This class action initially arose from an infectious disease outbreak at the Rothbart Centre for Pain Care in Toronto. The outbreak stemmed from epidural injections administered by the appellant anesthesiologist, Dr. Stephen James (“Dr. James”). The injections were administered in an area close to the spine as a pain relief treatment. After receiving the injections, patients subsequently developed meningitis and an abscess in or around their spine among other serious infections. An investigation later found that the outbreak was caused by inadequate Infection Prevention and Control in respect of the injections designed to reduce the risk of transmission of microorganisms in health care settings.

In 2021, Voula successfully defended nurses in Ontario’s first common issues trial for a medical malpractice class action in Levac v James, 2021 ONSC 5971. At trial, Justice Morgan held that there was no sustainable legal claim against any of the nurses and made a Sanderson Order, which required Dr. James to pay the nurses’ legal costs. Dr. James sought leave to appeal the Sanderson Order.

On appeal, Voula successfully persuaded the Court of Appeal to deny Dr. James leave to appeal Justice Morgan’s decision on costs. For context, Dr. James launched a crossclaim against the nurses in the initial action. At trial, Dr. James was found to be driving the case against the nurses and was considered by Justice Morgan to be primarily responsible for their remaining in the action. These proved to be key factors in Justice Morgan’s order that Dr. James pay the nurses’ costs. On appeal, Sossin J.A., for a unanimous Court, upheld the Sanderson Order and denied Dr. James leave to appeal. In this regard, Sossin J.A. broadly held that the general rule that costs follow the event is equally applicable to class proceedings in Ontario, even where liability may ultimately be rebutted in respect of the individual trials of class members. Sossin J.A. observed that Dr. James, in oral argument on appeal, still expressed an intention to pursue his claims against the nurses if evidence of the nurses’ negligence was adduced at the individual trials despite Justice Morgan’s finding that Dr. James’ case against the nurses was “remarkably thin” and disclosed “no sustainable legal claim.” Further, Sossin J.A. highlighted the deference afforded to trial judges on the issue of costs.

Finally, Sossin J.A. rejected Dr. James’ contention that Justice Morgan had no basis to award the nurses’ costs on a substantial indemnity basis. In awarding substantial indemnity costs at trial, Justice Morgan paid particular attention to the fact that the nurses had made an early attempt to settle the claims against them on a without costs basis and that there was no basis for Dr. James to keep them in the action. Sossin J.A. saw no potential error in Justice Morgan’s assessment of the amounts as “extremely reasonable” and “relatively modest;” likewise, Sossin J.A. observed the deference afforded to trial judges in the context of costs.

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In Andrews v. Pattison, the Ontario Court of Appeal upheld a summary motion decision involving section 5(1)(a) of the Limitations Act, 2002, SO 2002, c 24, Sch B (the “Limitations Act”).

Ms. Gorton was diagnosed with terminal lung cancer in the spring of 2013. She passed away in April 2014. Prior to her passing, she was treated by the respondent doctor between 2008 and 2013. The doctor ordered a chest x-ray in late 2008. No anomalies were discovered. No other chest x-rays were requisitioned until May 2013. It was the x-ray of May 2013 that led to the cancer diagnosis.

The appellants issued a statement of claim on April 11, 2016, against the respondent doctor. At the summary motion, the appellants asserted that the limitation period did commence until they obtained expert reports on the standard of care and causation in 2015. However, the motion judge held that the appellants’ claim was discoverable no later than February 6, 2014, when they met with a medical malpractice lawyer. By that date, the appellants had obtained the complete medical records of Ms. Gorton and expressed concern about whether an earlier x-ray might have led to a better outcome.

It was held that the appellants had actual knowledge of the potential claim against the respondent doctor on February 6, 2014. The claim issued on April 11, 2016, was therefore out of time. The action was summarily dismissed as statute barred under section 5(1)(a) the “Limitations Act”.

