COURT OF APPEAL FOR ONTARIO

CITATION: Svia Homes Limited v. Northbridge General Insurance Corporation, 2020 ONCA 684

DATE: 20201029

DOCKET: C67937

Rouleau, Miller and Zarnett JJ.A.

BETWEEN

Svia Homes Limited

Applicant (Appellant)

and

Northbridge General Insurance Corporation

Respondent (Respondent)

Thomas J. Donnelly and Joyce Tam, for the appellant

James G. Norton and James Tausendfreund, for the respondent

Heard: September 24, 2020 by video conference, with supplementary submissions in writing

On appeal from the judgment of Justice William S. Chalmers of the Superior Court of Justice, dated December 18, 2019, with reasons reported at 2019 ONSC 7459, 99 C.C.L.I. (5th) 310.

Zarnett J.A.:

INTRODUCTION

[1] The appellant, Svia Homes Limited (“Svia”), holds an unsatisfied judgment against 1390348 Ontario Limited (“139 Limited”). Svia brought an application to recover payment of that judgment from the respondent, Northbridge General Insurance Corporation (“Northbridge”). Svia’s application was under s. 132 of the Insurance Act, R.S.O. 1990, c. l.8, which permits the holder of an unsatisfied judgment against an insured person to recover the amount of the judgment from that person’s insurer, “subject to the same equities as the insurer would have if the judgment had been satisfied”. Northbridge is the insurer of 139 Limited under a Commercial General Liability policy of insurance (the “Policy”).

[2] The application judge held that 139 Limited had breached a condition in the Policy requiring it to give Northbridge timely notice of the action that led to the judgment, resulting in forfeiture of 139 Limited’s right under the Policy to claim indemnity from Northbridge. In the application judge’s view, the grounds necessary to justify granting relief from that forfeiture were not established. As Svia, under s. 132 of the Insurance Act, stood in no higher position than 139 Limited, Svia’s claim against Northbridge for payment of the judgment failed.

[3] Svia appeals the dismissal of its application. For the reasons that follow, I would dismiss the appeal.

BACKGROUND

[4] Between 2004 and 2008, Svia developed a townhouse project in Oakville, Ontario. Svia hired 139 Limited to install the project’s sewer system.

[5] Problems were encountered with the sewers. In 2008, Svia commenced an action (the “2008 Action”) against 139 Limited and others, claiming damages related to the defective installation of the sewers.

[6] Under the Policy, which was issued by Northbridge’s predecessor, 139 Limited had liability coverage for sums 139 Limited became obligated to pay because of property damage occurring between March 18, 2006 and March 18, 2007.

[7] Northbridge was not provided with notice of the 2008 Action until nine years after it was commenced. In the meantime, 139 Limited defended the 2008 Action until 2011, when its lawyer was removed from the record and its pleading was struck. Examinations for discovery of other parties took place in 2011, but 139 Limited did not participate. In 2013, 139 Limited was noted in default.

[8] In April 2017, Svia’s counsel in the 2008 Action provided notice of the 2008 Action to Northbridge.[^1] Upon receipt, Northbridge obtained a Non-Waiver Agreement from 139 Limited to allow it to investigate and consider whether the claims in the 2008 Action were covered.[^2]

[9] In July 2017, Northbridge sent a letter denying coverage for the 2008 Action. It asserted a number of bases for this position: that it had received no notice from 139 Limited in the nine years that had elapsed since the 2008 Action was commenced, and that this breach of condition precluded an action for coverage under the Policy; that even if there had been timely notice, the claims in the 2008 Action to recover the cost of replacing the sewer system were excluded under the Policy; and that, to the extent the 2008 Action made a “minor” claim for resultant damage, an action for coverage was barred by the expiry of a limitation period.

[10] In March 2018, Svia amended its statement of claim in the 2008 Action to include broader claims for resultant damage. The amended claim was not provided to Northbridge. On April 20, 2018, without notice to Northbridge, Svia obtained default judgment in the 2008 Action against 139 Limited (and one other defaulting defendant) in the amount of $1,979,555.38, plus interest and costs fixed in the amount of $23,500. On May 25, 2018, counsel for Svia provided a copy of the default judgment to Northbridge.

[11] On December 4, 2018, Svia moved, without notice to Northbridge, to amend the default judgment. The judgment was reduced to $1,864,619.87 as a result of a mathematical error, and the damages awarded were broken down: the damages for repairing the sewer system were quantified at $69,505.16, and resultant and consequential damages were quantified at $1,795,114.71.

