Notice - Adequacy of Notice. Varriano v. Allstate Insurance Company of Canada
In Varriano v. Allstate Insurance Company of Canada (Ont CA, 2023) the Court of Appeal considered the adequacy of a SABS auto insurance discontinuation notice letter, and in the process engaged in statutory interpretation of the notice provision:
 The Divisional Court overturned the decision of the LAT adjudicator, finding that Mr. Varriano’s application was not time-barred because Allstate’s Benefits Letter did not meet the legislative requirements under s. 37(4) of the SABS. The Divisional Court held that s. 37(4) required Allstate to provide medical reasons in the Benefits Letter for the stoppage of benefits.. Hodge v. Registrar Real Estate and Business Brokers Act
 If the insurer determines that it will discontinue paying a benefit because an insured is ineligible on any one or more grounds, the insurer, pursuant to s. 37(4) is required to provide a notice to the insured containing the reasons for their determination:
37(4) If the insurer determines that an insured person is not entitled or is no longer entitled to receive a specified benefit on any one or more grounds set out in subsection (2), the insurer shall advise the insured person of its determination and the medical and any other reasons for its determination. [Emphasis added.]....
 The Divisional Court held that Adjudicator Boyce erred in his interpretation of s. 37(4) of the SABS. That court concluded that a plain reading of s. 37(4) supported the interpretation of the word “and” in the phrase “medical and any other reasons” as bearing a conjunctive meaning. ...
A. The Divisional Court’s Interpretation Does Not Accord with the Modern Principle of Statutory Interpretation
 I begin with the observation that the modern approach to statutory interpretation requires that statutes “are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament”: Rizzo & Rizzo Shoes Ltd. (Re), 1998 CanLII 837 (SCC),  1 S.C.R. 27, at para. 26. A statute must not be interpreted in a manner that would result in absurd consequences. An interpretation will be absurd where it leads to “ridiculous or frivolous consequences, if it is extremely unreasonable or inequitable, if it is illogical or incoherent, or if it is incompatible with other provisions or with the object of the legislative enactment”: Rizzo, at para. 27. The modern principle of interpretation applies with equal force to regulations: Beaudin v. Travelers Insurance Company of Canada, 2022 ONCA 806, at para. 36.
 In my view, in giving a conjunctive meaning to the word “and” in the phrase “medical and any other reason” in s. 37(4), the Divisional Court failed to properly apply the modern principle of statutory interpretation. That interpretation failed to acknowledge that the grammatical and ordinary usage of the word “and” can include both the joint sense and the several sense. When the phrase “medical and any other reason” in s. 37(4) is read contextually, it becomes clear that the ordinary meaning of the word “and” was intended in its several sense. Nor does the Divisional Court’s interpretation accord with the purpose of the notice provision.
(1) The grammatical and contextual meaning of “medical and any other reason”
 Presuming that the plain meaning of the word “and” is conjunctive reflects an incomplete appreciation of the grammatical use of the word in ordinary language. As Ruth Sullivan points out in The Construction of Statutes, 7th ed. (Markham: LexisNexis Canada Inc., 2022) at § 4.05, “and” is sometimes used in the joint and several sense (A and B jointly or severally) and in other circumstances is used only in the joint sense (A and B jointly, but not severally).
 Considering the use of “and” in a statutory provision contextually assists in determining when it should be interpreted in the joint sense as opposed to the joint and several sense: R. v. Yadegari, 2011 ONCA 287, 286 C.C.C. (3d) 320, at para. 62. In my view, the requirement to provide reasons in s. 37(4) is inextricably tied to the grounds for discontinuance of benefits stipulated in s. 37(2). Contextually, when the two provisions are read properly together, it is clear that the word “and” in the phrase “medical and any other reason” was intended in the joint and several sense.
 These two sections read together simply require the insurer to determine the basis for disqualifying the insured person under s. 37(2) from receiving specified benefits and to communicate the basis for that determination to the insured. Some of the grounds under s. 37(2) are medical and some are not. For example, ss. 37(2)(a), (d), (f) and (g) provide for non-medical grounds to terminate benefits.
 Importantly, s. 37(4) states that the insurer may rely on “any one or more grounds set out in [s. 37(2)]” (emphasis added) in terminating benefits. By explicitly including those words, s. 37(4) recognizes that an insurer may rely on a single non-medical reason for termination of benefits, even though the insured might be otherwise medically entitled to the benefit. In such case, a medical ground is not a “reason” for the insurer’s determination under s. 37(4). Yet, the Divisional Court’s interpretation requires the insurer to state its position on the person’s medical eligibility even if that is not the basis for its determination. Put differently, interpreting “and” in the joint sense conflicts with the joint and several nature of the grounds for termination.
