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Good afternoon.

Following are this week’s summaries of the Court of Appeal for Ontario for the week of October 10, 2022. There were only two substantive decisions.

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In 2505243 Ontario Limited (ByPeterandPaul.com) v. Princes Gates Hotel Limited Partnership, the Court was asked to grant leave to intervene to a group of terminated employees who lost their jobs in the fallout of a dispute between the appellant and respondent. The Court applied the criteria in Jones v. Tsige and found that the proposed interveners were echoing the position of the respondents and where their submissions diverged, the proposed intervener was seeking to introduce a new issue on appeal. The Court further held that this was not a rare case where intervener status should be granted in an appeal involving a private dispute. The interests of the proposed intervener were adequately addressed in the submissions of the respondent.

In AIG Insurance Company of Canada v. Lloyd’s Underwriters, AIG brought an application to determine whether Lloyd’s had a duty to defend in connection with the underlying action in negligence against the insured City. AIG and Lloyd’s insured the City for different policy periods. Lloyd’s agreed that the alleged negligence occurred during its coverage period but that the damage was not caused by an “occurrence” during that coverage period. Lloyd’s relied on a report prepared for the City prior to Lloyd’s going on risk that recommended the City take remedial action. The Court agreed with the application judge in finding that the report was preliminary in nature, it was not extrinsic evidence but only referred to in the pleadings, and could not be construed as a crystalizing event after which ongoing property damage would not be covered by the Lloyd’s policy because it was no longer accidental. Thus, the Court held that Lloyd’s duty to defend was triggered and the City was not subject to the policy’s Exclusion Clauses based on preliminary findings of the report.

Wishing everyone an enjoyable weekend.

John Polyzogopoulos
Blaney McMurtry LLP
416.593.2953 Email
Ines Ferreira
Blaney McMurtry LLP
416.597.4895 Email

Table of Contents

Civil Decisions

2505243 Ontario Limited (ByPeterandPaul.com) v. Princes Gates Hotel Limited Partnership, 2022 ONCA 700

Keywords: Civil Procedure, Interveners, Breach of Contract, Damages, Bankruptcy and Insolvency, Employee Claims, Claims Process, Rules of Civil Procedure, r. 13.01, 2505243 Ontario Limited o/a ByPeterandPaul.com v. Princes Gate GP Inc. et al., 2021 ONSC 4649, Jones v. Tsige (2011), 106 O.R. (3d) 721 (C.A.), Foxgate Development Inc. v. Jane Doe, 2021 ONCA 745, Foster v. West, 2021 ONCA 263

AIG Insurance Company of Canada v. Lloyd’s Underwriters, 2022 ONCA 699

Keywords: Contracts, Interpretation, Extrinsic Evidence, Insurance, Commercial and General Liability Insurance, Coverage, Duty to Defend, Exclusion Clauses, Negligence, Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Progressive Homes Ltd. v. Lombard Insurance Company of Canada, 2010 SCC 33, Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49, Reeb v. The Guarantee Company of North America, 2019 ONCA 862

Short Civil Decisions

Boudreau v. Lavery, De Billy LLP., 2022 ONCA 691

Keywords: Contracts, Interpretation, Solicitor-Client Retainer Agreements, Civil Procedure, Parole Evidence, Solicitors Act, R.S.O. 1990, c. S.15, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53

Stefanchuk v. LeLiever , 2022 ONCA 697

Keywords: Wills and Estates, Civil Procedure, Settlements, Enforcement, Capital Gains Income Streams Corp. v. Merrill Lynch Canada Inc. (2007), 87 O.R. (3d) 464

Angelis v. Children’s Aid Society of Ottawa, 2022 ONCA 696

Keywords: Family Law, Crown Wardship, Adoption, Civil Procedure, Striking Pleadings, Abuse of Process, Collateral Attack

Nesbitt v. Jeffery, 2022 ONCA 702

Keywords: Civil Procedure, Third Party Claims, Discontinuance, Costs


CIVIL DECISIONS

2505243 Ontario Limited (ByPeterandPaul.com) v. Princes Gates Hotel Limited Partnership, 2022 ONCA 700

[Trotter J.A. (Motion Judge)]

Counsel:

P. Carey, P. Martin and A. Pilieci, for the appellant

L. Rennie, for the respondent

Keywords: Civil Procedure, Interveners, Breach of Contract, Damages, Bankruptcy and Insolvency, Employee Claims, Claims Process, Rules of Civil Procedure, r. 13.01, 2505243 Ontario Limited o/a ByPeterandPaul.com v. Princes Gate GP Inc. et al., 2021 ONSC 4649, Jones v. Tsige (2011), 106 O.R. (3d) 721 (C.A.), Foxgate Development Inc. v. Jane Doe, 2021 ONCA 745, Foster v. West, 2021 ONCA 263

facts:

This was a motion brought by 94 employees of the respondent, 2505243 Ontario Limited (“250”), to intervene as an added party on this appeal under r. 13.01 of the Rules of Civil Procedure. The motion was opposed by the appellant, Princes Gates GP Inc. (“PGH”). 250 took no position.

