ONTARIO COURT OF APPEAL SUMMARIES (SEPTEMBER 18 – SEPTEMBER 22, 2017)

Good evening.

Below are the summaries of this week’s civil decisions of the Court of Appeal for Ontario.

The Court released two companion decisions (El-Khodr v. Lackie and Cobb v. Long Estate) relating to the deductibility of collateral benefits, namely Statutory Accident Benefits, from MVA damage awards.. The decisions are lengthy and detailed and go into depth on how amendments to the Insurance Act have impacted the deductibility of collateral benefits. The Court also dealt with the applicable prejudgment interest rate and whether collateral benefits should be deducted when determining whether an offer to settle attracts Rule 49 consequences (yes).

In Rahimi v. SouthGobi Resources Ltd., a secondary market securities class action case, the Court reversed the certification motion judge and certified the claim against the individual officers responsible for the allegedly misleading representations of the corporation.

Finally, there was a family law decision (Whalen-Byrne v. Byrne) that considered the proper calculation of the period of cohabitation for the purposes of determining the duration of spousal support under the SSAGs, and a municipal law summary judgment decision regarding the propriety of how municipal wastewater processing fees were calculated.

It looks like the beautiful summer weather we have been having lately will carry over into weekend, so I hope you all enjoy it.

John Polyzogopoulos
Blaney McMurtry LLP
jpolyzogopoulos@blaney.com
Tel: 416 593 2953
http://www.blaney.com/lawyers/john-polyzogopoulos

Table of Contents:

Civil Decisions

Rahimi v. SouthGobi Resources Ltd., 2017 ONCA 719

Keywords: Securities Law, Secondary Market Misrepresentations, Class Actions, Securities Act, R.S.O. 1990, s. 138.8(1), s. 138.4(6)(a), Defence of Reasonable Investigative Efforts

Nylene Canada Inc. v. Arnprior (Town), 2017 ONCA 726

Keywords: Municipal Law, Municipal Services, Wastewater, Fees, Unjust Enrichment, Negligence, Municipal Act, ss. 394(1)(c) and 450, Summary Judgment

El-Khodr v Lackie, 2017 ONCA 716

Keywords: Insurance Law, Motor Vehicle Accidents, Damages, Collateral Benefits, Statutory Accident Benefits, Deductibility, Double Recovery, Cox and Carter Orders, Insurance Act, RSO 1990 c. I.8,  Sections 258.3(8.1) and 267.8, Bannon v. McNeely (1998), 38 O.R. (3d) 659 (C.A.), Gilbert v. South, 2015 ONCA 712, Jang v. Jang (1991), 54 B.C.L.R. (2d) 121 (C.A.) ,  Gurniak v. Nordquist, 2003 SCC 59, Mikolic v. Tanguay, 2016 ONSC 71, (Div. Ct.), Prejudgment Interest, Courts of Justice Act, R.S.O. 1990, c. C.43, s 127

Cobb v. Long Estate, 2017 ONCA 717

Keywords: Insurance Law, Motor Vehicle Accidents, Damages, Collateral Benefits, Statutory Accident Benefits, Deductibility, Double Recovery, Statutory Interpretation, Costs, Offers to Settle, Rule 49

Whalen-Byrne v. Byrne, 2017 ONCA 729

Keywords: Family Law, Spousal Support, Duration, Length of Cohabitation, Divorce Act, Spousal Support Advisory Guidelines

For Civil Endorsements, click here. 

For Capacity and Consent Board Decisions, click here. 

For Criminal Decisions, click here. 

Civil Decisions

Rahimi v. SouthGobi Resources Ltd., 2017 ONCA 719

[Epstein, Hourigan and Paciocco, JJ.A.]

Counsel:
Michael G. Robb, Paul Bates and Alex Dimson, for the appellant

John A. Campion, Gavin Tighe, and Stephanie Clark, for the respondents

Keywords: Securities Law, Secondary Market Misrepresentations, Class Actions, Securities Act, R.S.O. 1990, s. 138.8(1), s. 138.4(6)(a), Defence of Reasonable Investigative Efforts

Facts:

Paiman Rahimi is the representative plaintiff in a putative secondary market securities class action against the respondents SouthGobi Resources Ltd. (“SGR”), Terry Krepiakevich, Matthew O’Kane, Andre Deepwell, Pierre Lebel, Gordon Lancaster and Alexander Molyneux (collectively, save for Molyneux, the “Individual Respondents”) and Deloitte LLP.

SGR is a coal mining company trading on the Toronto and Hong Kong stock exchanges. Krepiakevich and O’Kane are two of its former CFOs. Deepwell, Lebel and Lancaster are directors and members of SGR’s audit committee.

The entirety of SGR’s revenue came from the coal-mining operations in Mongolia of its subsidiary SouthGobi Sands LLC (“SGS”).

SGS agreed to what are known as “bill and hold” contractual arrangements with certain of its customers. These customers ordered coal, which SGS stockpiled for customer pickup at a bonded yard that was under the control and supervision of the Mongolian government. The customers would pay the contract price as soon as the coal was delivered to the yard. Under that arrangement, they were able to avoid rising prices in coal and have greater flexibility in transporting it.

In 2012, a Chinese company attempted to purchase SGR, but the deal was blocked by the Mongolian government, which shut down SGS’s coal-mining operation in Mongolia in May 2012. The company produced no coal from then until September 2013. Coal prices in China were falling and, by the middle of 2012, SGS’s bill and hold customers had trouble making timely payments, resulting in a growing number of forfeitures of coal and repossessions by SGS.

SGR stopped using bill and hold agreements in mid-2012. It adopted a revenue recognition policy that required delivery of coal to the customer as a prerequisite to recognition. The transfer of title provisions in SGS’s bill and hold agreements were amended to take effect in January 2013, and the change in revenue recognition policy was to be implemented on a go-forward basis.

SGR concluded that there was no need in January 2013 to change its earlier financial statements as a result of these subsequent changes in operation. PwC, which reviewed the earlier financials from 2010 to mid-2012, agreed with this position.

SGR issued a formal restatement of its prior financial statements on November 8, 2013.

