COURT OF APPEAL FOR ONTARIO

CITATION: Costanza v. Desjardins Financial Security Life Assurance Company, 2023 ONCA 54

DATE: 20230126

DOCKET: C70332

van Rensburg, Sossin and Copeland JJ.A.

BETWEEN

Matteo Costanza by his Litigation Guardian, Bozana Skojo

Applicant (Respondent)

and

Desjardins Financial Security Life Assurance Company

Respondent (Appellant)

Noah Bonder and Alexandra White, for the appellant

A. Leigh McFadden and James P. Cavanagh, for the respondent

Heard: November 22, 2022

On appeal from the judgment of Justice Erika Chozik of the Superior Court of Justice, dated January 18, 2022, with reasons reported at 2022 ONSC 432.

Copeland J.A.:

[1]          The appellant insurer (“the insurer”) appeals from the judgment of the application judge declaring that the life insurance policy of which the respondent is the beneficiary is valid, subsisting, and binding on the insurer.

[2]          The issues raised in this appeal concern the duty of an insured to disclose material facts to their insurer and incontestability once a policy has been in force for two years or more during the life of the insured. At the time of the death of the insured, the life insurance policy at issue had been in effect for over five years. As a result, a failure to disclose or a misrepresentation of a material fact at the time the policy was obtained was not grounds for the insurer to void the policy in the absence of the insurer proving fraud at the time the policy was obtained: Insurance Act, R.S.O. 1990, c. I.8, s. 184(2). The insurer argues that the application judge erred in finding that the insurer had not met its burden, pursuant to s. 184(2), to show that a failure to disclose or misrepresentation of fact in the application for life insurance was fraudulently made. The insurer also brings a motion to admit fresh evidence as part of its appeal.

[3]          For the reasons that follow, I would dismiss the appeal and I would decline to admit the fresh evidence on the basis that it could not reasonably be expected to have affected the result of the application. Although the application judge erred in disregarding admissions made by the litigation guardian of the respondent that the deceased was convicted of assault causing bodily harm on March 11, 2009, I see no error in the application judge’s further finding, made in the alternative, that accepting that the conviction had been proven, the insurer had failed to establish that the deceased had the intent required for civil fraud at the time he completed the application for insurance. In the absence of palpable and overriding error, this finding by the application judge is entitled to deference.

Background

[4]          On January 9, 2012, Dean Costanza (“the deceased” or “the insured”) applied for life insurance. Question 21(a) of the application asked the following question: “In the last 3 years, have you been convicted of or pleaded guilty to any criminal offence or any moving violations or driving under the influence of alcohol or drugs?” The deceased answered “no”. On February 9, 2012, the insurer issued the life insurance policy to the deceased (“the policy”). The policy contained a life insurance benefit of $500,000 and designated the respondent as the primary beneficiary. The respondent is the deceased’s son.

[5]          On December 3, 2017, Mr. Costanza was killed. He was found in his car in front of his house. He had been shot to death.

[6]          On December 4, 2017, the respondent made a claim under the insurance policy. The insurer refused the respondent’s claim. The insurer took the position that the deceased made a material and fraudulent misrepresentation on his application for life insurance. The insurer asserted that the deceased’s answer to Question 21(a) was false. The insurer asserted that the deceased was convicted of assault causing bodily harm and sentenced to 90 days imprisonment on March 11, 2009 – 2 years, 9 months, and 29 days prior to the day he submitted the application for insurance.

[7]          The policy contained an incontestability clause, which stated: “Except for nonpayment of premiums, We will not contest the Basic Plan after it has been in force during the Insured’s lifetime for 2 years from the Policy Date.” At the time of the deceased’s death, the policy had been in effect for more than five years. The deceased paid all premiums as required on the policy.

[8]          The respondent sought a declaration that the policy was valid, subsisting, and binding on the insurer. The insurer argued before the application judge, and maintained on appeal, that the policy was voidable due to fraudulent non-disclosure or misrepresentation by the deceased in the application for insurance.

The application judge’s reasons

[9]          The application judge found that the insurance policy was valid, subsisting, and binding on the insurer. Her ultimate conclusion was that the insurer had not proven on a balance of probabilities that the deceased obtained the insurance through fraudulent non-disclosure or misrepresentation.

