DATE: 20010522
DOCKET: C35074
COURT OF APPEAL FOR ONTARIO
CARTHY, FELDMAN and SIMMONS JJ.A.
B E T W E E N:
UNIFUND ASSURANCE COMPANY
Leah Price for the appellant
Appellant
(Applicant)
- and -
Alan L. W. D'Silva and Sophie Vlahakis for the respondent
INSURANCE CORPORATION OF BRITISH COLUMBIA
Respondent (Respondent)
HEARD: March 9, 2001
On appeal from the order of Justice Colin Campbell dated August 29, 2000.
FELDMAN J.A.:
[1] The appellant applied to the Superior Court of Justice for an order appointing an arbitrator pursuant to certain provisions of the Insurance Act, R.S.O. 1990, c. I.8 and the Arbitration Act, 1991, S.O. 1991, c. 17. The respondent moved before the application judge for an order staying the application to appoint an arbitrator on the basis that the Ontario Insurance Act and its procedure does not apply to these parties in this case, that British Columbia law applies and that the British Columbia court and not the Ontario court is the proper forum to decide the choice of law issue. The respondent's motion was successful.
[2] The appeal turns on one narrow issue: did the application judge err in law by granting the stay, rather than proceeding with the appointment of an arbitrator and leaving any jurisdictional issues to be decided by the arbitrator in accordance with the provisions of the Arbitration Act?
[3] In my view the application judge erred. For the reasons set out below, he should have declined to hear the motion and proceeded with the appointment of the arbitrator who could then deal with any issues of jurisdiction and law.
FACTS
[4] The relevant facts can be briefly stated. Two Ontario residents, Mr. and Mrs. Brennan were in Vancouver to attend their son’s wedding in August, 1995. They were driving a rented car on August 16 when they were hit by a tractor-trailer. The accident rendered Mrs. Brennan a quadriplegic. Following the accident, the Brennans returned to Ontario.
[5] The Brennans brought an action in British Columbia against the owner and driver of the tractor-trailer, as well as against the garage that repaired the vehicle. The trial dealt with the quantum of damages as it was agreed that the plaintiffs were not at fault and the three defendants admitted joint liability for the accident. All three were insured by the respondent. The Brennans were awarded substantial damages after a trial in the British Columbia Supreme Court.
[6] Both Mr. and Mrs. Brennan received no-fault statutory accident benefits (SABS) from their own insurer, the appellant, pursuant to s. 268(2) of the Ontario Insurance Act. Mrs. Brennan’s benefits are substantial.
[7] In accordance with s. 25 of the British Columbia Insurance (Motor Vehicle) Act R.S.B.C. 1996, c. 231, the three defendant tortfeasors sought to deduct from the damages awarded to the Brennans the amount of the SABS they received from the appellant. There was an issue as to whether one of the joint tortfeasors, the garage, was covered by “automobile insurance” in order to qualify for the deduction under s. 25, the purpose of which, as stated by the British Columbia Court of Appeal, is “to prevent double recovery by allowing parties to deduct the “benefits” that a claimant receives, or to which a claimant is entitled, from the award of damages…” (Brennan v. Singh, [2000] B.C.J. No. 1026 at para. 4). There was no issue that the other two defendants were covered by “automobile insurance” within the meaning of s. 25.
[8] The British Columbia Court of Appeal held that the I.C.B.C. policy which insured the garage did constitute “automobile insurance” within the meaning of the Insurance (Motor Vehicle) Act, and that that defendant as well as the other two, was entitled to the s. 25 deduction of the benefits received from the appellant, from the damages awarded to the plaintiffs.
[9] Currently there is pending in the Supreme Court of British Columbia the continuation of the tort action to determine the amount of the benefits that will be ordered to be deducted from the Brennans’ damage award.
THE ONTARIO PROCEEDING
[10] Section 275 of the Ontario Insurance Act provides for indemnification of the no-fault insurer for benefits paid over $2,000 by the insurer of certain heavy commercial vehicles (including the tractor-trailer which hit the Brennans) if involved in the accident:
275(1) INDEMNIFICATION IN CERTAIN CASES. The insurer responsible under subsection 268(2) for the payment of statutory accident benefits to such classes of persons as may be named in the regulations is entitled, subject to such terms, conditions, provisions, exclusions and limits as may be prescribed, to indemnification in relation to such benefits paid by it from the insurers of such class or classes of automobiles as may be named in the regulations involved in the incident from which the responsibility to pay the statutory accident benefits arose.