 Such an interpretation is not a harmonious reading of the two sections particularly in light of s. 37(2)(g) which specifically contemplates that the disentitlement need not relate to an impairment. This subsection permits termination if the insurer determines that the insured person is not entitled to a specified benefit “for a reason unrelated to whether [the insured] has an impairment that entitles the insured person to receive the benefit” (emphasis added). The Divisional Court’s interpretation would require the insurer to state its position on the insured’s impairment even though it has no bearing on the insurer’s determination.
 In support of its interpretation that s. 37(4) requires an insurer to provide its position on an insured’s medical eligibility, the Divisional Court relies upon the fact that the SABS was amended in 2010 to specifically add the language “medical and any other reasons”. However, as the Divisional Court recognizes, prior to that, the SABS did not require insurers to provide any reasons for their determination. In my view, the addition of language of the 2010 amendment does not indicate that the legislature intended to mandate the provision of medical reasons in all cases, as the Divisional Court suggests. It merely codified the requirement to provide a sufficient reason or reasons for the insurer’s decision, by directly tying the reasons to the actual grounds for termination of benefits in s. 37(2).
 Accordingly, s. 37(4) requires provision of the insurer’s actual reasons for determination. If the insurer relies on a medical and a non-medical reason to deny benefits, the insurer must advise the insured person of both. However, if the insurer is relying on a non-medical ground under s. 37(2), the provision requires only that the insurer provide notice of the cancellation of the benefits and to provide the insured with the non-medical reason for that determination.
(2) The purpose of the notice provision
 This interpretation of the 2010 amendment accords with the purpose underlying the notice provision. In Smith, Gonthier J. concluded that insurance notice provisions serve a consumer protection purpose by requiring insurers to completely and clearly provide insured persons with the information they need in straightforward and understandable language to enable them to challenge a refusal to pay or a reduction of payments: at paras. 11-14. In Turner v. State Farm Mutual Automobile Insurance Co., (2005) 2005 CanLII 2551 (ON CA), 195 O.A.C. 61 (Ont. C.A.), this court also concluded that: “[t]he purpose of the requirement to give reasons is to permit the insured to decide whether or not to challenge the cancellation.” at para. 8.
 Accordingly, Smith and Turner support the argument that s. 37(4) should be interpreted with this policy goal in mind. That policy goal requires reasons to be sufficiently explanatory to permit the insured to decide whether to challenge the denial of benefits.
 Although these cases were decided before the Legislature’s 2010 amendments to the SABS, those amendments did not alter that underlying purpose. Rather, those amendments enhance and reinforce that purpose by codifying the requirement to provide a sufficient reason or reasons for the insurer’s decision. However, the amendments also acknowledge that the sufficiency of the content of those reasons is determined by the grounds for termination of benefits. Where the insurer relies solely on a single non-medical ground for denying benefits, requiring the addition of a line stating, “there are no medical reasons for this denial”, would not further assist an insured in deciding whether to challenge the denial of benefits.
In Hodge v. Registrar Real Estate and Business Brokers Act (Div Court, 2022) the Divisional Court considered the adequacy of notice in a disciplinary context, here in a Real Estate and Business Brokers Act, 2002 LAT 'Notice of Proposal' appeal:
 A person who will be affected by a decision of decisionmaker is entitled to notice of the case to be met. This is fundamental fairness. Procedural fairness exists to “ensure that administrative decisions are made using a fair and open procedure, appropriate to the decision being made and its statutory, institutional, and social context, with an opportunity for those affected by the decision to put forward their views and evidence fully and have them considered by the decision maker”: BCM International Canada Inc. v. Canada (Employment, Workforce Development and Labour), 2021 FC 687 (CanLII) at para. 22; Baker at paras. 22-28.. Atlas (Brampton) Limited Partnership v. Canada Grace Park Ltd.
 In follow-up written submissions, the Registrar conceded that the Appellant did not receive notice that the workplace misconduct allegations would form part of the case against him. The Registrar also concedes that no amendment to the Notice was provided, nor did the LAT consider any means by which to mitigate any prejudice to the Appellant arising from the lack of notice to him that it would consider and rely on the workplace conduct evidence.
 The Registrar submits that this evidence was not referred to in the portion of the LAT reasons discussing penalty, and thus despite the lack of procedural fairness, this made no difference to the outcome and is not a reviewable error. In such cases, it is open to the court on review to dismiss an appeal: See Al-Kazely v. v. College of Physicians and Surgeons of Ontario, 2022 ONSC 44 (Div. Ct.), at paragraph 48; Dr. Rajiv Maini v. HPARB et al., 2022 ONSC 3326 (CanLII), at para. 30.
