



COURT OF APPEAL FOR ONTARIO

CITATION: Vlanich v. Typhair, 2016 ONCA 517

DATE: 20160629

DOCKET: C59668

Sharpe, LaForme and van Rensburg JJ.A.

BETWEEN

Kaitland Vlanich, Robert Vlanich, Justin Vlanich,
    Jonathon Vlanich (by his litigation guardian Robert Vlanich), Rachel Vlanich
    (by his litigation guardian Robert Vlanich) and Joshua Sullivan

Plaintiffs (Interveners)

and

Clayton Typhair, 2043063 Ontario Ltd. (c.o.b. as
    Aces Taxi), Sheileena Mallette, Sheila Anne Sarah Mallette, Shirley Carne,
State
    Farm Mutual Automobile Insurance Company

Defendants (Appellant)

and

The Corporation of the
    Township of North-Grenville

Third Party (Respondent)

Chris G. Paliare and Tina H. Lie, for the appellant

Mark Charron and Stephanie Doucet, for the respondent

Lawrence Greenspon and Marisa Victor, for the
    interveners

Heard: April 21, 2016

On appeal from the judgment of Justice Stanley J.
    Kershman of the Superior Court of Justice, dated October 27, 2014, with reasons
    reported at 2014 ONSC 6245.

Sharpe J.A.:

[1]

The
    issue on this appeal is whether a municipality is liable in negligence for losses
    suffered as a result of a collision with a taxi that was inadequately insured
    in violation of the municipalitys taxi licencing bylaw.

A.

FACTS

[2]

Sheileena
    Mallette and Kaitland Vlanich, the plaintiffs and interveners on appeal, were
    injured in a motor vehicle accident involving a taxi owned by the defendant 2043063
    Ontario Ltd., carrying on business as Aces Taxi.

[3]

At
    the time of the accident, Sheileena Mallette was driving a vehicle owned by her
    mother Sheila Mallette, Kaitland Vlanichs aunt. The vehicle was insured by the
    appellant State Farm Mutual Automobile Insurance Company (State Farm). The
    State Farm policy includes a standard OPCF 44R Family Protection Coverage
    endorsement providing coverage if the at-fault motorist is uninsured or underinsured.

[4]

The
    interveners and their family members commenced separate actions to recover
    personal injury damages against Aces Taxi and Vlanich Typhair, the taxi driver.
    They asserted claims under the Family Protection Coverage endorsement and added
    State Farm as a defendant.

[5]

The
    plaintiffs amended their pleadings to add the respondent Corporation of the
    Township of North-Grenville (the Township) as a defendant. The Township had
    enacted a taxi licencing and regulation bylaw (the Bylaw) that required
    licensed taxis to carry a minimum of $1,000,000 in third-party liability
    insurance coverage. Aces Taxi had only $200,000 of coverage at the time of the
    accident. The plaintiffs alleged that the Township negligently failed to
    enforce the Bylaw to ensure that Aces Taxi had the required insurance coverage.
    State Farm brought third-party claims against the Township on the same basis.

[6]

Aces
    Taxi had provided the Townships bylaw enforcement officer with documentary
    proof that it carried the required $1,000,000 liability insurance when it
    applied for and obtained its taxi licence in 2005. The insurer cancelled coverage
    in August 2005 but a new policy was in place for the period August 16, 2005 to
    August 16, 2006. On September 12, 2005, the insurer provided the Township with
    a certificate of insurance indicating that Aces Taxi had $1,000,000 in
    third-party liability coverage.

[7]

On
    January 13, 2006, the insurer notified the Township that, effective January 22,
    2006, the policy was terminated for non-payment of premiums. Aces Taxi had no
    insurance from January 22, 2006 until January 29, 2007.

[8]

Aces
    Taxi completed a taxi licence application on February 6, 2006 containing a
    signed declaration that no information had been withheld and that, if licensed,
    Aces Taxi would comply with all applicable Bylaw provisions.

[9]

The
    Township had only one bylaw enforcement officer. In 2007, the bylaw enforcement
    officer was busy with other duties and, with the approval of his superiors, did
    not process taxi licence applications.

