



COURT OF APPEAL FOR ONTARIO

CITATION: Nodel v. Stewart Title Guaranty Company, 2018 ONCA
    341

DATE: 20180409

DOCKET: C63468

Epstein, Paciocco and
    Nordheimer JJ.A

BETWEEN

Karl Nodel

Applicant (Respondent)

and

Stewart Title Guaranty Company

Respondent (Appellant)

Peter H. Griffin
and Danielle
    Glatt, for the appellant

Gavin J. Tighe, Alexander Melfi, and John A. Campion, for the
    respondent

Heard: December 1, 2017

On appeal from the judgment of Justice Wendy M. Matheson
    of the Superior Court of Justice, dated February 8, 2017, with reasons reported
    at 2017 ONSC 890.

Paciocco J.A.:

OVERVIEW

[1]

Mr. Karl Nodel, a private mortgage lender, was the victim of a mortgage
    fraud. He made a claim for his loss under a mortgage insurance policy he had
    purchased from Stewart Title Guaranty Company (Stewart Title).

[2]

Stewart Title refused to pay. In denying the claim, Stewart Title relied
    on a coverage exception in the policy that applies if mortgage proceeds are
    paid to any person other than the registered title holder. Since Mr. Nodels
    lawyer had paid the mortgage proceeds to the borrowers lawyer, in trust,
    rather than directly to the borrower, Stewart Title said the exception applied.

[3]

The dispute over coverage was brought before an application judge. She
    concluded that, properly construed, the exception did not apply. In her view, the
    registered title holder was paid when the borrowers lawyer received the mortgage
    proceeds in trust. She declared that Mr. Nodels loss was therefore covered by
    the mortgage insurance policy. Stewart Title now appeals.

[4]

In my view, the application judge was correct. Properly interpreted, the
    exception enabling Stewart Title to deny coverage applies if the proceeds of the
    mortgage are transferred beneficially to a person or entity other than the
    borrower in the Insured Mortgage transaction (as defined in the policy). This
    did not happen here. Instead, the payment was made in trust to the borrowers
    lawyer for the benefit of the borrower. It was, in law, a payment to the
    borrower. The application judge was correct in declaring that Mr. Nodels loss
    was covered by the mortgage insurance policy.

[5]

I would therefore dismiss the appeal.

RELEVANT FACTS

[6]

A man posing as John Colarieti (the borrower) sought a $1,100,000 loan
    from Mr. Nodel, for investment purposes. Mr. Nodel agreed to lend the money to
    the borrower, to be secured with a second mortgage on a valuable residential
    property registered in Mr. Colarietis name.

[7]

Mr. Nodel hired a lawyer, Mr. Isaac Singer, to arrange mortgage security
    and to close the transaction. He instructed Mr. Singer to acquire mortgage
    insurance. Mr. Singer was an Examining Counsel, authorized to assist in the
    purchase of mortgage insurance from Stewart Title. He arranged mortgage
    insurance from Stewart Title that included coverage for mortgage fraud.

[8]

At closing, Mr. Singer paid the mortgage money to the borrowers lawyer,
    Mr. Bryan Dale, in trust. After he received the money, Mr. Dale did not transfer
    the money to his client. Instead he transferred the money to third parties
    under his clients direction. The money and the client then disappeared.

[9]

At Mr. Nodels direction, Mr. Singer made a claim against Stewart Title for
    coverage under the policy because of the mortgage fraud. Stewart Title refused
    to pay, relying on an exception in the policy that permits Stewart Title to
    deny coverage in certain circumstances.

[10]

Specifically, Clause 2 of Schedule B to the insurance policy provides,
    in relevant part:

2. Notwithstanding anything else contained within this Policy,
    in the event the proceeds of the Insured Mortgage are paid to any person or
    entity other than: i) to the registered title holder  then the Company can
    deny coverage and shall have no liability to the insured for any matters that
    involve the allegation of mortgage/title fraud.

[11]

Mr. Nodel sued Mr. Singer. Mr. Singer commenced a third party claim
    against Mr. Dale and Stewart Title. LawPro, the insurer for both lawyers  Mr.
    Singer and Mr. Dale  settled with Mr. Nodel, and took over the claim against
    Stewart Title. LawPro and Stewart Title agreed to settle their dispute about
    insurance coverage through an application by LawPro, in Mr. Nodels name, for a
    declaration that the title insurance provides coverage for the losses incurred.
    The application judge declared that the exception does not apply, and that the
    policy does provide coverage. Stewart Title now appeals, claiming that the
    application judge erred.

THE ARGUMENTS OF THE PARTIES AND
    THE STANDARD OF REVIEW

[12]

Stewart Title argues that there is no need to look beyond the four
    corners of the policy because the language of Clause 2 is clear and
    unambiguous. Stewart Title says that on the plain language of the provision, the
    proceeds of the mortgage have to be disbursed or directed to the registered
    title holder for the exception to be avoided and for insurance coverage to
    apply. During oral argument before this court, Stewart Title explained that
    this entails the requirement that the money be transmitted into the hands of
    the registered title holder. It says that since the money was paid to the
    borrowers lawyer, it was not paid into the hands of the registered title
    holder.

[13]

Stewart Title urges that the application judge erred, in turn, by: (i) failing
    to give effect to this clear meaning, and in finding ambiguity by looking at
    the word paid in isolation; (ii) giving no weight to the factual matrix
    surrounding how the Policy language operates in practice and in its commercial
    context when resolving the ambiguity; and (iii) resorting to
contra
    proferentem
reasoning before exhausting other methods of contract
    construction.

[14]

LawPro contends that the application judges conclusion is correct. It argues
    that the words are paid to cannot be confined to payment transmitted into the
    hands of the registered title holder without nullifying coverage under the
    policy. It agrees that paid to is unambiguous, but argues that it is unambiguously
    a broad enough term to encompass many methods of payment, including payment to
    the borrowers trustee. In the alternative, LawPro argues that if Stewart
    Titles proposed interpretation is viable and the exception is ambiguous, then that
    ambiguity must be resolved in favour of coverage, as the application judge did.

[15]

The parties agree that this appeal is to be determined on a correctness
    standard because the policy is a contract of adhesion or a standard form
    contract. See also
MacDonald v. Chicago Title Insurance Company of Canada
,
    2015 ONCA 842, 127 O.R. (3d) 663, at para. 41; and
Ledcor Construction Ltd.
    v. Northbridge Indemnity Insurance Co.
, 2016 SCC 37, [2016] 2 S.C.R. 23, at
    para. 46.

