



COURT OF APPEAL FOR ONTARIO

CITATION: 1472292 Ontario Inc. (Rosen
    Express) v. Northbridge General Insurance Company, 2019 ONCA 753

DATE:20190927

DOCKET: C65688

Feldman, Roberts, and Fairburn
    JJ.A.

BETWEEN

1472292 Ontario Inc. O/A Rosen
    Express

Applicant (Respondent)

and

Northbridge General Insurance
    Company

Respondent (Appellant)

Alan S. Cofman,
    for the Appellant

Patrick J.
    Monaghan, for the Respondent

Heard: March 7, 2019

On appeal from the judgment of Justice
    Edward M. Morgan of the Superior Court of Justice, dated June 27, 2018, with
    reasons reported at 2018 ONSC 4017, [2019] I.L.R. I-6077

Feldman J.A.:

Overview

[1]

This appeal arises out of a coverage dispute
    between a trucking company and its insurer as a result of the theft of two
    containers of electronic goods that the trucking company was consigned to
    deliver for a customer. Following the theft, the trucking company asked its
    insurer to confirm coverage, but after an investigation, the insurer sent a
    letter denying coverage for the stolen goods for two reasons. In the meantime,
    the customer had taken no steps to make a claim for its loss to the trucking
    company. All it did was fail to pay a number of outstanding invoices, which the
    trucking company assumed was a response to the theft.

[2]

The trucking company decided that it would be
    imprudent to make any inquiries of the customer regarding the outstanding
    invoices, lest it provoke a large loss claim that may be uninsured. It decided
    instead to bring an application against the insurer seeking a declaration that
    1) the insurer was obliged to indemnify the trucking company for claims in
    respect of the stolen goods, 2) the insurer had a duty to defend and 3) the
    insurer was obliged to reimburse the trucking company for the costs of
    responding to the claims.

[3]

The insurer filed no material in response
    because no claim had been made for the loss, and requested an order striking
    out the relief sought or an adjournment. That request was denied. The
    application judge declined to make the declaration for indemnity requested in
    the application, but made two declarations of fact based on the evidence filed by
    the trucking company. Those declarations disposed of the insurers two reasons
    for denying coverage.

[4]

The trucking company sought to file fresh
    evidence on the appeal to show that following the decision on the application, the
    trucking company made inquiries of the customer, resulting in confirmation from
    the customer that it had offset from its payables to the trucking company some
    of the outstanding amount owed for the stolen goods, and that it valued the
    stolen cargo at $356,968.26. The trucking company subsequently commenced an
    action (the subsequent action) against the insurer for $356,968.26 for breach
    of contract, based on the two declarations of fact made by the application
    judge.

[5]

For the reasons that follow, I would allow the appeal,
    set aside the declarations and orders made by the application judge, and order
    that the application be consolidated with the subsequent action.

Background facts

[6]

The respondent Rosen is a truck carrier and load
    broker insured with the appellant Northbridge. Rosen contracted with a member
    of a group of companies collectively referred to as FLS to pick up and
    deliver two loads of cargo consisting of electronics from Toronto to Montreal.
    It subcontracted the Toronto pick-up to Greenway Carriers. Rosen, Greenway and
    a third company shared a truck yard. The two loads were picked up by Greenway
    on November 11, 2016 and delivered to the yard. Rosen was to transport them to
    Montreal on November 14, but the two containers were stolen on November 12 and
    13 respectively.

[7]

Rosen reported the theft to the police and to
    Northbridge, seeking confirmation of coverage and indemnity. However, in a
    January 2017 letter, Northbridge denied coverage. In its letter, Northbridge
    gave two reasons for the denial of coverage. First, Rosen had failed to disclose
    in its application for insurance that it would be transporting electronics,
    which affected the risk and the premium, and that misrepresentation voided coverage
    for those loads. Second, the cargo was in the custody of Greenway and not Rosen
    at the time of the theft, and therefore not covered.

[8]

The police report valued the lost cargo at approximately
    $300,000, but FLS had not made any claim for compensation from Rosen. However,
    one or more FLS companies for which Rosen transported cargo failed to pay $65,516.01
    of unrelated invoices, which Rosen assumed was a set-off against the loss.
    Rosen was not prepared to inquire about the unpaid invoices lest FLS assert a possibly
    uninsured loss claim for the total of approximately $300,000.