The press released noted that “as a result of the potentially material effects on the Company’s financial statements, the previous financial information provided by the Company in respect of the periods to be covered by the Restated Financials are no longer accurate and should not be relied upon.”

Following the November 8 press release, SGR’s share price dropped about 18 per cent.

SGR released another press release on November 14, 2013, indicating that there was “a material weakness in the Company’s internal controls over the financial reporting.” The “material weakness” was explained as a failure to ensure that “all aspects of sales arrangements were considered” in determining the appropriate financial accounting in respect of the bill and hold contracts used. In other words, there was no assurance that the accounting for the bill and hold contracts were IFRS compliant.

Rahimi sought leave under s. 138.8(1) of the Securities Act, R.S.O. 1990, c. S.5 (“SA”) to proceed with a misrepresentation claim. SGR and the Individual Respondents took a very unusual position. They relied on the defence of reasonable investigative efforts afforded to them by s. 138.4(6)(a) of the SA. In support of that defence, they submitted that the financial statements during the class period did not need to be restated and that SGR had no material weaknesses in its internal financial reporting controls. In other words, the Individual Respondents’ position was that there was no misrepresentation during the class period; rather, any potential misrepresentation was in the Restatement and/or the November 14 Press Release.

The motion judge permitted the claim to proceed as against SGR but not the Individual Respondents, holding that there was no reasonable possibility that the Individual Respondents would not be able to succeed on a defence of reasonable investigation under s. 138.4(6)(a) of the SA.

Rahimi appeals the motion judge’s denial of leave as against the Individual Respondents (the “Rahimi Appeal”). SGR brings a separate appeal (the “Corporation Appeal”) against the motion judge’s ruling granting leave for the claim to proceed against it.

Issues:

(1) Did the motion judge err in denying leave on the claim against the Individual Respondents?

(2) Did the motion judge err in granting leave on the claim against SGR?

Holding: Rahimi Appeal allowed. Corporation Appeal dismissed.

Reasoning:

(1) Yes. The primary error made by the motion judge was treating the leave motion as if it were a trial in which he had to finally resolve significant credibility issues on the record before him. The motion judge failed to give meaningful consideration to gaps in the evidentiary record and the significant credibility issues apparent from that record. In particular, he failed to consider compelling evidence that contradicted the defence narrative offered by SGR and the Individual Respondents on the leave motion.

This was not a case where there was truly uncontroverted evidence adduced by a defendant in support of a reasonable investigation defence. This was a case where there was conflicting evidence emanating from SGR on that key issue for determination. The motion judge erred in accepting the denials asserted by the Individual Respondents without considering the lack of production, the absence of evidence from PWC and Deloitte and the unqualified statements made in the Restatement and the November 14 Press Release. In coming to these unwarranted evidentiary conclusions regarding the credibility of the Individual Respondents as if the leave stage constitutes a mini-trial, the motion judge failed to properly implement the screening mechanism of the leave requirement in s. 138.8 of the SA by foreclosing a misrepresentation claim that has a reasonable possibility of success. The residual credibility problems with the Individual Respondents’ central defence, which could only be determined at trial, meant that this was not a case in which the policy objective of the leave requirement of protecting defendants from unmeritorious claims would be advanced by denying leave to Rahimi’s claim on the basis of that defence.

Continuous disclosure obligations are not a shell game where investors are left to guess where the truth lies. Investors have a right to know a corporation’s true state of affairs. The motion judge failed to consider this policy imperative and rendered a decision with respect to the Individual Respondents that is inconsistent with basic notions of securities regulation. The discrepancy between the position asserted in this litigation and the position taken in the Restatement and the November 14 Press Release is so jarring that the motion judge should not have refused to grant leave to proceed against any of the respondents.

(2) No. With respect to the claim against SGR, the motion judge made no error in determining that there was no certainty at this stage that SGR’s reasonable investigation defence would succeed at trial. This is a case filled with credibility issues and gaps in the evidentiary record. It is not possible on this record to be satisfied that there is no reasonable possibility that SGR would not be able to succeed on a defence of reasonable investigation under s. 138.4(6)(a) of the SA.

Nylene Canada Inc. v. Arnprior (Town), 2017 ONCA 726

[Hoy A.C.J.O., MacFarland and Huscroft JJ.A.]

Counsel:

Pasquale Santini, for the appellant

Paul A. Webber and Melanie H. Levesque, for the respondents

Keywords: Municipal Law, Municipal Services, Wastewater, Fees, Unjust Enrichment, Negligence, Municipal Act, ss. 394(1)(c) and 450, Summary Judgment

Facts:

The respondent, the Corporation of the Town of Arnprior, charged wastewater processing fees based on wastewater rates multiplied by the amount of a user’s water consumption. The appellant, Nylene Canada Inc., commenced an action against the respondent alleging that charging for wastewater processing services based on water consumption contravened s. 394(1)(c) of the Municipal Act. That provision prohibits a municipality from imposing a fee or charge based on the use of a service, other than a service provided by the municipality. The appellant argued that the fees should instead be calculated based on the amount of water that actually exits as wastewater. The appellant alleged that the respondent had been unjustly enriched by its fee structure and negligent in failing to implement a system where users can apply for a rebate for their unused sewer capacity.

The respondent brought a motion for summary judgment dismissing the action under Rule 20 of the Rules of Civil Procedure. The motion judge granted summary judgment and dismissed the appellant’s action. He held that the facts were largely not in dispute and there was no issue of credibility. He found that the respondent did not violate s. 394(1)(c) and had made a policy based decision that was immune from civil action under s. 450 of the Municipal Act. Section 450 provides that no proceeding based on negligence in connection with the exercise or performance of a discretionary power or function shall be commenced against a municipality if the action stems from a policy decision made in good faith.

The appellant concedes that this was a proper case for summary judgment but that the policy decision is not immune from civil action under s. 450 because the decision was not “a good faith exercise of discretion” as per s. 394(1)(c).

Issue:

(1) Was the motion judge correct in his determination that the respondent did not violate s. 394(1)(c) of the Municipal Act?

Holding: Appeal dismissed.

Reasoning:

(1) Yes. The respondent did not violate s. 394(10(c).  The respondent imposed a fee based on the use of service that it provided to all its rate payers.

