Fall 2018 – Newsletter

By Tom Macmillan

The City of Hamilton has been busy recently at the Ontario Court of Appeal, acting as appellant on two separate appeals relating to findings of liability for non-repair of intersections.  The City was found partly at fault at the trial level in both actions, on similar facts.

Although the two appeals, Chiocchio v. Hamilton (City), 2018 ONCA 762, and Smith v. Safranyos, 2018 ONCA 760, deal with similar fact scenarios, they were heard by separate panels.

Given that the panels came to different conclusions on liability against the City on similar facts, one queries whether the results would have been different were the appeals argued together.

Read together, we are left with some guidance on how the Courts will address municipal liability in the context of allegations of non-repair.  The distinction between the facts in this case, however, provide lower courts with little guidance on how to determine when a municipality has failed in its duty to ensure safe intersections.

Section 44 of the Municipal Act, S.O. 2001, c.25 imposes on a municipality the obligation to keep highways under its jurisdiction,

…in a state of repair that is reasonable in the circumstances, including the character and location of the highway.

The Court of Appeal in Fordham v. Dutton-Dunwich (Municipality), 2014 ONCA 891, outlined that a municipality is required to prevent or remedy conditions on its roads that create an unreasonable risk of harm for ordinary drivers, exercising reasonable care.

The court in Fordham stressed that ordinary drivers make mistakes, and are not perfect, and a municipality must take that into consideration in its obligation with respect to highways.

However, the court made it clear that a municipality’s duties with respect to repair do not extend to remedying conditions that pose a risk of harm caused by negligent driving.

It is this last point that came to a head in both Chiocchio and Smith.

Chiocchio v. Hamilton (City) – Trial Decision

In Chiocchio, the plaintiff was a passenger in a motor vehicle which was travelling northbound when it was t-boned by the defendant Mr. Ellis.  Mr. Ellis had been stopped at a stop sign at the intersection, and had accelerated into the intersection.

There was no stop sign facing the plaintiff’s motor vehicle, and no dispute that Mr. Ellis was responsible for the accident.  He conceded at trial that he did not see the plaintiff’s vehicle.

At issue was the state of the intersection.  The stop sign was located between 8.4 and 9.4 metres back from a faded stop line, which itself was located between 1.9 and 2.9 metres behind the entrance to the intersection.  The stop line had last been painted about two years prior to the accident.

Furthermore, any driver stopped at the stop sign would have his view of southbound cross-traffic completely obscured by a house.  The sightlines for southbound traffic were clear, once a driver reached the edge of the intersection.

The trial judge apportioned liability at 50% against both the municipality and Mr. Ellis.

The City of Hamilton appealed.

Smith v. Safranyos – Trial Decision

In Smith, the injured plaintiffs were passengers in a vehicle operated by the defendant Safranyos.  Ms. Safranyos’ vehicle was travelling westbound, intending to turn left onto a more major roadway.

As in the Chiocchio case, she stopped at the stop sign, and without stopping again proceeded to enter the intersection thinking it was clear of traffic.  It was not, and her vehicle was t-boned by a vehicle operated by the defendant, Mr. McHugh.

In terms of the intersection, the stop sign facing Ms. Safranyos in Smith was located ten metres back of the intersection.  There had been at one point a stop line, but it had been removed about three years prior to the date of the accident.

In addition, there was evidence that the rising elevation of the arterial road approaching the intersection from the south, combined with a guardrail along the side of that road, made for partially-obstructed visibility to vehicles in Ms. Safranyos’ position.

As an added wrinkle, Mr. McHugh had consumed alcohol prior to operating his vehicle, and it was accepted by the trial judge that at the time of the impact he was travelling at least 15km/h over the speed limit.

The trial judge apportioned liability as follows:

Ms. Safranyos: 50%

Mr. McHugh: 25%

City of Hamilton: 25%

Both Mr. McHugh and the City of Hamilton appealed.

Appeal Decisions

Despite the similar facts in these cases, the two separate panels that heard these appeals came to different conclusions on liability with respect to the municipality.

In Chiocchio, the court granted the City’s appeal, and dismissed the action as against it.

In Smith, the court rejected the City’s appeal, leaving it with 25% of the liability for the accident for reason of non-repair of the intersection.  The Court granted Mr. McHugh’s appeal, dismissing the action against him.

So what are we to make of these differing rulings on the issue of non-repair? In particular, how are we to understand the standard of care of a municipality with respect to negligent drivers?  The most dynamic component of this question comes from the interplay between two statues, the Municipal Act and the Highway Traffic Act, R.S.O. 1990, c. H8.

 As noted above, the Municipal Act imposes on municipalities the obligation to keep highways in a state of repair, keeping in mind the reasonable driver, a prudent driver who nevertheless makes mistakes.

Added to the mix is the Highway Traffic Act, which dictates how motorists must behave on the roads, including at intersections where there are no stop lines.

Section 136(1) of the Highway Traffic Act outlines that, in the absence of a stop line, a driver must stop at the first painted marker of the pedestrian crossing at an intersection.  In the absence of a pedestrian crossing, then a driver must stop at the edge of the intersection.

In addition, the courts have consistently held that a reasonable driver only proceeds through an intersection when she believes it is safe to do so, meaning that a reasonable driver puts herself in a position to adequately observe the intersection, even if that means stopping again further ahead than the stop line or stop sign at an intersection.

The City of Hamilton in both Chiocchio and Smith argued that the intersections at issue in these cases were not unsafe for the reasonable driver, because the reasonable driver would have stopped at the stop sign, and then stopped again before proceeding into the intersections.

Furthermore, the City argued that, by failing to do so, the defendants Mr. Ellis and Ms. Safranyos were not reasonable drivers, but negligent drivers.  Implied in this latter argument is that their behaviour went beyond the accepted “mistakes” that reasonable drivers make, and that the City was not under an obligation to design and maintain intersections with such negligent behaviour in mind.

The Court of Appeal agreed with the City’s arguments in Chiocchio, and rejected them in Smith.

The panel in Chiocchio found that the trial judge erred, in that he did not support his conclusion that the intersection at issue posed an unreasonable harm to ordinary reasonable drivers.

The Court of Appeal found that a reasonable driver would have stopped at the stop sign, and then stopped again at the edge of the intersection, before proceeding into the intersection.

The Court of Appeal indicated that the municipality was not under an obligation to contemplate the obviously negligent actions of a driver operated his vehicle in the manner of Mr. Ellis.