[16]

In oral argument, LawPro placed great emphasis on the fact that the
    legal burden is on Stewart Title because it is relying on an exception. I do
    not agree that the burden of proof is central to this appeal. It is true that
    where coverage is established or conceded, an insurer bears the burden of
    establishing that an exception to that coverage applies:
Progressive Homes
    Ltd. v. Lombard General Insurance Co. of Canada
, 2010 SCC 33, [2010] 2
    S.C.R. 245, at para. 51.
[1]
This case does not turn, however, on a factual contest. It is about whether the
    application judges construction of the policy is correct, a question not
    heavily affected by who bears the burden of proof.

FOCUSING THE INQUIRY

[17]

Before examining whether the application judge was correct, I want to
    address the fact that much of the information shared with us was of limited
    utility.

[18]

First, we were presented with a series of documents released by Stewart
    Title to its Examining Counsel setting out its expectations and approval
    practices. These documents are largely irrelevant. The documents released to
    Examining Counsel are not incorporated into the insurance policy. Even though
    these documents purport to reflect Stewart Titles interpretation of its
    contracts of insurance, it is trite law that the meaning of an insurance
    contract is to be found within the four corners of the policy. The plain
    meaning of the language in the context of the policy governs unless the
    language is ambiguous, in which case the search is for the intention of the
    parties as determined using the tools of construction, including, if necessary,
    the rules of strict construction. The meaning that terms bear in a contract cannot
    be controlled by the subjective interpretations of one of the parties to the
    contract as reflected in other documents that the party generates. The Supreme
    Courts decision in
Sattva Capital Corp. v. Creston Moly Corp.
, 2014 SCC
    53, [2014] 2 S.C.R. 633, at paras. 59-61, expressly distinguished admissible
    objective evidence of the factual matrix from inadmissible parol evidence of a
    partys subjective intent.

[19]

We have also been provided with detailed information about Stewart
    Titles insurance application process, and the breadth of the direction to pay
    that Mr. Singer was provided. In my view, this information is also largely
    irrelevant.

[20]

As the application judge mentioned, she was not dealing with the
    enforceability of the policy. The issue before her, and hence before us,
    relates to the interpretation of an exception in a contract of adhesion, and
    whether the payment that was made triggered the exception. That exception is a
    term of a standard form contract. As such, its meaning does not vary from case
    to case, nor is that meaning affected by the way the application process
    unfolded in this particular case.

[21]

In my view, the sole contribution the backstory can make arises if the
    clear words of the contract do not settle matters. If that occurs, this
    backstory can assist in illustrating the broader commercial context in which
    the contract must be interpreted, a point I will return to later.

[22]

Similarly, whether the policy provides coverage for the losses incurred
    does not depend on the direction to pay, but rather on the actual payment made.
    The application judge found that the money was disbursed to the borrowers
    lawyer, in trust for his client. That finding has not been appealed.

[23]

The sole issue requiring resolution before the application judge,
    therefore, was whether the exception was invoked by payment to the borrowers
    lawyer in trust for the borrower. As indicated, the sole issue before us is
    whether the application judge was correct in holding that the exception did not
    apply.

ANALYSIS

A.

Overview

[24]

In my view, Clause 2 is ambiguous. As discussed below, the application
    judge attempted to apply the ordinary meaning of are paid to, and came to the
    conclusion that the phrase includes payment in trust to the borrowers lawyer. However,
    as I will explain, given the context in which are paid to is used, its
    ordinary meaning does not resolve the matter.

[25]

Stewart Titles contention that the ordinary meaning of Clause 2 requires
    direct delivery to the registered title holder suffers from problems of its
    own, not the least of which is that such an interpretation would nullify the
    mortgage fraud insurance coverage in its entirety, a construction impermissible
    in law.

[26]

Given that the ordinary meaning of the terms cannot apply, there are at
    least two potential meanings that arise for the language used, in context.
    Either the exception arises where money is paid beneficially to someone other
    than the borrower, or where money is handed over or delivered to someone other
    than the borrower.

[27]

When Clause 2 is interpreted in context, in light of the reasonable
    expectation of the parties and in a commercially sensible manner, the ambiguity
    that is created by these complications is resolved. Properly interpreted, that
    exception is triggered if the proceeds of the mortgage are transferred beneficially
    to any person or entity other than the borrower in the Insured Mortgage transaction.
    Payments in trust to the borrowers lawyer for the borrower do not fall within
    that exception, since, in law, such payments are to the borrower, not to any
    person or entity other than the borrower.

[28]

I will begin by examining the juridical nature of a payment in trust, followed
    by an evaluation of the application judges attempt to resolve the
    interpretation of Clause 2 by using ordinary language. I will then identify the
    difficulties with the interpretation offered by Stewart Title using ordinary
    language. Finally, I will review and support the application judges
    alternative analysis, involving the use of the tools of construction to resolve
    the meaning of the Clause 2.

B.

The Juridical Nature of a Trust

[29]

Since this case is a contest over whether an authorized payment to a
    lawyer in trust is payment to the client-borrower within the meaning of Clause
    2, it is helpful to put the dispute into context by describing, in simple
    terms, the juridical nature of a trust.

[30]

A trust is a fiduciary relationship, which exists between a trustee and
    a beneficiary (or beneficiaries), whereby the trustee holds title to property
    and manages it for the benefit of the beneficiary who has exclusive enjoyment
    of it:
Dunnison Estate v. Dunnison
, 2017 SKCA 40, [2017] S.J. No. 205,
    at para. 15, citing Donovan W.M. Waters, ed.,
Waters Law of Trusts in
    Canada
, 4th ed. (Toronto: Carswell, 2012) at p. 9.

[31]

A trust beneficiary has an equitable entitlement to compel a trustee to
    use its legal ownership over the property for the benefit of the beneficiary,
    according to the terms of the trust. Indeed, a sole trust beneficiary who is a
    competent adult and absolutely entitled to the trust property can, at any time,
    collapse the trust and demand delivery of full title, relying on the rule in
Saunders
    v. Vautier
, [1841] E.W.H.C. J82, affirmed (1841), 41 E.R. 482 (Eng. Ch.
    Div.): Eileen E. Gillese,
The Law of Trusts
, 3rd ed. (Toronto: Irwin
    Law, 2014), at pp. 85-88. This right is based upon the theory that, though
    title and management rest in the trustees, the significance of property lies in
    the right of enjoyment:
Waters Law of Trusts
, at p. 1235.

