



COURT OF APPEAL FOR ONTARIO

CITATION: Kozel v. The Personal Insurance
    Company, 2014 ONCA 130

DATE: 20140219

DOCKET: C57167

Rosenberg, MacPherson and LaForme JJ.A.

BETWEEN

Barbara Kozel

Respondent

and

The Personal Insurance Company

Appellant

Todd J. McCarthy, for the appellant

David A. Zuber, for the respondent

Heard: January 8, 2014

On appeal from the judgment of Justice T.M. Wood of the
    Superior Court of Justice, dated May 9, 2013, with reasons reported at 2013
    ONSC 2670.

H.S. LaForme J.A.:

I. INTRODUCTION

[1]

In February 2012, the respondent severely injured a motorcyclist in an
    automobile accident in St. Petersburg, Florida. At the time of the accident,
    the respondent was driving with an expired license. As a result, the respondent
    was in breach of statutory condition 4(1) of her insurance policy, and the
    appellant insurance company advised her of a possible denial of personal injury
    coverage. In the meantime, the injured motorcyclist commenced a tort action
    against the respondent in Florida. The respondent brought an application
    seeking a declaration that the appellant owes a duty to indemnify her and
    defend her in a third-party action under her contract of insurance.

[2]

The application judge ordered that the appellant has both a duty to
    defend and a duty to indemnify the respondent under her motor vehicle liability
    insurance policy with respect to the action brought against her. The order
    included the requirement that the appellant reimburse the respondent for all
    costs incurred by her in defending the Florida action. The insurance company
    appeals his order.

II. BACKGROUND

[3]

In Ontario, drivers licences must be renewed every five years by the
    holders birthday. Motor vehicle licence plate stickers must be renewed
    annually, also by the vehicle owners birthday. The respondents birthday is
    October 7, and both her licence plate stickers and drivers licence were to
    expire on October 7, 2011.

[4]

Sometime in August 2011, the respondent received an envelope in the mail
    from the Ontario Ministry of Transportation. She placed the envelope in her
    china cabinet and did not open it. On September 24, 2011, the respondent was
    taking possession of a new automobile she had purchased and brought the
    envelope with her to the car dealership. She believes she gave the envelope
    pertaining to licence plate sticker renewal to the dealership to enable it to
    licence the new car. She remembers opening the envelope but does not know
    whether it also contained documentation pertaining to the renewal of her
    drivers licence.

[5]

On February 16, 2012, the respondent was involved in an accident with
    Arthur Grimes, a motorcyclist, in St. Petersburg, Florida. She was charged in
    Florida with driving while having an expired licence. That charge was
    subsequently either dismissed or withdrawn. According to the application judge,
    this [a]pparently  occurred because of a provision in the Florida legislation
    granting a six month grace period before charges are laid for expired licences.
    Grimes subsequently brought a tort action in Florida against the respondent,
    seeking damages for his injuries.

[6]

At the time of the accident, the respondents drivers license had been
    expired for just over four months. On February 19, 2012, three days after the
    accident, the respondent returned to Canada and renewed her licence without any
    difficulty.

[7]

The application judge did not agree with the insurer that the respondent
    was not authorized to drive at the time of the accident. He found that, because
    the offence of driving without a valid license is one of strict rather than
    absolute liability, a due diligence defence was available to the respondent. After
    considering the evidence before him, the application judge held that the
    respondent exercised sufficient diligence and was therefore not in breach of
    statutory condition 4(1). As he summarized it at para. 28 of his reasons:
    While the [respondent]s actions do not amount to the perfect diligence of the
    ideal citizen they are a far cry from  complete passivity.

[8]

Apart from granting the respondents application on the basis of due
    diligence, the application judge went on to hold that the respondent was not
    entitled to relief from forfeiture under s. 129 of the
Insurance Act
,
    R.S.O. 1990, c. I.8, because that provision pertains to imperfect compliance
    with the terms of a policy relating to actions taken or not taken after a loss
    has occurred. Going further, he held that the respondent also could not obtain
    relief from forfeiture under s. 98 of the
Courts of Justice Act
,
R.S.O. 1990, c. C.43 (the 
CJA
),
because clause 4(1) is a fundamental term or
    condition precedent of the policy.

[9]

The application judge also rejected the respondents arguments that she
    was not in breach of her policy because she was authorized to drive at the time
    of the accident under Florida law, and that the insurance company was estopped
    from denying personal injury coverage because of its payment of the
    respondents property damage claim.