The panel in Smith, however, came to a different conclusion on the facts of that case.  On appeal the court found that the trial judge did not err in concluding that the absence of a stop line amounted to non-repair as contemplated by the Municipal Act.

The trial judge in Smith had based her finding of liability against the City both on the absence of a stop line, and on the fact that there was partially obstructed visibility at the intersection.

The Court of Appeal was careful to point out that the trial judge did not ground her finding of liability against the City solely on this latter issue.  To find otherwise would be to suggest that any intersection with partially obstructed visibility would, by its very existence, attract liability on a municipality.

Instead, the Court noted that it was within the right of the trial judge to find that the sightlines at the intersection contributed to the danger, already caused by the absence of the stop line.

The Court further noted that, even if the trial judge’s findings on sightlines were in error, that error was not palpable, given the non-repair finding based on the missing stop line.

Conclusion

The result of these two rulings leaves us with little in the way of guidance in determining municipal liability for non-repair, in the context of intersection layout.  In both cases, there were stop signs situated well back of the intersection.

Both cases featured limited sightlines for drivers stopped at the stop sign.  In Chiocchio there was a faded stop line, and in Smith there was none.  Moreover, each panel had similar accidents, suggesting that the alleged non-repair resulted in the same type of behaviour by confused motorists.

There is enough in the two judgments to suggest that the sightline issue in Smith was more pronounced, but even so, this is a relatively thin factual distinction, particularly when the court in Smith went out of its way to say that partially-obscured sightlines cannot, in themselves, ground a finding of liability against a municipality.

In short, these two cases leave future litigants with uncertainty on how the courts will treat cases of this nature in the future.  One can perhaps sympathize with the City of Hamilton for feeling like it has been left with insufficient clarity, when faced with intersections like those in these two cases.

One questions whether a further panel will be convened to make sense of these two rulings, or whether we will be left to argue in the future whether an intersection is of the Chiocchio variety or the Smith variety.

 By Stephen Ross & Meryl Rodrigues

Over three years have passed since the release of the Ontario Court of Appeal’s decision in Westerhof v. Gee Estate[1], wherein the Court definitively outlined the role of “participant experts”.

In short, the Court noted that participant experts, with special skill, knowledge, training, or experience, who have not been engaged by or on behalf of a party, may give opinion evidence for the truth of its contents, without compliance with Rule 53.03, where the following conditions are met:

• the opinion to be given is based on the witness’ observation of or participation in the events at issue; and,
• the witness formed the opinion to be given as part of the ordinary exercise of his or her skill, knowledge, training and experience while observing or participating in such events.

Despite the passage of time, there does not appear to have been much consideration of the role of participant experts within the framework for the admissibility of expert evidence in general, as outlined most recently by the Supreme Court of Canada in White Burgess Langille Inman v. Abbott and Haliburton Co.[2] and subsequently articulated by the Ontario Court of Appeal in R. v. Abbey[3].

Admissibility of Expert Evidence

The White Burgess framework sets out threshold criteria for the admissibility of expert evidence, all of which are to be met before the trial judge exercises his or her gatekeeping function in determining whether the benefits of admitting the evidence outweigh the costs of admission.

Arguably, the threshold criteria of logical relevance, necessity, and the absence of the application of an exclusionary rule require no particularly special consideration in the context of participant experts, versus litigation experts subject to Rule 53.03.

However, the same cannot be said of the threshold criterion of proper qualification, which, according to White Burgess and Abbey, requires that the expert be “willing and able to fulfil the expert’s duty to the court to provide evidence that is: (i) [i]mpartial, (ii) [i]ndependent, and (iii) [u]nbiased.”

The importance of this criterion cannot be overstated. Indeed, considerations of impartiality, independence and bias arise both at the threshold stage and in the gatekeeping stage of the framework.

Moreover, the Supreme Court in White Burgess held that an expert’s lack of impartiality and independence and an expert’s bias go both to admissibility of the evidence, as well as to the weight it ought to be given if admitted.[4]

Duty of Participant Experts

Consider these factors as they relate to participant experts. As stated above, participant experts are not subject to Rule 53.03, which requires that an expert acknowledge his or her duty to the court to provide fair, objective and non-partisan opinion evidence, overriding any duty that may be owed to a party (Form 53).

Although the Court in Westerhof did indicate that the court could require a participant expert to comply with Rule 53.03, this was in respect of opinion evidence that may be “beyond the scope of an opinion formed in the course of treatment or observation for purposes other than the litigation.”

What of the opinion that is formed in the course of treatment or observation for purposes other than litigation? Surely, only qualified and otherwise impartial and unbiased experts should be permitted to give opinion evidence in court.

However, both pre- and post-Westerhof, it has been commonplace to have a plaintiff’s treating doctor testify not only as a fact witness, but also to proffer opinion evidence speaking to diagnosis, treatment and prognosis evidence.[5]

It seems this has been with little or no regard to the factors of impartiality, independence, and bias underlying admissibility of such opinion evidence, from a medical professional whose duty is, arguably, to his or her patient, and not to the court.

Recent Case

An example may serve to highlight the concerns this should raise. In Imeson v. Maryvale,[6] the trial judge permitted the plaintiff’s treating psychologist to testify as a participant expert, and to proffer opinions formed as part of the ordinary exercise of his skill, knowledge, training and experience while observing or participating in the events at issue.

While the trial judge acknowledged those limits on the opinions that could be provided by the psychologist, there is no consideration given to a potential lack of impartiality or independence, or to bias – either as a threshold criterion or as a gatekeeping exercise.

It is submitted that concerns relating to impartiality, independence and bias are particularly acute in such a context as that in Imeson.

Ontario courts have recognized that a treating mental health practitioner, who establishes a therapeutic alliance with a patient, faces a challenge being objective and may be considered an advocate for the patient.[7]

One wonders whether such a treating practitioner can be sufficiently impartial, independent and unbiased, to permit the opinions permissible from participant experts under Westerhof.

Arguably, similar considerations can apply in the context of other treating practitioners, particularly ones with longstanding relationships with the plaintiff. Certainly, at the very least, the issues of impartiality, independence and bias ought to be canvassed before allowing such participant experts to provide their opinions pursuant to the Westerhof guidelines.

The court should be satisfied that, although their first duty in the course of care or treatment with the plaintiff is to the plaintiff, their first duty in the course of testifying at trial is to the court.