 

El-Khodr v Lackie 2017 ONCA 716

[Doherty, Macfarland and Rouleau JJ.A.]

Counsel:

BA Percival and JW Gibson, for the appellants

JY Obagi and EA Quigley, for the respondents

Keywords: Insurance Law, Motor Vehicle Accidents, Damages, Collateral Benefits, Statutory Accident Benefits, Deductibility, Double Recovery, Cox and Carter Orders, Insurance Act, RSO 1990 c. I.8,  Sections 258.3(8.1) and 267.8, Bannon v. McNeely (1998), 38 O.R. (3d) 659 (C.A.), Gilbert v. South, 2015 ONCA 712, Jang v. Jang (1991), 54 B.C.L.R. (2d) 121 (C.A.) ,  Gurniak v. Nordquist, 2003 SCC 59, Mikolic v. Tanguay, 2016 ONSC 71, (Div. Ct.), Prejudgment Interest, Courts of Justice Act, R.S.O. 1990, c. C.43, s 127

Facts:

The plaintiff (respondent) was catastrophically impaired when his tow truck was rear ended by the appellants’ vehicle. The trial proceeded before a jury and damages of $2,931,006 were awarded. The trial judge found that: (1) Prejudgment interest on the general damage award should be calculated at 5%, the rate that was in effect prior to January 1, 2015, when s. 258.3(8.1) of the Insurance Act was amended; (2) The respondent was required to assign his future income replacement benefit from his Statutory Accident Benefits (“SAB”)  insurer only to the age of 60 and not thereafter; (3) The jury should treat the existence of the Ontario Drug Benefit Program, which would cover the cost of the respondent’s medication after the age of 65, as a “contingency” only rather than as a certainty; and (4)  There should be no assignment to the appellant of any future payments to be made to the respondent by the SABs insurer in relation to medication and assistive devices or professional services.

The appellant appealed these findings of the trial judge. This appeal was heard together with Cobb v. Long Estate, 2017 ONCA 717, with reasons in that case being released concurrently. Both appeals deal with the regime in Part VI of the Insurance Act, R.S.O. 1990, c. I.8 for the treatment of SABs in the calculation of damages arising from motor vehicle accidents. The issue in relation to prejudgment interest is also common to both and the reasoning in Cobb on this point applies to this case as well.

Issues:

(1) Should prejudgment interest be calculated at 5%?

(2) Should the respondent be required to assign his future income replacement benefit from his SABs insurer only to the age of 60?

(3) Should the existence of the Ontario Drug Benefit Program have been treated as a “contingency” rather than a certainty?

(4) Should future SAB payments to be made to the respondent in relation to medication, assistive devices and professional services be assigned to the appellant?

Holding: Appeal allowed.

Reasoning:

(1) No. The amendment to the Insurance Act was effective from the day that it came into force and applied to all actions then in the system. The Courts of Justice Act (“CJA”) does not create a right to any particular rate of interest and context indicates that the legislature intended s.258.3(8.1) to apply to actions that had already arisen. The default interest rate pursuant to s.127 of the CJA is 2.5% and thus the prejudgment interest should be reduced accordingly.

(2) No. In her final reasons for judgment, the trial judge commented that the appellants admitted that the award did not disclose the retirement age that the jury had utilized and that it was a matter of speculation that the jury had used age 64. To ensure that the respondent’s entitlement to full compensation was not jeopardized, she held that the appellants were entitled to an assignment of income replacement benefits based on a retirement age of 60. The respondent presented his case through a variety of future earning scenarios by way of an accounting expert. Most of these scenarios involved the respondent retiring at age 64, others at 67.  The jury awarded an amount equal to a scenario in which the respondent was to retire at 64, therefore the obligation to assign should continue to the respondent’s 64th birthday.

(3) No. Under O. Reg 201/96 created pursuant to the Ontario Drug Benefit Act (“ODBA”), persons over the age of 65 are eligible for the Ontario Drug Benefit Program (“ODBP”), which covers the cost of prescription drugs. The jury was instructed to treat the ODBP as a contingency because there was substantial uncertainty about whether it would be available in 2028. The trial judge erred in this respect, as she should have instructed the jury to award damages based on the law as it currently exists.

(4) Yes. Following the jury verdict, the appellants sought an assignment of the SABs payments to which the respondent would be entitled post-trial. The trial judge’s refusal to make any assignment in relation to future professional services and future medication and assistive devices is the subject of this ground of appeal. The trial judge noted that the parties had not adopted the language proposed for the jury verdict sheet, accordingly the verdict sheet did not require the jury to specify costs under separate subheadings, and included only “Future Professional Services” and “ Future Medication & Assistive Devices.” This led the trial judge to conclude that “As a result of the jury’s global awards of $424,550 for Future Professional Services, and $82,429 for Future Medication and Assistive Devices, the Defendants are now unable to meet their onus to demonstrate that the jury award compensated the Plaintiff for the same loss in respect of which the Defendants now claim an assignment of benefits.” The trial judge considered the prevention of double recovery under section 267.8 the Insurance Act balanced against the respondent’s right to full compensation.

The trial judge in this case applied a strict matching approach on the basis of Bannon v. McNeely (1998), 38 O.R. (3d) 659 (C.A.), a case decided under a former statutory regime for the deduction of benefits, and Gilbert v. South, 2015 ONCA 712, 127 O.R. (3d) 526, a recent decision of this court that applies the Bannon approach in the assignment of benefits context. The Court of Appeal found that a strict qualitative and temporal matching requirement should not be applied to section 267.8. As it currently sits, the assignment and trust provisions of the Insurance Act requires the court to match benefits that will be received after trial to the broad, enumerated statutory categories only in a general way.

