COURT OF APPEAL FOR ONTARIO

CITATION: Chrisjohn v.
    Riley, 2015 ONCA 713

DATE: 20151026

DOCKET: C60237

Gillese, van Rensburg and Miller JJ.A.

BETWEEN

Deborah
    L. Chrisjohn, Kennard Chrisjohn, Rosaleen P. Weiler,

Pamela Chrisjohn, and
    Michelle Chrisjohn

Plaintiffs (Appellants)

and

Shawn
    C. Riley, Deceased, and/or the Estate of Shawn C. Riley,

Economical
    Mutual Insurance Company, Belair Insurance

Company, Iroquois
    Ironworks Ltd., and
Langdon Insurance Company

Defendants (
Respondent
)

Douglas M. Bryce, for the appellants

Lauren N. Bloom and Amir Fazel, for the respondent

Heard: October 5, 2015

On appeal from the order of Justice Antonio Skarica of
    the Superior Court of Justice, dated February 15, 2015.

van Rensburg J.A.:

A.

overview

[1]

The appellants appeal an order refusing to set aside an administrative
    dismissal of their personal injury action. Through no apparent fault of the
    appellants, and as a result of the delay, negligence and deliberate actions of
    their lawyers, no motion to set aside the dismissal was brought until more than
    five years after the dismissal, eight and a half years after the action had
    been commenced, and ten and a half years after the accident in which the
    appellant Deborah Chrisjohn was seriously injured. In the interim, the
    respondent (who had never been formally added as a defendant to the action) had
    been informed that the appellants would no longer pursue the personal injury
    action and instead would be suing their first lawyer. The respondent heard
    nothing from the appellants or their counsel for almost three years, when it
    received notice of a motion to set aside the dismissal.

[2]

In these circumstances, was the motion judge wrong to refuse to set
    aside the dismissal?

B.

facts

[3]

The appellant Deborah Chrisjohn was seriously injured in a motor vehicle
    collision in August 2002. The other driver, who died in the impact, and is
    alleged to have been impaired at the time of the accident, was uninsured. In August
    2004, an action was commenced by Ms. Chrisjohns first lawyer, R.N., seeking
    damages for her injuries and damages under the
Family Law Act,
R.S.O.
    1990, c. F.3, for the other appellants, who are her husband and daughters (the
    personal injury action). R.N. named two insurance companies among the
    defendants to the personal injury action. Pursuant to two orders made in 2005
    and 2006 in unopposed motions, the action against these insurers was dismissed
    and the appellants were granted leave to amend the claim to add as defendants
    the owner of the vehicle Ms. Chrisjohn was driving at the time of the
    collision, and the insurer of that vehicle, the respondent, Langdon Insurance
    Company (Langdon), with the requirement that the amendment be made within 20
    days.

[4]

R.N. did not take the steps required to amend the pleading, as a result
    of which Langdon was never added to the action as a defendant. In fact, R.N.
    took no steps to advance the action. A status notice was issued in May 2007, and
    the action was dismissed by registrars order on August 21, 2007.

[5]

A month before the dismissal, Langdons counsel examined Ms. Chrisjohn for
    discovery (although the examination was cut short by R.N. and not completed).
    Some 53 undertakings were given, and eight questions refused. The undertakings
    included to provide a sworn affidavit of documents by the end of the day and to
    deliver an amended statement of claim naming Langdon as defendant within 30
    days. None of the undertakings have ever been answered.

[6]

In November 2007, the parties attended a settlement conference without
    prejudice to the respondents position on the dismissal. The claim was not
    resolved.

[7]

Between September 2007 and February 2009, in response to letters from
    Langdons counsel, R.N. indicated repeatedly that he would take steps to
    regularize the proceedings, that is, to move to set aside the administrative
    dismissal and to add Langdon as a defendant. Motion dates were proposed and
    abandoned; no motion materials were ever served by R.N. There was no contact
    between R.N. and Langdon after April 2009.

[8]

Ms. Chrisjohn was aware of the administrative dismissal when it
    occurred, however she was assured by R.N. throughout his retainer that the personal
    injury action was continuing. R.N. told her that he had health and marital
    problems and when she threatened to change lawyers out of concern that her
    action was not progressing, he reacted angrily and bullied her.

[9]

In July 2009, the appellants terminated their relationship with R.N. and
    they so advised Langdon. In October 2009, the appellants retained A.M. as their
    new lawyer. Instead of moving immediately to set aside the administrative
    dismissal, A.M. focussed on R.N., alleging that he had been negligent in his
    handling of the personal injury action and demanding that R.N. report himself
    to his professional liability insurer, LawPro.

[10]

Langdon
    did not hear from the appellants or their counsel from July 2009 until April
    2010, when A.M. called Langdons counsel to advise that Ms. Chrisjohn was now
    pursuing a claim against her former lawyer, as the limitation period for
    pursuing a claim against Langdon had long since expired.

[11]

In
    August 2010, A.M. commenced an action in the appellants names against R.N. (the
    solicitors negligence action). R.N., who is representing himself, brought an
    unsuccessful motion for summary dismissal of the solicitors negligence action,
    asserting, among other things, that the action was premature and that A.M.
    ought to have moved immediately to set aside the administrative dismissal. A.M.
    filed an affidavit in that motion that was ultimately relied upon in support of
    the motion to set aside the dismissal of the personal injury action. In the
    affidavit, he explained the difficulties he encountered in the action against
    R.N. He asserted that the delay in the personal injury action was solely
    attributable to R.N.s refusal or failure to co-operate with LawPro.

[12]

Although
    A.M. did not explain in his own affidavit why he had delayed in bringing the
    motion to set aside the dismissal, Ms. Chrisjohn, in her affidavit, stated that
    A.M. told her that it was necessary to sue R.N. before the dismissal could be
    set aside.

[13]

R.N.
    refused to report the claim to LawPro. A.M. made a complaint to the Law Society
    of Upper Canada, whereupon an adjuster was appointed for R.N.  LawPro
    ultimately closed its file and R.N. has been acting in his own defence
    throughout the solicitors negligence action, which continues.

[14]

In
    2014, in proceedings by the Law Society to have R.N. psychiatrically assessed,
    it came to light that in April 2010, R.N. had taken leave of his law practice
    on medical grounds. The Law Society found that there are reasonable grounds to
    conclude that R.N. has been and is incapacitated.

[15]

In
    February 2013, A.M. filed a notice of change of lawyer indicating that his firm
    was solicitor of record for the appellants in the personal injury action, and also
    served notice of a motion to set aside the dismissal of that action, originally
    returnable in March 2013. In April 2014, new counsel for the appellants filed a
    notice of change of lawyer in the personal injury action, and argued the motion
    to set aside the administrative dismissal and to amend the pleading to add the
    respondent as a defendant. The motion was heard in 2015 and dismissed.

C.

Decision of the motion judge

[16]

The
    motion judge concluded that the appellants had failed to satisfy a number of
    the criteria set out in
Reid v. Dow Corning Corp.
, [2001] O.J. No.
    2365 (S.C.J.), revd on other grounds, using the contextual approach mandated
    by various decisions of this court, including
Scaini v. Prochnicki et al.
(2007), 85 O.R. (3d) 179 and
Marché DAlimentation Denis Theriault Ltée. et
    al. v. Giant Tiger Stores Ltd.
(2007), 87 O.R. (3d) 660.

[17]

First,
    the motion judge observed that the delay by R.N. was not properly explained.
    Before the administrative dismissal little progress had been made in the action
    and there was no evidence that R.N. intended to set down the action for trial within
    the time limit set out in the status notice. The motion judge noted that R.N
    was at one point depressed and had marital problems, but what influence these
    problems had on R.N.s conduct and decisions from 2002 to 2007 is unclear. R.N.
    did nothing in the next two years to set aside the administrative dismissal.

[18]

After
    A.M. became involved, no steps were taken to set aside the administrative
    dismissal for another three and a half years. The motion judge observed that it
    was reasonable to conclude that A.M. had made a strategic decision to abandon
    proceedings against the respondent and to pursue R.N. instead.

[19]

With
    a delay of five and a half years from the date the appellants became aware of
    the dismissal, it was clear that the motion to set aside the dismissal had not
    been brought promptly. The delay gave rise to a presumption of prejudice which
    was not rebutted by the appellants. There was also evidence of actual prejudice
    as numerous records relevant to Ms. Chrisjohns pre-and post-accident medical
    condition and liability (including on the issue of the other drivers sobriety)
    were not available, and the investigating police officer had suffered a stroke.
    Finally, the motion judge emphasized the compelling consideration of
    finality: based on the administrative dismissal and A.M.s communication to the
    respondents counsel, the respondent had assumed for almost three years that
    the case against it was over. He noted that the interest in finality in these
    circumstances must trump the plea for an indulgence.

D.

Issues

[20]

The
    decision of a master or judge refusing to set aside an administrative dismissal
    is entitled to deference and may be set aside only if made on an erroneous
    legal principle or infected by a palpable and overriding error of fact:
1196158
    Ontario Inc. v. 6274013 Canada Ltd.
, 2012 ONCA 544, 112 O.R. (3d) 67, at
    para. 16. The appellants assert that there were such errors in this case.