[32]

Not surprisingly, a beneficial interest in a trust is therefore considered
    to be property for the purposes of the
Family Law Act
, R.S.O. 1990, c.
    F.3:
Rawluk v. Rawluk
, [1990] 1 S.C.R. 70, [1990] S.C.J. No. 4, at p. 91;
    and
Hamilton v. Hamilton
(1996), 92 O.A.C. 103 (C.A.), [1996] O.J. No.
    2634, at paras. 32-40. Indeed, the beneficiary of a resulting trust was
    described in
Kerr v. Bananow
, 2011 SCC 10, [2011] 1 S.C.R. 269, at para.
    16, citing A.H. Oosterhoff
et al.
,
Oosterhoff on Trusts: Text,
    Commentary and Materials
, 7th ed. (Toronto: Carswell, 2009), at p. 25 as
    the true owner of the trust property.

[33]

For these reasons, a party owing a payment obligation to another will be
    considered, in law, to have fulfilled that obligation by transferring the
    payment, as directed, to the trustee of the person to whom the payment is owed.
    Put more plainly, delivery to the trustee is a mode of paying the beneficiary. Indeed,
    it is through payment to a lawyer in trust that mortgage funds are typically
    advanced. The instant question is whether, by its terms, Clause 2 removes this
    usual method of payment as an acceptable method of payment if insurance
    coverage is to apply.

C.

The Application Judges Ordinary interpretation

[34]

The application judge did not offer a precise definition of Clause 2, the
    exception clause. What she did was accept that the exception did not apply
    because the clause accommodated the applicants ordinary proposition that
    payments to a lawyer, in trust of his or her client, are payments to the
    client. This is another way to pay the registered title holder/borrower.

[35]

Stewart Title suggests that the application judge effectively
    interpreted the words are paid to as meaning disbursed in such a way as to
    amount at law to payment that satisfies an obligation. If this is what the
    application judge did, her interpretation is consistent with the ordinary
    meaning of the operative word paid, taken in isolation. As I will explain
    shortly, it is not consistent, however, with the way the phrase are paid to
    is used in Clause 2. I will nonetheless begin with the ordinary meaning or the
    operative word paid because this discussion remains relevant to the ultimate
    meaning of Clause 2.

[36]

The ordinary denotative or technical meaning of paid does require
    payment in satisfaction of an obligation. The word paid is not a synonym for
    disbursed to or directed to or even delivered to. This is because the
    concept of payment is inherently legalistic, denoting more than mere
    transmission or transfer to another. If I gift money to another, I am not
    paying them. If I transfer money to another, I am not necessarily paying them.
    I am only paying them in the ordinary sense of the term if I transfer money to
    them in satisfaction of an obligation. And if I, as a lender, transfer money
    with the borrowers authority to the borrowers lawyer, that borrower would be
    hard-pressed to argue credibly that the money owed was not paid to them. In
    effect, the ordinary meaning of the term paid describes more than a physical
    act of transfer. It requires a transfer that has an effect, namely, the
    satisfaction of an obligation.

[37]

In coming to this conclusion the application judge relied on
Blacks
    Law Dictionary
, 10th ed. (Thomson West, 2014), at p. 1309, to list five
    definitions of pay.
[2]
The fifth, [t]o be profitable; to bring in a return, refers to a different
    and inapplicable use of the term, unfitting in the context of an insurance
    policy. The other four definitions all require that the transfer be made in fulfilment
    of an obligation:

1.

To give money for a good or service that one buys; to make satisfaction.

2.

To transfer money that one owes to a person, company, etc.

3.

To give (someone) money for the job that he or she does; to compensate a
    person for his or her occupation.

4.

To give (money) to someone because one has been ordered by a court to do
    so.

[38]

The first and third definitions expressly link the act of transmission
    and the effect of transmission  specifically, (1) giving money to make
    satisfaction and (3) giving money to compensate. The other two definitions
    imply that payment is in satisfaction of obligations  specifically, (2) to
    discharge a debt and (4) to comply with a court order. The ordinary definition
    of pay does not simply describe an act of transmission.

[39]

Stewart Title, which contends that the phrase paid to describes only
    the act of handing the money over, is correct in insisting that words, or even
    a phrase, cannot be interpreted in isolation, but must be read in the context
    of the contract as a whole. In my view, this does challenge the ordinary
    meaning of the word paid I have described.

[40]

As indicated, Clause 2 provides, in material part, that Stewart Title
    can deny coverage in the event that the proceeds of the Insured Mortgage are
    paid to any person or entity other than: i) to the registered title holder. In
    Clause 2, the term are paid to therefore contemplates money being paid to
    two categories of recipient: (i) to the registered title holder, which will
    satisfy the mortgage lenders obligation; and (ii) to any other person or
    entity, which may not satisfy the mortgage lenders obligation. The natural, ordinary,
    or denotative meaning of paid does not extend to delivery to persons not in
    satisfaction of the relevant obligation. By using the term are paid to with
    reference to such transfers, it appears that a meaning other than the ordinary
    meaning described is meant to apply. It follows that the ordinary meaning of
    the words used in Clause 2 does not resolve the issue decisively in LawPros
    favour.

D.

The Difficulty with Stewart Titles Interpretation

[41]

Stewart Title argues that the ordinary meaning of Clause 2 requires
    transmission into the hands of the registered title holder before there will be
    insurance coverage. In its factum, Stewart Title attempted to rely upon the
    second of the four definitions I have reproduced above to support this
    position. It urged that the ordinary meaning of paid means  to
transfer
money that one owes to a person, company, etc. (emphasis in original). In my
    view, even if this definition were to be chosen it would not be decisive in
    Stewart Titles favour. The transfer of money owed to a person can be achieved
    by putting the money into the hands of the person owed, or by transferring the
    money to an authorized agent of the person owed, including a trustee of a trust
    in which the person owed is the beneficiary. There is nothing in the ordinary
    language of Clause 2 to require the kind of direct payment to the borrower that
    Stewart Title calls for.

[42]

Even if the ordinary meaning of Clause 2 does purport to require
    transmission into the hands of the registered title holder before there will be
    insurance coverage, which I do not accept, Clause 2 cannot be given this
    interpretation. This is because no mortgage fraud occurs where money is
    transmitted into the hands of the registered title holder. If Clause 2 were to require
    transmission into the hands of the registered title holder for coverage to
    apply, the policy would provide no actual mortgage fraud insurance. As a matter
    of law, an exception clause that results in a policy insuring nothing is
    nullified:
Cabell v. The Personal Insurance Company
, 2011 ONCA 105,
    104 O.R. (3d) 709, at paras. 1-2. Simply put, if Clause 2 does purport to
    negate coverage where mortgage proceeds are not transmitted into the hands of
    the registered title holder, Clause 2 is a nullity.