The Court held that the determination of when a potential plaintiff has sufficient material facts on which a plausible inference of liability on the defendant’s part can be drawn “is not to be conflated with the question of the discovery of the merits of the potential action.” Both the Court of Appeal and the motion judge recognized that the Limitations Act “does not distinguish between meritorious and non-meritorious claims.” In other words, knowing the strength of a potential action is not determinative of when the limitation period for that action will commence.

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FCL LLP Partner, Kim Duong, acting for the respondents, successfully appeared before the Ontario Court of Appeal in Dass v. Kay, 2021 ONCA 565, on issues involving the interpretation of the Limitations Act, 2002, S.O. 2002, c. 24, Sched. B. (“Limitations Act”).

The appellants raised two grounds of appeal alleging: (i) the motion judge erred in law by misrepresenting s. 5 of the Limitations Act, 2002, and (ii) the motion judge made palpable and overriding misapprehensions of fact. The arguments between the appellants and respondents centered on the new factor added to the analysis of the discoverability principle, s.5(1)(a)(iv) the appropriateness of a bringing a proceeding.

The appellants, in their arguments, proposed an expansion of the class of matters under s. 5(1)(a)(iv) to include any situation where plaintiffs know they have been wronged or suffered damage at the hands of the defendants, but doubt they will be able to marshal the evidence to prove the claim and are unsure whether the scale of the eventual commercial loss will make an action remunerative.
The case law has recognized two situations delaying the start of the limitation period: (i) where a plaintiff relied on a defendant’s superior knowledge and expertise, especially where the defendant took steps to ameliorate the loss; and (ii) where the parties have engaged an alternative dispute resolution process offering an adequate remedy and it has not been completed. However, the Court of Appeal held that in the case at hand, the appellants did not come within either situation.

The Court of Appeal was clear in stating that appellants were not restricted to the two categories of cases identified to date that delay the start of the limitation period. But if they cannot bring themselves within those two categories, they must propose another set of circumstances in which it could be said, on a principled basis, that a person with a claim could not have known that an action would be an appropriate means to remedy the injury, loss, or damage.

In agreeing with the respondents’ arguments, the Court of Appeal held that “the limitation period does not commence only when one can ascertain what damages would be entitled to as a remedy, such that one would be better able to assess whether litigation would be an attractive option.”

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Recently, the Ontario Court of Appeal released a decision which opined on the novel interpretive issue of data exclusion clauses. In Family and Children’s Services of Lanark, Leeds and Grenville v. Co-operators General Insurance Company, 2021 ONCA 159, the appellate court unanimously allowed for the appeal of an application judge’s decision requiring an action be brought in order to deny the duty to defend.

In this case, the respondent, Family and Children’s Services of Lanark, Leeds and Grenville (“FCS”), hired the respondent, Laridae Communications Inc. (“Laridae”), to provide communication and marketing services, namely updating FCS’s website. Laridae obtained and was insured under both a professional liability policy and a commercial general liability policy (“CGL”) from the appellant, Co-operators General Insurance Company (“Co-operators”). FCS was an additional insured under the CGL.

In April 2016,  a password-protected portal on FCS’s website was hacked. After which, a hyperlink to a confidential report, which contained numerous clients’ personal information, was posted on a social media platform.

Subsequently, a class action was brought against FCS and others. As a result, FCS commenced a third-party claim against Laridae for breach of contract and negligence.

Both FCS and Laridae brought applications seeking a declaration that the appellant had a duty to defend them against the class action and third-party claim after their request was denied.

On the application, the appellant argued that coverage was excluded under both policies for any personal injury arising from the distribution or display of data (“data exclusion clause”). The respondents took the position that the data exclusion clause did not exclude all the claims against them. Moreover, the respondents argued that this was an important issue that should not be determined on an application

The application judge agreed with the respondents concluding that coverage should not be determined on an application. The judge also found that there is the possibility of coverage in this case. Lastly, the application judge concluded that the appellant would be obligated to fund both defences, if there was a conflict of interest between the two respondents and neither of which would report to appellant.

The appellant successfully appealed.