III. THE ISSUES ON APPEAL

[10]

There
    are two issues on appeal. The first issue is whether or not the respondent, at
    the time of the accident, was in breach of her insurance policy. That is, was
    the respondent entitled to the defence of due diligence? The policy condition
    engaged is statutory condition 4(1) of
Statutory Conditions  Automobile
    Insurance
, O. Reg. 777/93, enacted pursuant to the
Insurance Act
. This
    statutory condition provides that:

The insured shall not drive or operate or permit any other
    person to drive or operate the automobile unless the insured or other person is
    authorized by law to drive or operate it.

[11]

The
    second issue is whether the respondent is entitled to relief from forfeiture under
    s. 98 of the
CJA
.

[12]

Appellants
    counsel asserted in oral argument that the respondents submissions on the s.
    98 issue are an effective cross-appeal. I reject this characterization of the
    respondents submissions. A respondent must file a cross-appeal if he or she
    seeks to set aside or vary the order appealed from, or if he or she will seek,
    if the appeal is allowed, other relief or a different disposition than the
    order appealed from:
Rules of Civil Procedure
, R.R.O. 1990, Reg. 194,
    r. 61.07(1). The respondent here sought none of the above, and her
    submissions on s. 98 fall within the proper scope of this appeal.

[13]

As
    I will explain, I would dismiss the appeal. My reasons for upholding the
    application judges order, however, differ from those he gave. While I disagree
    that this is a case in which the defence of due diligence is available to the
    respondent, I conclude that she is entitled to relief from forfeiture.

IV. ANALYSIS

(1)

Due diligence

[14]

The
    appellant takes the position that the application judge erred in making
    findings of fact based on evidence that was irrelevant and inferences that were
    incorrect and improper. It says that while deference is owed to a judges
    findings of fact, this court should interfere in this case because the
    assessment of the facts upon which the legal conclusions are founded
    constituted an error of law.

[15]

For
    purposes of this appeal, the appellant accepts that the application judge was
    correct in finding that the offence of driving without a valid license is one
    of strict liability for which a due diligence defence is available.

[16]

The
    Supreme Court of Canada discussed the circumstances in which a due diligence
    defence is available in
Lévis (City) v. Tétrault
, 2006 SCC 12, [2006]
    1 S.C.R. 420, at paras. 15 and 30:

The defence will be available if the accused reasonably believed
    in a mistaken set of facts which, if true, would render the act or omission
    innocent, or if he took all reasonable steps to avoid the particular event.



The concept of diligence is based on the acceptance of a
    citizen's civic duty to take action to find out what his or her obligations
    are. Passive ignorance is not a valid defence.

[17]

The
    application judge in this case relied on this courts reasoning in
Tut v.
    RBC General Insurance Co.
,
2011 ONCA 644, 107 O.R. (3d) 481
,
when deciding in favour of the respondent. At
    para. 27 of his reasons, he found that:

The events on [September 24, 2011] caused [the respondent] to
    make a mistake. She was rushed and focused on providing the dealership with the
    ministry documentation it would need to get current stickers for her new car.
    Time was running short and she admits that she may well not have noticed
    additional documentation for her drivers licence renewal.

[18]

The
    application judge then found, at para. 28, that:

Because the [respondent] was focused on renewing her plate
    stickers she wrongly assumed that this was all that the envelope contained. She
    took active steps to ensure that the duty she thought the envelope signalled
    was performed. She provided a believable explanation for her lack of perfect
    diligence on September 24
th
when she picked up her car.

[19]

The
    application judge concluded that the respondent had not demonstrated complete
    passivity in the handling of her affairs and did not deliberately place herself
    in harm's way. He therefore found that the respondent was not in breach of statutory
    condition 4(1).

[20]

I
    disagree with the application judge. In my view, he misapprehended the evidence,
    and his decision is not entitled to deference on review by this court.

[21]

The availability of the due diligence defence, as the Supreme Court
    explained in
Lévis, supra
, depends on the circumstances surrounding
    the relevant offence. That is, an individual can make out this defence if he or
    she can show a reasonable misapprehension of facts or reasonable care
with
    respect to the offence with which he or she is charged
. The respondent
    here, therefore, must show that she acted reasonably with regard to the expiry
    of her drivers license.