[21]

First,
    the appellants contend that the motion judge erred in his consideration of the
    explanation for the litigation delay by ignoring, or failing to give proper
    weight to, the uncontroverted evidence that the appellants always intended to
    proceed with the personal injury action.

[22]

Second,
    the appellants assert that the motion judge refused to consider as relevant the
    very real prospect that, if the action were not restored, they may be without
    any real remedy in respect of the very serious personal injuries sustained by
    Ms. Chrisjohn after a head-on collision with an impaired driver. LawPro has refused
    to defend R.N. in the solicitors negligence action, and (although not in
    evidence, but adverted to in oral argument), A.M. is actively defending a
    second solicitors negligence action brought by the appellants, arguing that
    R.N. and not A.M. was responsible for the dismissal of the personal injury
    action and the failure to have the dismissal set aside.

[23]

Third,
    the appellants argue that the motion judge erred in his assessment of prejudice,
    when the evidence compiled by their counsel suggested that there was no actual
    and significant prejudice and the action was capable of being fairly tried on
    the merits.

[24]

The
    respondent contends that there was no error in the motion judges reasoning or
    decision. It was reasonable for the motion judge to conclude on the evidence
    before him that the appellants had failed to satisfy any of the
Reid
factors
    and that the motion should be dismissed.

E.

Analysis

[25]

It
    is an understatement to say that the appellants were not well served by their former
    legal counsel in this case. Their first lawyer, R.N., took on Ms. Chrisjohns personal
    injury claim and did little to advance it. When the personal injury action was
    dismissed, he did not move promptly to set aside the dismissal. While there is
    evidence that R.N. suffered from personal problems as early as 2007, as the
    motion judge observed on the evidence before him, what influence these
    problems had on R.N.s conduct and decisions from 2002 to 2007 is unclear.  And
    as Langdon points out, during this time, R.N. managed to settle Ms. Chrisjohns
    long-term disability claim.

[26]

After
    Ms. Chrisjohn changed counsel, A.M. commenced and pursued the solicitors
    negligence action on her behalf against R.N., and did not take any steps in the
    personal injury action. Indeed, he did not deliver a notice of change of lawyer
    in that action until 2013, shortly before his retainer ended. He informed
    Langdon that the personal injury action was not being pursued. This was, as the
    motion judge concluded, a deliberate and strategic decision, and not
    inadvertent, even if, in retrospect, A.M. should have moved to set aside the
    administrative dismissal at the same time he pursued the solicitors negligence
    action.

[27]

Ms.
    Chrisjohns intention throughout was to recover damages for the personal
    injuries she suffered as a result of the 2002 collision. Unfortunately, however,
    the personal injury action had been dismissed in 2007, and from at least 2010,
    the respondent considered the dismissal to be final and that the action against
    it had ended.

[28]

In
    my view, the motion judge did not make any of the errors asserted by the
    appellants. His decision not to set aside the administrative dismissal was
    based on a careful consideration of the relevant circumstances. As he was
    required to do, he weighed all the factors and made the order that was just in
    the circumstances:
Habib v. Mucaj
, 2012 ONCA 880, at para. 6.

[29]

First,
    the motion judge was well aware of the fact that it was the conduct and inaction
    of her counsel, and not of Ms. Chrisjohn herself, that led to the
    administrative dismissal and the failure to move to set aside the dismissal
    promptly. He had before him the evidence in Ms. Chrisjohns two affidavits that
    made it clear that, while she knew of the administrative dismissal in August
    2007 when it occurred, she relied on her counsels assurances that the action
    would nevertheless continue. She stated that it was always her intention to
    pursue her claim for compensation.

[30]

The
    motion judge considered this evidence. After noting that, in August 2007, both
    Ms. Chrisjohn and her lawyer were aware of the administrative dismissal, he
    stated that R.N. assured Ms. Chrisjohn that everything was all right and even
    conducted mediation shortly thereafter. He also noted that, in order to get
    around the dismissal, A.M. pursued R.N.

[31]

In
Finlay v. Van Paassen
, 2010 ONCA 204, 101 O.R. (3d) 390, Laskin J.A.
    noted, at para. 33, that on a motion to set aside a dismissal order, the court
    should be concerned primarily with the rights of the litigants, not with the
    conduct of their counsel. In
Marché
, at para. 28, Sharpe J.A. observed:
    The law will not ordinarily allow an innocent client to suffer the irrevocable
    loss of the right to proceed by reason of the inadvertence of his or her
    solicitor. Sharpe J.A. went on to recognize that the situation may be
    different where the lawyers conduct is not inadvertent but deliberate.

[32]

The
    fact that Ms. Chrisjohn always intended to pursue her claim is a factor that
    weighs in favour of setting aside the administrative dismissal. It is not
    however sufficient. The rights of the appellants as plaintiffs and the
    respondent as defendant to an action that has been dismissed must be considered
    to determine ultimately whether it would be fair and just to set aside the
    dismissal and to allow the action to proceed.

[33]

Similarly,
    the absence of a guaranteed alternative recovery against her former counsel
    cannot be determinative. While the appellants point to the fact that R.N. is defending
    himself, suggesting that insurance will not be available to satisfy their claim
    should they succeed in the solicitors negligence action against him, and that
    the solicitors negligence action against A.M. is being defended, whether Ms.
    Chrisjohn will succeed or fail in either or both of the solicitors negligence
    actions, or in recovering damages in either action, is far from certain. The
    motion judge specifically stated that he did not take into account whether the
    plaintiffs had another remedy against either R.N. or A.M. for negligence. In
    this regard, he followed this courts advice in
Finlay v. Van Paassen
,
    where Laskin J.A. cautioned against weighing as a factor in such motions the
    plaintiffs ability to sue her former counsel, at para. 32:

A judge who refuses to set aside a dismissal order will
    naturally be concerned that the effect of the refusal will be to deprive an
    innocent party of its day in court. To protect the claim of the innocent party,
    the judge will often raise the possibility of a negligence action against the
    partys own lawyer. Although perhaps understandable, I do not find this
    helpful. Speculation about whether a party has a lawsuit against its own
    lawyer, or the potential success of that lawsuit, should not inform the courts
    analysis of whether the registrars dismissal order ought to be set aside.

[34]

The
    motion judge, accordingly, did not err in refusing to consider the appellants
    chances in their solicitors negligence actions. He did not fail to appreciate
    the very serious consequences to the appellants if the personal injury action
    were not restored. Rather, his decision turned on the important question of
    prejudice  whether the respondent, after such a significant delay and after
    being informed that the action was at an end, would fairly be able to defend
    the appellants claims if the action were restored.

[35]

I
    therefore turn to a consideration of the appellants final argument, that the
    motion judge erred in his assessment of prejudice in this case.

[36]

As
    this court noted in
Hamilton (City) v. Svedas Koyanagi Architects Inc.
,
    2010 ONCA 887, 104 O.R. (3d) 689, at para. 33, on a motion to set aside a
    dismissal for delay, the question of prejudice is invariably a key, if not
the
key consideration. The relevant prejudice is to the defendants ability to
    defend the action that would arise from steps taken following dismissal or
    which would result from the restoration of the action:
MDM Plastics Ltd. v.
    Vincor International Inc.
, 2015 ONCA 28, 124 O.R. (3d) 420, at para. 25;
    see also
806480 Ontario Ltd. v. RNG Equipment Inc.
, 2014 ONCA 488, [2014] O.J. No. 2979
, at
    para. 4.

[37]

I
    would not interfere with the motion judges assessment of prejudice in this
    case. He recognized that the appellants had the onus of rebutting the
    presumption of prejudice as a result of the passage of time; however, he relied
    not only on the presumption, but also on the extensive evidence put forward by
    the respondent of actual prejudice to its ability to defend the action.

[38]

There
    is no question that the appellants present counsel went to considerable
    lengths to attempt to address the question of prejudice. They made inquiries of
    various sources and confirmed that certain medical and other records had been
    preserved. They did not however produce such records, and as such, the
    respondent was unable to assess whether records said to have been available
    were complete. The motion judge noted that, as a result of the passage of time,
    there were important gaps in the available medical evidence. These include OHIP
    records for the first five months after the accident as well as pre-accident OHIP
    records for Ms. Chrisjohn, the original CT scans and x-rays taken after the
    collision, and records of certain treating professionals and prescription drug
    records for the first three years after the accident. No pre-accident medical
    records were produced or confirmed to be available. Many of the undertakings
    given in her discovery would have required Ms. Chrisjohn to obtain and produce
    medical records. None of the undertakings were answered. The respondents
    ability to assess and evaluate Ms. Chrisjohns claim for damages has been
    impaired.

[39]

As
    the motion judge noted, significant evidence respecting liability is also no
    longer available, in a case where liability would be a live issue. In her
    examination for discovery, Ms. Chrisjohn agreed that her vehicle had crossed
    over the centre line before impact, and there is little evidence indicating whether
    the other driver was impaired by alcohol. The investigating police officer
    suffered a stroke and has retired. Undertakings to produce 911 and Fire
    Department records, as well as to identify names and contact information for
    witnesses were not fulfilled. There was no evidence before the motion judge
    that any such evidence had been obtained or preserved.

