



COURT OF APPEAL FOR ONTARIO

CITATION: Canadian Northern Shield Insurance Company v.
    2421593 Canada Inc., 2017 ONCA 570

DATE: 20170705

DOCKET: C62793

LaForme, van Rensburg and Huscroft JJ.A.

BETWEEN

Canadian Northern Shield Insurance Company and
    Royal & Sun Alliance Insurance Company of Canada

Plaintiffs (Appellants)

and

2421593 Canada Inc., The Co-operators Group
    Limited, Federated Agencies Limited, Vancouver City Savings Credit Union and
    7081332 Canada Ltd.

Defendants (Respondents)

Marg A. McKillop and J. Anthony Caldwell, for the
    appellants

Geoff R. Hall and Jacqueline L. Cole, for the
    respondents, 2421593 Canada Inc. and Vancouver City Savings Credit Union

Barry H. Bresner, for the respondents, The Co-operators
    Group Limited, Federated Agencies Limited and 7081332 Canada Ltd.

Heard: May 15, 2017

On appeal from the order of Newbould J. of the Superior
    Court of Justice, dated September 19, 2016, with reasons reported at 2016 ONSC
    5843.

By the Court:

A.

Overview

[1]

The appellants appeal the summary dismissal of their action against the
    respondents. The parties principal dispute is about contract formation and
    interpretation.

[2]

Canadian Northern Shield Insurance Company
    (CNS) and Royal & Sun Alliance Insurance Company of Canada (RSA)
    (together CNS/RSA or the appellants) commenced an action against 2421593
    Canada Inc. (Vancity Insurance) and Vancouver City Savings Credit Union
    (together the Vancity respondents) for damages and other relief following the
    alleged breach of an oral agreement. They also sued The Co-operators Group
    Limited (Co-operators), Federated Agencies Limited and 7081332 Canada Ltd.
    (together the Co-operators respondents) for damages for inducing breach of contract.

[3]

There were two motions for summary judgment
    brought by the Vancity respondents and the Co-operators respondents.

[4]

The motion judge dismissed the action, primarily
    because he concluded on his review of the evidence that the parties expected
    and required there to be a signed written agreement in order for there to be a
    binding contractual agreement (referred to on appeal as his finding that there
    was a Precondition). This disposed of the claims for breach of contract and
    for inducing breach of contract. He also determined that in any event the
    decision of the Vancity respondents not to proceed with the alleged contract
    with CNS/RSA could not have been induced by Co-operators several months later.

[5]

The appellants seek an order setting aside the
    dismissal and sending the entire action to trial.

[6]

For the reasons that follow, we allow the appeal
    with respect to the action against the Vancity respondents, which we direct to
    trial. We dismiss the appeal with respect to the Co-operators respondents.

B.

Background

[7]

Vancity Insurance had non-exclusive broker agreements with CNS and RSA.
    In February 2008, it issued a request for interest (RFI) seeking expressions
    of interest from insurers in developing an exclusive supplier arrangement.  In
    June 2008, RSA/CNS were selected to enter exclusive negotiations to become
    Vancity Insurances sole insurer. Various things took place in the following
    months, including a press release announcing the parties relationship, notice
    by Vancity terminating its relationships with other insurers, and meetings and
    negotiations.  By July 2009, when Vancity Insurance was purchased by
    Co-operators, no written agreement had been signed between RSA/CNS and Vancity.

[8]

RSA/CNS asserted that the parties had concluded an oral agreement at meetings
    on July 3, 2008 and September 11, 2008. They claimed the parties had taken
    various actions in performance of their contractual obligations after the oral
    contract formed despite the absence of a written contract, actions that
    confirmed they had an agreement. Vancity Insurance asserted that no oral
    agreement was reached at those meetings on all essential matters and that, in
    any event, a signed written agreement was required, which never occurred.

C.

The Decision Below

[9]

In granting summary judgment in respect of the appellants claims
    against the Vancity respondents, the motion judge determined that it was not
    necessary to decide whether an oral agreement on essential terms came into
    existence. He found a Precondition: on a review of the evidence, it was clear
    to him that the parties expected and required there to be a signed, written
    agreement in order for there to be a binding contractual relationship, and that
    the understanding or intention of the parties was that their legal obligations
    were to be deferred until a formal contract had been approved by both sides and
    executed. The motion judge stated that, if it had been necessary to resolve
    whether the parties had an oral agreement and the terms of any such agreement,
    he would have ordered a trial of that issue.

[10]

As for the action against the Co-operators respondents for inducing
    breach of contract, the motion judge concluded that the claim was untenable in
    light of his conclusion on the first issue. He went on to provide alternative
    reasons for dismissing the claim for inducing breach of contract, including
    that there was no evidence that Co-operators deliberately sought to get the
    alleged oral contract terminated; that, on the evidence, Co-operators acted
    reasonably and did not turn a blind eye to any putative contract; and that,
    in any event, the decision of the Vancity respondents to explore the market to
    sell Vansity Insurance, and therefore not to settle the contract terms,
    predated Co-operators involvement, and so could not have been induced by Co-operators
    several months later.

D.

