costs of the motion are to the respondent fixed in the amount of $5,500
    inclusive all applicable taxes and disbursements.

K. M. Weiler J.A.

Paul Rouleau J.A.

G. R. Strathy J.A
.


COURT OF APPEAL FOR ONTARIO

CITATION: Penman v. Penman, 2014 ONCA 83

DATE: 20140130

DOCKET: C56915

Rosenberg, Cronk and Tulloch JJ.A.

BETWEEN

The
    Childrens Lawyer, litigation guardian for Jacob Roderick Penman,

Bernard
    Alexander, Rachel Penman, Valerie Clay, Julia Renee Honor Penman, Faith
    Katherine Penman and Scarlett Lynn Rivers, and Maja Joseph Rivers, minors, and
    as representative of the unborn and unascertained beneficiaries of the
    Penman Family Trust

Applicant/Respondents in Appeal

and

Randal
    Penman, Mark Penman,
Mary Lou McGillvray
, Rigel
    Penman, Kristy
    Lee Penman, Susan Penman and the Canada Trust Company, Trustee
    for the Penman Family Trust

Respondents/Mary Lou McGillvray

Appellant in Appeal

James A. Ironside and Heather
    McLeish, for the appellant

Susan J. Stamm for the respondent

Heard: January 23, 2014

On appeal from the judgment of Justice Lois B. Roberts of
    the Superior Court of Justice, dated March 18, 2013.

ENDORSEMENT

[1]

The appellant, Mary Lou McGillvray, appeals from the application judges
    ruling that she is jointly and severally liable, together with her two nephews,
    Randal Penman and Mark Penman, for the sum of $453,048.20, plus interest, on
    account of trust funds wrongfully removed from a trust created by her late
    brother and her sister-in-law for the benefit of their grandchildren.  At all
    relevant times, the appellant and Mark Penman were co-trustees of the trust.  On
    this appeal, the parties accept that Randal Penman, although not named as a
    co-trustee, was a trustee
de

son tort
of the trust.  The
    appellant was also one of the executors of her deceased brothers estate.

[2]

The appellants central submission is that she acted honestly and reasonably,
    in good faith, and with the benefit of legal advice from her nephew, Randal Penman,
    an Alberta lawyer, in all her dealings with the trust, that she was duped by
    her two nephews who wrongfully used the trust funds for their own benefit, and
    that no act or omission on her part caused the admitted loss of the trust
    funds.

[3]

The application judge disagreed.  Although she did not reject the
    appellants theory of wrongdoing by Mark and Randal Penman, she made multiple
    factual findings that the appellant breached her obligations as a co-trustee of
    the trust, including her fiduciary obligations, and that she knew more about
    her nephews dealings with the trust funds than the appellant claimed.

[4]

The application judges key findings concerning the appellant were
    expressly based on her adverse assessment of the appellants credibility and
    the reliability of her testimony.  They included the following findings:

(1)

the
    appellant signed a directors resolution authorizing her nephew Mark Penman to
    invest the trust funds in the exercise of his unfettered discretion;

(2)

after so
    authorizing Mark Penman, the appellant failed to make any inquiries regarding
    the investment of the trust funds or her nephews dealings with the funds;

(3)

contrary
    to her contention, the appellant was not misled by her nephews regarding the
    use and investment of the trust funds; and

(4)

the
    appellant did not act reasonably in relation to her duties as a co-trustee of
    the trust and did not comport herself in accordance with her statutory duty of
    care as a trustee, set out under s. 27(1) of the
Trustee Act
, R.S.O.
    1990, c. T. 23 (the Act).  To the contrary, she abdicated her duties
    entirely, by improperly delegating all her powers, duties and authority as a
    co-trustee to her two nephews.

[5]

The application judges core findings regarding the reasonableness of
    the appellants conduct are perhaps most succinctly set out at paras. 86, 87
    and 102 of her reasons:

While there is no suggestion of any dishonesty on her part, the
    evidence clearly establishes that Ms. McGillvray did not act reasonably: she
    failed to consider all relevant criteria in determining whether the proposed
    investments

were appropriate; she
    completely delegated the exercise of her discretion to Mark Penman and to
    Randal Penman; and she failed to make any reasonable inquiries about the
    proposed investments or to follow up regarding their status.

It is wilful neglect and default of a trustee to place trust
    funds in the hands of another and allow it to remain there for years without
    any inquiry or any assurance that the

trust

is being properly administered. Ms.
    McGillvrays failure to make any further inquiry about the investment of the
    trust funds constitutes wilful neglect and default of which Ms. McGillvray would
    not have been guilty in the management of her own affairs.

.

Even if I were to accept Ms. McGillvrays evidence at its
    highest, other than a brief conversation concerning an investment of the trust
    funds in a GIC, it appears that, by her own admission, Ms. McGillvray barely
    read anything to do with the proposed investment of the trust funds but simply
    signed whatever was placed in front of her.  She made no inquiries to
    understand all of the details of the investment.  She signed a directors
    resolution to allow Mark Penman to do whatever he wished with the trust funds without
    the necessity of having to consult her further or obtain her authorization.
    She made no further inquiries of the progress or status of the investment of
    the trust funds.  She simply assumed without any rational justification that
    things were going well.