Justice MacFarland, writing for the court, made the following comments:

The policy rationale underlying Bannon is no longer relevant. For accidents that occurred between 1971 and October 1989 the Insurance Act established a scheme that required future accident benefits payable to a plaintiff by the no-fault insurer be paid to the insurer responsible for payment of the tort damages. At common law, “Cox and Carter” orders were fashioned if entitlement to future benefits could not be strictly proven and the present value of future benefits could not be deducted. The courts imposed these orders to ensure there would be no double recovery. Such an order would require the defendant to pay the damage award, while providing the defendant with credit for collateral benefits paid to the date of trial. Future statutory benefits that the plaintiff would receive after trial were subject to a trust and would be paid to the defendant’s insurer in the tort action when received. For accidents occurring between October 1989 and January 1994, it was unclear whether “Cox and Carter” orders were still available or whether a defendant was simply entitled to a deduction at trial for the present value of future accident benefits that might be payable after trial. It was also unclear whether deductions of no-fault benefits could be made against any head of tort damages.

In Bannon, the court required a defendant claiming the benefit of a statutory deduction to bear a strict onus of establishing the present value of any future no-fault benefits to which a plaintiff was entitled. Under the regime in operation at the time, the deduction was made from the damage award immediately after the verdict on damages and at a time when the entitlement to the future receipt of the deducted benefit might have been uncertain. If the SABs insurer decided not to pay the benefit for any reason, the plaintiff would have already accounted, by way of a reduction in her damage award, for a benefit that she would not ultimately receive. Certainty was required under that statutory regime to avoid the risk of under-compensation of the plaintiff.

The current statutory scheme was introduced in November 1996, in s. 29 of the Automobile Insurance Rate Stability Act, 1996, S.O. 1996, c. 21. For present purposes, the 1996 amendments did three important things: they codified the principle that SABs benefits that fall into the enumerated three general categories are deductible; they eliminated the quantification and deduction of the present value of future benefits that might be payable; and they codified the common-law “Cox and Carter” orders. Thus the policy rationale supporting the strict matching requirement in Bannon no longer applies.

Bannon may no longer be good law in this province. The Ontario matching principle articulated in Bannon is based on the approach of the British Columbia Court of Appeal in Jang v. Jang (1991), 54 B.C.L.R. (2d) 121 (C.A.) In Gurniak v. Nordquist, 2003 SCC 59,  a majority of the Supreme Court of Canada expressly stated that Jang was wrongly decided.

In the Insurance Act’s regime for mandatory assignment of accident benefits, plaintiffs who have recovered damages for future income losses, future healthcare costs or other ongoing expenses have an obligation to pay the corresponding statutory benefits, as the plaintiff receives them, to the defendant’s insurer. In Gilbert, this court applied the strict matching approach adopted in Bannon to these assignment provisions. In Gilbert, the plaintiff was not catastrophically injured, so, according to the version of the Statutory Accident Benefits Schedule, O. Reg. 34/10, in force at the time, the plaintiff’s receipt of health care benefits would cease after ten years and have a monetary limit of $100,000. The plaintiff’s insurer had an obligation to provide coverage to Gilbert in relation to any damages caused by an uninsured driver. The insurer brought a motion for a declaration that Gilbert was required to hold certain future statutory benefits in trust and pay them to the insurer or, in the alternative, for an order assigning the plaintiff’s right to future statutory benefits from the accident benefit insurer. The insurer argued that the jury’s award of damages for future care costs, coupled with the plaintiff’s entitlement to statutory benefits for medical and rehabilitation expenses, would constitute double recovery in the absence of an order requiring a trust or an assignment of those future benefits. The judge in Gilbert concluded that the plaintiff should not be subjected unfairly to deductions based on collateral benefit entitlements that are in doubt and/or which may not truly overlap with sums recovered in the tort action. He noted that there was no evidence to indicate with certainty the total amount of statutory accident benefits the plaintiff would receive. Also, it was unclear for what time period the jury award was intended to compensate. In addition to the temporal uncertainty, the trial judge concluded that there were qualitative concerns as the jury award made no allocation of the future care costs towards any particular category of future care expenditures. Because certain future care expenses were not recoverable under the SABs, he concluded that there was no way of making an accurate determination of the extent to which the jury award was intended to cover aspects of future treatment for which the plaintiff would not be reimbursed under the SABs. The trial judge in that case concluded that if these qualitative distinctions were not made, the plaintiff could receive less than the full compensation to which he was entitled and thus declined to order either a trust or an assignment. The Court of Appeal upheld the decision.

The decision in Gilbert is anchored by the trial judge’s factual determination that the jury award encompassed future care costs for which accident benefits would not be received and that the trial record did not provide a basis to reconcile the two. The Insurance Act now requires a plaintiff to hold in trust or to assign any benefits that she receives from her SABs insurer after the trial judgment. These provisions ensure that the plaintiff is fully compensated by the jury award but limit double recovery by assigning only those benefits actually received in the future to the tort insurer.

However, the question as to whether the strict matching requirement between heads of damage and statutory benefits to the current statutory scheme should be reconsidered is left undecided, as Justice MacFarland found that the Gilbert decision can be distinguished on its facts. First, the respondent here has been designated catastrophically impaired. The ten-year temporal limitation for SABs that concerned the trial judge in Gilbert did not arise in this case. Second, there were no benefits for which the assignment was requested that were not covered by SABs. The transportation expense that concerned the trial judge in Gilbert is not in issue. All of the claims in this case that make up the awards for future professional service and future medication and assistive devices were itemized sufficiently and all were covered by the SABs schedule. If there is no trust or assignment in respect of the SABs to which he will be entitled and which he will receive in the future for medication, assistive devices and professional services, the respondent will be over-compensated and his receipt of any such benefits with no obligation to account to the tort insurer will constitute double recovery – a result this legislative scheme was specifically designed to avoid. The trial judge thus erred in failing to order that there be an assignment in relation to the cost of future medication, assistive devices, and professional services.

Cobb v. Long Estate, 2017 ONCA 717

[Doherty, MacFarland and Rouleau JJ. A.]

Counsel:

G. Paliare and T. H. Lie, for The Estate of Martin T. Long (Defendant)

Rouben and K. Bonn, for Wade Brett Cobb, Erica Mae Cobb and James Wade Cobb, a minor by his Litigation Guardian, Erica Mae Cobb (Plaintiff)

Keywords: Insurance Law, Motor Vehicle Accidents, Damages, Collateral Benefits, Statutory Accident Benefits, Deductibility, Double Recovery, Statutory Interpretation, Costs, Offers to Settle, Rule 49

Facts:

This is the companion decision to El-Khodr v Lackie.

