COURT OF APPEAL FOR ONTARIO

CITATION: Garcia v. Labourers International Union of North
    America, Local 1059, 2015 ONCA 230

DATE: 20150408

DOCKET: C59265

Doherty, Gillese and Lauwers JJ.A.

BETWEEN

David Garcia

Applicant (Appellant)

and

Jim MacKinnon in his Capacity as Trustee

of the Liuna Local 1059 Members Benefit Trust,

Brandon MacKinnon in his Capacity as Trustee

of the Liuna Local 1059 Members Benefit Trust,

Tom Dool in his Capacity as Trustee

of the Liuna Local 1059 Members Benefit Trust

and Joe Liberatore in his Capacity as Trustee

of the Liuna Local 1059 Members Benefit Trust

and Global Benefit Plan Consultant Inc.

Respondents (Respondents)

David P. Jacobs and Steven G. Bosnick, for the appellant

Lorne Richmond and Charles Sinclair, for the respondents

Heard:  February 5, 2015

On appeal from the order of Justice Alissa K. Mitchell of
    the Superior Court of Justice, dated July 23, 2014, with reasons reported at
    2014 ONSC 4410.

Lauwers J.A.:

[1]

This appeal and the underlying application are steps in an ongoing turf
    war between two rival trade unions in the Ontario construction industry. The
    appellant, David Garcia, is a member of the United Brotherhood of Carpenters and
    Joiners of America (the Carpenters), which is supporting this appeal. The
    respondents are associated with the Labourers International Union of North
    America, Local 1059 (Local 1059).

[2]

Mr. Garcia was a long-time member of Local 1059 until he was expelled in
    2012. He claims to be a beneficiary of a benefit trust and benefit plan administered
    by Local 1059, which are described in more detail below.

[3]

Mr. Garcia applied for an order permitting him to make claims against the
    benefit plan after the termination of his union membership by Local 1059. The
    application judge dismissed his application. For the reasons set out below, I
    would dismiss his appeal.

A.

FACTS

(1)

The Context

[4]

As aptly noted by the application judge, an understanding of the context
    of this case  the Ontario construction industry  is necessary to resolve the
    issues raised at trial and now on appeal. In
Arlington Crane Service Ltd.
    v. Ontario (Minister of Labour)
, (1988) 67 O.R. (2d) 225 (H.C.J.), Henry
    J. made a number of apposite observations about the unique nature of the
    construction industry. In particular, at p. 234, he contrasted the episodic and
    erratic nature of employment in the construction industry with the long-term
    employment typical in other industrial contexts:

There is no opportunity for the kind of tenured status which
    employees enjoy under most collective agreements outside of the construction
    industry. As well, there is no basis for the kind of enduring association which
    a group of employees can develop in an industrial bargaining unit. Any one job
    for the construction worker is usually short and fleeting, and he must be
    prepared to be highly mobile, shifting from project to project across a wide
    geographic area.

[5]

Labour law in Ontario has adapted to the structure of the construction
    industry, as shown by the numerous provisions of the
Labour Relations Act
,
1995
, S.O. 1995, c. 1, Schedule A (
LRA

),

devoted
    especially to the industry. In particular, as described by Henry J. at pp. 234-35
    of
Arlington Crane
, the unique nature of construction work has led to
    an equally unique form of union organization in the industry:

Since the relationship between employer and employee in
    construction is typically episodic rather than enduring in character, a special
    form of union organization has emerged to fill this vacuum. The major craft
    specialties have all developed their own trade unions; the union is the body
    with which the individual tradesman tends to have the most salient relationship
    in the industry  the union collects and administers the funds for the worker's
    vacation pay, health and welfare benefits, and retirement pensions (with the
    money coming from the numerous contractors for whom the tradesman may have
    worked during the year, at a defined contribution level for each hour worked).

[6]

This allocation of responsibilities, whereby unions rather than
    employers administer benefits, is a unique feature of the construction industry,
    and is recognized in s. 150 of the
LRA
. In most other sectors,
    employers are responsible for the administration of employee benefits: George
    W. Adams,
Canadian Labour Law
,
2d ed. (loose-leaf, consulted on
    23 February 2015), (Aurora: Canada Law Book, 1993), ch. 15 at para. 10. It is
    in this unique labour relations context that this case arose.

(2)

The Dual Union Policy

[7]

Mr. Garcia joined Local 1059 in 1999. On October 4, 2010, he also
    joined the Carpenters, following which time, he did no further work for
    employers bound by collective agreements with Local 1059.

[8]

In early 2011, as part of its battle with the Carpenters over formwork
    in its territory, the membership of Local 1059 voted to adopt a Dual Union Policy.
    Thereafter, no member of Local 1059 could also be a member of any affiliate of
    the Carpenters, on pain of expulsion from Local 1059.

[9]

Contrary to the Dual Union Policy, Mr. Garcia did not resign his
    membership in the Carpenters. Instead, he supported the Carpenters in issuing a
    challenge to the validity of the Policy before the Ontario Labour Relations
    Board (the OLRB).

[10]

Local
    1059 sought Mr. Garcias expulsion from its membership before the Trial Board,
    the unions internal dispute mechanism. The board granted the expulsion on the
    basis that Mr. Garcia was in violation of his obligations under the Local 1059s
    Constitution: first, by maintaining his membership in the Carpenters, Mr.
    Garcia violated his obligation to abide by Local 1059s polices; and second, by
    allowing the Carpenters to challenge the policy before the OLRB, he violated
    his obligation to respect the right of the union to adopt and enforce such
    policies, and to refrain from interfering with Local 1059s performance of its
    lawful obligations.

[11]

This
    decision was subsequently upheld by the unions internal Appellate Officer.

[12]

On
    February 2, 2012, the OLRB dismissed the Carpenters allegation that the Dual Union
    Policy violated s. 76 the
LRA
, finding that
it is
    not intimidation or coercion to expel a person from membership on the basis
    that they support another union. Rather,
making and enforcing
    membership rules are internal union matter[s] not the subject of Board
    supervision:
Carpenters (United Brotherhood of Carpenters and Joiners of
    America) v. Labourers International Union of North America
, 2012 CanLII
    4286, at para. 27.

[13]

Immediately
    after this OLRB decision, which confirmed Local 1059s authority to expel Mr.
    Garcia, Local 1059 suspended Mr. Garcias benefits under its benefit plan,
    which I will now describe in more detail.

(3)

The Benefit Trust and the Benefit Plan

[14]

Local
    1059 and two associations of employers are the settlors of a trust (the
    Benefit Trust) created by the Agreement and Declaration of Trust Establishing
    the LIUNA Local 1059 Benefit Trust, dated May 10, 2007 (the "Trust
    Agreement"). It is substantially identical to the trust agreement to which
    Local 1059 was a party prior to 2007: the Labourers Multi-Local Welfare Trust
    Fund of Ontario (the LML Plan).

[15]

The
    trustees of the Benefit Trust comprise two representatives of Local 1059
    Brandon MacKinnon, who is the President of Local 1059, and Jim MacKinnon, who
    is the Business Manager  and one representative from each affected employer
    association.

[16]

The
    trustees adopted the LIUNA Local 1059 Benefit Trust, Benefit Plan Text, dated
    May 24, 2009 (the Benefit Plan or the "Benefit Plan Text").

[17]

Explained
    in broad terms, the Benefit Trust and the Benefit Plan operate as follows: Employers
    bound by collective agreement with Local 1059 are required, by the terms of the
    collective agreement and the Trust Agreement, to contribute amounts, for each Local
    1059 member whom they employ, to the Benefit Trust. The contributed amounts are
    pooled and used by the trust administrator to purchase group insurance that
    provides members with entitlements under the Benefit Plan.

