CANADIAN CASES on the LAW of INSURANCE Fifth Series/Cinqui`Eme S´Erie Recueil De Jurisprudence En Droit Des Assurances

CANADIAN CASES ON THE LAW OF INSURANCE Fifth Series/Cinqui`eme s´erie Recueil de jurisprudence en droit des assurances

VOLUME 11 (Cited 11 C.C.L.I. (5th))

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[Indexed as: Durham District School Board v. Grodesky] Durham District School Board, Plaintiff and Bodan Daly Grodesky, “John Doe” Grodesky, “Jane Doe” Grodesky, Colten Todd Douglas James, Todd James and “Jane Doe” James, Defendants (Appellant) and ING Insurance Company of Canada, Third Party (Respondent) Ontario Court of Appeal Docket: CA C54226 2012 ONCA 270 Robert J. Sharpe, R.A. Blair, R.G. Juriansz JJ.A. Heard: February 24, 2012 Judgment: April 27, 2012 Insurance –––– Actions on policies — Commencement of proceedings — Obligations of insurer — To defend — Interpretation of policy –––– Defen- dant son allegedly started fire at high school — Plaintiff school board brought action against son, his father, and others for damages resulting from fire — Claim alleged that father failed to act — Father brought third party claim against insurer for indemnification — Insurer brought successful motion for determination that it was not obligated to defend father, and that third party action should be dismissed — Father appealed — Appeal allowed — Insurer had duty to defend father as school board’s claim was not excluded by policy — School board’s claim for father’s alleged failures was drafted in terms of negligence — Though negligence claim caused same harm as intentional tort allegedly committed by son, it was not derivative of intentional tort claim — Therefore, negligence claim could not be subsumed under intentional tort claim for purposes of applying exclusion clause. Cases considered by R.G. Juriansz J.A.: G. (P.) v. Children’s Aid Society of Dufferin (County) (2001), (sub nom. G. (P.) v. James) [2001] I.L.R. I-3927, 2001 CarswellOnt 6093, 26 C.C.L.I. (3d) 76, [2001] O.J. No. 313 (Ont. S.C.J.) — considered Non-Marine Underwriters, Lloyd’s London v. Scalera (2000), [2000] 1 S.C.R. 551, (sub nom. Scalera v. Lloyd’s of London) 135 B.C.A.C. 161, (sub nom. Scalera v. Lloyd’s of London) 221 W.A.C. 161, 2000 CarswellBC 885, 2000 CarswellBC 886, 2000 SCC 24, 50 C.C.L.T. (2d) 1, [2000] 5 W.W.R. 465, 75 B.C.L.R. (3d) 1, 18 C.C.L.I. (3d) 1, 185 D.L.R. (4th) 1, [2000] I.L.R. I- 172 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

3810, (sub nom. Scalera v. Lloyd’s of London) 253 N.R. 1, [2000] S.C.J. No. 26 (S.C.C.) — followed

APPEAL by father from judgment reported at Durham District School Board v. Grodesky (2011), 2011 ONSC 3286, 2011 CarswellOnt 7793, 100 C.C.L.I. (4th) 145 (Ont. S.C.J.), granting insurer’s motion for determination that it was not obligated to defend father, and that third party action should be dismissed.

William F. Kelly, for Appellant, Todd James Derek V. Abreu, for Respondent, ING Insurance Company of Canada

R.G. Juriansz J.A.:

1 This is an appeal from the decision of Gunsolus J. of the Superior Court of Justice, dated May 31, 2011, holding that the respondent ING Insurance Company of Canada (“ING”) was not required to defend the appellant Todd James for the claims against him brought by the Durham District School Board (“School Board”), and ordering the dismissal of the appellant’s third party action against ING.

(1) Background 2 The plaintiff Durham District School Board has brought a claim naming several defendants, including the appellant, his wife (“Jane Doe”), and his son. The School Board claims that the son, Colten Todd Douglas James, set fire to the contents of the Cartwright Central High School’s plastic recycling bins, which then spread to the school building, causing extensive property damage. The School Board’s claim against the appellant is set out in para. 9.D of the statement of claim as follows: As to the negligence of the defendants Todd James and “Jane Doe” James: a) They failed to provide a curfew for the defendant Colten Todd Douglas James; b) They failed to enforce a curfew for the defendant Colten Todd Douglas James; c) They failed to properly and adequately supervise the defendant Colten Todd Douglas James when they knew or ought to have known that he had a propensity for getting into mischief; d) They failed to properly and adequately supervise the defendant Colten Todd Douglas James when they knew or ought to have known that he had a propensity for setting fires; Durham District School Board v. Grodesky R.G. Juriansz J.A. 173

e) They failed to properly and adequately discipline the defendant Colten Todd Douglas James for inappropriate behaviour; f) They failed to properly and adequately instill in the defendant Colten Todd Douglas James a respect for private and public property. 3 The appellant advanced a third party claim against ING for indemnification under his homeowner’s comprehensive form insurance policy. 4 ING brought a motion for determination that it was not obligated to defend the appellant, and that therefore the third party action should be dismissed. In bringing its motion, ING relied on the following exclusion clause in the appellant’s homeowner’s policy: We do not insure your claims arising from (6) Bodily injury or property damage caused by any intentional or criminal act or failure to act by: (a) any person insured by this policy; or (b) any other person at the direction of any person insured by this policy. [Emphasis added.]

(2) Decision Below 5 The motion judge interpreted the School Board’s statement of claim to specifically allege that the appellant “failed to act in terms of providing/enforcing a curfew, supervising, disciplining and instilling in [his son] a respect for private and public property” (emphasis in original). 6 Consequently, he found that the School Board’s claim against the appellant fell within the “failure to act” exclusion, and that therefore ING had no duty to defend the appellant. 7 In reaching this conclusion, herelied on G. (P.) v. Children’s Aid Society of Dufferin (County) (2001), 26 C.C.L.I. (3d) 76 (Ont. S.C.J.), a case interpreting an identical exclusion clause. In G. (P.) v. Children’s Aid Society of Dufferin (County), the defendant was alleged to have been negligent in failing to act to protect a minor from sexual assault. Mossip J. concluded that, under the plain language of the clause, any tortious failure to act (not just an intentional or criminal one) triggers the exclusionary clause. Even though the plaintiff was only alleged to have acted negligently, the fact that a “failure to act” was alleged excluded the claim under the provision, and therefore the insurance company did not have a duty to defend. 174 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

(3) Analysis 8 Can ING refuse to defend the appellant, under the exclusion clause, given the claim made against the appellant? 9 The exclusion clause can be read in two ways. First, the clause can be read so that the words “intentional or criminal” modify the phrase “act or failure to act”. Read in this way, the clause would only exclude an “act or failure to act” that is intentional or criminal. Alternatively, the clause can be read to exclude an intentional or criminal act, and any failure to act. Read in this way, the clause would exclude a failure to act that was merely negligent. The motion judge, following G. (P.) v. Children’s Aid Society of Dufferin (County), adopted the second interpretation of the provision. 10 The principle that ambiguities in a contract should be resolved against the drafter and that insurance coverage clauses should be construed broadly and exclusions narrowly points to adopting the first interpretation. Moreover, the second interpretation would largely negate insurance coverage because harms resulting from negligence can typically be char- acterized as a failure to act. This would render the insurance coverage provided by the policy largely useless. 11 The Supreme Court considered a similar clause in Non-Marine Underwriters, Lloyd’s London v. Scalera, 2000 SCC 24, [2000] 1 S.C.R. 551 (S.C.C.). In Scalera, the clause excluded claims arising from “bodily injury or property damage caused by any intentional or criminal act or failure to act by ... any person insured by this document” (para. 59). Iacobucci J., in his concurring reasons, observed that reading the clause to exclude negligent failures to act would lead to absurd consequences because almost any act of negligence could be excluded. He explained his approach to interpreting the clause at para. 92: At the outset, the wording of this clause presents a threshold issue. The respondent argues that the clause requires only an intentional act, not an intent to injure. The majority below agreed with this interpretation. However, I agree with Finch J.A.’s dissent on this point. If the respondent were correct, almost any act of negligence could be excluded under this clause. After all, most every act of negligence can be traced back to an “intentional ... act or failure to act”. As this Court made clear in Canadian Indemnity Co. v. Walkem Machinery & Equipment Ltd., [1976] 1 S.C.R. 309, “negligence is by far the most frequent source of exceptional liability which [an insured] has to contend with. Therefore, a policy which would not cover liability due to negligence could not properly be called ‘comprehensive’” (pp. Durham District School Board v. Grodesky R.G. Juriansz J.A. 175

316-17). Consistent with this decision, the purpose of insurance, and the doctrines of reasonable expectations and contra proferentem referred to above, I believe the exclusion clause must be read to require that the injuries be intentionally caused, in that they are the product of an intentional tort and not of negligence. [Emphasis added.] 12 At the same time, at para. 84, Iacobucci J. cautioned against relying on the plaintiff’s characterization of the claim made against the defendant because “a plaintiff may draft a statement of claim in a way that seeks to turn intention into negligence in order to gain access to an insurer’s deep pockets.” Whether the plaintiff uses the language of negligence or intentional torts is not the end of the inquiry. The judge must look to the actions taken by the defendant underlying the claim. Further, when there are multiple claims (e.g. when intentional torts and negligence are both alleged) the judge must decide if the negligence claim is merely derivative of the intentional claim, or whether the two claims are severable, by examining the actions allegedly taken by the defendant, and deciding whether the claims are related to the same actions. 13 In this case, the School Board’s claim against the appellant for his alleged failures is drafted in terms of negligence. The trial judge described the claim as a “claim in negligence”, at para. 16. 14 Though this negligence claim caused the same harm as the intentional tort allegedly committed by the son, it is not derivative of the intentional tort claim in the sense indicated by Iacobucci J. At para. 84, he remarked that “a claim for negligence will not be derivative if the underlying elements of the negligence and of the intentional tort are sufficiently dispa- rate to render the two claims unrelated.” The elements of the intentional tort claim against the son and the negligence claim against the parents are entirely distinct. Therefore the negligence claim is not derivative of the intentional tort, and should not be subsumed under it for the purposes of applying the exclusion clause.

(4) Conclusion 15 I would conclude that ING has a duty to defend the appellant as the School Board’s claim against the appellant is not excluded by the policy. 16 I would allow the appeal and set aside the judgment below with the appellant’s costs fixed in the amount of $3,500.00 as agreed by counsel. 176 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

Robert J. Sharpe J.A.:

I agree

R.A. Blair J.A.:

I agree Appeal allowed. Insurance Corp. of British Columbia v. Awla 177

[Indexed as: Insurance Corp. of British Columbia v. Awla] Insurance Corporation of British Columbia, Plaintiff and Harpreet Awla, Daniel Ascencao, Agostinha Ascencao, Bobby Atwal, Vikram Singh Atwal, Avenue Auto Glass Ltd., Gurpreet Awla, Ujjal Awla, Updash Awla, Bansal & Sons Diesel Automotive Ltd., Kulvinder Singh Bansal, Navdeep Singh Brar, Kulbir Singh Chohan, Rodney Daniel Dick, Carolyn Rachel Duquesne, Robert Jules Duquesne, Allen Ferrier, Tariq Hezbawi, Cynthia Ann Hill, Ross Hinchberger, Lynn Holt, International Autohaus LLC, Cheri Kostynick, Ajmer Litt, Sara Larae Elizabeth McDonald, Mohamed Nachar, Sandeep Singh Rai, Satwant Ranauta, Jasbir Singh Randhawa, Shinderpal, Randhawa, Kulbir Romana, Mohammad Salim, Jagjeet Singh Sidhu, Jason Garry Smith, Riad Iskandar Youssef, John Zarelli, Mahmed Zkeer, Arthur Moran, Davinder Singh Deol, Breeze Produce Inc., 0640147 B.C. Ltd., and John Doe, Defendants Insurance Corporation of British Columbia, Plaintiff and Jean Claude Auger, Vikram Singh Atwal, Bobby Atwal, Avenue Auto Glass Ltd., Kulwant Singh Bal, John Richard Bracken, Mohamed Nachar, Jasbir Singh Randhawa, Shinderpal Randhawa, Varinder Singh Sahota, Bhupinder Singh Sangha, Jagjeet Singh Sidhu, Samuel Edward West, Jasraj Singh Bains, and John Doe, Defendants Insurance Corporation of British Columbia, Plaintiff and Jason Garry Smith, Defendant British Columbia Supreme Court Docket: Vancouver S076183, S076186, S034964 2012 BCSC 998 A.F. Cullen A.C.J.S.C. Heard: November 14-18, 21-25, 2011; December 5-9, 12-16, 19, 2011 Judgment: July 9, 2012 Torts –––– Conspiracy — Nature and elements of tort — General principles –––– Vehicles were wrongly taken by defendants (conspiracy defendants) as part of larger conspiracy to steal and fraudulently re-sell vehicles — Plaintiff government automobile insurer paid insureds millions of dollars for costs of 178 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th) their stolen motor vehicles — Conspiracy defendants created false registrations for vehicles, including providing new and false VINs, and transferred them to purchasers (conversion defendants) — Insurer brought actions for damages for conspiracy and conversion — Insurer took default judgment against SR and CK — Actions were granted — Insurer proved there was conspiracy between parties to defraud them and proved each defendants’ liability for at least one transaction claimed against them — Hearsay evidence was admissible against conspiracy defendants JA and VA as it was offered by their co-conspirators and met requirements to be admitted under exception to hearsay rule as conspiracy clearly existed — HA was liable to plaintiff for six of 12 vehicles of which conspiracy was claimed — HA recommended buyers to financing officer F at credit union and CK gave direct evidence she was aware HA was involved with revinning scheme and collected money for vehicles — Given contradictory nature of CK’s evidence plaintiff could not prove claims against HA for six transactions as it appeared some involved only his brother GA and there was insufficient evidence of HA’s involvement in those transactions — Plaintiff proved claim against VA for four of six vehicles claimed — Liability was established by evidence showing VA’s involvement with false registration, use of prior stolen identification and contemporaneous contact with others defendant involved in sales as well as sometime use of same insurance agency — No specific evidence was provided for two vehicles plaintiff claimed for — Plaintiff was able to prove conspiracy claim against GA for two of three vehicles claimed — CK’s evidence showed that GA was involved in false registration and resale efforts for two vehicles but third claim was dismissed as evidence could not prove it was GA who acted in trying to revin vehicle. Torts –––– Conversion — Availability — Against particular party — Mis- cellaneous –––– Vehicles were wrongly taken by defendants (conspiracy defendants) as part of larger conspiracy to steal and fraudulently re-sell vehicles — Plaintiff government automobile insurer paid insureds millions of dollars for costs of their stolen motor vehicles — Conspiracy defendants created false registrations for vehicles, including providing new and false VINs, and transferred them to purchasers (conversion defendants) — Insurer brought actions for damages for conspiracy and conversion — Actions were granted — Insurer proved most conversion defendants were liable for conversion and that all vehicles claimed had been wrongfully converted — Conversion defendants’ acts had effect or intention of interfering with insurer’s title or right to goods — Plaintiffs did not have to prove conversion defendants knew or ought to have known vehicles they dealt with were stolen — Plaintiff insurer was owner of vehicles once insurance claims were settled and had right to immediate possession of each vehicle — SR was vehicle inspector employed by B&S Ltd who completed PVIR on van that had false paper VIN which allowed van to be converted from its true owner’s possession and control — Circumstances and evidence showed that it was not owner who sought inspection and presented documents to in- Insurance Corp. of British Columbia v. Awla 179 surer — SR was not reliable witness and wrongfully performed blind inspection as part of conspiracy to defraud plaintiff and was intentionally done to interfere with rights of legitimate owner — B Inc. was vicariously liable for actions of its employee and thus was liable in conversion for R’s act of completing PVIR in blind inspection as that constituted participation in chain of events that resulted in sale of stolen vehicle — Evidence could not prove B was involved in conversion himself as individual — JS was liable for conversion for truck he purchased at conspicuously lower value than its worth — Insurer’s dual role as insurer and Registrar of Motor Vehicles did not vitiate its claim against JS — Evidence showed JS was aware of scheme particularly through his use of credit union involved when he had good credit at his own bank, extremely low price given actual value and circumstances of purchase — JS was clearly alerted to possibility truck was stolen and failed to take reasonable precautions in purchasing vehicle — JS did not come with clean hands as he did not rely on Certificate of Ownership as representing reality and thus could not rely on estoppels and also could not resist insurer’s claim to title through s. 26 of Sale of Goods Act — RD was liable in conversion as he paid conspicuously less than apparent and insured value of vehicle and purchased it from HA, not registered owner. Torts –––– Conspiracy — Remedies — Damages –––– Plaintiff government automobile insurer paid insureds costs of their stolen motor vehicles — Fourteen vehicles were wrongly taken by defendants (conspiracy defendants) as part of larger conspiracy to steal and fraudulently re-sell vehicles — Conspiracy defendants created false registrations for vehicles and transferred them to purchasers (conversion defendants) — Insurer brought actions for damages for conspiracy and conversion — Actions were granted — Conspiracy defendants were liable for special damages of net loss to insurer in connection with payouts of insurance claims for each stolen vehicle — Trial judge ordered each conspiracy defendant to pay plaintiff specific damages less amount recovered from others — Insurer did not fail to adequately mitigate its damages by selling recovered vehicles at wholesale prices — Insurer did not act unreasonably given it needed to deal with significant number of recovered stolen vehicles — Trial judge awarded plaintiff insurer punitive damages — Punitive damages were appropriate against defendant HA in amount of $60,000 (based on $10,000 per vehicle) as he had played significant role in scheme including planning and executing as well as recruiting others to participate — HA had attempted to dissuade another defendant from testifying and his conduct deserved denunciation — GA was ordered to pay $20,000 for his involvement in conspiracy to convert two vehicles — SR was less involved but had very important role due to his employment by plaintiff and he was ordered to pay $21,000 in punitive damages for his part in three transactions — R was ordered to pay $5,000 as he had breached his duty as motor vehicle inspector — JS was ordered to pay $3,000 in punitive damages due to his wilfull blindness to truck’s status — Defendants were involved in well organized and well executed criminal enterprise and puni- 180 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th) tive damages were appropriate — Plaintiff had spent significant amount of time, effort and money to investigate scheme, recover vehicles and try to mitigate its losses. Remedies –––– Damages — Damages in tort — Other torts — Conver- sion –––– Plaintiff government automobile insurer paid insureds costs of their stolen motor vehicles — Fourteen vehicles were wrongly taken by defendants (conspiracy defendants) as part of larger conspiracy to steal and fraudulently re- sell vehicles — Conspiracy defendants created false registrations for vehicles and transferred them to purchasers (conversion defendants) — Insurer brought actions for damages for conspiracy and conversion — Actions were granted — Trial judge ordered each conversion defendant except B to pay specific amount in damages relating to their own specific involvement — Insurer did not fail to adequately mitigate its damages by selling recovered vehicles at wholesale prices — Insurer did not act unreasonably given it needed to deal with significant number of recovered stolen vehicles — There was no evidence as to what prices could have been achieved with retail sales — Defendants failed to meet their burden of proof in showing that plaintiff failed to mitigate. Remedies –––– Damages — Exemplary, punitive and aggravated damages — Grounds for awarding exemplary, punitive and aggravated damages — Conversion –––– Vehicles were wrongly taken by defendants (conspiracy defendants) as part of larger conspiracy to steal and fraudulently re-sell vehicles — Plaintiff government automobile insurer paid insureds millions of dollars for costs of their stolen motor vehicles — Conspiracy defendants created false registrations for vehicles, including providing new and false VINs, and transferred them to purchasers (conversion defendants) — Insurer brought actions for damages for conspiracy and conversion — Actions were granted — Trial judge awarded plaintiff insurer punitive damages — Conversion was strict liability tort so conversion defendants had no defence that wrongful act was committed innocently — Punitive damages were appropriate against defendant HA in amount of $60,000 (based on $10,000 per vehicle) as he had played significant role in scheme including planning and executing as well as recruiting others to participate — HA had attempted to dissuade another defendant from testifying and his conduct deserved denunciation — GA was ordered to pay $20,000 for his involvement in conspiracy to convert two vehicles — VA was ordered to pay $20,000 for role in four conversions (at $5,000 per vehicle) and lower amount was deemed appropriate given similar orders already against him in other actions — SR was less involved but had very important role due to his employment by plaintiff and he was ordered to pay $21,000 in punitive damages for his part in three transactions — R was ordered to pay $5,000 as he had breached his duty as motor vehicle inspector — JS was ordered to pay $3,000 in punitive damages due to his wilfull blindness to truck’s status — Defendants were involved in well organized and well executed criminal enterprise — Puni- Insurance Corp. of British Columbia v. Awla 181 tive damages were appropriate — Plaintiff had spent significant amount of time, effort and money to investigate scheme, recover vehicles and try to mitigate its losses. Cases considered by A.F. Cullen A.C.J.S.C.: Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce (1996), [1997] 2 W.W.R. 153, [1996] 3 S.C.R. 727, 140 D.L.R. (4th) 463, 27 B.C.L.R. (3d) 203, 203 N.R. 321, 82 B.C.A.C. 161, 133 W.A.C. 161, 1996 CarswellBC 2314, 1996 CarswellBC 2315, EYB 1996-67134, [1996] S.C.J. No. 111 (S.C.C.) — considered Insurance Corp. of British Columbia v. Atwal (2010), 83 C.C.L.I. (4th) 13, 2010 BCSC 338, 2010 CarswellBC 627 (B.C. S.C.) — followed Insurance Corp. of British Columbia v. Atwal (2012), 2012 CarswellBC 20, 2012 BCCA 12, 27 B.C.L.R. (5th) 21, 315 B.C.A.C. 97, 535 W.A.C. 97, 4 C.C.L.I. (5th) 225 (B.C. C.A.) — considered Insurance Corp. of British Columbia v. Ben-Jaafar (2011), 2011 BCSC 1106, 2011 CarswellBC 2125, 100 C.C.L.I. (4th) 14 (B.C. S.C.) — followed Insurance Corp. of British Columbia v. Ben-Jaafar (2012), 2012 BCSC 505, 2012 CarswellBC 991 (B.C. S.C.) — followed Insurance Corp. of British Columbia v. Suska (2011), 16 B.C.L.R. (5th) 308, 299 B.C.A.C. 143, 508 W.A.C. 143, 2011 CarswellBC 143, 2011 BCCA 51 (B.C. C.A.) — followed Janiak v. Ippolito (1985), 1985 CarswellOnt 809, [1985] 1 S.C.R. 146, 16 D.L.R. (4th) 1, 57 N.R. 241, 9 O.A.C. 1, 31 C.C.L.T. 113, 1985 CarswellOnt 934, [1985] S.C.J. No. 5 (S.C.C.) — considered Pro Swing Inc. v. ELTA Golf Inc. (2006), 52 C.P.R. (4th) 321, [2006] 2 S.C.R. 612, 2006 SCC 52, 2006 CarswellOnt 7203, 2006 CarswellOnt 7204, 354 N.R. 201, 218 O.A.C. 339, 273 D.L.R. (4th) 663, 41 C.P.C. (6th) 1, [2006] S.C.J. No. 52 (S.C.C.) — referred to Statutes considered: Criminal Code, R.S.C. 1985, c. C-46 Generally — referred to Insurance (Vehicle) Act, R.S.B.C. 1996, c. 231 s. 14 — considered Sale of Goods Act, R.S.B.C. 1996, c. 410 Generally — referred to s. 26(1) — considered Rules considered: Rules of Court, 1990, B.C. Reg. 221/90 R. 18A — referred to Supreme Court Civil Rules, B.C. Reg. 168/2009 Generally — referred to 182 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

Regulations considered: Insurance (Vehicle) Act, R.S.B.C. 1996, c. 231 Insurance (Vehicle) Regulation, B.C. Reg. 447/83 s. 143(1) — considered

ACTION by insurer for damages for conversion and conspiracy.

M. Hewitt, J. Frahm, for Plaintiff D.H. Murray, for Defendant, Jason Smith S. Grey, for Defendants, Satwant Ranauta, Kulvinder Bansal, Bansal & Sons Diesel Automotive Ltd. Ross Hinchberger, Defendant, for himself

A.F. Cullen A.C.J.S.C. : Introduction and Background 1 There have been several trials of actions brought by the plaintiff, In- surance Corporation of British Columbia (“ICBC”), against various defendants for conspiracy to convert vehicles insured by ICBC and conspiracy to defraud ICBC and against other defendants for conversion of those vehicles. In Insurance Corp. of British Columbia v. Atwal, 2010 BCSC 338 (B.C. S.C.)(Atwal, BCSC), aff’d Insurance Corp. of British Columbia v. Atwal, 2012 BCCA 12 (B.C. C.A.) (Atwal, BCCA), and in Insurance Corp. of British Columbia v. Ben-Jaafar, 2011 BCSC 1106 (B.C. S.C.) (consisting of two trials ordered to be tried together), I gave Reasons for rendering Judgment, in part, against the defendants based both on the allegations of conspiracy and on the allegations of conversion. 2 In the present trial, I ordered two actions to be tried together, Insurance Corp. of British Columbia v. Awla, S076183 Vancouver Reg- istry, and Insurance Corp. of British Columbia v. Awla, S076186 Van- couver Registry. By the time of trial, the plaintiff had settled with and/or discontinued its claims against all the defendants in the Insurance Corp. of British Columbia v. Awla action, leaving only the Insurance Corp. of British Columbia v. Awla action to be heard, subject to settlement and/or discontinuances against individual defendants in the latter action. A third action Insurance Corp. of British Columbia v. Awla S034964 Vancouver Registry was ordered tried at the same time. 3 In the case of Insurance Corp. of British Columbia v. Ben-Jaafar, supra, I offered a description and explanation of the nature of that action and the transactions underlying it, in part relying on the judgment in Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 183

Atwal, BCSC. Those descriptions are apt in the present case and appear at paras. 1 - 10 inclusive of the decision in Insurance Corp. of British Columbia v. Ben-Jaafar as follows: [1] These two actions were ordered tried together. In Insurance Corp. of British Columbia v. Atwal, 2010 BCSC 338[Atwal], I described the nature of the cause of action in a related trial that is applicable to these two cases as follows at paras. 1, 2 and 3: [1] This action arises out of a scheme entailing the theft, or ostensible theft, of motor vehicles insured by the plaintiff, the Insurance Corporation of British Columbia (“ICBC”), the creation of a false identification and ownership history of the vehicles, and the resale of the vehicles to purchasers with or without knowledge of the wrongful nature of the sale transactions. The plaintiff, ICBC, claims against the various defendants both as the insurer which paid claims under the theft coverage of comprehensive policies sold to the owners of the wrongfully obtained and sold vehicles, and as the owner of the vehicles and the pre-existing rights of ownership of the vehicles acquired as a result of the payment of the theft claims under the comprehensive coverage policy. [2] Although this action involves seven vehicles wrongfully acquired between February 17, 2002 and June 7, 2002, it is alleged that the seven vehicles at issue in this law suit were wrongfully acquired, given a new identity, and sold in a manner consistent with a significant number of other vehicles and hence are part-in-parcel of a larger scheme operated throughout 2002 and 2003 in the lower mainland area of British Columbia. [3] In particular, the scheme at issue involved each stolen or fraudulently acquired vehicle being given a new vehicle identification number (“VIN”), with false registration documents from Alberta naming fictitious Alberta residents as owners, being transferred to an unwitting or, in some cases, complicit British Columbia residents and sold to third parties who by dint of their ownership are said to be liable in conversion to the plaintiff. [2] As I noted in Atwal, it is alleged that the claims in the present actions are part of a larger scheme operated throughout 2002 and 2003 in the lower mainland area of British Columbia. It is alleged that in total, the scheme was used “to disguise dozens of vehicles 184 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

resulting in a total of approximately $2,000,000 in insurance claims that were honoured by ICBC” (Plaintiff’s closing, para. 8). THE NATURE OF THE SCHEME ALLEGED [3] The means by which the scheme operated started with the creation of false Alberta Vehicle Registration Certificates (“AVRC”), which were used to register the various stolen or fraudulently obtained vehicles in B.C. using a false vehicle identification number (“VIN”). [4] The reason for the fabrication of AVRCs in each case was that any attempt to register a vehicle that had been reported stolen in Brit- ish Columbia would be caught by ICBC, who has the statutory obligation as Registrar of Motor Vehicles to register the ownership and transfer of motor vehicles, issue vehicle licences and sell compulsory basic insurance coverage. To be registered in B.C., a vehicle previously reported stolen in B.C. would need a new (false) VIN. The advantage of manufacturing a VIN on a forged AVRC was that the ICBC computers would not be able to reveal whether the falsely identified vehicle had ever in fact been registered in Alberta. In relation to each vehicle at issue in this case and in relation to each other vehicle revealed by the evidence in this case, the initiating document leading to the re-registration of a vehicle reported stolen in B.C. was a forged AVRC. Each of the AVRCs had several similar indicia of fraud described by the plaintiff in its closing submissions at para. 32 as follows: To the trained eye of Alberta Service’s employee Karla Fedorak, there are several indicia of fraud apparent from the information found on the face of the Alberta vehicle registration certificates used to import the vehicles that are the subject of this action: • Often the month of expiry is incorrect (i.e. does not correspond to the correct month according to letters of last name noted on the AVRC). • Often the day of expiry is incorrect (i.e. not last day of month). • In many cases, there are two licence plate numbers noted on one AVRC. • In many cases, the licence plate is recorded as Class “5”, which is a non-existent class. • The vehicles described on the registration documents did not exist within Alberta’s motor vehicle electronic system (MOVES database). Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 185

• The licence plate numbers noted on the documents either did not exist in Alberta’s MOVES, or did exist but were not registered to the person named as the owner of the AVRC. • The motor vehicle identity numbers (MVIDs) of people named as owners were either invalid, or, if valid, were not associated to the person named on the AVRC. • The Registry Agent identity numbers were either invalid, or were associated to one of two valid Registry Agents. • The addresses on the documents frequently did not exist. [5] In addition to the AVRCs, other falsified documents were used to complete the process of disguising the identity of and reregistering the stolen vehicles. The vehicles being imported into B.C. required an inspection by a vehicle inspector who would complete a Private Vehicle Inspection Report (“PVIR”). [6] The vehicles would then be transferred from the fictitious or unwitting Alberta resident into the name of an unwitting British Colum- bia resident using a Transfer/Tax form generally on the pre-text that the transfer was a “gift” to the unwitting recipient to avoid the payment of taxes. There would then be a transfer of the vehicle to a real person - the ultimate owner who would pay the person or persons involved in the scheme. [7] Various of the identities of the unwitting B.C. recipients of the initial transfer from the fictitious/unwitting Alberta owners were based on stolen pieces of identification which were used on a number of different occasions. The plaintiff asserts that in some cases, the repeated use of a particular stolen identity can be linked to one or another of the conspirators. [8] In Action S076185, Insurance Corp. of British Columbia v. Ben- Jaafar (“the Ben-Jaafar action”), there are eight vehicles alleged to have been stolen in the object of the scheme. In Action S076184, Insurance Corp. of British Columbia v. Gill (“the Gill action”), there are six vehicles said to be stolen in the object of the scheme. [9] As with Atwal, supra, the defendants in the Ben-Jaafar action and the Gill action fall into one of two categories. It is either alleged that they are “conspiracy” defendants involved in some aspect of the scheme by which the vehicles at issue were stolen, disguised and re- sold; or it is alleged that they are “conversion” defendants, the ulti- 186 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

mate purchasers of the vehicles whose possession of the stolen vehicles is said to render them liable to the plaintiff in conversion, whether or not they had knowledge of the actual status of the vehicles. [10] The various vehicles at issue in these lawsuits, and the other lawsuits generated by the scheme at issue, are identified by number. During the investigation, the plaintiff assigned a number to each vehicle from one to fifty-eight. Each vehicle was referred to as “stolen” at the time of the theft with its assigned number, and after its fraudulent re-identification as “Revin” with the same number. 4 In the context of this action, the plaintiff is seeking judgment against a number of defendants for conspiracy and a number of other defendants for conversion in connection with a total of 12 vehicles, some of which were subjected to more than one theft or extensible theft and “Revining”. In the result, there are 17 transactions in relation to which the plaintiff is seeking judgment against one or more of the defendants. 5 The specific vehicles and transactions at issue in this action are as follows: Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 187

Vehicle 53/Revin 53 2001 White Chevrolet Tahoe VIN: 1GNEK13T91R126020 Reported Stolen June 6, 2002 Recovered November 18, 2003 False description White 2000 Chevrolet Tahoe VIN: 1GNEK13T9YJ126012 Award claimed by plaintiff: $25,894.53 plus interest and punitive damages against Harpreet Awla. Vehicle 1A 2002 Grey Chevrolet Tahoe VIN: 1GNEK13Z72J141216 Reported stolen June 19, 2002 (Revin 10) False description 2001 Brown Chevrolet Tahoe VIN: 1GNEK13T71J141209 Reported Stolen April 6, 2003 (Revin 23) Second false description 2002 Brown Chevrolet Tahoe VIN: 1GNEK13T72J141910 Third false description 2002 Brown Chevrolet Tahoe VIN: 1GNEK13T72J141924 Recovered June 6, 2003 Judgment sought - damages of $21,241.50 plus interest against Vikram Atwal, Harpreet Awla and Cheri Kostynick jointly and severally. Punitive damages against Vikram Atwal and Harpreet Awla. 188 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

Vehicle 46 2001 Red GMC Sierra VIN: 1GTHK29G01E259925 Reported stolen June 19, 2002 (Revin 32) First false description 2001 Red GMC Sierra VIN: 1GTHK29G01E259911 Reported stolen October 1, 2002 $27,695.87 - plus interest plus punitive damages against Vikram Atwal (Revin 36) Second false description 2002 Red GMC Sierra VIN: 1GTHK29G02E259814 $40,475.75 - plus interest and punitive damages against Vikram Atwal (Revin 46) Third false description 2002 Red GMC Sierra VIN: 1GTHK29G02E259716 (Revin 46) $37,325 - plus interest joint and several Vikram Atwal, Harpreet Awla and Cheri Kostynick - punitive damages against Vikram Atwal and Harpreet Awla. Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 189

Vehicle 41 2002 Green Chevrolet Silverado VIN: 1GCHK29142E101505 Reported stolen June 10, 2002 (Revin 59) First false description 2001 Green Chevrolet Silverado VIN: 1GCHK29141E101518 Reported stolen February 26, 2003 (Revin 17) Second false description 2002 Brown Chevrolet Silverado VIN: 1GCHK29172E290442 (Revin 41) Third false description Green Chevrolet Silverado VIN: 1GCHK29172E211089 Judgment sought - damages of $26,614.31 plus interest and punitive damages against Harpreet Awla $66,293.38 against Harpreet Awla and Sandeep Rai, $26,614.31 plus interest joint and several against Rodney Dick. Vehicle 16 2001 Black GMC Sierra 2001 Black GMC Sierra VIN: 1GTHK291X1E325621 Reported stolen November 11, 2002 Revin 16) First false description 2002 Black GMC Sierra First false description 2002 Black GMC Sierra VIN 1GTHK281X2E325717 Recovered by police July 14, 2003 Judgment sought - $28,520.79 plus interest against Sandeep Rai (default defendant). 190 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

Vehicle 18 2002 Blue Chevrolet Silverado VIN: 1GCHK29172E290439 Reported stolen October 24, 2002 (Revin 18) False description 2002 Blue Chevrolet Silverado VIN: 1GCHK29172E290456 Judgment sought - $84,251.89 plus interest and punitive damages against Harpreet Awla and Sandeep Rai. $49,135 plus interest against Jason Smith joint and several with Harpreet Awla and Sandeep Rai with $31,590 to be paid out to ICBC from trust to satisfy that judgment. Vehicle 37 2002 White Chevrolet Express VIN: 1GCFG25M721237837 Reported stolen March 3, 2003 (Revin 37) False description 2002 White Chevrolet Express VIN: 1GCGG29R121139431 Recovered by police August 1, 2003 Judgment sought - $16,281.18 against Vikram Atwal, Satwant Ranauta, Kulvinder Bansal, Bansal and Sons, and Ajmer Litt (defendant defendant) against Vikram Atwal punitive damages are being sought. Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 191

Vehicle 52 2000 Green Pontiac Grand AM VIN: 1G2NF12EXYM811753 Reported stolen December 23, 2002 (Revin 52) False description Green 2000 Pontiac Grand AM VIN: 1G2NF12EXYM811803 Recovered October 27, 2003 Judgment sought - damages of $12,389.61 plus interest jointly and severally against Harpreet Awla, Gurpreet Awla and Cheri Kostynick and of that amount $11,211.76 plus interest jointly and severally against Navdeep Brar. Vehicle 14 2001 Black GMC Yukon VIN: 1GKEK13T71R134386 Reported stolen March 3, 2003 (Revin 14) False description 2001 Black GMC Yukon VIN: 1GKEK13T71R134680 Recovered May 8, 2003 Judgment sought - damages of $25,900.22 plus interest joint and several against Harpreet Awla, Gurpreet Awla and Cheri Kostynick plus punitive damages against Harpreet Awla and Gurpreet Awla. Vehicle 42 2003 Grey Chevrolet Silverado VIN: 1GCHK29143E117365 Reported stolen June 13, 2003 (Revin 42) False description 2003 Grey Chevrolet Silverado VIN: 1GCHK29143E117379 Recovered by police July 10, 2003 Judgment sought - damages of $9,926.03 plus interest and punitive damages against Harpreet Awla. 192 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

Vehicle 45 2002 White GMC Yukon VIN: 1GKEK63U52J285149 Reported stolen August 5, 2003 (Revin 45) False description 2002 White GMC Yukon VIN: 1GKEK63U22J337434 Recovered by police August 15, 2003 Judgment sought - $2,187.38 against Harpreet Awla, Gurpreet Awla and Cheri Kostynick and punitive damages against Harpreet Awla and Gurpreet Awla. Vehicle 49 2003 Black GMC Yukon Denali VIN: 1GKEK63U83J233600 Reported stolen August 14, 2003 (Revin 49) False description 2003 Black GMC Yukon Denali VIN: 1GKEK63U33J120931 Recovered by police August 25, 2003 Judgment sought - $4,226.66 plus interest against Cheri Kostynick and Harpreet Awla. 6 There were three other vehicles referred to in the plaintiff’s claim (Stolen/Revin 58, Stolen/Revin 54 and Stolen/Revin 50) in relation to which the plaintiff is not seeking judgment.

The Conspiracy Defendants 7 The primary conspiracy defendants in the Awla action are Harpreet Awla, Gurpreet Awla and Vikram Atwal. 8 Vikram Atwal was found liable in conspiracy in Atwal, BCSC, supra, and Ben-Jaafar, supra, in relation to 12 vehicles stolen and revined in 2002 and 2003. The transactions for which he was found liable are part of the same overall scheme that is alleged in the present case. Vikram Atwal did not defend himself at this trial. 9 Harpreet Awla was born in 1981. He admitted knowing Vikram Atwal, testifying in his examination for discovery that he had met him a couple of times. He also acknowledged knowing a person by the name of Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 193

Daljit Toor who rented a basement suite in his family home on 128th Street in Surrey. 10 Although he denied knowing Cheri Kostynick, she testified that she knew him through her then boyfriend, Daljit Toor. Ms. Kostynick testified as to her involvement with the theft and revining scheme in relation to various of the vehicles involved in this and earlier trials. 11 Harpreet Awla also acknowledged knowing Lynn Holt, who is now deceased, but who was involved with some of the vehicles in the revining scheme. Awla was present with Ms. Holt on November 27, 2003 when both of them were arrested after a failed attempt to sell one of the revined vehicles. He has refused to provide his cellular telephone number or records for the times connected to the conspiracy alleged. He also failed to attend an examination for discovery continuation scheduled for him on October 26, 2011. He did not attend the trial or defend himself in relation to these claims. 12 Gurpreet Awla is a younger brother of Harpreet Awla. He also knew Cheri Kostynick who, as earlier noted, testified at Atwal, BCSC, supra, that she was involved in a number of the Revin vehicles in this action. She also testified at the trial of this action that Harpreet Awla was involved in planning and organizing several different transactions involving the Revin vehicles. She testified Harpreet Awla was involved to a greater degree than Gurpreet Awla and it was Harpreet who collected the money from the stolen vehicles, as well as arranging for her to obtain and use false identification in the scheme. She testified she did not disclose as much of Harpreet Awla’s involvement in the Atwal, BCSC because she was told by him “to keep her mouth shut”. She testified at the present trial that she no longer has contact with the Awla family.