Once such baseline impartiality has been both acknowledged and accepted, perhaps the opinion can be tendered, with any remaining reservations regarding partiality, independence or bias going to the weight to be afforded such testimony.

Conclusion

It appears that “participant experts” are here to stay and will be part of the trial landscape for the foreseeable future. It is hoped, however, that, over time, greater clarity will emerge regarding the limits surrounding the admissibility of such opinion evidence.

As indicated, it is the authors’ view that the evidence of participant experts should be put at least to the same judicial scrutiny as that applied to the proposed admission of any expert opinion.

White Burgess and Abbey reveal that the threshold admissibility of expert evidence requires impartiality, independence and a lack of bias. It is submitted that no less should be required and expected of participant experts in our courtrooms.

[1] 2015 ONCA 206.

[2] 2015 SCC 23.

[3] 2017 ONCA 640.

[4] Considerations of bias with respect to expert evidence in the criminal context were recently outlined in R.  v. Natsis, 2018 ONCA 425.

[5] See Davies v. The Corporation of the Municipality of Clarington, 2016 ONSC 1079.

[6] 2016 ONSC 6020 – appeal pending.

[7] R v. Brown, 2006 CarswellOnt 2329, aff’d 2007 ONCA 607. See also, R v. K(L), 2011 ONSC 2562.

By David Rogers

Brandon Gomes and Michael Da Silva were two 16 year old boys playing against one another in a soccer game. An altercation ensued, and Gomes punched Da Silva in the face.

As a result, Da Silva was injured and Gomes was convicted of criminal assault. Da Silva and his family in turn brought an action for civil damages against Gomes as well as Gomes’ coach, the team manager, the Hamilton Sparta Sports Club, its vice president, and the Ontario Soccer Association Inc.

All defendants, with the exception of Gomes, were successful on summary judgment, and the claims against them were dismissed. The plaintiffs appealed and in Da Silva v. Gomes (2018 ONCA 610), the Ontario Court of Appeal dismissed the appeal.

The Court of Appeal found that the motion judge correctly rejected the plaintiffs’ argument that Gomes’ previous conduct showed a risk that he would commit violence against an opposing player.

None of his previous conduct led to this finding. Instead, Gomes’ act of punching Da Silva was a sudden and unexpected event that could not have been anticipated by any of the other defendants.

The Court of Appeal specifically approved of the motion judge’s reliance on school board cases as useful analogies regarding the standard of care, and confirmed that the law is clear that supervising authorities are not responsible for a sudden unexpected event in the midst of acceptable, safe activity.

Further, the Court of Appeal found that the motion judge correctly pointed out the fact that Gomes knew he was not to punch other players, but he did so anyways, impulsively.

Therefore, no preventative discipline would have deterred Gomes such that the assault would not have occurred, and so even if the defendants had breached the standard of care, the plaintiffs’ claims against them would fail on causation.

This determination on the standard of care should apply not only to school boards, but also most sport and recreational bodies. Further, the consideration of a causation defence is important where the acts would likely have occurred regardless of whether the defendant has, or has not, met the standard of care.

By David Rogers

The law related to civil damages in claims for long term sexual abuse has developed significantly over the past number of decades. Courts now recognize the potential devastation that can be caused by exposure to long term sexual abuse, notably in young children.

The law related to clams for a sexual assault is not nearly as developed. However, victims of sexual assault are now more readily bringing claims for damages in our civil courts.

In this context, the Ontario Court of Appeal, in Zando v. Ali (2018 ONCA 680), recently looked at how courts can assess non-pecuniary damages in sexual assault cases.

Trial Decision

Iram Zando brought a civil claim for damages against Syed Ali based on her allegation that he had sexually assaulted her at her home on June 22, 1999. At the time of the assault, both parties were physicians, friends and colleagues at the Sarnia General Hospital.

Following a three week trial, Morissette J. found, on a balance of probabilities, that the assault had occurred and awarded the plaintiff general damages of $175,000, punitive damages of $25,000, pre-judgment interest of $155,773.97 and costs of $325,000.

Appeal Decision

The defendant appealed the assessment of damages.

The defendant took the position that the trial judge erred in her assessment of general damages by considering claims involving much more serious, long term abuse.

For example, in determining the appropriate range of non-pecuniary damages, the trial judge had considered cases such as Nova Scotia v. B.M.G., a case involving repeated sexual assaults on a child by a person in a position of trust and Evans v. Sproule, a case involving a police officer who sexual assaulted a woman he had detained during a traffic stop.

The defendant argued that this assault was a single incident involving persons of equal status and there was no evidence of any long term psychological trauma. Therefore, the damage award should be significantly reduced.

The Court of Appeal rejected these arguments and found that it was open to the trial judge to adopt the range of damages in line with those found in long term abuse cases and assault cases with a significant power imbalance.

The trial judge correctly identified specific features of the assault consistent with the purpose of such damage awards, such as the plaintiff’s subsequent feelings of shame, guilt, humiliation and degradation.

A court does not require a finding of long term psychological trauma in order to award significant damages. This is because damages for sexual battery and assault are not awarded just to fully compensate for the physical and mental injuries.

One of the key purposes of non-pecuniary damages in sexual assault and battery cases is “to provide solace for the victim’s pain and suffering and loss of enjoyment of life, to vindicate the victim’s dignity and personal autonomy and to recognize the humiliation and degrading nature of the wrongful act.”

Conclusion

Case law is now starting to develop in these types of civil sexual assault claims with recognition of the serious impact of sexual violence, regardless of the relationship between the parties or number of times it occurs.

Factors such as shame, guilt, humiliation and degradation can exist following any type sexual assault. Damage awards will likely start to greater recognize this fact.

By Alon Barda

In A.F. v. North Blenheim Mutual Insurance Company,[1] the Executive Chair of the Licence Appeal Tribunal (LAT) reconsidered two decisions where the Tribunal applied the two year limitation under s.56 of the SABS and dismissed the claims as statute barred.

The Executive Chair on her own initiative held that it was a significant error of law for the Tribunal not to consider s.7 of the Licence Appeal Tribunal Act[2] (LAT Act) and sent both matters back for a hearing on the application of s.7, which states as follows:

Despite any limitation of time fixed by or under any Act for the giving of any notice requiring a hearing by the Tribunal  …  if the Tribunal is satisfied that there are reasonable grounds for applying for the extension and for granting relief, it may,

(a) extend the time for giving the notice either before or after the expiration of the limitation of time so limited; and

(b) give the directions that it considers proper as a result of extending the time.

