Progressive Casualty Insurance Company of Canada v. Dharam Sidhu, 2017 ONFSCDRS 255

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2017 ONFSCDRS 255

Appeal P17-00031

OFFICE OF THE DIRECTOR OF ARBITRATIONS

PROGRESSIVE CASUALTY INSURANCE COMPANY OF CANADA

Appellant

and

DHARAM SIDHU

Respondent

BEFORE:

Delegate Jeffrey Rogers

REPRESENTATIVES:

Ms. Debbie Orth, solicior for Progressive

Mr.Kevin Doan, solicitor for Mr. Sidhu

HEARING DATE:

On the record, by written submissions completed on September 5, 2017

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990 c. I.8 as it read immediately before being amended by Schedule 3 to the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014, and Regulation 664, R.R.O. 1990, as amended, it is ordered that:

1. This appeal is dismissed.

2. If the parties are unable to agree about expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.

September 28, 2017

Jeffrey Rogers

Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

Progressive appeals the Arbitrator’s order of April 12, 2017. The Arbitrator refused to dismiss Mr. Sidhu’s arbitration by applying the Doctrine of Laches. The Arbitrator ruled that the equitable remedy that the Doctrine provides cannot be applied to restrict Mr. Sidhu’s right to rescind a settlement which did not comply with the legislated terms of the Settlement Regulation.¹ Progressive submits that the Arbitrator erred in finding that Mr. Sidhu’s right of rescission is a legal right and not an equitable right. For the reasons that follow, I reject that submission. I find that the Arbitrator correctly concluded that Mr. Sidhu’s statutory right is a legal right. The Doctrine of Laches therefore does not apply.

II. BACKGROUND

Mr. Sidhu was injured in a motor vehicle accident on March 10, 1997. He applied for statutory accident benefits from Progressive, payable under the Schedule.² He applied for mediation after disputes arose about his entitlement to certain claimed benefits. Mediation took place on June 1, 2004. There, the parties agreed to resolve all claims for statutory accident benefits upon Progressive paying Mr. Sidhu $27,500.

On June 10, 2014, counsel for Mr. Sidhu notified Progressive that he rescinded the 2004 settlement. In doing so, he exercised rights conferred by the Settlement Regulation in circumstances where a purported settlement does not comply with its terms. He then applied for arbitration claiming various benefits.

Progressive took the position that the arbitration should be dismissed by operation of the Doctrine of Laches. This is the question that came before the Arbitrator. He refused to dismiss the arbitration. He ruled that the Doctrine only operates to bar equitable and not legal relief. As noted above, the Arbitrator found that the right that the Settlement Regulation confers is a legal one, and not an equitable right. He therefore concluded that the Doctrine does not apply.

III. ANALYSIS

Fresh Evidence

Progressive sought to admit fresh evidence on the appeal. I denied the request by letter dated September 7, 2017. The evidence was intended to show that Mr. Sidhu knowingly delayed in exercising his right to rescind the settlement. The issue of Mr. Sidhu’s delay is only relevant to the question of whether laches is established, after determining that the remedy is available. Since the Arbitrator found that the remedy is not available, he made no factual findings on whether the circumstances meet the test for establishing it. It is not the function of appeals to find the facts. In any event, the question is moot in view of the result in the appeal.

Receipt of the SDN

Mr. Sidhu’s rescission of the settlement was based upon Progressive’s failure to give him a Settlement Disclosure Notice (SDN). The Arbitrator made no specific finding in this regard. He only stated that there is “a question as to whether a Settlement Disclosure Notice (“SDN”) was provided by the insurer³”. Progressive argues that this was an error by the Arbitrator. I disagree. Progressive bears the onus of proving that it gave Mr. Sidhu the SDN. It concedes that it cannot do so but argues the onus results in inequity in the circumstances. Mr. Sidhu has no right to rescind unless Progressive breached the Settlement Regulation. There would have been no hearing before the Arbitrator if Progressive could prove that it gave Mr. Sidhu the SDN.

Difficulty of proof by Progressive is only relevant to whether it meets the criterion of prejudice, after determining that laches is available. It is not relevant to the question of whether that remedy is available. I see no error by the Arbitrator.

Laches does not apply

The Court of Appeal did a comprehensive review of the Doctrine of Laches in its decision in Intact Insurance Company of Canada v. Lombard Insurance Company of Canada.⁴ I have borrowed liberally from that decision for the general principles stated below.