[22]

The
    respondent, at the time of the accident, was 77 years of age. She had held a
    drivers licence since she was 17 or 18 and had always renewed it on time. Yet,
    on this occasion there is no evidence that she did anything to inquire about or
    even consider her drivers license renewal. The absence of reasonable care by
    the respondent distinguishes this case from
Tut
, in which the court
    considered  and found  due diligence as it related to the offence charged.

[23]

On
    the relevant facts as found by the application judge, the respondent did no
    more than state that she received an envelope from the Ministry of
    Transportation, which she merely placed in a china cabinet and did not open.
    Weeks later she opened the envelope while purchasing a new automobile, but only
    remembers seeing information pertaining to the plate stickers, which she gave
    to the dealer. She produced her drivers licence for the dealership to copy,
    and later at a lawyers office for identification purposes, but she did not
    examine it on either occasion.

[24]

The
    only additional potentially relevant facts to the due diligence defence, which
    were mentioned neither by the application judge nor by the parties in their
    factums, pertain to health problems experienced by the respondents sons around
    the time her license expired.

[25]

The
    respondent describes that, in the fall of 2011, she was dealing with the poor
    health of her two sons. One of her sons had liver and back problems, and the
    other was in [and] out of hospital for appointments and assessments because of
    issues relating to bleeding bowels. It was therefore open to the respondent to
    argue that, in light of these circumstances, the care she took to avoid driving
    with an expired license was reasonable.

[26]

The
    difficulty with this evidence is that it lacks specificity. That is, the precise
    period of time during which these events took place and the actual impact they
    had on her is not addressed. It is also telling to me that no mention was made of
    the evidence in the decision below or in the parties factums. I doubt that the
    respondents preoccupation with her sons health issues rose to a level where
    it would excuse her failure to take steps to renew her drivers license, and am
    therefore not persuaded that this evidence is strong enough to mount a due
    diligence defence.

[27]

At
    best, the respondents evidence in this case demonstrates that she took all
    reasonable care in connection with her vehicle plate renewal
.
It does not
    show that she acted with reasonable care or operated under a reasonable
    misapprehension of the relevant facts in connection with her drivers licence.
    I would accept the appellants position on this ground of appeal.

(2)

Relief from forfeiture

[28]

Relief
    from forfeiture simply refers to the power of a court to protect a person
    against the loss of an interest or a right because of a failure to perform a
    covenant or condition in an agreement or contract.

[29]

The
    remedy of relief against forfeiture is equitable in nature and purely
    discretionary:
Saskatchewan River Bungalows Ltd. v. Maritime Life Assurance
    Co
.
, [1994] 2 S.C.R. 490, at p. 504. Its origin and purpose was
    briefly reviewed by Doherty J.A. in
Ontario (Attorney General) v. 8477
    Darlington Crescent
, 2011 ONCA 363, 333 D.L.R. (4th) 326, at paras. 86-87:

Courts of equity have always had the power to relieve against
    the forfeiture of property consequent upon a breach of contract. That power is
    now expressed in various statutes dealing with specific kinds of contracts
    (e.g., contracts of insurance, leases) and has been given more general
    expression in s. 98 of the [
CJA
].  The power is predicated on the
    existence of circumstances in which enforcing a contractual right of
    forfeiture, although consistent with the terms of the contract, visits an
    inequitable consequence on the party that breached the contract. Relief from
    forfeiture is particularly appropriate where the interests of the party seeking
    enforcement by forfeiture can be fully vindicated without resort to forfeiture.
    Relief from forfeiture is granted sparingly and the party seeking the relief
    bears the onus of making the case for it. [Citations omitted.]

[30]

In
    insurance cases, the purpose of the remedy is to prevent hardship to beneficiaries
    where there has been a failure to comply with a condition for receipt of
    insurance proceeds and where leniency in respect of strict compliance with the
    condition will not result in prejudice to the insurer:
Falk Bros.
    Industries Ltd. v. Elance Steel Fabricating Co
., [1989] 2 S.C.R. 778, at
    p. 783.

[31]

In
    exercising its discretion to grant relief from forfeiture, a court must
    consider three factors: (i) the conduct of the applicant, (ii) the gravity of
    the breach, and (iii) the disparity between the value of the property forfeited
    and the damage caused by the breach:
Saskatchewan River Bungalows
, at
    p. 504.

