Court Of Appeal Summaries (August 17 ' 21, 2020)

• Published date: 27 August 2020
• Subject Matter: Litigation, Mediation & Arbitration, Insolvency/Bankruptcy/Re-structuring, Insolvency/Bankruptcy, Trials & Appeals & Compensation, Civil Law
• Law Firm: Blaney McMurtry LLP
• Author: Mr John Polyzogopoulos

Good afternoon.

There was only one substantive decision of the Court of Appeal for Ontario last week.

In a lengthy decision in McEwen (Re) , the Court determined that a panel of the Court had the jurisdiction to review the decision of a single member of the Court sitting in chambers that denied leave to appeal under s. 193(e) of the Bankruptcy and Insolvency Act.

CIVIL DECISIONS

McEwen (Re) 2020 ONCA 511

[Gillese, Brown and Paciocco JJ.A.]

Counsel:

Harvey Chaiton and Alan L. Rachlin, for the moving party Traders General Insurance Company

Joseph Y. Obagi, for the responding parties, BC et al.

Keywords: Torts, Negligence, MVA, Contracts Automobile Insurance, Bad Faith Claims, Bankruptcy and Insolvency Automatic Stay, Property of the Bankrupt, Choses in Action, Civil Procedure, Lifting Automatic Stay, Appeals, Motions to Review Jurisdiction, Leave to Appeal, Constitutional Law, Doctrine of Paramountcy, Bankruptcy and Insolvency Act, R.S.C. 1985 c. B-3, ss. 37, 38, s. 41(10), 67(1)(c), 183(2), 187(5), 193(a), 193(e), Courts of Justice Act, R.S.O. 1990, c. C.43, ss. 7(5), Bankruptcy and Insolvency General Rules, C.R.C., c. 368, Rule 3, Carroll v. McEwen, 2018 ONCA 902, Dundas v. Zurich Canada, 2012 ONCA 181, Business Development Bank of Canada v. Aventura II Properties Inc., 2016 ONCA 408, Business Development Bank of Canada v. Pine Tree Resorts Inc., 2013 ONCA 282, R. v. Scherba (2001), 54 O.R. (3d) 555 (C.A.), Alberta (Attorney General) v. Moloney, 2015 SCC 51, Business Development Bank of Canada v. Astoria Organic Matters Ltd. , 2019 ONCA 269, Millcraft Investment Corp. v. Ontario (Regional Assessment Commissioner, Region No. 3) (2000), 46 O.R. (3d) 685 (Div. Ct.), Hillmond Investments Ltd. v. Canadian Imperial Bank of Commerce (1996), 29 O.R. (3d) 612 (C.A.), Denison Mines Ltd. v. Ontario Hydro (2001), 56 O.R. (3d) 181 (C.A.), Universal Am-Can Ltd. v. Tornorth Holdings Ltd. et. al. (2003), 177 O.A.C. 297 (Div. Ct.), Tseng v. Toronto (City) , 2011 ONSC 191 (Div. Ct.), Exchange Tower Ltd. v. Municipal Property Assessment Corp., Region No. 9, 2012 ONSC 415 (Div. Ct.), R. v. R.E.M., 2008 SCC 51

facts:

On March 28, 2009, the responding party, BC, a pedestrian, was struck by a car driven by RM and owned by CM. BC suffered serious injuries.

On March 25, 2011, BC and the other plaintiffs commenced an action in Ottawa against RM and CM (the "MVA Action"). They also named Aviva Canada Inc. ("Aviva") and Pilot Insurance Company ("Pilot") as defendants on the basis that one or both of them had issued motor vehicle liability policies that provided the plaintiffs with additional coverage with respect to inadequately insured motorists under an OPCF Family Protection Coverage 44R endorsement. In fact, Pilot, not Aviva, insured the plaintiffs. As well, it was determined that Traders General Insurance Company ("Traders") had insured the McEwens, not Aviva, which is a corporate holding company that operates Traders.

