Law Times

Page 2 April 23, 2018 • lAw Times www.lawtimesnews.com preted a certain way, I think it really does open up the door for insurers to continue to make the same argument," she says. Dunbar says the words "paid to" are truly ambiguous and that Stewart Title probably intended for the language of the exception to say that the funds have to be "received" by the borrower. "The problem here is the lan- guage that they used. I know what they intended and what they meant to say, but because what they're meaning to say and what's actually on paper can be interpreted [in] different ways, the court finds there was an am- biguity," she says. Peter Griffin, one of the law- yers representing the insurance company, declined to com- ment on the decision and said he was not in a position to dis- cuss whether his client expects to seek leave from the Supreme Court of Canada to appeal the ruling. Tighe says the decision will have substantial implica- tions for a great number of cur- rent claims where title insurers have attempted to rely on this exception. LT He says it could have also meant that lawyers who repre- sent lenders in fraudulent mort- gage transactions could end up being liable to their clients. "If the title insurer success- fully denies the coverage, the lawyer for the lender is the one holding the bag in terms of the liability to the lender," he says. The exception in the policy at issue held that if the proceeds of the insured mortgage are "paid to any person or entity" other than the registered titleholder, then Stewart could deny coverage. Stewart Title argued that the policy required that the mort- gage proceeds be paid directly to the registered titleholder, but that in this instance that did not happen, as the money was paid to the borrower's lawyer. LawPRO, which was involved because of the action against Singer, argued that the words "are paid to" should not be con- fined to a direct payment to the titleholder and that it allowed for many methods of payment, in- cluding to the borrower's trustee. The majority decision at the Court of Appeal found that the exception clause is ambiguous and that the term "are paid to" should not be interpreted to ex- clude the conventional way of paying mortgage proceeds. The Court of Appeal noted that pay- ment of mortgage money to a borrower's lawyer in trust is rou- tine practice that would not be reasonably expected to disquali- fy mortgage fraud insurance. "Moreover, disqualifying coverage where payment is made to the borrower's lawyer in trust would not produce a reasonable commercial result," wrote Jus- tice David Paciocco on behalf of the majority of the three-judge panel. "As the application judge pointed out, if the borrower has counsel, the lender's lawyer can- not deal directly with the bor- rower and must deal with the lawyer." The lone dissenting judge, Justice Ian Nordheimer, said that the language of the clause was unambiguous and applied to the situation. As the money was not paid to the registered titleholder, they were not paid in accordance with the policy and Stewart was entitled to deny cov- erage, he said. Camille Dunbar, a lawyer with Koskie Minsky LLP, who was not involved in the decision, says the analysis of the majority's decision was sound, but lower courts might latch on to Nord- heimer's strong dissent. "Even though the majority of the Court of Appeal has ruled that this exception is to be inter- fraud. You should be careful the next time you threaten some- one," according to the decision. The physiotherapist started a claim against Falletta's client, the lawyer and his firm, Cen- tennial Law Group LLP. When the plaintiff contacted Falletta again to inform him of his intention to sue to retrieve the unpaid account, McDow- ell's decision said the lawyer continued to threaten criminal charges in a second email. The plaintiff withdrew the claim against Falletta's client, but it proceeded with the claim against the lawyer and his firm. The outstanding issue for McDowell to rule on in the pro- ceeding was whether Falletta should pay punitive damages, as the defendants no longer dis- puted the outstanding account. In his decision, McDowell cited a 2002 ruling, Whiten v. Pilot, in which the Supreme Court of Canada held that "pu- nitive damages can be awarded in the absence of an accompa- nying tort" and that the require- ment of an independent tort would complicate proceedings. The plaintiff sought $23,000 in punitive damages, but Mc- Dowell awarded $5,000. Fall- etta has appealed the matter to the Divisional Court, contend- ing that McDowell erred by al- lowing information that was discussed at the settlement con- ference at trial. Falletta's lawyer, Ronald Allan, is arguing that McDowell made a number of other errors, including in how he applied the principles set out in Whiten v. Pilot. Allan says that in breach of contract cases relying on Whiten that involve punitive damage awards, the offending party was always in a position of power and there was usually or always a duty in law owed to the offending party. In those cases, the offending party also exercised its power over the other party in an unfair man- ner, which was done over the course of a long period of time, Allan says. "The facts of this case do not resemble Whiten or cases rely- ing on Whiten in this regard," Allan says. "The plaintiff in this in- stance was not able to establish a tort and, thus, in our view, there should not have been an award of punitive damages based on the facts." LT NEWS Physiotherapist awarded damages Continued from page 1 Continued from page 1 Decision will have substantial implications Untitled-1 1 2018-04-12 11:13 AM

• Cover