COURT FILE NO.: CV-21-655212 and CV-21-665423 DATE: 20220214 ONTARIO SUPERIOR COURT OF JUSTICE

RE: GUARANTEED FUNERAL DEPOSITS OF CANADA (FRATERNAL) Applicant/Respondent -and- ASSURANT LIFE OF CANADA, Respondent/Cross-Applicant

BEFORE: FL Myers J

COUNSEL: Jean-Claude Killey, for the Guaranteed Funeral Deposits of Canada (Fraternal) Matthew P Sammon and Sean Lewis, for the Assurant Life of Canada

HEARD: February 10, 2022

Endorsement

The Application

[1] Guaranteed Funeral Deposits of Canada (Fraternal) applies to enforce its reading of a contract with Assurant Life of Canada. Assurant submits that the interpretation put forward by Guaranteed is erroneous. Alternatively, it cross-applies for an order rescinding the contract.

[2] I heard the parties on contract formation, contract interpretation, rescission for innocent misrepresentation, fraudulent misrepresentation, mutual mistake, unilateral mistake, and equitable mistake.

[3] The bottom line is that Guaranteed misled Assurant to sign an amending agreement by mis-stating facts. The misrepresentation may have been made innocently. If Guaranteed intended the agreement to have the effect it now claims, then the misrepresentation might have been deliberate. I do not need to decide that question. In either case, Assurant has made out all of the requisite elements to readily entitle it to the remedy of rescission.

[4] Moreover, I find that this it is both fair and equitable to declare the amending agreement rescinded.

The Facts and the Issue

[5] Guaranteed is a fraternal society that provides services to funeral homes who are its members.

[6] Assurant is an insurance company. Among other things, it sells life insurance to be used to fund the purchase of pre-need funeral and cemetery arrangements.

[7] In 2002, Assurant’s predecessor entered into an agreement with Guaranteed under which Guaranteed agreed to exclusively promote Assurant’s life insurance products to its funeral home members. Under the agreement, Guaranteed and funeral homes would receive a commission on sales of Assurant life insurance policies. The commissions would be divided among Guaranteed and its funeral homes as they may agree. In addition, Assurant agreed to pay Guaranteed an administrative fee equivalent to one-eighth of one per cent (0.125%) of the aggregate face value of all life insurance policies outstanding at the end of each calendar quarter.

[8] Article VI of the agreement provided that compensation would be paid to Guaranteed under the agreement even after the agreement was terminated (other than for default by Guaranteed). In that way, any commissions earned on sales made just before the termination of the agreement would be paid. In addition, as life insurance policies were paid out over the ensuing decades after the contract terminated, Guaranteed would continue to be paid its administrative fee. As the administrative fees was based on the face value of outstanding policies, the fee would decline as policies benefits were paid and the face value of policies remaining outstanding at the end of each calendar quarter declined.

[9] The relevant wording of Article VI said:

In the event that either [Assurant] or [Guaranteed] terminates this Agreement… [Guaranteed] shall be entitled to continue to receive compensation for sales made prior to the termination date.

[10] The 2002 agreement had a five year term. It was renewed for another five years in 2007. When it came up for renewal in 2012, Guaranteed told Assurant that other insurers were offering insurance products to funeral homes with higher commissions than Guaranteed was able to offer to its members. It asked Assurant to maximize up-front commissions in the pricing for the renewal term.

[11] Assurant came back with pricing that increased commissions but eliminated Guaranteed’s ongoing administrative fee. At Guaranteed’s suggestion, Assurant provided pricing with Guaranteed receiving a fixed administrative fee of $75,000 per quarter ($300,00 per year), increasing by 3% per annum. The fee would be payable only for as long as the agreement was in force.

[12] By disconnecting the fee from the face value of policies outstanding and limiting the fee to the term of the agreement, Assurant was able to provide a higher commission component for Guaranteed to offer to pay to or to share with its member funeral homes.