[40]

The
    onus was not on the respondent to demonstrate significant and actual
    prejudice, as asserted by the appellants (although there was evidence of such
    prejudice on the record), but on the appellants to rebut the inference of
    prejudice, that is, prejudice to the respondents ability to defend the action.
    The motion judge correctly concluded that the onus was not met in the present
    case, and that actual prejudice relevant to the ability to defend the action on
    damages and liability had been established.

[41]

This
    is not a case where a defendant complained of prejudice that it might have
    taken steps to avoid. Langdons counsel acted responsibly, even proactively
    defending the action although Langdon had not been formally added as a
    defendant, communicating with R.N. and co-operating in scheduling the proposed
    motions respecting the dismissal, and even engaging in mediation on a without
    prejudice basis  until being informed that the appellants would not pursue
    their personal injury action. As the motion judge observed, based on the
    dismissal and A.M.s communication, the respondent assumed legitimately that
    the case against it was over.

[42]

I
    see no error in the motion judges decision not to set aside the administrative
    dismissal. Further, I agree with the motion judge that in the circumstances of
    this case, the principle of finality was important.

F.

DISPOSITION

[43]

For
    these reasons, I would dismiss the appeal and award costs to the respondent in
    the sum of $12,500, inclusive of disbursements and HST.

K. van Rensburg J.A.

I agree E.E. Gillese

I agree B.W. Miller
    J.A.


COURT OF APPEAL FOR ONTARIO

CITATION:
Conforti (Re), 2015 ONCA 708

DATE: 20151022

DOCKET: C57476

Laskin, Blair and Pepall JJ.A.

In the Matter of the Bankruptcy of
    Vincenzo Francesco Conforti

Robert A. Klotz, for the appellant, Vincenzo Francesco
    Conforti

Howard F. Manis and Debora Miller-Lichtenstein, for the
    respondent Trustee in Bankruptcy, Pat Robinson Inc.

On appeal from the order of Justice James M. Spence of
    the Superior Court of Justice, dated May 3, 2012, with reasons reported at 2012
    ONSC 2656, and the supplemental order dated March 6, 2013.

COSTS ENDORSEMENT

Pepall J.A.:

[1]

The appellant seeks an order of costs on a full indemnity scale. He asks
    this court to award $20,345 for the costs of his appeal, $18,655 for the costs
    of the motion in issue in the appeal, and $27,235 for the costs of a related
    motion. For the reasons that follow, I would award $5,000 for the costs of the
    proceedings under appeal and $10,000 for the costs of the appeal, both on a
    partial indemnity scale.

[2]

A brief chronology of material events assists in understanding the
    proceedings.

[3]

In September 2009, the appellant filed an assignment in bankruptcy. He
    did not disclose or advise the Trustee of a personal injury action he had
    commenced in 2007 or of a claim he had made in 2008 for additional statutory
    accident benefits, both of which arose from a serious motor vehicle accident.
    He subsequently settled the action and the claim for $275,000 and $21,000,
    respectively.

[4]

When the appellant applied for a discharge from bankruptcy, it was
    opposed by both the Trustee and the appellants principal creditor, Central Mortgage
    and Housing Corporation. At the same time, the Trustee sought directions from
    the court on the issues of property and income inclusions so as to ascertain
    amounts, if any, payable to the bankrupts estate.

[5]

The Trustees motion for directions proceeded in two stages.

[6]

In an endorsement released in 2012, Wilton-Siegel J. determined that the
    settlement payment allocation of $100,000 for future loss of competitive
    advantage was not property under s. 67 of the
Bankruptcy and Insolvency Act
,
    but rather income under s. 68. The parties were given 30 days to provide
    written submissions on costs.  Neither did and no costs order was ever made.
    Neither party appealed the order of Wilton-Siegel J.

[7]

The Trustee then sought directions on proposed inclusions in the appellants
    income calculations and whether conditions should be imposed on his proposed
    bankruptcy discharge.

[8]

Spence J. heard the second motion. He made numerous determinations, only
    some of which were appealed. In his reasons, he established a schedule for
    costs submissions.

[9]

A flurry of correspondence between counsel for the appellant and counsel
    for the Trustee ensued.  Spence J. granted leave to make further submissions in
    writing on the calculations reflected in the order he had granted. He
    subsequently concluded that counsels submissions did not show any mathematical
    errors and there was no reason to change the order. On the issue of costs, he
    observed that this was a case of mixed success. Unless a Rule 49 offer had been
    made, there was no reason for submissions on costs.

[10]

Based
    on the record before this court, it would appear that Spence J. was not advised
    of any Rule 49 offer and no costs order was made.

[11]

The
    appellants appeal from portions of Spence J.s order was allowed in part.  The
    order was varied the order to remove the requirement to pay surplus income and
    by reducing the payment of $42,986.28 payable by the appellant to $15,000.

Parties Positions

[12]

As
    mentioned, the appellant claims full indemnity costs for three proceedings. In
    support, he argues that:

·

His position that the $100,000 damages allocation for future loss
    of competitive advantage constituted income was vindicated by Wilton-Siegel J.
    Even through the Trustee had not appealed Wilton-Siegel J.s order, the Trustee
    maintained his position before Spence J.

·

His position that no surplus income was owed was vindicated on
    appeal.

·

The Trustee persisted in maintaining that the appellant was a
    malingerer and not disabled, notwithstanding the findings to the contrary of
    both Wilton-Siegel and Spence JJ.

·

The Trustee sought 100 per cent of the appellants damages
    allocation for loss of future income and pain and suffering, which would have
    resulted in the appellant receiving nothing from his tort recovery.

·

The appellant conceded the fact and quantum of the $15,000
    penalty.

·

The appellant made numerous settlement offers, all of which
    benefited the Trustee more than the outcome of either the motion or the appeal.

·

Pending Wilton-Siegel J.s decision, the Trustee refused to
    consent to the release of some funds for Christmas.

·

The Trustee received less than what the appellant had conceded at
    the inception of the dispute.

·

Without at least an award of partial indemnity costs, the
    appellant will lose almost all of his compensation for future lost income and
    pain and suffering.

·

An element of misconduct increased the costs and rancour of the
    proceeding. Mr. Manis, counsel for the Trustee, had advised Mr. Klotz, counsel
    for the appellant, that he intended to correspond with the application judge
    but did not copy the appellants counsel in advance, nor did he advise the
    application judge that Mr. Klotz would be responding. Shortly thereafter, Mr.
    Klotz received a copy of the judgment, not having had an opportunity to respond
    to Mr. Manis letter.

·

The appeal involved $179,000, was important and complex,
    incorporated a
Charter
challenge, clarified several issues of national
    importance in personal bankruptcy law, and the proceedings consumed 101.9
    billable hours.

[13]

Furthermore,
    the appellant asks that if the costs order exceeds $15,000, such costs should
    be made payable by the Trustee personally as there is nothing in the estate to
    pay such costs and no party should litigate with impunity.

[14]

The
    Trustee resists the appellants request. It submits that if costs are awarded,
    they should be on a partial indemnity scale and limited to the appeal. In
    support, it submits that:

·

The appellant is not entitled to recover costs of previous court
    appearances. The motion before Wilton-Siegel J. was separate and distinct and
    no costs were requested or awarded and the order was not appealed.

·

The appeal stems from a discharge hearing where the Trustee
    opposed the discharge for valid reasons. The appellant had been deceitful. It
    is a general principle that costs are not awarded at a discharge hearing as
    parties, especially the Trustee, must be encouraged to administer the estate
    for the benefit of creditors. A costs award for the discharge hearing would
    serve to discourage trustees from opposing discharges in spite of the existence
    of valid grounds to do so.

·

No costs award was made by Spence J.

·

Substantial indemnity costs should only be awarded in rare and
    exceptional circumstances. They are warranted only where there is a Rule 49
    offer or where a party has engaged in behaviour worthy of sanction.

·

Moreover, no Rule 49 offers were exchanged prior to the discharge
    hearing or the appeal. In spite of Spence J.s invitation, Mr. Klotz did not
    take the position before him that there was a Rule 49 offer. In any event, a
    defendant is not entitled to substantial indemnity costs based on Rule 49.

·

The costs claimed by the appellant are excessive, exaggerated and
    unreasonable.

·

The Trustee should not be required to pay a bankrupts costs
    personally, especially given the bankrupts reprehensible behaviour.

·

Both parties should bear their own costs. If costs are awarded, a
    reasonable amount for the appeal is $5,500, inclusive of disbursements and HST.

Analysis

(a)

Scale of Costs

[15]

Neither
    Rule 49.10 nor the conduct of the Trustee justifies an award of costs on a full
    or substantial indemnity scale.

[16]

The
    appellants offer addressed the matters currently pending and returnable
    before Wilton-Siegel J. and was stated to expire upon the commencement of the
    hearing. Ambiguously, it also stated that if the offer was accepted after the
    commencement of the hearing, the settlement amount was to be reduced by the
    appellants partial indemnity costs.

[17]

Additionally,
    the offer did not address all of the issues before Spence J. Furthermore, the
    Trustee was requesting directions of the court. Given the state of the law, it
    was fair and reasonable for it to do so. Additionally, for purposes of those
    directions, the appellant stood in the shoes of a defendant under Rule 49.10. A
    defendant is not entitled to a substantial indemnity award under Rule 49.10
    where it makes an offer to settle that is greater than the amount awarded:
St.
    Elizabeth Home Society v. Hamilton (City)
, 2010 ONCA 280, 319 D.L.R. (4th)
    74, at para. 90. Accordingly, full or substantial indemnity costs are not merited
    based on Rule 49.10.

