



COURT OF APPEAL FOR ONTARIO

CITATION: Aviva Canada Inc. v. 1843538 Ontario Inc., 2020
    ONCA 581

DATE: 20200915

DOCKET: C67255

van Rensburg, Pardu and Huscroft JJ.A.

BETWEEN

Aviva Canada Inc.

Plaintiff/Defendant by Counterclaim

(Respondent)

and

1843538
    Ontario Inc.
,
c.o.b. Mississauga Collison Centre
,
and/or

McLaren
    Collison
,
Fady Rony Warda
,
Rony Amanuel Warda
,

and
    Michael Wetzel

Defendants/Plaintiffs by Counterclaim

(
Appellants
)

Lou Ciotoli, for the appellants 1843538 Ontario Inc.,
    c.o.b. Mississauga Collison Centre, and/or McLaren Collison, Fady Rony Warda
    and Rony Amanuel Warda

Daniel I. Reisler and Richard Tapp, for the respondent

Heard: September 4, 2020 by video conference

On
    appeal from the order of Justice Lorne Sossin of the Superior Court of Justice,
    dated June 21, 2019, with reasons reported at 2019 ONSC 3874.

REASONS FOR DECISION

[1]

The appellants appeal from the order of the motion judge dismissing their
    motion to dismiss the respondents claim under Rule 21 and striking paragraphs
    of their statement of defence and counterclaim under Rule 25 of the
Rules of
    Civil Procedure
, R.R.O. 1990, Reg. 194. The court was informed that the appellants
    co-defendant Michael Wetzel has settled with the respondent and is no longer
    part of the case.

[2]

This appeal arises out of an independent investigation the respondent
    insurer undertook to study fraud in the auto-collision industry. In short, the
    respondent insured several vehicles purchased by its wholly owned subsidiary.
    The subsidiary damaged these vehicles intentionally and submitted them to body
    shops that had repaired vehicles for the respondent in the past. Following
    repair of the vehicles, the respondents appraiser examined them and the work
    that had been performed. The respondent claimed that the appellants included
    parts on their appraisal to be refinished or replaced that did not require any
    repair and, in addition, deliberately damaged the vehicles in order to perform
    additional repairs. The respondent seeks to recover damages for fraudulent
    misrepresentation, breach of duty of honest performance of a contract, unjust
    enrichment, and conspiracy to commit fraud, in addition to damages for trespass
    to property, investigative costs, and punitive and exemplary damages.

[3]

We conclude that the motion judge made no error in permitting the
    respondents claim to proceed. However, the impugned paragraphs of the
    statement of defence and counterclaim can be amended rather than struck. Accordingly,
    the appeal is allowed in part.

The claim was properly allowed to proceed

[4]

The motion judge did not err in finding that it is not plain and obvious
    that the respondents claim cannot succeed as a result of the
ex turpi causa
doctrine. In other words, the motion judge did not err in refusing on this Rule
    21 motion to dismiss the respondents claim on the basis of
ex turpi causa.
The motion judge applied the law as set out by the Supreme Court in
Hall v.
    Hebert
, [1993] 2 S.C.R. 159 and
British Columbia v. Zastowny
,
    2008 SCC 4, [2008] 1 S.C.R. 27. He found that it was not plain and obvious the
    respondent had either committed criminal mischief or an act of fraud and
    misrepresentation warranting the application of the
ex turpi causa
doctrine. These findings are entitled to deference and there is no basis to
    interfere with them.

[5]

Nor did the motion judge err in refusing to strike the respondents
    claims for the costs of its investigation and punitive damages on the basis
    that the respondent should not be able to claim a profit or windfall beyond
    their actual losses with respect to the subject vehicles. The motion judge
    properly concluded that these were novel claims that should not be determined
    on a Rule 21 motion.

The pleadings can be amended

[6]

The motion judge found that paras. 7 and 14 of the appellants statement
    of defence and counterclaim should be struck because a civil defence of
    entrapment has not been recognized and, even if it were recognized, it is plain
    and obvious that the conduct of the respondent did not meet the standard for
    entrapment. The appellants now seek leave to amend paras. 7 and 14 of their
    statement of defence and counterclaim. They argue that these paragraphs do not
    plead entrapment and use the word entrapping only to describe the nature of
    the investigation conducted by the respondent. The appellants want only to plead
    the defence of
ex turpi causa
.

[7]

The respondent concedes that this court should give leave to the
    appellants to amend paras. 7 and 14 of their pleading. We agree. Although the
    appellants did not ask the motion judge for leave to amend, it is apparent from
    the motion judges reasons that he contemplated that the appellants could
    continue to raise the defence of
ex turpi causa
.

[8]

Accordingly, and with consent of the parties, the appellants are granted
    leave to amend paras. 7 and 14 of their statement of defence and counterclaim
    to read as follows:

7. Instead, the Defendants plead that the repairs were not
    owned by consumers of auto body repair services, but by the plaintiff or its
    designates itself, in order to test for the legitimacy of these repairs.

14. These Defendants plead, and the fact is, that the
    Plaintiff, of its own accord or in concert with others, resorted to the
    commission of illegal, indeed criminal, activity. As a result, these Defendants
    plead and rely on the doctrine of ex turpi causa non oritur actio.

Disposition

[9]

For these reasons, the appeal is allowed in part. The appellants are
    granted leave to amend their statement of defence and counterclaim as set out above.

[10]

The
    appellants have failed on the main aspect of the appeal and the respondent is
    entitled to costs. The appellants success in securing an amendment of the
    pleadings is best understood as an indulgence. As a result, the respondent is
    entitled to costs of the appeal, fixed in the agreed amount of $5,000,
    inclusive of taxes and disbursements.

K. van Rensburg J.A.

G. Pardu J.A.

Grant Huscroft J.A.


