Top 5 Civil Appeals From The Court Of Appeal – May 2018

1. Nodel v. Stewart Title Guaranty Company, 2018 ONCA 341 (Epstein, Paciocco and Nordheimer JJ.A), April 9, 2018

   In this case, a title insurer sought to avoid coverage for a mortgage fraud on the basis of a provision that excluded coverage for funds paid to any person other than the registered title holder.

   The respondent, Karl Nodel, was a private mortgage lender. He agreed to loan $1,100,000 to a man posing as John Colarieti (the borrower). The loan was secured with a second mortgage on a valuable residential property registered in Colarieti's name.

   Nodel hired a lawyer, Isaac Singer, to arrange mortgage security and to close the transaction. He instructed Singer to acquire mortgage insurance. Singer, an "Examining Counsel" authorized to assist in the purchase of mortgage insurance from the appellant, Stewart Title Guaranty Company, arranged mortgage insurance from Stewart Title that included coverage for mortgage fraud. At closing, Singer paid the mortgage money to the borrower's lawyer, Bryan Dale, in trust. After he received the money, Dale did not transfer it to his client, but instead transferred the funds to third parties under his client's direction. The money and the client then disappeared.

   At Nodel's direction, Singer made a claim against Stewart Title for coverage under the policy because of the mortgage fraud. Stewart Title refused to pay, relying on the following clause in the policy:

2. Notwithstanding anything else contained within this Policy, in the event the proceeds of the Insured Mortgage are paid to any person or entity other than: i) to the registered title holder ... then the Company can deny coverage and shall have no liability to the insured for any matters that involve the allegation of mortgage/title fraud.

   Since Nodel's lawyer had paid the mortgage proceeds to the borrower's lawyer, in trust, rather than directly to the borrower, Stewart Title said the exception applied.

   Nodel sued Singer, who commenced a third party claim against Dale and Stewart Title. LawPro, the insurer for both Singer and Dale, settled with Nodel and took over the claim against Stewart Title. LawPro and Stewart Title agreed to resolve the dispute about insurance coverage through an application by LawPro, in Nodel's name, for a declaration that the title insurance provided coverage for the losses incurred.

   The application judge concluded that the exclusion did not apply and that the policy provided coverage for Nodel's loss. In her view, the registered title holder was paid when the borrower's lawyer received the mortgage proceeds in trust.

   The Court of Appeal dismissed Stewart Title's appeal, holding that the application judge was correct in her finding.

   Writing for the court, Paciocco J.A. acknowledged that the impugned provision was ambiguous: the exclusion applied either where money was paid beneficially to someone other than the borrower, or where money was handed over or delivered to someone other than the borrower. He held, however, that when it was interpreted in context, in light of the reasonable expectations of the parties and in a commercially sensible manner, the ambiguity was resolved. Properly interpreted, the exclusion enabled Stewart Title to deny coverage if the proceeds of the mortgage were transferred beneficially to any person or entity other than the borrower. This did not happen here. The payment was made in trust to the borrower's lawyer for the benefit of the borrower. It was, in law, a payment to the borrower. Paciocco J.A. also noted that payment of mortgage money to a borrower's lawyer in trust is a routine practice. Disqualifying coverage where payment is made to the borrower's lawyer in trust would not produce a reasonable commercial result.

   In dissent, Nordheimer J.A. held that the wording of the exclusion was unambiguous and, by its plain terms, applied to this situation. The mortgage funds were not handed over or transferred to the registered title holder, or the person everyone assumed was the registered title holder, and thus the funds were not paid in accordance with the terms of the insurance contract. If they had been, and the person posing as the registered title holder had managed to take off with the funds, then undoubtedly Stewart Title would have had to provide coverage. In this case, however, the mortgage funds were paid in breach of the express terms of the insurance policy and, as a result, Stewart Title was entitled under the terms of the policy to deny coverage.

   The appeal was dismissed.

2. Wallbridge v. Brunning, 2018 ONCA 363 (Juriansz, Lauwers and Miller JJ.A.), April 13, 2018

   The respondent Williams Litigation Lawyers is a partnership of lawyers located in Ottawa. The respondent Fay Brunning, a lawyer, practiced "in association" with Williams. This case raised the question of whether Williams could be vicariously liable for defamatory statements allegedly made by Brunning and, as the Court of Appeal has pointed out, has potentially far-reaching implications for lawyers and firms practicing in this fashion.

   Brunning's practice was separate from that of Williams, but she shared the same office address, telephone number, fax number, and front desk receptionist. She paid Williams a monthly fee for the space and facilities she used in its office.

   Significantly, Williams authorized Brunning to use its letterhead, without supervision.

   This letterhead referenced Brunning as "Practicing in Association, not in Partnership". Brunning's name was listed with other lawyers' names in the header of the letterhead, with an asterisk beside her name - the only one with an asterisk. The footer of the letterhead listed Brunning's name again, along with her...