[10]

In January 2008, Aces
    Taxi submitted a renewal application with the standard signed declaration
    stating:

I, the undersigned, attest and certify the truth of all
    statements or representations contained herein. I further attest that I have
    not withheld any information pertinent to this application, and if licensed by
    the Township of North Grenville, agree to abide by the provisions of all
    applicable by-laws.

With respect to the approvals already on file with the
    Township, I hereby declare that there have been no significant changes which
    would affect my viability to hold a Municipal licence.

[11]

With that application,
    Aces Taxi submitted a pink slip for the period January 18, 2008 to February 1,
    2008 issued by the same insurer that had provided $1,000,000 of coverage in
    2005. The pink slip did not indicate the level of coverage, but in fact Aces
    Taxis coverage at the time of the application and on the date of the accident,
    June 19, 2008, was only $200,000.

B.

TRIAL DECISION

[12]

An order was made for
    a modified summary trial of the third-party claims with the outcome binding on
    the parties in the main actions. The interveners did not participate in the
    trial. The trial judge found that, although the Township owed the interveners a
    duty of care, the Township did not fall below the standard of care in enforcing
    the Bylaw.

[13]

The trial judge found
    that the Township had met the standard of care when it issued a licence to Aces
    Taxi in 2005 as a certificate of $1,000,000 coverage had been supplied. He found
    that Aces Taxi had either been untruthful or negligent when declaring that
    there were no significant changes affecting its ability to hold a license after
    ceasing to carry $1,000,000 of insurance coverage.

[14]

The trial judge
    concluded that [w]hile the best practice may have been for the Township to
    obtain proof of the $1,000,000 insurance coverage at the time of
    renewalfailing to do so [was] not unreasonable or in bad faith. He found that
    the Township had relied on other reasonable measures to enforce the bylaw. It
    had requested and obtained pink slips indicating that Aces Taxi was insured and
    was entitled to rely on the signed declarations that there had been no
    significant changes. That, said the trial judge, was sufficient to satisfy the
    standard of care.

C.

PARTIES POSITIONS ON APPEAL

[15]

State Farm appeals,
    arguing that the trial judge erred in finding that the Township did not fall
    below the standard of care.

[16]

The Township argues
    that the trial judges finding that it met the standard of care should not be
    disturbed on appeal. In the alternative, the Township submits that the appeal
    should be dismissed on the ground that the trial judge erred in holding that it
    owed the interveners a private law duty of care.

[17]

The interveners
    support State Farms position and urge this court not only to reverse the trial
    judgment but also to find that the Townships negligence caused their damages.

D.

ISSUES

[18]

This appeal raises the
    following three issues:

(1)

Did the Township owe the interveners a
    private law duty of care?

(2)

Did the trial judge err in finding that
    the Township did not fall below the standard of care?

(3)

Should this court determine that the
    Townships negligence was the cause of the interveners losses?

E.

ANALYSIS

(1)


Did the Township owe the interveners a private law
    duty of care?

[19]

The trial judges
    consideration of duty of care was cursory. He found that the Township had
    enacted the Bylaw to benefit and protect those residents sharing the road with
    taxicabs and that this amounted to evidence of a sufficiently close and
    proximate relationship between the Township residents and the municipality,
    such that the bylaw created a private law duty of care.

[20]

For the following
    reasons, I conclude that the trial judge erred in finding that the Township owed
    the interveners a private law duty of care.

(i)

The Anns/Cooper test

[21]

It is common ground
    that whether a public authority such as the Township owes a private law duty of
    care to an individual or to a class is determined by applying the two-part test
    first announced by the House of Lords in
Anns v. Merton London Borough
    Council
, [1978] A.C. 728, at pp. 751-52, and refined by the Supreme Court
    of Canada in
Cooper v. Hobart
, 2001 SCC 79, [2001] 3 S.C.R. 537, at
    paras. 30-31:

At the first stage of the
Anns
test, two questions
    arise: (1) was the harm that occurred the reasonably foreseeable consequence of
    the defendant's act? and (2) are there reasons, notwithstanding the proximity
    between the parties established in the first part of this test, that tort
    liability should not be recognized here? The proximity analysis involved at the
    first stage of the
Anns
test focuses on factors arising from the
    relationship between the plaintiff and the defendant. These factors include
    questions of policy, in the broad sense of that word. If foreseeability and
    proximity are established at the first stage, a
prima facie
duty of
    care arises. At the second stage of the
Anns
test, the question still
    remains whether there are residual policy considerations outside the
    relationship of the parties that may negative the imposition of a duty of care.