The Transactions Vehicle 53 13 Vehicle 53 is as noted a White 2001 Chevrolet Tahoe, bearing VIN 1GNEK13T91R126020. It was registered to GMAC Leaseco Ltd. as lessor and Country Roots Furniture Inc. as lessee. The lessee insured the vehicle on April 30, 2002 for a year, expiring on April 29, 2003. 14 Vehicle 53 was reported stolen on June 6, 2002 by its insured driver, Daniel Carrier. ICBC paid out $50,879.50 consisting of three payments of $300, $187.25, and $692.25 as loss of use payments, and $49,700 as the total loss value less deductible and without GST. 194 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

15 Subsequently, when the vehicle was recovered and sold, ICBC received $26,666.66. 16 In the meantime, on June 16, 2002, an Alberta Vehicle Registration Certificate (AVRC) was provided to ICBC for Revin 53, which was described as a 2000 Chevrolet Tahoe, VIN 1GNEK13T9YJ126012, showing an owner as Gary Gorman at 162 Shawnings Avenue SE, Calgary. That address was fictitious and there were other indicia of fraud on the AVRC, including the wrong month and date of expiry and a non-existent licence class. 17 There was no official record of the VIN in the Alberta motor vehicle database and the licence plate identified on the AVRC related to another vehicle. 18 The AVRC showed that the vehicle was sold to Sharon Kumiko Seki of 8707 Crest Drive, Burnaby, B.C. on May 27, 2002. Ms. Seki testified that she had no involvement with the purported sale or transfer of the vehicle to her. She testified that she had dealings with Sussex Insurance located in Crest Plaza in Burnaby, a location where a number of the Revin vehicles were registered and insured. 19 On June 16, 2002, Mohamed Nachar, a vehicle inspector at Salem Auto Sales Ltd. in Surrey conducted a private vehicle inspection resulting in the creation of a Private Vehicle Inspection Report (PVIR). That report showed that Gary Gorman was the owner of the vehicle at the time of the inspection. On the same date, a B.C. Transfer/Tax form purporting to evidence the transfer of Revin 53 from Gary Gorman to Ms. Seki was provided to the plaintiff, ICBC. The vehicle was registered to Ms. Seki as a non-licensed vehicle. About three days later on June 19, 2002, the vehicle was transferred to Sara McDonald, allegedly for a price of $30,000. Ms. Seki testified she had no involvement with any of the transactions relating to Revin 53. 20 On June 30, 2002, a temporary operating permit was issued in Ms. McDonald’s name for Revin 53. On June 21st, an Owner’s Certificate of Insurance and vehicle licence was issued to her, valid until September 30, 2002. On July 2, 2003, a storage policy was issued to Ms. McDonald for Revin 53 until October 1, 2003. 21 On July 31, 2003, ICBC issued a temporary operating permit to Ms. McDonald until August 6, 2003. On August 27, 2003, another temporary operating permit was issued to Ms. McDonald until September 2, 2003. Another temporary operating permit was issued on October 18th until the 19th, 2003, and another one between October 19 and 20, 2003. Finally, Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 195

on November 4, 2003, another temporary operating permit was issued for that date only. 22 Ms. McDonald financed her purchase of Revin 53 through the Greater Vancouver Community Credit Union (GVCCU). She obtained a secured personal loan of $15,000 through the manager of the GVCCU, Allen Ferrier. Mr. Ferrier testified that earlier he had met a person by the name of “Harp” in 2002. He identified that person, by photograph, as Harpreet Awla. According to Mr. Ferrier, Harpreet Awla told him that he was a broker who brought cars in from Alberta to sell to BC residents and he would send his prospective customers to Ferrier to get financing. 23 Within a few weeks of meeting Awla, Ferrier began to get phone calls, which he construed as threatening, to coerce him into approving loans for Awla’s prospective customers. Ferrier testified he received four or five such calls preceding individuals coming in for loans to purchase vehicles from Awla. He testified he did not recognize the voice on the phone calls to him as being Harp Awla’s, but it was always the same voice and he associated the calls to Harpreet Awla’s scheme. He denied receiving any financial benefit from Awla or otherwise in the scheme and testified that he approved all the loans referred to him by Harpreet Awla as a result of the phone calls which he considered to be threatening in nature. 24 Mr. Ferrier testified that Ms. McDonald would not have qualified for a loan from GVCCU. 25 At the time, Ms. McDonald was in a relationship with Daniel Ascen- cao. She testified that although the vehicle was in her name, it was purchased for his use and benefit and he actually arranged for the loan in her name and paid for the vehicle using the $15,000 in cash which he withdrew from the GVCCU following her receipt of the loan. Ms. McDonald testified she knew Harpreet Awla through her boyfriend, Daniel Ascen- cao, who was a friend of his. 26 Revin 53 was eventually recovered on November 18, 2003, from a car dealership called Savoy Pacific Auto located in Burnaby. At the time of its recovery, it had the false VIN on it and when inspected, it was discovered to be vehicle 53.

Vehicle 1A 27 Vehicle 1A is a grey 2002 Chevrolet Tahoe bearing VIN 1GMEK1327ZJ141216. It was owned by Geordy Rentals Inc., doing business as Budget Rent-A-Car, and it was leased to Natalie Weber. It 196 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

was insured with ICBC for a one year period from November 19, 2001 to November 18, 2002. Ms. Weber reported the vehicle stolen on June 19, 2002. ICBC paid out $43,200 in total, consisting of $42,400 to Geordy Rental Inc. as a total loss value, and an additional $800 to Ms. Weber for her loss of use of the vehicle. 28 The vehicle was fraudulently re-registered in British Columbia as a 2001 Chevrolet Tahoe bearing VIN 1GNEK13T71J141209, with an AVRC indicating it was owned by John McGill of 374 Jersey Road NE, Edmonton, Alberta. There were various indicia of fraud in the AVRC including the fact that the address of the purported owner did not exist and the licence plate related to a separate vehicle. According to the AVRC on July 4, 2002, the vehicle was transferred to Russell Herding with a Surrey address. Mr. Herding lived at that address at that time but on June 7, 2002, his black 2002 GMC Sierra was stolen from his property along with his driver’s licence, photo identification and other documents. 29 Mr. Herding’s vehicle was the subject of a claim in Insurance Corp. of British Columbia v. Atwal, BCSC, supra. Vikram Atwal was found liable in relation to that claim for conspiracy to convert that vehicle. 30 Mr. Herding’s identification was used in three Revins in July 2002, including in relation to vehicle 1A. Mr. Herding testified that he had nothing to do with the transfer of Revin 1A to his name from that of John McGill. 31 On July 9, 2002, Mahmed Zkeer of MT Auto Repairs completed and filed a PVIR in relation to Revin 1A, naming John McGill as the owner. He completed a PVIR for Revin 32 on the same day. 32 On that same date, ICBC processed a B.C. Transfer/Tax form transferring Revin 1A from John McGill to Russell Herding. It was processed by Don Wotherspoon Agency (broker #56539). That broker number related to an insurance agent named Jasdeep Sandhu, who was used by Vikram Atwal on other occasions, in relation to Revin 35 (Insurance Corp. of British Columbia v. Atwal) on July 16, 2002 and Revin 40 (Insurance Corp. of British Columbia v. Ben-Jaafar). Vikram Atwal’s cell phone records reveal contact between his telephone and Jasdeep Sandhu’s on many occasions between January and July 2002, including two calls on July 8 and two calls on July 10, 2002, the day before and the day after the transfer from McGill to Herding on his home number. Vikram Atwal’s cell phone records also reveal five calls the day before Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 197

the transfer and 14 calls the day of the transfer of Revin 1A to Herding on Sandhu’s work telephone number. 33 In the result, on July 9, 2002, Revin 1A was transferred to Russell John Herding as a non-licensed vehicle with no purchase price asserted. The vehicle retained that registration until September 23, 2002 when it was transferred to Kulbir Singh Chohan for $26,000. Mr. Herding testified that he had no involvement with any of the transfers in relation to Revin 1A. Mr. Chohan insured the vehicle for a year until September 22, 2003. 34 Mr. Chohan was a principal of the Hontel Construction and Develop- ment Ltd. company, which at the time was involved in building homes in the Chimney Heights area of Surrey. Various builders involved in Chim- ney Heights Development in 2002 and 2003, including Manraj Khela, Rupinder Chahil and Jarinder Ghuman, were also involved in the purchase of Revin vehicles through the scheme at issue in the present case. 35 Mr. Chohan’s cell phone records show him to have been in contact with Jagjeet (Bob) Gill in the period around his acquisition of Revin 1A on September 23, 2002. In particular, his phone was in touch with Gill’s phone on October 14, 2002. He was again in touch with Jagjeet (Bob) Gill on April 6, 2003, a little less than a month before he reported Revin 1A stolen on May 3, 2003. In Insurance Corp. of British Columbia v. Ben-Jaafar, supra, Jagjeet Gill was found to be liable in conspiracy to convert five other Revin vehicles. 36 The defendant Vikram Atwal’s cell phone was in touch with Jagjeet Gill’s cell phone on September 22, 2002 and on September 24, 2002, the days before and after the fraudulent transfer of Revin 1A to Mr. Chohan. 37 Mr. Chohan testified that Revin 1A was stolen from his residence on April 6, 2003. As a result of its investigation, the plaintiff declined to pay Mr. Chohan for his claim, as it concluded that Revin 1A was not legiti- mately stolen. Mr. Chohan did not contest that conclusion.

Revin 10 38 On April 14, 2003, Mohammad Salim of IP Auto completed a PVIR in relation to Revin 10, which according to an AVRC provided to ICBC on that date, was a 2002 Chevrolet Tahoe bearing VIN 1GNEK13T72J141910. The AVRC revealed that Johnathon Kostynick of 739 East 72 Avenue, Calgary, was the owner. Various of the information on the AVRC was demonstrably false: the name was fictitious as 198 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

was the address; the month and date of expiry was incorrect; and, the Alberta Motor Vehicle System database had no corresponding record for the VIN reported on the AVRC. 39 According to the back of the AVRC, Revin 10 was sold to Cheri Kos- tynick on April 9, 2003. A B.C. Transfer/Tax form was processed by broker 63380 at Allied Insurance on April 14, 2003, evidencing the transfer from “Johnathon Kostynick” to Cheri Larisa Kostynick. There is no purchase price paid and a gift letter and a nonmarket value and tax exemption form was submitted in support of the transfer. The letter indicated “Johnathon” and Cheri Kostynick were brother and sister and the vehicle was a gift. 40 In the Atwal trial, Ms. Kostynick admitted her involvement in registering Revin 10 at the request of Gurpreet Awla. She also testified she was involved in registration of Revins 23, 45, 46 and 52. Her evidence from Insurance Corp. of British Columbia v. Atwal, BCSC, was admitted as evidence in the present trial. 41 Ms. Kostynick also testified that in relation to Revin 10, she went with her then boyfriend, Daljit Toor, to a house in Richmond to pick the vehicle up. The false AVRC was given to her by Gurpreet Awla and she took the vehicle to IP Auto for inspection and the creation of the false PVIR. She identified the house in Richmond as the location from which she obtained several vehicles in similar circumstances and testified at the present trial that Harpreet Awla was generally the one who took her there. 42 Mohammad Salim testified that he performed the inspection with respect to Revin 10 and identified Cheri Kostynick (by photo) as a person who brought him a number of vehicles for inspection. He also identified Harpreet Awla (by photograph) as the person who attended with Ms. Kostynick, although his identification was very tentative. 43 According to IP Auto’s records, Johnathon Kostynick was the customer seeking the PVIR and his address was the same as that of Cheri Kostynick on her photo identification. 44 On the same day the PVIR was issued, Ms. Kostynick took Revin 10 to Preston Chev-Olds dealership in Langley to attempt to sell it. A sales associate at that dealership named Delmar Jaldbert testified that Ms. Kostynick approached him to sell the vehicle. He obtained a photocopy of the Owner’s Certificate and a phone number for her and he told her he would call her once he had made the appropriate inquiries about the car. His inquiries of the VIN through the General Motors database revealed Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 199

no record of Revin 10. He called Ms. Kostynick a number of times but she initially made excuses not to return to the dealership and eventually stopped answering her telephone. Mr. Jaldbert reported the incident to the police in Langley on or about April 14, 2003. Revin 10 never “resurfaced” after it was first registered on that day. 45 According to Cheri Kostynick, Harpreet Awla retrieved Revin 10 from her as a result of the difficulty she was having with the sales repre- sentative at Preston Chev-Olds dealership. Subsequently, on May 23, 2003, the vehicle was returned to Ms. Kostynick as Revin 23, a 2002 brown Chevrolet Tahoe with VIN 1GMEK13T72J141924.

Revin 23 46 Revin 23 came into existence on May 23rd, 2003 when an AVRC in relation that vehicle was presented to ICBC showing Johnathon Edward Klassen of 762 North 72 Street, Calgary, Alberta, as the registered owner. There were a number of indicia of fraud on the AVRC: the address did not exist; the month and date of the expiry were incorrect, and there was no corresponding record for the VIN in the Alberta Motor Ve- hicle System database. As well, the licence plate shown on the AVRC related to another vehicle. 47 The AVRC indicated that the vehicle was sold to Tammy Klassen, a name which Ms. Kostynick used as an alias. 48 Tammy Klassen testified that her identification had been stolen in 2000 and she had had nothing to do with Revin 23 or its transfer into her name. 49 On May 23rd, ICBC was also presented with a PVIR dated May 16, 2003 indicating that Mohammad Salim of IP Auto inspected it on that date for the owner “Tammy Klassen”. 50 Also on the same date, ICBC processed a B.C. Transfer/Tax form and related documents through broker 60999 at Prospera Insurance, purporting to transfer Revin 23 to Tammy Klassen from Johnathon Klassen and showing they were brother and sister and the vehicle was given as a gift. 51 Following the transfer, the vehicle was subject to a series of temporary operating permits: on May 23, 2003, May 26, 2003 and May 28, 2003. On June 5, 2003, an Owner’s Certificate of Insurance and vehicle licence was issued to Tammy Klassen for Revin 23. 52 In his testimony, Mohammad Salim confirmed that he issued the PVIR for “Tammy Klassen” on May 16, 2003. He identified Tammy 200 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

Klassen as Cheri Kostynick by photo and tentatively identified Harpreet Awla as being present with her at the time of the inspection. The IP Auto file contained a photocopy of identification related to Tammy Klassen which Mr. Salim identified as depicting Tammy Klassen or Cheri Kos- tynick as the person who brought Revin 23 for his inspection. 53 Revin 23 was recovered on June 6, 2003 in Surrey. It was inspected and determined to be in reality vehicle 1A. 54 There were similarities in the way that Revin 10 and Revin 23 were disguised and brought into existence and they corresponded in make, year and description.

Vehicle 46 55 Vehicle 46 is a red 2001 GMC Sierra with VIN 1GTHK29GO1E259925. It was owned and insured by Reynolds Con- crete Ltd. on October 1, 2001 for a one year period ending September 30, 2002. As with Vehicle 1A, Vehicle 46 went through several transforma- tions of identity. It was reported stolen on June 19, 2002 by the insured driver, as a result of which ICBC paid a total of $46,197.49, consisting of the total loss value of $45,705.75 and $491.74 in loss of use of payments. Eventually, ICBC received $18,009.88 from the sale of the recovered vehicle. 56 Following the theft of Vehicle 46, Revin 32 surfaced on July 19, 2002 when an AVRC showing a red 2001 GMC Sierra with VIN 1GTHK29901E259911 owned by Joseph Stansburg of 3427 - 32nd Street NE, Calgary, Alberta was presented to ICBC. Indicia of fraud similar to other of the Revin vehicles were evident on the AVRC, including a non-existent address, the wrong expiry month and date, and the lack of any corresponding records for the vehicle in the Alberta Motor Vehicle System database. The licence plate referred to in the AVRC related to another vehicle. The AVRC indicated that the owner Stansburg had sold the vehicle to Russell Herding who, as earlier noted, had his identification stolen previously and who denied any involvement with the transaction in relation to this vehicle. 57 Mahmed Zkeer completed a private vehicle inspection report in relation to Revin 32 on July 19, 2002. This was the same day he “inspected” Revin 1A and less than a week before he inspected Revin 35. All three of those vehicles were purportedly sold to Russell Herding. Vikram Atwal was found liable for conspiracy to convert Revin 35 in Insurance Corp. of British Columbia v. Atwal, supra. Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 201

58 On the same date, July 19, 2002, ICBC through All Time Insurance (Agent 33332) processed a B.C. Transfer/Tax form purporting to transfer Revin 32 from Stansburg to Herding. As to Herding’s vehicle which was stolen at the same time as his identification, Vikram Atwal was found liable in conspiracy to convert that vehicle (stolen 31) in Insurance Corp. of British Columbia v. Atwal, supra. 59 All Time Insurance processed a number of transactions of other Revin vehicles, including Revin 25 (February 9, 2003); Revin 38 (Febru- ary 17, 2003); Revin 20 and 21 (April 16, 2003); and Revin 29 (April 30, 2003). 60 Of those vehicles, Vikram Atwal was found liable for conspiracy to convert Revins 38, 20 and 29 in Insurance Corp. of British Columbia v. Ben-Jaafar, supra. In relation to Revin 21, Atwal’s cellular telephone number was used in the inspection report issued by vehicle inspector Mohamed Nachar in relation to that. 61 On September 4, according to a B.C. Transfer/Tax form filed with ICBC, Revin 32 was sold to Jagjeet Singh Sidhu for $35,350. Mr. Herd- ing had no part in that transaction. The vehicle was duly registered to Sidhu with an Owner’s Certificate of Insurance and vehicle licence. It was insured from September 4, 2002 to December 3, 2002. 62 Subsequently, on October 1, 2002, Revin 32 was reported stolen by Sidhu. ICBC paid him a total of $41,781.12 ($40,475.75 total loss; $1,144.88 for loss of use; and $160.49 for the loss of a car seat). Mr. Sidhu settled the plaintiff’s claim against him for conversion. Revin 32 never resurfaced in that identity, although the plaintiff alleges that it resurfaced with the new identity of Revin 36.

Revin 36 63 Before Revin 32 was reported stolen, Revin 36 was created with a false AVRC relating to a red 2002 GMC Sierra, VIN 1GTHK29GO2E259814. The AVRC indicated Jagbir Sangera to be the owner. The address given form was non-existent. A variation of the same address had been used on other Revins, including Revin 1, which Vikram Atwal was held liable for in Insurance Corp. of British Columbia v. Atwal. Other indicia of fraud were present in the AVRC, including false dates and months of expiry, no corresponding records for the vehicle in the Alberta Motor Vehicle database and the use of a licence plate related to another vehicle. 202 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

64 Mohamed Nachar completed a private vehicle inspection report on September 10, 2002 naming Jagbir Sangera as the owner. According to a B.C. Transfer/Tax form processed by Don Wotherspoon Agency through Agent 56539 (Jasdeep Sandhu) in Port Coquitlam, Revin 36 was transferred from Jagbir Sangera to Deana Marie Breem and it was registered as a non-licensed vehicle. Ms. Breem testified at the Insurance Corp. of British Columbia v. Atwal trial. Her evidence from that trial was admitted in the present trial. She testified her wallet, including her driver’s licence and other identification was stolen in 2000 or 2001 while she was working at the Surrey Place Mall. Her identification was used in connection with Revins 24, 36 and 37. She testified she had nothing to do with any of those vehicles or their registrations. 65 As earlier noted, Jasdeep Sandhu, the agent at Don Wotherspoon Agency who processed the transfer of Revin 36 from Sangera to Breem on September 10, had dealings with other Revins between July 2002 and June 2003. During that same time, there was significant telephone con- tacts between Vikram Atwal’s cell phone and Sandhu’s home and work telephone number. 66 Specifically, with respect to the transfer of Revin 36, there was a call from Vikram Atwal’s cell phones to Sandhu’s work number the day before the transfer, on September 9, 2002, and 10 calls to his work number from Atwal’s cell phone on the actual date of the transfer - Septem- ber 10, 2002. There was also one call from Atwal’s cell phone to Sandhu’s home phone on the day of the transfer. 67 Revin 36 remain registered in Ms. Breem’s name until December 2, 2002 when a BC Transfer /Tax form indicated it was transferred to Breeze Produce Inc./Kulbir Romana for $37,500. The transfer was done through Koch D &Y Insurance. The principal operator of the vehicle was Mr. Romana. The vehicle was insured for six months, expiring June 1, 2003. Mr. Romana reported the vehicle stolen to ICBC on January 21, 2003 as a consequence of which ICBC paid out the sum of $37,325 to Breeze Produce Inc. Mr. Romana settled the ICBC claim in conversion against him.

Revin 46 68 Revin 36 never resurfaced again, however, on March 22, 2003, Revin 46 bearing VIN 1GTHK29G02E259716 was “imported” into B.C. when a false AVRC and a PVIR completed by Mohammad Salim of IP Auto Services was provided to ICBC showing its transfer from Susan Kos- Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 203

tynick of 487 East 36th Avenue, Calgary, Alberta to Cheri Lorisa Kos- tynick of 12977 Glengarry Crescent, Surrey, British Columbia. Indicia of fraud similar to other Revins were on the AVRC: the address did not exist, the months and dates of expiry were incorrect and the Alberta Mo- tor Vehicle database had no vehicle corresponding to that described in the AVRC. 69 On the same date, March 22, 2003, a B.C. Transfer/Tax form showed the transfer of a red 2002 Jaguar with the same VIN as Revin 46 to Cheri Kostynick. On March 24, 2003, ICBC issued an Owner’s Certificate of Insurance and vehicle licence by Walia Insurance Company (Agent 62210) changing the description of the vehicle to a red 2002 GMC Sierra from its previous description as a Jaguar. 70 According to Mohammad Salim, as earlier noted, he was brought a number of vehicles for inspection by a person he identified by photograph as Cheri Kostynick, and a young Indo-Canadian male whom he tentatively identified, by photo, as Harpreet Awla. 71 On March 28, 2003, ICBC processed a B.C. Transfer/Tax form for Revin 46 indicating the sale of Revin 46 from Cheri Kostynick to Carter Plymouth Chrysler. Although no purchase price was revealed in the transfer documents, the sales manager of Carter Plymouth Chrysler testified that the dealership paid Ms. Kostynick $25,000 for the vehicle by cheque. After transfer of Revin 46 to Carter Plymouth Chrysler, it was transported to DK Brokerage Ltd. in Abbotsford, B.C. on April 4, 2003 and thereafter to Klamac Motor Company Ltd., a car dealership in Rich- mond, B.C. 72 It was recovered from a car dealership in Marysville, Washington state, U.S.A. on September 2, 2003 and on inspection it was determined to be Vehicle 46.

Vehicle 41 73 Vehicle 41 is a 2001 green Chevrolet four-wheel drive Silverado, VIN 1GCHK29142E101505. It was owned and insured by Arnold Boldt on September 17, 2001 for one year, expiring September 16, 2002. It was reported stolen on June 10, 2002 as a result of which ICBC paid out $58,521.17 ($57,724.13 for total loss and $796.86 for loss of use). 74 When eventually recovered after several transactions, ICBC received $31,110 in sale proceeds. 204 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

Revin 59 75 An AVRC indicating that Jacob Gilberts of 347 East 48th Avenue NE, Calgary as owner was presented to ICBC on September 18, 2002. The AVCR had indicia of fraud similar to the false AVRCs used in the scheme, including a false address, an incorrect date and month of expiry, a non-existent class of licence and no corresponding Alberta records for the vehicle. As well, the listed licence plate related to another vehicle. 76 According to the AVRC, the vehicle was sold to Rupinderjit Kaur Choong on September 2, 2002. Ms. Choong denied any knowledge of or involvement with the vehicle but testified her passport was lost in 1997. 77 Mohamed Nachar completed a PVIR form on August 14, 2002 naming Jacob Gilberts as the owner. As well, Nachar had acknowledged completing a number of false PVIR forms for Jasraj Bains and Vikram Atwal in the Insurance Corp. of British Columbia v. Atwal action. He also completed PVIR forms in relation to this action including Revins 53, 36, 16, 17 and 18. He acknowledged knowing Harpreet Awla and Allen Ferrier as someone whom he had borrowed money from through GVCCU in the late 1990s. Three of the vehicles that Nachar purported to inspect in this action were purchased by financing through Allen Ferrier at GVCCU. 78 The PVIR along with the AVRC and the B.C. Transfer/Tax form were provided to ICBC on September 18, 2002 evidencing the transfer of the vehicle to Ms. Choong and registering the vehicle as a non-licensed vehicle. 79 On October 12, 2002, another B.C. Transfer/Tax form was processed for Revin 59, transferring it into the name of Rodney Daniel Dick, indicating a purchase price of $25,000. Ms. Choong had no involvement in the sale or transfer of the vehicle to Mr. Dick. The Owners Certificate of Insurance and Vehicle Licence was issued by ICBC to Mr. Dick. 80 Mr. Dick was called in the plaintiffs’ case. He agreed that in 2002 he was in “dire financial straits”. He went to see Allen Ferrier at GVCCU to see about getting a loan for a vehicle. It was a green Silverado truck he had been shown by someone named Harp who had the vehicle for sale. 81 He was given a photo of Vehicle 41 and testified it resembled the vehicle he purchased as Revin 59. He was shown a picture of Harp Awla and said he couldn’t say for sure if it was “Harp” as he only saw him one or two times and it was a long time ago. He met Harp at the GVCCU and first saw the green Silverado at the bank. He got a loan from the Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 205

GVCCU for $16,000 and the truck for $25,000. It was Allen Ferrier who completed the application forms for a loan for Mr. Dick and he approved the financing for Revin 59. The loan was secured against Revin 59. He paid cash for the vehicle, paying “Harp” at an unlocked van parked outside GVCCU. It was registered to Dick on October 12, 2002. He had it for a few months and then reported it stolen on February 26, 2003. 82 He knew Ross Hinchberger. He was the person who referred him to Allen Ferrier at GVCCU, who in turn referred him to “Harp”. After he reported the green Silverado stolen he telephoned Ferrier to ask if there was another vehicle available. Around six months later, Harp phoned him and told him “they” had another vehicle that had been fixed up. 83 He was paid at $39,000 by ICBC for the green Silverado, so he made about $15,000 on the transaction. He acknowledged that he wrongly reported having paid $35,000 for the vehicle. 84 Once Revin 59 was reported stolen by Mr. Dick, it did not resurface.

Revin 17 85 Revin 17, which the plaintiff alleges to be the same vehicle as Revin 59 (Vehicle 41), was registered on October 21, 2002, not long after Revin 59 was registered to Dick and several months before he reported it stolen. The registration documents included an AVRC in relation to a brown Chevrolet Silverado VIN 1GCHK29172E290442. The AVRC had indicia of fraud including a false address, an incorrect month and date of expiry and no VIN corresponding vehicle in the Alberta Motor Vehicles database. The PVIR was prepared by Mohamed Nachar on October 18, 2002, the same date he issued PVIRs for Revin 16 and Revin 18. As noted, he had issued a PVIR for Revin 59 on August 14, 2002. 86 On October 21st, a B.C. Transfer/Tax form was filed with ICBC purporting to transfer Revin 17 from its Alberta owner Jonathon Greywood to Reaia Ng. It was processed by McNaughton and Ward Insurance Agency, Agent 61523. Ms. Ng who testified, had nothing to do with the vehicle or the transfer. She denied being a past customer of McNaughton and Ward but there was a previous transaction in her name involving the agency. 87 Mohamed Nachar admitted performing “blind inspections” for Jasraj Bains and Vikram Atwal when he testified at the Insurance Corp. of British Columbia v. Atwal trial, during this time frame. Nachar acknowledged some previous contact with Harpreet Awla but gave no clear evidence that Awla had brought him vehicles for inspection. He did ac- 206 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

knowledge knowing Allen Ferrier and he inspected three other revined vehicles in this action financed by Ferrier at GVCCU. 88 Revin 17 remained registered to Reaia Ng as a non-licensed vehicle until March 21, 2003 when Cynthia Hill, who at that time was married to Ross Hinchberger, both took out a three day temporary operating permit (“TOP”) with a letter purportedly signed by Ms. Ng authorizing it. Ms. Hill testified that Mr. Hinchberger asked whether she was interested in buying the vehicle. According to Ms. Hill, she drove the vehicle for the duration of the TOP but when it expired, someone took the vehicle away. She saw the same vehicle again about two to three months later in Mr. Hinchberger’s possession. She identified a photograph of Vehicle 41 as Revin 17 and the vehicle she later saw in Mr. Hinchberger’s possession (Revin 41). It was a green 2002 Chevrolet Silverado. 89 She had heard of and met Harpreet Awla through Ross Hinchberger. Ross Hinchberger knew Harpreet Awla and Allen Ferrier. He got Revin 41 from Harpreet Awla and he testified it was the same vehicle that he and Ms. Hill previously had with the TOP.

Revin 41 90 Revin 41 first surfaced on June 27, 2003, through a false AVRC in relation to a green 2002 Chevrolet Silverado VIN 1GCHK29172E2110089 purportedly owned by Jason McDonald of 283 - 34 Avenue Calgary, Alberta. The address was non- existent, the month and date of expiry was incorrect and Alberta’s Motor Vehicle database has no record of Revin 41. As well, the licence plate identified on the AVRC related to another Alberta vehicle. There was no PVIR issued for Revin 41 and on June 27, Cynthia Hill purchased a three day TOP on the basis of the AVRC. She testified she did so at the request of Mr. Hinchberger who testified he got the vehicle from Harpreet Awla. Both of them testified Revin 41 and Revin 17 were the same vehicle. 91 On July 2, 2003, the vehicle was seized from the Hinchberger/Hill residence. Upon subsequent inspection it was determined to be Vehicle 41 originally reported stolen by owner Arnold Boldt on June 10, 2002. 92 The key which was seized from Revin 41 was examined by a locksmith as were keys turned over by Mr. Boldt in relation to Stolen 41 and Dick (Revin 59). The locksmith concluded that the keys from the Dick claim and the Boldt claim were cut to the same combination and the Boldt keys were original, while the Dick keys were cut by code as were the keys seized with Revin 41. Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 207

Vehicle 16 93 The sole remaining defendant in connection with Vehicle 16 is Sandeep Rai against whom the plaintiff has default judgment as a result of his failure to file an appearance and statement of defence. 94 Vehicle 16 is a black 2001 GMC Sierra VIN 1GTHK291X1E325621 registered to Red of the Red Chicken and Seafood Co. Ltd. (RRCS) and owned for a year as of September 1, 2002. 95 The named driver was Edwin Piendl. He reported the vehicle stolen on March 11, 2002. ICBC paid out $60,202.17 consisting of $57,500 to GMAC for total loss, $1,128 to Piendl for reimbursement of a car seat and tires, and $1,334.77 to Piendl representing a loss of use payment. In a salvage sale after recovery of the vehicle, ICBC received $33,881. 96 A PVIR in relation to Revin 18 completed by Mohamed Nachar on October 18, 2002 was provided to ICBC on October 21, 2002. The PVIRs for Revin 18 and 17 were completed at the same time. As with Revin 17, the PVIR was created before the original vehicle was reported stolen. No PVIR accompanied a false AVRC relating to a black 2002 GMC Sierra VIN 1GTHK291X2E325717. The AVRC related to a vehicle which did not exist in the Alberta database and referred to a licence plate connected to another vehicle. The Alberta owner was said to be James Gurin and on the B.C. Transfer/Tax form filed on October 21, 2002 it was ostensibly transferred to Edith Wilson as a gift from her “cousin” James Gurin. Ms. Wilson testified she had nothing to do with the vehicle or the transfer. Vehicle 16 remained in Ms. Wilson’s name until January 3, 2003 when it was transferred by B.C. Transfer/Tax form to Harold Roger Moran for $12,500. 97 Ms. Wilson had nothing to do with that transfer. Mr. Moran insured the vehicle until July 2, 2003 and on July 3, 2003, insured it until July 2, 2004. 98 Mr. Moran and the defendant Rodney Dick knew one other, as Mr. Moran worked for Mr. Dick from time to time and Mr. Dick’s cell phone records reflected various calls to Mr. Moran between September 9, 2002 and February 26, 2003. The latter date was the day on which Mr. Dick reported Revin 59 stolen. 99 According to Ross Hinchberger, he had introduced Moran to Harpreet Awla as Moran was interested in buying a truck. 208 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

100 Revin 16 was seized on July 13, 2003. A subsequent inspection revealed it to be Vehicle 16. The bar code used on the false VIN related to a vehicle stolen five days before Vehicle 16 was reported stolen. 101 The transfer of the vehicle from Ms. Wilson to Mr. Moran was done through McNaughton and Ward Insurance Agency, where Ms. Wilson had been a customer. Sundeep Rai was the agent who processed the transfers.

Vehicle 18 102 Vehicle 18 is a blue 2002 Chevrolet Silverado VIN 1GCHK29172F290439. It was owned by GMAC as Lessor and Canvey Equipment Erectors Ltd. as Lessee and insured on June 21, 2002 for a year expiring June 20, 2003. 103 The insured driver was Keith Fortier. He reported the vehicle stolen on October 23, 2002. He testified that until it was stolen, the vehicle had been in his possession and control exclusively. No one had permission to use it, or take it for an inspection prior to the theft. He denied ever taking the vehicle to Guildford Mall or putting a for sale sign on it. 104 As a result of the theft claim, ICBC paid out a total of $59,141.32, consisting of $55,200 to GMAC as total loss value without GST, $2,759.05 to Canvey Equipment Erectors as total loss value; $268.74 to Canvey as total loss value and $854 to Keith Fortier as loss of use payment. 105 When eventually Vehicle 18 was recovered, ICBC received $31,590 by way of salvage sale. These funds are being held in trust pursuant to an order of Allan J. in Insurance Corp. of British Columbia v. Awla, which was ordered to be tried at the same time as this action. 106 Revin 18 first surfaced in British Columbia on October 21, 2002, two days prior to the reported theft of Vehicle 18. Revin 18 was a blue 2002 Chevrolet Silverado VIN 1GCHK29172E290456. It was identified in a false AVRC provided to ICBC on October 21, 2002 as being owned by Gabriel Stevens of 483 East Veneals Way, Calgary Alberta. There was no corresponding vehicle in the Alberta Motor Vehicle database, and other indicia of fraud were on the AVRC. The PVIR was completed by Mohamed Nachar on October 18, 2002 as noted on the same day as Revins 16 and 17, both apparently “blind” inspections. The PVIR reflected the same owner and address as the false AVRC. Those documents along with a B.C. Transfer/Tax form were provided to and processed by ICBC on October 21, 2003, evidencing a transfer from Gabriel Stevens Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 209

to Tarsem Phagura. Mr. Phagura testified he had nothing to do with the vehicle or its transfer and the signature on the forms related to him were not his. 107 The vehicle was registered to Tarsem Phagura as a non-licensed vehicle on October 21, 2002 until it was transferred to the defendant Jason Smith on October 29, 2002. The purchase price shown on the B.C. Transfer/Tax form was $38,500. The transfer/tax form showed the sell- ers’ signature as “P. Tarsem”. Mr. Phagura testified he had nothing to do with the sale and the signature was not his. 108 On October 29, 2002, ICBC issued Mr. Smith with an Owners Certif- icate of Insurance and Vehicle Licence to Jason Guy Smith. It was insured until October 28, 2003. 109 Revin 18 was one of the several revined vehicles that was purchased through loans from GVCCU arranged by Allen Ferrier. 110 There was evidence that Mr. Smith began his dealings with GVCCU on October 10, 2002 by depositing the sum of $5,100 into a newly opened account from “Royal Bank Mission - savings acc.” Despite being asked on discovery, Mr. Smith was unable or unwilling to produce records relating to the source of these funds. 111 On October 10, 2002, GVCCU generated a Member Information Pro- file document and an Equifax Summary relating to Mr. Smith’s credit worthiness in connection with his application for a loan of $18,900 said to be for the purchase of a “2002 Chev 2500 Diesel”. Mr. Ferrier testified that his information on the application form came from “the client”. 112 Subsequently, on October 29, 2002, a second Member Information Profile was generated by GVCCU in relation to a second application for a loan, this time for $6,100.00 for a “car purchase”. 113 On a net worth statement in his second Member Information Profile, the 2002 Chevrolet Silverado was valued as $48,000. 114 On October 29, 2002, a total of $30,000, including loans one and two and $5,000 from the initial deposit were withdrawn from Mr. Smith’s account. According to a withdrawal slip which he signed, Mr. Smith obtained the $30,000 in cash. 115 There was no evidence whether or from where the balance of the asserted purchase price of $38,500 was paid. 116 Mr. Ferrier was replaced as the General Manager of the GVCCU Sur- rey Branch by Robert Hattrick in January 2003. Mr. Hattrick testified he was contacted by Jason Smith in July or August 2003, who told him that 210 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

the police informed him that Revin 18 was a stolen vehicle. He was at the branch for copies of documents relating to the financing. Mr. Smith told Mr. Hattrick that he was in the Guildford Mall area and noticed Revin 18 in the parking lot, which was about one and one-half blocks away and on the opposite side of the street from the GVCCU branch. Mr. Smith told Mr. Hattrick that his keys and registration to the vehicle had been dropped off for him at the branch. 117 Revin 18 was involved in an accident in April 2003, and Mr. Smith took it to Erv’s Autobody Ltd. in Abbotsford. 118 According to Troy Hanley, who worked at Erv’s, when he entered the vehicle’s VIN on to the database, it appeared to relate to another vehicle, a smaller gasoline engine pick-up truck. 119 Mr. Hanley testified he told Mr. Smith of the discrepancy. He also testified he noticed that the federal standards decal located on the inside of the driver’s door appeared to be tampered with and he also told Mr. Smith about that and recommended that Mr. Smith contact ICBC and the police. He testified Mr. Smith did not seem concerned. 120 The manager at Erv’s at this time was Joseph Kovack. He testified he had no recollection of speaking with Mr. Smith about the vehicle and had no recollection of there being a problem with a VIN related to a 2002 Silverado.

The Evidence of Jason Smith 121 Mr. Smith testified on his own behalf. In 2003, he lived in Mission, B.C., and was working as an apprentice lineman for Galbraith Power Lines. That job entailed travelling around the Lower Mainland. 122 He was in the market for a pick-up in the $40,000 range, for which he would have needed a loan. 123 He bought Revin 18. He just noticed it for sale in the Guildford Mall parking lot and contacted the person selling it by the phone numbers on the for sale sign. 124 He subsequently met the seller whose name was Tarsem. He told Smith he was going through a divorce and needed the money. He had a look at the vehicle and drove it around the mall parking lot. He could not recall the mileage or any discussion about how new it was. There was a discussion about price. He remembered talking about $40,000, which he thought was a little cheaper than a dealership price. They settled on a Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 211

price of $38,500. He believed there was more than one discussion. There was nothing about the transaction that made him suspicious. 125 Mr. Smith had to finance the vehicle and did so through a credit union, the GVCCU, which was right across the street from where the truck was located in the mall parking lot. 126 He had done no previous business there. He was asked why he went there and answered that he was not sure exactly, it was in the area, and he frequented the area. He had to borrow $25,000 to $30,000. 127 He dealt with a guy named Al at the credit union. He was asked if someone referred him to Al and responded “I just set up an appointment and went to the appointment after that.” 128 He filled in all the forms that were required. He thought there were about two to three weeks between attending at the credit union and purchasing the truck. 129 It was “Al” who had him fill out the forms for his loan application. At some point he specifically discussed the vehicle with Al. He said the bank wanted to check out the truck so he had to get hold of the seller to let him know he needed the vehicle and he dropped off the registration at the credit union. He was not present but Al informed him of that and said his loan was ready to go and the truck had “cleared lien charges”. He went to the credit union for the transfer documents, for his plates and insurance, then met the seller and got the truck. He got the plates and insurance at Meridian Insurance in Port Coquitlam and registered the transfer. He then went to Richmond to pick up the truck. He couldn’t recall why he went to Richmond. He paid the seller some cash when he picked up the vehicle but couldn’t recall how much. He didn’t think he gave him $38,500. He got a set of keys and drove away. He never saw the seller “Tarsem” again. 130 He testified that the truck was in a collision and required repair. He took it to Erv’s where he dealt with a person called Joe. He thought Troy was just a helper. There was some difficulty with the parts not fitting. He didn’t recall if there was an issue about the “serial number”. 131 He recalled Troy saying something about the vehicle being stolen. He was surprised and didn’t know what to think but no one made further inquiries and ICBC paid his claim. He said Joe told him the parts weren’t matching so the truck could be stolen or there could be a mix-up in the factory. Joe told him ICBC insured it and was paying for the damages. He was never contacted by ICBC. 212 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

132 In July 2003, two RCMP officers came to his front door. He let them in to have a look at his truck. After looking at it, they took the vehicle away to inspect it even though Mr. Smith protested. 133 Once the vehicle was towed by the police, he never saw it again. He was not contacted again by the police or ICBC. He did not attempt to contact the police. ICBC commenced an earlier action against him in September 2004 and another one in 2007. 134 He repaid the loan to the credit union. He did not recall going there to make any inquiries as Mr. Hattrick testified. 135 He retained counsel two to three weeks after the truck was seized, and had no further direct dealing with the police or ICBC.

Cross-Examination 136 Mr. Smith had two other licensed trucks at the time he purchased Revin 18. 137 He didn’t recall if he was referred to GVCCU by the seller. He agreed on his examination for discovery that he testified he went to GVCCU on his own and was not referred there. He got one loan and one overdraft in the total amount of $25,000, on October 29, 2002. He couldn’t recall if he received $30,000 in cash from the credit union and couldn’t recall if he got his truck the same day he got the cash. 138 He agreed that, although he was told the vehicle was stolen at Erv’s, he did not report it to the police or ICBC. 139 He denied knowing more about the source of his vehicle than he told the Court. He had no knowledge of Harp Awla, Rodney Dick, Roger Moran or Ross Hinchberger. 140 He could not recall if anyone else was present when he saw the vehicle presented for sale in Guildford Mall. He wasn’t sure if the credit union was one and one-half blocks away from the parking lot. He had never before been to the credit union. At the time, he did his banking at the Royal Bank. He agreed when he picked up the vehicle it was a long way from Meridian Insurance and a long way from the Guildford Mall. He agreed to go to Richmond to pick up the truck. Someone else had to drive with him to bring the vehicle back but couldn’t recall who. He agreed Meridian Insurance was close to where he worked. 141 He was asked if he paid $38,500 and replied “I think that’s what I paid”. He agreed the transfer tax box that said below market value was Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 213

checked but was not sure if he put it there, but he signed the form. He thought the price was cheaper than at a dealership. 142 He agreed at his examination for discovery that the vehicle “was worth more than he was asking”. 143 He agreed on the loan application to GVCCU the vehicle was valued at $48,000. 144 He agreed he had produced no cell phone records of calling the number of the seller. 145 He also agreed the seller “could have” referred him to Ferrier at the GVCCU. 146 In his discovery evidence on November 9, 2010, he testified as follows: 301 Q What do you remember in terms of how you dealt with the bank — like your first dealing with the bank? - did you walk over there, did you call over there — what did you do? A I think I just walked in. 302 Q You think so? A Yeah. 303 Q Was the seller involved in that in any way? A How do you mean? 304 Q Was the seller involved in introducing you to the credit union or anything like that? A I don’t recall. ... 307 Q Yeah, those questions were about the credit union, and you said “I think I found it on my own.” A. Yeah. 308 Q And is that right? A. Yeah, it was across the street. 309 Q And then later questions I was just making sure that nobody had introduced it to you or referred you to it? A I don’t recall that, no. I believe it was just convenient across the road, and that’s where I went. 147 He expressed uncertainty about whether he was introduced by the seller to GVCCU. 214 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

148 He agreed he met the seller two times; once at the Mall and once in Richmond when he picked up the truck, and that there was about two or three weeks between deciding to buy the truck and actually buying it. 149 He said he didn’t know the truck could have been in the possession of the real owner if he saw it two to three weeks before he bought it on October 29, 2002, speculating that maybe he saw another truck. 150 He did not recall October 10, 2002 as the date he probably went to the credit union. He agreed the vehicle’s registration documents were dropped off at the credit union but did not know if Ferrier knew the person who dropped them off or referred to him as Harp. 151 He did not recall meeting with Mr. Hattrick after the truck was seized, or expressing surprise that he had signed for $30,000 cash. He said he did not think he carried that much cash. 152 He did not recall depositing $5,000 of his own funds with the credit union. He produced no documents showing that he opened an account or deposited funds on October 10, 2002. The documents he produced did not reflect any transactions before October 29, 2002. 153 He agreed that he would have had to pay an additional $8,500 in addition to his $30,000 withdrawal on October 29 to make full purchase price but produced no records relating to the withdrawal or payment of $8,500. 154 He agreed he could not substantiate that he paid the seller more than $30,000, except the insurance papers which show a price of $38,500. 155 He agreed he was unable to show the source of the original $5,000 deposited in the GVCCU on October 10, 2002. 156 He agreed he could have got a loan from other facilities such as the Royal Bank, but not did check there or shop for interest rates. He could not recall what the interest rate at the credit union was or what he could have got elsewhere. 157 He agreed that on October 10, 2002 that he just went to the credit union. He applied for a loan of $18,900 for the purpose of purchasing a “2002 Chevrolet 2500 Diesel”. He agreed it would cost more than $18,900, but did not agree that he had not yet seen it. He agreed that according to the statement of his account at the credit union, he deposited $5,000 on October 10, 2002 and that was the only amount until October 29 was the $18,900 loan and the $6,100 overdraft were deposited to his account. Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 215

158 He couldn’t recall having $5,000 ready to deposit when he went to the credit union on October 10, 2002. He agreed it appeared that he brought $5,100 in cash from which $5,000 was deposited according to the credit union source of funds declaration on October 10, 2002, which he agreed he asserted came from his Royal Bank savings account. He produced no documents to reflect the source of the $5,100. He could not recall why he deposited $5,000 if it was just to open an account. 159 He agreed that the October 29, 2002 withdrawal slip for $30,000 looked like it had his signature on it. He agreed when he met the seller he gave him money but did not recall what he gave him. It is possible he paid him something other than $38,500. 160 Mr. Smith agreed that after the vehicle was seized by the RCMP in July 2003, he did not sue RCMP or any insurance agent or agency and has not brought a counterclaim against ICBC in any existing actions.