[13] As the administrative fee was to be limited to the term of the agreement, the parties agreed to remove Article VI from the 2012 agreement. The fee was no longer to continue after the termination of the agreement. This was reinforced by the wording of the administrative fee itself in Schedule “B” to the 2012 agreement renewal that provided:

An amount equal to $75,000 will be paid at the end of each calendar quarter during the term of this agreement .[Emphasis added.]

[14] Heather Kiteley became CEO of Guaranteed in January 2017. She had some involvement in the 2012 negotiations with Assurant. But she was not involved in the discussions about the quarterly administrative fee.

[15] Upon her appointment, Ms. Kiteley was tasked with reviewing all of Guaranteed’s third-party contracts. Ms. Kiteley was considering Guaranteed’s potential exposure and its ability to terminate its contracts with third parties. She testified:

9. In the course of conducting this review I noticed that Article VI ("Termination after Compensation") appeared in both the 2002 and 2007 Marketing Agreements, but was not included in the 2012 Marketing Agreement. I was not aware of any reason why GFD would have agreed to stop receiving trailing payments from ALOC after the termination of the Marketing Agreement, so I assumed that this omission was an oversight. Regardless of whether it was or wasn't an oversight, however, it was a clause that it seemed to me would be in GFD's interest to have included in the Marketing Agreement. I asked Gary Carmichael to contact ALOC about amending the Marketing Agreement to include a term similar to Article VI. [Emphasis added.]

[16] Mr. Carmichael testifies that “Ms. Kiteley charged me with remedying this oversight in the Marketing Agreement.” As a result,

27. On September 7, 2017, I reached out to Matt McGuire, Vice President and Managing Attorney at ALC, by phone and email and advised him that Article VI had been " overlooked in the 2012 Marketing Agreement between Assurant and GFD ". I asked that Mr. McGuire arrange to amend the Marketing Agreement to include a provision comparable to Article VI of the 2002 and 2007 Marketing Agreement. [Emphasis added.]

[17] The highlighted words in quotation marks are taken directly from Mr. Carmichael’s contemporaneous email to Mr. McGuire of Assurant. Mr. Carmichael gave no other evidence about the content of his telephone call with Mr. McGuire or of a prior call with Fernand LeBlanc of Assurant.

[18] Fernand LeBlanc is Vice President, Global Strategy and Innovation for Assurant. He is an actuary by profession. Mr. LeBlanc testifies that Mr. Carmichael called him first:

8. He told me that GFD had identified a mistake in the drafting of the 2012 Marketing, namely that a clause (which he identified as Clause VI from prior marketing agreements) was missing. Mr. Carmichael asked that ALOC agree to re-introduce the clause to fix the mistake.

9. I was generally familiar with contractual language of this kind in Assurant agreements. I understood that the clause dealt with the situation where there were allowances still owing to [Guaranteed]-member Funeral Homes at the time of contract termination (from sales of insurance/annuity products), and it was to ensure that the Funeral Homes would still receive the allowances owing to them despite the termination. I thought that re-introducing the clause would be fair and reasonable (since agents or Funeral Homes should not be deprived of allowances for sales they had made shortly before termination merely because [Assurant] had not yet made payment at the time the contract came to an end). I told Mr. Carmichael that I would have no problem adding back a clause of this kind, and believe I told him to contact Matt McGuire (the Managing Attorney for Assurant Preneed) about it. Based on our discussion, I understood that I was agreeing to a minor, administrative change to the contract.

10. At no time in this brief conversation (or subsequently) did Mr. Carmichael raise the issue of the quarterly fees being paid to [Guaranteed] under the 2012 Marketing Agreement.

[19] In cross-examination, Mr. LeBlanc testified further that during the telephone call, Mr. Carmichael described the oversight in relation to a missing clause that “dealt with commissions earned on a sale that was made during the terms of the agreement that is payable or due post the term, that we would still honour it”.

[20] On that basis, the parties entered into amendment No. 4 to the 2012 agreement on October 4, 2017 to reintroduce Article VI providing:

In the event that either [Assurant] or [Guaranteed] terminates this Agreement [other than for default by Guaranteed] [Guaranteed] shall be entitled to continue to receive compensation for sales made prior to the termination date.