[43]

No doubt because of this difficulty, Stewart Title conceded before the
    application judge that receipt by an approved party is not part of the
    definition of are paid to. Its position before the application judge was that if
    money is paid in trust to a lawyer with an undertaking to disburse the funds
    directly to an approved party, then that will suffice even if mortgage fraud
    then occurs.

[44]

The application judge rejected Stewart Titles attempt to interpret
    Clause 2 in this way because doing so would require reading words into the
    provision that are not there. In my view, the application judge was right in
    this regard.

[45]

Perhaps because of this difficulty, Stewart Title changed its position on
    appeal. It retreated from the concession that payment in trust will suffice if
    there is a direction to pay the registered title holder, and now contends that payment
    in trust to the borrowers lawyer under direction to pay the borrower will
    satisfy the policy only if delivery is ultimately made to the borrower. In an
    attempt to skirt the nullification problem this new interpretation gives rise
    to Stewart Title accepts that the policy would have provided coverage in this
    case if the money had been received by the imposter rather than the lawyer in
    trust. The problem with this attempt to find some room for coverage in the
    policy is that the policy requires that proceeds of the Insured Mortgage be
    paid to  the registered title holder, and an imposter is not the registered
    title holder.

[46]

Simply put, in promoting its ordinary interpretation, Stewart Title
    encountered a paradox. Because of the nullification doctrine, its ordinary
    interpretation submission relating to Clause 2 depends on avoiding the ordinary
    interpretation of the registered title holder.

[47]

Having made this point, the difficulty the nullification doctrine
    presents for the ordinary meaning of the registered title holder can be
    overcome. It could not have been in the reasonable contemplation of the parties
    that Clause 2 would be given an interpretation that would nullify it. The
    option of interpreting Clause 2 as requiring receipt by the actual registered
    title holder is not on the table, if the clause is going to be interpreted to
    be valid. Where a clause reasonably bears a meaning that would not nullify it,
    then the meaning that should apply is the one that maintains the clauses
    validity. Registered title holder must therefore be read as the application
    judge evidently did, and as both parties have assumed throughout, as a
    reference to the individual identified as the registered title holder in the
    Insured Mortgage transaction; in other words, the borrower.

[48]

Even though the ambiguity in the term registered title holder can be
    overcome in this way, it is obvious from this problem alone that the meaning of
    Clause 2 cannot be resolved using the ordinary or natural meaning of the words.
    In my view, Clause 2 is ambiguous in another more central respect, a point I
    now turn to below.

E.

The Proper Construction

(1)

Clause 2 is Ambiguous

[49]

In her alternative analysis, the application judge found that if Stewart
    Titles interpretation was viable, then Clause 2 would be ambiguous based on
    the contested interpretations of the provision. She also found that Stewart
    Titles position was effectively a concession of ambiguity, given Stewart
    Titles attempt to limit the different ways a payment can be made, allowing
    some but not others, without any supporting language in the policy. On appeal,
    Stewart Title argues that the application judge erred in finding ambiguity on
    these bases.

[50]

I need not resolve the dispute over whether these bases for finding
    ambiguity are appropriate. In my view, Clause 2 is ambiguous because the ordinary
    language of Clause 2 does not offer a clear or settled meaning. I have
    explained that, because Clause 2 contemplates payments that do not satisfy
    obligations, the ordinary meaning of paid  disbursed in such a way as to
    amount at law to a payment that satisfies an obligation  cannot apply. The
    failure of the ordinary meaning of that operative word to provide a clear
    meaning leaves open more than one possible interpretation of Clause 2.

[51]

On the one hand, even without a transfer satisfying an obligation, the
    operative word paid in the phrase are paid to connotes a transfer of the benefit
    of money. This interpretation would, of course, service LawPros position that
    payment to the borrowers lawyer in trust for the borrower is enough, since
    payment to the borrowers lawyer in trust is considered in law to be a payment
    for the benefit of the borrower.

[52]

On the other hand, a more colloquial use of the phrase could simply
    describe the act of transmitting money from one to another. This interpretation
    would service Stewart Titles position that, properly interpreted, Clause 2
    requires that the mortgage proceeds be transmitted directly into the hands of
    the registered title holder before there will be insurance coverage.

(2)

Resolving the Ambiguity

[53]

Stewart Title takes issue with the way the application judge resolved
    the ambiguity in Clause 2. It urges that the application judge should have
    exhausted all means of ascertaining the meaning of the language before turning
    to the
contra proferentem
principle. In my view, the application judge complied
    with this analytical scheme.

[54]

The first thing the application judge did in an effort to resolve the
    ambiguity she perceived was to look at the context of the policy, the
    reasonable expectations of the parties, and the reasonable commercial results 
    the very things Stewart Title says must go into the construction of the
    contract before the
contra proferentem
principle applies. Indeed, at
    para. 43 of her reasons, the application judge adverted to and applied the
    principles of interpreting insurance contracts that this court endorsed in
MacDonald
,
    at para. 66.

[55]

This exercise by the application judge did not produce the result that
    Stewart Title desired. In the application judges words at para. 59 of her
    reasons:

Relevant surrounding circumstances support the conclusion that
    the exception permits payments to a lawyer in trust for his or her client. Both
    the regulatory regime and common practice support the applicants
    interpretation as reasonable and commercially sensible. And the regulatory
    regime and common practice are part of the industry in which the insurer
    operates.

[56]

The application judges analysis is persuasive. In my view, an
    interpretation of Clause 2 that is supported by the context of the policy, the
    reasonable expectations of the parties, and the reasonable commercial results,
    supports LawPros position and defeats Stewart Titles claim that only direct
    transmission to the borrower will permit coverage.

[57]

Interpreted in context, the term are paid to is capable of describing
    either a transfer of beneficial ownership or the act of transmitting money. In
    my view, however, the former use of the term is more natural. This is because
    the concept of payment connotes the transfer of beneficial interest, and not
    just the act of transmission. In other words, the term are paid to more
    naturally refers to the effect of a transfer rather than the act of
    transmission. Interpreting are paid to in context as describing the transfer
    of beneficial interest in money honours the connotation of the term, whereas interpreting
    are paid to as simply describing the act of transmitting money requires
    setting aside both the denotation and the ordinary connotation of the phrase.
    Thus, the contextual interpretation preferred by LawPro is the more natural
    interpretation.

