COURT OF APPEAL FOR ONTARIO
CITATION: Aviva Canada Inc. v. 1843538 Ontario Inc., 2020 ONCA 581
DATE: 20200915
DOCKET: C67255
van Rensburg, Pardu and Huscroft JJ.A.
BETWEEN
Aviva Canada Inc.
Plaintiff/Defendant by Counterclaim
(Respondent)
and
1843538 Ontario Inc., c.o.b. Mississauga Collison Centre, and/or McLaren Collison, Fady Rony Warda, Rony Amanuel Warda, and Michael Wetzel
Defendants/Plaintiffs by Counterclaim
(Appellants)
Lou Ciotoli, for the appellants 1843538 Ontario Inc., c.o.b. Mississauga Collison Centre, and/or McLaren Collison, Fady Rony Warda and Rony Amanuel Warda
Daniel I. Reisler and Richard Tapp, for the respondent
Heard: September 4, 2020 by video conference
On appeal from the order of Justice Lorne Sossin of the Superior Court of Justice, dated June 21, 2019, with reasons reported at 2019 ONSC 3874.
REASONS FOR DECISION
[1] The appellants appeal from the order of the motion judge dismissing their motion to dismiss the respondent’s claim under Rule 21 and striking paragraphs of their statement of defence and counterclaim under Rule 25 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The court was informed that the appellants’ co-defendant Michael Wetzel has settled with the respondent and is no longer part of the case.
[2] This appeal arises out of an independent investigation the respondent insurer undertook to study fraud in the auto-collision industry. In short, the respondent insured several vehicles purchased by its wholly owned subsidiary. The subsidiary damaged these vehicles intentionally and submitted them to body shops that had repaired vehicles for the respondent in the past. Following repair of the vehicles, the respondent’s appraiser examined them and the work that had been performed. The respondent claimed that the appellants included parts on their appraisal to be refinished or replaced that did not require any repair and, in addition, deliberately damaged the vehicles in order to perform additional repairs. The respondent seeks to recover damages for fraudulent misrepresentation, breach of duty of honest performance of a contract, unjust enrichment, and conspiracy to commit fraud, in addition to damages for trespass to property, investigative costs, and punitive and exemplary damages.
[3] We conclude that the motion judge made no error in permitting the respondent’s claim to proceed. However, the impugned paragraphs of the statement of defence and counterclaim can be amended rather than struck. Accordingly, the appeal is allowed in part.
The claim was properly allowed to proceed
[4] The motion judge did not err in finding that it is not plain and obvious that the respondent’s claim cannot succeed as a result of the ex turpi causa doctrine. In other words, the motion judge did not err in refusing on this Rule 21 motion to dismiss the respondent’s claim on the basis of ex turpi causa. The motion judge applied the law as set out by the Supreme Court in Hall v. Hebert, 1993 CanLII 141 (SCC), [1993] 2 S.C.R. 159 and British Columbia v. Zastowny, 2008 SCC 4, [2008] 1 S.C.R. 27. He found that it was not plain and obvious the respondent had either committed criminal mischief or an act of fraud and misrepresentation warranting the application of the ex turpi causa doctrine. These findings are entitled to deference and there is no basis to interfere with them.
[5] Nor did the motion judge err in refusing to strike the respondent’s claims for the costs of its investigation and punitive damages on the basis that the respondent should not be able to claim a “profit” or “windfall” beyond their actual losses with respect to the subject vehicles. The motion judge properly concluded that these were novel claims that should not be determined on a Rule 21 motion.
The pleadings can be amended
[6] The motion judge found that paras. 7 and 14 of the appellants’ statement of defence and counterclaim should be struck because a civil defence of entrapment has not been recognized and, even if it were recognized, it is plain and obvious that the conduct of the respondent did not meet the standard for entrapment. The appellants now seek leave to amend paras. 7 and 14 of their statement of defence and counterclaim. They argue that these paragraphs do not plead entrapment and use the word “entrapping” only to describe the nature of the investigation conducted by the respondent. The appellants want only to plead the defence of ex turpi causa.
[7] The respondent concedes that this court should give leave to the appellants to amend paras. 7 and 14 of their pleading. We agree. Although the appellants did not ask the motion judge for leave to amend, it is apparent from the motion judge’s reasons that he contemplated that the appellants could continue to raise the defence of ex turpi causa.
[8] Accordingly, and with consent of the parties, the appellants are granted leave to amend paras. 7 and 14 of their statement of defence and counterclaim to read as follows:
Instead, the Defendants plead that the repairs were not owned by “consumers” of auto body repair services, but by the plaintiff or its designates itself, in order to test for the legitimacy of these repairs.
These Defendants plead, and the fact is, that the Plaintiff, of its own accord or in concert with others, resorted to the commission of illegal, indeed criminal, activity. As a result, these Defendants plead and rely on the doctrine of ex turpi causa non oritur actio.
Disposition
[9] For these reasons, the appeal is allowed in part. The appellants are granted leave to amend their statement of defence and counterclaim as set out above.
[10] The appellants have failed on the main aspect of the appeal and the respondent is entitled to costs. The appellants’ success in securing an amendment of the pleadings is best understood as an indulgence. As a result, the respondent is entitled to costs of the appeal, fixed in the agreed amount of $5,000, inclusive of taxes and disbursements.
“K. van Rensburg J.A.”
“G. Pardu J.A.”
“Grant Huscroft J.A.”