[22]

The Supreme Court went
    on to explain what was meant by proximity, the element necessary to establish
    a duty of care in addition to reasonable foreseeability of harm, at para. 31:

Two things may be said. The first is that "proximity"
    is generally used in the authorities to characterize the type of relationship
    in which a duty of care may arise. The second is that sufficiently proximate
    relationships are identified through the use of categories. The categories are
    not closed and new categories of negligence may be introduced. But generally,
    proximity is established by reference to these categories. This provides
    certainty to the law of negligence, while still permitting it to evolve to meet
    the needs of new circumstances.

[23]

Proximity is
    determined by "looking at expectations, representations, reliance, and the
    property or other interests involved" to "evaluate the closeness of
    the relationship between the plaintiff and the defendant" and by asking
    "whether it is just and fair having regard to that relationship to impose
    a duty of care in law upon the defendant":
Cooper
,
at para. 34.

(ii)

The Prima Facie Duty of Care

(a) Is there a recognized duty of care?

[24]

The first question is
    whether the case falls within or is analogous to one of the categories of cases
    in which the courts have recognized a duty of care:
Cooper
, at para.
    36. If the case fits within a recognized category or an analogous one and
    reasonable foreseeability is established, it is not necessary to proceed to the
    second stage of the
Anns/Cooper
test.

[25]

State Farm relies on
    the negligent inspection of buildings cases but concedes that its claim does
    not fall within a recognized category or an analogous one. Accordingly, to
    succeed, State Farm must establish proximity on the basis of the
Anns/Cooper
test.

(b) Is this a situation in which a new duty of care
    should be recognized?

[26]

The Township does not
    contest that failing to enforce the Bylaws $1,000,000 insurance requirement
    resulted in reasonably foreseeable harm to the interveners due to a motor
    vehicle accident with an underinsured taxi. However, in addition to
    foreseeability, State Farm must show that the Township and the interveners were
    in a relationship of proximity.

[27]

The proximity
    contemplated by the
Anns/Cooper
test requires a sufficient nexus or
    connection between the alleged neglect of the public authority and the risk
    that caused the losses suffered by the interveners.

[28]

If a duty of care
    exists, it must be found in the Townships Bylaw, which creates a relatively
    detailed scheme for the licencing and regulation of taxis, taxi drivers, and
    taxi brokers in North-Grenville: see
Cooper
, at para. 43. Of
    particular relevance to the present case are the following provisions:

5.       CONDITIONS FOR ISSUANCE OF TAXICAB OWNER LICENSE

(1) No license shall be issued to an applicant for a taxicab
    owner license unless and until the License Inspector has been furnished with
    satisfactory proof that:



(d)      the applicant has filed proof of insurance in
    accordance with the requirements of section 9 hereof;



9.       VEHICLE INSURANCE REQUIREMENTS

(1) Prior to the issuance of a taxicab owner license, each
    taxicab owner shall file with the License Inspector proof of insurance in
    respect of each vehicle owned or leased by the taxicab owner in accordance with
    the following minimum requirements:

(a)      coverage for public liability in the amount of not
    less than one million dollars ($1,000,000.00) in respect of death, bodily
    injuries and property damage for damage occasioned by an accident arising out
    of the operation of the vehicle;

(b)      endorsement to provide that the License Inspector
    will be given at least ten (10) days notice in writing of any cancellation,
    expiration or decrease in the amount of coverage provided by the policy below
    the requirement in subsection 9(1).

(2) Where a licenced taxicab owner no longer complies with
    subsection 9(1) hereof, the taxicab owner license issues under this by-law
    shall be deemed to be suspended as of the date of the cessation or decrease of
    the insurance.