(2) Idem. Indemnification under subsection (1) shall be made according to the respective degree of fault of each insurer’s insured as determined under the fault determination rules.
(4) Arbitration. If the insurers are unable to agree with respect to indemnification under this section, the dispute shall be resolved through arbitration under the Arbitrations Act.
[11] The appellant sought indemnification from the respondent in relation to the SABS it was paying to the Brennans pursuant to s. 275(1) of the Insurance Act.
[12] The appellant and the respondent were "unable to agree with respect to indemnification under s. 275" because the respondent took the position that the Ontario Insurance Act does not apply and that the respondent was therefore not an “insurer” under s. 275. Consequently, in accordance with ss. (4), the appellant brought an application to the Superior Court for the appointment of an arbitrator pursuant to s. 10 of the Arbitration Act. In response, the respondent took two steps: it first brought an application in the British Columbia Supreme Court for a declaratory order that the law of British Columbia applies to the rights of the two insurers and not the law of Ontario, and that the appellant has no right of indemnification by the respondent under British Columbia law; and second, it brought a motion returnable before the application judge in Ontario for an order staying the arbitration. This appeal is from the order granting the stay.
ISSUE
Did the application judge err by making an order in the proceeding rather than appointing the arbitrator?
ANALYSIS
1) Arbitrator to decide all questions of law and jurisdiction
[13] Section 10(1)(b) of the Arbitration Act provides:
10 (1) The court may appoint the arbitral tribunal, on a party's application, if,
(b) a person with power to appoint the arbitral tribunal has not done so after a party has given the person seven days notice to do so.
[14] The scheme of the Act is that where either an agreement of the parties or a statute provides for arbitration, all decisions are to be made by the arbitrator including questions of law and jurisdiction, while the role of the courts is not to intervene but to determine questions referred by the arbitrator or the parties, to hear appeals in prescribed circumstances, and to enforce the orders of the arbitrator. The following sections of the Arbitration Act applicable to arbitrations mandated by a statute (in this case, the Insurance Act), provide for that scheme:
2 (3) This Act applies, with necessary modifications, to an arbitration conducted in accordance with another Act, unless that Act provides otherwise; however, in the event of conflict between this Act and the other Act or regulations made under the other Act, the other Act or the regulations prevail.
6 No court shall intervene in matters governed by this Act, except for the following purposes, in accordance with this Act:
To assist the conducting of arbitrations.
To ensure that arbitrations are conducted in accordance with arbitration agreements.
To prevent unequal or unfair treatment of parties to arbitration agreements.
To enforce awards.
8 (2) The arbitral tribunal may determine any question of law that arises during the arbitration; the court may do so on the application of the arbitral tribunal, or on a party's application if the other parties or the arbitral tribunal consent.
(3) The court's determination of a question of law may be appealed to the Court of Appeal, with leave.
17 (1) An arbitral tribunal may rule on its own jurisdiction to conduct the arbitration and may in that connection rule on objections with respect to the existence or validity of the arbitration agreement.
(3) A party who has an objection to the arbitral tribunal's jurisdiction to conduct the arbitration shall make the objection no later than the beginning of the hearing or, if there is no hearing, no later than the first occasion on which the party submits a statement to the tribunal.
(7) The arbitral tribunal may rule on an objection as a preliminary question or may deal with it in an award.
(8) If the arbitral tribunal rules on an objection as a preliminary question, a party may, within thirty days after receiving notice of the ruling, make an application to the court to decide the matter.
(9) There is no appeal from the court's decision.
20 (1) The arbitral tribunal may determine the procedure to be followed in the arbitration, in accordance with this Act.
31 An arbitral tribunal shall decide a dispute in accordance with law, including equity, and may order specific performance, injunctions and other equitable remedies.
32 (1) In deciding a dispute, an arbitral tribunal shall apply the rules of law designated by the parties or, if none are designated, the rules of law it considers appropriate in the circumstances.