[10]       The application judge began her analysis by recognizing the well-established principle of insurance law that an insured has a duty to make full disclosure of material facts to an insurer. She noted that the duty is codified under s. 183(1) of the Insurance Act. She further noted that a failure to disclose or a misrepresentation of material fact renders the contract voidable pursuant to ss. 183(3) and 184 of the Insurance Act. However, s. 184(2) establishes that, where a contract has been in effect for two years during the lifetime of the person whose life is insured, a failure to disclose a material fact or misrepresentation of fact does not, in the absence of fraud, render the contract voidable. The application judge therefore identified the issue she had to decide as whether the insurer had proven that any material non-disclosure or misrepresentation made by the deceased in the insurance application met the standard for civil fraud. She identified that the intent required for civil fraud is knowledge or recklessness as to the falsehood of the representation.

[11]       The insurer argued before the application judge that the life insurance policy was voidable on two bases. First, the insurer argued that the deceased had made a fraudulent material misrepresentation in answering “no” to question 21(a), which asked if he had “been convicted of or pleaded guilty to any criminal offence or any moving violations or driving under the influence of alcohol or drugs” in the last three years. Second, the insurer argued that the deceased was obliged to disclose the fact that he had a “criminal history” or “criminal background”, and had failed to do so. The insurer argued that this was a material non-disclosure.

[12]       On the first issue, the insurer filed a partial printout from the Canadian Police Information Centre, purporting to list “Criminal Convictions Conditional and Absolute Discharges and Related Information” of the deceased (the “CPIC printout”). The CPIC printout included the following entry:

2009-03-11 BRAMPTON ON

ASSAULT CBH SEC 267 (B) CC

90 DAYS & MANDATORY WEAPONS PROHIBITION SEC 109 CC

 

(March 11, 2009 was 2 years, 9 months, and 29 days prior to the date the deceased submitted the insurance application).

[13]       The application judge found that the CPIC printout was not sufficient evidence to prove that the deceased was convicted of assault causing bodily harm on March 11, 2009. It was not authenticated in any way. It was a partial document. No evidence was led about the interpretation of the CPIC printout. There was no evidence whether the March 11, 2009 date represented a date of conviction, imposition of sentence, or some other date. She noted that a CPIC printout is a police record, not a court record. The insurer had chosen not to file a certified copy of the Information or Indictment or any other court record. She stated, “The way to verify the date of a conviction is by reference to the official court record entry contained in an Information or Indictment or a court transcript.”

[14]       The application judge was not satisfied that the March 11, 2009 date showed the date of conviction as opposed the date of sentence. She noted that in criminal proceedings, conviction and sentencing routinely proceed on different dates, particularly where a custodial sentence is realistically available. In light of this and the absence of any indication whether the March 11, 2009 date on the CPIC printout was the date of conviction or the date sentence was imposed, the application judge found that, at best, it showed that the deceased was convicted on some date no later than March 11, 2009. She concluded:

On the evidence before me, I am not satisfied that [the deceased] was “convicted” or “pled guilty” to the criminal offence on March 11, 2009. I am therefore not satisfied that his answer to question 21(a) was false or a misrepresentation. The [insurer] has not discharged its onus in this regard. The evidence that Mr. Costanza was “convicted” on March 11, 2009, falls woefully short.

[15]       Despite this finding, the application judge went on to consider, in the alternative, if the deceased was convicted of or pled guilty to assault causing bodily harm on March 11, 2009 (i.e., if a misrepresentation was proven), whether the insurer had satisfied its burden to prove that the intent required for civil fraud was met in relation to the deceased’s answer to question 21(a).

[16]       The application judge was not satisfied on a balance of probabilities that any misrepresentation by the deceased in his answer to question 21(a) was made with knowledge that it was false or with recklessness as to its truth or falsity. The insurer had argued that the deceased must have known that the conviction was within three years of the application because he served time in custody. The application judge found that this argument was based on a misconception of the criminal process. She found that the deceased could have been mistaken in calculating when he was convicted due to the multiple court appearances that are part of criminal proceedings. She found that it was at least as likely, if not more likely, that the deceased was mistaken or merely negligent as to the date of conviction when he filled out the application for insurance.

[17]       The application judge then considered the insurer’s second argument, that the deceased made a material non-disclosure in failing to disclose a “criminal history” or “criminal background”. Before the application judge, the insurer did not rely on the entries on the CPIC printout in support of this argument. Rather, it relied only on two printouts of online news articles posted in the days after the deceased was shot and killed. One article reported that the deceased’s name surfaced as part of Niagara Regional Police’s operation “Project Ink” that targeted another man and “mob cocaine smuggling activities in the Niagara Region.” The other article reported that, in June 2014, Niagara Regional Police indicated that the deceased was targeted for kidnapping and murder between October 2011-July 2012, by Niagara Region mobsters in a dispute over money and drugs.