[29]

State Farm argues that
    the Bylaw imposes a duty to enforce on the part of the License Inspector and relies
    on the negligent inspection cases including
Kamloops v. Nielsen,
[1984]
    2 S.C.R. 2,
Ingles v. Tutkaluk Construction Ltd.
, 2000 SCC 12, [2000]
    1 S.C.R. 298, and
Mortimer v. Cameron
(1994), 17 O.R. (3d) 1. State
    Farm submits there is a relationship of sufficient proximity because the
    interveners are in the very class of individuals the Bylaw intended to protect;
    namely, residents sharing the road with taxicabs.

[30]

By enacting the Bylaw,
    the Township established a general standard to benefit the public as a whole.
    This is a common feature of legislation and bylaws. Standards are established
    in the general public interest and public authorities have a duty to the public
    at large to see to their enforcement. But public authorities are not liable for
    losses simply because a legislated standard was not enforced: see e.g.
Cooper;
    Kent v. Laverdiere
, 2011 ONSC 5411, 85 C.C.L.T. (3d) 296, at paras. 115
    and 135; and
118143 Ontario Inc. v. City of Mississauga,
2015 ONSC
    3691, 39 M.P.L.R. (5th) 231, at paras. 226-27. The added element of proximity
    must be present.

[31]

Proximity between a
    public authority and an individual member of the public may arise in
    circumstances in which the public authority assumes responsibility for ensuring
    compliance with a standard that is intended to avoid or to reduce a risk of physical
    damage or harm.

[32]

In the inspection
    cases, the public authority is directly implicated in the risk of physical
    damage or harm because it has invited the injured party to rely on an
    inspection, and it has assumed responsibility for avoiding the risk. If the
    public authority fails to inspect as required by the legislated standard, the
    physical damage or harm will occur. The plaintiff relies on the public
    authority to take steps to avoid the risk through reasonable inspection and the
    authoritys obligation to do so is what creates a relationship of proximity
    with the injured party.

[33]

In all three cases
    cited by State Farm, the standard to avoid or to prevent a risk of physical
    damage or harm was set by a building code.
Tutkaluk
involved physical
    damage due to flooding. In
Mortimer
, the plaintiff was rendered
    quadriplegic when an exterior wall gave way causing him to plunge 10 feet. In
Kamloops
,
    the bylaw intended to prevent construction of houses on defective foundations
    and imposed on the Building Inspector a duty to enforce its provisions. The
    Supreme Court permitted recovery for economic loss for a defective foundation that
    was obviously going to have to be repaired since it represented a threat to
    the health and safety of the occupants and where there was no concern about
    indeterminate liability:
Kamloops
, at paras. 88 and 91. Importantly, had
    the health and safety standards been observed in these cases, the physical
    damage and injury would not have occurred.

[34]

Although the
    inspection cases might support a claim for physical damage or harm arising from
    the negligent enforcement of a safety bylaw, State Farm does not allege that
    enforcement of the insurance requirement would have prevented the interveners
    physical injuries. The Townships Bylaw did not set a standard to avoid a risk
    of physical damage or harm resulting from a motor vehicle accident with a taxi.
    Failure to ensure that Aces Taxi complied with the Bylaw was not an opportunity
    lost to prevent the physical harm that occurred.

[35]

State Farms claim is
    quite different. State Farm advances a claim for loss of access to insurance
    monies triggered by the tortious conduct of Aces Taxi and Clayton Typhair. As
    such, the claim is for a purely economic loss: see
DAmato v. Badger
,
    [1996] 2 S.C.R. 1071, at para. 13;
Martel Building Ltd. v. Canada
,
    2000 SCC 60, [2000] 2 S.C.R. 860, at para. 34; and
Design Services Ltd. v.
    Canada
, 2008 SCC 22, 1 S.C.R. 737, at para. 30.

[36]

State Farm has not
    provided any authority for finding that this case falls within one of the five
    recognized categories of economic loss or an analogous one: see
Canadian
    National Railway Co. v. Norsk Pacific Steamship Co
., [1992] 1 S.C.R. 1021,
    at p. 1049; Allen M. Linden and Bruce Feldthusen,
Canadian Tort Law
,
    10th ed (Toronto: LexisNexis, 2015), at pp. 470-71. Although courts have the
    power to recognize novel claims, the suggestion that a licencing authority
    should be liable for economic losses arising from the tortious conduct of
    non-compliant third-party licensees strikes me as extraordinary.

