Court File and Parties

COURT FILE NO.: CV-14-10503-00CL DATE: 20160919 SUPERIOR COURT OF JUSTICE – ONTARIO COMMERCIAL LIST

CANADIAN NORTHERN SHIELD INSURANCE COMPANY and ROYAL & SUNALLIANCE INSURANCE COMPANY OF CANADA Plaintiffs

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2421593 CANADA INC., THE CO-OPERATORS GROUP LIMITED, FEDERATED AGENCIES LIMITED, VANCOUVER CITY SAVINGS CREDIT UNION and 7081332 CANADA LTD. Defendants

BEFORE: Newbould J.

COUNSEL: Geoff R. Hall and Jacqueline Cole, for the Vancouver City Savings Credit Union and 2421593 Canada Inc. (formerly Vancity Insurance Services Ltd.) Barry H. Bresner, for The Co-operators Group Limited, Federated Agencies Limited and 7081332 Canada Inc. J. Anthony Caldwell and Marg A. McKillop, for the plaintiffs

HEARD: September 13 and 14, 2016

Endorsement

[1] Vancouver City Savings Credit Union and 2421593 Canada Inc. (formerly Vancity Insurance Services Ltd.) move on a motion for summary judgment to dismiss the claims against them. The Co-operators Group Limited, Federated Agencies Limited and 7081332 Canada Inc. (the “Co-operators Group”) also move on a motion for summary judgment to dismiss the claims against them.

[2] Vancouver City Savings Credit Union (“Vancity”) is a Vancouver-based financial institution. Until September 2009, it owned Vancity Insurance Services Ltd. (“Vancity Insurance”), which was an insurance broker offering auto and property insurance policies primarily to Vancity customers.

[3] In 2008, Vancity Insurance engaged in discussions with Canadian Northern Shield Insurance Company (“CNS”) and Royal & SunAlliance Insurance Company of Canada (“RSA”) towards an arrangement whereby CNS and RSA would become the sole supplier of insurance products to Vancity Insurance. Discussions proceeded for several months, but eventually ended when Vancity decided to sell Vancity Insurance to The Co-Operators Group. The issue in the plaintiffs’ case against Vancity is whether the arrangement between Vancity Insurance, CNS and RSA proceeded to the point of a legally enforceable contract between Vancity Insurance and CNS.

[4] The Co-operators Group Limited (“Co-operators”) is a holding company with subsidiaries which carry on business in the financial services sector, including insurance. It was the successful bidder in an auction process under which Vancity sold its shares in Vancity Insurance to Co-operators under a share purchase agreement dated July 21, 2009. The issue in the plaintiffs’ case against the Co-operators Group is whether Co-operators induced a breach of the alleged contract between Vancity Insurance and CNS. [1]

[5] All parties say that this case can be decided taking into account the principles enunciated in Hryniak v. Mauldin, 2014 SCC 7.

[6] For the reasons that follow, the motions for summary judgment are granted and the action is dismissed in its entirety against all defendants.

Plaintiffs’ claim against Vancity and Vancity Insurance

[7] Vancity Insurance was a party to non-exclusive broker agreements with CNS dated October 17, 1998 and with RSA dated August 1, 2004. [2]

[8] On February 29, 2008, Vancity Insurance issued a RFI asking a number of insurers to express their interest in developing an exclusive supplier arrangement with Vancity Insurance. CNS and RSA responded to the RFI and there were a number of discussions between the parties. Some documents were provided by RSA/CNS to Vancity Insurance. On June 26, 2008, Glen Pentland of Vancity Insurance informed Ken Keenan of CNS and RSA that they had been selected to enter exclusive negotiations to become their sole insurer. There is no dispute between the parties that at this point there was no deal in place.

[9] From the outset, it was apparent to both parties that what was being discussed by the parties was complex and unique. It was quite different from any other deal RSA/CNS had ever done before. Vancity Insurance had for many years had many suppliers of insurance for which it acted as a broker. It was proposing to change to one insurance supplier and it saw this as pursuing a “unique and bold strategy” to enter into an exclusive relationship with one insurer rather than the industry standard broker/insurer model where a broker works with multiple insurers.

