Her Majesty the Queen in Right of Ontario as Represented by the Minister of Finance v. Progressive Casualty Insurance Company of Canada [Indexed as: Ontario (Minister of Finance) v. Progressive Casualty Insurance Co. of Canada]
95 O.R. (3d) 219
Court of Appeal for Ontario,
O'Connor A.C.J.O., Doherty and Rosenberg JJ.A.
March 25, 2009
Insurance -- Automobile insurance -- Disputes between insurers -- Motor Vehicle Accident Claims Fund not precluded from bringing action for restitution in Superior Court rather than proceeding by way of arbitration under Dispute Regulation in "proper case" -- "Proper case" existing where automobile insurer and Fund continued to engage in informal discussions over responsibility for payment of benefits beyond 90-day period for initiating arbitration process under s. 3 of Dispute Regulation so that compliance with notice provisions of Dispute Regulation was no longer possible when it became clear that dispute would not be resolved -- Notice provisions of Dispute Regulation not applying to restitution [page220] claim brought by way of action in Superior Court -- Trial judge erring in refusing to apply Court of Appeal decision holding that Fund is insurer for purposes of Dispute Regulation retrospectively -- O. Reg. 283/95.
N was seriously injured in a motor vehicle accident. His automobile insurer, Progressive, took the position that the policy was cancelled before the accident. N's lawyer sent an application for statutory accident benefits to both the Motor Vehicle Accident Claims Fund and Progressive. In ongoing discussions, Progressive continued to insist that it was not responsible for paying N's benefits. The Fund commenced an action against Progressive for a declaration that progressive was liable to pay the benefits and for restitution in the amount of the benefits paid to N. The action was allowed. Progressive appealed. It no longer contended that its policy was not in place at the time of the accident, but it argued that the Fund was obligated to proceed by way of arbitration under O. Reg. 283/95 (the "Dispute Regulation") rather than by way of a restitution claim in the Superior Court and that, even if the Superior Court had jurisdiction to hear the action, the notice provisions in the Dispute Regulation applied and the Fund had failed to comply with those provisions.
Held, the appeal should be dismissed.
While the Fund is an "insurer" for the purposes of the Dispute Resolution, it is not precluded from seeking restitution in the courts in a "proper case". The answer to the following two questions will assist in identifying those cases that constitute a "proper case". Were the ultimate parties to the dispute engaged in a dispute over payment of benefits within the time limits set out in s. 3 of the Dispute Regulation and did the parties, either expressly or by implication from their conduct, choose not to proceed under the Dispute Regulation? Was arbitration in accordance with the process set out in the Dispute Regulation no longer possible when objection was first taken to a party proceeding by way of a restitution claim? If the answer to both questions is yes, a common-law action for restitution provides the only way that the dispute can be resolved according to the priority scheme established in the Insurance Act, R.S.O. 1990, c. I.8. In this case, Progressive and the Fund chose to continue informal discussions over responsibility for payment of the benefits well beyond the 90-day period under s. 3 of the Dispute Regulation for initiating the arbitration process. By their conduct, they effectively chose not to access the arbitration process to resolve the dispute. When, many months later, it became clear that the dispute would not be resolved, compliance with the notice provisions of the Dispute Regulation was no longer possible. A lawsuit for restitution and declaratory relief provided the only means by which the dispute could be determined on its merits. There was no irreparable prejudice to Progressive in allowing the Fund to proceed by way of a restitution claim.
The Fund was not bound by the notice requirements in the Dispute Regulation. The timeline fixed by the Dispute Regulation does not control a restitution claim brought in the Superior Court. Once the trial judge decided that this was an appropriate case in which to allow the Fund to proceed by way of a restitution claim, the procedural provisions in the Dispute Regulation, including the notice requirements, became irrelevant.
The trial judge erred in holding that Allstate Insurance Co. of Canada v. Motor Vehicle Accident Claims Fund, which held that the Fund is an insurer for the purpose of the Dispute Regulation, should not apply to this case as it should have a prospective effect only. The application of the "new" law as pronounced in Allstate to this case was a retrospective, not a retroactive, application of the judgment. Judge-made law is, by its very nature, inherently retrospective. If an appellate ruling is to [page221] have something less than its normal retrospective impact, it is for the appellate court making that ruling to specifically announce the limitation.
APPEAL from the judgment of D.M. Brown J., 2007 15475 (ON SC), [2007] O.J. No. 1769, 51 C.C.L.I. (4th) 35 (S.C.J.) allowing an action for declaration and restitution.