[21] But it is necessary to recall that under the terms of the 2012 agreement, Assurant pays two different streams of payments to Guaranteed. First, it pays up-front commissions on policy sales to Guaranteed and its funeral homes. As Mr. LeBlanc explained, Assurant had no problem agreeing that if a commission was already earned at the time that the agreement was terminated, it would pay the commission.

[22] But the second stream of payments payable by Assurant to Guaranteed under the 2012 agreement was different. Under the 2012 agreement, Assurant was also required to pay an administrative fee to Guaranteed of $75,000 per quarter during the term of the agreement. The fee amount increased automatically by 3% per year. It is this fee that is the subject matter of this application.

[23] Guaranteed says that as a result of the amendment to the agreement to which Assurant agreed, this fee too continues for as long as any Assurant policies remain outstanding. Assurant says it never agreed to extend the administrative fee. It specifically negotiated to limit the administrative fee to the term of the agreement in return for increased commissions as sought by Guaranteed in 2012.

[24] The issue arose in 2018 when the 2012 agreement was terminated. Guaranteed claimed that it was entitled to receive ongoing administrative fees and Assurant quickly denied that Guaranteed had any entitlement to the continuation of those fees.

[25] Guaranteed does not deny that the economic outcome of the position it advances is absurd. Prior to 2012, its administrative fee was based on a small percentage of the face value of policies that remained outstanding each calendar quarter. The parties understood that after the agreement terminated, the face value of outstanding policies will necessarily decline as people die. Guaranteed’s administrative fee would continue but would decrease commensurate with the decrease in policies being administered by Guaranteed.

[26] But, with the 2012 amendments, the administrative fee became a fixed dollar amount that increases by 3% per year. If that fee continues after the relationship ends, the fee paradoxically increases while the policies outstanding decrease.

[27] There are a few policies that have been sold by Guaranteed’s member funeral homes that insure the lives of young children. Those policies may continue for 60 to 80 years.

[28] Actuarial projections show that by 2081, the total face value of outstanding policies will have decreased from approximately $180,000,000 in 2018 to approximately $343,000 or about 0.02% of their value. But, by that time, the $300,000 per year administrative fee will have increased to $2,272,576.84. That is, Guaranteed will be administering one five-hundredth of the total policy value that was outstanding in 2018 and it will be claiming a fee that is 7.5 times as much as it was entitled to during the term of the agreement.

[29] No one pretends this makes any sense economically.

[30] Mr. McGuire also testified to the content of the telephone call that he received from Mr. Carmichael:

He said that [Guaranteed] had discovered that a provision had been mistakenly omitted from the 2012 Marketing Agreement, namely Clause VI from the prior marketing agreements between GFD and ALOC. He told me that the clause's omission had been a clear administrative error and he asked that the clause be re-introduced to cure this error. [Emphasis added.]

[31] Unlike every other prior pricing amendment to the agreements between the parties, this one did not include any negotiations. Assurant simply took Mr. Mcguire at his word and agreed to re-insert the mistakenly omitted clause to protect accrued commissions in the event that the agreement terminated while commissions on sales remained outstanding.

[32] It never occurred to Assurant that Guaranteed was seeking to affect its limited entitlement to administrative fees. According to Mr. LeBlanc, Mr. Carmichael mentioned only commissions. As a result, Assurant did not consider any economic impact of the amendment ion relation to administrative fees. The wording of the fee in Schedule “B” to the agreement was not changed. It still says that the fee is only payable “during the term of this agreement”. But Guaranteed submits that under the Amendment No. 4 as agreed, the administrative fee is part of the “compensation for sales made prior to the termination date” that Assurant agreed to keep paying.

Did Guaranteed make an Innocent Misrepresentation or a Fraudulent Misrepresentation?

[33] Guaranteed does not deny that Mr. Carmichael made a misrepresentation to Messrs. LeBlanc and McGuire. He said, as a matter of fact, that article VI had been removed from the agreement in 2012 by mistake or oversight. That was not true. It was discussed in 2012 and it was removed by agreement, on purpose, to reflect the changed deal terms and economics sought by Guaranteed as discussed above.