[32]

This
    appeal considers statutory provisions found in s. 98 of the
CJA
and s.
    129 of the
Insurance Act
. Under s. 98, A court may grant relief
    against penalties and forfeitures, on such terms as to compensation or
    otherwise as are considered just. In contrast to this broad language, s. 129
    provides:

Where there has been
imperfect compliance with a statutory
    condition

as to the proof of loss
to be given by the insured or
    other matter or thing required to be done or omitted by the insured with
    respect to the loss and a consequent forfeiture or avoidance of the insurance
    in whole or in part and the court considers it inequitable that the insurance
    should be forfeited or avoided on that ground, the court may relieve against
    the forfeiture or avoidance on such terms as it considers just. [Emphasis added.]

[33]

In
Stuart v. Hutchins
(1998), 40 O.R. (3d) 321 (C.A.),
    this court addressed the scope of both of these statutory provisions. Citing
Falk
    Bros
.
, Moldaver J.A. (as he then was) explained, at pp. 327-28,
    that where an insureds breach constitutes imperfect compliance with a policy
    term, relief under s. 129 remains available. However, a breach that consists of
    non-compliance with a condition precedent to coverage forecloses the
    availability of relief against forfeiture under s. 129. Without deciding
    whether s. 98 could be invoked in the circumstances of the case, Moldaver J.A. rejected,
    at p. 333, the possibility of its application on the same grounds: namely, that
    even if s. 98 was available, its reach could not extend beyond that of s. 129
    to relieve against forfeiture in the case of a breach amounting to
    non-compliance with a condition precedent to coverage.

[34]

Courts have interpreted
Stuart
as having decided that s.
    98 has no application to instances of non-compliance with a condition precedent
.
[1]
Indeed, in this case, the application judge based his holding that s. 98 relief
    was not available solely on the fact that the respondents breach here is one
    of non-compliance with a condition precedent to coverage.
At para. 43 of his reasons, he noted that
Stuart

is authority for the
    principle that relief cannot be granted under the powers conferred by
s. 98
for a breach of a
fundamental term or condition
    precedent
of a contract.

[35]

The
    respondent properly concedes that s. 129 of the
Insurance Act

cannot
    provide relief here. That provision does not give judges a broad discretion to
    "grant relief from forfeiture" generally where the conditions of an
    insurance policy are breached. Rather, the court's power under
s. 129
is a narrow one
    pertaining only to those policy conditions  statutory or contractual  that
    relate to proof of loss. It does not apply generally to all policy conditions:
Williams
    v. York Fire & Casualty Insurance Co
.
, 2007 ONCA 479, at paras.
    33 and 35.

[36]

The
    respondent argues that this might be the appropriate case in which to grant
    relief under s. 98 of the
CJA
. She argues that holding for the
    insurance company would expose her personal assets and allow the company to
    enjoy a large and unwarranted windfall.

[37]

The
    brief submissions made by the appellant on the merits of the application of s.
    98 were specific: authorization to drive is a condition precedent to coverage.
    That is, as the law is currently drafted, statutory condition 4(1) is a
    fundamental provision of an automobile insurance contract. And, until the
    legislature says otherwise, this court cannot grant relief against forfeiture.
    There was no explanation as to why statutory condition 4(1) is fundamental,
    nor was this court directed to any authorities in support of this argument.

[38]

In
    light of this and the current state of the law described above in
Stuart

and
Williams
, I propose to examine whether the breach here  the
    failure to hold a valid drivers license, in violation of statutory condition
    4(1)  constitutes imperfect compliance with a policy term, rather than
    non-compliance with a condition precedent, and whether the respondent may be
    entitled to relief under s. 98.

[39]

There
    are two threshold questions to resolve before undertaking the three-part
    analysis in
Saskatchewan River Bungalows
to determine whether the
    court should exercise its discretion to grant relief from forfeiture. First,
    does the breach in this case constitute imperfect compliance with a policy term
    or non-compliance with a condition precedent to coverage? Second, is relief
    available under s. 98 of the
CJA
despite the existence of a specific
    relief against forfeiture provision in the
Insurance Act
?

(a)

Does the breach here constitute imperfect compliance with a
    policy term or non-compliance with a condition precedent to coverage?

[40]

The
    difference between imperfect compliance and non-compliance is crucial for the
    purposes of the relief against forfeiture analysis. If the respondents breach
    of statutory condition is 4(1) is imperfect compliance with a policy term,
    relief against forfeiture under s. 98 of the
CJA
is available. If,
    however, the breach amounts to non-compliance with a condition precedent, the
    court cannot award relief under s. 98:
Stuart
, at p. 333.