Cases referred to Allstate Insurance Co. of Canada v. Motor Vehicle Accident Claims Fund (2007), 84 O.R. (3d) 401, [2007] O.J. No. 292, 2007 ONCA 61, 277 D.L.R. (4th) 720, 45 C.C.L.I. (4th) 1, [2007] I.L.R. I-4577, 42 M.V.R. (5th) 165, 154 A.C.W.S. (3d) 1191, apld Kalinkine v. Ontario (Superintendent of Financial Services), 2004 48058 (ON CA), [2004] O.J. No. 5138, 193 O.A.C. 77, 17 C.C.L.I. (4th) 2, 8 M.V.R. (5th) 178, 135 A.C.W.S. (3d) 1148 (C.A.), consd Other cases referred to Canada (Attorney General) v. Hislop, [2007] 1 S.C.R. 429, [2007] S.C.J. No. 10, 2007 SCC 10, 278 D.L.R. (4th) 385, 358 N.R. 197, J.E. 2007-477, 222 O.A.C. 324, 153 C.R.R. (2d) 173, 37 R.F.L. (6th) 1, 154 A.C.W.S. (3d) 362, EYB 2007-115536; Cousson v. Quan (2007), 87 O.R. (3d) 241, [2007] O.J. No. 4348, 2007 ONCA 771, 231 O.A.C. 277, 286 D.L.R. (4th) 196, 53 C.C.L.T. (3d) 122, 164 C.R.R. (2d) 284 [leave to appeal to S.C.C. granted [2008] S.C.C.A. No. 11]; Edward v. Edward Estate, 1987 982 (SK CA), [1987] S.J. No. 423, 39 D.L.R. (4th) 654, [1987] 5 W.W.R. 289, 57 Sask. R. 67, 27 E.T.R. 152, 8 R.F.L. (3d) 370, 5 A.C.W.S. (3d) 323 (C.A.); Épiciers Unis Métro-Richelieu Inc., division "Éconogros" v. Collin, [2004] 3 S.C.R. 257, [2004] S.C.J. No. 55, 2004 SCC 59, 244 D.L.R. (4th) 1, 326 N.R. 89, J.E. 2004-1885, 133 A.C.W.S. (3d) 1036; Friedmann Equity Developments Inc. v. Final Note Ltd., [2000] 1 S.C.R. 842, [2000] S.C.J. No. 37, 2000 SCC 34, 188 D.L.R. (4th) 269, 255 N.R. 80, J.E. 2000-1445, 134 O.A.C. 280, 7 B.L.R. (3d) 153, 34 R.P.R. (3d) 159, 98 A.C.W.S. (3d) 85; Ha v. New South Wales (1997), 189 C.L.R. 465 (Aus. H.C.A.); Kingsway General Insurance Co. v. Ontario (Minister of Finance) (2007), 84 O.R. (3d) 507, [2007] O.J. No. 290, 2007 ONCA 62, 277 D.L.R. (4th) 711, 45 C.C.L.I. (4th) 32, [2007] I.L.R. I-4580, 42 M.V.R. (5th) 179, 154 A.C.W.S. (3d) 1192; Kleinwort Benson Ltd. v. Lincoln City Council, [1999] 2 A.C. 349, [1998] 4 All E.R. 513, [1998] 3 W.L.R. 1095, [1999] L.G.R. 1 (H.L.); National Westminster Bank plc v. Spectrum Plus Ltd., [2005] UKHL 41, [2005] 2 A.C. 680 (H.L.); Ontario (Minister of Consumer and Commercial Relations) v. Employers Mutual Liability Insurance Co. of Wisconsin (1980), 1980 1798 (ON CA), 28 O.R. (2d) 397, [1980] O.J. No. 3584, 110 D.L.R. (3d) 408, [1980] I.L.R. Â1-1211 at 783, 2 A.C.W.S. (2d) 163 (C.A.); Ontario (Minister of Finance) v. Allstate Insurance Co., [2001] O.J. No. 1181, 14 M.V.R. (4th) 72, 104 A.C.W.S. (3d) 409 (S.C.J.); Ontario (Minister of Finance) v. ING Halifax, 2003 90080 (ON SC), [2003] O.J. No. 6036, 15 C.C.L.I. (4th) 281 (S.C.J.) Statutes referred to Arbitration Act, 1991, S.O. 1991, c. 17 Insurance Act, R.S.O. 1990, c. I.8, ss. 20 [as am.], 121(1)10.4 [as am.], 268 [as am.], (1), (2) [as am.], (3) [as am.], 275 [as am.] Rules and regulations referred to Disputes Between Insurers, O. Reg. 283/95, ss. 2, 3, (1), 7, (1) Statutory Accidents Benefits Schedule -- Accidents on or after November 1, 1996, O. Reg. 403/96 Authorities referred to Duggan, Anthony J., and Kent Roach, "A Further Note on Final Note: The Scope and Limits of Judicial Law Making" (2002), 36 Can. Bus. L.J. 115 Hall, Geoff R., "Preserving the Clavicle in the Cat: Stunted Reform of Common Law Rules in the Supreme Court of Canada" (2002), 36 Can. Bus. L.J. 89 [page222] Sullivan, Ruth, Sullivan on the Construction of Statutes, 5th ed. (Markham, Ont.: LexisNexis Butterworths, 2008)
Jamie R. Pollack and Amanda M. Lennox, for appellant. John Friendly, for respondent.
The judgment of the court was delivered by
DOHERTY J.A.: --
I. Overview
[1] Section 268(1) of the Insurance Act, R.S.O. 1990, c. I.8 declares that all motor vehicle liability policies are deemed to provide for the statutory accident benefits (the "benefits") set out in the Statutory Accident Benefits Schedule -- Accidents on or after November 1, 1996, O. Reg. 403/96. Section 268(2)1 of the Act sets out a series of rules for determining against which insurer an injured occupant of a vehicle has recourse for the payment of the benefits. Section 268(3) provides that an insurer against whom an occupant has recourse is liable to pay those benefits. Section 268(2)1(iv) makes the Motor Vehicle Accident Claims Fund (the "Fund") responsible for payment of the benefits if none of the insurers listed in s. 268(2)1(i), (ii) or (iii) are liable to pay the benefits.
[2] Ontario Reg. 283/95, entitled "Disputes Between Insurers" (the "Dispute Regulation"), directs that disputes as to which insurer is required to pay the benefits under s. 268 shall be settled in accordance with the Regulation. The Dispute Regulation does two things. First, it requires that the first insurer to receive a completed application for benefits pay those benefits pending resolution of any dispute among the insurers as to the obligation to pay the benefits: s. 2. Second, the Dispute Regulation provides for the resolution by way of arbitration under the Arbitration Act, 1991, S.O. 1991, c. 17 of disputes among insurers over which of those insurers bears the ultimate burden of paying the benefits: s. 7(1).
[3] A dispute arose between the appellant, Progressive Casualty Insurance Company of Canada ("Progressive"), and the Fund over who bore the responsibility for paying benefits to an occupant of a motor vehicle who had been seriously injured in an accident. The Fund paid the benefits pending resolution of that dispute. The Fund eventually sued Progressive, seeking a [page223] declaration that Progressive was liable to pay the benefits and claiming restitution from Progressive in the amount of the benefits the Fund had paid to the occupant.
[4] There were three issues at trial: -- Did the Superior Court have jurisdiction to entertain the Fund's claim for restitution and a declaration, or was the Fund required to proceed by arbitration under the Dispute Regulation? -- Was the Fund bound by the notice requirements in the Dispute Regulation and, if so, had it complied with those requirements? -- Was the Progressive automobile policy in effect on the date of the accident?