[10] The plaintiffs plead that an agreement was made between the parties between late June, 2009 and the middle of July 2008. After discoveries they delivered affidavits that said the oral agreement was made at a meeting between them and Vancity Insurance on July 3, 2008 and that further things were agreed at a further meeting on September 11, 2008. Vancity Insurance says that no oral agreement was reached at those meetings on all essential matters and that in any event, a signed written agreement was required, which never occurred.

[11] The proper approach to determining whether there is a legally enforceable contract was set out by Cromwell J.A. (as he then was) in United Gulf Developments Ltd. v. Iskandar:

The judge sought, as he should, to determine from the perspective of an objective, reasonable bystander, in light of all the material facts, whether the parties intended to contract and whether the essential terms of that contract could be determined with a reasonable degree of certainty: see G.H.L. Fridman, The Law of Contract in Canada, 5th ed. (Toronto: Thomson Carswell, 2006) at p. 15. While evidence of one party's subjective intent has no independent place in this interpretative exercise, it has long been settled that whether the legal effect of a document is conditional on future agreements must be decided having regard, not only to the terms of the document, but to the ‘genesis and aims of the transaction.’: Hillas & Co., Ltd. v. Arcos, Ltd., [1932] All E.R. Rep. 494 (H.L.) per Lord Wright at 502; Canada Square Corp. v. Services Ltd. (1982), 34 O.R. (2d) 250 at 258.

[12] There is a considerable difference in the evidence as to whether an oral agreement was reached at the two meetings of July 3 and September 11, 2008. Included in the difference is evidence given by a Mr. Tony Hayes on his examination for discovery as a representative of RSA/CNS and a later affidavit of his filed on behalf of RSA/CNS on this motion. The plaintiffs rely on this affidavit and an affidavit of a Mr. Glen Pentland who at the relevant time was employed by Vancity Insurance and attended the meeting of July 3, 2008 but at the time of his affidavit had left Vancity Insurance after its sale to the Co-operators Group.

[13] The plaintiffs contend that after the July 3, 2008 meeting at which an agreement was reached, the parties acted for all purposes as if their relationship was governed by the agreement. They say that RSA/CNS and Vancity Insurance announced their new relationship to the world, jointly developed the first generation of the custom habitational insurance policy sold to Vancity Insurance’s customers, worked together to transfer or “rollover” approximately 9,000 insurance policies from Vancity Insurance’s other insurers, and made the decisions that were required in order to enable the roll-over. They say this conduct is confirmatory of there being a concluded oral agreement.

[14] It is argued by Vancity that the evidence filed on behalf of the plaintiffs is in part inadmissible as being evidence of subjective intention and contains bald statements of agreements being reached without supporting cogent evidence. It is argued that the evidence of Mr. Hayes and Mr. Pentland is unreliable in a number of aspects. Vancity says that it is clear that while there were discussions and some items were “taken off the table”, other matters of considerable importance were not agreed in the discussions. It says that clear and definite terms were never agreed orally. It says that during the discussions there were two tracks, being (i) an operational track involving moving over existing policies from other insurers, dealing with gaps in product and price and developing new price and (ii) a contract track dealing with putting together a binding agreement. It says that after the dates of the alleged oral agreements the parties continued to negotiate terms which is indicative of no prior binding agreement.

[15] Vancity argues that this is a case about business people getting ahead of themselves. In their excitement over a proposed business venture, they lost sight of the need to agree on clear and definite contract terms. In the end, no contract was signed, clear and definite terms were never agreed orally, and one of the parties decided to go in a different direction. Vancity says that the spurned counterparty now claims that there was a legally enforceable contract as of a date early in the parties’ discussions, even though the parties continued to negotiate for months, and continued to disagree on material terms including compensation.

[16] I have come to the conclusion that it is not necessary to decide whether an oral agreement on essential terms was arrived at between Vancity Insurance and RSA/CNS. If it were, I would be inclined to order a trial of the issue in spite of the agreement of the parties that the case can be decided on a motion for summary judgment without the need for a trial.