 The penalty portion of the reasons do not refer to the weight or impact of the workplace misconduct on the decision to suspend the Appellant’s registration for three months. However, the reasons for penalty did not remove these aggravating facts from the penalty calculation. This was not minor misconduct: the LAT characterized it as having weighed in the decision. It is objectively serious conduct. In all the circumstances, I cannot rule out that the LAT did not consider the workplace conduct evidence in assessing the appropriate penalty which it imposed on the Appellant.
 On this basis alone, I would quash the appeal and remit the matter to the LAT for a new hearing. On the question of whether the LAT decision to suspend the Appellant’s registration for three months, that question cannot be adequately assessed without knowing the role the workplace misconduct played in the penalty. That will fall to be determined after a procedurally fair hearing into the allegations for which the Appellant had notice.
In Atlas (Brampton) Limited Partnership v. Canada Grace Park Ltd. (Ont CA, 2021) the Court of Appeal considers whether notice requirements under PPSA Part V had been adequately satisfied (here, notice of intention to retain collateral):
 The appellants point out that the application judge found Canada Grace had “failed to give the requisite notice” to foreclose under Part V of the PPSA: at para. 22. However, it is not clear from the application judge’s reasons whether he found, as a matter of fact, that no notice was given or whether, as a matter of law, that the notice given was inadequate.
 In my view, Canada Grace followed the PPSA procedure for accepting the shares in satisfaction of Atlas Brampton’s debt. Further, Atlas Brampton has not demonstrated its ability to redeem the shares by paying its debt.
 The respondents produced at least five communications with the appellants, which they submit constituted adequate notice for the purpose of foreclosure under Part V of the PPSA:
1. On December 24, 2018, citing Romlex’s receivership, the respondents’ solicitor demanded that Romlex transfer its shares to Canada Grace no later than January 5, 2019; Faced with these communications, the application judge seems to have accepted that notice was given but was inadequate. This was an error stemming from a lack of clarity in the law in this area. In my view, the notice was adequate.
2. On January 4, 2019, Mr. Grigoras signed a note confirming that Romlex would transfer its shares to Canada Grace on or before January 15, 2019;
3. On January 14, 2019, the respondents’ solicitor made email and letter demands for the transfer for the shares before January 25, 2019;
4. On February 12, 2019, in response to Romlex’s offer to repay the loan in installments, the respondents’ solicitor demanded either repayment of the full amount of the loan or transfer of the pledged shares by February 28, 2019;
5. On March 1, 2019, the solicitor for Atlas Springbank, Diana Young, sent a “Notice of Default” to Romlex, Mr. Grigoras and Atlas Brampton stating that the share transfer had been completed.
 As I describe below, courts have taken inconsistent approaches to the notice requirement for foreclosure under the PPSA. Part V of the PPSA requires a foreclosing creditor to give notice of its “proposal” to accept collateral in satisfaction of a secured debt – in other words – to foreclose. The notice requirement set out in s. 65(2) of the PPSA states that the secured party “shall serve a notice of the proposal [to foreclose] on the persons mentioned in clauses 63(4)(a) to (d),” including the debtor, the owner of the collateral, and every person who has a security interest in the collateral.
 However, it is important to note that while s. 65(2) incorporates by reference the list of recipients of notice mandated by s. 63(4), it does not import from s. 63(5) the detailed rules that set out the required contents of a notice of disposition of collateral (for example, by sale). The task of establishing the appropriate contents of a notice of foreclosure and, by extension, the adequacy of the notice, has fallen to the courts in the absence of express requirements in the PPSA.
 Creditors should give adequate notice. A notice of intention to foreclose on collateral should ordinarily expressly cite the PPSA and include a) the amount of the secured obligation, b) a description of the collateral, c) expression of the clear intention to retain the collateral in satisfaction of the debt (and not as continuing security), and d) an indication that the parties receiving notice have 15 days to object. Such a notice would be difficult to attack on the ground of sufficiency. However, in line with the functional approach courts have been instructed to take, there will be cases in which the secured party’s intention to foreclose on the collateral is clear in the circumstances, even when one or more of these elements is absent, and the debtor is under no illusion about the consequences of failing to pay. In that context, it not unfair to expect the debtor to attempt to redeem the collateral within 15 days.
 The law in Ontario was well-described by Lax J. in Casse v. Credifinance Securities Ltd (1999), 14 P.P.S.A.C. (2d) 352,  O.J. No. 1908 (S.C.). In Casse, Lax J. reviewed the case law and held that the notice of intention to retain collateral must be expressed in clear and precise terms: at para. 7. However, she also held that “[t]he court must be able to conclude on all the evidence that the debtor knew that the purpose of the secured party in retaining the collateral was to satisfy the obligation secured” (emphasis added). She added: “If the Legislature had wished to specify the contents of the notice, it could have prescribed this as it did in s 63(5) in regard to disposal of collateral. In my opinion, the Legislature did not do so as it intended that the contents of the notice be flexible so as to accommodate a variety of commercial circumstances”: at para. 7. I agree.