[5] The trial judge held: -- The Fund could sue Progressive for a declaration and restitution, and was not obliged to proceed by way of arbitration under the Dispute Regulation. -- The Fund was not bound by the notice requirements in the Dispute Regulation and, in any event, had substantially complied with those requirements. Furthermore, Progressive was not prejudiced by any non-compliance. Finally, Progressive could not rely on any non-compliance with the Dispute Regulation by the Fund because Progressive had improperly deflected the claim to the Fund when it should have been paying the benefits to the occupant of the vehicle pending resolution of the dispute. -- Progressive's purported cancellation of its policy was ineffective. The policyholder had sufficient funds in his bank account to pay the premium had Progressive withdrawn the premium on the day provided for in the contract of insurance. Unfortunately, Progressive delayed the withdrawal by one day, by which time there were insufficient funds in the account.
[6] The trial judge concluded that as Progressive's policy was in place at the time of the accident, it was obliged under the terms of s. 268(2) of the Act to pay the benefits due to the occupant. The trial judge granted a declaration that Progressive was responsible for those payments and held that the Fund was entitled to recover from Progressive the amounts that the Fund had paid by way of benefits to the occupant. That recovery was [page224] subject to a determination of whether the payments made by the Fund were reasonable. The Fund and Progressive had agreed prior to trial that the issue of the reasonableness of the payments would be referred to arbitration.
[7] On appeal, Progressive submits that the Fund was obligated to proceed by way of arbitration under the Dispute Regulation rather than by way of a restitution claim in the Superior Court. Progressive further submits that even if an action for restitution could be brought in the Superior Court, the notice provisions in the Dispute Regulation applied, and the Fund had failed to comply with those provisions. Progressive submits that the trial judge erred in excusing the Fund from compliance with the notice provisions and erred in holding that Progressive, and not the Fund, should have been paying the benefits pending resolution of the dispute. Progressive seeks an order setting aside the trial judgment and declaring that, by virtue of its non-compliance with the Dispute Regulation, the Fund is barred from proceeding against Progressive for recovery of the amount paid by way of benefits.
[8] Progressive does not appeal from the trial judge's finding that the Progressive policy had not been cancelled as of the day of the accident and was in full force and effect as of that date. [^1] Under the scheme established in s. 268(2) of the Act, Progressive, as the insurer of the automobile in which the occupant was riding, was responsible for the payment of benefits to the occupant in priority over the Fund. As Progressive no longer contends that its policy was not in place, it cannot claim that the Fund was responsible for paying the benefits under s. 268. Rather, it claims that because the Fund took its case to the wrong forum, and failed to comply with the notice requirements of the Dispute Regulation, it cannot recover from Progressive the benefits it has paid.
II. Facts
[9] Mr. Cuong Ngo was seriously injured when a vehicle in which he was a passenger left the road and struck a tree. The accident happened on August 11, 1997. Progressive had issued an automobile liability policy to the driver of the automobile in which Mr. Ngo was a passenger. That policy was effective [page225] April 22, 1997. Progressive had purported to cancel that policy for non-payment of the premiums effective June 18, 1997.
[10] A claims adjuster from Progressive attended at the scene of the accident and investigated. Three days later, Progressive advised Mr. Ngo's social worker that its policy issued to the driver of the automobile had been cancelled prior to the accident. The social worker contacted the Fund about applying for benefits on behalf of Mr. Ngo. The Fund contacted Mr. Ngo's lawyer to discuss making a proper application for benefits and the possibility that the benefits could be payable through the driver's insurer, Progressive. The Fund was aware that Progressive was taking the position that its policy had been cancelled. Mr. Ngo, who had been seriously injured, had immediate and ongoing medical needs. Some of these needs were covered by the benefits provided for under the Act and regulations. The Fund agreed to pay these benefits to Mr. Ngo on a without prejudice basis while making further inquiries as to the Fund's ultimate responsibility for the payment of those benefits.
[11] On August 26, 1997, about two weeks after the accident, Progressive sent a letter to its insured, the driver of the motor vehicle, with a copy to Mr. Ngo, advising that Progressive's policy had been cancelled prior to the accident and that there was no coverage at the time of the accident. In early September, the Fund wrote Mr. Ngo's counsel indicating that it appeared that there was insurance through the Progressive policy. The Fund continued its attempts to determine whether Progressive was on coverage.
[12] On September 19, 1997, Mr. Ngo's lawyer sent a completed application for benefits on Mr. Ngo's behalf to both the Fund and Progressive. By chance, the lawyer faxed the completed application first to the Fund and moments later to Progressive.
[13] In October and November 1997, the Fund continued to request more information from Progressive concerning the cancellation of the driver's policy. Although the Fund took no firm position as to Progressive's responsibility to pay Mr. Ngo's benefits, it did, on October 9, 1997, advise Progressive that the Fund's position was that Progressive was responsible for the payment of benefits due to another occupant of the same vehicle. That occupant had been killed in the accident.
[14] On January 16, 1998, the Fund wrote Progressive seeking confirmation that Progressive would take over payment of the benefits on the basis that the Progressive policy was in place at the time of the accident. Discussions continued intermittently among the Fund, Progressive and Mr. Ngo's lawyer. Progressive [page226] held to its position that the driver's policy had been cancelled prior to the accident and that Progressive was not responsible for paying Mr. Ngo's benefits. The Fund continued to pay the benefits.
[15] The Fund commenced this action in August 2002. In the statement of claim, the Fund contended that Progressive's purported cancellation of the driver's policy was ineffective. The Fund alleged that the benefits it had paid to or on behalf of Mr. Ngo ($776,724.51) should properly be paid by Progressive as the insurer of the automobile in which Mr. Ngo was an occupant at the time of the accident.
[16] In its statement of defence, Progressive argued that it had properly cancelled the policy with the driver and was, therefore, not responsible for the payment of any benefits to Mr. Ngo. Progressive argued that under the Dispute Regulation, the Fund was obliged to pay Mr. Ngo's benefits pending resolution of the dispute. Progressive further alleged that the Fund had failed to comply with the notice provisions in the Dispute Regulation and failed to commence arbitration proceedings as required under the Dispute Regulation, and was, therefore, estopped from advancing the restitution claims set out in the Fund's statement of claim.
III. Issues
[17] The issues relevant to this appeal are the following: (1) Does the Superior Court have jurisdiction over the Fund's claim for restitution and declaratory relief? (2) Is the Fund bound by the notice requirements in the Dispute Regulation? (3) Should this court's decision in Allstate Insurance Co. of Canada v. Motor Vehicle Accident Claims Fund (2007), 2007 ONCA 61, 84 O.R. (3d) 401, [2007] O.J. No. 292 (C.A.) be applied retrospectively to this dispute?