[17] However, on my review of the evidence, it is clear that the parties expected and required there to be a signed written agreement in order for there to be a binding contractual relationship.

[18] The test on this point has been clearly laid out in the Ontario Court of Appeal’s decision in Bawitko Investments Ltd. v. Kernels Popcorn Ltd. (1991), 79 D.L.R. (4th) 97 (Ont. C.A.) in which the issue was whether an oral agreement was required to be put into a written form and signed in order to be bound. The trial judge had found an oral agreement to be binding without the need for a written signed agreement. The Court of Appeal reversed. In so doing Robins J.A. for the Court discussed the relevant tests:

20 As a matter of normal business practice, parties planning to make a formal written document the expression of their agreement, necessarily discuss and negotiate the proposed terms of the agreement before they enter into it. They frequently agree upon all of the terms to be incorporated into the intended written document before it is prepared. Their agreement may be expressed orally or by way of memorandum, by exchange of correspondence, or other informal writings. The parties may "contract to make a contract", that is to say, they may bind themselves to execute at a future date a formal written agreement containing specific terms and conditions. When they agree on all of the essential provisions to be incorporated in a formal document with the intention that their agreement shall thereupon become binding, they will have fulfilled all the requisites for the formation of a contract. The fact that a formal written document to the same effect is to be thereafter prepared and signed does not alter the binding validity of the original contract.

21 However, when the original contract is incomplete because essential provisions intended to govern the contractual relationship have not been settled or agreed upon; or the contract is too general or uncertain to be valid in itself and is dependent on the making of a formal contract; or the understanding or intention of the parties, even if there is no uncertainty as to the terms of their agreement, is that their legal obligations are to be deferred until a formal contract has been approved and executed, the original or preliminary agreement cannot constitute an enforceable contract. In other words, in such circumstances the "contract to make a contract" is not a contract at all. The execution of the contemplated formal document is not intended only as a solemn record or memorial of an already complete and binding contract but is essential to the formation of the contract itself. [Citations omitted]

[19] Thus in this case did the parties agree on all of the essential provisions to be incorporated in a formal document with the intention that their agreement should thereupon become binding, in which case the fact that a formal written document to the same effect was to be thereafter prepared and signed would not alter the binding validity of the original contract?

[20] Or, was the understanding or intention of the parties, even if there was no uncertainty as to the terms of their agreement, that their legal obligations were to be deferred until a formal contract has been approved and executed, in which case the original or preliminary agreement could not constitute an enforceable contract and the execution of the contemplated formal document was not intended only as a solemn record or memorial of an already complete and binding contract but was essential to the formation of the contract itself?

[21] I have concluded that there may well have been some uncertainty in the terms discussed orally by the parties. However, even if there was no uncertainty, Vancity and Vancity Insurance have established that both sides acted on the understanding and intent that there was to be a formal executed written contract in order to be legally bound. I will deal with the evidence that supports this finding.

[22] In their statement of claim the plaintiffs said that the agreement “needed to be memorialized in writing” and that the plaintiffs worked to do this through the fall of 2008. This is an admission in effect in the statement of claim that the plaintiffs understood that the agreement had at least to be in writing in a form agreed by both sides.

[23] Mr. Hayes, the Vice-President of sales and distribution for CNS responsible for preparing the written agreement in this case admitted on his examination for discovery that the relationship between a broker and an insurer is invariably documented by an agreement in writing and that it would be very foolish to have a situation where a broker could issue policies in the name of, for example, Royal without having some sort of a signed document indicating the scope of their authority. This is evidence that RSA/CNS expected any new agreement with Vancity Insurance would be in writing and signed. [3]

[24] In its first proposal made by RSA/CNS to Vancity Insurance dated February 29, 2008 there was contained under a Heading “Next Steps-Letter of Intent” the following-

Our next steps as partners is investigative due diligence and discussion. Ideally, we jointly sign a non-binding Letter of Intent that will allow us to enter exclusive detailed negotiations for a period of approximately six weeks, the outcome of which will be a full legal contract with a five year tenure.