[18]

The
    Benefit Plan administrator determines employees eligibility for benefits using
    the accounting concept of a Dollar Bank Account for each employee. An
    employees Dollar Bank Account tracks the contributions made by each employer
    for whom that employee has worked. This is the mechanism by which the administrator
    determines an employees eligibility to obtain and maintain coverage under the
    Plan.

[19]

The
    Dollar Bank Account is uniquely suited to the exigencies of the construction
    industry, in which workers experience short-term engagements and periods of
    little or no employment. To be eligible for benefits, an employees Dollar Bank
    Account must have a positive balance by way of attributed employer
    contributions large enough to fund the employees share of the monthly insurance
    premium. Since there is no cap on the amount that can be attributed to the
    employees Dollar Bank Account, coverage can be maintained for periods of
    unemployment by the contributions made during periods of employment.

[20]

To
    summarize, the Dollar Bank Account is a conceptual device used to determine
    eligibility for benefits; there is no
actual
Dollar Bank Account for
    any employee, nor are there segregated funds attributable to any particular
    employee other than for the purpose of determining eligibility for benefits. Rather,
    all funds contributed by employers are at all times part of the general funds
    of the Benefit Plan.

[21]

At
    the date of Mr. Garcias expulsion from Local 1059, the notional balance in his
    Dollar Bank Account was about $20,000.

[22]

The
    Benefit Plan administrator advised Mr. Garcia on July 5, 2012 that his benefits
    had been suspended effective February 3, 2012. Since that date, Mr. Garcia
    has not incurred any expenses that would ordinarily have been covered by the
    Benefit Plan as he has been covered by the equivalent Carpenters plan. He is,
    therefore, not out-of-pocket.

B.

DECISION BELOW

[23]

After
    his expulsion from Local 1059, Mr. Garcia brought an application before the
    Superior Court of Justice, seeking an order that he was permitted to make
    claims against the Benefit Plan for so long as he has an adequate balance in his
    Dollar Bank Account. In the alternative, he sought a cash payment in the amount
    of his Dollar Bank Account balance.

[24]

The
    application judge dismissed Mr. Garcias application. She concluded that Mr.
    Garcia ceased to be a beneficiary of the Benefit Trust upon his expulsion from
    Local 1059. He was therefore no longer eligible for coverage under the Benefit
    Plan, regardless of the balance in his notional Dollar Bank Account, nor was he
    entitled to a return of the balance. In addition, the application judge held
    that Brandon MacKinnon and Jim MacKinnon were not in a conflict of interest and
    therefore did not breach their fiduciary duty as trustees in adopting and
    enforcing the Dual Union Policy.

[25]

I
    discuss the reasons of the application judge in further detail in my analysis
    below.

C.

ISSUES

[26]

The
    appellant argues that the application judge made legal errors in her decision
    dismissing his claim, which distill into three issues:

1)

Is Mr. Garcia a
    beneficiary of the Benefit Trust, entitled to claim benefits so long as there
    is an adequate positive balance in his Dollar Bank Account?

2)

Did the trustees of
    the Benefit Trust give Mr. Garcia adequate notice that he would lose access to
    the Benefit Plan if he were expelled from Local 1059?

3)

Did union officials
    Jim MacKinnon and Brandon MacKinnon breach their fiduciary duties as trustees
    under the Benefit Trust by adopting and enforcing the Dual Union Policy?

[27]

I
    address each issue in turn.

D.

ANALYSIS

(1)

Is the Appellant a beneficiary of
    the Benefit Trust entitled to claim benefits so long as there is an adequate
    balance in his Dollar Bank Account?

[28]

The
    appellant argues that unless the beneficiaries of the Benefit Trust are defined
    to include those, like him, on whose behalf contributions have been made to
    the Trust, the Trust will be void for uncertainty of objects (beneficiaries). He
    argues that the need to refer to the Benefit Plan Text to identify the
    beneficiaries of the Benefit Trust imports a fatal uncertainty into the Trust
    because it makes eligibility under the Trust discretionarily amendable by the
    trustees. In other words, as the appellant asserts in his factum, The Court cannot
    rely on an exercise of a power by the trustees in attempting to ascertain the
    beneficiaries of the trust because that would render that exercise of the power
    of the trustees beyond curial review.

[29]

I
    disagree.

[30]

The
    appellant is correct in asserting that the Trust Agreement gives powers to the
    trustees to determine the conditions of eligibility for beneficiaries,
    including when eligibility will terminate. Article 2.01 provides that the Trust
    will be administered by the trustees for the purpose of providing Benefits in
    accordance with the terms of this Agreement and the Benefit Plan. Article 5.01(a)
    of the Trust Agreement authorizes the trustees to adopt and administer the
    Benefit Plan. It specifically provides that the Benefit Plan will set forth in
    writing the conditions of eligibility for the Benefits, the terms of payment
    therefore such other terms as the Trustees deem necessary. Further, paragraph
    (g) empowers the trustees to adopt such procedures, by-laws, rules, and
    regulations consistent with the terms of this Agreement, deemed necessary or
    advisable to carry out the trusts conferred upon them. Articles 5.01 and 5.02
    of the Benefit Plan Text implement these powers.

[31]

In
    my view, contrary to the appellants argument, it is permissible to read the
    Trust Agreement together with the Benefit Plan Text in order to determine the
    identity of the beneficiaries. The appellant concedes that it is entirely
    possible to identify the beneficiaries of the Trust with certainty, at any time,
    by applying the extended definition of employee in the Trust Agreement together
    with the termination provisions in the Benefit Plan text, as the application
    judge did. Therefore, there is no factual uncertainty about the identity of the
    beneficiaries at any point in time.

[32]

I
    note that the appellant has provided no authority for his proposition that a
    fatal uncertainty is imported into the Benefit Trust simply because reference
    must be made to the Benefit Plan Text in order to identify the beneficiaries of
    the Benefit Trust.

[33]

Therefore,
    the application judge did not err in reading the Trust Agreement and the
    Benefit Plan Text together to determine the beneficiaries of the Benefit Trust,
    and find that those who cease to be members of Local 1059 pursuant to article
    5.01(a) of the Benefit Plan Text are no longer beneficiaries and, under article
    5.02, the notional balance in the Dollar Bank Account attributed to them become
    part of the general funds of the Plan. There is no conflict between the
    provisions in the Trust Agreement that confer benefits on Mr. Garcia, and the
    operation of articles 5.01 and 5.02 of the Benefit Plan Text that terminated
    his access to the benefits on the ending of his membership in Local 1059. (In
    reaching this conclusion, I do not rely on the application judges unsupported finding,
    at para. 72, that the corpus of the Trust would be quickly exhausted if
    members of other unions were permitted to receive benefits from it).

(2)

Did the trustees give Mr. Garcia adequate notice that he would lose
    access to the Benefit Plan if he were expelled from Local 1059?

[34]

There
    is no merit to the appellants argument that he did not receive adequate notice
    that he would lose access to the Benefit Plan if he were expelled from Local
    1059. The evidence is that he was fully aware that his expulsion from Local
    1059 would lead to this result. The crux of the appellants complaint is that when
    the Dual Union Policy was adopted, it was already too late for lawful notice because,
    by that time, he had accumulated a positive balance in the Dollar Bank Account,
    had an interest in those trust funds, and could not be deprived of that beneficial
    interest.

[35]

I
    reject this submission for two reasons. First, article 2.03(b) of the Trust
    Agreement provides that no beneficiary will have any right, title or interest
    in or to the assets of the Trust except as specifically provided by the Benefit
    Plan and the applicable rules and regulations thereunder adopted by the Trustees.
    No provision gives the appellant the beneficial interest he asserts in the
    balance of his Dollar Bank Account.

[36]

Second,
    article 5.01 of the Benefit Plan Text replicates an equivalent provision from
    the LML Plan, under which the appellant worked for many years and accumulated a
    positive balance that was carried forward into the new Benefit Plan. Both plans
    always provided for the termination of benefits when a person ceased to be a
    union member. This feature of the Benefit Plan was not new.