[37]

The interveners make
    the same claim as State Farm but also argue that the Townships failure to
    suspend Aces Taxis licence caused them physical harm. Had the Township
    enforced the Bylaw, the taxi would not have been operating on the day of the
    accident. That claim was not before the trial judge and, in any event, I do not
    think it advances the case for the recognition of a duty of care. The concept
    of proximity articulated in
Cooper
requires a much more immediate and
    direct nexus between the plaintiff and the defendant.

[38]

We were not referred
    to any case holding that a public authority owes a private law duty of care to
    a member of the public not to issue a licence for a regulated activity unless
    the licensee is in compliance with all requirements of the scheme. A claim
    similar to that advanced in this action was rejected in
Lake v. Callison
    Outfitters Ltd.
(1991), 58 B.C.L.R. (2d) 99 (S.C.) (failure to enforce a
    regulation requiring that a guide carry $500,000 in public liability
    insurance).

[39]

A public authority administering
    a licencing scheme owes a general duty to the public at large to ensure
    compliance with the regulatory scheme. However, that general public duty is not
    equivalent to a private law duty of care. Without something more, licencing a
    third party does not create a close and direct relationship capable of giving
    rise to a duty of care between a public authority and an individual member of
    the public who may interact with a licensee.

[40]

The conclusion that
    there is no duty of care on the facts of this case is supported by
Cooper
and
Edwards v. Law Society of Upper Canada
, 2001 SCC 80, [2001] 3
    S.C.R. 562, cases in which the Supreme Court found that the plaintiffs failed
    to establish a private law duty of care.

[41]

In
Cooper
,
    the British Columbia Registrar of Mortgage Brokers had a statutory right to
    license and regulate the activities of mortgage brokers. The plaintiffs, who
    had suffered economic losses investing with a non-compliant mortgage broker,
    argued that the Registrar owed them a private law duty to suspend the broker's
    licence or to notify investors if a mortgage broker was under investigation. In
Edwards
, the Law Society of Upper Canada had the statutory authority
    to license and regulate the activities of lawyers. The plaintiffs, who suffered
    losses allegedly caused by improper use of a lawyers trust account, argued that
    the Law Society, having knowledge of the manner in which the lawyer operated
    his trust account, owed them a private law duty to ensure that the lawyer's
    trust account was operated according to the regulations.

[42]

Arguably the case for
    finding a duty of care was stronger in both cases as the plaintiffs complained
    about a failure to investigate and to control improper behaviour by the licensee,
    not about an improperly granted licence. Yet in both cases, the Supreme Court
    of Canada held that there was not a private law duty of care.

[43]

I cannot accept State
    Farms submission that
Cooper
and
Edwards
are distinguishable
    on the basis that the regulatory bodies were not obligated to suspend the
    licenses by virtue of a specific bylaw. The Supreme Courts conclusions were
    premised on a finding that any duty was owed to the public as a whole rather
    than to individual investors or clients who interacted with the brokers or
    lawyers regulated by the legislation.

[44]

In
Cooper
,
    the Supreme Court noted, at para. 49: Even though to some degree the
    provisions of the Act serve to protect the interests of investors, the overall
    scheme of the Act mandates that the Registrar's duty of care is not owed to
    investors exclusively but to the public as a whole. Similarly in
Edwards
,
    the Supreme Court found, at para. 14: The
Law Society Act
is geared
    for the protection of clients and thereby the public as a whole, it does not
    mean that the Law Society owes a private law duty of care to a member of the
    public who deposits money into a solicitor's trust account.

[45]

As previously
    mentioned, in this case, the Townships duty was a general public duty to
    enforce the licensing scheme for the benefit of the public. I conclude,
    accordingly, that stage one of the
Anns/Cooper
test is not satisfied
    and that there is no
prima facie
duty of care.

(iii)

The Second Stage of the Anns/Cooper Test

(a) Are there residual policy considerations
    sufficient to negate the imposition of a duty of care?