On July 8, 2008, the vehicles driven by Martin T. Long and the plaintiff, Wade Cobb, collided. Long was charged with operating a motor vehicle while impaired or “over 80” (Criminal Code, R.S.C., 1985, c. C-46, s. 253(1)), to which charge he pleaded guilty in August 2009. Mr. Long died before the trial of the civil action, so his estate became the defendant in this litigation.

In December 2009, the plaintiffs brought this action in negligence and gross negligence, claiming $2.35 million in compensatory damages and $3 million in punitive damages. The trial took place over the course of 19 days in the fall of 2015. The jury awarded $220,000 in compensatory damages. After deducting amounts pursuant to the Insurance Act for collateral benefits that Wade Cobb had received from his insurer and for the statutory deductible for general damages (i.e., damages for “non-pecuniary” losses, such as “pain and suffering” and “loss of amenity”), the trial judge calculated a final judgment amount of $34,000.

At trial, the real issue dividing the parties was the quantum of damages to which the plaintiff, Wade Cobb, was entitled. By the time of trial, Mr. Cobb’s injuries would be described as soft tissue in nature, resulting in chronic pain, such that he claimed to be permanently disabled and unable to resume either his pre-accident employment in the contracting field or any other meaningful employment.

The trial judge rejected the plaintiff’s request to put the question of punitive damages to the jury. The plaintiff alleged this was a proper case for that question to go to the jury because of Mr. Long’s drinking and driving conviction arising from the accident and the fact that Mr. Long had an earlier conviction for a similar offence.

From the jury’s award for past and future income losses, which totalled $150,000, the trial judge deducted the sum of $159,300 that the plaintiffs had received before trial in SABs for income replacement benefits. This sum was comprised of $29,300 received before the settlement of June 29, 2010, and the $130,000 portion of that settlement apportioned to “all past and future income replacement benefits”. This deduction resulted in a net award of zero for the loss of past and future income.

The plaintiff had received $9,150 in housekeeping and home maintenance benefits (“HKHM benefits”) before trial from his SABs insurer. Accordingly, the trial judge reduced the jury’s award of $5,000 for past HKHM expenses to zero. However, the trial judge refused to apply the remaining $4,150 in HKHM benefits that the plaintiff had received before the trial to the amount that the jury had awarded for future housekeeping loss, maintaining that award at $10,000.

The trial judge did not determine whether the amendment in s. 258.3(8.1) of the Insurance Act, which came into force on January 1, 2015, and which reduced the default rate of prejudgment interest for non-pecuniary losses for bodily injury or death from five percent to the bank rate at the time the proceeding was commenced (here, .5 percent), applied retrospectively. Instead, the trial judge exercised his discretion pursuant to s. 130 of the Courts of Justice Act and set the prejudgment interest rate at three percent.

Effective August 1, 2015, the statutory deductible applicable to an award for non-pecuniary damages increased from $30,000 to $36,540 through an amendment to s. 5.1(1) of the regulation entitled Court Proceedings for Automobile Accidents that Occur on or After November 1, 1996, O. Reg. 461/96.

The trial judge concluded that the change to the regulation was “substantive”, as opposed to “procedural”, and, accordingly, should not be applied retrospectively to this action. He applied a deductible of $30,000, leaving a net general damage award of $20,000.

In his reasons on costs, the trial judge addressed whether the amendment to s. 267.5(9) of the Insurance Act that came into force on August 1, 2015 should apply to this action. Until July 31, 2015, under s. 267.5(9) and this court’s decision in Rider v. Dydyk, 2007 ONCA 687, 87 O.R (3d) 507, the court was not to consider the statutory deductible in determining entitlement to costs. Effective August 1, 2015, however, s. 267.5(9) was amended so that entitlement to costs was to be determined “with regard” to the statutory deductible. The difference here was significant, because of a defence settlement offer made March 13, 2014.

In reasons for judgment dated December 23, 2015 and reported at 2015 ONSC 7373, the trial judge determined that he “would not give the Insurance Act amendments retroactive application”. He added, however, that if he was wrong in that determination, he would exercise his discretion and order that each side bear its own costs.

Issues:

The plaintiffs raise three grounds of appeal:

  1. Did the trial judge err by deducting, pursuant to s. 267.8(1) of the Insurance Act, the amounts allocated to income replacement benefits in the SABs settlement from the jury awards for past and future income loss?
  2. Did the trial judge err in refusing to put the question of punitive damages to the jury?
  3. Did the trial judge err in his determination of prejudgment interest?

The defendant also raises three grounds of appeal:

  1. Did the trial judge err by failing to deduct the full amount of the HKHM benefits received by the plaintiff before the trial from the damages awarded for the housekeeping loss?
  2. Did the trial judge err in applying the statutory deductible in force prior to August 1, 2015 ($30,000) rather than the statutory deductible in force at the time of judgment ($36,540)?
  3. Did the trial judge err in his assessment of costs?

Held: Plaintiff’s appeal dismissed. Defendants’ appeal allowed.

Reasoning:

1. No. The attribution of the settlement funds to particular claims is a question of fact on which the court owes deference to the trial judge. The record fully supports the trial judge’s determination on this issue. In the settlement negotiations, the SABs insurer left it up to plaintiff’s counsel to determine the allocation of the settlement amounts. The Settlement Disclosure Notice divided the settlement compensation of $152,000 into $130,000 for income replacement benefits, $20,000 for medical benefits and $2,000 for “other items”. Correspondence from the settlement negotiations indicates that, before executing the Release, the plaintiff had agreed to allocate $130,000 of the $152,000 settlement to income replacement benefits, $20,000 to medical benefits and $2,000 to the plaintiff’s legal costs. There was no evidence in the record that the plaintiff had negotiated for compensation arising from any allegation of bad faith.

Claims advanced in a tort action for both past and future income loss are required to be separately advanced. Pre-judgment interest is owed on past income claims but not on future loss claims. The onus on a plaintiff is different – a plaintiff who claims for pre-trial pecuniary loss must prove the amount of that loss on the balance of probabilities. In contrast, a claim for future (i.e., post-trial) pecuniary loss needs only be proved on the basis of a “real and substantial possibility” of impairment of future earnings and a jury instructed accordingly.