[25] This communicated to Vancity that RSA/CNS intended to have a non-binding letter of intent followed by a “full legal contract”, which on any objective basis meant a signed legal contract containing the full terms of the arrangement.

[26] RSA/CNS prepared a written proposal to Vancity Insurance which was given to Vancity Insurance and discussed with them on June 10, 2008. The proposal contained a page with a title Contract: Terms and Conditions. A box under the heading contained four bullet points, one of which was “Formal Agreement”. This was evidence that RSA/CNS wanted a formal agreement and it was communicated to Vancity Insurance. An objective view of the statement communicated to Vancity Insurance was that RSA/CNS required a formal agreement, i.e. a signed written agreement.

[27] The minutes of the meeting of July 3, 2008 prepared by Vancity Insurance, upon which so much reliance is placed by the plaintiffs, contained under the first heading of Partnership a bullet point which stated “RSA/CNS to provide boiler plate contract for review/discussion.” Mr. Pentland, then a Vancity Insurance executive who attended the meeting, but who left Vancity Insurance after the sale to Co-operators and later filed an affidavit on behalf of the plaintiffs, explained on his cross-examination that the discussions at the meeting were at a more conceptual level and the idea was that after the meeting RSA/CNS was to provide a form of document to be further considered. He admitted that it was contemplated that there was going to be a written agreement down the road. He said that there were points discussed and it was contemplated that they would be incorporated into a document. These minutes made by Vancity Insurance after the meeting and given to RSA/CNS, objectively told RSA/CNS that a contract would be drafted and discussed. In fact the first draft contract later came from the RSA/CNS side.

[28] Prior to the meeting of the parties on September 11, 2008, Mr. Pentland of Vancity Insurance prepared a memorandum for the meeting and provided it to RSA/CNS. The memorandum referred in two places to a written agreement. The first was at the beginning of the memorandum and the second was at the end.

1. “Spirit and intent” Partnership Agreement

Develop a one to two page document that summarizes the “spirit and intent” of the partnership and is signed by Ken and Terry. This is a non-legal document that will summarize the vision, spirit and intent of the partnership.

4. Service Level Agreement (SLA)

Identify key service level agreement terms and performance standards. This could be an addendum to the contract or a separate agreement that is updated as required. (Underlining added)

[29] This second reference clearly contemplated that a written contract would be made.

[30] After the meeting, Mr. Hayes of RSA/CNS made some changes to the memorandum to reflect what he said occurred at the meeting. The very last bullet point under heading 4 for Service Level Agreements stated: “The LOI would specify Service Agreements but rather point to the future development of an acceptable SLA.” Mr. Hayes did not change that in the memorandum but in his affidavit sworn some seven years later said it was a mistake. He stated:

The items I removed were removed as they would not form part of the written contract. I referred to the LOI in error since the agreement at the September 11th meeting was that RSA/CNS would draft a written agreement.

[31] In his examination for discovery as a representative of RSA/CNS that took place 15 months before his affidavit was sworn, Mr. Hayes had confirmed that it was contemplated in September 2008 that there would be a one to two page non-binding spirit and intent document. Whether or not it was an error to remove the reference to an LOI, the statement by Mr. Hayes in his affidavit indicated that RSA/CNS continued to contemplate a written agreement.

[32] A minute of the September 11, 2008 meeting prepared by Vancity Insurance and circulated to the parties contained a statement under the heading Monday, September 15-Options “1.wait until draft comes back from counsel-review”. This clearly indicated that Vancity Insurance expected to receive a draft agreement to be reviewed.

[33] On December 1, 2008 Mr. Hayes of RSA/CNS sent to Mr. Terry Tacuik, the president of Vancity Insurance, a draft contract. The letter began-

Please find enclosed a first draft of the Vancity/CNS contract. I apologize for the delay in getting this to you but hope this will serve as a solid first draft for us to work on. As you will see, we have built the contract with the ability to add addendums for specific contract items such as service level agreements or claims satisfaction surveys.

