



COURT OF APPEAL FOR ONTARIO

CITATION: MacDonald v. Chicago Title Insurance Company of
    Canada, 2015 ONCA 842

DATE: 20151203

DOCKET: C59947

Cronk, Hourigan and Benotto JJ.A.

BETWEEN

Paul MacDonald and Stefanie MacDonald

Plaintiffs (Appellants)

and

Chicago Title Insurance Company of Canada

Defendant (Respondent)

Gavin Tighe and Alexander Melfi, for the appellants

Robert W. Dowhan and Catharine J. Grinyer, for the
    respondent

R. Leigh Youd, for the
    intervener Lawyers Professional Indemnity Company (LAWPRO)

Heard: September 22, 2015

On appeal from the judgment of Justice John A.B. MacDonald
    of the Superior Court of Justice, dated December 29, 2014, with reasons
    reported at 2014 ONSC 7457, 123 O.R. (3d) 789.

Hourigan J.A.:

A.

Overview

[1]

The appellants brought a motion for summary judgment seeking a
    declaration that the title insurance policy (the Title Policy) they purchased
    from the respondent, Chicago Title Insurance Company of Canada (Chicago Title),
    provided coverage and indemnification for a dangerous structural condition
    affecting their home. That condition was caused by unpermitted construction
    done by a previous owner. The motion judge dismissed the appellants motion
    and, notwithstanding that Chicago Title did not bring a cross-motion, granted
    summary judgment in Chicago Titles favour, dismissing the appellants action.

[2]

The appellants submit that the motion judge fundamentally misconceived
    the purpose and function of title insurance, made a significant evidentiary
    error, and misinterpreted the terms of the Title Policy.

[3]

For the reasons that follow, I would allow the appeal, set aside the
    order below, and grant the appellants motion for summary judgment on the issues
    of coverage and indemnification under the Title Policy.

B.

Background Facts

[4]

The appellants purchased a multi-story family home in Toronto in 2006
    (the Property). As part of the purchase, they also acquired the Title Policy,
    which provides under the heading Covered Title Risks:

This

Policy

insures

against

actual

loss

resulting

from

the

following covered

risks,

if

they

affect

your

Title

on

the

Policy

Date,
or
to

the

extent
    expressly

stated

below,

if

they

affect

your

title
[
sic
]
after

the

Policy

Date.

[5]

The term Title is defined under s. 1(f) of the Definitions section of
    the Title Policy as ...the ownership of your interest in the Land, as shown in
    Schedule A.

[6]

In 2013, the appellants discovered that load-bearing walls at the
    Property had been removed during renovation work undertaken by a previous owner
    without a building permit, rendering the second floor unsafe. The City of
    Toronto issued an Order to Remedy an Unsafe Building (the City Order),
    requiring that work be done to temporarily support the floor. The appellants
    undertook the required temporary work and made a claim under the Title Policy
    for the costs of those repairs and the permanent repairs needed to make their
    home structurally sound.

[7]

Chicago Title denied the claim based on a lack of coverage under the
    Title Policy. The appellants brought an action seeking, among other things, declarations
    of coverage and indemnification. During the course of that proceeding, Chicago
    Title amended its defence to also deny coverage on the basis that the
    appellants claim was excluded under the terms of the Title Policy.

C.

Decision of the Motion Judge

[8]

In support of their claims for coverage and indemnification, the
    appellants relied on the following Covered Title Risks in the Title Policy:

11.

Your

Title

is

unmarketable,

which

allows

another

person

to

refuse

to perform

a

contract

to

purchase,

to

lease,

or

to

make

a

mortgage

loan.



13.

You

are

forced

to

remove

or

remedy

your

existing

structure,

or

any part

of

it,

other

than

a

boundary

wall

or

fence,

or

you

cannot

use

it

for

a one

to

six

family

residential

property

or

condominium

unit

because:



(e) of

any

outstanding

notice

of

violation

or

deficiency

notice.



15.     Work

orders,

unless

you

agreed

to

be

responsible

for them.

16. You

are

forced

to

remove

your

existing

structure

-

other

than

a boundary

wall

or

fence

-

because

any

portion

of

it

was

built

without obtaining

a

building

permit

from

the

proper

government

office

or

agency.



23.

Other

defects,

liens,

hypothecs,

rights

of

priority

or

encumbrances.

[9]

The appellants also relied upon certain admissions that they submit were
    made by David Mineo, the Vice President of Claims of Chicago Title, during his
    cross-examination on two affidavits filed by Chicago Title in response to the
    motion for summary judgment.

[10]

The
    motion judge ruled that the Title Policy was unambiguous and that the Covered

Title Risks did

not

apply in the
    circumstances of the case. In so ruling, the motion judge concluded that the
    appellants

title

was

unaffected
    by the unpermitted construction because

it

remained

marketable,

even

though

it

was

marketable

for

an

amount
that was
less

than what

the
    appellants had

paid

for

the
    Property. He also held that in

order

for

coverage

to

apply,

any

demand

or

work

order

by

a

municipal

authority

to rectify

a

structural

problem

had

to be

registered

on

title.
The motion judge further held that the
    appellants had suffered no loss, as that term is defined in the Title Policy.
Finally,
    the motion judge ruled that the appellants

were

unable

to

rely

on
    any admissions

made

by

Mr.
    Mineo on

his

cross-examination, as those admissions did not bind Chicago
    Title.

[11]

The
    motion judge dismissed the appellants motion and granted summary judgment
    against them, dismissing their action, including their claim that Chicago Title
    acted in bad faith.

