2011 NBCA 98, 2011 NBCA 98

COURT OF APPEAL OF NEW BRUNSWICK 49-10-CA ESTATE OF MICHAEL BURKE, as represented by HAROLD VERNON HALL, Administrator, and 1021256 ONTARIO INC. APPELLANTS SUCCESSION DE MICHAEL BURKE représentée par HAROLD VERNON HALL, administrateur, et 1021256 ONTARIO INC. , APPELANTES, - and - - et - ROYAL & SUN ALLIANCE INSURANCE COMPANY OF CANADA RESPONDENT ROYAL & SUN ALLIANCE DU CANADA, SOCIÉTÉ D’ASSURANCES , INTIMÉE Estate of Michael Burke and 1021256 Ontario Inc. v. Royal & Sun Alliance Insurance Company of Canada, 2011 NBCA 98 Succession de Michael Burke et 1021256 Ontario Inc. c.

Royal & Sun Alliance du Canada, société d’assurance, 2011 NBCA 98 CORAM: The Honourable Chief Justice Drapeau The Honourable Justice Larlee The Honourable Justice Quigg CORAM : L’honorable juge en chef Drapeau L’honorable juge Larlee L’honorable juge Quigg Appeal from a decision of the Court of Queen’s Bench: March 18, 2010 Appel d’une décision de la Cour du Banc de la Reine : Le 18 mars 2010 History of Case: Historique de la cause : Decision under appeal: 2010 NBQB 100 Décision frappée d’appel : 2010 NBBR 100 Preliminary or incidental proceedings: N/A Procédures préliminaires ou accessoires : s.o.

Appeal heard: June 17, 2011 Appel entendu : Le 17 juin 2011

Judgment rendered: November 3, 2011 Jugement rendu : Le 3 novembre 2011 Reasons for judgment by: The Honourable Chief Justice Drapeau Motifs de jugement : L’honorable juge en chef Drapeau Concurred in by: The Honourable Justice Larlee The Honourable Justice Quigg Souscrivent aux motifs : L’honorable juge Larlee L’honorable juge Quigg Counsel at hearing: For the appellants: Lee McKeigan-Dempsey For the respondent: Terrence L.S. Teed, Q.C. and Emmy M. Chiasson Avocats à l’audience : Pour les appelantes : Lee McKeigan-Dempsey Pour l’intimée : Terrence L.S. Teed, c.r., et Emmy M.

Chiasson THE COURT The appeal is allowed with costs. The decision rendered in the Court of Queen’s Bench is set aside and the Court declares that Michael Burke was, at all material times, an insured person and an eligible claimant for underinsured motorist coverage purposes in connection with the June 10, 2000 motor vehicle accident that gave rise to the underlying litigation. LA COUR L’appel est accueilli avec dépens.

La décision rendue par la Cour du Banc de la Reine est annulée et la Cour déclare qu’à l’époque déterminante, Michael Burke était un assuré et un demandeur admissible aux fins de la garantie sous-assurance des tiers relativement à l’accident de véhicule à moteur du 10 juin 2000 qui a donné lieu à l’instance sous-jacente. The judgment of the Court was delivered by DRAPEAU, C.J.N.B. I. Introduction [ 1 ] Michael Burke was severely injured when, through no fault of his own, the Peterbilt truck he was operating as part of a tractor-trailer combination collided head-on with an uninsured automobile.

The policy of insurance covering the Peterbilt provided un insured motorist coverage, but no under insured motorist protection. However, the latter was afforded to Mr. Burke by an N.B.E.F. No. 44 – Family Protection Endorsement attached to the policy Royal & Sun Alliance Insurance Company of Canada had previously issued for his personal vehicle, a Chevrolet pickup truck. In the twilight stages of the proceedings in first instance, Royal & Sun Alliance formally admitted both Mr. Burke and “his” company, the appellant 1021256 Ontario Inc., were “named insured” under its

policy and for NBEF 44 purposes. [ 2 ] The NBEF 44’s “Insuring Agreement” obligates the insurer to indemnify an “insured person” who is an “eligible claimant” for the compensatory damages he or she is legally entitled to recover from an inadequately insured motorist.

That obligation is “subject to the provisions” of the NBEF 44, chief among which are Clause 1 (“Definitions”) and Clause 4, which provides for the deduction of amounts recovered and recoverable by the claimant from various “sources”. [ 3 ] Pursuant to Clause 1(c), the words “eligible claimant” include “the insured person sustaining bodily injury” (emphasis added). Since a corporation cannot sustain bodily injury, it is common ground that 1021256 Ontario Inc., although a “named insured”, could never qualify as an “eligible claimant”.

Accordingly, the only “named insured” for which the NBEF 44 might provide indemnity is Mr. Burke, and, ultimately, his eligibility hinged upon the application of the definition of “insured person” in Clause 1(f)(i) (2), the lead part of which recognizes that a “named insured” is covered while occupying not only the policy’s “described automobile” but, as well, any other automobile. There is, however, an exclusion from that coverage: a named insured who “owns” the other automobile is not an “insured person” for the purposes of the NBEF 44 attached to the policy in respect of the “described automobile”.

As is well known, the purpose of this ownership exclusion, which is entirely unobjectionable, is to compel a person who “owns” several automobiles to purchase underinsured motorist coverage in respect of each. [ 4 ] At all material times, Mr. Burke was the only officer and shareholder of 1021256 Ontario Inc., which, in turn, was the sole registered owner of the Peterbilt involved in the accident.

After nearly a decade of interlocutory proceedings (including various motions as well as documentary and oral discovery), the exchange of two sets of pleadings and several related documents designed to narrow the issues, pre- and post-trial briefs, and a two-day trial in the Court of Queen’s Bench, Royal & Sun Alliance’s opposition to Mr. Burke’s coverage eligibility has been reduced to this: he is not an “insured person” because, at the time of the accident, he co-owned the Peterbilt with its registered owner, 1021256 Ontario Inc.

Unfortunately, the controversy has not always been that clear and focused. [ 5 ] At any rate, in advocating acceptance of the co-ownership theory by this Court, Royal & Sun Alliance takes the position that the term “owns” in the ownership exclusion includes both the registered and the “true” owner of the “other” automobile, and it expressly requests confirmation of the judgment under appeal for reasons other than those articulated by the trial judge. As will be seen, he “deemed” Mr.

Burke the one and only owner of the Peterbilt after lifting the corporate veil of 1021256 Ontario Inc. [ 6 ] I would allow the appeal and declare Mr. Burke was both an “insured person” and an “eligible claimant” for NBEF 44 purposes. In my view, the denial of Mr. Burke’s eligibility is unsustainable for two equally compelling reasons:

(1) Royal & Sun Alliance’s pleadings did not provide the required concise statement of the facts upon which objection to Mr. Burke’s eligibility was taken and accepted at trial, and, as a result, he and his estate have sustained significant prejudice in the prosecution of the case for NBEF 44 coverage; and (2) in any event, Royal & Sun Alliance did not discharge its burden of proving Mr. Burke owned or co-owned the Peterbilt at the time of the accident. II. Context [ 7 ] Michael Burke earned a living as an independent commercial truck driver. He carried out that undertaking through 1021256 Ontario Inc.

As mentioned, he was its only officer and shareholder. [ 8 ] In the fall of 1998, Mr. Burke and 1021256 Ontario Inc. co-leased a 1998 Chevrolet pickup truck from Lounsbury Company Limited. Lounsbury subsequently assigned the lease to GMAC Leaseco Limited. [ 9 ] Although it was anticipated the Chevrolet pickup would be Mr. Burke’s private vehicle, it was used, on occasion, for purposes incidental to the commercial trucking operation carried out by Mr. Burke through 1021256 Ontario Inc.

Thus, and rather unsurprisingly, the Chevrolet pickup was used to pick up parts and materials for the operation of the Peterbilt and its predecessor, a 1996 model. [ 10 ] In its pre-trial brief, Royal & Sun Alliance asserts that “on January 31, 2000, 1021256 Ontario Inc. purchased the [Peterbilt]”. It goes on to add that this vehicle “replaced a 1996 Peterbilt Tractor also owned by 1021256 Ontario Inc. A full-length box highway trailer was also owned by 1021256 Ontario Inc. The tractor was financed by Paccar Financial Ltd., and the trailer was financed by Newcorp Financial”.