Both types of claims are still claims for income loss. The Insurance Act does not differentiate between past and future losses.

Section 267.8(1) speaks only to amounts received prior to the trial for income loss. Whether those amounts relate to past or future claims is irrelevant for the purpose of deductibility.

2. No. The key point is that punitive damages are awarded “if, but only if” all other penalties have been taken into account and found to be inadequate to accomplish the objectives of retribution, deterrence, and denunciation.” Where tortious acts have already been sanctioned by the imposition of a criminal sentence, it is inappropriate to award punitive damages in a civil lawsuit. To do so is to punish twice for the same offence. Where, however, the civil proceedings establish that…the sentence does not fully sanction the tortfeasor’s behaviour… punitive damages may be awarded.  Here, the court found that there was no evidence to suggest that the defendant’s criminal sentence, consisting of a fine of $1,300 and a one-year driving prohibition, was insufficient to meet the objectives of retribution, deterrence and denunciation; and that the trial judge’s decision not to put the question of punitive damages to the jury was reasonable in the circumstances. His decision in this regard is therefore entitled to deference.

3. No. For the purposes of s. 128, s. 127(1) defines “prejudgment interest rate” as “the bank rate at the end of the first day of the last month of the quarter preceding the quarter in which the proceeding was commenced”. However, s. 128(2) creates an exception from this default rate of prejudgment interest for damages for non-pecuniary loss arising from personal injuries:

The relevant “rule of court” to which s. 128(2) refers is r. 53.10 of the Rules of Civil Procedure, which provides:

53.10 The prejudgment interest rate on damages for non-pecuniary loss in an action for personal injury is 5 per cent per year.

Therefore, s. 128 of the Courts of Justice Act contemplates two default rates of prejudgment interest: one for damages for non-pecuniary loss in personal injury actions, and one, called “the prejudgment interest rate”, for all other money awards for which s. 128 makes prejudgment interest available. The plaintiffs commenced their action on December 8, 2009, so the applicable prejudgment interest rate in s. 128(1) is .5%.

The effect of s. 258.3(8.1) of the Insurance Act is that, in an action for damages arising out of a motor vehicle accident, the prejudgment interest rate on non-pecuniary damages will now be the rate provided for in ss. 127 and 128(1) of the Courts of Justice Actsubject to the overriding discretion of the court in s. 130 of the same statute to increase or reduce the rate, to change the interest period, or to disallow interest altogether.

In this case, the trial judge did not make a determination one way or the other as to whether the amendment applied retrospectively. Instead, he chose what he described as “a third choice” and exercised the discretion available to him under s. 130(1)(b) of the Courts of Justice Act. Having “taken into account the factors set out in s. 130(2)” and having “considered the overall circumstances of the case”, he fixed the interest rate for non-pecuniary damages at three percent.

This was not erroneous. The amendment in the Insurance Act to the prejudgment interest rate was intended to have retrospective effect and it applies to all actions that are tried after its commencement.

First, as a matter of statutory interpretation, there is a presumption that the legislature does not intend to interfere with “vested rights”: Dikranian, at paras. 32-33. Dikranian, at paras. 37-40, endorsed Prof. Côté’s test for establishing a “vested right”: (1) the individual’s legal situation must be “tangible and concrete rather than general and abstract” (i.e.: the individual must point to a specific right); and (2) the legal situation must have been sufficiently constituted at the time of the new legislation’s commencement. In other words, by the time of the legislation’s commencement, the right must have crystallized and become “inevitable” and “certain”: 1392290 Ontario Ltd. v. Ajax (Town), 2010 ONCA 37, 257 O.A.C. 311, at paras. 37-38.The characterization of the “right” at issue is important to the success of the argument that the right had “vested” by commencement: 1392290 Ontario Ltd., at para. 39.

Second, new legislation that affects substantive rights is presumed to have a purely prospective effect unless a clear legislative intent that it is to apply retrospectively is evident. However, “procedural legislation designed to govern only the manner in which rights are asserted or enforced” applies immediately to both pending and future cases because such legislation does not affect the “substance” of the relevant rights: R. v. Dineley, 2012 SCC 58, [2012] 3 S.C.R. 272, at para 10. In Dineley, the Supreme Court emphasized that this presumption of immediate application does not apply to “procedural legislation” if that legislation “affects substantive rights”. Therefore, “the key task” lies “not in labelling the provisions “procedural” or “substantive”, but in discerning whether they affect substantive rights”: Dineley, at para. 11.

The plaintiff has not demonstrated that he has a crystallized or certain right to a particular rate of prejudgment interest. This the court was of the view that it was not necessary to consider the application of the presumptions or to decide whether s. 258.3(8.1) of the Insurance Act, which only deals with the rate of prejudgment interest and not with the entitlement to prejudgment interest, is substantive in nature. Even if the rate of prejudgment interest constitutes a substantive right, the fact that a particular presumption could apply does not necessitate a conclusion that the amendment does not apply in this case. Common-law presumptions on temporal application of legislation are simply aids in the identification of legislative intent. A contextual analysis of the legislation demonstrates that the legislature intended s. 258.3(8.1) to apply to causes of action that had already arisen but not yet been tried.

4. Yes. There is no reason to distinguish between the past and future awards. The head of damage is to compensate for loss of the ability to carry out HKHM both in the past and the future. The language of the legislation requires a reduction from the damages awarded. That is, all payments received before the trial for SABs in respect of pecuniary loss.

5. Yes. The legislature intended for the 2015 amendment to s. 5.1.(1) to have retrospective application. Accordingly, the amendment applied at the time of the judgment and the trial judge erred in holding otherwise.