[18]

An
    award of substantial or full indemnity costs may be based on conduct including
    circumstances where there has been reprehensible, scandalous, or outrageous
    conduct on the part of one of the parties:
Young v. Young
, [1993] 4 S.C.R.
    3, at p. 134. As stated by Robins J.A. in
Mortimer v. Cameron
(1994), 17
    O.R. (3rd) 1 (C.A.) at p. 23, such an award is ordered only in rare and
    exceptional cases to mark the courts disapproval of the conduct of the party
    in the litigation.

[19]

The
    conduct in this case does not rise to that level. Recall the context of the
    Trustees conduct  it was responding to circumstances where the appellant had
    misrepresented his assets and where the Trustee was justifiably wary of acting
    in the absence of court direction, particularly given the uncertain state of
    the law relating to personal injury settlements. While the Trustees skepticism
    surrounding the appellants disability was misplaced and his Christmas response
    may have been churlish, these factors alone or taken together with those
    enumerated by the appellant do not demand an award of full or substantial
    indemnity. Furthermore, there was delay caused by the appellant and Spence J.
    was aware of the conduct of both parties when he did not award costs absent a
    Rule 49.10 offer.

[20]

For
    these reasons, I would decline to order full or substantial indemnity costs as
    requested by the appellant.

(b)

Proceedings in Issue

[21]

The
    costs of the motion before Wilton-Siegel J. are not properly before this court.
    He made no order for costs and his order was not appealed. In these
    circumstances, I would decline to impose a costs order for that proceeding.

[22]

In
    contrast, Spence J.s order was under appeal and the appeal was allowed in
    part.

[23]

In
    considering the appellants request, I note that:

·

the appellant only appealed some aspects of the order, although
    he was successful on most of what he appealed.

·

Although he made mention of costs and the parties mixed success,
    Spence J. was not asked to make a further costs disposition.

·

The hearing before him addressed in part the discharge of the
    appellant from bankruptcy. In the face of the appellants admitted deceit, the
    Trustee cannot be faulted for opposing his discharge nor can his primary
    creditor, CMHC. Although available, generally costs are not awarded on
    discharge hearings. See: Frank Bennett,
Bennett on Bankruptcy
, 17th ed.
    (Markham, ON: LexisNexis Canada Inc., 2014) at p. 640; and Lloyd Houlden,
    Geoffrey Morawetz, & Janis Sarra,
The 2015 Annotated Bankruptcy and
    Insolvency Act
(Toronto: Carswell, 2015) at p. 992, and
Vattese (Re)
(2006), 26 C.B.R. (5th) 124 (S.C.).

[24]

That
    said, given the appellants significant success on appeal, he should be
    entitled to some costs of the motion before Spence J.

(c)

Quantum

[25]

The
    appellant requests partial indemnity costs before Spence J. of $12,915. Given
    the aforementioned reasons, I would grant $5,000 as a fair and reasonable award
    of costs.

[26]

The
    appellant also seeks partial indemnity costs of $14,085 for the appeal. The
    appeal was allowed in part and for the most part. I would grant the appellant costs
    of the appeal fixed in the amount of $10,000 inclusive of disbursements and
    HST.

Released:    OCT 22 2015                          S.E.
    Pepall J.A.

JL                                                             I
    agree John Laskin J.A.

I
    agree R.A. Blair J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Connolly v. Advantagewon Inc., 2015 ONCA 709

DATE: 20151023

DOCKET: C60059

Feldman, Juriansz and Brown JJ.A.

BETWEEN

Kevin Connolly

Applicant

(Appellant)

and

Advantagewon Inc.

Respondent

(Respondent)

Paul Gemmink, for the appellant

Ali Chahbar, for the respondent

Heard: September 28, 2015

On appeal from the judgment of Justice Peter A. Douglas
    of the Superior Court of Justice, dated January 29, 2015.

Brown J.A.:

I.

Overview

[1]

The appellant, Kevin Connolly, appeals from the judgment of Douglas J.
    which declared that the respondent, Advantagewon Inc., was entitled to a
    non-possessory lien under Part II of the
Repair and Storage Liens Act
,
    R.S.O. 1990, c. R. 25 (
RSLA
), in respect of the appellants 2011
    Nissan Titan (the Vehicle).

[2]

In July 2013, the appellant purchased low profile rims and tires for his
    Vehicle from Xclusive Performance Group (Xclusive). To finance the purchase,
    the appellant entered into an agreement with the respondent for a loan in the
    amount of $4,124.21.

[3]

Three documents evidenced the transaction: (i) a July 3, 2013 invoice
    from Xclusive to the appellant (the Invoice); (ii) a June 28, 2013
    Advantagewon Loan Application and Preapproval Document signed by the appellant (the
    Loan Application); and, (iii) a July 2, 2013 Advantagewon Contractual Repair
    Agreement purportedly signed by Xclusive and the appellant (the Contractual
    Repair Agreement). The Loan Application and Contractual Repair Agreement
    identified Xclusive as the repairer, and further disclosed that Xclusive
    intended to assign any of its lien rights in the Vehicle.

[4]

The Loan Application suggested that Xclusive intended to assign any lien
    rights to the respondent.  By contrast, the Contractual Repair Agreement
    indicated that Stephan Bernier and Lorraine Berube were the assignees and, in
    August 2013, a claim for lien under the
RSLA
was registered, on behalf
    of Bernier and Berube.  In the result, that differing identification of
    assignees in the transaction documentation was of little practical significance
    because, by Assignment of Debt and Lien dated May 23, 2014, Bernier and Berube
    assigned to the respondent any entitlement to the debt owed by the appellant,
    including any and all rights arising from the
Repair and Storage Liens Act
.

[5]

After entering into the transaction, the appellant promptly defaulted on
    his monthly payment obligations under the Loan Agreement, and the respondent
    attempted to seize the Vehicle based on a purported non-possessory lien under
    the
RSLA
. The appellant thereupon commenced an application seeking a
    declaration that the respondent does not have a lien under the
RSLA
in
    respect of the Vehicle.

[6]

The application judge declared that the respondent is entitled to a
    non-possessory lien in the Vehicle under Part II of the
RSLA
.

[7]

This appeal involves two main issues:

(i)

The appellant submits that the application judges conclusion that the
    respondent has a non-possessory lien in the Vehicle was based on a palpable and
    overriding error in finding that Xclusive had installed the rims and tires on
    the Vehicle;

(ii)

The respondent submits that in the event this court finds the
    application judge made such an error, it nevertheless is entitled to a
    non-possessory lien by reason of the terms of its contract with the appellant
    or by operation of the deemed possession provisions of s. 3(4) of the
RSLA
.

II.

Did Xclusive install the rims and tires on the Vehicle?

[8]

Section 3(1) in Part I of the
RSLA
provides, in part, that a
    repairer has a lien against an article that the repairer has repairedand the
    repairer may retain possession of the article until the amount is paid.  Part
    II of the
RSLA
concerns non-possessory liens.  In that Part, s. 7(1)
    provides, in part, that a lien claimant who is entitled to a lien under Part I
    (Possessory Liens) against an article, and who gives up possession of the
    article without having been paid the full amount of the lien has, in place of
    the possessory lien, a non-possessory lien against the article for the amount
    of the lien claimed under Part I that remains unpaid.

[9]

In concluding that the respondent was entitled to a non-possessory lien
    on the Vehicle under the
RSLA
, the application judge stated that the
    respondent had advanced funds to a third-party who performed the installation
    work for the tires and rims. The appellant submits that the application judge
    made a palpable and overriding error of fact in finding that the third-party,
    Xclusive, had performed the installation work. It submits that Xclusive never
    repaired the Vehicle or even possessed it.

[10]

I
    accept the appellants submission.

[11]

Although
    the Xclusive Invoice for the sale of the rims and tires described them as
    mounted and balanced, the appellant deposed that neither Xclusive nor the
    respondent had installed the new rims and tires on his Vehicle. Instead, he had
    installed them on the Vehicle after their purchase. The appellant also filed a
    chain of emails between himself and Xclusive in which Xclusive had stated that
    on these deals we don[]t install them [p]hysical[l]y as we[]re not set up
    for that. The respondent did not file any evidence from Xclusive.  The
    evidence before the application judge therefore established that that neither
    Xclusive nor the respondent had possessed the Vehicle or installed the rims and
    tires on the Vehicle. Consequently, the application judge erred in finding that
    Xclusive had performed the installation work.

[12]

At
    common law, when a worker applied skill, labour or money to the repair or
    improvement of personal property, with the authority of the owner, a lien
    attached to the personal property and continued in existence so long as the
    personal property remained in the lien claimants possession:
Royal A.
    Vaillancourt Co. Ltd. v. Trans Canada Credit Corporation Ltd.
, [1963] 1
    O.R. 411 (C.A.), at p. 413. Section 52 of the former
Mechanics Lien Act
,
    R.S.O. 1980, c. 261, recognized the lien created at common law and gave the
    lienholder the right to sell the personal property upon compliance with the
    conditions set out in the section:
Vaillancourt
, at p. 414.