Vehicle 37 161 Vehicle 37 is a 2002 white Chevrolet Express van, with VIN 1GCFG28M721237837. It was leased and insured by Mohammed Hanif in January 2003. The lessor was GMAC Leaseco Ltd. Mr. Hanif used the van in his courier business and drove the vehicle to and from Seattle daily from Monday to Friday. He reported the vehicle stolen on March 3, 2003. He testified that he used the van up until that date and it was never out of his possession or control. 162 As a result of the theft claim, ICBC paid out a total of $27,003.38, comprised of $799.28 for loss of use payment to Mohammed Hanif and $26,204.13 to GMAC for a total loss value. 163 Before Vehicle 37 was reported stolen, Revin 37 surfaced on Febru- ary 27, 2003 when ICBC was presented with an AVRC, a PVIR and a B.C. Transfer/Tax form in relation to a white 2002 Chevrolet Express bearing VIN 1GCG929R121139431. The AVRC had indicia of fraud similar to others used in the scheme. It showed as owner, Gill Sandeep of 43 Northwoods Village, Edmonton, Alberta T6H 4L1. That was the same address as on the AVRC for Revin 24 which identified Wayne Grant as the owner. The name Gill Singh Sandeep was on the AVRC for Revin 55. The postal code was used for Revin 28, 29, 30, 2, 25 and 57. 164 Both Jasraj Bains and Vikram Atwal had connections to Sandeep Gill and Vikram Atwal was found liable for Revins 28, 29 and 30 which used the same postal codes. 216 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

165 The address on the AVRC for Revin 37 does not exist, the month and date of expiry is incorrect and there is no corresponding vehicle in the Alberta motor vehicle data base. 166 According to the AVRC, Revin 37 was transferred to Dianna Breen of Surrey on February 17, 2003. The B.C. Transfer/Tax form dated Feb- ruary 27 showed a different address for Ms. Breen. As earlier noted, Ms. Breen testified her identification had been stolen in 2000/01 and she had nothing to do with Revin 37 or its transfer to her and from her at any time. Her identify had been used for Revin 24 and 36 as well as 37 and she had no knowledge of any of these transactions. 167 The PVIR form presented to ICBC was dated February 27, 2003. It indicated that at noon Satwant Ranauta of Bansal & Sons Diesel Auto- motive inspected Revin 37 and indicated Sandeep Gill of 7128 - 123 Street in Surrey as the owner. 168 The address for Sandeep Gill is in fact the address of Bhupinder Gill who leased Stolen 48 which was the subject of the action in Insurance Corp. of British Columbia v. Ben-Jaafar. 169 On February 27, 2003 at 6:53 p.m., ICBC processed a B.C. Trans- fer/Tax form to transfer the vehicle to Dianna Marie Breen. It was processed by Broker 33332 at All Time Insurance. 170 Revin 37 was processed as a gift to avoid the need for payment of taxes. 171 There was a connection established between Vikram Atwal and All Time Insurance which processed Revin 32 in this action, as well as Revins 28 (February 9, 2003), 38 (February 17, 2003), 20 (April 16, 2003), and 21 and 29 (April 30, 2003). Vikram Atwal was held liable for Revins 38, 20 and 29. With respect to Revin 21, Vikram Atwal’s cellular number was used on the PVIR by Mohamed Nachar who conducted its inspection. 172 The defendant Satwant Ranauta was, and is, a licensed vehicle inspector employed by Bansal & Sons. He did not testify at the trial. At his examination for discovery he testified he got the “job card” for the inspection. He was unclear whether in 2003 he would regularly get a “job card” to do inspections. He had no specific recollection of the inspection in question, but based his discovery evidence on what was in the remaining document. 173 Jasvinder Gill, also known as Jerry Gill, previously testified as to his involvement with Stolen/Revin 24 for which his cousin Raminder Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 217

Bhandher was found liable in Insurance Corp. of British Columbia v. Atwal. 174 He was named as the lessee for Vehicle 24, but in reality it was leased for Mr. Bhandher. 175 With respect to Vehicle 24, I made the following findings based on the evidence before me then, which is similarly before me at this trial, at para. 282 as follows: [282] On the other hand, I have no difficulty in accepting that the plaintiff has proved its case against the defendant Bhandher with respect to vehicle 24. With respect to that vehicle, there is reliable evidence which I accept that he was the user and lessee of the vehicle through his cousin Jasvinder Gill and that over a month before he reported it stolen, it had been given a false VIN registered through Jasdeep Sandhu of Don Wotherspoon Agency. Bhander received calls from Vikram Atwal’s cell phone, and vehicle 24 was transferred a second time about three weeks before the defendant Bhandher reported it stolen. In those circumstances, and in light of the locksmith’s evidence that the vehicle was likely stolen with a working key, and that the false registration of the vehicle was accomplished by an insurance agent whom Raminder Bhandher’s friend Vikram Atwal was in contemporaneous contact with all combines in my view to establish to the requisite degree that Raminder Bhandher was inte- grally involved in the conspiracy to convert vehicle 24 and I accordingly find him liable. 176 In the present case, Jerry Gill testified that the defendant Kulvinder Bansal is a good friend of his and he was aware of his business Bansal & Sons. He was sure he was at the business in 2003 and was familiar with Satwant Ranauta, one of Bansal’s employees. He identified a call from Mr. Bansal’s cell records as being to his home number on February 11, 2003, but had no recollection of the reason for the call. He had no knowledge of the transfer of Vehicle 37 to Dianna Breen on February 27, 2003 and knew nothing of the vehicle involved. 177 He said he recalled Vikram Atwal and Raminder Bhandher asked about vehicle inspections and he gave them his friend’s business number. He recalled Mr. Bhandher asking him whether his friend did vehicle inspections. 178 He was asked about two calls from Vikram Atwal’s cell phone to his, one on July 3, 2002 and one on January 23, 2003. He did not know what they were about and speculated they could be from Mr. Bhandher. 218 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

The Evidence of Kulvinder Bansal 179 Kulvinder Bansal testified on his and his company’s behalf. He took over the business started by his father in 1983 or 1984. The defendant Mr. Ranauta has been employed for about 20 years. Both of them are licensed to inspect vehicles. There is a Commercial Vehicle Manual which was available in 2003. He identified a page (Exhibit 134) which dealt with verifying the VIN. 180 He identified a later 2010 version of the Manual relating to the inspection of the VIN. 181 He identified a PVIR filled out by Mr. Ranauta and testified that was the form which would be filled out for a PVIR. He identified Mr. Ranauta’s handwriting and signature on the form. He noted the odometer showed 56,362 according to what was written on the form. 182 In cross-examination, he said he knew nothing about the transfer of the vehicle or its insurance certificate and had no copies of those documents in his business records. He had not seen or had a copy of the AVRC. 183 He did say that his company produced a copy of the PVIR which it had in its records. There were three copies, white, green and blue - one for owners, one for the facility and one for ICBC. He gave his lawyer the green copy, which was the facility copy. 184 That was the only document on file. There was no registration certificate, no insurance documents, no identification documents and no internal documents other than the PVIR. 185 It was the practice to write down the start time of the inspection. 186 He himself had no involvement in the inspection. He found no invoice for the inspection. When the case started he called his lawyer and produced the records for the lawyer. 187 The job card was what was used to give to the mechanics to do the required work. They were created manually but if no one was in the office none would be created. There was no job card created in this case. 188 He knows Mohammad Salim and knew he inspected vehicles. He got in touch with him to find out what this was all about. 189 He knew Paramjit Awla. Jerry Gill is a friend of his. He didn’t see him regularly in 2003 and didn’t think he came to his property. Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 219

190 He denied Jerry Gill referred the Express van to him. He was familiar with Raminder Bhandher as “Sandy” and dealt with him one or two times with Jerry Gill. 191 He may have called Jerry Gill in February 2003 but they never did any business. 192 He agreed no PVIR should be issued if there was no vehicle present. 193 He agreed that Exhibit 20E which contained the false VIN seized from Revin 37 after it was recovered was not a proper bar code for a dashboard VIN, it was a piece of paper - most are metal and attached with rivets. He agreed it was clearly not a dashboard VIN. 194 In cross-examination by Mr. Murray, he said ICBC would regularly audit inspectors once every one or two years to check the paper work. 195 Revin 37 was maintained in Ms. Breen’s name until March 9, 2003 when it was transferred to Ajmer Litt for a purchase price reported to be $6,000. On March 9, an Owners Certificate of Insurance and Vehicle Li- cence was issued until April 23, 2003 as a delivery vehicle. 196 The plaintiff has a default judgment against Ajmer Litt on the basis that he is liable for purchasing Revin 37 from Vikram Atwal. 197 On March 9, 2003, Vikram Atwal received a cheque from Ajmer Litt for $3,600. Mr. Atwal has refused or neglected to produce the bank records for the account to which he deposited the cheque. Mr. Atwal’s telephone records show contact between his cell phone and telephone numbers associated to Ajmer Litt in the period leading up to, including and following March 9, 2003, the date of the transfer of Revin 37 to Litt. 198 According to Litt’s telephone records, he called Atwal three times on March 9, the day of his purchase of Revin 37, and several more times after that, on March 10, 12, and 13, 2003. 199 On August 1, 2003, Litt brought Revin 37 to the North Delta Public Safety Building where it was inspected and determined to be Vehicle 37. The false VIN on the dashboard was seized and it was what was shown to Mr. Bansal, who testified it was not a proper VIN plate.

Vehicle 52 200 Vehicle 52 is a green 2000 Pontiac Grand Am with a VIN of 1G2NF12EXYM811753. It was reported stolen by its insured owner, Shelley Ali, on December 23, 2002. As a result of the theft, ICBC paid out a total of $17,115.08, consisting of $15,157.50 as the total loss value to the insured, $1,390 as a loss of use payment, $40.58 for reimburse- 220 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

ment for a booster seat, and $525 to Golf 2000 Auto Sales as part of the total loss value. 201 The keys for the vehicle turned over by the owner showed signs of tracing indicative of copying. Eventually the vehicle was recovered on October 27, 2003 and it sold in a salvage sale for $6,200 leaving a net claim of $10,913.35. 202 The insured, Shelley Ali, was married to Mohammed Ali, who testified. He knew and was a former business partner of Tariq Hezbawi. He took the vehicle to Hezbawi’s auto mechanic shop for repairs. He knows some of the other defendants in this action, including Mohamed Nachar, Mahmed Zkeer and Sandeep Rai. 203 Revin 52 surfaced on May 12, 2003 when an AVRC was provided to ICBC in relation to a 2000 Pontiac Grand Am with VIN 1G2NF12EXYM811803. 204 According to the AVRC, Justin Klassen of 378 - 47th Avenue in Red Deer, Alberta was the registered owner. No such address existed and the AVRC had other indicia of fraud similar to other “revined” vehicles. The Klassen name had been used on other occasions as well. The Alberta Motor Vehicle database had no records for a vehicle corresponding to the VIN and the licence plate referred to in the AVRC related to a different vehicle. 205 According to the AVRC, Revin 52 was sold to Tammy Klassen in May 2003. Ms. Klassen’s identification had been stolen and her name had been used in several other fraudulent “revining” transactions. 206 Cheri Kostynick testified that she used Ms. Klassen’s name as an alias in a scheme to “revin” the stolen vehicles. 207 The bar code on Revin 52 was inspected when the vehicle was eventually recovered on October 27, 2003, and it decoded to a 1992 Chevrolet G20 Van associated to Paramjit Awla, who was Harpreet and Gurpreet’s uncle. 208 On May 12, 2003, ICBC registered the vehicle to Tammy Klassen after presentation of a B.C. Transfer/Tax form, an AVRC, a PVIR, and a Non-Market Value and Tax Exemption form showing that the vehicle was a gift from Justin Klassen to Tammy Klassen. 209 Cheri Kostynick, using the identity of Tammy Klassen, purchased three temporary operating permits for the vehicle; one on May 12, one on May 14 and one on May 21 of 2003. Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 221

210 The PVIR which had been submitted in relation to the registration of the vehicle was dated May 8, 2003 and was completed by Mohammad Salim of IP Auto. He completed three other PVIRs for Tammy Klassen around the same time. 211 Ms. Kostynick testified that she registered Revin 52 (as well as Revins 23, 10 45 and 46) at the request of Gurpreet Awla. She used the Tammy Klassen ID and after the vehicle was registered, it was advertised for sale and she sold it to Harjit Brar for $6,200, consisting of $2,500 in cash and a cheque for $3,700. She got a commission for her part in the sale and gave the balance of the money to others involved in the scheme. 212 Harjit Brar’s husband is Navdeep Brar. He testified that it was he who owned and possessed the truck. When he attended an insurance office to attempt to insure the vehicle in October of 2003, he was told by the agent he was dealing with that it was stolen. He waited for the police to arrive after they were called and then took them to his home where the vehicle was located. 213 When recovered, it was determined that Revin 52 was in reality Vehi- cle 52. 214 The plaintiff seeks damages in the amount of the loss, plus interest jointly and severally against Harpreet Awla, Gurpreet Awla and Cheri Kostynick. The plaintiff also seeks damages for the loss, plus interest jointly and severally against Navdeep Brar, but no costs are sought against Navdeep Brar.

Vehicle 14 215 Vehicle 14 is a black 2001 GMC Yukon. It was insured by Cheryl Kuhn on November 20, 2002. It bore VIN 1GKEK13T71R134386 and the insurance was set to expire on November 19, 2003. 216 On March 3, 2003, Ms. Kuhn reported Vehicle 14 stolen as a result which ICBC paid out a total of $50,656.05 consisting of $47,473 as total loss value, $121 to pay Cheryl Kuhn for reimbursement of a new licence plate, registration fee and car seat, $392.25 to Cheryl Kuhn representing a loss of value payment and $2,669.80 to Carter Pontiac Buick, representing the total loss value with GST of Vehicle 14. 217 After eventually recovering and selling the vehicle, ICBC recovered the sum of $27,901. 218 A forged AVRC with respect to Revin 14 was recovered on May 8, 2003. The AVRC related to a black 2001 GMC Yukon bearing VIN 222 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

1GKEK13T71R134680 and indicated that Johnathon Klassen of 342 East 31st Avenue in Edmonton, Alberta, T7R 4Y9 was the registered owner. That address was non-existent. On the back of the AVRC, it indicated that Revin 14 was sold to Tammy Klassen on May 1, 2003. The purported transaction was similar to the transaction between Johnathon Klassen and Tammy Klassen with respect to Revin 23 and similar to the transaction involving Revin 52 between Justin Klassen and Tammy Klassen. 219 The bar code on the public VIN of Revin 14 (as with Revin 23 and Revin 52) decoded to the Awla Van. 220 Revin 14 was never registered in British Columbia, but in May 2003, Cheri Kostynick went to Five Star Auto, an inspection facility, located on 76 Avenue in Surrey, to obtain an inspection of Revin 14. Mr. Parmjit Dhaliwal testified that a person whom he identified as Cheri Kostynick from her photograph brought him a black 2001 GMC Yukon to be inspected. 221 He obtained a copy of the Alberta registration document purportedly showing the transfer of Revin 14 from Johnathon Klassen to Tammy Klassen and he completed the inspection of Revin 14. 222 After the inspection, Revin 14 would not start and when Ms. Kos- tynick returned to Five Star Auto he advised her that the repairs should be covered under warranty and suggested the vehicle be taken to a dealership for repair. 223 According to Mr. Dhaliwal, Ms. Kostynick told him she didn’t want the repairs done under warranty and told him that money was not a problem and just go ahead and fix the vehicle. 224 At that point, Mr. Dhaliwal became suspicious. He contacted the RCMP and provided the serial number (VIN) for Revin 14. 225 The police attended and recovered the vehicle and determined it to be Vehicle 14. The vehicle was towed to the North Delta Public Safety Building in Delta.

Vehicle 42 226 Vehicle 42 is a grey 2003 Chevrolet Silverado with VIN 1GCHK29143E117365. It was insured by Clayton Gagnon on February 27, 2003 for a one year period. 227 Mr. Gagnon reported the vehicle stolen on June 13, 2003. Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 223

228 ICBC paid out $491.73 to Enterprise Rent A Car, representing a loss of use payment and another $400 to Clayton Gagnon, representing a loss of use payment for a total of $891.73. The vehicle was, when recovered, returned to Mr. Gagnon, although ICBC paid an additional $8,747.47 to Musalem Chevrolet for repair charges. 229 Revin 42 surfaced on June 19, 2003, bearing VIN 1GCHK29143E117379 on an AVRC provided to ICBC on that date. The AVRC indicated that Jessica Bowens of 389 East 34 Avenue in Calgary, was the registered owner. Variations of that address were used on Revin 1 (which was also a vehicle related to Rodney Dick), Revin 36 and Revin 47. 230 The address at issue did not exist and the AVRC contained other indicia of fraud, including the fact that the Alberta Motor Vehicle database has no record corresponding to the VIN indicated. 231 The back of the AVRC indicated that Revin 42 was sold to John Zarelli, of Surrey on June 19, 2003. 232 Mr. Zarelli testified that he became involved in Revin 42 through a person named Lynn Holt. He was told by Ms. Holt that her friend fixed up and sold vehicles that could only sell a certain number of vehicles each year without a dealer’s licence. Mr. Zarelli testified that he understood he was doing a favour in registering Revin 42 in his name and that the owner would avoid the cost of obtaining a dealer’s licence. 233 He said that in return, Ms. Holt would forgive money which he owed to her. 234 Mr. Zarelli testified he never used Revin 42. He was introduced to Lynn Holt by two East Indian males. He identified his signature on the insurance documents for Revin 42, but testified that the remaining handwriting was not his and was already filled out when he received the documents from one of the Indo-Canadian males. The PVIR provided to ICBC in respect of Revin 42 was completed by Mohammad Salim and Mr. Zarelli agreed that he attended IP Auto and provided a copy of his driver’s licence for the inspection. 235 On June 19, 2003, ICBC processed a B.C. Transfer/Tax form evidencing the transfer of Revin 42 from Jessica Bowens to John Zarelli showing it as a gift, as a result of which no tax was payable. 236 After Revin 42 was registered in his name, Mr. Zarelli testified he did not see it again and had no further involvement with it or the two Indo- Canadian men. 224 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

237 Mohammad Salim confirmed that he performed the inspection of Revin 42 and identified a photograph of Cheri Kostynick as a person who had brought him several vehicles for inspection. 238 He gave a tentative identification of a photograph of Harpreet Awla as a person who attended with Ms. Kostynick. 239 On June 27, 2003, ICBC processed a B.C. Transfer/Tax form evidencing the transfer of Revin 42 from John Zarelli to Rodney Dick which showed a purchase price of $36,000. 240 Mr. Zarelli testified that the signature on the tax form was his but he said he was not involved in the transfer of Revin 42 from his name to Rodney Dick and he does not know Rodney Dick. 241 Rodney Dick testified that he purchased Revin 42 from Harpreet Awla. He said he paid $30,000 cash to Harpreet Awla for the vehicle. He was unable to pay in full the agreed upon price of $35,000 and testified that he received telephone calls from Harpreet Awla asking him to pay the outstanding amount. 242 He testified that he had originally been told by the manager at GVCCU that he could obtain a loan for the vehicle but was later told he could not and as a result, he was unable to pay in full for Revin 42. 243 The vehicle was recovered on July 10, 2003, seized by the RCMP and eventually determined to be Vehicle 42. The bar code on the false VIN on the dashboard decoded to the bar code on the public VIN of the van associated to Paramjit Singh Awla. 244 Paramjit Singh Awla was deceased and was Harpreet Awla’s uncle, that is, his father’s brother. 245 That van was reported stolen on October 7, 1998. It was owned by a company called Three-R Contracting Services which was a business owned by Paramjit Awla. Harpreet Awla was noted to be the insured driver and the last driver of the van prior to its reported theft. It was Harpreet Awla who reported the theft of the van to ICBC on October 7, 1998. The Awla van was recovered but there was extensive damage to the interior and exterior of the vehicle. The claim for insurance was denied by ICBC and the van was towed to the Awla residence. Although Paramjit Awla sought to contest ICBC’s denial of coverage, his case was dismissed when he failed to attend a settlement conference in the Provin- cial Court. 246 As ICBC did not pay for the theft claim in respect of Vehicle 42, it did not assume ownership of the vehicle and, accordingly, the only claim Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 225

is against the defendant Harpreet Awla for damages in the amount of $9,927.03, plus interest and punitive damages.

Vehicle 45 247 Vehicle 45 is a white 2002 GMC Yukon bearing VIN 1GKEK63U52J285149. It was insured by Transportation Lease Systems Inc. as lessor and 573789 BC Limited as lessee on May 16, 2003. 248 On August 5, 2003, the insured driver of the vehicle, Jan R. Huettle reported the vehicle stolen. 249 ICBC paid out a total of $2,187.48 as a result of the Huettle claim, consisting of $421.49 paid to Budget Rent-a-Car representing a loss of use payment and $1,765.99 paid for mechanical repairs to the vehicle, towing costs and reports. 250 Revin 45 surfaced on August 11, 2003, when an AVRC was provided to ICBC in relation to a white 2002 GMC Yukon bearing VIN 1GKEK63U22J337434 indicating that Tanya Gortons of 329 Scarce Road NW, Edmonton, Alberta was the registered owner of Revin 45. There were similar indicia of fraud with respect to the AVRC for Revin 45 as with regard to the other AVRCs, including the fact that the address did not exist, the month of expiry was incorrect and the date of expiry was incorrect. In addition, there was no record for the VIN in the Al- berta’s Motor Vehicle database. 251 According to the AVRC, Revin 45 was sold to Bonnie Keats of 382 Carlsway NE, Calgary, Alberta. On August 9, 2003, Mohammad Salim completed a PVIR which was supplied to ICBC on August 11, 2003. That PVIR, together with the AVRC and a B.C. Transfer/Tax form, Non- Market Value and Tax Exemption form and a gift letter, evidenced that Bonnie Keats purchased Revin 45 from Tanya Gortons without any purchase price as the vehicle was a “gift to cousin”. 252 There were several temporary operating permits issued for Revin 45, one on August 11, one on August 14, and one on August 15, 2003. 253 Cheri Kostynick admitted that she registered this vehicle at the request of Gurpreet Awla and that Bonnie Keats was the name she used. 254 Mr. Salim, who conducted the vehicle inspection, identified a photograph of Cheri Kostynick appearing as Tanya Gortons as the person who had brought him several vehicles for inspection. The photograph he identified was on an Alberta driver’s licence in the name of Tanya Gortons 226 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

but appeared, in fact, to be a photograph of Cheri Kostynick whom he had dealt with as Tammy Klassen. 255 The information on the driver’s licence is similar to information on the Alberta driver’s licence relating to Bonnie Keats and to another person by the name of Samantha Albert who was involved with Revin 49. As well, the photographs appeared to be identical. 256 The first transfer of Revin 45 to Bonnie Keats from Tanya Gortons was effected by Peggy Bird, an agent at Co-Operator’s Insurance. She testified that a female identifying herself as Bonnie Keats came in by herself to register the vehicle in her name and told her that she had received the vehicle as a wedding gift from a relative. 257 Ms. Kostynick admitted that Bonnie Keats was the alias which she used. 258 On August 14, 2003, Ms. Kostynick testified that she posed as Bon- nie Keats and attended Applewood Kia at 16299 Fraser Highway in Sur- rey and attempted to sell Revin 45. 259 Lindsay Scott, who was a sales associate at Applewood Kia in August 2003, dealt with Cheri Kostynick posing as Bonnie Keats. She identified the photograph on an Alberta driver’s licence photocopy in the Ap- plewood Kia file as the person she dealt with. 260 When the management at Applewood Kia conducted a background check for the vehicle and when that check indicated that the public VIN of Revin 45 came back to a black GMC Yukon Denali registered in Texas, they called the police who attended the dealership and recovered the vehicle. 261 Ms. Kostynick, in the guise of Bonnie Keats, left the dealership before the police arrived. After seizure of the vehicle, the police determined that Revin 45 was indeed Vehicle 45. The sum of $2,187.48, plus costs and interest, are sought against Harpreet Awla, Gurpreet Awla and Cheri Kostynick, and punitive damages are sought against Harpreet Awla and Gurpreet Awla.

Vehicle 49 262 Vehicle 49 is a black 2003 GMC Yukon Denali bearing VIN 1GKEK63U83J233600. That vehicle was owned by Westminster Auto Leasing as lessor and Alternative Cartage Inc. as lessee, both of which insured the vehicle on March 19, 2003, for a year. On August 14, 2003, the insured driver for the vehicle, Racalda Overdick, reported it stolen. Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 227

The vehicle was recovered by the police before it was registered in Brit- ish Columbia but after its recovery, ICBC found an AVRC and a PVIR in the vehicle. It was recovered on August 25, 2003. 263 The AVRC indicated that Samantha Alberts of 221 Konkav Road SW, Calgary, Alberta was the registered owner. The information on the driver’s licence as it appears on the AVRC related to Samantha Albert, appeared very similar to the information on the Alberta driver’s licences of Bonnie Keats and Tanya Gortons in relation to Revin 45. As well, the photographs appear identical. 264 The PVIR which was recovered from the vehicle after recovery of the vehicle was dated August 18, 2003 and was completed by Mohammad Salim of IP Auto, naming Samantha Alberts of 34921 52nd Street in Sur- rey as the owner. 265 Previously, Mr. Salim had completed the inspection of Revin 45 with Tanya Gortons as the owner, showing identification with a photograph identical to that provided by Samantha Alberts. 266 Mr. Salim again identified a photograph of Cheri Kostynick as a person who brought him several vehicles for inspection. 267 He testified that Ms. Kostynick attended IP Auto with another person, a young Indo-Canadian male, and he tentatively identified a photograph of Harpreet Awla as that Indo-Canadian male. 268 Richard Howell was a witness who owned a security company called H & G Contracting. In 2003, he employed Lynn Holt as a security guard at a construction site in the South Surrey area. He was aware that Ms. Holt had a friend named Parm. He was aware that Lynn Holt also had a friend named Ujjal, who he thought was a brother of Parm. 269 He testified that he fired Ms. Holt from her position as a security guard after about six weeks and he hauled her trailer from the construction site where she was working to a trailer park called Timberland Trailer Park. He noticed that in her trailer she had a “bunch of identification” on the coffee table but he did not know whose identification it was. 270 Revin 49 was recovered by the police on August 25, 2003 at Timber- land Motel and Campground, the same trailer park where Lynn Holt’s trailer was hauled to by Mr. Howell. After inspection, it was determined that Revin 49 was, indeed, Vehicle 49. 271 Keith Thomas was the manager at Timberland in 2003, and he identified Lynn Holt as a resident there in that same year. He was aware that a 228 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

vehicle was seized from Timberland in August of 2003 and he believed it was parked beside her trailer when it was seized. 272 ICBC paid out a total of $1,325.00 in insurance monies as a result of the theft claim by Ricalda Overdick, consisting of $1,300 to Alternative Cartage Inc. as a loss of use payment and $25 paid to ICBC. ICBC has also claimed further payments of $517.08 to Precision Locksmith for a report; $363.09 to Unitow Services; $1,584.77 for repair; $461.97 for repair; and $123.00 to Alternative Cartage amounting to $3,049.87. The total is $4,347.87. ICBC’s claim in relation to Vehicle/Revin 49 is $4,226.66 plus interest.

The Law - Conspiracy 273 In Insurance Corp. of British Columbia v. Atwal, I set out the law founded on claims of civil conspiracy at paragraphs 236-248 as follows: [236] In G.H.L. Fridman, The Law of Torts in Canada, 2nd ed. (To- ronto: Carswell, 2002) at 765-772, the elements of liability for an actionable conspiracy under the second branch of the Cement LaFarge test are discussed. The requirements can be reduced to the following: 1. An agreement between two or more persons to act unlawfully, which constitutes a common design. Participation is the essence of conspiracy, and mere knowledge that a conspiracy exists or acquiescence in the agreement will not suffice. 2. Conspiracy is an intentional tort, which applies where the parties have agreed to act in a certain way, for a certain purpose, and with a certain intent. The parties accused of a civil conspiracy must know what they are doing; they must be willing participants acting as a consequence of their agreement to do so, desiring the end that is to be achieved (committing unlawful acts). 3. The agreement must consist of a plan to engage in “unlawful conduct”, which in the context of civil conspiracy includes crime, tort, breach of contract, or breach of statute. 4. Damage is an essential element of tortious conspiracy, and the plaintiff must establish the defendants committed acts which furthered the conspiracy and caused it damage. [237] The Court of Appeal in Golden Capital Securities Ltd. v. Holmes, 2004 BCCA 565, 33 B.C.L.R. (4th) 1, discussed the requirement of a constructive intent to injure, stemming from Justice Estey’s statement in Cement LaFarge that the defendants “should know in Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 229

the circumstances that injury to the plaintiff is likely to result”. Lowry J.A. (for the Court) at para. 46 commenced his analysis with the comment that “Liability in conspiracy requires proof by compelling evidence”. Mr. Justice Lowry then stated the following regarding the elements of the tort: 47 Thus, to prove a case in conspiracy, it is first necessary to plainly establish, directly or by inference, that there was an agreement between the defendant and one or more others. That does not mean an agreement in the contractual sense. A defendant must be shown to have agreed in the sense of having combined or conspired with one or more others to carry out a common design or a means of achieving a common objective, which is then implemented with resulting injury to the plaintiff. 48 Where the means are unlawful, there must also be proof that the unlawful conduct was directed toward the plaintiff and that the likelihood of injury to the plaintiff was or should have been known to the defendant. 49 What becomes important for the purposes of this appeal is the meaning to be given to the “likelihood of injury”. What knowledge must the defendants have had, or should they have had, about the potential for injury to the plaintiff? [238] Building on Cement LaFarge, Lowry J.A. stated the following test, which requires the conduct to be “directed” at a third person in circumstances where consequential loss to that third person was “clearly expected”: 56 Civil conspiracy, as it has long been understood, has been the conspiring of two or more to injure a third. Hav- ing particular regard for the fact that conspiring to act unlawfully is an extension of that tort, I consider that a constructive intent must constitute more than a greater than 50% chance that injury to the plaintiff will occur; it must amount to a clear expectation. 57 The tort exists not to provide a remedy for unlawful conduct per se but to provide a remedy where conduct of that kind is directed at a particular person (or persons) who suffers injury. 58 I would then say that liability in conspiracy will arise where two or more have agreed to carry out a common design by unlawful means, directed at a third person, if those who have agreed knew, or in the circumstances 230 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

should have known, that injury to that person was likely in the sense that it was clearly expected, and the injury was sustained as a result of the agreed upon means being implemented. THE CO-CONSPIRATORS EXCEPTION TO THE HEARSAY RULE [239] In the course of considering the plaintiff’s case against the various conspiracy defendants, it is necessary in relation to some of the transactions at issue to determine the admissibility of the acts or declarations of alleged co-conspirators against other alleged co- conspirators. [240] As I see it, there is no evidence potentially admissible against the defendant Bains under the co-conspirators exception to the hearsay rule as to his membership in the conspiracy. The only evidence capable of proving that the defendant Bains was a member of the conspiracy in relation to Revins 27, 19 and 31, comes from the direct evidence of Mohamed Nachar, who did not testify as to any acts or declarations of the other alleged coconspirators in furtherence of the conspiracy capable of implicating the defendant Bains. [241] Similarly, as against the defendant Bhandher in relation to Revins 27, 19 and 31 (the Tung vehicles) the only evidence capable of proving his membership in those conspiracies is the direct evidence of Tiffany Work. There is no other evidence of acts or declarations of other alleged coconspirators in furtherance of the conspiracy implicating the defendant Bhandher as a member as opposed to establishing the nature and existence of the conspiracy. [242] The same is true, I conclude, of his involvement with Revin 24. [243] In my view, however, the evidence relevant to Jaspal Atwal and Vikram Atwal is on a somewhat different footing in that there is a body of evidence of the acts and/or declarations of each of them from which it could be inferred that they were acting in concert with respect to Revin 27 and accordingly, there is evidence of the actions of each of them potentially admissible against the other probative of the issue of their membership in the conspiracy with respect to Revin 27. [244] In determining that issue, it is helpful to consider I.C.B.C. v. Sun, 2003 BCSC 1059, 18 B.C.L.R. (4th) 338, in which Groberman J. (as he then was) dealt with the application of the co-conspirator’s exception to the hearsay rule in the context of a civil trial. In that decision, Groberman J. cited R. v. Carter, [1982] 1 S.C.R. 938, 67 C.C.C. (2d) 568, and R. v. Barrow, [1987] 2 S.C.R. 694, quoting Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 231

from the dissenting judgment of MacIntyre J. in the latter case, setting forth the three stages of the rule as follows: 22. It is convenient to begin an analysis of the coconspirators’ exception to the hearsay rule in Canada with Regina v. Carter, [1982] 1 S.C.R. 938. In that case, the Supreme Court of Canada established the approach for applying the co-conspirators’ exception to the hearsay rule in a criminal case. The court held that the rule is to be applied in three stages. A convenient summary of the three stages appears in the dissenting judgment of McIntyre J. in Bar- row v. The Queen, [1987] 2 S.C.R. 694, 38 C.C.C. (3d) 193 at 228-9: 1. The trier of fact must first be satisfied beyond reasonable doubt that the alleged conspiracy in fact existed. 2. If the alleged conspiracy is found to exist then the trier of fact must review all the evidence that is directly admissible against the accused and decide on a balance of probabilities whether or not he is a member of the conspiracy. 3. If the trier of fact concludes on a balance of probabilities that the accused is a member of the conspiracy then he or they must go on and decide whether the Crown has established such membership beyond reasonable doubt. In this last step, only the trier of fact can apply the hearsay exception and consider evidence of acts and declarations of coconspirators done in furtherance of the object of the conspiracy as evidence against the accused on the issue of his guilt. [245] Groberman J. went on to note in relation to R. v. Carter that: 24. The analysis in Carter is consistent with an agency theory of the co-conspirators; exception. The acts and statements of a member of a conspiracy in furtherance of the conspiracy are treated as acts and statements of the collective. They can be used against individuals who are alleged to be members of the conspiracy once it is established, to the requisite degree of proof that they are, indeed, members. The “requisite degree of proof” will be lower than the proof required for a conviction. [246] Groberman J. went on to address the difficulty of applying the Carter test in a civil case and concluded that not only must the ulti- 232 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

mate standard of proof of membership in the conspiracy at the third stage of the test be changed from beyond a reasonable doubt to on a balance of probabilities, but also that the penultimate standard of proof determinative of the use of evidence of acts and declarations of co-conspirators must be changed from the balance of probabilities to a prima facie case which equates to “a reasonable likelihood”. [247] Groberman J. also addressed the issue of multiple conspiracies. In criminal cases, a count in an indictment can only relate to a single conspiracy. Groberman J. noted that in the context of civil cases involving multiple conspiracies, as in the present case “the co-conspirator’s exception to the hearsay rule can only apply to a statement made in furtherance of the varied conspiracy to which a defendant is found to belong.” [248] In the result, Groberman J. articulated the test for admissibility of evidence under the co-conspirator’s exception to the hearsay rule in a civil case thus at para. 35 of his reasons: 1. The trier of fact must first be satisfied on the balance of probabilities that a conspiracy alleged in the Statement of Claim in fact existed. 2. If an alleged conspiracy is found to exist, then the trier of fact must review all the evidence that is directly admissible against the defendant and decide whether it shows a reasonable likelihood that the defendant is a member of that conspiracy. 3. If the trier of fact concludes that there is a reasonable likelihood that the defendant is a member of that conspiracy, then the trier of fact must go on to decide whether the plaintiff has established such membership on the balance of probabilities. In this last step, the trier of fact can apply the hearsay exception and consider evidence of acts and declarations of co-conspirators done in furtherance of the object of the specific conspiracy under consideration as evidence against the defendant on the issue of his or her liability. 4. The trier of fact must conduct this analysis separately not only for each defendant, but also for each conspiracy that may include a given defendant. 274 In this case, as in the case of Atwal, BCSC, the plaintiff relies to some extent on evidence of similar facts in relation to the conspiracy defendants. In Atwal, I found the similar fact evidence to be of limited utility as Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 233

I do in this case. In Atwal, BCSC, I held as follows with respect to similar facts at paras. 216-226: [216] The plaintiff sought to lead evidence of several transactions involving other vehicles as similar fact evidence. As the various defendants were unrepresented, I deferred ruling on the admissibility of the similar fact evidence until I had heard all of the evidence and the arguments advanced so I could consider the issue in its full context. [217] The plaintiff argues that evidence in relation to “other Revins” is admissible to prove participation in relation to the seven vehicles at issue in the current law suit and provides the following examples of how it is relevant: • The similarity in documentation and vehicle disguise of all vehicles. • The overwhelming connection between Revin 24 (in the action) and Revin 37 (other Revin). • Identities, addresses and participants in the seven subject Revins that reappeared later on other Revins. • The corroboration of Mohamed Nachar’s testimony against both Vikram Atwal and Jasraj Bains through cellphone records and invoices on other Revins. • The involvement of Jasraj Bains with the Sussex insurance agent on 8 Nachar-inspected vehicles, and three vehicles registered in the name of “Adam Chan”. • The involvement of Vikram Atwal with Bob Gill, the supplier of six other Revins to Gurcheran Kondolay. • Jaspal Atwal’s close connection to several of the other Revins, involving his customers and co-workers. • The close connections of each of the conspirators to various participants in other Revins - insurance agents, identities, theft victims and Revin owners. [218] The plaintiff relies on the tendency of the similar fact evidence to establish the existence of a scheme, citing the judgment Bull J.A. in McDonald v. Canada Kelp Co. Ltd., [1973] 5 W.W.R. 689, 39 D.L.R. (3d) 617 at 626 (B.C.C.A.) as follows: Where there is a real and substantial nexus or connection between the act or allegation made, whether it be a crime or a fraud (but not, of course, limited to those), and facts relating to previous or subsequent transactions are sought to be given in evidence, then those facts have relevancy and are admissible not only to rebut a defence, such as 234 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

lack of intent, accident, mens rea or the like, but to prove the fact of the act or allegation made. [219] The plaintiff also relies on the observations of Bull J.A. in Conti v. Canarim Investment Corp., [1974] 5 W.W.R. 709 at 711, 49 D.L.R. (3d) 262 (B.C.C.A.), in interpreting his judgment in McDon- ald where he stated as follows: With one Justice dissenting as being unable to accept such a material bearing, the majority of the Court (of which, as indicated, I was one) held that under the circumstances of that case the rejected evidence was material to the issue. There a plan or scheme was asserted that for the purpose and in the course of privately selling shares in a venture to members of the public the same alleged fraudulent mis- representations sued upon were, during the same general period, allegedly made to other potential purchasers in the like position as the plaintiffs. On that basis the evidence of the other statements was held relevant and material to the issue of whether or not the like statements were in fact made to the plaintiffs. I think the case at bar is quite dis- tinguishable from that in MacDonald. No like selling plan or scheme of conduct on the part of the respondents was alleged. [220] The plaintiff relies on the following passage from Sopinka, Lederman, and Bryant, The Law of Evidence in Canada 2nd ed. (To- ronto: Butterworths, 1999) at 596: [s]imilar occurrences and recurrent instances of the same conduct may be sufficient to render the evidence admissible if the past similar acts are part of a system. [221] The plaintiff also relies on Sopinka, The Law of Evidence in Canada, for the proposition that in civil cases, lesser emphasis is placed on the potential prejudicial effect of similar fact evidence than in criminal cases, as explained in the following passage at p. 602: It is apparent from the foregoing that while the rules relating to the admissibility of similar fact evidence in civil cases reflect very strongly the influence of the “category” approach of the earlier criminal cases, they in fact focus on whether the evidence is relevant to a material issue. The categories of relevance are not closed and the inquiry should concentrate on determining the probative value of the evidence without the constraint of fitting the evidence into a particular pigeonhole. Moreover, prejudice, which dominates the determination of admissibility of similar Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 235

fact evidence in criminal cases, plays a significantly lesser role in civil cases, and evidence of similar facts should be admitted if it is logically probative to an issue in the case as long as, to borrow the formula of Lord Denning, it is not unduly oppressive or unfair to the other side, does not consume a disproportionate amount of court time, and does not bear the whole burden of proving the case. [222] The plaintiff submits that in the present case, the evidence is relevant to the identity of persons involved in the conspiracy alleged and as to the intent of the conspirators with respect to the seven subject vehicles. [223] In the case at bar, the evidence taken as a whole, establishes that the Revinning scheme was wide-spread and involved other participants who engaged in transactions not necessarily involving the four conspiracy defendants here. It is accordingly the theory of the plaintiff that the present conspiracy defendants were involved in some but not all the transactions comprising the larger scheme. In that context, evidence of other transactions they may have been involved with, without a full canvass of the circumstances of transactions they are not alleged to be involved with produces the potential danger of unfairness and prejudice. [224] In Sopinka, Lederman and Bryant, The Law of Evidence in Canada 3rd edition (Markham: LexisNexis, 2009) the editors note as follows at para. 11.220: The general principles that govern the admission of similar fact evidence in criminal cases apply equally to civil cases. Thus, evidence of discreditable conduct on other occasions is presumptively inadmissible and evidence tendered solely to show a general disposition or a mere propensity to act or think or feel in a particular way is inadmissible. The party who proffers evidence of discreditable conduct on other occasions must satisfy the trial judge on the balance of probabilities that in the context of the particular case the probative value of the evidence in relation to a particular issue outweighs its potential prejudicial effect. [225] What is at issue in the present case is not whether the conspiracy defendants were involved in a larger scheme to wrongfully acquire, falsely identify, register and sell vehicles for profit, it is whether they were involved in one or more of the seven transactions at issue in this law suit. In general, evidence that they were involved in other like transactions does not particularly address whether they 236 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

were involved in a conspiracy relating to the instant transactions, so long as there is evidence that those involved were not part of a closed set limited to the present defendants. On balance, and in general therefore, I am not satisfied that the evidence of other transactions involving one or more of the conspiracy defendants is admissible as circumstantial evidence in connection with the transactions at issue in the case at bar. Except for Jaspal Atwal, none of the conspiracy defendants has testified or otherwise called evidence raising a defence to be rebutted by the impugned similar fact evidence. Thus, to the extent the similar fact evidence is proffered to prove “the fact of the allegation made” through proof of the existence of a scheme, it is of very limited utility and of considerable prejudicial effect, and I would not admit it on that basis. [226] Having made that ruling however, it does not follow that all of the evidence called by the plaintiff which touches on transactions outside the scope of this lawsuit is necessarily inadmissible. There is evidence, for example, which touches on one or more of the defendants’ participation with others involved in other transactions which is probative of a fact in issue in connection with the transactions at bar and hence relevant and admissible. In particular, the evidence of cell phone calls between the defendant Jasraj Bains’ cell phone and Saleem Auto’s telephone number in early 2003 offers some corroboration of Mohamed Nachar’s evidence that Bains was a customer who brought him vehicles or vehicle registrations for inspection. In other words, it is evidence of an association that offers some indirect support for Nachar’s testimony that he and the defendant Bains had contact through Saleem Auto, and it bears on the reliability and cred- ibility of Nachar’s evidence.