IV. Analysis
1. Does the Superior Court have jurisdiction over the Fund's claim for restitution and declaratory relief?
[18] But for the potential impact of the Dispute Regulation, the Superior Court would clearly have jurisdiction to entertain the Fund's claim for restitution and declaratory relief: see Ontario (Minister of Consumer and Commercial Relations) v. Employers Mutual Liability Insurance Co. of Wisconsin (1980), 1980 1798 (ON CA), 28 O.R. (2d) 397, [1980] O.J. No. 3584 (C.A.). [page227] Progressive contends that the mandatory language of the Dispute Regulation signals the legislature's intent to move jurisdiction over s. 268 priority disputes exclusively to an arbitrator. Progressive submits that the Fund is an insurer for the purpose of s. 268 and is subject to the mandatory arbitration procedure described in the Regulation.
[19] The Dispute Regulation came into force on May 27, 1995. The full Regulation is attached as an appendix to these reasons. The provisions of the Regulation material to the jurisdictional issue are set out below:
All disputes as to which insurer is required to pay benefits under section 268 of the Act shall be settled in accordance with this Regulation.
The first insurer that receives a completed application for benefits is responsible for paying benefits to an insured person pending the resolution of any dispute as to which insurer is required to pay benefits under section 268 of the Act. . . . . .
7(1) If the insurers cannot agree as to who is required to pay benefits . . . the dispute shall be resolved through an arbitration under the Arbitration Act, 1991.
(2) The insurer paying benefits under section 2, any other insurer against whom obligations to pay benefits is claimed . . . may initiate the arbitration but no arbitration may be initiated after one year from the time the insurer paying benefits under section 2, first gives notice under section 3.
8(1) Except as provided in this Regulation, the Arbitration Act, 1991 applies to an arbitration under this Regulation.
[20] The Dispute Regulation does not define the word "insurer". Until the 2007 decision of this court in Allstate holding that the Fund is an insurer, the Fund had always taken the position that it was not an insurer for the purpose of the Dispute Regulation but could, if it saw fit, avail itself of the arbitration process set out in the Dispute Regulation. Consequently, when the Fund disputed its obligation to pay s. 268 benefits, it sometimes proceeded by way of arbitration and sometimes made a restitution claim in the Superior Court. Various trial level decisions supported the Fund's position that it was not an insurer and could, if it chose to do so, proceed by way of a restitution claim: see, for example, Ontario (Minister of Finance) v. Allstate Insurance Co., [2001] O.J. No. 1181, 14 M.V.R. (4th) 72 (S.C.J.); Ontario (Minister of Finance) v. ING Halifax, 2003 90080 (ON SC), [2003] O.J. No. 6036, 15 C.C.L.I. (4th) 281 (S.C.J.).
[21] I cannot agree that the Fund relied on the jurisprudence in proceeding as it did in 1997. This court did not pronounce on whether the Fund was an insurer for the purpose of the Dispute [page228] Regulation until 2004. Nor, in my view, is there anything to suggest that the Fund relied on trial decisions in making the decisions it did in 1997 and 2002. It is, however, fair to say that those responsible for making the necessary decisions on behalf of the Fund reasonably interpreted the word "insurer" in the Dispute Regulation as not including the Fund: see Ontario Insurance Commission Bulletin No. A-05/95, May 29, 1995.
[22] In December 2004, in Kalinkine v. Ontario (Superintendent of Financial Services), 2004 48058 (ON CA), [2004] O.J. No. 5138, 17 C.C.L.I. (4th) 2 (C.A.), decided some two and a half years after this lawsuit was commenced, this court addressed the argument that the Fund was an insurer for the purpose of the Dispute Regulation, was obliged to proceed by way of arbitration under that Regulation and could not proceed by way of a restitution claim in the Superior Court. In rejecting that argument, the court held that the Fund was not an insurer for the purpose of the Dispute Regulation. The court also held, presumably on the assumption that the process set out in the Dispute Regulation was available to the Fund, that the Dispute Regulation did not remove the Fund's right to proceed by way of an action for restitution "in a proper case".
[23] Based on Kalinkine, the Superior Court's jurisdiction to adjudicate the Fund's claim for a declaration and restitution would be beyond doubt. Unfortunately for the Fund, Kalinkine had a short shelf-life and this matter did not get to trial while Kalinkine was still the law in Ontario.
[24] Allstate [^2] expressly overruled Kalinkine and held that the Fund was an insurer for the purpose of the Dispute Regulation. In Allstate, the Fund had chosen to proceed by way of arbitration. The arbitrator ruled in the Fund's favour. Allstate appealed, relying on Kalinkine. The Superior Court judge reluctantly allowed the appeal and held that in light of Kalinkine, the arbitrator did not have jurisdiction to consider the Fund's claim. Laskin J.A., speaking for a five-person court, began by rejecting the Fund's argument that it could, at its option, either arbitrate under the Dispute Regulation or sue for restitution. He said, at para. 34:
[E]ither the Fund is an insurer under the regulation and bound by all its provisions, or it is not an insurer and cannot take advantage of any of the provisions of the regulation. If it is an insurer, it must arbitrate, not [page229] litigate, any dispute. If it is not an insurer, absent any agreement to arbitrate, it must litigate disputes with licensed insurers over the payment of accident benefits. (Emphasis added)
[25] After a cogent analysis of the context and the language of the Dispute Regulation, Laskin J.A. concluded, at para. 47:
The Fund is an insurer under regulation 283 and, where it disputes its obligation to pay benefits, it must resolve that dispute, not in the court, but in accordance with the arbitration process under the regulation. (Emphasis added)
[26] If the reasoning in Allstate stopped with the unequivocal pronouncement quoted above, Progressive's argument that the Superior Court had no jurisdiction would carry the day. However, my colleague, Laskin J.A., went on, at para. 48, to indicate:
In Kalinkine, this court said that regulation 283 did not preclude the Fund from seeking restitution in the courts "in a proper case". I agree. Kalinkine itself was a proper case because there was nothing to arbitrate. Whether there are any other "proper cases" need not be decided on these appeals. (Emphasis added)
[27] Counsel for Progressive does not claim that the Dispute Regulation completely removes the jurisdiction of the court in disputes over the liability to pay s. 268 benefits. Counsel accepts the existence of the "proper case" exception to the jurisdiction of the arbitrator identified in Allstate. Those cases which have interpreted other statutory provisions as entirely ousting the jurisdiction of the court and granting exclusive jurisdiction to an arbitrator have no application here.