[34] Mr. Killey submits however, that Assurant is conflating the statement that the clause was removed in error with an unstated assurance that the clause only deals with commissions and not with administrative fees. Mr. Killey submits that Guaranteed never said that the clause only deals with commissions. If that is what Assurant thought when it signed the amendment, then that is its own fault due to its own lack of due diligence. The meaning of the clause, to which the parties agreed, is to be determined based on its objective wording. What Assurant thought or did not think it meant, he submits, is irrelevant.

[35] While I agree that the meaning of the clause is determined by its words and objective circumstances that formed the factual matrix at the time the agreement was entered into, I do not agree with the rest of Mr. Killey’s submission.

[36] First, Mr. Carmichael did not give any evidence on the content of his calls with Messrs. LeBlanc and McGuire. He just recited his follow-up email. He did not even mention a call with Mr. LeBlanc at all. On receiving the LeBlanc and McGuire affidavits, Mr. Carmichael did not respond to deny their evidence.

[37] I also do not agree with Mr. Killey that Mr. LeBlanc’s evidence in cross-examination that Mr. Carmichael mentioned only commissions and not the administrative fee was undermined or otherwise lacking credibility.

[38] In any event, the misrepresentation to which Guaranteed admits, had an effect. There is no evidence at all undermining Assurant’s evidence that in agreeing to the amendment proposed, they relied on the misrepresentation that it had been left out of the 2012 agreement due to a simple administrative error. They did not conduct due diligence because their long term business partner told them that a standard clause had been mistakenly omitted from a written agreement. No negotiations occurred despite every other amendment to pricing being preceded by negotiations based on calculations of complex insurance underwriting inputs.

[39] Guaranteed is not conflating two different issues in arguing that the misrepresentation made induced it to agree to a clause that it would never have agreed to had it known what Guaranteed now asserts.

[40] In Free Ukrainian Society (Toronto) Credit Union Ltd. v. Hnatkiw, 1964 CarswellOnt 94 the Court of Appeal adopted the definition of a misrepresentation set out by Denning LJ (as he then was) in Curtis v. Chemical Cleaning & Dyeing Co., [1951] IK.B. 805,

…any behaviour, by words or conduct, is sufficient to be a misrepresentation if it is such as to mislead the other party about the existence or extent of the exemption. If it conveys a false impression, that is enough.

[41] The Court of Appeal continued:

12 Unquestionably knowledge of the untruth of a representation would be a complete bar to relief, since a person aggrieved could not assert that he had been misled by such a mis-statement even if it had been made fraudulently, and in such a case the misrepresentation would cease to have any further significance. Relief, however, will not be refused on this ground except upon clear proof that the party complaining possessed actual and complete knowledge of the true facts - actual, not constructive, complete, not fragmentary. The onus would rest upon the plaintiff to prove that the defendants had unequivocal notice of the truth. The mere fact that they had been afforded an opportunity to investigate and verify a representation made to them would not deprive them of their right to avoid a contract obtained by such means. As Lord Dunedin stated in Nocton v. Lord Ashburton, [1914] A.C. 932 at p. 962:

No one is entitled to make a statement which on the face of it conveys a false impression and then excuse himself on the ground that the person to whom he made it had available the means of correction. [Emphasis added.]

[42] That leads to the question of what did the parties know at the time. As I have already noted that the outcome is no different regardless of how the misrepresentation is characterized, I will just touch on this issue.

[43] First, it is noteworthy that Ms. Kiteley did no due diligence before she arrived at the conclusion that Article VI was deleted from the agreement in 2012 by mistake. She instructed Mr. Carmichael to correct the “oversight”. Neither of them looked at the file or spoke to the people involved to confirm the “oversight” was actually an oversight.

[44] In cross-examination, Ms. Kiteley agreed that on reviewing the 2012 agreement, she knew that the administrative fee used to be based on a percentage of outstanding insurance amounts. She knew that the fee changed in 2012 to a fixed and increasing amount. She knew this when she instructed Mr. Carmichael that the issue was just “housekeeping” and that he should “correct” it.

