COURT OF APPEAL FOR ONTARIO

CITATION: König v. Hobza, 2014 ONCA 691

DATE: 20141009

DOCKET: C57156

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

BETWEEN

Klaus-Peter König

Plaintiff (Respondent)

and

Antonin Hobza, John Douglas Laine, Kim H. Dobson,

John
    Anthony Chisholm also known as Jack Chisholm,

TJK Enterprises Limited
    and
1669051 Nova Scotia Limited

Defendants (
Appellants
)

Sarit E. Batner and Justin H. Nasseri, for the
    appellants

Ronald Flom, for the respondent

Heard: July 18, 2014

On appeal from the judgment of Justice Laurence A.
    Pattillo of the Superior Court of Justice, dated May 10, 2013, with reasons
    reported at 2013 ONSC 1060, and from the costs judgment, dated November 20,
    2013, with reasons reported at 2013 ONSC 5531.

Hoy A.C.J.O.:

I.

INTRODUCTION

[1]

The respondent, Klaus-Peter König, was a silent investor in the
    successful 1669051 Nova Scotia Limited, formerly East West Plastics &
    Electric Products Limited (East West). He was the only shareholder of East
    West not involved in its management and operation.

[2]

Among other things, the respondent claimed that Antonin Hobza, John
    Douglas Laine and Kim H. Dobson, and Jack Chisholm (the Managing Directors)
    as officers and directors of East West and, through TJK Enterprises Limited
    (TJK), shareholders  awarded themselves excessive compensation over a period
    of 22 years. The respondent argued that this conduct breached his reasonable expectations
    and warranted an oppression remedy.

[3]

The trial judge agreed. He found the appellants East West, Hobza, Dobson
    and Laine (but not Chisholm, who had ceased to be involved with East West in
    November of 1997) jointly and severally liable for damages in the amount of
    $250,000 and prejudgment interest in the amount of $49,793.83. The trial judge
    also concluded that the appellants conduct warranted costs on a substantial
    indemnity scale, and awarded costs on that scale in the amount of $413,000,
    inclusive of disbursements and taxes.

[4]

The appellants main arguments on appeal are that the trial judge erred:
    (1) by fixing a precise amount as the total fair market value compensation for
    the Managing Directors in each year, in the face of what they say was unanimous
    expert evidence, which the trial judge accepted, that there is always a range
    of fair market compensation, and by failing to provide a basis or methodology
    for doing so; and (2) by failing to calculate the over-compensation on a net
    basis over the entire 22-year period at issue. Had the trial judge properly
    accepted that compensation at any point within the range was fair, and
    considered the Managing Directors compensation on a net basis over the entire
    22-year period, he would have concluded that the appellants had been overpaid
    by a much lesser amount. Indeed, when properly averaged over the full 22-year
    period at issue, the excess pay would have been so little that it would not
    have unfairly prejudiced or unfairly disregarded the respondents interests. Alternatively,
    it would have resulted in a much reduced damages award.

[5]

The appellants also argue that the trial judge erred in finding that the
    appellants conduct regarding financial disclosure was oppressive and in fixing
    costs on a substantial indemnity scale. Finally, they submit that if costs were
    properly assessed on a partial indemnity scale, judgment would not be more
    favourable than the appellants Rule 49
[1]
offer to settle the action for $300,000, inclusive of interest, plus partial
    indemnity costs. Accordingly this court must give effect to the cost
    consequences of Rule 49.10.

[6]

For the reasons that follow, I conclude that the trial judge erred by
    not calculating the Managing Directors over-compensation on a net basis over
    the entire 22-year period at issue and would accordingly reduce damages to $187,453.51,
    and prejudgement interest thereon to $37,336.12.  I would not interfere with
    the trial judges award of costs on a substantial indemnity scale. However,
    because I would reduce the quantum of damages, I would return the questions of
    the quantum of those costs and the cost consequences of Rule 49.10 to the trial
    judge for reconsideration. I would otherwise dismiss the appeal.

[7]

Below, I first outline the background of the respondents claim, the
    trial judges principle findings and the process by which the trial judge
    determined what fair market compensation would have been. I then address the
    appellants arguments in turn.

II.

BACKGROUND

[8]

The respondent König lives in Germany. He and Hobza became friends in
    1978, when Hobza worked in Germany at the respondents fathers company for a
    few months. After Hobza returned to Canada, they remained in touch and the
    respondent expressed interest in being involved in any business that Hobza
    might establish.

[9]

In 1985, Hobza, Dobson, Laine and Chisholm founded East West, a sign
    supply distribution company. They held their shares in East West through TJK.

[10]

The
    respondent and Hobza agreed that the respondent would invest $100,000 in East
    West and be entitled to a 10% interest in it. Hobza told the respondent that
    when East West made a profit, it would remain in the company or the respondent
    would receive a 10% share. The respondent asked that his name not appear on any
    papers showing his investment: the respondents father had friends at East
    Wests competitor. Accordingly, TJK held the respondents shares in trust for
    him. Dobson, Laine and Chisolm agreed to the respondents investment in East
    West.

[11]

Although
    there had been no discussion of the respondents money being a loan, the
    $100,000 he provided to Hobza was provided to East West as a shareholder loan
    as were the lesser amounts advanced by the Managing Directors. The Managing
    Directors also guaranteed the payment of the operating loan in the range of
    $400,000 to $500,000 made to East West by its bank.

[12]

East
    West never held a shareholders meeting (until the sale of the business in
    2007) or a formal directors meeting. From the outset, Hobza, Dobson, Laine and
    (until he left East West in November of 1997) Chisholm ran East West. They
    spoke with each other daily and agreed on all major decisions.

[13]

The
    Managing Directors set their compensation yearly, in arrears, following the end
    of the fiscal year. In doing so, they considered revenues and expenses in the
    prior year, as well as East Wests tax position and bank covenants. By
    agreement, each received the same amount of compensation in each year. Total
    actual compensation paid ranged from $40,000 in 1986 ($10,000 to each of Dobza,
    Hobson, Laine and Chisholm) to a high of $1,650,000 in 2006 ($550,000 to each
    of Hobza, Dobson and Laine). As well, during the first few years of operation,
    East West repaid the shareholder loans advanced by the Managing Directors.

[14]

In
    1988, the Managing Directors signed a directors resolution (the 1988
    Resolution) declaring a bonus payable in the amount required to reduce the
    active business income of East West to $200,000 for the then fiscal year and
    all subsequent fiscal years. This ensured that East West would be taxed at the
    lower, small business rate of taxation.

[15]

From
    1986 to 1990, and in the 2003, 2006 and 2007 fiscal years, East Wests
    financial statements were audited. In the remaining years, its accountants
    provided a review engagement report only.

[16]

From
    1986 to 1992, East Wests financial statements disclosed the total compensation
    paid to the Managing Directors as a line item. Beginning with the year ended
    November 30, 1993, East West adopted a different practice, to avoid disclosing
    sensitive information to suppliers who requested copies of the financial
    statements. For the years ended November 30, 1993 and November 30, 1997, and
    for the three-month period ended February 28, 1998, compensation paid to the
    Managing Directors was instead detailed on a separate schedule, entitled
    Statement of Warehouse, Selling and Administrative Expenses, and not broken out
    in the financial statements. For the fiscal years ended November 30 1994, 1995
    and 1996, and fiscal years ended February 28, 1999, 2000 and 2001, a portion of
    the Managing Directors compensation was set out in the financial statements,
    and the balance was disclosed in the Statement of Warehouse, Selling and
    Administrative Expenses. For the fiscal years ended February 28, 2002 to 2006
    (February 29 in 2004), the entirety of the compensation was set out in the
    financial statements.

[17]

The
    respondent received the separate Statement of Warehouse, Selling and
    Administrative Expenses only for the fiscal years ended February 28, 2001 and
    2002. The trial judge found that the respondent only received financial
    information concerning the full compensation received by the Managing Directors
    for the period from 1993 to December 2000.

[18]

In
    November of 1997, Chisholm left East West, and East West purchased his interest
    in TJK and East West. As a result, the remaining shareholders percentage
    interests in East West increased  in the case of the respondent, from 10% to
    12.25%.

[19]

At
    para. 45 of his reasons, the trial judge found that:

[A]lmost from the time [the respondent] first received East
    Wests financial information, he asked questions of Hobza concerning the nature
    of his interest in East West and monies paid by East West to the Managing
    Directors. Further, as time went by and East West became more profitable, in addition
    to questions about what the Managing Directors were being paid, [the
    respondent] questioned why the profits of East West were not being distributed
    to the shareholders.

[20]

The
    respondent learned in 1990 that his $100,000 investment was being characterized
    as a loan, and not equity, but that he was nonetheless entitled to a 10%
    interest in East West. And, while some information was provided by East Wests
    accountant in 2000 regarding compensation in 1999 and 2000, it was not until
    March 2007 that East Wests auditors provided the respondent with a breakdown
    of the total compensation paid by East West to the Managing Directors from 1986
    to 2006. In response to his queries about why no dividends had been declared,
    the respondent was always told that East Wests bank would not permit it to pay
    dividends.
[2]

[21]

In
    early 2001, the respondent requested that East West repay his $100,000 loan,
    and by March 2002 it was repaid, without interest. The respondent also asked to
    transfer his shares to his company, König GmbH. His request was refused.

[22]

In
    late 2004, the respondent took issue with the level of compensation paid to the
    Managing Directors in the year ended February 29, 2004. The response was
    abrupt: he was advised that East West was a private company and it was not [his]
    business. The dialogue did not end. As noted above, it was not until March
    2007 that East Wests auditors provided the respondent with a complete
    breakdown of the total compensation paid by East West to the Managing Directors
    from 1986 to 2006.

[23]

East
    West was successful. Its revenues and gross profit grew in every year except
    1991. Between 1985 and 2007, it expanded from three branches and 13 employees
    (including the Managing Directors) to six branches and 130 employees. For the
    fiscal year ended February 28, 2007, sales were approximately $50.6 million,
    gross profit was $13,953,136 and net after-tax income was $1,544,125.

[24]

By
    early 2007, the parties had retained litigation counsel.

[25]

In
    June of 2007, East West sold its business to an arms length purchaser. The
    respondent received approximately $1.5 million in respect of his 12.25%
    interest. As a condition of the sale, Laine entered into an employment contract
    with the purchaser to be its president at an annual base salary of $170,000
    plus a discretionary bonus of up to 50% of base salary.