Appeal of Dismissal of Claims Against Vancity Respondents

[11]

The central issue in this appeal relates to whether the motion judge
    erred in finding the Pre-condition  in his determination that CNS/RSA and
    Vancity Insurance had agreed that no binding contractual relationship would
    come into existence without a written, signed agreement.

[12]

The appellants submit the motion judge made palpable and overriding
    errors in making this finding: he drew the wrong inferences from the documents
    and other evidence he assessed, and made this finding in the absence of any
    evidence to support it. Further, the appellants submit the motion judge erred
    in law when he concluded that the conduct of the parties was irrelevant to the
    Pre-condition question.

[13]

For their part, the Vancity respondents urge deference. They say the
    motion judge made no error in assessing the extensive record on the summary
    judgment motion, including draft agreements, discovery evidence, affidavits and
    cross-examinations. Nor did he hold that conduct evidence was irrelevant.
    Rather, he expressly considered the parties conduct, and simply disagreed with
    the inferences the appellants wished to draw from it.

(1)

Analysis

[14]

This court owes considerable deference to the motion judges interpretation
    of the parties agreement:
Sattva Capital Corp. v. Creston Moly Corp
.,
    2014 SCC 53, [2014] 2 S.C.R. 633. Here, the motion judges finding that there
    was a Pre-condition, that the parties intended and agreed that their legal
    obligations were to be deferred until a formal contract had been approved by
    both sides and executed, was a palpable and overriding error. As we explain,
    the evidence reviewed by the motion judge was not capable of supporting that
    conclusion.

[15]

The Vancity respondents point to the following 11 pieces of evidence
    referred to by the motion judge at paras. 22  34 of his reasons, evidence they
    say supports his conclusion about the Pre-condition:

(a)      CNS/RSA admitted in their pleading that the agreement
    needed to be memorialized in writing, which indicated that the plaintiffs
    understood that the agreement had to be in writing in a form agreed by both
    sides;

(b)      Mr. Hayes (RSA/CNSs representative on examination for
    discovery) admitted that the relationship between a broker and an insurer is
    invariably documented by an agreement in writing and that it would be very
    foolish to have a situation where a broker could issue policies without having
    some sort of signed document indicating the scope of their authority;

(c)      CNS/RSAs written proposal to Vancity Insurance
    indicated that the parties intended to reach a non-binding Letter of Intent,
    followed by a period of exclusive, detailed negotiations which would result in
    a full legal contract;

(d)      CNS/RSAs written proposal for discussion on June 10,
    2008 contained a list of terms and conditions, one of which was formal
    agreement;

(e)      The minutes of the meeting of July 3, 2008  at which
    CNS/RSA assert a binding contract was formed  state that CNS/RSA was to
    provide boiler plate contract for review/discussion;

(f)       CNS/RSAs own affiant, Mr. Pentland, gave evidence on
    cross-examination that the discussions at the July 3, 2008 meeting were at a
    more conceptual level, that CNS/RSA was to provide a form of document to be
    further considered following the meeting, and that it was contemplated that
    there would be a written agreement between the parties;

(g)      Prior to the parties meeting of September 11, 2008,
    Mr. Pentland prepared a memorandum which expressly referred to the anticipated
    written contract;

(h)      Mr. Hayes affidavit expressly indicated that the
    agreement at the September 11th meeting was that CNS/RSA would draft a written
    agreement;

(i)       The minutes of the September 11, 2008 meeting,
    circulated by Vancity Insurance, state that Vancity would wait until draft
    comes back from counsel  review, reflecting that they intended to receive a
    draft of a written agreement;

(j)       An email of December 1, 2008 from Mr. Hayes to Mr.
    Terry Taciuk, president of Vancity Insurance, enclosed a draft written
    agreement and stated that it would serve as a solid first draft for us to work
    on and that it had been drafted with the ability to add addendums for
    specific contract items such as service level agreements or claims satisfaction
    surveys; and

(k)      Mr. Hayes evidence on discovery was that he did not
    expect Vancity Insurance to sign the draft contract delivered on December 1,
    2008, and that the draft contained a number of points that had not been agreed.

[16]

The difficulty for the Vancity respondents is that, whether considered
    individually or cumulatively, these aspects of the evidence only go so far as
    to support the conclusion the parties intended and agreed to eventually set out
    their agreement in writing, and that they were taking steps to negotiate the
    terms of their contract  what the Vancity respondents counsel referred to as
    the contract track. This evidence does not, in our view, support the motion
    judges conclusion, on which he based his disposition of the Vancity motion,
    that they had established that both sides acted on the understanding and
    intent that there was to be a formal executed written contract in order to be
    legally bound: at para. 21.

[17]

The motion judge was tasked with answering two separate questions: (i)
    did the parties agree that they would set out their contractual arrangements in
    writing? and (ii) if so, did the parties agree that execution of a written
    contract was a precondition to the creation of legal obligations between them?
    It was not in dispute that the answer to the first question was yes;
    nonetheless, the motion judge appears to have treated the evidence providing an
    answer to the first question as dispositive of the second.