On September 15, 2011, the RM and CM made an assignment into bankruptcy and Doyle Salewski Inc. was appointed trustee of both their estates (the "Trustee"). The M's Statement of Affairs listed the realizable value of their unencumbered assets as $6,450, against which there were liabilities owed to unsecured creditors of $456,964.83. The lawyers for the plaintiffs were identified as an unsecured creditor in the amount of $375,000.

On June 16, 2012, the M's were discharged from their bankruptcies. The Final Dividend Sheet showed dividends paid to creditors totaling $2,985.85. Neither the plaintiffs nor their lawyers were listed as creditors. Subsequently, the Trustee was also discharged.

On October 12, 2012, the plaintiffs obtained an order from Master Roger that: (i) declared the stays contained in ss. 69 to 69.4 of the Bankruptcy and Insolvency Act ("BIA") no longer operated with respect to the MVA Action "to have the proceeds of any liability insurance policy applied in or toward the satisfaction of the claim" (emphasis added); (ii) set aside the automatic stay of the MVA Action resulting from the assignments in bankruptcy; and (iii) granted the plaintiffs leave to continue the MVA Action against the M's.

The MVA Action proceeded to trial on September 14, 2015, before a jury and McLean J. In October 2015, the jury rendered a verdict awarding damages to the plaintiffs.

Prior to the start of the trial, the parties exchanged some offers to settle. Copies of the offers were not in the record on this motion. However, McLean J. described some of the offers in post-verdict reasons that he issued on May 19, 2016. He identified two joint offers made by Traders and Pilot on August 27, 2015 and on September 11, 2015. McLean J. noted that the plaintiffs had made various offers, but they stipulated that there would be no assignment of statutory accident benefits. According to the Trustee's factum filed on the motion before Kershman J. to set aside the BIA s. 38 Order, "[o]n or about September 9, 2015, the plaintiffs offered to settle the [MVA] Action against the M's, within the policy limits of the M's policy, however, Traders refused to accept their offer". This was the only information before the Court of an offer made by the plaintiffs to settle the MVA Action within the limits of the M's policy with Traders.

On September 23, 2015, the Trustee - which had been discharged several years before in 2012 - sent the McEwens' trial counsel and an Aviva claims analyst a communication that stated, in part: We are advised that the claimants BC and her family have offered to settle this [MVA] Action against the M's for the limits of their automobile liability policy, namely $1 million dollars, plus costs and that Aviva has failed to accept that offer and has proceeded to trial. This course of conduct places Aviva's financial interest in priority to that of its insureds - the M's, and accordingly is bad faith conduct. Aviva has a duty to settle this lawsuit within the limits of the policy and it has failed to do so. This is notice to you that in the event a Judgment is granted against the M's for any sum greater than the limits of the liability policy, we hold Aviva fully liable for the excess amount. It is unclear whether the Aviva claims analyst in fact received a copy of the Trustee's communication.

In reasons for decision dated May 19, 2016, McLean J. stated that "the clear effect of the Bankruptcy Order that the M's exposure is limited to their policy limits" and that "the judgment of the jury against the M's must be restricted to the amount of their liability and the jury verdict will be subject to the proviso that it is limited in its enforceability to the amount of insurance otherwise payable."

The parties were unable to settle the terms of judgment. As a result, another hearing was held before McLean J. on September 19, 2016 to settle the judgment. The plaintiffs proposed that two separate judgments should be issued, the second of which would deal with the issues of the assignment of statutory accident benefits ("SABs") and the effect of the M's bankruptcies. McLean J. declined to include in the final judgment the additional language sought by the plaintiffs.

A judgment dated October 30, 2015 was issued that stated the M's were liable to (i) BC for damages of $2.418 million consisting of $186,000 in general damages and $2.232 million in future care costs; (ii) to the other plaintiffs for damages totaling $102,132.60; and (iii) for pre-judgment interest on all amounts ("Judgment"). Pilot was adjudged...