PGH operated Hotel X, a luxury hotel in Toronto. 250 provided food and beverage services throughout the hotel. The applicants are 94 food and hospitality workers who lost their jobs in the fallout of a dispute between 250 and PGH when Hotel X closed to the public as a result of the COVID-19 state of emergency. 250 sued PGH for breach of contract.

At trial, 250 was awarded over $7 million in damages, less $735,879 owing to PGH. Because 250 was insolvent, the trial judge ordered that funds were to be held in trust and declared that they do not form part of 250’s estate and were not available to other creditors. The trial judge also set aside an additional $2.063 million for the potential claims made by 250’s ex-employees. The trial judge determined that the termination damages were a reasonably foreseeable consequence of the termination of the agreement without notice when 250 had several hundred employees working at Hotel X. While 250 claimed these damages under a separate heading, the trial judge held that formed part of the overall compensatory damages claimed and were not conditional damages.

The trial judge further held that due to the difficulty of knowing how much will actually be claimed, the highest of the four scenarios calculated by the 250 would be paid by the PGH to the Trustee within 30 days of the date of judgment over a six-month period and to pay out the claims as they are received. Any amounts left after the claims process period would be returned to PGH. If the claims exceeded the amounts paid to the Trustee, 250 would not be permitted to claim more from PGH.

On appeal, PGH launched a broad challenge to the trial judge’s decision, but devoted only two paragraphs to the propriety of the award made in favour of the former employees, where PGH disputed the trial judge’s jurisdiction to make such an award. Moreover, it claimed that the damages were contingent and uncertain. PGH also submitted that the Ministry of Labour already ruled that it is not liable for any of the employees’ claims for termination pay or vacation pay. 250 sought to uphold this aspect of the trial judge’s damages award.

The proposed interveners submitted that they had a direct financial interest in the subject matter of the appeal. They submitted that, although their interests aligned with the position taken by 250, they could still make a useful contribution to the argument of the issues on appeal. They asserted that their submissions would “complement but were not duplicative of 250’s legal arguments” because: (a) 250 did not address the extent to which the contractual terms make employee termination damages “reasonably foreseeable”; and (b) 250 did not address PGH’s position that the damages should not be owed because they did not employ the workers.

PGH took the position that the proposed interveners would not be able to make a useful contribution to what are mostly straightforward issues of contractual interpretation. PGH submitted that the proposed interveners stand in the same position as any other creditor of any insolvent respondent. PGH also submitted that the proposed interveners sought to introduce a new issue on appeal, that is, whether PGH and 250 were “common employers” of the workers. This issue was never addressed at trial.

issues:

Should leave to intervene as an added party be granted to the 94 employees of 250?

holding:

Motion dismissed.

reasoning:

No.

The test for intervention as an added party is set out in r. 13.01 of the Rules of Civil Procedure, where there must be either an interest in the subject-matter of the proceeding, an adverse affect by a judgment, or a common question of law or fact.

Applying the criteria in r. 13.01, the Court was satisfied that the proposed interveners had an interest in the subject matter of the proceeding (i.e., the $2.063 million fund created for their benefit by the trial judge), but that other factors acted against allowing them to intervene as an added party.

The Court relied on Jones v Tsige (“Jones”) to hold that the nature of the dispute between the parties on appeal was crucial to the determination, and the standard to be met in a civil dispute is more onerous. Accordingly, the nature of the dispute was contractual between two corporate entities and the former employers did not now stand in the same position as any other creditor.

As another important consideration, the Court looked to the nature of the contribution that was to be made by a proposed intervener. The intervener must be able to demonstrate that it would be able to make a useful contribution to the litigation. The Court referred again to Jones, where: “In the end, a proposed intervenor must have more to offer than mere repetition of the position advanced by a party…”

In applying these criteria, the Court held that the submissions of the proposed interveners substantially echoed the position of 250 concerning the disputed aspect of the trial judge’s damages award and where their submissions diverged, the proposed intervener sought to introduce a new issue on appeal.

The Court held that this was not a rare case where intervener status should be granted in an appeal involving a private dispute. The interests of the proposed intervener were addressed in the submissions of 250.