[12]

The
    appellants appeal the dismissal of their motion for summary judgment and the
    dismissal of their claims for coverage and indemnification. They do not appeal
    the motion judges dismissal of their bad faith claim.

D.

Issues

[13]

The
    appeal raises the following issues:


(i)

What standard of review applies to the
    interpretation of this standard form insurance contract?


(ii)

Did the motion judge err in finding that any
    admissions made by the representative of Chicago Title did not bind the
    corporation?

(iii)

Did the motion judge err in his
    interpretation of the Title Policy?

(iv)

What is the correct interpretation of the
    Title Policy?

E.

Analysis

(i)

Standard of Review

[14]

Chicago
    Title relies upon
Sattva Capital Corp. v. Creston Moly Corp.
, 2014 SCC
    53, [2014] 2 S.C.R. 633, in support of its submission that the standard of
    review on this appeal is palpable and overriding error, absent an extricable
    error of law.
Sattva
is the latest in a series of decisions from the
    Supreme Court of Canada providing guidance to provincial appellate courts on
    the appropriate standards of appellate review.

[15]

I
    pause here to note that we are not concerned, on this appeal, with the standard
    of review that applies to the motion judges determination that there was no
    genuine issue requiring a trial and that he was therefore required to grant
    summary judgment under r. 20.04. The motion judge found, at para. 7 of his
    reasons, that there were no factual disputes and that he was in a position to
    decide the issues in the case on the record before him. That discretionary decision
    is entitled to a high degree of deference:
Hryniak v. Mauldin
, 2014
    SCC 7, [2014] 1 S.C.R. 87, at para. 83.

[16]

Having
    determined that there was no genuine issue requiring a trial, the motion judge then
    interpreted the Title Policy. The issue raised squarely on this appeal is the
    standard of review that applies, following
Sattva
, to the motion
    judges interpretation of this contract.

[17]

The
    seminal case on the issue is
Housen v. Nikolaisen
, 2002 SCC 33, [2002]
    2 S.C.R. 235, which established the standard of appellate review as palpable
    and overriding error for findings of fact and inferences from facts. For
    questions of law, including extricable questions of law, the standard of
    review is correctness. Matters of mixed fact and law lie along a spectrum. Where
    the error of the first-instance decision-maker can be traced to a clear error
    in principle, for example, it may be characterized as an error of law and subjected
    to a standard of correctness. Where the legal principle is not readily
    extricable, then the matter is subject to the more stringent standard of
    palpable and overriding error.

[18]

In
Sattva
, Rothstein J., writing for a unanimous seven-member panel,
    recognized that the traditional view in England and Canada has been that the
    standard of review on an appeal from a lower court decision involving the
    interpretation of a contract is correctness. According to Rothstein J., this
    traditional view is rooted in historical concerns regarding the accuracy of
    English jury verdicts in contract cases at a time of widespread illiteracy.

[19]

Justice
    Rothstein, while noting that some Canadian courts still favoured the traditional
    approach despite the fact that the historical rationale for it no longer exists,
    determined that the historical approach should be abandoned for two primary
    reasons.

[20]

First,
    the general approach in the Canadian case law to contractual interpretation has
    changed over time. The restrictive rules of contractual interpretation have
    been loosened and Canadian courts now recognize that the meaning of contractual
    terms is often derived from contextual factors, including the purpose of the
    agreement, the commercial background of the agreement, and the nature of the
    relationship created by the agreement. This modern approach directs courts to
    apply principles of contractual interpretation to the words of the contract,
    considered in light of the factual matrix or surrounding circumstances. Justice
    Rothstein noted that determining the facts surrounding a contract is a critical
    part of the analysis and that the exercise of applying the principles of
    contractual interpretation to these facts and the words of the agreement is
    closer to a question of mixed fact and law than a question of law, as those
    terms are defined in
Canada (Director of Investigation and Research) v.
    Southam Inc.
, [1997] 1 S.C.R. 748,

at para. 35, and
Housen
,
    at paras. 26 and 36.

[21]

Second,
    the purpose of the distinction drawn in the jurisprudence between questions of
    mixed fact and law and questions of law supports, as a matter of judicial economy,
    a limit on the ability of an appellate court to interfere with the
    fact-finders interpretation of a contract, given that in most cases the interpretation
    will have no impact beyond the interests of the parties to the particular
    dispute. To hold otherwise would only serve to stir up unnecessary litigation by
    permitting the parties to re-litigate their dispute on appeal.

[22]

Notwithstanding
    the foregoing, Rothstein J. recognized that it might be possible to identify an
    extricable question of law from within what was initially characterized as a
    question of mixed fact and law. He cited, by way of example, the application of
    an incorrect principle, the failure to consider a required element of a legal
    test, or the failure to consider a relevant factor. He also noted that there
    were other issues in contract law that engage substantive rules of law,
    including the requirements for the formation of the contract, the capacity of
    the parties, and the requirement that certain contracts be evidenced in
    writing.

[23]

However,
    immediately after recognizing the existence of these potential extricable
    questions of law, Rothstein J. warned that courts should be cautious in
    identifying them in disputes over contractual interpretation. He stated, at
    para. 55, that the circumstances in which a question of law can be
    extricated from the interpretation process will be rare.

[24]

Sattva
has been the subject of a great deal of commentary by academics and provincial
    appellate courts across Canada. Much of this analysis has been focused on
    determining the intended scope of
Sattva

with regard to the
    standard of review in contract cases.

