McNaughton Auto. v. Co-op General, (2008) 250 O.A.C. 352 (CA)

• Jurisdiction: Ontario
• Judge: Laskin, Simmons and Armstrong, JJ.A.
• Neutral Citation: 2008 ONCA 597
• Date: 29 August 2008
• Court: Court of Appeal (Ontario)

McNaughton Auto. v. Co-op General (2008), 250 O.A.C. 352 (CA)

MLB headnote and full text

Temp. Cite: [2009] O.A.C. TBEd. FE.020

McNaughton Automotive Limited (applicant/appellant) v. Co-operators General Insurance Company (respondent/respondent)

(M34895; C40376; 2008 ONCA 597)

Indexed As: McNaughton Automotive Ltd. v. Co-operators General Insurance Co.

Ontario Court of Appeal

Laskin, Simmons and Armstrong, JJ.A.

August 29, 2008.

Summary:

The 2001 judgment of the Ontario Court of Appeal in McNaughton Automotive Ltd. v. Co-operators General Insurance Co. decided that the practice of automobile insurers charging a deductible on total loss claims, where the insurer took title to the salvage, breached s. 6(7) of Ont. Reg. 777/93 of the Insurance Act. The judgment was the catalyst for proposed class actions in 37 different cases, which included the insurers in this proceeding. The defendant insurers brought several preliminary motions pursuant to rules 20 and 21 of the Rules of Civil Procedure. The insurers succeeded on all of their motions. Cross-motions brought by the plaintiffs to add or substitute a representative plaintiff were dismissed. The motions judge held that the costs of the various motions were payable to the successful parties. The costs awards were to be on a partial indemnity scale, except for the rule 20 motions where the defendant insurer showed that there was no genuine issue for trial relating to the limitation period and the plaintiffs had "persisted with unsubstantiated allegations of fraud, dishonesty and deceit". In the latter cases, the costs awards were to be on a substantial indemnity scale. The plaintiffs and the Law Foundation of Ontario applied for leave to appeal from the costs orders. There are 42 motions for leave to appeal, which had been consolidated into a single proceeding.

The Ontario Court of Appeal dismissed the application for leave to appeal.

Practice - Topic 210.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - Costs - The 2001 judgment in McNaughton Automotive Ltd. v. Co-operators General Insurance Co. (Ont. C.A.) was the catalyst for proposed class actions in 37 different cases, which included the insurers in this proceeding - The defendant insurers brought several preliminary motions pursuant to rules 20 and 21 of the Rules of Civil Procedure - The insurers succeeded on all of their motions - Cross-motions brought by the plaintiffs to add or substitute a representative plaintiff were dismissed - The motions judge awarded costs of the motions to the successful parties - The costs were to be payable on a partial indemnity scale, except for the rule 20 motions where the defendant insurer showed that there was no genuine issue for trial relating to the limitation period and the plaintiffs had "persisted with unsubstantiated allegations of fraud, dishonesty and deceit" - In the latter cases, the costs awards were to be on a substantial indemnity scale - The plaintiffs and the Law Foundation of Ontario sought leave to appeal from the costs orders, arguing, inter alia, that the motions judge failed to give proper consideration to the underlying goals of the Class Proceedings Act (CPA) - The Ontario Court of Appeal held that this potential ground of appeal had no merit - The motions judge considered and addressed the relevance of the CPA's underlying principles to entitlement and scale - See paragraphs 28 to 33.