[26]

The
    respondent commenced this action against the appellants in 2008. He invoked the
    oppression remedy provisions of East Wests incorporating statute, the Nova
    Scotia
Companies Act
, R.S.N.S. 1989, c. 81 (the Act),
[3]
alleging that East Wests
    profits were stripped to the benefit of the Managing Directors and that such
    conduct was oppressive, unfairly prejudicial and unfairly disregarded the
    respondents interests as a shareholder of East West. He also alleged breach of
    trust, third-party breach of trust based on knowing receipt, and breach of
    fiduciary duty.

III.

THE TRIAL JUDGES KEY FINDINGS

[27]

The
    trial judge provided thorough reasons, 227 paragraphs in length. Here, by way
    of overview, I set out the trial judges key findings. Further below, I provide
    detail about how the trial judge determined fair market compensation for the
    Managing Directors.

[28]

The
    trial judge dismissed the respondents claims in breach of trust, third-party
    liability for breach of trust, and breach of fiduciary duty. However, he agreed
    that two aspects of the appellants conduct  the lack of financial disclosure
    and the excessive compensation  warranted an oppression remedy.

[29]

On
    financial disclosure, the trial judge found that from the outset of the
    relationship through to 2007, there was a pattern of non-disclosure or worse,
    wrong information by East West and Hobza towards [the respondent] as a
    shareholder (para. 87). There was no issue concerning financial disclosure
    from 1986 to 1992: the financial statements for those years included a
    breakdown of the compensation paid to the Managing Directors (para. 118).
    However, the failure to disclose the Managing Directors compensation to the
    respondent for the years between 1993 and 2000 constituted a breach of the
    respondents reasonable expectations as a shareholder by East West and the
    Managing Directors that was oppressive, unfairly prejudicial or unfairly
    disregarded the respondents interests as a shareholder (para. 121).

[30]

With
    respect to excessive compensation, the trial judge found that it was a
    reasonable expectation that the Managing Directors be paid a fair salary and
    bonus for the work they did, and that any net income remaining would either be
    retained in the corporation to be used for corporate purposes or paid to
    shareholders by way of dividend (para. 123). In the following chart (which
    refers to market survey evidence regarding executive compensation compiled by
    executive compensation experts Morneau Shepell, explained below) the trial
    judge  set out what he found the total fair market value compensation for the
    Managing Directors in each of the years in question to be as follows:

East West Fiscal
          Year

Total

Actual
          Compensation ($)

Morneau Shepell

50%

Morneau Shepell

75%

Total Fair
          Market Compensation ($)

1986

40,000

283,562

389,661

300,000

1987

200,000

271,414

401,884

325,000

1988

385,600

330,000

410,000

350,000

1989

192,000

342,215

423,941

360,000

1990

302,000

337,582

398,388

365,000

1991

240,000

351,506

416,809

375,000

1992

270,000

418,056

502,712

425,000

1993

312,000

399,568

481,421

425,000

1994

599,600

407,919

486,522

450,000

1995

672,000

431,107

521,474

500,000

1996

502,000

600,850

773,025

625,000

1997

556,000

542,300

653,250

650,000

1998

(3 months)

129,000

98,856

118,682

110,000

1999

980,500

414,475

514,725

500,000

2000

875,000

513,025

623,275

550,000

2001

743,700

525,475

734,050

625,000

2002

525,000

432,525

605,475

625,000

2003

630,000

552,625

767,333

650,000

2004

1,200,000

512,625

688,067

675,000

2005

1,500,000

559,800

703,550

700,000

2006

1,650,000

522,875

714,600

700,000

2007

807,150

564,700

802,267

750,000

Totals

13,311,550

11,035,000

[31]

On
    a net basis, the total amount paid by East West to the Managing Directors from
    1986 to 2007 exceeded the total fair market compensation for the period by
    $2,276,550 (para. 165). In the trial judges view, whether this constituted a
    breach of the respondents reasonable expectations and was oppressive, unfairly
    prejudicial or unfairly disregarded his interests, should be determined on a
    net basis, taking into account the deficiencies in compensation received as
    well as the excesses over the 22-year period at issue, consistent with the
    parties approach (paras. 168 and 171).

[32]

On
    the evidence, the trial judge determined that the claim should be broken into
    two periods: 1986-1992 and 1993-2007 (para. 172).

[33]

He
    concluded that the Managing Directors actions in setting compensation in the
    period between 1986 and 1992 was not a breach of the respondents reasonable
    expectations, and was not oppressive or unfairly prejudicial, and did not unfairly
    disregard his rights as a shareholder (para. 173). First, their compensation
    was only in excess of what was reasonable in 1988, and then only by $35,600
    (para. 175). On a net basis for 1986-1992, the Managing Directors received
    significantly less than the fair market compensation over that period. Second,
    the remuneration that the Managing Directors received was clearly set out in
    East Wests financial statements, which the respondent received (para. 176). Finally,
    the oppression remedy provisions in the Act did not come into force until July
    1991, and its provisions are not retrospective (para. 177).

[34]

However,
    the trial judge concluded that the excess compensation the Managing Directors
    received over the period between 1993 and 2007 was a breach of the respondents
    reasonable expectations as a shareholder and was unfairly prejudicial and
    unfairly disregarded the respondents interests as a shareholder (para. 186). The
    trial judge found that it was significantly in excess of what was fair and
    reasonable during the period (para. 180). And because the Managing Directors were
    shareholders, when they paid themselves excess compensation, it effectively
    amounted to a dividend (para. 182). The sole criteria they considered were
    reducing East Wests tax rate and East Wests covenants with its bank. No
    consideration was given to whether their compensation was fair and reasonable
    for the work they were doing (para. 183).

[35]

The
    trial judge indicated that he accepted the methodology of Steve Ranot, a
    partner with Marmer Penner Inc., business valuators and litigation accountants,
    for calculating damages (para. 194). On that methodology, the after-tax amount
    to East West of each excess or deficit in compensation for each year over the
    22-year period should be determined using the applicable tax rate. The
    respondent would be entitled to 10% of the net amount overpaid up to November
    30, 1997, when Chisholm left, and 12.25% thereafter, either in the form of
    dividends or as his share of retained earnings (para. 192).

[36]

However,
    the trial judge applied Mr. Ranots methodology with respect to the last 15
    years of the 22-year period, and used 12.25% for the entire period, on the
    basis that the net after-tax amount for the five years prior to 1997
    (Chisholms departure) results in a small deficit. On that basis, he concluded
    that the respondents damages were $250,000 (para. 195).

[37]

The
    trial judge found East West, Hobza, Dobson and Laine jointly and severally
    liable for the damages. Chisholm, however, was not liable: during the five
    years of the 15 year period between 1993 and 2007 that Chisholm was still with
    East West, the Managing Directors conduct in setting compensation was not
    oppressive or unfairly prejudicial (para. 196). On a net basis, total
    compensation for that five-year period was less than the total fair market
    compensation for the same period (para. 197).

IV.

HOW THE TRIAL JUDGE DETERMINED TOTAL FAIR MARKET COMPENSATION FOR THE
    MANAGING DIRECTORS

[38]

The
    appellants and the respondent called executive compensation experts to
    establish whether the amounts that East West paid the Managing Directors
    constituted fair market compensation.

[39]

While
    the appellants only take issue with the final step in the trial judges
    determination of fair market compensation  fixing specific amounts rather than
    accepting that anything within the 50th to 75th percentile range of the Morneau
    Shepell market survey was fair market compensation  an understanding of the
    process undertaken by the trial judge sets the stage for this final step in his
    analysis. It also demonstrates that the trial judge considered the experts
    evidence in a careful and balanced fashion.

[40]

The
    parties experts compiled market survey evidence about what organizations paid
    individuals in comparable positions. The trial judge preferred the market
    survey evidence of the respondents expert, Michel Dubé of Morneau Shepell,
    over that of the Managing Directors expert: Mr. Dubé specifically compiled the
    survey data for each year utilizing companies that had similar sales to East
    West for each year in question (para. 153).

[41]

The
    trial judge considered whether long-term incentive programs (LTIPs) should be
    included in determining total compensation. Including LTIPs in the comparators
    would justify higher cash compensation for the Managing Directors. He accepted
    the evidence of Mr. Dubé over that of the appellants experts, Paul Gryglewicz
    and David Crane, that it was not appropriate to include LTIPs in determining
    total compensation for the Managing Directors.

[42]

The
    trial judge rejected the evidence of the respondents expert, Mr. Ranot, that
    Dobson and Chisholm should be classified as middle management for the purpose
    of determining compensation. He concluded that all of the Managing Directors
    should be treated as holding executive level positions (paras. 155 and 156).

[43]

He
    also rejected the evidence of Mr. Ranot that, based on the compensation that
    the purchaser was to pay Laine, which fell between the 25th and 50th
    percentiles, an average of the 25th and 50th percentiles should be used to
    determine fair market value compensation. The trial judge reasoned that Laines
    compensation is only one data point and not indicative of the market. Moreover,
    his compensation did not arise out of a traditional employee/employer
    negotiation (paras. 150, 159-60).

[44]

Instead,
    the trial judge accepted the evidence of the appellants expert, Mr. Crane,
    that fair market value compensation for the Managing Directors should fall
    somewhere between the 50th and 75 percentile of Morneau Shepells survey
    results for each year (para. 161).

[45]

The
    trial judge then made the determination with which the appellants take issue.
    He wrote that what, within that range, constitutes fair market compensation will
    depend in part on the internal equities of East West, and outlined factors
    (discussed below) that he considered in fixing a point within that range.

V.

ISSUES ON APPEAL

(1)

Did the trial judge err by fixing fair market compensation for each
    year?

[46]

The
    appellants argue that the trial judge erred by generating precise figures for
    fair market compensation for each year, instead of following what the
    appellants say was the unanimous opinion of the experts, which he accepted,
    that there is always a range for fair market compensation. They say that as
    long as the Managing Directors compensation was at some point within the 50th
    to 75th percentile in Morneau Shepells market survey  the range and survey
    accepted by the trial judge  it was reasonable. Further, they say the trial
    judge compounded his error in principle by failing to provide any basis or
    methodology for his determination of what fair and reasonable compensation
    would have been.

[47]

I
    reject both arguments.

[48]

As
    to the first argument, it cannot fairly be said that the experts unanimously
    testified that compensation is reasonable simply if it falls anywhere within
    the identified percentile range of the accepted market survey results for the
    benchmarked position (in this case, the Morneau Shepell survey utilized by Mr. Dubé)
    for a year. The trial judges approach of treating the range merely as a
    starting point in determining fair compensation is supported by the record.