In her decision, the Executive Chair highlighted that the Tribunal, in determining whether to grant an extension of time under s.7 of the LAT Act, generally weighs the following four factors to determine whether the case is one that warrants an extension to be granted:

1. The existence of a bona fide intention to appeal within the appeal period;
2. The length of the delay;
3. Prejudice to the other party; and,
4. The merits of the appeal [challenge of insurer’s denial].

An extension of a limitation period was not available under the FSCO regime and the question at the time of the A.F. v. North Blenheim decision was the circumstances at which the LAT would apply s.7 to relieve against missed limitation periods.

There have since been three decisions that have applied s.7 and these decisions provide insight into the application of s.7 for SABs disputes at the LAT.

D.A. v. Aviva Insurance Canada

The first decision on this issue after A.F. v. North Blenheim was D.A. v. Aviva Insurance Canada.[3] In that case, a preliminary issue was raised by the insurer that the applicant was statute barred pursuant to s.56 of the SABS from appealing the insurer’s refusal to pay non-earner benefits (NEBs).

The Tribunal ultimately found that the applicant filed the appeal in time and was not statute-barred.

Nevertheless, the Tribunal went on to consider the application of s.7, which the adjudicator noted allows the Tribunal to extend the time for filing an appeal of a denial of benefits beyond the limitation period if the Tribunal is satisfied that there are reasonable grounds to do so.

The Tribunal noted the four factors as set out in A.F. v. North Blenheim and found that the applicant would meet the four-part test for a s.7 extension if one were necessary.

In this regard, the Tribunal stated that the applicant was involved in the dispute resolution process (at FSCO, prior to filing an Application at the LAT) and, therefore, had a bona fide intention to file an appeal within the appeal period.

Furthermore, the Tribunal found that the (at most) five week delay was not lengthy and the Tribunal also highlighted that there was no claim by the insurer that proceeding with the appeal would result in prejudice.

In terms of the last factor to consider, the Tribunal stated that the insurer did not challenge the merits of the appeal and, therefore, the Tribunal had no reason to doubt the NEB appeal warranted a hearing on the substantive evidence.

The Tribunal ultimately found that, while it was unnecessary to invoke s.7, the applicant’s claim for NEBs nevertheless met the criteria for granting an extension.

17-004874 v. Economical Mutual Insurance Company

More recently, in 17-004874 v. Economical Mutual Insurance Company,[4] the insurer similarly raised a preliminary issue that the applicant was barred from filing an application with respect to her claim for NEBs since the application was not filed within two years of the insurer’s denial.

In that case, the applicant was a minor and the insurer denied her NEBs on February 7, 2012. The applicant turned 18 in November 2014 but did not file an Application with the LAT until July 20, 2017, which is more than two years after the claimant turned 18 years old.

On the issue of extending the limitation period, the Tribunal noted that the overriding consideration on a request for an extension of time is whether the justice of the case requires such an extension.

In addressing the first factor, the Tribunal found that the applicant did not have a bona fide intention to appeal within the appeal period a she had an opportunity to appeal from February 7, 2012 (the date of the denial) to November 16, 2016 (the day she turned 20 years old).

The Tribunal stated that an intention to appeal is an intention to commence a proceeding at the LAT and “anything short of taking steps to commence a proceeding to the Tribunal” does not “amount to satisfying the first factor in determining the test of whether an extension of time shoulder be granted under s.7 of the LAT Act.”

In terms of the delay, the Tribunal held that the eight month delay in the applicant filing her application was not a reasonable period of time in the circumstances of the case.

The Tribunal also found that prejudice to the insurer outweighed that of the applicant as the applicant had not identified the prejudice that would be suffered by the applicant. In this regard, while the applicant suggested that the Tribunal can compensate the insurer with a cost award to remedy the prejudice, the Tribunal stated that this is not grounds for issuing a cost award at the LAT.

Finally, the Tribunal held that, even if it were to find the applicant’s NEB claim has merit, a consideration of all of the factors together with the facts of the case result in a finding that the justice of the case favours not extending the limitation period.

Conclusion

The above cases highlight that s.7 of the LAT Act is indeed available to be applied in accident benefit disputes at the LAT and has been applied to extend a limitation period.

Nevertheless, the most recent decision on this issue demonstrates that the applicant must establish that the justice of the case requires the granting of an extension of a missed limitation period.

Insurers should ensure that they provide evidence on all four factors as both cases include findings largely based on a lack of evidence.

In addition, insurers should be aware of s.7 and be prepared to raise the limitation period issue at the LAT case conference and to ask for a preliminary issue hearing on the issue as soon as possible. If the insurer is successful at a preliminary issue hearing, a hearing on the merits is ultimately not necessary on that issue.

[1] 2017 CanLII 87546 (ON LAT).

[2] S.O. 1999, c. 12, Sch. G.

[3] 2018 CanLII 39443 (ON LAT)

[4] 2018 CanLII 83515 (ON LAT)

By Stephen Ross & Andrew Yolles

In Yaiguaje v. Chevron Canada Corporation, 2018 ONCA 472, the Ontario Court of Appeal significantly restricted the court’s ability to “pierce the corporate veil”.

Leave has been sought to appeal this decision to the Supreme Court of Canada. However, if leave is denied, or the decision is upheld, it could have far reaching consequences for nearly every field of law in this province.

What follows is a summary of the case, and the authors’ views of how the Supreme Court might approach these important issues.

Background to the Case

Since the basic principle that a corporation has a separate legal personality from its shareholders or principals, and that the debts of one cannot be collected from the other, was first articulated in Salomon v. Salomon & Co., [1897] A.C. 22 (H.L.), it has served as a cornerstone of corporate law in the common law courts.

As the courts have explained, this limited liability is a hallmark of incorporation, and although it may at times frustrate creditors, it is necessary for enterprise and business adventure to thrive[1].

Our courts have rigidly applied this principle in almost every case. However, there have been exceptional cases where our courts have found it necessary to “pierce the corporate veil” and look beyond the façade of the corporation to hold its directing minds responsible for the company’s debts or actions, in order to avoid a substantial injustice.

