McNaughton Automotive Ltd. v. Co-operators General Insurance Co.

[Indexed as: McNaughton Automotive Ltd. v. Co-operators General Insurance Co.]

54 O.R. (3d) 704

[2001] O.J. No. 2312

Docket No. C34926

Court of Appeal for Ontario

Laskin, Sharpe and Simmons JJ.A.

June 18, 2001

• Application for leave to appeal to the Supreme Court of Canada was dismissed with costs March 7, 2002 (Gonthier, Major and LeBel JJ.). S.C.C. File No. 28797. S.C.C. Bulletin, 2002, p. 368.

Insurance--Automobile insurance--Statutory conditions --Statutory conditions prevail over other policy terms to extent that other policy terms conflict with or qualify effect of statutory conditions--Statutory condition 6(7) requires insurer who takes title to damaged vehicle pay actual cash value without deduction for policy deductible--Insured not precluded from asserting claim by agreeing to terms of Proof of Loss that took deductible into account.

The respondent issued a standard form automobile policy to the appellant for a fleet of motor vehicles. The policy provided for a deductible of $1,000 to be applied to all claims for loss or damage, except for claims resulting from fire, lightning or theft of the entire vehicle. One of the appellant's vehicles was involved in a collision and damaged beyond repair. The respondent paid the appellant the value of the vehicle, less the deductible under the policy, and took title to the vehicle as salvage. By Notice of Application, the appellant sought an interpretation of statutory condition 6(7), governing the entitlement of automobile insurers to obtain title to damaged vehicles upon payment of the actual cash value of the vehicle before it was damaged. The appellant moved for judgment, alleging that the terms of the applicable statutory policy condition required the respondent to pay the actual cash value of the automobile with no reduction for the deductible. The motions judge dismissed the application on the grounds that the statutory condition had to be read together with the policy term providing for a deductible, and that the appellant could not escape the deductible clause under its policy. The appellant appealed.

Held, the appeal should be allowed.

Section 234(2) of the Insurance Act, R.S.O. 1990, c. I.8 provides that no variation or omission of or addition to a statutory condition is binding on the insured. Through that subsection, the Legislature has created a hierarchy of contractual terms in which the statutory conditions are to be accorded priority. To the extent that other policy terms would conflict with or qualify the effect of the statutory conditions, such other policy terms must yield so that the statutory conditions prevail. Section 234(2) is a form of consumer protection legislation. By mandating certain policy terms and by expressly providing that an insured is not bound by other conflicting or limiting policy terms, the Legislature has limited the extent to which commercial efficacy or the apparent intention of the parties are determinative. In this setting, consumer protection is the controlling principle and the statutory conditions are paramount. In the face of s. 234(2), the phrase "actual cash value" in statutory condition 6(7) could not be interpreted as "actual cash value minus any deductible". Statutory condition 6(7) requires an insurer who takes title to a damaged vehicle to pay actual cash value without reduction for the policy deductible.

The appellant was not precluded from asserting a claim by agreeing to terms in the Proof of Loss which took the deductible into account. The respondent could not overcome the protective language of the Insurance Act that altered the result that would follow at common law. Section 131(2) provides that neither the insured nor the insurer shall be deemed to have waived any term or condition by virtue of the adjustment of a claim. This provision allows both the insured and the insurer to engage in the adjustment process without risking the loss of their respective contractual rights.

APPEAL from judgment of Haines J. (2000), 2000 CanLII 22409 (ON SC), 50 O.R. (3d) 300, 6 M.V.R. (4th) 297 (S.C.J.) dismissing a motion for a judgment.