 In my view, Lax J.’s approach in Casse strikes the appropriate balance. There will be circumstances in which, on the basis of all the evidence, it is obvious that the debtor knows its creditor is foreclosing on the collateral in satisfaction of the secured obligation, even if the formal notice might be deficient in some sense.
 I would agree that Canada Grace’s first four notices were individually inadequate. These notices generally provided minor extensions of time for Atlas Brampton to repay the loan in the face of what Canada Grace viewed as state of continuing default, but, taken together, they adequately signal Canada Grace’s intent to take ownership of the Atlas Springbank shares in accordance with the Security Agreement if the default is not remedied.
 The March 1 Notice of Default would not have come as a surprise to the appellants. It was addressed to Romlex, Atlas Brampton, and Mr. Grigoras. It had as its subject: “Re: Notice of Default under Loan Agreement and Supplementary Agreement; Share Transfer Deemed upon Default; removal of the positions as Director and Officer.” The notice specifically referred to the Security Agreement (using the term “Supplementary Agreement” and “Loan Documents”) dated December 12, 2018 and reproduced the terms of the share pledge.
 The March 1 Notice then identified Atlas Brampton’s failure to pay the loan as the operative event of default and culminated with an assertion that the pledged shares had been transferred so that Canada Grace was now the sole shareholder of Atlas Springbank:
Pursuant to the Loan Documents, please be advised that the Pledged Shares have been transferred to Canada Grace who is now the sole shareholder of the Lender, and the Guarantor has been removed from the positions of director and officer(s) of the Lender. The appellants rely on three cases, all of which I would distinguish. First, in Klein v. Lemore Investments Ltd. (1983), 2 P.P.S.A.C. 252,  O.J. No. 204 (H.C.), White J. held that a notice of intention to retain collateral must express a “proposal” to retain the collateral, that is, it must express an intention “as to the future” instead of a “fait accompli”. In that case, a plaintiff real estate investor, Klein, pledged his shares in a real estate holding company to a fellow investor to secure a loan for roughly $60,000. Shortly after the plaintiff’s default, the secured party notified him that “our said client, [the secured party], is now the legal owner of twenty common shares in the above noted company.” White J. held that this was an improper notice of fait accompli and therefore “even to [the date of the judgment], having regard to the provisions of the Personal Property Security Act, Klein has a right to redeem his shares”: at para. 46.
 I acknowledge that the situation in this case resembles somewhat the “fait accompli” that was fatal to the foreclosure notice in Lemore. Canada Grace did not expressly state its intention to retain the shares or offer Romlex an opportunity to redeem them; it simply asserted its sole ownership of Atlas Springbank. However, taking into account the context and the words of the communications from Canada Grace’s counsel as the default persisted, there is no doubt that the appellants were aware of the respondents’ intention to foreclose if the default was not remedied. Moreover, as the application judge noted, neither Romlex nor any of the Grigoras’ companies tendered fulfillment of the loan within 15 days after any of the notices, or at any time since. He noted that they did not put forward any reliable evidence of Atlas Brampton’s ability to pay. That failure persisted in this court.
 The appellants also invoke Angelkovski v. Trans-Canada Foods Ltd., 1986 CanLII 4794 (MB KB),  3 W.W.R. 723,  M.J. No. 148 (Q.B.). In that case, the court held that notice must be given “in clear and precise terms” not only that the creditor intends to retain the collateral but that it intends to retain the collateral in satisfaction of the obligation secured: at para. 21. The defendants had taken possession of a restaurant under a chattel mortgage. Wright J. found that they had manifested an intention to retain it in satisfaction of the debt and operate it as a going concern. However, Wright J. rejected an argument that the plaintiff’s awareness of the defendant’s intention constituted constructive notice and held that the plaintiffs retained a right to redeem the property until there had been compliance with the notice requirements of the PPSA. Wright J. found that the debtor had not received the required notice and held open the right to redeem. I would simply respond as Lax J. did in Casse, at para. 13, in words that apply equally to Mr. Grigoras:
He was given an opportunity to redeem the shares when the debt fell due…. He was under no misapprehension as to the legal effect of the pledge, nor of the consequences of failing to redeem. Finally, the respondents cite Tureck et al. v. Hanston Investments Ltd. et al. (1986), 1986 CanLII 2701 (ON SC), 56 O.R. (2d) 393 (H.C.). As the application judge noted at para. 22, in that case the pledge of shares reserved to the pledgor all the incidents of ownership and title in the pledged shares. The security agreement did not confer a right to foreclose. The court held that the only remedy available to the security holder was the statutory right under the PPSA but because the security holder had not given notice of an intention to retain the collateral in satisfaction of the secured obligation, the remedy was denied. By contrast, in this case the notice was adequate, as I have explained.