[18]       Based on these news articles, the insurer argued that the deceased was known to police, that his murder was believed to be targeted and related to a dispute over money or drugs connected to a drug bust.

[19]       The application judge ruled the news articles to be inadmissible and “woefully” unreliable. They were a “dangerous” type of hearsay, “namely rumour and unsubstantiated innuendo.” She found that the fact that the news articles asserted that “the police” said the deceased was involved in criminal activity was not evidence that the deceased was, in fact, involved in criminal activity.

[20]       As a result of the inadmissibility and unreliability of the news articles, the application judge was not satisfied that the deceased had a criminal history or background or that the insurance policy was voidable for failure to disclose it.

Analysis

[21]       The insurer raises four grounds of appeal. The insurer also brings a motion to admit fresh evidence. The proposed fresh evidence is a certified copy of an Indictment in relation to the conviction of the deceased for assault causing bodily harm on February 2, 2009.

[22]       The grounds of appeal are as follows:

(1)   That the application judge erred in finding that the insurer had not proven that the deceased had been convicted of assault causing bodily harm in the three years preceding his application;

(2)   That the application judge erred in law in the test she applied for civil fraud;

(3)   That the application judge erred in finding that the deceased’s representation that he had not been convicted of a criminal offence in the three years preceding his application had not been proven by the insurer to have been made with knowledge that it was false or with recklessness as to its truth or falsity; and

(4)   That the application judge erred in finding that the insurer had not proven that the deceased had a “criminal history” or “criminal background” that he failed to disclose.

[23]       These reasons are structured as follows. First, I provide an outline of the legal principles applicable to the obligation of an applicant for insurance to disclose material facts to the insurer at the time of the application and to the incontestability of a policy after it has been in force for two years or more. Second, I address the fresh evidence application. Third, I address the grounds of appeal. Because the fourth branch of the test for admissibility of fresh evidence established in Palmer requires a consideration of whether the fresh evidence could reasonably be expected to affect the result of the application, there is some interplay between the analysis of the admissibility of the fresh evidence and the analysis of the grounds of appeal.

A.          The relevant statutory provisions and legal principles

[24]       It is helpful as context for the issues in this appeal to start with the statutory provisions and principles applicable to the duty to disclose placed on a person applying for insurance and to incontestability once the policy has been in force for two years or more. None of these basic principles are in dispute between the parties.

[25]       It is well-established that a person applying for insurance has a duty to disclose to the insurer all facts within the person’s knowledge that are material to the insurance. The duty is not only an obligation on the applicant for insurance not to misrepresent their situation, but also a positive obligation to volunteer information which a reasonable[1] insurer would consider relevant to assessing the risk. The duty to disclose applies even in the absence of questions on a given subject from the insurer, although the absence of questions may be evidence that an insurer does not consider a fact to be material: Gregory v. Jolley (2001), 54 O.R. (3d) 481 (C.A.), at paras. 31-32; Sagl v. Chubb Insurance Company of Canada, 2009 ONCA 388, 249 O.A.C. 234, at paras. 51-52.

[26]       Part V of the Insurance Act governs life insurance. Sections 178 to 189.1 address conditions governing formation of the insurance contract. Section 183 codifies the duty of disclosure on an applicant for insurance at the time of the application (and at the time of some subsequent applications to vary an insurance contract) as well as the consequences of failure to disclose or misrepresentation. Section 183 provides as follows:

Duty to disclose

183 (1) An applicant for insurance and a person whose life is to be insured shall each disclose to the insurer in the application, on a medical examination, if any, and in any written statements or answers furnished as evidence of insurability, every fact within the person’s knowledge that is material to the insurance and is not so disclosed by the other.

Failure to disclose

(2) Subject to section 184 and subsection (3) of this section, a failure to disclose, or a misrepresentation of, such a fact renders the contract voidable by the insurer.

Failure to disclose, application for change, etc., in contract

(3) A failure to disclose, or a misrepresentation of, a fact referred to in subsection (1) relating to evidence of insurability with respect to the following kinds of applications renders the contract voidable by the insurer, but only in relation to the addition, increase or change applied for:

1. For additional coverage under a contract.

2. For an increase in insurance under a contract.

3. For any other change to insurance after the policy is issued.

[27]       Where an applicant for insurance makes a material misrepresentation or fails to disclose material information, the insurance contract is voidable at the option of the insurer.