Expectedly, the appellants have not taken issue with any of these assertions.

[ 11 ] From the time of its acquisition to the date of the accident, the Chevrolet pickup was insured through a S.P.F. No. 1 Standard Automobile Policy for New Brunswick issued by Royal & Sun Alliance. That policy provided underinsured motorist coverage through an N.B.E.F. No. 44 – Family Protection Endorsement, with limits of $1,000,000. Although the policy identified GMAC Leaseco Limited as the insured, Royal & Sun Alliance conceded at trial Mr.

Burke and 1021256 Ontario Inc. were “named insured”. [ 12 ] Shortly after its purchase by 1021256 Ontario Inc. in early 2000, the Peterbilt was leased to S-G Transport Ltd., a division of Maple Leaf Foods Inc. The appellants could not find and, therefore, could not produce at the trial (a decade later) the lease with S-G Transport Ltd. [ 13 ] The trial judge found, and it is not contested that 1021256 Ontario Inc. “owned” the Peterbilt at the time of the accident.

I note parenthetically the trial judge also found 1021256 Ontario Inc. owned the trailer which the Peterbilt was hauling at that time. [ 14 ] The accident occurred on June 10, 2000 when the Peterbilt Mr. Burke was operating collided head-on with a Dodge Lancer driven by Roger Babineau and owned by Roger LeBlanc. The latter automobile was uninsured. The collision occurred in Mr. Burke’s lane of travel without any contributory negligence on his part. Mr.

Babineau died as a result of the collision. [ 15 ] The Peterbilt was insured through a fleet policy issued to Maple Leaf Foods Inc. by CGU Insurance Company of Canada. That policy featured

Section D (uninsured motorist coverage) to a maximum of $200,000. It did not provide underinsured motorist coverage in connection with the Peterbilt. [ 16 ] Due primarily, if not exclusively, to his accident-related injuries, Mr. Burke was prevented from resuming gainful employment and had to be cared for by Esther and Harold Vernon Hall in whose home he resided both before and after the accident, and until his death nearly a decade later. [ 17 ] In 2001, Mr. Burke and 1021256 Ontario Inc. brought two actions, seeking compensation for accident-related losses, one in tort against Messrs.

Babineau and LeBlanc, the other against CGU Insurance for uninsured and underinsured benefits under the fleet policy covering the Peterbilt. It is undisputed that Mr. Burke and 1021256 Ontario Inc. were able to recover the $200,000 limits under

Section D (uninsured motorist coverage) of the policy covering the Peterbilt, and nothing more. Mr. Burke also received workers’ compensation benefits, including loss of income disability benefits. As well, he may have received

Section B no-fault accident benefits. [ 18 ] On May 30, 2002, Mr. Burke and 1021256 Ontario Inc. commenced the underlying action against Royal & Sun Alliance, seeking in the Statement of Claim’s prayer for relief a declaration that they were “insured persons” for NBEF 44 purposes and that Royal & Sun Alliance was liable to indemnify them for the compensatory damages they were entitled to recover from Messrs. Babineau and LeBlanc in excess of the insurance available through them and/or CGU Insurance. In the body of the Statement of Claim, Mr.

Burke and 1021256 Ontario Inc. set out the material facts upon which they relied for that declaratory relief. Significantly, they alleged 1021256 Ontario Inc. “had its truck destroyed in [the June 10, 2000] motor vehicle accident” (emphasis added). [ 19 ] In its Statement of Defence, which is dated November 6, 2002, Royal & Sun Alliance admitted issuing the policy on the Chevrolet pickup (with an NBEF 44) and that it was effective on the date of the accident, but alleged it was not liable “pursuant to the policy or endorsements”.

It claimed to have no knowledge of the allegation that 1021256 Ontario Inc.’s Peterbilt had been destroyed in the accident. Importantly, Royal & Sun Alliance did not allege Mr. Burke owned or co-owned the Peterbilt truck. Moreover, it did not plead facts that might have justified lifting the corporate veil of 1021256 Ontario Inc. That relief was not actually sought in the Statement of Defence, whether expressly or by implication. Nevertheless, Royal & Sun Alliance did deny either plaintiff was an “insured person” within the meaning of Clause 1(f)(ii) . Intriguingly, there was no mention of Clause 1(f)(i) .

It may be timely to reproduce the full text of Clause 1(f): I.

DEFINITIONS where used in this endorsement […] (

f) The words “insured person” mean:

(

i) the named insured and his or her spouse if residing in the same dwelling premises and any dependent relative of either, while (1) an occupant of the described automobile, a newly acquired automobile or a temporary substitute automobile as defined in the general provisions,

definitions and exclusions of the policy, (2) an occupant of any other automobile but excluding the person who leases such other automobile for a period in excess of 30 days or who owns such other automobile unless underinsured motorist insurance is in force in respect of such other automobile, or (3) not an occupant of an automobile who is struck by an automobile; (ii) if the named insured is a corporation, an unincorporated association or partnership, any officer, employee or partner of the named insured for whose regular use the described automobile is provided (which individual shall be considered the “named insured” for the purpose of Definition 1(

b) and his or her spouse if residing in the same dwelling premises, and any dependant relative of either, while (1) an occupant of the described automobile, a newly acquired automobile or a temporary substitute automobile as defined in the general provision

definitions and exclusions of the policy, (2) an occupant of an automobile other than the automobile referred to in (ii)(1) above leased by the named insured for a period in excess of 30 days or owned by the named insured provided underinsured motorist insurance is in force in respect of such other automobile; or

(3) Not an occupant of an automobile who is struck by an automobile; Provided that where the policy has been endorsed to grant permission to rent or lease the described automobile for a period in excess of 30 days, any reference to the named insured shall be construed as a reference to the lessee specified in that endorsement. [ 20 ] In a follow-up Demand for Particulars, dated May 1, 2003, the plaintiffs sought particulars of the provisions of the policy and endorsements upon which Royal & Sun Alliance was relying for its denial of liability in the Statement of Defence.

In the responding July 28, 2003 Statement of Particulars, Royal & Sun Alliance asserted it relied upon the wording of the provisions of the NBEF 44 and “that any further particulars are evidence and not proper for the purposes of pleadings”. [ 21 ] On January 26, 2005, a judge of the Court of Queen’s Bench executed a Consent Order severing the questions of liability and damages, and directing the parties proceed to trial on the issue of whether the NBEF 44 provides “indemnity coverage to either of the Plaintiffs for damages arising from the motor vehicle accident of June 10, 2000”.

At trial, the parties agreed the only appellant with an arguable case for indemnity was the Estate of Michael Burke, as represented by Harold Vernon Hall, Administrator. [ 22 ] In a Request to Admit Facts dated November 10, 2008, Mr. Burke and 1021256 Ontario Inc. sought Royal & Sun Alliance’s admission of the facts set out in an attached schedule, which consisted of 21 paragraphs.

Paragraph 10 read: “On June 10, 2000, while driving a truck owned by the corporate Plaintiff, 1021256 Ontario Inc. (the “Peterbilt”) at or near Portage, in the County of Westmorland and Province of New Brunswick, the Plaintiff Michael Burke was seriously injured in a motor vehicle accident” (emphasis added). I pause to note that, under Rule 51.02 of the Rules of Court , the party to whom a Notice to Admit Facts is directed and who wishes to object to a particular stated fact must provide reasons for the objection.

In flagrant disregard for that mandatory requirement, Royal & Sun Alliance filed and delivered a Notice of Refusal to Admit Facts dated December 23, 2008 in which it refused, without providing any supporting reasons, to admit any of the facts set out in paragraph 10, including the fact of 1021256 Ontario Inc.’s ownership of the Peterbilt. Royal & Sun Alliance actually refused to admit, without any justificatory explanation, all facts set out in paragraphs 2 to 21 of the Request to Admit Facts.