Yaiguaje v. Chevron Canada Corporation is certainly an exceptional case. The case arose as a result of extensive environmental damage caused by oil exploration and extraction carried out by a subsidiary of Texaco Inc. on the traditional lands of indigenous peoples in Ecuador between 1964 and 1992. Texaco is now a subsidiary of Chevron Corporation, an American company based in California.

The indigenous peoples affected by Texaco’s operations first filed suit against Chevron Corporation in the United States. Chevron opposed on jurisdictional grounds, and after it agreed to attorn to the jurisdiction of the Ecuadorian courts, the American court declined to assume jurisdiction over the matter.

The case then proceeded through the Ecuadorian courts, and resulted in judgment against Chevron in the amount of US$9.5 billion.

Chevron Corporation did not have any assets in Ecuador. The plaintiffs therefore commenced a proceeding in the United States to enforce the Ecuadorian judgment against Chevron there.

However, the American court hearing the matter found that the plaintiffs’ lawyers had perpetrated extensive frauds in the course of the Ecuadorian proceedings, including bribing the Ecuadorian judge to appoint a “hired gun” expert of the plaintiffs’ lawyers’ choosing to advise the court, and ultimately ghost-writing the judgment that the Ecuadorian judge signed.

Because of this finding, the American court refused to recognize the Ecuadorian judgement, and issued an injunction on enforcement of the judgment against Chevron Corporation in the United States.

As they were without recourse in the United States, the plaintiffs initiated a proceeding in the Ontario Superior Court of Justice seeking to enforce the Ecuadorian judgment against Chevron Canada Limited, a seventh-level wholly owned subsidiary of Chevron Corporation based in Calgary.

Initially, the Ontario proceeding was opposed by Chevron on jurisdictional grounds. That issue went all the way up to the Supreme Court of Canada, where it was ultimately determined that Ontario had jurisdiction to hear the case.

The Majority Decision

The action then proceeded to a summary judgment motion to determine whether the shares and assets of Chevron Canada were exigible to satisfy the judgment against Chevron Corporation.

Chevron raised as its defence that Chevron Canada and Chevron Corporation are at law separate and distinct legal entities, notwithstanding that the former is a wholly owned subsidiary of the latter.

Chevron was successful on the motion at first instance.

On appeal, the Court of Appeal reviewed two main arguments advanced by the plaintiffs.

First, the plaintiffs argued that Chevron Canada’s assets are made exigible to satisfy the judgment debt of Chevron Corporation by the provisions of the Execution Act, which permits execution against any legal or equitable right, whether direct or indirect, held by the judgment debtor.

The Court of Appeal rejected this argument, noting that the Execution Act is a purely procedural statute that simply provides a mechanism for the enforcement of judgments, and as such it cannot provide substantive rights to a judgment creditor that do not otherwise exist in law.

Second, the plaintiffs asked the Court to pierce the corporate veil in this case, to look beyond the legal fiction that Chevron Canada and Chevron Corporation are separate and distinct entities, to the underlying reality that Chevron Canada is fully owned and controlled by Chevron Corporation, and for all practical purposes is one and the same entity.

The plaintiffs submitted that, as the Supreme Court of Canada stated in Kosmopoulos v. Constitution Insurance Co., [1987] 1 S.C.R. 2, the court has jurisdiction to do so where necessary to avoid a result that would be “too flagrantly opposed to justice”.

The Court of Appeal rejected this argument as well. In doing so, Justice Hourigan, writing for the majority of the Court, held that the law has evolved since the Kosmopoulos decision, and the courts no longer possess a residual discretion to pierce the corporate veil simply because it is in the interests of justice to do so.

Instead, Justice Hourigan adopted in very strong terms the approach suggested by the Ontario Divisional Court in Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co., [1996] O.J. No. 1568.

Justice Hourigan stated, as had been suggested in Transamerica, that the corporate veil can only be pierced in three scenarios: when the court is construing a statute, contract, or other document; when the court is satisfied that a company is a “mere façade” concealing true facts; and where the company is an authorized agent for its controllers or members.

In cases of the second type, where the court is asked to find that the company is a mere façade, Justice Hourigan stated that a two-part test must be met before the court will pierce the corporate veil.

First, it must be established that there is complete control of the subsidiary, such that the subsidiary is the “mere puppet” of the parent corporation; and second, it must be established that the subsidiary was incorporated for a fraudulent or improper purpose or was used by the parent as a shell for improper activity.

In this case, the plaintiffs did not even allege that Chevron Canada was incorporated or used for an improper purpose, and Justice Hourigan held that this was fatal to their case, as they could not hope to meet the second part of this test.

A New and Restrictive Approach to Piercing the Corporate Veil

The approach adopted by Justice Hourigan represents a significant restriction on the court’s ability to pierce the corporate veil.

While Canadian courts have always been very reluctant to deviate from the Salomon principle and look beyond the corporate veil, there have been cases where the courts have deemed it necessary to do so in the interests of justice.

Although such cases have often fallen into the categories articulated by Justice Hourigan, our courts have not previously restricted the ambit of the court’s ability to pierce the veil to only those cases. Even the Transamerica decision itself did not state the proposition in such strict terms, as is evident from the following passage:

There are undoubtedly situations where justice requires that the corporate veil be lifted. The cases and authorities already cited indicate that it will be difficult to define precisely when the corporate veil is to be lifted, but that lack of a precise test does not mean that a court is free to act as it pleases on some loosely defined “just and equitable” standard.

Given the finding by the American Courts that the Ecuadorian judgment was obtained by fraud, Yaiguaje was perhaps not the clearest example of a case where the demands of justice require the corporate veil to be pierced despite not otherwise meeting the strict Transamerica criteria. Nevertheless, one can certainly envision such cases.

One example is the case of Manley Inc. v. Fallis, [1977] O.J. No. 1080, in which the Ontario Court of Appeal did pierce the veil to hold accountable an employee of a Canadian subsidiary of an American company who ran a side business that directly competed with the American parent corporation of his employer.

Even though the employee was not competing with his employer, the Court decided to pierce the corporate veil and view the American parent and Canadian subsidiary as one and the same for competition purposes.

Although Justice Hourigan rejected the “group enterprise” theory that Manley Inc. v. Fallis seems to espouse, it is nevertheless a clear case where the interests of justice demanded that the corporate veil be pierced.