[28]       However, the Insurance Act limits voidability where the policy has been in effect for two years or more during the lifetime of the insured. Section 184(2) provides as follows:

Incontestability, general

184 (2) Subject to subsection (3), where a contract, or an addition, increase or change referred to in subsection 183 (3) has been in effect for two years during the lifetime of the person whose life is insured, a failure to disclose or a misrepresentation of a fact required to be disclosed by section 183 does not, in the absence of fraud, render the contract voidable.

[29]       Thus, where a policy has been in effect for two years or more during the lifetime of the insured, if the insurer seeks to have the policy voided on the basis of material misrepresentation or material non-disclosure, the insurer must prove on a balance of probabilities that the misrepresentation or non-disclosure was made with the intent required for civil fraud: Gregory, at para. 15.

[30]       The application judge correctly instructed herself on these legal principles.

B.          Should the fresh evidence be admitted?

[31]       As noted above, the fresh evidence is a certified copy of an Indictment relating to the deceased. The certified copy of the Indictment establishes the fact that the deceased was convicted of assault causing bodily harm on February 2, 2009, and was sentenced to 90 days imprisonment and an ancillary weapons prohibition on March 11, 2009. February 2, 2009 is 2 years, 11 months, and 8 days prior to the submission of the insurance application by the deceased.

[32]       The four-part test for admissibility of fresh evidence is well-established:

(1)    The evidence should generally not be admitted if, by due diligence, it could have been adduced at trial;

(2)    The evidence must be relevant in the sense that it bears upon a decisive or potentially decisive issue in the trial;

(3)    The evidence must be credible in the sense that it is reasonably capable of belief; and

(4)    The evidence must be such that, if believed, it could reasonably, when taken with the other evidence adduced at trial, be expected to have affected the result: Palmer v. The Queen, [1980] 1 S.C.R. 759.

[33]       The respondent concedes that the fresh evidence meets the second and third branches of the Palmer test. The certified copy of the Indictment is relevant to the issue of whether there was a misrepresentation in the deceased’s answer to question 21(a), whether he had a criminal conviction in the three years preceding the application. It is also credible, as it is a certified copy of a court document – the criminal Indictment.

[34]       In light of these concessions, I need only address the first and fourth branches of the Palmer test.

[35]       At first blush, one might conclude that the motion to admit fresh evidence must fail on the first branch of the Palmer analysis because there was nothing preventing the insurer from obtaining a certified copy of the Indictment and including it in the record before the application judge. However, this initial conclusion is complicated by admissions made by Bozana Skojo, the ex-common-law spouse of the deceased, and the mother and litigation guardian of the respondent.

[36]       In her affidavit filed on the application (and recall that the respondent was the applicant in the court below), Ms Skojo stated:

Based on the records produced in accordance with the Order of Master P. McGraw, I believe that the deceased’s criminal record indicated that on March 11, 2009, he was convicted of assault causing bodily harm and was sentenced to 90 days prison. Attached as Exhibit “G” is a true copy of the criminal record of Dean Costanza.[2]

The Application was completed by the deceased on or about January 9, 2012.

The deceased was convicted 2 years, 9 months and 29 days prior to the date he completed the application.

I believe that the deceased mistakenly calculated the length of time since he had been convicted.

[37]       In cross-examination by the insurer, Ms Skojo agreed with the suggestion put to her “that it’s a fact that Mr. Costanza was convicted of assault causing bodily harm in March of 2009”. She also agreed with the suggestion put to her “that we are in agreement that Mr. Costanza did have a criminal conviction in the three years prior to the application”. She was also asked in cross-examination, “So there was a wrong answer in the application?” (in reference to question 21(a)), and responded, “Yes.”

[38]       The insurer argues on the fresh evidence motion that it meets the due diligence threshold because it was entitled to rely on the admissions by Ms Skojo about the deceased’s conviction for assault causing bodily harm. It could not have anticipated that the application judge would disregard the admissions.

[39]       Although the application judge’s reasons make reference to some aspects of Ms Skojo’s evidence, they make no reference to her admissions about the deceased’s conviction for assault causing bodily harm. However, the application judge’s reasons are clear that she was concerned about the reliability of the CPIC printout, an issue I return to further below in my analysis of the grounds of appeal.

