



COURT OF APPEAL FOR ONTARIO

CITATION: Alguire v. The Manufacturers Life Insurance Company
    (Manulife Financial), 2018 ONCA 202

DATE: 20180301

DOCKET: C62706

Feldman, Cronk and Hourigan JJ.A.

BETWEEN

William Alguire

Plaintiff

(Appellant)

and

The
    Manufacturers Life Insurance Company

c.o.b. as Manulife Financial

Defendant

(Respondent)

Peter Griffin, Warren Rapoport and Aryan Ziaie, for the
    appellant

Robert Harrison and Chad Pilkington, for the respondent

Heard: January 9, 2018

On appeal from the judgment of Justice James F. Diamond of
    the Superior Court of Justice dated August 22, 2016, with reasons reported at
    2016 ONSC 5295 and from the costs order dated September 27, 2016.

Hourigan J.A.:

[1]

The appellant, William Alguire, appeals the decision of the trial
    judge dismissing his claim for declaratory and other relief related to a policy
    of insurance issued by the respondent, The Manufacturers Life Insurance Company
    (Manulife).  Mr. Alguire also seeks leave to appeal the costs award ordered
    by the trial judge.

[2]

For the reasons that follow, I would dismiss both the appeal and
    the application for leave to appeal the costs award.

Background Facts

[3]

On June 3, 1982, Mr. Alguire met with an insurance broker and
    Manulife agent, Alan Elias, about obtaining a $5,000,000 key man insurance
    policy with large up front premiums in the early years of the policy and
    greatly reduced premiums thereafter. A short time later Mr. Alguire left on an
    extended holiday. In his absence, Mr. Elias contacted Manulife who prepared a
    special actuarial quote (the Quote) on June 14, 1982.

[4]

The Quote provided for the requested $5,000,000 in face amount
    coverage, with large premiums paid up front.  It also contained a guaranteed paid-up
    value table that provided for insurance coverage in the event of default. For
    example, if Mr. Alguire defaulted on the policy at age 65, the paid-up value at
    that point would have totalled $2,680,000 and he would have been entitled to
    coverage in that amount. The trial judge found that Mr. Elias accepted the Quote
    on behalf of Mr. Alguire, and a policy was issued on July 21, 1982 (the
    Policy).

[5]

Mr. Alguire and Mr. Elias met again in mid-August 1982. Mr.
    Alguire denied that he saw the Quote during that meeting. There was no evidence
    from Mr. Elias, who had passed away. His file did not contain notes of what
    occurred at the meeting. Mr. Alguire testified that he was advised of and
    directed to a table of non-forfeiture values on page 3 of the Policy, which set
    out the paid-up values on various anniversary dates. Starting on its fifteenth anniversary,
    the Policys paid-up value exceeds the $5,000,000 in face amount coverage. When
    these proceedings started, the Policys paid-up value was $13,400,000.

[6]

The figures in the table of non-forfeiture values on page 3 of
    the Policy are the same as the table of guaranteed paid-up values in the Quote,
    save for the fact that the values on page 3 are per $1,000 of the face amount coverage
    and the values from the Quote are per $5,000 of the face amount coverage.

[7]

Mr. Alguires position at trial was that he had asked that the Policy
    be specifically designed to ensure that the value of the death benefit grew
    over the course of his life.  He submitted that the Policy provided him with
    immediate $5,000,000 coverage together with inflation protection over the long
    term. According to him, the paid-up values on page 3 of the Policy reflect his
    request for inflation protection.

[8]

Mr. Alguire commenced an action seeking, among other things, an
    order requiring Manulife to honour the terms of the Policy as written 
    particularly on page 3. Manulife took the position that Mr. Alguire never made
    a request for inflation protection. It submitted that the values on page 3 of
    the Policy were clearly created in error. Manulife brought a cross-application
    seeking rectification of the Policy.

[9]

The trial judge dismissed the action after an 18-day trial. He found
    that the values on page 3 were set out in error, and reflected a common
    mistake, as the Policy did not accurately reflect the agreement of the parties.
    He specifically found that Mr. Alguire never requested inflation protection. He
    ordered that the Policy be rectified to reflect the agreement of the parties that
    the paid-up values on page 3 were per $5,000 of the face amount coverage. He also
    rejected Mr. Alguires submission that Manulifes request for rectification was
    barred by the
Limitations Act, 2002
, S.O. 2002, c. 24, Sched. B.