[49]

Mr.
    Dubé testified that market is by far not the only factor to consider in
    considering appropriate compensation for an executive. Internal equity is
    just as important. And Mr. Ranot  whom the trial judge accepted as an expert
    in business valuation, noting that business valuation included the assessment
    of fair market compensation for executives  similarly testified that the
    market survey results are only one factor in assessing the appropriateness of
    executive compensation.

[50]

The
    trial judge had evidence before him as to what internal equity meant, and what
    other relevant factors were.

[51]

The
    trial judge accepted Mr. Ranots evidence on the methodology for the
    calculation of damages. Given that, the following exchange in the
    cross-examination of Mr. Ranot, coupled with Mr. Dubés and Mr. Ranots evidence
    referred to above, is in my view dispositive of the appellants first argument:

Q. And will you agree with me that the concept of market
    compensation and executive compensation is just really not that precise?

A. Yes.

Q. And that there is a broad range of what is fair and
    appropriate in any give case for the compensation of an executive?

A. Yes, theres a range. We tried to take the midpoint of that
    range to arrive at a conclusion.

Q. I understand that, but in taking the midpoint of the
    range what you are saying is to the extent the directors in this case had a
    different place in the range, they are wronged and the excess is damages?
    Thats your opinion, right?

A. Yes.
[Emphasis
    added.]

[52]

In
    other words, the trial judge had before him expert evidence that he should not
    simply accept a range and should make a specific determination of fair market
    compensation.

[53]

Nor
    do I accept that the trial judge provided no analysis as to how he reached the
    numbers within the 50th and 75th percentile of Morneau Shepells survey results
    for each year that he did, and that his determinations accordingly cannot
    stand. He did so at paras. 161-163 of his reasons:

Where exactly the compensation will fall in that range for each
    year will depend in part on the internal equities in respect of East West which
    include the financial success of East West compared to the year prior and
    overall and the compensation paid to the Managing Directors in the prior year.
    I have also had regard to the compensation information for East Wests senior
    employees for the years 2004 to 2007 as contained in Exhibit 17 [the answer to
    undertakings].

In considering prior years compensation, it is apparent from
    the Morneau Shepell survey results that in some years the compensation numbers
    are less than the prior year. In such situations, where East Wests gross
    profit increased over the prior year, it is my view that the Managing
    Directors compensation should not fall below that of the previous year.

Further, while total compensation paid by East West to the
    Managing Directors will decrease beginning in 1998 as a result of Chisholms
    departure, in my view it does not mean that it should increase by an amount
    equal to Chisholms full compensation. The remaining three Managing Directors
    are entitled to some additional compensation over and above what they would
    otherwise have been entitled to given that they assumed Chisholms
    responsibilities. While Laine assumed many of Chisholms responsibilities, the
    increase is split equally between the three Managing Directors given their
    agreement.

[54]

All
    agreed that setting executive compensation is a complex and imprecise exercise:
    as Mr. Ranot testified, it is an art and not a science. In my view, the trial
    judge provided satisfactory reasons as to how, in conducting this imprecise
    exercise, he arrived at specific amounts for each year.

[55]

As
    I note below, this is not a case of a trial judge supplanting directors
    business judgment as to what, within a range, was fair and reasonable executive
    compensation. Here, effectively no business judgement was exercised. The trial
    judge engaged in the exercise that the Managing Directors had failed to
    undertake.

(2)

Did the trial judge err by not approaching the calculations on a net
    basis over the full 22-year period?

[56]

As
    the trial judge acknowledged at para. 124 of his reasons, the central issue in
    [the] action was whether the compensation paid to the Managing Directors from
    1986 to 2007 was fair and reasonable. The respondent and his expert, Mr. Ranot,
    calculated the respondents claim on a net basis over the entire 22-year
    period. I agree with the appellants that the trial judge erred in principle by
    not calculating whether, and by what amount, the Managing Directors were
    over-compensated by reference to the entire 22-year period at issue. By not
    doing so, the trial judge failed to consider the payments in later years in
    light of the under-compensation and give the Managing Directors credit for the
    amount by which they were under-compensated in East Wests early years, and as
    a result, overstated the respondents damages.

[57]

East
    West began as a small start-up. Its Managing Directors were under-compensated
    in its early years. Their higher rates of compensation when East West matured
    would in part effectively have recompensed them for lack of compensation during
    the early years.

[58]

The
    trial judge appreciated this. Several passages in his reasons highlight the
    importance of calculating excess compensation on a net basis over the full
    22-year period:

[168] The remuneration of East Wests Managing Directors was
    tied to the companies cash flow. As can be seen from [the compensation table],
    in the early years of East Wests operation, reduced revenues resulted in
    compensation below fair market. The compensation received was what East West
    could afford at the time. Even as revenues grew, there were years when the
    Managing Directors compensation was below what I have concluded was the fair
    market compensation for that year. Where, as here, the company was otherwise well
    run and profitable year after year, in my view it is more appropriate to
    consider the issue on a net basis taking into account the deficiencies in
    compensation received as well as the excesses.

[175]  [O]n a net basis, for the years 1986 to 1992 the Managing
    Directors received significantly less compensation than the fair market
    compensation over the same period.

[185] [B]y approaching the issue of oppression in the way in
    which I have, I have taken into account the years the Managing Directors compensation
    was below fair market.

[192] Mr. Ranot presented [the respondents] damage claim on a
    cumulative or net basis for the entire 22 year period.

[194] While I do not accept Mr. Ranots determination of fair
    market compensation, I am of the view that his methodology in calculating
    damages is appropriate and should be followed in this case.

[59]

And
    Mr. Ranot explained that his methodology for calculating damages, which the
    trial judge indicated that he accepted, involved making up for the bad years.
    (TR, vol 1, p. 452).

[60]

Despite
    this, the trial judge ultimately calculated damages only over the 15-year
    period from 1993 to 2007, excluding the six-year period after East West was
    founded during which the Managing Directors were significantly under-compensated.

[61]

Respectfully,
    the trial judges reasons in this one respect are flawed. Essentially, he
    concluded that the Managing Directors conduct in relation to compensation
    during that period did not breach the respondents reasonable expectations
    they were not over-compensated during that period and their compensation was disclosed
     and was not oppressive or unfairly prejudicial, and did not unfairly
    disregard the respondents interests as a shareholder. Moreover, he reasoned,
    the oppression remedy provisions of the Act did not come into force until July
    1991 and were not retrospective.

[62]

Focussing
    on whether the Managing Directors conduct in relation to compensation during
    the six-year period after East West was founded supports an oppression remedy
    is a red herring. This reasoning ignores the importance of assessing the
    respondents reasonable expectations, and the Managing Directors compensation,
    in the period from 1993 to 2007 in light of the Managing Directors
    acknowledged under-compensation during the prior period. It amounts to an error
    in principle. Accordingly, in my view, the trial judges damages calculation
    cannot stand.

[63]

Using
    the trial judges methodology for calculating damages (described at paras. 35
    and 36 above), but crediting the Managing Directors for their
    under-compensation prior to 1993, I would reduce the damages to $187,453.51. In
    doing so, I use the trial judges determination (in the chart at para. 164 of
    his reasons, reproduced at para. 30 above) of compensation paid and fair market
    compensation during each of the 22 years, and employ the tax rates used by him
    in Schedule A of his reasons to determine the after tax amount of the deficit
    or excess in compensation paid in each such year.  My calculation of this
    amount is reproduced at Schedule A of these reasons. It aligns with that
    included in Schedule D of the appellants factum.

[64]

The
    fact that I arrive at a lesser amount than the trial judge does not warrant
    disturbing his conclusion that the payment of the excess compensation breached
    the respondents reasonable expectations, and unfairly prejudiced or unfairly
    disregarded the respondents interests. Indeed, had damages been assessed in
    the manner that the appellants argue they should have, I would still conclude
    that the Managing Directors had breached the respondents reasonable
    expectations and that this breach justified an oppression remedy.

[65]

Both
    quantum and process are relevant. The trial judge clearly found that in fixing
    their compensation, the Managing Directors did not consider whether it was fair
    and reasonable for the work done. In other words, they did not consider the
    respondents interests. This is not a case of a trial judge supplanting directors
    business judgment as to what was fair and reasonable executive compensation for
    the work done. Here, effectively no business judgement was exercised.

(3)

Did the trial judge err in finding that the appellants failure to make
    financial disclosure warranted an oppression remedy, or in awarding substantial
    indemnity costs?

[66]

The
    appellants focus on whether their conduct regarding financial disclosure was
    oppressive because that conduct played a role in the trial judges subsequent
    decision to fix costs on a substantial indemnity scale. Because of the
    interplay between these two final issues, I consider them together.

[67]

As
    noted above, the trial judge found that the failure to disclose the Managing
    Directors compensation to the respondent for the period between 1993 and 2000
    constituted a breach of the respondents reasonable expectations as a
    shareholder by East West that was oppressive, unfairly prejudicial or unfairly
    disregarded the respondents interests as a shareholder.

[68]

The
    appellants advance two main arguments about the characterization of the
    appellants non-disclosure.

[69]

First,
    the appellants say that the trial judge mischaracterized the evidence of their
    non-disclosure when concluding that it breached the respondents reasonable
    expectations. They argue that the trial judge failed to have regard to his own
    findings that:

·

The respondent received financial statements from East West every
    year;

·

The respondent and Hobza corresponded regularly and met annually;

·

Discussions took place between East Wests and the respondents
    professional advisors;

·

East Wests accountant wrote to the respondents advisor in 2000,
    satisfying the respondents inquiries regarding 1999 and 2000; and

·

It was not the case that management compensation was not broken
    out in the financial statements with a view to concealing information from the
    respondent.

[70]

The
    appellants say that in light of these findings, the trial judge committed a
    palpable and overriding error in finding that the respondents reasonable
    expectations were breached.

[71]

I
    am not persuaded that the trial judge erred. In my view, the findings the
    appellants point to are not inconsistent with the trial judges conclusion
    that, in all of the circumstances, the respondent had a reasonable expectation
    that the financial information he was provided with would disclose the
    compensation paid to the Managing Directors. The respondent was the only
    shareholder who was not also a director and officer; he had been told that
    whenever East West made a profit, it would remain in the company or he would
    receive 10% of it; over the 22-year period no distributions had been paid to
    shareholders; the financial statements the respondent was provided with in the
    early years disclosed the Managing Directors compensation as a line item; the
    respondent had made inquiries about the level of compensation paid to the Managing
    Directors; and some of the financial statements he was provided with were
    misleading because they only disclosed part of the Managing Directors
    compensation. I reject this first argument.

