



COURT OF APPEAL FOR ONTARIO

CITATION: Brown v. Laurie, 2019 ONCA 175

DATE: 20190306

DOCKET: C65697

Simmons, Tulloch and Brown JJ.A.

BETWEEN

Brad Jeffrey Brown

Respondent (Plaintiff)

and

Donna
    Laurie, personally, and Donna Laurie

in her capacity as personal representative
    of the Estate of Lachlan Laurie

Appellants (Defendants)

David B. Williams and Rob Danter, for the appellants

John A. Nicholson, for the respondent

Heard: February 25, 2019

On appeal from the order
    of Justice Michael D. McArthur of the Superior Court of Justice, dated June 22,
    2018 with reasons reported at 2018 ONSC 3071.

REASONS FOR DECISION

OVERVIEW

[1]

The respondent, Brad Brown, and Lachlan Laurie operated a jewellery
    store in London, Ontario through their company, 1079597 Ontario Limited. Their
    business venture started in July, 2014. As part of their business arrangement, they
    each took out a life insurance policy on the others life, with the company paying
    the premium. One policy insured Mr. Lauries life for $250,000 (the Policy);
    it named Mr. Brown as the sole beneficiary.

[2]

Unfortunately, Mr. Laurie became ill less than a year after the business
    venture started. Mr. Laurie died on November 12, 2015.

[3]

Disputes then arose between Mr. Brown and Mr. Lauries estate. His
    widow, the appellant Donna Laurie, acts as estate trustee of the estate. The
    parties agreed to place the proceeds from the Policy in an escrow account (the
    Proceeds).

[4]

Mr. Brown commenced this action against the appellants seeking two forms
    of relief. First, he sought a declaration that he was entitled to the Proceeds
    as the named beneficiary under the Policy. Second, Mr. Brown sought judgment on
    a $42,000.00 promissory note that he alleged Mr. Laurie had executed in respect
    of the balance of the subscription price owed for Mr. Lauries shares in the
    company. Mr. Brown alleged that a share purchase agreement he, 1079597 Ontario
    Limited and Mr. Laurie entered (the Share Purchase Agreement) misstated the
    purchase price for Mr. Lauries share and that Mr. Laurie gave him the
    promissory on account of the balance owing for his shares.

[5]

In their Fresh as Amended Statement of Defence and Counterclaim, the
    appellants deny any liability on the promissory note and plead that Mr. Brown
    would be unjustly enriched if he were to receive the Proceeds. The appellants
    also counterclaim seeking: (i) an order that they are entitled to the Proceeds
    (a) by virtue of an agreement made by Mr. Lachlan and Mr. Brown that the
    proceeds of the insurance policies were to go to the estate of the deceased
    shareholder or (b) by virtue of a constructive trust; and (ii) a mandatory
    order requiring Mr. Brown to purchase the Estates shares in the company for
    $250,000.

[6]

Mr. Brown moved for summary judgment on his claims in respect of the Proceeds
    and the promissory note. He also sought summary judgment dismissing the
    counterclaims.

[7]

The motion judge granted summary judgment declaring Mr. Brown entitled
    to the escrowed Proceeds and he dismissed the appellants counterclaim that
    they are entitled to the Proceeds. However, the motion judge did not grant Mr.
    Brown summary judgment on the promissory note. Instead, he directed a trial of
    that claim.

[8]

The appellants argue that the motion judge made two main errors: (i)
    granting judgment in respect of the Proceeds based solely on the documentary
    evidence without hearing oral evidence; and (ii) granting judgment on the
    Proceeds claim while directing a trial on the promissory note claim when the
    two matters are interconnected and not separable.

[9]

We are not persuaded by either submission.

FIRST ISSUE:
    WHETHER A GENUINE ISSUE REQUIRING A TRIAL EXISTS REGARDING ENTITLEMENT TO THE INSURANCE
    PROCEEDS

[10]

There
    is no dispute that Mr. Brown was designated as the sole beneficiary of the
    Policy. Notwithstanding that designation, the appellants claim a genuine issue
    requiring a trial exists that they are entitled to the Proceeds on two main
    grounds.