[58]

The reasonable expectations of the parties also serves LawPros
    preferred interpretation. As the application judge noted, payment of mortgage
    money to a borrowers lawyer in trust is a routine practice. In my view, it
    would not be in the reasonable contemplation of the parties that using the
    standard method of disbursing mortgage money to the borrower would disqualify
    mortgage fraud insurance.

[59]

Moreover, disqualifying coverage where payment is made to the borrowers
    lawyer in trust would not produce a reasonable commercial result. As the
    application judge pointed out, if the borrower has counsel, the lenders lawyer
    cannot deal directly with the borrower and must deal with the lawyer.

[60]

Indeed, if Stewart Titles position that Clause 2 requires direct
    delivery to the borrower is accepted, even a direct deposit into a bank account
    in the name of the borrower would not suffice to assure coverage. This is
    because a depositor does not own the money in the account. The bank does,
    subject to a simple debtors obligation to pay the amount of the deposit to the
    depositor as its creditor:
Foley v. Hill
(1848), 2 H.L. Cas. 28, 9 E.R.
    1002 (U.K.H.L.); and
B.M.P. Global Distribution Inc. v. Bank of Nova Scotia
,
    2009 SCC 15, [2009] 1 S.C.R. 504, at para. 63. It follows that a direct deposit
    by the lender into the borrowers bank account would not entail direct delivery
    to the borrower, even if the negotiable instrument used to achieve payment was made
    payable in the borrowers name. The interpretation Stewart Title offers would therefore
    effectively absolve it from paying insurance unless the lender put a bag of
    money or a cheque directly into the borrowers hands. In my view, such an
    interpretation is not commercially reasonable because direct payment of the
    kind contemplated would be impractical and inefficient.

[61]

In my view, Stewart Titles submissions about the involvement of lawyers
    being inadequate to prevent fraud, or the goal of improving visibility of the
    destination of mortgage proceeds, do not add weight to its interpretation
    either. These matters may well be of concern to insurers, but they are not the
    kinds of considerations that, in the face of the routine use of in trust
    payments, can sustain a mutual or objectively reasonable expectation that the
    exception would disqualify coverage if in trust payments are made to lawyers.
    Put more plainly, these are subjective concerns that insurers may hold. They
    are not the kinds of considerations that the parties to an insurance policy,
    the insurer and the insured, would naturally contemplate in understanding the
    meaning of the policys terms.

[62]

Nor am I persuaded that trust payments to lawyers do not provide a
    commercially reasonable mode of paying mortgage advances given the risks of
    mortgage fraud, whereas payment to financial institutions would do so. Lawyers
    are obliged by
Rules of Professional Conduct
to take steps to assure the
    identity of their clients, and trust funds held by lawyers receive greater
    legal protection than bank deposits do. While Stewart Title would be well
    within its rights to insist that insurance coverage will extend only if money
    is paid directly into the hands of borrowers, or into their bank accounts, the
    disparity in the security of transactions it claims between trust payments to
    lawyers and deposits into financial institutions is not, in my view, a
    consideration that can drive the interpretation of Clause 2, based either on
    considerations of the parties reasonable expectations or commercial
    reasonableness.

[63]

The specific elements cited by Stewart Title in its factum as relevant
    to the factual matrix it relies upon, cannot fairly drive the interpretation of
    this standard form contract either. The fact that
this
transaction was
    a private lender contract cannot colour the meaning of a general exception
    clause that purports to apply to all lender contracts, private or not. Meanwhile,
    Mr. Singers subjective awareness that payments to third parties unrelated to
    the transaction increases the risk of fraud is irrelevant to the meaning of a
    standard form contract. Even converting Mr. Singers subjective appreciation into
    a more general proposition that third party payments are a flag indicating
    possible fraud says nothing about payments to lawyers authorized to receive
    funds for lenders, since those lawyers are not third parties. Questions asked
    by Stewart Title, one party to a contract, of its Examining Counsel when
    considering an insurance request may reflect its policy positions in lending,
    but cannot drive the contractual interpretation of an agreement entered into
    with others.

[64]

Simply put, a consideration of the factors that Stewart Title says
    should have been examined first by the application judge in resolving any ambiguity
    in Clause 2 actually defeats an interpretation of the exception that would
    invalidate coverage if payment is made to lawyers in trust for the borrower.

[65]

Properly interpreted using these tools of construction, the Clause 2 exception
    is triggered if the proceeds of the mortgage are transferred beneficially to
    any person or entity other than the borrower in the Insured Mortgage
    transaction. Payments in trust to the borrowers lawyer do not fall within that
    exception, since, in law, they are payments to the borrower.

[66]

In my view, had these ordinary tools of construction not resolved the
    meaning of are paid to in Clause 2, things would not have become easier for
    Stewart Title. If there is ambiguity in a valid exclusion clause, that
    exclusion clause will be strictly or narrowly interpreted. As this court
    explained in
Cabell
, at para. 11, ambiguity in the policy will be
    construed against the insurer, applying the
contra proferentum
doctrine
    (emphasis in original). On this basis, it is difficult to see how the term are
    paid to can be interpreted to exclude the conventional way of advancing
    mortgage money by payment to a borrowers lawyer in trust for the borrower.

[67]

As a result, Clause 2 cannot be relied upon by Stewart Title to exclude
    coverage in this case. Either the clause is invalid as an improper attempt to
    nullify coverage under the policy, or Clause 2 is to be interpreted as
    including payment to the borrowers lawyer in trust as money paid to  the
    registered title holder.

[68]

Since this resolves the question on appeal, it is unnecessary to deal
    with the respondents fresh evidence application.

CONCLUSION

[69]

In my view, the application judge was correct in declaring that the
    exception in Clause 2 does not exclude coverage for the loss incurred by Mr. Nodel,
    and that the title insurance provides coverage for the losses incurred. I would
    dismiss the appeal.

[70]

Counsel for both parties agree that the successful party should receive
    costs in the amount of $20,000, inclusive of taxes and disbursements. I would therefore
    order costs in that amount to the respondent. I would not disturb any costs
    award made in the proceedings below.

David M. Paciocco J.A.

I agree. Gloria Epstein J.A.




Nordheimer J.A. (dissenting):

[71]

I have read the very thorough reasons of Paciocco J.A. and agree with
    much of the analysis he undertakes. I agree that the standard of review is
    correctness. I also agree that the burden of proof is not central to this
    appeal because this case does not turn on a factual contest. I further agree
    that much of the additional material provided to us was of limited, if any,
    assistance. Unfortunately, I do not agree with my colleague with respect to his
    conclusion on the central issue, that is, whether the exception clause is
    ambiguous.