Liability of the Conspiracy Defendants 275 The remaining conspiracy defendants in this action are: 1. Harpreet Awla: Vehicle 53; Vehicle 59; Vehicle 17 (41); Vehicle 18; Vehicle 46; Vehicle 10 (1A); Vehicle 52; Vehicle 14; Vehicle 23 (1A); Vehicle 42; Vehicle 45; and Vehicle 49. 2. Vikram Atwal: Vehicle 14; Vehicle 32; Vehicle 36 (46); Vehicle 37; Vehicle 10 (1A); and Vehicle 23 (1A). 3. Gurpreet Awla: Vehicle 52; Vehicle 14; and Vehicle 45. Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 237

Those conspiracy defendants against whom the plaintiff has taken default judgment are: 1. Sandeep Rai Vehicle 17 (41); Vehicle 16; and Vehicle 18. 2. Cheri Kostynick Vehicle 46; Vehicle 10 (1A); Vehicle 52; Vehicle 14; Vehicle 23; Vehicle 45 and Vehicle 49.

1. Harpreet Awla 276 Harpreet Awla did not participate in the trial. In assessing his liability, it is necessary to consider whether the evidence proves on the balance of probabilities that there was a conspiracy as alleged in the plaintiff’s pleadings, whether Harpreet Awla was a member of the conspiracy and whether the conspiracy he was a member of related to the specific vehicles that the plaintiff claims him to be liable for. 277 Having considered the evidence and the submissions of the plaintiff, which were not resisted in any way by the defendant, Harpreet Awla, I conclude he was liable in respect of a number of vehicles but not all contended for by the plaintiff.

(a) Vehicle 53/Revin 53 278 The thrust of the plaintiff’s case against Harpreet Awla in connection with this vehicle comes from the confluence of the evidence of Sarah McDonald and Allen Ferrier. Ms. McDonald financed the purchase of Revin 53 through a loan from the Greater Vancouver Community Credit Union (GVCCU) which had been approved by Allen Ferrier but for which she would not otherwise have qualified. The $15,000 loan was used by her boyfriend, Daniel Ascencao, to purchase Stolen/Revin 53. Ascencao was a friend of Harpreet Awla. 279 Mr. Ferrier testified that he approved loans for customers referred to him by Harpreet Awla to purchase vehicles Awla claimed to be import- ing from Alberta. He said before all the loans he processed for customers referred by Awla to finance vehicle purchases he got a threatening telephone call which caused him to approve the loan whether the customer was qualified or not. That evidence, taken with the evidence of Cheri Kostynick that she was aware of Harpreet Awla’s involvement with the scheme and that he collected money for the stolen vehicles and arranged, in those transactions in which she was involved, to supply her with false 238 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

identification, persuades me on the balance of probabilities that Harpreet Awla is liable in conspiracy in relation to Stolen/Revin 53.

(b) Vehicle 41/Revin 59 280 I am similarly persuaded of Harpreet Awla’s liability for Revin 59. It too was financed through a loan from GVCCU approved by Allen Ferrier for Rodney Dick. Mr. Dick testified in the plaintiff’s case that he purchased the vehicle from someone named “Harp” who had it for sale. Al- though Mr. Dick did not positively identify a photograph of the defendant, Harpreet Awla, as the person who he purchased the vehicle from, I am satisfied on the basis of Mr. Ferrier’s evidence and that of Cheri Kostynick that it was the defendant, Harpreet Awla, who was behind the theft and sale of Vehicle 41 as Revin 52 to Mr. Dick, and I accordingly find him liable in conspiracy in respect of that vehicle.

(c) Vehicle 41/Revin 17 281 I am similarly satisfied that Harpreet Awla was behind the conversion of Vehicle 41 as Revin 17, before it was reported stolen by Rodney Dick in its guise as Revin 59. The evidence of Mr. Ferrier, Mr. Dick, Ms. Kostynick, Cynthia Hill and Ross Hinchberger established Harpreet Awla’s involvement with that vehicle in its various guises beginning as Vehicle 41, becoming Revin 59, then Revin 17 and finally Revin 41 and I accordingly find him liable in conspiracy in respect of Revin 17.

(d) Vehicle 18/Revin 18 282 Vehicle 18 is another vehicle that was financed through the approval of a loan by Allen Ferrier at GVCCU, and I conclude based on the evidence of Mr. Ferrier as to the nature of Harpreet Awla’s specific involvement with him and Cheri Kostynick’s evidence of his general involvement with the revining scheme that Harpreet Awla was involved in and liable for the conspiracy in relation to Vehicle 18.

(e) Vehicle 46/Revin 46 283 Vehicle 46 went through several guises after it was initially reported stolen on June 19, 2002. It was first revined and registered as Revin 32 on July 19, 2002, transferred to Jagjeet Singh Sidhu on September 4, 2002, reported stolen by him on October 1, 2002 after it was re-registered as Revin 36 on September 10, 2002. It was then sold as Revin 36 to Breeze Produce Inc. on December 2, 2002 before it was reported stolen Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 239

as Revin 36 on January 31, 2003 and registered as Revin 46 to Cheri Lorisa Kostynick from Susan Kostynick on March 26, 2003. 284 The evidence said to implicate Harpreet Awla in connection with Revin 46 is the general evidence of Cheri Kostynick of Harpreet Awla’s involvement in the scheme, including collecting the money from the sales of revin vehicles and the supply to her of false identifications to complete the fraudulent transactions, as well as the evidence of Moham- mad Salim tentatively identifying a picture of Harpreet Awla as the person present with Cheri Kostynick when he performed an inspection of the vehicle. 285 It appears however that there were occasions when Cheri Kostynick was involved in revining transactions with Gurpreet Awla when there is no evidence of Harpreet Awla’s involvement (for example, with respect to Vehicle/Revin 52). While it is not implausible that Harpreet and Gur- preet, being brothers involved in the conspiracy generally, might be involved in the same transactions, it is not a necessary inference and in the absence of some clear or direct evidence of Harpreet’s involvement in the particular transaction, I am not satisfied the standard of proof is met. Mr. Salim’s identification of a photograph of Harpreet Awla is simply too tentative to amount to a positive identification and Ms. Kostynick’s general evidence of the nature of Harpreet Awla’s involvement in light of her earlier inconsistent evidence without more falls short of amounting to adequate proof. I thus decline to find Harpreet Awla liable with respect to Vehicle 46.

(f) Vehicle 1A/Revin 10 and 23 286 Revin 10 was originally Vehicle 1A which was reported stolen on June 19, 2002. It went through three identity changes: Revin 1A on July 9, 2002; Revin 10 on April 14, 2003, and Revin 23 on May 23, 2003. 287 In the case of Revin 10 and Revin 23, Harpreet Awla’s liability is established by the direct evidence of Cheri Kostynick who testified she registered Revin 10 at the request of Gurpreet Awla on April 14, 2003 and attempted to sell it the same day at a car dealership in Langley. When she encountered difficulties in completing the sale because the vehicle VIN did not match the vehicle itself, it was taken from her by Har- preet Awla and was subsequently returned to her on May 23 when she registered it using the false identity of Tammy Klassen at the request of Gurpreet Awla. In view of Ms. Kostynick’s direct evidence of Harpreet Awla’s involvement with Revin 10, her evidence as his overall involve- 240 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

ment with the revin vehicles and her evidence that he supplied her with the false identification to use to register the revin vehicles, I am satisfied that the plaintiff has established Harpreet Awla’s liability for conspiracy in relation to Revin 10 and Revin 23.

(g) Revin 52 288 I am not similarly satisfied that Harpreet Awla’s liability has been established with respect to Revin 52. Although Ms. Kostynick similarly used the identity of Tammy Klassen in relation to that vehicle, she testified she did so at the request of Gurpreet Awla and in his presence. She gave no evidence as to the involvement of Harpreet Awla with respect to Revin 52 and when she sold it to Navdeep Brar she put the money in her account, kept a fee and paid the rest to “one of the guys who was involved” who she did not identify. While it is not implausible that Har- preet Awla was involved with the theft and conversion of Revin 52, the evidence taken as a whole does not establish it on the balance of probabilities.

(h) Revin 14 289 The asserted connection between Revin 14 and Harpreet Awla was the general evidence provided by Cheri Kostynick of his involvement with her in providing her with false identification including that of Tammy Klassen to register the revin vehicles, and the fact that the bar code on the false dashboard VIN on Vehicle 14 (as well as Vehicles 23, 41, 42, 45, 50 and 52) related to a vehicle formerly owned by his and Gurpreet’s uncle which some years before had been reported stolen but recovered and returned to the Awlas. The use of the bar code does not distinguish between Gurpreet and Harpreet however, and there is no evidence as to which of the two or whether both of them were involved in seeking to have Ms. Kostynick obtain a PVIR and register Revin 14. In those circumstances, I am not satisfied the liability of Harpreet Awla is established by the evidence, in view of Ms. Kostynick’s earlier contra- dictions as to who she was most involved with.

(i) Revin 42 290 I am satisfied that the plaintiff has established Harpreet Awla’s liability in connection with Revin 42 based on the evidence of John Zarelli that he permitted his name to be used in the registration of Revin 42 at the request of Lynn Holt, a proven associate of Harpreet Awla, and given Rodney Dick’s evidence that he purchased Revin 42 from Harpreet Awla Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 241

and received subsequent calls from him requesting him to pay the unpaid balance. I note that as well Revin 42 was one of the revin vehicles that used the Awla bar code.

(j) Revin 45 291 While there is as with Revins 46, 14 and 52 some plausibility with respect to Harpreet Awla’s involvement with Revin 45, given Cheri Kos- tynick’s general evidence of the nature and scope of his involvement in the scheme at large, and the use of the Awlas’ bar code in the revining process, the only direct evidence of who dealt with Revin 45 from Cheri Kostynick was that it was Gurpreet Awla who involved her in registering the vehicle in attempting to sell it. Given the contradictory nature of Ms. Kostynick’s general evidence, I am not satisfied that the plaintiff has established Harpreet Awla’s liability on a balance of probabilities.

(k) Vehicle 49 292 I am similarly not satisfied that the plaintiff has proved Harpreet Awla’s liability with respect to Vehicle 49. Although his involvement is plausible again, there is no reliable or direct evidence to determine whether he or Gurpreet Awla or both of them were involved in engaging Ms. Kostynick to falsely register the vehicle. Mohammad Salim’s tentative and hesitant identification of the photograph of Harpreet Awla as the person with Cheri Kostynick is not in context sufficient to establish that it was he and not Gurpreet who attended with her at the time of the vehicle inspection.

2. Vikram Atwal 293 Vikram Atwal did not participate in the trial. The plaintiff relies in part on the evidence as to the nature and scope of Vikram Atwal’s involvement in the revining scheme revealed by the evidence tendered at this trial from Insurance Corp. of British Columbia v. Atwal, supra, and Insurance Corp. of British Columbia v. Ben-Jaafar, supra and Insurance Corp. of British Columbia v. Ben-Jaafar, supra, and in part on the evidence said to directly implicate Vikram Atwal in the vehicles at issue in the actions at bar. 294 As I noted previously, although there is evidence which establishes the existence of the conspiracy alleged in the plaintiff’s pleadings and there is evidence that establishes the defendant Atwal’s involvement in that conspiracy, because of the widespread participation of other individ- 242 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

uals and groups in relation to various other revin vehicles, I consider it necessary to find some evidence of the involvement of individual conspiracy defendants with individual vehicles before determining liability. In other words, in the circumstances of this case, the existence of similar facts such as the use of similar false identities, similar false addresses, similar or the same bar codes or VINs does not of itself necessarily establish a case of liability given the involvement and access of others to the scheme and to a means by which the scheme was perpetrated.

(a) Vehicle/Revin 1A 295 Thus, in the case of Revin 1A, the defendant Atwal’s liability was established not simply by virtue of the fact that he was found liable in Insurance Corp. of British Columbia v. Atwal in relation to a claim in respect of a vehicle which was stolen with identification which was subsequently used to falsely register Revin 1A (Russell Herding’s identification) but also that the false registration was done by Jasdeep Sandhu who Vikram Atwal was previously found to have used on two other occasions. Further, the evidence that Atwal’s cell phone was in contact with phones associated to Jasdeep Sandhu the day immediately before and the day immediately after the false registration of Revin 1A establishes the basis for a finding of his liability. 296 In addition, when Revin 1A was ultimately transferred to the purchaser Kulbir Chohan, both he and Vikram Atwal were in touch with Jagjit Gill, who it was established, was involved in the sale and distribution of various of the revin vehicles, immediately before and after the transfer to Mr. Chohan. Thus, in those circumstances, I am satisfied that the plaintiff has made out its claim in conspiracy against Vikram Atwal in relation to Revin 1A.

(b) Vehicle 1A/Revin 10/Revin 23 297 I am not satisfied that the evidence establishes that Vikram Atwal’s participation in the subsequent “theft” or revining and false registration of Revin 10 or Revin 23 is made out. The evidence in connection with those transactions appears to involve Cheri Kostynick, and Gurpreet and Harpreet Awla. While it is not implausible that Vikram Atwal had a hand in the ensuing transactions, there is no specific evidence of it and thus in context I am unable to make a finding of his participation in these transactions. The sole ICBC loss however was in relation to the payment on Vehicle 1A, which I have found the defendant Atwal liable for. Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 243

(c) Vehicle 46/Revin 32 298 As far as Revin 32 is concerned, the evidence of Vikram Atwal’s liability is founded on evidence akin to that in relation to Vehicle/Revin 1A: the use of Russell Herding’s identification, together with evidence that the PVIR processed by Mohamed Nachar referred to Vikram Atwal’s cell phone number and that the false registration of Vehicle 32 was processed at an insurance agency used by Vikram Atwal in connection with three other fraudulent registrations of revin vehicles. I accordingly find him liable in respect of Revin 32.

(d) Vehicle 46/Revin 36 299 Similarly, insofar as Revin 36 (Vehicle 46) is concerned, Vikram Atwal’s liability is established by his prior involvement with Vehicle 46 in the guise of Revin 32, and the use of Jasdeep Sandhu again to process the false registration for Revin 36 while there was contemporaneous contact between Atwal and Sandhu’s respective telephones. I am satisfied that he is liable in respect of Revin 36.

(e) Vehicle 46/Revin 46 300 I am not satisfied that the plaintiff has established the defendant Vikram Atwal’s involvement in the transaction with respect to Revin 46 despite his involvement with two earlier incarnations of that vehicle (Revins 32 and 36). The involvement of Cheri Kostynick does not imply the involvement of the defendant Atwal, as her involvement appears to be at the behest of one or other or both of the Awlas. There is no other evidence of Atwal’s involvement in the particular transaction involving Revin 46 and accordingly I decline to find him liable in relation to that vehicle.

(f) Vehicle 37/Revin 37 301 In relation to Revin 37, Vikram Atwal’s liability is established by his connection to the insurance agency which processed a fraudulent registration - All Time Insurance - which he was found to have used to process Revins 38, 20 and 29 and which I am satisfied he used to process to Revin 21. As well, the ultimate sale of Revin 37 to Ajmer Litt and the evidence that Atwal was in contact with Ajmer Litt around the time of that sale on March 9, 2003 and that he received a cheque from Ajmer Litt on the same date for $3,600 combines to satisfy me that he was involved in and is liable for conspiracy in relation Revin 37. 244 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

3. Gurpreet Awla 302 As with Harpreet Awla and Vikram Atwal, Gurpreet Awla did not participate in the trial or contest his liability.

(a) Vehicle 52/Revin 52 303 The liability of Gurpreet Awla with respect to Revin 52 rests primarily on the evidence of Cheri Kostynick given at the Atwal trial on June 9, 2009 to the effect that she was involved in the false registration of Revin 52 using the identification of Tammy Klassen at the request of Gurpreet Awla and that he took her to an agent to have it registered. I am satisfied on the basis of the evidence taken as a whole and Cheri Kos- tynick’s evidence in relation to Gurpreet Awla that he was involved in the conspiracy to steal or otherwise fraudulently acquire vehicles provide them with new false identities and sell them to complicit or unsuspecting purchasers. I am also satisfied on the strength of Cheri Kostynick’s evidence that he was involved in the conspiracy with respect to Vehicle 52 specifically. I thus find him liable in connection with that vehicle.

(b) Vehicle 14/Revin 14 304 I am not similarly satisfied with respect to Gurpreet Awla’s liability for Vehicle 14. The involvement of Cheri Kostynick posing as Tammy Klassen in attempting to get a PVIR to re-register the vehicle and in the “decoding” of the bar code on the dashboard VIN to the Awla van impli- cates either Harpreet or Gurpreet Awla or both, but there is no specific evidence to establish which of those three possibilities is more probable than the other.

(c) Vehicle 45/Revin 45 305 The evidence in relation to Vehicle 45 also involved Cheri Kostynick using a false identity to obtain a PVIR and to register Revin 45. The evidence also established that she attempted to sell Revin 45 at Ap- plewood KIA on August 14, 2003. The bar code on the dashboard of Revin 45 similarly came from the Awla vehicle. In her evidence at the Atwal trial, Ms. Kostynick identified Gurpreet Awla as having involved her in the fraudulent registration and attempted to sell Revin 45. In the circumstances, I am satisfied that the plaintiff has established Gurpreet Awla’s liability in relation to Vehicle 45. 306 As I earlier noted, the plaintiff has taken default judgment against Sandeep Rai with respect to Vehicle 17 (Stolen 41): Vehicle 16; and Ve- Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 245

hicle 18; against Cheri Kostynick with respect to Revin 46 (Stolen 46); Revin 10 (Stolen 1A); Vehicle 52; Vehicle 14; Vehicle 23; Vehicle 45; and Vehicle 49.

The Law - Conversion 307 In Atwal, BCSC, I summarized the law relating to the tort of conversion as follows at paras. 283-287: [283] In G.H.L. Fridman, The Law of Torts in Canada, 2nd Ed. (To- ronto: Carswell 2002) at p. 136, the elements of the tort of conversion are set out as follows: 1. a wrongful act by the defendant involving the goods of the plaintiff; 2. the act must consist of handling, disposing of or destroying the goods; 3. the defendant’s action must have either the intention or the effect of interfering with (or denying) the plaintiff’s title or right to the goods. [284] In Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce, [1996] 3 S.C.R. 727, 140 D.L.R. (4th) 463 at para. 31, the court defined and explained the tort of conversion as follows: The tort of conversion involves a wrongful interference with the goods of another, such as taking, using or destroying these goods in a manner inconsistent with the owner’s right of possession. The tort is one of strict liability and accordingly it is no defence that the wrongful act was committed in all innocence. Diplock L.J. asserted this principle in Marfani & Company v. Midland Bank Ltd., [1968] 2 All E.R. 573 at pp. 577-578: ...the moral concept of fault in the sense of either knowledge by the doer of an act that is likely to cause injury, loss or damage to another, or lack of reasonable care to avoid causing injury, loss or damage to another, plays no part. ... If the customer is not entitled to the cheque which he delivers to his banker for collection, the banker, however innocent and careful he might have been, would at common law be liable to the true owner of the cheque for the 246 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

amount of which he receives payment, either as damages for conversion or under the cog- nate cause of action, based historically on as- sumpsit, for money had and received. [285] In MacKenzie v. Blind Man Valley Cooperative Association Ltd., [1947] 2 W.W.R. 443 at 451, [1947] 4 D.L.R. 687 (Alta. S.C.) cited with approval in General Securities Ltd. v. Parsons (1955), 14 W.W.R. (N.S.) 424 (B.C.C.A.), Chief Justice Howson stated as follows: The principle under which the liability for conversion is determined is stated in the head note of the report of the House of Lords decision in the Hollins v. Fowler, supra, at p. 169: Any person who, however innocently, obtains the possession of the goods of a person who has been fraudulently deprived of them, and disposes of them, whether for his own benefit or that of any other person is guilty of a conversion... [286] In the present case it is not necessary that the plaintiff prove that the conversion defendants knew or ought to have known that the vehicle they dealt with was stolen. See Mutungih v. Bokun (2006) O.J. No. 3041 at paras. 15 - 18 (S.C.J.) cited with approval by Fisher J. in Four Star Auto Lease Ltd. v. 565204 B.C. Ltd., 2008 BCSC 98at para. 21, 55 CCLT (3d) 134. [287] The plaintiff in the present case must prove either ownership of the vehicles in question or the right to immediate possession. Under the terms of the relevant insurance policies, it becomes the owner of the vehicles once the theft claim is settled, and it has the right to immediate possession and the rights of the theft victim through subrogation. 308 In Atwal, BCCA, affirming Atwal, BCSC, the Court offered a suc- cinct summary/statement of the law of conversion at paras. 24-26 as follows: [24] Conversion of property occurs when a person wrongfully inter- feres with the ownership or title to another person’s chattel: Boma Manufacturing Ltd. v. Canadian Imperial Bank of Commerce, [1996] 3 S.C.R. 727 at para. 31. The wrongful interference with a chattel does not require its actual possession. Conversion may occur by written or spoken words that demonstrate an intention to interfere with the chattel in a manner that is inconsistent with the owner’s right of Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 247

possession or title to the property: Oakley v. Lyster, [1931] 1 K.B. 148 (C.A.) at 153-155. [25] Conversion is a strict liability tort and as such, it is not a defence to a claim for conversion that the wrongful act (the interference with the owner’s right of possession and/or title) was committed innocently: Boma Manufacturing Ltd. at para. 31. Liability for conversion does not require proof that the tortfeasor knew, for example, that the property was stolen. Both a purchaser and a vendor of stolen goods may be liable in conversion regardless of the state of their knowledge: Nilsson Bros. Inc. v. Mcnamara Estate, [1992] 3 W.W.R. 761 (Alta. C.A.). The plaintiff need only establish that the act, which was wrongful in its effect of interfering with the rights of the legitimate owner, was done deliberately or intentionally: 373409 Alberta Ltd. (Receiver of) v. Bank of Montreal, 2002 SCC 81, [2002] S.C.R. 312 at para. 8. [26] It is clear that the appellant participated in the chain of events that ultimately resulted in the sale of the stolen Vehicle #27 by providing Mr. Cheema’s cell phone number for the purpose of facilitat- ing the sale of Vehicle #27. In this manner, his actions wrongfully interfered with the interests of the vehicle’s true owner, ICBC, which acquired ownership of the vehicle upon its payment of Mr. Harjinder Cheema’s claim. 309 The Court of Appeal similarly provided guidance as to the nature and effect of the tort of conversion in Insurance Corp. of British Columbia v. Suska, 2011 BCCA 51 (B.C. C.A.) at para. 9 as follows: [9] As conversion is a strict liability tort, it is no defence that the wrongful act of conversion was committed in all innocence as to the true ownership of the vehicles: Boma Manufacturing Ltd. v. Cana- dian Imperial Bank of Commerce, [1996] 3 S.C.R. 727 at para. 31, 140 D.L.R. (4th) 463. Mr. Palma’s liability for conversion simpliciter did not depend on a finding that he knew the vehicles were stolen or that he was a participant in fraud. The appellant was required to prove only that he was linked to the exercise of control over the vehicles in a manner inconsistent with the rights of the true owner. If he accommodated Mr. Suska’s activities by allowing his facilities to be used for the purposes of the conversions, I think that his liability for conversion would follow, even if he was unaware that the vehicles were stolen. As Fleming observes, this strict rule in conversion “constitutes the most effective safeguard against rogues profiting from their dishonesty, as it encourages utmost circumspection by the business community” (John G. Fleming, The Law of Torts, 9th ed. (LBC Information Services: Sydney, N.S.W.) at 62). Here, Mr. Palma ap- 248 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

parently had the right to control the use of his facilities and properties. The issue in conversion simpliciter then involves a determination of whether he allowed Mr. Suska and others to use his facilities and properties for the exercise of a control over vehicles inconsistent with the rights of their true owners. 310 In Boma Manufacturing Ltd. v. Canadian Imperial Bank of Com- merce [1996 CarswellBC 2314 (S.C.C.)], supra, the Court held at para. 32 as follows: 32 The fact that liability for the tort of conversion is strict suggests that the respondent’s submission that the appellants were contribu- torily negligent must fail. The matter was raised before the Court of Appeal, and was dismissed without reasons. While this argument would be available in an action for negligence, the notion of strict liability involved in an action for conversion is prima facie antitheti- cal to the concept of contributory negligence. 311 In the present case, each of the defendants Bansal & Sons Automo- tive Ltd., Kulvinder Singh Bansal, Satwant Ranauta, Rodney Dick and Jason Smith actively defended the claims of the plaintiff against each of them for conversion, and in the case of the Bansal defendants, negligence. 312 As to the plaintiff’s claim in negligence (in the alternative) against the Bansal defendants, because I consider the evidence relied on by the plaintiff as establishing negligence is subsumed in the broader claim of conversion, I do not consider it necessary to discuss or apply the law of negligence.

The Bansal Defendants - Analysis and Conclusion 313 The essence of the plaintiff’s claim in conversion against the Bansal defendants rests on the evidence that Satwant Ranauta, a vehicle inspector employed by Bansal & Sons, completed a PVIR in relation to Mo- hammad Hanif’s 2002 white Chev Express van, using a false VIN number, even though the van was still in the possession of Mr. Hanif with its original correct VIN number, or alternatively, in the presence of the van while its original correct dashboard VIN was disguised by a false paper VIN which Mr. Ranauta ought to have concluded was false. In that latter assertion, the plaintiff relies upon the evidence of Mr. Bansal that the paper VIN was clearly not a proper dashboard VIN. In the result, following the PVIR performed by Mr. Ranauta, the van underwent its transfor- mation from Vehicle 37 to Revin 37 and was successfully converted from its true owner’s possession and control. The plaintiff submits that at Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 249

the material times, it was the legitimate owner of Vehicle 37 by virtue of paying the owner GMAC $26,204.13 as total loss value and acquiring ownership by virtue of s. 14 of the Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231 and Regulation 143(1) of the Revised Regulation (1984) under the Insurance (Motor Vehicle) Act, B.C. Reg. 447/83. Those sections read as follows: 14 The corporation may acquire and hold for the benefit of the plan the salvage to which it becomes entitled (a) on settlement of a claim under the plan, and (b) as provided by the regulations. Salvage 143. (1) Where the corporation replaces a vehicle or pays to an insured the declared value or actual cash value of a vehicle or its equipment or both, less any applicable deductible amount in accordance with section 117, (a) the corporation is entitled, at its option, to the salvage in the vehicle or its equipment or both, and (b) the insured shall, on request of the corporation, execute any documents necessary to transfer to the corporation title to the vehicle or its equipment or both. 314 The plaintiff submits in effect the actions of the inspector in issuing the PVIR under circumstances where he ought not to and thereby facili- tating the fraudulent scheme renders the Bansal defendants liable for conversion of that vehicle. 315 Counsel for the defendants submits there is no basis for a finding of liability against Kulvinder Bansal. There is no evidence he conducted the inspection or was otherwise “personally responsible for the PVIR”. 316 The Bansal defendants further submit that the plaintiff’s position that the Hanif vehicle was not inspected advances the defendants’ position, not the plaintiff’s. Mr. Grey, for the Bansal defendants submits that the examination for discovery read in by the plaintiff of Mr. Ranauta’s evidence goes to establish that Mr. Ranauta inspected a 2002 Chev van on February 27, 2003, commencing about noon. His evidence was that the VIN he examined on the vehicle matched the VIN on the AVRC, had no irregularities, and was what he put on the PVIR. 317 According to the PVIR completed by the defendant Mr. Ranauta, the mileage on the van was 56,362. Mr. Grey relies on evidence that on Feb- ruary 27, 2003, the same day as the PVIR was completed, the vehicle, 250 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

Revin 37, was transferred to Dianna Breen by an ICBC agent who noted VIN “cited and confirmed” and the mileage recorded was 56,362. Mr. Grey contrasts that with the evidence of Mr. Hanif that he had the vehicle in his possession throughout the time of the inspection and did not have it inspected and when it was last in his possession at 11:30 p.m. on March 3, 2003, in front of his house in Surrey, it had about 15,000 km on the odometer. 318 It is Mr. Grey’s contention that Mr. Ranauta did inspect the van on February 27, 2003, according to his discovery evidence read in on the plaintiff’s case, that the plaintiff concedes by calling Mr. Hanif that it was not his van, that it was never put to Mr. Ranauta on discovery, that he inspected no vehicle in relation to which the PVIR was created and thus, the plaintiff is estopped from asserting that Mr. Ranauta did not inspect the van bearing the false VIN. 319 The defendant says given the evidence that the vehicle recovered by ICBC bearing the false VIN mirrored the VIN recorded by Mr. Ranauta and the Autoplan agent, the most likely possibility is that “the rogues involved in perpetrating the fraud used a different white 2002 van when it was inspected by Mr. Ranauta and later the Autoplan agent”. 320 Mr. Grey notes there is evidence that other stolen vehicles were revined more than once. 321 The defendants submit in all the circumstances that the plaintiff has failed to meet the burden of proof on the balance of probabilities that Mr. Ranauta failed to inspect a van on February 27, 2002. The defendants note that when a vehicle is being registered for the first time in British Columbia, Autoplan agents/brokers are required to examine the VINs on vehicles which are being registered. He points out there were many such revined vehicles that passed muster in this scheme which weighs against a finding of negligence. The defendants also contend that the tort of conversion is not made out since if the plaintiff’s theory is correct and there was no vehicle inspected, then the defendants ask rhetorically “how can Ranauta be liable in conversion when the vehicle described in the PVIR did not exist?” 322 The defendants further submit that the duty on the Autoplan agent to inspect the VIN after the PVIR is issued vitiates any effect of the acts of the vehicle inspector in such circumstances. If there was an act that facil- itated the conversion of the vehicle, it was the plaintiff’s agent, not the defendant Mr. Ranauta. Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 251

323 As far as damages are concerned, the defendants submit that the plaintiff should only be able to recover the difference between what the plaintiff paid the insured party and the fair market value at the time of recovery. The defendants submit there is no evidence of fair market value but the vehicle was recovered a few months later and the defendants submit the market value at the time of the recovery would be relatively close to what it was when the insurance payment was made. 324 I conclude that there was no second van involved in the circumstances of this case. In the first place, there is no evidence of the theft of any other white 2002 Chevrolet Express which could have been used as the vehicle which brought Revin 37 to the surface. Secondly, there is no logical reason to transfer the false VIN on one stolen vehicle to another similar stolen vehicle. That would simply lead to the need to create a second false VIN for the first stolen vehicle as there could not be two registered vehicles with the same VIN. Thirdly, if the false VIN used for the first vehicle was adequate to fool an experienced vehicle inspector and/or an ICBC agent, then why would the false VIN tag for the recovered Vehicle 37 not be the same or equally as foolproof, which clearly it was not? In the fourth place there is no evidence of another white 2002 Chevrolet Express being “revined” after the Hanif vehicle was reported stolen. Finally, the coincidence of two white 2002 Chevrolet Express vans being stolen and “revined” in sequence to allow one to be substituted for the other, is neither logical nor credible, particularly in the absence of any objective evidence that more than one such vehicle was stolen. 325 In my view, the Bansal defendants’ submissions are based on speculation rather than evidence. I conclude it is much more likely that Revin 37 and Vehicle 37 were always one and the same. There is evidence through Mohamed Nachar that he conducted “blind inspections”, that is, where no vehicle was present, at the behest of conspirators involved in this scheme, including Vikram Atwal. Thus, it is quite plausible that in this case Mr. Ranauta was confronted with the same request in anticipation of Vehicle 37 being stolen or otherwise brought into the scheme. The evidence that an insurance agent at All Time Insurance purported to inspect the VIN before transferring the vehicle is conditioned by the evidence that on four other occasions that agency processed falsely vinned vehicles associated to Vikram Atwal, and that Ms. Breen’s name - the ostensible owner of Revin 37 - was used by Vikram Atwal on two other occasions in revining vehicles. Whoever it was who presented the registration and transfer documents to All Time Insurance, it assuredly was 252 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

not Ms. Breen, who had nothing to do with the transfer. Nor was she the person who would have presented the AVRC to Mr. Ranauta. It is far more likely in my view that it was Mr. Atwal who sought the PVIR from Bansal & Sons and presented the transfer documents to All Time Insur- ance, in light of the evidence of his payment from the eventual purchaser of Revin 37, Ajmer Litt, who has not contested his liability for conversion. 326 In those circumstances, Mr. Ranauta’s failure to recall details of the inspection is less plausible and his evidence, based on the surviving documents, has little weight in the context of the evidence as a whole. 327 As to how Revin 37 notionally came to be inspected by Bansal & Sons, it is at least plausible that it occurred through Jerry Gill, who knew both Mr. Atwal and Mr. Bhandher, both of whom were involved in the scheme, and Mr. Bansal, the proprietor of Bansal & Sons and who apparently gave information to Mr. Bhandher that Bansal & Sons conducted such inspections. 328 Given Mr. Bhandher’s involvement in the scheme, and Mr. Gill’s at least peripheral involvement, it seems likely to me that Mr. Bhandher’s request for information was in furtherance of the scheme. Mr. Bhandher’s association to Mr. Atwal and the context of the scheme sup- ports the conclusion that it was Mr. Atwal who arranged for the PVIR completed by Mr. Ranauta. 329 I do not think the evidence goes far enough to establish on a balance of probabilities that Mr. Bansal was implicated in the blind inspection performed by Mr. Ranauta. While it is not improbable, I do not think the evidence establishes it was more probable than not. As to the defendant Mr. Ranauta’s liability and Bansal & Sons vicarious liability, I am satisfied the plaintiff has made out its case. The fact that Mr. Ranauta did not know precisely what vehicle his actions in completing a blind inspection were contributing to the conversion of, is of no avail to him. As noted in Atwal, BCCA, supra, “the plaintiff need only establish that the act which was wrongful in its effect of interfering with the rights of the legitimate owner was done deliberately or intentionally.” 330 In the present case, Mr. Ranauta’s deliberate act of completing the PVIR in a blind inspection in relation to a white 2002 Chevrolet Express van clearly amounts to participation “in the chain of events that ultimately resulted in the sale of” stolen 37 by providing a false VIN that enabled the conspirators to register the stolen vehicle in BC and sell it for profit. That there may have been others involved in the facilitation does Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 253

not preclude his liability in conversion. As I understand it, the Bansal defendants do not contest the appropriateness of a finding of vicarious liability of Bansal & Sons in those circumstances. 331 As far as Mr. Bansal is concerned, as earlier noted, I am not satisfied the evidence goes far enough to establish on a balance of probabilities that he was implicated in the blind inspection of Revin 37. While the evidence of his contact with Jerry Gill and Mr. Gill’s evidence of referring Raminder Bhandher to Bansal & Sons as doing vehicle inspections, raises the possibility of Mr. Bansal’s knowledge of the proposed inspections for the scheme, there is no other evidence to tie down his knowledge and no evidence of any other inspections in furtherance of the scheme at Bansal’s establishment, as there was with Mohamed Nachar or Mr. Salim, that might provide the basis to infer his knowledge and acquiescence in the scheme. In my view, the evidence against Mr. Bansal does not go beyond raising a reason to suspect his knowledge or involvement to reach proof of it on a balance of probabilities.