45 (1) If the arbitration agreement does not deal with appeals on question of law, a party may appeal an award to the court on a question of law with leave, which the court shall grant only if it is satisfied that…
(5) The court may confirm, vary or set aside the award or may remit the award to the arbitral tribunal with the court's opinion on the question of law, in the case of an appeal on a question of law, and give directions about the conduct of the arbitration.
46 (1) On a party's application, the court may set aside an award on any of the following grounds:
- The subject-matter of the dispute is not capable of being the subject of arbitration under Ontario law.
(6) If the ground alleged for setting aside the award could have been raised as an objection to the arbitral tribunal's jurisdiction to conduct the arbitration or as an objection that the arbitral tribunal was exceeding its authority, the court may set the award aside on that ground if it considers the applicant's failure to make an objection in accordance with section 17 justified.
49 An appeal from the court's decision in an appeal of an award, an application to set aside an award or an application for a declaration of invalidity may be made to the Court of Appeal, with leave of that court.
[15] It is clear from these sections that when a statute provides that a matter is to be decided by arbitration under the Arbitration Act, the arbitrator is to make the initial determination of any questions of jurisdiction, subject to the right to appeal to the court.
[16] In this case, the respondent says that before appointing an arbitrator, the application judge was entitled to decide, as a preliminary question, which province’s courts should determine the applicable law. The application judge agreed. He stated at para. 30 of his Reasons:
This is not a situation such as faced the court in Jevco Insurance Co. v. Continental Insurance Co. of Canada [1999] Carswell Ont. 1887. In that case, Mr. Justice Wilkins considered on a motion brought under Rule 21 that the Court had no jurisdiction to hear the issues raised in the Statement of Claim, all of which were properly within the jurisdiction of the arbitrator; and on that basis refused a stay.
[17] In my view the application judge erred in distinguishing Jevco v. Continental, which was affirmed by the Court of Appeal (2000 Carswell Ont. 226; 2000 26969 (ON CA), 132 O.A.C. 379). In that case there had been several arbitrations by the parties pursuant to s. 275 of the Insurance Act resulting in awards. The second party insurer, who had indemnified the first party insurer, commenced an action seeking reimbursement of monies paid pursuant to some of the awards on the basis that the first party insurer had a legal defence to the payment of benefits, should therefore not have paid those benefits in the first place, and as a result, was not entitled to indemnification.
[18] Wilkins J. dismissed the action of the second party insurer. He held that the issue sought to be raised in the action as to whether the payor company was an “insurer” within the meaning of ss. 268 and 275 of the Act, was an issue of the jurisdiction of the arbitrator and had to be decided by the arbitrator. He stated at paras 24 - 26:
… To argue that a finding by the WSIAT that the accident in question was one covered by Workers' Compensation legislation and for which the cause of action had been taken away is, in effect, to argue that the insurer is no longer an insurer responsible under ss. 268(2) for the payment of no-fault benefits and, as such, it is not an insurer under s. 275, entitled to indemnification and arbitration in respect of indemnification. A reading of s. 275 of the Insurance Act, in particular its reference to the Arbitration Act, and s. 17 of the Arbitration Act, in my view, places this issue as to the jurisdiction of the arbitrator squarely upon the arbitrator and, I might point out in passing, pursuant to the provisions of s. 17(3) of that Act, a party who has an objection to the arbitrator's jurisdiction is required to make that objection no later than the beginning of the hearing or no later than the first occasion on which that party submits a statement to the arbitrator.
There are a series of decisions which establish that the mechanism set out under the Insurance Act, in which automobile insurers who are the payors of no-fault benefits may be reimbursed or indemnified, constitutes a code for the determination of the rights both of insured persons and insurers in those respects. In addition, the jurisdiction for determination of these issues has been taken away from the courts and placed into a system of arbitration, as provided for under the Arbitration Act. The cases of Progressive Casualty Insurance Co. v. Jevco Insurance Co. (1994), 1994 19787 (ON CJ), 27 C.C.L.I. (2d) 234 (Ont. Ct. Gen. Div.), Jevco Insurance Co. v. Canadian General Insurance Co. (1993), 1993 8451 (ON CA), 14 O.R. (3d) 545 (Ont.C.A.), the unreported decision of Mr. Justice Matlow reported at [1994] O.J. No. 2389 at paras. 2 through 5 and Boreal Property and Casualty Insurance Co. v. The Dominion of Canada Insurance Co. [1996] I.L.R. 1-3300 (Ont. Ct. (Gen. Div.)) appear to establish this proposition.