[72]

My colleague has set out the factual background to this case so I do not
    need to repeat it.

[73]

In my view, the answer to the question posed by this appeal is, in the
    first instance, a straight forward one. Is the language of the exception to the
    title insurance policy ambiguous? If it is, then a more detailed analysis must
    follow, as my colleague has undertaken. If it is not, then Stewart Title
    Guaranty Company (Stewart Title) was entitled to deny coverage and the matter
    ends. As Rothstein J. said in
Progressive Homes Ltd. v. Lombard General
    Insurance Co. of Canada
, 2010 SCC 33, [2010] 2 S.C.R. 245, at para. 22:

The primary interpretive principle is that when the language of
    the policy is unambiguous, the court should give effect to clear language,
    reading the contract as a whole

[Citation omitted.]

[74]

Although they reach their conclusions through different routes, both my
    colleague and the application judge conclude that the language of the exception
    is ambiguous. I do not agree.

[75]

This whole case arises from the reality that the borrower was not in
    fact the registered title holder. Rather, he pretended to be the registered
    title holder and was, apparently, able to convince his lawyer, Mr. Dale, that
    he was, in fact, the registered title holder. There can be no dispute that the
    insurance policy was intended to provide coverage against such a result, but
    only if the terms of the policy were complied with. This is the commercial
    context that surrounds this insurance contract interpretation appeal.

[76]

The starting point for the analysis is the actual language of the
    exception. While my colleague has set out the language above, I repeat it here
    for the sake of convenience. The exception is contained in Clause 2 of Schedule
    B to the policy. It reads, in part:

Notwithstanding anything else contained within this Policy, in
    the event that the proceeds of the Insured Mortgage are paid to any person or
    entity other than: i) to the registered title holder or holders, as the case
    may be [] then the Company can deny coverage

[77]

There is no dispute on the facts of this case that the proceeds of the
    Insured Mortgage (as defined in the policy) were not paid to the registered
    title holder. Rather, the proceeds were paid to Mr. Dale, the lawyer for the
    imposter registered title holder. They were so paid pursuant to a written
    direction, ostensibly signed by the registered title holder, that the funds
    were to be paid to Bryan R. Dale in trust or as he may further direct in
    writing. The question is whether that method of payment falls within the
    exception language in Clause 2.

A.

The Coverage Exception is Not Ambiguous

[78]

In my view, fairly read, there is nothing ambiguous about the wording of
    the exception. It is clear that Stewart Title is entitled to deny coverage if
    the proceeds are paid to any person or entity other than the registered title
    holder. The right to deny coverage is clear from the opening words of Schedule
    B:

This policy does not insure against loss or damage [...] which
    arise by reason of...

[79]

Stewart Title has the right to create exceptions to the insurance
    coverage it is agreeing to provide. Once an insured accepts the insurance
    policy provided, the insured is bound by the exceptions, just as any person is
    bound by the terms and conditions of any contract to which they are a party. As
    Moldaver J.A. said in
Stuart v. Hutchins
(1998), 40 O.R. (3d) 321
    (C.A.), 164 D.L.R. (4th) 67, at para. 30:

Trite though it may be, an insurer has the right to limit
    coverage in a policy issued by it and when it does so, the plain language of
    the limitation must be respected.

[80]

Both my colleague and the application judge reject this plain meaning
    because it would result in the policy insuring nothing. That conclusion is
    based on their interpretation that a plain meaning interpretation would suggest
    that the funds had to be received by the actual registered title holder,
    otherwise Clause 2 would apply. I do not share their view.

[81]

This disagreement frames the central issue in this appeal: what is the
    meaning of the words are paid to as used in Clause 2? The nullity consequence
    relied upon both by my colleague and the application judge only occurs if the
    words are paid to are given the restricted interpretation prescribed by the
    application judge as disbursed in such a way as to amount at law to payment
    that satisfies an obligation.

[82]

With respect, that is not the only plain meaning of the word paid and
    it is not the appropriate meaning to be given in the context of this contract
    of insurance. The
Oxford Dictionary of English
, 3rd ed. (Oxford
    University Press, 2010) defines pay as meaning, among other things, to Hand
    over or transfer the amount due to someone. This is also consistent with the
    second definition of pay to which my colleague refers from
Blacks Law
    Dictionary
, 10th ed. (Thomson West, 2014), at p. 1309, that is, To
    transfer money that one owes to a person, company, etc.

[83]

My colleague says that the plain meaning of hand over or transfer
    cannot be accepted because no mortgage fraud occurs where money is transmitted
    into the hands of the registered title holder. This is because my colleague
    restricts the meaning of registered title holder to 
actual
registered
    title holder, and excludes an 
imposter
registered title holder. As
    such, the title insurance contract would be of no use if the monies had to be
    paid to the actual registered title holder. In his view, the words are paid
    to must be given a meaning that ameliorates the restrictive meaning that he
    imposes upon the words registered title holder. Therefore, my colleague
    interprets the words are paid to to include a payment to the borrowers
    lawyer. Further, my colleague also holds the view that one cannot pay an
    imposter registered title holder because there is no legal obligation to be discharged
    vis-à-vis the imposter. Again, I do not agree.

B.

The Commercial Context

[84]

With respect, my colleagues interpretation is detached from the
    commercial realities of the context of this case. The object of the title
    insurance contract must be kept in mind. What is being insured against is the
    possibility that money will be transmitted into the hands of a person, who is
    believed to be the registered title holder, but who is not, in fact, that
    person. The plain meaning of are paid to in this context is a transfer or
    hand over of money that may or may not satisfy an obligation. And the plain
    meaning of registered title holder must include an imposter registered title
    holder. In this case, if the funds had been transferred or handed over to the
    imposter registered title holder, the insurance coverage would have applied.
    But that is not what happened. Rather, the money was handed over to a lawyer.

[85]

The words are paid to and registered title holder have to be
    understood in the context of the instant insurance contract. This fundamental
    principle regarding the interpretation of a contract was stated in
Sattva
    Capital Corp. v. Creston Moly Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633,
    where Rothstein J. said, at para. 47:

Regarding the first development, the interpretation of
    contracts has evolved towards a practical, common-sense approach not dominated
    by technical rules of construction. The overriding concern is to determine the
    intent of the parties and the scope of their understanding [] To do so, a decision-maker
    must read the contract as a whole, giving the words used their ordinary and
    grammatical meaning, consistent with the surrounding circumstances known to the
    parties at the time of formation of the contract. Consideration of the
    surrounding circumstances recognizes that ascertaining contractual intention
    can be difficult when looking at words on their own, because words alone do not
    have an immutable or absolute meaning:

No contracts are made in a vacuum: there is always
    a setting in which they have to be placed. ... In a commercial contract it is
    certainly right that the court should know the commercial purpose of the
    contract and this in turn presupposes knowledge of the genesis of the
    transaction, the background, the context, the market in which the parties are
    operating

[Citations omitted.]