The only facts admitted were those set out in Paragraph 1: “The Defendant, Royal & Sun Alliance Insurance Company of Canada, is an insurer licensed to issue contracts of insurance policies, pursuant to the provisions of

the Insurance Act […])”. [ 23 ] On February 24, 2009, Mr. Burke and 1021256 Ontario Inc. filed an Amended Statement of Claim setting out the material facts in support of Mr. Burke’s entitlement to indemnity under the NBEF 44. They also alleged the compensatory damages arising from the June 10, 2000 accident exceeded by more than $3,000,000 the amount recovered under

Section D of the CGU Insurance policy covering the Peterbilt ($200,000).

The claims advanced in the Amended Statement of Claim relate, inter alia , to the following pecuniary losses: - Future Costs of medication, in the projected amount of $119,142.68; - Future costs of assessments/evaluations, including occupational therapy, disability management and home needs assessments, in the projected amount of $6,500.00; - Future costs of treatment modalities, including physiotherapy, massage therapy and psychological therapy in the projected amount of $65,700.21; - Future costs of equipment needs, in the projected amount of $20,751.58; - Future cost of loss of valuable services, including home support workers, in the projected amount of $1,081,660.13; - Lifeline costs, in the projected amount of $7,379.79; - Interior and exterior home maintenance, in the projected amount of $72,368.24; - Costs of acquisition of walker/wheelchair accessible home, in the projected amount of $107,206.72; - Costs of mileage for transportation to therapy, pharmacy and fitness appointments, in the projected amount of $221,541.43; - Past loss of domestic capacity, in the projected amount of $36,982.00; - Past loss of income to December 31, 2007, in the projected amount of $481,490.00; - Future loss of income from December 31, 2007, in the projected amount of $1,036,714.93.

Needless to say, it remains to be determined what damages are recoverable by Mr. Burke’s estate and whether their quantum exceeds the amounts actually recovered and recoverable by Mr. Burke: (1) pursuant to the Workers’ Compensation Act , R.S.N.B. 1973, c. W-13; (2) under

Section D of CGU Insurance’s policy on the Peterbilt; and (3) from other sources, if any (see Economical Insurance Company of Canada v. Lapalme , 2010 NBCA 87 , 366 N.B.R. (2d) 199 ). . [ 24 ] On March 5, 2009, Royal & Sun Alliance filed an Amended Statement of Defence in which it admitted a number of important coverage-related facts. For now, I would simply highlight Royal & Sun Alliance’s formal admission that 1021256 Ontario Inc. “owned” the Peterbilt at the time of the accident. While it denied for the first time that Mr.

Burke qualified as an “insured person” under Clause 1(f)(i) , Royal & Sun Alliance did not set out any facts in support of that denial. In particular, there is no allegation that Mr. Burke was the owner or a co-owner of the Peterbilt. Moreover, Royal & Sun Alliance did not formulate a statement of the facts

that might have justified the lifting of 1021256 Ontario Inc.’s corporate veil, all with a view to having Mr. Burke declared the one andonly owner of the Peterbilt. In fairness, later events would confirm it was not seeking any such relief. [25] On the same date, Mr. Burke and 1021256 Ontario Inc. filed and delivered a second Demand For Particulars, inwhich they sought particulars of: (1) the allegation in the Amended Statement of Claim that neither of the plaintiffs was an “insuredperson” within the meaning of Clauses 1(f)(

i) or (ii) of the NBEF 44; and (2) “all material facts advanced in support thereof”. In aStatement of Particulars dated March 11, 2009, Royal & Sun Alliance flat out refused to provide the sought-after particulars. [26] On March 6, 2009, the day after filing and serving its Amended Statement of Defence, Royal & Sun Alliancedelivered an Amended Refusal to Admit Facts in which it admitted the facts enunciated in 12 of the 21 paragraphs found in the originalNotice to Admit Facts. Yet again, the required justificatory reasons for objection to the other facts were not provided.

Bizarrely, Royal &Sun Alliance purported to require proof at trial that 1021256 Ontario Inc. owned the Peterbilt, a fact it had formally admitted the daybefore in its Amended Statement of Defence. That admission could not be withdrawn without leave of the court (see Stamper v. Finnigan(1986), (NB KB), 74 N.B.R. (2d) 271, [1986] N.B.J. No. 419 (Q.B.) per Deschênes, J. as he then was) (QL) rev’d inpart on other grounds (1988), (NB CA), 85 N.B.R. (2d) 404, [1988] N.B.J. No. 133 (QL)). Leave was never sought,let alone granted. [27] Three days later, on March 15, 2009, Mr. Burke died.

At this juncture, Royal & Sun Alliance had yet toprovide a concise statement of the facts it relied upon to resist coverage under the NBEF 44. More pertinently for our present narrowpurposes, it had not provided, either in its pleadings or Statements of Particulars, an account of the material facts undergirding its baldplea that Mr. Burke was not an “insured person” within the meaning of Clauses 1(f)(

i) or (ii). [28] At any rate, Letters of Administration of Mr. Burke’s estate were granted shortly after his death and, on April17, 2009, an Order to Continue issued permitting the pursuit of Mr. Burke’s action in the name of his Estate, as represented by HaroldVernon Hall, Administrator. [29] On December 28, 2009, Royal & Sun Alliance filed a pre-trial brief in which it claimed that the plaintiffs“having only obtained an [NBEF] 44 endorsement for the pickup, are now seeking to extend that coverage to their other automobiles”(emphasis added). Royal & Sun Alliance went on to assert: The facts are clear.

The wording of the SEF 44 is clear. If you own two or more vehicles and you want to protect yourself against the riskcovered by underinsured motorist insurance for each vehicle, you must purchase each insurance for each vehicle. Since the Plaintiffsfailed to do so for the Peterbilt there is no underinsured motorist insurance in respect of the plaintiff Michael Burke’s loss arising fromthe accident which occurred while he was in the Peterbilt. [para. 41] At trial, Royal & Sun Alliance did not seek to amend its pleading to allege that Mr. Burke owned or co-owned the Peterbilt.

Had itsought such an amendment, the issue of prejudice to Mr. Burke’s Estate would have occupied center stage in the ensuing debate. Rule27.10(1) provides that the court may, at any time, grant leave to amend a pleading “unless prejudice will result which cannot becompensated for by costs or an adjournment”. Royal & Sun Alliance was never put to the test of demonstrating lack of irremediableprejudice to Mr. Burke’s Estate since it managed to avoid having to request an amendment to its pleading.

It bears underscoring that bythe time Royal & Sun Alliance filed its pre-trial brief and raised “co-ownership” of the Peterbilt as the factual foundation for its objectionto eligibility, Mr. Burke had passed away. [30] Be that as it may, by the time of trial, the following facts were either explicitly admitted by Royal & SunAlliance (in its Amended Statement of Defence) or were deemed admitted pursuant to Rule 51: • Mr.

Burke resided at Old Homestead Road, Petitcodiac, New Brunswick; • the registered office of 1021256 Ontario Inc., a body corporate, was at 105 Bauer Place, Waterloo, Ontario; • 1021256 Ontario Inc. was registered to do business in New Brunswick;

• 1021256 Ontario Inc. was solely owned, and managed exclusively by Mr. Burke for the purposes of earning income as aprofessional truck driver; • 1021256 Ontario Inc. was in effect Mr. Burke’s alter ego for the purposes of earning that income; • 1021256 Ontario Inc. owned the Peterbilt; • Mr. Burke and 1021256 Ontario Inc. were co-lessees of the Chevrolet pickup under a lease, which Lounsbury assigned toGMAC Leaseco; • both Mr.

Burke and 1021256 Ontario Inc. were “named insured” under Royal & Sun Alliance’s policy covering theChevrolet pickup; • on June 10, 2000, while driving the Peterbilt owned by 1021256 Ontario Inc., Mr. Burke was injured, through no fault ofhis own, in a collision with a Dodge Lancer owned by Roger LeBlanc and driven by Roger Babineau; • the Dodge Lancer was an “uninsured automobile” within the meaning of the policy on the Chevrolet pickup; • Mr.

Babineau was an “inadequately insured motorist” for NBEF 44 purposes; • both the Dodge Lancer and the Peterbilt were “automobiles” for NBEF 44 purposes; • as a result of an action launched by Mr. Burke and 1021256 Ontario Inc. against CGU Insurance, the maximum limits ofinsurance available under

Section D of its fleet policy ($200,000) were paid out; • there was no underinsured motorist coverage under the CGU Insurance policy; and • the Royal & Sun Alliance policy issued for the Chevrolet pickup, with NBEF 44 attached, was valid and effective on June10, 2000, and provided coverage limits of $1,000,000. [31] At the hearing on appeal, Royal & Sun Alliance confirmed Mr.