[41]

As
    McLachlin J. (as she then was) explained in
Falk Bros
.
, at p.
    784, the distinction between imperfect compliance and non-compliance is akin
    to the distinction between breach of a term of the contract and breach of a
    condition precedent. However, in the context of relief from forfeiture, the
    imperfect compliance/non-compliance analysis does not engage with the contracts
    jurisprudence on conditions precedent. Rather, the focus is on whether the
    breach of the term is serious or substantial. Where the term is incidental, its
    breach is deemed to be imperfect compliance; where the provision is fundamental
    or integral, its breach is cast as non-compliance with a condition precedent.

[42]

In
Falk Bros.
, the issue was whether the claimants failure to give
    notice of his claim to the insurer within the prescribed period precluded an
    award of relief against forfeiture under s. 109 of the
Saskatchewan
    Insurance Act
, R.S.S. 1978, c. S-26
.
    Reviewing the case law, McLachlin J. observed, at pp. 784-85, that the failure
    to give timely notice of a claim has been viewed as imperfect compliance, while
    failure to institute an action within the prescribed time period has been
    viewed as non-compliance, or breach of a condition precedent.

[43]

McLachlin
    J. concluded that a failure to give notice of a claim within the relevant
    period is imperfect compliance, firstly because it is a less serious breach
    than failing to bring an action in a timely manner, and secondly because it
    pertains to proof of loss. In my view, this second reason has no application to
    our case, because unlike s. 109 of the
Saskatchewan Insurance Act
, s.
    98 of the
CJA

does not limit relief to cases of imperfect compliance
    with a condition as to the proof of loss.

[44]

Likewise,
    in
Stuart
, the import of the relevant contract provision  and
    accordingly, the scale of the breach  was an important factor in determining
    whether the breach constituted imperfect compliance or non-compliance with a
    condition precedent. At p. 332, Moldaver J.A. held that the failure of the
    broker to report the claim within the policy period amounted to non-compliance
    with a condition precedent to coverage, rather than imperfect compliance with a
    term of the policy. He stressed the conceptual difference between occurrence
    policies and claims-made and reported policies. In these latter policies, the
    notice provision is integral.

[45]

Finally,
    this court addressed the imperfect compliance/non-compliance distinction in
Canadian
    Newspapers Co. v. Kansa General Insurance Co
.
(1996),30 O.R. (3d)
    257
.
In that case, a newspaper publisher entered into a corporate insurance policy
    with the insurer, which provided, among other things, that the publisher had a
    duty to co-operate with the insurer. This court held that the publisher could
    not succeed on its claim for relief against forfeiture because its breach of
    the duty of co-operation was substantial. In doing so, Weiler J.A. made the
    following observations, at p. 281:

In
Travellers Indemnity Co. v. Sumner Co
.
[(1960),
    27 D.L.R. (2d) 562 (N.B. C.A.)], the court held that, although a breach of the
    insured's duty of co-operation could qualify as imperfect compliance, an
    insurer could deny coverage or refuse to defend if the lack of co-operation was
    substantial. West J.A. held, at p. 565, that [n]o inconsequential or
    trifling breach of such obligation should serve to exonerate the insurer from
    his contractual liabilities under the policy. The liability in that case arose
    out of a motor vehicle accident. The breach complained of by the insurer was
    the insured's failure to promptly notify the insurer of a drink the insured had
    taken shortly before the accident. The insured informed the insurer of this
    drink before he was examined for discovery and, at trial, the judge found that
    the insured was not intoxicated at the time of the accident. The court of
    appeal held that this inconsequential breach should not serve to allow the
    insurer to refuse to indemnify the insured.

The breach complained of in the present appeal is a
    substantial breach of the insured's duty of co-operation and of the insurer's
    right to defend the action. [The publisher] failed to report on the progress of
    the litigation, to convey offers to settle, to inform [the insurer] of the
    theory of the defence and to advise that the action had proceeded to trial
    until after the trial had begun. This breach is more than mere imperfect
    compliance, it is a substantial breach of the policy and on this basis alone
    [the publisher] is not entitled to claim relief from forfeiture.

[46]

In
Colliers McClocklin Real Estate Corp. v. Lloyds Underwriters
, 2004
    SKCA 66, 10 C.C.L.I. (4th) 1, at para. 28, the Saskatchewan Court of Appeal
    followed
Canadian Newspapers
, emphasizing that the proper inquiry is
    whether the relevant contract provision is a fundamental term, and whether its
    breach is a fundamental breach.