Consolidated-Bathurst Export Ltd. v. Mutual Boiler & Machinery Insurance Co., 1979 CanLII 10 (SCC), [1980] 1 S.C.R. 888, 112 D.L.R. (3d) 49, 32 N.R. 488, [1980] I.L.R. 1-1176; Mueller v. Western Union Insurance Co., 1974 CanLII 249 (AB SCTD), [1974] 5 W.W.R. 530, [1974] I.L.R. 1-636 (Alta. Dist. Ct.); Prasad v. Gan Canada Insurance Co. (1997), 1997 CanLII 1995 (ON CA), 33 O.R. (3d) 481, [1997] I.L.R. 1-3466, 27 M.V.R. (3d) 113 (C.A.) [Leave to appeal to S.C.C. refused [1997] 3 S.C.R. viii, 225 N.R. 399n], consd Other cases referred to Bywater v. Toronto Transit Commission (1998), 27 C.P.C. (4th) 172 (Ont. Gen. Div.), supp. reasons (1999), 30 C.P.C. (4th) 131 (Ont. Gen. Div.); Curtis's & Harvey (Canada) Ltd. v. North British & Mercantile Insurance Co. (1920), 1920 CanLII 464 (UK JCPC), 55 D.L.R. 95 (P.C.); July v. Neal (1986), 1986 CanLII 149 (ON CA), 57 O.R. (2d) 129, 17 O.A.C. 390, 32 D.L.R. (4th) 463, [1986] I.L.R. 201-2126, 12 C.P.C. (2d) 303, 44 M.V.R. 1 (C.A.); Langford v. Federated Guarantee Mutual Co., 543 So.2d 675 (Ala. Sup. Ct. 1989); Straus v. Allstate Inc., 378 N.E.2d 1308 (Ill. App. 1 Dist. 1978) Statutes referred to Class Proceedings Act, 1992, S.O. 1992, c. 6, s. 34(1) Insurance Act, R.S.O. 1990, c. I.8, ss. 131(2), 227, 227(2), 234(2), 268(1) Rules and regulations referred to Statutory Accident Benefits Schedule -- Accidents Before January 1, 1994, R.R.O. 1990, Reg. 672, s. 2 "insured person" Statutory Conditions -- Automobile Insurance, O. Reg. 777/93, statutory conditions 6(5)-(7), 7.3 Authorities referred to Brown, C. and J. Menezes, Insurance Law in Canada, looseleaf, vol. 1 (Scarborough: Carswell, 1999) Inquiry into Motor Vehicle Accident Compensation in Ontario (Toronto: Ontario Ministry of the Attorney General and the Ministry of Financial Institutions, 1988) Newcombe, J., The Standard Automobile Policy Annotated (Toronto: Butterworths, 1986)

Michael McGowan, Kirk Baert and Paul Downs, for appellant. T.H. Rachlin, Q.C. and Michael Eizenga, for respondent.

The judgment of the court was delivered by

SHARPE J.A.:--

Introduction

[1] This appeal arises from an intended class proceeding brought on behalf of a class of automobile insurance policyholders. The appellant is the named applicant. One of the appellant's automobiles was damaged beyond repair. The respondent Co-operators General Insurance Company paid the appellant the value of the vehicle, less the deductible under the policy, and took title to the damaged vehicle as salvage. The appellant alleges that, in these circumstances, the terms of the applicable statutory policy condition required the respondent to pay "the actual cash value of the automobile", with no reduction for the deductible under the policy.

[2] The appellant moved for judgment on its own claim and for certification of the class proceeding brought on behalf of similarly situated policyholders insured by the respondent in Ontario and five other provinces where the same statutory condition is imposed. The motions court judge dismissed the application on the ground that the statutory condition must be read together with the policy term providing for a deductible. The motions court judge held that the appellant could not escape the deductible clause under its policy.

[3] The appellant submits that the terms of the statutory condition prevail and that the motions court judge erred in dismissing the application. The respondent submits that the motions court judge correctly interpreted the statutory condition together with the other terms of the policy that provide for the application of the deductible. The respondent submits that, in any event, the appellant settled its claim by negotiating the value of the vehicle and accepting payment on the basis that the deductible applied, and that it is therefore barred from asserting a claim for the deductible.

