COURT OF APPEAL FOR ONTARIO

CITATION: Seidel v. Markham (Town), 2016 ONCA 306

DATE: 20160426

DOCKET: C60817

Sharpe, LaForme and van Rensburg JJ.A.

BETWEEN

Henry Seidel

Plaintiff

and

Town of Markham

Defendant/Appellant

and

V.T.A. Construction Ltd. and Intact Insurance (formerly ING Insurance Company of Canada)

Third Parties/Respondent

Counsel:

David G. Boghosian and Shaneka M. Taylor, for the appellant

Sean R. Chambers, for the respondent

Heard and released orally: April 22, 2016

On appeal from the judgment of Justice Bruce A. Glass of the Superior Court of Justice, dated July 3, 2015.

ENDORSEMENT

[1] This appeal arises out of a dispute between the appellant Town of Markham (“Markham”) and the respondent Intact Insurance Company of Canada (“Intact”), with respect to the interpretation of what both parties referred to as an “agreement”.

[2] The plaintiff sued for damages after an alleged slip and fall on Markham’s property. He sued Markham, the appellant in this appeal, initially pleading that the accident occurred March 6, 2011. Markham had a winter maintenance contract with V.T.A. Construction Ltd (“V.T.A.”). As required by the contract, V.T.A. had Markham added as an additional insured to its policy with Intact “but only with respect to the legal liability arising out of the operations of [V.T.A.]”. Markham retained counsel, Mr. Persaud, and in January 2012, served a statement of defence and issued a third party claim against V.T.A. and Intact. The third party claim claimed contribution and indemnity from V.T.A. and a declaration that Intact owed a duty to defend and indemnify Markham in respect of the plaintiff’s claims.

[3] In May 2012, the plaintiff added V.T.A. as a defendant to the action and amended the statement of claim to plead that the accident occurred on March 5, 2011.

[4] In the fall of 2012 and early 2013, there were a series of communications between Mr. Persaud, Intact and Mr. Lipetz at Benson Percival Brown LLP (“BPB”), the law firm appointed to defend V.T.A. in the action, about the defence of the action and the third party claim. Mr. Persaud prepared an Assumption of Defence Agreement that specifically provided for Intact to assume Markham’s defence and to indemnify Markham in respect of any damages in the action. Mr. Lipetz advised that Intact would not be executing the agreement but that his office would serve a Notice of Change of Lawyers. Mr. Persaud replied that he did not have to sign the agreement so long as it was understood that Markham would be covered for any amounts arising from a finding of liability against it. The next day, Mr. Lipetz delivered the Notice of Change of Lawyers, with the effect that BPB represented both V.T.A. and Markham in the defence of the action. In fact, the retainer continued for the following 16.5 months, during which time BPB was the only firm representing Markham in the proceedings, which included attendance at examinations for discovery.

[5] In December 2013, BPB notified Mr. Persaud that it was bringing a motion to remove itself from the record. This occurred six months later. New counsel was appointed for V.T.A. but not Markham. Markham brought a motion under Rule 49 to enforce the “settlement agreement”.

[6] The motion judge dismissed Markham’s motion that sought to enforce Intact’s obligation to both defend and indemnify Markham in the action. He concluded that there had not been a “meeting of the minds” between the parties on the question of indemnification and that the agreement was not in clear enough terms to require Intact to indemnify Markham for any loss suffered as a result of V.T.A.’s negligence.

[7] The appellant raises a number of arguments on appeal, having to do with the motion judge’s approach to the issue and his consideration of the evidence. The respondent asserts that the motion judge’s interpretation of what occurred is based on his findings of fact and entitled to deference. Further, the communications between counsel were not sufficient to conclude an agreement to indemnify “in the clearest of terms”.

[8] This appeal is allowed for the following reasons.

[9] First, the motion judge erred in concluding that there was no agreement. The parties both agreed that they entered into an agreement resulting in the appointment of the same counsel to represent both V.T.A. and Markham in the defence of the action. The issue was not whether there was an agreement, but its interpretation.

[10] Second, the motion judge erred in concluding that Intact could not have agreed to indemnify Markham for liability in the action, except as resulted from V.T.A.’s negligence. While that may well have been what was provided for in the maintenance contract, and the coverage provided by V.T.A.’s insurance policy with Intact, the issue was the interpretation of the parties’ agreement that was entered into in the context of both the action and the third party claim.

[11] In its third party claim, Markham claimed both a defence and indemnification from Intact. Intact had three choices. It could have denied both obligations, in which case Markham would have been on its own in the action. It could have resisted the claim for indemnification but accepted the obligation to defend, assuming the cost of Markham’s defence by different counsel. Or it could have accepted the obligation to defend and indemnify. The first two options would recognize that Markham and V.T.A. continued to be adverse in interest in the main and third party action. The third would mean that their interests were aligned or the same.

[12] Intact’s appointment of a single firm to represent both Markham and V.T.A. could not have occurred if V.T.A. and Markham continued to be adverse in interest. The motion judge erred in failing to consider this important and determinative fact. The fact that BPB was appointed to represent both defendants and in fact did represent them in litigation until discoveries had been completed was only consistent with one meaning, namely, that Intact had agreed to both defend and indemnify Markham, including in respect of its own negligence unrelated to V.T.A.’s acts or omissions. This, in our view, is an agreement to indemnify in sufficiently clear terms. Without an agreement to indemnify Markham, counsel appointed by Intact to act for both V.T.A. and Markham would have been in an obvious and untenable conflict of interest.

[13] It may be that Intact and its counsel failed to appreciate the significance of the change in the plaintiff’s pleading of the accident date until quite late in the day. However, this did not permit Intact to resile from the agreement the parties had reached, after discoveries had been conducted and after BPB had acted as Markham’s counsel for more than 16 months.

[14] The appeal is therefore allowed. The order in the court below is set aside. Intact shall appoint counsel to defend Markham at its sole expense and Intact shall indemnify Markham for any damages and costs awarded against Markham in the main action.

[15] Costs are payable to the appellant and fixed in the sum of $25,000, inclusive of the costs below, the appeal and applicable taxes and disbursements.

“R.J. Sharpe J.A.”

“H.S. LaForme J.A.”

“K. van Rensburg J.A.”