[18]

Nor does the motion judges conclusion take into account evidence of the
    parties conduct that pointed to the existence of some type of contractual
    relationship between the parties, while they negotiated a formal contract 
    what the Vancity respondents counsel referred to as the operational track.
    Referring to evidence that the parties pursued the roll-over of the business
    from Vancity Insurances other insurers to CNS and continued to work on the
    program, as evidence they had a binding agreement, the motions judge, at para.
    36, discounted that conduct on the basis that it ignores the need for a signed
    written contract that the parties pursued for many months. He pointed to the
    fact that the parties persisted in seeking a final written agreement while they
    were performing the actions relied on by the appellants. But as we have already
    observed, the parties pursuit of a written contract could not furnish a basis
    to infer an intention that execution of a written agreement was to be a
    precondition to contractual obligations.

[19]

Consequently, the motion judge provided no reasonable explanation for
    rejecting the appellants arguments regarding the significance of the parties
    conduct in performing on the terms of the deal. The Vancity respondents concede
    that such evidence is relevant in contractual interpretation, but say the
    motion judge considered and interpreted the evidence and, as he was entitled to
    do, reached a conclusion other than the one advanced by the appellants. In our
    view, however, the motion judges treatment of the conduct evidence in para. 36
    is tantamount to disregarding it: having concluded that the parties agreed the
    execution of the written agreement was a precondition to contractual
    obligation, he determined he did need to consider conduct that arguably
    undermined that view. Since, as we have said, the evidence the motion judge
    adverted to was not capable of supporting the inference for which it was relied
    upon, it also cannot be a basis for disregarding evidence that had a clear
    bearing on the very question he had to consider.

[20]

For these reasons, we conclude that the motion judge erred in concluding
    that there was no issue requiring a trial on the question of a Precondition,
    and that therefore this permitted him to dismiss the action against the Vancity
    respondents.

(2)

Remedy and Conclusion Regarding Claim Against Vancity Respondents

[21]

The Vancity respondents submit that, even if the motion judge erred in
    granting summary judgment on the basis that there was a Precondition, the
    dismissal of the action against them should be upheld on the basis that there is
    no genuine issue requiring a trial. The Vancity respondents assert there was
    insufficient certainty of terms for there to be an enforceable contract between
    the parties. However, the motion judge stated, at para. 16, that if he had
    considered it necessary to decide whether an oral agreement had come into
    being, he would be inclined to order a trial of the issue in spite of the
    agreement of the parties that the case can be decided on a motion for summary
    judgment without the need for a trial. We see no reason to interfere with this
    conclusion. There are considerable unresolved factual disputes that this court
    is not in a position to adjudicate.

[22]

As a result, we conclude that the motion judge erred in determining, on
    a summary judgment motion, that the parties intended and agreed that their
    legal obligations were to be deferred until a formal written contract had been
    approved by both sides and executed. We therefore allow the appeal in respect
    of the appellants claims against the Vancity respondents.

E.

Appeal of Dismissal of claims against co-operators respondents

[23]

The motion judges dismissal of the action against the Co-operators
    respondents for inducing breach of contract followed automatically from his
    decision on the Precondition. If there was no agreement between the appellants
    and the Vancity respondents, because one could not come into existence without
    a written contract, then there could be no inducement of a breach of contract.
    The focus of the appellants submissions on appeal was on the motion judges
    conclusion that there was a Precondition.

[24]

However, the motion judge articulated a reasonable, alternative basis
    for dismissing the claim against the Co-operators respondents that did not rely
    on his conclusions with respect to whether a binding contract had formed: see
    paras. 41-59 of his reasons. Essentially, he found that while Co-operators,
    through its due diligence, was aware of the nature of the business that was
    being conducted by CNS/RSA with Vancity Insurance, and that the parties were
    taking opposite positions as to whether there was a binding contract,
    Co-operators was in no position to make a determination as to which of the
    parties was correct in their positions. Further, there was no evidence that
    Co-operators deliberately sought to get the alleged oral contract terminated.
    In any event, since the Vancity respondents had decided to explore the market
    to sell Vancity Insurance and therefore not to settle the contract terms with
    the appellants by sometime in December 2008, the decision of the Vancity
    respondents not to proceed with the alleged contract with the appellants could
    not have been induced by Cooperators several months later.

[25]

On appeal, the appellants did not attack these findings that were
    available to the motion judge on the evidence, and fully supported his
    alternative basis for dismissing the claim against the Co-operators
    respondents. Accordingly, there is no basis to interfere with the order
    dismissing the action against the Co-operators respondents.

F.

Disposition

[26]

For these reasons we allow the appeal in part. We set aside the
    dismissal of the action against the Vancity respondents.

[27]

Success on appeal was divided. The Co-operators respondents were
    entirely successful and the Vancity respondents were entirely unsuccessful,
    while the appellants succeeded against Vancity only. The Co-operators
    respondents are therefore awarded costs in the agreed upon amount of $10,000
    plus HST payable by the appellants. The appellants are in turn awarded costs in
    the agreed upon amount of $15,000 plus HST payable by the Vancity respondent.

Released: HSL JUL 5 2017

H.S. LaForme J.A.

K. van Rensburg J.A.

Grant Huscroft J.A.