[13]

With
    its enactment in 1989, the
RSLA
created a new legislative regime for
    repairers liens: S.O. 1989, c. 17.  Part I of the
RSLA
is entitled,
    Possessory Liens.  In that Part, s. 3(1) codifies the common law right to a
    lien by providing that a repairer has a lien against an article that the
    repairer has repaired and the repairer may retain possession of the article
    until the amount is paid.

[14]

In
    the present case, Xclusive sold the rims and tires to the appellant without
    installing them or taking possession of the Vehicle; the respondent financed
    their purchase. Neither had possession of the Vehicle at any time.  The usual conditions
    necessary to create a Part I possessory lien against the Vehicle did not arise.

[15]

Usually
    such circumstances would be fatal to a claimants entitlement to a
    non-possessory lien under the
RSLA
because such entitlement depends on
    the claimant first having the right to a possessory lien. Section 7(1) of the
RSLA
provides that a non-possessory lien arises where a lien claimant who is
    entitled to a lien under Part I (Possessory Liens) against an articlegives up
    possession of the article without having been paid the full amount of the lien
    to which the lien claimant is entitled under Part I.

[16]

To
    overcome the fact that neither it nor Xclusive ever possessed the Vehicle, the
    respondent advances two arguments to support its claim to a non-possessory lien
    in the circumstances: (i) the appellant granted Xclusive such a lien by contract;
    and, (ii) Xclusive had deemed possession of the Vehicle under s. 3(4) of the
RSLA
thereby enabling it to obtain a non-possessory lien.

III.

Did a non-possessory lien arise under contract?

[17]

The
    respondent submits that a lien on the Vehicle in favour of Xclusive was created
    by the Contractual Repair Agreement, one term of which states:

Lien  Applicant acknowledges his or her total indebtedness and
    understands and agrees that the Repairer has a repairers lien against the
    Vehicle described above pursuant to the Repair and Storage Liens Act Ontario,
    for the total amount which the Applicant has agreed to pay for the repair
    described in Repairers Invoice 00021200, plus associated fees, totalling
    $5,633 as further detailed below.

Xclusive had issued the Invoice to the appellant for
    the tires and rims.

[18]

I
    do not accept the respondents submission.

[19]

A
    lien under Parts I and II of the
RSLA
arises by operation of statute,
    not by contract. For a valid lien to arise, a lien claimant must satisfy the
    requirements of the
RSLA
.

[20]

Xclusive
    did not satisfy these requirements. For a possessory lien to arise against an
    article, a person must have repaired the article:
RSLA
, s. 3(1).  The
    definition of repair in s. 1 of the
RSLA
includes an expenditure of
    money on, or the application of labour, skill or materials to, an article for
    the purpose of altering, improving or restoring its properties. However,
    Xclusive did not expend any money on, nor did it apply any labour, skill or
    materials to the Vehicle.  Xclusive simply sold tires and rims to the
    appellant, who later attached them to his Vehicle.  Accordingly, Xclusive did
    not make a repair to the Vehicle within the meaning of the Act. As a result,
    no possessory or non-possessory repairers lien arose in favour of Xclusive
    which it could assign to the respondent.

[21]

On
    its part, the respondent submits that it satisfied the
RSLA

s
requirements,
    pointing to the application judges conclusion that because it had financed the
    appellants purchase of the tires and rims, the R[espondent] has made an
    expenditure of money, and this expenditure is linked to the repair in that it
    financed the installation of tires and rims.  I do not accept that
    submission.

[22]

First,
    although s. 1 of the
RSLA
includes within the definition of repair
    an expenditure of money onan article for the purpose of altering, improving
    or restoring its properties, the Loan Application and Contractual Repair
    Agreement did not treat the respondent as the repairer in whose favour a lien
    was created.  They treated Xclusive as the repairer.  If no lien arose in
    favour of Xclusive, the respondent had no lien it could take by assignment.

[23]

Second,
    the respondents submission blurs the distinction between liens that may arise
    under the
RSLA
and security interests which can be taken in personal
    property under the
Personal Property Security Act
, R.S.O. 1990, c.
    P.10 (
PPSA
).  Whereas possession of the personal property to which a
    lien attaches plays a key role under the
RSLA
, under the
PPSA
a person can take a security interest in personal property which it never
    possessed.

[24]

The
    respondent financed the appellants purchase of personal property  i.e. the
    tires and rims. It did not conduct a repair on the Vehicle.  A person who
    finances the acquisition of personal property may take an interest in that
    personal property, or in other personal property, to secure payment of the debt
    obligation, and may perfect its security interest in accordance with the
    provisions of the
PPSA
.  The evidence disclosed that the respondent did
    just that, registering a security interest in the Vehicle under the
PPSA
on behalf of Bernier and Berube.   However, at the hearing, counsel advised
    that the
PPSA
registration had lapsed.  Having failed to protect the registered
    security interest under the
PPSA
in the Vehicle, the respondent lost
    its statutory rights to seize and sell the Vehicle upon the appellants default
    on the loan.

IV.

Did Xclusive have deemed possession of the Vehicle under
RSLA
s. 3(4)?

[25]

In
    oral argument, the respondent advanced a second basis for its claim to a
    non-possessory lien.  It submitted that the assignor of the lien, Xclusive, was
    entitled to a Part I possessory lien by reason of the deemed possession
    provision contained in s. 3(4) of the
RSLA
. That sub-section reads:

3(4). For the purposes of this Act, a repairer who commences
    the repair of an article that is not in the repairers actual possession shall
    be deemed to have gained possession of the article when the repair is commenced
    and shall be deemed to have given up possession when the repair is completed or
    abandoned.

[26]

Xclusives
    Invoice to the appellant described the product sold as rims mounted and
    balanced with a set oftires.  The respondent contends that mounted and
    balanced referred to placing the tires on the rims.  Even though Xclusive did
    not install the rims and tires on the Vehicle, the respondent submits that by mounting
    and balancing the tires on the rims, Xclusive commenced a repair on the Vehicle
    and, by virtue of
RSLA
s. 3(4), was deemed to have gained possession
    of the Vehicle.

[27]

I
    do not accept this submission.  First, it is difficult to accept the
    respondents contention that the reference in Xclusives Invoice to mounting
    and balancing referred to placing the tires on the rims, when the respondent
    did not file any evidence from Xclusive to explain the Invoices language.  In
    any event, the email exchange between the appellant and Xclusive disclosed that
    Xclusive did not intend to repair the Vehicle.  In an email the appellant had
    asked: [J]ust wondering are you guys going to mount them or am just picking
    them up?  To which Xclusive responded: [O]n these deals we don[]t install
    them [p]hysical[l]y as we[]re not set up for that. That response indicates that
    Xclusive did not intend to apply any labour, skill or materials to the Vehicle
    in satisfaction of the RSLAs definition of repair.

[28]

Second,
    s. 3(4) must be read together with s. 3(5) of the
RSLA
which provides:

A repairer who, under subsection (4), is deemed to
    have possession of an article may remove the article
from the premises on
    which the repair is made
. [Emphasis added.]

[29]

When
RSLA
s. 3(4) and 3(5) are read together, they appear to address a
    situation where a repairer makes a repair to an article at a location away from
    the repairers premises, and the article remains in the actual possession of the
    person entitled to it.  In those circumstances, s. 3(4) deems the repairer to
    have gained possession of the article when the repair is commenced, and then
    deems the repairer to have given up possession when the repair is completed or
    abandoned. By deeming the repairer to have gained possession of an article despite
    the repairers lack of actual possession, s. 3(4) enables the repairer to
    obtain a possessory lien.  When the deemed possession ends, the repairer may
    either remove the article from the premises on which the repair is made under
    s. 3(5) or register a non-possessory lien under Part II of the
RSLA
.

[30]

This
    interpretation of the purpose of ss. 3(4) and 3(5) finds support in the legislative
    history of the
RSLA
.  In 1985, the Ministry of the Attorney General
    issued a Discussion Paper on Repair and Storage Liens, which contained a
    draft
RSLA
.  That draft proposed the scheme of possessory and
    non-possessory liens that ultimately was enacted by the
RSLA
.
    However, the draft did not propose any provision similar to
RSLA
ss.
    3(4) or 3(5).

[31]

Later
    that year, Arthur Close wrote a Commentary on the Discussion Paper which
    appeared in (1985), 10 Canadian Business Law Journal 359.  In the course of
    discussing the limitations of the proposed legal framework for a scheme of
    non-possessory liens, the author observed, at p. 364:

The second observation that might be made about s. 7(1) is that
    in order to claim a non-possessory lien, the lien claimant must once have had a
    possessory lien. This is a serious limitation on the scope of Part II. There
    are many situations in which work will be carried out on the premises of the
    owner. An example is where a piece of heavy equipment breaks down at a remote
    work site and it is wholly impractical to relocate it to the repairer's
    premises. It is doubtful whether the person who performs repairs at a place
    which is under the effective control of the owner of the property being
    repaired can ever be said to have possession of the property sufficient to
    support a lien. Yet to deny him a non-possessory lien creates a wholly
    artificial distinction between work which is lienable and work which is not,
    depending on the essentially irrelevant issue of where the repairs are made.