[37]

I
    would give no effect to the appellants argument that the loss of benefits is inconsistent
    with the LIUNA Local 1059 Benefit Trust Members Booklet. Although the Booklet
    does not list termination of union membership as one of the reasons that a
    members coverage would terminate, the Booklet does not purport to be
    exhaustive. It states clearly in the introduction that the Benefit Trust was
    created  for the Members of Local 1059. Common sense suggests that the
    termination of employment ordinarily results in the loss not only of wages, but
    also of employment benefits. Applying this logic to the employment structure in
    the construction industry suggests that termination of union membership  the
    gateway to employment in the industry  similarly results in the loss of
    employment benefits.

[38]

I
    find the appellants other submissions related to notice to be similarly unpersuasive.
    First, the appellant submits that, Jim MacKinnons failure to respond, at the
    Trial Board hearing, to counsels proposition that the appellant would not be
    deprived of his earned benefits if he were expelled,  led the appellant to
    believe this would be the case. There is no legal entitlement that flows from
    this conduct.

[39]

The
    appellant also points out that the OLRB hearing, after Jim MacKinnon had
    already directed the plan administrator to cease benefits to the appellant,
    Local 1059 averred that Mr. Garcias Dollar bank was still extant. This
    proposition is literally true since, at that point, the Trial Boards decision
    was still under appeal and it remained open to the appellant to resign his
    membership in the Carpenters and return to the fold as a Local 1059 member.
    Under the terms of the Benefit Plan Text, he could have returned and
    reactivated his Dollar Bank Account for a limited time. Again, there is no
    legal entitlement that flows from this point.

[40]

There
    is no doubt that the appellant could have avoided the claimed loss by staying
    with Local 1059; he was aware of that opportunity throughout and chose to
    forego it. Accordingly, there is no merit to his argument that he did not have
    adequate notice that he would lose his benefits if he were expelled.

(3)

Did union officials Jim MacKinnon and Brandon MacKinnon breach their
    fiduciary duties as trustees of the Benefit Trust by adopting and enforcing the
    Dual Union Policy?

[41]

The
    appellant argues that because of their status as trustees of the Benefit Trust,
    the MacKinnons were legally disabled from participating as union officials in
    three critical actions: adopting the Dual Union Policy; prosecuting the
    internal union charges against the appellant; and directing the Benefit Plan administrator
    to confiscate Mr. Garcias Dollar Bank.

[42]

The
    appellant concedes that Jims role in initiating charges against him and
    Brandons role in adopting the Dual Union Policy were within their roles as
    members of Local 1059s executive. However, the appellant submits that these
    actions of the MacKinnons as union officials placed them in a conflict of
    interest when, as trustees, they used the Dual Union Policy to effect the
    confiscation of his Dollar Bank Account balance; the MacKinnons thereby breached
    their fiduciary duties to the appellant as a beneficiary of the Benefit Trust. In
    particular, the appellant asserts that [t]rustees breach their duties to
    beneficiaries by forcing a choice between a diminution of the rights they held
    on accruing their interest in trust funds and the loss of beneficial ownership
    of such funds.

[43]

The
    application judge found that there was no conflict of interest, and that the
    functions of union management and benefit trust administration did not overlap
    in this factual context. In particular, she found, at para. 128, that the adoption
    of the Dual Union Policy did not affect the administration of the trust, the
    terms of the trust documents, the nature or level of benefits, eligibility
    requirements or the funding of the Benefit Trust. Further, the application
    judge found, at para. 131, that Local 1059s decision to bring proceedings
    against a member for violation or breach of the unions Constitution and by-laws
    does not relate in any way to the administration of the Benefit Trust by the
    trustees. Once Local 1059 decided to expel Mr. Garcia, it was the trust
    administrators duty to terminate his coverage.

[44]

In
    reaching her decision, at para. 123, the application judge paraphrased and
    relied on the approach to the conflict of interest issue taken by Cromwell J.
    in
Sun Indalex Finance, LLC v. United Steelworkers
, 2013 SCC 6, at
    paras. 197-98, 201. The appellant submits that the trial judge erred in relying
    on Cromwell J.s structural approach as it differed from what he views as the
    majority contextual approach to the conflict of interest issue.

[45]

For
    the reasons below, I find that the application judges analysis and conclusion with
    respect to the conflict of interest contain no legal error. My analysis
    involves: (a) a short discussion of the
Indalex
decision; (b) a description
    of the contextual approach to deciding whether a conflict of interest exists;
    (c) a review of the relevant contextual factors in this case; and, (d), an
    application of the contextual approach to the facts of this case.

(a)

The
Indalex
Decision

[46]

Indalex
found itself in financial
    difficulties and determined that it should seek protection from its creditors
    under the
Companys Creditors Arrangement Act
, R.S.C. 1985 c. C-36 (
CCAA
).
    Indalex was both the corporate employer and  the administrator of two employee pension
    plans. Such a dual role is permissible under s. 8(1)(a) of the
Pension
    Benefits Act
, R.S.O. 1990, c. P.8 (
PBA
), which also provides, in
    s. 22(4), that a plan administrator must not permit its interests to conflict
    with its duties in respect of the pension fund.

[47]

A
    corporate decision to seek protection under the
CCAA
gives rise to the
    prospect that the corporate employers financial interests could conflict with
    the interests of the pension beneficiaries, thus jeopardizing the corporate
    employers ability discharge its fiduciary duties properly as the plan
    administrator.

[48]

Acknowledgment
    of this permissible dual role which could potentially result in a conflict of
    interest, was the common starting point for all three
Indalex
judgments.
    As Deschamps J. observed, at para. 64, the ability of a corporate employer to
    act as plan administrator is based on the assumption that not all decisions
    taken by directors in managing a corporation will result in conflict with the
    corporations duties to the plans members. Cromwell and Lebel JJ. make
    similar observations at paras. 197-98 and 272, respectively.

[49]

At
    bottom,
Indalex
was about the respective priorities of creditors and
    pension beneficiaries when an enterprise is no longer operating in the ordinary
    course of business, but is under the
CCAA
and heading for bankruptcy. The
    issue that divided the Supreme Court was the point at which Indalex was
    required to address the conflict between its corporate duties and its duties as
    pension administrator, and what it ought to have done to address the conflict.

[50]

I
    agree with the appellant that the court must take a contextual approach to
    determine whether a conflict of interest arose that led to a breach of
    fiduciary duties. However, as I see it, this is the conventional approach to
    cases of this sort, to which
Indalex
made no relevant legal change.

[51]

In
    my view, all three judgments in
Indalex
took a contextual approach. Each
    paid close attention to the statutory structure of the
PBA
, to the
    plan documents, and to the particular circumstances of the parties. Deschamps
    J. commented, at para. 69, I would stress that factual contexts are needed to analyse
    conflicts between interests. Although Cromwell J.s reasons are more
    discursive on the conflict of interest issue, I do not detect a substantive difference
    between his reasoning and that of Deschamps J. that is relevant to the conflict
    analysis in this case.

[52]

I
    therefore reject the appellants argument that the application judge wrongly followed
    Cromwell J.s structural approach rather than the contextual approach
    adopted by Deschamps and LeBel JJ.

(b)

The Contextual Approach

[53]

The
    duty of a fiduciary to avoid conflicts of interest may be modified by statute
    or agreement:
Indalex
, at para 186. Therefore, relevant statutory
    provisions and plan documents are important contextual factors in determining the
    extent of any such modification.