[25]

Appellate
    judges and commentators have pointed to the unique factual circumstances of
Sattva
as a basis for limiting its application. The appeal concerned an arbitral
    decision rendered in the context of a proceeding conducted pursuant to a
    statute that limited appeals to questions of law alone. In
Vallieres v.
    Vozniak
, 2014 ABCA 290, 580 A.R. 326, at para. 12, the Alberta Court of
    Appeal noted that:


Sattva

was decided under the British Columbia

Arbitration
    Act
,

RSBC 1996, c. 55, which limits appeals
    to questions of law. The reasons in

Sattva

must be read having regard to the context in which it
    was decided. Appeals from the Court of Queens Bench of Alberta to the Alberta
    Court of Appeal can be brought on any basis. While all appeals must be decided
    within the context of the appropriate standard of review, appeals are available
    on questions of law, mixed questions of fact and law, and questions of fact.
Some
    of the restrictive language in

Sattva

does not apply to ordinary appeals in Alberta.
[Emphasis added.]

Similar warnings about the unique factual
    circumstances of
Sattva
have been repeated in both Alberta and British
    Columbia: see
Ledcor Construction Limited v. Northbridge Indemnity
    Insurance Co.
, 2015 ABCA 121, 386 D.L.R. (4th) 482, leave to appeal
    granted, 2015 CarswellAlta 1769, 2015 CarswellAlta 1770, at para. 12;
Robb
    v. Walker
, 2015 BCCA 117 (CanLII), at para. 48, Chaisson J.A., dissenting.

[26]

Similarly,
    one commentator has stated that it is,

[A]rguable, on a strict reading of
Sattva
, that the
    decision should be read as limited to the proper interpretation of the
British
    Columbia Arbitration Act
in a case in which the appeal did involve mixed
    questions of law and fact, and that subsequent general comments on the standard
    of review applicable to arbitral and trial decisions on contractual
    interpretation were
obiter
.

Earl A. Cherniak, 
Sattva
Revisited (2015)
    34:2 Adv. J. 6, at p. 7.

[27]

While
    the comments of Rothstein J. may technically be
obiter
,

as he was
    not dealing with an appeal from the interpretation of a contract by a judge, it
    would be an error to ignore the direction of the court. It is clear that, in
    the context of a unique fact scenario, Rothstein J. was endeavouring to provide
    guidance on how contractual interpretation fits into the broader standard of
    review jurisprudence, including
Southam
and
Housen
. As a
    matter of deference and respect, that guidance must be heeded.

[28]

That
    said, the limitations of the applicability of the case, given its unique
    circumstances, must also be recognized. The facts of
Sattva
did not
    afford Rothstein J. an opportunity to consider the issue of the standard of
    review as it pertains to all contracts in all circumstances.

[29]

The
    issue is whether the reasoning in
Sattva
is applicable to the Title
    Policy. In my view, considering the rationales animating the decision in
Sattva
in the context of the contract at issue in the present case, the standard of
    review to be applied to the motion judges interpretation of the Title Policy
    is not palpable and overriding error but correctness. Below, I consider the two
    justifications relied upon by Rothstein J., together with the role of a
    provincial appellate court, to explain why the interpretation of the standard
    form contract in this case remains a question of law.

[30]

First,
    Rothstein J. emphasized that determining the objective intentions of the
    parties to a contract, the goal of contractual interpretation, is a
    fact-specific goal, informed, in part, by a consideration of the surrounding
    circumstances known to the parties at the time of formation of the contract:
Sattva
,
    at paras. 47, 49.

[31]

There
    is no question that
Sattva
reflects the increasing emphasis placed by
    appellate courts and commentators over the last several years on the factual
    matrix, or the surrounding circumstances of a contract, as part of the
    interpretive process: see e.g.
Investors Compensation Scheme Ltd. v. West
    Bromwich Building Society
, [1998] 1 All E.R. 98 (H.L.), at p. 114;
Eli
    Lilly & Co. v. Novopharm Ltd.
, [1998] 2 S.C.R. 129, at para. 54;
Bell
    Canada v. The Plan Group
, 2009 ONCA 548, 96 O.R. (3d) 81, at para. 37;
    Geoff R. Hall,
Canadian Contractual Interpretation Law
, 2d ed.
    (Markham, ON: LexisNexis, 2012), at p. 22.

[32]

However,
    the relative importance of the surrounding circumstances is largely dependent
    on the nature of the contract. The circumstances surrounding the formation of a
    contract negotiated by arms-length parties may be very important in
    understanding the parties objective intent. Similarly, the determination
    whether the parties are in a special relationship, such as a fiduciary
    relationship, may also be an important factor in determining the parties
    objectively intended obligations under a contract.

[33]

The
    importance of the factual matrix is far less significant, if at all, in the
    context of a standard form contract or contract of adhesion where the parties
    do not negotiate terms and the contract is put to the receiving party as a take-it-or-leave-it
    proposition. Any search for the intention of the parties in the surrounding
    circumstances of these contracts is merely a legal fiction:
Ledcor
,
    at para. 14.

[34]

The
    Title Policy was a pre-printed contract produced by Chicago Title and provided to
    the appellants on a take-it-or-leave-it basis. Chicago Title did not sit across
    from the appellants and hammer out the details of their bargain. The terms of
    the Title Policy were simply not negotiated in any meaningful sense and it
    would be illusory to suggest that anything could be inferred about the meaning
    of the contract from the facts surrounding its formation.

[35]

Thus,
    one of the fundamental bases underlying the treatment of contractual
    interpretation as a question of mixed fact and law in
Sattva
, being
    the importance of interpreting a contract in light of the factual matrix, is
    wholly inapplicable to the Title Policy.