[40]       I agree with the insurer that it has satisfied the due diligence branch of the Palmer inquiry. In her evidence on the application, Ms Skojo admitted the fact of the deceased’s assault causing bodily harm conviction, but took the position that any incorrect statement in the insurance application was made by mistake. In my view, given Ms Skojo’s unequivocal admissions about the fact of the conviction, there was no failure of due diligence by the insurer in not obtaining and filing a certified copy of the Indictment before the application judge. Based on the admissions made by Ms Skojo, the fact of the deceased’s conviction for assault causing bodily harm was not in dispute. The insurer was entitled to rely on the admissions by Ms Skojo on behalf of the respondent.

[41]       The fourth branch of the Palmer test requires the court to consider whether the fresh evidence could reasonably be expected to affect the result of the application. Because this branch is interrelated with the substantive grounds of appeal, I state my conclusion now, and address the reasons in more detail in my analysis of each ground of appeal.

[42]       In my view, the fresh evidence could not reasonably be expected to affect the result of the application. The fresh evidence does not materially change the factual basis relied on by the application judge to find that the insurer failed to meet its burden to prove that if there was a misrepresentation in the answer to question 21(a) it was made fraudulently. The application judge engaged in that analysis using the date of March 11, 2009 as the date of conviction (from the CPIC printout). The fresh evidence shows that the actual date of conviction was about five weeks earlier, February 2, 2009. This change in date could not reasonably be expected to affect the application judge’s finding that she was not satisfied that the incorrect answer to question 21(a) was made by the deceased with knowledge that it was false or with recklessness as to its truth or falsity.

[43]       The fourth branch of the Palmer test requires that the fresh evidence could be reasonably expected to affect the result. For the insurer to succeed before the application judge on its argument that the policy was voidable because of the incorrect answer to question 21(a), it had to prove a material misrepresentation and that the misrepresentation was made by the deceased with knowledge that it was false or with recklessness as to its truth or falsity. Although the fresh evidence could affect the issue of whether there was a material misrepresentation, it could not reasonably be expected to affect the result of the application, because it could not reasonably be expected to affect the application judge’s finding that the insurer had failed to establish the intent required for civil fraud.

[44]       Further, on the other ground on which the insurer sought to void the policy – that the deceased had failed to disclose his “criminal history” or “criminal background” – in light of the insurer’s position before the application judge that it was relying only on the newspaper articles in support of this argument, admitting the fresh evidence to prove the February 2009 assault causing bodily harm conviction could not reasonably be expected to affect the result. The insurer should not be permitted to change position on appeal as to the factual basis for this argument.

C.           Analysis of the grounds of appeal

(1)         Did the application judge err in finding that the insurer had not proven that the deceased had been convicted of assault causing bodily harm in the three years preceding his application?

[45]       The insurer argues that the application judge erred in finding that the insurer had not proven that the deceased had been convicted of assault causing bodily harm in the three years preceding his application for insurance. As a result, she erred in finding that the insurer had not proven that the deceased’s answer to question 21(a) was false or a misrepresentation.

[46]       This argument by the insurer has two branches. The first branch is based on admissions made by the respondent in the application. The second branch is based on the fresh evidence. I address each branch in turn.

[47]       I have outlined above the admissions made by Ms Skojo about the deceased having been convicted of assault causing bodily harm on March 11, 2009.

[48]       The insurer argues that the application judge erred in disregarding the admissions made by Ms Skojo. According to the insurer, based on Ms Skojo’s admissions, the fact that the deceased was convicted of assault causing bodily harm was agreed between the parties.

[49]       The insurer characterizes the error by the trial judge as a mistake of fact by the trial judge, in making factual findings that fail to recognize and address the admissions by Ms Skojo.

[50]       I agree that it is a palpable and overriding error of fact, but it is also a more fundamental error of procedural unfairness to the insurer.

[51]       The application judge made no reference in her reasons to the fact that Ms Skojo, on behalf of the respondent, admitted in both her affidavit and cross-examination evidence that the deceased had been convicted of assault causing bodily harm on March 11, 2009.

[52]       In my view, the failure of the application judge to address the clear admissions by Ms Skojo in relation to the deceased’s 2009 conviction for assault causing bodily harm constitutes palpable and overriding error in relation to the application judge’s conclusion that the insurer had not proven that the deceased was convicted of a criminal offence in the three years preceding the insurance application. This finding was made in the absence of any consideration of the admissions of Ms Skojo.