[54]

Indalex
provides a useful example. The
PBA
statutory scheme tolerates what
    this court described in
Indalex Ltd
.
(Re)
, 2011 ONCA
    265, at para.128, as the two hats metaphor, to capture the duties of the
    corporate employer who is also the pension administrator. As this court explained,
    at para 129:

The "two hats" analogy in Imperial Oil assists in
    understanding the parameters of the dual roles of an employer who is also the
    administrator of its pension plan. The employer, when managing its business,
    wears its corporate hat. Although the employer qua corporation must treat all
    stakeholders fairly when their interests conflict, the directors' ultimate duty
    is to act in the best interests of the corporation: see
BCE Inc. v. 1976
    Debentureholders
, [2008] 3 S.C.R. 560, [2008] S.C.J. No. 37, at paras.
    81-84. On the other hand, when acting as the pension plan administrator, the
    employer wears its fiduciary hat and must act in the best interests of the
    plan's members and beneficiaries.

[55]

In
Indalex
, Cromwell J. pointed out, at para. 198, that [t]he employer,
    within the limits set out in the plan documents and the legislation generally,
    has the authority to amend the plan unilaterally and even to terminate it.
    These steps may well not serve the best interests of plan beneficiaries. The
    obvious inference arising from this statement is that by taking such permitted steps,
    the employer does not fall into a conflict of interest.

[56]

The
    issue of unilateral amendment by the employer also arose in
Imperial Oil Ltd.
    v. Ontario (Superintendent of Pensions)
(1995), 18 C.C.P.B. 198, where the
    Pension Commission of Ontario permitted Imperial Oil to amend two employee
    pension plans to reduce the availability of enhanced early retirement benefits.
    The Commission noted, at para. 35, Another way of looking at the matter would
    be to see that the power of amendment contained in the Plans is an express agreement
    that for the purpose of making amendments, Imperial Oil would be acting in its
    capacity as employer. The existence of such an agreement recognizes an employers
    two hats and modifies the duty to avoid conflicts; this is part of the
    contextual approach and applies with necessary modification to this case.

[57]

Nothing
    in the Supreme Courts
Indalex
decision contradicts this approach. I
    agree with Deschamps J.s comment, at para 65, that once the conflict is plain
    because the trust is heading toward termination, the two hats metaphor ceases
    to have utility  but that is not the situation here.

(c)

The Context of this Case

[58]

In
    alleging a conflict of interest, the appellant relies on
Indalex
to
    posit a sharp disjunction between the role of a union official in union
    business and the role of a trustee under a benefit trust. However, a number of
    important contextual factors differentiate this case from
Indalex

and
    are relevant to determining whether the MacKinnons were in a conflict of
    interest.

[59]

First,
    unlike Indalex, which was facing bankruptcy proceedings, Local 1059 and the Benefit
    Trust were carrying out their respective functions in the ordinary course of
    business. In contrast to the situation in
Indalex
, there is no
    prospect of termination or shortfall in the present case; the Benefit Trust is
    not in extremis. Therefore, the two hats metaphor has reasonable application.

[60]

Second,
    in this case, the statutory context is provided by the
LRA
. Local 1059
    is a trade union within the meaning of the Act. Its main function is to bargain
    wages, benefits and working conditions collectively on behalf of its members. As
    a result, members rights related to benefits are largely contractual. There is
    no statutory overlay in this case, as in
Indalex
, where the public
    policy goals of the
PBA
were in possible conflict with the goals of
    the
CCAA
.

[61]

Third,
    and perhaps most importantly, in the unique context of labour relations in the
    construction industry, employees stand in a somewhat different relationship
    with the administrator of their benefits. Article 4.01(b) of the Trust
    Agreement stipulates that Local 1059 shall appoint its Business Manager and
    another individual as the two union-appointed trustees responsible for
    administering the Benefit Trust. The MacKinnons, as members of the Local 1059 leadership,
    were appointed as trustees pursuant to this provision.

[62]

Since
    union members have democratic control over the union leadership, the usual power
    imbalance between an employer-administrator (like Indalex) and an employee is
    not truly reflected in the relationship between a union-administrator (like
    Local 1059) and a union member.

[63]

Further,
    any collective agreement the union negotiates is subject to ratification by the
    membership, including the balance between the employers contribution to wages
    on the one hand, and to benefits on the other. It is open to the union to
    negotiate collectively for wage and benefit improvements, and it is also open
    to the union to negotiate freezes or reductions in difficult economic times. In
    either case, benefits, while important, are only one part of the overall
    compensation package to be negotiated, and the union members collectively
    decide how they should be prioritized.

[64]

Finally,
    unions have duties to their members which employers do not have toward their
    employees, including the duty of fair representation, the duty of fair
    referral, and the duty to refrain from intimidation and coercion:
LRA
,
    ss. 74-76. These duties, combined with the democratic power of union members
    over the union executive and the collective bargaining process, create a more
    balanced and non-adversarial relationship than that in the usual situation between
    employees and an employer that administers their benefits plan.

[65]

Bearing
    these important contextual factors in mind, I now consider whether a conflict
    of interest arises in this case.

(d)

The Application of the Contextual Approach to this Case

[66]

To
    begin, I note that the conflict of interest issue in this case is, in general
    terms, a proxy for an inter-union rivalry. In legal terms, however, the dispute
    is between Mr. Garcia and Local 1059. That dispute has been exhaustively
    pursued through Local 1059s internal grievance process and the OLRB. The court
    should not be quick to take up the same fight couched in somewhat different
    terms.

[67]

In
    any event, if the strict approach to conflicts of interest proposed by the
    appellant were to be followed, it is hard to see how a union could function in
    this area. However, the appellant and the Carpenters do not, and plainly would
    not, argue that union officials who are also benefit trust trustees are, by
    that fact alone, disabled from collectively bargaining, even though benefits
    may be at risk in the bargaining process.

[68]

Instead,
    the appellant argues, first, that the adoption of the dual union policy after he
    joined the Carpenters created a clear conflict because it would lead to his
    expulsion when he had accrued the earnings in trust for him. However, as I explained,
    at para. 36 above, the appellant had no beneficial interest in the funds under
    the terms of the Trust.

[69]

Second,
    the appellant argues that trustee Jim MacKinnon was legally disabled from
    laying charges and proceeding with the prosecution before the Trial Board
    because the appellant was a trust beneficiary. This is where the two hats
    metaphor has particular salience. I agree with the application judges analysis,
    at para. 123:

Where fiduciary obligations stem from a legal framework which
    allows or requires the same person or entity to hold dual roles, a conflict of
    interest or duty does not arise merely because the entity or individual makes a
    decision in its non-trustee role (for example as employer or, here, as business
    manager/trustee or union president) that could potentially affect the rights of
    plan beneficiaries. Rather, a conflict occurs "when there is a substantial
    risk that the [business manager/trustee's] representation of plan beneficiaries
    would be materially and adversely affected by the [business manager/trustee's]
    duties to the [union]", always bearing in mind that a trustee's fiduciary
    obligations to plan members do not exist at large, but arise only in relation
    to those tasks and duties stemming from the legal framework established by the
    trust documents and any applicable statutory scheme. [citing
Indalex
, at
    paras. 197-198, 201 per Cromwell J.; See also para. 70 per Deschamps J.]

[70]

The
    functions of union management and benefit trust administration did not overlap
    in the factual context. Jim MacKinnon, as trustee, owed the appellant no
    specific and individualized duty that was engaged by his prosecution for
    violation or breach of the unions Constitution and by-laws. That prosecution
    did not relate in any way to the administration of the Benefit Trust by the
    trustees.

[71]

Third,
    the appellant argues that trustee Jim MacKinnon was legally disabled from
    directing the trust administrator to confiscate Mr. Garcias Dollar Bank. The
    letter, dated February 3, 2012, provides:

Please be advised that [David Garcia] is no longer a member of
    the Labourers International Union of North America, Local 1059 therefore,
    please suspend his benefits effective this date and transfer the balance of his
    welfare bank to the Surplus Fund.