The Ontario Court of Appeal held that a determination regarding the appellant’s duty to defend could be made based on the application materials before the court. Through a coverage analysis, the court found that the exclusion clauses are clear and unambiguous. Moreover, the appellant court disagreed that some of the claims could be covered by the policy. Based on the substance of the claims pleaded in the class action, the allegations would fall directly within the policy exclusions. Therefore, the appellant owes no duty to defend either respondent.

Lastly, Appellate Court affirmed that the onus would be on the insured to establish a reasonable apprehension of a conflict of interest on the part of the insurer in order to remove their right to participate in the defence.

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Recently, the Ontario Court of Appeal (“ONCA”) unanimously upheld the Ontario Superior Court of Justice’s decision in Malik v Attia, 2020 ONCA 787 (“Malik v Attia”). In doing so, the Appellate court provided guidance on the appropriate use of partial summary judgments, outlining a list of requirements that should be satisfied prior to seeking this motion.

In Malik v Attia, a Seller listed two neighbouring properties to be sold together. Subsequently, two Buyers entered into an agreement with the Seller for the purchase and sale of each of the properties but were unable to secure firm mortgage financing. Consequently, the Seller commenced an action against the Buyers for breach of contract and for the forfeiture of the deposit. Two years later, the Seller moved for a summary judgment on her claim.

At the initial summary hearing, the motion judge determined that there was no genuine issue regarding the breach that would warrant a trial. The breach of contract, indisputably, occurred when the Buyers were unable to close on the transaction. As such, the motion judge, concluded that this case was one of the exceptional circumstances where a partial summary judgment would be an appropriate remedy. Subsequently, the motion judge bifurcated this action and directed the remaining issues of damages and the forfeiture of the deposit for trial.

The Buyers’ appealed.

The ONCA strongly disagreed with the decision to seek, and hear, this motion for a partial summary judgment. The Court stated this process had increased the cost and further delayed the final resolution of this matter, contrary to the objectives of summary judgments.

However, the Appellate court did not set aside the decision. ONCA determined that while this partial summary judgment was a costly and timely endeavour, it was not grounds for judicial interference.

For summary judgments to truly be a “faster and cheaper” way to access the civil court system, the Court of Appeal concluded that there needed to be a system in place to triage. That way, the adjudicator would be able to determine a case on its merits once and for all instead of a myriad of partial decisions.

To assist with this, ONCA provided the following criteria for motion judges to consider when determining whether a motion for partial summary judgment is appropriate:

1. Demonstrate that dividing the determination of this case into several parts will prove cheaper for the parties;
2. Show how partial summary judgment will get the parties’ case in and out of the court system more quickly;

• Establish how partial summary judgment will not result in inconsistent findings by the multiple judges who will touch the divided case.

This case cautions counsel seeking a partial summary judgment to (re)consider whether it is the appropriate avenue for achieving proportionate, timely and affordable justice for their client. As such, this decision is likely to result in fewer motions for partial summary judgment being brought and even less heard.

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Insurers Beware: Coverage for Business Interruption Losses Could Include Partial Cessation of Business Activity

In the recent Ontario Court of Appeal decision, Le Treport Wedding & Convention Centre Ltd. v. Co-operators General Insurance Company, the court reaffirmed the relevant principles for interpreting insurance policies, including coverage for business interruption losses.

Background

In this case, the plaintiff-insured operated a banquet hall that had suffered significant damage following a severe rainstorm. Among others, the policy included a sewer back up endorsement, flood endorsement, and indemnity for business interruption losses. Shortly following the date of loss, the insurer advised the plaintiff to cease business operations to complete the necessary repairs. The plaintiff declined to do so.

The insurer paid out its policy limits under the terms for sewer back up but denied coverage for flood and business interruption losses as the insured had failed to cease business operations. The plaintiff sued for coverage.

