DATE: 2002-12-17

DOCKET: C37276

COURT OF APPEAL FOR ONTARIO

RE: SHINER AND ASSOCIATES INC., TRUSTEE OF THE ESTATE OF THOMAS S. MISIRLIS, A BANKRUPT (Plaintiff/Respondent) v. THE CONTINENTAL INSURANCE COMPANY (Defendant/Appellant)

BEFORE: DOHERTY, AUSTIN and CHARRON JJ.A.

COUNSEL: Barry A. Percival, Q.C. for the appellant A. Gaertner for the respondent

HEARD: December 4, 2002

RELEASED ORALLY: December 4, 2002

On appeal from the judgment of Madam Justice Backhouse dated June 25, 2001 and supplementary reasons dated October 29, 2001.

E N D O R S E M E N T

[1] The appellant contends that the trial judge erred in holding that Mr. Misirlis’ conduct did not come within the “intentional wrongful act” exemption in the policy. There are two components to this submission. The first requires a determination as a matter of law of the meaning of the phrase “intentional wrongful act” in the context of an exemption clause in an errors and omissions insurance policy. The second requires a review, albeit a limited review, of the trial judge’s finding of fact that Misirlis did not intend to injure his client, Phoenix.

[2] Counsel for the appellant submits that a deliberate act from which injury is foreseeable constitutes an intentional wrongful act for the purposes of the policy. We cannot agree. In our view, Lloyd’s of London v. Scalera (2000), 2000 SCC 24, 185 D.L.R. (4th) 1 (S.C.C.) makes it clear that an exclusion clause such as the one in this policy, is directed at intentional torts as opposed to acts of negligence, even if those acts of negligence are deliberate in the sense that they are volitional. The two cases relied on by the appellant from this court, Buchanan v. Gan Canada Insurance Co. (2000), 50 O.R. (3d) 89 and Godonoaga v. Khatambakhab (2000), 188 D.L.R. (4th) 706, do not assist the appellant. Neither suggests that conduct which does not amount to an intentional tort can constitute an “intentional wrongful act” for the purposes of an exclusion clause.

[3] In the circumstances of this case, Misirlis’ conduct could constitute an intentional tort if he intended to cause economic injury to Phoenix, or perhaps if he was reckless as to that the result, when he placed the insurance with the offshore insurer.

[4] The trial judge accepted that an intention to cause harm to Phoenix or recklessness as to that result could support a finding that Misirlis’ conduct amounted to an “intentional wrongful act” within the meaning of the exemption in the policy. She concluded that Misirlis did not intend economic harm to Phoenix and was not reckless as to that result. The evidence was certainly not all one way. Aspects of Misirlis’ conduct raised serious questions. We are satisfied, however, that it was open to the trial judge to come to the conclusion that she did. We can see no misapprehension of any material evidence nor, any failure to consider material evidence. It is noteworthy that the trial judge relied to a considerable extent on the evidence of a defence witness in coming to her conclusion that Misirlis did not intend economic harm to Phoenix. Nothing said in the submissions made to this court has convinced us that she in any way misapprehended or overstated the evidence of that defence witness.

[5] This ground of appeal fails.

[6] The appellant also argued that even if it was liable under the policy, prejudgment interest should run from the date of this action, 1996, and not from the date of the underlying action brought by Phoenix against Misirlis. That action was commenced in 1990.

[7] We reject this submission. The policy clearly obligated the appellant to pay prejudgment interest on the judgment obtained against Misirlis by Phoenix. Under the terms of the policy, that prejudgment interest could run from the date the action was commenced by Phoenix. The appellant’s obligation to pay prejudgment interest was above and beyond the face value of the appellant’s error and omissions policy with Misirlis.

[8] In support of his argument that the prejudgment interest should have run from 1996, the appellant referred to s. 132 of the Insurance Act. That provision has no application to this proceeding. It is directed to a proceeding brought by a third party against an insurer. This is a proceeding brought by the trustee in bankruptcy of the insured against the insurer.

[9] The appeal is dismissed with costs fixed on consent at $10,000.

“Doherty J.A.”

“Louise Charron J.A.”

“Austin J.A.”