Financial Services Commission

Commission des services financiers de l’Ontario

Neutral Citation: 2002 ONFSCDRS 65

Appeal P02-00004

Appellant

and

Respondent

Before: Stewart McMahon

Counsel: Mrs. Giovanna Roccamo (for MVACF) Mr. Henry Goldentuler (for Farida and Sadruddin Govani)

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

The Appellant's motion to proceed with the appeal before the remaining issues in arbitration have been disposed of, is denied.

May 13, 2002

Stewart McMahon Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Mr. and Mrs. Govani were involved in a motor vehicle accident in California. They presented a claim for statutory accident benefits to the Motor Vehicle Accident Claims Fund ("the Fund"), which denied the claim. Mr. and Mrs. Govani elected to have the dispute resolved by way of arbitration conducted at the Financial Services Commission of Ontario ("FSCO"), pursuant to s.282 of the Insurance Act, R.S.O. 1990 Ch. I.8, as amended. The Fund responded to the Application for Arbitration, in part, by challenging the authority of FSCO's arbitrators' to determine if the Fund can be responsible for the payment of benefits arising from an accident outside Ontario. The parties agreed to have this issue decided by way of a preliminary order, and to await the outcome before proceeding to a hearing on the balance of the issues.

On January 18, 2002, the arbitrator released her decision. She concluded that an arbitrator did have the authority to hear and determine the issues between the parties. The Fund seeks to appeal this ruling.

Because the appeal is from a preliminary order, Rule 50.2 of the Dispute Resolution Practice Code applies. It states that the appellant must obtain leave if it wishes to proceed with the appeal, before all of the remaining issues have been decided. The Fund has asked for leave, and a stay of all further arbitration proceedings, pending disposition of the appeal.

Mr. and Mrs Govani (the "Respondents") have resisted the request for a stay and submitt that the appeal should not proceed until the remaining issues have been disposed of.

The Fund argues that a failure to proceed with the appeal "will unnecessarily result in a waste of the time and resources of FSCO as well as of all counsel." It also argues that a "failure to grant leave to appeal the jurisdictional question as a preliminary or interim issue will result in unnecessary delay for all concerned in arriving at an ultimate resolution of this claim on the merits." I am not convinced that either of these outcomes is inevitable. To the contrary, if the appeal were to go ahead now, the risk of delaying the ultimate disposition of the matter is just as high. Furthermore, there would be a distinct possibility of multiple appeal proceedings.

II. BACKGROUND

To put this decision in context, I need to review the history of these proceedings. I have taken this history from the pleadings, the decision, and the correspondence filed with the Commission.

The Respondents, who are residents of Ontario, were injured while visiting relatives in California. At the time of the accident, they were occupants of a vehicle insured pursuant to the laws of California.
The Respondents claimed accident benefits from the Fund because they did not think there was an Ontario insurer obliged to respond to the claim. The Fund denied the claim on the basis that it could not be called on to pay benefits in relation to an accident that happened outside Ontario.
After a failed mediation, the Respondents filed Applications for Arbitration.
The Fund filed Responses in which it asserted the territorial defence. The Fund did not challenge FSCO's jurisdiction to decide this question.
A pre-hearing was conducted on November 15, 2000. The pre-hearing letter makes note of the Fund's position on extra-provincial accidents. It also records that the parties agreed to have this preliminary issue disposed of by way of a hearing on April 30, 2001. There is no indication in the letter that the Fund raised any concerns about FSCO's authority to deal with the issue.
Although it is not recorded in the pre-hearing letter, it is apparent from subsequent correspondence, that the Fund was also taking the position that there might be an Ontario insurer responsible for responding to the Respondents' claims, and that it wanted to rule out this possibility before proceeding with the preliminary hearing. To this end, the Fund filed an amended Response on December 8, 2000, asserting that a determination of the territorial issue was premature until the question of a potential insurer was resolved.
On March 28, 2001, the Fund asked that the hearing be adjourned because it had not yet been able to ascertain if there was an insurer that should be responding to the claim. The Respondents resisted the adjournment request, arguing that there was no need to defer the territorial issue until the end of the investigation into potential insurers.
The parties made oral submissions on the adjournment and other matters on April 25, 2001. The arbitrator adjourned the hearing and ordered a further pre-hearing to be conducted on July 10, 2001. Amongst other things, the parties were directed to explore the existence of potential insurers, consider whether the Priorities Regulation applied in the event there was such an insurer, and whether the potential insurers should be added as parties to the arbitration.
On June 19, 2001, the Fund wrote to the Respondents' counsel and FSCO to advise that it intended to challenge the authority of FSCO's arbitrators to determine whether the Fund "is required to pay accident benefits to a resident of Ontario injured in accident outside of the province of Ontario, under the Motor Vehicle Accident Claims Act." This was the first time the Fund expressed any concern about the arbitrator's authority to deal with this issue. During the July 10th pre-hearing, the parties agreed to have this challenge dealt with on the basis of written submissions.
The July 10th pre-hearing letter notes that the parties were still attempting to obtain information with respect to potential insurers. The arbitrator notes that "it seems to me that the Applicants' preliminary issue [the territorial defence] is premature until the factual basis of the claim is established. This issue should not be decided in a vacuum, out of academic interest or because it may be a question of general interest to the legal profession."
During the fall and winter of 2001, the parties attended to various production matters and filed written submissions on the jurisdictional issue.
On January 18, 2002, the arbitrator issued her decision. Amongst other things, she determined that an arbitrator was authorized to determine whether the Fund could be responsible for benefits arising out of an accident that occurred outside Ontario.
The Fund has appealed this portion of the decision. It asks that the order be quashed, and the arbitration stayed. It also proposes that the issue of the Fund's potential liability in respect of extra-provincial accidents be referred to a judge of the Ontario Superior Court, for a declaration pursuant to Rule 14.05(3)(d) of the Rules of Civil Procedure.

