



COURT OF APPEAL FOR ONTARIO

CITATION: Legg v. Simcoe Muskoka Catholic District School
    Board, 2014 ONCA 745

DATE: 20141027

DOCKET: C58968

Cronk, MacFarland and LaForme JJ.A.

BETWEEN

Diane Legg

Applicant (Respondent)

and

Simcoe Muskoka Catholic District School Board

Respondent (Appellant)

Martin Sclisizzi and Heather K. Pessione, for the
    appellant

Stephen J. Moreau and Lauren Sheffield, for the
    respondent

Heard:  October 6, 2014

On appeal from the judgment of Justice P. H. Howden of
    the Superior Court of Justice, dated May 23, 2014.

MacFarland J.A.:

[1]

The appellant appeals the order of Howden J. dated May 23, 2014 wherein
    he declared that the appellant:

Shall indemnify, reimburse and save the [respondent] harmless
    for all costs, expenses, and charges she has incurred or will incur in
    defending herself pursuant to Article 13.01 of her contract of employment with
    the appellant, commencing on January 30, 2014.

[2]

The appellant School Board employed the respondent as its Director 
    Communications and Public Affairs pursuant to a written agreement.  The
    respondent had been an employee of the appellant since 2000 and was promoted to
    the position of Director in 2008.

[3]

On February 4, 2014, as the result of complaints made by the respondents
    fellow employees, which the parties were unable to resolve internally, the
    respondent was suspended from her position on suspicion that she may have
    submitted fraudulent expense claims.  As Darlen Schmidt put it in his affidavit:

On February 4, 2014, the Board suspended Ms. Legg with pay
    so that it could have a third party conduct a more fulsome investigation.

[4]

That same day a private investigator was hired.  On April 24, 2014,
    having received the investigators report, Ms. Legg was fired for expense
    fraud.

[5]

In early April, 2014 she brought an application before Howden J. of the
    Superior Court of Justice, seeking payment of her ongoing legal expenses
    pursuant to Article 13.01 of her contract of employment, which provides in part:

13.01 Indemnity for Errors and Omissions

Subject to the limits imposed by
    law, if any, the Board shall at the sole cost and expense of the Board, from
    time to time and at all times, both during the term of this Contract and
    thereafter indemnify and save harmless the Communications and Public Affairs
    Director (and her heirs, executors and administrators, and estate and effects,
    successors and assigns) from and against:

a)

all costs, charges and
    expenses whatsoever which the Communications and Public Affairs Director
    sustains or incurs in or relation to any action, suit or proceeding which is
    brought, commenced or prosecuted against the Communications and Public Affairs
    Director for or in respect of any act, deed, matter or thing whatsoever, made,
    done or permitted by the Communications and Public Affairs Director, in or in
    relation to the execution of the duties of the office of Communications and
    Public Affairs Director of the Board, or in respect of any such liability, and,

b)

all other costs
    charges and expenses which the Communications and Public Affairs Director
    sustains or incurs in or in relation to the affairs thereof,

except such costs, charges or
    expenses as are occasioned by the Communications and Public Affairs Directors
    own failure to act honestly and in good faith in the performance of the duties
    of office, or by other willful neglect or default.

[6]

The application judge concluded that the word proceeding was broad
    enough to include the proceedings instituted by the Board commencing January
    30, 2014 when Ms. Leggs Superior, the Director of Education, told her that her
    department was in a state of crisis and further investigation was required, not
    of her department but of her, at which point it was clear that the School Board
    was initiating a proceeding focussed on the respondent.

[7]

The appellant argues three main grounds of appeal:

1)

the
    School Board raised a
prima

facie
case that Ms. Legg failed
    to act honestly and thus the exclusion clause in Article 13.01 applies;

2)

the
    application judge erred fundamentally in not determining whether or not Ms.
    Legg had acted in good faith;

3)

the
    application judge erred in determining that a workplace investigation is a
    proceeding within the meaning of Article 13.01;

First Ground

[8]

In my view, and counsel agrees, in order to invoke the exclusion clause
    in Article 13.01, the School Board was obliged to raise a
prima facie
case that Ms. Legg had acted dishonestly.