Facts

[4] The respondent issued an automobile policy to the appellant for a fleet of vehicles effective April 21, 1998 for a period of one year. The policy is in the standard form, approved by the Commissioner of Insurance, pursuant to the Insurance Act, R.S.O. 1990, c. I.8. It provides for a deductible of $1,000 to be applied to all claims for loss or damage, except for claims resulting from fire, lightning or theft of the entire vehicle.

[5] In March 1999, one of the appellant's vehicles was involved in a collision and damaged beyond repair. Initially, the appellant and the respondent's adjuster could not agree on the value of the vehicle. The adjuster thought it was worth $7,150, but the appellant wanted more. The adjuster offered to settle on the basis that the value of the vehicle was $7,625, but this was not satisfactory to the appellant. The adjuster sent the appellant a proof of claim form. After consulting a lawyer, the appellant completed the proof of claim as follows:

The total amount of loss

or damage so caused is $8,100.00

Deductible $1,000.00

The total amount claimed of

the said insurer in respect

of the loss or damage is $7,100.00

[6] The proof of claim form signed by the appellant's representative included the following:

[I]n consideration of such payment the Insurer is discharged forever from all further claim by reason of the said loss or damage. . . . All right, title and interest in the said vehicle or any part or equipment thereof is hereby transferred to the insurer only in the event that this claim is based upon the whole value of the said vehicle because it has been lost, destroyed or damaged beyond economical repair and the Insured agrees immediately to notify the Insurer in the event of its recovery.

[7] In the end, the respondent paid the appellant more than specified by the proof of claim. The claim was ultimately resolved on the following basis:

Actual cash value $7,625

P.S.T. (8 per cent) 610

Less Deductible 1,000

Net Amount $7,235

[8] The respondent paid the appellant the net amount and took the damaged vehicle, which it then sold for $1,900. After paying expenses for towing, storage, and auction fees, the respondent recovered the net amount of $1,419.

[9] The appellant commenced this proceeding by way of application. The proposed class is as follows:

All persons (a) who owned a motor vehicle which was insured against loss or damage by Co-operators General Insurance Company ("The Co-operators") through an insurance policy issued in Ontario, Alberta, New Brunswick, Newfoundland, Nova Scotia or Prince Edward Island, and (b) who suffered a total loss of the motor vehicle by reason of collision, theft, fire or vandalism, and (c) to whom The Co-operators paid the value of the vehicle minus a deductible sum provided by the applicable insurance policy, and (d) to whom The Co-operators failed to account regarding salvage of the motor vehicle.

[10] By way of relief, the Notice of Application seeks an interpretation of the Ontario, Alberta, New Brunswick, Newfoundland, Nova Scotia, and Prince Edward Island statutory conditions governing the entitlement of automobile insurers to obtain title to damaged vehicles upon payment of the actual cash value of the vehicle before it was damaged. The appellant also seeks on behalf of the proposed class a declaration that class members are entitled to the salvage obtained by the respondent from their vehicles, as well as compensatory and punitive damages. The Notice of Application alleges that the respondent was in breach of its duty of good faith in failing to reveal the terms of the statutory condition and in failing to pay the class members the amounts recovered for the salvage of their vehicles. As an alternative theory of liability, it is alleged that the respondent is liable for conversion of the vehicles.

Legislation, Statutory Conditions, and Policy Terms

[11] The Insurance Act, s. 234(2) provides that certain mandatory statutory conditions must be part of any automobile insurance policy and that no variation, omission or addition to such statutory conditions is binding upon the insured:

234(2) No variation or omission of or addition to a statutory condition is binding on the insured.

[12] The statutory condition at issue here is the following:

6(7) There shall be no abandonment of the automobile to the insurer without the insurer's consent. If the insurer exercises the option to replace the automobile or pays the actual cash value of the automobile, the salvage, if any, shall vest in the insurer.