[36]

The
    second significant justification for treating contractual interpretation as a
    question of mixed fact and law relied upon by Rothstein J. in
Sattva
was
    that the interpretation of a contract usually has no impact beyond the interest
    of the parties:

One central purpose of drawing a distinction between questions
    of law and those of mixed fact and law is to limit the intervention of
    appellate courts to cases where the results can be expected to have an impact
    beyond the parties to the particular dispute. It reflects the role of courts of
    appeal in ensuring the consistency of the law, rather than in providing a new
    forum for parties to continue their private litigation. For this reason,
Southam
    Inc.

identified the degree of generality (or precedential value)
    as the key difference between a question of law and a question of mixed fact
    and law. The more narrow the rule, the less useful will be the intervention of
    the court of appeal.



Similarly, this Court in
Housen

found that
    deference to fact-finders promoted the goals of limiting the number, length,
    and cost of appeals, and of promoting the autonomy and integrity of trial
    proceedings.. These principles also weigh in favour of deference to first
    instance decision-makers on points of contractual interpretation. The legal
    obligations arising from a contract are, in most cases, limited to the interest
    of the particular parties. Given that our legal system leaves broad scope to
    tribunals of first instance to resolve issues of limited application, this
    supports treating contractual interpretation as a question of mixed fact and
    law. (
Sattva
, at paras. 51-52.) [Citations omitted.]

[37]

The
    distinguishing factor between questions of law and mixed fact and law on appeal
    is the precedential value of the appellate courts intervention. It is inarguable
    that the interpretation of many contracts would likely have very limited
    precedential value. However, standard form contracts are often highly
    specialized contracts that are sold widely to customers without negotiation of
    terms. The interpretation of the Title Policy applies equally to the appellants
    and to all of Chicago Titles other customers who purchased the same policy,
    and therefore is of general importance and has precedential value in a way that
    the interpretation of other contracts may not.

[38]

In
    addition to the incompatibility of the reasoning in
Sattva
with the contract
    at issue in the current case, there is an important public policy argument that
    supports the adoption of a correctness standard for appeals involving the
    interpretation of standard form contracts such as the Title Policy. As Rothstein
    J. recognized in
Sattva
, at para. 51, provincial appellate courts play
    an important role in ensuring consistency in the law. They must be vigorous in
    fulfilling that mandate and must always be mindful of the line between
    deference to the trial court and the abdication of their statutorily-imposed
    duties.

[39]

Correction
    of legal errors lies at the heart of the responsibilities and the capabilities
    of provincial appellate courts. The standard of review analysis must respect
    the roles of both the trial and appellate courts in order for the civil justice
    system to function effectively. As Slatter J.A. wrote in
Northwest
    Territories (Attorney General) v. Association des parents ayants droit de
    Yellowknife
, 2015 NWTCA 2 (CanLII), at paras. 22-23:

In short, the standard of review analysis should not be seen as
    a competition between recognizing the legitimate role of trial courts, and
    recognizing the legitimate role of appeal courts. The two levels of court are
    equally important components of one system. It is equally important to
    recognize that appeal courts need deference in their role as much as first
    instance courts need deference in theirs. Tipping the balance too far either
    way effectively compresses the system into a single rank of court. Doing so
    undermines both the capacity of the system to give individual justice and also
    the capacity of the system to ensure equal justice under law to everyone.

The law is ultimately an honour system in the sense that its
    authority depends on the integrity and credibility of the justice system, and
    self-discipline by each level of court in staying within its mandate. A system
    that effectively transfers the fact finding role of the first instance court to
    an appeal court could essentially reduce the first instance court to an
    expensive decoration. A system that effectively puts findings of fact or mixed
    fact and law by the first instance court beyond review has the similar
    potential for analogous damage to the ability of the appeal court to play its
    role. Appeal courts are expected to operate at a higher level of legal
    generality and, crucially, are to review outcomes for legality and
    reasonableness. If the appeal court is ineluctably confined to a structure of
    findings by the first instance court, there would be little or no real review
    for legality at the level of generality of appeal courts. The confidence of
    the enlightened public in a justice system with only one real level of judicial
    authority within and for each province or territory would soon wither.

[40]

It
    is untenable for standard form insurance policy wording to be given one meaning
    by one trial judge and another by a different trial judge: see
Ledcor
,
at para. 18. Unpredictable outcomes in
    litigation only serve to encourage litigation because the more a given result
    depends on the particular trial judge, the greater the chance that litigants
    will risk going to trial. Appellate courts have a valuable role to play in
    ensuring consistency in the law and greater predictability in litigation
    outcomes: see
Northwest Territories
, at para. 28.

[41]

In
    summary, the standard of review that applies to a standard form insurance
    contract like the Title Policy is correctness. The rationales in
Sattva
that support adopting a deferential standard of review do not apply to contracts
    of this type, as the factual matrix does not meaningfully assist in interpreting
    them and their construction has broad application. For these reasons, adopting
    the correctness standard of review for these contracts best ensures that
    provincial appellate courts are able to fulfill their responsibility of
    ensuring consistency in the law.

(ii)

Admissions

[42]

As
    referenced above, in support of their motion for summary judgment the
    appellants relied upon certain admissions they said were made by Mr. Mineo on
    his cross-examination. According to the appellants, those admissions are an
    important part of their case and include the following concessions: that
    Chicago Title has no evidence that the appellants would have been able to get a
    retroactive building permit; that a potential purchaser of the Property would
    be able to refuse to close a purchase on the basis of the City Order; and, had
    the City Order made clear on its face that it was being issued due to the fact
    that the construction was unpermitted, there may have been coverage.

