COURT FILE NO.: 1727
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N:
FOVANT FARMS LIMITED Plaintiff/Respondent (Appellant by Cross-Appeal)
Stephen T. Gibson, for the Plaintiff/Respondent (Appellant by Cross-Appeal)
- and -
WEST ELGIN MUTUAL INSURANCE COMPANY Defendant /Appellant (Respondent by Cross-Appeal)
Malcolm B. Scott, for the Defendant/Appellant (Respondent by Cross-Appeal)
-and-
RAY JENKEN Defendant (Respondent by Appeal and Cross-Appeal)
Catherine R. Bruni, for the Defendant(Respondent to Appeal and Cross-Appeal)
HEARD: June 3, 2009
GORMAN J.
[1] The Appellants appeal a Judgment of Deputy Judge K.J. Brooks dated July 16, 2008 whereby the Plaintiff, Fovant Farms Ltd. (“Fovant”) obtained a judgment as against the Appellant, but whose claim was dismissed as against the defendant, Ray Jenken. Fovant cross-appeals on the issue of costs.
BACKGROUND
[2] The Plaintiff is a large farming operation. West Elgin Mutual Insurance Company (“West Elgin”) provided Fovant with a farm insurance policy that covered amongst other things, livestock and machinery.
[3] On or about February 16, 2006, Fovant suffered a loss of 76 hogs, and thereafter made a claim to West Elgin for coverage. West Elgin denied the claim on the basis that the manner in which the hogs perished was expressly excluded under the policy. Fovant subsequently commenced an action against West Elgin, and its captive agent, Ray Jenken. The trial of the action was held in the Small Claims Court on June 26, 2008. On July 16, 2008 the Honourable Deputy Judge K.J. Brooks released an endorsement granting judgment against West Elgin and dismissing the action against Ray Jenken. Additionally, while counsel for Fovant made submissions on the issuance of a Sanderson or a Bullock order, Deputy Judge Brooks made no mention of this in his costs judgment, released on August 21, 2008.
ISSUES ON APPEAL AND CROSS-APPEAL
[4] There are three main issues on this appeal and cross-appeal:
- did the trial judge err in finding that West Elgin is liable under the contract of insurance?;
- did the trial judge err in finding that Ray Jenken and West Elgin were in a type of employer/employee relationship, and that West Elgin failed to train him properly; and,
- given the ultimate dismissal of the action against Ray Jenken, i) should leave be granted to appeal the cost award in favour of Jenken? and if so, ii) did the trial judge err in failing to exercise his discretion to make a Bullock or Sanderson order relative to the costs award in favour of Jenken and against Fovant?
POSITIONS OF THE PARTIES
[5] The Appellant, West Elgin submits that if the hogs were entrapped, leading to “piling” which caused their death, it was expressly not covered by the insurance policy. In this regard, West Elgin submits that the learned deputy judge disregarded the evidence of the Appellant that upon discovering the loss, a principal of Fovant, Sandy Lyle, contacted the adjuster and advised that the hogs had perished as a result of “piling”. Further, the Appellant submits that the learned deputy judge erred in finding that the Appellant was unable to define the term “piling”, and held that this was central to the issues at trial.
[6] West Elgin further submits that the learned deputy judge erred in finding an employer-employee relationship as between West Elgin and Ray Jenken, and further erred in finding that the Appellant was negligent for failing to train and direct him.
[7] In terms of the Cross-Appeal, West Elgin submits that the general rule is that a plaintiff is entitled to costs against the unsuccessful defendant, and the successful defendant is entitled to costs against the plaintiff. This was followed by the learned Deputy Judge and should not be interfered with.
[8] The Respondent Fovant (Appellant by Cross-Appeal) submits that it was open to the learned Deputy Judge to find that West Elgin was liable for the loss under the terms of the comprehensive farm insurance policy, and that he made no error in fact or law in so doing.[^1] Fovant submits that the learned Deputy Judge did not make a finding of an employer-employee relationship as between West Elgin and Ray Jenken, but rather that West Elgin was akin to being Ray Jenken’s principal. Fovant submits that on the evidence, it was open to the learned Deputy Judge to find that West Elgin failed to properly train its captive agents in their responsibilities, particularly as to communication and advice to be provided to those they insure.
[9] Fovant submits that leave should be granted to appeal the cost award in favour of Ray Jenken because the learned Deputy Judge failed to exercise his discretion to make a Bullock or Sanderson order relative to the cost award in favour of Ray Jenken and against Fovant.[^2]
[10] The Respondent Ray Jenken submits that it is not clear whether Deputy Judge Brooks found an employer-employee relationship as between West Elgin and Ray Jenken, but that the evidence at trial was that Ray Jenken sold only West Elgin products, and West Elgin paid his commission and operating expenses including the provision of an office.
THE STANDARD OF REVIEW
[11] The parties are in agreement on the standard of review. Findings of fact and conclusions based on fact by the trial judge are entitled to deference by an Appellate Court. An Appellate Court ought not to reassess the trial evidence but rather, interfere only where an unreasonable finding or incorrect decision is evidenced.
[12] The appellate review of a trial judge’s decision to make or not make a Sanderson or Bullock order is subject to the deferential standard associated with costs issues in general. Unless “plainly wrong”, costs awards are not to be set aside: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303.