[72]

Second,
    the appellants say that
BCE Inc. v. 1976 Debentureholders
, 2008 SCC 69,
    [2008] 3 S.C.R. 560, makes clear that the conduct required to ground a finding
    of oppression, unfair prejudice or unfair disregard are different, and the
    trial judge did not specify which of these he found. Moreover, they argue, the
    conduct at issue did not rise to any of those levels. At the highest, it only
    amounted to the appellants sometimes refusing to respond to the respondents
    requests for information during the last few years. And even if the appellants
    conduct were seen as unfairly disregarding the respondents interests, it did
    not result in compensable harm.

[73]

It
    can safely be said that the trial judge found the appellants conduct to be
    oppressive. In his costs endorsement following trial, the trial judge described
    his decision as finding that the appellants conduct in awarding themselves
    excess compensation during the period 1993 to 2007, coupled with their conduct
    towards [the respondent] was oppressive and unfairly prejudicial. He
    characterized that conduct as egregious, outrageous and reprehensible,
    justifying an award of substantial indemnity costs.

[74]

The
    conduct on which the trial judge focussed began in 2005:

[13] Beginning with Hobzas angry response in early 2005 to [the
    respondents] December 23, 2004 email that stated that the [appellants]
    compensation is not your business!, the [appellants] and particularly Hobza,
    along with East Wests lawyer [Robin] McDonald, deliberately took steps to
    prevent [the respondent] from receiving information about their salaries.

[14] When [the respondent] raised the issue, rather than deal
    with it, they refused to address it. They forced [the respondent] to retain
    legal counsel and ultimately start an action to recover from them monies that
    they improperly received.

[75]

I
    reject the appellants argument that because the trial judge did not invoke the
    descriptors egregious, outrageous and reprehensible in his trial reasons, his
    costs endorsement is inconsistent with his findings at trial, and his award of
    substantial indemnity costs accordingly cannot stand. Where on the range of
    conduct covered by the oppression remedy the non-disclosure fell became
    relevant only when faced with the task of fixing costs. Properly viewed, the costs
    endorsement supplements the trial reasons.

[76]

Moreover,
    it is clear from his costs decision that the trial judge considered the
    non-disclosure together with the payment of the excess compensation as
together
warranting substantial indemnity costs. It does not matter that the
    non-disclosure in and of itself did not result in compensable harm.

[77]

Therefore,
    the final  question, before turning to the costs awarded by the trial judge, is
    whether the trial judge erred in principle or made a palpable and overriding
    error of fact in concluding that the non-disclosure conduct at issue, combined
    with the payment of excess compensation in circumstances where the Managing
    Directors had no regard to whether the compensation paid was fair and
    reasonable, amounted to oppression. I am not persuaded that the trial judge
    erred. ,

[78]

At
    para. 104 of his reasons, the trial judge refers to
BCE
and properly
    instructed himself as to the varying scale of wrongful conduct reflected in the
    terms oppression, unfairly prejudicial and unfairly disregards  with
    oppression, a wrong of the most serious sort at one end, and unfair
    disregard at the other.
[4]

[79]

And
    as this court has held, whether a shareholder has a reasonable expectation, and
    whether the actions of a corporation are oppressive, unfairly prejudicial to or
    unfairly disregard the interests of a shareholder are essentially questions of
    fact:
Casurina Ltd. Partnership v. Rio Algom Ltd.
(2004), 40 B.L.R.
    (3d) 112 (Ont. C.A.), at para. 24. The trial judge makes a fully-supported
    finding of deliberate high-handed conduct: the refusal to provide information
    to the respondent about compensation paid to the Managing Directors when asked.

[80]

Nor
    am I persuaded that there is a basis to interfere with the trial judges award
    of costs on a substantial indemnity scale.  This court will interfere with an
    award of substantial indemnity costs only if it is satisfied that the trial
    judge erred in principle or that the costs award is plainly wrong:
Ford
    Motor Co. of Canada v. Ontario (Municipal Employees Retirement Board)
(2006)
, 17 B.L.R. (4th) 169 (Ont. C.A.),
    at para. 12.

[81]

The
    trial judge properly instructed himself that a finding of oppression does not
    always attract substantial indemnity costs, and, having characterized the
    appellants conduct as outrageous, egregious and reprehensible, determined that
    their conduct was sufficient to justify an award of substantial indemnity
    costs.

[82]

The
    appellants argue that the trial judge failed to consider a number of
    significant factors that weighed heavily against a substantial costs award:

·

They made good faith efforts to settle the action, a factor taken
    into account in
Harmer v. McNeely Engineering Consultants Ltd
., [1997]
    O.J. No. 4886 (Gen. Div.) at para. 10;

·

The money that they improperly paid to themselves was overwhelmingly
    theirs, whether paid by dividend or executive compensation;

·

The respondent profited significantly overall from his investment
    in East West; and

·

As they say the trial judge found, their conduct was informed by
    advice from East Wests professional advisors.

[83]

I
    take no issue with the first three factors the appellants advance. However, I
    will comment on the final factor. As expressed, it suggests stronger reliance
    on professional advisors than the trial judge found. The trial judge did not
    find that East Wests professional advisors told the Managing Directors that
    they need not provide copies of the Statement of Warehouse, Selling and
    Administrative Expenses to the respondent, or respond to the respondents
    requests for information about compensation. And while East Wests accountants
    may have explained that its active business income could be reduced to a level
    that would be taxable at the small business rate by paying management bonuses,
    the trial judge did not find that East Wests professional advisors told the
    Managing Directors that, in the circumstances, this was a proper means for
    determining their compensation.

[84]

In
    any event, a trial judge cannot be expected to address every argument in his or
    her costs endorsement. The trial judges costs decision is 13 pages in length,
    and he set out the reasons why he determined that substantial indemnity costs
    were appropriate in this case. I am not satisfied that the trial judges decision
    to award substantial indemnity costs is plainly wrong.

[85]

Although
    I would not interfere with the trial judges award of costs on a substantial
    indemnity scale, I would order that the questions of the quantum of costs and
    the cost consequences of Rule 49.10 be remitted to the trial judge for
    reconsideration.

[86]

In
    fixing costs, the trial judge specifically considered the amount recovered by
    the respondent. The reasonableness of the quantum must be reconsidered in light
    of the reduced recovery. While this court may reassess the quantum of
    substantial indemnity costs awarded when it reduces the amount of damages (see
340812
    Ontario Ltd. v. Canadian National Railway Co.
(1997), 149 D.L.R. (4th) 575
    ;
Pirani v. Esmail
, 2014 ONCA 145, 94 E.T.R. (3d) 1), as I explain below,
    in this case the reduction may have cost consequences under Rule 49.10    At a
    minimum, it highlights the reasonableness of the appellants settlement offer (
Pirani
at para. 77).  For these reasons, I would return these questions to the
    trial judge.

[87]

As
    noted in the introduction to these reasons, the appellants made an offer to
    settle the action for $300,000 inclusive of interest, plus partial indemnity
    costs. The trial judges award of damages ($250,000) and prejudgment interest ($49,793.83)
    was in total very slightly less than $300,000. He rejected the appellants
    argument that the judgment was therefore not as favourable as or less
    favourable than the offer to settle, explaining at para. 22 of his Costs
    Endorsement that in comparing the terms of a judgment, all of the terms of the
    offer must be considered, including the provisions for costs:
Rooney
    (Litigation Guardian of) v. Graham
(2001), 53 O.R. (3d) 685 (C.A.).

[88]

The
    trial judge concluded, at para. 23 of his Costs Endorsement:

[the respondent] is entitled to substantial indemnity costs of
    the action. The [appellants] conduct which gives rise to the higher cost award
    occurred prior to the commencement of the action and therefore the higher cost
    scale should have been included as part of the Offer. Given the Offer was made
    on the eve of trial, the difference between partial indemnity and substantial
    indemnity costs was significant from a monetary perspective. In my view,
    therefore, the judgement was more favourable than the Offer and accordingly,
    the [appellants] cannot rely on the cost consequences of Rule 49.

[89]

A
    judgment that provides for substantial indemnity costs will not always be as
    favourable or more favourable than a settlement offer that provides for partial
    indemnity costs. As the trial judge notes, when the settlement offer was made
    is relevant. However, the difference between the principal amount in the offer
    and principal amount of the judgment is also relevant. One only need imagine an
    offer to settle for $100,000, plus prejudgment interest and partial indemnity
    costs, and a judgment for $10,000, and substantial indemnity costs. Here, as
    noted above, the amount of damages awarded by the trial judge, and prejudgment
    interest thereon, nearly equalled the amount of the settlement offer. The
    $300,000 settlement offer exceeds the damages that I would award ($187,453.51)
    and prejudgment interest thereon ($37,336.12) by approximately $75,000. This is
    an important factor.

VI.

DISPOSITION AND COSTS

[90]

I
    would accordingly allow the appeal, in part, and reduce damages to $187,453.51,
    and prejudgment interest thereon to $37,336.12 (3.3% per annum, for 2,203
    days). I would not disturb the award of costs on a substantial indemnity scale,
    but would return the questions of the quantum of those costs, and the cost
    consequences of Rule 49.10 to the trial judge for reconsideration, in light of
    the reduced damages award.

RELEASED:

OCT -9 2014                                    Alexandra
    Hoy A.C.J.O.

AH                                                   I
    agree E.E. Gillese J.A.

I
    agree P. Lauwers J.A.