Burke could qualify as an “insured person” and“eligible claimant” in two ways: (1) under Clause 1(f)(i), in his personal capacity qua named insured under the policy on the Chevroletpickup; and (2) under Clause 1(f)(ii), as an officer of 1021256 Ontario Inc., the other named insured under that policy. Royal & SunAlliance also conceded that qualification under one or the other of those scenarios would entail coverage for Mr. Burke under the NBEF44.

In other words, the two means of qualification were not mutually exclusive. [32] Notwithstanding the admissions and concessions inventoried above, and his finding that 1021256 Ontario Inc.owned the Peterbilt for legitimate purposes, the trial judge “lifted the corporate veil”: I find that the corporate veil must be lifted to give effect to the intention behind the S.E.F. 44 Endorsement in question even though1021256 was not being used by Burke as a shield for fraudulent or improper conduct, one of the two requirements in [Transamerica LifeInsurance Co. of Canada v. Canada Life Assurance Co., (ON SC), [1996] O.J.

No. 1568 (G.D.) (QL), aff’d [1997]O.J. No. 3754 (C.A.) (QL)]. There is no need to apply the contra preferentem rule of

interpretation here as the intention behind the S.E.F. 44 Endorsement issufficiently established otherwise.

The purpose of the ownership exclusion in the S.E.F. 44 Endorsement is to ensure that a person who owns or leases more than one automobile, places and pays the premium for family protection on all such automobiles. The piercing of the corporate veil is required in the present case as I find that the entirety of the interactions, relationship and set up are such that Burke must be deemed to be the owner of the Peterbilt for the purpose of the subject insurance policy on the pickup truck, particularly because Burke, and only Burke, drove the Peterbilt and because he drove it year round to earn a livelihood.

To find otherwise would result in an untenable situation. For the above reasons the Plaintiffs do not meet the definition of “insured person” pursuant to the

definitions of the S.E.F. 44 Endorsement and as a result do not meet the definition of “eligible claimant”. [paras. 39-43] III. The issues raised by the parties [ 33 ] As might be expected, the first ground of appeal attributes reversible error to the trial judge’s finding that Mr. Burke should be “deemed to be the owner” of the Peterbilt. In the appellants’ submission, the trial judge fell into error by failing to apply and give effect to the criteria that govern applications for lifting any corporate veil.

The appellants also protest the trial judge failed to apply and give effect to: (1) the plain wording of the NBEF 44, which provided indemnity to Mr. Burke by reason of the fact that he did not “own” the Peterbilt; and (2) the contra proferentem rule, in the event of ambiguity. Additionally, the appellants complain the trial judge made palpable and overriding errors by: (1) determining the Workplace Health, Safety and Compensation Commission was, for NBEF 44 purposes, subrogated for all of its outlays; (2) finding that: (

a) the Chevrolet pickup was used by Mr. Burke for business purposes and for his livelihood; (

b) Mr. Burke used his own name and the name of 1021256 interchangeably; (

c) the NBEF 44 was included in the policy of insurance on the Chevrolet pickup simply because it was the insurance broker’s standard practice to do so; and (

d) finding Mr. Burke had an agreement with S-G Transport Limited, which provided for insurance on the Peterbilt. The appellants also submit the trial judge committed reversible error by placing undue weight on the following circumstances: (a) 1021256 Ontario Inc. was a co-lessee of the Chevrolet pickup; (

b) the lease payments for the Chevrolet pickup were initially made by 1021256 Ontario Inc. as business expenses; and (

c) no evidence was led to disprove that Mr. Burke had an insurable interest in the Peterbilt. Finally, the appellants state the trial judge committed reversible error by failing to give “due and proper, or any, consideration to the uncontradicted evidence that the Peterbilt was leased by 1021256 to S-G Transport”.

In the appellants’ stated view those errors of fact led the trial judge to “improperly” reach the conclusion that “the entirety of the interactions, relationship and set up are such that Burke must be deemed to be the owner of the Peterbilt for the purpose of the subject insurance policy”. [ 34 ] Royal & Sun Alliance has filed a Notice of Contention in which it argues the decision under appeal should be affirmed on grounds other than those given by the trial judge.

In its submission: (1) “it was not necessary for the corporate veil to be lifted for the purposes of interpreting the policy of insurance and finding that there is no coverage afforded” to Mr.

Burke under the NBEF 44; (2) in the alternative, “if the lifting of the corporate veil was required in order to interpret the policy of insurance, the Court was not required to do so as the Plaintiffs had already lifted the corporate veil by their own admission”; and (3) in the further alternative, “if the Court was required to lift the corporate veil, the Trial Judge misdirected himself in failing to conclude that it was just and appropriate to do so, since the Plaintiffs’ application for insurance was not bona fide as it contained false information and the defendant issued a policy based on such false information”.

Royal & Sun Alliance goes on to contend it is entitled to relief additional to the declaratory relief granted at trial, namely the dismissal of the action. [ 35 ] After hearing the parties, the Court requested further written submissions on the following questions: (1) was the option of lifting the corporate veil ruled out once Royal & Sun Alliance formally admitted the Peterbilt was owned by 1021256 Ontario Inc.? (2) for that option to be live at trial, was Royal & Sun Alliance required to: (

a) deny in its pleading that 1021256 Ontario Inc. owned the Peterbilt; and (

b) allege it was owned by Mr. Burke? (3) is not the word “owns” in Clause 1(f)(

i) part of a coverage exclusion and, as such, should it not be given a narrow

interpretation, one that would limit its meaning to registered ownership? (4) in any event, who bore the burden of proving Mr. Burke “owned” the Peterbilt? If it was Royal & Sun Alliance, where did the trial judge take this burden of proof into account in arriving at his conclusion regarding ownership? (5) does a presumption of ownership in 1021256 Ontario Inc. arise from the fact that it is the registered owner? If so, where did the trial judge take that presumption into consideration in arriving at his conclusion? IV. Analysis and Decision [ 36 ] In the text that follows, I focus principally on three issues: (1) the meaning of the word “owns” found in Clause

1(f)(i); (2) the significance of Royal & Sun Alliance’s failure to request the lifting of the corporate veil of 1021256 Ontario Inc. and to plead any supporting material facts, and the sustainability of the trial judge’s decision to grant that equitable remedy; and (3) the significance of Royal & Sun Alliance’s failure to conform with the rules of pleading in connection with the co-ownership defence, the applicable burden of proof and the cogency of the evidence on point.

I do not deal with the other issues raised by the appellants, particularly the question of whether the trial judge’s adverse findings of fact are tainted by palpable and overriding error, for the simple reason that it is unnecessary to do so, given their success on the main issues. That said, I do agree the trial judge’s observations regarding the WHSCC’s rights of subrogation were out of order: the issue was not before him, and it is doubtful any such rights exist in the present case, Royal & Sun Alliance being entitled to deduct any amounts recovered by Mr.

Burke from the Commission ( see Economical Insurance Company of Canada v. Lapalme ). Furthermore, I do not delve in any great detail into most of the incidental arguments advanced by Royal & Sun Alliance because, with respect, they border on the frivolous. The following illustrate that point. [ 37 ] Royal & Sun Alliance submits the trial judge fell into error in concluding Mr. Burke was not using 1021256 Ontario Inc. as a shield for nefarious purposes. Its related contention is that Mr.

Burke: (1) grossly underestimated the number of kilometers he expected to put on the Chevrolet pickup when he applied for insurance in 1998; and (2) falsely represented, at that time, the vehicle would not be used for commercial purposes. There is absolutely no merit to this suggestion. First, Royal & Sun Alliance did not plead Mr. Burke’s application-related statements in 1998 constituted “wrongful” conduct susceptible of opening the door to corporate veil lifting in relation to the June 10, 2000 accident.