[13] There are other related statutory conditions defining the obligations of an insurer where a vehicle is damaged. Statutory condition 6(5) limits the liability of the insurer to "the actual cash value of the automobile at the time any loss or damage occurs". Statutory condition 6(6) gives the insurer the option of repairing, rebuilding or replacing the damaged vehicle instead of paying its actual cash value.

[14] There are other policy terms in addition to the statutory conditions. Policy terms are not governed by s. 234(2), but the Insurance Act, s. 227 requires that policy terms be approved by the Superintendent of Financial Services of Ontario. The policy on this appeal, approved by Ontario Regulation 777/93 [Statutory Conditions -- Automobile Insurance], provides for a deductible (s. 7.3):

The Deductible

The amount we pay to cover any losses may be subject to a deductible. The deductible is the amount you agree to pay toward the cost of any single claim under this Section. The deductible, if any, is shown on the Certificate of Automobile Insurance.

. . . The deductible applies each time you make a claim

We will only pay for loss or damage that exceeds the amount of the deductible.

If you are insured for loss or damage caused by fire or lightning, or for theft of the entire automobile, there is no deductible for these losses.

[15] Finally, s. 131(2) provides that neither the insurer nor the insured shall be taken by certain acts to have waived a term or condition of the contract:

131(2) Neither the insurer nor the insured shall be deemed to have waived any term or condition of a contract by any act relating to the appraisal of the amount of loss or to the delivery and completion of proofs or to the investigation or adjustment of any claim under the contract.

Issues

1. Does statutory condition 6(7) require an insurer who takes title to a damaged vehicle to pay actual cash value without reduction for the policy deductible?

2. Is the appellant precluded from asserting a claim by the terms of the Proof of Loss?

3. Should the applicants claim be certified as a class proceeding pursuant to the Class Proceedings Act, 1992, S.O. 1992, c. 6?

Analysis

Issue 1: Does statutory condition 6(7) require an insurer who takes title to a damaged vehicle to pay actual cash value without reduction for the policy deductible?

[16] The motions court judge held that the entire policy, including statutory condition 6(7), had to be "read as a whole". He applied the principle of interpretation stated by Estey J. in Consolidated-Bathurst Export Ltd. v. Mutual Boiler & Machinery Insurance Co., 1979 CanLII 10 (SCC), [1980] 1 S.C.R. 888 at p. 901, 112 D.L.R. (3d) 49:

[T]he normal rules of construction lead a court to search for an interpretation, which, from the whole of the contract, would appear to promote or advance the true intent of the parties at the time of entry into the contract. Consequently, literal meaning should not be applied where to do so would bring about an unrealistic result or a result which would not be contemplated in the commercial atmosphere in which the insurance was contracted.

[17] The motions court judge held that the deductible provision of the policy should apply where the insurer elects to take ownership of the salvage. He noted that if the insured kept the damaged vehicle, the insurer would be credited with its salvage value and the deductible would apply. To achieve the same financial result, he reasoned that the deductible should also apply where the insurer elected to take the salvage. The motions court judge concluded as follows [at p. 307 O.R.]:

In my view the only way statutory condition 6(7) can be given commercial efficacy, and therefore produce the result that must have been contemplated by the parties when the statutory condition is read in the context of the whole policy, is to accept that the replacement of the automobile or payment of the actual cash value in the context of statutory condition 6(7) is subject to the application of the deductible. This interpretation confers no advantage on either party and is in harmony with the purpose of the policy which is to fully indemnify the insured for all losses that exceed the amount of the agreed upon deductible.

[18] The approach taken by the motions court judge rests on the assumption that the entire policy, including the statutory conditions, is to be read as a whole with no priority given to the statutory conditions. This has the result that the deductible will be applied consistently and it accords with what appears to be widespread industry practice.