[12] After unsuccessful attempts, including by execution, to collect the judgment from 139 Limited, Svia commenced an application against Northbridge for the amount of the judgment. The application was brought under s. 132 (1) of the Insurance Act, which provides:

132 (1) Where a person incurs a liability for injury or damage to the person or property of another, and is insured against such liability, and fails to satisfy a judgment awarding damages against the person in respect of the person’s liability, and an execution against the person in respect thereof is returned unsatisfied, the person entitled to the damages may recover by action against the insurer the amount of the judgment up to the face value of the policy, but subject to the same equities as the insurer would have if the judgment had been satisfied.

THE APPLICATION JUDGE’S REASONS

[13] The application judge referred to the principle that persons, such as Svia, who seek recovery in a proceeding under s. 132, can stand in no better position than the insured would if it were claiming payment from the insurer. Thus, if Northbridge had a defence to a claim by 139 Limited, that would also be a defence to Svia’s claim.

[14] He then considered whether the judgment fell within the terms of coverage the Policy provided. He noted that the Policy excluded coverage for the cost to repair the insured’s own defective work ($69,505.16 of the judgment), giving Northbridge a defence to that part of the claim. However, the terms of coverage did extend to consequential damage resulting from the insured’s defective work ($1,795,114.71 of the judgment). Therefore, the terms of coverage alone would not afford Northbridge a defence to that part of the claim.

[15] The application judge then turned to whether Northbridge had a defence based on the lack of timely notice of the claim, which he dealt with by considering two issues.

[16] First, he considered whether 139 Limited breached the Policy by failing to provide timely notice of the 2008 Action. He noted that Liability Condition 5 of the Policy required that “If a claim is made or ‘action’ is brought against any Insured, you [that is, 139 Limited] must see to it that we [Northbridge] receive prompt written notice of the claim or ‘action’”. He also noted that the Policy permitted Svia to give notice, as Statutory Condition 8 provided that if the insured was absent, unable to provide notice, or refused to do so, notice could be given “by a person to whom any part of the insurance money is payable”. He found that 139 Limited breached Liability Condition 5 by its failure to provide timely notice, the notice by Svia coming nine years after the 2008 Action had been commenced.

[17] Second, in light of the provision of the Policy that no claim could be brought against the insurer unless all terms of the Policy had been complied with, he considered whether relief from forfeiture could be granted under s. 129 of the Insurance Act, which provides:

Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss and a consequent forfeiture or avoidance of the insurance in whole or in part and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.

[18] The application judge found that Svia had standing to request relief from forfeiture as an applicant in a s. 132 application. But he held that the test for relief from forfeiture set out in Monk v. Farmers’ Mutual Insurance Company (Lindsay), 2019 ONCA 616, 92 C.C.L.I. (5th) 84, at para. 79, leave to appeal refused, [2019] S.C.C.A. No. 384, had not been met. First, the conduct of 139 Limited in failing to give timely notice had not been reasonable; second, the breach of the condition to give timely notice was substantial and had prejudiced Northbridge’s ability to respond on behalf of 139 Limited to the 2008 Action; and third, although the forfeiture of insurance coverage was significant, the loss of Northbridge’s ability to defend the action was also significant such that there was no disparity between the insured’s loss of coverage and the damage caused to the insurer by the breach of condition.

[19] Svia’s application was accordingly dismissed.

THE ISSUES ON APPEAL

[20] Svia’s factum on appeal focussed on the refusal of the application judge to grant relief from forfeiture. It argued that the application judge erred in finding that there had been prejudice to Northbridge arising from the late notice (the “no prejudice argument”). It also argued that the application judge was wrong to focus on 139 Limited’s conduct, rather than Svia’s conduct, in deciding whether to grant relief (the “wrong perspective argument”).

[21] In oral argument, Svia made an additional argument (the “Statutory Condition 8 argument”). Svia submitted that Statutory Condition 8, under which Svia had provided notice of the 2008 Action to Northbridge, did not have a timeliness requirement. Therefore, there was no late notice; the Policy’s relevant notice requirement was not breached. The questions the application judge had considered, namely, whether 139 Limited had breached the requirement for timely notice under Liability Condition 5, and whether that breach should be relieved against, were irrelevant. Since notice under Statutory Condition 8 was given, and since there was no other coverage defence (except as to the relatively minor amount allocated in the judgment to the repair of 139 Limited’s defective work), Svia was entitled to succeed.

ANALYSIS

(1) The Statutory Condition 8 Argument

[22] For ease of analysis, I first address the Statutory Condition 8 argument advanced by Svia in its oral submissions.