[43]

The
    motion judge held, at para. 39 of his reasons, that the appellants could not
    rely on Mr. Mineos admissions:

I conclude this part of my Reasons by addressing the applicants
    assertion that Mr. Mineo conceded coverage in his cross examination. I conclude
    that he did not do that. In his affidavits, Mr. Mineo deposes that he is the
    respondents Vice President of Claims. However, he states that the contents of
    his affidavits are based upon his personal information and belief. He was cross
    examined on that basis and I see nothing in either his affidavits or cross
    examination which indicates that his personal information and belief bind the
    respondent. In essence, the applicants submission is that Mr. Mineos personal
    information and belief vary the contractual terms. The purpose of this plain
    language policy is to speak for itself about the insurance coverage it
    provides.

[44]

To the extent that this paragraph can be understood to
    mean that Mr. Mineos personal
information and belief was not
    binding on the motion judge to vary clear contractual terms, it is correct. The
    motion judge was not obliged to accept Mr. Mineos understanding of the
    contract, and indeed, to the extent that Mr. Mineos evidence described strictly
    his (and by extension, Chicago Titles) subjective view of what the terms of
    the Title Policy meant, or Chicago Titles subjective intention in drafting the
    Title Policy, it was inadmissible for the purposes of contractual
    interpretation: see Hall, at p. 30.

[45]

What
    the appellants take issue with is the finding of the motion judge that Mr.
    Mineos answers on cross-examination do not bind Chicago Title. They submit
    that the answers given by Mr. Mineo bind the corporation in the same way that they
    would bind Chicago Title if he were a witness produced on an examination for
    discovery.

[46]

Counsel
    for Chicago Title does not argue that the motion judges ruling is correct. He
    concedes that the evidence of Mr. Mineo binds his client and that the motion
    judge erred. However, he argues that the appellants are misinterpreting that
    evidence and that Mr. Mineo made no admissions on his cross-examination.

[47]

Despite
    this concession and the fact that, in my view, the evidence in issue is not
    necessary to undertake the appropriate contractual analysis, I believe that it
    is necessary to address the motion judges error. Summary judgment motions are
    taking on greater prominence in our civil justice system. It is important that
    there be no confusion on issues as fundamental as whether an affiants answers on
    cross-examination bind a corporate party.

[48]

It
    has long been the law of Ontario that, where a corporation is a party to an
    action, an officer of the corporation examined for discovery under the
Rules
    of Civil Procedure
, R.R.O. 1990, Reg. 194, literally speaks for the
    corporation and what he says by way of admission on behalf of the corporation
    may be used against the corporation:
Royal Bank of Canada v. Paul Pogue
    Companies Ltd
.
(1972), 11 O.R. (2d) 171 (C.A.).

[49]

Should
    the situation be different where, as here, the officer was cross-examined under
    r. 39.02 on affidavits tendered in support of Chicago Titles position on a
    motion for summary judgment? In my view, it should not.

[50]

Sub-rule
    20.02(2) states that, in response to a summary judgment motion, a responding
    party may not rest solely on the allegations or denials in the partys
    pleadings, but must set out, in affidavit material or other evidence, specific
    facts showing that there is a genuine issue requiring a trial. As Perell and
    Morden note, [a] deponent may be cross-examined on the evidence contained in
    his or her affidavit and on any fact in his or her knowledge that is relevant
    to the determination of the motion: Paul M. Perell & John W. Morden,
The
    Law of Civil Procedure in Ontario
, 2d ed. (Markham, ON: LexisNexis, 2014),
    at para. 8.45.

[51]

In
    the present case, the affidavits filed by Chicago Title included Mr. Mineos
    views on the scope of the Title Policy and the meaning of various clauses
    therein. It would be inequitable for a corporate party to be permitted to rely
    on the evidence of one of its corporate officers in support of its position that
    there is a genuine issue requiring a trial while at the same time being
    sheltered from admissions made by that same corporate officer under cross-examination
    that could tend to undermine that position.

[52]

This
    view is supported by the Supreme Courts decision in
Hryniak
where
    Karakatsanis J. held, at para. 5, that, summary judgment rules must be
    interpreted broadly, favouring proportionality and fair access to the
    affordable, timely and just adjudication of claims. None of these goals is
    served if the party cross-examining a corporate officer produced by a corporation
    cannot rely on evidence obtained on that cross-examination in support of its
    position on the motion.

[53]

In
    conclusion, I am of the view that where a corporate officer is cross-examined
    on an affidavit filed in support of the corporations position on a motion for
    summary judgment, that officer speaks for the corporation and his or her
    admissions on cross-examination may be used against the corporation in the same
    way that admissions on an examination for discovery could be. It was an error in
    law for the motion judge to conclude otherwise.

(iii)

The Motion Judges Interpretation of the Title Policy

[54]

The
    motion judge

stated twice

in his reasons that the City Order did
    not affect the appellants ownership of the Property because it had not been
    registered on title. At para. 34, the motion judge commented:

There

is

no

evidence

capable

of

supporting an

assertion
that

the
applicants

ownership

of

the

lands

and

premises

(the

definition

of

title)
    was

affected

by

the

order,

or

by

the

compulsion

thereby

created.

There

is
    no

evidence

that

the

order

was

registered

against

the

applicants

title.

They complied

with

it,

which

probably

is

why

the

city

did

not

register

it

against title.

[55]

At

para.

40,

the motion judge

further

stated:

The

applicants

rely

in

particular

on

Mr.

Mineos

statement

in

cross
    examination

that

an

order

for

temporary

remediation

could

be

a

title
    defect. It

can

be, if

registered

on

title.

[56]

This
    conclusion, that in order for a municipal work order to affect an owners
    interest in their property under the terms of the Title Policy, it must be
    registered on title, was reached by the motion judge entirely of his own
    volition. It was not supported by any evidence regarding the registration of
    municipal work orders in the appropriate land registration systems.