[32]

When
    the
RSLA
was enacted in 1989, it included ss. 3(4) and 3(5).  That
    legislative history suggests that the deemed possession created by s. 3(4) is
    designed to protect a repairer who repairs an article at a location other than
    the repairers premises.

[33]

While
    it is not necessary for the purposes of this appeal to interpret definitively
    s. 3(4) of the
RSLA
, in my view it is clear that s. 3(4) has no
    application to the facts of this case, in which the lien claimant was a vendor
    of personal property who never applied any labour, skill or materials to the
    article against which a lien is claimed.

V.

Disposition

[34]

For
    the reasons given, I would allow the appeal, set aside the judgment, and grant
    an order declaring that no lien on the Vehicle arose under the
RSLA
.

[35]

The
    parties have agreed that the successful party on the appeal is entitled to
    costs in the amount of $6,000, all inclusive.  I would order the respondent to
    pay the appellant that amount.  As to the costs of the proceeding below, I
    would order the respondent to pay the appellant costs of the application in the
    amount of $2,000, all inclusive.

Released: October 23, 2015 (KF)

David
    Brown J.A.

I
    agree K. Feldman J.A.

I
    agree R.G. Juriansz J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: D.L.G. & Associates Ltd. v. Minto Properties
    Inc., 2015 ONCA 705

DATE: 20151022

DOCKET: C59891

Doherty, Lauwers and Huscroft JJ.A.

BETWEEN

D.L.G. & Associates Ltd.

Plaintiff (Appellant)

and

Minto Properties Inc.

Defendant (Respondent)

Shawn Laubman and Christine Muir, for the plaintiff (appellant)

Adam Grant and Alyssa Caverson, for the defendant (respondent)

Heard: June 29, 2015

On appeal from the order of Justice P. Perell of the
    Superior Court of Justice, dated December 16, 2014, reported at 2014 ONSC 7287.

Doherty J.A.:

I

[1]

This is an appeal from an order striking most of the claims advanced by
    the appellant as disclosing no reasonable cause of action.  I agree that some
    of the claims were properly struck.  I would hold, however, that the motion
    judge erred in striking the negligent misrepresentation claim and the claim
    that the respondent was estopped from relying on the covenant to insure in the
    lease in respect of the damages caused by the second of the two sewer backups.
    In my view, those pleadings cannot be struck at this stage.

II

the assumed facts

[2]

The motion judge properly took the facts as pleaded by D.L.G. for the
    purposes of the motion.  He also considered the contents of the lease and a
    Lease Amending Agreement, as both documents were referred to in the pleadings.
    The relevant facts can be summarized as follows.

[3]

The respondent, Minto Properties Inc. (Minto) owned a property at 2177
    Yonge Street in Toronto.  In February 2011, the appellant, D.L.G. &
    Associates Ltd. (D.L.G.), agreed to lease a part of the property.  D.L.G.
    planned to operate a restaurant on the premises.  The lease commenced on July
    15, 2011 and D.L.G. opened the restaurant.

[4]

In October 2011, a sewer backup caused by a backward surge in the main
    line accepting drainage from the rented premises caused extensive damage to the
    restaurant premises.  D.L.G. was forced to close the restaurant for extensive repairs.
    It turned out that the backup was caused by a drainage pipe that did not meet the
    standards set by the
Building Code Act
, S.O. 1992, c. 23.

[5]

D.L.G. recovered under its insurance policy.  Minto agreed to cover
    additional costs associated with cleanup and reconstruction.  The restaurant eventually
    reopened in December 2011.

[6]

As a result of the first sewer backup, D.L.G.s insurer removed sewer
    backup coverage from D.L.G.s insurance policy.  D.L.G. notified Minto of the
    cancellation.  At no time after learning of the cancellation did Minto require
    D.L.G. to obtain new coverage for sewer backup.

[7]

After the first flood, Minto undertook to D.L.G. that it would repair
    and maintain the plumbing system.  Unbeknownst to D.L.G., Minto did not take
    the steps necessary to correct the defects in the plumbing system that had
    caused the first sewer backup.

[8]

In April 2012, D.L.G. and Minto entered into a Lease Amending
    Agreement.  The agreement reduced the amounts that had been payable by D.L.G.
    under the lease while the necessary repairs were being made.  The Lease Amending
    Agreement also provided that D.L.G. would release and forever discharge Minto
    from any and all actions, causes of action, claims and demands, for damages,
    restitution, compensation, proprietary interests, loss of injury, howsoever
    arising which may have been sustained by D.L.G. in any manner prior to the
    date of the Amending Agreement.

[9]

A second sewer backup occurred in September 2012.  The restaurant closed
    again.  It never reopened.

[10]

In
    October 2012, D.L.G. notified Minto that it was in breach of the lease for
    failing to take steps to repair the plumbing after the first sewer backup.
    D.L.G. also advised Minto that if D.L.G.s franchisor cancelled the restaurant franchise,
    D.L.G. would treat the lease as terminated.  Minto responded that it was not in
    breach of the lease and that D.L.G. was in arrears on its rent payments.

[11]

The
    franchisor terminated D.L.G.s franchise in November 2012.  D.L.G. advised
    Minto that it was in breach of the lease and purported to terminate the lease.
    Minto responded by declaring that D.L.G. was in breach of the lease for
    non-payment of rent and it, too, purported to terminate the lease.

[12]

D.L.G.
    commenced this action in July 2013.  D.L.G. claimed damages for fraudulent and
    negligent misrepresentation, breach of the terms of the lease and negligence.  Minto
    denied liability and counterclaimed, principally for amounts owing for back
    rent.

III

the motion

[13]

In September 2014, Minto brought a motion pursuant to r. 21 to strike all
    of the claims as failing to disclose a reasonable cause of action.  Minto
    argued that:

·

D.L.G.s covenant in the lease to obtain all risk insurance
    coverage precluded recovery by D.L.G. for damages caused by the sewer backups;

·

The limitation of liability clauses in the lease excluded Minto
    from any liability for damages caused by the sewer backups;

·

Minto did not waive compliance by D.L.G. with any of the terms of
    the lease;

·

The Lease Amending Agreement in April 2012 released Minto from
    any pre-existing claims that D.L.G. might have against Minto.

[14]

The
    motion judge held that the fraudulent misrepresentation claim could proceed to
    trial (paras. 64-70) and that the effect of the release executed by D.L.G. as
    part of the Lease Amending Agreement on the fraud claim should also be
    determined at trial (paras. 93-102).  Minto does not challenge either holding.

[15]

The
    motion judge found that it was plain and obvious that the covenant to insure in
    the lease barred D.L.G.s claims for breach of contract, negligence and
    negligent misrepresentation (paras. 50-58) and that Minto had not waived the
    covenant by its acknowledgment that D.L.G.s insurer had terminated the sewer
    back-up insurance after the first incident (paras. 59-63). The motion judge
    went on to consider whether, assuming the covenant to insure could be regarded
    as an exclusion clause, the principles in
Tercon Contractors Ltd. v.
    British Columbia (Minister of Transportation and Highways)
, 2010 SCC 4,
    [2010] 1 S.C.R. 69, precluded Minto from relying on the provision. After a
    careful analysis (paras. 72-91), the motion judge determined that it was plain
    and obvious that the enforceability of the covenant to insure was not negated
    by the principles described by the Supreme Court of Canada in
Tercon
.

IV

The covenant to insure

[16]

D.L.G.
    in para. 7.1 of the lease undertook to obtain all risks insurance which
    specifically included insurance for sewer back-up. D.L.G. accepts that a
    claim in negligence against Minto for failure to properly maintain the plumbing
    is barred by the covenant to insure, but submits that it is not plain and
    obvious that the covenant also bars a claim based on Mintos breach of its quiet
    enjoyment and good repair obligations under the lease.

[17]

D.L.G.
    argues that a trial is necessary to properly interpret the covenant to insure
    in the context of the entire agreement.  I do not accept this argument. The
    covenant to insure focuses on risk and the responsibility as between D.L.G. and
    Minto for losses covered should the identified risks materialise during the
    term of the agreement. The provision is not concerned with the legal
    characterization of claims for losses arising out of the materialization of the
    risks.

[18]

D.L.G.s
    submission runs aground on this courts judgment in
Madison Developments
    Ltd. v. Plan Electric Co.
(1997), 36 O.R. (3d) 80 at para. 9. Carthy J.A.,
    speaking of a situation in which the landlord had covenanted to insure against
    all risks said:

The law is now clear that in the landlord-tenant relationship,
    where the landlord covenants to obtain insurance against the damage to premises
    by fire, the landlord cannot sue the tenant for a loss by fire caused by the
    tenants negligence.
A contractual undertaking by one party to secure
    property insurance operates in effect as an assumption by that party of the
    risk of loss or damage caused by the peril to be insured against. This is so
    notwithstanding a covenant by the tenant to repair which, without the
    landlords covenant to insure, would obligate the tenant to indemnify for such
    a loss. This is a matter of contractual law not insurance law
, but of
    course, the insurer can be in no better position than the landlord on a
    subrogated claim.
The rationale for this conclusion is that the covenant to
    insure is a contractual benefit accorded to the tenant, which, on its face,
    covers fire with or without negligence by any person
. There would be no
    benefit to the tenant from the covenant if it did not apply to a fire caused by
    the tenants negligence. [Emphasis added.]