[34] On his examination for discovery Mr. Hayes confirmed that the draft contract was not a document he expected Vancity just to sign, and that it was just a solid first draft to work on with Vancity. His letter enclosing the draft contained a reference to a number of things that needed to be discussed and agreed, and Mr. Hayes on his discovery agreed that the draft contained a number of points that had not been agreed and contained bullet points or blanks in some places.

[35] Vancity Insurance never returned the draft agreement to Mr. Hayes. In the New Year Vancity decided to sell Vancity Insurance and turned its attention to that. Even though RSA/CNS was a bidder during that process, it was still looking for the agreement to be returned. On February 10, 2009 Mr. Hayes emailed Mr. Taciuk and asked how the contract review was going. It became known to Mr. Taciuk that there was pressure within RSA/CNS to have the agreement finalized and signed. On March 16, 2009 Mr. Taciuk said in an internal email that CNS is still looking for the contract. By then Mr. Taciuk was purposely dragging his feet because of the initiative to sell Vancity Insurance

[36] The plaintiffs argue that whether the parties acted as if they had a binding agreement after entering into an understanding ought to be given great weight by the courts in determining whether there is an unenforceable agreement or a binding contract. See Geoff R. Hall, Canadian Contractual Interpretation Law, 2nd ed. (Markham Ont.: LexisNexis 2012) at p. 164 §5.5. The plaintiffs argue that by pursuing the roll-over of the business from Vancity Insurance’s other insurers to CNS and continuing to work on the program, the parties confirmed that they had a binding agreement. I do not agree. That ignores the need for a signed written contract that the parties pursued for many months. Pursuing such a written contract has to be taken into account in weighing what the parties did after the meetings at which it is alleged that an oral agreement was reached. Indeed the minutes of those meetings indicated that that parties expected there to be a written signed contract and that was pursued by the plaintiffs well into the spring of 2009. That activity belies the notion of the parties acting as if they had a binding agreement without the need for a signed written agreement.

[37] I conclude from all of the evidence and find that the understanding or intention of RSA/CNS and Vancity Insurance was that their legal obligations were to be deferred until a formal contract had been approved by both sides and executed. Thus, as there was no binding agreement, the claim against Vancity and 7081332 Canada Ltd (formerly Vancity Insurance) is dismissed.

Plaintiffs’ claim against Co-operators

[38] The Co-operators Group Limited (“Co-operators”) is a holding company with subsidiaries which carry on business in the financial services sector, including insurance. It was the successful bidder in an auction by Vancity of its shares in its wholly owned subsidiary, Vancity Insurance. The defendant 7081332 Canada Ltd. is a subsidiary of Co-operators which was incorporated to purchase the shares of Vancity Insurance. The defendant Federated Agencies Limited is also a subsidiary of Co-operators which carries on business as an insurance broker. However, it is not a party to the Share Purchase Agreement and the basis on which it was joined as a defendant is unclear.

[39] The claim against Co-operators is that they induced a breach of the agreement said to have been made by RSA/CNS with Vancity Insurance. The pleading claims that the agreement in question was an oral agreement made by RSA/CNS with Vancity Insurance between late June and the middle of July, 2008.

[40] The tort of inducing a breach of contract is well known. See Drouillard v. Cogeco Cable Inc. (2007), 2007 ONCA 322, 86 O.R. (3d) 431 (C.A.) at para. 26. There are four elements:

(a) the plaintiff had a valid and enforceable contract with a third party; (b) the defendant was aware of the existence of this contract; (c) the defendant intended to and did procure the breach of the contract; and (d) as a result of the breach, the plaintiff suffered damages.

[41] The claim against the Co-operators Group must fail in light of the decision that the plaintiffs had no binding agreement with Vancity Insurance. However, even if I had held that a binding agreement had been made between the plaintiffs and Vancity Insurance, I would still hold that the action against Co-operators must fail.