AIG Insurance Company of Canada v. Lloyd’s Underwriters, 2022 ONCA 699

[Gillese, Huscroft and Sossin JJ.A.]

Counsel:

H. Gray and J. Vizzaccaro, for the appellant

S. A. Kamayah, for the respondent

Keywords: Contracts, Interpretation, Extrinsic Evidence, Insurance, Commercial and General Liability Insurance, Coverage, Duty to Defend, Exclusion Clauses, Negligence, Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, Progressive Homes Ltd. v. Lombard Insurance Company of Canada, 2010 SCC 33, Monenco Ltd. v. Commonwealth Insurance Co., 2001 SCC 49, Reeb v. The Guarantee Company of North America, 2019 ONCA 862

facts:

An action was brought by KF and MF (the “Fs”) against the City of Timmins (the “City”). From 2012 to 2013, the Fs purchased vacant land. The City was responsible for issuing building permits for the construction of homes and Mattagami Region Conservation Authority (the “MRCA”) regulated, managed, and protected land and water. The Fs applied for a building permit and attached a site plan and an MRCA permit that referred to an engineering report the Fs were to obtain before construction. In 2016, the slope of the adjoining property started to fail and ongoing erosion from September 2016 to December 2019 impacted the stability of the Fs’ property. In December 2019, the City issued an order requiring the Fs to move, relocate, or demolish their home. The Fs brought a claim against the City for property damage occurring between April 2016 and December 2019 (the “Underlying Action”) and named the owners of the Adjoining Property, the MRCA, and the author of the Engineering Report as co-defendants.

The appellant, Lloyd’s Underwriters (“Lloyd’s”), and the respondent, AIG Insurance Company of Canada (“AIG”), provided general liability insurance to the City during successive policy years in the period covered by the Underlying Action. AIG provided the City with coverage for 2016 and 2017. Lloyd’s provided the City with coverage for 2018 and 2019.

AIG agreed to defend the City, under reservation of rights for indemnity because its policy with the City did not respond to any “occurrence” giving rise to “property damage” taking place after AIG’s time on risk. Lloyd’s denied coverage for the underlying action. AIG and Lloyd’s agreed that their respective insuring agreements were “functionally identical” and provided coverage for property damage caused by an “occurrence” if it occurred during the policy period. Both agreements also excluded coverage for “Expected or Intended Injury.”

AIG brought an application to determine whether Lloyd’s had a duty to defend in connection with the underlying action and sought equitable contribution for the costs of defending the City. Lloyd’s conceded that the underlying action alleged the City’s negligence led to property damage during the coverage period, but argued that the damage was not caused by an “occurrence.” A report prepared for the City in 2017 (the “AMEC Report”) offered recommendations to the City to take remedial action and the appellant relied on the report in its argument that the property damage had manifested by 2017 and any ongoing property damage was no longer “accidental.”

The application judge found that the AMEC Report was preliminary in nature and could not be construed as a crystalizing event after which ongoing property damage would not be accidental and had to be seen as “expected or intended”. The application judge concluded that damage to the Property continued and progressed during the currency of the Lloyd’s Policy and that the evidence “more than [met]” the “mere possibility” test, thereby triggering Lloyd’s duty to defend. Lloyd’s appealed.

issues:

Did the application judge err in concluding that the appellant has a duty to defend the underlying action?

holding:

Appeal dismissed.

reasoning:

No.

The Court held that the application judge did not err in excluding the AMEC report and agreed that it was premature evidence and, therefore, not permissible extrinsic evidence. The Court noted that the application judge’s treatment of the AMEC report correctly followed the Supreme Court’s decision in Monenco v. Commonwealth Insurance Co. (“Monenco”), which sets out the legal principles for assessing whether an insurer’s duty to defend has been triggered. In particular, Monenco provides that when determining whether a duty to defend exists in any given situation requires an assessment of the pleadings to ascertain their substance and true nature (para. 35). Further, Monenco states that the court may go beyond the pleadings and consider “extrinsic evidence that has been explicitly referred to within the pleadings … to determine the substance and true nature of the allegations, and thus, to appreciate the nature and scope of an insurer’s duty to defend” (para. 36). However, this approach cannot cause the duty to defend application to become “a trial within a trial”. That is, the court may not look to “premature” evidence, that if considered, would require findings to be made before trial that would affect the underlying litigation” (para. 37).

The Court held that the differences between ‘permissible uses of’, ‘extrinsic evidence’ and ‘premature evidence’ were critical in the resolution of the appeal in this case.