The trial judge held that losses due to sewer back up losses had been paid to its limits; the flood endorsement did not apply based on an application of a surface water exclusion which effectively precluded the plaintiff recovery; and dismissed all other claims. The plaintiff appealed and the appeal was allowed in part for coverage per the flood endorsement. Interestingly, though the appeal court affirmed the trial judge’s decision to deny the plaintiff coverage for business interruption losses, the court came to its conclusion based on a different understanding of the applicable law and policy term.

Ruling with Regards to Coverage for Business Interruption Losses

The relevant term of the policy stipulated that the “insurer agrees to indemnify the insured against loss directly resulting from necessary interruption of business.” The trial judge denied coverage on two grounds: first, the trial judge was not convinced the evidence supported an actual loss of profits. Second, and importantly, the trial judge adopted a narrow view of the term ‘necessary interruption of business’ as requiring a total cessation of activity for a period of time for coverage to arise. In the absence of the word, ‘interfere’, the trial judge concluded that business ‘interruption’ must mean total cessation of business activity to trigger coverage based on analogous cases.

The ONCA disagreed. Instead, the court held that though analogous cases may be useful for purposes of interpretation, the focus must nonetheless be on the specific language of the policy at issue. The ONCA relied instead on other portions of the policy to inform ‘interruption’ of business activity as including interference with or partial cessation of business activity.

This case thus serves as a reminder that coverage under policies must first and foremost be determined in view of the contract as a whole and its surrounding circumstances. Under a different set of facts, the policy for business interruption losses would have interpreted to include partial cessation of business activity though not expressly stated in the actual clause itself.

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Solicitor-client privilege is the cornerstone of our legal system. It can only be set aside in the rarest of circumstances. As a rule, solicitor-client privilege remains as close to absolute as possible. The exceptions are few. Recently, on appeal of a motion, the Ontario Divisional Court reviewed one such exception to the rule, the crime/fraud exception in Industrial Alliance Securities Inc. v Kunicyn, 2020 ONSC 3393.

BACKGROUND

The Respondent, Industrial Alliance Securities Inc., brought an action against the Appellant, Ms. Kunicyn, for the repayment of the remainder of a forgivable loan. In response, the Appellant counterclaimed that the remainder was compensation for the losses she incurred due to the termination of her agreement with Industrial Alliance. Additionally, the Appellant claimed for damages for breach of contract, breach of duty of good faith and malicious prosecution.

The Appellant pleaded that the Respondent procured her prosecution by the regulatory body, Investment Industry Regulatory Organization of Canada (“IIROC”). The Respondent allegedly facilitated her prosecution by providing false evidence in the form of a correction email. The email correction stated that the Respondent was, in fact, unaware of the appellant’s office sharing arrangement with a permanently barred investment representative until the IIROC investigation. The correction stems from the Vice President of the Respondent’s, Industrial Alliance, previous statements to IIROC claiming that the Respondent had long known of the appellant’s office sharing arrangement.

The President of the Respondent was examined for discovery regarding the circumstances of the correction email. However, the questions and requests for further productions pertaining to the correction email were refused on the basis of solicitor-client privilege.

Subsequently, the former Vice President of the Respondent, was examined and testified to being coerced into changing his IIROC testimony by the President. He stated that contents of the correction email were false and that the Respondent had known of the appellant’s office-sharing arrangement prior to entering into a business agreement with her.

THE MOTION

The Appellant brought a motion for an order to compel the questions regarding the correction emails to be answered and for the productions to be made. There was no issue that the information sought was privileged, rather it was whether the crime/fraud exception applied. However, the motion judge found the Appellant had not met the threshold for applying the fraud/crime exception.

The Appellant appealed the motion judge’s decision on two bases:

• the motion judge erred in requiring proof of a crime in applying the test for the exception;
• the motion judge erred in applying too high a standard of proof to the exception.

ON APPEAL

The fraud/crime exception, as per the Supreme Court of Canada in Descôteaux et al. v. Mierzwinski, [1982], is solicitor-client communication made for the purpose of committing a crime or the communication itself is a material element of the crime.