[6]

These key findings were open to the application judge on the evidentiary
    record before her.  The appellant has failed to establish that they are tainted
    by palpable and overriding error.  Accordingly, there is no basis for appellate
    interference with these findings.

[7]

The application judges factual findings are dispositive of the issue of
    the appellants personal liability for the wrongfully exhausted trust funds
    unless she may be relieved of liability by operation of law or under the terms
    of the trust indenture.

[8]

Before the application judge, the appellant argued that she could, and
    should, be absolved from personal liability on two grounds.  First, she sought
    to invoke the courts authority under s. 35(1) of the Act to relieve a trustee
    from personal liability for breach of trust or for omitting to obtain the
    directions of the court in the matter in which the trustee committed the breach
    at issue.

[9]

The application judge concluded that the appellant could not rely on the
    protection of s. 35(1) of the Act.  She held, at para. 85:

Ms. McGillvray relies upon subsection 35(1) of the
Trustee
    Act
, which excuses trustees from liability for breaches of trust and
    failure to seek direction of the court where it is found that they acted
    honestly and reasonably.  This relief is not available to Ms. McGillvray
    because the alleged loss arises out of investment of the trust property; and
    subsection 35(2) of the
Trustee Act
expressly provides that subsection
    35(1) does not apply in these circumstances.

[10]

We
    agree.  Moreover, on the application judges findings, relief under s. 35(1) is
    unavailable to the appellant on a second preclusive ground.  As the application
    judge noted, court-ordered relief under s. 35(1) is available only for a
    trustee who has acted reasonably, as well as honestly.  On the application
    judges findings, that is not this case.

[11]

The
    appellant also relies, as she did before the application judge, on paragraph 8
    of the trust indenture as a bar to any finding of personal liability as against
    her.  Paragraph 8 reads in part:

The Trustee [
sic
] shall not be responsible for the
    acts or defaults of each other or for any error in judgment or for any act of
    omission or commission not amounting to actual fraud in the management and
    administration of the Trust Property.  The Trustee shall not be personally
    liable for any monies to become due from or by any claims against the Trust
    Property or upon any investment executed by the Trustees under the provisions
    hereof.

[12]

The
    application judge held that paragraph 8 did not apply to immunize the appellant
    from personal liability for her breaches of her duties as a co-trustee of the
    trust.  She reasoned, in part, at para. 90:

Further, an exculpatory clause will not protect a trustee when
    it is found that the trustee improperly delegated the power or discretion in
    question.  Each trustee must actively consider his or her discretion and will
    not be exonerated for passively acquiescing in the actions of a co-trustee.
    The law does not distinguish between passive and active trustees.  In accepting
    a trusteeship, a trustee assumes a duty to the beneficiaries of the trust.
    [Citation omitted.]

[13]

Again,
    we agree.  In their leading text,
Waters Law of Trusts in Canada, 4th ed.
(Toronto: Carswell, 2012), at pp. 981-82, Waters, Gillen and Smith suggest that
    there is some uncertainty in Canadian law concerning the validity of indemnity
    or exculpatory clauses in trust instruments in relation to a trustees
    liability for gross negligence; however, they also state that clauses of this
    kind will not protect the trustee when it is found that he improperly
    delegated [his or her] power or discretion.  See also
Re Wilson
,
    [1937] O.R. 769, 3 D.L.R. 178 (Ont. C.A.).

[14]

Paragraph
    8, the exculpatory clause in the trust indenture in question, is designed to
    protect trustees in their management and administration of the trust property.  In
    this case, the appellant was found to have wholly abdicated her duties as a co-trustee
    in favour of others, by reason of her improper delegation of all her
    discretion, authority, powers and duties to her nephews.  As a result, she did
    not function as a co-trustee of the trust, although she was obliged to do so.
    Nor was she engaged in the management and administration of the trust property.
    To the contrary, the appellant wrongfully delegated these responsibilities to
    others.

[15]

In
    these circumstances, we agree with the application judge that the appellant is
    unable to bring herself within the protective ambit of paragraph 8 of the trust
    indenture.

[16]

We
    observe that nothing in these reasons should be taken to mean that the
    appellant is without a potential remedy. She remains free to pursue
    indemnification from her nephews, Randal and Mark Penman, for their wrongdoing
    in relation to the trust, should she be so advised.

[17]

For
    the reasons given, the appeal is dismissed.  The Childrens Lawyer sought
    nominal costs in the event of success on this appeal.  We would therefore

award the Childrens Lawyer costs of the appeal, fixed
    in the amount of $2,500, inclusive of disbursements and all applicable taxes.

[18]

We
    thank both counsel for their forthright and helpful submissions to the court.

M. Rosenberg J.A.

E.A. Cronk J.A.

M. Tulloch J.A.