[10]

The
    trial judge ordered substantial indemnity costs against Mr. Alguire in the
    amount of $1,250,000. He found that this was one of those rare instances where
    a partys conduct ought to be chastised by the court through an award of costs
    on a higher scale. The impugned conduct was Mr. Alguires inflation protection submission,
    which the trial judge found lacked any air of reality. He rejected Mr.
    Alguires version of events, and equated the proceedings with gotcha
    litigation.

Issues

[11]

On appeal, Mr. Alguire does not challenge the trial judges credibility
    findings. He focuses on two issues: (i) the trial judge erred in finding that
    rectification was an available remedy; and (ii) even if rectification was
    available on the facts of this case, it was statute-barred by operation of the
Limitations
    Act
. In addition, he seeks leave to appeal the costs award on the basis
    that it is unreasonable and contrary to access to justice considerations. Each
    of these issues is considered below.

Analysis

(a)

Rectification

[12]

Rectification
    is an equitable doctrine that is available when it is clear that the parties
    written agreement does not accord with their actual agreement. In such
    circumstances, a court may rectify the agreement so that it gives effect to the
    parties true intentions:
Canada (Attorney General) v. Fairmont Hotels
,
    2016 SCC 56, [2016] 2 S.C.R. 720, at para. 12.

[13]

In
    the present case, Manulife argued that rectification was necessary to correct a
    common mistake. Such a mistake arises where
the
    parties, subscribe to an instrument under a
common

mistake
    that it accurately records the terms of their antecedent agreement:
Fairmont
, at para. 14. To obtain an order for rectification in
    these circumstances, Manulife was required to show, that the parties had
    reached a prior agreement whose terms are definite and ascertainable; that the
    agreement was still effective when the instrument was executed; that the
    instrument fails to record accurately that prior agreement; and that, if
    rectified as proposed, the instrument would carry out the agreement:
Fairmont
,
at para.
    14.

[14]

On
    appeal, Mr. Alguires primary submission on this issue is that there was an
    insufficient evidentiary basis at trial for concluding that the parties had
    entered into an antecedent agreement. In other words, it was not open to the
    trial judge on the evidentiary record to find that the agreement was definite
    and ascertainable. Accordingly, he argues that the remedy of rectification was
    not available. As part of this argument, Mr. Alguire submits that the trial
    judge erred in finding that Mr. Elias acted as his agent in securing the Policy.

[15]

I
    am unable to give effect to this submission. In my view, there was ample
    evidence to ground the trial judges conclusion that there was an antecedent
    agreement based on the Quote, which was for the issuance of a $5,000,000 key
    man insurance policy with no special provision for inflation protection.  I
    reach this conclusion for the following reasons.

[16]

First,
    this conclusion is consistent with Manulifes internal files, including various
    documents and notations made by its underwriting department that were based on
    a $5,000,000 policy and Mr. Alguires insurance application, which sought coverage
    in that amount. Manulife produced its entire application file, containing
    various documents and forms submitted by Mr. Alguire (through Mr. Elias) and
    reviewed by members of Manulifes underwriting and other processing
    departments. No document produced referenced inflation protection.

[17]

Second,
    the trial judges conclusion is supported by his finding that Mr. Elias
    accepted the Quote on behalf of Mr. Alguire. I see no error in the trial
    judges holding that Mr. Elias was acting as Mr. Alguires agent in securing
    and agreeing to the Quote. The jurisprudence is clear that an insurance agent
    may be a dual agent, acting for both the insured and the insurer:
Gilmore
    Farm Supply Inc. v. Waterloo Mutual Insurance Co.
, [1984] O.J. No. 222
    (H.C.), at paras. 31-32, varied on other grounds, [1984] O.J. No. 2431 (H.C.);
Farrant
    (Litigation Guardian of) v. Low
(1998), 77 A.C.W.S. (3d) 419 (Gen. Div.),
    at para. 49.