Leave has been sought to appeal the Court of Appeal’s decision in Yaiguaje to the Supreme Court of Canada. Should leave be granted, there is certainly room for the Supreme Court to reinstate the court’s equitable jurisdiction to pierce the corporate veil where justice demands it.

The Concurring Decision

This is foreshadowed by the strong concurring decision of Justice Nordheimer in Yaiguaje v. Chevron Canada Corporation. Justice Nordheimer concurred in the result with Justice Hourigan, in that he felt that this was not an appropriate case in which to pierce the corporate veil, particularly as the equities of the case are so unclear.

However, he disagreed with Justice Hourigan that a strict test must be met in order to pierce the corporate veil, and that the court has no residual discretion to do so where justice demands it.

Justice Nordheimer pointed out that the Transamerica case did not deal with the enforcement of a judgment, as this case does, but rather with the imposition of liability on a party by piercing the corporate veil.

He further noted that the authorities relied on by Justice Hourigan for the proposition that there should not be a residual authority in the courts to pierce the corporate veil where the Transamerica criteria is not satisfied do not state that proposition quite so strongly or broadly as Justice Hourigan suggests.

Justice Nordheimer explained that the court’s ability to pierce the corporate veil has its roots in equity, and the court’s equitable jurisdiction supersedes its legal jurisdiction. He concluded that if the court’s equitable jurisdiction is to be curtailed in the manner suggested by Justice Hourigan, there should be very clearly jurisprudential authority or legislation to that effect.

Otherwise, the courts should retain the equitable jurisdiction to pierce the corporate veil where the interests of justice demand it.

Our Proposed Solution

It can be hoped that if the Supreme Court of Canada does reverse Justice Hourigan’s decision and reinstate the residual discretion to pierce the corporate veil where necessary, even where the criteria in Transamerica are not met, they will provide some further guidance as to what might be an appropriate case for this discretion to be exercised.

In the relatively recent case of Kozel v. The Personal Insurance Company, 2014 ONCA 130, the Ontario Court of Appeal set out an extensive framework for the granting of a different equitable remedy, relief from forfeiture.

In that case, the Court of Appeal held that when considering whether equitable relief from forfeiture should be granted, the court should consider the conduct of the person leading to the forfeiture of the right for which relief is sought, the gravity, nature, and impact of the breach that caused the forfeiture, and the disparity of the value of the forfeiture compared to the damage caused by the breach.

We suggest that a similar approach might be utilized in considering when the court might pierce the corporate veil, in cases where the Transamerica factors are not met or do not apply.

The court could consider the conduct of the party requesting that the corporate veil be pierced in the context of the dispute giving rise to the request, the gravity or importance of the issue to both parties, and balance the value in maintaining separate legal personality vs. piercing the corporate veil in a given case.

In Yaiguaje, consideration of these factors would likely lead to the same result actually obtained. This case could be decided on the first factor, as the plaintiffs do not have clean hands, since the judgment they seek to enforce may have been obtained through fraud. In the absence of clean hands, equitable relief should not be granted.

The other factors in this case are likely balanced, as the gravity of Texaco’s breach in causing environmental damage, for which Chevron has been held responsible through the Ecuadorian judgment, is likely sufficiently substantial to compete with its interest in maintaining separate legal identity, and the value to each party is the same: US$9.5 billion.

This test would likely also have applied in Manley Inc. v. Fallis to reach the correct result. The employer corporations had clean hands in their dealings with the defendant employee, while the defendant did not and sought to hide from liability behind the separate corporate identities of his employer.

The gravity of the defendant’s breach in competing with the employer’s parent corporation was certainly non-trivial, and the defendant’s interest in upholding the separate corporate personality of the plaintiff corporations in order to avoid liability for his breach is plainly outweighed by the value of the plaintiffs in being able to seek justice for that breach.

All of this would lead to the conclusion that the corporate veil ought to be pierced in that case.

Conclusion

It is the authors’ view that leave to appeal Yaiguaje to the Supreme Court of Canada should be granted, so that the law can be clarified to reintroduce the court’s discretion to pierce the corporate veil where the interests of justice demand it.

As stated, it is our hope that the Supreme Court will set out some guidance or a test at law for the court to utilize when determining when that discretion should be exercised.

Our recommended approach, as set out above, would be similar to the Kozel test applied in the context of the equitable remedy of relief from forfeiture. The court should consider:

1. the conduct of the party seeking to pierce the veil;
2. the gravity or importance of the issue to both parties; and
3. the balance between the value in maintaining separate legal personality vs. piercing the corporate veil in the context of the case.

It is our view that although the imposition of such a test would not alter the outcome in Yaiguaje, it would nevertheless provide discretion to the court to pierce the veil when the “interests of justice demand it”, and provide some guidance and structure to the circumstances where that discretion should be exercised.

Obviously, our views matter little as this important issue will require input and clarification from our country’s highest court.

However the Supreme Court resolves the issue, it will likely represent a significant change in Canadian corporate law. We look forward to watching it play out.

[1] See, e.g., Clarkson Co. Ltd. v. Zhelka et al., 1967 CanLII 189 (ON SC)

By Colleen Mackeigan, Student-at-Law

When Does a Plaintiff Meet the ‘Threshold’?

“Threshold defensible” is a term often used in the world of insurance defense litigation to refer to a case whereby the alleged injuries claimed by the plaintiff, as a result of a motor vehicle accident (“MVA”), are unlikely to give rise to an award for general damages or health care expenses.

Section 267.5(5) of the Insurance Act alleviates liability for damages for non-pecuniary losses from a defendant in an MVA claim unless the injured person has sustained a “permanent, serious impairment of an important physical, mental, or psychological function”.[1] Section 267.5(3) provides similar protection with respect to health care expenses.

In order to satisfy the test, the impairment must substantially interfere with either the injured person’s ability to continue his or her regular employment, continue training for a career in the field in which the person was training before the incident occured, or carry out most of the usual activities of daily living.[2]

Once one or more of the criteria are met, it must be established that the impairment is important in that it must be a function necessary to carry out such criteria.[3]

Finally, for the impairment to be permanent, it must have been continuous since the incident, not expected to substantially improve, continue to meet the criteria of being an impairment, and be of such nature that same would be expected by persons in similar circumstances.[4]

The plaintiff bears the onus of adducing medical evidence by way of expert opinion in order to satisfy the Court of the aforementioned threshold criteria.[5]

How are the Ontario Courts Applying the Threshold in 2018?