Should the Argument Be Considered?

[23] After oral argument was completed and the matter had been taken under reserve, Northbridge sought leave to make the submission that the Statutory Condition 8 argument should not be considered, since it was not advanced before the application judge, nor was it referred to in Svia’s appeal factum. Northbridge relies on this court’s decision in Becker v. Toronto (City), 2020 ONCA 607. Svia, for its part, acknowledges that the Statutory Condition 8 argument was not made below or in its factum on appeal, but submits that it should nevertheless be entertained because it flows from what Svia argues is a far-reaching concession that first appeared in Northbridge’s factum on appeal. Svia says that Becker does not apply to this kind of circumstance.

[24] It is true that Becker dealt with a different situation than that present in this case. In Becker, the appellant did not ask this court to consider an argument that it acknowledged was being made for the first time on appeal; rather, it argued that the trial judge had been required to consider a particular issue or theory and had erred in not doing so. The decision in Becker turned on what issues or theories a trial judge is obliged to consider, given the way a case is presented at trial. That said, the principle applied in Becker, that a trial judge does not err when he or she considers only the issues and theories actually articulated and advanced by the parties, and the principle that a party is generally foreclosed from raising entirely new issues on appeal, are closely linked: see Becker, at paras. 36-41.

[25] The rationale for the general rule that appellate courts will not entertain an entirely new issue on appeal is that “it is unfair to spring a new argument upon a party at the hearing of an appeal in circumstances in which evidence might have been led at trial if it had been known that the matter would be an issue on appeal”. The party seeking to raise the new argument must persuade the appellate court that the facts necessary to address the point are before the court “as fully as if the issue had been raised at trial”, a burden more easily met if the issue is one of law. The decision whether to grant leave to allow a new argument is discretionary, “guided by the balancing of the interests of justice as they affect all parties”: Kaiman v. Graham, 2009 ONCA 77, 245 O.A.C. 130, at para. 18.

[26] The Statutory Condition 8 argument is aptly described as “entirely new”. It was not raised before the application judge. It was not referred to in, and is inconsistent with, Svia’s factum on appeal, in which Svia both conceded that there had been late notice and characterized the issue on appeal as whether the application judge erred in refusing to grant relief from forfeiture. Additionally, the Statutory Condition 8 argument does not raise an issue of law alone. The argument turns on the interpretation of the Policy, which is a question of mixed fact and law.

[27] Nevertheless, Svia justifies the timing of its new argument by reference to a concession it says first appeared in Northbridge’s factum on appeal. The concession was that although Statutory Condition 8 gave Svia a right to provide notice, it imposed no obligations on Svia; Svia did not breach any obligation it had under the Policy in giving Northbridge notice when it did; and thus, there was no forfeiture arising from a breach by Svia for the court to relieve. Svia maintains that this is a concession of all points necessary for a finding in its favour. On Svia’s approach, it would be unjust for this court not to give effect to what it maintains are the legal consequences of this concession.

[28] In the unusual circumstances of this case, I would exercise the discretion to consider the Statutory Condition 8 Argument on its merits. I would do so for two reasons. First, we heard extensive oral submissions from the parties on the Statutory Condition 8 argument, before Northbridge asked for, and obtained, the opportunity to object to the argument as new. Second, Svia’s justification for advancing an entirely new argument on appeal, and the merits of the new argument, are tightly interwoven. One cannot assess Svia’s claim, that the new argument ought to be entertained because it flows from a complete concession of liability first appearing in Northbridge’s factum on appeal, without considering the scope of the concession and comparing that to what is necessary, under s. 132 of the Insurance Act, to find Northbridge liable to Svia.

The Merits of the Argument

[29] As noted above, Svia maintains that Northbridge has conceded all the ingredients necessary to find that it is liable to Svia. I disagree. I read Northbridge’s concession to be limited to pointing out that although Statutory Condition 8 gave Svia a right to give notice, it imposed no obligation on it to do so, and therefore Svia did not breach any obligations under the Policy that needed to be relieved against.[^3] I do not read it as a concession that 139 Limited did not breach the Policy, that 139 Limited’s breach should be relieved against or, most importantly, that without relief from 139 Limited’s breach, Svia’s application could or should succeed.

[30] The language of s. 132 (1) of the Insurance Act demonstrates that it is those non-conceded items that matter, as the central question is whether the insured (here 139 Limited) would have had a valid claim to coverage if it had satisfied the judgment. In The Sovereign General Insurance Company v. Walker, 2011 ONCA 597, 107 O.R. (3d) 225, at para. 13, this court stated:

The concluding words of s. 132(1) – “subject to the same equities as the insurer would have if the judgment had been satisfied” – are important. Persons … seeking recovery under s. 132 can stand in no better position than the insured. So, if the insurer … had a defence against its insured … that defence would apply to the [s. 132 claimant’s] claim [Citation omitted.].