Schedule A

Fiscal Year

Compensation Paid

Fair Market Compensation

Excess (Deficit) Before Tax

Tax Rate

Excess (Deficit)    After Tax

1986

$40,000.00

$300,000.00

-$260,000.00

44.69%

-$143,806.00

1987

$200,000.00

$325,000.00

-$125,000.00

42.98%

-$71,275.00

1988

$385,600.00

$350,000.00

$35,600.00

40.55%

$21,164.20

1989

$192,000.00

$360,000.00

-$168,000.00

39.08%

-$102,345.60

1990

$302,000.00

$365,000.00

-$63,000.00

38.82%

-$38,543.40

1991

$240,000.00

$375,000.00

-$135,000.00

38.25%

-$83,362.50

1992

$270,000.00

$425,000.00

-$155,000.00

38.11%

-$95,929.50

1993

$312,000.00

$425,000.00

-$113,000.00

36.55%

-$71,698.50

1994

$599,600.00

$450,000.00

$149,600.00

35.58%

$96,372.32

1995

$672,000.00

$500,000.00

$172,000.00

35.82%

$110,389.60

1996

$502,000.00

$625,000.00

-$123,000.00

35.89%

-$78,855.30

1997

$556,000.00

$650,000.00

-$94,000.00

35.89%

-$60,263.40

1998

(3 months)

$129,000.00

$110,000.00

$19,000.00

35.89%

$12,180.90

1999

$980,500.00

$500,000.00

$480,500.00

35.86%

$308,192.70

2000

$875,000.00

$550,000.00

$325,000.00

35.52%

$209,560.00

2001

$743,700.00

$625,000.00

$118,700.00

35.12%

$77,012.56

2002

$525,000.00

$625,000.00

-$100,000.00

34.12%

-$65,880.00

2003

$630,000.00

$650,000.00

-$20,000.00

34.00%

-$13,200.00

2004

$1,200,000.00

$675,000.00

$525,000.00

33.36%

$349,860.00

2005

$1,500,000.00

$700,000.00

$800,000.00

35.36%

$517,120.00

2006

$1,650,000.00

$700,000.00

$950,000.00

35.11%

$616,455.00

2007

$807,150.00

$750,000.00

$57,150.00

35.11%

$37,084.64

Total

$13,311,550.00

$2,276,550.00

$1,530,232.72

Respondents
          Share (12.25%)

$278,877.38

$187,453.51

[1]

Rules of Civil
    Procedure
, R.R.O. 1990, Reg. 194.

[2]
The trial judge expressed doubt that this was the case in the period beginning
    in the mid-1990s.

[3]
Section 5 of the Third Schedule of the Act provides the following:

(1) A
    complainant may apply to the court for an order under this Section.

(2) If,
    upon an application under subsection (1) of this Section, the court is
    satisfied that in respect of a company or any of its affiliates

(a) any act or omission of the company or any of its
    affiliates effects a result;

(b) he business or affairs of the company or any of
    its affiliates are or have been carried on or conducted in a manner; or

(c) the powers of the directors of the company or any
    of its affiliates are or have been exercised in a manner,

that it
    is oppressive or unfairly prejudicial to or that unfairly disregards the
    interests of any security holder, creditor, director or officer, the court may
    make an order to rectify the matters complained of.

[4]

BCE

explains, at para. 92, that
    oppression connotes harsh and abusive conduct and is reserved for wrongs of
    the most serious sort. On the other hand:

[93] Unfair prejudice is
    generally seen as involving conduct less offensive than oppression. Examples
    include squeezing out a minority shareholder, failing to disclose related party
    transactions, changing corporate structure to drastically alter debt ratios,
    adopting a poison pill to prevent a takeover bid, paying dividends without a
    formal declaration, preferring some shareholders with management fees and
    paying directors fees higher than the industry norm.

[94] Unfair disregard is
    viewed as the least serious of the three injuries, or wrongs. Examples include
    favouring a director by failing to properly prosecute claims, improperly
    reducing a shareholders dividend, or failing to deliver property belonging to
    the claimant. [Citations omitted.]


COURT OF APPEAL FOR ONTARIO

CITATION: Legg v. Simcoe Muskoka Catholic District School
    Board, 2014 ONCA 745

DATE: 20141027

DOCKET: C58968

Cronk, MacFarland and LaForme JJ.A.

BETWEEN

Diane Legg

Applicant (Respondent)

and

Simcoe Muskoka Catholic District School Board

Respondent (Appellant)

Martin Sclisizzi and Heather K. Pessione, for the
    appellant

Stephen J. Moreau and Lauren Sheffield, for the
    respondent

Heard:  October 6, 2014

On appeal from the judgment of Justice P. H. Howden of
    the Superior Court of Justice, dated May 23, 2014.

MacFarland J.A.:

[1]

The appellant appeals the order of Howden J. dated May 23, 2014 wherein
    he declared that the appellant:

Shall indemnify, reimburse and save the [respondent] harmless
    for all costs, expenses, and charges she has incurred or will incur in
    defending herself pursuant to Article 13.01 of her contract of employment with
    the appellant, commencing on January 30, 2014.

[2]

The appellant School Board employed the respondent as its Director
    Communications and Public Affairs pursuant to a written agreement.  The
    respondent had been an employee of the appellant since 2000 and was promoted to
    the position of Director in 2008.

[3]

On February 4, 2014, as the result of complaints made by the respondents
    fellow employees, which the parties were unable to resolve internally, the
    respondent was suspended from her position on suspicion that she may have
    submitted fraudulent expense claims.  As Darlen Schmidt put it in his affidavit:

On February 4, 2014, the Board suspended Ms. Legg with pay
    so that it could have a third party conduct a more fulsome investigation.

[4]

That same day a private investigator was hired.  On April 24, 2014,
    having received the investigators report, Ms. Legg was fired for expense
    fraud.

[5]

In early April, 2014 she brought an application before Howden J. of the
    Superior Court of Justice, seeking payment of her ongoing legal expenses
    pursuant to Article 13.01 of her contract of employment, which provides in part:

13.01 Indemnity for Errors and Omissions

Subject to the limits imposed by
    law, if any, the Board shall at the sole cost and expense of the Board, from
    time to time and at all times, both during the term of this Contract and
    thereafter indemnify and save harmless the Communications and Public Affairs
    Director (and her heirs, executors and administrators, and estate and effects,
    successors and assigns) from and against:

a)

all costs, charges and
    expenses whatsoever which the Communications and Public Affairs Director
    sustains or incurs in or relation to any action, suit or proceeding which is
    brought, commenced or prosecuted against the Communications and Public Affairs
    Director for or in respect of any act, deed, matter or thing whatsoever, made,
    done or permitted by the Communications and Public Affairs Director, in or in
    relation to the execution of the duties of the office of Communications and
    Public Affairs Director of the Board, or in respect of any such liability, and,

b)

all other costs
    charges and expenses which the Communications and Public Affairs Director
    sustains or incurs in or in relation to the affairs thereof,

except such costs, charges or
    expenses as are occasioned by the Communications and Public Affairs Directors
    own failure to act honestly and in good faith in the performance of the duties
    of office, or by other willful neglect or default.

[6]

The application judge concluded that the word proceeding was broad
    enough to include the proceedings instituted by the Board commencing January
    30, 2014 when Ms. Leggs Superior, the Director of Education, told her that her
    department was in a state of crisis and further investigation was required, not
    of her department but of her, at which point it was clear that the School Board
    was initiating a proceeding focussed on the respondent.

[7]

The appellant argues three main grounds of appeal:

1)

the
    School Board raised a
prima

facie
case that Ms. Legg failed
    to act honestly and thus the exclusion clause in Article 13.01 applies;

2)

the
    application judge erred fundamentally in not determining whether or not Ms.
    Legg had acted in good faith;

3)

the
    application judge erred in determining that a workplace investigation is a
    proceeding within the meaning of Article 13.01;

First Ground

[8]

In my view, and counsel agrees, in order to invoke the exclusion clause
    in Article 13.01, the School Board was obliged to raise a
prima facie
case that Ms. Legg had acted dishonestly.

[9]

The law presumes that persons act honestly until the contrary is proved.
    (
Blair v. Consolidated Enfield Corp.
, [1995] 4 S.C.R. 5, at para. 35)
    There was no admissible evidence of dishonest conduct before the application
    judge.

[10]

The
    School Board did not rely on the truthfulness of the investigative report. Further,
    Mr. Schmidts evidence of what hed been told by certain principals about Ms. Legg
    was hearsay and, in any event, was incapable of proving that shed been
    dishonest.

[11]

In
    my view, this ground of appeal must fail.

Second Ground

[12]

It
    was not for the application judge to determine the merits of the School Boards
    allegations against the respondent.  As he put it in para. 11 of his reasons:

Without proof to the high degree of a strong
prima facie
case that the applicant has acted dishonestly or in bad faith,
which is not
    even attempted before me
, the application before me is limited to whether
    by contract, and/or by statute, Ms. Legg is entitled to immediate and ongoing
    indemnification of her legal costs incurred during the investigation by the
    Board. [Emphasis added.]

[13]

I
    agree with the application judge. The ultimate merits of the School Boards
    allegations will be determined by arbitration in accordance with
    Article 14.06 of the contract of employment. Were it otherwise, the
    contractual promise to indemnify and save harmless would be rendered
    meaningless. All the School Board would need to do to avoid its indemnification
    obligation would be to allege bad faith or dishonesty without proof. In that
    event, there would be no indemnity unless and until, at the end of the day, the
    allegations were proved to be without merit.

[14]

I
    therefore agree with the application judge that absent any effort to prove the
    allegation before him, his task was to interpret the contract.

[15]

I
    also agree with his conclusion, at para. 12 of his reasons:

Until the applicant is found to have acted dishonestly and/or
    in bad faith and the Board confirms such finding after granting the applicant a
    hearing, within the procedures set up by the contract
and
, if appealed,
    such finding is registered by the arbitrators pursuant to the terms of the
    contract, there is no disentitlement to indemnification.  [Emphasis in
    original.]

Third Ground

[16]

Thirdly,
    the appellant argues that the application judge erred in determining that a
    workplace investigation is a proceeding within the meaning of the contract.
    It argues that a proceeding has to be in the context of an action or suit.

[17]

I
    do not agree.

[18]

In
    his reasons, at para. 23, the application judge quoted from the decision of the
    Supreme Court of Canada in
Markevich v. Canada
, [2003] S.C.J. No. 8:

Though the word proceeding is often used in the context of an
    action in court, its definition is more expansive.  The Manitoba Court of
    Appeal stated in
Royce v. MacDonald (Mun.)
(1909), 12 WLR 347, at p. 350,
    that the word proceeding has a very wide meaning and includes steps or
    measures which are not in any way connected with actions or suits. In Blacks
    Law Dictionary, 96
th
ed., 1990, at p. 1204, the definition of
    proceeding includes,
inter alia
, an act necessary to be done in
    order to obtain a given end; a prescribed mode of action for carrying into
    effect a legal right.

[19]

As
    the application judge noted, the School Board in its drafting did not choose to
    limit instances of the use of the indemnification provision to legal actions or
    regulatory proceedings.  It would have been a simple matter for it to have done
    so by the use of appropriate language.

[20]

The
    application judge concluded that from the end of January, 2014, the School
    Board focused its attention on Ms. Leggs conduct and began its formal
    investigation. It first suspended her from her employment and then, on receipt
    of its investigators report, terminated her employment for alleged fraudulent
    conduct.  He concluded that this conduct constituted a proceeding within the
    meaning of Article 13.01 and I agree.