While the legislation itself is quite comprehensive in setting out what is required to meet the threshold for general damages in MVA claims, the Ontario courts in interpreting the criteria have added colour and complexity to the application of the legislative scheme.

Thus far, in 2018,the Ontario courts have released nine reported threshold decisions: seven  from the Superior Court of Ontario and four from the Divisional Court by way of appeal.

Of these nine decisions, four concluded that the plaintiff met the threshold (Mousseau v. Morrison; A.B. v. Waite; Rodrigues v. Purtill; O’Brien v. O’Brien).

In contrast, the other five decisions concluded that either the plaintiff did not prove the existence of a permanent and serious impairment (Saleh v. Nebel; McGrath v. Engler; Debruge v. Arnold; Bodenstien v. Penley) or failed to prove that the established threshold impairment had been caused by the relevant MVA (Grieves v. Parsons).

While the recent threshold decisions have not substantially altered or shaped this area of the law, the interpretation and application of the legislation by the courts is notable in the following respects.

Importance of Reliability and Credibility

The courts have continued to place great weight on the perceived reliability and credibility of the plaintiff and lay witnesses.

In Mousseau v. Morrison, the plaintiff’s husband and two former co-workers, in addition to the required physician expert evidence,  gave testimony before the Court in support of the plaintiff’s injuries being a permanent and serious impairment. The Court found the witnesses to be reliable and credible.[6]

As a result, the Court rejected the defendant’s argument that since the plaintiff had returned to her former employment after the accident and continued to work in said employment for over four years, the impairment could not be found to be “serious”within the context of the threshold criteria.

In rejecting the defendant’s argument, the Court found:

[47]…the plaintiff continued to work over the ensuing approximate 4.5 years through her perseverance, fortitude and sheer determination, in furtherance of her admirable work ethic, and that the impairment of the important function is indeed serious.[7]

On the other hand, when a plaintiff’s testimony is found to be self-serving or given with the intent solely to maximize the plaintiff’s claim, the Court has found the testimony to be unreliable and not credible, as was the case in Saleh v. Nebel whereby the plaintiff failed to meet the threshold on such basis.[8]

The reliability and credibility of treating physicians and experts is also important in determining whether a plaintiff’s claim meets the threshold.

In Debruge v. Arnold, the Divisional Court upheld the Superior Court’s finding that the plaintiff’s injuries did not meet the threshold on the basis that the physician produced by the plaintiff failed to give fair and objective evidence, acted as an advocate for the plaintiff, and spoke outside of his expertise as a physician.[9]

Nonetheless, in A.B. v. Waite, the Court determined a physican’s testimony to be credible and reliable despite the fact that the physician did not give an opinion that contained the words “permanent” or “serious” when opining on the plaintiff’s impairment.

The Court held that it is not necessary for a physician to use the precise words of the statute or regulation when providing a medical opinion.[10]

Consideration of Ability to Work

In recent threshold decisions, the courts have taken a close look at the plaintiff’s ability to work in his or her chosen occupation, both presently and in the future.

In Rodrigues v. Purtill the plaintiff trained to be a veterinary assistant before the relevant MVA. However, she never obtained a position after completing her training due to pregnancy.

Since the injuries sustained by the plaintiff were such that: (i) she could likely have returned to her pre-accident employment in the customer service industry, (ii) she had completed and did not need to return to veterinary assistant training, and (iii) her injuries did not impact necessary daily activities, it appeared unlikely she would be able to meet the criteria for the impairment to be of an important function under s.4.2(1)2.[11]

The Court found, however, that “there need only be a settled intention to enter the trade or profession trained for or to return to it”.[12] Thus, the Court determined the plaintiff’s regular or usual employment to be a veterinary assistant.[13]

The plaintiff, due to her injuries, could not fulfill the necessary duties of being a veterinary assistant. As such, it was found that she met the threshold.

In O’Brien v. O’Brien, the plaintiff developed arthritis in his ankle as a result of an ankle fracture sustained from the relevant MVA. The Court accepted expert testimony that the plaintiff, though able to return to his pre-accident employment, would likely be required to transition to a more sedentary position as the condition of the plaintiff’s ankle deteriorated over time.[14]

For this reason the plaintiff was found to meet the threshold, as the Court stated it was entitled to consider all the evidence including evidence with respect to the plaintiff’s future impairment in determining whether the plaintiff meets the threshold.[15]

Consideration of Jury Verdict

In threshold motions brought in jury trials, it is common practice for courts to follow the Ontario Court of Appeal decision in Kasap v. MacCallum which stands for the proposition that, while a trial judge on a threshold motion is not bound by the verdict of the jury, she or he is entitled to take the jury’s verdict into consideration.[16]

The Court in Bodenstien v. Penley, however, suggested that the trial judge should not undermine the findings of the jury. The jury in this case had awarded no general damages to the plaintiff.

The Court accepted the defendant’s position that the issue of whether the plaintiff had met the threshold was moot as per Mandel v. Fakhim, a 2016 Ontario Superior Court decision in which the Court declined to decide the threshold issue on the basis that doing so may undermine the role of the jury as the exclusive finders of fact.[17]

The Court in Bodenstien determined that it was open to the jury to reject some or all of the plaintiff’s evidence and given that the jury did not award general damages, it was not the Court’s place to usurp the jury’s rejection of the plaintiff’s evidence.[18]

Conclusion

Our survey of reported threshold decisions from 2018 shows a fairly even result. In four decisions, the plaintiff was found to have met the threshold, and, in five decisions, the plaintiff did not meet the threshold.

The credibility of the plaintiff continues to be the key factor. In evaluating a claim, it is important to consider whether the plaintiff is a believable person and whether there is any evidence which contradicts the plaintiff’s evidence on her or his alleged impairment.

[1] Insurance Act, R.S.O. 1990, c. I.8, s.267.5(5).

[2] Insurance Act, R.S.O. 1990, c. I.8, s.267.5(5), Court Proceedings for Automobile Accidents that occur on or after   November 1, 1996,O. Reg. 461/96, s.4.2(1)1.

[3] Ibid, s.4.2(1)2.

[4] Supra, note 2 s.4.2(1)3.

[5] Supra, note 2 s.4.3.

[6] Mousseau v. Morrison, 2018 ONSC 1274.

[7] Ibid, para 47.

[8] Saleh v. Nebel, 2018 ONSC 452.

[9] Debruge v. Arnold, 2018 ONSC 2357, para 11.

