Ontario Court of Appeal dismisses insurance lawyer cheque case

In April 2018, Sylvia Zwaan lived on a farm with her partner Michael Al-Saati. When a fire destroyed their barn, being wisely insured, the pair received an insurance payout. The cheque, issued by specialty insurer Intact Insurance, was made payable to Zwaan and Merk Investments Ltd., the original mortgage lender on her property, though the mortgage had been transferred to another lender, Larry Kelln, unbeknownst to Zwaan.

According to Zwaan’s testimony, she endorsed the cheque and gave it to LaFramboise, intending for him to secure Merk’s endorsement and deposit it into his trust account to apply the funds toward her mortgage. However, LaFramboise deposited the cheque into his personal account. He later argued that he had applied the funds toward mortgage payments, a claim the court ultimately rejected.

The trial judge found Zwaan’s account credible, while she questioned the reliability of LaFramboise’s testimony. LaFramboise contended that he had acted under Al-Saati’s instructions to apply the funds to Zwaan’s mortgage payments, but he acknowledged that he did not receive authorization from Zwaan to deposit the cheque in his personal account.

The fresh evidence motion

As part of his appeal, LaFramboise sought to introduce fresh evidence in the form of Zwaan’s bank statements, claiming they would demonstrate inaccuracies in her trial testimony. He argued that Zwaan had not consistently made mortgage payments as she had testified. LaFramboise contended this new evidence would support his position that he applied the insurance funds toward mortgage payments rather than retaining them for personal use.

However, the court denied the motion to introduce this evidence, stating it could have been reasonably obtained before trial if LaFramboise had disclosed his defence argument in a timely manner. The court found that the proposed evidence did not meet the criteria for admissibility as fresh evidence and would not have likely changed the outcome.

LaFramboise also attempted to admit an affidavit from Michael Slattery, CEO of Merk Investments, who asserted that LaFramboise was responsible for mortgage payments on the property. However, the affidavit had not been subject to cross-examination, and the court concluded it did not qualify as admissible fresh evidence since no motion had been filed to include it.

Key issues on appeal

LaFramboise’s appeal raised three primary arguments:

1. He contested that the trial judge improperly held him to a lawyer’s fiduciary standard in the absence of a solicitor-client relationship.
2. He argued the trial judge’s findings were based on insufficient evidence, such as bank records.
3. He claimed the order for payments to Zwaan was excessive given that other funds from the property sale were held in court in related litigation.

The Court of Appeal found no merit in these arguments, affirming that the trial judge’s findings were based on a sound assessment of credibility and factual evidence. The court noted that the judge had carefully considered all evidence, including LaFramboise’s failure to provide bank records detailing the disposition of the insurance funds.

The appeal judgment upheld the punitive damages of $50,000 awarded by the trial court. Although the punitive damages significantly exceeded the $36,200 owed, LaFramboise did not challenge the amount on appeal. Consequently, the court did not re-evaluate the quantum but noted that punitive damages were warranted given the circumstances.

The Court of Appeal ordered LaFramboise to pay $15,000 in costs to Zwaan, bringing final closure to this case.