[72]

The
    appellant submits that [i]t was the responsibility of the Trustees,
    collectively, to decide what effect, if any, Mr. Garcias expulsion from Local
    1059 for joining the Carpenters Union would have on his benefits, which they
    abdicated. I reject this argument. There is no doubt that the appellant was
    expelled by Local 1059 by a process, and with an outcome, that are not
    challenged before us. Therefore, I accept the OLRBs conclusion that Local 1059
    was entitled to adopt and enforce the Dual Union Policy. Once the appellant was
    properly expelled, the role of the trustees is limited; they have no overriding
    discretion to provide benefits to a person who is no longer a beneficiary.

[73]

Fourth,
    the appellant submits that the Benefit Plan Booklet suggests that ceasing to
    be a member of Local 1059 would not lead to the confiscation of his Dollar
    Bank; this disabled the MacKinnons from participating in a decision of the
    trustees to adopt a provision in the Benefit Plan purporting to have the
    opposite effect. I have already rejected this argument for the reasons set out
    at para 38.

[74]

Finally,
    I observe that the consequences of any breach in this case are minimal. The
    appellant has experienced no shortfall of benefits and is not out-of-pocket in
    relation to benefits.

[75]

In
    my view, the application judge did not err in taking the approach she did on
    the issue of conflict of interest. I agree with her that no conflict of
    interest existed on the facts of this case.

E.

Disposition

[76]

I
    would dismiss the appeal with costs to the respondents fixed in the amount of
    $32,000, all inclusive.

Released:  April 8, 2015
    DD                       P. Lauwers J.A.

I
    agree Doherty J.A.

I
    agree E.E. Gillese J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Garneau v. Industrial Alliance Insurance and
    Financial Services Inc., 2015 ONCA 234

DATE: 20150409

DOCKET: C58855

Lauwers, Hourigan and Pardu JJ.A.

BETWEEN

Denise Garneau

Plaintiff (Appellant)

and

Industrial Alliance Insurance and Financial
    Services Inc.

Defendant (Respondent)

Nikiforos Iatrou and Katharine Montpetit, for the
    appellant

Stephen Victor, Q.C. and David Cutler, for the
    respondent

Heard: March 3, 2015

On appeal from the judgment of Justice Robert J. Smith of
    the Superior Court of Justice, dated March 7, 2014, with reasons reported at 2014
    ONSC 1495.

Lauwers J.A.:

OVERVIEW

[1]

The respondent insurer overpaid about $114,000 in long-term disability
    (LTD) benefits to the appellant. The respondent then reduced the appellants monthly
    benefit payments to reimburse itself for the overpayment. The appellant brought
    an action for a declaration that the respondent was not entitled to do so. The
    motion judge granted the respondents motion for summary judgment and dismissed
    the action.

[2]

On appeal, the appellant argues that, in failing to prevent the
    respondent from reducing her monthly benefit payments to reimburse itself for
    the overpayment, the motion judge erred in interpreting the LTD insurance
    policy. The appellant also argues that the motion judge erred in finding that
    the respondent had not breached its fiduciary duty and duty of good faith. For
    the following reasons, I would dismiss the appeal.

FACTS

[3]

No facts are in dispute since the motion judge proceeded on the
    assumption that the facts as pleaded by the appellant were correct.

[4]

The appellant, who suffers from Fibromyalgia, began receiving LTD
    benefits from the government in 1996. On June 28, 2002, she took medical
    retirement from her government job and began receiving superannuation benefits.
    The appellants LTD Policy provided that the amount of her monthly LTD benefits
    payable would be reduced by the amount she received as superannuation benefits
    and the amount received from Canada Pension Plan (CPP).

[5]

On June 13, 2002, the Superannuation Insurance Section of the government
    (Superannuation) sent a letter to the respondent informing it that the
    appellant would retire effective June 28, 2002. While the respondent insurer
    initially denied having received this letter, the motion judge accepted that it
    had been received but was not forwarded to the proper department.

[6]

For employees like the appellant, who were in receipt of LTD benefits on
    the date of retirement, Superannuations usual practice was to send a form to the
    LTD insurer outlining the precise amount of retirement benefits the employee
    would receive. Superannuation failed to send the appellants form to the
    respondent until September 24, 2007, about five years after her retirement.

[7]

The respondent therefore made full LTD benefit payments to the appellant
    without any reduction to account for her Superannuation or CPP benefits from
    June 2002 until September 24, 2007, when it discovered the error. By that point,
    the appellant had been overpaid $114,644.76.

[8]

To reimburse itself for this overpayment, the respondent reduced the
    appellants LTD benefits to zero for the months of October through December
    2007, but later repaid her 50 percent of her LTD benefits entitlement for those
    three months. The respondent then began to pay the appellant 50 percent of her
    LTD benefits each month, applying the other 50 percent to reduce the
    overpayment. (The respondent accepts that interest is not exigible on the overpayment
    balance.) The appellant receives $803.43 per month as CPP benefits and $1,726
    per month as retirement benefits. The 50 percent reduction to the appellants
    LTD benefits has reduced her overall annual income from $49,152, during the
    time she was being overpaid, to approximately $39,700.

[9]

The motion judge accepted, for the purpose of his analysis, the
    following additional facts:

·

The
    appellant relied on her former employer, Superannuation, and the respondent to
    calculate and pay her the correct amount of benefits;

·

The
    appellant was unaware that she was being overpaid by approximately $1,726 per
    month;

·

The
    appellant believed Superannuation had informed the respondent of her
    retirement; and,

·

The
    following factors contributed to the overpayment: the respondents failure to
    follow up on the June 13, 2002 letter from Superannuation informing it of the
    appellants upcoming retirement; Superannuations failure to send the respondent
    the form detailing the appellants pension entitlements in a timely manner; and
    the appellants failure to inform the respondent that she was receiving a
    retirement pension.

[10]

In
    2009, the appellant moved for an order limiting the respondent to a 20 per cent
    reduction in her monthly LTD benefits, based on the
Wages Act
, R.S.O.
    1990, c. W-1, s. 7. In particular, the appellant argued that since the Act
    exempts 80 percent of wages, which includes disability payments, from seizure
    or garnishment, the same proportional exemption should apply to her LTD benefit
    payments. Métivier J. dismissed the appellants motion, for the reasons
    reported at 74 C.C.L.I. (4th) 132, [2009] O.J. No. 2203 (S.C.). She held that
    the overpayment was a debt, not a wage, and as a result, the
Wages Act

did not apply. Leave to appeal this decision to the Divisional Court was
    denied.

DECISION BELOW

[11]

The
    motion judge held that the respondent was entitled to use the self-help remedy
    of deducting [the appellants] LTD benefits to repay the overpayment by the
    terms of the disability policy. He relied on the reasoning of Perell J. in the
    decision in
Ruffolo v. Sun Life Assurance Co.
    of Canada
(2007), 56 C.C.L.I. (4th)
    116, [2007] O.J. No. 4541 (S.C.), at para. 7.

[12]

The
    motion judge found that the respondent did not owe an
ad hoc
or
    situation specific fiduciary duty to the appellant. He cited this courts
    statement in
Plaza Fiberglass Manufacturing Ltd. v. Cardinal Insurance Co
.
(1994), 18 O.R. (3d) 663 (C.A.), at p.669, para. 14
:
    The fact that a contract is one of utmost good faith does not however mean
    that it gives rise to a general fiduciary relationship ... The insurer-insured
    relationship is contractual, the parties are parties to an arms-length
    agreement.

[13]

The
    motion judge found the respondents ongoing 50 percent reduction in LTD benefit
    payments to be reasonable in the circumstances and not unfair to the appellant;
    it did not amount to a breach of its duty of good faith or fair dealing.

[14]

Finally,
    the motion judge determined that the respondents reduction of the LTD benefits
    payable to the appellant did not constitute malicious, oppressive or highhanded
    conduct entitling the appellant to aggravated, exemplary, punitive or special
    damages. Since the appellant could not succeed on her underlying tort claims, no
    trial was required to determine damages.