[28] Progressive's jurisdictional argument turns on whether the circumstances of this case bring it within the "proper case" exception so as to permit the Fund to proceed by way of a restitution claim. I approach this submission by recognizing that while Allstate borrows the phrase "proper case" from Kalinkine, the phrase is used differently in Allstate than it was in Kalinkine. In Kalinkine, the court found that the Fund was not bound by the Dispute Regulation. The phrase "proper case" in that context referred to any case in which a common-law action for restitution could be brought by the Fund. In Allstate, having found that the Fund was bound by the Dispute Regulation and was required to arbitrate disputes, the court then recognized that an action for restitution was appropriate in the "proper case". The phrase is used in Allstate to carve out an exception to the generally applicable requirement that s. 268 disputes must be arbitrated in accordance with the Dispute Regulation. [page230]
[29] There are strong indications that the "proper case" exception should be narrowly construed. In Allstate, at para. 35, the court, without attempting an exhaustive definition of the "proper case" exception, acknowledged that only the "rare case" would fall within that exception. The Dispute Regulation is made pursuant to s. 121(1)10.4 of the Act and is sheltered under the strong privative language of s. 20 of the Act. The clear language of the Dispute Regulation itself speaks to a strong preference for dispute resolution through the process established by that Regulation. The "proper case" exception must also be carefully confined to avoid defeating the obvious purpose of the Regulation which is to bring about a timely, cost-efficient resolution of s. 268 disputes by arbitrators experienced in such matters: Allstate, at para. 39.
[30] As narrow as the "proper case" exception is, however, it is an exception to the general rule that the Dispute Regulation governs s. 268 disputes among insurers, including the Fund. As it is an exception to the rule that the Dispute Regulation applies, the "proper case" exception must reach cases that are otherwise within the ambit of the Dispute Regulation. There is no need to speak of a "proper case" exception permitting restitution actions in cases that are not subject to the Dispute Regulation.
[31] Counsel for Progressive argues for a very narrow reading of the "proper case" exception. He submits that cases like Kalinkine, where the insurer did not dispute its obligation under s. 268 but only disputed the forum in which the claim was brought, constitute the only kind of "proper case" in which it is appropriate to proceed by way of a restitution claim. For reasons I will explain, I do not read the "proper case" exception that narrowly. However, even if I did, it is not clear to me that Progressive would succeed on this appeal. There is a strong argument that Progressive's position on this appeal is exactly the same as the position of the insurer in Kalinkine.
[32] As I read the trial judgment in Kalinkine, the insurer did not concede at trial its obligation to pay the benefits under s. 268 of the Act. The insurer raised factual issues (e.g., the identity of the driver) that were material to its obligation to pay those benefits. The trial judge decided those factual issues against the insurer. When the matter came to this court, the insurer conceded its primary responsibility to pay the s. 268 benefits and argued that the Fund could not recover the benefits the Fund had paid because the Fund failed to proceed by way of arbitration as it was required to do. In Allstate, Laskin J.A., at para. 35, relied on the concession made on appeal when he referred to [page231] Kalinkine as a case "where there is no dispute to be arbitrated" and, therefore, a "proper case" to sue for restitution.
[33] Progressive argued at trial that it did not have any responsibility under s. 268 to pay the benefits because its policy had been cancelled before the accident. However, on appeal, Progressive, just like the insurer in Kalinkine, has abandoned the argument that it was not obliged to pay the benefits. Having chosen not to dispute the trial judge's finding that the Progressive policy was in force at the time of the accident, Progressive has effectively admitted that under the s. 268 scheme, its obligation to pay the benefits to the injured occupant of the automobile trumps any obligation the Fund might have to pay benefits under that section. Given the position now taken by Progressive, it could be said, just as in Kalinkine, that the dispute is no longer over which insurer is obliged to pay the benefits under s. 268, but is instead a dispute over the propriety of the Fund's choice of forum in which to assert its claim, and the Fund's failure to comply with the procedural requirements of the Dispute Regulation.
[34] I am tempted to dispose of Progressive's claim on the basis that it is indistinguishable from Kalinkine. There is, however, a problem in doing so. The finding that Progressive's policy was in force and that it was, therefore, responsible for the benefits under s. 268 was made in a proceeding in which Progressive alleges the trial judge had no jurisdiction. Even though Progressive does not take issue with that finding on appeal, I do not think that Progressive's jurisdictional argument can be defeated by relying on a finding of fact made in the very proceeding which is the subject of the jurisdictional challenge.
[35] I move now to an attempt to describe the reach of the "proper case" exception. It is impossible to provide an exhaustive description of the cases that could fall within the exception. No formulation could contemplate the variety and combination of circumstances that may arise for consideration. As the phrase "proper case" suggests, a measure of judicial discretion must, of necessity, be involved in determining whether a particular case falls within that category. I will, however, identify those criteria that should guide the exercise of that discretion.
[36] In drawing the boundaries of the "proper case" exception, it is appropriate to have regard to the purpose of s. 268 of the Act and the Dispute Regulation, the nature of the disputes involved and the relationship of the parties involved in those disputes.
[37] The purpose of s. 268 and the Dispute Regulation is twofold. They are intended to ensure that benefits are paid expeditiously to those who need and are entitled to receive them. At [page232] the same time, these provisions seek to ensure that the ultimate cost of the benefits will be distributed among insurers and the Fund according to the priorities fixed by s. 268. Those priorities make it clear that the Fund is the payor of last resort. The process set out in the Dispute Regulation is designed to achieve this purpose by facilitating the expeditious imposition of the burden of the benefits on the insurer who, according to the priority system set up in s. 268, should bear that burden.