[46]

If I am wrong in my
    analysis of proximity, moving to the second stage of the
Anns/Cooper
test, I would hold that there are residual policy considerations outside the
    relationship of the parties sufficient to negate the imposition of a duty of
    care. The Supreme Court described those considerations in
Cooper
, at
    para. 37:

These [residual policy considerations] are not concerned with
    the relationship between the parties, but with the effect of recognizing a duty
    of care on other legal obligations, the legal system and society more
    generally. Does the law already provide a remedy?  Would recognition
    of the duty of care create the spectre of unlimited liability to an unlimited
    class? Are there other reasons of broad policy that suggest that the duty
    of care should not be recognized?

[47]

The first question is
    whether the law already provides a remedy. The injured plaintiffs have the
    benefit of the standard OPCF 44R Family Protection Coverage endorsement. While
    that endorsement is not imposed as a matter of law, insurers like State Farm
    are legally required to make it available to afford protection against the risk
    of uninsured or underinsured at-fault drivers. The injured plaintiffs have the protection
    of that endorsement and it would not be sound policy to afford State Farm a
    remedy to recoup the loss it agreed to cover.

[48]

The related question
    is whether the burden that would be imposed on the Township if it were found liable
    for negligent enforcement of the licencing Bylaw suggests that a duty of care
    should not be imposed. In this case, liability would not be that of unlimited
    liability to an unlimited class but the burden on small municipalities with
    limited resources could be significant.

[49]

In my view, the
    residual policy considerations militate against the recognition of a duty of
    care in this case.

(2)

Did the trial judge err in finding
    that the Township did not fall below the standard of care?

[50]

Although my conclusion
    with respect to the duty of care is sufficient to dispose of the appeal, for
    the sake of completeness I will also deal with the standard of care.

[51]

State Farm argues that
    the trial judges analysis reveals an error of law in his interpretation of the
    Bylaw. State Farm contends that, properly read, the Bylaw required the Township
    to treat Aces Taxis 2006 and 2008 applications not as renewals but as new
    applications for which proof of $1,000,000 insurance was required. Pursuant to
    s. 9(2) of the Bylaw, Aces Taxis licence was deemed to be suspended when it
    lost its insurance coverage in January 2006. Subsection 9(3) provides that the
    licence shall be re-instated upon proof of compliance with subsection 9(1).
    Subsection 9(1) requires the applicant to provide proof of insurance at the
    minimum level of $1,000,000.

[52]

Although it was not
    argued at trial, State Farm also relies on s. 12 of the Bylaw to bolster this
    argument:

(1)      Every license issued pursuant to this by-law to a
    taxicab driver, taxicab owner or taxicab broker shall, subject to the
    provisions at sections 9, 14 and 15 hereof, be valid for a maximum period of
    one (1) year only, being from January 1
st
to December 31
st
.

(2)      Applications for renewals of licenses must be
    completed and submitted to the License Inspector no later than thirty (30) days
    prior to the expiration of each license.

(3)      Where an application for renewal of a license is not
    submitted to the License Inspector prior to the expiry date of a license, the
    licensee may make application for renewal up to and including the thirtieth day
    after the expiry of the license.

(4)      In the event that the licensee does not renew his or
    her license on or before the thirtieth day after the expiry date of the
    license, the licensee ceases to be a licensee and any application submitted
    shall be considered a new application for licence.

[53]

As no licence was
    issued for 2007, the 2008 application was made well after the expiry of Aces
    Taxis 2006 licence. Consequently, State Farm argues that the trial judge erred
    in treating the 2008 application as a renewal.

[54]

I am unable to accept
    State Farms argument for the following reasons.

[55]

First, I agree with
    the Townships submission that the trial judge was not engaged in an exercise
    of strict statutory interpretation attracting a standard of review of
    correctness.

[56]

Second, I also agree
    that it would be unfair to permit State Farm to shift ground on appeal. The
    issue whether the 2006 and 2008 applications should have been treated as new
    applications rather than renewals was not argued at trial. As noted, no
    reference was made to s. 12 of the Bylaw and State Farm did not challenge the
    characterization of the 2008 application as a renewal at trial. As the issue is
    raised for the first time on appeal, the Township is not in a position to
    provide evidence to explain its treatment of the 2006 and 2008 applications as
    renewals or its treatment of existing licences following the hiatus in 2007.