[19]

The
    language from
Madison
applies here. A covenant to insure is one of
    several provisions within a lease which allocates risk as between the parties
    to the lease. The allocation of risk is presumably reflected in the rent to be
    paid. A covenant to insure would hardly serve the purpose of risk allocation if
    it were read as allocating the risk to the tenant if the landlord was
    negligent, but to the landlord if the same act amounted to a breach of a
    provision in the lease, e.g. the obligation to maintain and repair. As almost
    any act of negligence would also be a breach of the obligation to maintain and
    repair, the interpretation urged by the appellant would effectively put the risk
    on Minto despite D.L.G.s obligation to obtain all risks insurance.

The enforceability of the covenant to insure

[20]

D.L.G.
    submits that the covenant to insure is an exclusion clause and is unenforceable
    under the principles set down in
Tercon
. In my view, the covenant to
    insure cannot be read as a clause excluding Minto from liability it would
    otherwise carry but for the clause. Instead, the covenant to insure assigns
    risk for certain losses by requiring that the tenant, D.L.G., obtain insurance
    coverage for those losses:
Smith v. T. Eaton Co.
, [1978] 2 S.C.R. 749
    at 756,
St. Lawrence Cement Inc. v. Wakeham & Sons Limited
(1995),
    26 O.R. (3d) 321 at paras. 37-39 (C.A.).

[21]

As
    I am satisfied that the covenant to insure cannot be read as an exclusion
    clause, I need not address the enforceability of that clause. I would, however,
    observe that in the context of a negotiated lease between arms-length
    commercial entities I see little room for an argument that a covenant to
    insure, whether directed at the landlord or the tenant, could be viewed as
    unconscionable.

[22]

Nothing
    in the pleadings alleges any inherent unfairness in placing the burden of
    obtaining all risks insurance on D.L.G.  I reject the argument that the
    relationship between D.L.G. and Minto during the lease negotiations was one of
    unequal bargaining power because Minto had knowledge about the plumbing that
    D.L.G. did not have.  Nothing in the pleadings suggests that D.L.G. could not
    have made the relevant inquiries and conducted the necessary inspections to
    obtain whatever information about the plumbing it deemed necessary.  Although D.L.G.s
    claim that it relied on fraudulent/negligent misrepresentations by Minto gives
    rise to tort claims against Minto, it does not provide the basis for the
    assertion that D.L.G. was in a position of unequal bargaining power during the
    lease negotiations: see also the reasons of the motion judge at paras. 85-89.

The misrepresentation claims

[23]

D.L.G.
    alleges both fraudulent and negligent misrepresentations.  D.L.G. alleges
    misrepresentations that induced it to enter into the lease with Minto and it
    alleges different misrepresentations after the first sewer backup that induced
    D.L.G. to continue to operate under the lease and attempt to restart its
    restaurant business.  These misrepresentation claims are founded in tort and
    are not premised on any obligations created by the terms of the lease.

[24]

D.L.G.
    alleged that during the negotiations which led to the lease, Minto represented
    that the plumbing in the unit to be rented was in good order and that there had
    been no prior flooding in the unit.  D.L.G. alleged that both representations
    were false and that the unit had been flooded as a result of a sewer backup
    during the prior tenants occupation.  D.L.G. alleged that Minto either knew
    the representations were false, or did not care whether the representations
    were false.  Alternatively, D.L.G. contends that Minto made the representations
    negligently and that it owed a duty of care to D.L.G.  D.L.G. asserts that it relied
    on the representations made by Minto when entering into the lease.

[25]

D.L.G.
    also alleged misrepresentations by Minto after the first sewer backup.  D.L.G. maintained
    that Minto represented that it had carried out the necessary repairs and
    reconstruction of the plumbing and would maintain the plumbing in good repair
    going forward.  D.L.G. alleged that it relied on those representations to
    reopen the restaurant and continue the lease.  D.L.G. alleged that Minto did
    not make the repairs as it had represented and that the failure to do so led to
    the second sewer backup and flood.

[26]

The
    motion judge held (at paras. 42-44) that D.L.G. had advanced a legally viable
    fraudulent misrepresentation claim although the pleading of the claim was
    somewhat deficient.  In holding that it was not plain and obvious that the
    covenant to insure foreclosed the fraudulent misrepresentation claim the motion
    judge said at paras. 64-65:

In other words, the covenant to insure may exculpate
    liability for the risks and claims for which insurance is to be obtained but it
    is not plain and obvious that the insurance in this case was meant to cover
    damages for fraudulent misrepresentation.

I emphasize that I am not deciding that the covenant to insure
    does not cover a fraudulent misrepresentation or that the property or income
    damages consequent upon a fraudulent misrepresentation were not covered by the
    covenant to insure, but the
Cummer-Yonge Investments
line of cases
    does not appear to have addressed this type of claim, which goes more to the
    formation of the contract than it does to the performance of it.  And, it is
    also worth noting that a fraudulent misrepresentation claim may have a different
    doctrinal approach to damages and a different measure of damages than a breach
    of contract claim.  In any event, it is not plain and obvious that the covenant
    to insure precludes D.L.G.s fraudulent misrepresentation claim.

[27]

The
    motion judge also held (para. 102) that it was not plain and obvious that the
    release executed by D.L.G. as part of the amendment to the lease foreclosed the
    fraudulent misrepresentation claim.

[28]

The
    motion judge did not deal separately with the negligent misrepresentation claim.
    In his analysis, he treated that claim no differently than the breach of
    contract and negligence claims advanced by D.L.G.:
e.g.
see para. 58.
    The motion judge also did not distinguish between the alleged
    misrepresentations made prior to the parties entering into the lease, and those
    made after the first sewer backup.

[29]

D.L.G.
    submits that the motion judges analysis of the fraudulent misrepresentation
    claim quoted above (para. 28) applies equally to the negligent
    misrepresentation claim.  D.L.G. submits that the negligent misrepresentation
    claim, like the fraudulent misrepresentation claim, is based on alleged
    tortious conduct that occurred outside of the lease.  D.L.G. submits that the covenant
    to insure allocates risk in the performance of the lease and does not impact on
    claims based on tortious conduct that predated the lease, or are unrelated to any
    obligations or rights created by the lease.

[30]

In
    response, Minto submits that the motion judges analysis precluding a claim of
    negligence in the face of the covenant to insure is equally applicable to a
    claim of negligent misrepresentation.  Minto also relies on the entire
    agreement clause in para. 13.5 of the lease.  That paragraph provides:

This lease and its schedules and riders, if any, set forth the
    entire agreement between [Minto] and [D.L.G.] with respect to the premises and
    there are no representations, agreements or understandings between them other
    than is set out in this lease.  This lease supersedes and revokes all previous
    negotiations, arrangements, letters of intent, offers to lease, lease
    proposals, brochures, representations and information conveyed whether orally
    or in writing between the partiesThis lease and its schedules and riders may
    not be modified except by agreement in writing executed by [Minto] and
    [D.L.G.].

[31]

Setting
    aside Mintos argument based on the entire agreement clause in the lease for
    the moment, it is arguable that Mintos liability for negligent
    misrepresentation, like its liability for fraudulent misrepresentation, is not
    precluded by the covenant to insure in the contract.  The covenant to insure
    was intended to assign risk within the operation of the contractual
    relationship between D.L.G. and Minto.  The alleged tortious conduct, be it
    fraudulent or negligent, occurred outside of that relationship.  It is not
    plain and obvious to me, setting aside the entire agreement clause, that the
    terms of the contract demonstrate that the parties intended to exclude Mintos
    potential liability for any negligent misrepresentations that induced D.L.G. to
    enter into and/or continue the tenancy.

[32]

The
    entire agreement clause argument made by Minto requires a separate
    consideration of the misrepresentations made by Minto before the lease was
    entered into and those made after the first sewer backup.

[33]

The
    reach of the entire agreement clause is a matter of interpretation and the
    wording of the clause is of primary importance.  It is arguable that absent
    very clear language, the entire agreement clause does not apply prospectively
    to representations made after the contract was entered into by the parties: see
Shelanu Inc. v. Print Three Franchising Corp.
, [2003] O.J. No. 1919 at
    paras. 48-50 (C.A.); M.G. Ogilvie Entire Agreement Clauses: Neither Riddled
    Nor Enigma, (2008) 87 Can. B.R. 625 at 633, 642; A. Swan, J. Adamski,
Canadian
    Contract Law
, 3rd ed (2012) at p. 600.  It is not plain and obvious that
    the entire agreement clause should immunize Minto from liability for
    post-contract misrepresentations.

[34]

Nor
    does the language in the entire agreement clause requiring that any modification
    to the lease be in writing, make it plain and obvious that claims based on
    negligent misrepresentations made after the lease was entered into must fail.
    A determination of whether those misrepresentations stand apart from the terms
    of the lease and are therefore not a modification of the terms of the lease,
    cannot be decided within the narrow confines of a pleadings motion.

[35]

Finally,
    nothing in the terms of the Lease Amending Agreement clearly makes the entire
    agreement clause in the lease applicable to negligent misrepresentation claims
    based on representations made after the first flood.  The Lease Amending
    Agreement provides that all provisions of the lease continue in full force and
    effect.  Those words, however, do not assist in interpreting the provisions of
    the lease and specifically do not assist in determining whether the entire
    agreement clause applies prospectively to misrepresentations made after the
    lease was entered into.