[38] The Dispute Regulation targets a very specific kind of dispute that arises where insurers or the Fund have competing views as to who should bear the responsibility of paying those benefits. The injured person's entitlement to the benefits is not in issue in these disputes. The insurers and the Fund, the usual participants in a s. 268 dispute, are members of a small community of well-informed, sophisticated entities. These entities routinely interact on a variety of automobile insurance matters and regularly address the kinds of problems that give rise to s. 268 disputes. When a s. 268 dispute arises, the insurers and the Fund are not parties engaged in a one-off piece of litigation. Rather, they are stakeholders in the ongoing operation of the multi-million dollar automobile insurance industry. That industry is carefully regulated. Insurers and the Fund play a significant and ongoing role in formulating those regulations. The interest of the Fund and the insurers goes well beyond success or failure in a specific dispute. Their interest is in maintaining the ongoing effective operation of the regulatory scheme which they have played a significant role in organizing. That scheme includes the resolution of priority disputes under s. 268. As described above, the ultimate goal of s. 268 and the Dispute Regulation is to distribute the cost of paying the benefits among insurers and the Fund according to the priorities established in s. 268 and elsewhere in the Act: see, for example, s. 275. The Fund and the insurers have a common interest in seeing that goal achieved.
[39] Having regard to the purpose of the provisions, the nature of s. 268 disputes and the ongoing relationship of the parties to those disputes, the "proper case" exception exists for those cases where the merits of the dispute cannot be reached through the Dispute Regulation and there is no prejudice caused to the defending party by addressing those merits in the context of a restitution claim. Without laying down any hard and fast rules, I suggest that the answer to the two questions posed below will assist in identifying those cases that constitute a "proper case" to permit a party to proceed by way of a restitution claim: [page233] -- Were the ultimate parties to the s. 268 dispute engaged in a dispute over payment of benefits within the time limits set out in s. 3 of the Dispute Regulation and did the parties, either expressly or by implication from their conduct, choose not to proceed under the Dispute Regulation? -- Was arbitration in accordance with the process set out in the Dispute Regulation no longer possible when objection was first taken to a party proceeding by way of a restitution claim?
[40] If the answer to both questions is yes, a common-law action for restitution provides the only way that the dispute can be resolved according to the priority scheme established in the Act. The choice is between permitting a restitution action in which the merits of the claim can be addressed and potentially sanctioning the imposition of the burden of the s. 268 benefits on a party other than the party who should bear that burden under the terms of the Act. If the first choice can be made without irreparable prejudice to the defending party, the interests of justice warrant treating the case as an exception to the general rule requiring arbitration pursuant to the Dispute Regulation.
[41] I would add this caveat. The above analysis proceeds on the premise established in Allstate that the Dispute Regulation does not give the arbitrator exclusive jurisdiction. The "proper case" exception acknowledges the continued jurisdiction of the court, albeit a jurisdiction that is to be exercised in limited circumstances. Consequently, nothing said in these reasons is intended to suggest that parties can, by their mutual consent, give a court jurisdiction it does not have. Nor is anything in these reasons intended to address the nature and scope of the jurisdiction granted to arbitrators and others in other parts of the Act or in other statutes. My analysis of the reach of the "proper case" exception depends very much on the nature of the interests at stake in s. 268 disputes.
[42] I will now apply these criteria to the present appeal. The Fund and Progressive both received completed applications for benefits from the injured occupant. Both knew early on that they disagreed as to which was obliged to pay those benefits. Under s. 3(1) of the Dispute Regulation, either Progressive or the Fund, or both, could have served a written notice of dispute on the other party. [^3] That written notice triggers the arbitration [page234] process set out in the Dispute Regulation. Without that notice, there will be no arbitration of the dispute under the Dispute Regulation.
[43] Instead of triggering the arbitration process, the Fund and Progressive chose to continue informal discussions over responsibility for payment of the benefits. These discussions ran well beyond 90 days after Progressive and the Fund had received the completed applications for benefits from the occupant. Under s. 3 of the Dispute Regulation, Progressive and the Fund had 90 days to initiate the arbitration process by serving their notice of their dispute.
[44] The Fund and Progressive were well aware of the nature of their dispute and their respective positions within a short time after the accident. Neither suggests that it was unaware of the Dispute Regulation and the steps that could have been taken to trigger the arbitration process had it chosen to do so. By their conduct, Progressive and the Fund effectively chose not to access the arbitration process to resolve their dispute. When, many months later, it apparently became clear that the dispute would not be resolved, compliance with the notice provisions of the Dispute Regulation was no longer possible. A lawsuit for restitution and declaratory relief provided the only means by which the dispute could be determined on its merits and the obligation to pay the benefits placed on the party who, under the terms of s. 268 of the Act, should bear that burden. Absent irreparable prejudice to Progressive, I see no interest that would be served by closing the courtroom door on the Fund in these circumstances.
[45] There is no irreparable prejudice to Progressive in allowing the Fund to proceed by way of a restitution claim. [^4] Progressive's ability to defend against the restitution claim on the basis that its policy was not in place at the time of the accident is not compromised by allowing the Fund to proceed in Superior Court rather than by way of arbitration. The only advantage Progressive loses is the ability to rely on the Fund's failure to comply with the procedures set out in the Dispute Regulation, particularly the notice requirements in s. 3. I would not classify this [page235] as prejudice in the relevant sense. Indeed, Progressive itself declined to follow those procedures to resolve the dispute between it and the Fund.
[46] In summary, a common-law action for restitution provided the only means by which the merits of the dispute could be settled. Allowing the dispute to be settled in that forum did not prejudice Progressive. This was a "proper case" to allow the Fund to proceed by way of a restitution claim.
2. Is the Fund bound by the notice requirements in the dispute regulation?
[47] The trial judge, after concluding that this was a "proper case" to allow the Fund to proceed by way of a restitution claim, moved on to consider the procedural requirements of the Dispute Regulation. The trial judge assumed, subject to a fairness argument based on the change in the law brought about by Allstate, that the procedural requirements in the Dispute Regulation applied to a restitution claim brought by way of action in the Superior Court. I do not think that the procedural requirements in the Dispute Regulation have any application to a restitution claim.
[48] The Dispute Regulation, and particularly the notice requirements in ss. 3 and 7, applies to disputes conducted under the Regulation. Section 3 triggers the dispute process described in the Dispute Regulation by providing for a notice of dispute to be filed within the 90-day time limit described in s. 3. Section 7 speaks of commencing an arbitration within a year of giving notice under s. 3. The timeline described in these sections assumes that the dispute will be determined under the arbitration process set out in the Dispute Regulation. In my view, the timeline fixed by the Dispute Regulation does not control a restitution claim brought in the Superior Court. To interpret the Regulation otherwise would be to read it as imposing a limitation period on common-law restitution claims brought in respect of s. 268 benefits disputes.
