Mostafa v. Prudential of America General Insurance

Mostafa v. Prudential of America General Insurance Collection Decisions of the Court of Appeal Date 1999-10-20 Docket numbers C27773 Judges Finlayson, George Duncan; Catzman, Marvin Adrian; Sharpe, Robert J. Subject Civil Decision Content DATE: 19991020 DOCKET: C27773 COURT OF APPEAL FOR ONTARIO RE: ELSAYED MOSTAFA and NOVREL MOSTAFA (Plaintiffs) –and– PRUDENTIAL OF AMERICA GENERAL INSURANCE COMPANY (CANADA) (Defendant) BEFORE: FINLAYSON, CATZMAN and SHARPE JJ.A. COUNSEL: D. Stortini for the appellant L.J. Burns and F. Alibhai for the respondents HEARD: October 13 and 14, 1999 On appeal from the judgment of Dyson J. dated June 27, 1997. ENDORSEMENT [1] Following a fire that destroyed much of their house and its contents, the respondents asserted a claim against the appellant, their insurer. The appellant resisted their claim on the basis of arson and of fraud in the claim for contents. After trial, Dyson J. gave judgment for the respondents in an amount that was substantially less than their claim. The appellant appeals, and the respondents cross-appeal, from the judgment at trial. The appeal [2] On the issue of liability, Ms. Stortini took us through passages in the transcripts and exhibits in an attempt to show that, having regard to evidence of motive and to the speed and intensity of the fire, the respondents had been parties to arson and that they had committed fraud in their claim for loss of contents allegedly destroyed in the fire. [3] We deal first with the defence of arson. Having found that the appellant had established that the fire was incendiary in origin, Dyson J. reviewed the evidence relating to the respondents’ motive and opportunity to set the fire and concluded as follows: I was impressed by [Mrs. Mostafa’s] comportment when she indicated her husband was not the type of man to commit such an act. I was impressed with the demeanour and responses of Mr. Mostafa when he was confronted directly with the accusation that he knew who committed the crime. Further, I was impressed with the sincerity and emotion of the [respondents] in relation to the loss of many of their valued possessions and family heirlooms, which they clearly treasured. I am satisfied that the [appellant] has not established on a balance of probabilities arson on the part of the [respondents]. [4] With respect to the alleged fraud in the respondents’ claim, particularly with respect to two paintings for which Dyson J. ultimately denied any recovery, he said: With respect to the two Von Grutzner paintings, Mr. Mostafa stated that he had obtained the two paintings in a trade which had an agreed value of $20,000, but the goods that he exchanged were not, in his view worth, $20,000. He stated that he knew nothing of Von Grutzner and he was leaving the assessment to the expert. Rather than being fraudulent and wilfully misleading, I found Mr. Mostafa to be completely candid about this item. [5] In our view, it was open to the trial judge, on the evidence before him, to reach the conclusions he did respecting the appellant’s allegations of arson and fraud, and we are not persuaded that he committed any reversible error in reaching those conclusions. [6] The appellant took issue with Dyson J.’s decision to dispense with the jury and try the action alone. That decision was made on the ninth day of a twelve-day trial, in response to the second motion for such an order brought by the respondents. In his ruling, Dyson J. stated that: I’ve pondered the problems that have arisen as a result of the testimony, and I must say that the complexity that has arisen as a result of the evidence has given me great concern, particularly with respect to the issue of the value of the contents being considered by the jury after repudiation of the contract in January of 1991. The issue of actual cash value or replacement cost is, again, one of considerable difficulty and complexity, not only for lay persons but for persons in the profession. I was under the impression at the outset of the trial that the issue of arson or no arson was really the major and main issue to be decided by this jury. However, it has become abundantly apparent that other complex issues must be put to the jury …Accordingly it is with great regret and reluctance that I am going to release the jury from their duties and consider the matter myself. [7] This court will not interfere with a trial judge’s exercise of discretion to take a case from a jury except where it is shown that the discretion was exercised arbitrarily or capriciously or was based upon a wrong or inapplicable principle of law. We are not persuaded that Dyson J. made any such error in the present case. [8] Dyson J. ordered that the amount payable to the respondents bear prejudgment interest at the rate of 10% per annum from January 4th, 1991, when the appellant denied their claim. The presumptive rate of prejudgment interest payable under the Courts of Justice Act was 12.3% per annum. Ms. Stortini submitted that the average annual rate of prejudgment interest between 1991 and the date of trial was 6.2%, and that Dyson J. erred in failing to order prejudgment interest at that rate. [9] In our view, this submission is without merit. Had Dyson J. seen fit to do so, it was open to him to award interest at the presumptive rate of 12.3% mandated by s.128(1) of the Courts of Justice Act. Instead, he exercised his discretion under s.130 of that Act to reduce the interest rate to 10%. He committed no reversible error by failing to reduce the interest rate to the still lower figure proposed by the appellant. [10] The appeal is dismissed with costs. The Cross-Appeal [11] The respondents cross-appealed. They sought to vary the judgment at trial to allow damages for the loss of their house by reference to replacement cost rather than actual cash value, and to provide specifically for payment to them of the fee charged by their public adjuster. [12] We deal first with the claim for replacement cost. As noted by Dyson J., the house was neither replaced nor repaired. Although the respondents continued to maintain its carrying costs until 1993, they then sold it and moved into another residence closer to their place of business. Their insurance policy with the appellant specifically provided for payment of actual cash value at the date of the occurrence if they did not repair or replace the building. Dyson J. committed no error in failing to calculate the respondents’ award based on replacement cost. [13] For a fee of 7%, Alex N. Sill Insurance Adjustment Company (Canada) Ltd. (“Sill”) undertook to assist in the calculation and presentation of the respondents’ claim for building and contents. The respondents submitted that Dyson J. should have ordered the appellant specifically to pay the amount of Sill’s fee which, we were advised, was approximately $79,000 plus interest. [14] For the appellant’s “bad faith” in dealing with the respondents’ claim, Dyson J. ordered the appellant to pay to the respondents their costs of the action on a solicitor and client basis. The quantification of those costs will entail the assessment of the amount payable for reasonable disbursements for services reasonably necessary to advance the respondents’ position at trial. While that assessment will undoubtedly include some amount referable to the Sill fee, we consider it preferable to leave to the assessment officer the calculation of the specific amount of that fee that should be assessed in the context of the respondents’ solicitor and client costs. [15] The cross-appeal is dismissed with costs. Signed: “G.D. Finlayson J.A.” “M.A. Catzman J.A.” “Robert J. Sharpe J.A.”