The Doctrine of Laches is an equitable remedy. Historically, statutes of limitations did not apply to equitable claims. As a result, the courts of equity developed their own limitation defences to delayed equitable claims. The most important of these defences is the Doctrine of Laches.⁵ Mere delay is insufficient to establish laches. To trigger a laches defence, the defendant must prove one of two things. The delay of the plaintiff must either constitute acquiescence or result in circumstances that make the prosecution of the action unreasonable.⁶

Mr. Sidhu did not breach any limitation period when he rescinded the settlement. Progressive argues that his right to rescind the settlement is an equitable right. Further, he both acquiesced and the circumstances make the prosecution of his claim unreasonable. Progressive therefore seeks to have the Doctrine applied in this case. The Arbitrator made no findings with regard to acquiescence or prejudice because he found that Progressive cannot rely on the Doctrine in these circumstances. I agree.

The question is whether this equitable remedy can be applied to limit Mr. Sidhu’s statutory right to rescind. I agree with the Arbitrator that it cannot. The Doctrine was traditionally applied only to bar claims based in equity, but the Court of Appeal carved out an exception in Perry, Farley & Onyschuk v. Outerbridge Management Ltd.⁷ In that case, the plaintiff brought a claim under the Fraudulent Conveyances Act, about 12 years after an alleged fraudulent transfer. The Court ruled that the Limitations Act did not set a time limit for claims brought under the Fraudulent Conveyances Act. The Court concluded that the claim was nevertheless barred. The Court found that the Doctrine of Laches applies, although the claim was based upon a statutory right. It is this exception that Progressive seeks to have applied here.

The logic of Perry is that laches applied even though the claim was brought under a statute because of the “distinctively equitable flavour” of a claim to set aside a fraudulent conveyance. In its analysis, the Court looked at the elements of the statutory claim. The Court stated:

I am not persuaded by the argument that a court entertaining a claim for relief under the Fraudulent Conveyances Act would be precluded from considering equitable defences merely because the claim arises under a statute. The elements of a claim to set aside a fraudulent conveyance have a distinctively equitable flavour and the argument is inconsistent with the modern approach to the significance of the intersection between law and equity.⁸

However, the claim for rescission that Mr. Sidhu makes is different from the claim made in Perry. There is no doubt that the remedy of rescission has its origin in equity, but the right Mr. Sidhu exercised, although called rescission, is entirely a statutory creation. The Settlement Regulation imposes a statutory obligation upon an insurer to give an insured person an SDN containing specific, prescribed information. It gives the insured person the absolute right to rescind the agreement within 2 days. It also gives the insured person the right to rescind at any later date, if the insurer has not complied with the SDN provisions. Rescission of an agreement in equity is allowed when there is fraud, lack of capacity, undue influence, misrepresentation etc. There is no equivalent in equity, to the rights that the Settlement Regulation created. Therefore, rescission under the Settlement Regulation does not have the “distinctively equitable flavour” that would trigger the Perry exception.

The Court of Appeal later modified the Perry exception in the Intact⁹ decision I referred to earlier. Progressive argues that Intact nevertheless left open the possibility of applying laches in the circumstances of this case. In Intact the question was whether laches could be applied to bar a loss transfer claim under s. 275 of the Insurance Act. The Court had to take into account the fact that the Limitations Act, 2002 had come into force since Perry. The new Act removed the use of equitable defences, which the old Act had specifically preserved. The Court concluded that this meant that laches can no longer defeat claims for legal relief that were subject to an unexpired limitation period, even if the claim had an “equitable flavour”. The Court stated:

I agree with Chiappetta J. that the defence of laches cannot be invoked in response to a loss-transfer claim under s. 275. Such a claim is a claim for legal relief. In my view, given the historic restriction of laches to claims for equitable relief, the removal of the provision preserving the use of equitable defences from the Limitations Act, 2002 and the comprehensive nature of the new Ontario limitations scheme, the defence of laches cannot be raised to defeat claims for legal relief that are subject to the unexpired basic limitation period under the Limitations Act, 2002, even those with an “equitable flavour”. Accordingly, even if a second party insurer’s right to indemnity under s. 275 might be argued to have an “equitable flavour” because its objective is to re-allocate the cost of statutory accident benefits in a more equitable fashion, a second party insurer cannot invoke the doctrine of laches as a defence.¹⁰

I do not agree with Progressive that Intact left open the possibility of applying laches to bar technically legal claims which are not subject to the Limitations Act, 2002. I do not accept that laches is available just because Mr. Sidhu’s claim is not subject to a limitation period set out in the Limitations Act, 2002. It is not necessary to invoke laches when there is an expired limitation period under the Limitations Act, 2002. The claim would be barred in any event. Therefore, there is a broader meaning to the Court’s statement that the defence of laches cannot be raised to defeat claims for legal relief that are subject to the unexpired basic limitation period under the Limitations Act, 2002, even those with an “equitable flavour”. The reference to the Limitations Act is superfluous. The statement really means that laches can no longer be invoked to defeat any claim that arises from a statutory right, where there is an applicable statutory limitation period.