[19] The real issue is whether, in law, the terms of the statutory condition must be given priority or whether they can be qualified by other policy provisions. In my view, the legislature has answered that question with s. 234(2). By stipulating that "no variation or omission of or addition to a statutory condition is binding on the insured", the legislature has created a hierarchy of contractual terms in which the statutory conditions are to be accorded priority. To the extent other policy terms would conflict with or qualify the effect of the statutory conditions, such other policy terms must yield so that the statutory conditions prevail.

[20] I agree with the submission of the appellant that s. 234(2) is a form of consumer protection legislation. By mandating certain policy terms and by expressly providing that an insured is not bound by other conflicting or limiting policy terms, the legislature has limited the extent to which commercial efficacy or the apparent intention of the parties are determinative. In this setting, consumer protection is the controlling principle of interpretation and the statutory conditions are "paramount": Curtis's & Harvey Ltd. v. North British & Mercantile Insurance Co. (1920), 1920 CanLII 464 (UK JCPC), 55 D.L.R. 95 at pp. 99-100 (P.C.). In his report on the Inquiry into Motor Vehicle Accident Compensation in Ontario (Toronto: Ontario Ministry of the Attorney General and the Ministry of Financial Institutions, 1988) at p. 138, Osborne J. drew a clear distinction between the general policy provisions and the statutory conditions: "[t]he entire policy is subject to the Statutory Conditions." By according the statutory conditions priority, s. 234(2) limits the extent to which a court is free to apply the general rules of interpretation laid down in Consolidated-Bathurst.

[21] The respondent relies on the fact that the terms of the policy, including those relating to the deductible, are closely regulated and subject to approval by the Superintendent. That argument was rejected by this court in an analogous situation in Prasad v. Gan Canada Insurance Co. (1997), 1997 CanLII 1995 (ON CA), 33 O.R. (3d) 481, 27 M.V.R. (3d) 113 (C.A.), leave to appeal to S.C.C. refused [1997] 3 S.C.R. viii, 225 N.R. 399n. Prasad dealt with the Statutory Accident Benefits Schedule -- Accidents Before January 1, 1994, R.R.O. 1990, Reg. 672, which defined an insured person entitled to benefits as someone "involved in an accident in or outside of Ontario . . ." (emphasis added). The Insurance Act, s. 268(1), requires every motor vehicle policy to include the benefits set out in the Statutory Accident Benefits Schedule. Thus, the Statutory Accident Benefits Schedule is closely analogous to the statutory conditions at issue in the present case. The terms of the policy provided for coverage only in Canada or the United States. This court held at p. 483 O.R. "that a territorial limitation inserted in the contract of insurance by the defendant could not effectively reduce the coverage under the benefits schedule. That coverage was required by statute, and could be limited only by statute." The court rejected the argument that territorial limits in the policy should apply because the policy was approved by the Commissioner. The court held at p. 484 O.R. that s. 227(2), validating any form of policy approved by the Commissioner "even if those terms are inconsistent with, vary, omit or add to any provision or condition of this Part" did not apply in the absence of evidence that the Commissioner "made a decision under s. 227(2) to approve a form of policy inconsistent with the Act".

[22] I note as well that the policy itself confirms the paramountcy of the statutory conditions. In the plain language summary, it is stated: "If there is a discrepancy between the statutory conditions and the wording in the policy, the statutory conditions in Section 8 prevail."

[23] In the face of s. 234(2), I am unable to accept the proposition that the phrase "actual cash value" in statutory condition 6(7) can be interpreted as "actual cash value minus any deductible".