[57]

On
    appeal, both parties agree that the motion judge erred in reaching this
    conclusion. LAWPRO intervened in the appeal to ensure that the motion judges error
    does not cause confusion in the profession regarding the purpose and scope of
    title insurance.

[58]

I
    agree with the parties and the intervener that the motion judges understanding
    that municipal work orders are routinely registered against title is incorrect.
    Municipal

work

orders

are not

registered

in

either

the

Registry

or

Land

Titles

systems in Ontario. They are a defect that can only be discovered by
    what are commonly known as off-title

searches.
    These searches are described by Marguerite E. Moore and Janet M. Globe in
Title
    Searching and Conveyancing in Ontario
,

6th

ed. (Markham, ON: LexisNexis,

2010), at p.

500, as follows:

There

is

a

multitude

of

potential

off-title,

land-related inquiries
which
    may be completed on behalf of a purchaser
,

lender,

or

any

other interested

person.

A
law clerk/
conveyancer

will

check

for

liens,

work orders
,
restrictions

on

use,

compliance or non-compliance

with
federal
,
provincial,
and

municipal

(by-laws)

regulations,

and

information

on

land

and government

regulation

and

programs

in

general. [Emphasis added.]

[59]

In
    an affidavit filed on appeal, LAWPRO describes a 2005 agreement among the Law
    Society of Upper Canada and major title insurers, including Chicago Title. The
    agreement provides that the title insurers release, indemnify, and save
    harmless Ontario lawyers for any claims arising under a title insurance policy
.
Pursuant to the agreement, LAWPRO was able to pass on the costs of
    defending claims and indemnifying against potential settlements or judgments in
    title-insured transactions to the title insurers in exchange for LAWPRO
    agreeing to waive the real estate transaction levy surcharge that would
    otherwise be payable in any transaction not covered by title insurance.

[60]

According
    to its affidavit, LAWPRO understood that title meant more than just those
    claims/impediments/documents that are registered against title, and also included
    defects that would only be discoverable through off-title searches. LAWPRO
    submits that unless the decision of the motion judge is overturned, the agreement
    with the title insurance companies would not cover any claims that arise off-title.
    Consequently, those claims will be the responsibility of LAWPRO,
    notwithstanding that it has already agreed to waive the surcharge.

[61]

I
    accept the position advanced by the parties and the intervener that the motion
    judge erred in his conclusion that title insurance only responds to defects
    registered against title. That conclusion, if accepted, would undermine one of
    the fundamental purposes of title insurance, being coverage of off-title defects.
    The restrictive scope of title insurance contemplated by the motion judge would
    cause chaos in the real estate bar as, no doubt, purchasers of title insurance
    throughout the province had instructed their solicitors not to conduct
    off-title searches on the understanding that such defects were covered by their
    title insurance.

[62]

While
    Chicago Title has conceded that the motion judge erred in his conclusion
    regarding the requirement that work orders be registered, it maintains that the
    motion judges finding that there is no coverage is correct and that his
    reasoning is sound.

[63]

I
    disagree. On a review of the motion judges reasons, it is apparent that his misapprehension
    of the scope of title insurance permeated his analysis of the Title Policy. For
    example, the motion judge explicitly rejected the applicability of Covered
    Title Risks 13 and 15 on the basis that nothing was registered on title. More
    broadly, when considering his reasons as a whole, the motion judges approach was
    plainly that title insurance offers very limited coverage and that the claim
    asserted by the appellants clearly falls outside of his understanding of the
    purpose of title insurance and the risks it is designed to cover. This caused
    the motion judge to adopt an unduly restrictive interpretation of the coverage
    provisions in the Title Policy.

[64]

In
    my view, the decision of the motion judge is not correct. Leaving aside the impact
    of the evidentiary error regarding Mr. Mineos admissions, it contains numerous
    legal errors. Fundamentally, as described below, the motion judge failed to
    properly apply the governing principles of interpretation for contracts of
    insurance. Further, as I will also explain, he interpreted clause 11 of the
    Title Policy in a manner that is inconsistent with the actual wording of the
    clause. These errors are distinct from, and compound, his factual error regarding
    the registration of municipal work orders.

[65]

In
    light of these errors, it is clear that the motion judges interpretation of
    the Title Policy cannot stand. Below, I consider the general rules of
    construction of insurance contracts and provide my analysis of the correct interpretive
    approach to, and interpretation of, the Title Policy.

(iv)

Interpretation of the
    Title Policy

[66]

The
    following principles of interpretation for insurance contracts cited by the
    appellants in their factum are well settled in Canadian law and are not
    disputed by Chicago Title:

·

The

court

must

search

for

an

interpretation

from

the

whole

of

the contract

and

any relevant

surrounding

circumstances

that
    promotes the true intent and

reasonable

expectations

of

the

parties

at

the

time

of

entry

into

the
    contract;

·

Where

words

are

capable

of

two

or

more

meanings,

the

meaning

that

is
    more

reasonable

in

promoting

the

intention

of

the

parties

will

be

selected;

·

Ambiguities

will

be

construed

against

the

insurer

having

regard

to

the reasonable

expectations

of

the

parties;

·

An

interpretation

that will result in either

a

windfall

to

the

insurer

or an

unanticipated

recovery

to

the

insured

is to

be

avoided;

·

Coverage

provisions

are

to

be construed broadly, while exclusion clauses

are

to

be

construed

narrowly;

·

The

contract

of

insurance

should

be

interpreted

to

promote

a

reasonable
    commercial

result;

and

·

A

clause should

not

be

given

effect
    if to
do

so
would
nullify

the
coverage

provided

by

the

policy.