[53]       Further, as I have already explained in relation to the due diligence analysis of the fresh evidence application, it was procedurally unfair for the application judge to disregard the clear admissions by Ms Skojo about the deceased’s 2009 conviction for assault causing bodily harm, which the insurer had relied on, without giving the insurer an opportunity to provide further evidence on that issue, if the application judge was not prepared to accept the admissions.

[54]       I want to briefly address the concern which, one can infer, led the application judge to disregard the admissions by Ms Skojo. From reading the portions of Ms Skojo’s affidavit and cross-examination which contain the admissions that the deceased was convicted of assault causing bodily harm on March 11, 2009, it is clear that the basis for her admissions was reliance on the CPIC printout which the insurer had obtained through a production order in other litigation about the deceased’s estate.

[55]       The reasons of the application judge demonstrate that she was concerned about the reliability and propriety of using a CPIC printout to prove a conviction. Nonetheless, Ms Skojo, on behalf of the respondent, made admissions which the insurer was entitled to rely on and did rely on. As a matter of fairness, the application judge should not have disregarded Ms Skojo’s admissions about the conviction for assault causing bodily harm without giving the insurer, who had relied on the admissions, the opportunity to lead evidence of the fact that was the subject of the admissions.

[56]       My conclusion that the application judge erred in disregarding the admissions by Ms Skojo should not be read as suggesting that a CPIC printout is sufficient proof of a prior conviction in the absence of an admission. The proper method to prove the existence of a criminal conviction, if it is not admitted, is with a certified copy of the Indictment or Information,[3] as the case may be: Evidence Act, R.S.O. 1990, c. E.23, s. 22.1; F.(K.) v. White (2001), 53 O.R. (3d) 391 (C.A.), at paras. 5, 21-22; Andreadis v. Pinto (2009), 98 O.R. (3d) 701 (S.C.J.), at paras. 10, 14-15; D. Paciocco, P. Paciocco and L. Stuesser, The Law of Evidence in Canada, 8th ed., (Toronto: Irwin Law, 2020), at pp. 188-91; S. Lederman, A. Bryant and M. Fuerst, Sopinka, Lederman & Bryant: The Law of Evidence in Canada, 6th ed. (Toronto: LexisNexis, 2022), at paras. 19.217-19.220.

[57]       For these reasons, I conclude that the application judge erred in disregarding the admission by the respondent that the deceased was convicted of assault causing bodily harm on March 11, 2009.

[58]       However, as I explain under the next ground, I find that this error had no impact on the result of the decision by the application judge, because she went on to find that, assuming that the deceased had been convicted of assault causing bodily harm on March 11, 2009, the insurer had not satisfied her on a balance of probabilities that the deceased gave that false answer knowingly or recklessly as opposed to by mistake or negligence not rising to the level of recklessness.

[59]       The second branch of the insurer’s argument on this ground is based on the certified copy of the Indictment for the deceased’s February 2, 2009 conviction for assault causing bodily harm. If admitted, the certified copy of the Indictment proves that the deceased was convicted of a criminal offence in the three years prior to his application for insurance (contrary to the response that he gave to question 21(a) on the insurance application).

[60]       I return to the fourth branch of the Palmer test – whether the fresh evidence could reasonably be expected to affect the result of the application. In my view, it could not. The certified copy of the Indictment could reasonably be expected to affect the application judge’s conclusion on one issue within the application, but that issue was not determinative of the result of the application. For this reason, the fresh evidence could not reasonably be expected to affect the result of the application.

[61]       The reason for this conclusion is as follows. The certified copy of the Indictment, if admitted, would prove that the deceased’s answer to question 21(a) was false, because it shows that he was convicted of a criminal offence within the three years prior to the application for insurance. However, for the insurer to prevail in its argument that the policy was voidable under s. 184(2) of the Insurance Act, it also had to prove that the misrepresentation was fraudulently made – that is, that the deceased did so knowingly or recklessly. The application judge found that the insurer had not met its burden on the latter issue. And the certified copy of the Indictment did not materially change the factual basis for the application judge’s conclusion on the latter issue (which I discuss further below). Thus, although the certified copy of the Indictment could be expected to affect the application judge’s conclusion on one issue within the application, it could not be expected to affect the result of the application.

(2)         Did the application judge err in law in the test she applied for civil fraud?

[62]       The insurer argues that the application judge applied the wrong legal test for civil fraud. This argument is entirely based on one reference in the reasons to the words “intent to deceive”.

[63]       I would reject this argument.

[64]       This argument raises a question of law. The standard of review is correctness.