[45] Moreover, she said that when she instructed Mr. Carmichael, she wanted him to ensure that the administrative fee continued after the termination of the agreement. Under a particularly skillful piece of cross-examination, she was asked and answered:

Q. So you knew that would be a fundamental change in terms of the structure of post-termination fees, compared to the prior agreements, correct?

A. Correct. I would have assumed that Assurant would have priced accordingly.

[46] A few questions later, Ms. Kiteley realized that her admission, that she was seeking a fundamental change that Assurant should have priced accordingly, was utterly inconsistent with her testimony that she characterized the request as “housekeeping” and that she instructed Mr. Carmichael just to have Assurant correct the mistaken deletion of the clause in 2012. She backtracked accordingly.

[47] Mr. Sammon invited me to find that Ms. Kiteley had Mr. Carmichael knowingly lie to hide Guaranteed’s intention and to trick Assurant into trusting him that the clause was of no consequence.

[48] The difficulty that I have with making this finding is that I cannot tell from the transcript if this is what actually happened or if Ms. Kiteley was trapped by a clever cross-examination. On reading the transcript, it is equally likely to me that Ms. Kiteley did not want to admit that she was the one who made the initial mistake. When she read the 2012 agreement and saw the missing clause, she assumed it was an oversight. On being cross-examined about what she understood when she read the agreement (before she spoke to Mr. Carmichael) she did not want to admit that she had missed the import of the deletion of Article VI. So she said she understood the terms of the agreement when she read it. It was only later in the examination when she realized that if she understood the import at the time she instructed Mr. Carmichael, she was committing a deliberate act of deception. The scales fell from her eyes and she backtracked. I cannot tell however if her embarrassment was in being caught instructing Mr. Carmichael to lie or in her own failure to understand the importance of the deletion of the clause and putting this whole process into play.

[49] Mr. Sammon submits that if Ms. Kiteley made an error, it would not be suing today. Instead of trying to capitalize on a slip induced by her own error, a business executive with a stronger sense of morality would be expected to say, “my mistake, sorry.” Guaranteed, by contrast, submits that the contract says what it says and Assurant has only itself to blame if it failed to look into the economic impact and import of what it signed.

[50] In Downtown King West v. Massey Ferguson Industries Ltd., the Court of Appeal expressly agreed with a statement from an earlier decision, Stepps Investments Ltd. v. Security Capital Corp. (1976), in which Grange J. (as he then was) held:

55. In the circumstances of this case I believe that the plaintiffs should have known of the mistake made by the defendant and I believe it would be equitable accordingly to grant relief to the defendant. It is not unreasonable, in my view, in modern commercial relations, to require the parties, where an important amendment is being made, to ensure that knowledge of such amendment comes to the other side. I do not mean that a party must overcome obtuseness in his opposite number but he must at least give him a real opportunity to appreciate the change. And if the circumstances are such that the amendment might readily be missed he should be particularly reluctant to assume such knowledge [Emphasis added.].

[51] Guaranteed is on the wrong side of the line demarcating acceptable from unacceptable conduct either way. Either it intended to make a fundamental change and it tricked Assurant, or it made a mistake and now seeks to enforce a fundamental change it said was a “housekeeping”, “administrative”, amendment to correct a “mistake” that the parties “overlooked”.

[52] The law will not and should not countenance either approach.

What does the Amendment Mean?

[53] Assurant submits that the court can interpret the language of the amendment to reach the result Assurant seeks without considering equitable relief. The main difficulty I have with that submission is that if there is an entitlement to rescission, then one never gets to the question of interpretation. In that case, there is no contract to interpret.

[54] Assurant submits that the amendment, as agreed upon, does not extend the administrative fee in any event,. It only extends “compensation for sales”. The fee used to be based on the policy values and therefore could have been seen to be related to sales. But as a fixed fee, Assurant submits, it is completely and deliberately, divorced from sales. Moreover, as mentioned above, the amendment did not alter the wording of the administrative fee itself set out in Schedule “B” to the agreement that limits Assurant’s requirement to pay a fee to the term of the agreement.