[42] John Esher is a senior executive at Co-operators. He was chief negotiator on behalf of Co-operators in the transaction for the purchase of Vancity Insurance during the period February to July 2009. Co-operators learned through Deloitte that Vancity was interested in selling Vancity Insurance. On March 9, 2009, Co-operators delivered a non-binding expression of interest to Vancity to acquire its shares of Vancity Insurance. Between March and July 2009, Co-operators engaged in a due diligence process with Vancity regarding the potential purchase of Vancity Insurance.

[43] Co-operators assembled a team to perform due diligence on Vancity Insurance. During the due diligence process, Co-operators was provided with copies of Vancity Insurance’s broker agreements with various insurance companies for which it issued insurance policies, including a non-exclusive broker agreement between CNS and Vancity Insurance dated October 17, 1998, and another between RSA and Vancity Insurance dated August 1, 2004. Vancity Insurance represented to Co-operators that those broker agreements with RSA and CNS were the only current agreements with the plaintiffs. This evidence is from the affidavit of Mr. Esher and while he was cross-examined on his affidavit, he was not challenged on that evidence of the representation made to Co-operators, and I accept it.

[44] During a meeting with Vancity on April 2, 2009, Vancity management advised Co-operators that Vancity Insurance had developed “a branded program with CNS with a strategy to roll over all business from their other markets to this program …”. However, Vancity management also expressly advised Co-operators that Vancity Insurance did not have a current contract with CNS that set out the terms of that proposed new program. That evidence from the affidavit of Mr. Esher was not challenged on his cross-examination, and I accept it.

[45] During the due diligence process, Co-operators was also provided with a copy of an unexecuted document entitled “Insurance Program Agreement” between CNS and Vancity Insurance, which was labelled “Draft for Discussion Purposes.” That is the draft agreement that had been sent by Mr. Hayes of RSA/CNS to Vancity Insurance on December 1, 2008.

[46] Mr. Esher further stated in his affidavit that at all material times, Co-operators understood from Vancity Insurance and Vancity that the draft Insurance Program Agreement was never finalized between or executed by Vancity Insurance and CNS and that there were no binding agreements with CNS or RSA other than earlier 1998 broker agreement with CNS and the 2004 broker agreement with RSA. He was not cross-examined on this evidence and I accept it.

[47] Mr. Esher further stated in his affidavit that while relying on the representations of Vancity and Vancity Insurance that there was no binding agreement with RSA or CNS regarding the matters addressed in the draft Insurance Program Agreement that had been sent by RSA/CNS to Vancity Insurance, Co-operators was concerned that RSA or CNS might bring a potential claim in relation to the alleged contract, and for that reason, Co-operators negotiated for an indemnity against any such claim as part of the share purchase agreement, described further below. The sale agreement between Vancity and 7081332 Canada Ltd. for Co-operators did contain such an indemnity. It also contained in a schedule of contracts the following:

CNS is currently providing insurance services to the Corporation on the basis of a relationship without a formal written contract. The terms of this relationship are not easily ascertained, but some of them may be included in a draft agreement provided by CNS to the Corporation in December of 2008. The terms of the relationship were never settled. CNS is claiming that the arrangement may contain a 5 year term with a two year termination provision, and exclusivity provisions. The Corporation and its legal counsel have received an e-mail dated May 25, 2009 and a letter dated June 25, 2009 setting out CNS's position with respect to this arrangement.

[48] The thrust of the plaintiffs’ argument is that Co-operators knew of the roll-out of the program being developed for Vancity Insurance by RSA/CNS, that Co-operators knew of the threat of a claim by RSA/CNS against Vancity Insurance for breach of an alleged contract and that Co-operators turned a blind eye to whether there was in fact a binding agreement and instead obtained an indemnity to protect themselves.

[49] The plaintiffs rely on an internal Co-operators memorandum of April 3, 2009 that discusses things Co-operators was learning through its due diligence that contained the following;

VISL developed a branded program with CNS with a strategy to roll over all business from their other markets to this program. The policy includes $10,000 of “environmental cover”…The commission terms and roll-over commissions are very generous improving their revenue stream in the brokerage. They started in November and added 6 contract staff to manage the roll-over.

