



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). Svias 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 persons 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
    Limiteds right under the Policy to claim indemnity from Northbridge. In the
    application judges 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, Svias 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
    projects 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
    Northbridges 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, Svias 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 persons 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 JUDGES 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 Svias 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 insureds 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 insureds 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 Northbridges 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 Northbridges
    ability to defend the action was also significant such that there was no
    disparity between the insureds loss of coverage and the damage caused to the
    insurer by the breach of condition.

[19]

Svias application was accordingly dismissed.

THE ISSUES ON APPEAL

[20]

Svias 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 Limiteds conduct, rather than
    Svias 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
    Policys 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 Limiteds 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 Svias appeal factum.
    Northbridge relies on this courts 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 Northbridges 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, Svias 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
    Northbridges 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 Svias 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, Svias justification for advancing an entirely new argument on
    appeal, and the merits of the new argument, are tightly interwoven. One cannot
    assess Svias claim, that the new argument ought to be entertained because it
    flows from a complete concession of liability first appearing in Northbridges
    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 Northbridges 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 Limiteds
breach should be relieved against or, most
    importantly, that without relief from
139 Limiteds
breach, Svias
    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 claimants] 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
, [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 Svias 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 Svias
    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 Svias 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 insureds 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 proposesmaking incontestable a Statutory Condition 8 notice regardless
    of when it was givenwould 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
    Svias 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 insurers 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 Svias judgment, Northbridge
    would have had a defence to 139 Limiteds 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 Limiteds 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]

Svias 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 judges findings of fact. The notice Northbridge
    received came well after 139 Limiteds 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 Svias
    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]

Svias 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 Limitedits failure to provide timely notice,
    why that occurred, and the effect that had on Northbridgeas equities in
    deciding whether to grant relief from forfeiture. That is exactly what the
    application judge was required to do in evaluating Svias 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]
Svias 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.