[47]

In
    light of the above, my view is that in this case, the respondents breach of
    statutory condition 4(1) is not non-compliance with a condition precedent.
    There are no grounds to believe that 4(1) is a fundamental term or that the
    respondents breach of it was of a fundamental nature. While the provision is a
    condition in name, the appellant pointed to no language in the contract stressing
    that the insurance coverage was conditioned on the claimant being authorized to
    drive. This fact renders our case different than the facts in
Stuart
,
    where plain language in the contract identified the relevant contractual term
    as a condition precedent. Neither was the respondents breach here a
    fundamental one. Had the respondents violation of statutory condition 4(1)
    been more substantial  for example, if she had been drinking heavily prior to
    driving  she may have been barred from obtaining relief from forfeiture.  This
    case, however, involves a relatively minor breach.

[48]

Going
    forward, this courts strict holding in
Stuart
should be applied
    narrowly. In
Marche v. Halifax Insurance Co
.
, 2005 SCC 6,
    [2005] 1 S.C.R. 47, the Supreme Court decided that s. 171 of the Nova Scotia
Insurance
    Act
, R.S.N.S. 1989, c. 231, which states that a policy condition is not
    binding on the insured if a court finds it unjust or unreasonable, extends to
    statutory conditions. Citing the decision in
Falk Bros
.
,
    McLachlin C.J. reasoned that s. 171s remedial purpose warranted this broad
    interpretation.

[49]

Plainly,
Marche
addressed the interpretation of a different statute, and its
    holding is not controlling of the case before us. Nonetheless,
Marche
s
    broad interpretive approach indicates that courts should give remedial
    provisions like s. 98 a wide scope to provide relief where the result would be
    otherwise inequitable or unjust.

[50]

In
    light of
Marche
, I believe the decision in
Stuart
should

be
    given a narrow application. A court should find that an insureds breach
    constitutes noncompliance with a condition precedent only in rare cases where
    the breach is substantial and prejudices the insurer. In all other instances,
    the breach will be deemed imperfect compliance, and relief against forfeiture
    will be available.

[51]

This
    holding does not upset the balance in the existing relief against forfeiture
    jurisprudence, because an insured must still make three showings  that his or
    her conduct was reasonable, that the breach was not grave, and that there is a
    disparity between the value of the property forfeited and the damage caused by
    the breach  in order to prevail.

(b)

Is relief available under s. 98 in insurance cases?

[52]

The
    remaining question of law is whether the relief against forfeiture provision in
    s. 98 of the
CJA
applies to contracts regulated by the
Insurance
    Act
. There is little jurisprudence on this issue, and it appears to be
    unsettled as to whether the relief provision in s. 98 is operative in the
    insurance realm, given the existence of s. 129 of the
Insurance Act
. In
    my view, it is.

[53]

The
    Supreme Court addressed equitable jurisdiction in the insurance context in
Saskatchewan
    River Bungalows Ltd. v. Maritime Life Assurance Co
.
,
supra
. 
    The Court rejected the appellants argument that Albertas
Insurance Act
,
    R.S.A. 1980, c. I-5 occupied the field of equitable relief and precluded
    application of the
Judicature Act
, R.S.A. 1980, c. J-1 (the equivalent
    of the
CJA
) to life insurance contracts.  The Court explained at p. 505
    that the
Insurance Act
does not codify the whole law of insurance;
    rather, it merely imposes minimum standards on the industry.

[54]

It
    is worth repeating that courts are to interpret relief from forfeiture
    provisions broadly. In
Falk Bros
.
, McLachlin J. noted at pp.
    782-83, that:

The first consideration is that s. 109 is a remedial section
    and as such should be given an appropriately broad interpretation. In

Minto
    Construction Ltd. v. Gerling Global General Insurance Co.
(1978), 86
    D.L.R. (3d) 147, citing

Canadian Equipment Sales & Service Co. v.
    Continental Insurance Co
.
(1975), 59 D.L.R. (3d) 333 (Ont. C.A.),
    MacKinnon J.A. noted at p. 151 that the equivalent Ontario section is an
    ameliorating clause, and [that] it should be given a fair, large and liberal
    interpretation.

[55]

While
    these comments relate to relief from forfeiture provisions in Saskatchewan and
    Ontarios provincial insurance statutes, s. 98 is no different in that it too
    is a remedial section and merits a correspondingly broad interpretation.