[9]

With no underlying claim from FLS having been
    made, Rosen brought this application for a declaration that a) Northbridge had
    an obligation to indemnify Rosen under the policy for the claims advanced
    against Rosen Express in relation to two loads that were stolen from its yard
    (the underlying claims); b) Northbridge had an obligation under the policy to
    defend Rosen Express in the underlying claims; and c) an order that Rosen
    Express be repaid by Northbridge the legal expenses that it incurred in responding
    to the underlying claims.

[10]

Rosen filed an affidavit of its president on
    which Northbridge conducted a cross-examination. However, Northbridge filed no
    responding record. Its position was that the application should be struck and
    adjourned because there was no underlying claim to indemnify, with leave to
    amend if a claim were made.

Reasons of the application judge

[11]

Although the judgment dismisses the requests to
    strike out the relief sought in the application and for an adjournment, the
    application judge does not refer to or address those motions in his reasons.

[12]

The application judge stated that Northbridge
    raised two grounds for denying coverage of Rosens claim, then addressed each reason
    in turn. He acknowledged that there was a factual controversy over whether the
    goods had been delivered to Rosen at the time they were stolen. He referred to
    the presidents affidavit which states that the goods were dropped off at the
    Rosen yard. He then stated that Rosens evidence was that there was a shared
    yard and that the goods were delivered to Rosens portion of the yard, although
    they were still in the Greenway trucks. I note here that although the affiant
    gave evidence about the shared yard and that there were designated areas for
    each company, he was not asked whether the trailers were in Rosens part of the
    yard when the theft occurred.

[13]

Rosens position was that the goods were in its
    custody because the goods were waiting in the shared yard for a Rosen driver to
    start the delivery trip to Quebec, while Northbridges position was that the
    goods had not yet been handed over to Rosen by Greenway. The application judge
    stated that he was skeptical about Northbridges characterization of custody.
    He found that even if the goods had not been delivered to Rosen, they were in
    the custody of Greenway as Rosens agent, and if that was not accurate, then
    Greenway was a connecting carrier under the policy because it picked up the
    goods. According to the application judge, there was coverage either way.

[14]

Dealing with Northbridges second ground for
    denying coverage contained in its letter of January 2017, the alleged
    misrepresentation with respect to the type of cargo Rosen transported, the
    application judge set out Rosens position that its cargo was described generally
    in the application and would change from day to day but not in a dramatic
    fashion. Rosens president stated in cross-examination that electronics fell
    under general freight.

[15]

The application judge held that the onus was on
    the insurer to prove reliance on any misrepresentation, and that its denial
    letter was just an after the fact position and was not evidence of reliance.
    Sworn evidence was required.

[16]

Because no claim had been made for the loss by
    FLS, the application judge was not prepared to declare an obligation to indemnify.
    However, he made two other declarations: first, that Rosen did not make a
    material misrepresentation on its application for insurance with respect to its
    transportation of consumer electronic goods; and second, that the theft occurred
    while the cargo was in Rosens custody. His intention was to address
    Northbridges two objections to coverage referred to in the January 2017 letter.
    He concluded, however, that: [o]f necessitythis approach leaves to another
    day the question of whether the actual claim of loss eventually brought against
    the Applicant is covered in whole or in part by the Respondents insurance
    policy, as that will depend on the nature and scope of that eventual claim.

Proposed fresh evidence

[17]

Following the application judges decision, Rosen
    contacted FLS, resulting in confirmation that FLS had offset from its payables some
    of the outstanding amount owed for the stolen cargo, and that FLS valued the loss
    at $356,968.26. Rosen has subsequently issued a statement of claim against
    Northbridge in the subsequent action, claiming damages for breach of contract
    in that amount and reciting and relying on the two declarations to foreclose
    any objection to coverage by Northbridge.

[18]

Rosen seeks to adduce its correspondence with FLS
    that forms the basis for the subsequent action as fresh evidence. Northbridge
    takes no position on the fresh evidence motion. While the subsequent
    correspondence and procedural steps are not fresh evidence in the classic
    sense because they did not exist at the time of the application, as this court
    stated in similar circumstances in
Sengmueller v. Sengmueller
(1994),
    17 O.R. (3d) 208 (C.A.) at p. 211: where the evidence is necessary to deal
    fairly with the issues on appeal, the court may admit it. As the existence of
    the subsequent developments is relevant and necessary to the remedy sought on
    the appeal, I would admit the fresh evidence.