The Defendant, Jason Smith - Analysis and Conclusion 332 In respect of the defendant, Jason Smith, there are two actions outstanding. He is a defendant in Insurance Corp. of British Columbia v. Awla, and as well, there is an earlier action commenced by the plaintiff on September 15, 2003 in which the plaintiff, ICBC, sought a declaration of ownership with respect to Vehicle 18. That action (Insurance Corp. of British Columbia v. Awla) was ordered to be tried at the same time as the two principal actions; Insurance Corp. of British Columbia v. Awla and Insurance Corp. of British Columbia v. Awla. 333 In neither the Insurance Corp. of British Columbia v. Awla action nor the Insurance Corp. of British Columbia v. Awla action does the defendant Smith make a counterclaim against the defendant founded on negligence or otherwise. 334 In the Awla action, the defendant Smith pleaded that: At all material times the plaintiff was also Registrar of Motor Vehi- cles for British Columbia and as such issued Certificates of Owner- ship to members of the public on which the public relied. 335 The defendant further pleaded that he purchased for valuable considerable a 2002 Chevrolet Silverado from a person “who possessed a valid Certificate of Ownership issued by the plaintiff” and that he registered it with and purchased the insurance from the plaintiff and was issued with “an ostensibly valid Certificate of Ownership”. 254 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

336 He pleaded that he relied on the validity of this Certificate of Owner- ship and asserted he was a valid owner of Vehicle 18. 337 Mr. Smith asserts that the damages, if any, suffered by the plaintiff are the result of the plaintiff’s “own negligence and deliberate conduct”. He further asserted that the plaintiff had no foundation for alleging that he participated in the unlawful conduct alleged and asserted it was “an abuse of process for the plaintiff to make such allegations and name him in an enormously expensive lawsuit.” 338 In Insurance Corp. of British Columbia v. Awla, in which the plaintiff sought a declaration that it is the legal and beneficial owner of Revin 18 and lawfully entitled to dispose of it, the defendant Mr. Smith pleaded that he purchased Revin 18 in good faith, that he agreed to pay and paid $38,500 for the vehicle and that he relied on the Certificate of Ownership issued by the plaintiff in relation to Revin 18. He further asserted that he paid $2,887.50 in social services tax for the vehicle. He asserted that ICBC never informed him that Revin 18 bore a false serial number or that it might seized from him. He asserted the plaintiff had a statutory and regulatory duty to determine the true identity of the vehicle for which it issued a Certificate of Ownership. He alleged the seizure of the vehicle on July 24, 2003 was done by peace officers acting as agents for the plaintiff who unlawfully placed the vehicle in the hands of the plaintiff and failed to notify him of their intention to do so without regard to the relevant provisions of the Criminal Code. 339 The defendant Smith further pleaded that because the plaintiff issued a Certificate of Ownership for Revin 18, it is estopped from claiming ownership. The defendant asserted that the plaintiff “has acted in an arro- gant, reckless and unlawful fashion with regard to the defendant’s vehicle and toward the defendant” and sought an order dismissing the plaintiff’s claim with special costs. 340 On December 6, 2004, the plaintiff brought an application under the summary trial provisions of the Rules of Court (then Rule 18A) seeking a declaration that it was the legal and beneficial owner of Vehicle 18 and was lawfully entitled to dispose of it. 341 Madam Justice Allan who heard the application described the defendant’s principal defence thus at paras. 11 and 12 of her Judgment: [11] Mr. Smith opposes the relief sought by ICBC on the basis that he is the lawful owner of the Truck by virtue of the Certificate of Ownership issued by ICBC under the Motor Vehicle Act. Mr. Murray submits that Mr. Smith, as an insured, was entitled to rely upon the Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 255

statutory scheme of registration and licensing of vehicles. In this case, the vendor of the Truck, Tarsem Pharga, held a valid Owner’s Certificate and Mr. Smith, the purchaser, was issued a valid Owner’s Certificate by ICBC. [12] The statement of defence pleads reliance on the representations made by ICBC that the Truck was properly transferred to Mr. Smith, who then became its legal owner. The defendant suggests that ICBC is now estopped from claiming ownership of the Truck. The statement of defence does not claim any relief other than a dismissal of the plaintiff’s claim with special costs. 342 In the result, Justice Allan found that the case was not suitable for resolution under Rule 18A. She noted “several unexplained factual issues that are of concern” which “potentially point to ICBC’s own negligence”. She cited evidence of the makeshift nature of the false VIN stickers that should have alerted a trained inspector to this irregularity, she also pointed to the fact that Revin 18 was apparently inspected five days before Vehicle 18 was reported stolen and that the inspection of the vehicle ostensibly before it was stolen showed 12,000 more kilometres on the odometer than the theft report which occurred later than the inspection. 343 Justice Allan considered it necessary to explore those and other evidentiary issues to enable a just determination of the issues. 344 She also considered the issue whether ICBC’s dual role as insurer and Registrar of Motor Vehicles could lead to an estoppel of its claim “by reason of its conduct”. She regarded that as a significant issue which ought to be decided in the context of a full evidentiary hearing. 345 In my view, based on the evidence taken as a whole, neither the plaintiff’s alleged negligence nor its dual role as insurer and Registrar of Mo- tor Vehicles vitiates its claim against the defendant Smith. 346 Although the B.C. Transfer/Tax Form reflects that the defendant Smith paid $38,500 for the vehicle, apart from the assertion in that document which is in all other critical aspects a manifestly false document designed to camouflage a fraudulent transaction, and his own ambiguous testimony, there is no evidence that Mr. Smith paid more than $30,000 for Revin 18. While there is no direct evidence of its value at the time, I note that the total loss payments made by ICBC to GMAC and Canvey totalled in excess of $58,000 and in Mr. Smith’s own net worth statement filled out for GVCCU the vehicle had an asserted value of $48,000. 256 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

347 Mr. Smith’s inability or unwillingness to explain where he got the additional $8,500 to pay the asserted purchase price persuades me in context of all the evidence that he paid no more than $30,000 for the vehicle which I conclude was an amount conspicuously less than its market value at the time. That Mr. Smith was similarly unable to remember details about why or with whom he went to Richmond to pick up the vehicle when according to him it has been displayed for sale in a shopping mall parking lot in Surrey is in my view unconvincing and buttresses the conclusion that he was aware that the transaction involving Revin 18 was not legitimate at the time he was involved in it. Although there has been a lapse in time since these events took place, the seizure of his vehicle as stolen in July 2003 would fix details of his acquisition of it at that time. 348 His resort to GVCCU for a loan when he had a good credit rating at his own bank and could have got a loan at a lower rate adds to the evidence that his involvement in the scheme was consistent with knowledge of what was afoot. As with other purchasers of the revin vehicles, Mr. Smith obtained his loan from Allen Ferrier at GVCCU to avoid careful scrutiny of the suitability for a loan and of the legitimacy of the vehicles for which the loans were obtained. I do not accept Mr. Smith’s evidence that he resorted to Ferrier at GVCCU simply by coincidence because it was convenient to where he saw the truck displayed. The fact that he found his way to the very person whom Harpreet Awla had earmarked to assist in arranging financing in furtherance of the scheme purely by coincidence defies common sense. The speculation that he may have been directed there by the seller does not answer why he would go, unless it was to obtain financing without scrutiny of the legitimacy of the transaction. 349 In addition, as the evidence unfolded, it is not at all clear that Mr. Smith actually relied on the Certificate of Ownership in the name of Tar- sem Phagura for his purchase of the vehicle. It appears from the loan application documents at GVCCU that he took steps in anticipation of buying the vehicle before it had been “revined” or registered in the name of Tarsem Phagura and indeed before it had even been reported stolen. 350 Mr. Smith’s claim to have seen the vehicle on display in the Guildford Mall parking lot in the context of all the evidence seems to me improbable given that it would have been before October 10, 2002 when he took steps to obtain financing at GVCCU which was several weeks before Revin 18 was reported stolen, was inspected, or was registered. Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 257

351 Further, when Mr. Smith took Revin 18 to Erv’s Autobody as a result of the accident involving it, he was clearly alerted to the prospect that there was something amiss with the vehicle and that it may have been stolen and he took no steps to inquire about or resolve the issue. In my view, that circumstance adds considerable weight to the contention that at all material times he was aware of the true status of the vehicle. 352 On balance, and in light of all the evidence and the lack of evidence, I conclude that the defendant Smith bought Revin 18 in circumstances which made it clear that it was a stolen vehicle. He agreed to buy it and took steps to take out a loan to buy it before it existed as Revin 18; he purported to see it for sale by someone claiming to be Tarsem Phagura, before it was registered to Tarsem Phagura (or anyone but the true owner) and before it was stolen or reported as stolen. He paid conspicuously less than the market value for it and “coincidentally” financed it through a person complicit in the theft and conversion scheme who also helped others to finance “revin” vehicles without the need to scrutinize their legitimacy. 353 Finally, he failed to do anything when he was confronted with some objective evidence that the vehicle was not what it appeared to be. In those circumstances, I conclude Mr. Smith knew or was wilfully blind to the fact that Revin 18 was stolen and did not at any time rely on the Certificate of Ownership issued by the plaintiff as being valid or accurate. 354 In those circumstances, I would not give effect to the defendant Mr. Smith’s pleadings either that the plaintiff is estopped from asserting its claim because of its own conduct or that it caused its own damages through its own negligence. 355 In coming to that conclusion, I do not wish to be taken as holding that on a different factual foundation a defendant could not successfully resist the plaintiff’s claim on the basis of estoppel or causation. However, where, as here, the evidence establishes that in purchasing the vehicle conspicuously below market value, the defendant relied on the very conduct which he now complains would be illegal, to give effect to his defence or to allow him to rely on the equitable defence of estoppel, would be illegal and unreasonable. 356 In the case of the claim of estoppel, it is clear that a party seeking to rely on an equitable remedy must “come with clean hands”. See: Pro Swing Inc. v. ELTA Golf Inc., 2006 SCC 52 (S.C.C.) at para. 22. In the case at bar, the defendant Smith did not come with clean hands. He did 258 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

not rely on the Certificate of Ownership as representing a true state of affairs, or act on it as though it were. On the contrary, it was the duplici- tous quality of the Certificate of Ownership that enabled him to acquire the vehicle it purported to refer to, for a price conspicuously less than it was worth. 357 The same reasoning applies in relation to the defendant’s causation argument. The plaintiff’s conduct whether negligent or not did not cause its damages. The damages were caused when Vehicle 18 was stolen re- portedly on October 23, 2002 and the plaintiff paid on the subsequent claim in November 2002. The issuance of the Certificate of Ownership for Revin 18 in the name of Tarsem Phagura on October 21st and the subsequent sale of Revin 18 to the defendant Smith did not cause the theft or engage the plaintiff’s obligation to pay the claim advanced. 358 At most, those actions may have postponed the recovery of the vehicle by enabling it to be disguised as Revin 18, but in circumstances, as here, where the defendant Smith participated in the deception by purporting in the transfer document to pay more for the vehicle than he did, and by financing the vehicle through GVCCU to avoid scrutiny of the legitimacy of the transaction, allowing him to rely on the asserted negligence of the plaintiff in failing to uncover the deception which he participated in would offend public policy. 359 Apart from estoppel or causation, the only other basis for the defendant Mr. Smith to resist the plaintiff’s title is through s. 26 of the Sale of Goods Act, which reads as follows: 26 (1) Subject to this Act, if goods are sold by a person who is not the owner of them, and who does not sell them under the authority or with the consent of the owner, the buyer acquires no better title to the goods than the seller had, unless the owner’s conduct precludes the owner from denying the seller’s authority to sell. 360 At the time of the sale of Vehicle 18 as Revin 18 to the defendant Smith, the owner was GMAC. There is simply no evidence that GMAC did anything to preclude denying the seller’s authority to sell. The issue of ICBC’s conduct does not stand to be determined under the Sale of Goods Act as it did not become the owner of Vehicle 18 until November of 2002 after the sale which is at issue. Moreover, at most, ICBC’s vicarious conduct gave Tarsem Phagura ostensible authority to sell Vehicle 18 disguised as Revin 18. It is clear that Tarsem Phagura had nothing to do with the sale of Revin 18 and hence even if ICBC could be said to have been the owner at the time of the sale, its vicarious liability for Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 259

Sandeep Rai’s conduct would not preclude it from denying Harpreet Awla’s authority to sell. 361 The authority to sell created by the Certificate of Ownership is only to the purported owner, not to anyone posing as the purported owner. Thus in those circumstances, I would not give effect to Mr. Smith’s defence against the claim of the plaintiff and find him liable in conversion with respect to Vehicle 18. I would also give effect to the plaintiff’s application for a declaration of ownership in Insurance Corp. of British Columbia v. Awla.

The Defendant, Rodney Dick - Analysis and Conclusion 362 The plaintiff’s claim against Rodney Dick is in respect of Vehicle 41, a 2002 green Chevrolet Silverado disguised as Revin 59, Revin 12 and Revin 41. The plaintiff’s claimed loss in respect of Vehicle 41 against Mr. Dick in conversion is $26,614.31 which represents the amount paid out to the owner of Vehicle 41 of $57,724.13 as total loss value on July 15, 2002, less the amount realized from the sale of the salvage when Vehicle 41 was recovered as Revin 41, amounting to $31,110. 363 Although the evidence shows an additional total loss payment to the owner of Vehicle 41 of $796.84, that amount is not calculated into the plaintiff’s submissions and accordingly I would not give effect to that. 364 I am satisfied that the plaintiff has made out its claim against the defendant Rodney Dick in conversion. Although he has launched a counterclaim against the plaintiff, that counterclaim has been severed off from the trial and does not fall to be determined at this juncture. 365 Mr. Dick was a purchaser who paid conspicuously less than the apparent and insured value of the vehicle. He like Mr. Smith and Ms. Mc- Donald financed the vehicle through Allen Ferrier at GVCCU purporting to pay $25,000 for it, but receiving only $16,000 by way of loan from GVCCU and being unable to account for the payment of the remaining $9,000. 366 When Mr. Dick reported Revin 59 stolen, he falsely reported that he paid $35,000 for it and he received $39,679.25 (with GVCCU) from ICBC as a result of his theft claim. He purchased the vehicle from Har- preet Awla, not from Ms. Choong, the purported registered owner. In my view, the plaintiff has established that Revin 59 was Vehicle 41 given its similarities and the fact that no other vehicle resembling Revin 59 was reported stolen or recovered, except for Vehicle 41. Accordingly, I am satisfied that the plaintiff has made out its claim in conversion against 260 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

Mr. Dick entitling them to damages in the amount of $26,614.31 plus interest. As Mr. Dick’s counterclaim is not being litigated in the context of this action, I make no express findings with respect to his knowledge or wilful blindness as to the status of Revin 59 when he acquired it and possessed it as it is not necessary to a finding of liability for conversion.

Damages 367 In its pleadings and submissions, the plaintiff has sought both special damages and punitive damages. In connection with all the conspiracy defendants, except Cheri Kostynick, the plaintiff has sought punitive damages. In connection with those conversion defendants who are found to have purchased and used the revin vehicles with knowledge of or being reckless as to their status, the plaintiff also seeks punitive damages. 368 As far as special damages are concerned, the plaintiff seeks damages for its payment to the each insured for the value of the vehicle against all defendants found liable in respect of each vehicle jointly and severally. As against the conspiracy defendants, the plaintiff seeks additional special damages for expenditures relating to the theft of the vehicle and/or their recovery, such as payments of loss of use to the insured, towing charges, repair charges, and payment to the locksmith for a locksmith’s report for example.

1. Mitigation 369 The defendants submit that the plaintiff failed to adequately mitigate its losses through the sale of the recovered vehicles. Although the plaintiffs did sell the vehicles at wholesale prices, the defendants say that they should have been sold on the retail market where they might have realized more as a result of the sales. 370 In Janiak v. Ippolito, [1985] 1 S.C.R. 146 (S.C.C.), the Supreme Court of Canada discussed the law of mitigation. Failure to mitigate is a question of fact and must be proven on a balance of probabilities by the defendant. The question to be determined is whether the plaintiff acted unreasonably in the circumstances in minimizing its loss. See: pp. 163 to 166. 371 In the circumstances of the present case, I am not satisfied that the plaintiff acted unreasonably in the means by which it chose to mitigate its losses. The plaintiff was confronted with significant numbers of stolen vehicles which had been stolen and used for varying periods of time and as a result, the increase in age and mileage of the vehicles would de- Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 261

crease their resale value. Given the need to deal with significant numbers of vehicles and the lack of any evidence of what could be expected to be achieved through individual retail sales in terms of timing and cost, I am not satisfied that the defendants’ submissions concerning the plaintiff’s failure to mitigate amount to more than an invitation to speculate that the plaintiff may have realized greater net sums through an attempt to sell the vehicles on a retail basis. In my view, that is insufficient to discharge the defendants’ burden of proof with respect to its assertion of a failure to mitigate. I am not satisfied that the evidence permits a conclusion that the plaintiffs acted other than reasonably in all the circumstances and therefore I reject the defence of a failure to mitigate.

2. Special Damages 372 In summary, I have made the following findings of liability and special damages. For clarity, I have first set out the findings of liability based on each vehicle and the amount of damages and then below that I have set out the total liability for each defendant. It is important to note that the two ways of expressing the information representing the same total amount and should not be read as ordering double recovery. The amounts of money in the second grouping are subject to the joint and several liability described in the first grouping.

(a) Summary of Special Damages by Vehicle i. Vehicle 53/Revin 53 373 With respect to this transaction, I find Harpreet Awla liable in conspiracy in the amount of $25,894.53.

ii. Vehicle 49/Revin 49 374 With respect to this transaction, I find Cheri Kostynick liable in the amount of $4,226.66 as a conspiracy defendant. Although the evidence showed payments of $4,347.87 by the plaintiff, in submissions it sought the lesser amount of $4,226.66.

iii. Vehicle 52/Revin 52 375 In connection with this vehicle, I find Gurpreet Awla and Cheri Kos- tynick liable as conspiracy defendants in the amount of $10,913.08 jointly and severally and Navdeep Brar liable as a conversion defendant in the amount of $9,482.50 jointly and severally with Gurpreet Awla and Cheri Kostynick. 262 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

iv. Vehicle 14/Revin 14 376 I find Cheri Kostynick liable in conspiracy for special damages of $22,755.05.

v. Vehicle 45/Revin 45 377 I find Cheri Kostynick and Gurpreet Awla jointly and severally liable in relation to this vehicle as conspiracy defendants in the amount of $2,187.38.

vi. Vehicle 41/Revin 59 378 I find Harpreet Awla liable as a conspiracy defendant in relation to Vehicle 41 in its incarnation as Revin 59 in the amount of $26,614.31 jointly and severally with Rodney Dick, who I find liable in conversion in relation to the same transaction in the same amount, that is $26,614.31.

vii. Vehicle 41/Revin 17 379 I find Harpreet Awla and Sandeep Rai jointly and severally liable in the amount of $39,679.25 as conspiracy defendants. Their liability is joint and several with Ross Hinchberger as a conversion defendant in the same amount, that is, $39,679.25.

viii. Vehicle 16/Revin 16 380 I find Sandeep Rai liable as a conspiracy defendant in connection with this vehicle and transaction in the amount of $28,520.79.

ix. Vehicle 18/Revin 18 381 I find Harpreet Awla and Sandeep Rai liable as conspiracy defendants jointly and severally for the amount of $59,141.52 less the amount to be paid by Singleton Urquhart to the benefit of the plaintiff. Their liability is joint and several with Jason Smith whom I find liable as a conversion defendant for the sum of $58,227.79 less the same amount to be paid by Singleton Urquhart to the benefit of the plaintiff.

x. Vehicle 37/Revin 37 382 I find Vikram Atwal liable as a conspiracy defendant for the sum of $13,403.38. His liability is joint and several with the liability of Satwant Ranauta and Bansal & Sons Diesel Automotive Ltd., whose liability is in the amount of $12,604.13 and is joint and several with one another Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 263

and with Vikram Atwal. I also find Ajmer Litt liable as a conspiracy defendant in the amount of $12,604.13. His liability is joint and several with the other two conversion defendants and with Vikram Atwal as a conspiracy defendant.

xi. Vehicle 1A/Revin 1A 383 In connection with this vehicle and transaction, I find Vikram Atwal liable as a conspiracy defendant in the amount of $21,241.50.

xii. Vehicle 1A/Revin 10/Revin 23 384 I find Harpreet Awla and Cheri Kostynick to be jointly and severally liable with one another and with Vikram Atwal for the sum of $21,241.50 for their involvement with Vehicle 1A in its incarnations as Revin 10 and Revin 23.

xiii. Vehicle 46/Revin 32 385 I find Vikram Atwal liable as a conspiracy defendant in the sum of $27,695.87.

xiv. Vehicle 46/Revin 36 386 I find Vikram Atwal liable as a conspiracy defendant in connection with this vehicle in its incarnation as Revin 36 in the amount of $40,475.75.

xv. Vehicle 46/Revin 46 387 I find Cheri Kostynick liable as a conspiracy defendant in the amount of $37,325.00 in connection with this transaction in its incarnation as Revin 46.

xvi. Vehicle 42/Revin 42 388 I find Harpreet Awla liable in the amount of $9,926.03 in connection with Revin 42 as a conspiracy defendant.

4. Summary of Special Damages by Defendants 389 Harpreet Awla’s total liability is $182,496.96 for his involvement with six transactions, less the amount to be paid to the plaintiff from Singleton Urquhart LLP’s trust account in respect of Vehicle 18. 264 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

390 Cheri Kostynick’s liability is $127,341.56 for her involvement with six transactions, less the amount to be paid to the plaintiff from Singleton Urquhart LLP’s trust account in respect of Vehicle 18.. 391 Sandeep Rai’s total liability is $95,751.56 for his involvement with three transactions. 392 Vikram Atwal’s total liability is $102,815.75 for his involvement with four transactions. 393 Gurpreet Awla’s total liability is $13,100.46 for his involvement in two transactions. 394 Navdeep Brar’s total liability is $9,482.50. 395 Ross Hinchberger’s total liability is $39,679.25. 396 Rodney Dick’s total liability is $26,614.31. 397 Jason Smith’s total liability is $58,227.79, less the amount held in plaintiff’s counsel’s trust account to be paid to the benefit of the plaintiff, in respect of Vehicle 18. 398 Satwant Ranauta’s total liability is $12,604.13. 399 Bansal & Sons Diesel Automotive Ltd.’s total liability is $12,604.13. 400 Ajmer Litt’s total liability is $12,604.13.

5. Punitive Damages 401 In this case, the plaintiff has sought punitive damages against all of the conspiracy defendants except Cheri Kostynick and against those “conversion defendants who are found to have knowingly or recklessly obtained and used the stolen vehicles or taken steps to conceal the true facts from the plaintiff or the court”. 402 The plaintiff seeks punitive damage awards similar to those in Insurance Corp. of British Columbia v. Atwal, Insurance Corp. of British Columbia v. Ben-Jaafar and Insurance Corp. of British Columbia v. Ben- Jaafar. 403 In Insurance Corp. of British Columbia v. Atwal, I set for the basis for punitive damages at paragraphs 305 to 308 as follows: [305] The plaintiff seeks punitive damages against the conspiracy defendants and “against any conversion defendants who are found to have knowingly or recklessly obtained and used the stolen vehicles or who took steps to conceal the true facts from the court”. [306] In Insurance Corporation of British Columbia v. Husseinian, 2008 BCSC 241, 59 C.C.L.I. (4th) 200, Gerow J. set forth the basis Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 265

for considering the imposition of punitive damages at paras. 161 - 163 as follows: [161] In Whiten v. Pilot Insurance Co., [2002] 1 S.C.R. 595, the Supreme Court of Canada stated at ¶94 that the following points are important in determining whether an award of punitive damages is appropriate: (1) Punitive damages are very much the exception rather than the rule, (2) imposed only if there has been high-handed, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour. (3) Where they are awarded, punitive damages should be assessed in an amount reasonably proportionate to such factors as the harm caused, the degree of the misconduct, the relative vulnerability of the plaintiff and any advantage or profit gained by the defendant, (4) having regard to any other fines or penalties suffered by the defendant for the misconduct in question. (5) Punitive damages are generally given only where the misconduct would otherwise be unpunished or where other penalties are or are likely to be inadequate to achieve the objectives of retribution, deterrence and denunciation. (6) Their purpose is not to compensate the plaintiff, but (7) to give a defendant his or her just desert (retribution), to deter the defendant and others from similar misconduct in the future (deterrence), and to mark the community’s collective condemnation (denunciation) of what has happened. (8) Punitive damages are awarded only where compensatory damages, which to some extent are punitive, are insufficient to accomplish these objectives, and (9) they are given in an amount that is no greater than necessary to rationally accomplish their purpose. (10) While normally the state would be the recipient of any fine or penalty for misconduct, the plaintiff will keep punitive damages as a “windfall” in addition to compensatory damages. (11) Judges and juries in our system have usually found that moderate awards of punitive 266 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

damages, which inevitably carry a stigma in the broader community, are generally sufficient. [162] The court went on to note at ¶95 that what is essential in determining whether an award of punitive damages should be made and the amount of the award are the particular circumstances of the case, the fact that the remedy is exceptional, and fairness to both sides. [163] Other factors to consider in determining whether an award of punitive damages should be made and the amount of the award include: The financial means of the defendant; Whether the defendant required the plaintiff to prove its claim; Whether the defendant has perpetrated a fraud on the public; Whether the conduct includes criminal conduct; If the defendant has been charged criminally, that fact should be taken into account; Whether the defendant has abused the court process by conduct such as commencing actions in pursuit of his or her fraudulent claims; If the act was fraudulent, whether it was planned and deliberate; and Whether there was one act or multiple acts. Insurance Corporation of British Columbia v. Akers, 2003 BCSC 1407; Insurance Corp. of British Columbia v. Hoang, 2002 BCSC 1162; Insurance Corp. of British Columbia v. Hoang, 2003 BCSC 1139. [307] In the present case, the conspiracy defendants whom I have found liable, were involved to some degree or another in a well organized and executed criminal enterprise to defraud the plaintiff of a significant amount of money. The cost to the plaintiff is, of course, the cost to the motoring public. In determining whether punitive damages are appropriate, and if so in what amount, it is important to consider the factors set out in para. 306 above in relation to each of Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 267

the defendants and to consider whether the global amount of special damages ordered is insufficient to address the issues set out above. [308] In that regard, it is important to note that the plaintiff has expended considerable time, effort and money in investigating the scheme at issue, recovering the vehicles in question, and mitigating its losses through salvage sales. The plaintiff has not sought as damages the costs expended in the investigations or recoveries of the vehicles at issue and hence, I am satisfied that the special damages ordered while reflective of the direct costs consequent on the actions of the defendants relative to the individual vehicles does not fully address the need to accomplish the objectives of retribution, deterrence and denunciation for which punitive damages are awarded, given that the defendants face no criminal sanction for their conduct. 404 In Insurance Corp. of British Columbia v. Ben-Jaafar; Insurance Corp. of British Columbia v. Ben-Jaafar, supra, I held as follows with respect to Vikram Atwal at paragraph 292: Insofar as Vikram Atwal is concerned, it appears that he was inte- grally involved in the scheme at issue in these actions, and he now faces total liabilities in three cases in the order of approximately $335,000. Bearing in mind that he effectively took no part in defending either of the present actions, and that the quantum of damages thus far awarded against him reflects a substantial amount, I decline to order a further $10,000 per vehicle, but would instead order punitive damages against Vikram Atwal in the total amount of $40,000 arising from these two actions. That will bring the total punitive damage award against Vikram Atwal to $100,000. 405 Insofar as Harpreet Awla is concerned, it appears on the evidence that he played a significant role in the revinning scheme, not only in terms of acquiring, disguising and selling the various vehicles, but also in enlist- ing others such as Lynn Holt and Cheri Kostynick to become involved in the process based on their particular vulnerabilities. In my view, it is appropriate in all the circumstances to award punitive damages of $10,000 per vehicle against Harpreet Awla for a total of $60,000. 406 Harpreet Awla did not defend this case but there is evidence that on an earlier occasion he dissuaded or attempted to dissuade Cheri Kos- tynick from testifying against him and in my view that increases the need to impose a sanction by way of a damage award that emphasizes the need to deter and denounce his conduct. 407 Insofar as Gurpreet Awla is concerned, it does not appear that he was as involved as Harpreet but he nonetheless played a significant role inso- 268 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

far as he was concerned and I would similarly award punitive damages against him of $10,000 for each car he was involved in for a total of $20,000 in punitive damages. 408 Insofar as Vikram Atwal is concerned, again I must take account of the significant damage award that has been made against him, not only in connection with this case but in connection with the case of Insurance Corp. of British Columbia v. Awla, and Insurance Corp. of British Columbia v. Awla and Insurance Corp. of British Columbia v. Ben- Jaafar, supra. In my view, in light of those awards, it is appropriate to scale down the punitive damages awarded against Vikram Atwal and I would award the sum of $5,000 per vehicle for a total of $20,000. 409 Finally in respect of Sandeep Rai who is a default defendant in conspiracy, it is my view that he was not as involved as the other principal members of the conspiracy but nonetheless played a critical role in connection with those vehicles upon which his liability is based and clearly breached a position of trust vis-a-vis his principal, the Insurance Corpo- ration of British Columbia for whom he worked as an agent. 410 In those circumstances, I conclude that punitive damages of $7,000 per vehicle is merited for a total of $21,000. 411 Insofar as Mr. Ranauta and Bansal and Sons are concerned, as Bansal and Sons are liable vicariously, I would not order punitive damages against that entity. Insofar as Mr. Ranauta is concerned, his one involvement in contributing to the disguise of a stolen vehicle marked a breach of his duties as a motor vehicle inspector in a way that contributed to a serious scheme of theft and conversion. In those circumstances, I would award punitive damages in the amount of $5,000. 412 Insofar as the defendant Smith is concerned, there is evidence that he has lost the $30,000 which he paid for the vehicle in the first place and will be liable for the difference between the sale proceeds of the vehicle and the amount paid to the insured, amounting to approximately $28,000. 413 I have found that he knew or was wilfully blind to the fact that the vehicle he was buying, given the circumstances in which he bought it and the price which he paid for it, that the vehicle was stolen and thus renders him liable to some measure of punitive damages. In all the circumstances, I conclude that punitive damages in the amount of $3,000 is an appropriate sum to award against Mr. Smith for his participation in this scheme. Insurance Corp. of British Columbia v. Awla A.F. Cullen A.C.J.S.C. 269

414 Insofar as Mr. Dick is concerned, as his claim has not yet been finally determined, given the severance of his counterclaim against ICBC, I consider it inappropriate to award punitive damages at this time. 415 In the event that and when Mr. Dick’s counterclaim is determined, the plaintiff will have liberty to re-apply for an award of punitive damages against Mr. Dick. 416 Costs will be awarded against those defendants whom I have found liable. Counsel have liberty to address me on each party’s proportionate share of costs if they are unable to agree. 417 Mr. Bansal is entitled to his proportionate costs of defending the action. 418 Insofar as interest is concerned, I order that it be awarded as calculated on the same formula as set forth in the Insurance Corp. of British Columbia v. Ben-Jaafar, 2012 BCSC 505 (B.C. S.C.) . 419 All the awards of special damages in relation to each vehicle are reduced by any amount that is credited to that vehicle as a consequence of settlements reached with other defendants in relation to that vehicle. Action granted. 270 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

[Indexed as: Desormeaux v. Dominion of Canada General Insurance Co.] Sophie Desormeaux, Applicant and The Dominion of Canada General Insurance Company, Respondent Ontario Superior Court of Justice Docket: 12-53821 2012 ONSC 3199 Peter Annis J. Heard: May 22, 2012 Judgment: May 30, 2012 Insurance –––– Actions on policies — Commencement of proceedings — Obligations of insurer — To defend — Interpretation of policy –––– Insured had husband and two children, X and Z — X was injured in yard of grandmother, M, when another child, G, threw something that struck X’s eye — In- sured commenced action against M, G and G’s mother — M, G and G’s mother filed counterclaims against insured — Insured had homeowner’s policy of insurance with insurer — Insurer denied any duty to defend — Insured brought application for declaration that insurer was obligated to provide her with defence to counterclaims — Application dismissed — Coverage was excluded for obligations to pay claims for bodily injury — Reference in exemption to “bodily injury” was sufficiently focused in sense that it encompassed “claims arising from” bodily injury — Introductory words that “policy” did not apply conveyed that no coverage was provided for losses involving bodily injury. Insurance –––– Extent of risk (exclusions) — Liability insurance — Terms of art — Miscellaneous –––– Insured had husband and two children, X and Z — X was injured in yard of grandmother, M, when another child, G, threw something that struck X’s eye — Insured commenced action against M, G and G’s mother — M, G and G’s mother filed counterclaims against insured — Insured had homeowner’s policy of insurance with insurer — Insurer denied any duty to defend — Insured brought application for declaration that insurer was obligated to provide her with defence to counterclaims — Application dismissed — Cov- erage was excluded for obligations to pay claims for bodily injury — Reference in exemption to “bodily injury” was sufficiently focused in sense that it encompassed “claims arising from” bodily injury — Introductory words that “policy” did not apply conveyed that no coverage was provided for losses involving bodily injury. Desormeaux v. Dominion of Canada General Insurance Co. Peter Annis J. 271

Cases considered by Peter Annis J.: Non-Marine Underwriters, Lloyd’s London v. Scalera (2000), [2000] 1 S.C.R. 551, (sub nom. Scalera v. Lloyd’s of London) 135 B.C.A.C. 161, (sub nom. Scalera v. Lloyd’s of London) 221 W.A.C. 161, 2000 CarswellBC 885, 2000 CarswellBC 886, 2000 SCC 24, 50 C.C.L.T. (2d) 1, [2000] 5 W.W.R. 465, 75 B.C.L.R. (3d) 1, 18 C.C.L.I. (3d) 1, 185 D.L.R. (4th) 1, [2000] I.L.R. I- 3810, (sub nom. Scalera v. Lloyd’s of London) 253 N.R. 1, [2000] S.C.J. No. 26 (S.C.C.) — referred to Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada (2010), [2010] 2 S.C.R. 245, (sub nom. Progressive Homes Ltd. v. Lombard General Insurance Co.) [2010] I.L.R. I-5051, 406 N.R. 182, 92 C.L.R. (3d) 1, [2010] 10 W.W.R. 573, 2010 SCC 33, 2010 CarswellBC 2501, 2010 CarswellBC 2502, 89 C.C.L.I. (4th) 161, 73 B.L.R. (4th) 163, 9 B.C.L.R. (5th) 1, 323 D.L.R. (4th) 513, 293 B.C.A.C. 1, 496 W.A.C. 1, [2010] S.C.J. No. 33 (S.C.C.) — followed Quick v. MacKenzie (1995), 23 O.R. (3d) 117, [1995] I.L.R. 1-3231, 1995 Cars- wellOnt 4245 (Ont. Gen. Div.) — referred to Quick v. MacKenzie (1997), 1997 CarswellOnt 1410, 43 C.C.L.I. (2d) 262, (sub nom. Sheppard v. Co-operators General Insurance Co.) 33 O.R. (3d) 362, (sub nom. Sheppard v. Co-operators General Insurance Co.) [1997] I.L.R. I- 3437, (sub nom. Sheppard v. Co-operators General Insurance Co.) 99 O.A.C. 390, [1997] O.J. No. 1600 (Ont. C.A.) — distinguished

APPLICATION by insured for declaration that insurer was obligated to provide her with defence to counterclaims.

Thomas P. Connolly, for Applicant Pasquale Santini, for Respondent

Peter Annis J.: Introduction 1 This is an application for a declaration that The Dominion of Canada General Insurance Company (“Dominion”) is obligated to provide the applicant with a defence to counterclaims advanced against her in Court file No. 10-49924 at Ottawa. 2 Dominion denies any duty to defend because the facts alleged in the counterclaims do not fall within the coverage provided by the policy of insurance. In particular, it alleges that the applicable homeowners’ policy of insurance excludes coverage for the claims brought against the applicant. 272 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

3 The applicant also raised, but did not argue, a supplementary issue whether Dominion is entitled to control the defence, including choosing instructing counsel in defence to the counterclaim. As this issue was not followed up in argument, it is not considered in the reasons that follow. 4 I conclude that Dominion does not owe the applicant a duty to defend the counterclaims inasmuch as coverage is excluded by the wording in the home owners’ policy of the applicant. My reasons in support of this conclusion follow.

Facts 5 The applicant, Sophie Desormeaux (“Ms. Desormeaux”) lives in the Town of Hammond with her husband Roy Desormeaux and their two children Xavier and Zoe Desormeaux. 6 Dominion issued a Homeowner’s Policy of Insurance to Sophie and Roy Desormeaux for their property in the Town of Hammond. This policy of insurance provided coverage to the applicant in accordance with its terms and conditions as of September 16, 2009, the date of the alleged loss. 7 The mother of Roy Desormeaux, Margaret Desormeaux, provided daycare services for her grandchildren Xavier and Zoe on weekdays. On or about September 16, 2009 Xavier was injured in Margaret Desormeaux’s yard when, it is alleged, another child, Gabby Asselin, threw something that struck Xavier’s right eye. 8 The Desormeaux family comprised of Sophie, Roy, Xavier and Zoe commenced an action claiming damages arising from the bodily injury suffered by Xavier as against Margaret Desormeaux, Gabby Asselin and Gabby’s mother, Anita Asselin (the “defendants”). 9 The defendants filed counterclaims against Sophie Desormeaux for contribution and indemnity towards her son’s injuries. The defendants allege that Sophie Desormeaux was negligent in the supervision of a child, and at that time, Xavier was under her care. 10 Dominion denies that it has an obligation to defend the applicant against the counterclaims because coverage is excluded for obligations to pay claims for bodily injury to the named insured, the children of the named insured where the children are permanent residents of the same household, or any person under the age of 21 under the named insured’s care. Desormeaux v. Dominion of Canada General Insurance Co. Peter Annis J. 273

The Policy Provisions 11 The relevant provisions of the insured’s Homeowner’s Policy of In- surance include: Definition of “You” By the terms “you” and “your” used in this policy we mean the person(s) named as Insured on the Declaration Page, and if a permanent resident of the same household, his or her spouse, the children of either, relatives of either, any person under age 21 in their care. Coverage E - Personal Liability Coverage E applies separately, as follows: 1. Personal liability We will pay on your behalf all sums you become liable to pay as compensation for loss because of bodily injury or property damage. Defence If there is a suit against you, not otherwise excluded, and insurance is provided by Coverage E, we will defend you even if the suit is groundless, false or fraudulent. We reserve the right to investigate, negotiate and settle any claims or suit if we decide this is appropriate. Exclusions This policy does not apply to Under Coverage E(1) Personal Liability 1. Bodily injury to you, or any person residing in your household, other than residence employees

Issue 12 Whether coverage of the insured applicant is excluded by the wording of the Homeowner’s policy issued by Dominion?

Analysis Principles of Interpretation 13 There is no disagreement between the parties over the contents of the duty to defend; Progressive Homes Ltd. v. Lombard General Insurance Co. of Canada, [2010] 2 S.C.R. 245, [2010] S.C.J. No. 33 (S.C.C.) being the authority cited by both parties in this regard. In this regard see also Non-Marine Underwriters, Lloyd’s London v. Scalera, [2000] 1 S.C.R. 551, 2000 SCC 24 (S.C.C.). 274 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

14 I summarize these principles only as they relate to the interpretation of insurance contracts and exemption clauses as the narrow focus of this matter involves the interpretation of an exemption clause. • The focus of insurance policy interpretation should first and fore- most be on the language of the policy at issue. General principles of tort law are no substitute for the language of the policy. • 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. • It is axiomatic that the rules of construction are applied to resolve ambiguity; they do not operate to create ambiguity where none exists. • Where the language of the insurance policy is ambiguous the courts rely on general rules of contract construction: for example supportable interpretations that are consistent with the reasonable expectations of parties; avoidance of interpretations giving rise to unrealistic results or beyond the contemplation of parties when the policy was concluded; striving to ensure similar insurance policies are construed consistently. • However, in respect of the interpretation of exclusions from coverage, because the threshold for the duty to defend is only the possibility of coverage, the insurer must show that exclusion clearly and unambiguously excludes coverage.

Quick v. McKenzie and Lumbermens Mutual 15 There was considerable debate concerning the application of the On- tario Court of Appeal decision [Quick v. MacKenzie, 1997 CarswellOnt 1410 (Ont. C.A.)] in Quick v. MacKenzie (1995), 23 O.R. (3d) 117 (Ont. Gen. Div.), CanLII 7184 (hereinafter “Quick” or the “Quick decision”). Both parties argued that it supported their position. 16 The Quicks were insured by a homeowner’s policy issued by Lum- bermens Mutual Casualty Company. Laura Quick, the six-year-old daughter of the insureds was playing with other children when a dog be- longing to the defendants bit her. An action was commenced by the Quicks against the owners of the dog. 17 As in this matter, the owners of the dog advanced a counterclaim against Laura Quick’s parents alleging that they failed to supervise her Desormeaux v. Dominion of Canada General Insurance Co. Peter Annis J. 275

children (and in vicarious liability for the alleged failure to supervise by their nanny). 18 The Quicks made an application for coverage under their homeowner’s policy. Lumbermens refused to defend them based upon the exclusionary clause in their policy, which the Court of Appeal upheld, overturning the decision of the Trial Judge. 19 The exclusionary clause in Quick reads as follows: You are not insured for claims made against you arising from: bodily injury to you or any person residing in your household other than a residence employee. 20 Dominion submits that the Quick decision should be applied to this case. It claims that there is no meaningful distinction between the alleged facts of the two situations, or the language of the coverage and exclusion clauses. 21 Both parties acknowledged that the application of an exclusion clause depends upon its wording. This was clearly demonstrated in the Quick decision inasmuch as the case of Quick v. MacKenzie (1997), 33 O.R. (3d) 362 (Ont. C.A.), CanLII 2230 considered and reported together with Quick and concerning similar facts, rejected the exclusionary clause employed because it was “almost meaninglessly broad”. 22 Catzman J.A., writing for the Court of Appeal summarized his conclusions in Quick as follows: ... the language of this exclusion clause (“claims made against you arising from... bodily injury to you or to any person residing in your household other than a residence employee”) is precisely focused. The claim against the Quicks is one “arising from” the bodily injury to Laura within the meaning of this clause. 23 I disagree with the respondent that the Quick decision is of much utility in upholding the exclusion clause used by Dominion. The specific words (“claim arising from”), focused on extensively in various passages by the Court of Appeal appear nowhere in Dominion’s exclusionary clause or in its coverage clause. 24 Instead, Dominion employed language and indeed a structure that is markedly different from that used in the Quick decision. While both exclusionary clauses share identical end-of-clause wording (“bodily injury to you, or any person residing in your household other than residence employees”), as shall be seen below, the introductory words of the clauses are entirely different. 276 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

25 Were the Quick decision to have application, I think a better case could be made by the applicant. She argued that Dominion’s exclusion clause is ambiguous because it “does not refer to claims made against you for bodily injury nor to claims arising from bodily injury”. 26 However, because I find the wording, and indeed design of Domin- ion’s exculpatory clause so dissimilar to that in Quick, I do not find the case to be of great assistance to either party in resolving this matter.

Reference to the Coverage Clause 27 I turn therefore to the crux of the respondent’s submission which di- rects the court to consider the exclusion clause in light of the initial grant of coverage. I consider this approach to be different from that in Quick, where the exculpatory clause is what I would describe as a “stand alone” clause in the sense that the exemption is largely self-contained in the clause. 28 To better analyze Dominion’s submission, the relevant provisions of the coverage and exclusion sections are restated together with my emphasis added to the salient wording in both provisions: COVERAGE Coverage E applies separately, as follows: 1. Personal liability We will pay on your behalf all sums you become liable to pay as compensation for loss because of bodily injury or property damage EXCLUSION This policy does not apply to Under Coverage E(1) Personal Liability 1. Bodily injury to you, or any person residing in your household, other than residence employees 29 Dominion argues that “the exclusion clearly applies to compensation for which the insured becomes liable to pay for bodily injury to an insured person, which would encompass both ‘claims made against’ the insured for bodily injury and ‘claims arising from’ bodily injury”. 30 By referring specifically to “Coverage E(1) Personal Liability”, I accept that the linkage between the exclusion provision and the coverage provision is clearly described, bearing in mind that in any event, the court is required to read the policy as a whole when interpreting provisions of an insurance policy. Desormeaux v. Dominion of Canada General Insurance Co. Peter Annis J. 277

31 I also agree that in framing coverage based on “liability to pay as compensation for loss for bodily injury”, the reference in the exemption to “bodily injury” is sufficiently focused in the sense that it encompasses “claims arising from” bodily injury. 32 In other words, I do not interpret the Quick decision as prescribing a formulaic requirement to speak to “claims arising” (i.e. not limiting other expressions of how losses may arise from bodily injury) in exculpatory clauses. I also do not read the decision as requiring that an exemption clause should be self-contained to be effective.

Policy Not Applying 33 The second issue concerning Dominion’s exculpatory clause is whether the introductory words “This policy does not apply...” conveys unambiguously that no coverage is provided for losses involving bodily injury. 34 I am satisfied that stating that a “policy” does not apply is tantamount to saying that no coverage under the policy will be provided. While at first blush the phrasing appears overly large in scope, I cannot think of any other interpretation to give the wording in the context of an exclusionary clause which might render it ambiguous.

Direct Claims against the Insured 35 As a final note, the applicant argued that the policy was intended to prevent Xavier from suing his mother directly; but would not exclude a duty to defend when the claim was made indirectly, by a third party via counterclaim. 36 I cannot make out such a distinction from the wording of the Domin- ion exclusion. The liability coverage is very wide and as pointed out, the exclusion is framed with reference to the coverage clause. If no exemption applies for indirect claims involving bodily loss to one of the insureds, there is no basis to conclude that direct claims by Xavier against his mother would be otherwise excluded from coverage. 37 In summary, I conclude that the Dominion exclusionary clause clearly indicates that the policy by which the insurer provides personal liability coverage for sums it would otherwise be liable to pay on behalf of the insured as compensation for loss because of bodily injury without limitation, will not apply to bodily injury occurring to the insured (which by the extended definition of “you” includes Xavier). 278 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

Costs 38 As is the practice in Ottawa, the parties provided sealed envelopes containing their Cost outlines to be considered after disposition of the substantive decision. 39 I award the respondent partial indemnity costs in the amount claimed. They are less than the amounts requested by the applicant, while the hours worked and tariffs proposed by the respondent are reasonable in the circumstances.