[55] The arguments become somewhat artificial. Guaranteed submits that commission on sales is only really payable to the funeral homes. The amendment extending Guaranteed’s right to compensation must therefore relate to the administrative fee. Assurant points out that Guaranteed has a right to take a piece of the commission if it chooses to do so and there is some conclusory evidence that it did so or was doing so in or around the termination of the agreement in 2018.

[56] The fee is also set out in a schedule entitled “Commission”. It appears that the parties did not change the heading when they agreed to fix the fee in 2012. But I am not convinced that even when the fee was set at .125% of the aggregate outstanding policy value, it was readily classified as “compensation for sales”. And yet, there is no doubt that the parties understood the administrative fee prior to 2012 to fall within that wording in Article VI.

[57] Mr. Sammon submits that the court is free to move beyond the literal meaning of the words of an agreement where the outcome of applying them leads to an absurdity. In Consolidated-Bathurst Export Ltd. c. Mutual Boiler & Machinery Insurance Co., Estey J. held:

… literal meaning should not be applied where to do so would bring about an unrealistic result or a result which would not be contemplated in the commercial atmosphere in which the insurance was contracted. Where words may bear two constructions, the more reasonable one, that which produces a fair result, must certainly be taken as the interpretation which would promote the intention of the parties. 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. [Emphasis added.]

[58] I hesitate to adopt such a results-oriented approach in this case. The fact that I could interpret the amendment to defeat ignoble conduct and to prevent an absurd outcome, troubles me in this case. It would have me find that the words mean what I say they mean to prevent Guaranteed from getting its way. But when I wrote above that the law will not countenance its approach, I meant that there are legal doctrines that prevent Guaranteed from putting into place an agreement born of a misrepresentation and a failure to bring home to the other party a misapprehension of the importance of an amendment being proposed. I did not mean that I would erect barriers myself through other legal devices.

[59] So, while this issue could be a basis to resolve the case, I prefer to deal with the real issue head on. The issue of interpretation of the amendment is obiter dictum if the amendment is void.

Rescission and Mistake

[60] In Deschenes v. Lalonde, 2020 ONCA 304, K. van Rensberg JA described the requisite elements of the cause of action of rescission based on an innocent misrepresentations follows:

29 The equitable remedy of rescission is available for a false or misleading representation that induces a contract: Guarantee Co. of North America, at para. 39. Rescission requires proof that the misrepresentation was material and was relied on by the party seeking to rescind the contract: 1323257 Ontario Ltd. v. Hyundai Auto Canada Corp. (2009), 55 B.L.R. (4th) 265 (Ont. S.C.J.), at para. 71; Barclays Bank PLC v. Metcalfe & Mansfield Alternative Investments VII Corp., 2011 ONSC 5008, 82 C.B.R. (5th) 159 (Ont. S.C.J. [Commercial List]), at paras. 156-59, aff'd 2013 ONCA 494, 365 D.L.R. (4th) 15 (Ont. C.A.), leave to appeal refused, (2014), [2013] S.C.C.A. No. 374 (S.C.C.). To be material, a misrepresentation must relate to a matter that would be considered by a reasonable person to be relevant to the decision to enter the agreement, but it need not be the sole inducement for acting: York University v. Markicevic, 2016 ONSC 3718, 33 C.C.E.L. (4th) 26 (Ont. S.C.J. [Commercial List]), at para. 145, aff'd 2018 ONCA 893, 51 C.C.E.L. (4th) 30 (Ont. C.A.), leave to appeal refused, [2019] S.C.C.A. No. 134 (S.C.C.). Whether a contracting party did in fact rely on the misrepresentation, at least in part, to enter into the agreement is a "question of fact to be inferred from all the circumstances of the case and evidence at trial": Barclays Bank, at para. 159.

