Gagne v. Harrison, 2024 ONCA 82

COURT OF APPEAL FOR ONTARIO

DATE: 20240202 DOCKET: COA-22-CV-0381

Before: Lauwers, van Rensburg and Thorburn JJ.A.

BETWEEN

Marc Gagne, Roche Gagne and M R Investments Corp. Plaintiffs (Appellants)

and

Randy Harrison, Advanced Planning Insurance Group a.k.a. Harrison Financial Services Ltd., Gordon B. Lang & Associates Inc., Gordon Lang, Holliswealth a.k.a. Hollis Insurance Inc./Les Assurances Hollis Inc., PPI Management Inc., Ivari*, John Doe and John Doe Corporation Defendants (Respondent*)

Counsel: Margot L. Pomerleau, for the appellants J. Stephen Cavanagh, for the respondent

Heard: January 31, 2024

On appeal from the order of Justice Robert Pelletier of the Superior Court of Justice, dated October 26, 2022.

REASONS FOR DECISION

[1] The appellants commenced an action against the respondent life insurance company and others alleging breach of contract, breach of fiduciary duty and negligence in relation to the creation of a financial retirement plan that included, among other things, the use of life insurance contracts. The appellants allege that the plan was unsuitable and caused them loss and damages.

[2] The respondent Ivari brought a motion under r. 21.01(1)(b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 for dismissal of the action against it for failure to disclose a reasonable cause of action.

[3] The motion judge accepted the respondent’s argument, that based on a line of cases following Fine’s Flowers et al. v. General Accident Assurance Co. of Canada et al. (1977), 17 O.R. (2d) 529 (C.A.), insurers do not have a duty to determine an insured’s requirements. The motion judge concluded that the appellants failed to identify a duty owed to them by the respondent and to state how that duty was breached. He took the view that the litigation was really about bad advice, not a bad product or the faulty delivery of insurance products. He refused leave to amend the statement of claim because he was not persuaded that there was a way to amend the pleadings to create a viable cause of action “in circumstances where the legal principles distinguishing between insurance brokers and insurers are settled.”

[4] The appellants contend that the motion judge erred in applying what he considered to be “settled principles of law” to dismiss the claim against the respondent insurer. They submit that the claims against the respondent were properly pleaded, and in the alternative that, if there are pleadings deficiencies, the motion judge erred in refusing leave to amend. They ask that this court restore the action against the respondent and, if required, grant leave to amend the statement of claim.

[5] The respondent asserts that the motion judge correctly accepted that the claims against it as the insurer could not succeed because the action is essentially about bad advice given by a financial planner. The action was properly dismissed against it because the claims as pleaded could not succeed. The respondent also asserts that the statement of claim is deficient because the appellants have failed to plead all essential elements of the various causes of action against it, and the motion judge did not err in principle in refusing leave to amend.

[6] After hearing argument on the appeal, we advised the parties that the appeal was allowed, with reasons to follow. These are our reasons.

[7] First, the motion judge erred in treating the r. 21 motion as if it were a motion for summary judgment under r. 20. A motion under r. 21.01(1)(b) focuses on the legal sufficiency of a plaintiff’s pleading, and not the merits of the proceeding. The pleading is to be read generously, accounting for deficiencies in drafting: Tran v. University of Western Ontario, 2015 ONCA 295 at para. 16. The fact that no evidence is admissible on the motion underscores that the determination is to be made solely by reference to the pleading, and that the focus is to be on whether the claim pleaded is legally sufficient: The Catalyst Capital Group Inc. v. Dundee Kilmer Developments Limited Partnership, 2020 ONCA 272, 150 O.R. (3d) 449, at paras. 39, 41. A statement of claim is legally insufficient if its allegations “do not give rise to a recognized cause of action or it fails to plead the necessary elements of an otherwise recognized cause of action”: Yan v. Hutchinson, 2023 ONCA 97, at para. 12.

[8] The motion judge appears to have drawn two conclusions about the appellants’ pleading: first, that the statement of claim did not disclose a cause of action against the respondent because of settled principles of law distinguishing between the obligations of insurers and brokers and agents; and second, that the statement of claim did not plead the necessary elements of the various causes of action against the respondent. We agree with the second conclusion, but not the first.

[9] We do not agree that there is any general principle of law that an insurer will never owe a duty to an insured with respect to the suitability of an insurance product. The cases relied on by the motion judge were decided in the context of summary judgment motions or after trial, where claims against insurers were dismissed based on the evidence. Indeed, the respondent’s counsel acknowledged that there is no such general principle of law, although he contends that in the particular context of the relationship between these parties, there was no opportunity for the respondent to have given what amounted to financial planning advice.

[10] We do not read the statement of claim as articulating any particular understanding of the relationships among the parties. The appellants plead that all of the defendants were involved in selling them a retirement plan they did not need, in failing to properly advise them, and in respect of the corporate defendants, failing to supervise the activities of the agent. The question at this stage is whether the pleading discloses a cause of action, not whether, on the evidence about the specific relationship and dealings between the appellants and the respondent, the claim as pleaded will or will not succeed.

[11] We agree with the motion judge that there are deficiencies in the pleading, and that the statement of claim does not specifically identify the duty owed to the appellants by the respondent and state how that duty was breached, in respect of each of the causes of action pleaded. The deficiencies stem from the fact that the pleadings of the three causes of action – in breach of contract, negligence and breach of fiduciary duty – fail to distinguish among the various defendants. All of the defendants are alleged, at para. 27 of the statement of claim, to have owed and to have breached the same duties of care to the appellants, and at para. 28, all of the corporate defendants are alleged to have breached other duties in relation to the supervision and monitoring of the agent.

[12] The statement of claim fails to (1) identify the contract between the appellants and the respondent, and the alleged breaches of the contract; (2) specify the duty of care owed by the respondent to the appellants, and the specific breaches and harm caused by the respondent’s negligence; and (3) plead the facts on which a fiduciary relationship arises, the extent and content of the fiduciary duty owed by the respondent to the appellants, and the specific breach of duty. The failure to plead these essential elements would justify striking the claims against the respondent.

[13] The question is then whether leave should be granted to the appellants to amend the statement of claim. Leave to amend a statement of claim should be denied only in the clearest of cases, when it is plain and obvious there is no tenable cause of action, the proposed pleading is scandalous or vexatious or there is non-compensable prejudice to the defendants. The test applies even where it is determined that the statement of claim, as pleaded, should be struck: Fernandez Leon v. Bayer, 2023 ONCA 629, at para. 5.

[14] The motion judge refused leave to amend based on his incorrect conclusion that the legal principles distinguishing between brokers and insurers were settled. In our view there is no reason to refuse leave to amend in this case. The respondent’s counsel fairly acknowledges that allowing the statement of claim to be amended will not prejudice the respondent. The statement of claim contains tenable causes of action against the respondent, although their essential elements have not been properly pleaded. The appellants should have the opportunity to rectify their pleadings against the respondent by setting out the essential elements of the relevant causes of action and the facts supporting such claims.

[15] Accordingly, we allow the appeal in part. The Statement of Claim remains struck, but the action against the respondent is restored and the appellants are granted leave to amend the statement of claim. By agreement between the parties there will be no costs awarded for the appeal, the order for costs in the court below is set aside, and the respondent will refund to the appellants the costs that they have paid pursuant to that order.

“P. Lauwers J.A.”

“K. van Rensburg J.A.”

“Thorburn J.A.”