See e.g.
Amos v. Insurance Corp. of British
    Columbia
, [1995] 3 S.C.R. 405, at para. 19;
Non-Marine Underwriters,
    Lloyds London v. Scalera
, 2000 SCC 24, [2000] 1 S.C.R. 551, at paras.
    67-71;
Derksen v. 539938 Ontario Ltd
., 2001 SCC 72, [2001] 3 S.C.R.
    398, at para. 49;
Zurich Insurance Co. v. 686234 Ontario Ltd
. (2002), 62
    O.R. (3d) 447 (C.A.), leave to appeal refused, 189 O.A.C. 197 (note), at paras.
    23-28;
Tannahill v. Lanark Mutual Insurance Co
., 2010 ONSC 3623, 86
    C.C.L.I. (4th) 69, at para. 26; and,
Sams Auto Wrecking Co. v. Lombard
    General Insurance Co. of Canada
, 2013 ONCA 186, 114 O.R. (3d) 730, at
    para. 37.

[67]

Responsible
    consumers purchase insurance policies for indemnification. Canadian courts have
    developed these fundamental principles of interpretation as a means of ensuring
    that these consumers are treated fairly and that their reasonable expectations
    are protected. The principles are to be applied rigorously in the
    interpretation of insurance contracts. It is not sufficient, as the motion
    judge did in this case, to cite the principles and then move on to an
    interpretation of a contract of insurance that is free from any analysis of how
    the principles apply to the contract in issue.

[68]

As
    mentioned above, the appellants rely upon several Covered Title Risks under the
    Title Policy. For the purpose of this appeal, it is sufficient to focus on
    clause 11, which provides for coverage in circumstances where Your

Title

is

unmarketable,

which

allows

another

person

to

refuse

to perform

a

contract

to

purchase,

to

lease,

or

to

make

a

mortgage

loan.

[69]

Contrary
    to Chicago Titles submission before this court, in order to understand the
    meaning of the term unmarketable in clause 11, it is unnecessary to look
    beyond the wording of the clause. This is a standard form contract and Chicago
    Title defined within the clause those circumstances that would constitute an
    unmarketable title. Chicago Title is fixed with the language it chose to
    include in its contract. That language must be interpreted broadly as this is a
    coverage provision.

[70]

The
    motion judge found that the Title Policy provided coverage for the specific risks
    as described therein, but only if they affect the appellants title.  According
    to the motion judge, the appellants title has not been affected because it is
    as marketable now as it always was, although it is now subject to a duty to
    disclose the nature of the structural problems, and the Property would therefore
    be sold for an amount that is less than what the appellants paid for it.
    Chicago Title adopts this analysis on this appeal.

[71]

Again,
    I disagree. It is entirely irrelevant and speculative to postulate, as the
    motion judge did and Chicago Title invites us to do, that the appellants might
    be able to sell the Property to someone else at some undetermined lower price.
    The fact that someone might be willing to purchase a dangerously defective
    building does not mean that it is marketable under the Title Policy.
    Marketability must be determined in accordance with the language of clause 11.

[72]

The
    motion judges interpretation of clause 11 is overly restrictive and violates
    the principle that coverage provisions must be construed broadly. It also
    imports a definition of unmarketable that is inconsistent with the wording of
    clause 11. The correct approach to the issue of coverage is to determine, first,
    whether the defect in issue has rendered the Property unmarketable as that term
    is defined in clause 11 (i.e. can a potential purchaser refuse to close an agreement
    of purchase and sale on learning of the defect). The next question is whether
    coverage is excluded under the exclusions or limitations of liability
    provisions of the Title Policy. In my view, for the reasons that follow, clause
    11 of the Title Policy provides coverage for the appellants and is not caught
    by any contractual exclusion or limitation.

[73]

Chicago
    Title does not contest that the discovery of the dangerous condition of the
    Property would permit a potential purchaser to refuse to close a purchase
    transaction. However, it submits that the structural condition of the Property
    is a latent defect that is not subject to coverage under the Title Policy. It
    argues that the failure of the previous owner to obtain the necessary permit
    from the City of Toronto was not the cause of the problem; it was the improper
    construction that caused the problem.

[74]

I
    would not give effect to this argument. There is no issue that the unpermitted
    work led to the issuance of the City Order. It is clear that had the necessary
    approval for this dangerous construction been sought from the City of Toronto
    it never would have been granted. The dangerous condition of the Property, therefore,
    flows directly from the failure of the previous owner to attempt to obtain the
    necessary municipal approval. That failure has made the appellants title
    unmarketable within the meaning of clause 11 of the Title Policy.

[75]

Chicago Title also contends that the Title Policy was never
    intended to cover the type of loss suffered in the present case, and had it
    been so, the premium would have been much higher. There are two problems with this
    contention. First, as I mentioned earlier, a partys subjective intentions are
    not relevant to the exercise of contractual interpretation. Second, if this
    argument were accepted it would, in effect, reverse the business relationship
    between the parties such that the appellants become the insurers of Chicago
    Title, with the appellants bearing the loss caused by Chicago Titles failure
    to properly draft the coverage provisions and properly price the policy. This is
    a commercially absurd result.

[76]

In
    my view, there is coverage under Covered Title Risk 11. The analysis now shifts
    to whether the coverage is negated by any exclusions or limitations of
    liability in the Title Policy.