ISSUES AND ANALYSIS

[15]

I
    see no error in the motion judges determination that a summary judgment motion
    was appropriate in this case. The appellant makes five arguments which I set
    out and address below.

(1)

Did the motion judge fail to consider and apply the appropriate test for
    determining whether the respondent owed the appellant an
ad hoc
fiduciary duty?

[16]

The
    test for establishing an
ad hoc

fiduciary duty has been
    modified since
Frame v. Smith,
[1987] 2 S.C.R. 99. This duty will only
    be found where the alleged fiduciary has provided an express or implied
    undertaking to act in the best interests of the other party:
Galambos v.
    Perez
, 2009 SCC 48, [2009] 3 S.C.R. 247, at para. 66;
Alberta v. Elder
    Advocates of Alberta Society
, 2011 SCC 24, [2011]
    2 S.C.R. 261, at para. 30
.

[17]

The
    appellant relies on the terms of a release signed on April 25, 2001 by the
    appellant in favour of the respondents predecessor.  The release contains no
    wording which might suggest that it is to function as an undertaking by the
    insurer to act in the appellants best interests, nor do the circumstances in
    which the appellant provided the release give rise to an implied undertaking by
    the respondent.

[18]

There
    is also no basis for the appellants argument that the motion judge only
    considered one paragraph of the decision in
Fiberglass Manufacturing
.
    His reasons do not suggest he believed a fiduciary duty could never exist
    between an insurer and an insured, as alleged by the appellant.

[19]

In
    my view, the motion judge correctly concluded the respondent did not owe the
    appellant an
ad hoc

fiduciary duty in the circumstances of this
    case.

(2)

Did the motion judge err in interpreting or applying the Clerical Error Clause
    in the LTD Policy?

[20]

The
    LTD Policy provides that [c]lerical error shall not prejudice the rights of
    the Insurer or of any person having a beneficial interest in the insurance
    (the Clerical Error Clause). The motion judge found that the respondents failure
    to follow up on the June 2002 letter from Superannuation informing it that the
    appellant would retire effective June 28, 2002 constituted a clerical error.

[21]

The
    appellant submits that this was not a mere clerical error and so the motion
    judge erred in concluding that the respondent could not be prejudiced by the
    error. However, on my reading, the Clerical Error Clause played only a minor
    role in the motion judges reasons. The sole reference to it in the motion
    judges analysis was at para. 28, where he said that the overpayment was caused
    as a result of clerical error and also as a result of not being advised that
    Ms. Garneau had retired and had commenced receiving retirement benefits. He
    made no mention of prejudice to the respondent resulting from the error, as
    alleged by the appellant.

[22]

I
    see no error in the motion judges interpretation of the Clerical Error Clause.
    At no point did he suggest that the respondent was entitled to repayment of the
    overpayment based solely on the Clause. Accordingly, I would dismiss this
    ground of appeal.

(3)

Did the motion judge err in interpreting and applying the Reduction of
    Payable Benefits Clause in the LTD Policy?

[23]

This
    issue is the heart of the appeal. The LTD Policy contains a Reduction of
    Payable Benefits Clause, which provides:

Reductions

In calculating the amount of an employees Monthly Income
    Benefit, the amount of the benefit otherwise payable hereunder in respect of
    any month or partial month of total disability shall be reduced by 100% of:

(1) the amount of income
paid or payable
to the employee
    or on his or her account, for such month or partial month under the Governor
    Generals Act, the
Lieutenant Governors
    Superannuation Act
, the
Members
    of Parliament

Retiring
    Allowances Act
and any other pension or retirement plan provided to
    the employee by or through his or her Participating Employer or administered by
    the Participating Employer;

(5) The amount of any income or benefit
payable
to the
    employee or on his or her account for such month or partial month under the
    Public Service Superannuation Act, including any contributions for elective
    service. (Emphasis added.)

[24]

The
    appellant argues that the respondents reduction of monthly payments must be
    expressly authorized by the language of the LTD Policy. She makes three associated
    arguments: first, para. (5), not para. (1), of the Reduction of Payable
    Benefits Clause applies in this case; second, para. (5) does not permit the
    deduction of past overpayments from current monthly benefits; and third, nothing
    in the Clause permits the respondent to reduce the appellants LTD benefits at
    a rate of 50 percent or 100 percent.

[25]

The
    first and second issues are best addressed together.

(i)

Does para. (1) or
    para. (5)  of the Reduction of Payable Benefits Clause Apply?

(ii)

Does para. (5)  of the Reduction of
    Payable Benefits Clause Permit the Reduction of LTD Benefits to the Appellant?

[26]

The
    motion judge seems to have relied on para. (1) of the Reduction of Payable Benefits
    Clause as the basis for his conclusion that the respondent was permitted to
    reduce the appellants LTD benefits to account for superannuation payments she
    had received. I draw this inference from para. 21(i) of the reasons, where the
    motion judge refers to p. 28 of the policy, which contains para. (1) of the Reduction
    of Payable Benefits Clause, while para. (5) of the Clause is found on the
    following page.

[27]

The
    appellant concedes that benefits paid under the LTD policy fall under the Reduction
    of Payable Benefits Clause, within the wording of para. (1) as any other
    pension or retirement plan provided to the employee by or through his or her
    Participating Employer or administered by the Participating Employer. However,
    the appellant argues that because para. (5) is more specific, it takes
    precedence and applies to individuals like the appellant who receive income or
    benefits payable under the
Public Service Superannuation Act
, R.S.C. 1085, c. P-36 (
PSSA
)
. The key difference is that while
    para. (1) refers to amounts paid or payable, para. (5) refers only to amounts
    payable, which the appellant says do not include overpayments made in the
    past.

[28]

The
    appellant argues that, in relying on para. (1), the motion judge relied in
    error on the affidavit of Anna Antonini, a Disability Specialist employed by
    the respondent, which stated the respondent was entitled to deduct the amount
    of income
paid or payable
 (emphasis added) as superannuation
    benefits, quoting the words of para. (1) of the Reduction of Payable Benefits
    Clause.

[29]

The
    overpayment the respondent is collecting was paid, and could fit under para.
    (1) as an appropriate basis for a reduction in the appellants monthly LTD
    benefits, under the expression the amount of income
paid or payable
to the employee (emphasis added). If this is the correct interpretation, the
    overpayment can be collected, as the respondent is doing, subject to the
    appellants arguments about the rate of reduction.

[30]

However,
    the appellant asserts that para. (5) of the Reduction of Payable Benefits
    Clause is applicable; it provides, by contrast to para. (1), that the
    respondent is entitled to deduct from its monthly LTD benefits payment only the
    amount of income or benefit
payable
 (emphasis added) under
    superannuation. The appellant argues that the difference in language is
    critical, since para. (5) is only forward looking in stating that the
    respondent may reduce its monthly LTD payment only by any income or benefit
payable
,
    while para. (1) is both backward and forward looking, (emphasis added).

[31]

Therefore,
    argues the appellant, para. (5) cannot be used by the respondent as the basis
    for recovering past overpayments from the current LTD benefit payments; it only
    permits the respondent to reduce the current LTD benefit payments by the amount
    of current superannuation payments. If this is the correct interpretation, then
    the respondent cannot use the self-help remedy and must pursue the appellant in
    a separate action with its attendant uncertainties and difficulties in
    collection.

[32]

The
    appellant argues that
Ruffolo
is not an applicable precedent because the
    policy in that case provided that the insurer could reduce the monthly benefit
    by the amount of disability benefits which were
paid
or may become
    payable (emphasis added).

[33]

There
    are two approaches to characterizing the distinction between para. (1) and
    para. (5) of the Reduction of Payable Benefits Clause. The first is to read the
    two provisions as distinct and separate, and find that the appellant falls
    squarely under para. (5) and exclusively under that deduction entitlement. This
    is the approach favoured by the appellant.