[57]

Finally, as I have
    noted, the Township did not grant the licence to Aces Taxi without
any
proof of insurance as required by s. 9(1). The issue is whether the evidence of
    insurance was adequate in the circumstances.

[58]

State Farm contends
    that even if the 2006 and 2008 applications were properly treated as renewals,
    the Township fell below the standard of care. The Township knew or should have
    known that Aces Taxis insurance was cancelled in 2006 and it should not have
    relied on signed declarations and pink slips that contained no information as
    to policy limits. State Farm also submits that, not having processed any
    applications in 2007, it was unreasonable for the Township to rely on the
    declaration and pink slips when processing the 2008 application.

[59]

The trial judges
    determination that the Township met the standard of care is a question of mixed
    fact and law that attracts deference on appeal:
Housen v. Nikolaisen
,
    2002 SCC 33, [2002] 2 S.C.R. 235, at para. 37. His reasons indicate that he was
    fully aware of the facts and circumstances relating to Aces Taxis insurance
    coverage, including the fact that the Township is a small municipality with
    limited resources to devote to bylaw enforcement.

[60]

As the trial judge
    noted, this court has recognized that municipalities have discretion in
    determining how to enforce their bylaws provided they act reasonably and in
    good faith:
Foley v. Shamess
, 2008 ONCA 588, 297 D.L.R. (4th) 287, at
    para. 29; see also
Donnell v. Joseph
, 2012 ONCA 240, 94 M.P.L.R. (4th)
    169, at para. 28. Aces Taxi did provide some evidence of insurance in the form
    of the pink slips issued by the same insurer that had originally provided $1,000,000
    of coverage. The bylaw enforcement officer testified that on the basis of the
    pink slips and the signed declaration, and in the light of his personal
    relationship with the owner, he believed that Aces Taxi had the required
    $1,000,000 of coverage.

[61]

The trial judge was
    faced with a difficult judgment call as to whether the Townships practice of
    accepting pink slips and signed declarations was satisfactory proof of the
    required insurance pursuant to ss. 5 and 9 of the Bylaw. He recognized that
    there were shortcomings in the Townships approach and that the best practice
    might well have been to insist upon a certificate of insurance when the taxi
    licence was renewed, but he did not consider the failure to do so to be
    unreasonable or in bad faith. I cannot say that the trial judge committed a
    palpable and overriding error in concluding that, in all of the circumstances,
    the Township acted reasonably and in good faith.

[62]

Accordingly, I would dismiss
    State Farms appeal from the trial judges determination that the Township did
    not fall below the applicable standard of care.

(3)

Should this court determine that the Townships negligence was the cause
    of the interveners losses?

[63]

The interveners ask us
    to deal with the question whether the Townships negligence caused their losses.
    They do so because they wish to claim against the Township any damages exceeding
    the limits of the OPCF 44R Family Protection Coverage endorsement.

[64]

My decision on the issues
    of duty and standard of care is sufficient to dispose of this issue. However, I
    would add these brief comments. The order directing the trial of the third-party
    claims did not provide for the interveners participation at trial. The issue
    of causation was not raised at trial and, in my view, the interveners should
    not be permitted to raise it at this stage. It would be unfair to the Township
    for us to consider the issue in the abstract without the benefit of evidence
    and argument before the trial court. Moreover, without a proper record, I fail
    to see how we could decide the issue on appeal. Finally, as the issue of
    causation was not dealt with at trial, had we allowed State Farms appeal,
    there is nothing in the trial judges reasons that would have prevented the
    interveners from advancing the issue of causation at a new trial.

F.

DISPOSITION

[65]

I would, accordingly,
    dismiss the appeal with costs to the Township fixed at $12,500 inclusive of
    disbursements and taxes, payable by State Farm. The interveners and the
    Township agree that the costs of the three preliminary motions should follow
    the outcome of the appeal and accordingly, I would order the interveners to pay
    those costs to the Township, fixed at $5,000 inclusive of disbursements and
    taxes.

Released: June 29, 2016

Robert J. Sharpe
    J.A.

I agree H.S. LaForme
    J.A.

I agree K. van
    Rensburg J.A.