We asked management how they thought CNS would react if The Co-operators was the successful purchaser and the discussion didn’t produce any conclusions. We also discovered that they do not have a current contract with CNS outlining the new terms which should be highlighted as a “risk” to this transaction.

[50] There is no doubt that Co-operators was told of the nature of the business that was being conducted by RSA/CNS with Vancity Insurance. But to be noted in this memorandum is the statement that Co-operators discovered that Vancity Insurance did not have a current contract with CNS. There is also no doubt that Co-operators understood that the lawyers for the two sides were taking opposite positions. Co-operators understood that the lawyers for Vancity Insurance were taking the position that the only agreement in force was the old 2004 CNS brokerage agreement whereas the lawyers for CNS were taking the position that it was the December 2008 draft agreement that was in force.

[51] The plaintiffs are critical of an answer made by Mr. Asher of Co-operators on his cross-examination in which he said after being advised of the competing legal opinions that Co-operators did not have to decide whether there was an enforceable contract between Vancity Insurance and RSA/CNS. The plaintiffs contend that Co-operators did not care whether there was a legally binding agreement between RSA/CNS and Vancity Insurance and it just took an indemnity to protect itself. It simply turned a blind eye to the situation. Thus it should be taken to have known that there was a binding agreement.

[52] I do not accept that criticism. Co-operators was in no position to make any kind of a determination as to whether RSA/CNS or Vancity Insurance were correct in their positions.

[53] There has been considerable litigation on this very issue, with affidavits, cross-examinations and more than a day of legal argument. It cannot seriously be argued in these circumstances that Co-operators “turned a blind eye” to the issue and that if it had looked more thoroughly into the question, as it ought to have done, it would have determined for itself that there was a binding agreement between RSA/CNS and Vancity Insurance. There was clearly no piece of paper that Co-operators could have looked at to make clear that an oral agreement had been made. Does the law in these circumstances require a potential purchaser such as Co-operators to learn who all the relevant persons from each side were and then attempt to interview them? Would it require Co-operators to then form a judgment as to whose evidence should be accepted? Would it require Co-operators to form a judgment as to whether terms not agreed, as certainly was the case, were sufficiently minor so not as to prevent a binding oral contract from having been formed? And what would be the consequences to Co-operators if it had done all that and then had come to a conclusion as to whether or not there was a binding agreement that differed from a later decision of a court after a lengthy trial and perhaps appeals.

[54] In my view, the commercial world does not require such steps to be taken. It was a perfectly legitimate thing for Co-operators in the circumstances in which it found itself to take an indemnity. It had been told of the difference between the lawyers for the parties and had been told by Vancity Insurance that there was no concluded agreement with CNS. Co-operators obtained a warranty to that effect in the purchase agreement under which Vancity Insurance was bought and an indemnity to protect itself. Those were prudent steps that any responsible purchaser would take.

[55] In Harry Winton Investments Ltd. vs. CIBC Development Corp. [2000] O.J. No. 1196; aff’d (2001), , 52 OR 3rd 417 (C.A.), a tenant took the position that the landlord had breached his lease by renting premises in the same building to an abortion clinic. The tenant sued the landlord for a declaration that the landlord had fundamentally breached the lease, and on the following day retained an agent to locate new premises for him. The tenant later leased new premises and abandoned the old premises. His old landlord sued his new landlord for inducing breach of contract. It was held that as the tenant had already decided to terminate his lease, the new landlord’s efforts to persuade the tenant to become a tenant in its building could not be taken to have induced the tenant to breach his lease with his old landlord. One of the arguments made by the old landlord against the new landlord was that once the new landlord was made aware of the lease with the old landlord, the new landlord was obliged to satisfy itself that the tenant had good grounds in law to establish a breach before the new landlord could agree to lease to the tenant. The trial judge rejected the argument, saying:

It is not for Development [the new landlord] to adjudicate the legitimacy of the claim of breach. To suggest otherwise would make the negotiating of commercial leases virtually impossible.