If there is a threshold issue as to the jurisdiction of the arbitrator arising as a consequence of factual circumstances which might bring into effect s. 17 of the Workers Compensation Act, then that legislation sets out clearly the method by which such a determination is to be made. If the consequences of such a determination impact upon the jurisdiction of the arbitrator, as contemplated by s. 275 of the Insurance Act, then, in my view, it is the jurisdiction of the arbitrator to determine the impact of those circumstances and the presence or absence of any ruling by the WSIAT on the issue.
[19] The Court of Appeal expressed substantial agreement with the reasons of Wilkins J. The analysis confirms the scheme of the Arbitration Act which is that it is the role of the arbitrator and not of the court, at least initially, to decide questions of jurisdiction, applicable law and questions of law including whether a party is an “insurer” for the purposes of s. 275.
2. Forum Non Conveniens
[20] The application judge agreed to deal with the motion for a stay because the issue that was raised before the court was forum non conveniens, and in particular, which provincial jurisdiction should determine the choice of law issue. Although he did not say that an arbitrator cannot decide a question of forum non conveniens, he stated that an arbitrator appointed to determine issues under s. 275 of the Insurance Act was limited to deciding “intra-Ontario” issues only.
[21] At para. 43 of his Reasons the application judge concluded:
… The purpose of arbitration within the scope of section 275 of the Insurance Act in Ontario is to deal with matters that are clearly in issue within the rules applicable in Ontario. That process was not designed to resolve legal issues that may arise as a result of operation of an inter-provincial scheme in which problems arise because of conflict in the legislation in two different provinces.
[22] With respect, that conclusion is erroneous for two reasons.
[23] First, the application judge's conclusion is inconsistent with the terms of s. 275 when read in conjunction with the Power of Attorney and Undertaking (PAU) to which British Columbia and Ontario are signatories.
[24] Goudge J.A. described the effect of the PAU in Healy v. Interboro Mutual Indemnity Insurance Co. (1999), 1999 1485 (ON CA), 44 O.R. (3d) 404 (C.A.) (leave to appeal to S.C.C. refused [1999] S.C.C.A. No. 384) at para. 14:
. . . To paraphrase the description of Blair J.A. in Potts, supra, [(1992), 1992 7623 (ON CA), 8 O.R. (3d) 556 (C.A.) at 557-8] a participating insurer agrees to be bound by the law concerning compulsory automobile insurance coverage of the province where the action against it is brought rather than the automobile insurance coverage of the state or province where its policy is issued. . . .
Paragraph A. of the PAU states that the signatory company undertakes “To appear in any action or proceeding against it or its insured in any Province or Territory in which such action has been instituted and of which it has knowledge.” [Emphasis added]
[25] Section 275 does not purport to limit its own application to Ontario insurers. The legislation operates within the context where the PAU is in place. There is therefore no basis to conclude that the arbitration provision of the section is intended to operate fully only in the limited circumstances where all parties and issues are confined to Ontario.
[26] The issue of the extra-territorial application of the section was recently considered by this court in Insurance Corp. of British Columbia v. Royal Insurance Co. of Canada, 1999 818 (ON CA), [1999] O.J. No. 1668 (C.A.), a case where the current respondent was seeking to have the section applied so that it would receive the benefit of indemnification for SABS it had paid. Procedurally the case arose on an application by the plaintiff, I.C.B.C., under s. 8(2) of the Arbitration Act. In that case, the application judge held that I.C.B.C., which was the payor insurer of the SABS, was not an “insurer” within the meaning of s. 268(1) and (2) of the Insurance Act because those sections only apply to contracts made in Ontario. Consequently I.C.B.C. was not entitled to indemnification under s. 275.
[27] The Court of Appeal disagreed. Goudge J.A. made the following important observation at para. 10:
This conclusion does not constitute the extra-territorial application of Ontario law to a British Columbia automobile insurance contract. Rather, ICBC is an extra-provincial insurer which has undertaken through the PAU to be the insurer responsible under s. 268(2) of the Insurance Act for the payment of SABS to its insured. As such, it is entitled as a matter of statutory interpretation to indemnification from Royal, since it meets the pre-condition that triggers s. 275.