[49] Once the trial judge decided, correctly in my view, that this was an appropriate case in which to allow the Fund to proceed by way of a restitution claim, the procedural provisions in the Dispute Regulation, including the notice requirements, became irrelevant. The Fund's action was subject to the procedures and time limits applicable to claims for restitution brought by way of statement of claim in the Superior Court. There is no suggestion that the Fund failed to comply with any of those requirements. [page236]
3. Should Allstate apply retrospectively to this dispute?
[50] The reasons set out above are sufficient to dismiss the appeal and affirm the result reached at trial. I will, however, address one further aspect of the trial judge's reasons. He held that the ratio in Allstate should not apply to this case. He reasoned that as Allstate had changed the law and made the Fund subject to the Dispute Regulation, that change should not be applied to cases where the relevant events occurred before the decision in Allstate. In other words, the trial judge held that the ruling in Allstate should have a prospective effect only. He said, at para. 43:
Progressive submitted that in Allstate the Court of Appeal intended for its decision to apply retroactively to other cases currently before the courts. I do not think the matter is so clear. Courts usually proceed cautiously when faced with an argument that a statute has a retroactive effect -- they apply the presumption that a legislature does not intend legislation to apply retroactively unless express provision is made for such an effect. Similar caution, in my opinion, needs to be taken when assessing the impact on outstanding cases of an appellate decision that has reversed the prevailing interpretation about procedural provisions in a statute or regulation. (Emphasis added)
[51] The trial judge went on, at para. 48, to observe that the Fund had relied on the law "as it was understood at that time [1997]" and that it would be unfair to subject the Fund to the requirements "newly set down" in Allstate in 2007. The trial judge ultimately concluded, at para. 50, that absent an express direction in Allstate making the decision applicable to cases that arose before Allstate was decided, the trial judge would not apply the ratio of Allstate to this case.
[52] With respect to the trial judge, whose careful reasons I have relied on in many respects, his proposed prospective application of Allstate reveals several errors.
[53] First, the application of the "new" law as pronounced in Allstate to this case is a retrospective, and not a retroactive, application of the judgment. It would involve applying the new rule announced in Allstate to a case that, although involving events that occurred in 1997 and 1998, arose for judgment after Allstate was decided. It would not involve undoing decided cases or changing the law as of some date prior to the release of Allstate -- that would be a retroactive application of the law: see Ruth Sullivan, Sullivan on the Construction of Statutes, 5th ed. (Markham, Ont.: LexisNexis Butterworths, 2008), at pp. 670-73; Épiciers Unis Métro- Richelieu Inc., division "Éconogros" v. Collin, 2004 SCC 59, [2004] 3 S.C.R. 257, [2004] S.C.J. No. 55, at para. 46. [page237]
[54] Second, while new legislation is presumptively prospective only, judge-made law is by its very nature inherently retrospective in that it attributes legal consequences as announced in the particular case to the prior events that are at issue in the litigation: see, for example, Cousson v. Quan (2007), 2007 ONCA 771, 87 O.R. (3d) 241, [2007] O.J. No. 4348 (C.A.), at paras. 145-49, leave to appeal to S.C.C. granted [2008] S.C.C.A. No. 11; National Westminster Bank plc v. Spectrum Plus Ltd., [2005] UKHL 41, [2005] 2 A.C. 680 (H.L.), per Lord Nicholls, at paras. 4-7.
[55] Third, while the Supreme Court of Canada has recognized various forms of prospective lawmaking in constitutional cases such as Canada (Attorney General) v. Hislop, 2007 SCC 10, [2007] 1 S.C.R. 429, [2007] S.C.J. No. 10, the case relied on by the trial judge, that court, as recently as 2000, rejected prospective judicial lawmaking in the private law context. In Friedmann Equity Developments Inc. v. Final Note Ltd., 2000 SCC 34, [2000] 1 S.C.R. 842, [2000] S.C.J. No. 37, the appellants argued that the court should abolish the common-law sealed contract rule. The respondents argued that the rule should be maintained in part because it had been relied on by persons in the ordering of their affairs and abolition of the rule would prejudice persons who had relied on it. Bastarache J., for a unanimous five-person court, accepted the reliance argument, declaring, at para. 51:
The abolition of the sealed contract rule would have the unfair result of creating uncertainty for those who had relied on the rule in executing their contracts. To avoid uncertainty and any unfairness to those parties who have structured their commercial relationships in accordance with the sealed contract rule, any change to the law should operate prospectively. Only the Legislature has the power to create a prospective change in the law. (Emphasis added)
[56] Bastarache J. implicitly rejected prospective overruling as a means of avoiding the unfairness and uncertainty that would be created by the judicial abolition of the common-law sealed contract rule. This aspect of the decision in Friedmann Equity, although the subject of criticism, [^5] is consistent with a strong body of judicial authority that has rejected prospective judicial [page238] lawmaking as inimical to the role of the judiciary: see, for example, Edward v. Edward Estate, 1987 982 (SK CA), [1987] S.J. No. 423, 39 D.L.R. (4th) 654 (C.A.), at pp. 661-64 D.L.R.; Kleinwort Benson Ltd. v. Lincoln City Council, [1999] 2 A.C. 349, [1998] 4 All E.R. 513 (H.L.), per Lord Goff, at pp. 378-79, 381 A.C.; Ha v. New South Wales (1997), 189 C.L.R. 465 (Aus. H.C.A.), at pp. 503-504, 515 C.L.R.
[57] Fourth, even those who advocate for prospective judicial lawmaking see it as very much the exception to the general rule that judge-made law is retrospective. The argument for prospective overruling is made all the more difficult where the issue is one of statutory interpretation and not common law: National Westminster Bank plc, per Lord Nicholls, at paras. 38-41, per Lord Scott, at para. 125.
[58] If available at all, the possibility of a prospective overruling of a prior decision should be considered only if the party seeking that ruling demonstrates a clear and detrimental reliance on the prior authority. The Fund made the decisions relevant to this issue in 1997 and 1998. There is nothing in the record to suggest that the Fund relied on any judicial decisions in deciding not to comply with the Dispute Regulation. Clearly, the Fund cannot argue that it relied on Kalinkine, decided some six years later.