Issues

1.

Did the application judge err by making declarations in the absence
    of an underlying claim and therefore a real dispute?

2.

Did the application judge err by declaring findings of fact?

[19]

Northbridge raises a number of other issues,
    including: did the application judge err by deciding issues that were not
    pleaded in the notice of application; did the application judge err by effectively
    penalizing Northbridge for not filing evidence when there was no claim to
    respond to; did the application judge err by misapprehending the evidence; and
    did the application judge err by failing to apply the statutory definition of
    connecting carrier? These issues do not need to be addressed in light of my
    conclusions on the first two issues and the remedy I propose.

Analysis

Issue 1: Did the application judge err by making
    declarations in the absence of an underlying claim and therefore a real dispute?

[20]

The Supreme Court most recently described the
    criteria for declaratory relief in
S.A. v. Metro Vancouver Housing Corp.
,

2019 SCC 4, 430 D.L.R. (4th) 621, at para. 60:

Declaratory relief is granted by the courts on
    a discretionary basis, and may be appropriate where (a) the court has
    jurisdiction to hear the issue, (b) the dispute is real and not theoretical,
    (c) the party raising the issue has a genuine interest in its resolution, and
    (d) the responding party has an interest in opposing the declaration being sought
    (
Ewert v. Canada
, 2018 SCC 30, at para. 81; see also
Daniels v.
    Canada (Indian Affairs and Northern Development)
, 2016 SCC 12, [2016] 1
    S.C.R. 99, at para. 11;
Canada (Prime Minister) v. Khadr
, 2010 SCC 3,
    [2010] 1 S.C.R. 44, at para. 46).

[21]

The authority to make a declaration of right is
    found in s. 97 of the
Courts of Justice Act
, R.S.O. 1990, c. C.43.
    Section 97 provides:

The Court of Appeal and the Superior Court of
    Justice, exclusive of the Small Claims Court, may make binding declarations of right,
    whether or not any consequential relief is or could be claimed.

[22]

While the court has the jurisdiction and
    authority to make a declaration of right, it is only to be used when the
    declaration will have an effect on an existing dispute between the parties. It is
    not to be given as an opinion on a hypothetical set of facts, or as an academic
    exercise to settle what may happen in the future. For example, in
Re
    Lockyer
, [1934] O.R. 22 (Ontario Supreme Court  Court of Appeal), a will
    left the residue of the testators estate following the death of the life
    interest beneficiary to be divided among named charities, one of which was the
    Protestants Orphan Asylum. As there was no such charity in existence, the
    Protestant Childrens Homes sought a declaration that it was the intended
    residuary beneficiary. However, it brought the application before the death of
    the life interest beneficiary. The court refused to give the declaration
    because it would have no present effect and circumstances could change before
    it could have an effect; for example, the life interest beneficiary could use
    the entire interest before she died. At p. 26, Riddell J.A. quoted from
Curtis
    v. Sheffield
(1882), 21 Ch. D. 1, at pp. 3-4, where Jessel M.R. stated:

Now it is true that it is not the practice of
    the Court, and was not the practice of the Court of Chancery, to decide as to
    future rights, but to wait until the event has happened, unless a present right
    depends on the decisions, or there are some other special circumstances to
    satisfy the Court that it is desirable at once to decide on the future rights.

[23]

The leading decision from the Supreme Court on
    this issue is
Solosky v. The Queen
, [1980] 1 S.C.R. 821. Mr. Solosky,
    a federal prisoner, sought a declaration that it would be illegal for penitentiary
    officials to open and read his mail to and from his lawyer. Dickson J. stated
    that the principles that guide the court in exercising its jurisdiction to grant
    a declaration have been stated many times. There are two factors to consider. The
    first is the reality of the dispute: Dickson J. explained at p. 832 that [i]t
    is clear that a declaration will not normally be granted when the dispute is
    over and has become academic, or where the dispute has yet to arise and may not
    arise. In
Solosky
, the dispute was not hypothetical because there was
    an order in place requiring that Mr. Soloskys mail be opened and read; that order
    had been and was continuing to be applied and therefore would apply to future
    mail.

