COURT OF APPEAL FOR ONTARIO

DATE: 20060710

DOCKET: C42884

RE: ATTO & ASSOCIATES INSURANCE BROKERS INC. (Plaintiff (Appellant)) – and – ALLIANZ INSURANCE COMPANY OF CANADA (Defendant (Respondent)

BEFORE: O’CONNOR, A.C.J.O., LABROSSE and FELDMAN JJ.A.

COUNSEL: Jeffrey B. Simpson for the appellant Robb C. Heintzman and Mark G. Evans for the respondent

HEARD AND RELEASED ORALLY: July 6, 2006

On appeal from the judgment of Justice Sarah Pepall of the Superior Court of Justice dated December 3, 2004.

E N D O R S E M E N T

[1] Atto & Associates Insurance Brokers appeals the decision of Pepall J. on a motion by Allianz Insurance Company of Canada. The motion judge dismissed that part of the motion requesting summary judgment, but granted Allianz a stay of Atto’s action and ordered that the undertaking as to damages given by Atto, on a motion for an interlocutory injunction, was available to be enforced by Allianz. She directed an inquiry to determine whether Allianz sustained any damages and ordered that the parties bear equally the expenses of an arbitration proceeding. Finally she ordered Atto to pay the costs of the motion, fixed at $15,000.

[2] Atto appeals the order with respect to the undertaking as to damages, the expenses of the arbitration proceeding and the order as to costs. For the reasons that follow, we would dismiss the appeal.

[3] Allianz is an insurer and Atto was an insurance broker through whom Allianz provided its insurance products pursuant to a written agency agreement. The agreement contained a provision that permitted either party to terminate the agreement and required that any dispute arising out of or under the agreement be subject to arbitration.

[4] When Allianz purported to terminate the agency agreement, Atto commenced this action to prevent Allianz from terminating the agreement and for damages. Atto immediately brought a motion for an injunction prohibiting Allianz, pending a determination as to whether the agreement had been properly terminated, from providing the required notice of Allianz’s decision to Atto’s customers to terminate the agency agreement as required pursuant to the Insurance Act (the “Section 236 Notices”). As a condition to obtaining injunctive relief, Atto, in the affidavit filed by its president, gave its undertaking to abide by any court order for damages suffered by Allianz as a result of the injunction.

[5] On the consent of the parties, Harvey T. Spiegel J. made an order adjourning Atto’s motion to permit the delivery of responding materials and for cross-examinations, on terms that no Section 236 Notices would be sent by Allianz during the period of the adjournment.

[6] Prior to the return of its motion, Atto served a notice of arbitration in respect of its dispute with Allianz in accordance with the terms of the agency agreement. On the return of the motion, Molloy J., on consent, further adjourned Atto’s motion on terms that the order prohibiting Allianz from sending the Section 236 Notices would remain in effect pending the determination of the arbitration.

[7] Subsequently, an arbitration panel determined that Allianz had properly terminated the agency contract. Atto sought leave to appeal which was denied. Notwithstanding the arbitral decision, Atto advised Allianz that it intended to continue its claim for damages in the action. Allianz then brought the motion under appeal. Allianz has claimed that it suffered damages as a result of not sending the Section 236 Notices pending the outcome of the arbitration. During that period, it was exposed to numerous claims and had been unable to collect premiums owing on the temporary policies.

[8] We turn to the issues of whether the undertaking as to damages applies to the consent adjournment of the injunction application.

[9] In detailed reasons, the motions judge found that the undertaking as to damages was “contained in the affidavits that are typically expressly referenced in the order”, that the undertaking was not spent by virtue of a consent order and that the orders adjourning the motion granted the injunctive relief requested by Atto pending the determination of the matters in dispute by arbitration. Accordingly, the undertaking as to damages was available to be enforced. She directed that an inquiry by held to determine the quantum of the damages incurred by Allianz.

[10] Bearing in mind that this appeal is not a rehearing and that the decision of the motion judge is entitled to deference, Atto has failed to show that the motion judge erred in her appreciation of the evidence, in the inferences she drew from the evidence, or in her application of the relevant legal considerations: see Katsigiannis v. Kottick-Katsigiannis (2001), 55 O.R. (3d) (C.A.) 456 at 464.

[11] We agree with the motion judge that based on the exchange of correspondence between the parties and the terms of the orders issue by Speigel J. and Molloy J., an injunction had issued prohibiting Allianz from delivering the same Section 236 Notices contemplated by Atto’s motion for injunctive relief. The undertaking given to the court was not withdrawn for the purpose of the consent orders as there can be no doubt that if the undertaking had been off the table, Allianz would not have consented to the terms of the orders and, more important, the court would not have imposed the terms contained in the consent orders.

The costs of the arbitration

[12] Each party appointed an arbitrator and the two arbitrators in turn appointed a third member. The parties did not consult on the costs of the arbitrators. Atto “assumed” that each party would pay the fees charged by its chosen member and that the parties would be responsible for payment of the expenses of the third arbitrator. It turned out that the person appointed by Allianz charged considerably more that the other two members.

[13] The motion judge ordered that in accordance with the express terms of the arbitration provisions contained in the agency agreement, it was “abundantly clear” that the costs of the arbitration were to be shared equally by the parties. Atto was required to pay one-half of the costs of the arbitration. We agree.

[14] In addition, we are of the view that the motion judge had jurisdiction to deal with this issue pursuant to s. 6 of the Arbitration Act, S.O. 1991, c. 17, which provides that a court shall not intervene in matters governed by this Act except “to assist in the conducting of arbitrations”. This was a discreet issue that needed to be addressed in order to ensure that the arbitration was conducted in accordance with the parties’ arbitration agreement. Apparently the arbitration panel had not been asked to consider this issue and we think it was appropriate in the circumstances for the motion judge to do so.

The costs of the motion

[15] In our view, the costs order should stand. The dismissal of that part of the motion seeking summary judgment is of no importance. What is important is that Atto’s action was stayed. In light of the ongoing stay of the action and the motion judge’s finding that it was Atto’s questionable conduct in insisting upon the continuation of the action that forced Allianz to bring its motion, in which it was essentially successful, we are of the view that the motion judge properly exercised her discretion in awarding costs to Allianz.

Costs of the Appeal

[16] Allianz is entitled to its costs of this appeal fixed at $13,549.66.