Second, Royal & Sun Alliance has formally admitted the policy on the Chevrolet pickup and the attached NBEF 44 were valid and effective on the date of the accident. In the vernacular, it cannot “suck and blow” at the same time: the policy and the NBEF 44 were either valid or they were not. Once Royal & Sun Alliance formally admitted they were valid, the debate on point ended. Third, the alleged misconduct on Mr. Burke’s

part in 1998 has nothing to do with the issue at the heart of the controversy over corporate veil lifting, which is whether, at the time of the accident, Mr. Burke was using 1021256 Ontario Inc. (as the registered owner of the Peterbilt) to provide a shield for fraudulent or improper purposes. There is absolutely no evidence of that and the trial judge’s finding on point in favour of the appellants is unimpeachable.

Royal & Sun Alliance also sprinkles its submission with distracting arguments, which litigators are fond of calling “red herrings". [ 38 ] For example, Royal & Sun Alliance suggests it never intended to provide underinsured motorist coverage to Mr. Burke while he was operating a commercial vehicle like the Peterbilt to earn a living. This may have been the defence put forward in the initial Statement of Defence, which, admittedly, is sketchy and anything but clear. Be that as it may, the complaint does not stand up to even superficial scrutiny.

Royal & Sun Alliance’s subjective intention, expressed post-loss and post-claim, is of no interest to the courts. Its intention stands to be ascertained by a contextual assessment of the words it chose to employ in the NBEF 44. In other words, courts look to the objective rather than the subjective intention of the insurer in construing an NBEF 44. In that regard, it bears noting that Royal & Sun Alliance pleaded they were relying on “the wording” of the NBEF 44 to defend the claim and nowhere in its pleadings or Statements of Particulars can one find any reliance on the insurer’s “intention” as described above.

The undeniable fact is that the Peterbilt meets the definition of “automobile” in the NBEF 44. It is equally beyond dispute that NBEF 44 coverage extends to work- related automobile accidents, express provision having been made for the insurer’s right to deduct workers’ compensation benefits under Clause 4(b)(vii) ( see Economical Insurance Company of Canada v. Lapalme ). [ 39 ] Royal & Sun Alliance also weaves into its submission the complaint that, since only $21 was paid for NBEF 44 coverage, Mr. Burke could not have expected he would be covered while operating the Peterbilt. This is nonsense.

First, no plea of that nature can be found in the pleadings. Moreover, Clause 2 (“Insuring Agreement”) states that “in consideration of the premium charged” and “subject to the provisions” of the NBEF 44, Royal & Sun Alliance undertakes to indemnify Mr. Burke for the compensatory damages he was entitled to recover from an inadequately insured motorist. The “premium charged” was paid, and Mr. Burke, like any other insured, could reasonably expect to benefit from whatever coverage was provided by the wording the insurer had chosen to incorporate in its NBEF 44’s provisions.

I should add that, in this Province, relatively low premiums are charged for underinsured motorist insurance mainly, if not exclusively because: (1) claimant-friendly common law rules have been replaced with defence-friendly statutory provisions that significantly compress damage awards; (2) judges generally, and rightly in my view, incline toward moderation in making damage awards; and

(3) NBEF 44 payouts are relatively rare, being limited to compensatory damages for losses that remain outstanding after deducting, pursuant to Clause 4, amounts recovered and recoverable from other sources ( see Economical Insurance Company of Canada v. Lapalme ) . [ 40 ] Finally, Royal & Sun Alliance contends the appellants lifted the corporate veil themselves by their allegation in the Amended Statement of Claim that 1021256 Ontario Inc. was in effect Mr. Burke’s alter ego for the purposes of earning income as a professional truck driver. The trial judge did not buy into that argument, and neither do I.

To cast my objection in everyday language, the argument mixes “apples and oranges”. All the plaintiffs are saying in their pleading is this: for loss of income assessment purposes, Mr. Burke and 1021256 Ontario Inc. are effectively one and the same. No lifting of the corporate veil with respect to the Peterbilt’s ownership is required to give effect to that fairly pedestrian proposition. No matter who owns the Peterbilt, the fact is, according to the plaintiffs, that Mr. Burke and 1021256 Ontario Inc. were one and the same for the purposes of assessing his accident-related loss of professional income.

That is a far cry from the suggestion that they lifted the corporate veil of 1021256 Ontario Inc. in respect of the ownership of the Peterbilt. I will say no more on this argument, which, thankfully, was not pressed very forcefully on appeal. A. What is meant by the term “owns” in Clause 1(f)(i)?

[41] As is often the case in litigation of this kind, a threshold issue of

interpretation arises and, in this particularinstance, it is whether the term “owns” in the ownership exclusion found in Clause 1(f)(

i) encompasses the registered owner of the“other” automobile, its “true” owner or both. Royal & Sun Alliance contends the last mentioned

interpretation is the correct one.Unfortunately, the first hypothesis was not fully explored in the court below and I think it wise to put off a determination of its validity toa later, better-suited occasion. That said, some – hopefully thought-provoking – observations are warranted, if only to fuel acomprehensive debate whenever the issue ends up being squarely before the Court. [42] The words “owns” and “owner” are not defined in the NBEF 44 or the policy. Nor are they defined in theInsurance Act, R.S.N.B. 1973, c. I-12.

Nonetheless, it can be safely asserted the words have different meanings depending on thecontext. In some contexts, the words refer to the registered owner (see Varson v. Town of Vegreville, [1916] A.J. No. 96 (S.C.) (QL);Rochester & Pittsburg Coal & Iron Co. v. “Garden City” (The) (1901), (CA EXC), 7 Ex.C.R. 34 at para. 8 (QL) andIn re Ballas and Minister of Education, (AB CA), [1931] A.J. No. 7 (C.A.) (QL)). In other instances, the wordsdesignate the “true” owner (see Rogers v. City of Fredericton (1931), (NB KB), 3 M.P.R. 161 at 165 (N.B.S.C.)).

Inother cases, the words are more broadly interpreted and may include not only the registered owner, but also the beneficial owner (seePrentice v. Brown, (AB CA), [1914] 17 D.L.R. 36 at 37 (Alta. C.A.); Chuwick v. Bevans et al., (ABKB), [1964] A.J. No. 95 (QL), 49 W.W.R. 699 at 700, 702 (S.C.) and Whelton v. Mercier et al., 2004 NBCA 83, 277 N.B.R. (2d) 251 atpara. 32). That said, I doubt that an insurable interest, short of proprietorship, would suffice to find an insured person “owned” the“other” automobile within the meaning of the ownership exclusion in Clause 1(f)(i) (see Morrow v.

Royal Insurance Co. of Canada,[1990] A.J. No. 1246 (Q.B.) (QL), 42 C.C.L.I. 135 at 147). [43] It has been astutely observed that the word “owner” is “an elastic form, and the meaning which must be givento it in a statutory enactment depends very much upon the object the enactment is designed to serve” (see Wynne v. Dalby, (ON CA), [1913] O.J. No. 9 (S.C.A.D.) (QL), and Haberl v. Richardson and Richardson, (ON CA), [1951] O.R.302 at 304 (C.A.), per Henderson J.A.). In Zed v. Fullerton (1944), (NB KB), 17 M.P.R. 417 (N.B.S.C.), at 419, BaxterJ. remarked that “at common law ‘owner’ is an indefinite expression”.