[9]

The law presumes that persons act honestly until the contrary is proved.
    (
Blair v. Consolidated Enfield Corp.
, [1995] 4 S.C.R. 5, at para. 35) 
    There was no admissible evidence of dishonest conduct before the application
    judge.

[10]

The
    School Board did not rely on the truthfulness of the investigative report. Further,
    Mr. Schmidts evidence of what hed been told by certain principals about Ms. Legg
    was hearsay and, in any event, was incapable of proving that shed been
    dishonest.

[11]

In
    my view, this ground of appeal must fail.

Second Ground

[12]

It
    was not for the application judge to determine the merits of the School Boards
    allegations against the respondent.  As he put it in para. 11 of his reasons:

Without proof to the high degree of a strong
prima facie
case that the applicant has acted dishonestly or in bad faith,
which is not
    even attempted before me
, the application before me is limited to whether
    by contract, and/or by statute, Ms. Legg is entitled to immediate and ongoing
    indemnification of her legal costs incurred during the investigation by the
    Board. [Emphasis added.]

[13]

I
    agree with the application judge. The ultimate merits of the School Boards
    allegations will be determined by arbitration in accordance with
    Article 14.06 of the contract of employment. Were it otherwise, the
    contractual promise to indemnify and save harmless would be rendered
    meaningless. All the School Board would need to do to avoid its indemnification
    obligation would be to allege bad faith or dishonesty without proof. In that
    event, there would be no indemnity unless and until, at the end of the day, the
    allegations were proved to be without merit.

[14]

I
    therefore agree with the application judge that absent any effort to prove the
    allegation before him, his task was to interpret the contract.

[15]

I
    also agree with his conclusion, at para. 12 of his reasons:

Until the applicant is found to have acted dishonestly and/or
    in bad faith and the Board confirms such finding after granting the applicant a
    hearing, within the procedures set up by the contract
and
, if appealed,
    such finding is registered by the arbitrators pursuant to the terms of the
    contract, there is no disentitlement to indemnification.  [Emphasis in
    original.]

Third Ground

[16]

Thirdly,
    the appellant argues that the application judge erred in determining that a
    workplace investigation is a proceeding within the meaning of the contract. 
    It argues that a proceeding has to be in the context of an action or suit.

[17]

I
    do not agree.

[18]

In
    his reasons, at para. 23, the application judge quoted from the decision of the
    Supreme Court of Canada in
Markevich v. Canada
, [2003] S.C.J. No. 8:

Though the word proceeding is often used in the context of an
    action in court, its definition is more expansive.  The Manitoba Court of
    Appeal stated in
Royce v. MacDonald (Mun.)
(1909), 12 WLR 347, at p. 350,
    that the word proceeding has a very wide meaning and includes steps or
    measures which are not in any way connected with actions or suits. In Blacks
    Law Dictionary, 96
th
ed., 1990, at p. 1204, the definition of
    proceeding includes,
inter alia
, an act necessary to be done in
    order to obtain a given end; a prescribed mode of action for carrying into
    effect a legal right.

[19]

As
    the application judge noted, the School Board in its drafting did not choose to
    limit instances of the use of the indemnification provision to legal actions or
    regulatory proceedings.  It would have been a simple matter for it to have done
    so by the use of appropriate language.

[20]

The
    application judge concluded that from the end of January, 2014, the School
    Board focused its attention on Ms. Leggs conduct and began its formal
    investigation. It first suspended her from her employment and then, on receipt
    of its investigators report, terminated her employment for alleged fraudulent
    conduct.  He concluded that this conduct constituted a proceeding within the
    meaning of Article 13.01 and I agree.

Disposition

[21]

For
    the reasons given, I would dismiss the appeal.

[22]

I
    would award costs of the appeal to the respondent fixed in the sum of $8000,
    inclusive of disbursements and HST, the figure to which counsel agreed.

Released: October 27, 2014  EAC

J.
    MacFarland J.A.

I
    agree E.A. Cronk J.A.

I
    agree H.S. LaForme J.A.