The 2015 amendment to s. 5.1 of the Court Proceedings Regulation contains no transition provision that clearly indicates its temporal application. In contrast, the version of s. 5.1 in force before August 1, 2015 specifically stated that it was applicable to accidents that occurred on or after October 1, 2003. The court also noted that s. 267.5(8.1.1) of the Insurance Act specifically provides that the statutory deductible does not apply to “damages awarded for non-pecuniary loss awarded in respect of a person who dies as a direct or indirect result of an incident that occurs after August 31, 2010” (emphasis added). It is noteworthy that within that part of the statute that deals with the statutory deductible, the language distinguishes between those sections that are specifically intended to have only a prospective application and those that are not. The fact that there is no similar temporal language in the current version of s. 5.1 of the regulation provides some support for the argument that the change should apply to accidents occurring before its promulgation.

Absent persuasive evidence of a legislative intention to apply the version of a regulation in force at a specific date, section 59 of the Legislation Act, 2006 ensures application of the current version of a regulation to which a statutory provision refers. Thus, the interpretation of the regulation at issue must start from the premise that the regulation that is intended to apply to any given case is the regulation that is in force from time to time and not the version of the regulation that was in force at the date of the accident.

A regulation applies retrospectively where authorized by the regulation’s enabling statute, either by express words or by necessary implication: British Columbia (Attorney General) v. Parklane Private Hospital Ltd., [1975] 2 S.C.R. 47, at p. 60; Keyes, at p. 498-9. The Insurance Act authorizes the immediate application of the amended regulation to accidents that occurred before its promulgation. The fact that the dates for calculating the prescribed damage quantum in s. 267.5(8.3) of the Insurance Actabove which the deductible does not apply, match the dates in s. 5.1(1) of the Court Proceedings Regulation proves that the legislature must have authorized the executive to amend s. 5.1(1) with retrospective application to pending and future proceedings.

6. Yes.  The Court of Appeal concluded that the amendment to s. 267.5(9) which changed the words “without regard” to “with regard”, applies to the fixing of costs in this case for two reasons: (1) there is no vested right to costs, and (2) costs legislation is “procedural”. Thus the trial judge erred in holding otherwise.

The defendant’s offer to settle on March 13, 2014 of $40,000 inclusive of all damages was a valid Rule 49 offer and, based on the amount of the trial judgment as revised, was more favourable than the judgment that the plaintiffs achieved at trial. In the ordinary course, it should follow that the plaintiffs would be entitled only to their partial indemnity costs to the date of the offer and the defendant to its partial indemnity costs thereafter. However, in his reasons on costs, the trial judge said that, if he was incorrect in his calculation of the judgment amount, and it was determined that the deductible was to be taken into account so as to reduce the judgment figure for costs purposes, he would have ordered that each side bear its own costs. The defendant advised the court that it was prepared to live with that order and will not require the plaintiffs to pay the defendant’s partial indemnity costs from the date of the offer.

In response to the plaintiff’s assertion of entitlement to substantial indemnity on the basis of s. 4(6) of the Victims’ Bill of Rights, 1995, the court noted that the record does not disclose that any effort was made by way of motion before the trial judge to have the reasons corrected in this or any other relevant respect. In the circumstances the court must accept the reasons of the trial judge as they were written. In any event, the trial judge’s assessment of costs at approximately $409,000 on a judgment of $22,136.60, (or $34,000, as the trial judge found) is out of all proportion and cannot stand. On any proportional basis, the plaintiff’s costs, even taking the defence offer out of the equation for the moment, could not have been expected to exceed approximately $200,000, given the results achieved.

Whalen-Byrne v. Byrne, 2017 ONCA 729

[Laskin, Feldman and Miller JJ.A.]

Counsel:

Michael J. Polisuk, for the appellant/respondent by way of cross-appeal

Chelsea Hooper and Christina Doris, for the respondent/appellant by way of cross-appeal

Keywords: Family Law, Spousal Support, Duration, Length of Cohabitation, Divorce Act, Spousal Support Advisory Guidelines

Facts:

Both the appellant, Timothy Byrne, and the respondent, Kellie Whalen-Byrne, appeal from the February 17, 2016 order of Douglas J., which dealt with child support and spousal support. Each party raises a single issue. Mr. Byrne submits that the trial judge erred by failing to characterize a $75,000 advance he made to Ms. Whalen-Byrne as a payment on account of spousal support.

On her cross-appeal, Ms. Whalen-Byrne submits that in fixing the duration of spousal support, the trial judge erred by finding that the length of the parties’ cohabitation was only 13 years instead of 16.5 years. Thus, Ms. Whalen-Byrne contends that the trial judge erred in holding that the duration of spousal support should be 11 years from the date of separation.

Issues:

  1. Did the trial judge err by failing to characterize a $75,000 advance that Mr. Byrne made to Ms. Whalen-Byrne as a payment on account of spousal support?
  2. Did the trial judge err by finding that the length of the parties’ cohabitation was 13 years instead of 16.5 years?

Holding: Appeal dismissed. Cross-appeal allowed.

Reasoning:

  1. The $75,000 advance made to Ms. Whalen-Byrne was not a payment on account of spousal support.

On October 23, 2013, Mulligan J. made an order on the consent of the parties that Mr. Byrne pay Ms. Whalen-Byrne interim disbursements of $75,000. The order resolved Ms. Whalen-Byrne’s motion for interim disbursements. Importantly, the order provided: “The aforesaid payment is without prejudice to the issue of whether or not such payment shall be credited against an equalization payment.” In April 2015, the parties resolved all net family property issues, and their resolution was incorporated into a final order. This order included a provision for a $399,000 equalization payment from Mr. Byrne to Ms. Whalen-Byrne. The order said nothing about the $75,000 advance for interim disbursements.

The Court held that if Mr. Byrne was to receive any credit for his $75,000 advance, it was to be a credit against an equalization payment, not against his support obligation. As equalization issues were resolved well before trial, the dismissed Mr. Byrne’s appeal.

  1. The trial judge erred in finding the length of cohabitation to be 13 years instead of 16.5 years.

(a) Length of cohabitation

The parties began living together in June 1993. From the end of October 1996 until March 1997 – a period of approximately five months – Ms. Whalen-Byrne moved out of the matrimonial home and stayed with her mother. The parties then reconciled and married in late June 1999. They separated on April 25, 2010.