The Court found that the application judge determined that the true nature and substance of the Fs’ pleaded claim against the City was negligence. As required by the pleadings rule, his determination assumed that the factual allegations in the pleadings were true. The Court stated that the application judge’s reasons can be read as identifying that, in the Underlying Action, the Fs assert facts against the City which, if true, would require Lloyd’s to indemnify it for damages due to property damage caused by an occurrence during the period in which Lloyd’s provided coverage.

The Court stated that, while the AMEC Report was referred to in the pleadings, the AMEC Report did not form part of the pleadings. The Court concluded that the AMEC Report was extrinsic evidence as noted in Monenco. However, because the AMEC Report was not part of the pleadings, it was not subject to the pleadings rule. The Court further stated that the application judge’s reasons considered the AMEC Report, which was properly subject to the permissible use of extrinsic evidence principle in Monenco.

Lloyd’s also contended that the Exclusion Clause applied because the allegations in the amended statement of claim together with the AMEC Report alerted the City to the problem that led to damage which Lloyd’s contended that the City “expected”, which ousted Lloyd’s duty to defend.

The Court held that neither the amended statement of claim nor the AMEC Report supported Lloyd’s contention that the Exclusion Clause applied and ousted its duty to defend. The Court noted that the amended statement of claim did not allege intentional conduct on the part of the City that would suggest the property damage was expected or intended during the time that Lloyd’s was on risk. The Court agreed with the application judge’s finding that the true nature and substance of the Fs’ pleaded claim against the City was negligence. Absent reference to a policyholder’s intentional conduct causing expected or intended property damage, negligence allegations suggest the damage was fortuitous and an accident.
Thus, the Court concluded that the application judge did not err in concluding that Lloyd’s exclusion clause did not apply. Accordingly, the application judge did not err in ruling that Lloyd’s had a duty to defend.


SHORT CIVIL DECISIONS

Boudreau v. Lavery, De Billy LLP, 2022 ONCA 691

[van Rensburg, Pardu and Copeland JJ.A.]

Counsel:

P. Champagne, for the appellants

L. Berdnikoff, for the respondent Lavery, de Billy

G.G. Boyd, for the respondent Low Murchison Radnoff LLP

Keywords: Contracts, Interpretation, Solicitor-Client Retainer Agreements, Civil Procedure, Parole Evidence, Solicitors Act, R.S.O. 1990, c. S.15, Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53

Stefanchuk v. LeLiever, 2022 ONCA 697

[Fairburn A. C.J.O., Huscroft and George JJ.A.]

Counsel:

R. Brady, for the appellant

P. Ingrassia and T. Howard, for the respondent

Keywords: Wills and Estates, Civil Procedure, Settlements, Enforcement, Capital Gains Income Streams Corp. v. Merrill Lynch Canada Inc. (2007), 87 O.R. (3d) 464

Angelis v. Children’s Aid Society of Ottawa, 2022 ONCA 696

[Fairburn A. C.J.O., MacPherson and Huscroft JJ.A.]

Counsel:

J. Zibarras, for the appellant

Giovanna Asaro, for the respondent

Keywords: Family Law, Crown Wardship, Adoption, Civil Procedure, Striking Pleadings, Abuse of Process, Collateral Attack

Nesbitt v. Jeffery, 2022 ONCA 702

[Fairburn A. C.J.O., Huscroft and George JJ.A.]

Counsel:

M. Sydney, for the appellant

E. Pullan and A. Giel, for the respondent

Keywords: Civil Procedure, Third Party Claims, Discontinuance, Costs



The information contained in our summaries of the decisions is not intended to provide legal advice and does not necessarily cover every matter raised in a decision. For complete information or for specific advice, please read the decision or contact us.

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Photo of John Polyzogopoulos John Polyzogopoulos

John has been the editor of Blaneys Appeals since the inception of the blog in the Summer of 2014. He is a partner at the firm with over two decades of experience handling a wide variety of litigation matters. John assists clients with…

John has been the editor of Blaneys Appeals since the inception of the blog in the Summer of 2014. He is a partner at the firm with over two decades of experience handling a wide variety of litigation matters. John assists clients with matters ranging from appeals, to injunctions, to corporate, partnership, breach of contract, construction, environmental contamination, product liability, debtor-creditor, insolvency and other business litigation. He also handles complex estates and matrimonial litigation involving disputes over property and businesses, as well as professional discipline and professional negligence matters for various types of professionals. In addition, John represents amateur sports organizations in contentious matters, and also advises them in matters of internal governance. John can be reached at 416-593-2953 or jpolyzogopoulos@blaney.com.