[56]

I
    endorse the view expressed by Brown J. in
Sage v. Peel Mutual Insurance Co
.
(2005), 32 C.C.L.I. (4th) 110 (Ont. S.C.), a case discussed by the
    application judge. In
Sage
, the court granted relief under s. 98 to
    the plaintiffs who were denied coverage after failing to pay an insurance
    premium prior to an automobile accident. While recognizing that
Saskatchewan
    River
left the issue open, Brown J. stated, at p. 118:

In these limited circumstances I am satisfied that the general
    provisions of s. 98 of the [
CJA
] can provide the statutory basis for
    granting relief from forfeiture notwithstanding there is a specific relief from
    forfeiture provision in the
Insurance Act
.

[57]

Like
    Brown J., I would hold that the relief from forfeiture provision in s. 98 of
    the
CJA
applies to contracts regulated by the
Insurance Act
.
    This holding is consistent with the Supreme Courts finding in
Saskatchewan
    River Bungalows
that an insurance statute does not occupy the field of
    equitable relief, and that statutory standards operate as a floor, rather than
    a ceiling, for the insurance industry.

[58]

As
    the application judge explained, s. 129 of the
Insurance Act
is
    restricted to instances of imperfect compliance with terms of a policy
after

a loss has occurred; it has no application to cases where the breach
    occurred before the loss. As a consequence, a person who loses coverage because
    he or she was driving with an expired license, or because he or she failed to
    make a premium payment, see
Sage
, cannot rely on s. 129 for relief. That
    s. 129 leaves individuals like these  who have acted in good faith and whose
    breaches are relatively minor  without a remedy gives force to the argument
    that s. 98 should be operative in insurance cases. Thus, in the absence of
    clear legislative intent indicating that s. 129 of the
Insurance Act
applies to the exclusion of s. 98 of the
CJA
, I would hold that the
    latter provision is available as an avenue of relief for contracts governed by
    the
Insurance Act
.

(c)

Application of relief from forfeiture factors in this case

[59]

Having
    resolved the two threshold questions in the respondents favour, It remains to
    be decided whether she is entitled to relief against forfeiture. As noted
    above, the relief against forfeiture analysis is informed by three factors: (i)
    the conduct of the applicant, (ii) the gravity of the breach, and (iii) the disparity
    between the value of the property forfeited and the damage caused by the
    breach:
Saskatchewan River Bungalows
, at p. 504.

[60]

The
    first factor focuses on the reasonableness of the breaching partys conduct. It
    might seem that a finding that the respondent acted reasonably here would be
    foreclosed by my holding that the respondent did not act with all reasonable
    care and therefore cannot make out a due diligence defence. However, this is
    not necessarily so, because the reasonableness inquiry in the relief against
    forfeiture analysis is a much broader one.

[61]

As
    Doherty J.A. explained in
8477 Darlington Crescent
, at para. 89, the
    first factor of the analysis requires an examination of the reasonableness of
    the breaching partys conduct
as
it relates to all facets of the
    contractual relationship
, including the breach in issue and the
    aftermath of the breach (emphasis added). The scope of the reasonableness
    analysis was also discussed by Osborne J.A. in
Williams Estate v. Paul
    Revere Life Insurance Co.
(1997)
,
    34 O.R. (3d) 161,

at p. 175:

The reasonableness test requires consideration of the nature of
    the breach, what caused it and what, if anything, the insured attempted to do
    about it. All of the circumstances, including those that go to explain the act
    or omission that caused the lapse (forfeiture) of the policy, should be taken
    into account. It is only by considering the relevant background that the
    reasonableness of the insured's conduct can be realistically considered.

[62]

In my view, when all facets of the contractual relationship
    between the parties are taken into account, especially with the relevant
    background, the respondent in this case acted reasonably. Consider that, up
    until the respondents birthday on October 7, 2011, her drivers license was
    valid, and as soon as she discovered that her license had expired she sought to
    renew it and had no difficulty doing so.
Moreover,
    the respondent always paid her premiums in a timely manner and acted in good
    faith on all occasions.

[63]

The
    cases in which courts have found that a breaching party failed to act
    reasonably involve conduct far removed from the respondents actions here. For
    example, in
Day Estate v. Pandurevic
, 2008 ONCA 266, 61 C.C.L.I. (4th)
    50, the court found at para. 4 that the respondent could not obtain s. 98
    relief even though he had no knowledge that his license was suspended. The
    court emphasized the fact that the respondents license had been suspended
    twice before, and that on the day of the accident he picked up two letters from
    the Ministry of Transportation and continued driving without reading them. To
    the court in
Day Estate
, the facts indicated that the respondent acted
    with wilful blindness or recklessness.