Practice - Topic 210.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - Costs - The 2001 judgment of the Ontario Court of Appeal in McNaughton Automotive Ltd. v. Co-operators General Insurance Co. (McNaughton I) decided that the practice of automobile insurers charging a deductible on total loss claims, where the insurer took title to the salvage, breached s. 6(7) of Ont. Reg. 777/93 of the Insurance Act - The judgment was the catalyst for proposed class actions in 37 different cases, which included the insurers in this proceeding - The defendant insurers brought several preliminary motions pursuant to rules 20 and 21 of the Rules of Civil Procedure - The insurers succeeded on all of their motions - Cross-motions brought by the plaintiffs to add or substitute a representative plaintiff were dismissed - The motions judge awarded costs of the various motions to the successful parties - The costs awards were to be on a partial indemnity scale, except for the rule 20 motions where the defendant insurer showed that there was no genuine issue for trial relating to the limitation period and the plaintiffs had "persisted with unsubstantiated allegations of fraud, dishonesty and deceit" - In the latter cases, the costs awards were to be on a substantial indemnity scale - The plaintiffs and the Law Foundation of Ontario applied for leave to appeal from the costs orders, arguing, inter alia, that the motions judge failed to give proper consideration to the factors in s. 31(1) of the Class Proceedings Act (CPA) - Section 31(1) provided that, in exercising its discretion with respect to costs "the court may consider whether the class proceeding was a test case, raised a novel point of law or involved a matter of public interest" - The Ontario Court of Appeal denied leave to appeal - While McNaugton I was a test case, the motions in this case were resolved with the application of settled law - There was no merit in the applicants' submissions that the various motions could be collectively characterized as a test case and that the motions raised novel points of law - The issues raised by the motions could fairly be described as typical of everyday civil litigation - The issues raised in the motions did not "impact anyone beyond the reach of these proceedings" and therefore did not engage the public interest in the broader sense meant by the CPA - See paragraphs 34 to 38.

Practice - Topic 210.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - Costs - The 2001 judgment in McNaughton Automotive Ltd. v. Co-operators General Insurance Co. (Ont. C.A.) decided that the practice of automobile insurers charging a deductible on total loss claims, where the insurer took title to the salvage, breached s. 6(7) of Ont. Reg. 777/93 of the Insurance Act - The judgment was the catalyst for proposed class actions in 37 different cases - In an action commenced against the defendant Allstate, Giuliano was named as the representative plaintiff - It was later discovered that Giuliano had been reimbursed for his deductible and the plaintiffs moved to substitute Japetco Corp. and Barash as representative plaintiffs - Before the return of that motion, the plaintiffs commenced a second action in the names of Japetco Corp. and Barash against Allstate - That action was eventually dismissed with costs on a substantial indemnity scale - The plaintiff and the Law Foundation of Ontario sought leave to appeal from the costs order - They argued that the motions judge erred in awarding costs on a substantial indemnity scale in respect of the second action because that action was commenced out of an abundance of caution to protect the class in the event that the motion to substitute was denied - The Ontario Court of Appeal denied leave to appeal - The court agreed with the motions judge that there was no justification for the commencement of the Japetco and Barash action - The plaintiffs created a duplicate proceeding to which the defendant was forced to respond - Such conduct was scandalous and the defendant was entitled to recover its substantial indemnity costs - See paragraphs 61 to 64.

Practice - Topic 7029

Costs - Party and party costs - Entitlement to - Successful party - Exceptions - Novel or important point - [See second Practice - Topic 210.3 ].

Practice - Topic 7029.5

Costs - Party and party costs - Entitlement to - Successful party - Exceptions - Public interest or test case - [See second Practice - Topic 210.3 ].

Practice - Topic 7457

Costs - Solicitor and client costs - Entitlement to solicitor and client costs - Where claim or defence irrelevant, scandalous or without merit - [See third Practice - Topic 210.3 ].

Practice - Topic 7462.1

Costs - Solicitor and client costs - Entitlement to - Unproven allegations of dishonest or improper conduct - [See Practice - Topic 7470 ].

Practice - Topic 7470

Costs - Solicitor and client costs - Entitlement to - Unproved allegation of fraud - The defendant insurers in proposed class actions in 37 cases brought several preliminary motions pursuant to rules 20 and 21 of the Rules of Civil Procedure - The insurers succeeded on all of their motions and cross-motions brought by the plaintiffs to add or substitute a representative plaintiff were dismissed - The motions judge awarded costs of the motions to the successful parties - The costs were to be payable on a partial indemnity scale, except for the rule 20 motions where the defendant insurer showed that there was no genuine issue for trial relating to the limitation period and the plaintiffs had "persisted with unsubstantiated allegations of fraud, dishonesty and deceit" - In the latter cases, the costs awards were to be on a substantial indemnity scale - The plaintiffs and the Law Foundation of Ontario sought leave to appeal from the costs orders - They submitted that the motions judge erred in awarding costs on a substantial indemnity scale where the unproven allegation of fraudulent concealment was pleaded in relation to the running of the limitation period - They submitted that unlawful concealment was a form of equitable fraud and that an unproven allegation of equitable fraud was not sufficient to attract an award of substantial indemnity costs - The Ontario Court of Appeal denied leave to appeal - No Ontario case was provided in support of the proposition that unproven allegations of equitable fraud were not a sufficient ground for an award of substantial indemnity costs - The representative statements of claim also contained allegations of fraudulent or dishonest conduct that was capable of attracting substantial indemnity costs if such allegations were unproven - See paragraphs 40 to 60.

