Bruinsma v. Cresswell et al. [Indexed as: Bruinsma v. Cresswell]

112 O.R. (3d) 252

2012 ONSC 4440

Ontario Superior Court of Justice,

Heeney J.

August 1, 2012

Insurance -- Automobile insurance -- Uninsured automobile coverage -- Statutory condition 4(1) not applying to uninsured automobile coverage unless contract provides that it does.

Limitations -- Insurance -- Plaintiff suing uninsured driver and owner of other vehicle for damages sustained in motor vehicle accident and making claim against insurer of his own vehicle for uninsured automobile coverage -- Insurer denying that plaintiff was entitled to uninsured automobile coverage -- Motor Vehicle Accident Claims Fund bringing cross-claim in name of driver of other vehicle for declaration that plaintiff had uninsured automobile coverage -- Fund's right to seek recourse against insurer of plaintiff's vehicle not extinguished by s. 18 of Limitations Act, 2002 -- That right remaining in full force and effect pursuant to terms of Motor Vehicle Accident Claims Act -- Limitations Act, 2002, S.O. 2002, c. 24, Sch. B, s. 18 -- Motor Vehicle Accident Claims Act, R.S.O. 1990, c. M.41.

The plaintiff was injured in a motor vehicle accident. At the time, he was driving a vehicle owned by his girlfriend, which was insured by CAA. The other vehicle involved in the accident was not insured. The plaintiff sued the owner and driver of that vehicle for damages for personal injuries, and also claimed against CAA for uninsured automobile coverage. CAA defended that claim on the basis that the plaintiff was disentitled to uninsured automobile coverage because he was disqualified from driving at the time of the accident. The Motor Vehicle Accident Claims Fund (the "fund") brought a cross-claim in the name of the driver of the other vehicle for a declaration that the plaintiff had uninsured automobile [page253] coverage under CAA's policy and for judgment requiring CAA to pay any amount awarded to the plaintiff up to its policy limits. CAA brought a motion for summary judgment dismissing the plaintiff's claim for uninsured automobile coverage and dismissing the cross-claim.

Held, the motion should be dismissed.

There was no question that statutory condition 4(1) (which provides that the insured shall not drive or operate or permit any other person to operate the automobile unless the insured or other person is authorized by law to drive or operate it) was breached. However, s. 234(3) of the Insurance Act, R.S.O. 1990, c. I.8 states that statutory conditions do not apply to the uninsured automobile coverage that is provided for in s. 265, "except as otherwise provided in the contract". Section 234(3) makes no provision for statutory conditions to be incorporated into uninsured automobile coverage by way of regulation. Section 10 of Uninsured Automobile Coverage, R.R.O. 1990, Reg. 676 purports to make statutory conditions apply to the uninsured automobile coverage provided by s. 265. There is an irreconcilable conflict between s. 234(3) of the Act and s. 10 of the Regulation such that the provisions of the Act prevailed. The contract in this case stated: "If you fail to meet your responsibilities, claims under this policy . . . may be denied". It also stated: "You agree not to drive or operate the automobile, or allow anyone else to drive or operate the automobile, when not authorized by law." The contract did not clearly provide for a denial of coverage where that term was breached. The word "may" was capable of several interpretations, and the one most favourable to the insured was that it was synonymous with the word "might". Uninsured automobile coverage was available to the plaintiff.

The right of the fund to seek recourse against CAA was not extinguished by s. 18 of the Limitations Act, 2002. Those rights remained in full force and effect pursuant to the terms of the Motor Vehicle Accident Claims Act.

MOTION for summary judgment dismissing a claim for uninsured automobile coverage and a cross-claim.