[18]

With
    regard to the agency issue, Mr. Alguires appeal counsel, Mr. Griffin, advanced
    a new argument not made to the trial judge that s. 199 of the
Insurance Act
,
    R.S.O. 1980, c. 218, which was in effect at the time the Policy was issued, operates
    as a legal bar to a finding that Mr. Elias acted as Mr. Alguires agent. That
    section provides:

No officer, agent or employee of an insurer and no
    person soliciting insurance, whether or not he is an agent of the insurer,
    shall, to the prejudice of the insured, be deemed to be the agent of the
    insured in respect of any question arising out of a contract.

[19]

I
    am not persuaded that s. 199 or its equivalent in the current
Insurance Act
,
R.S.O. 1990, c. I.8, being s. 222, assist the appellant in the circumstances of
    this case. It cannot be said that in securing the Quote, Mr. Elias was acting
    to the prejudice of Mr. Alguire. To the contrary, he was acting in accordance
    with his instructions. Mr. Elias actions could only be considered prejudicial
    to Mr. Alguire if Mr. Alguires evidence about wanting to secure inflation
    protection was accepted by the trial judge. It was not.

[20]

Third,
    the finding of an antecedent agreement is also consistent with the trial
    judges interpretation of Mr. Alguires affidavit evidence to the effect that
    Mr. Elias presented the Quote before he executed the Policy. Although Mr.
    Alguire submits that the trial judge misinterpreted that evidence, I am of the
    view that the trial judges interpretation was open to him.  By agreeing to the
    Policy, which was supposed to be consistent with the Quote, Mr. Alguire
    ratified Mr. Elias acceptance of the Quote.

[21]

Fourth,
    in considering whether there was sufficient evidence of an antecedent
    agreement, it is important to consider the trial judges rejection of Mr.
    Alguires testimony. There were two competing narratives at trial. Either the
    parties agreed to the terms of the Quote or they agreed to a policy that
    provided inflation protection. It was not Mr. Alguires position that he just
    accepted the Policy as presented without considering the paid-up values or
    their effect. The trial judge, who found that Mr. Alguire never requested inflation
    protection, rejected the inflation protection narrative.  That finding is not
    challenged on appeal. It follows that the true agreement between the parties
    was in accordance with the terms of the Quote.

[22]

In
    summary, because the trial judge found that the Quote was an antecedent
    agreement that contained the definite and ascertainable terms of the parties bargain,
    it was open to him to rectify the Policy to reflect the parties true
    intention.

(b)

Limitations Act

[23]

Mr.
    Alguire argues that rectification is a cause of action, not a defence, and is
    therefore subject to the two-year limitation period in s. 4 of the
Limitations
    Act
. According to Mr. Alguire, the limitation period commenced in 2007
    when an actuary at Manulife discovered the error, and thus rectification should
    not have been granted, as Manulife did not claim that relief until it issued
    its cross-application in 2013. He submits that policy considerations, including
    discouraging insurers from sleeping on their rights and avoiding leaving
    beneficiaries to litigate cases after the insured dies, further support
    dismissing the rectification claim.

[24]

I
    would not give effect to this ground of appeal. I conclude that the rectification
    relief sought by Manulife was not barred by the
Limitations Act
.
To
    properly analyze this ground of appeal, it is necessary to consider a number of
    issues.

[25]

The
    first issue is the nature of the right being asserted by Manulife. It takes the
    position on appeal that it is simply asserting a defence and that accordingly
    rectification is not subject to the
Limitations Act
.
I do not
    agree.

[26]

I
n my view, Manulifes request for rectification is a claim. It is
    more than just a denial of Mr. Alguires claim; it is an independent claim.
    Even if Mr. Alguire had not brought this proceeding, Manulife would have been
    entitled to bring an application seeking rectification of the Policy. Consequently,
    Manulifes request goes beyond a mere defence and qualifies as a claim
for rectification, which is equitable relief:
Fairmont
,
at
    para.12. The
Limitations Act
applies to equitable claims:
McConnell
    v. Huxtable
, 2014 ONCA 86, 118 O.R. (3d) 561, at paras. 48-49.