[59] The Fund proceeded as it did because it did not regard itself as an "insurer" for the purpose of the Dispute Regulation. This was a reasonable, although ultimately wrong, interpretation of the Dispute Regulation. I do not think that an erroneous, albeit reasonable, interpretation of a statute or a regulation justifies giving a judicial decision prospective effect only. Most debates about statutory interpretation that reach an appellate court pit two reasonable but conflicting interpretations against each other. The unsuccessful party could almost always argue that it proceeded on a reasonable interpretation of the statute and should, therefore, despite losing the statutory interpretation battle, not suffer the consequences of an adverse ruling. To accept this argument would be to fundamentally alter the nature of judging in the common law.
[60] Finally, the trial judge erred in concluding that it was for him to determine the temporal scope of the new rule pronounced in Allstate. If an appellate ruling is to have something less than its normal retrospective impact, it is for the appellate court making that ruling to specifically announce the limitation. Absent the placing of any limit on the new rule by the appellate court announcing that rule, trial judges must apply that rule to subsequent cases. [page239]
V. Disposition
[61] I would dismiss the appeal. The parties agreed that the successful party on appeal should have costs in the amount of $7,500. I would award costs to the Fund in that amount, inclusive of GST and disbursements.
Appeal dismissed.
APPENDIX "A"
O. Reg. 283/95 Disputes Between Insurers
All disputes as to which insurer is required to pay benefits under section 268 of the Act shall be settled in accordance with this Regulation.
The first insurer that receives a completed application for benefits is responsible for paying benefits to an insured person pending the resolution of any dispute as to which insurer is required to pay benefits under section 268 of the Act.
3(1) No insurer may dispute its obligation to pay benefits under section 268 of the Act unless it gives written notice within 90 days of receipt of a completed application for benefits to every insurer who it claims is required to pay under that section.
(2) An insurer may give notice after the 90-day period if, (a) 90 days was not a sufficient period of time to make a determination that another insurer or insurers is liable under section 268 of the Act; and (b) the insurer made the reasonable investigations necessary to determine if another insurer was liable within the 90-day period.
(3) The issue of whether an insurer who has not given notice within 90 days has complied with subsection (2) shall be resolved in an arbitration under section 7.
- An insurer that gives notice under section 3 shall also give notice to the insured person using a form approved by the Superintendent.
5(1) An insured person who receives a notice under section 4 shall advise the insurer paying benefits in writing within 14 days whether he or she objects to the transfer of the claim to the insurers referred to in the notice.
(2) If the insured person does not advise the insurer within 14 days that he or she objects to the transfer of the claim, the insured person is not entitled to object to any subsequent agreement or decision to transfer the claim to the insurers referred to in the notice.
(3) An insured person who has given notice of an objection is entitled to participate as a party in any subsequent proceeding to settle the dispute and no agreement between insurers as to which insurer should pay the claim is binding unless the insured person consents to the agreement or 14 days have passed since the insured person was notified in writing of an [page240] agreement and the insured person has not initiated an arbitration under the Arbitration Act, 1991.
- The insured person shall provide the insurers with all relevant information needed to determine who is required to pay benefits under section 268 of the Act.
7(1) If the insurers cannot agree as to who is required to pay benefits or if the insured person disagrees with an agreement among insurers that an insurer other than the insurer selected by the insured person should pay the benefits, the dispute shall be resolved through an arbitration under the Arbitration Act, 1991.
(2) The insurer paying benefits under section 2, any other insurer against whom the obligation to pay benefits is claimed or the insured person who has given notice of an objection to a change in insurers under section 5 may initiate the arbitration but no arbitration may be initiated after one year from the time the insurer paying benefits under section 2 first gives notice under section 3.
8(1) Except as provided in this Regulation, the Arbitration Act, 1991 applies to an arbitration under this Regulation.
(2) The decisions of an arbitrator made under this Regulation shall be public.
9(1) Unless otherwise ordered by the arbitrator or agreed to by all the parties before the commencement of the arbitration, the costs of the arbitration for all parties, including the cost of the arbitrator, shall be paid by the unsuccessful parties to the arbitration.
(2) The costs referred to in subsection (1) shall be assessed in accordance with section 56 of the Arbitration Act, 1991.
10(1) If an insurer who receives notice under section 3 disputes its obligation to pay benefits on the basis that other insurers, excluding the insurer giving notice, have equal or higher priority under section 268 of the Act, it shall give notice to the other insurers.
(2) This Regulation applies to the other insurers given notice in the same way that it applies to the original insurer given notice under section 3.
(3) The dispute among the insurers shall be resolved in one arbitration.
- If the Motor Vehicle Accident Claims Fund receives an application for benefits, sections 4 and 5 do not apply and the insured person is not entitled to initiate or participate as a party in an arbitration under section 7.
Notes
[^1]: Progressive does raise as a ground of appeal in its Notice of Appeal (para. 9) that the trial judge "erred in law in finding that the Progressive policy was still in force as of the date of teh motor vehicle accident". However, Progressice did not pursue this issue in its factum or in oral argument.
[^2]: Kingsway General Insurance Co. v. Ontario (Minister of Finance) (2007), 2007 ONCA 62, 84 O.R. (3d) 507, [2007] O.J. No 290 (C.A.) was argued, and released, with the decision in Allstate.
[^3]: An insurer's right to trigger arbitration by serving the s. 3 notice is distinct from the obligation found in s. 2 on the insurer who first receives the application for benefits to pay those benefits pending resolution. As I read s. 3, any insurer who receives the completed application may trigger the arbitration process, although the insurer who is paying the benefits will probably be the one most likely to do so.
[^4]: There may be added costs insurred by proceeding by way of a restitution claim rather than by way of arbitration. That kind of prejudice can, however, be addressed by an appropriate order with respect to costs.
[^5]: The assertion of Bastarache J. that the court could not prospectively overrule the common-law sealed contract rule is challenged by Geoff R. Hall in "Preserving the Clavicle in the Cat: Stunted Reform of Common Law Rules in the Supreme Court of Canada" (2002) 36 Can. Bus. L.J. 89, Final Note: The Scope and Limits of Judicial Law Making" (2002), 36 Can. Bus. L.J. 115, at pp. 128-38.