[24] To the extent that there is specific authority on the point, it favours the appellant. In Mueller v. Western Union Insurance Co., 1974 CanLII 249 (AB SCTD), [1974] 5 W.W.R. 530, [1974] I.L.R. 1-636 (Alta. Dist. Ct.), Tavender D.C.J. interpreted the same statutory condition under the Alberta regime that also makes the statutory conditions part of every policy and prohibits any variation, omission or addition to them. He held, at p. 536 W.W.R., that the insurer had the option of either paying the amount of the loss, less the deductible, in which case the insured retained title to the salvage, or, the insurer "may elect to take the salvage under the statutory conditions and in this case it must pay the insured the actual cash value of the vehicle. The wording of the condition is very clear." As the insurer had taken the salvage but reduced its payment to the insured by the amount of the deductible, the insured recovered judgment for the deductible. C. Brown and J. Menezes, Insurance Law in Canada, looseleaf, vol. 1 (Scarborough: Carswell, 1999) at p. 11-16 considers the Mueller decision and states: "This solution is appropriate and consistent with other principles of insurance law." Similarly, J. Newcombe, The Standard Automobile Policy Annotated (Toronto: Butterworths, 1986) at p. 164, reviews the Mueller decision and states: "this decision seems to be a correct interpretation of the wording, but insurers continue to follow the same procedure [paying cash value less the deductible] without being challenged."

[25] The respondent relies on American authority to the contrary: Straus v. Allstate Inc., 378 N.E.2d 1308 (Ill. App. 1 Dist. 1978); Langford v. Federated Guarantee Mutual Co., 543 So.2d 675 (Ala. Sup. Ct. 1989). However, these cases are distinguishable on the ground that the courts were not interpreting mandatory statutory conditions that prevail over ordinary policy terms.

[26] To the extent there is any doubt on the point, the interpretive approach adopted by MacKinnon A.C.J.O. in July v. Neal (1986), 1986 CanLII 149 (ON CA), 57 O.R. (2d) 129 at p. 135, 44 M.V.R. 1 (C.A.) requires us to resolve that doubt in favour of the appellant:

Insurance policies are statutory contracts and the wording of the terms as in the instant case normally are not the words of the insurer but the words of the statute or of the regulation. To such terms the contra proferentem rule does not apply. However, the insurance industry is consulted and does have input with regard to legislation affecting the industry. The individual insured has none. His role is to pay the premium for the expected indemnity. It appears to me that if there is doubt in the legislation establishing and governing the cover, and there are two possible interpretations of any aspect of the cover, the one more favourable to the insured should govern . . .

[27] The respondent argues that accepting the appellant's argument would lead to the elimination of the deductible in other situations. Particular concern was expressed with respect to statutory condition 6(5) which provides that ". . . the insurer shall not be liable for more than the actual cash value of the automobile at the time any loss or damage occurs . . .". That statutory condition imposes a limit on liability and, unlike statutory condition 6(7), does not require the insurer to pay actual cash value. By adopting the appellant's interpretation of statutory condition 6(7), we would not eliminate the deductible from situations falling under statutory condition 6(5).

[28] Accordingly, I conclude that as the respondent elected to take title to the damaged vehicle, the terms of statutory condition 6(7) required the respondent to pay the appellant the actual cash value, with no reduction for the amount of the deductible under the policy.

Issue 2: Is the appellant precluded from asserting a claim by the terms of the Proof of Loss?

[29] The respondent submits that by agreeing to terms that plainly took the deductible into account, the appellant released any claim. The argument rests on the terms of the proof of loss, signed by the appellant.

[30] In my view, the respondent's submission on this point must be rejected. I do not see how the respondent can overcome the protective language of the Insurance Act that alters the result that would follow at common law. Section 131(2) provides that neither the insured nor the insurer shall be deemed to have waived any term or condition by virtue of the adjustment of a claim. This provision allows both the insured and the insurer to engage in the adjustment process without risking the loss of their respective contractual rights. As the legislation specifically protects the contractual rights of the parties during the adjustment process, I fail to see how the appellant can be said to have waived or surrendered its contractual rights.

[31] Secondly, even if s. 131(2) did not have this protective effect, the wording of the proof of loss does not amount to a release of all claims. Indeed, the proof of loss form tracks the wording of statutory condition 6(7). The proof of loss states that title to the vehicle is transferred "only in the event that this claim is based upon the whole value of the said vehicle". On that wording, which in turn must be read in the light of statutory condition 6(7), it is difficult to see how the respondent could have obtained title to the damaged vehicle as the claim was not based on the whole value of the vehicle, but rather on the value of the vehicle, less the deductible.

