Insurance Law - Interpretation of Exclusion Clauses, Conflict of Laws - Foreign Judgments, Civil Procedure - Appeal - Standard of Review
This appeal was taken by CE Design (CE), an Illinois company, and the representative plaintiff in a class action lawsuit brought in Illinois against Homegrown, Monty Loree and Lisa Loree (Homegrown), insureds of a Saskatchewan-based insurance company (SMI). CE was a defendant in an action filed in Saskatchewan and brought by SMI. CE appealed to overturn two unreported decisions made in 2015 by a Queen’s Bench judge in Saskatchewan in the course of the action. In the first decision (CE Design Ltd. v Saskatchewan Mutual Insurance Company, QB 171/08, JCS, Apr5/19) (stay decision), the chambers judge dismissed CE’s application to stay SMI’s Saskatchewan action and in the second decision (Saskatchewan Mutual Insurance Company v Homegrown Advertising Inc., QB 171/08, JCS, Apr5/19) (summary judgment) the same judge allowed SMI’s summary judgment application for declaratory relief that SMI had no duty to defend Homegrown in the class action and bore no liability to CE. Homegrown was a Saskatchewan business providing unsolicited fax advertising for its customers. It was hired by an Illinois company to provide this service and sent thousands of unsolicited advertisements by fax to businesses in Illinois, contrary to the Telephone Consumer Protection Act of 1991, 47 USC § 227 of that state. CE was certified by Illinois law as the representative plaintiff in a class action against Homegrown for damages resulting from this statutory breach. The class action was eventually settled and approved by the appropriate court in Illinois. By the terms of the settlement, CE and Homegrown agreed that the amount of the settlement was $5,000,000.00, but Homegrown would not be liable to pay it, and CE would look to SMI for recovery of the amount. SMI had not been given notice of the class action or the settlement. CE obtained default judgment against SMI and applied in 2008 to Queen’s Bench in Saskatchewan pursuant to The Enforcement of Foreign Judgments Act to register it, but the application was dismissed by the chambers judge because SMI “did not receive notice of the commencement of proceedings in sufficient time to present a defence” (see: 2008 SKQB 12). Immediately following that ruling, SMI commenced its action against CE and Homegrown. In response, CE brought an application to Queen’s Bench arguing that the court had no jurisdiction over the proceedings or the subject matter of the action, and that the action should be dismissed. The chambers judge dismissed the application after reviewing The Court Jurisdiction and Proceedings Transfer Act, finding that the action had a substantial connection with the jurisdiction; both SMI and Homegrown were based in Saskatchewan, and the insurance policy central to the action was made in Saskatchewan and governed by Saskatchewan and Canadian law (see: 2009 SKQB 358). The chambers judge further found that the balance of convenience favoured that the action be continued in Saskatchewan. Also in 2008, CE, now with full knowledge that SMI’s Saskatchewan action had been court-endorsed, tried to enforce its default judgment in Illinois. In 2013, SMI tried in five separate applications to have the default judgement set aside. Under Illinois law, SMI was barred from so doing for procedural reasons. SMI was not able to argue the merits of its claim that by the terms of the insurance policy it was not liable to Homegrown for any losses arising from the sending of the unsolicited faxes. It was at this point that SMI sought summary judgment, and CE a stay of the action.
HELD: The Court of Appeal dismissed the appeal, in large measure because it found that CE’s grounds of appeal were outside the court’s scope of review. With respect to the standards of review, the court stated that the identification of the applicable law and the interpretation of that law is subject to a standard of correctness, and so an error of this kind is an error of law; questions of mixed law and fact, and questions of fact, required deference to the decisions of the lower court and so are subject to a palpable and overriding error standard of review; the standard of review for abuse of process decisions is deferential as these are discretionary, which means that the court will not intervene except where the lower court has made an error in principle, disregarded or misinterpreted a material fact, failed to act judicially, or a result is so plainly wrong that it amounts to an injustice. A decision to proceed by way of summary judgment is a question of mixed law and fact, and absent an error in principle, the decision should not be overturned, except in the case of a palpable and overriding error. As to the standard of review as it pertains to the interpretation of insurance contracts, in this case, it was one of correctness. The appeal court reviewed the stay decision and the summary judgment with these standards in mind. The main ground of appeal advanced by CE with respect to the stay decision was that SMI was given an opportunity in Illinois to fully state its case on the merits during the hearings leading to the Mullen and Ortiz decisions such that it would be abusive and contrary to the law with respect to multiplicity of proceedings in Saskatchewan, particularly in light of The Court Jurisdiction and Proceedings Transfer Act, for SMI’s claim to be allowed to continue. The appeal court ruled that it was open on the evidence for the chambers judge to find that SMI’s policy or coverage defences to CE’s claims had not been considered fully since no evidence had been called or considered by the courts with respect to these defences. Expert evidence had been presented by affidavit during the stay decision hearing. The chambers judge preferred the opinion evidence of the expert called by SMI who testified that the Illinois court had not as a matter of law considered whether the policy required SMI to defend Homegrown against CE’s claims. It was within his discretion to accept that evidence in preference to the evidence of the expert called by CE. As the chambers judge was entitled to find the coverage defences had not had a full hearing, and had applied the relevant law and made the necessary rulings, the appeal court dismissed the appeal of the stay decision. Turning to the summary judgment, the appeal court found that the chambers judge made no error in deciding to proceed in this manner. He had made no error in principle and had judicially exercised his discretion to so do. In his consideration of SMI’s claim that Homegrown had no coverage under the policy, the chambers judge found that Homegrown was not covered under the policy because Homegrown had failed to inform SMI of the settlement negotiations as required by the policy, and Homegrown’s actions in sending the faxes were not accidental, but were intentional, so were not covered for that reason. The appeal court found no error in principle in this reasoning, but thought the judge should have embarked on a more thorough interpretation of the definitions of “property damage” and “accident,” finding that property damage had resulted from the sending of the faxes because of the wasted toner, wear and tear on the fax machines, and waste of staff time. The appeal court also interpreted “accident” to mean an act which was unintended, unlike the intentional sending of faxes.