Neutral Citation: 2014 ONFSCDRS 104

FSCO A12-001105

BETWEEN:

JOSEPH (BRUCE) LEDUC Applicant

and

AVIVA CANADA INC. Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Pamila Ahlfeld Heard: June 2, 2014, at the Offices of the Financial Services Commission of Ontario in Toronto. Written Submissions June 17, 2014 and June 18, 2014.

Appearances: Doug Wright for Mr. Leduc James M. Brown for Aviva Canada Inc.

Issues:

The preliminary issue is:

Is Mr. Leduc precluded from arbitrating his claims for IRB’s and housekeeping by operation of section 30(1)(b) of the Schedule because he was driving with a suspended licence at the time of the accident?

The Applicant, Joseph (Bruce) Leduc, was injured in a motor vehicle accident on April 12, 2009. He applied for and received statutory accident benefits from Aviva Canada Inc. (“Aviva”), payable under the Schedule.¹ Aviva denied payment on Income Replacement Benefits (“IRBs”) and housekeeping expenses on the grounds that the Applicant was driving with a suspended licence at the time of the accident and he was therefore precluded from receiving these benefits pursuant to section 30(1)(b) of the Schedule. The parties were unable to resolve their disputes through mediation and the Applicant applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.1.8 as amended.

Result:

Mr. Leduc is precluded from proceeding to arbitration for income replacement benefits and housekeeping expenses.

EVIDENCE & ANALYSIS:

The Applicant, his stepson and agent, (who dealt with the Applicant’s highway traffic tickets that he received from the accident), all testified at the hearing. A Joint Document Brief was entered into evidence as Exhibit A-1.

The Applicant testified that he was unaware of the fact that his driver’s licence was suspended at the time of the accident. He testified that, prior to the accident, he had received tickets for speeding and “something else” and that he had given his stepson $600.00 to pay the fines. He stated that he had assumed that his stepson had paid the fines. He stated that his stepson maintained that he paid the fines even after the accident but later confessed that he used the money for himself.

The Applicant’s stepson testified that he used the money given to him by the Applicant for the Applicant’s fines, to pay off money he owed for his car. He confirmed that he led the Applicant to believe that he had paid the fines. He stated that after he found out that the Applicant had been charged with driving with a suspended licence, he was afraid to tell the Applicant that the fines had not been paid. He stated that he only advised the Applicant of this a couple of years ago.

The Applicant testified that he hired an agent to defend the highway traffic tickets that he received as a result of the accident. He stated that he hired the agent because after the accident he wasn’t able to defend the tickets himself. The Applicant testified that unbeknownst to him, the agent pled him guilty to two charges; one of them being that he was driving with “no [driver’s] licence or improper class of licence” and the Applicant was convicted of that charge on May 20, 2010.²

The Applicant’s agent confirmed that a guilty plea was entered on behalf of the Applicant for driving with a suspended licence because the prosecutor would not withdraw the charges and the agent believed that this was the best possible result. He acknowledged that he knew very little about the accident itself and that accident benefits are not a part of his practice. The agent testified that his retainer makes clear that, as the agent, he has the authority to plead the Applicant guilty to a lesser charge. He stated that he did not discuss the guilty plea with the Applicant. He testified that he then sent out a letter to the Applicant informing him that the fine had to be paid within 60 days of the conviction date. The agent stated that when the Applicant found out about the guilty plea, he told the agent that he wanted to speak to the prosecutor himself. The agent testified that he thought the Applicant might have taken his file from the agent. He stated that the Applicant did not ask him to appeal the conviction.

At the time of the accident, the Applicant was charged under section 53 of the Highway Traffic Act (HTA),³ with driving while licence is suspended.⁴ An extract from a 3-Year Driver Record with Address issued by the Province of Ontario indicates that the Applicant was charged with “no driver’s licence or improper class of licence” on February 23, 2009 and convicted of same on April 9, 2009, just 3 days prior to his accident.⁵ A further 3-Years Driver Record Search dated November 14, 2012 indicated that the Applicant was convicted of “no driver’s licence or improper class of driver’s licence” on May 20, 2010 for the April 12, 2009 offense.⁶

Given the documentary evidence and the testimony before me, which does not dispute that a licence suspension was in effect at the time of the accident, I am satisfied that at the time of the accident, the Applicant was driving without a valid driver’s licence as defined by section 30 of the Schedule, below.

Section 30(1) in its entirety provides:

(1) The insurer is not required to pay an income replacement benefit, a non-earner benefit or a benefit under section 20, 21 or 22 in respect of a person who was the driver of an automobile at the time of the accident,

(a) if the driver knew or ought reasonably to have known that he or she was operating the automobile while it was not insured under a motor vehicle liability policy;

(b) if the driver was driving the automobile without a valid driver’s licence;

(d) if the driver knew or ought reasonably to have known that he or she was operating the automobile without the owner’s consent. O. Reg. 403/96, s. 30 (1).