Cases referred to Chambo v. Musseau (1993), 15 O.R. (3d) 305, [1993] O.J. No. 2140, 106 D.L.R. (4th) 757, 65 O.A.C. 291, 19 C.C.L.I. (2d) 66, 49 M.V.R. (2d) 111, 42 A.C.W.S. (3d) 727 (C.A.); Larkman Estate v. Briginshaw, [2007] O.J. No. 1656, 157 A.C.W.S. (3d) 71 (S.C.J.); Levesque v. Levesque, [2002] O.J. No. 4230, [2002] O.T.C. 843, 117 A.C.W.S. (3d) 880 (S.C.J.); Matt v. Crawford (2010), 2010 ONSC 3980, 103 O.R. (3d) 715, [2010] O.J. No. 3622, 97 C.C.L.I. (4th) 278 (S.C.J.), consd Other cases referred to Combined Air Mechanical Services Inc. v. Flesch (2011), 108 O.R. (3d) 1, [2011] O.J. No. 5431, 2011 ONCA 764, 286 O.A.C. 3, 97 C.C.E.L. (3d) 25, 14 C.P.C. (7th) 242, 13 R.P.R. (5th) 167, 211 A.C.W.S. (3d) 845, 93 B.L.R. (4th) 1, 10 C.L.R. (4th) 17; Friends of Oldman River Society v. Canada (Minister of Transport), [1992] 1 S.C.R. 3, [1992] S.C.J. No. 1, 88 D.L.R. (4th) 1, 132 N.R. 321, [1992] 2 W.W.R. 193, J.E. 92-180, 84 Alta. L.R. (2d) 129, 3 Admin. L.R. (2d) 1, 7 C.E.L.R. (N.S.) 1, 31 A.C.W.S. (3d) 250; Ortiz v. Dominion of Canada General Insurance Co. (2001), 52 O.R. (3d) 130, [2001] O.J. No. 27, 196 D.L.R. (4th) 732, 24 C.C.L.I. (3d) 25, [2001] I.L.R. I-3943, 10 M.V.R. (4th) 21, 102 A.C.W.S. (3d) 198 (C.A.); Shipman v. Dominion of Canada General Insurance Co. (2004), 73 O.R. (3d) 144, [2004] O.J. No. 4160, 190 O.A.C. 343, 16 C.C.L.I. (4th) 227, 5 M.V.R. (5th) 161, 134 A.C.W.S. (3d) 318 (C.A.); Van Kooten v. Doy (1980), 31 O.R. (2d) 247, [1980] O.J. No. 3852, 20 C.P.C. 32 (Div. Ct.) Statutes referred to Criminal Code, R.S.C. 1985, c. C-46 [as am.] [page254] Insurance Act, R.S.O. 1990, c. I.8, ss. 234, (3), 265 [as am.], (1) Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. [as am.], s. 18(1) Motor Vehicle Accident Claims Act, R.S.O. 1990, c. M.41, ss. 7 [as am.], (2), 8 [as am.], (2) Rules and regulations referred to Uninsured Automobile Coverage, R.R.O. 1990, Reg. 676, s. 10 Authorities referred to Sullivan, Ruth, Sullivan on the Construction of Statutes, 5th ed. (Markham, Ont.: LexisNexis, 2008)

Kristi Sargeant-Kerr, for plaintiff. Jennifer Chapman, for defendant Kyle Cresswell. Jonathan Schwartzman, for defendant CAA Insurance Company (Ontario).

[1] HEENEY J.: -- This is a motion for summary judgment brought by the defendant CAA Insurance Company (Ontario) ("CAA"), in which it seeks dismissal of the plaintiff's claim for uninsured automobile coverage. It similarly seeks dismissal of the cross-claim brought in the name of the defendant Kyle Cresswell by counsel for the Motor Vehicle Accident Claims Fund (the "fund"), which sought a declaration that the plaintiff was covered by the uninsured automobile coverage provided under CAA's policy, and judgment requiring CAA to pay any amount awarded to the plaintiff up to their policy limits.

[2] The plaintiff does not oppose the relief sought, and counsel for the plaintiff made no submissions on this motion. The dispute, then, is between CAA, who wants out of this lawsuit, and the fund, who takes the position that it is CAA, and not the fund, who should be paying any amount ultimately awarded to the plaintiff, up to its policy limits.

[3] The primary issue is whether uninsured automobile coverage is rendered unavailable to the plaintiff by reason of an admitted breach of both a term of the policy and a statutory condition that the vehicle not be driven, or permitted to be driven, by a person who is not authorized by law to drive.

[4] A second issue was also argued, in which CAA submits that the cross-claim is statute-barred by the Limitations Act, 2002, S.O. 2002, c. 24, Sch. B. I will deal with that issue after I dispose of the primary issue. [page255]

The Facts

[5] The relevant facts are not in dispute.

[6] The action arises out of a motor vehicle accident which occurred on November 11, 2006. The plaintiff was driving a Ford Ranger pickup truck owned by his girlfriend Danielle Debie. Ms. Debie's vehicle was insured under a policy of motor vehicle insurance issued by CAA.