[65]       It is well-established that reasons must be read as a whole. Reading the reasons in this case as a whole, there can be no doubt that the application judge applied the correct legal standard for the intent for civil fraud.

[66]       The portion of the reasons that the insurer argues reveals error is three words in the following sentence: “Even if Mr. Costanza was “convicted” or pled guilty on March 11, 2019, I am not satisfied that the Respondent has proven the intent to deceive required to make out a civil fraud” (emphasis added). This sentence appears at the outset of the section of the reasons for judgment where the application judge considers whether the required level of intent for civil fraud had been proved by the insurer on the record before her.

[67]       In my view, when this sentence is read in the context of the reasons as a whole, it is clear that the reference to “intent to deceive” is shorthand reference to the intent requirement for civil fraud which the application judge repeatedly stated elsewhere in her reasons – knowledge of or recklessness as to the falsehood of the representation.

[68]       The application judge expressly referred to the correct level of intent for civil fraud – knowledge of or recklessness as to the falsehood of the representation – repeatedly in her reasons. First, at the outset of her legal analysis, she set out in detail the four elements of civil fraud, with specific reference to one of the leading authorities, Bruno Appliance and Furniture, Inc. v. Hryniak, 2014 SCC 8, [2014] 1 S.C.R. 126, at para. 21. There, she correctly stated that the level of intent required is: “Some level of knowledge of the falsehood of the representation on the part of the defendant, whether through knowledge or recklessness”. The insurer accepts that the application judge correctly stated the intent required for civil fraud in this passage.

[69]       The passage relied on by the insurer with the words “intent to deceive” appears directly below a heading which reads: “Was Any Misrepresentation Done with Knowledge or Recklessness?” (emphasis added). Further down in the same paragraph as the passage the insurer relies on, the application judge stated: “I am not satisfied that it can reasonably be said that it is more likely than not Mr. Costanza answered that question knowing that it was false or being reckless as to its truth” (emphasis added). After considering the evidence before her, the application judge concluded her analysis of the issue of whether the intent for civil fraud had been proven as follows:

I find that in these circumstances, I cannot be satisfied on a balance of probabilities that any misrepresentation by Mr. Costanza was done knowingly or recklessly. It is at least as likely (if not more likely) that Mr. Costanza was mistaken or merely negligent as to the date of the conviction when he filled out the application for insurance.

[70]       In addition to the multiple references in the application judge’s reasons to the correct standard of intent for civil fraud – knowledge or recklessness as to whether the representation was false – the substance of her analysis shows that she applied the correct legal standard. Her assessment of the evidence shows that she was not assessing whether intentional deceit had been proven. Rather, she considered whether the evidence was sufficient to prove on a balance of probabilities either knowledge or recklessness as to the falsehood of the answer, or was at best sufficient to prove negligence or mistake, which would not amount to civil fraud. She found the latter.

[71]       In light of this context, I conclude that the application judge did not err in law regarding the standard of intent required for civil fraud. Her reasons show that she understood that the standard was knowledge or recklessness as to the falsehood of the representation. And that is the standard she applied in assessing the evidence before her.

[72]       The fresh evidence has no bearing on this ground of appeal. Thus, this ground provides no basis to conclude that the fresh evidence could reasonably be expected to affect the result of the application.

(3)         Did the application judge err in finding that the deceased’s representation that he had not been convicted of a criminal offence in the three years preceding his application had not been shown by the insurer to have been made knowingly or recklessly?

[73]       The insurer argues that the application judge erred in finding that it had not proven that the deceased made the representation that he had not been convicted of a criminal offence in the three years preceding the insurance application with knowledge that it was false or with recklessness as to its truth or falsity.

[74]       This ground of appeal raises a question of fact or mixed fact and law about the application judge’s factual findings regarding whether knowledge or recklessness had been proven by the insurer. The palpable and overriding error standard of review applies.

[75]       I am not persuaded that the insurer has shown any palpable and overriding error in the application judge’s finding that the insurer failed to prove that the deceased made the representation in his answer to question 21(a) knowingly or recklessly.

[76]       It is important in considering this ground of appeal to bear in mind that the insurer bore the burden of proof to establish that the deceased made the incorrect representation in his answer to question 21(a) knowingly or recklessly: Gregory, at para. 15.

[77]       Before the application judge, the insurer argued that because the deceased served time in custody for the assault causing bodily harm conviction (90 days in jail), he must have known that the conviction was within three years before he completed the insurance application.