“Valid driver’s licence” means a driver’s licence that is not expired, cancelled or under suspension.⁷

Although it is only subsection (b) that is applicable in this preliminary issue hearing, I am of the view that subsections (a) and (d) are relevant in that they are informative with respect to whether or not knowledge is a consideration under section (b). The wording of the Schedule is clear that knowledge is a relevant consideration under subsections (a) and (d). Subsection (b) however is silent with respect to knowledge. Given that the drafters of this legislation included knowledge as an element in subsections (a) and (d), I am persuaded that had they wanted it to be an element of the other subsections, it would have been included. In fact, the knowledge requirement of subsection (b) was actually removed from the SABS — 1994.⁸

I am also guided in this regard by the case of Troncoso and Co-Operators General Insurance Company⁹ where Director’s Delegate Draper upheld the arbitrator’s order that the section 30(1)(b) exclusion in the SABS — 1996 applies to anyone who “is driving the automobile without a driver’s licence” and that there was no longer an exception for those suspended for non-payment of a fine as per s. 58 of the SABS — 1994.¹⁰ Notwithstanding, the Supreme Court of Canada in R. v. City of Sault Ste. Marie¹¹ and later in Levis (City) v. Tetreault;¹² discussed those circumstances where a defence of due diligence would be applicable to a strict liability offence such as in this Applicant’s circumstances of driving with a suspended licence:

The defence will be available if the accused reasonably believed in a mistaken set of facts which, if true, would render the act or omission innocent, or if he took all reasonable steps to avoid the particular event.

The concept of diligence is based on the acceptance of a citizen’s civic duty to take action to find out what his or her obligations are. Passive ignorance is not a valid defence in criminal law.

Turning to the facts of this case, the Applicant relies on the “due diligence” argument that he did not know that his licence was suspended. While the evidence reveals that he thought that his stepson paid the fines and he consistently asked him for the receipts, there is no evidence before me that he actually went to the court to find out what had happened nor on realizing the error, did he appeal the decision. Furthermore, with respect to the agent’s plea bargain with the prosecutor that led to the Applicant’s conviction for driving with a suspended licence, the Applicant had the option to try to appeal that decision but again did not do so. In sum, there is no persuasive evidence before me that he has, in fact, exercised due diligence.

Neither party raised the remedy of relief from forfeiture at the arbitration hearing. After the hearing had completed, I became aware of the Court of Appeal case of Kozel v. The Personal Insurance Company¹³ and I invited the parties to make brief submissions in writing in this regard. The Applicant responded on June 17, 2014. Aviva responded on June 18, 2014.

RELIEF FROM FORFEITURE

Relief from forfeiture refers to a court’s power to protect a person against the loss of an interest or right because of a failure to perform a covenant or condition in an agreement or contract.¹⁴

After having reviewed the submissions from the parties, I am persuaded that I do not have the jurisdiction to consider relief from forfeiture either in the context of section 129 of the Insurance Act or section 98 of the Courts of Justice Act.¹⁵

In Williams v. York Fire Casualty Insurance Co.,¹⁶ the Court dealt with whether or not section 129 of the Insurance Act gives judges a broad discretion to grant relief from forfeiture generally where the conditions of an insurance policy are breached.

Section 129 of the Insurance Act provides:

Where there has been imperfect compliance with a statutory condition as to the proof of loss to be given by the insured or other matter or thing required to be done or omitted by the insured with respect to the loss and a consequent forfeiture or avoidance of the insurance in whole or in part and the court considers it inequitable that the insurance should be forfeited or avoided on that ground, the court may relieve against the forfeiture or avoidance on such terms as it considers just.

MacFarland, B. and LaForme, J.A. found that granting relief from forfeiture generally where an insurance policy is breached would be granting the court power to alter the terms of a policy or conditions of coverage that was never envisioned by section 129.¹⁷ Williams narrowly interprets section 129 of the Insurance Act to provide relief from forfeiture in limited circumstances such as those related to proof of loss. Furthermore and more significantly, the case of Bissoon and Pilot Insurance Co.,¹⁸ makes clear that section 129 specifically gives authority to “the court,” while the legislation sets out the powers of an arbitrator in other sections.

LaForme, J.A. in Kozel expanded the application of section 129 of the Insurance Act relying on the case of Falk Bros. Industries Ltd. v. Elance Steel Fabricating Co.¹⁹ In Falk Bros., the court stated that in the insurance context, the remedy of this section is “to prevent hardship to beneficiaries where there has been a failure to comply with a condition for receipt of insurance proceeds and where leniency in respect of strict compliance with the condition will not result in prejudice to the insurer.”²⁰ In this regard, Justice LaForme found that relief is available under section 98 of the Courts of Justice Act if an applicant is imperfectly compliant with a policy term rather than non-compliant with a condition precedent to coverage in cases where the breach is serious or substantial.²¹

All that being said, equitable relief under the Courts of Justice Act is limited to the Superior Court or Court of Appeal and not an available remedy for arbitrators under the Insurance Act. Accordingly, the remedy of relief from forfeiture is not available to the Applicant in this forum.

CONCLUSION:

I find that the Applicant is a person described in section 30(1)(b) of the Schedule. Given that the Applicant was unable to persuade me that he exercised due diligence with respect to his driving while his licence was suspended and given that I do not have the jurisdiction to grant equitable relief, I find that the Applicant is precluded from arbitrating his claims for IRB’s and housekeeping by operation of section 30(1)(b) of the Schedule.

EXPENSES:

The parties made no submissions with respect to expenses. I encourage them to resolve this issue, failing which they may request an expense hearing before me in accordance with Rule 79 of the Dispute Resolution Practice Code.

June 25, 2014

Pamila Ahlfeld Arbitrator

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

Mr. Leduc is precluded from proceeding to arbitration for income replacement benefits and housekeeping expenses.