Mr. Sidhu’s claim for accident benefits is subject to an unexpired limitation period set out in the Insurance Act. The logic applied in Intact was that the removal of the laches-saving provision from the new Act, and the thrust of the new legislation to create clarity, meant the end of the Perry exception. The Court concluded that the remedy remains available to bar statutory rights, only where specifically preserved by statute. Further, since the remedy was only preserved in the Real Property Limitations Act, the laches-saving provision might always have been intended to apply only to real property claims. The Court stated:

Permitting a defendant to invoke the equitable doctrine of laches because a legal claim has an “equitable flavour” would be inconsistent with the comprehensive approach to the limitation of actions represented by the Limitations Act, 2002.¹¹

And:

The fact that the legislature extricated Part I of the old Limitations Act – including the laches-saving provision in s. 2 – and enacted it as the Real Property Limitations Act without adding a general laches-saving provision to the Limitations Act, 2002 might suggest that it had always intended that the laches-saving provision apply only to real property claims¹².

And:

The legislature’s removal of the laches-saving provision overrules any suggestion in Perry that laches might bar the commencement of a proceeding to pursue an unexpired legal claim to which the basic limitation period prescribed by the Limitations Act, 2002 applies. Indeed, even in the presence of such a provision, this court has held that “[s]o long as the action was instituted within the limitation period, the question of laches does not arise”: F.(L.) v. F.(J.R.) (2001), 2001 CanLII 294 (ON CA), 144 O.A.C. 372 (C.A.), at para. 6.¹³

In any event, Intact certainly did not modify the Perry requirement that laches can only be applied to bar legal claims with an “equitable flavour”. As I ruled above, Mr. Sidhu’s right to rescind does not have the necessary “equitable flavour”.

There is no case in which the Doctrine has been applied to extinguish a right to rescind under the Settlement Regulation. Progressive relies on the decisions in Monette v. Old Republic Insurance Company,¹⁴ Hutchinson and Dominion of Canada General Insurance Company,¹⁵ and Lewchuk and Wawanesa Mutual Insurance Company.¹⁶ Progressive submits that these cases show that laches is a viable argument in the context of a claim for statutory accident benefits. I find none of these cases to be of assistance.

Monette involved a claim for accident benefits, but the issue of laches was not relevant to that claim. The issue arose in the context of a third-party claim for restitution, made between two insurers. The Court ruled that the question of laches did not arise because the action was commenced within the limitation period.

In Hutchinson the Arbitrator found that it was unfair to allow the insurer to raise a technical defence under s. 33 of the Schedule because of the delay in raising it. The Arbitrator was not sure of how to characterize the remedy. He stated:

Whether it is characterized as laches, acquiescence, or the operation of the fairness principle, it is the insurer’s unconscionable delay in pursuing its potential defence that speaks most clearly in support of barring those technical defences.¹⁷

Although the Arbitrator thought he might be applying laches, he was not. Laches bars a claim. It does not operate to preclude raising a defence. The same Arbitrator was similarly confused when he used laches to describe the remedy of precluding a defence, in his decision in Lewchuk. In neither decision did the Arbitrator consider whether laches applies to preclude a statutory right.

As I stated earlier, I agree with the hearing Arbitrator that laches cannot be applied to extinguish Mr. Sidhu’s right to rescind the settlement under the Settlement Regulation. I have therefore dismissed this appeal.

IV. EXPENSES

If the parties are unable to agree about expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.

September 28, 2017

Jeffrey Rogers

Director’s Delegate

Date

Footnotes

1. 1R.R.O. 1990, Reg. 90, as amended
2. 2The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended
3. 3At page 2
4. 42015 ONCA 764, leave to appeal to the SCC dismissed 2016 CanLII 24868
5. 5At paragraph 8
6. 6At paragraph 9
7. 72001 CanLII 5678
8. 8At paragraph 35
9. 9See footnote 3 above
10. 10At paragraph 33
11. 11At paragraph 54
12. 12At paragraph 50
13. 13At paragraph 52
14. 142001 CanLII 28072 (ON SC), [2001] O.J. No. 2245
15. 15(FSCO A06-000955, April 7, 2008)
16. 16(FSCO A04-000307, September 16, 2005)
17. 17At page 9