[32] Thirdly, the terms of the proof of loss left the insurer with various options. After the appellant had completed the proof of loss, it remained open to the insurer to decide whether or not it wished to take title to the damaged vehicle. The cause of action asserted by the appellant arose later when the respondent elected to take the salvage. Accordingly, even if the terms of the proof of loss were sufficient to bar the claim now asserted, that claim did not exist at the time the appellant signed the proof of loss.

[33] Accordingly, I would dismiss the respondent's submission that the appellant is barred by the terms of the proof of loss from asserting the claim.

Issue 3: Should the applicant's claim be certified as a class proceeding pursuant to the Class Proceedings Act, 1992?

[34] The appellant asks this court to certify the application as a class proceeding. We were informed that the issue of certification was fully argued before the motions court judge. In view of the conclusion he reached on the substantive point, he understandably did not rule on certification. The result, however, is that we do not have the benefit of his findings and views on certification. I have considerable sympathy for Mr. McGowan's submission that every effort should be made to simplify class proceedings and, where possible, to avoid protracted and multiple routes of appeal. However, I do not think it appropriate for this court to attempt to deal with certification as if we were a court of first instance. Class proceedings are procedurally complex. The Class Proceedings Act, 1992, s. 34 (1) requires that all pre-trial motions are to be heard by the same judge and in the practice of the Superior Court, class proceedings are closely case managed. It is obvious that as an appellate court we cannot carry out this function. This regime does not lend itself to a piecemeal approach whereby this court would determine whether the matter should be certified and then, if it is to be certified, leave the details of bringing the matter forward to a judge of the Superior Court. In my view, the appropriate order is to remit the matter to the motions court judge to deal with the issue of certification.

Other issues

[35] In its factum, the appellant raises a number of other issues and asks this court to determine the entitlement of each class member to compensatory and punitive damages, in addition to pre-judgment interest. As I have already indicated, the proposed class includes policyholders from five other provinces and would require determination of their rights under the laws of those provinces. Issues are also raised as to applicable limitation periods.

[36] We must not lose sight of the fact that this proceeding is an intended class proceeding and that, if certified, it will affect the rights of a significant number of individuals. In certain circumstances, it may be appropriate to make a substantive determination of law at the request of the proposed representative plaintiff prior to certification: see e.g. Bywater v. Toronto Transit Commission (1998), 27 C.P.C. (4th) 172 (Ont. Gen. Div.). In the present case both parties were content to have the substantive issue of the interpretation and the effect of the statutory condition resolved before certification. I see no reason why we should not grant declaratory relief determining the appellant's rights. However, we must also exercise a measure of restraint lest we put our substantive cart before the procedural horse. While I think it appropriate to give a declaration as to the effect of the statutory condition, it would be inappropriate to go any further before there has been an order certifying the matter as a class proceeding. In particular, we should avoid attempting to resolve the many controversial issues that flow from the declaration of right.

[37] Accordingly, I express no view on the other issues that have been raised as I deem it appropriate to leave those matters to be resolved after the issue of certification has been dealt with.

[38] For these reasons, I would allow the appeal, set aside the judgment below, and in its place, order as follows:

(1) The appellant is entitled to a declaration that, as the respondent elected to take title to the damaged vehicle, statutory condition 6(7) of its automobile insurance policy required the respondent to pay the appellant the actual cash value of the vehicle with no reduction for the amount of deductible under the policy.

(2) The matter is remitted to the motions court judge for determination of the issue of certification pursuant to the Class Proceedings Act, 1992, including the issue of the costs of the certification motion before the motions court judge.

(3) The appellant is entitled to its costs of this appeal and to the costs of the application before the motions court judge.

Appeal allowed.