[78]       The application judge rejected this argument. She found that it misconceived the criminal process. Convictions and sentences do not necessarily happen the same day. There are often many court appearances where an accused person may or may not be present. In this context, she found that it was not at all unlikely that the deceased could have been mistaken in calculating when his conviction was in relation to the date of his insurance application. She was not satisfied that the insurer had proved on a balance of probabilities that the deceased made the representation that he had not been convicted of a criminal offence in the three years prior to the application with knowledge that or recklessness as to whether it was false. She found that: “It is at least as likely (if not more likely) that Mr. Costanza was mistaken or merely negligent as to the date of the conviction when he filled out the application for insurance.”

[79]       In my view, the appellant has failed to show any palpable and overriding error in the findings of fact of the application judge on this issue. Her findings are entitled to deference.

[80]       Returning to the fourth branch of the Palmer analysis, the fresh evidence could not reasonably be expected to affect the result. If the fresh evidence were admitted, it would not materially change the factual basis on which the application judge reached the conclusion that the insurer had not satisfied the civil fraud standard. The application judge engaged in this analysis on the assumption that the deceased had been convicted of assault causing bodily harm on March 11, 2009, 2 years, 9 months, and 29 days prior to the insurance application. If the fresh evidence were admitted, the only difference is that the conviction is approximately five weeks earlier, and even closer to the three-year limit in question 21(a). There is no basis to conclude that this five-week difference would have made any difference to her finding that the insurer had failed to show that the deceased’s incorrect answer to question 21(a) was made knowing that or reckless as to whether it was false. Thus, admission of the fresh evidence could not be expected to change the result.

(4)         Did the application judge err in finding that the insurer had not shown that the deceased had a criminal history?

[81]       The insurer argues that the application judge erred in finding that it had not proven that the deceased had a “criminal history” or “criminal background” that he was required to disclose.

[82]       In considering this ground of appeal, one must bear in mind the manner in which the insurer advanced before the application judge the argument that the deceased had a “criminal history” or “criminal background” that he failed to disclose. The application judge expressly outlined in her reasons the evidence on which the insurer relied in making this argument before her, and on which the insurer chose not to rely:

The Respondent argues that Mr. Costanza was obliged to disclose the fact that he had a “criminal history” or “criminal background”. Mr. Costanza’s CPIC shows a number of convictions and dispositions between 1990 and 1994, then 2002, 2008 and finally on March 11, 2009. The Respondent does not argue that this is the criminal history that Mr. Costanza ought to have disclosed. These convictions are dated and, inferring from the dispositions, relatively minor.

Rather, in support of its contention that Mr. Costanza was obliged to disclose his criminal involvement, the Respondent relies on two printouts from news stories posted on the internet in the days after Mr. Costanza was shot and killed…

Based on these generically sourced media reports - and only this evidence - the Respondent argues that Mr. Costanza was known to the police, his murder was believed to be targeted and related to a dispute over money or drugs connected to “a massive cocaine bust involving drug kingpin Nick Nero.” [Emphasis added.]

[83]       On appeal, the insurer seeks to change the factual basis on which this argument is advanced. Rather than rely solely on the newspaper articles, the insurer now seeks to rely on the CPIC printout and the certified copy of the Indictment that it seeks to file as fresh evidence. Indeed, on appeal the insurer does not challenge the finding of the application judge that the newspaper articles were inadmissible and were insufficient to establish a criminal background on the part of the deceased.

[84]       I would reject this ground of appeal. An appeal is not a forum for a party to advance new arguments not raised below. The insurer did not rely on the CPIC printout or any specific criminal conviction(s) in its argument before the application judge that the deceased failed to disclose his “criminal history” or “criminal background”. Rather, it chose to rely only on the news articles. It is not appropriate to allow the insurer on appeal to fundamentally change the basis on which this argument was made: Frohlich v. Ferraro, 2017 ONCA 978, 85 R.P.R. (5th) 175, at para. 5.

[85]       As it relates to this ground of appeal, the result of the application could not be affected by the fresh evidence. Fresh evidence is not a vehicle for a party to advance arguments on a fundamentally different basis than raised below.

Disposition

[86]       I would dismiss the motion to file fresh evidence, and dismiss the appeal. As agreed by the parties, I would order costs payable to the respondent in the amount of $15,000, inclusive of disbursements and applicable taxes.

Released: January 26, 2023 “K.M.v.R.”

“J. Copeland J.A.”

“I agree. K. van Rensburg J.A.”

“I agree. Sossin J.A.”