[24]

If the dispute is established as a real dispute,
    then the second factor is whether the declaration is capable of having any
    practical effect in resolving the issues in the case: at p. 833. In
Solosky
,
    the court concluded that the appellant was not entitled to the declaration
    sought for other reasons, but that otherwise, the court could have exercised
    its jurisdiction to grant it because the two criteria stated above were met.

[25]

In the present case, neither of the two criteria
    for granting a declaration of rights was satisfied. First, Rosen sought a
    declaration that Northbridge was required to indemnify it for a claim that had
    not yet been made. While the theft had occurred, the party that suffered the
    loss had not yet sought to recover for that loss from Rosen. There was, as yet,
    no real dispute. It was unclear whether a claim would be made, and if so the
    nature or extent of the claim.

[26]

Second, the declaration had no practical effect.
    That was recognized by the application judge when he declined to make the
    declaration that was requested, which was that Northbridge was obliged to
    indemnify Rosen for a claim advanced in relation to the stolen goods. He found
    that because the nature and extent of the potential claim were not known, the
    court could not grant a declaration that required Northbridge to indemnify
    against it. As a result, the declarations that were made had no practical
    effect. The utility of the declarations was only hypothetical, and contingent
    on a viable claim being brought against Rosen.

[27]

This court set aside a declaration made under r.
    612 (superseded by r. 14.05(3))
[1]
in somewhat analogous circumstances in
296616 Ontario Ltd. v. Richmond Hill
    (Town)

(1977)
,
14 O.R. (2d) 787 (C.A.). In that case,
    parties to an agreement of purchase and sale of a building in Richmond Hill,
    Ontario brought an application for the court to declare in advance that the
    purchasers proposed use of the building would amount to a legal non-conforming
    use.

[28]

On appeal by the municipality, apparently on the
    merits, this court raised the question whether such a declaration could be
    made, and concluded that it could not, at pp. 789-90:

It is our respectful view that the order ought
    not to have been made. If Rule 612 is applicable at all, and we are not persuaded
    that it was, it applies, as it states, only where there are no material facts
    in dispute, or upon undisputed facts and the proper inference from such facts.
    The reference in the statement of facts to the future use of lands, should
    not be confused with the future facts when such use is said to occur. It is only
    upon the actual facts that the Court can declare the rights of the parties, and
    it cannot be said that, where those facts have not yet occurred, the situation
    is within the type contemplated by Rule 612. If it were otherwise, a
    declaration might well preclude any future action by the municipal corporation
    for what is then a breach of the by-law. Such a motion as this based upon a
    hypothetical situation could not be used to escape future enforcement of the
    by-laws of the municipality.

[]

By adopting this course, it was again
    contended the Court will resolve future differences between the parties.
    However, this is not the function of this Court in this type of application.
    There is no pending issue between the parties to these proceedings, which raises
    the question of construction of the by-law and the right of the landowner as to
    present use, and the Court will not make an order on the basis of an assumed
    set of facts to resolve future matters.

[29]

In my view, this case, similarly, was not one where
    the court could make a declaration to govern the rights of the parties contingent
    on a possible future event, here, a claim against Rosen for compensation for
    the theft.

Issue 2: Did the application judge err by
    declaring findings of fact?

[30]

Declaratory relief must determine the rights of
    the parties. While determining the rights of the parties may entail findings of
    fact, courts do not have jurisdiction to simply declare facts, detached from
    the rights of the parties.

[31]

Where the issue between an insured and the insurer
    is not the interpretation and application of the policy to a specific set of
    facts, but rather, what were the facts that occurred, then it is not a proper
    case for declaratory relief. The application judge erred by making findings of
    fact under the guise of a declaration of right.