30 The remedy of rescission is available even if the misrepresentation was made innocently, that is, by a party who believed it was true: "Where rescission is claimed it is only necessary to prove that there was misrepresentation. Then, however honestly it may have been made, however free from blame the person who made it, the contract, having been obtained by misrepresentation, cannot stand": Peek v. Derry (1889), [1886-1890] All E.R. Rep. I (U.K. H.L.), at p. 13, per Lord Herschell. In Kingu v. Walmar Ventures Ltd., [1986] B.C.J. No. 597 (B.C. C.A.), McLachlin J.A. (as she then was) set out a list of requirements for rescission of a contract on the basis of innocent misrepresentation. In addition to the requirement of a positive misrepresentation of an existing fact that induced the plaintiff to enter into the contract, in order for rescission to be granted, the plaintiff must have acted promptly upon discovery of the misrepresentation to disaffirm the contract, no third party may have acquired rights for value as a result of the contract, and it must be possible to restore the parties substantially to their pre-contract position: Kingu, at para. 15.

[61] For Assured to succeed on this ground therefore, it must show:

i) Guaranteed made a false or misleading representation of an existing fact;

ii) The misrepresentation must have actually induced Assurant to enter into an agreement factually (although it needn’t have been the sole inducement);

iii) The misrepresentation must have related to a matter that a reasonable person would consider relevant to the decision to enter into the agreement;

iv) Assured acted promptly to disaffirm the contract;

v) No third party rights were acquired for value under the agreement; and

vi) It is possible to restore the parties to their pre-contractual positions.

[62] Here Guaranteed represented as a matter of fact that Article VI was deleted from the 2012 agreement by mistake or oversight. That was an untrue fact. It also represented that putting the clause back into the 2012 agreement was an administrative, housekeeping matter. If it knew that sweeping administrative fees back into the post-termination obligations was the outcome, then this representation was also untrue and knowingly so.

[63] There is no evidence challenging Assurant’s evidence that it relied on the misrepresentations in agreeing to the amendment as proposed. It did not look into the issue and there was no negotiation as would have resulted if a pricing change had been contemplated. I have no doubt that they trusted their partner’s characterization and misstatements of fact.

[64] The issue of whether the deletion of the post-termination obligations was a mistake or a negotiated point as part of Guaranteed’s request to increase commissions was very relevant to any reasonable person’s decision-making process in like circumstances. Any long-term business partner can be expected to have developed a degree of trust in the other partner and would reasonably be expected to respond to a request to correct a mutual mistake in a manner different from how it would be expected to react if a fundamental change in agreed pricing was put on the table.

[65] Assurant disaffirmed the amendment as soon as Guaranteed asserted the extended meaning.

[66] No third party rights have been acquired and it is possible to restore the parties to their pre-amendment positions simply be dismissing Guaranteed’s application.

[67] I do not assess the issues of unilateral mistake or equitable mistake (if different) as the outcome is the same on pretty much the same analysis.

[68] Finally, I do not need to deal with the submission that the amendment is void for lack of consideration. Were it otherwise, I would have held that this ground advanced by Assured failed based on the decision of the Court of Appeal Richcraft Homes Ltd. v. Urbandale Corporation, 2016 ONCA 622 at para. 47. It is up to the Court of Appeal to deal with the issues set out in paras. 31 to 36 of Richcraft. This court can only follow the law despite the concerns set out by the Court of Appeal and academics.

Punitive Damages

[69] I am not prepared to assess punitive damages in this case. I have not found the commission of an intentional tort. The only harm suffered by Assurant from Guaranteed’s misadventure is the costs of this proceeding. That issue remains to be considered.

Order

[70] Therefore the application is dismissed and the cross-application is granted. The court declares Amendment No. 4 rescinded and of no force or effect.

Costs

[71] Assurant may deliver file no more than three pages of costs submissions and its Costs Outline by February 21, 2022. Guaranteed may respond with no more than three pages of submissions and its Costs Outline by February 28, 2022. All references to statutory material and case law shall be embedded as hyperlinks in the parties’ submissions. The parties may also deliver copies of any offers to settle on which they rely. All material shall be filed through the Civil Submissions Online portal and uploaded to Caselines.

FL Myers J Date: , February 14, 2022