Under the Divorce Act, R.S.C. 1985, c. 3 (2d. Supp.), the length of cohabitation is a relevant factor in determining the duration of spousal support. The trial judge found that for the purpose of Ms. Whalen-Byrne’s claim for spousal support, the period of cohabitation was 13 years from March 1997 to April 2010. In other words, he did not include the three years and five months that the parties cohabited before their separation in October 1996.

The Court held that Mr. Byrne and Ms. Whalen-Byrne never formally separated in October 1996. At most what occurred was a brief “interim separation” with, as the trial judge found, “the possibility of resumption of cohabitation.” Therefore, the Court found that the appropriate period of cohabitation for the purpose of support is 16 years and 10 months (June 1993 to April 2010), less the 5 month period the parties lived apart – a total period of cohabitation of 16 years and 5 months.

(b) Duration of spousal support.

In fixing the duration of spousal support at 11 years from the date of separation, the trial judge took into account the relevant considerations under the Divorce Act and the Spousal Support Advisory Guidelines. For a period of cohabitation of 13 years, the Guidelines propose a duration of support between 6.5 years and 13 years from the date of separation. The trial judge’s order of 11 years was towards the upper end of the range.

For the appropriate cohabitation period of 16.5 years, the Guidelines propose a duration of support between 8.25 years and 16.5 years from the date of separation. Consistent with the trial judge’s consideration of the Guideline’s ranges, the Court fixed the duration of spousal support toward the upper end of the applicable range – at 14 years from the date of separation.

Short Civil Endorsements

Pepper v. Sanmina-Sci Systems (Canada) Inc., 2017 ONCA 730

[Hoy A.C.J.O., MacFarland and Huscroft JJ.A]

Counsel:

Elizabeth Bennett-Martin and Stephen Simpson, for the appellant

Brian A. Pickard, for the respondent

Keywords: Insurance Law, Limitation Periods, Markel Insurance Co. of Canada v. ING Insurance Co. of Canada, 2012 ONCA 218, Appeal Allowed

Weglarz v. Toronto (Police Services Board), 2017 ONCA 727

[Hoy A.C.J.O., Huscroft and Paciocco JJ.A]

Counsel:

Fred Fischer, for the respondent

Andrew Weglarz, acting in person

Keywords: Endorsement, Civil Procedure, Striking Pleadings, Appeal Dismissed

Muslim Green Cemeteries Corporation v. Toronto Muslim Cemetery Corp., 2017 ONCA 732

[Doherty, LaForme and Miller JJ.A.]

Counsel:

Shahzad Siddiqui, for the appellant

John Longo and Patrick Copeland, for the respondent

Keywords: Endorsement, Administrative Law, Adjournment, Appeal Dismissed

Criminal Decisions

R v. Cho (Publication Ban), 2017 ONCA 723

[Watt, Epstein and Brown JJ.A]

Counsel:

Janani Shanmuganathan, for the appellant

Hannah Freeman, for the respondent

Keywords: Criminal Law, Assault with a Weapon, Sexual Assault, Evidence, Burden of Proof, Credibility, Sentencing, Appeal Dismissed

R v. Nield, 2017 ONCA 722

 

[Watt, Huscroft and Trotter JJ.A.]

Counsel:

Karl Gowenlock, for the appellant

Davin M. Garg, for the respondent

Keywords: Criminal Law, Impaired Driving, Summary Conviction Appeal, Canadian Charter of Rights and Freedoms, ss. 9 and 24(2), Highway Traffic Act, R. v. Hajivasilis, 2013 ONCA 27, Criminal Code, ss. 839., R. v. R.R. (2008), 90 O.R. (3d) 641, Leave to Appeal Refused

R v. Niemi, 2017 ONCA 720

[Doherty, MacFarland and Paciocco JJ.A.]

Counsel:

David E. Harris, for the appellant

Randy Schwartz and Jeffrey Pearson, for the respondent

Keywords: Criminal Law, First Degree Murder, Sexual Assault, Evidence, Inculpatory Statements,  R. v Hart, [2014] SCC 52, One Party Consent Wiretap, Jury Directions, Appeal Dismissed

R v. Verdon, 2017 ONCA 721

[Laskin, Trotter and Fairburn JJ.A]

Counsel:

Eva Taché-Green, for the appellant

Michelle Campbell, for the respondent

Keywords: Criminal Law, Intimidation, Criminal Harassment, Assault, Sentencing, Indeterminate Sentence, Aging Offenders

R v. Abedi (Publication Ban), 2017 ONCA 724

[Laskin, Trotter and Fairburn JJ.A.]

Counsel:

Joshua Frost and Eric Neubauer, for the appellant

Andrew Cappell, for the respondent

Keywords: Criminal Law, Evidence, Loss of Evidence, Prejudice,

R v. Hamilton (Publication Ban), 2017 ONCA 735

[Laskin, Pepall and Trotter JJ.A.]

Counsel:

Carol Cahill, for the appellant

Rochelle Direnfeld, for the respondent

Keywords: Criminal Law, Sexual Assault, Sexual Interference, Evidence, Admissibility, Appeal Dismissed

R v. M.G.T. (Publication Ban), 2017 ONCA 736

[Watt, Benotto and Roberts JJ.A]

Counsel:

Michael W. Lacy, for the appellant Luke Schwalm, for the respondent

Keywords: Criminal Law, Sexual Assault, Re-opening Request, Fresh Evidence, Appeal Dismissed

R v. N.J. (Publication Ban), 2017 ONCA 740

[Pardu, Benotto and Huscroft JJ.A.]

Counsel:

Raymond Boggs, for the appellant

Karen Shai, for the respondent  

Keywords: Criminal Law, Manslaughter, Sentencing, Bail Conditions, Appeal Dismissed

Consent and Capacity Board Decisions

Murray (Re), 2017 ONCA 731

[Watt, Epstein and Brown JJ.A. ]

Counsel:

Jason Murray, acting in person

Kelley Bryan, appearing as amicus curiae

Katherine Beaudoin, for the Attorney General of Ontario

Janice Blackburn, for St. Joseph’s Healthcare Hamilton

Keywords: Ontario Review Board, Administrative Law, Involuntary Detention, Procedural Fairness, Self-Representation, Amicus Curiae

 

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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