In W.J. Blainey Ltd. v. The City of Toronto, (ONSC), [1935] O.J. No. 250 (H.C.J.) (QL), [1935] 4 D.L.R. 328 at 329, Hope J. described “owner” as a “variable” term. Interestingly, thereis authority, at the first instance level, for the view that “ownership” may include “joint ownership” (see Hill v. Co-operative Fire &Casualty Company, [1977] B.C.J. No. 1178 at para. 17 (S.C.) (QL)). [44] Of course, in this Province, the words “owns” and “owner”, when used in a statute, must be given a large andliberal

interpretation in accordance with the dictates of s. 17 of the

Interpretation Act, R.S.N.B. 1973, c. I-13, which reads as follows: 17 Every Act and regulation and everyprovision thereof shall be deemed remedial,and shall receive such fair, large and liberalconstruction and

interpretation as best ensuresthe attainment of the object of the Act,regulation or provision. 17 Toute loi, tout règlement et toutedisposition de ceux-ci sont réputésréparateurs et doivent faire l’objet del’interprétation large, juste et libérale, la pluspropre à assurer la réalisation de leurs objets. [45] Here, the word “owns” forms part of an exclusionary provision in an optional endorsement to a standard policyof automobile insurance. That being so, one would expect the word to be given a narrow

interpretation (see Reid Crowther & PartnersLtd. v. Simcoe & Erie General Insurance Co., (SCC), [1993] 1 S.C.R 252, [1993] S.C.J. No. 10 (QL) at para. 37 andIrving Oil Ltd. v. London & Hull Maritime Insurance Co., 2000 NBCA 23, 229 N.B.R. (2d) 378). There are a number of possibleinterpretations for the word “owns”. As mentioned, it could refer to the “true” owner, which might or might not be the registered owner.As well, it could embrace two or more persons, including the registered owner and any other person or persons who might be thebeneficial owner or owners. The difficulty with such a broad

interpretation is this: it invites protracted investigations and litigation in acontext where the insurer and the insured should be able to determine eligibility and entitlement easily and promptly, without anylawsuit. [46] Of course, the term “owns” could be understood to target only the registered owner. The attractiveness of thatunderstanding is two-fold. First it accords with what typically takes place in the real world. When a broker queries an applicant forinsurance about ownership of a vehicle, he or she is invariably asking about registered ownership, the only readily ascertainable state ofaffairs.

That broker is not seeking to identify who the “beneficial” owner might be at the end of lengthy legal and judicial proceedings.Second, that narrow understanding appears to be harmonious with the purpose of the ownership exclusion, which is to deny coverage toa claimant who was required by law to insure the “other” automobile and, thus, had an opportunity to add the optional underinsuredmotorist endorsement to the statutorily required bundle of coverages.

In the case at hand, title to the Peterbilt was registered in a distinctlegal entity (1021256 Ontario Inc.) and it was leased to S-G Transport Limited, whose responsibility it was to provide the insurancecoverage required by law. The upshot is this: Mr. Burke was not required by law to insure the Peterbilt. [47] Perhaps the following exercise might further highlight the difficulty with Royal & Sun Alliance’s proposed

interpretation of the term “owns”. Assume that, prior to his application for insurance on the Chevrolet pickup, Mr. Burke had closely read the NBEF 44, and in particular the definition of “insured person” found in Clause 1(f)(i). And assume also that he asked the broker if he was an “insured person” when operating another automobile whose registered owner was his duly constituted corporation. Would the broker have “discovered” Mr.

Burke to determine whether, having regard to all of the pertinent circumstances, a judge might, in the fullness of time and after hearing erudite legal submissions, conclude he was the “other” automobile’s “true” owner and thereby be excluded from coverage? One might be forgiven for suspecting the broker would have told Mr. Burke he was indeed an “insured person” because the “other” automobile was not “owned” by him, but rather by a distinct legal entity. B.

The pleadings and lifting the corporate veil [ 48 ] In my respectful view, the trial judge erred in law in resting his decision on facts that were neither pleaded nor proven, and in disposing of the case through an unrequested equitable remedy, the lifting of the corporate veil of 1021256 Ontario Inc. [ 49 ] Rules 27.06(1) and (9) and 27.07(3) are of particular interest in the present case. They read as follows: 27.06 Rules of Pleading - Applicable to All Pleadings Material Facts

(1) Every pleading shall contain a concise statement of the material facts on which the party pleading relies for his claim or defence, but not the evidence by which those facts are to be proved. […] Nature of Act or Condition of Mind

(9) Where fraud, misrepresentation or breach of trust is alleged, the pleading shall contain full particulars thereof; but malice, intent or knowledge may be alleged as a fact without pleading the circumstances from which it is to be inferred. […] Different Version of Facts 27.07(3) Where it is intended to prove a version of the facts different from that pleaded by the opposite party, a mere denial of the version so pleaded is not sufficient, but the party, in his defence or reply, shall plead his own version of the facts. 27.06 Règles de la plaidoirie d’application commune Faits déterminants

(1) Chaque plaidoirie doit exposer de façon concise les faits déterminants sur lesquels repose la demande ou la défense, mais non les moyens de preuve à l’appui. […] Nature de l’acte ou état d’esprit

(9) Lorsqu’il y a allégation de fraude, de fausse déclaration ou d’abus de confiance, la plaidoirie doit contenir toutes les précisions sur celle-ci. Par contre, la malveillance, l’intention ou la connaissance peuvent être plaidées comme des faits sans invoquer les circonstances à l’appui. […] Version différente des faits 27.07(3) Il ne suffit pas à celui qui a l’intention de prouver une version des faits différente de celle plaidée par son adversaire de nier cette version plaidée. Il doit donner sa propre version des faits dans sa défense ou dans sa réplique.

[50] Abidance by those rules of pleading is not optional and may only be dispensed with where required in theinterests of justice (see Trifidus Inc. v. Samgo Innovations Inc., 2011 NBCA 59, [2011] N.B.J. No. 231 (QL), per Quigg J.A. for themajority). To comply with its pleading obligations, Royal & Sun Alliance had to provide in its Statement of Defence and, later, in itsAmended Statement of Defence a concise statement of the material facts upon which it was relying to oppose Mr. Burke’s eligibility andentitlement under the NBEF 44. A bald denial in the Amended Statement of Defence of Mr. Burke’s status as an “insured person” underClause 1(f)(

i) was hardly sufficient, particularly in light of the earlier admission in the very same pleading that 1021256 Ontario Inc.“owned” the Peterbilt. [51] If the denial of eligibility and entitlement was based on Mr. Burke’s co-ownership of the Peterbilt, thatallegation of fact had to appear in Royal & Sun Alliance’s pleading. Likewise, if the denial was based on Mr. Burke’s sole ownership ofthe Peterbilt, that allegation of fact had to be made in the defendant’s pleading.

In the latter event, Royal & Sun Alliance would also havebeen required to allege 1021256 Ontario Inc. was used as registered owner of the Peterbilt for fraudulent or other improper purposes, andto provide a concise statement of the supporting material facts. In addition, Royal & Sun Alliance’s pleading would have had to contain“full particulars” of any fraud or other nefarious conduct relied upon (see Rule 27.06(9)). [52] None of these rules of pleading was respected.

Most importantly, non-compliance was deliberate, given Royal& Sun Alliance’s refusal to provide the particulars sought in the two Demands for Particulars. [53] By the first of those documents, which was dated May 1, 2003, Mr. Burke and 1021256 Ontario Inc. soughtparticulars of the Statement of Defence’s assertion that Royal & Sun Alliance was not liable pursuant to the policy or endorsements.

Inits responding Statement of Particulars, Royal & Sun Alliance took the position – one that is inarguably untenable, in my view – that thesought-after particulars constituted evidence, “being the wording of the endorsements issued with the Policy of Insurance, whichendorsements have been provided to the [Appellants]”. Recall that Royal & Sun Alliance pleaded only Clause 1(f)(ii) in its Statement ofDefence. Presumably, the material facts for that plea would have been: (1) 1021256 Ontario Inc. owned the Peterbilt; and (2) there wasno underinsured motorist insurance in respect of the Peterbilt.

These facts should have been particularized if not in the Statement ofDefence, then in the Statement of Particulars. Of course, if, despite its omission to plead Clause 1(f)(i), Royal & Sun Alliance wished toalso defend the claim on the grounds of Mr. Burke’s exclusion from the class of “insured persons” by reason of his ownership or co-ownership of the “other” automobile (the Peterbilt), it had to say so in its pleading or Statement of Particulars. [54] In a second Demand For Particulars dated March 9, 2009, Mr.

Burke and 1021256 Ontario Inc. soughtparticulars of the Amended Statement of Defence’s allegation that neither of the plaintiffs was an “insured person” within the meaning ofClauses 1(f)(

i) or (ii) of the NBEF 44. They also sought particulars of the material facts Royal & Sun Alliance relied upon to substantiatethat allegation. In a Statement of Particulars dated March 11, 2009, Royal & Sun Alliance refused to provide the sought-after particulars.Once again, it passed on the opportunity to assert Mr. Burke was either the owner or a co-owner of the Peterbilt. Nor did Royal & SunAlliance set out any facts that might arguably bring into play the equitable remedy of corporate veil lifting.