Disposition 40 The application is dismissed with costs payable on a partial indemnity basis to the respondent in the all in amount of $7,959.45, inclusive of HST. Application dismissed. Brandiferri v. Wawanesa Mutual Insurance Co. 279

[Indexed as: Brandiferri v. Wawanesa Mutual Insurance Co.] Salvatore Brandiferri and Linda Brandiferri and The Wawanesa Mutual Insurance Company and Strone Construction Ontario Superior Court of Justice Docket: 60185/01 2012 ONSC 2206 P.D. Lauwers J. Heard: May 24-25, 30-31, 2011; June 3, 6-8, 14-15, 23-24, 2011 Judgment: June 22, 2012* Insurance –––– Claims — Appraisal –––– Fire occurred in garage of insureds and possessions in home suffered smoke damage — Insureds claimed remediation work done on home was deficient and that insurer was responsible for work of builder — Policy had single inclusive limit of $564,000 — Insureds brought actions for recovery of loss under policy against insurer and remediator, insurer brought counterclaim for fraud — Action allowed, counterclaim dismissed — Insureds entitled to additional amounts for remediation, contents of home, and living allowance — Failure to get appraisal as set out in s. 128 of Insurance Act was not fatal to claim — Insurer waived requirement for appraisal. Insurance –––– Claims — Payment of insurance proceeds — Replacement or repair of loss — Fire insurance — Unsatisfactory repair –––– Fire occurred in garage of insureds and possessions in home suffered smoke damage — Insureds claimed remediation work done on home was deficient and that insurer was responsible for work of builder — Policy had single inclusive limit of $564,000 — Insureds brought actions for recovery of loss under policy against insurer and remediator, insurer brought counterclaim for fraud — Action allowed, counterclaim dismissed — Insureds entitled to additional amounts for remediation, contents of home, and living allowance — Builder admitted work had not been completed — Insured took active role in remediation and often dis- agreed with insurer and builder, but many concerns of insured were legitimate — Installation of brickwork caused home to be susceptible to basement flooding — Properly refinishing floors was part of remediation, but retiling was not required — Work done on heat recovery ventilator was reasonable and compensable — Work to make house habitable was compensable, but certain extras

*A corrigendum issued by the Court on June 28, 2012 has been incorporated herein. 280 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

such as installation of gas fireplace were extras and not compensable — Cost of driveway brickwork replacement was not recoverable as chemical wash could likely clean bricks. Insurance –––– Contracts of insurance — Statutory conditions — General principles –––– Rebuilding requirements — Fire occurred in garage of insureds and possessions in home suffered smoke damage — Insureds claimed remediation work done on home was deficient and that insurer was responsible for work of builder — Policy had single inclusive limit of $564,000 — Insureds brought actions for recovery of loss under policy against insurer and remediator, insurer brought counterclaim for fraud — Action allowed, counterclaim dismissed — Insureds entitled to additional amounts for remediation, contents of home, and living allowance — Insurer did not elect to rebuild as per s. 13 of Act, in order to avoid requirement to rebuild completely. Insurance –––– Contracts of insurance — General principles –––– Parties — Fire occurred in garage of insureds and possessions in home suffered smoke damage — Insureds claimed remediation work done on home was deficient and that insurer was responsible for work of builder — Policy had single inclusive limit of $564,000 — Insureds brought actions for recovery of loss under policy against insurer and remediator, insurer brought counterclaim for fraud — Action allowed, counterclaim dismissed — Insureds entitled to additional amounts for remediation, contents of home, and living allowance — Contract for reconstruction was with builder and insured and not insurer, although insurer controlled payment — However, insurer was agent of insured for purposes of payment — Despite insureds’ instruction not to make final payment, insurer did so, breaching its obligation as agent for insured, and improperly expended $149,542.01 that would otherwise have been available to remediate builder’s work — In event that insureds were unable to make full recovery from builder for any amount owing by builder, insurer was obliged to make up any deficiency in payment up to $149,542.01, and amounts paid would not be new money and would not count against insurance policy’s single inclusive limit — Insurer and builder were responsible for respective shares of extra remediation work, to be agreed upon by them — Builder could not demand set-off for storage after it was reasonable to return goods — No contract regarding goods existed between insureds and builder, rather agreement was between builder and insurer. Insurance –––– Claims — Payment of insurance proceeds — Recovery of expenses –––– Living expenses. Personal property –––– Bailment and warehousing — Nature and formation of bailment relationship — Necessity for bailee’s possession or control –––– Fire occurred in garage of insureds and possessions in home suffered smoke damage — Insureds claimed remediation work done on home was deficient and that insurer was responsible for work of builder — Policy had single inclusive Brandiferri v. Wawanesa Mutual Insurance Co. 281 limit of $564,000 — Insureds brought actions for recovery of loss under policy against insurer and remediator, insurer brought counterclaim for fraud — Action allowed, counterclaim dismissed — Insureds entitled to additional amounts for remediation, contents of home, and living allowance — Insureds were satisfied with amount insurer proposed for certain goods in garage — Some goods including clothing and carpets were sent for cleaning, and some items were destroyed at fire in particular cleaner — Insurer was bailee of insured’s goods — It was not open to insurer to simply abandon the goods to cleaners, to force insureds to pay charges levied by contractors, unilaterally alter terms of bailment — Insurer ordered to compensate insureds for items sent to cleaner whose return was rejected, and for items that were sent to builder that were not properly restored or were damaged — Builder delivered certain items on eve of trial, making valuation difficult — Appraisal of goods ordered — Insurer responsible for any charges levied by builder for its restoration and storage of goods, and moving costs for their return. Insurance –––– Claims — Fraud and misrepresentation — In issuance of claim — General principles –––– Fire occurred in garage of insureds and possessions in home suffered smoke damage — Insureds claimed remediation work done on home was deficient and that insurer was responsible for work of builder — Policy had single inclusive limit of $564,000 — Insureds brought actions for recovery of loss under policy against insurer and remediator, insurer brought counterclaim for fraud — Action allowed, counterclaim dismissed — Insureds entitled to additional amounts for remediation, contents of home, and living allowance — Insureds did not engage in fraud — Law in Ontario is that it is not automatically fraud for plaintiff to put in claim that might be seen as exaggerated — Schedules of loss were prepared in circumstances of complete transparency, as items were available for inspection — Claim that certain goods were destroyed was not fraudulent, as goods may have been unsalvageable and all parties knew goods were in possession of builder — Claim of fraud was late breaking opportunity and was not originally pleaded. Remedies –––– Damages — Exemplary, punitive and aggravated damages — Grounds for awarding exemplary, punitive and aggravated damages — Miscellaneous –––– Insurance cases — Fire occurred in garage of insureds and possessions in home suffered smoke damage — Insureds claimed remediation work done on home was deficient and that insurer was responsible for work of builder — Policy had single inclusive limit of $564,000 — Insureds brought actions for recovery of loss under policy against insurer and remediator, insurer brought counterclaim for fraud — Action allowed, counterclaim dismissed — Insureds entitled to additional amounts for remediation, contents of home, and living allowance — Punitive damages awarded in amount of $100,000 — Allegations of fraud were high-stakes tactic designed to intimidate 282 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

insured — Insurer was repeat offender who engaged in high-handed conduct — No grounds to award aggravated damages. Cases considered by P.D. Lauwers J.: Bowen v. Guardian Insurance Co. of Canada (1992), 10 C.C.L.I. (2d) 171, 1992 CarswellBC 694, [1992] B.C.J. No. 901 (B.C. S.C.) — considered Brandiferri v. Wawanesa Mutual Insurance Co. (2011), 2011 ONSC 3200, 2011 CarswellOnt 5088, 1 C.C.L.I. (5th) 298, 16 C.P.C. (7th) 169, [2011] O.J. No. 2723 (Ont. S.C.J.) — referred to Brandiferri v. Wawanesa Mutual Insurance Co. (2011), 2011 ONSC 3464, 2011 CarswellOnt 5089, 1 C.C.L.I. (5th) 316, 16 C.P.C. (7th) 187, [2011] O.J. No. 2724 (Ont. S.C.J.) — referred to C. (R.) v. McDougall (2008), [2008] 11 W.W.R. 414, 83 B.C.L.R. (4th) 1, (sub nom. F.H. v. McDougall) [2008] 3 S.C.R. 41, 2008 CarswellBC 2041, 2008 CarswellBC 2042, 2008 SCC 53, 60 C.C.L.T. (3d) 1, (sub nom. H. (F.) v. McDougall) 297 D.L.R. (4th) 193, 61 C.P.C. (6th) 1, 61 C.R. (6th) 1, (sub nom. F.H. v. McDougall) 380 N.R. 82, [2008] 3 S.C.R. 53, (sub nom. F.H. v. McDougall) 439 W.A.C. 74, (sub nom. F.H. v. McDougall) 260 B.C.A.C. 74, [2008] S.C.J. No. 54, [2008] A.C.S. No. 54 (S.C.C.) — considered Campbell v. Waterloo Mutual Insurance Co. (February 14, 1983), Doc. 12034/80, [1983] O.J. No. 910 (Ont. Co. Ct.) — considered Cr´edit foncier v. Halifax Insurance Co. (1985), 1985 CarswellNS 145, 155 A.P.R. 142, 67 N.S.R. (2d) 142 (N.S. C.A.) — considered Daver v. Chubb Insurance Co. of Canada (1996), 1996 CarswellOnt 3383, 37 C.C.L.I. (2d) 236, [1996] O.J. No. 3164 (Ont. C.A.) — referred to Dorset Co. v. Royal Insurance Canada (1999), 1999 NWTSC 16, 1999 Car- swellNWT 119, 17 C.C.L.I. (3d) 21, [1999] N.W.T.J. No. 130 (N.W.T. S.C.) — considered Fidler v. Sun Life Assurance Co. of Canada (2006), 2006 SCC 30, 2006 Car- swellBC 1596, 2006 CarswellBC 1597, (sub nom. Sun Life Assurance Co. of Canada v. Fidler) [2006] I.L.R. 1-4521, [2006] 2 S.C.R. 3, 350 N.R. 40, 227 B.C.A.C. 39, 374 W.A.C. 39, 39 C.C.L.I. (4th) 1, (sub nom. Sun Life Assurance Company of Canada v. Fidler) 2007 C.L.L.C. 210-015, [2006] 8 W.W.R. 1, 2006 C.E.B. & P.G.R. 8202, 57 B.C.L.R. (4th) 1, 53 C.C.E.L. (3d) 1, (sub nom. Sun Life Assurance Co. of Canada v. Fidler) 271 D.L.R. (4th) 1, [2006] R.R.A. 525, [2006] S.C.J. No. 30, EYB 2006-107056 (S.C.C.) — considered Fotinos v. Pitts Insurance Co. (1981), [1981] I.L.R. 1-1377, 1981 CarswellOnt 1314, [1981] O.J. No. 224 (Ont. H.C.) — referred to Gebhard Hoelzler Construction Ltd. v. Seidler (2006), 51 C.L.R. (3d) 157, 55 B.C.L.R. (4th) 352, 2006 BCSC 763, 2006 CarswellBC 1170, [2006] 8 W.W.R. 537, [2006] B.C.J. No. 1090 (B.C. S.C.) — considered Gebhard Hoelzler Construction Ltd. v. Seidler (2008), 2008 BCCA 77, [2008] 5 W.W.R. 614, 2008 CarswellBC 320, [2008] I.L.R. I-4681, 75 B.C.L.R. (4th) Brandiferri v. Wawanesa Mutual Insurance Co. 283

203, 56 C.P.C. (6th) 229, 68 C.L.R. (3d) 207, [2008] B.C.J. No. 283 (B.C. C.A.) — referred to Greer v. Co-operators General Insurance Co. (1999), [2000] I.L.R. I-3785, 1999 CarswellOnt 2570, 13 C.C.L.I. (3d) 255, [1999] O.J. No. 3118 (Ont. S.C.J.) — followed Hanes v. Wawanesa Mutual Insurance Co. (1963), [1963] 1 C.C.C. 321, 36 D.L.R. (2d) 718, 1963 CarswellOnt 61, [1963] S.C.R. 154, [1963] S.C.J. No. 8 (S.C.C.) — followed Holland v. Marsh & McLennan Ltd. (1978), 1978 CarswellNS 377, 45 A.P.R. 622, 29 N.S.R. (2d) 622, [1978] N.S.J. No. 652 (N.S. T.D.) — considered Montini Foods Ltd. (Trustee of) v. General Accident Insurance Co. of Canada (1997), 42 C.C.L.I. (2d) 52, 1997 CarswellOnt 919, [1997] O.J. No. 1333 (Ont. Gen. Div.) — referred to N & H Contracting Ltd. v. Gordon (1993), 74 B.C.L.R. (2d) 373, 6 C.L.R. (2d) 68, (sub nom. N & H Contracting Ltd. v. Royal Insurance Co.) [1993] I.L.R. 1-2928, [1993] 3 W.W.R. 674, (sub nom. N & H Contracting Ltd. v. Royal Insurance Co.) 22 B.C.A.C. 10, (sub nom. N & H Contracting Ltd. v. Royal Insurance Co.) 38 W.A.C. 10, 11 C.C.L.I. (2d) 303, 1993 CarswellBC 5, [1993] B.C.J. No. 45 (B.C. C.A.) — considered North West Electric Co. v. Switzerland General Insurance Co. (1976), [1976] 6 W.W.R. 446, [1977] I.L.R. 1-834, 1976 CarswellSask 87, [1976] S.J. No. 301 (Sask. Q.B.) — considered PCL Constructors Westcoast Inc. v. Norex Civil Contractors Inc. (2009), 76 C.L.R. (3d) 184, 2009 BCSC 95, 2009 CarswellBC 179, [2009] 4 C.T.C. 68, [2009] G.S.T.C. 22, [2009] B.C.J. No. 142 (B.C. S.C.) — considered Pereira v. Hamilton Township Farmers’ Mutual Fire Insurance Co. (2006), [2006] I.L.R. I-4499, 267 D.L.R. (4th) 690, 2006 CarswellOnt 2279, 36 C.C.L.I. (4th) 11, (sub nom. 1018202 Ontario Ltd. v. Hamilton Township Farmers’ Mutual Fire Insurance Co.) 209 O.A.C. 127, [2006] O.J. No. 1508 (Ont. C.A.) — considered Plester v. Wawanesa Mutual Insurance Co. (2006), 213 O.A.C. 241, 39 C.C.L.I. (4th) 44, 2006 CarswellOnt 3241, [2006] I.L.R. I-4539, 269 D.L.R. (4th) 624, [2006] O.J. No. 2139 (Ont. C.A.) — considered Rodriguez v. Allstate Insurance Co. (1994), 1994 CarswellOnt 793, 24 C.C.L.I. (2d) 146, [1995] I.L.R. 1-3126, [1994] O.J. No. 1686 (Ont. Gen. Div.) — considered Sagl v. Cosburn, Griffiths & Brandham Insurance Brokers Ltd. (2009), 72 C.C.L.I. (4th) 193, [2009] I.L.R. I-4839, 2009 ONCA 388, 2009 Carswell- Ont 2440, 249 O.A.C. 234, [2009] O.J. No. 1879 (Ont. C.A.) — referred to Seed v. ING Halifax Insurance (2002), 38 C.C.L.I. (3d) 257, [2002] I.L.R. I- 4099, 2002 CarswellOnt 1663, [2002] O.J. No. 1976 (Ont. S.C.J.) — referred to 284 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

Voloudakis v. Allstate Insurance Co. of Canada (1998), 1998 CarswellOnt 431, [1999] I.L.R. I-3639, [1998] O.J. No. 354 (Ont. Gen. Div.) — referred to Whiten v. Pilot Insurance Co. (2002), 156 O.A.C. 201, 35 C.C.L.I. (3d) 1, [2002] 1 S.C.R. 595, 2002 SCC 18, 2002 CarswellOnt 537, 2002 Carswell- Ont 538, 283 N.R. 1, 20 B.L.R. (3d) 165, [2002] I.L.R. I-4048, 209 D.L.R. (4th) 257, [2002] S.C.J. No. 19, REJB 2002-28036 (S.C.C.) — considered 702535 Ontario Inc. v. Non-Marine Underwriters, Lloyd’s London, England (2000), 2000 CarswellOnt 904, (sub nom. 702535 Ontario Inc. v. Non- Marine Underwriters, Lloyd’s, London) 130 O.A.C. 373, (sub nom. 702535 Ontario Inc. v. Lloyd’s London, Non-Marine Underwriters) 184 D.L.R. (4th) 687, (sub nom. 702535 Ontario Inc. v. Lloyd’s London Non-Marine Under- writers) [2000] I.L.R. I-3826, [2000] O.J. No. 866 (Ont. C.A.) — considered Statutes considered: Insurance Act, R.S.O. 1990, c. I.8 Generally — referred to s. 128(1) — considered s. 128(2) — considered s. 128(3) — considered s. 129 — considered s. 131 — considered Rules considered: Rules of Civil Procedure, R.R.O. 1990, Reg. 194 R. 53.03 — referred to Regulations considered: Building Code Act, 1992, S.O. 1992, c. 23 Building Code, O. Reg. 350/06 Generally — referred to

ACTION by plaintiffs for recovery under contract of insurance.

A. Kwinter, J. Singer, for Plaintiffs B. Jenkins, for Defendant, Strone Construction M. Forget, A. Dix, for Defendant, Wawanesa Mutual Insurance Company

P.D. Lauwers J.:

1 On August 8, 2000, there was a fire at the plaintiffs’ home at 34 Granite Street, in Woodbridge, Ontario. The garage and its contents were destroyed and smoke penetrated the house. In one action the plaintiffs claim that Strone Construction is liable for the deficient remedial con- Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 285

struction work on their house; in the other action the plaintiffs claim that their insurer, the Wawanesa Mutual Insurance Company is responsible for Strone’s poor work. They also claim for the loss of personal property and for additional living expenses (“ALE”) that they incurred. The actions were tried together without a jury. 2 The plaintiffs’ homeowners’ insurance policy with Wawanesa provided them with coverage for the house, personal property, and additional living expenses. The policy provided “guaranteed replacement cost” coverage for the house and the contents. The policy had a “single inclusive limit” of $564,000.00. Wawanesa asserts that it paid the following amounts: building $377,755.57, contents $46,660.85, and ALE $54,613.00 for a total of $479,029.42. The plaintiffs seek additional payments under each of these heads, and punitive damages. 3 The onus is on the plaintiffs to establish their loss: Sagl v. Cosburn, Griffiths & Brandham Insurance Brokers Ltd., [2009] O.J. No. 1879, 2009 ONCA 388 (Ont. C.A.) at para 75. For the reasons that follow, I hold that the plaintiffs have met this onus and are entitled to judgment under all of these heads, but not in the amounts claimed.

Background facts 4 The Brandiferri residence was in excellent condition. The fire was in the attached garage at the front of the house. The dynamic of a fire is that super heated air expands and moves from the location of the fire. It trav- els through the accessible open spaces in the building, carrying along with it soot and other products of combustion that are deposited on the surfaces where the smoke flows. There was no apparent fire damage to the interior of the house but there was extensive smoke damage. In order to remove the stink of smoke the contaminated material must be replaced. Some surfaces can be painted over using a fixative after being cleaned. The smoke damage turned out to be much more extensive than the Brandiferris, Wawanesa, or Strone understood at the outset. 5 Wawanesa appointed an experienced employee, Al Benzie, as adjuster. He arranged for Bachly Construction to attend on the scene and secure the site. Urban Clean, a Bachly-related company, arrived and removed the “soft” furniture, the clothing and the linens. Some of the soft furniture was cleaned and returned to the Brandiferris. The clothing and linens were sent by Urban Clean to Crest Cleaners for cleaning. This material was later destroyed in a fire at Crest Cleaners in December 2002. 286 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

6 Strone removed the “hard” furniture in the house, cleaned it and stored it in a warehouse. It was returned the week before the trial and some of it was damaged. Strone retained it until then, at least in part, because the Brandiferris did not pay warehousing fees after Wawanesa stopped paying them. 7 As is its custom, Wawanesa arranged for two contractors to attend at the house to provide estimates for the costs of repair. They were “insurance restorators,” which is a specialized restoration service for fire damage. Both had the status of “preferred contractors” with Wawanesa. 8 Bachly Construction provided an initial estimate to carry out the repairs for $44,778.00 on August 15, 2000, and a revised estimate of $68,814.59 on Tuesday, September 12, 2000. 9 Strone Construction provided an estimate of $82,328.18 on Septem- ber 11, 2000. Mr. Brandiferri selected Strone Construction as the contractor because its estimator Tony Diceglie spoke Italian. Strone provided a revised estimate on January 9, 2001, in the amount of $249,431.11, about three times larger than its original estimate. On June 7, 2001, Strone provided another revised estimate of $352,454.13. The trajectory of the estimates shows that there was much more damage to the house than anyone originally thought. 10 The Brandiferris were out of the house from the date of the fire until February 27, 2005. Occupancy was prevented in part by various orders to comply issued by the City of Vaughan, which ultimately inspected the house, lifted the orders to comply, and issued an occupancy permit on February 24-25, 2005. 11 The facts in this case oblige the court to determine the following issues: 1. Is the absence of an appraisal under the Insurance Act R.S.O 1990, c.I.8, as amended, fatal to the plaintiffs’ claim? 2. Are the plaintiffs entitled to compensation because the house was not completely or acceptably restored? 3. Are the plaintiffs entitled to compensation for additional living expenses? 4. Are the plaintiffs entitled to compensation for missing, damaged or destroyed items of personal property? 5. Did the plaintiffs commit fraud in completing the proofs of loss? 6. Should the plaintiffs receive punitive damages? Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 287

Issue 1: Is the Absence of an Appraisal Fatal to the Plaintiffs’ Claim? 12 Wawanesa takes the position that an appraisal under section 128 of the Insurance Act is a condition precedent to an action on an insurance policy: 128. (1) This section applies to a contract containing a condition, statutory or otherwise, providing for an appraisal to determine specified matters in the event of a disagreement between the insured and the insurer. Appraisers, appointment (2) The insured and the insurer shall each appoint an appraiser, and the two appraisers so appointed shall appoint an umpire. Appraisers, duties (3) The appraisers shall determine the matters in disagreement and, if they fail to agree, they shall submit their differences to the umpire, and the finding in writing of any two determines the matters. 13 Wawanesa submits that the requirement for an appraisal has not been waived in accordance with section 131 of the Insurance Act. Mr. Forget submits: “that as the Brandiferris have brought this action without determining the amount at issue by way of appraisal, there cannot [be] recovery under [the] policy.” This, Mr. Forget asserts, is the effect of Statutory Condition 11, which provides: In the event of disagreement as to the value of the property insured, the property saved or the amount of the loss, those questions shall be determined by appraisal as provided under the Insurance Act before there can be any recovery under this contract whether the right to recover on the contract is disputed or not, and independently of all other questions. There shall be no right to an appraisal until a specific demand therefore is made in writing and until after proof of loss has been delivered. 14 Mr. Forget submits that, by including Statutory Condition 11 in the insurance contract, the parties agreed: ...to give effect to a process to encourage a quick settlement of the loss and to facilitate the use of the expertise of an appraiser. The parties agree before there can be a recovery under the contract whether the right to recover on the contract is disputed or not, and independently of all other questions to have the value of the insured property or properties saved or amount of loss determined by an appraisal. 288 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

15 Wawanesa relies on Saskatchewan Government Insurance v. Nipawin (Town), [1999] I.L.R. 1-3651 (B.C.C.A.), Seed v. ING Halifax Insurance, [2002] O.J. No. 1976 (Ont. S.C.J.), and Greer v. Co-operators General Insurance Co., [1999] O.J. No. 3118 (Ont. S.C.J.) at para. 8. 16 On June 5, 2001, Mr. Benzie had a conversation with the broker. Mr Benzie raised the prospect of an appraisal as Wawanesa’s “likely option.” Shortly afterwards Wawanesa made an all-in offer to the Brandiferris communicated by the broker. On July 3, 2001, the broker called Mr. Benzie and advised him that the Brandiferris had rejected the offer and Mr. Benzie noted that he responded: “O.K., We will go the appraisal route.” 17 On July 5, 2001, Alistair Riswick notified Mr. Benzie that he had been retained by the Brandiferris to pursue the claim. On July 13, 2001, Mr. Benzie wrote to Mr. Riswick and indicated that if matters could not be resolved Wawanesa wanted “to have the entire matter to Appraisal, as provided for under The Insurance Act (sic).” 18 Mr. Riswick confirmed agreement with the process of appraisal by fax letter dated August 23, 2001. On August 29, 2001, he advised Mr. Benzie that the Brandiferris had appointed Ron Koerth of Walters Foren- sic Engineering to be their appraiser. 19 Mr. Joel Kuchar assumed carriage of the file from Mr. Riswick and advised Mr. Benzie by letter dated October 17, 2001, that in his view the issues were largely about the quality of the reconstruction. He stated, “In the circumstances, I am concerned that proceeding by way of Appraisal at this point might not be the best way to address the issue of quality repair work, as opposed to value.” He invited further discussions but they were fruitless. 20 The action then proceeded in the way of ordinary civil litigation and the Brandiferris passed the Trial Record on October 23, 2003. 21 On March 23, 2004, after his discovery examination of Mr. Phin, Mr. Kuchar wrote to Mr. Forget and proposed an appraisal: “This dispute now once again appears to have been reduced to one of valuation of loss, and an appraisal would now once again appear to be the most sensible way of proceeding.” He proposed postponing the examination for discovery of the plaintiffs so that the appraisal process could resume. 22 Mr. Forget responded by letter dated March 24, 2004, insisting that the plaintiffs’ discoveries proceed, and said: “In any event, it [Wawanesa] takes the position that your client is not entitled [to] an ap- Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 289

praisal.” Mr. Kuchar wrote back on April 19, 2004, requesting reconsid- eration, without success. 23 In light of the correspondence I find it to be plain that Wawanesa, through its counsel Mr. Forget, waived its right to insist on an appraisal, in writing, and therefore cannot now insist that it is a condition precedent to the plaintiffs’ right to recovery in this action.

Issue 2: The House 24 The plaintiffs seek $178,093.74 in compensation from Wawanesa and from Strone for the fact that the house was not completely or acceptably restored. They say this is what it would cost to put things right, relying on an estimate prepared by Chris Jones of ProCare Restoration. As per ProCare estimate of April 2004 $172,189.62 For basement ceramic tile $ 19,850.05 Total $152,339.57 As per Strone Estimate for driveway interlock $ 25,754.17 Total $178,093.74 25 The Brandiferris also seek to recover for the cost of installation of a heat recovery ventilator system and some amounts for partial remediation carried out by ProCare. I address those claims below. 26 The factual question is whether the home was completely and acceptably repaired. The legal question is which of Wawanesa or Strone are responsible for any incompleteness or deficiencies in the quality of the work done. I address the factual question first.

Was the Brandiferri Home Completely and Acceptably Repaired? 27 Strone concedes that the repairs to the house were not completed and that there were deficiencies. Mr. Jenkins made the following submissions on Strone’s behalf: Stone has never taken the position in this lawsuit that either: (a), it finished the job or (b), that the work was satisfactory. That’s never been the position. The only issue is what’s the value of the work to be finished and whether all or a portion of the brick work has to be replaced. 28 Mr. Phin is a claims manager with Wawanesa Insurance. He was Mr. Benzie’s superior and occasionally substituted for him in the adjustment of the Brandiferri claim - Mr. Benzie is long retired and did not testify. In 290 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

cross-examination Mr. Phin admitted that: “as of the time that Strone stopped working on this project, this house was nowhere near its pre-fire condition.” 29 Wawanesa blames Mr. Brandiferri for the unfortunate outcome, at least in part, because he was unreasonable; Mr. Phin complained that “he was standing behind them at every step of the way, and he was con- stantly asking for more, more and more things to be addressed.” Wawanesa submits that: ...the Brandiferris were involved in every step of the repair. They met with sub-trades; they monitored the work; they criticized the work; they stopped the work; they demanded more work; they demanded the removal of Tony on the project; they demanded and agreed to extras; they had other contractors do some of the work; they kicked Strone off the site and authorized them to return; and they even directed Wawanesa not to pay Strone in January 2001... These factual assertions are all true. 30 In cross-examination, however, Mr. Phin acknowledged the legitimacy of many of Mr. Brandiferri’s complaints. He testified, for example: Q. And if somebody is covering smoky insulation, and the homeowner believes that if it’s covered, it’s going to still smell from smoke, is he entitled to yell and scream and call Mr. Benzie or the adjuster? A. Of — of course he is. 31 In my view it was entirely appropriate for the Brandiferris to monitor the work, and, where it was incomplete, to demand more work; it was entirely appropriate for them to demand the correction of deficient work. For the most part it was Mr. Brandiferri’s doggedness that identified ar- eas of the house that needed remediation, which led to the much higher estimates from Strone that Wawanesa covered. In general terms Mr. Benzie, Wawanesa’s adjuster, was sympathetic to the Brandiferris and approved the changes to Strone’s scope of work as necessary, although he eventually balked, especially regarding repairs that he saw as extras. 32 The adjuster’s notes are replete with notes on disputes with the Brandiferris about certain items such as window replacement, whether the entire roof should be re-shingled or only the part that was burnt, whether cabinets needed to be replaced, and so on. On a number of occasions Mr. Benzie gave in to the Brandiferris and on other occasions he did not. I see this as typical of the to-and-fro that would occur in any reconstruction project. Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 291

The Brickwork 33 A major element of the deficiency is the brickwork, which Mr. Phin admitted in cross-examination was deficient: Q. That’s something that doesn’t quite put the house back? A. It’s a cosmetic disaster, yes... Q. And you wouldn’t want to patch that job, would you? A. No..., it should be done properly. 34 The brickwork was done by Medi Group Incorporated as a subcon- tractor to Strone. According to the engineering report prepared by Michael Picco of Picco Engineering, Medi Group Incorporated did not install the parging below the brick line on the foundation, but this assertion is mistaken, since the parging is identified in a Wawanesa deficiency list dated March 20, 2001. 35 The most comprehensive critique of the brickwork is found in the engineering report prepared for Strone by Barry P. Kozluk, a professional engineer with Rochon Engineering. His report, dated December 6, 2001, noted that the brick veneer on the entire dwelling was removed and replaced over the winter of 2000-2001. This report notes that the parging was done in conjunction with reinstallation of the brick veneer. Mr. Kozluk’s report noted “numerous deficiencies”: 1. Excessive thickness in both horizontal and vertical mortar joints in the southwest quoin of the garage, along the garage west elevation, along the west elevation of the main dwelling adjacent to the garage, in the soldier course above the first floor windows along the west and north elevations and on the north elevation on either side of the patio door; 2. The mortar joints at the second level elevation along the east side of the dwelling, adjacent to the northeast corner, were not raked out to produce consistent concave joints that matched the remaining mortar joints along this elevation; 3. The southeast quoin of the attached garage was not constructed square; 4. A lightened colour in the mortar joints existed in the vicinity of the southeast quoin on the mail dwelling, along the west elevation of the dwelling and along the north elevation of the dwelling; 5. Missing weep holes at the brick ledge along the east elevation and overtop of the basement windows in various locations; 292 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

6. Covered up weep holes along the north elevation where an abut- ting brick pacing stone walkway was installed at the exterior grade level; 7. The parging on the exterior face of the foundation walls was applied overtop of the bottom course of brick veneer on all elevations, as well as, the cement parging was installed up to 15 mm thick which eliminated the required brick overhang along the brick ledge; and, 8. Mortar deposits on the face of the brick veneer along the east elevation of the garage, isolated locations along the east elevation of the main dwelling, along the west elevation of the garage and main dwelling and along the north elevation, as well as, mortar stains on the precast windowsills. 36 Mr. Kozluk noted that weep holes were missing and it was not clear if flashings were present underneath. He was of the opinion that the original flashings were not properly installed since they did not extend out to the face of the brick veneer, but this was also true of the adjacent dwell- ings built by the same builder. Mr. Kozluk was critical of the parging because it acts as a dam along the underside of the brick veneer. He also noted that the brick pavers at the exterior grade level and along the north elevation were above the bottom course of the brick veneer, as a result of which the weep holes, flashing and the brick ledge had been covered, which prevents the moisture behind the brick veneer from dissipating. 37 Mr. Kozluk recommended isolated repair or reconstruction of sections of the brick veneer. He recommended that the southwest quoin of the garage be reconstructed, the west elevation of the garage, and the west elevation of the main dwelling next to the garage, the north elevation on both sides of the patio door and in the southeast quoin of the garage. The mortar joints lacked appropriate pigment and should be routed out and repointed. In addition, there ought to be cleaning of the remaining brickwork and the removal of the parging. Mr. Kozluk took the position that a total removal and reinstallation of the brick veneer was not required in order to rectify the deficiencies. 38 Mr. Kozluk’s recommendations and report were accepted by Picco Engineering on behalf of Medi Group Incorporated, whose employees did the brickwork. Mr. Picco agreed that repairs could be done without the need to re-brick the entire house. Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 293

39 Strone accepted Mr. Kozluk’s report, and in its letter of November 15, 2001 to Wawanesa, indicated that the remedial work should be done after the winter of 2002. The work was never done. 40 Dan Walters of Construction Control Inc. prepared a report for Mr. Brandiferri dated October 5, 2001. His report contains photographs of the deficiencies in the brick work. He took the position that the deficiencies could only be properly corrected by replacing the brickwork. 41 Ron W. Koerth is a professional engineer working with Walters Fo- rensic Engineering. He authored a report dated September 28, 2001, for the Brandiferris, and observed: The exterior brick veneer work was of very poor workmanship, with mortar joints that varied from 1/8 in. to nearly 1 in., joint lines at the 1 front entrance (highly visible) that varied out of level up to /2 in. over 48 in., efflorescence, and other visible defects. During a re-attendance for the collection of an air sample we performed an invasive examination of the brick and determined that there were more serious deficiencies pertaining to the inadequate installation of through-wall flashings as well as an improper application of a parge coat to the foundation walls above grade. 42 Mr. Koerth took the position that the brick deficiencies could not be adequately rectified without completely removing and replacing the exterior brick walls. 43 Pina Naccarato, the Brandiferris’ daughter, gave evidence, which I accept, that there is now routinely water in the basement after a rain and that did not happen before the fire. 44 Robert McEwen is a professional engineer retained by Strone. In his report dated September 14, 2010, he noted: There was evidence of water penetration into the basement, damag- ing walls and the basement kitchen cupboards. I could find no structural defects resulting from the fire in 2000, and noted that water damage to the building components had occurred after repairs had been made. The water damage could be the result of improper wall flashing installed when the brick veneer was replaced and could also be due to deterioration of the perimeter foundation drain. Either condition could allow water to penetrate into the basement. 45 In argument for Strone, Mr. Jenkins notes that the plaintiffs are not claiming for water damage but instead are using the fact of water penetration as a rationale for replacing all of the brick veneer on the house. 294 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

Proving that the brick veneer was installed negligently leading to water in the basement would require destructive investigation to get to the bottom of the flashing issue, but the plaintiffs did not do it. The evidence of the engineers sets out a number of possible reasons for water in the basement including parging, pavers covering the brick veneer at the back of the house, and grading at the back of the house in violation of the On- tario Building Code. Mr. Jenkins asserts that the evidence does not permit the court to conclude that the faulty brickwork is the cause of water damage. He submits that the plaintiffs have not proven the claim. 46 Mr. Jenkins submits, as recommended by Rochon Engineering, that the most reasonable thing to do in the circumstances would be to replace the bricks at the front and the back of the house but not on the sides. I assume that this submission is based on the notion that only the front and the back of the house are visible and the problems with the brickwork are purely cosmetic. 47 An estimate for replacing the brickwork was prepared by Chris Jones of ProCare Restoration and is included in his April 2004 estimate. To replace the brickwork and parging, and to do the associated work would cost about $48,000.00. 48 The defendants urge the court to require only limited reconstruction of the brickwork. I see, however, no compelling reason to require the Brandiferris to settle for less than adequate reconstruction. The Brandiferris are entitled to compensation to allow them to re-build the house to the original standard. As Mr. Phin conceded: “it should be done properly.” The evidence of Mr. Jones on the cost was not contested. I see no reason to deduct part or all of the cost from the ProCare estimate. 49 The precise cause for the water in the basement has not been determined conclusively. The engineering evidence is somewhat mixed. Per- haps only destructive testing would reveal the truth. On balance, however, because of the timing of the basement flooding and in the absence of any other compelling plausible explanation, there is sufficient engineering opinion to surmise that something the installation of the brickwork and parging has caused the home to be susceptible to basement flooding. That said, this prospect did not drive me to the conclusion that the brickwork and parging ought to be remedied, but simply points to a possible beneficial side effect of that repair. Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 295

The Rest of the House 50 Mr. Jenkins argued for Strone that the benchmark report in terms of other deficiencies was the Construction Control report written by Dan Walters. It notes on the first page that “the repair work was substantially complete at the time of our inspection.” This same thought appears in the report of Ron Koerth of Walters Forensic Engineering, which notes at page 2: “At the time of our attendance [August 19, 2001] the house was essentially complete except for the main level kitchen, which was not present, and minor finishing details.” Further, the Fisher Environmental report of October 23, 2003, noted that: “The property with the exception of electrical outlet installation, washer and fan installation, and base- board finishing, appears to be in near completion form...” 51 Strone accepts the statement of deficiencies in the Construction Con- trol report and quarrels only with the observations about the brickwork noted above. Mr. Jenkins submits that the report is very detailed and is backed up by photographs and Mr. Walters’ evidence for Construction Control; its detail makes it reliable since it noted, for example, such pica- yune details as a nail pop and a crooked light switch. 52 Mr. Jenkins was prepared to accept the accuracy of the cost figures in the ProCare estimate of April 20, 2004, for the items it addressed but submits that any items identified by Mr. Jones in the ProCare estimate that are not in the Construction Control report should not be considered by the court. He gave two reasons for this submission. First, Mr. Jones deferred to the Construction Control report in his evidence. Second, Mr. Jones was not a properly qualified expert under rule 53.03 of the Rules of Civil Procedure so that any additional information he provided that went beyond the scope of the Construction Control report was not properly admissible; I decided this issue to the contrary in my ruling at [Brandiferri v. Wawanesa Mutual Insurance Co.] 2011 ONSC 3464, [2011] O.J. No. 2724 (Ont. S.C.J.). Accordingly, I advised Mr. Jenkins that I wanted to hear from him on a detailed review of the ProCare report to determine what, if anything else, ought to be recognized by the court as either incomplete or deficient. 53 Mr. Jenkins attacked a number of items in the ProCare Restoration estimate. First, he argued that ProCare’s estimates to refinish parquet floors in various rooms and closets were not corroborated by the Con- struction Control report and therefore should be ignored. The references are: 296 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

Page 3 $1,548.92 Page 3 $1,775.83 Page 4 $1,930.10 Page 5 $1,029.38 Page 13 $ 473.16 Page 14 $ 322.76 Total $7,080.15 54 I see no reason to reject to Mr. Jones’s evidence that these floors should be properly refinished. I therefore decline to deduct this amount from the ProCare estimate. 55 At a number of points in the estimate, ProCare notes that the Strone estimate had numbers for retiling floors, but this work was not done. In Mr. Jones’s opinion it was not necessary. I accept Mr. Jones’ opinion. I therefore dismiss the plaintiffs’ request for compensation for this item. The related figures are: Page 16 $ 3,350.00 Page 17 $ 10,278.37 Page 17 $ 804.11 Page 18 $ 1,476.72 Page 19 $ 1,143.17 Page 20 $ 445.36 Page 21 $ 1,932.98 Page 21 $ 419.34 Total $19,856.05 56 Mr. Jenkins argues that a number of items ought to be deducted as not appropriately part of the repair: Page 2 $645.00 for the intercom system hook-up and replacement. Pages 3, 6 and 9 $985.26 for chandeliers in Strone’s possession at $328.42 each. Page 23 $280.00 for additional gravel on the flat roof. Page 4 $2,362.99 to install fireplace and damper but there had not been one before Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 297

Page 22 $625.30 to install a fire-rated door from the house to the garage. Page 25 $4,500.00 to install a heat recovery ventilator. 57 I agree with Mr. Jenkins that the chandeliers should be deducted. Though I recognize that Strone added some gravel to the roof, I accept Mr. Jones’ opinion that more was needed so I decline to deduct anything for this. I agree that the fire-rated door is an extra. To avoid double counting I deduct the amount reserved in the original ProCare estimate for the heat recovery ventilator unit. Accordingly, this creates a deduction on these miscellaneous items of $6,110.56. I address the fireplace issue below. 58 The heat recovery ventilator was not included in the Strone estimate. But, as noted below, Strone did not fully remediate the fire damage behind the drywall in the living room. There were also a number of chemical smells. Accordingly, I find that the remedial work done by ProCare and referred to in its invoice of November 23, 2004, was reasonable and is properly compensable, including the heat recovery ventilator. It con- sisted of the following: Deodorize using ozone $1, 500.00 To supply and install HRV unit $4,500.00 To supply and install new thermostat $ 150.00 Total $6,150.00 59 ProCare did work to render the house habitable and eligible for an occupancy permit under an estimate dated February 24, 2005. It is also plain that the Brandiferris asked for extras which are not properly part of Strone’s deficiencies. These include: The supply and installation of seven valance $1,128.54 fixtures The installation of a wire and microwave $ 455.00 Work related to the installation of a gas fire- $5,127.00 place Page 9 Offset to remove fireplace and replace $1,050.00 the drywall as per Strone estimate Page 15, ProCare 298 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

To supply and install exhaust fan and re-wire $ 554.72 the vent including drywall repair. The net adjustment is $6,215.26. 60 Mr. Jenkins submits that the glass tub shower doors, caulking, and large wall mirrors in two bathrooms were not appropriately charged since these items do not appear in Strone’s estimate. It was pointed out, however, that the drywall in these rooms needed to be replaced because of the smoke smell after Strone had left the site. I find that these items are properly part of the work that Strone should have done, for which Wawanesa should have paid. 61 The Brandiferris seek $25,754.17 to replace the driveway brickwork that was stained in the fire. I decline to order this as an element of compensation since Mr. Jones made provision in his estimate for chemical cleaning of the driveway and there is no evidence that a chemical wash would not work. 62 Pulling the various numbers together, I find that the following calculation sets out the additional amount needed to put the Brandiferri home in the condition that it was in before the fire: ProCare estimate of April 20, 2004 $134,104.06 Deduct amounts reserved for tile floors $ 19,856.05 Deduct miscellaneous items $ 6,110.56 Deduct work done under estimate of February $ 28,339.88 25, 2005 Add cost on November, 2004 ProCare in- $ 6,150.00 voice Add cost to complete finishing work identi- $ 4,267.25 fied in McEwen & Associates report Total $ 90,214.82 Overhead at 10 per cent $ 9,021.48 Profit at 10 per cent $ 9,021.48 Total $ 108,257.78 Appropriate taxes must be added. Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 299

The Allocation of Legal Responsibility for the House Repairs 63 The plaintiffs seek to make both Strone and Wawanesa liable. The legal issue is whether Wawanesa is liable to the plaintiffs for deficiencies in the completeness or acceptability of the house repairs carried out by Strone. This depends on Wawanesa’s status throughout the repair process. 64 There are a few ways to construe Wawanesa’s status. The first is that Wawanesa elected under statutory condition 13 to repair the house using Strone; the plaintiffs adopt this position, which would impose responsibility for the incompleteness and deficiencies in Strone’s work on Wawanesa. The second is that the Brandiferris hired Strone as their contractor, with Wawanesa paying the costs under the insurance policy; this is Wawanesa’s position, which would leave Wawanesa responsible for repairs left incomplete, but Strone responsible for deficiencies. The third is some hybrid of the two others; this is effectively the plaintiffs’ alternative argument based largely on Wawanesa’s failure to adequately police Strone’s work. These alternatives are discussed below.