[86]

The same point was again made in
Ledcor Construction Ltd. v.
    Northbridge Indemnity Insurance Co.
, 2016 SCC 37, [2016] 2 S.C.R. 23, a
    case that also dealt with insurance policies, where Wagner J. said, at para.
    50:

These rules include that the interpretation should be
    consistent with the reasonable expectations of the parties, as long as that
    interpretation is supported by the language of the policy; it should not give
    rise to results that are unrealistic or that the parties would not have
    contemplated in the commercial atmosphere in which the insurance policy was
    contracted

[87]

In this case, the commercial purpose of the title insurance policy is
    clearly to protect against fraud, that is, the receipt of monies by someone
    other than the person who is expected, and entitled, to receive the funds.
    Consequently, the term registered title holder, as used in Clause 2, cannot
    mean the actual registered title holder because, as my colleague quite
    correctly points out, that would eliminate any opportunity for the insurance
    coverage to apply. In order to give commercial sense to the contract, in other
    words to have it operate as the parties bargained for and intended, the term
    registered title holder must be understood as meaning a person who everyone
    involved in the transaction believes to be the actual registered title holder.
    It is the possibility of those persons being duped, in that regard, which
    constitutes the event that the title insurance policy insures against. This
    does not mean that the term registered title holder is ambiguous because, as
    Rothstein J. observed, words alone do not have an immutable or absolute
    meaning:
Sattva
, at para. 47. It simply means that the term has to be
    understood in a manner that honours the commercial purpose of the contract.

[88]

A substantially similar point applies to the use of the term are paid
    to in Clause 2. Where the same word has different meanings, it is not
    appropriate to create an ambiguity as a consequence of adopting a meaning of a
    word that leads to an absurdity or, in this case, results in the nullification
    of insurance coverage. Rather, the proper rules of interpretation direct that
    one first looks for a meaning of the word that does not render terms of the
    contract ineffective:
Weyerhaeuser Company Limited v. Ontario (Attorney
    General)
, 2017 ONCA 1007, at para. 65. In this case, given that there are
    different meanings for the words pay or paid, the interpretative process
    ought to begin with giving the word a meaning that will not result in the
    insurance coverage being nullified. Neither my colleagues approach, nor that
    of the application judge, accords with that fundamental principle.

[89]

One of the surrounding circumstances known to the parties at the time
    of formation of the contract was that the more hands that mortgage monies pass
    through, the greater the chance for mortgage fraud to occur. As the Law Society
    of Upper Canada noted in its March 24, 2005 Report to Convocation on Mortgage
    Fraud, at para. 21:

In this type of transaction, numerous parties are involved 
    many never know or actually meet each other in person. Without due diligence
    throughout the process, it is easy for fraudsters to pass themselves off and to
    take advantage of the lack of oversight.

[90]

In light of that reality, Stewart Title had the contractual right to
    restrict the parties, in terms of their movement of the funds, given the
    purpose of the insurance. Stewart Title was entitled, as a term of its
    coverage, to only permit the mortgage funds to be transmitted to the person who
    was believed to be the registered title holder and not to any intermediary,
    including the purported registered title holders lawyer. Insofar as this
    involved a departure from the usual or routine practice of monies being paid to
    a partys lawyer in trust, Stewart Title was entitled to insist on that
    departure in favour of a requirement that the monies had to be paid to the
    registered title holder. Put another way, Stewart Title was entitled to insist
    on a more restricted method of payment in order to reduce its exposure under
    the policy.

[91]

Therefore, contrary to what my colleague concludes, the language in
    Clause 2 is unambiguous in my view. The plain meaning of the words are paid
    to in this context is the transferring of an amount to another. In particular,
    the words are paid to carries this meaning, given the context of the case and
    the commercially reasonable expectations of the parties to this title insurance
    contract. As such, there is no contradiction in concluding that Clause 2 is not
    invoked where a transfer of funds is made to an imposter registered title
    holder with no legal effect. Since the plain meaning of the words do not give
    rise to an ambiguity, there is no basis to read into Clause 2 an additional method
    of paying to a lawyer in trust.

C.

Restricting the Opportunities for Fraud

[92]

It might be asked why this makes a difference. Surely payment to the
    partys lawyer is payment to the party, as some, including my colleague, would
    say. The answer to that question is evident from this case. If payments are
    allowed to be made to the registered title holders lawyer, Stewart Title is
    then relying on the lawyer to ensure that his or her client is, in fact, the
    registered title holder. As this case (and, unfortunately, many others) proves,
    that is not always a reliable safeguard. If, on the other hand, the monies have
    to be paid (that is transferred) to the registered title holder, instead of the
    lawyer receiving the funds and then retransmitting them as directed by his or
    her client, then the funds have to be transferred or handed over to the person
    who purports to be the registered title holder. Normally, such a transfer will
    be accomplished either by way of cheque or electronic transfer. In that
    situation, the purported registered title holder must convince some financial
    institution that he or she is the actual registered title holder in order to
    receive the funds. Stewart Title was entitled to its reasonable belief that
    Canadian financial institutions may be less easily fooled by a fraudster than a
    lawyer might be. By requiring this method of payment only, Stewart Title could
    rely on the extra security steps that a Canadian financial institution must
    take when dealing with its account holders to reduce the possibility of fraud.
[3]

[93]

In this case, for example, if a cheque or electronic transfer for the
    mortgage funds had been directed to John Colarieti, the actual registered title
    holder, then in order to gain control over the funds, the imposter would have
    had to arrange with a Canadian financial institution for an account to receive
    those funds so that the imposter could then gain access to them. Again, I
    believe that one can reasonably assume that a Canadian financial institution,
    approached by an individual asking to receive $1.1 million, would require a
    high level of proof of the identity of the individual before it would agree to
    process such a sum. I say Canadian financial institution since the actual
    registered title holder, Mr. Colarieti, was known to be Canadian. This was not
    a transaction involving foreign investors or borrowers, or a transaction that
    otherwise called for the funds to be sent out of the country. Indeed, under the
    meaning I give to the exception, if the borrower had asked that the mortgage
    funds be transferred to a foreign financial institution or foreign location,
    that, in and of itself, might have given rise to questions which might have
    revealed the fraud.