In failing to provide thoseparticulars in its Amended Statement of Defence, Royal & Sun Alliance violated the rules of pleading. That flagrant violation wascompounded by its wholly unjustified refusal to detail in its Statement of Particulars the material facts underlying its reliance uponClause 1(f)(i). [55] Royal & Sun Alliance has never requested leave to amend its pleadings to achieve compliance with Rules27.06(1) and (9), as well as Rule 27.07(3). Nor did it seek leave to withdraw its admission that 1021256 Ontario Inc. “owned” thePeterbilt.

In fact, Royal & Sun Alliance maintains that admission to this day, arguing Mr. Burke was a co-owner. I will return to this topicin short order. [56] The importance of adherence to the rules of pleading has been repeatedly underscored by the courts of thisProvince. In Parlee v. McFarlane (1999), (NB CA), 210 N.B.R. (2d) 284, [1999] N.B.J. No. 88 (C.A.) (QL), theCourt cautioned against non-compliance with those rules: It is commonplace that trial by ambush has no place in our modern system of justice.

The rules of pleading enunciated in Rule 27 of theRules of Court are designed to ensure that the relevant issues are raised, and that no party is taken by surprise. The importance ofpleadings cannot be underemphasized. They define the issues not only for the parties, but for the judge as well.

Indeed, I cannot fathom asituation where a trial judge could properly decide the case before him or her on a basis not raised in the pleadings or at trial. [para. 33] [57] The reference in that passage to “issues […] not raised […] at trial” intended to signal that a case couldproperly be decided on an un-pleaded basis where it and the material facts had been spotlighted and brought home to the opposite partyin non-prejudicial fashion. Those rare situations allow this Court to sustain the judgment at trial on the basis that the pleading was“deemed” amended. It goes without saying that the Court in Parlee v.

McFarlane did not encourage trial judges to overlook non-compliance with the rules of pleading in circumstances where, as here, an un-pleaded or improperly pleaded defence would, if effect

were given to it, cause prejudice to the plaintiff that an adjournment or a suitable award of costs would not sufficiently minimize. [58] For the equitable remedy of corporate veil lifting to be in play, Royal & Sun Alliance had to ask for it. If theAmended Statement of Defence had featured such a request, a concise statement of the material facts in support would have beenrequired. With the benefit of hindsight, one imagines those facts might well have been:

(1) Mr. Burke, not 1021256 Ontario Inc., ownedthe Peterbilt; and (2) the registration of title in the name of 1021256 Ontario Inc. was used, at the time of the accident, as a shield forfraudulent or other improper purposes. Additionally, particulars of the allegation of fraud or other wrongdoing would have beenexpected. None of these elementary pleading requirements were met.

Of course, if those requirements had been satisfied, the admissionthat 1021256 Ontario Inc. owned the Peterbilt would have been very problematic for Royal & Sun Alliance. [59] That said, even if I could be persuaded the features, failings and inadequacies of Royal & Sun Alliance’spleadings did not foreclose resort to corporate veil lifting, I would still hold that equitable remedy was inappropriate given the trialjudge’s unimpeachable finding that Mr.

Burke used 1021256 Ontario Inc. for entirely legitimate purposes. [60] It has been hornbook law for quite some time that a corporation is a legal entity distinct from its shareholders(see the oft-cited Salomon v. Salomon & Co., [1897] A.C. 22 at pages 53-54 (H.L.)). Courts will only very exceptionally disregard theseparate legal personality of a corporate entity. In Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co., (ON SC), [1996] O.J. No. 1568 (G.D.) (QL), aff’d [1997] O.J.

No. 3754 (C.A.) (QL) at para. 21, Justice Sharpe rejectedthe view that courts may lift the corporate veil whenever they please “on some loosely defined ‘just and equitable’ standard”. He opinedthat lifting the corporate veil was only appropriate where those in control of a corporation use it as a shield for “fraudulent or improperconduct” (para. 22). Though this test was articulated in connection with the distinction between a corporation and its subsidiary, there isno principled reason to exclude its application in the context of a one-person corporation. See, as well, the discussion in 642947 OntarioLtd. v.

Fleischer, (ON CA), [2001] O.J. No. 4771 (C.A.) (QL) at paras. 67-69, per Laskin J.A. [61] More recently, in A-C-H International v. Royal Bank of Canada, (ON CA), [2005] O.J.No. 2048 (C.A.) (QL), Blair, J.A. who delivered the Court’s unanimous judgment, endorsed the Transamerica test: Finally, I turn to the question of piercing the corporate veil. The trial judge determined that this was “not a proper case for recognizingthe completely separate identity of [ACL] and ACPI from their shareholders and directors” (para. 36). Again, I note that this is not anissue that was pleaded.

The trial judge said, however: Whether or not they (Messrs. Courtney and Ambler) were personally responsible for the unauthorized transfers, they were the only oneswho could explain what became of the money after the transfers. The record does not reveal any other directors, and as I said earlier, theevidence demonstrates on a balance of probability that they were the only shareholders, and accordingly the only persons presumptivelybenefiting from the unauthorized diversions.

It is useful to remember that the separate corporate identity of corporations is notnecessarily recognized when a corporation is used as a shield for fraudulent or improper conduct of its controlling mind or minds. SeeTransamerica Life Insurance Co. of Canada v. Canada Life Assurance Company (1996), (ON SC), 28 O.R. (3d) 423,affirmed by Ontario Court of Appeal [1997] O.J. No. 3754. One cannot escape liability for conversion by simply transferring theproceeds of conversion to a limited company. The beneficiaries of the unauthorized diversions were all unjustly enriched. [underlining inoriginal.] Mr.

David argued that implicit in the foregoing passage is a finding of improper conduct on the part of the appellant, which justifiespiercing the corporate veil on the law as it presently stands. If that is so, there is nothing in the reasons to indicate what that improperconduct consisted of, other than the appellant’s failure to explain why he had not caused ACL and ACPI to return the monies and hisfailure to cause the corporations to do so.

More is required to pierce the corporate veil than merely a majority shareholding position, oreven a controlling shareholder position, and a role as officer or director, however. As Sharpe J. (as he then was) noted, in TransamericaLife Insurance Co. of Canada v. Canada Life Assurance Company (1996), (ON SC), 28 O.R. (3d) 423 (Ont. Ct. Gen.Div.), affirmed [1997] O.J.

No. 3754 (C.A.), at p. 433, the court is not “free to act as it pleases on some loosely defined ‘just andequitable’ standard.” The question of whether the appellant, as an officer and director of ACPI and ACL, could be found to be personally responsible for thetort committed by the corporations - had this question been raised on the pleadings - would require evidence to support a finding that theappellant exercised clear domination and control over the corporations in directing the wrongful things to be done, and that the conducthe engaged in was akin to fraud, deceit, dishonesty or want of authority and constituted a tort in itself: see Transamerica Life, supra;801962 Ontario Inc. v.

MacKenzie Trust Co., [1994] O.J. No. 2105 (Ont. Ct. Gen. Div.); ADGA Systems International Ltd. v. ValcomLtd. (1999), (ON CA), 43 O.R. (3d) 101 (C.A.), leave to appeal dismissed, [1999] S.C.C.A. No. 124; Clarkson Co.Ltd. v. Zhelka (1967), (ON SC), 64 D.L.R. (2d) 457 (Ont. H.C.); Montreal Trust Co. of Canada v. ScotiaMcLeod Inc.(1995), (ON CA), 26 O.R. (3d) 481 (C.A.), (sub nom. ScotiaMcLeod Inc. v. Peoples Jewellers Ltd.), at 490-491, leave

to appeal dismissed, [1996] S.C.C.A. No. 40. Here, it is conceded that the appellant did not benefit directly from the diversion of funds,and the trial judge appears to have accepted that he was not personally responsible for the unauthorized transfers.

There is nothing on therecord to suggest that the appellant engaged in any other conduct that would meet the foregoing criteria, and the trial judge made no suchfindings that would justify the exercise of the court’s equitable jurisdiction to pierce the corporate veil. [paras. 27-29] [Emphasis added.] [62] The Transamerica criteria for lifting the corporate veil have withstood the test of time. Indeed, they wererecently adopted and applied by this Court in Stewart v. Webster, 2007 NBCA 50, 315 N.B.R. (2d) 193.