The Divisional Court found that the motion judge judiciously did not weigh in on the debate on whether the fraud/crime exception should be extended to include civil wrongs such as the tort of malicious prosecution. Instead, the motion judge turned to whether, if the exception could be extended, had the Appellant made out a prima facie case that the exception should apply?

The Court reviewed the alleged wrongdoing at issue in the Appellant’s counterclaim, malicious prosecution. The appellate judges found that there was no evidence to support the claim that it was impossible for IIROC to exercise independent discretion regarding her prosecution. Moreover, they found no evidence that the correction email, in any way, influenced IIROC’s prosecution of her. The evidence before the motion judge, and the Court, illustrates IIROC’s prosecution of the appellant stemmed from her arrangement with the banned investment representative.

Additionally, the Court disagreed with the Appellant that the motion judges analysis focused on whether there was prima facie evidence of malicious prosecution in deciding that the exception should not apply as that would have been erroneous.

The Court reaffirmed that the characterization of communications is central to the exceptions to the solicitor-client privilege. As such, the exception does not depend on whether communication is for a criminal or civil purpose.

At law, for a deceit to constitute a wrong, the dishonest conduct must cause injury. The Court took issue with the application of the exception in this case. There was an absence of prima facie evidence that the communications were either unlawful in of themselves, or they were made for the purpose of furthering unlawful conduct. The appellate judges determined that the evidence from the Respondent’s former Vice President does not show that the communications were made to injure the Appellant or that her injury would be a consequence from the correction email. While there was prima facie evidence to support that the correction email was a untrue; however, there was no prima facie evidence to support the Appellant’s allegation that the lie to IIROC would harm her or protect the Respondent.

In sum, the Court concurred with the motion judge’s finding that given the lack of harm stemming from the correction email, it does not warrant invoking what is meant to be “a very narrow exception to a very important privilege”.

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An Insurer’s Duty to Defend

In Développement les Terrasses de l’Îles inc. v. Intact, Compagnie d’assurances, 2019 QCCA 1440, the Court of Appeal of Quebec enforced Intact Insurance Company’s duty to defend, by overturning the Superior Court’s decision absolving the Insurer of its duty.

In this case, the Insureds purchased a commercial general liability insurance policy from Intact Insurance Company. An action was brought against the Insureds for damages and defects caused during the construction of a building. The claim was later amended to include damages resulting from structural issues, mould and water infiltration. The Insureds brought a claim against Intact when their Insurer declined to defend the action on the grounds that the damages claimed were not covered by the Policy.

The Superior Court held that the damages claimed did not result from a “loss” pursuant to the Policy, but instead, from construction and design errors attributed to the Insureds. Thus, the damages claimed were not covered by the Policy.

In a unanimous decision, the Court of Appeal overturned the ruling. The court reiterated a long standing principle that an Insurer’s duty to defend is triggered if the Insureds can demonstrate that material damages may be recoverable under the scope of the Policy. The Insurer can then resort to deferring liability if it can prove that a clear and unambiguous exclusion clause can preclude the claim. Intact had not proven that an exclusion clause excluded coverage, so it would be required to compensate for material damages, but not for the cost of remedying the consequences flowing out of those damages, such as water infiltration.

While there was some contention in discerning whether the damages occurred as a result of the defect, or were defects in and of itself, the court concluded that the duty to defend had been triggered nonetheless.

The court also advised that coverage provisions were to be interpreted broadly while exclusion clauses were to be interpreted restrictively. The court held that the lower court interpreted “loss” too narrowly. The design defects had caused unforeseen material damage and this was sufficient in triggering the Insurer’s duty to defend.

This case provides interesting dicta about an Insurer’s duty to defend and opines on the limits of this duty. While this decision may be persuasive, it is not binding on the courts of Ontario.

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The New Tort of Harassment? Not yet.

In the common law system where passed precedents rule the courts, breaking through the law to set your own, is the ultimate legal feat. But, how malleable is the justice system in allowing novel ideas to supersede its predecessor? In Merrifield v. Canada (Attorney General), 2019 ONCA 205, the plaintiff attempted to preserve the Superior Court’s decision to establish, for the first time, the tort of harassment. On appeal, this decision was overturned, with the court deciding that there was no freestanding tort of harassment in Ontario.