[31] The question of whether 139 Limited breached the Policy provisions concerning notice requires interpretation of the Policy. In that process, meaning must be given, if possible, to both Liability Condition 5 and Statutory Condition 8. An insurance policy, like any contract, must be read as a whole; interpretations that render any term of the contract meaningless are to be avoided. “Similarly, an interpretation which defeats the intentions of the parties and their objective in entering into the commercial transaction in the first place should be discarded in favour of an interpretation of the policy which promotes a sensible commercial result”: Consolidated-Bathurst v. Mutual Boiler, 1979 CanLII 10 (SCC), [1980] 1 S.C.R. 888, at p. 901.

[32] Liability Condition 5 required the insured, 139 Limited, to give Northbridge timely notice of an action against it. In relevant part, it provides that “If a claim is made or ‘action’ is brought against any Insured, you [that is, 139 Limited] must see to it that we [Northbridge] receive prompt written notice of the claim or ‘action’”. Liability Condition 5 supplements that requirement with obligations that 139 Limited provide Northbridge with copies of any “legal papers” received by 139 Limited in connection with the claim or action, authorize Northbridge to obtain records and information, and cooperate in the defence of the claim or action.

[33] The purpose of a notice provision (like Liability Condition 5) in a liability insurance policy “is to make [the insurer] aware of a claim against its insured so that it has the timely opportunity to deal with it. … Typically, once served with notice, [the insurer] will have to open a file, retain an adjuster, and take any other steps necessary to respond to the claim against its insured”: Sovereign, at para. 35 [Emphasis added.].

[34] Statutory Condition 8 of the Policy does not by its language, completely override or displace Liability Condition 5. Rather, Statutory Condition 8 expands the category of persons who may give notice to the insurer if the insured is absent, unable to provide notice, or refuses to do so. It provides:

Notice of loss may be given and proof of loss may be made by the agent of the Insured named in the contract in case of absence or inability of the Insured to give the notice or make the proof, and absence or inability being satisfactorily accounted for, or in the like case, or if the Insured refuses to do so, by a person to whom any part of the insurance money is payable

[35] The application judge held that Svia was a person who came within the concluding words of Statutory Condition 8, and was a proper party to provide notice. Northbridge does not contest that conclusion. Therefore, Northbridge could not ignore Svia’s notice on the sole basis that it came from a person who was not the insured. Northbridge had to treat such a notice as though the insured, 139 Limited, had provided it.

[36] Nevertheless, Statutory Condition 8 did not detract from the right of Northbridge, or the obligation of 139 Limited, that any notice that was provided be timely, as contemplated by Liability Condition 5. The provision of a notice by Svia under Statutory Condition 8 partially cured the failure of 139 Limited to provide notice, in the sense that before Svia’s notice, 139 Limited had not provided any notice. But it did not fully cure the default, as it did not make the notice timely. Since the notice was not provided until 2017, it was not timely within the meaning of Liability Condition 5; the fact that Svia provided the notice under Statutory Condition 8 does not alter that conclusion.

[37] I would reject Svia’s argument that reading the Policy this way makes Statutory Condition 8 meaningless. On the contrary, it has an important meaning. It confers a right on third parties, such as Svia, to give notice and deprives the insurer of the ability to ignore a notice on the sole basis that its insured did not give it. It requires the insurer to treat the Statutory Condition 8 notice as though the insured provided it at that time. In a case where a Statutory Condition 8 notice is timely, it would fully deprive the insurer of a right to complain of a failure of its insured to provide timely notice. In a case where a Statutory Condition 8 notice was late, but no prejudice to the insurer arose, the Statutory Condition 8 notice and other relevant factors may be sufficient for the court to relieve from any forfeiture arising from the insured’s breach of the Policy. The fact that the Statutory Condition 8 notice does not have either effect on the facts of this case does not mean the provision was meaningless. It is not necessary, in order to give Statutory Condition 8 meaning, to read it as requiring the insurer to treat a notice as proper no matter when it was received, even one coming so late that it deprives the insurer of all opportunities that timely notice of a claim is intended to provide.