[77]

Chicago
    Title relies upon the following language from the exclusions section of the
    Title Policy to deny coverage on the basis that coverage is excluded for
    defects discovered after the policy date:

In

addition

to

the

Exceptions

in

Schedule B,

you

are

not

insured

against loss, costs,

legal

and/or

notarial

fees,

and

expenses

resulting

from:



3. Title risks:



(d) that first affect your Title after the policy date 
    this does not limit the coverage in items 3, 20 and 21 of the Covered Title
    Risks.

[78]

Chicago
    Titles position is that the unpermitted construction was discovered many years
    after the policy date and, consequently, there is no coverage. I would decline
    to give effect to this argument for the following reasons.

[79]

This
    is an exclusion provision and must be restrictively interpreted. There is
    nothing in the Title Policy indicating that a defect rendering title
    unmarketable under clause 11 that is extant at the time of the policy date is
    not covered unless the insured discovers the defect as at the policy date. The
    introduction of this discoverability concept is a significant broadening of the
    exclusion provision that is not supported by the language of the Title Policy.
    The fact is that the unpermitted construction affected the appellants title on
    the date of purchase; in other words, their title was unmarketable within the
    meaning of the Title Policy from the moment they acquired the Property, even if
    they were not yet aware of that fact.

[80]

This
    conclusion is supported by this courts decision in
Krawchuk v. Scherbak
,
    2011 ONCA 352, 106 O.R. (3d) 598, leave to appeal refused, 297 O.A.C. 395
    (note). In that case, t
he
purchaser
    of a home discovered serious latent structural and plumbing defects after
    closing. She was successful in claiming under her title insurance policy and
    then sued the vendors, her real estate agent and the real estate brokerage. The
    court was focused on her ability to assert claims against these parties and not
    on the issue of coverage under the title policy. Nonetheless, Epstein J.A.s
    comments, at para. 105, are instructive:

In my view, title insurance is a contract of indemnity,
    designed to compensate for actual loss:  see
Grunberger v. Iseson
, 75
    A.D. (2d) 329, 331 (N.Y. App. Div. 1980).  While title insurance is different
    from most insurance products in that it has not traditionally insured against a
    future event but has been used only to insure against loss from a title defect
    in existence at the date of the policy, it is nonetheless designed to respond
    as well to a future loss.  Ms. Krawchuks loss from the existing defects in the
    house crystallized when it became necessary for her to spend the money to do
    the repairs required by the Citys order to comply, an event that took place
    after the policy was in place.

[81]

Similarly,
    in the present case, the unpermitted construction was an existing defect that
    crystalized when the appellants became aware of the defect.

[82]

Chicago Title also relies upon the motion judges finding that
    the appellants have not suffered any actual loss. The motion judge held that,
under clause (a) of the Limitation of the Companys Liability
    section of the Title Policy, the appellants are entitled only to their actual
    loss. Having made no permanent repairs, their actual loss does not include
    unincurred expenditures.

[83]

To
    the extent that the motion judge held that the loss has not been incurred
    because the City Order was restricted to temporary repairs, he is incorrect
    because logically an order that is explicitly marked as temporary means that
    other permanent work is required. It appears that the motion judge meant that
    the appellants would only be compensated after they went into their own pockets
    to pay for the repairs. This would be a remarkable interpretation that would
    mean that only those insureds who had the financial resources to cover their
    loss would receive compensation. In either case, this is a highly restrictive
    interpretation of this limitation of liability and it cannot stand.

[84]

I
    conclude that clause 11 provides coverage and indemnification regarding the
    defect at issue in this case, being the unpermitted construction, and it is not
    caught by any exclusion or limitation of liability under the Title Policy.

F.

Disposition

[85]

I
    would allow the appeal, set aside the order below, and grant the appellants
    motion for summary judgment on the issues of coverage and indemnification under
    the Title Policy.

[86]

The
parties agree that the successful party on appeal is entitled to costs
    of the appeal in the amount of $18,000 on a partial indemnity basis.
    Accordingly, I would award the appellants $18,000 in costs of the appeal,
    inclusive of all fees, disbursements and applicable taxes.

[87]

On the motion below, the motion judge awarded no costs. The
    appellants submit that, if successful on the appeal, they are entitled to their
    costs of the motion on a partial indemnity basis, in the amount of $32,809.79,
    including fees, disbursements and applicable taxes. Chicago Title argues that,
    if the appellants are successful on the appeal, this court should direct the
    parties to make further submissions on the appropriate costs to be awarded on
    the motion.

[88]

I would decline this request. The relief requested by the appellants
    in their notice of appeal includes the costs of the summary judgment motion.
    Parties are expected to come to this court ready to argue all issues on the
    appeal, including costs. I am also cognizant of the significant disparity in resources
    between the appellants and Chicago Title. Simply put, Chicago Title, a large
    insurance corporation, can easily afford to continue making submissions,
    whereas the appellants do not have unlimited resources to continue litigating
    this matter indefinitely.

[89]

In
    my view, there is no reason to deprive the appellants, who should have been
    successful on their summary judgment motion, of their costs. This case involved
    the interpretation of Chicago Titles standard form contract. Chicago Titles
    interpretation of that contract was incorrect and, to the extent there was any
    confusion about its terms, the responsibility lies with Chicago Title as the drafter
    of the Title Policy.

[90]

I
    am also satisfied that the quantum of costs sought, which is less than what
    Chicago Title claimed on the motion, is entirely reasonable, fair, and
    proportionate. Therefore, I would order that Chicago Title pay the appellants their
    costs of the motion below, fixed in the amount of
$32,800, inclusive of all fees, disbursements and
    applicable taxes.

Released: December 3, 2015 EAC                       C.
    W. Hourigan J.A.

I
    agree E. A. Cronk J.A.

I
    agree M. L. Benotto J.A.


