Marie-Pier Gagnon Nadeau

The Court of Appeal for Ontario dismissed Surefire Dividend Capture, LP’s appeal from the Superior Court’s decision denying insurance coverage for losses suffered in a Ponzi scheme perpetrated by Brenda Smith, CEO of Broad Reach Capital, LP.

The court held that the fidelity bond did not cover losses caused by fraudulent acts of a sub-advisor’s directing mind, as the bond’s language did not extend “Employee” status to such individuals.

The court also found no coverage for “Theft of Customer Property” because SDC no longer had a property interest in the funds once invested in BRC.

The trial judge’s interpretation of the bond was entitled to deference, and no reversible error was found.

SureFire Dividend Capture LP (SDC) sought indemnification from Berkshire Hathaway Specialty Insurance under a fidelity bond for losses incurred due to a Ponzi scheme perpetrated by Brenda Smith, manager of Broad Reach Capital, LP (BRC), in which SDC had invested.

SDC claimed coverage under three insuring agreements (A)(1), (A)(4), and (B)(1)(b) of the Bond.

The court found that SDC failed to establish that its loss fell within the initial grant of coverage under any of the agreements, primarily because the stolen funds belonged to BRC, not SDC or its investors, and Brenda Smith was not an "Employee" of SDC as defined by the Bond for the purposes of SDC's direct claim.

The court also noted that SDC failed to disclose a material "in-kind" transfer of interests from other funds to SDC, which would have excluded coverage for that portion of the loss.

SDC's claim for punitive damages for bad faith was also dismissed.

The plaintiffs' home was severely damaged by a fire while undergoing renovations.

The plaintiffs alleged the fire was caused by the spontaneous combustion of stain-soaked rags left by the defendant painting subcontractor, and sought to hold the general contractor vicariously liable.

The court found that the plaintiffs failed to prove the cause of the fire on a balance of probabilities, accepting the painter's evidence that he did not leave rags in the home and noting that electrical arcing could not be ruled out as a cause.

The court declined to draw an adverse inference against the defendants for failing to call another fire investigator.

The action was dismissed, though damages were assessed at $1,348,939.91 in the alternative.

This appeal concerned an actionable encroachment on an easement.

The appellants built a swimming pool and amenities over a ten-foot strip of land subject to an easement held by the respondents, which prohibited the erection of any building or structure.

The application judge found an actionable encroachment and ordered removal.

The appellants appealed, arguing the easement was not intended to prohibit such structures, that the 'substantial interference' test was misapplied, and that the easement was abandoned or proprietary estoppel applied.

The Court of Appeal dismissed the appeal, affirming that the express prohibition in the easement constituted an actionable encroachment, and rejected arguments of abandonment or proprietary estoppel.

Two appellants — a religious congregation and a religious institution managed by its members — sought to overturn authorization of a class action brought by victims of alleged sexual assaults committed by members of the congregation decades ago.

The majority held that the Superior Court had made numerous errors of fact and law in denying authorization under the four conditions of art. 575 of the Code of Civil Procedure, and that the Court of Appeal was entitled to substitute its own assessment on all conditions.

The majority further held that the three-year period under art. 2926.1 para. 2 C.C.Q., which applies upon the death of the victim or the author of the act, does not create a term for forfeiture but remains a prescriptive period, with the starting point continuing to be when the victim becomes aware of the connection between the assault and the injury.

The minority would have allowed the appeal against the religious institution for lack of sufficient factual allegations, while dismissing the appeal as to the congregation.