Disposition

[21]

For
    the reasons given, I would dismiss the appeal.

[22]

I
    would award costs of the appeal to the respondent fixed in the sum of $8000,
    inclusive of disbursements and HST, the figure to which counsel agreed.

Released: October 27, 2014  EAC

J.
    MacFarland J.A.

I
    agree E.A. Cronk J.A.

I
    agree H.S. LaForme J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Leggat v. Jennings, 2014 ONCA 754

DATE: 20141028

DOCKET: C58633

Feldman, Juriansz and Rouleau JJ.A.

BETWEEN

Brian Leggat and 1180330 Ontario Inc.

Plaintiff (Appellants)

and

Kelly Jennings
,
    Craig Beck,
1393024 Ontario Inc., Peninsula Motor Sales
    Limited
, 4061357 Canada Inc., 921384 Ontario Inc. D.B.A Midland Honda,
    2233361 Ontario Ltd. D.B.A. Powerband Global, Elizabeth Jennings, Brianne
    Jennings, Courtney Jennings and 2213922 Ontario Inc. D.B.A Peninsula Automotive
    Sales & Leasing

Defendants (Respondents)

AND BETWEEN

Kelly Jennings, 1393024 Ontario Inc., and Peninsula
    Motor Sales Limited

Plaintiffs

and

Brain Leggat, Doug Leggat, 1180330 Ontario Inc.,
    2095008 Ontario Inc., 2155866 Ontario Inc., Four Ways Inc. (F.K.A. 2064281
    Ontario Inc.) 952430 Ontario Inc., 4061420 Canada Inc., Leggat Pontiac Buick
    Cadillac Limited

Defendants

Shaun F. Laubman and Lauren Epstein, for the appellant

Neil Stuart Rabinovitch and Kathryn McCulloch, for the
    respondents

Heard and released orally: October 20, 2014

On appeal from the order of Justice A. Donald K.
    MacKenzie of the Superior Court of Justice, dated March 12, 2014.

ENDORSEMENT

[1]

The sale process ordered by the court was in response to the need for
    both sides to deal with the pressure from the bank that it would force the sale
    of the dealerships if it was not paid out.  They submitted the matter to the
    court as part of the oppression remedy claim.  The court accepted the
    respondents position that for sale purposes the two corporations being sold
    could no longer be parties to the litigation.  He had the power to include that
    provision as part of the sale process order.

[2]

The parties made it clear in their affidavits that their intent in
    agreeing to a sale process was that it would not affect or prejudice anyone in
    the litigation.  The appellant now says there are tax reasons why any damages
    for oppression must be paid to and flowed through the corporation and not
    directly to the plaintiffs.  They acknowledge, however, that the practical
    effect of the relevant tax consequences can be achieved by expert calculation
    without actually flowing any payment of damages through a party corporation.  It
    was clearly the intent both of the parties and of the motion judge that there
    be no effective prejudice to the litigant by this order.

[3]

The appellant also raises with the court a third party claim that has
    arisen against Peninsula after the order appealed from.  In our view, the
    parties can deal with the practical efficacies of that claim as part of trial
    management.  It does not affect the judges decision that for the purposes of
    the sale, the two corporations should no longer be parties to the main action.

[4]

The appeal is therefore dismissed with costs fixed at $10,000 inclusive
    of disbursements and HST.

K. Feldman J.A

R.G. Juriansz J.A.

Paul Rouleau J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Lester v.
    Bond, 2014 ONCA 749

DATE: 20141028

DOCKET: C58246

MacFarland, LaForme and Lauwers JJ.A.

BETWEEN

Reid Lester and Carol Jones

Applicants

(Appellants)

and

James William Chanwell Bond and Mary Elizabeth
    Bond

Respondents

(Respondents in Appeal)

Reid Lester, acting in person

Evert Van Woudenberg, for the respondent

Heard and released orally:  October 10, 2014

On appeal from the judgment of Justice John A. B.
    MacDonald of the Superior Court of Justice, dated December 23, 2013.

ENDORSEMENT

[1]

The application judge carefully reviewed the evidence before him
    including three surveys one from 1986 and two from 2012 having been
    commissioned by the parties. He found that the low retaining wall, which is the
    subject of the appellants complaint, encroaches at most .74 meters and at its
    least .64 meters, into the right of way. He reviewed the lengthy affidavits of
    the parties including the exhibits to those affidavits and the
    cross-examinations upon them.

[2]

The application judge concluded that the 1998 retaining wall, which
    replaced and continued an earlier wall in the same location, part of which was
    built by the City on its property, did not create a substantial obstruction to
    the appellants rights pursuant to the 1916 grant. The real problem, he found,
    was created by the pinch point at the north end of the right of way on City
    property. His findings are well-supported in the evidence and as such, are owed
    deference in this court.

[3]

The application judge  followed the law as set out in this courts
    decision in
Devaney v. McNab
(1921), 69 D.L.R. 23 (Ont. C.A.) as
    Middleton J.A. noted: (i)n each case it appears to me that it must be regarded
    as a question of fact,

as to whether or not there has been a substantial
    inference with the dominant tenement holders rights.

[4]

We see no error and the appeal is dismissed.

Cross-Appeal

[5]

The respondents seek leave to appeal the costs order of MacDonald J.
    wherein he denied the respondents costs of the application.

[6]

This was a property dispute between two parties  where neither have
    particularly clean hands. We are not persuaded that there was any error in principle
    or other error in the costs decision  we would not grant leave to appeal.

Disposition

[7]

The appeal is dismissed. The cross-appeal is dismissed. Costs of the
    appeal are awarded to the respondent in the sum of $10,000 inclusive of disbursements
    and H.S.T.

[8]

The cross-appeal is also dismissed with costs fixed to the respondent by
    cross-appeal in the sum of $1,000.

[9]

Accordingly, the appellant will pay the respondent the net amount of
    $9,000.00.

J. MacFarland
    J.A.

H. S. LaForme
    J.A.

P.
    Lauwers J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Liu v. The Bagg Group, 2014 ONCA 718

DATE: 20141020

DOCKET: C58878

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

BETWEEN

Wan S. Liu

Plaintiff

(Appellant)

and

The Bagg Group, Keith Bagg Staffing Resources
    Inc., Keith Bagg Staffing (Regional) Inc.

Defendants

(Respondents)

Wan S. Liu, acting in person

Amanda C. McLachlan and Jessica Mathewson, for the
    respondent The Bagg Group, et al.

Heard: October 9, 2014

On appeal from the order of Justice Edward P. Belobaba of
    the Superior Court of Justice, dated May 14, 2014.

APPEAL BOOK ENDORSEMENT

[1]

The appellant appeals from the order of the motion judge, dated May 14,
    2014, granting the respondents motion for summary judgment dismissing her
    claim and dismissing her motion for summary judgment.

[2]

We are of the view that the appeal should be dismissed.

[3]

The motion judge found that the appellant provided no evidence to
    support her claim that the respondent, an employment agency, was contractually
    obliged to forward her application for a specific position or that it committed
    an actionable wrong in failing to do so.  He concluded that the appellants
    claim is based on bare allegations and that it should, therefore, be dismissed.

[4]

We see no basis to interfere with the motion judges decision.  We are
    not satisfied that the motion judge erred in reaching his conclusion that the
    appellant had not adduced sufficient evidence in support of her claim or that
    the hearing of the motion was tainted by any procedural unfairness.

[5]

With respect to the appeal of the dismissal of the appellants motion
    for summary judgment, that was an interlocutory order and the appellant was
    required to seek leave to appeal in the Divisional Court. This court does not have
    jurisdiction to hear that appeal.  In any event, given that the appellants
    claim was properly dismissed on the respondents summary judgment motion, it
    follows that the appellants appeal of the dismissal of her motion for summary
    judgment must fail.

[6]

We are also not satisfied that the motion judge erred in awarding costs
    of $10,000 against the appellant. It was in the discretion of the motion judge
    to award costs to the successful party and the motion judge is entitled to
    deference in his assessment of costs.

[7]

The appeal is dismissed.

[8]

The appellant is ordered to pay the respondent costs of $4,500 inclusive
    of taxes and disbursements.

C. William Hourigan J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Mader v. South Easthope Mutual Insurance Company,
    2014 ONCA 714

DATE: 20141021

DOCKET: C57494

Weiler, Hourigan and Pardu JJ.A.

BETWEEN

Michelle Mader

Plaintiff (Appellant)

and

South Easthope Mutual Insurance Company
,
    Cunningham Lindsey Canada Limited, Dan Vaspori, Lawrence Diamond, Jack
    Wettlaufer, Wayne Tebbatt, Frank Rider, Steven Howell, Daryl Stevenson, Debra
    Gerber, Helen Schildermans, Lloyd Debus, Douglas Wettlaufer, Murray
    Schlotzhauer, Murray McGonigle, Donald Henry and Gordon Gross

Defendant (
Respondent
)

Sean Oostdyk, for the appellant

Bruce Keay, for the respondent, South Easthope Mutual
    Insurance Company

Heard: May 16, 2014

On appeal from the order of Justice Robert J. Nightingale
    of the Superior Court of Justice, dated July 16, 2013, with reasons reported at
    2013 ONSC 2821.

Hourigan J.A.:

Overview

[1]

The appellant, Michelle Mader, appeals an order dismissing her motion
    for partial summary judgment and granting the motion of the respondent, South
    Easthope Mutual Insurance Company, for summary judgment dismissing her claim.

[2]

For the reasons that follow, I would dismiss the appeal.

Facts

[3]

On July 21, 2002, the appellant was involved in a single vehicle motor
    vehicle accident. The appellant claimed that as a result of the accident, she
    sustained a broken ankle, a disc herniation, pain in her neck, shoulder, and
    back, and an adjustment disorder with anxiety and depression. She also claimed
    she was no longer able to work at her job as a customer service representative.

[4]

At the time of the accident, the appellant was insured by the respondent
    under a no-fault policy for accident benefits governed by the
Statutory
    Accident Benefits Schedule  Accidents on or after November 1, 1996
, O.
    Reg. 403/96 (the SABS). On July 30, 2002, the appellant applied for accident
    benefits pursuant to the SABS. On August 1, 2002, she began receiving income
    replacement benefits at a rate of $175.45 per week.

[5]

On April 24, 2003, the appellant received a Notice of Stoppage of Weekly
    Benefits and Request for an Assessment by a Designated Assessment Centre
    (DAC) from the respondent. The notice stated that the respondent would be
    terminating the appellants income replacement benefits as of May 6, 2003. The
    respondent claimed that the appellant was able to resume the duties of her
    pre-accident employment.