In that case, the directing mindof a corporation operating a townhouse development was found personally liable at trial for defects in certain items sold with theplaintiff’s unit. The Court allowed the appeal for the following reasons: The trial judge pierced the corporate veil and found the appellant personally liable for losses the respondents sustained in connectionwith a townhouse they purchased from a company controlled by the appellant (see 2006 NBQB 321).

There is absolutely no evidence tosupport a piercing of the corporate veil and the correlative finding of personal liability on the part of the appellant. In short, there is not ascintilla of evidence supporting a finding that the company in question or any related corporation was “being used [by the appellant] as ashield for fraudulent or improper conduct” (see Transamerica Life Insurance Co. of Canada v. Canada Life Assurance Co. (1996), (ON SC), 28 O.R. (3d) 423 at 433-34 (Gen. Div.), [1996] O.J. No. 1568 (QL), aff’d [1997] O.J. No. 3754 (C.A.) (QL)).

Accordingly, the appeal is allowed and the judgment entered in the court below against the appellant is set aside, with costs of $500together with disbursements. [paras. 1-2] [63] Needless to say, there is absolutely no impropriety in creating “corporate structures and relationships for validbusiness, tax and other reasons” (see Wildman v. Wildman, (ON CA), [2006] O.J. No. 3966 (C.A.) (QL) at para. 49,per MacPherson J.A, cited with approval in Milton v. Milton, 2008 NBCA 87, 338 N.B.R. (2d) 300 at para. 30, per Larlee J.A.). In myview, Mr. Burke was entitled to organize his affairs as he did.

More specifically, it was entirely legitimate for 1021256 Ontario Inc. totake and hold title in its name given, in particular, that it “purchased” the Peterbilt. [64] The trial judge found 1021256 Ontario Inc.’s registered ownership of the Peterbilt was not part of a fraudulentor otherwise improper scheme. He appears to have pierced the corporate veil for “just and equitable” reasons. There may be instanceswhere that test would be appropriate, although I confess no example readily comes to mind, but the present case is not one of them. C.

The pleadings, the issue of co-ownership, the applicable burden of proof and the evidence on point [65] As mentioned, Royal & Sun Alliance did not allege, either in its pleadings or its responses to the Demands forParticulars, that Mr. Burke co-owned the Peterbilt, along with its sole registered owner, 1021256 Ontario Inc. In the particularcircumstances of this case, that failure to plead precludes reliance on co-ownership as a defence. Indeed, had that allegation been made ina timely fashion, as required by the Rules of Court, Mr.

Burke would undoubtedly have collected and preserved all of the documentationhaving some remote connection to that issue. I infer that he did not, given the low number of pertinent documents produced at trial andthe lack of any suggestion the appellants failed in their disclosure obligations. And it bears recording, once again, that co-ownership wasnot raised as a defence during Mr. Burke’s lifetime: it found its way into the record by way of Royal & Sun Alliance’s pre-trial brief,which was filed and delivered after Mr. Burke’s death.

One can easily imagine the difficulty his estate’s Administrator would haveencountered in trying to locate ownership-related documentation nearly a decade after the accident and some eight years after Royal &Sun Alliance filed their Statement of Defence. This is a case where the inference of irremediable prejudice is irresistible. At any rate,Royal & Sun Alliance’s co-ownership objection fails for another, equally compelling reason. [66] It is trite law that the burden lies on the insurer to establish the condition precedents to the application of anexclusion. In Continental Insurance Co. v.

Dalton Cartage Co., (SCC), [1982] 1 S.C.R. 164, Laskin C.J.C. stated that“[a] long standing line of authorities require an insurer, seeking solace in an exclusion from otherwise unlimited liability, to show that theexclusion applies” (at 167-168). That view was recently reaffirmed in Canadian National Railway Co. v. Royal and Sun AllianceInsurance Co. of Canada, 2008 SCC 66, [2008] 3 S.C.R. 453 at para. 34. Moreover, it was echoed and applied in Optimum InsuranceCompany Inc. v. Donovan, 2009 NBCA 6, 340 N.B.R. (2d) 45 at para. 39, leave to appeal denied [2009] S.C.C.A. No. 62 (QL).

Thisunderstanding of the law is in synch with the equally well-settled view that the party making an assertion carries the burden of its proof(see Townsend-Grant v. Grant, 2011 NBCA 12, 369 N.B.R. (2d) 202 at para. 12, per Bell J.A.). [67] Royal & Sun Alliance asserted, first in its pre-trial brief and then at trial, that Mr. Burke was not an “insured

person” because of the ownership exclusion found in Clause 1(f)(i). It was incumbent upon Royal & Sun Alliance to establish that assertion on a balance of probabilities. It failed to do so. How it could hope to discharge that burden of proof remains a mystery to me. After all, Royal & Sun Alliance did not admit 1021256 Ontario Inc. co-owned the Peterbilt: it formally admitted that 1021256 Ontario Inc. owned it.

The impact of this critical concession is compounded by the further admission that 1021256 Ontario Inc. was the sole registered owner and the assertion in Royal & Sun Alliance’s pre-trial brief that the Peterbilt had been purchased by 1021256 Ontario Inc . to replace a 1996 Peterbilt tractor “also owned” by 1021256 Ontario Inc. [ 68 ] Tellingly, Royal & Sun Alliance states in its written submission on appeal that the evidence pertaining to the Peterbilt’s ownership is “incomplete and inconsistent”. Such a poor evidential record is hardly sufficient to discharge the burden of establishing Mr.

Burke owned or co-owned the Peterbilt at the time of the accident. Moreover, I am also satisfied the un-pleaded allegation that Mr. Burke owned or was a co-owner of the Peterbilt at the time of the accident is wholly unsubstantiated by what evidence there is in the record. I note the trial judge did not find Mr. Burke was a co-owner of the Peterbilt, despite Royal & Sun Alliance’s plea that he do so. IV.

Conclusion and Disposition [ 69 ] For the reasons fleshed out in the preceding text, I would allow the appeal, with costs. [ 70 ] More precisely, I would set aside the decision rendered in the Court of Queen’s Bench and declare that Mr. Burke is an insured person and an eligible claimant for all NBEF 44 purposes in connection with the June 10, 2000 accident. Obviously, that declaration leaves untouched any quantum-related defence available to Royal & Sun Alliance under the NBEF 44. [ 71 ] Finally, I would fix the costs at $15,000 for the trial and at $10,000 for the appeal.

The following circumstances helped shape my assessment. The proceedings to date have been unquestionably exceptional. It has taken nearly a decade to get to this point. Mr. Burke passed away more than 2 years ago, some 7 years after the litigation was launched. No benefit has accrued to him personally by reason of the NBEF 44 for which he paid the premium charged. Had Royal & Sun Alliance complied with the rules of pleading in a timely fashion, I have no doubt Mr. Burke’s case would have been even more compelling and that it would have been heard and resolved before his death.

Justice may be slow, but it does move relatively quickly when the real issues are crisply defined and the related factual substantiation is provided in the pleadings, in accordance with the Rules of Court . Moreover, some of the arguments advanced by Royal & Sun Alliance, both in first instance and on appeal, were frivolous and detracted from the core issue it apparently wished to have adjudicated. In the result, the litigation was prolonged unnecessarily. No provisional award of damages has been made, that question having been severed from the issue of liability.

This decision is a step, albeit an important one, in a litigation that, if history teaches us anything, will continue for some time. My sense is that an enormous amount of time and effort went into the prosecution of the case at trial and on appeal. Counsel for the appellants filed particularly impressive written submissions, both at trial and on appeal.

Finally, the following also bear noting: (1) the documents pertaining to the proceedings in the Court of Queen’s Bench occupy two bankers’ boxes in the clerk’s office; (2) the appeal-related documents are nearly as substantial; (3) both pre- and post-trial briefs were necessary; and (4) both pre- and post-appeal submissions were required. ____________________________________ J. ERNEST DRAPEAU CHIEF JUSTICE OF NEW BRUNSWICK WE CONCUR: ____________________________________ M.E.L. LARLEE, J.A.

_____________________________________ KATHLEEN A. QUIGG, J.A.