[28] Second, the conclusion of the application judge referred to at paragraph 21 above is contrary to the scheme of the Arbitration Act and the powers accorded an arbitral tribunal under the Act. The Arbitration Act does not refer specifically to the power to decide an issue of forum non conveniens, nor to grant a stay. However, the Act gives arbitral tribunals the authority to decide issues of jurisdiction (s. 17(1)), questions of law (s. 8(2)), and their own procedure (s. 20). Under s. 31, the arbitral tribunal has the power to order equitable remedies.
[29] The issue of whether a court (or tribunal) has jurisdiction over a particular matter, and if so, whether to decline to exercise its jurisdiction in favour of another forum, are two separate issues to be determined sequentially as a two-step process: Canadian International Marketing Distributing Ltd. v. Nitsuko Ltd. (1990), 1990 2090 (BC CA), 68 D.L.R. (4th) 318 (B.C.C.A.); Ell v. Con-Pro Industries Ltd. (1992), 1992 2034 (BC CA), 11 B.C.A.C. 174 (C.A.); Lemmex v. Bernard (2000), 2000 29056 (ON SCDC), 51 O.R. (3d) 164 (Sup. Ct.). In the latter case, Aitken J. set out the rule in this way:
All counsel agree that the question of whether Ontario has jurisdiction to hear these actions is a different question from whether this court should decline to exercise its jurisdiction because another forum is the more convenient forum. Using other terminology, the concept of jurisdiction simpliciter is different from that of forum non conveniens. The second question of whether Ontario should decline to exercise jurisdiction because another forum is the more convenient forum only needs to be considered once an Ontario court has determined that it has jurisdiction to hear the action. If an Ontario court decides it does not have jurisdiction, then it need not proceed to question whether another forum would be more convenient (Canadian International Marketing Distributing Ltd. v. Nitsuko (1990), 1990 2090 (BC CA), 68 D.L.R. (4th) 318, 56 B.C.L.R. (2d) 130 (C.A.)).
[30] The first issue for the arbitral tribunal is to decide if it has jurisdiction in the case. Clearly if the arbitral tribunal were to determine that it did not have jurisdiction because s. 275 of the Insurance Act did not apply, then it would not proceed with the arbitration. In that case, no stay is necessary because the negative conclusion on jurisdiction disposes of the matter in Ontario.
[31] If the arbitral tribunal determines that it does have jurisdiction and that s. 275 is applicable and in light of the PAU, it is difficult to see how the matter could ever be stayed in Ontario by application of the doctrine of forum non conveniens. However, if the parties sought to raise the issue, the scheme of the Arbitration Act requires that all questions of law and jurisdiction are initially for the arbitrator to determine unless the arbitrator or the parties consent to a referral of the issue to the court.
STAY UNDER S. 275(5)
[32] The one limitation on proceeding to arbitration under s. 275 is found in ss. (5) which provides:
275(5) No arbitration hearing shall be held with respect to indemnification under this section if, in respect of the incident for which indemnification is sought, any of the insurers and an insured are parties to a mediation under section 280, an arbitration under section 282, an appeal under section 283 or a proceeding in a court in respect of statutory accident benefits.
[33] The application judge referred to this section as one of the respondent’s initial grounds for the original application on the basis that there was “a proceeding in a court in respect of statutory accident benefits”. He did not however, make any further reference to that ground. The subsection is not applicable in this case. The only outstanding proceedings are the respondent’s declaratory application in British Columbia to which the insured is not a party, and the ongoing tort trial to which the insurers are not parties. The subsection therefore has no application.
CONCLUSION
[34] The application judge erred by staying the arbitration proceeding in Ontario in favour of the declaratory application in British Columbia. As s. 275 of the Insurance Act mandates that disputes under the section be resolved through arbitration under the Arbitration Act, all questions of law and jurisdiction are to be determined not by the court, but in the first instance, by the arbitrator. It will be for the arbitrator to consider all of such issues as may be raised by the parties including the applicable law and forum.
[35] The appeal is allowed with costs. The matter is referred back to the application judge to deal with the application to appoint an arbitrator under s. 10 of the Arbitration Act.
RELEASED: May 22, 2001 “KNF”
“K. Feldman J.A.”
“I agree J.J. Carthy J.A.”
“I agree Simmons J.A.”