[32]

This issue has been canvassed numerous times by
    the Ontario Superior Court of Justice in the context of s. 108(2) of the
Courts
    of Justice Act
,
which provides that claims for declaratory relief
    are to be assessed without a jury. Therefore where a plaintiff asks for
    declaratory relief and seeks to strike a jury notice, the court will examine
    whether in fact the claim is for declaratory relief, in which case the jury notice
    will be struck, or whether it is in reality merely a factual dispute that can
    be decided by a jury. The jury notice will not be struck where the claim is not
    properly for declaratory relief but for findings of fact on disputed evidence:
    see
Harrison v. Antonopoulos

(2002)
,
62 O.R. (3d) 463
    (S.C.)
;
Ramm v. Sun Life Assurance Co. of Canada

(1999)
,
43
    O.R. (3d) 652 (S.C.); and
Thibault v. Empire Life Insurance Co.
,
2012
    ONSC 1723, 24 C.P.C. (7th) 208.

[33]

For example, in
Reid v. Manufacturer
,
    2010 ONSC 4645, 89 C.C.L.I (4th) 149, the court explained at paras. 35-36:

Manulife's argument, of course, assumes that
    there was, in fact, a detrimental change in Mr. Reid's health in the relevant
    time period. But that fact is disputed. In fact it is the very centre of the
    dispute between the parties. There appears to be no dispute about their legal
    rights, obligations and entitlements depending on the outcome of that factual
    finding.
The court in this instance is not called upon to make a
    pronunciation on the legal rights of the parties. They agree that their rights
    are spelled out in the policy.

What they do not agree upon is whether a
    particular constellation of facts existed that vitiated the policy.
The
    court is called upon to determine what is a relatively narrow factual dispute:
    whether there was a detrimental change in Joel Reid's health in the relevant
    time period.

On careful review, in pith and substance,
    this case is clearly a factual dispute
. The parties
    seek a determination of that factual dispute and, at least from the plaintiff's
    point of view, a coercive order should that factual determination be resolved
    in his favour. [Emphasis added.]

[34]

With respect, once the application judge heard
    the application and found that he could not make a declaration of rights because
    no claim existed, it was an error to make factual findings in relation to the
    two disputed issues raised by Northbridges denial of coverage letter and to
    frame those findings as declaratory relief.

[35]

As an ancillary point, s. 138 of the
Courts
    of Justice Act
directs that: As far as possible, multiplicity of legal
    proceedings shall be avoided. This court has recently explained in the context
    of the propriety of awarding partial summary judgment, that cases should only rarely
    be bifurcated. In
Butera v. Chown, Carins LLP
,
2017 ONCA 783,
    137 O.R. (3d) 561, the court set out a number of reasons why findings should
    not be made by one judge that do not dispose of the action and bind the judge
    that will hear and dispose of it, at paras. 29-34: (1) the danger of
    duplicative or inconsistent findings; (2) delay of the main action; (3) such
    motions can be expensive; (4) judges are required to spend time writing
    extensive reasons which do not dispose of the action; and (5) the record
    available at the hearing of a partial summary judgment motion will likely not
    be as expansive as the record at trial, increasing the risk of inconsistent
    findings.

[36]

In this case, the effect of the declarations of
    fact was to leave for another proceeding the issue of coverage, with findings
    that were intended to be used in a future dispute regarding a claim for
    compensation for the stolen property. Once that claim was made in this case, a subsequent
    action was commenced by Rosen against Northbridge. All issues could have been
    determined in that claim. The application and this appeal involved the unnecessary
    expenditure of the resources of the parties as well as judicial resources.

Remaining Issues

[37]

In light of my conclusions regarding the lack of
    propriety of the declaratory relief granted in this case, there is no need to
    address the balance of the evidentiary issues or the interpretation of
    connecting carrier in the policy, which may be determined, if raised, in the subsequent
    action that Rosen has brought.

Result

[38]

I would allow the appeal and set aside the declarations
    of fact made by the application judge. Rather than dismiss the application, I
    would order that it be consolidated with and continued as part of the subsequent
    action Rosen has commenced against Northbridge (court file number CV-18-00609508-0000).
    I would order the costs of the application and of this appeal to follow the
    event of the cause in the subsequent action, at the discretion of the trial
    judge or summary judgment motion judge.

Released: K.F. September 27, 2019

K. Feldman J.A.

I agree. L.B. Roberts J.A.

I agree. Fairburn J.A.





[1]
Homestead
    and Watson
, Ontario Civil Procedure,
volume 1, (Toronto: Carswell,
    1990), tables of concordance, 1990 rules/1984 rules/1980 rules, at p. C-22.