Did Wawanesa Elect to Repair the Brandiferri House? 65 Statutory Condition 13 provides: (1) The Insurer, instead of making payment, may repair, rebuild or replace a property damaged or lost, giving written notice of its intent to do so within thirty days after receipt of the Proof of Loss (2) In that event the Insurer shall commence to repair, rebuild, or replace the property within forty-five days after receipt of the proofs of loss and shall thereafter proceed with all due dili- gence to the completion thereof. (emphasis added) 66 It is common ground that Wawanesa did not provide such written notice to the Brandiferris. Mr. Kwinter relies on various authorities for the proposition that formal compliance with the rules of election is not always required for the court to find that the insurer has made the election. In Dorset Co. v. Royal Insurance Canada, [1999] N.W.T.J. No. 130 (N.W.T. S.C.), the court refused to grant summary judgment in favour of an insurance company in the same position as Wawanesa where the work was controlled by an external adjuster hired by the insurance company. 67 In North West Electric Co. v. Switzerland General Insurance Co., [1976] 6 W.W.R. 446, [1976] S.J. No. 301 (Sask. Q.B.), the court noted that the actions of an insurer can constitute an election by the insurer to 300 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

repair (para. 26, at page 455). This election can occur before the proofs of loss are received (para. 29, at page 456). Disbery J. noted that once the insurer elects to repair, it must do so completely, whatever the cost (para 31, at page 456); this is the insurance company’s “gamble.” 68 Wawanesa takes the position on building coverage that: “if the insured repairs or replaces the damaged property on the same location with buildings of same occupancy constructed with materials of similar quality within a reasonable time after the damage, then he or she will be entitled to the cost of the repair or replacement (whichever is less) without deduction for depreciation.” Wawanesa says that since the Brandiferris decided to rebuild the house, they were entitled under the policy to recover the cost of repairing the premises with materials of similar kind and quality. Wawanesa asserts that: “the contract for repair of the premises is between the Brandiferris and Strone and Wawanesa cannot be held liable for any breach of that contract.” 69 Mr. Forget relied on a number of authorities for the proposition that there is no contract between the insurance company and the contractor who repairs the house. Instead, he argued that the contractual relationship is between the plaintiffs and Strone and that Wawanesa is a stranger to their contract and is not responsible for any deficiencies. 70 In Bowen v. Guardian Insurance Co. of Canada, [1992] B.C.J. No. 901 (B.C. S.C.), the plaintiff argued that the deficient repairs were undertaken by the insurer. The court found that the restoration firms were retained by the plaintiffs’ daughter as their agent. The adjuster appointed by the insurance company who was an independent contractor gave evidence that he did not retain contractors on behalf of the insurer or the insureds but only proposed names that were familiar to him which the insureds accepted. Melvin J. found that “As the contractual arrangement is between the plaintiffs and those contractors, in my view, the plaintiff(s) can have no claim against the defendant for the alleged inferior quality of workmanship.” Melvin J. went on to find that the insurance company remained responsible for certain incomplete limits of repair. He also added that the plaintiffs were obliged to actually replace the items in order to take advantage of the replacement costs endorsement. 71 In N & H Contracting Ltd. v. Gordon, [1993] B.C.J. No. 45 (B.C. C.A.), the insured sued the insurer for the costs of repairing deficiencies in the contractor’s work. The contractor testified that its contract was with the insurer and not the insured. The trial judge accepted this evidence but the Court of Appeal reversed, holding at para. 58 that the trial Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 301

judge misapprehended the evidence: “There was no reason for the insurer entering into a contractual relationship with a contractor of the kind found by the trial judge.” The Court of Appeal found that the insurance company had not exercised the option to replace set out in statutory condition 13 (para. 34). The court held that the contract was between the contractor and the insured and that the insurer’s obligation was to pay for the repair. The court rejected the fact that the insurer’s cheque was made jointly payable to the owner and the contractor against the owner’s delivery of an interim proof of loss as establishing that there was a contractual arrangement directly between the insurer and the contractor. 72 In Gebhard Hoelzler Construction Ltd. v. Seidler, [2006] B.C.J. No. 1090 (B.C. S.C.), appeal dismissed, [2008] B.C.J. No. 283 (B.C. C.A.), the plaintiff contractor sued the defendant building owner for payment under a construction contract following a fire. The trial judge followed N & H Contracting Ltd. v. Gordon in concluding that the adjuster retained the contractor on behalf of the building owner and not on behalf of the insurer. The trial judge noted at para. 23: However, that practical accommodation does not change the funda- mental nature of the insurance contract. The insurer had no obligation under the policy to directly undertake repairs to the building or to directly enter into a contract with a contractor. Nor is there anything in the policy that gave the insurer power to impose its choice of contractor on the defendants. 73 The Court of Appeal dismissed the appeal finding that there was sufficient evidence about the building owner’s participation and acquiescence to conclude that: “The defendants impliedly consented to the adjuster hiring the plaintiff as a contractor to affect the specified work. The insured could not have made this decision on the owner’s behalf without the owner’s consent. The insurer’s only duty was to pay the indemnity due under the policy” (para. 22). At paras. 23 and 24, the court said: 23 As well as giving implied authority and consent to BCAC to act as its agent in contracting with the plaintiff, the defendants also exercised effective control over the contract between themselves and the plaintiff. The evidence discloses that one or more of the defendants were on site from time to time to monitor the plaintiff’s work while it was effecting the repairs. The defendants gave instructions, criticized the work done, and authorized extra work not contained in the speci- fications. When they were not satisfied with the work, the defendants effectively stopped payment on the second cheque for $50,000 by refusing to endorse it. Ultimately, the defendants terminated the con- 302 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

tract when the defendant Ingobert Seidler telephoned the plaintiff to advise that the defendant did not want anyone from the plaintiff company in their building (trial judge’s reasons para. 8). 24 Neither the insurer nor the adjuster could have overridden the owners’ decision to terminate. To repeat, the insurer’s only obligation was to indemnify its insured. The adjuster could neither authorize nor approve anything not agreed to by the owner.

The Facts Related to the Contractual Status of Wawanesa and Strone 74 As noted, Wawanesa arranged for two insurance restoration contractors to attend at the house and provide estimates for repairing the house. The Brandiferris chose Strone. They could have picked Bachly or another contractor of their own choosing. 75 Mr. Phin testified that in all of his years at Wawanesa, the company has never elected to proceed under statutory condition 13. He testified that Wawanesa proceeded under the terms of the insurance contract, which provide: If you repair or replace the damaged or destroyed building(s) on the same location, with building(s) of the same occupancy constructed with materials of similar quality within a reasonable time after the damage, you may choose as the basis of loss settlement either (A) or (B) below; otherwise, settlement will be as in (B). 76 Clause (A) was to pay the “cost of repairs or replacement.” The policy had a guaranteed replacement cost-coverage, which insures the dwelling to 100 per cent of its replacement cost and permits the repair of the building “constructed with material of similar quality.” 77 Mr. Phin explained the dynamic in the contractual language. The insured selects the contractor of his choice and enters into a contract with it. Mr. Phin expected but was not sure that a copy of each estimate or “scope of work” was given to the Brandiferris when they were prepared. I am satisfied that the first Strone estimate was provided to the Brandifer- ris before the work began but they did not receive copies of the other two when they were delivered to Wawanesa. 78 Mr. Phin asserts that the contract between Stone and the Brandiferris consists of the authorization for Strone to proceed and the scope of work prepared by Strone and provided to Wawanesa. Mr. Kwinter ridiculed this position, pointing out that a number of important elements including the cost of the repairs and the timing are not addressed. Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 303

79 In my view the customer authorization dated September 20, 2000, is sufficient to form a contract between Strone and the Brandiferris. I note that the language does contemplate the involvement of Wawanesa: I, Salvatore Branbiferri (sic), authorize Strone Construction to proceed with the necessary restoration services to my damaged dwelling and/or contents and understand and agree that the cost of repairs and/or cleaning is to be approved by my adjuster. I hereby authorize and direct my insurers to pay the insurance proceeds directly to Strone Construction and this shall by my insurers’ sole authority for so doing. I hereby agree to pay Strone Construction the sum of $0 (waived by Insurance Adjuster applied towards content loss), which represents the deductible portion required by my insurance coverage. Should I require work which is not covered under my insurance policy, I agree to enter into a separate agreement with Strone Construc- tion and agree not to direct trades to complete such work without an authorization. 80 As noted, Mr. Benzie was sympathetic to the Brandiferris and approved the changes to Strone’s scope of work as necessary. Mr. Kwinter submits that the important point to note is that Strone would not do work without Mr. Benzie’s prior approval. He was a frequent visitor to the house and often performed a mediation function between the Brandiferris and Strone. 81 Mr. Phin was adamant that there is no contract between Wawanesa and Strone. At the same time, he admitted that “Wawanesa controlled all the cheque payments here” (page 104), noting that this was because of a written “direction to make payment to Strone” signed by Mr. Brandiferri. 82 Mr. Phin acknowledged that Wawanesa had agreed to pay for and did pay for a building permit to be taken out by Strone as recommended by the engineer. The adjuster therefore knew that a building permit was required. In cross-examination Mr. Phin said: Q. And isn’t part of monitoring the site to make sure that the requisite building permit has been obtained by whoever’s doing it, as part of your monitoring duties? A. I think in — in — in better practice, yes. Q. And it should have been done here, shouldn’t it? A. Yes. 304 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

83 Mr. Phin admitted that Wawanesa would only “make a payment when they believed that certain work was done and done right.” He testified: Q. All right. And you’ll agree with me that it was Wawanesa’s obligation in controlling the payments, and not making payment until proper inspections had been done to insure, before they made all the payments that they made, that the house was restored to its pre-fire condition. Is that a fair statement? A. Yes. 84 Wawanesa made a final payment to Strone on October 1, 2001 of $149,542.01. Mr. Phin conceded that when he authorized the final payment there was still work to be done, something that he only found out after the cheque had been sent. He takes the position, however, that Wawanesa is not responsible for any deficiencies (page 110), which were “between Strone and them to sort out.” 85 Mr. Phin admitted that Mr. Benzie should have done a final inspection before the cheque was issued by Wawanesa. In cross-examination he said: Q. Well, now that you’ve found that you cut the cheque and Strone hasn’t corrected their mistakes, do you recognize Wawanesa’s obligation to having made that error in paying them? A. Yes. 86 Mr. Phin admitted that: “there’s an instruction right in Mr. Benzie’s notes not to pay...And that was ignored.” He admitted that he was: “pretty surprised to see all those deficiencies listed...And — and to — and to find out that the work that the — the actual work itself, hadn’t been completed, actually, we were very upset...we’d been taken advantage of.” Mr. Phin admitted that he never wrote an objecting letter to Strone about what happened nor did Wawanesa take third-party action against Strone.

Discussion 87 As noted, there are three possible findings the court can make. The first is to find that Wawanesa elected to reconstruct the house under statutory condition 13. The second is to find that the Brandiferris elected to rebuild the house, which would impose on Wawanesa the obligation to pay in accordance with the policy. The third is a hybrid of the other two. 88 The insurer’s risk or “gamble,” to use the word of Disbery J. in Northwest Electric Company Limited, is that if it elects to rebuild then it Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 305

must do so completely, whatever the cost. Wawanesa did not formally elect to rebuild under statutory condition 13 precisely to avoid that risk. Once it became clear that the reconstruction effort would not reach a happy end Wawanesa backed away after making a final payment to Strone, and left the Brandiferris and Strone to their own devices. 89 Wawanesa has built itself a middle position in which it controls the cash flow and de facto also controls the reconstruction, as is shown by Mr. Benzie’s extensive involvement even on a day-to-day basis and by Strone’s refusal to work without his authorization. I find that Wawanesa’s actions and its degree of control were not sufficient, however, to amount to an election under statutory condition 13. I find that, as the plaintiffs allege in their statement of claim against Strone, the contract to do the reconstruction was with Strone. It was not with Wawanesa. 90 That said, in my view Wawanesa was the Brandiferris’s agent for the purpose of paying Strone. The Brandiferris withdrew their authorization for Wawanesa to make the final payment to Strone. In its Statement of Law, Wawanesa makes a critical admission: the Brandiferris “even directed Wawanesa not to pay Strone in January 2001 suggesting in their minds they had the control to stop the payment, which Wawanesa concedes they did.” 91 Despite the Brandifferis’ express instruction not to make the final payment, Wawanesa did so, breached its obligation as agent for the Brandiferris in respect of that payment, and improperly expended $149,542.01 of the Brandiferris’ money. These are funds that would otherwise have been available to the Brandiferris to remediate Strone’s work. In my view the situation is analogous to the payment by an owner in the face of a construction lien and must have the same result as matter of equity. I hold that in the event that the Brandiferris are unable to make full recovery from Strone for any amount owing by Strone under this decision, Wawanesa is obliged to make up any deficiency in Strone’s payment up to the amount of $149,542.01. Any amounts paid would not be new money and would not count against the insurance policy’s single inclusive limit. 92 I have found that the cost of bringing the house back into the condition it was in before the fire, which is the Brandiferris’ entitlement under the insurance policy, is $ 108,257.78. I recognize that some of the elements may be more in the nature of incomplete repairs than deficiencies; if work is to be done for which Strone was not compensated, it is prop- 306 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

erly the responsibility of Wawanesa under the insurance policy. The difficulty is that by co-operating in the defence of the two actions, neither Strone nor Wawanesa assisted the court by identifying repairs that would fall into the category of deficiencies and those that would fall into the category of incompleteness. I find them to be severally liable for their respective shares of the additional cost of remediation. In the event that they are unable to sort out those respective shares within 30 days of the date of this decision, I will hear further evidence and argument.

Issue 3: Additional Living Expenses 93 The Wawanesa policy provided coverage for additional living expenses: Additional Living Expense: If an Insured Peril makes your dwelling unfit for occupancy we insure any necessary increase in living expenses, including moving expenses incurred by you, so that your household can maintain its normal standard of living. Payment shall be for the reasonable time required to repair or rebuild your dwelling or, if you permanently relocate, the reasonable time required for your household to settle elsewhere. 94 Wawanesa submitted that the coverage indemnifies the insured for any “necessary” increase in living expenses “incurred” while the dwelling is not fit for occupancy. It takes the position that ALE coverage is only for the “reasonable time required to repair the dwelling”. 95 The Brandiferris left the house on the day of the fire and moved into Ms. Naccarato’s home. Her brother Fabio went to live at the Dodge Suites Hotel. The Brandiferris left Ms. Naccarato’s house in September 2001 and moved into a rental property at 102 Comoq Avenue, Wood- bridge. They moved from that rental house back into the property in Feb- ruary 2004. 96 The Brandiferris make the following claim for more payments on account of additional living expenses from August 8, 2000, until February 2004; they also make the same claim for compensation from Strone for its delay: $18,068.90 outstanding amount paid by plaintiffs to Travelodge for Fabio. $68,400.00 total rent incurred for 102 Comoq from September of 2001 to February of 2004. $9,074.94 total hydro and gas difference for maintaining two homes. Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 307

$3,258.15 Mini-Warehouse storage charges. $4,500.00 paid to Urban Clean for the return of contents of home. Total $103,301.99 97 Wawanesa says that it spent $56,692.56 on ALE. Mr. Benzie terminated payments for ALE at the end of August or September 2001, with hotel bills paid through to October 1, 2001, on the basis that the Brandiferris could have been back in the house by then (the evidence is not entirely clear on the termination date for payments selected by Mr. Benzie). Mr. Benzie also appeared to be of the view, according to his letter to the Brandiferris’ lawyer dated September 20, 2001, that ALE had been paid to the policy limits, which Wawanesa now concedes was not the case in view of the policy’s single inclusive limit. 98 Mr. Forget argued that the work required to complete the dwelling, render it habitable, and comply with the Orders to Comply so that an occupancy permit could be obtained, was relatively modest; the Brandiferris were obliged by the general duty to mitigate to attend to these repairs within a reasonable time. Strone submitted that the house could have been sufficiently remediated to permit occupancy by ordinary people well before the date on which the Brandiferris returned. The fact that they have been living in the house since returning without complaint shows that there are no ongoing difficulties and that the Brandiferris could have moved back into the house much sooner. 99 Ms. Naccarato testified that the Brandiferris were advised by Mr. Kuchar, their lawyer at the time, that Wawanesa and Strone had the responsibility to complete the construction of the house and that the Brandiferris had no obligation to do so. It was not until Messrs. Singer and Kwinter came on the scene that the Brandiferris set about getting the house ready to occupy again. 100 When would it have been reasonable for the Brandiferris to have returned to the house? 101 Ms. Naccarato complained to the Building Standards Department of the City of Vaughan about the property on August 20, 2001. This led to an inspection. An Order to Comply was issued on August 29, 2001. 102 Strone’s last day on the job was about November 15, 2001. Mr. Benzie’s notes record a conversation with Neil Blinco, Chief Executive Officer of Strone Construction on December 6, 2001. Mr. Blinco said that the deficiencies mentioned in his letter to Wawanesa on November 15, 2001, had all been repaired with the exception of the brick work 308 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

which should wait until the spring. The notes report another conversation with Mr. Blinco on December 11, 2001. Thereafter the notes largely deal with legal matters. 103 Another Order to Comply was issued on July 18, 2002, and a third on August 19, 2002. On September 23, 2002, Strone wrote to the City of Vaughan stating: “This letter will service (sic) to confirm that Strone has restored this residence back to its existing condition prior to the fire using materials and/or components to retain the existing character.” On September 27, 2002, the City of Vaughan issued a building permit. On October 1, 2003, the City of Vaughan inspected the property and issued another Order to Comply. Strone sent a letter on October 6, 2003, and an engineering report to the City. 104 In order to get back into the house, the Brandiferris retained ProCare to complete the necessary work to make the house habitable, to comply with the Orders to Comply issued by the City of Vaughan, and to obtain the necessary occupancy permit. The work by ProCare took about six weeks, starting on January 21, 2004, and ending February 27, 2004. The City inspected the house on February 24 and 25, 2005, lifted the Orders to Comply and issued an occupancy permit. 105 Mr. Jenkins submitted that the Brandiferris’ delay in moving back into the house was unreasonable. Mr. Brandiferri said in discovery that they did not move back earlier because of the persistent smell of smoke. 106 The smoke issue was addressed in the evidence of David Fisher, whom I qualified as an expert witness to give evidence on environmental concerns relating to the remediation of fire damage to the plaintiffs’ home in my ruling at [Brandiferri v. Wawanesa Mutual Insurance Co.] 2011 ONSC 3200, [2011] O.J. No. 2723 (Ont. S.C.J.). Mr. Fisher provided four reports. In his first report dated October 23, 2003, he noted that “a faint smoke smell is still present.” He added that: After spending one and half-hour at the house I experienced dry throat, which persisted for two hours after vacating the premises. People prone to allergies should not reside in the house in the present state, due to the omni-present paint odours and smoke. 107 Mr. Fisher took the view, in assessing the air testing results in the Walters Forensic Engineering report of September 28, 2001, that “the general air quality inside the subject house is unacceptable.” He recommended that a significant course of ventilation be undertaken. Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 309

108 In the Walters Forensic Engineering report, Mr. Koerth concluded that: The tabulated data does not contain any of the chemical compounds normally found in atmospheres containing “smoke” or fire damage odours. Fires involving wood and plastic materials produce chemical compounds known as aldehydes and styrenes, neither of which has been found in the gas sample that was analyzed. 109 Mr Koerth then reviewed the results of the tests in detail and concluded: None of the detected compounds are present to a sufficient concentration to be considered a health hazard, although many of these compounds, in the concentrations noted, could be bothersome to sensitive individuals and produce headaches and nausea. 110 Mr. Koerth gave the opinion that the compounds “should be expected to decrease in intensity with increased ventilation and time.” He added that, because of: ...the discomfort for sensitive individuals living in the house...these concentrations should be significantly reduced before the house is occupied. This could be done through passive ventilation (opening windows) but would take more time than active ventilation, which can be performed through the installation of a permanent HRV (heat recovery ventilator) unit...given the apparent high usage of solvent- laced products to remediate the smoke damage and the failure to-date of passive ventilation to reduce the concentration of these chemicals, the installation of an HRV system may be a practical consideration in this case. 111 In his report dated December 13, 2004, Mr. Fisher noted that he had carried out testing and stated: “In conclusion we consider the house free of detectable hydro carbon. Further, no indication of mould contamina- tion was detected.” 112 In his report dated September 14, 2005, Mr. Fisher carried out some drywall cut-outs: Inspection in the dining room ceiling revealed that some of the wood joists that were painted over badly charred joists. The wood preserva- tive and sealer did not fulfill their intended purpose. Smoke has penetrated into the wood fibres and samples of wood chips show raw smoke and soot still impregnated on wood. The I-beam has been painted over without removal of black soot from the fire. In the electrical panel a black stain is still present, indicating smoke damage. 310 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

113 In his report dated October 13, 2010, Mr. Fisher commented on the test results assessed in report done by Air Quality Engineering Inc. for Strone. The author of that report, Tonu Petersoo was not called as a witness. Mr. Fisher noted: “The report from Air Quality Engineering was that many chemicals are indeed fire related and not from gasoline, diesel and other related fuels and solvents. In particular, the turpene family of chemicals are products of wood tars and benzo-related chemical in our products of incineration of household materials.” He concluded: “We have not visited the house for a considerable period of time and if after all this time the listed compounds are still present in the house, then there is a very strong suspicion that this house needs significantly more sys- temic remediation or ultimately a complete demolition.”

Discussion 114 I find that the Brandiferris did have a duty to mitigate their damages in relation to additional living expenses. Little if anything appears to have happened with the house after December 11, 2001, in terms of further repairs by Strone. Mr. Benzie met with Mr. Kuchar, who represented the Brandiferris at the time, on December 18, 2001. There was a stand- off with the Brandiferris that crystallized, in my view, when Mr. Kuchar reported to them in late December since it was then plain that Wawanesa was not prepared to fund more work but only to settle. Had the Brandiferris responded on a timely basis to this development, they would have contacted the City of Vaughan by the end of December 2001 for a further inspection and then they would have had the work completed. 115 The evidence satisfies me that there was a smoke problem in the house that was eventually remediated by repairs and by the installation of the heat recovery ventilator unit to capture residual odours. I do not find that the Brandiferris were unusually susceptible to such odours. Nor do I find, however, that the odours justify the additional delays in returning to the house. 116 I find that it would be fair and reasonable, in determining the date by which the Brandiferris ought to have been able to return to the house, to give them another notional twelve weeks to get an estimate, to complete the paperwork and to have the work done on the house; this would bring the reasonable occupancy date to March 30, 2002. That is the last day on which Wawanesa would accordingly be responsible for further payments of ALE. The damages figure for ALE must be calculated on that basis. Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 311

117 Wawanesa complained that the Brandiferris received too much money for additional living expenses. Wawanesa noted that it paid $4,000.00 a month for eight months to the Brandiferris while they were living in the Naccarato house. Ms. Naccarato admitted that she did not charge her parents rent so that this money went to them entirely. She testified, however, that Mr. Benzie was fully aware of the arrangement. There is no evidence to contradict her since Mr. Benzie did not testify. Wawanesa has not established that these payments were made in response to a fraudulent claim. I find that Wawanesa is not entitled to any offset for the money paid to the Brandiferris while they were living in Ms. Naccarato’s house. 118 Wawanesa is liable for ALE but its liability for rent, ongoing expenses for both the house and the Comoq Avenue rental, storage expenses, and any other related charges accordingly ends on March 30, 2002. If the parties cannot agree on the number, I may be spoken to.

Issue 4: Personal Property 119 The plaintiffs claim compensation for certain items of personal property that were irreparably damaged by the fire. The insurance policy provided the following coverage: We will pay for all other personal property on an Actual Cash Value basis unless the Declarations indicate otherwise. If the Declarations indicate that REPLACEMENT COST ON CON- TENTS is included: a. We will pay for all other personal property on the basis of Replacement Cost; and “REPLACEMENT COST” means the lower of: 1) the cost of repairing the property with material of similar kind and quality; or 2) the cost of new articles of similar kind, quality and usefulness; on the date of the loss or damage, without any deduction for depreciation. If you choose to settle the loss on an Actual Cash Value basis and then decide, within 180 days after the date of loss, to replace any destroyed or stolen property, you can make an additional claim for the difference between the Actual Cash Value and Replacement Cost basis. “ACTUAL CASH VALUE” will take into account such things as replacement cost less depreciation. In determining depreciation we will 312 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

consider the condition of the article immediately before damage, its resale value and its normal life expectancy. 120 There are four general categories of personal property: the contents of the garage, the clothing and other cloth items like sheets, table cloths and so on that could be laundered or dry cleaned, the soft furniture such as couches and carpets, and the hard furniture such as tables and chairs, cabinets, dishware and so on. 121 Mr. Phin explained that the typical process, which was followed in this case, is that the adjuster appointed by Wawanesa immediately arranges for the site to be secured and first steps to be taken to salvage goods. As noted above, Mr. Benzie dispatched Bachly Construction and a company related to it called Urban Clean, to the Brandiferri house. Ur- ban Clean removed the clothing from the house and sent it to Crest Cleaners to be cleaned. It retained the soft furniture and carpets to clean. Wawanesa had Strone remove the hard furniture and goods from the house for restoration and repair.

The Contents of the Garage 122 On November 20, 2000, Ms. Naccarato sent a schedule of loss to Mr. Benzie that included a list of the items that were in the garage when it burned. Mr. Benzie responded by letter dated December 6, 2000, enclos- ing a cheque for $10,000.00 as “interim payment toward the submission.” He raised questions about a number of the items including the value on a bicycle of $2,185.00 and advised that there is a limit on bi- cycles in the amount of $500.00 under the policy. He also noted that there was a claim for automobile parts in the amount of about $2,618.00 and the policy limited recovery to $1,000.00. Mr. Benzie asked whether the tools were used for business purposes. Mr. Benzie also observed that: “a number of the replacement cost amounts for various of the items on the list appear to indicate values that are higher than such items generally available at retailers”. He pointed out that some of the items lacked sufficient detail in the description to be able “to confirm an accurate evaluation.” 123 Ms. Naccarato responded by letter dated January 7, 2001, and explained why there were so many tools in the garage. Her brother Fabio had been studying to become a licensed mechanic and her father had been an iron worker with tools of his own. She noted that: “The prices of the tools were determined by a trade catalogue but if you feel that these Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 313

prices were too high then please use your own judgment in determining their fair value.” 124 Wawanesa adjusted the claim for the contents of the garage. On Feb- ruary 12, 2001, Wawanesa paid $6,000.00 on this particular claim and $1,822.73 for a washer and dryer. The Brandiferris’ are not “disputing that in this action” and are not seeking more funds for the contents of the garage.

The Goods at Crest Cleaners 125 Ms. Naccarato testified that Mr. Benzie presented three items of clothing from Crest Cleaners to her parents who refused to take them because of their odour. Ms. Naccarato testified that there was “a chemical smell” on the items and that she would not have worn them herself. Mr. Benzie’s note is that on November 1, 2001, he spoke with Ms. Nac- carato to set up an attendance at Crest Cleaners for her parents to examine the clothing. The Brandiferris inspected the bottom of two racks of their clothing and rejected all of it because of the unpleasant odour. 126 Ms. Naccarato assembled the revised Schedule of Loss for clothing in 2004 or 2005 by valuing the items on the inventory list provided by Crest Cleaners. Ms. Naccarato explained that she valued the items of clothing according to their nature. Items that were likely bought at Sears were valued using Sears’ figures. Items that were bought at expensive Italian shops were valued by looking at comparable items on the internet, particularly American sites including Neiman Marcus. The back-up material was voluminous and was provided to Wawanesa. Ms. Naccarato was completely transparent about her information sources. 127 The amount claimed on the revised Schedule of Loss for Crest Clean- ers was $79,876.62, mostly for clothing but there were some household materials on the list. Ms. Naccarato derived that number by going through the schedule of clothing from Crest, and depreciating the total by 30 per cent to arrive at the actual cash value. This was explained by Ms. Naccarato as having been recommended by the public adjuster Steven Kay, who was experienced in the area, as the standard way of approach- ing the calculation. Mr. Kay could not be found to give evidence. Wawanesa offered no contrary evidence. 128 Ms. Naccarato was cross-examined at length on the claim related to the clothing and other items sent by Urban Clean to Crest Cleaners. To summarize her evidence, she admitted that her parents shopped at the Bay and Sears and similar outlets for their everyday clothing. However, 314 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

they also attended a number of social events, particularly weddings, for which her mother had special dresses. These were purchased at Italian specialty shops and were typically used only once. Her father had good Italian suits for those events, also purchased from Italian speciality shops. Included in the more luxurious clothing were Ms. Naccarato’s own wedding dress, and some very good coats including leather jackets owned by her brothers. 129 On the list provided by Crest, seventeen were items identified as “fancy dresses.” Correspondence from Crest clarified that the word “fancy” meant, as Mr. Forget explained: “It usually pertains to an article that had something more than ordinary. For example, it may have a fancy lace, some beadwork, special trim that may require special attention during the cleaning process.” 130 Mr. Forget’s typical cross-examination pattern in respect of a particular item of expensive clothing was to seize upon a description in the back-up material provided by Ms. Naccarato and then to challenge both the make of the item and its cost. For example, he asked: Q. Do you agree that your mother did not have a Marquesa dress for $1,080.00? A. No, but she had something that had beadwork coming down with sequins, which she wore. 131 Elsewhere, the following exchange occurred: Q. Do you agree that your mother did not - a Valentino coat — a Valentino $1,800.00 coat? [sic] A. She did not have — may — she may not have had a Valen- tino coat, but she did have a very good quality cashmere coat, which is expensive to replace. (page 316) 132 Concerning her father, the following exchange occurred: Q. You agree that your father did not have an Armani suit? Are you taking — is your — do you agree with that? A. There was an Italian suit that he purchased and I asked him how — because they were both sitting with me — we were going through the pictures trying — I’m not looking. I was just basically trying to prepare this my father goes something similar to that, thinking George Armani, thinking quality, thinking good quality material. Q. And, so your answer to that is — did your father own an Armani suit? Yes or no? Or did he just have a blue suit? Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 315

A. He had — I, I — Hugo Boss, one hundred per cent he had. My father says, at one time, a Muscotta (ph), one time an Armani. He was giving me several but what he clearly said was that he did have a suit from Italy and he would wear it from time to time. It’s no longer there. 133 In cross-examination, Mr. Phin admitted using Urban Clean as a “preferred vendor”. He agreed with the statement that: “Wawanesa arranged, as part of its clean-up and removal, for all items to be taken out of the Brandiferri home, correct?” The following exchange occurred: Q. And since Wawanesa arranges for the goods to be removed, I take it that Wawanesa also is responsible for bringing them back? A. Yes. Q. All right. And as far as the clothing is concerned, that never came back, right? A. That’s what I understand now, yes. 134 As it turned out, the Brandiferri clothing was destroyed in a fire at Crest Cleaners in December 2002. Mr. Benzie was told but he did not tell the Brandiferris. Mr. Phin agreed that the Brandiferris “need to be informed by somebody.” The following exchange occurred: Q. Who would that somebody be? Wouldn’t it be Wawanesa? A. Well, it certainly could have been, yes. Q. So did Wawanesa drop the ball in not telling them? A. Yes. Wawanesa did not advise the Brandiferris that the clothing at Crest Cleaners was gone until 2005.

The Goods at Urban Clean 135 The Brandiferris make two sets of claims in respect of goods removed by Urban Clean that were not sent on to Crest Cleaners. They claim $18,262.89 actual cash value of items destroyed and not replaced to-date, including $6,490.45 for carpets. The Brandiferris also claim the replacement cost of items destroyed and replaced in the amount of $10,908.42, of which $1,616.70 represents carpets. 136 The methodology used by Ms. Naccarato to identify and value the items taken by Urban Clean was similar to the method she had used for Crest Cleaners and Strone. 316 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

137 Wawanesa did not present any evidence of value for any of the items claimed by the Brandiferris. Wawanesa’s trial strategy appeared to be to cast doubt on some of the figures without offering alternative evidence. 138 The only amount seriously challenged by Wawanesa was the amount claimed for carpets. The evidence is that 26 carpets were sent out to be cleaned and only 23 were returned by Urban Clean. The position of the Brandiferris appears to be that all 23 of the carpets returned were smoke damaged and continued to harbour a smoke odour. These were items that Mr. Benzie instructed Urban Clean to be cleaned, fringed, ozoned, wrapped, and returned when the house was finished. 139 Gary Snodden’s evidence for Urban Clean was that the carpets were acceptable and had been cleaned to the best of Urban Clean’s ability. The invoice from Urban Clean dated October 16, 2000, however, bears the following note: “Due to heavy smoke damage on floors, the insured may not accept all rugs.” In evidence Mr. Snodden confined this observation about heavy smoke damage to the carpets on the basement floors but he was not able to identify which carpets were involved. In cross-examination, Mr. Snodden said that he had cordial relations with the Brandiferris and that they did accept some goods returned by Urban Clean and rejected other goods as unsuitable. No inference can be drawn that the Brandiferris were simply being unreasonable. 140 I therefore find on the balance of probabilities that the plaintiffs are entitled to the damages sought in respect of Urban Clean. 141 The Brandiferris received bills from Urban Clean for the storage after July 2001, a date picked by Mr. Benzie on the basis, according to Mr. Phin: “That he was no longer going to allow for the cost of the storage of the items that should have been returned to the home...because he believed that there was no reason why they couldn’t be returned to the home.” The evidence is that Urban Clean required the Brandiferris to pay $4,500.00 in back-storage charges before returning the goods to them. This is because Wawanesa stopped paying storage charges after about a year, starting in August 2001.

The Goods at Strone 142 As noted, Strone took a number of items of furniture from the house, stored them in its warehouse for a number of years and returned them just before the trial. 143 The Brandiferris make two sets of claims in respect of the goods removed by Strone. They claim $33,536.69 for items that were destroyed, Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 317

which they replaced; the valuation was carried out by Ms. Naccarato in the same way as the valuation of the other goods. The Brandiferris claim $51,981.85 to repair or replace items that were damaged by Strone. They also claim moving costs of $2,201.66. 144 Along with its Scott Schedule, Strone filed a Statement of Position which provided: Subsequent to the release of the goods just prior to trial, the Brandiferris advanced a claim that Strone damaged some of the goods stored at the Strone storage facility, a claim that had not previously been advanced. Since quantifying the claim, the Brandiferris have not allowed Strone access to the goods for which they allege damage for the purpose of valuation. As a result, in order to respond to this new claim Strone requests that a process for determination of what goods were damaged and the value of those goods be implemented by this court and that the results of that process be forwarded to Your Honour for incorporation in your reasons. 145 With respect to the hard furniture and contents, Mr. Phin admitted that: “Wawanesa arranged...for a lot of the personal items of the Brandiferris, the contents, to be taken to Strone Construction’s warehouse.” Wawanesa paid for cleaning and storage. The following exchange occurred: Q. And, I take it, that if Wawanesa arranged for those to be taken to Strone’s warehouse, you would also arrange for them to be returned? A. Yes.

Discussion 146 Wawanesa’s position on its liability is set out in its Statement of Law: The Brandiferris are entitled to the lesser of the cost of repairing or replacing the personal property damaged in the fire. They are not entitled to benefits if the personal property is not damaged or can be cleaned. They are entitled to payment under Replacement Cost Cov- erage only if they replace the contents rendered unsalvageable — meaning not successfully cleaned. If they do not replace that property, their coverage is limited to the actual cash value of the items. The onus is on the Brandiferris to establish that they are entitled to more. Other than the items contained in the garage, 3 rugs and 2 couches, the contents were undamaged or successfully cleaned. The Brandiferris have led no evidence to show that they are entitled to further benefits under the contents coverage. As an example, they 318 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

were paid $10,000.00 as an advance after receiving the Schedule of Loss listing the destroyed items in the fire. There is no evidence that any of those items have been replaced, and therefore the recovery for those items would be limited to the actual cash value. The Brandifer- ris have led no evidence on the actual cash value of those items or any items to show the money paid for the replacement of the unsalvageable contents was insufficient. 147 Mr. Kwinter argues that Wawanesa should not be permitted to rely on the provisions of the insurance contract to reduce damages payable for personal property if the property has not been replaced by the insured. He points out that even though the Brandiferris had financial resources they had financial responsibilities as well, including the payment of ex- perts’ fees, legal costs and repair costs. Indeed, they still owe ProCare money for its remedial work. Moreover, he notes that the Brandiferris were facing a $600,000.00 counterclaim by Wawanesa that was only withdrawn on the eve of trial. It is therefore no surprise, he argues, that they did not go out and replace all the clothing and the other items that they lost. 148 I accept Mr. Kwinter’s point that a form of equitable estoppel should operate where it is the actions of the insurance company that have in large part compromised the ability of an insured to take normal action to replace personal property after a fire. I note that a number of the more expensive items claimed are fancy dresses purchased by Mrs. Brandiferri for celebrations such as weddings, which were generally used only once and then stored. One of the dresses, for example, was Pina Naccarato’s wedding dress. None of these dresses was likely to be replaced by the Brandiferris so that actual cash value would appear to be the most appropriate value for these items. It appears that the actual cash value is the basis for the revised schedules of loss, given the depreciation allowance built in. 149 In respect of the personalty I find that Wawanesa assumed the position of bailee and the Brandiferris were bailors. In removing the Brandiferris’ personal possessions from their home, Bachly, Urban Clean and Strone were sub-bailees of Wawanesa. Crest Cleaners was in turn a sub-bailee of Urban Clean. When the purpose for the bailment was en- ded, it was Wawanesa’s obligation as bailor to have the goods returned directly to the Brandiferris. It was not open to Wawanesa to simply abandon the goods to Urban Clean, to Crest Cleaner or to Strone. It was not open to Wawanesa to force the Brandiferris to pay the charges levied by Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 319

Wawanesa’s contractors. It was not open to Wawanesa to unilaterally alter the terms of the bailment. 150 I hold that Wawanesa must compensate the Brandiferris pursuant to the insurance contract for the items lost in Crest Cleaner’s fire. In the interests of finality, and as a matter of rough justice, I accept the valuation put on the items by Ms. Naccarato but reduce the calculated value by an additional ten percent to account for any possible over-estimation. 151 I hold that Wawanesa must compensate the Brandiferris for the items sent to Urban Clean whose return was rejected by them. Again, I accept Ms. Naccarato’s valuation as reasonable and likewise reduce the calculated value by an additional ten percent. I further find that Wawanesa must compensate the Brandiferris for the amount of $4,500.00 that they paid to recover their goods from Urban Clean and any moving costs. 152 I hold that Wawanesa must compensate the Brandiferris for the items that were sent to Strone that were not properly restored or were damaged over the years. The goods still exist. I do not consider the visits that Strone permitted the Brandiferris to make to their premises, described by the Strone witnesses, to have provided them with an adequate opportunity to evaluate the goods. Strone’s return of the goods to the Brandifer- ris on the eve of trial effectively made it impossible for them to properly evaluate the goods for trial purposes. I do not want to foreclose Wawanesa’s ability to challenge the necessity for the Brandiferris to replace some of the items in the Strone warehouse, nor do I have the degree of confidence in the valuation of the costs to replace or repair items damaged at Strone that I have in relation to the Crest Cleaners’ goods. I direct Wawanesa and the Brandiferris to proceed with an appraisal under the Insurance Act with respect to the goods delivered by Strone. 153 In directing an appraisal I rely on the decision of Shaughnessy J. in Greer v. Co-operators General Insurance Co. He observed at para. 10 that “The mechanism of appraisal and dispute resolution under s. 148 and s. 128 of the Insurance Act is an efficient and cost saving measure available to the parties to effectively resolve their dispute.” I also agree with his comments at para. 8 that the existence of the statutory appraisal mechanism: “...evidences a legislative intention that the determination of the disputed value of the loss must be resolved by appraisal before there can be any recovery on the contract. This necessarily implies a continued availability of the appraisal process despite the commencement of any action.” In my view, an appraisal does provide a useful mechanism for 320 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

the determination of the damages relating to the goods held by Strone for Wawanesa. This is the appropriate and feasible remedy in this instance. 154 I further find that Wawanesa is responsible for any charges levied by Strone for its restoration and storage of the goods, and the moving costs for their return of $2,201.66.