Cases Noticed:

Polowin (David) Real Estate Ltd. v. Dominion of Canada General Insurance Co. (2005), 199 O.A.C. 266; 76 O.R.(3d) 161 (C.A.), refd to. [para. 2]

McNaughton Automotive Ltd. v. Co-operators General Insurance Co. (2001), 151 O.A.C. 252; 54 O.R.(3d) 704 (C.A.), refd to. [para. 2].

Brad-Jay Investments Ltd. v. Village Developments Ltd. et al. (2006), 218 O.A.C. 315 (C.A.), refd to. [para. 24].

Inter-Trust Mortgage Corp. v. Robinson, [1999] O.A.C. Uned. 197; 1999 CarswellOnt 1733 (C.A.), refd to. [para. 25].

Hamilton v. Open Window Bakery Ltd. et al., [2004] 1 S.C.R. 303; 316 N.R. 265; 184 O.A.C. 209, refd to. [para. 26].

Hollick v. Metropolitan Toronto (Municipality) et al., [2001] 3 S.C.R. 158; 277 N.R. 51; 153 O.A.C. 279; 2001 SCC 68, refd to. [para. 28].

Guerin v. Canada, [1984] 2 S.C.R. 335; 55 N.R. 161, refd to. [para. 40].

K.M. v. H.M., [1992] 3 S.C.R. 6; 142 N.R. 321; 57 O.A.C. 321, refd to. [para. 41].

First City Capital Ltd. v. British Columbia Building Corp., [1989] B.C.J. No. 130 (S.C.), refd to. [para. 41].

Georgialee Lang & Associates v. Wigod, [2003] B.C.T.C. 1178 (S.C.), refd to. [para. 41].

131843 Canada Inc. v. Double "R" (Toronto) Ltd. (1992), 7 C.P.C.(3d) 15 (Ont. Gen. Div.), refd to. [para. 56].

Murano et al. v. Bank of Montreal et al. (1998), 111 O.A.C. 241; 41 O.R.(3d) 222 (C.A.), refd to. [para. 56].

Statutes Noticed:

Class Proceedings Act, S.O. 1992, c. 6, sect. 31(1) [para. 11].

Counsel:

Kirk Baert, for the appellant;

Alan L.W. D'Silva and Adrian C. Lang, for the respondents, the Economical Insurance Group and Liberty Mutual Insurance Company;

Kevin L. Ross and Ian F. Leach, for the respondents, AXA Insurance (Canada), Allianz Insurance Company of Canada, the Personal Insurance Company of Canada, Trafalgar Insurance Company of Canada, Royal & SunAlliance Insurance Company of Canada, and Middlesex Mutual Insurance Co.;

Howard B. Borlack and Lisa La Horey, for the respondent, Zurich Canada;

Michael Eizenga and Matt Baer, for the respondents, Co-operators General Insurance Company and the Guarantee Company of North America;

Annie M.K. Finn, for the respondents, the Dominion of Canada General Insurance Company, the Wawanesa Mutual Insurance Company, Belair Insurance Company, and ING Halifax;

Kevin S. Adams, for the respondents, Pilot Insurance Company and CGU Insurance Company of Canada;

Sheldon A. Gilbert, Q.C., for the respondent, Allstate Insurance Company;

Theodore P. Charney, for the respondents, Security National Insurance Company and Primmum Insurance Company (formerly known as Canada Life Casualty Insurance Company), Coseco Insurance Company and TD General Insurance Company;

Catherine A. Bruder, for the respondent, the Citadel General Insurance Company;

Deanna M. Stea, for the respondent, York Fire & Casualty Insurance Company;

Jean-Marc Leclerc, for the respondent, State Farm Insurance Company of Canada;

Russell M. Raikes, and John D. Goudy, for the Law Foundation of Ontario (Intervenor).

This application for leave to appeal was heard on February 14 and 15, 2008, before Laskin, Simmons and Armstrong, JJ.A., of the Ontario Court of Appeal. The following judgment of the Court of Appeal was delivered by Armstrong, J.A., and was released on August 29, 2008.