(1)

The buy/sell agreement

[11]

First,
    the appellants submit that the record discloses a triable dispute as to whether
    Mr. Brown and Mr. Laurie had entered into a buy-sell agreement under which the
    proceeds from the insurance policy on one partners life would be used to
    purchase his shares in the company from his estate.

[12]

The
    appellants point to several pieces of evidence in support of the existence of a
    buy-sell agreement: a notation on the application for the insurance Policy that
    its purpose was for Buy Sell; a handwritten note apparently made by an
    insurance broker, Mr. Mike Smolders, memorializing a discussion with the two
    business partners about a buy/sell; and Ms. Lauries evidence that her
    husband had told her that all of the insurance proceeds were to be paid to her.
    They submit this evidence discloses a genuine issue requiring a trial as to the
    existence of a buy-sell agreement.

[13]

The
    motion judge held that Mr. Brown and Mr. Laurie had not entered into a buy-sell
    agreement. First, he observed that the Share Purchase Agreement made no mention
    of a buy-sell agreement. Next, he concluded that Ms. Lauries evidence about
    her discussions with her husband constituted inadmissible hearsay. We see no
    error in that ruling.

[14]

Further,
    the motion judge viewed the note by the insurance broker as only supporting an
    inference that a buy-sell agreement never advanced beyond initial discussions
    between the business partners. We see no palpable and overriding error in that
    finding.

[15]

Finally,
    the motion judge placed great weight on a May 31, 2015 email sent by Mr. Laurie
    to Mr. Brown, about six months before Mr. Lauries death, in which he urged Mr.
    Brown to consider directing $100,000 of the insurance proceeds to his family
    following his death. At para. 42 of his reasons, the motion judge wrote that
    the clear and obvious inference from this email was that Mr. Laurie did not
    have a subjective belief that there was a buy-sell agreement requiring payment
    of the insurance proceeds for the shares. We see no palpable and overriding
    error in that inference; it was clearly open for the motion judge to make given
    the clear language of the email.

[16]

After
    considering the entirety of the evidence, the motion judge concluded, at paras.
    48 and 49:

The evidentiary burden is on the Estate to show a genuine issue
    requiring a trial on the issue of whether there was a contract governing the
    payment of life insurance proceeds. When considering the note of Mr. Smolders
    in the context of the totality of the evidence, this court finds that there is
    no genuine issue requiring a trial in relation to entitlement to the proceeds. Neither
    have the defendants raised a genuine issue respecting the existence of a
    buy-sell agreement. The evidentiary record does not demonstrate that the
    proceeds of insurance were to fund the purchase of the shares or that either
    party was otherwise contractually obligated to do so. On this evidence the
    Estate has not led evidence to show a genuine issue.

I find there was term life insurance on the other personally
    and nothing more. There was also no agreement or contract between the plaintiff
    and Mr. Laurie that the proceeds of life insurance were to go to the Laurie
    Estate.

[17]

Those
    conclusions were fully supported by the evidence.

[18]

The
    appellants submit that the motion judge required
viva voce
evidence
    from Ms. Laurie and Mr. Smolders before determining that no buy-sell agreement
    existed. We disagree. Ms. Lauries affidavit disclosed that her only evidence
    on the issue was the hearsay statement from her husband. As to the evidence of
    Mr. Smolders, the onus lay on the appellants to demonstrate the existence of
    some circumstance that justified departing from the clear beneficiary
    designation in the Policy. They were required to put their best foot forward
    on that issue. Yet, they did not file an affidavit from Mr. Smolders or examine
    him under r. 39.03. The motion judge did not err by granting summary judgment
    in the absence of such evidence.

[19]

Finally,
    the appellants argue that the motion judge erred in ruling that there was no
    genuine issue requiring a trial in relation to its argument that Mr. Browns
    failure to keep the companys minute book up-to-date meant that he never had a
    legal interest in the shares of the company, with the result that the parties
    Share Purchase Agreement was void. We see no need to deal with the details of
    this argument because we agree with the motion judges conclusion, in para. 71
    of his reasons, that:

Even if the share purchase agreement was void, the plaintiff and
    Mr. Laurie would have still have had a pecuniary and insurable interest in one
    another. The entitlements under the insurance policy are unaffected.