Does Strone have a Set-Off Defence? 155 Strone argues that it has a defence of set-off against anything owing to the Brandiferris for construction deficiencies. The set-off relates to unpaid storage charges incurred by the Brandiferris for storage after Octo- ber 3, 2001, when Wawanesa stopped paying the fees and before Strone returned the goods just before trial. Mr. Jenkins notes that this is a defence so that if Strone is not found to be liable to the Brandiferris, no set off occurs; Strone has not counterclaimed for storage fees. 156 What would the amount of any set-off be? 157 Mr. Singer requested Strone to return the goods in a letter to Mr. Jen- kins on June 11, 2007: I understand my clients have attended on a couple of occasions to review the items that are remaining at Strone’s warehouse. Unfortu- nately due to time restraints put on them by Strone they were unable to see all items and determine what they considered salvageable and not. They would like to have all items returned to their home in order to have a better understanding of what items are in fact salvageable and are not. Mr. Singer added that electrical items, mattresses, dried flower arrangements, et cetera should not be returned. He concluded: “Additionally, they would ask that the hardware furniture and oil paintings be cleaned and restored to their pre-fire condition.” 158 The Strone invoice to Wawanesa dated September 27, 2001, indicated that the storage fee was $180.00 per month. It seems to me to be completely unreasonable to permit Strone to charge storage costs after June 11, 2007, when the goods could have been returned. 159 The month of October 2001 is the earliest date on which the Brandiferris might be liable for storage charges. Deeming Strone to have returned the goods by mid-June 2007 works out to 69.5 months at $180.00 per month or a maximum set off of $12,510.00. Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 321

160 Strone’s submission raises the ticklish subject of whether it had a contract with the Brandiferris. Strone’s Statement of Defence stated that the contract was between Strone and Wawanesa. Strone’s witnesses asserted that the contract was between the Brandiferris and Strone. Mr. Jenkins was more circumspect in argument and danced around the issue, eventually submitting that there was a contract since Strone would have sued the Brandiferris for the construction costs if Wawanesa had not paid them. That permitted him to argue that the equitable defence of set off applies, citing PCL Constructors Westcoast Inc. v. Norex Civil Contractors Inc., 2009 BCSC 95, [2009] B.C.J. No. 142 (B.C. S.C.) at para. 49: The law of equitable setoff was discussed in Holt v. Telford, [1987] 2 S.C.R. 193. The judgment sets out a number of points regarding the nature of both legal and equitable setoff, but relevant to this case, the Court held that equitable setoff applies when the mutual obligations in question arise out of the same contract, and setoff is available whether the claimed setoff is liquidated or not: Holt at 207. The reason for this is simple: when there is a close relationship between dealings giving rise to mutual claims, equity will not permit one of them to be insisted upon without taking the other into account: Holt at 213. 161 The “customer authorization” signed by the Brandiferris on Septem- ber 20, 2000, and addressed to Strone is both ambiguous and laconic in terms of normal contractual provisions. It does, however, provide: “I, Salvatore Branbiferri (sic), authorize Strone Construction to proceed with the necessary restoration services to my damaged dwelling and/or contents...(emphasis added).” 162 In my view, however, the contractual relationship between Strone and the Brandiferris was limited to the reconstruction of the house. Although the standard-form language of the customer authorization may seem broad enough to capture the goods, I find that it was Wawanesa, according to Mr. Phin, that directed Strone to remove the goods and not the Brandiferris. There is accordingly no contract between the Brandiferris and Strone with respect to the goods; their arrangement lacks the feature described in P.C.L. Constructors: “the mutual obligations in question arise out of the same contract.” I therefore find that Strone does not have a defence of set-off against the Brandiferris for unpaid storage charges. 322 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

Issue 4: Fraud and the Proofs of Loss 163 Wawanesa takes the position that the Brandiferris’ claim must fail on the basis of fraud. In its Statement of Law, Wawanesa states: The Proof of Loss sworn by Mr. and Mrs. Brandiferri on August 31, 2001 is replete with false statements. By swearing the Proof of Loss, the Brandiferris swore that the items listed were destroyed in the fire. Those statements were false. The Brandiferris, who secured the estimates to support the claim, knew those statements were false. There was neither honest belief, nor inadvertence nor innocent mistake. They were not claiming these items in the context of an honest claim for indemnity but rather in an attempt to secure the maximum payout from the policy and turn this fire as a source of gain. 164 Wawanesa relies on Statutory Conditions 6 and 12, which provide: 6 (1) Upon the occurrence of any loss of or damage to the insured property, the insured shall, if the loss or damage is covered by the contract, in addition to observing the requirements of conditions 9, 10, and 11, b) deliver as soon as practical to the insurer a proof of loss verified by statutory declaration, (i) giving a complete inventory of the destroyed and damaged property and showing in detail quanti- ties, costs, actual cash value and particulars of amount of loss claimed, 12. The loss is payable within sixty days after the completion of the proof of loss, unless the contract provides for a shorter period. 165 Wawanesa also relies on Statutory Condition 7, which provides: 7. Any fraud or wilfully false statement in a statutory declaration in relation to any of the above particulars, vitiates the claim of the person making the declaration. 166 Mr. Phin testified in chief that a proof of loss is typically executed “when the claim is finished...when all of the costs are known, and...the total value of the loss has been established.” 167 Mr. Phin testified in cross-examination that the “main basis” for the fraud claim was with respect to the first proof of loss: “that items were overvalued, and that he was claiming, and primarily, the issue at the time was the fact that he was claiming for all of the furniture which we knew wasn’t — wasn’t damaged by the fire.” It was his view that by means of the proof of loss, the Brandiferris: “were claiming for full replacement costs of the furniture that had been cleaned and stored.” Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 323

The Facts Related to Fraud 168 The Brandiferris filed three proofs of loss with schedules of loss prepared by Ms. Naccarato.

The First Proof of Loss 169 Wawanesa has focussed on the first formal proof of loss dated August 31, 2011. It claimed the following amounts: Building $362,454.13 Furniture and furnishings $154,682.86 Accommodations $ 76,000.00 Clothing, shoes and miscellaneous $ 30,000.00 Total $ 623,137.99 170 Ms. Naccarato prepared the schedule of loss. She had never done one before and got no instructions on how to fill it out. When it was completed she gave it to the Brandiferris’ lawyer, Mr. Kuchar. 171 Ms. Naccarato simply put everything in the house on the list. It had all been taken away. She did not know which items on the list were damaged when she filled it out. Mr. Kwinter asked her: Q. Okay. So, why did you list everything, in this list, both damaged or items that you didn’t know were damaged? Could you explain that to the court? A. Because at the time, that’s what I thought a proof of loss was because they removed everything not knowing what was coming back. First of all, I had no furniture to go through. So I was just going through a list and I was putting amounts. Q. Were you claiming for anything that wasn’t lost or damaged? A. No. Q. Were you in any way trying to mislead the insurance company? A. Not at all. 172 The number for damage to the building in the proof of loss was taken from Strone’s estimate. 173 As described above, Ms. Naccarato got the number for the contents by taking the list received from Urban Clean and Strone and going to a furniture shop and matching up items with things of similar kind and quality. This led to the number $154,683.86. 324 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

174 The clothing number was a placeholder. Ms. Naccarato inserted the figure of $30,000.00, and the attached “Schedule of Loss” simply said “TBA”. She said: “I just assumed 30,000.00”. At the time she did not have the list of the items that were at Crest Cleaners. 175 Mr. Kwinter argued that Ms. Naccarato, who put together the proofs of loss, did so systematically but not correctly, and certainly not fraudulently. 176 Mr. Phin testified that when he reviewed the first proof of loss he had the impression that: “It was inaccurate...fraudulent.” His basic complaint was: “That the values that they were claiming here made no sense whatsoever, essentially claiming everything in the house in the proof of loss.” This included furniture and furnishings that had been “cleaned and stored.” 177 Mr. Phin conceded in cross examination that the insurance company may deal differently with “interim proofs of loss” but he testified that he saw the first proof of loss as a final proof of loss. Mr. Phin was aware that Ms. Naccarato put together supporting and detailed schedules. 178 In fire losses the real opportunity for fraud occurs where the goods have been consumed by fire and are not available to check. This was, however, a case where everything was available for inspection. Mr. Phin said: “I don’t know if we were actually misled.” 179 Mr. Phin testified that in situations where the insurance company has received a proof of loss that is not properly completed, or to which the company has an objection, it is “customary to reject the proof of loss.” In this case there was no rejection letter. Mr. Phin admitted that Wawanesa never wrote back for clarification and never formally rejected the proof of loss. He admitted that he “never made a note anywhere to Mr. Benzie, to your supervisor, to anybody, that there’s a fraudulent claim here.” He admitted that the first time the word “fraud” was in the counterclaim that Wawanesa made against the Brandiferris.

Subsequent Proofs and Schedules of Loss 180 The second proof of loss was dated November 15, 2004, and claimed building costs in the amount of $172,189.62. This was the amount that was estimated by ProCare to be necessary restore the house. 181 The third proof of loss was dated November 22, 2004, and combined a claim for contents of $51,591.61 and additional living expenses of $103,237.34 for a total of $154,828.95. Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 325

182 As described above, Ms. Naccarato assembled a “Summary of Re- ports” setting out the costs related to items that were never returned, additional living expenses, the installation of windows, the ProCare estimate in order to move back into the home and invoices, and finally, professional reports and opinions. She prepared the document sometime in 2004 or 2005 but is not sure of the date. At that time nothing had been returned by Strone Construction.

Discussion 183 The parties agree that Wawanesa bears the burden of proof of fraud. 184 Mr. Kwinter proffered the authority by B. Billingsley, General Prin- ciples of Canadian Insurance Law (1st edition Canada: LexisNexis 2008) at pages 195-197. Relying on Hanes v. Wawanesa Mutual Insurance Co., [1963] S.C.R. 154 (S.C.C.), at 161, the author asserts that a “higher degree of probability” is required. In my view Hanes v. Wawanesa Mutual Insurance Co. was effectively overruled by the Supreme Court of Can- ada in C. (R.) v. McDougall, [2008] 3 S.C.R. 41 (S.C.C.), per Rothstein J. at paras. 26-49, particularly at paragraph 40, where he said: Like the House of Lords, I think it is time to say, once and for all in Canada, that there is only one civil standard of proof at common law and that is proof on a balance of probabilities. Of course, context is all important and a judge should not be unmindful, where appropriate, of inherent probabilities or improbabilities or the seriousness of the allegations or consequences. However, these considerations do not change the standard of proof. 185 I find that the applicable standard of proof of fraud to be met by Wawanesa is on the balance of probabilities. 186 The law is that if the claimant makes an “intentionally false claim” the claim should be dismissed: Daver v. Chubb Insurance Co. of Can- ada, [1996] O.J. No. 3164 (Ont. C.A.) at para. 3-4. A false statement will violate statutory condition 7 if it is made knowingly, without belief in its truth, or recklessly without caring whether it is true or not: Voloudakis v. Allstate Insurance Co. of Canada, [1998] O.J. No. 354 (Ont. Gen. Div.) at para. 65, 68-9. The intention to mislead can be inferred from even a small or proportionally small breach: Fotinos v. Pitts Insurance Co., [1981] O.J. No. 224 (Ont. H.C.) at paras. 14-15, Montini Foods Ltd. (Trustee of) v. General Accident Insurance Co. of Canada, [1997] O.J. No. 1333 (Ont. Gen. Div.) pages 13-15. 326 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

187 I am not persuaded on the evidence that the Brandiferris committed fraud in preparing and filing the first or subsequent proofs of loss, even though they did seek to maximize their recovery. There are a number of reasons that lead me to this conclusion. 188 First, the law in Ontario is that it is not automatically fraud for a plaintiff to put in a claim that might be seen as exaggerated. Mr. Forget relies on the decision in Holland v. Marsh & McLennan Ltd., [1978] N.S.J. No. 652 (N.S. T.D.) where the claimant was suggested to be creat- ing “an opening for negotiations.” As the court noted at para 12: “To start negotiations from a false premise is as serious as to advance a claim which is spurious.” The Ontario law, however, is more tolerant, within limits, of this natural human tendency of claimants to seek to maximize their recovery and to exaggerate. 189 One of the issues confronted by the Ontario Court of Appeal in Pereira v. Hamilton Township Farmers’ Mutual Fire Insurance Co., [2006] O.J. No. 1508, 267 D.L.R. (4th) 690 (Ont. C.A.), was fraud in proof of loss statements. The proof of loss filed claimed $1.2 million, but the statutory appraisal process resulted in a figure for the building of about $200,000.00. The insurance company argued that the greater amount was claimed even though the plaintiff knew that it was too high. The testimony of the public adjuster who had filed the claim was that: The amount claimed was simply an opening salvo in negotiating how much the respondents would receive under the policy. According to Watson, this was a relatively standard practice for him when he was acting for insured parties in negotiations with insurance companies (para. 94). 190 Borins J.A. noted the evidence of the public adjuster: ...that he did not at any time intend to mislead, deceive, or defraud the appellant. Rather, he was simply acting on behalf of his client in an effort to secure payment under the policy. (para. 95) 191 Borins J.A. then turned to the law and made the following observations: 97 The appellant’s ability to succeed on this ground of appeal rests on the proposition that where the insured makes a statement in the Proof of Loss form that he or she knows to be false, this results in a breach of Statutory Condition 7 and the claim is vitiated. On this argument, it is no answer to say that the insured never intended to mislead the insurer. Unfortunately for the appellant, that is not the law. Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 327

98 As a general statement of law, fraud requires some form of intention to mislead or deceive: see Gregory v. Jolley (2001), 201 D.L.R. (4th) 729 at para. 15 (Ont. C.A.), application for leave to appeal dismissed, [2001] S.C.C.A. No. 460. This requirement applies to the Proof of Loss forms and Statutory Condition 7. 192 Borins J. noted: “that the jury accepted Watson’s evidence that the proof of loss, although a statutory declaration made under oath, was used simply an opening salvo in the negotiation process” (para. 101). He did not disturb that jury conclusion. In relying on Cr´edit foncier v. Halifax Insurance Co. (1985), 67 N.S.R. (2d) 142 (N.S. C.A.), the Ontario Court of Appeal approved the statement of Morrison J.A. at page 152: I am compelled to say, however, that in a case such as this where a claim made by Proof of Loss is excessive, that there must be strong evidence to support any finding of fraud. I doubt that there are many Proofs of Loss filed in insurance claims that are exactly accurate. Some leeway must be made in allowing for puffery or establishing a negotiating position. When it is determined that the claimant is indeed indulging only in puffery or in attempting to establish a negotiating position fraud should not be imputed to the claimant. As pointed out in the Short v. Guardian Insurance case, [1984] N.S.J. No. 74, supra, the burden on the insurance company to establish fraud is a heavy one and great care should be taken by the court before finding any claimant guilty of fraud as a result of the contents of the Proof of Loss form alone [emphasis added by Borins J.A.] 193 The idea that it is open to the parties to negotiate is implicit in the Court of Appeal’s review of the facts in Plester v. Wawanesa Mutual Insurance Co., [2006] O.J. No. 2139, 269 D.L.R. (4th) 624 (Ont. C.A.), where Armstrong J.A. said at paragraph 97: I do not regard the proposal to settle the claim at fifty percent as evidence of bad faith on the part of the appellant [insurance company]. As Reinhardt’s unchallenged testimony indicated, he was simply doing what he regularly does in his position as a claims adjuster. 194 In Rodriguez v. Allstate Insurance Co., [1994] O.J. No. 1686 (Ont. Gen. Div.), Chapnik J. accepted the reasonableness of the approach of a public adjuster to estimate costs of repair. She noted at paragraph 46: “Since the NFA approach generally meets the test of reasonableness, each item claimed should be accepted by the court in the absence of pal- pable or overriding error.” 195 Second, the manner in which the claim related to the items in the garage was processed set up a reasonable modus operandi between the 328 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

Brandiferris and Wawanesa. The value of at least one item claim, being the bicycle, was clearly exaggerated. Wawanesa nonetheless processed the claim within the limits of the policy while drawing the issue of exag- geration to Ms Naccarato’s attention. She had simply advanced the number given to her by her brother. 196 Third, the schedules of loss were prepared in circumstances of complete transparency. By this I mean that apart from the items that were destroyed in the garage, the items that were removed from the building were available for inspection. This was not like a typical and paradig- matic fire loss case in which the plaintiff claims recovery for items that were not actually in the fire where the insurer has no way of knowing the truth because everything was destroyed. Ms. Naccarato knew and expected that the claims would be checked by Wawanesa. At the time that Ms. Naccarato prepared the revised Schedule of Loss, for example, she did not know that the clothing had been burnt in the Crest fire. There was no reason for her to think that the revised Schedule of Loss for clothing she assembled would not be checked by Wawanesa as the garage claim had been checked. This makes any imputation of fraud to her inherently implausible. 197 Mr. Forget cross-examined Ms. Naccarato vigorously and at length. She struck me as an intelligent and well-spoken woman. She was candid in her evidence. She was able to explain what she did and why. Her explanations were plausible, sensible and reasonable. She was undoubtedly looking to maximize her parents’ recovery from what she and they saw as a devastating blow. That said, she did not balk at Mr. Benzie’s decision on the garage contents and I have no doubt would have similarly been reasonable in responding to challenges on the valuations of the goods that she provided had Mr. Benzie chosen to make them. She evinced an honest belief in the fairness of the valuation methodology she adopted and the evidence she presented, and in Wawanesa’s ability to make a reasonable response. There was nothing in Mr. Forget’s pressing cross-examination of Ms. Naccarato that led me to form the impression that she engaged in any fraud in relation to the claim. 198 Fourth, Mr. Forget submits that the Brandiferris were lying in claiming that items held by Strone were “destroyed,” since they knew that those goods still existed. This is an absurd submission since at the time the proofs of loss were completed, Wawanesa also knew that the goods were still being held by Strone. The live issue was whether the goods are salvageable. This is still a live issue. An item need not be consumed by Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 329

fire to have been rendered unsalvageable by smoke damage, and that may include hard goods. 199 Finally, I find the late-breaking allegation of fraud to be opportunis- tic. The fact that it first came up in the Statement of Defence and not in the active adjustment of the claim by Wawanesa suggests that it is more a product of legal strategy than factual reality. This was effectively acknowledged by Mr. Forget in argument. 200 Mr. Forget notes that if the court finds fraud, then the court still would have discretion under section 129 of the Insurance Act to grant relief from forfeiture of the policy. Section 129 provides: 129. Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss and a consequent forfeiture or avoidance of the insurance in whole or in part and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just. 201 I consider relief from forfeiture in the event that I am found to be mistaken in my decision that the Brandiferris did not commit fraud. 202 Mr. Forget submits that the court should not grant the plaintiff’s relief from forfeiture in these circumstances. He relies on Campbell v. Waterloo Mutual Insurance Co., [1983] O.J. No. 910 (Ont. Co. Ct.) (Mc- Dermid Co.Ct.J). The plaintiffs sued for the contents of their home which was damaged by fire, but neglected to provide a proof of loss within the time required by statutory condition number 12. The trial judge found the plaintiffs responsible for setting the fire, but commented that even if their only fault had been late delivery of the proof of loss, he would not have granted relief from forfeiture, noting at paras. 148-149: In this regard, it is interesting to note that s. 103 provides some relief where there has been “imperfect compliance”. In this case there has been total non-compliance as opposed to imperfect compliance and in my opinion, the section, therefore, does not apply to give any relief whatsoever to the plaintiffs. However, if I am wrong in this interpretation, it is still my opinion that no relief should be granted. Over 3 1/2 years have expired since the loss occurred and no one knows where many of the damaged items are at this time or, indeed, what actually happened to them. In my opinion, the Campbells failed to act within a reasonable time to retrieve their furniture from their home before the mortgagee sold it. 330 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

They had sufficient time to make arrangements to move the furniture from their home and to store it elsewhere. In this regard, by failing to act to retrieve their property within a reasonable time, they did not move to mitigate their damages. The insurer is not now in a position, even if proof of loss forms were delivered, to view all the various items claimed to have been lost or damaged and to assess the nature and extent of the loss or even to determine so simple a matter as whether an item has been destroyed beyond repair or is capable of being repaired. Although Mr. Rowell took photos to assist him, in my opinion, these are not sufficient to give the insurer the ability to assess adequately the nature and extent of the loss claimed. In addition, the insurer’s right to salvage is lost. In these ways, Waterloo Mutual is severely prejudiced. 203 In this case, by contrast, Wawanesa was at all relevant times able: “to view all the various items claimed to have been lost or damaged and to assess the nature and extent of the loss or even to determine so simple a matter as whether an item has been destroyed beyond repair or is capable of being repaired.” Mr. Forget did not point to, and would have been unable to point to any prejudice to Wawanesa. I would not hesitate to grant relief from forfeiture to the Brandiferris if that were necessary.

Issue 5: Punitive Damages 204 It is trite law that an insurer owes an insured a duty of utmost good faith in investigating, assessing and attempting to resolve claims: 702535 Ontario Inc. v. Non-Marine Underwriters, Lloyd’s London, England, [2000] O.J. No. 866, 184 D.L.R. (4th) 687 (Ont. C.A.). The court recognized at para. 28 that the insurer must proceed with reasonable prompt- ness because the insured “having suffered a loss, will frequently be under financial pressure to settle the claim as soon as possible in order to re- dress the situation that underlies the claim.” At paragraph 29, O’Connor J.A. noted: The duty of good faith also requires an insurer to deal with its insured’s claim fairly. The duty to act fairly applies both to the manner in which the insurer investigates and assesses the claim and to the decision whether or not to pay the claim. In making a decision whether to refuse payment of a claim from its insured, an insurer must assess the merits of the claim in a balanced and reasonable manner. It must not deny coverage or delay payment in order to take advantage of the insured’s economic vulnerability or to gain bargain- ing leverage in negotiating a settlement. A decision by an insurer to Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 331

refuse payment should be based on a reasonable interpretation of its obligations under the policy. The court went on to hold that a breach of the duty to act in good faith gives rise to a separate cause of action distinct from the obligation to pay proceeds under the policy (paras. 32-33). 205 In this case the plaintiffs submit that Wawanesa’s misconduct was egregious. It first made the fraud allegation in the Statement of Defence and Counterclaim. Further, the counterclaim in the amount of $600,000.00 “put a gun to the head” of the Brandiferris by threatening them with “financial ruin.” The abandonment of the counterclaim just before trial underlines the abuse. Mr. Kwinter argues that if Wawanesa, as “a repeat offender,” is allowed to get away with what it did here, then it undermines “the heart of insurance coverage.” There was not a reasonable possibility of proving fraud in this case. It was, he asserts, a con- cocted defence. 206 Mr. Kwinter buttresses this claim by submitting that Wawanesa breached its duty of good faith by making the final payment to Strone despite the Brandiferris’ instruction. He asserts that this exemplifies the cosiness between Strone and Wawanesa, which is further illustrated by the fact that there is no ligation between Strone and Wawanesa. He also points to Wawanesa’s failure to advise the Brandiferris of the Crest Cleaners fire until three years after it occurred, 207 The plaintiffs rely on the decision of the Supreme Court of Canada in Whiten v. Pilot Insurance Co., [2002] 1 S.C.R. 595 (S.C.C.). In that case the insurer alleged arson although there was no air of reality to it. The Court upheld a jury award in the amount of $1 million, although it noted that the amount was higher than the court would have awarded. Binnie J. laid out the basic principles behind an award of punitive damages at paragraph 94 of the decision. Picking up some expressions in that decision, Mr. Kwinter argues that Wawanesa has engaged in “highhanded, malicious, arbitrary or highly reprehensible misconduct that departs to a marked degree from ordinary standards of decent behaviour.” He high- lights the “relative vulnerability of the plaintiff.” Mr. Kwinter submits that the “objectives of retribution, deterrence and denunciation” apply to serious insurer misconduct. 208 Mr. Kwinter notes that in Plester v. Wawanesa Mutual Insurance Co., [2006] O.J. No. 2139 (Ont. C.A.), another case in which the insurer alleged arson, the Court of Appeal upheld the jury award in the amount of $350,000.00 against insurance liability of about $400,000.00 and but re- 332 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

duce aggravated damages from $175,000.00 to $50,000.00. The Court of Appeal nonetheless found the amount of punitive damages to be higher than it would have awarded. Based on the outcome of Plester, Mr. Kwinter describes Wawanesa is a “repeat offender”. 209 Mr. Kwinter submits that an award of punitive damages in the amount of $350,000.00 plus aggravated damages in the amount of $50,000.00 would be appropriate and are necessary to get Wawanesa’s attention and secure its reform. 210 Mr. Forget argues that this is not a case for punitive damages: “It has been conceded by several parties to the action, including Salvatore Brandiferri, Vince Naccarato, Pina Naccarato and Tony Diceglie, that Mr. Benzie acted fairly and promptly in the circumstances. Tony Diceg- lie went even further stating Wawanesa was too generous in circumstances providing additional scopes of damages and agreeing to replace items which were clearly not damaged by any smoke.” Mr. Forget submits that Wawanesa’s conduct must be seen as a whole and that it does not meet the standard required by the cases: “It is submitted that in the face of the Brandiferris breaching their duty of good faith, Wawanesa acted fairly and promptly in responding to the claim and the Brandiferris have failed to show otherwise.”

Discussion 211 Mr. Forget’s argument does not address the gravamen of Mr. Kwinter’s complaint about Wawanesa’s high-handed litigation strategy, which Mr. Forget did not attempt to justify. 212 Part of an insurer’s duty of utmost good faith in investigating, assessing and attempting to resolve claims must attach to the insurer’s litigation strategy against the insured when the claim is disputed. This does not mean, as O’Connor J.A. noted in 702535 Ontario Inc., that the duty of good faith forces an insurer to be correct in making a decision to dispute a claim (at para. 30), and see Fidler v. Sun Life Assurance Co. of Canada, [2006] 2 S.C.R. 3 (S.C.C.) at paras 63, 71. But the insurer may not abuse its financial power, knowing that the insured, “having suffered a loss, will frequently be under financial pressure to settle a claim as soon as possible” (702535 Ontario Inc., at para. 28). 213 The fraud allegation was late breaking and was only made after the action was started in the Statement of Defence and Counterclaim. I find this to have been a high-stakes litigation strategy designed to intimidate the Brandiferris. I do not accept Mr. Phin’s evidence that he concluded Brandiferri v. Wawanesa Mutual Insurance Co. P.D. Lauwers J. 333

early that the claim was fraudulent. Nothing in Wawanesa’s written record or the conduct of its personnel corroborates that assertion. His self- serving evidence on that issue, in the context of all of the information available to all of the participants and their pattern of conduct in adjust- ing the claims including the garage claim, simply does not bear scrutiny. 214 I accept that Wawanesa is a repeat offender and ought to be punished significantly. That said, punitive damages ought to be proportional. I fix punitive damages in the amount of $100,000.00 to be paid by Wawanesa to the Brandiferris. 215 I now consider the plaintiffs’ claim for aggravated damages. In Fidler the Supreme Court refers to a category of contracts in which damages for mental distress or breach might be awarded as a foreseeable consequence of a breach. That case concerned a disability policy, but it seems to me that a homeowner’s insurance policy falls into the category of the “peace of mind” class of contract to which the Court adverts. 216 At paragraphs 51-53 the Court speaks of damages for mental distress in a contractual setting as an instance of “aggravated damages.” The Court notes, however, that evidence is required: 47 This does not obviate the requirement that a plaintiff prove his or her loss. The court must be satisfied: (1) that an object of the contract was to secure a psychological benefit that brings mental distress upon breach within the reasonable contemplation of the parties; and (2) that the degree of mental suffering caused by the breach was of a degree sufficient to warrant compensation. These questions require sensitivity to the particular facts of each case. 217 The plaintiffs led no evidence of mental distress on which to base such compensation. I decline to grant such “aggravated damages” on nothing more than an inference of mental distress. In this instance only I accept Mr. Forget’s submission that an adverse inference should be drawn from the fact that the Brandiferris did not testify. 218 In Fidler the Court also criticizes the use of the label “aggravated damages” in relation to “peace of mind” contracts as “unnecessary and, indeed, a source of possible confusion” (para. 53). The conceptual basis for aggravated damages outside of the “peace of mind” contract cases is unclear, but it seems to me that such damages are best addressed within the conceptual framework of punitive damages, which I have already assessed. I therefore decline to award aggravated damages of a punitive nature. 334 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

219 Judgment accordingly. If the parties cannot agree on the calculation of the numbers they may contact the trial co-ordinator in Newmarket for an appointment to settle them. 220 The plaintiffs have been successful and are entitled to costs. If these cannot be agreed between the parties, I will accept written submissions on a 10-day turnaround basis starting with the plaintiffs and ending with the plaintiffs’ reply submissions. Action allowed. Singh v. Insurance Corp. of British Columbia 335

[Indexed as: Singh v. Insurance Corp. of British Columbia] Hankar Singh, Plaintiff and Insurance Corporation of British Columbia, Defendant British Columbia Supreme Court Docket: Vancouver S116123 2012 BCSC 870 T.A. Schultes J. Heard: April 24, 2012 Judgment: May 14, 2012 Civil practice and procedure –––– Pre-trial procedures — Severance — Of issues –––– Insured was elderly individual who alleged his vehicle had been stolen — Insured submitted claim to insurer — Insurer denied claim on basis of fraud — Insured commenced action against insurer for damages for breach of contract of insurance and bad faith — Insurer brought application for order staying bad faith claim pending outcome of coverage issue — Application granted — Balancing of interests came down in favour of bifurcation of issues — Successful bad faith claim was dependent on entitlement to coverage — Insurer established that having to defend bad faith claim at this stage could require it to waive solicitor-client privilege — Application was not premature — Insured’s age was not particular factor in light of his delay in pursuing action — In any event, insured’s evidence could be preserved by deposition, and bad faith claim would focus on insurer’s conduct rather than insured’s. Insurance –––– Actions on policies — Practice and procedure — Miscellane- ous –––– Insured was elderly individual who alleged his vehicle had been stolen — Insured submitted claim to insurer — Insurer denied claim on basis of fraud — Insured commenced action against insurer for damages for breach of contract of insurance and bad faith — Insurer brought application for order staying bad faith claim pending outcome of coverage issue — Application granted — Balancing of interests came down in favour of bifurcation of issues — Successful bad faith claim was dependent on entitlement to coverage — Insurer established that having to defend bad faith claim at this stage could require it to waive solicitor-client privilege — Application was not premature — Insured’s age was not particular factor in light of his delay in pursuing action — In any event, insured’s evidence could be preserved by deposition, and bad faith claim would focus on insurer’s conduct rather than insured’s. 336 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

Cases considered by T.A. Schultes J.: Brennand v. Sun Life Assurance Co. of Canada (2011), 2011 CarswellBC 1412, 2011 BCSC 759, 2011 C.E.B. & P.G.R. 8440, [2011] I.L.R. I-5156, 1 C.C.L.I. (5th) 237 (B.C. S.C.) — considered Wonderful Ventures Ltd. v. Maylam (2001), 2001 BCSC 775, 2001 CarswellBC 1516, 31 C.C.L.I. (3d) 298, 91 B.C.L.R. (3d) 319, [2001] B.C.J. No. 1144 (B.C. S.C. [In Chambers]) — considered

APPLICATION by insurer for order staying insured’s bad faith claim pending outcome of coverage issue.

K.F. Gourlay, for Mr. Singh M.J. Hewitt, for ICBC

T.A. Schultes J. (orally): 1. Introduction 1 This is an application by the defendant, the Insurance Corporation of British Columbia (“ICBC”), to have the plaintiff Hankar Singh’s claim for breach of duty of good faith severed off and stayed until his claim for insurance coverage has been decided. Incidental to that order, ICBC seeks to have its discovery and document production obligations on the bad faith claim stayed until the decision about coverage is made.

2. Background 2 This action arose out of Mr. Singh’s report in October of 2009, that his Mercedes had been stolen and his resulting claim for indemnification. ICBC denied the claim. 3 The notice of civil claim was filed in September 2011. It can be bro- ken down into two essential components. First is the claim for coverage for the theft under the insurance contract. Second, Mr. Singh seeks aggravated and punitive damages arising from ICBC’s duty to act in good faith in handling the claim. 4 Under the breach of good faith component Mr. Singh alleges that there were deficiencies in ICBC’s internal guidelines and procedures, such as failing either to have or to follow them in relation to the timely, reasonable and effective assessment of claims. He also alleges that ICBC did not have properly trained personnel making these assessments, and had a policy that encourages the denial of claims. Singh v. Insurance Corp. of British Columbia T.A. Schultes J. 337

5 As I will discuss, Mr. Singh is prepared to abandon some of these allegations to avoid the necessity of severing the claims.

3. ICBC’s Position 6 ICBC submits that the bad faith allegations will make relevant, but not producible, communications that are protected by solicitor-client privilege. It has already successfully objected, before Master Scarth, to producing of a portion of a report of its Special Investigation Unit (“SIU”), on the basis that it contains advice from one of its in-house counsel. 7 In addition to confirming that he gave the advice that has been redacted from the SIU’s report, the in-house counsel has deposed that ICBC has sought (and will continue to seek) advice from the firm that represents it in this action, about both the coverage and bad faith aspects. His affidavit also raised the possibility that ICBC will have to rely on some of the communications with members of that firm in its defence of the bad faith claim. This would require its counsel in this action and other members of his firm to withdraw so that they can give evidence as witnesses. Mr. Singh’s counsel has objected to this affidavit, because it purports to have been filed in response to his material, when in fact it asserts matters of privilege that should have been part of ICBC’s original application material. I will deal with that objection in a moment. 8 In overview, ICBC submits that it should not have to decide whether to waive privilege in order to defend the bad faith claim, when Mr. Singh’s contractual entitlement to coverage has not yet been established. If he is not entitled, it is submitted, the issue of bad faith will not arise. ICBC relies on a line of authority that was well summarized in Brennand v. Sun Life Assurance Co. of Canada, 2011 BCSC 759 (B.C. S.C.), which in turn builds on the decision in Wonderful Ventures Ltd. v. May- lam, 2001 BCSC 775 (B.C. S.C. [In Chambers]). 9 The critical portion of Brennand for the purposes of this application begins at para. 29: [29] In my view, the cases in British Columbia that have ordered severance of bad faith from entitlement are specific applications of the general rules relating to severance that take into account the particular circumstances that frequently arise when a bad faith claim is advanced. Critically, those cases have turned on the need to protect solicitor client privilege and the prejudice that would be incurred by a defendant who may be required to waive privilege and possibly retain new counsel in circumstances where the plaintiff has not yet 338 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

established entitlement, without which the evidence relating to bad faith, including legal advice, is not relevant. [30] The issue of severing or bifurcating entitlement and bad faith claims is a matter of balancing interests in the principled exercise of discretion. The case that establishes the framework of analysis and provides guidance on the weighing of factors is Wonderful Ventures Ltd.. Garson J. (as she then was) stated: [33] I find that the prejudice to CNS [the insurer] of having the contract claim and the bad faith claim tried together overrides any inconvenience, cost or expense which may be suffered by Wonderful Ventures as a result of my severing paragraphs 67 to 70 of the Amended Statement of Claim. As noted, in R. v. McClure (supra) the protection of privileged communications is fundamen- tal to the legal system and in my view should not be interfered with lightly. [34] If there is any prejudice to Wonderful Ventures that would arise from having two trials, it is on balance less significant than the prejudice to CNS in having to disclose privileged communications. With severance, if Wonderful Ventures does not succeed on the contract claim, there will be no subsequent trial on the bad faith claim. If Won- derful Ventures succeeds on the contract claim, it will recover the insurance moneys found due under the contract, and possibly, damages. Wonderful Ventures will not have to await the outcome of the subsequent bad faith trial before being made whole, at least in respect to pecuniary losses. [Emphasis in original.] 10 On a more practical level, ICBC also submits that the discovery process will be much more extensive if its internal policies and procedures need to be addressed, and that if entitlement is not ultimately proven the additional time and expense of protected discoveries will have been unnecessary.

4. Mr. Singh’s Position 11 Mr. Singh has raised a number of points in opposition to the application. 12 He is elderly and in ill health and his affidavit expresses the concern that the delay that would be caused by a severance of entitlement and bad faith will lead to a decline in his ability to recall the events surrounding Singh v. Insurance Corp. of British Columbia T.A. Schultes J. 339

the theft. Even more seriously, he may not be well enough to see the process through to its end. The combined trial is currently set for late 2013, so a bifurcation could result in him being almost 80 years old before both claims are resolved. This, along with the obvious additional cost of two trials, amounts to significant prejudice, it is argued. 13 In addition, Mr. Singh’s counsel submits that the essence of the bad faith claim is that ICBC has treated this as a case of fraud without a reasonable basis. He submits that this makes the bad faith claim quite straightforward in comparison to a case such as Brennand, because no scrutiny or interpretation of documents or policies is needed — only a consideration of whether there was ever really any proper basis to deny coverage. 14 In a late affidavit whose admissibility is disputed by ICBC, Mr. Singh has appended some items from ICBC’s list of documents concerning the investigation, which are said to show the tenuous basis of the denial of coverage. These were: • an RCMP investigation report into the theft of Mr. Singh’s vehicle, which describes him as not appearing interested in the details of the burning of his vehicle after it was stolen; • the report of a locksmith retained by ICBC, which explains that the vehicle should not have been drivable without a key and points out that one of the only two issued keys is unaccounted for; and • a copy of Mr. Singh’s initial report to one of ICBC’s adjusters, in which he describes having mislaid the second key. 15 Mr. Singh’s counsel also reviewed the SIU’s report, which he submitted had reached its conclusions on inaccurate and speculative bases. 16 Counsel further notes that the circumstances of this case are also different than Brennand in that the bad faith claim is actionable independently of the coverage issue, if a decision was made to deny coverage from the outset as Mr. Singh alleges. 17 Counsel emphasizes that bifurcation is an exceptional remedy and that the facts of an individual case and the balancing of interests based on those factors are what should govern. There is certainly no blanket rule that severance should occur simply because a bad faith claim is going to be raised by Mr. Singh and there is a mere possibility of privileged matters being relied on. 340 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

18 He explains that Mr. Singh’s attempt to obtain unredacted portions of the SIU report does not foretell an ongoing search for privileged material for its own sake. 19 He suggests that a pragmatic approach should be taken here. He has indicated a willingness not to proceed on those allegations that potentially raise the ICBC’s internal procedures within the bad faith claim. Those are subparagraphs (e) to (h) of that allegation in the Notice of Civil Claim. 20 He also suggests that the need to rely on privileged material remains speculative at this point and that it is preferable to take a wait-and-see approach, with ICBC always able to insist on particular items not being produced if a privilege issue arises. It is not inevitable that the parties are on a collision course in this regard. 21 Further, he submits that it is not clear what reason there would be for advice given by ICBC’s current counsel to arise in the defence of the bad faith claim. The allegations of bad faith in the notice of civil claim are based on matters that predate the retainer of current ICBC’s counsel. That is different from the situation in Wonderful Ventures Ltd., in which counsel for the insurer had advised on the coverage issues from the very outset, before litigation arose. More primarily, it is submitted, legal advice is not in itself a defence to a bad faith claim in any case.

5. Discussion 22 I will resolve the dispute on affidavits first. 23 I think that the affidavit from ICBC’s in-house counsel is properly responsive. It represents evidence from someone within that organization asserting that privileged material may have to be revealed in the ongoing defence of the bad faith claim. The absence of such evidence on behalf of ICBC itself was first raised by Mr. Singh in the application response material. ICBC is not required to anticipate in its initial material all possible responses that may be provided. Indeed, that is the purpose of permitting a further response by an applicant. 24 I am also prepared to receive the late affidavit from Mr. Singh. It consists in essence of appended documents that were previously disclosed by ICBC from its own possession and it is relied on by Mr. Singh solely for the purposes of explaining the alleged deficiencies in the refusal of coverage. ICBC is not prejudiced in any manner by my reference to them for that purpose alone. Singh v. Insurance Corp. of British Columbia T.A. Schultes J. 341

25 The strong general presumption is obviously that all issues arising from a particular event or transaction should be litigated together. The efficient use of court resources, the maintenance of reasonable costs to the parties and the consistency of outcomes on all issues are advanced by doing so. It is only when the balancing of interests in a specific case displaces that presumption that separate trials of issues should be considered. As the line of cases culminating in Brennand shows, the paramount value to our system of upholding solicitor-client privilege means that the availability of a staged trial process that may avoid the need to waive the privilege can be sufficient reason to justify bifurcation. 26 I think counsel for ICBC is correct that, academic or theoretical possibilities aside, the route to a successful bad faith claim here has to pass first through a finding of entitlement to coverage. The real question becomes whether I should take ICBC’s assertion about the possibility of having to waive privilege in the bad faith portion at face value at this stage, in light of what Mr. Singh’s counsel has submitted are strong indi- cations that it is unlikely to arise. Even if I should weigh that likelihood, how do Mr. Singh’s personal circumstances affect that balancing process? 27 First of all, ICBC is correct that Brennand endorses an analysis in which the assertion of a defendant that the privilege issue may arise (see para. 41) is sufficient to trigger the concerns. Judicial comity requires me to take the same approach, although I think it is the correct one in any case. In that regard the affidavit of ICBC’s in-house counsel is adequate for the purpose. Even if it were not, we have before us a concrete example of legal advice already being redacted from the SIU report and that redaction being upheld by a master. This seems highly likely to be advice that ICBC will want to rely on in the bad faith claim, given the apparent importance of the report and its conclusions to a decision to deny coverage. 28 I found the possibility of counsel for ICBC in this action having to withdraw and testify to give evidence of legal advice somewhat less compelling, and a bit different than the situation in Brennand and Wonderful Ventures Ltd.. The present claim, as Mr. Singh’s counsel has explicitly stated, stems purely from pre-litigation decisions, in which ICBC’s present counsel and his firm would have had no part. 29 I agree with ICBC’s counsel that insisting on detailed explanations of the potential privileged material to be waived defeats the very purpose of protecting it, but even bearing that caution in mind I still found this justi- 342 CANADIAN CASES ON THE LAW OF INSURANCE 11 C.C.L.I. (5th)

fication less convincing than the likely relevance of the advice in the SIU report. Put another way, it was not clear to me on the current evidence how ongoing advice from present litigation counsel could arise, if the claim is as confined as Mr. Singh suggests. 30 However, I also cannot accept Mr. Singh’s suggestion that a bifurcation application can well await an issue of privilege actually arising. If pre-trial representations to that effect are not sufficient, then the only alternative is the benefit of severance arising after the leading of evidence on the point in the course of a combined trial on both issues, something that would be even less efficient and more costly than what ICBC seeks. I am not sure what else ICBC could raise in advance of a trial beyond what it raises now. 31 It is also no comfort to ICBC that Mr. Singh’s counsel wants nothing disclosed that is properly determined to be privileged. It is ICBC’s ability to defend itself, but only at the cost of waiving privilege, and not simply its ability to resist disclosure applications that is at issue. 32 I find that ICBC has demonstrated a realistic possibility that it will have to decide whether or not to waive its solicitor-client privilege over material in the bad faith case — specifically the advice contained in the SIU report. There may be other reasons that emerge, but that is the one on which I rely at this point. 33 The only other factors that could affect the balancing process, given that finding, are Mr. Singh’s personal ones. While I am sympathetic to the risks to the integrity of his evidence posed by his age and health, the reality is that the concern about his age has been in play since the theft of his vehicle occurred, and for whatever reason he has not acted with particular urgency in the commencement of his claim. 34 I also agree with ICBC’s counsel that Mr. Singh’s evidence can be preserved against any declining health and memory loss by a deposition, and that in any case the bad faith trial will focus on the propriety of ICBC’s actions, rather than on Mr. Singh’s.

6. Conclusion 35 For these reasons, I conclude that the balancing of interests in this particular case comes down in favour of a bifurcated trial, and so I will grant the relief sought by ICBC in paragraphs 1 and 2 of its notice of application. Costs will be to ICBC in the cause. Application granted.