[36]

Minto
    stands on firmer ground in relying on the entire agreement clause to preclude
    any possible liability based on negligent misrepresentations made before the
    lease was entered into by the parties.  Entire agreement clauses in contracts
    negotiated at arms length by commercial entities are often read as excluding
    liability for alleged negligent misrepresentations that were said to have
    induced one party to enter into the contract,
e.g.
see
No. 2002 Taurus
    Ventures Ltd. v. Intrawest Corp.
2007 BCCA 228, [2007] B.C.J. No. 812, at
    para. 59;
McNeely v. Herbal Magic Inc.
, 2011 ONSC 4237, 89 B.L.R.
    (4th) 226, at para. 16-19; Ogilvie Entire Agreement Clauses: Neither Riddle
    nor Enigma at p. 636-637.  Some of the cases exclude liability as a matter of
    contractual interpretation, and some read the entire agreement clause as
    negating any possible reliance on the pre-contract representations.

[37]

None
    of the cases, however, involve motions to strike claims based on the
    pleadings.  They arise out of trial decisions or decisions made on motion for
    summary judgment.  The courts have looked to a variety of interpretive aids in
    considering the potential application of an entire agreement clause to
    pre-contractual misrepresentations: see J.D. McCamus:  The Law of Contract, 2
nd
ed 2012, Irwin Law Inc., at 365-66.  The courts have considered:

·

the language used in the entire agreement clause;

·

the relationship of the parties when the contract was
    consummated;

·

the sophistication of the parties;

·

the nature of the negotiations;

·

the language of other terms of the contract and specifically the
    extent to which allowing or precluding a negligent misrepresentation claim
    would be inconsistent with the other terms of the agreement.

[38]

Taurus
provides a good example of the kind of analysis that has led courts to conclude
    that an entire agreement clause forecloses a party to the contract from
    successfully advancing a negligent misrepresentation claim.  In holding that
    the entire agreement clause foreclosed the plaintiff from successfully
    advancing a claim that it had been induced to enter into the contract by
    negligent misrepresentations, the court said, at para. 59:

The parties were both sophisticated, commercial entities.  Mr.
    Houghton had extensive experience in real estate development, was a player in
    the Whistler real estate market, and had dealt extensively with Intrawest.  The
    contract was not a standard adhesion contract.  It included, in the Disclosure
    Statement, a detailed description of not only lot 13, but the Kadenwood
    development and the responsibilities and obligations of the various parties
    involved in the development including Intrawest, the owners of the lots in the
    development, and the strata corporation.  Mr. Houghton read the disclosure
    statement before Taurus entered into the contract.  He had personal contact
    with Intrawest representatives both before and after he purchased lot 13.  He
    had ample opportunity to ask questions and seek answers to any concerns he had
    about the details of the development of Kadenwood.  In these circumstances,
    where the contract was clearly intended to govern the relationship between the
    parties, it would not accord with commercial reality to give no effect to the
    entre agreement clause in determining whether Taurus can claim a tort remedy.

[39]

The
    evidentiary detail necessary to decide whether an entire agreement clause
    precludes reliance on pre-contractual negligent misrepresentations is not
    available on a motion to strike based on the pleadings.  It may be that Minto
    can convince a trial judge or a judge on a summary judgment motion that just as
    in
Taurus
at para. 59
,
    it would not accord with commercial reality to give no effect to the entire
    agreement clause in deciding whether a tort claim for negligent
    misrepresentation based on pre-contractual representations should succeed.  The
    argument is premature at this stage.

The waiver/estoppel claim

[40]

D.L.G.
    pleaded that after the first sewer backup, Minto had agreed to cover the costs
    of cleanup, repairs and reconstruction, and to investigate and fix the problems
    that had led to the first sewer backup.  D.L.G. further pleaded that it told
    Minto that its insurer had refused to provide sewer backup coverage after the
    first sewer backup.  According to D.L.G., Minto:

[a]cknowledged and accepted the continuation by D.L.G. of its
    tenancy under the lease with correspondingly reduced insurance coverage.  At no
    time after learning of the cancellation by D.L.G.s insurer did the defendants
    [Minto] require D.L.G. to obtain new coverage for sewer backup.

[41]

D.L.G.
    pleaded that as a consequence of Mintos conduct after the first sewer backup, Minto
    could not rely on the covenant to insure in the lease in respect of damages
    flowing from the second sewer backup.  D.L.G. pleaded acquiescence, waiver and
    equitable or promissory estoppel.

[42]

The
    motion judge concluded that neither waiver nor estoppel could assist D.L.G.
    (paras. 59-63).  In doing so, he briefly examined the individual circumstances
    relied on by D.L.G. in support of its waiver and estoppel arguments.  For
    example, he determined that Mintos apparent acquiescence in D.L.G.s continued
    tenancy despite its inability to obtain sewer backup insurance coverage did not
    constitute waiver (para. 60).

[43]

Counsel
    for Minto relies on the motion judges reasons and on para. 10(5)(a) of the
    lease.  That paragraph reads:

The waiver by the landlord of any breach of any provision of
    this lease is not deemed to be a waiver of that provision or any subsequent
    breach of it or of any other provision of this lease. The subsequent acceptance
    of any rent or other amount by the landlord is not deemed to be a waiver of any
    provision of this lease or of any proceeding breach by the tenant of any
    provision of this lease, even if the landlord had knowledge of the proceeding
    breach.
No provision in this lease nor any breach of any provision (whether
    or not continuing or recurring) is deemed to have been waived by the landlord
    unless that waiver is expressly set out in writing and signed by the landlord
.
    [Emphasis added.]

[44]

Minto
    submits that the waiver and the estoppel argument are one and the same.  Absent
    any claim of a written waiver, and there is none, Minto submits that it is
    plain and obvious that D.L.G. cannot rely on waiver or estoppel to prevent the
    operation of the covenant to insure in the lease.

[45]

The
    waiver clause presents a formidable obstacle to D.L.G.s waiver/estoppel claim.
    However, it is not plain and obvious that an estoppel argument based on Mintos
    conduct after the first sewer backup cannot succeed.  Waiver under the terms of
    the lease cannot necessarily be equated with the broader equitable doctrine of
    promissory estoppel.  As Professor McCamus has observed, promissory estoppel is
    a more expansive version of the waiver doctrine:  McCamus:  The Law of
    Contract, at p. 287.

[46]

A
    party relying on promissory estoppel to escape an obligation that the party
    would otherwise have must show three things:

·

A pre-existing legal relationship between the parties;

·

A promise or assurance, express or implied, by one party to the
    other that it would not hold the other party to the performance of an
    obligation imposed under the pre-existing legal relationship; and

·

Reliance on the promise or assurance by the other party who acts
    in some way to change its position because of the promise or assurance:  see
Maracle
    v. Travellers Indemnity Co. of Canada
, [1991] 2 S.C.R. 50 at 57; B.
    MacDougall, Estoppel, 2012 LexisNexis Canada Inc., at pp. 303-304, 310-14.

[47]

The
    facts as pleaded provide a basis for the factual determinations necessary to
    support a promissory estoppel claim.  Consequently, it is not plain and obvious
    on the pleadings that the claim cannot succeed.  Clearly, the entire
    agreement provision and the strict waiver provision in the lease will be
    relied on by Minto to refute D.L.G.s assertion that Minto is estopped by its
    conduct from relying on the covenant to insure.  The terms of the agreement may
    be particularly important in respect of the reliance requirement:  see
Marble
    Trend Ltd. v. Sir Wynne  Hylands Inc.
, [2004] O.J. No. 3127, at paras. 99-100
    (S.C.), affd by [2005] O.J. No. 3730 (C.A.); MacDougall, Promissory Estoppel
    at p. 325.  Similarly, D.L.G.s reliance on conduct as the basis for the
    promissory estoppel rather than any express assurance or promise made by Minto
    could pose additional forensic problems for D.L.G.  These and any other
    evidentiary problems D.L.G. may encounter are battles to be fought at some
    later stage in this litigation.

V

conclusion

[48]

I
    agree with the motion judge that the fraudulent misrepresentation claim should
    proceed.  I would allow D.L.G.s negligent misrepresentation claim to stand,
    and would allow D.L.G.s assertion that Minto is estopped from relying on the
    covenant to insure in respect of damages caused by the second sewer backup to stand.
    I would also hold that the effect of the purported release on any of D.L.G.s
    claims cannot be resolved on the pleadings motion.  Finally, I would extend the
    leave to amend the claim granted to D.L.G. by the motion judge in respect of
    the fraud claim to all of the claims that remain alive.

[49]

After
    judgment was reserved, the parties helpfully advised the court that they had
    reached an agreement on costs.  Their agreement, however, assumed that one side
    or the other would be entirely successful on the appeal.  Success has been
    divided.  Hopefully the parties can come to an agreement as to the appropriate
    disposition of costs having regard to the divided success.  If they cannot, the
    parties should exchange and file costs submissions of no more than 4 pages
    within 30 days of the release of these reasons.

Released:
October 22, 2015
    (D.D.)

Doherty
    J.A.

I
    agree. P. Lauwers J.A.

I
    agree. Grant Huscroft J.A.