ANALYSIS
Did the Trial Judge err in finding that West Elgin was liable under the contract of insurance?
[13] Under the contract of insurance, the insurer bears the onus of proving an exclusion that prohibits overage under the policy. When West Elgin failed to cover Fovant for the loss of the hogs, an action was commenced. While the plaintiff’s claim did indeed refer to “piling” – an event that might engage the exclusionary rule, the evidence at trial was that “piling” is an agricultural term, and not an insurance industry term. It fell to West Elgin to prove, that the hogs died in a manner which was expressly not covered by the terms of the policy.
[14] Mr. Dave Balogh, a claims manager for West Elgin, testified at the trial. He testified as follows:
THE COURT: Then how do you know in this case it was piling? A: How do I know it was piling? THE COURT: Yes. A: Because that’s how the owner of the pigs described it to me and showed it in his diagram of what happened. It was by his own admission. Transcript, p.186
[15] Mr. Sandy Lyle, a principal with the plaintiff farm testified that he never spoke of “piling” with Mr. Balogh.
[16] The learned Deputy Judge found that “the Defendant has not provided evidence sufficient to show that the hogs died as a result of huddling and piling as outlined in the exclusion within the Farm Insurance Policy.”
[17] In my view, based on a review of the evidence, it was open to the trial judge to conclude that West Elgin failed to prove the application of the exclusion it relied upon to deny coverage. The decision was reasonable, and supported by the evidence.
Did the Trial Judge err in finding that Ray Jenken and West Elgin were in an employer/employee relationship?
[18] While the relationship Mr. Jenken had with West Elgin was more akin to a “captive agent”, I do not find that the trial judge erred in this regard. The trial judge found that a relationship existed between West Elgin and Mr. Jenken, whether he was correct to use the term “employer” in his judgment is immaterial. The evidence abundantly supported a dependent relationship. Mr. Jenken sold only West Elgin products, was paid commission only by West Elgin and was furnished with an office by West Elgin.
Did the Trial Judge err in finding that West Elgin was negligent for failing to properly train and direct Mr. Jenken?
[19] No. This conclusion was certainly available to the trial judge based on the evidence. There was ample evidence that the training Mr. Jenken did receive did not relate to exclusions and the review of coverage and risk assessment.
[20] Findings of fact by a trial judge and the conclusions based upon them are entitled to deference by an appellate court. An appellate court should only interfere where an unreasonable finding or incorrect decision is clearly demonstrated. It has not.
[21] I do not feel it is necessary to address considerations of contributory negligence.
Should leave be granted to appeal the costs award?
Did the Trial Judge err in failing to make a Sanderson or Bullock order?
[22] If leave is granted, the appellate court should not interfere with a lower court’s exercise of its discretion in awarding costs unless there is a clear and compelling reason for doing so. There must be an error in principle or demonstration of a decision which is clearly wrong.
[23] In written submissions on costs, counsel for the plaintiff asked the trial judge to exercise his discretion to make either a Sanderson or a Bullock order. In support of this request, counsel submitted, amongst other things, that Ray Jenken was a necessary party to the proceeding given his relationship with both Fovant and West Elgin.
[24] The usual test for determining whether a Sanderson order is appropriate has two steps: see Times Square Holdings Ltd. v. Shimsu, 2001 BCCA 667, [2001] B.C.J. No. 2419 at para. 9 (C.A.) The court asks a threshold question: whether it was reasonable to join the defendants together in one action. If the answer is “yes” the court goes on to determine whether a Sanderson order would be fair in the circumstances.
[25] In his decision as to costs, Deputy Judge Brooks made a cost award of $2,000.00 in favour of Jenken and as against Fovant, without any reference to submissions on the Sanderson and Bullock orders.
[26] Because of Fovant’s claims against both defendants, and their intertwined relationship it was reasonable to join the defendants. Accordingly the threshold test for making a Sanderson order was met. Secondly, given a review of the case law as it relates to the second step of the test, it is clear that a Sanderson order was available to the court: see Babcok v. Carr (1981), 127 D.L.R. (3d) 77 (Ont. H.C.J.); Eichmanns v. Wawanesa Mutual Insurance Co. (2007), 2007 ONCA 92, 278 D.L.R. (4th) 15.
[27] Given the complete absence of any reference to the Sanderson/Bullock submissions, I am satisfied that this is an appropriate instance wherein the appellate court ought to interfere with the costs order.
CONCLUSION AND ORDERS
[28] Accordingly, the appeal is dismissed on all issues except the Sanderson costs order.
[29] Leave is hereby granted to appeal the costs order of the trial judge.
[30] The Cross-Appeal by the Respondent Fovant Farms Limited is allowed. A Sanderson order is to issue requiring West Elgin Mutual Insurance Company to pay Ray Jenken his costs fixed by Deputy Judge K. Brooks in the amount of $2,000.00.
[31] If the parties are unable to come to an agreement as to costs of the appeal, I may be written to within 15 days of this order.
“Justice K. A. Gorman”
Justice K. A. Gorman
Released: June 10, 2009
[^1]: The Respondent Ray Jenken adopts this submission. [^2]: The Respondent Ray Jenken takes no position on this issue.