[94]

Mr. Nodel argues that there was no evidence that requiring the monies to
    be paid in the manner involving a Canadian financial would invoke more
    stringent scrutiny than in a private lender transaction. I make two
    observations in response to that point. First, the application judge accepted
    that more stringent scrutiny would likely be the result from the requirement
    that a Canadian financial institution be involved. She said, at para. 66 of her
    reasons, I accept that a bank may take steps that would reduce the risk of
    fraud, to the benefit of Stewart Title. Second, common sense should be sufficient
    to conclude that would be the case. However, in the end result, it matters not
    whether increased scrutiny would have resulted in fact. The point is that
    Stewart Title was entitled to contractually require payment of the funds to the
    registered title holder, and not through a lawyer, because it believed that
    would reduce the risk of fraud.

D.

Payments to Agents

[95]

Another ground on which my colleague and I differ in respect of the
    plain meaning of Clause 2, is the application of the general principle that
    payment to an authorized agent is payment to the person to whom the obligation
    is owed. The application judge took the same approach as my colleague. She
    said, in her reasons at para. 59:

Relevant surrounding circumstances support the conclusion that
    the exception permits payments to a lawyer in trust for his or her client. Both
    the regulatory regime and the common practice support the applicant's
    interpretation as reasonable and commercially sensible. And the regulatory
    regime and common practice are part of the industry in which the insurer
    operates.

[96]

I do not quarrel with this general proposition or the common practice
    described. But the general proposition and industry practice has little
    application where the manner of payment is expressly provided for and
    restricted by the contract itself. As I have already alluded to, a party to a
    contract is entitled to exclude what may otherwise be normal or routine manners
    of payment. It is especially entitled to do so where it is insuring against
    fraudulent conduct. In this case, Stewart Title saw fit to preclude the ability
    to pay through intermediary agents (as that term is understood in law).

[97]

I would also note, on this point, that the concern raised that lawyers
    must deal with other lawyers, and not with a party directly, does not arise
    here nor can it be used to bolster my colleagues interpretation. What is
    central to the issue raised is how the monies are transmitted, not who
    transmits them. Put another way, it is a question as to whom the cheque for the
    proceeds is made payable, not who delivers the cheque or to whom it is
    delivered.

[98]

The proposition that my colleague advances in support of his
    interpretation that payment to the borrowers lawyer was permitted might have
    more sway if Clause 2 had been worded more generally. For example, if Clause 2
    had read simply Unless the proceeds are paid to the registered title holder,
    then the scope for payment to an agent, such as a lawyer, might be more easily
    found. That is not, however, how the exception is worded. Clause 2 expressly
    provides that if payment is made to any person or entity other than the
    registered title holder, then the exception applies. With respect, the wording
    could not be clearer.

E.

When Does Ambiguity Actually Arise?

[99]

Finally, the suggestion was made that, because there has been a debate
    over the meaning of the words used in the exception, that disagreement on its
    own establishes that the language is ambiguous. I do not accept that
    proposition. I have no doubt that lawyers can find a basis to argue over
    different interpretations no matter what words are used. Indeed, I suspect that
    there are no words used in a contract or statute that lawyers could not argue
    over. The fact that they can use their talents for that purpose does not mean
    that the words are, in fact, ambiguous. As Iacobucci J. said in
Bell
    ExpressVu Limited Partnership v. Rex
, 2002 SCC 42, [2002] 2 S.C.R. 559, at
    para. 30:

For this reason, ambiguity cannot reside in the mere fact that
    several courts  or, for that matter, several doctrinal writers  have come to
    differing conclusions on the interpretation of a given provision. Just as it
    would be improper for one to engage in a preliminary tallying of the number of
    decisions supporting competing interpretations and then apply that which
    receives the higher score, it is not appropriate to take as ones starting
    point the premise that differing interpretations reveal an ambiguity.

[100]

It
    follows from this same point that the mere fact that a word has more than one
    plain meaning does not automatically render the meaning of that word ambiguous
    when it is used in a contract or other document. Rather, in keeping with the
    modern rule of interpretation, one employs the meaning of the word that is
    consistent with the purpose of the contract. In the context of this contract of
    title insurance the meaning of the word paid must be hand over or transfer
    in order to fairly achieve the purpose of Clause 2, which is to reduce the
    likelihood of fraud, while still maintaining coverage when a fraud occurs.

[101]

I
    would add that holding the parties to a strict interpretation of the insurance contract
    does not produce any unfairness in this case. The true victim in this case, Mr.
    Nodel, has been compensated for his loss. What is left is a battle between two insurers
    as to which of them should bear the loss. Given that it is clear that it was
    the lawyer who allowed himself to be duped by the imposter, it does not seem
    unreasonable that his insurer, LawPro, should be the one to bear the resulting loss.

CONCLUSION

[102]

The
    fact of the matter is that the wording of the exception is unambiguous and by
    its plain terms it applies to this situation. The mortgage funds were not
    handed over or transferred to the registered title holder, or the person
    everyone assumed was the registered title holder, and thus the funds were not
    paid in accordance with the terms of the insurance contract. If they had been,
    and the person posing as the registered title holder had managed to make off
    with the funds, then undoubtedly Stewart Title would have had to provide
    coverage (subject to any other defences or claims against others). But that is
    not what happened in this case. The mortgage funds were paid in breach of the
    express terms of the insurance policy. As a result, Stewart Title was entitled,
    under the terms of its policy, to deny coverage.

[103]

I
    would allow the appeal, set aside the order of the application judge, and
    dismiss the application.

Released: April 9, 2018 G.E.

I.V.B.
    Nordheimer J.A.





[1]


In
Progressive Homes
, the Supreme
    Court analyzed a commercial general liability insurance policy. Justice
    Rothstein, writing for the court at paras. 26-28, used the term exceptions to
    describe provisions intended to bring exclusions from coverage back into
    coverage. In the instant case, however, Clause 2 of Schedule B is referred to
    in the Stewart Title policy as one of the EXCEPTIONS FROM COVERAGE. Stewart
    Title also refers to Clause 2 as an exception in its written materials. As
    such, I refer to Clause 2, which operates to exclude liability in certain
    circumstances, as an exception in these reasons.



[2]
The definitions of the word pay in the
Concise Oxford English
    Dictionary
, 12th ed. (Oxford University Press, 2011) are similar.



[3]

If there is any doubt about the existence of these
    security steps, I would refer the reader to the provisions of the
Proceeds
    of Crime (Money Laundering) and Terrorist Financing Act
, S.C. 2000, c. 17
    and the regulations thereunder.