[34]

The
    second approach is to read the two provisions together, so that the general
    reduction principle is set out in para. (1), but the method for implementing
    the reduction for recipients of payments under the
PSSA
(by reducing
    monthly LTD payments) is specified in para. (5).

[35]

I
    would take the second approach since it best accords with the key principle of
    contractual interpretation that the words of one provision must not be read in
    isolation but should be considered in harmony with the rest of the contract:
Tercon
    Contractors Ltd. v. British Columbia (Transportation and Highways)
, 2010
    SCC 4, [2010] 1 S.C.R. 69, at para. 64; see also
BG Checo International
    Ltd. v. British Columbia Hydro and Power Authority
, [1993] 1 S.C.R. 12, at
    pp. 23-24, [1993] S.C.J. No. 1, at para. 9. See also
Brissette Estate v.
    Westbury Life Insurance Co.; Brissette Estate v. Crown Life Insurance Co.
,
    [1992] 3 S.C.R. 87, [1992] S.C.J. No. 86, at para. 42.

[36]

In
Solway v. Lloyds Underwriters
(2006), 80 O.R. (3d) 401, Moldaver J.A.
    stated, at para. 43:

[A]n insurance contract, like any other contract, should be construed
    in a manner that attempts to harmonize and make sense out of the various
    provisions contained in it, and does not strain them. Ambiguities are to be
    resolved in favour of the insured. But ambiguity does not exist whenever the
    policy contains wording that could be open to two or more reasonable
    interpretations. Before resorting to the
contra

proferentem
principle,
    an effort should be made to interpret the policy in a commercially reasonable
    fashion and in a way that gives effect to the reasonable expectations of the
    parties.

I find these words to be especially apt for this case.

[37]

In
    my view, the word payable in para. (5) is not meant to be understood as
    distinctive from the expression paid or payable found in para. (1). In
    the chart that follows para. (5), which details the ways in which reductions
    may be made, the distinction between paid and payable simply disappears. This
    is shown by the fact that if an employee elects to take the option available
    under the
PSSA
of a lump sum payment, the chart specifically details
    [h]ow the employees monthly income benefit will be reduced by stating:

The employees Monthly Income Benefit will be immediately
    reduced by the monthly amount equivalent to the immediate annuity. The
    reductions will continue until such time as the employees Monthly Income
    Benefit payments have been reduced by the full amount of the Lump Sum.

[38]

The
    lump sum payment is made before the stream of monthly income benefits begin,
    making it an amount paid in the past. The chart is explicit that this paid
    amount is to be recovered out of current monthly LTD payments. Thus,
    para. (5), properly construed, uses the word payable in a manner that
    includes payments that have already been made. A common sense reading of the Reduction
    of Payable Benefits Clause in the LTD Policy entitles the respondent to deduct
    retirement benefits that have been received.

[39]

This
    interpretation is also consistent with
Perrault v. Manufacturers Life
    Insurance Co.
(
2006), 39 C.C.L.I. (4th) 285 (Ont. S.C.)
. As in
    this case, the policy in
Perrault
used only the word payable, and
    not paid. Nonetheless, the court concluded the insurer was entitled to reduce
    LTD benefit payments by 100 percent going forward to compensate for a past
    overpayment.

[40]

Therefore,
    I would not interfere with the motion judges conclusion that the Reduction of
    Payable Benefits Clause permits the respondent to reduce the appellants LTD
    benefits to account for superannuation payments she received in the past. (I
    note that the respondent only asserted a right to set off under the insurance
    policy, not a common law or equitable right.)

(iii)

Does the Reduction of
    Payable Benefits Clause permit the respondent to reduce the appellants LTD
    benefits at a rate of 50 percent or 100 percent?

[41]

The
    appellant argues that there must be express authorization in the Policy to
    permit the insurer to apply any rate of reduction to LTD payments. Such
    authorization is found in para. (1) of the Reduction of Payable Benefits Clause,
    which I have found to apply in this case; para (1) expressly authorizes the
    insurer to withhold 100 percent of the monthly payments until the overpayment
    is retired. It is to the insurers credit that it has withheld benefits at a
    lower rate (50 percent), recognizing the appellants need.

(4)

Did the motion judge err in his calculation of the reduction in LTD
    benefits allowable under the
Wages Act
?

[42]

The
    appellant argues the motion judge erred by calculating the rate of permissible
    income reduction against the appellants total income, rather than solely
    against the source of income at issue (the LTD benefits). In the appellants
    view, had the motion judge applied the proper calculation, it would be clear
    that the 50 percent reduction vastly exceeds the 20 percent rate permissible
    under the
Wages Act
.

[43]

There
    may be some merit to the appellants argument that the appropriate rate of
    income reduction under the
Wages

Act

should be
    calculated based solely on the income source that is being reduced. However, Métivier
    J.s conclusion that the
Wages Act

does not apply precludes the
    appellants argument that the respondents 50 percent reduction to her LTD
    benefits violates that Act. The motion judge did not purport to overturn Métivier
    J.s conclusion that the
Wages Act

was inapplicable or purport
    to apply the
Wages
Act
; he simply referenced it as a useful
    tool for evaluating the reasonableness of the reduction in benefits.

[44]

I
    would agree with the respondents submission that there was no palpable and
    overriding error in the motion judges determination that reducing a debtors
    total income by approximately 20 percent in order to discharge a debt
    obligation is not unreasonable.

(5)

Did the motion judge err in failing to award aggravated, exemplary and
    punitive damages for breach of the duty of good faith?

[45]

The
    appellant argues that the respondent breached its duty of good faith by
    withholding 50 or 100 percent of her LTD benefits without a contractual basis
    for doing so, and by failing to properly apply the
Wages Act
. This
    final ground of appeal is based on the rejected first three grounds of appeal, so
    it too must fail. Since the appellant has been unsuccessful in her claims,
    there is no basis for an award of aggravated, exemplary and punitive damages
    against the respondent.

DISPOSITION

[46]

I
    would dismiss the appeal, with costs fixed at $20,000 in view of the
    appellants failure to accept the respondents settlement offer. These are to
    be added to the overpayment balance to be repaid on the same basis.

Released:  April 9, 2015 PL                                  Peter
    Lauwers J.A.

I
    agree C.W. Hourigan J.A.

I
    agree G. Pardu J.A."


COURT OF APPEAL FOR ONTARIO

CITATION: H.E. v. M.M., 2015 ONCA 244

DATE: 20150410

DOCKET: M44808 & M44870 (C59991)

Weiler J.A. (In Chambers)

BETWEEN

H.E.

Applicant (Appellant in Appeal)

and

M.M.

Respondent (Respondent in Appeal)

Amy A. Green, for the applicant

Rick Peticca, for the respondent

Heard: April 7, 2015

ENDORSEMENT

[1]

This is a motion to stay an order that the mother forthwith return the
    two children of the marriage to Egypt pending her appeal and a cross-motion by
    the father for security for costs. In such cases, the best interests of the
    child must prevail and must be the paramount consideration:
Thomson v.
    Thomson
(1994) 3 S.C.R. 551 at para. 40. It follows that the criteria on a
    stay application must be assessed from the point of view of the best interests
    of the child.

[2]

The test for staying an order
    pending appeal under r. 63.02 of the
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194 as amended, is the same as the
    test for an interlocutory injunction established by the Supreme Court of Canada
    in
RJR-Macdonald Inc. v. Canada (Attorney General)
,
[1994] 1 S.C.R. 311
, at p. 334. The test requires the court to consider the following three
    factors:

(1)     a preliminary assessment must be made of the
    merits of the case to ensure that there is a serious question to be tried;

(2)     it must be determined whether the applicant
    would suffer irreparable harm if the application were refused; and

(3)     an assessment must be made as to which of the
    parties would suffer greater harm from the granting or refusal of the remedy
    pending a decision on the merits.