[27]

The
    next issue is whether Manulife can rely on s. 16(1)(a) of the
Limitations
    Act
, which provides that there is no limitation period in respect of
a proceeding for a declaration if no consequential relief is
    sought.

[28]

In the context of a limitation period analysis, declaratory relief
    should be narrowly construed so as to ensure that s. 16(1)(a) is not used as a
    means to circumvent applicable limitation periods:
Joarcam, LLC v.
    Plains Midstream Canada ULC
,
2013 ABCA 118,
90 Alta. L.R. (5th) 208,
at
    para. 7.

[29]

I conclude that this subsection is unavailable to Manulife in the
    circumstances of this case, as it is seeking consequential relief.  The remedy
    of rectification sought in this case has significant consequences for the
    parties and goes beyond clarifying the nature of a particular obligation. Mr.
    Alguire stands to receive significantly less money as a result of the rectification
    compared to what he argued he was entitled to on the Policys face.

[30]

The
    foregoing leads to the critical issue of when the limitation period for the
    rectification claim began to run. A claim is not discovered until a party
    knows, or reasonably ought to have known, that injury, loss, or damage caused
    or contributed to by an act or omission by the person against whom the claim is
    made has occurred:
Limitations Act
, ss. 5(1)(a)(i)-(iii) and 5(2). In
    this case, Manulifes internal discovery of the error in the Policy occurred in
    2007. Manulife, however, did not seek to rectify the Policy until after Mr. Alguire
    filed his application in 2012. The question thus arises as to when the injury,
    loss, or damage for the rectification claim occurred.

[31]

To
    answer this question regard must be had to the grounds asserted for
    rectification. In the present case, the trial judge determined that
    rectification was appropriate to remedy a common mistake.
On the
    evidence accepted by the trial judge that the mistake was common,  when Manulife
    discovered the error in 2007, it did not know that Mr. Alguire would seek to
    resile from the parties common understanding that the paid-up values were per
    $5,000 of the face amount coverage, not per $1,000 as mistakenly indicated in
    the Policy. In other words, until Mr. Alguire instituted his claim and sought
    to change what the parties had actually agreed to, he had not committed an act
    or omission causing or contributing to Manulifes injury, loss, or damage for
    purposes of the rectification claim.

[32]

As Manulife only knew that injury, loss, or damage occurred when Mr.
    Alguire sought a declaration that the erroneous paid-up values were correct,
    the claim for rectification was not made after the expiry of the limitation
    period and is not statute-barred.

[33]

Finally,
    Mr. Alguire raises policy considerations in support of his submission that the
    claim for rectification is statute-barred.  Those considerations cannot, in the
    circumstances of this case, drive the result.  The
Limitations Act
was
    designed to promote certainty in the analysis of when claims are statute-barred. 
    The task of a reviewing court is to determine the applicable limitation period
    having regard to the legislation. A limitation period analysis is not a laches
    analysis where the courts investigation is driven by the equities of the
    situation.

[34]

In any event, the
Limitations Act
already requires
    parties to act diligently and not sleep on their rights. As noted above, a
    claim is discovered when a party knows,
or reasonably ought to have known
,
    that injury, loss, or damage caused or contributed to by an act or omission by
    the person against whom the claim is made has occurred:
Limitations Act
,
    ss. 5(1)(a)(i)-(iii) and 5(2). The fact that a claim is discovered when either
    a party knows or reasonably ought to have known of the claim means that parties
    cannot sit idly by and must instead act with due diligence in determining if
    they have a claim.
A claim, however, requires an act or omission
    of the person against whom it is made:
Limitations Act
, s. 5(1)(a)(iii). In this case, it is Mr. Alguires resiling from the
    parties intended agreement that grounds the rectification claim. Even though
    Manulife discovered the error in the paid-up values in the Policy in 2007, it
    did not know, and could not reasonably ought to have known, that Mr. Alguire
    would seek to resile from the parties intended agreement at some point in the
    future. Manulife therefore cannot be faulted for failing to act with due
    diligence.

[35]

For
    these reasons, I would reject this ground of appeal.