III. ANALYSIS

The starting point for any consideration of an appeal from a preliminary decision is Rule 50.2, which indicates that proceeding with an appeal before all of the issues have been determined, will be the exception, not the rule. However, this is subject to the over-arching principal enunciated in Rule 1.1 that the Dispute Resolution Practice Code is to be "broadly interpreted to produce the most just, quickest and least expensive resolution of the dispute." See General Accident Assurance Company of Canada and Glynn, (OIC P96-00085, May 17, 1997). The Director and his delegates have frequently relied on this principle as the basis for granting leave when a successful appeal would dispose of the entire matter. A prime example would be an appeal from a preliminary decision on a limitation defence.

The nature of this appeal, which challenges the arbitrator's authority to deal with the issues at arbitration, might suggest that the Fund's request would be looked at favourably. However, the question of the arbitrator's jurisdiction is only one of two issues the parties agreed to have disposed of by way of a preliminary ruling. The other is the territorial defence itself. This means that if I were to proceed with the appeal, but it was unsuccessful, a second preliminary hearing would be held. Having granted leave to proceed with the appeal from the first preliminary decision, there would be a legitimate expectation that leave would be granted with respect to the second preliminary decision. The potential for these kind of multiple appeal proceedings was the very problem Rule 50.2 was designed to address.

In addition, there is still the question of whether there is an insurer which might be obliged to respond to this claim. The Fund had previoulsy taken the position that it was premature to deal with the territorial issue until the question of a potential insurer was resolved. It strikes me that the same can be said of the need to proceed with the appeal.

I am also influenced by the fact the Fund did not raise questions about the arbitrator's authority until quite late in the day.

Finally, I have considered the strength of the appeal. There is little material available to me at this stage, and consequently it is problematic to delve too deeply into the merits. However, it is fair to say, that the strength is not so obvious that it justifies deferring the balance of the proceeding to allow this appeal to proceed forthwith.

For all of these reasons, I conclude that it is preferable to defer the appeal. The question of proceeding with an appeal can be revisited after the question of a potential insurer has been sorted out, and a decision is delivered on the preliminary issue of whether the Fund can be called on to pay benefits arising out of an accident in California.

Finally, I wish to take this opportunity to offer a general comment about the scheduling of preliminary issue hearings. This case would appear to be typical, in that the parties agreed that it made sense to defer a number of issues pending the disposition of a preliminary issue. However, again typically, there is no indication that the parties discussed the possibility or implications of an appeal. I would encourage counsel to discuss this question at the time the preliminary hearing is arranged, rather than waiting until the matter has been disposed of, when the chance of a consensus is much more remote. If appropriate, any consensus on whether an appeal should proceed in advance of the remaining issues, or should be deferred, could be recorded in the pre-hearing letter. Such a consensus would not bind the Director or his delegates, but it would be helpful to have a record of any such discussion.

IV. EXPENSES

The expenses associated with preparing the submissions on whether this matter should proceed now or later, are very minor. In the circumstances, each party will bear their own expenses.