[56] I agree with that statement and it is entirely apt to this case.

[57] The plaintiffs rely upon a statement of Lord Denning M.R. in Emerald Construction Co v Lowthian, [1966] 1 W.L.R. 691 (C.A.) to support their case. While what Lord Denning said was no doubt correct, it has no application to this case. Lord Denning said:

Such being the facts, how stands the law? This “labour only” sub-contract was disliked intensely by this trade union and its officers; but nevertheless it was a perfectly lawful contract. The parties to it had a right to have their contractual relations preserved inviolate without unlawful interference by others: see Lord Macnaghten in Quinn v. Leathem ([1900-03] All ER Rep at p 9; [1901] AC at p 510). If the officers of the trade union, knowing of the contract, deliberately sought to procure a breach of it, they would do wrong: see Lumley v. Gye (1853) 2 E. & B. 216. Even if they did not know of the actual terms of the contract, but had the means of knowledge - which they deliberately disregarded - that would be enough. Like the man who turns a blind eye. So here, if the officers deliberately sought to get this contract terminated, heedless of its terms, regardless whether it was terminated by breach or not, they would do wrong. For it is unlawful for a third person to procure a breach of contract knowingly, or recklessly, indifferent whether it is a breach or not.

[58] In that case, there was a binding written contract which the union officers deliberately disregarded when they had the means of knowledge to find out its terms. None of that pertains to Co-operators. There was no written contract and Co-operators had no means to find out contractual terms said to have been agreed or whether it was even a binding agreement. Nor is there evidence that Co-operators deliberately sought to get the alleged oral contract terminated. Co-operators was assured throughout by Vancity Insurance that there was no binding contract. [4]

[59] There is another reason why Co-operators could not be liable for inducing breach of contract. The plaintiff’s case, as articulated by Mr. Hayes in his affidavit, is that by sometime in December, 2008 Vancity had decided to explore the market to sell Vancity Insurance and that they were not going to proceed to settle the contract terms because of this decision. That being the case, the decision of Vancity and Vancity Insurance not to proceed with the alleged contract with CNS could not have been induced by Co-operators several months later. It is the same situation that pertained in Harry Winton. In the Court of Appeal affirming the trial judge, Abella J.A. (as she then was) and Rosenberg J.A. for the Court stated:

[25] In our view, because Development approached Padulo and offered to lease space to it at a time that Padulo had already decided to breach its contract with the appellant, there can be no liability. The possibility of liability could only arise if Padulo had not yet decided to terminate its lease and had been approached by Development to consider new premises.

[60] For all the above reasons, the claim against 7081332 Canada Ltd., The Co-operators Group Limited and Federated Agencies Limited is dismissed.

Conclusion

[61] The action in its entirety is dismissed. The defendants are entitled to their costs. Written cost submissions no longer than three pages and proper cost outlines may be made within ten days and responding written cost submissions no longer than three pages for each defendant group may be made within a further ten days.

Newbould J.

Date: September 19, 2016

[1] The plaintiffs pleaded a conspiracy action against the defendants but on the hearing of the motions it was agreed that the plaintiffs are not pursuing their conspiracy claim.

[2] CNS was purchased by RSA in January 2008.

[3] Mr. Hayes acknowledged that Vancity Insurance’s authority to issue policies in the names of CNS and RSA derived from the old broker agreements and said that while that was part of his thinking, “it was more what was happening at the time that, I guess, gave comfort that we didn’t have a signed agreement”. This was no evidence that RSA/CNS did not think a new signed agreement was necessary to have Vancity Insurance bound to a new agreement but rather was evidence that because of the roll-over of business to RSA/CNS they were willing to take a chance on continuing what they were doing without yet obtaining a new signed agreement. What Mr. Hayes later did confirms that.

[4] For much the same reasons, the case of 369413 Alberta Ltd. v Pocklington, 2000 ABCA 307 and the statements of law in it have no application to the facts of this case.