[38] On the other hand, reading Statutory Condition 8 as Svia proposes—making incontestable a Statutory Condition 8 notice regardless of when it was given—would seriously undermine the value to the insurer of Liability Condition 5 and its requirement of timely notice. The premise, accepted by the parties in this court, was that Svia could give a Statutory Condition 8 notice because it was a person, other than the insured, to whom “any part of the insurance money is payable”, as Svia had a claim against the insured that fell within the terms of coverage the Policy afforded. As this was a liability policy, the same premise would apply to any other person who had a claim against 139 Limited that was covered by the Policy. Accordingly, a consequence of Svia’s proposed interpretation would be that for any claim coming within the terms of coverage there would always be a person who could provide notice without regard to timeliness and thereby render the insurer liable, even where the insurer was not afforded the opportunity to defend the claim against its insured. Given the important relationship of a provision like Liability Condition 5 to the insurer’s right to meaningfully respond to an action against its insured, such an interpretation would not yield a sensible commercial result.

[39] The question on a s. 132 application is whether the insurer would have a defence to a claim by its insured if the insured had satisfied the judgment. If 139 Limited had satisfied Svia’s judgment, Northbridge would have had a defence to 139 Limited’s claim for indemnity under the Policy on the basis that the first notice it received of the 2008 Action (the notice from Svia) was nine years after the action commenced and therefore was not timely notice, in breach of 139 Limited’s obligations under the Policy.

[40] Svia can stand in no higher position than 139 Limited. The Statutory Condition 8 argument must therefore be rejected.

(2) The Lack of Prejudice Argument

[41] Svia’s argument that the application judge erred when he held that Northbridge had been prejudiced by late notice of the 2008 Action fails on the application judge’s findings of fact. The notice Northbridge received came well after 139 Limited’s defence had been struck out, discoveries had been conducted, and 139 Limited had been noted in default. The application judge rejected the contention that Northbridge would have denied coverage for the claim for resultant damages, and would have declined to participate in the defence of the action, even if it had received timely notice. He rejected Svia’s contention that the denial of coverage letter should be read that way, or that other evidence on the application supported that view. Instead, he found that Northbridge was denied the opportunity to carry out a timely investigation into the claim for resultant damages, and to participate in the discovery process, and that by the time it received notice, the limitation period for bringing an action for contribution and indemnity against other parties who might be liable had expired. In all these respects Northbridge had suffered significant prejudice. These findings were open to the application judge and are supported by the record.

[42] I would therefore reject the lack of prejudice argument.

(3) The Wrong Perspective Argument

[43] Svia argues that the application judge should have considered relief from forfeiture solely from the perspective of Svia and based on its conduct, rather than from the perspective of 139 Limited and based on its conduct. For example, it argues that the application judge should have considered what Northbridge would have done differently if it received earlier notice from Svia, and contends that Northbridge would have ignored that notice and cannot be said to have been prejudiced by the timing of the notice Northbridge actually received from Svia.

[44] Northbridge objects to this argument as one that is entirely new. Svia submits that this is not an entirely new argument, as relief from forfeiture and the factors relevant to it were in issue before the application judge. Given the disposition I would make of the argument, it is unnecessary to resolve the debate between the parties about the extent to which Svia put its case this way to the application judge.

[45] Svia’s argument founders on the requirement that in a s. 132 application the court is to apply the same equities as would apply if the insured had satisfied the judgment and was itself claiming the insurance moneys from the insurer. If that had occurred here, the court would have considered the conduct of 139 Limited—its failure to provide timely notice, why that occurred, and the effect that had on Northbridge—as equities in deciding whether to grant relief from forfeiture. That is exactly what the application judge was required to do in evaluating Svia’s claim on the required basis that Svia could stand in no higher position than 139.

[46] I would therefore reject the wrong perspective argument.

CONCLUSION

[47] For these reasons I would dismiss the appeal.

[48] I would award Northbridge its costs of the appeal fixed in the agreed amount of $18,000 inclusive of disbursements and applicable taxes.

Released: “PR” October 29, 2020

“B. Zarnett J.A.”

“I agree. Paul Rouleau J.A.”

“I agree. B.W. Miller J.A.”

[^1]: Svia’s counsel had, shortly before sending this notice, learned of the existence of the Policy from one of the other defendants in the 2008 Action.

[^2]: Svia argues that the Non-Waiver Agreement also reflected that notice had been given by 139 Limited. Svia does not contend that any notice by 139 Limited preceded the notice given by Svia in April 2017, so nothing turns on this point.

[^3]: The statements were made in the context of an argument by Northbridge that in seeking relief from forfeiture, Svia was seeking relief from the consequences of a breach by the insured, not its own breach, and that this informed from whose perspective relief should be considered.