[64]

In

Williams
,
supra
, the court held at p. 176 that the
    appellant did not qualify for relief under s. 98 because his failure to pay his
    premiums in a timely fashion occurred due to his ongoing negligence and general
    inability to keep track of his personal finances.

[65]

Finally,
    in
Saskatchewan River Bungalows
, the Supreme Court found, at p. 504,
    that the respondents did not act reasonably because, among other things, they
    learned that payment of a premium was nine months overdue but did not tender a
    replacement cheque until three months later.

[66]

In
    short, I have no doubt that, for the purposes of the relief against forfeiture
    analysis, the respondents conduct here was reasonable.

[67]

The
    second factor is the gravity of the breach. This inquiry looks at both the
    nature of the breach itself and the impact of that breach on the contractual
    rights of the other party:
8477 Darlington Crescent
, at para. 91. If,
    for example, the forfeiture provision operated as a means of securing the
    payment required under a lease, the fact that the breaching party had paid all
    the amounts owing could obviate the need to resort to forfeiture and support a
    claim for relief
.

[68]

This
    second factor has received less judicial consideration than the first, partly
    because courts often end the analysis once it has been determined that the
    breaching party failed to act reasonably. One might argue that in this case,
    the breach was serious because the license had been expired for over four
    months at the time of the accident. However, the breach had no impact on the
    respondents ability to drive safely or on the contractual rights of the
    insurance company. While the purpose of the forfeiture provision here was not a
    means of securing payment, which is typically a ground for finding this factor
    fulfilled,
[2]
the breach here was by no means grave.

[69]

The
    third factor is the disparity between the value of the property forfeited and
    the damage caused by the breach. This factor entails a kind of proportionality
    analysis:
8477 Darlington Crescent
, at para. 92. In an insurance
    case, this inquiry involves comparison of the disparity between the loss of
    coverage and the extent of the damage caused by the insureds breach.

[70]

For
    example, in
Sage
,
the
    court found that the substantial disparity between the loss of insurance
    coverage  which required the plaintiffs to pay for damage to their car  and
    the value of the additional premium that the plaintiffs neglected to pay
    weighed in favor of granting relief against forfeiture.

[71]

In
    the case at bar, the disparity is enormous: the respondent stands to lose
    $1,000,000 in insurance coverage, while the breach of statutory condition 4(1)
    caused no prejudice to the insurance company.

V. CONCLUSION

[72]

For
    the reasons stated above, I would reverse the application judges holding on
    due diligence but grant the respondent relief against forfeiture under s. 98 of
    the
CJA
.

[73]

In
    my view, the facts required to make out a due diligence defence are simply not present.
    At the same time, if this court were to allow the appeal, the insurance company
    would enjoy a large windfall at the expense of an individual who acted in good
    faith and whose breach caused no prejudice to the company. This result would be
    contrary to fundamental notions of equity. Accordingly, I would dismiss the
    appeal.

VI. COSTS

[74]

As
    the respondent is the successful party on appeal, I would award her costs in
    the agreed-upon sum of $12,500 inclusive of disbursements and HST.

Released:

FEB 19 2014                                    H.S.
    LaForme J.A.

JCM                                                          I
    agree M. Rosenberg J.A.

I
    agree J.C. MacPherson J.A.





[1]
See e.g.,
Williams v. York Fire & Casualty Insurance Co
.
,
    2007 ONCA 479, 86 O.R. (3d) 241, at para. 40;
Commander Construction v.
    Sovereign General Insurance Co
.
, 2013 ONSC 7104, at para. 38;
Sage
    v. Peel Mutual Insurance Co
.
(2005), 32 C.C.L.I. (4th) 110 (Ont.
    S.C.).



[2]
See e.g.,
Shiloh Spinners Ltd. v. Harding
, [1973] A.C. 691, at p. 722
    ([W]e should reaffirm the right of courts of equity in appropriate and limited
    cases to relieve against forfeiture for breach of covenant or condition where
    the primary object of the bargain is to secure a stated result which can
    effectively be attained when the matter comes before the court, and where the
    forfeiture provision is added by way of security for the production of that
    result.).