[6]

The appellant disagreed with the stoppage and requested a DAC assessment
    in accordance with the SABS in order to assess her entitlement to income
    replacement benefits.

[7]

On May 6, 2003, the respondent stopped paying income replacement
    benefits to the appellant.

[8]

On or about July 14, 2003, before a DAC assessment could take place, the
    appellant signed a Full and Final Release, which released the respondent from any
    obligation to pay accident benefits to the appellant. In exchange, the
    respondent made a lump sum payment of $3,000 to the appellant.

[9]

The appellant and the respondent provided conflicting evidence regarding
    the circumstances surrounding the execution of the release.

[10]

According
    to the appellant, the respondents adjuster went to the appellants apartment
    building and had a conversation with her in the hallway. The adjuster convinced
    the appellant to sign the Full and Final Release in exchange for the $3,000
    lump sum. The appellant alleged that, at the time, she felt that she had no
    other choice but to accept the settlement. The adjuster did not tell her that
    she did not have to sign the release or that she could continue to receive
    benefits from the insurer.

[11]

According
    to the respondent, it was the appellant who first approached the respondent
    with a view to settling her claim due to her ongoing financial difficulties.

[12]

On
    April 8, 2005, the appellant issued a statement of claim, naming the respondent
    as a defendant and seeking the following relief:

·

A declaration that the release signed by the appellant is a
    nullity;

·

$600,000 in damages for breach of contract;

·

$750,000 in damages for conspiracy;

·

$50,000 in damages for mental distress;

·

$100,000 in damages for breach of the duty to act in good faith;

·

$25,000 in aggravated damages; and

·

$2,500,000 in punitive and exemplary damages.

[13]

The
    appellant claimed she was unable to lead a normal life and to work, and was therefore
    entitled to income replacement benefits for life, in addition to medical,
    rehabilitation, housekeeping, and attendant care benefits. She alleged that the
    respondent breached its duty of good faith and caused her mental distress by
    unlawfully terminating these benefits.

[14]

In
    a letter dated August 9, 2005, the respondent's counsel informed the
    appellants counsel that the appellant had a statutory obligation to repay the settlement
    funds received and to file her dispute for mediation at the Financial Services
    Commission of Ontario (FSCO) before commencing her action.

[15]

The
    letter also indicated that the respondent was prepared to re-open the file and
    deal with the matter as if the settlement had not taken place. The respondent
    stated that it would reinstate the appellants income replacement benefits and
    pay the arrears owing to date, provided the appellant described her activities
    and earnings since signing the release and agreed to undergo an independent
    medical examination pursuant to s. 42 of the SABS.

[16]

The
    appellant did not respond to the letter and the respondent filed a statement of
    defence. The respondent pleaded that the appellants claim should be dismissed
    because it did not disclose a reasonable cause of action and because the
    appellant did not provide documentary disclosure or satisfy the statutory prerequisites
    to litigation.

[17]

To
    date, the appellant has not repaid her settlement funds or filed for mediation.

[18]

The
    respondent has not arranged or requested a DAC assessment for the appellant. As
    of 2006, DAC assessment facilities no longer exist in Ontario.

[19]

In
    January 2013, the appellant brought a motion for partial summary judgment and a
    declaration that she is entitled to income replacement benefits until the
    respondent complies with its alleged obligation to provide the requested DAC
    assessment.

[20]

The
    respondent also brought a motion for summary judgment, seeking to dismiss the
    appellants action on the grounds that it is statute barred because the
    appellant did not repay her settlement funds and file for mediation prior to
    commencing litigation.

Decision Below

[21]

The
    motion judge dismissed the appellants motion for partial summary judgment and
    granted the respondents motion for summary judgment dismissing the appellants
    claim.

[22]

The
    motion judge held that the appellant was obligated to repay the settlement
    funds and proceed to mediation before she could commence litigation. In
    particular, ss. 279(1) and 281(2) of the
Insurance Act
, R.S.O. 1990, c
    I-8, together require an insured person to seek mediation of a dispute in
    respect of accident benefit entitlements or amounts before commencing a court
    proceeding. That person is also required, under s. 9.1(8) of the
Automobile
    Insurance Regulation,
R.R.O. 1990, Reg. 664, to return any money received
    as consideration for a settlement before commencing mediation.

[23]

The
    motion judge rejected the appellants characterization of her claim as a stand-alone
    action not subject to these mediation requirements. The appellant had argued
    that she was not claiming payment of benefits, which would be covered by the
    mediation process. Rather, she was claiming damages and an order for reinstatement
    of her income replacement benefits since July 2003 due to the respondents
    failure to arrange a DAC assessment, as then required by regulation.

[24]

The
    motion judge found this to be a distinction without a difference. He
    characterized the appellants claim as one concerning her entitlement, or lack
    thereof, to rescind the settlement agreement and to now claim accident benefits
    since the settlement date.

[25]

Characterized
    in this way, the appellants claim was subject to the mandatory mediation
    provisions. Since the appellant had denied the respondent its statutory right
    to have the matter proceed to mediation prior to commencing litigation, the
    motion judge dismissed the appellants action by way of summary judgment.

[26]

The
    motion judge also dismissed the appellants claims for damages for mental
    distress and bad faith. The motion judge held that these claims were in
    respect of the appellants entitlement to accident benefits under s. 279(1) of
    the
Insurance Act
,

and were therefore subject to the mandatory
    mediation requirements found in ss. 280 to 283 of the Act.

[27]

Additionally,
    the motion judge held that the claims of mental distress and bad faith were not
    independent causes of action. Rather, they flowed from the respondents alleged
    breach of the insurance policy. Since the respondent had not been found in breach
    of its obligations and the appellants claim for payment of income replacement
    benefits had accordingly been dismissed, there was no basis for the claims of
    mental distress and bad faith.

[28]

Finally,
    the motion judge dismissed the appellants motion for partial summary judgment.
    He found that summary judgment was not appropriate because unresolved questions
    of fact and law remained. In particular, the motion judge found that the
    evidence conflicted in terms of the appellants ongoing disability and the
    details of her post-accident employment and income earned.

Issues

[29]

This
    appeal raises the following issues:

1)

Did the motion judge
    err in granting the respondents motion for summary judgment?

2)

Did the motion judge
    err in dismissing the appellants motion for partial summary judgment?

Analysis

(1) The Respondents Motion for Summary Judgment

[30]

The
    Supreme Court of Canada made it clear in
Hryniak v. Mauldin
, 2014 SCC
    7, [2014] 1 S.C.R. 87, at para. 81, that, absent an error in law, the exercise
    of powers by a motion judge under the new summary judgment rule attracts
    deference. With respect to the motion judges decision to grant the
    respondents summary judgment motion, I see no basis for appellate
    interference.

[31]

The
    starting point in the analysis is s. 279(1) of the
Insurance Act
which
    provides:

Disputes in respect of any insured persons entitlement to
    statutory accident benefits or in respect of the amount of statutory accident
    benefits to which an insured person is entitled shall be resolved in accordance
    with sections 280 to 283 and the
Statutory Accident Benefits Schedule
.

[32]

Pursuant
    to s. 281(1), the appellant was permitted to choose between an action in the
    court system and an FSCO arbitration. However, the right to bring either type
    of proceeding is limited by s. 281(2), which states that no person may commence
    a court or arbitration proceeding unless he or she has first sought mediation
    and mediation has failed
.

[33]

Mediation
    is central to the statutory scheme for resolving disputes between insured
    persons and their insurers and is a statutory precondition to an insured
    bringing court proceedings:
Hurst v. Aviva Insurance
, 2012 ONCA 837, 356
    D.L.R. (4th) 323, at para. 25;
Younis v. State Farm Mutual Automobile
    Insurance Company
, 2012 ONCA 836, 356 D.L.R. (4th) 318, at para. 3.

[34]

Without
    mediation, the court has no jurisdiction to hear the appellants claim:
Amorini
    v. Select Coffee Roasters Inc
. (2001),
143 O.A.C. 363, at para. 8
(Div. Ct.).

[35]

It
    is not disputed that the appellant has not sought mediation of her claim. She
    contends that her dispute would not be accepted for mediation at FSCO because
    its
Dispute Resolution Practice Code
(the Code)
requires a denial of benefits as a precondition to mediation
    and does not permit mediation where a settlement agreement is in place.

[36]

In
    my view, the appellants dispute is clearly contemplated by the Codes
    mediation procedure, which covers any dispute about an insured persons
    entitlement to accident benefits or the amount of those benefits where a claim
    has been denied or the prescribed period for the insurer to respond to the
    claim has elapsed.

[37]

The
    Code also permits mediation where a settlement agreement is in place in limited
    circumstances, including where the claimant disputes the validity of the
    settlement, such as whether the insurer has complied with the requirements of
    the
Settlement Regulation.
 The appellant submits that this exception
    is inapplicable because it is not her position that the Full and Final Release
    did not comply with the
Settlement Regulation
, but that it was
    obtained through fraud and misrepresentation.

[38]

There
    is no merit to this submission. Clearly, the exception applies in all
    circumstances where the claimant disputes the validity of the settlement. The
    reference to a challenge based on non-compliance with the
Settlement
    Regulation
is merely illustrative. Therefore, there is no valid reason for
    the appellants failure to comply with the mediation requirement.

[39]

In
    her claim, the appellant also purports to rescind the settlement agreement. In
    order to do so, she is
required,
pursuant to
    s. 9.1(7) of the
Automobile Insurance Regulation
,
to deliver a written notice to the office of the insurer or
    its representative and to return any money received by her as consideration for
    the settlement.
In addition, the appellant is prohibited, pursuant to s.
    9.1(8), from
commencing a mediation proceeding under
    s. 280 of the
Insurance Act
unless she
    has returned the money received as consideration for the settlement
.

[40]

Therefore,
    the settlement funds must be repaid and mediation must fail before a court
    proceeding may be commenced:
Lindsay v. Martin
,
[2004] O.T.C.
    468, at para. 12 (Ont. S.C.).

[41]

No
    repayment of settlement funds has been made. In this regard, counsel for the
    appellant made a submission on the return of the motions that he had the money
    available for payment. Such an assertion is not evidence. The motion judge was
    correct to reject the submission as proof that the appellant had fulfilled her
    statutory obligation to repay the settlement funds.

[42]

In
    my view, it is clear that the appellant has not fulfilled either of the
    statutory preconditions to the commencement of a court proceeding. The appellant
    submits, however, that she has sued not only for breach of contract, but for mental
    distress, breach of the duty to act in good faith, and conspiracy. She submits
    that these latter three claims do not require an FSCO mediation before an
    action can be commenced.