In this case, the plaintiff employee brought a claim against the RCMP management for harassment and bullying that caused severe impairments to his reputation, career and mental health over seven years. The strained relationship allegedly began after the plaintiff ran a campaign to be nominated as the Conservative Party’s candidate for Barrie, in the federal election. The plaintiff sought damages for the mental distress he suffered at the hands of the management.

The Superior Court’s Decision

In allowing the action, the trial judge held that the managers’ behaviour towards the plaintiff was egregious enough to warrant damages under the tort of harassment. The trial judge took into account the following, in order to establish entitlement for damages under harassment:

1. Was the conduct of the defendants toward the plaintiff outrageous?
2. Did the defendants intend to cause emotional distress or did they have a reckless disregard for causing the plaintiff to suffer from emotional distress?
3. Did the plaintiff suffer from severe or extreme emotional distress?
4. Was the outrageous conduct of the defendants the actual and proximate cause of the emotional distress?

The Court of Appeal’s Decision

When the RCMP appealed, the court decided that the trial judge erred in establishing a new tort of harassment because no legal authorities supported this tort; and this case was not one “whose facts [cried] out for the creation of a novel legal remedy.” The court held that there were other legal remedies such as tort of intentional infliction of mental suffering (IIMS) to redress the alleged conduct. Interestingly, the court decided that this case did not even meet the threshold for entitlement to damages under IIMS.

In affirming that a novel tort was unnecessary, the court reiterated a quote by McLachlin J, that: “common law change is evolutionary in nature: it proceeds slowly and incrementally rather than quickly and dramatically.” However, despite the resistance to recognize harassment as a tort, the court did not dispense with the possibility altogether, but instead suggested that this was not the appropriate case to inaugurate the change.

This case has at the very least, continued the conversation in Jones v. Tsige, 2012 ONCA 32 (Ont. C.A.), which established the tort of intrusion upon seclusion. As for harassment as a standalone tort – we’re not there yet. The law is quick to bind and slow to change. The legal community eagerly anticipates the breakthrough case that will establish harassment as a new tort, but for now, we continue to rely on human rights and employment standards legislation to protect against workplace harassment.

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Commit it to paper. Sign it. Seal it. Shake on it. This sums up the best practice to transact a contract in the legal community. Why? Because, the coveted realm within the four corners of a document is a confirmation binding one to their word.

With the Ontario Divisional Court’s recent decision in Shete, Lada, and Chung v. Bombardier Inc.,[1] however, it is now clear that verbal or unsigned agreements may be enforceable if there was a meeting of minds.

Bombardier terminated three employees, and offered them a termination package, with a Release precluding any future legal actions. The employees stated that they would accept the package if an additional $2,500 was added to each package to cover the cost of legal fees. Bombardier consented and returned the revised offers for the employees to sign. The employees never executed the offers. Two months later, the employees brought an action against Bombardier for wrongful termination.  Bombardier tried to dismiss the case by relying on the Releases.

The motions judge held the Releases were unenforceable because Bombardier’s revised offer constituted a new agreement that the employees had not accepted.

On appeal, the court ruled in favour of Bombardier, resolving that the Releases were enforceable even without the signatures of the employees. The court found that it was clear from the sequence of events that the parties had reached a settlement. The employees represented that they accepted the Releases conditionally, as long as Bombardier paid the additional $2,500 each. Bombardier conceded, and no other terms were added or modified; nor were any such requests made by the employees. Even though the employees may have reconsidered their position, an enforceable contracted existed nonetheless.

This case has opened up inquiries as to what now constitutes a preliminary agreement; at what point a contract is binding without a signature, and finally, what happens when there is a brief meeting of minds, but a party has reconsidered their position, thereafter? Until such questions are clarified, don’t throw caution to the wind: just get the signature.

[1] 2019 ONSC 4083

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