[3]

These three factors are not
    watertight compartments: the strength of one may compensate for the weakness of
    another. The overarching consideration is whether the interests of justice call
    for a stay:
International Corona Resources Ltd. v. LAC Minerals Ltd.
(1986), 21 C.P.C. (2d) 252 (Ont. C.A.); see also
Longley
    v. Canada (Attorney General)
,
2007
    ONCA 149
, 223 O.A.C. 102 (Weiler J.A., in
    chambers), at paras. 14-15;
BTR Global
, at para. 16.

[4]

Ms. H.E., the applicant mother, has satisfied me that the test for a
    stay has been met. There is a serious question to be tried as to whether the
    court erred in declining to accept jurisdiction and decide her claim for
    custody in Ontario having regard to the evidence that the father was not
    actually exercising custody rights at the time the mother unilaterally removed
    the two girls to Ontario in June, 2012. Article 13 of the
Hague Convention on the Civil Aspects of International
    Child Abduction, 1980,
Can. T.S. 1983
    No. 35,
states that the child need not be returned under the Convention when
    the parent opposing her return establishes that:

the person, institution or other body having the care of the
    child was not actually exercising the custody rights at the time of removal or
    retention

[5]

The father is the guardian of the children under Egyptian law. There is
    no court order granting the father access although there is an order granting
    supervised access to the childrens paternal grandparents who live in Egypt.
    The father, who was working in Saudi Arabia, exercised de facto access at times
    with the paternal grandfather. The issue of the fathers standing in these
    proceedings was not raised at trial.

[6]

Among the several errors of fact alleged in the trial judges decision
    is his finding in paragraph 38 of his reasons that, prior to the mother
    unilaterally removing the children to Canada, access was frequently obstructed
    by Ms. H.E. and her parents to the childrens paternal grandfather who had
    been granted regular, weekly visitation/access rights to the children at a
    sports club in Cairo.

[7]

This finding ignores the certificate from the sporting club filed as
    part of the proceedings in court which indicates that, although the mother or
    her parents presented themselves with the children for access to be exercised,
    in many instances going over periods of months no one attended in order to
    exercise access.

[8]

The trial judges finding that the mother frustrated access in Egypt was
    material to the trial judges conclusion that the children be returned to Egypt
    where the father and the paternal grandfather have started custody proceedings.

[9]

There is a serious question to be tried as to whether Article 13 of the Hague
    Convention applies; that is whether, although the father had guardianship, he
    was not exercising custody rights at the time of the mothers removal of the
    child.

[10]

The
    mother acknowledges that the court order she obtained in Egypt was granted on
    the basis of fraudulent representations. I note, however, that the father made
    no attempt to set aside that order prior to the mother leaving with the
    children although the father was well aware of it.

[11]

On
    the issue of irreparable harm for which compensation cannot be made by the
    award of costs, the mother has always been the primary caregiver of the two
    children, born October 29, 2005 and December 7, 2006. Both parties are anxious
    to have the appeal heard and have agreed that it be heard in August or
    September depending on counsels availability. If the children were to be
    removed to Egypt now, they would lose the balance of their school year in
    Ontario. This would be prejudicial to them and is not in their best interests.

[12]

With
    respect to balance of convenience, I observe that on this motion the court was
    not presented with any actual plan of care respecting who would be physically
    caring for the children in the event the order was not stayed and the children
    returned to Egypt. In
Thomson
,

at para. 138,

the court
    held that reasonable transition terms or a plan of care for the childs
    transfer and care needs pending further direction from the court in the country
    to which the child is removed are valuable and show the regard of the parent seeking
    the return of the child for the welfare of the child.

[13]

As
    well, an appeal date for the appeal to be heard is available in August or
    September. The balance of convenience favours the granting of the stay pending
    the appeal and I so order.

[14]

As
    a condition of granting the stay, however, I order that the mother is not to
    remove the children from Ontario and that the Canadian and Egyptian passports
    and any travel documents respecting the children be deposited with counsel for
    the mother. This includes any passports that replace existing ones that expire.
    In the event that the mother discharges her present counsel, present counsel
    shall retain the passports until further court order and they shall not be
    returned with the mothers file.

[15]

I
    canvassed with counsel for the father whether his client wished to exercise access
    pending the hearing of this appeal. Although requesting the address of the
    mothers residence and cell phone number as part of the relief requested,
    counsel was unable to tell me whether his client wished to exercise access or
    not because he does not wish to be seen as attorning to the jurisdiction of
    the court. The mother opposes access that is not supervised access. In the
    circumstances, I make no order as to access.

[16]

The
    fathers motion is for security for costs of this appeal. The mother is engaged
    in an Ontario Works program and she lives in assisted housing. Her legal
    representation is currently funded by legal aid. By granting the stay
    application I have implicitly found that the application is not frivolous and
    vexatious.

[17]

Counsel
    for the father also submits that an order for security for costs could be made
    under rule 56.01. He submits that the mother has another proceeding for the
    same relief pending elsewhere, namely, Egypt. Although counsel submitted that
    the issues in Egypt and Ontario were the same, there is no evidence in the
    record indicating that the relief claimed in the Egyptian proceeding is the
    same as the proceedings here. Thus, I decline to find that r. 56.01(b)
    applies. On the question of outstanding costs orders, the $38,000 in costs that
    the mother was ordered to pay from a prior motion was ordered to be paid at the
    end of the litigation. The litigation has not ended. Nor have the costs of
    trial been assessed. Thus, r. 56.01(c) has no application either.

[18]

Finally,
    there is the question of whether for other good reason security for costs
    should be ordered under r. 61.06(c). While it was put to me that the mothers
    fraud in obtaining her Egyptian custody order warranted an order for security
    for costs in these proceedings, as I have indicated, it appears to me that the
    father made no attempt to set aside that order prior to the mother leaving with
    the children although the father was well aware of it. In the circumstances,
    this is not a good reason to order security for costs.

[19]

The
    motion for security for costs is dismissed.

[20]

On
    consent I order that the appeal be expedited to the first available date in
    August save and excepting the last week of August, or that it be heard in
    September. I leave it to counsel to work out the timelines and to file their
    material accordingly. Obviously it would be in the best interests of the
    children for the appeal to be heard expeditiously, particularly given the start
    of the school year in September.

[21]

The
    costs of these motions are reserved to the panel hearing the appeal.

K.M. Weiler J.A.


COURT OF APPEAL FOR ONTARIO

CITATION: Hrycko v. Miller Estate, 2015 ONCA 296

DATE: 20150430

DOCKET: C59742

Doherty, Pepall and van Rensburg JJ.A.

BETWEEN

John Hrycko

Plaintiff (Respondent)

and

Justin Booth, Estate Trustee of the Estate of
    Olga Miller,
Ferro & Company and Lucio Anthony Ferro
    (a.k.a. Lou Ferro)

Defendants (Appellants)

William G. Scott, for the defendants (appellants)

Ronald Bohm, for the plaintiff (respondent)

Heard:  April 24, 2015

On appeal from the judgment of Justice Gilmore of the Superior
    Court of Justice, dated November 17, 2014.

APPEAL BOOK ENDORSEMENT

[1]

We do not agree that the motion judge applied the wrong test
    in assessing damages for the admitted breach.  She identified and articulated
    the correct test (paras. 28-29).  The crucial finding, i.e. that it was
    reasonably foreseeable that the respondent would continue to lend money to Ms.
    Miller was reasonably available
given,
    first, the history of the lending relationship between the respondent and Ms.
    Miller as known to the appellants law firm (he advanced seven loans over
    several months) and, second, the purpose of the loans (living expenses).

We
    would not interfere with the finding.

[2]

To the extent that s. 13
    of the
Ontario Evidence Act
is engaged, we agree with the motion judges analysis of the case law
    and her conclusion, at para. 44 of her reasons.

[3]

The appeal is dismissed.  Costs to
    the respondent in the amount of $13,000, inclusive of disbursements and
    relevant taxes.