(c)

Costs Award

[36]

The test for leave to appeal a costs award is stringent. L
eave to appeal
will not be granted, save in obvious cases where the
    party seeking leave convinces the court that there are strong grounds upon
    which the appellate court could find that the judge erred in exercising his
    discretion:
Lauzon v. AXA Insurance (Canada)
,
2013 ONCA
    664, 235 A.C.W.S. (3d) 510, at para. 15;
Brad-Jay Investments Ltd. v.
    Szijjarto

(2006),

218 O.A.C. 315 (C.A.)
,
    at para. 21.

[37]

At
    trial, Manulife submitted that Mr. Alguires conduct was worthy of sanction and
    that it should be awarded its costs of the entire proceeding on a substantial
    indemnity basis. It argued that Mr. Alguires theory of the case was a scam
    to take advantage of a clerical error in the Policy. Further, Manulife
    submitted that Mr. Alguires allegations of a breach of the duty of good faith
    were akin to failed allegations of fraud or other serious misconduct.

[38]

The
    trial judge agreed with Manulife that this case was one of those rare instances
    where a partys conduct ought to be chastised by the court through a costs
    award on a higher scale. He found that Mr. Alguires story lacked any air of
    reality and that his version of events never took place. According to the trial
    judge, his decision went beyond the standard battle of credibility between
    parties.

[39]

In
    determining quantum, the trial judge acknowledged that he must take into account
    what is fair and reasonable, with a view to balancing compensation  for the
    successful party with the goal of fostering access to justice:
Boucher v.
    Public Accountants Council (Ontario)
(2004), 71 O.R. (3d) 291 (C.A.), at
    paras. 37-38. He noted that he should be wary of the negative impacts on access
    to justice that could result from substantial costs awards against individuals
    involved in proceedings against well-funded corporations. The trial judge
    excluded from the costs award the costs of a mid-trial motion brought by Manulife
    that Mr. Alguire successfully resisted. He also found that some of the hourly
    rates sought by Manulifes counsel were unreasonable. The $1,250,000 awarded
    marked a significant reduction from the amount sought in Manulifes bill of
    costs, being $2,270,160.

[40]

In
    my view, there is no basis to interfere with the costs award and accordingly I would
    deny leave to appeal.

[41]

The
    trial judge was entitled to consider Mr. Alguires conduct and determine
    whether it was worthy of sanction:
Davies v. Clarington (Municipality)
,
2009 ONCA 722, 100 O.R. (3d) 66, at para. 28. I see no error in his
    conclusion that this was an exceptional case where elevated costs were
    appropriate. As the trial judge rejected Mr. Alguires version of events, it
    follows that he concluded Mr. Alguire fabricated his testimony to fit his claim
    for the increased paid-up values found on page 3 of the Policy. The awarding of
    costs on a higher scale was therefore not, to use Mr. Griffins phrase, a case
    of piling on, but rather a response to conduct worthy of judicial sanction.

[42]

I
    also do not accept the submission that the costs award will have an adverse
    impact on access to justice. This is not a case of an earnest policyholder
    asserting a claim under an insurance policy in good faith. This is a case where
    Mr. Alguire has been found to have fabricated evidence. Obviously, cases
    brought in bad faith should be discouraged, if for no other reason than they
    waste court resources and delay legitimate cases from being heard. In awarding
    elevated costs, the trial judge sought to send a message that there are
    consequences to such behaviour. In so doing, he was protecting access to
    justice, not eroding it.

[43]

Finally,
    I see no error in the quantum of the costs awarded. The trial judge did not
    rubber stamp Manulifes bill of costs. He reviewed it carefully and made a
    substantial reduction. There is nothing to suggest that the quantum of costs
    awarded was tainted by an error in principle or plainly wrong. There is,
    therefore, no basis for appellate intervention with it.

Disposition

[44]

I
    would dismiss the appeal. The parties may make written submissions regarding
    the costs of the appeal. Manulife shall serve its costs submissions within 10
    days of the release of these reasons. Mr. Alguire shall have 10 days from the
    receipt of Manulifes costs submissions to respond. Manulife shall then have 5
    days to file reply submissions. All submissions shall be filed within 30 days
    of the date of the release of these reasons.

Released: K.F. March 1, 2018

C.W. Hourigan J.A.

I agree. K. Feldman J.A.

I agree. E.A. Cronk