[43]

It
    is the appellants position that her mental distress and bad faith claims are
    inextricably linked. She alleges that the respondent coerced her into signing
    the settlement and that by persisting in denying her benefits and refusing to
    set up a DAC assessment for seven years, the respondent acted in bad faith. The
    appellant further alleges that the respondent and two of its representatives
    conspired to injure her by closing her file.

[44]

The
    appellant submits, therefore, that her claims result from the respondents
    denial of her procedural rights, rather than the denial of benefits. In other
    words, her mental distress and bad faith claims are independent causes of
    action, which are not in respect of entitlement to or amounts of benefits.
    Accordingly, the appellant submits that she is not required to bring these
    claims to an FSCO mediation.

[45]

In
    some instances, breach of an insurers duty of good faith or intentional
    infliction of mental distress can constitute an independent cause of action:
Whiten
    v. Pilot Inusrance Co.,
2002 SCC 18

[2002] 1 S.C.R. 595, at para. 82;
Prinzo v. Baycrest Centre for Geriatric Care
(2002),

60 O.R. (3d)
    474, at paras. 37-39, 64. However, neither is a separate actionable wrong in
    this case.

[46]

The
    reasoning of this court in
Arsenault v. Dumfries Mutual Insurance Co.
,
    (2002), 57 O.R. (3d) 625 (C.A.), is instructive on this point. The issue in
    that case was whether a claim for bad faith damages arising out of an insurer's
    termination of no-fault accident benefits was subject to the two-year
    limitation period set out in s. 281(5) of the
Insurance Act
. Answering
    this question necessitated a determination of whether bad faith claims were
    caught by s. 279(1) of the Act.

[47]

Justice
    Abella noted that in s. 279, the legislature mandated that disputes in respect
    of any claim to no-fault benefits must be resolved in accordance with ss. 280
    to 283 of the Act. Relying on the Supreme Court of Canadas decision in
Nowegijick
    v. The Queen
, [1983] 1 S.C.R. 29, Abella J.A. commented, at para. 16, that
    the use of the phrase in respect of is probably the widest of any expression
    intended to convey some connection between two related subject matters. She determined,
    at para. 17, that any and all disputes about an insurer's refusal to pay
    no-fault benefits, including disputes which allege the insurer's bad faith in
    connection with that refusal were caught by the scheme in ss. 280 to 283.

[48]

Abella
    J.A. went on to conclude, at paras. 19 and 21:

If I am wrong in concluding that bad faith claims in connection
    with no-fault benefits refusals are subject to the procedures and time limits
    set out in
ss. 280
to 283 of the
Insurance Act
, I
    am nonetheless of the view, based on the pleadings, that this appellant's claim
    is not an independent, actionable wrong, but is in fact exactly the kind of
    dispute over no-fault benefits entitlements contemplated by the dispute
    resolution scheme in the Insurance Act... Moreover, had the dispute been
    arbitrated, it was open to the arbitrator under
s. 282(10)
, if it was
    found that the insurer had "unreasonably withheld or delayed
    payments", to award an additional lump sum.

Ms. Arsenault's characterization of the insurer's refusal as
    bad faith conduct is merely an attempt to circumvent the mandatory requirements
    of the dispute resolution scheme in the
Insurance Act
through the
    guise of linguistic reformulation. Her allegations, distilled, are that the
    refusal was inappropriate in the circumstances, the very issue contemplated for
    resolution under the scheme, and a claim that is clearly subject to the two
    year limitation period set out in
s. 281(5)
.

[49]

This
    analysis applies in the present case. The claims asserted by the appellant all
    flow from the denial of benefits. At their essence, they amount to nothing more
    than a claim that the appellant was wrongly denied benefits to which she
    believes that she is entitled to receive. This is precisely the type of claim
    contemplated for resolution by the procedure in ss. 280 to 283 of the
Insurance
    Act
.

[50]

Indeed,
    s. 282(10) of the
Insurance Act

provides that if the parties
    proceed to arbitration and the arbitrator finds that an insurer has
    unreasonably withheld or delayed payments, the arbitrator shall award, in
    addition to the benefits to which an insured person is entitled, a lump sum of
    up to 50 per cent of the amount to which the person was entitled at the time of
    the award. This subsection makes clear that the procedure in ss. 280 to 283 is not
    restricted solely to claims for benefits, but is also designed to include
    claims related to the manner in which benefits were administered.

[51]

The
    pleading of a conspiracy does not transform the appellants claim into an
    independent actionable wrong. The facts underlying the appellants conspiracy
    claim are the same as those underlying the rest of her claims. The object of
    the alleged conspiracy was to deny the appellant her benefits.

[52]

In
    summary, the appellant has failed to establish that the motion judge made any
    error of law in his analysis. There is, therefore, no basis for appellate
    interference with the motion judges decision to grant the respondents motion
    for summary judgment dismissing the appellants claim.

(2) The Appellants Motion for Summary Judgment

[53]

The
    appellant brought a motion for partial summary judgment, asserting that she was
    entitled to payment of benefits until the respondent complies with its
    obligations under the SABS to arrange the requested DAC assessment.

[54]

DAC
    assessments have not been part of the statutory benefits regime since 2006.
    Therefore, the order sought by the appellant would be an order in perpetuity.

[55]

The
    denial of the appellants motion for partial summary judgment is an interlocutory
    order, from which an appeal lies to the Divisional Court, with leave:
Courts
    of Justice Act
, R.S.O. 1990, c. C-43, s. 19(1)(b). Only if leave is
    obtained from the Divisional Court can the appeal be combined with an appeal
    that lies to Court of Appeal in the same proceeding under s. 6(2) of the
Courts
    of Justice Act
:
Cole v. Hamilton (City)

(2002), 60 O.R. (3d) 284, at paras. 11, 15.  Since no
    leave was obtained, this court has no jurisdiction to hear the appellants
    appeal from the order dismissing her motion for summary judgment.

[56]

Even
    if the appellant was in the right court, all of her claims, including the claim
    that was the subject of her motion for partial summary judgment, were properly
    dismissed on the respondents summary judgment motion.

[57]

It
    follows that the appellants appeal of the dismissal of her motion for partial
    summary judgment must fail.

Disposition

[58]

I
    would therefore dismiss the appeal.

[59]

With
    respect to costs, the parties agreed that the sum of $6,000, all-inclusive, is the
    appropriate award. Accordingly, I would order that the appellant pay the
    respondent $6,000 in costs, all-inclusive.

Released: October 21, 2014 KMW

C.
    William Hourigan J.A.

I
    agree K. M. Weiler J.A.

I
    agree G. Pardu J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Mikitchook v. John, 2014 ONCA 729

DATE: 20141021

DOCKET: C58645

Laskin, Gillese and Pardu JJ.A.

BETWEEN

Yaroslav Mikitchook

Plaintiff (Respondent)

and

Darren John also known as Darren P. John

Defendant (Appellant)

No one appearing for the appellant

No one appearing for the respondent

Heard: October 17, 2014

On appeal from the order of Justice John R. Sproat of the
    Superior Court of Justice, dated March 14, 2014.

APPEAL BOOK ENDORSEMENT

[1]

Neither party appeared.  There is no basis to interfere with the costs
    award.  Leave to appeal costs is refused.


COURT OF APPEAL FOR ONTARIO

CITATION: Okel v. Misheal, 2014 ONCA 699

DATE: 20141015

DOCKET: M44029, M43917, M43918, C46899

Juriansz, Rouleau and Pepall JJ.A.

BETWEEN

Mona Okel

Applicant (Responding Party)

and

Peter Misheal

Respondent (Moving Party)

Mona Okel, acting in person

Peter Misheal, acting in person

On a motion to review the order of Justice K.M. Weiler of the
    Court of Appeal for Ontario, dated July 4, 2014.

ENDORSEMENT

[1]

This motion is part of a protracted dispute about Mr. Misheals support
    obligations toward his former wife, Ms. Okel, and their children.

[2]

In February 2013, Hourigan J. ordered an oral hearing to determine the
    enforceability of a Nova Scotia court order terminating Mr. Misheals support
    obligations and cancelling his arrears. Ms. Okel was unable to attend the
    scheduled hearing and, in her absence, Gray J. granted judgment in favour of
    Mr. Misheal.

[3]

In December 2013, this court set aside the order of Gray J. and ordered
    that the matter proceed to an oral hearing in accordance with the order of
    Hourigan J.

[4]

Mr. Misheal subsequently brought a motion seeking to stay this courts
    order pending his appeal to the Supreme Court of Canada. He also brought a
    motion for an extension of time to file an appeal of the order of Hourigan J.
    In July 2014, Weiler J.A. dismissed both motions.

[5]

Mr. Misheal now brings a motion to review the order of Weiler J.A. and
    to stay the December 2013 order of this court. Both aspects of this motion are
    completely devoid of merit.

[6]

The issue of a stay is moot because leave to appeal to the Supreme Court
    of Canada has now been refused. The issue of an extension of time to appeal the
    order of Hourigan J. is, in effect, also moot because this court confirmed that
    the hearing ordered by Hourigan J. should proceed and leave to appeal from that
    decision has been refused.

[7]

The lack of merit in Mr. Misheals motion is further evidenced by the
    fact that his factum does not squarely address Weiler J.A.s decision, but
    instead sets out why he believes his support obligations should be terminated
    and his arrears cancelled and, presumably, why the Nova Scotia court order
    should be enforced. This is precisely the issue both Hourigan J. and this court
    ordered to proceed to an oral hearing involving both parties, which has yet to
    occur.

[8]

Mr. Misheals motion is but another vexatious step in this protracted
    matrimonial dispute in which Mr. Misheal has brought five unsuccessful appeals
    seeking to strike or amend his support or arrears, as well as numerous motions.

[9]

Accordingly, the motion is dismissed on the basis of Mr. Misheals
    written submissions, pursuant to rule 2.1.02(1) of the
Rules of Civil
    Procedure
, R.R.O. 1990, Reg. 194.

[10]

Rules
    2.1.01(3) and 2.1.02(2) provide that unless the court orders otherwise, the
    moving party be given notice and an opportunity to argue that the motion has
    merit in a written submission of no more than 10 pages. We consider Mr.
    Misheals 19-page factum to fulfill this requirement, but if necessary we order
    otherwise.

[11]

There will be no order as to costs.

R.G.
    Juriansz J.A.

Paul
    Rouleau J.A.

S.E.
    Pepall J.A.