(2)

Constructive trust

[20]

The appellants
    also argue that a genuine issue requiring a trial exists as to whether the Proceeds
    are impressed with a constructive trust in their favour. The motion judge
    rejected that argument, stating at paras. 52-54:

To establish a constructive trust, the defendants must prove
    that the Mr. Laurie was wrongfully deprived of his rights that Mr. Brown should
    not possess due to unjust enrichment, interference or due to a breach of a
    fiduciary duty by the plaintiff.

I find that the there is no deprivation to the Laurie estate
    nor did Mr. Brown possess trust monies due to unjust enrichment, interference
    or breach of fiduciary duty. Mr. Brown received insurance funds as the parties
    jointly anticipated from the outset.

Furthermore, there is no basis to find any wrongful conduct by
    the plaintiff that could give rise to a juristic reason supporting a finding of
    unjust enrichment.  On the totality of the evidence, I find that the
    plaintiffs conduct does not provide the basis for any trust claim by the
    defendants to the insurance proceeds.

[21]

We
    see no error in that conclusion. Once the motion judge had found that Mr. Brown
    and Mr. Laurie never entered into a buy-sell agreement, no basis existed on the
    evidence to challenge the payment of the Proceeds to Mr. Brown.

SECOND ISSUE:
    THE SUITABILITY OF GRANTING PARTIAL SUMMARY JUDGMENT

[22]

The
    appellants further submit that the motion judge erred in granting summary
    judgment on the Proceeds claim but directing a trial for the promissory note
    claim. They contend that both claims involve intertwined issues, rendering it
    inappropriate to grant partial summary judgment.

[23]

We
    disagree. Mr. Brown moved for summary judgment on his entire claim. The motion
    judge was alive to the risks of granting summary judgment on only part of the
    claim. He canvassed the factors discussed by this court in
Butera v. Chown,
    Cairns LLP
, 2017 ONCA 783, 137 O.R. (3d) 561 at paras. 26 to 35. He
    concluded that the dangers of duplicative or inconsistent findings did not
    arise in the circumstances: at para. 63. As a result, he granted partial
    summary judgment in respect of the Proceeds and directed the claim as to the
    validity and enforceability of the promissory note to proceed to trial: at
    para. 72.

[24]

We
    see no error in principle in that exercise of discretion by the motion judge.
    The appellants advanced two defences to resist payment of the promissory note:
    Mr. Laurie never signed a promissory note; alternatively, if he did, the note
    was discharged through the payment of $50,000 on July 28, 2014 under the Share
    Purchase Agreement. Those defences are not connected to the grounds the
    appellants advanced for their claim to the Proceeds. In the circumstances, it
    was open to the motion judge to grant summary judgment only on the claim
    regarding the Proceeds.

[25]

That
    said, we would observe that the summary judgment motion was argued one year
    ago, with judgment rendered eight months ago. The appellants were entitled to
    appeal the judgment, which they did. In the meantime, the trial of the
    promissory note claim is on hold. When the scheduling dust settles, it may well
    be that the trial of the promissory note claim does not take place until almost
    two years after the summary judgment motion was argued. That is a most
    unfortunate delay for an action involving a claim of only about $300,000.
    Before scheduling a summary judgment motion for a claim of that size, we would
    encourage both counsel and the motions Bench to consider faster and cheaper
    alternatives for conducting a final adjudication on the merits of the claim.
    This action required no more than three days for trial. Had that trial taken
    place a year ago, the parties would not be facing the prospect of further
    litigation costs following this decision.

DISPOSITION

[26]

For
    the reasons set out above, we dismiss the appeal.

[27]

The
    appellants shall pay Mr. Brown his costs of the appeal fixed in the amount of
    $8,500, inclusive of disbursements and H.S.T.

Janet Simmons J.A.

M. Tulloch J.A.

David Brown J.A.