[10] A.B. v. Waite, 2018 ONSC 1456, para 8.

[11] Rodrigues v. Purtill, 2018 ONSC 3102.

[12] Ibid, para 44.

[13] Ibid.

[14] O’Brien v. O’Brien, 2018 ONSC 4665, para 67.

[15] Ibid, para 73.

[16] Kasap v. MacCallum, [2001] O.J. No. 1719.

[17] Mandel v. Fakhim, 2016 ONSC 6538.

[18] Bodenstein v. Penley, 2018 ONSC 116, para 41.

By Brian Sunohara

In Bucknol v. 2280882 Ontario Inc., 2018 ONSC 5455, the plaintiff was struck by a beer bottle that was thrown in a bar in Toronto, Ontario.

Moments before he was struck, the plaintiff noticed an altercation between two men close to him.  He believed that the bottle hit him one to two seconds later.

The plaintiff sustained a significant eye injury.  He sued the bar.  On a summary judgment motion, Justice Coroza dismissed the claim.

Justice Coroza noted that there was no legal duty on the bar to remove every possible danger from its premises, or to constantly look for potential dangers or conduct constant surveillance.

The bar complied with its duty to ensure that its premises were reasonably safe. There were several security guards and police officers on site.  The bartenders were Smart Serve certified.  In addition, busboys were hired to clear glass bottles from the premises throughout the night.

Further, Justice Coroza determined that the incident was not reasonably foreseeable. It happened very quickly. There were no prior instances of beer bottles being thrown in the bar and no history of frequent altercations.

Justice Coroza rejected the plaintiff’s argument that the bar could have taken further measures to prevent the incident.

This case demonstrates that occupiers, such as a bar, have to take reasonable measures to ensure that people who visit their premises are reasonably safe.

It is usually impossible to predict and prevent every potential danger that may exist, and occupiers are not expected to do so.

• In August 2018, Andrew Yolles and Erin Crochetière were defence counsel in a hearing at the Workplace Safety and Insurance Appeals Tribunal.  The main issue was whether the plaintiff was a worker of a trucking company or an independent operator.  The decision is under reserve.
• The court released a decision in August 2018 in Kapoor v. Kuzmanovski, 2018 ONSC 4770.  The case dealt with a plaintiff’s allegation of juror bias in motor vehicle accident cases.  The Advocates’ Society was an intervenor.  Stephen Ross, with the assistance of Meryl Rodrigues, was a member of The Advocates’ Society’s Task Force on this issue.
• In September 2018, Brian Sunohara was defence counsel in a summary judgment motion involving a motor vehicle accident at a shopping centre.  Brian represented the owner of the shopping centre.  The plaintiff alleges that the design of the shopping centre was unsafe.  The decision is under reserve.
• In September 2018, one of our new associates, Robert Forderer, opposed the plaintiff’s motion to set aside a registrar’s dismissal order in Minogue v. Harper, 2018 ONSC 5551.  Although the court allowed the motion, our client was awarded costs of $4,000 in light of the plaintiff’s unresponsiveness and delay.
• In September 2018, Meryl Rodrigues was counsel for the third party in a motion to strike a third party claim.  The main action involves a snowboarding accident.  The third party action involves alleged mistreatment at a community living centre.  The decision is under reserve.
• Stephen Ross and Erin Crochetière are preparing to argue an appeal at the Court of Appeal in October 2018.  The appeal arises out of a jury’s assessment of damages in respect of a motor vehicle accident.  This will be Stephen’s third appearance at the Court of Appeal this year.
• In November 2018, Stephen Ross will be a speaker at an Osgoode Professional Development program on Personal Injury Law and Practice.  Stephen will be presenting on issues relating to collateral benefits in motor vehicle accident tort claims.  Meryl Rodrigues is assisting Stephen with this presentation.
• Stephen Ross has been named in The Best Lawyers in Canada 2019 in the areas of Insurance Law and Personal Injury Litigation.
• Kevin Adams has been named in The Best Lawyers in Canada 2019 in the area of Insurance Law.
• Anita Varjacic has been named in The Best Lawyers in Canada 2019 in the area of Personal Injury Litigation.

FOMO – The Power of Partial Settlement Agreement Negotiations

FOMO (the “Fear Of Missing Out”) is not something simply experienced/talked about by kids these days (admittedly, if they even use that expression any longer), it is an accurate description of the feeling I experienced many years ago in one of my first multi-party mediations.

I was quite junior, my client had little actual liability exposure, but would not likely be absolved of liability entirely; they had one of the larger insurance policy limits and was faced with being one of the only non-settling defendants left standing with a defendant whom the balance of the evidence suggested was mostly at fault (and had significantly less insurance limits).

As discussions of a potential partial settlement agreement arose, it became clear that we would need to revisit our liability stance, having regard for the potential increased risk in exposure should we have been unable to make inclusion of ourselves in the Pierringer Agreement possible.

In a partial settlement, the plaintiff will be accepting a certain degree of risk in that the non-settling defendant may establish a greater share of liability on the settling defendants than the plaintiff may have anticipated at the time of the settlement agreement.

To account for this, the plaintiff may look for, and the settling defendant(s) may need to consider, a settlement value that accounts for a premium for the plaintiff accepting that risk.  But this “FOMO” comes from a feeling that the riskiest position of all may be being left out of any partial settlement.

I find that good mediators will work towards a global settlement and not entertain talks of partial settlement until it is clear a global settlement is unlikely.  They then recognize that there may be a potential for partial settlement and/or that talks of a partial settlement may move certain parties off of their espoused positions.  The parties should be mindful of this as well.  There is a power in partial settlement agreement negotiations that should not be overlooked.

Where one party is unprepared or unwilling to talk settlement in a range where the balance of the parties see exposure, talk of a partial settlement agreement, where that party would be left with no comrades in arms, and exposed to the plaintiff’s costs (and their own costs) of trial, may see a change in their settlement positioning.

That said, be wary of falling victim to the “FOMO” yourself.  It is important heading into any multi-party mediation or negotiation that you have considered the risks and benefits of a partial settlement and whether it may be in your client’s best interest.  It is important that you prepare your client for those discussions in advance of any negotiations as well.

For more information on partial settlement agreements and their practical realities, I would invite you to review an article by Stephen Ross and Gemma Healy-Murphy of our office entitled “Partial Settlement Agreements: Practical Realities”.