[7] The other vehicle involved in the accident was owned by the defendant Ronald Cresswell and operated by the defendant Kyle Cresswell. It was not insured.

[8] The plaintiff issued a statement of claim, dated December 4, 2008, in which he claimed damages for injuries arising out of the accident. He also made a claim against CAA for uninsured automobile coverage, as provided for in Ms. Debie's policy.

[9] CAA defended that claim on the basis that the plaintiff was disentitled to uninsured automobile coverage because he was disqualified from driving at the time of the accident. It is undisputed that he was convicted under the Criminal Code, R.S.C. 1985, c. C-46, on February 23, 2006, for driving with more than the prescribed limit of alcohol in his blood. His driver's licence was thereupon suspended until February 23, 2009. He was subsequently convicted for driving while disqualified on July 11, 2006, which extended his driving suspension until February 23, 2010.

[10] His girlfriend, Ms. Debie, conceded that the Ford Ranger had been previously owned by the plaintiff, but the ownership had been transferred into her name after his driver's licence was suspended. The plaintiff admitted that this was done because he could not insure the vehicle, in view of his licence suspension. Ms. Debie proceeded to obtain her policy with CAA. On the day of the accident, she gave the plaintiff the only set of keys to the vehicle, knowing that he had no licence to drive, and knowing that he was taking the vehicle to move furniture.

[11] The plaintiff ultimately pleaded guilty to the offence of driving while suspended, arising out of the driving he did on the date of the accident.

The Test for Summary Judgment

[12] This motion for judgment is based upon facts that are not disputed. The sole issues to be determined are legal ones, relating to whether uninsured automobile coverage is, or is not, available to the plaintiff. This will be determined through the interpretation and application of the relevant statute, regulations and the terms of the policy itself. [page256]

[13] I am satisfied that this is a case where I, as motion judge, am able to achieve the full appreciation of the evidence and issues that is required in order to make dispositive findings, without the need for a trial: see Combined Air Mechanical Services Inc. v. Flesch (2011), 2011 ONCA 764, 108 O.R. (3d) 1, [2011] O.J. No. 5431 (C.A.). Neither counsel submitted otherwise in argument. Accordingly, this is an appropriate matter to be dealt with by way of a motion for summary judgment.

The Statutory Framework

[14] Uninsured automobile coverage must be included in every policy of motor vehicle insurance, pursuant to s. 265(1) of the Insurance Act, R.S.O. 1990, c. I.8 (the "Act"), which reads as follows:

265(1) Every contract evidenced by a motor vehicle liability policy shall provide for payment of all sums that, (a) a person insured under the contract is legally entitled to recover from the owner or driver of an uninsured automobile or unidentified automobile as damages for bodily injuries resulting from an accident involving an automobile; (b) any person is legally entitled to recover from the owner or driver of an uninsured automobile or unidentified automobile as damages for bodily injury to or the death of a person insured under the contract resulting from an accident involving an automobile; and (c) a person insured under the contract is legally entitled to recover from the identified owner or driver of an uninsured automobile as damages for accidental damage to the insured automobile or its contents, or to both the insured automobile and its contents, resulting from an accident involving an automobile,

subject to the terms, conditions, provisions, exclusions and limits as are prescribed by the regulations.

[15] Certain "statutory conditions" are also required to be included in every policy. Section 234 of the Act provides as follows:

234(1) The conditions prescribed by the regulations made under paragraph 15.1 of subsection 121(1) are statutory conditions and shall be deemed to be part of every contract to which they apply and shall be printed in English or French in every policy to which they apply with the heading "Statutory Conditions" or "Conditions légales", as may be appropriate.

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

(3) Except as otherwise provided in the contract, the statutory conditions referred to in subsection (1) do not apply to the insurance required by section 265 or 268. (Emphasis added) [page257]

[16] Statutory conditions are relevant to this motion, because CAA pleads that the plaintiff has breached statutory condition 4(1), found in s. 8 of the policy. That condition states:

4(1) The insured shall not drive or operate or permit any other person to drive or operate the automobile unless the insured or other person is authorized by law to drive or operate it.

[17] The final piece of the regulatory framework is found in s. 10 of a regulation to the Act, entitled Uninsured Automobile Coverage, R.R.O. 1990, Reg. 676 ("Regulation 676"). That section reads as follows:

10. In so far as applicable, the general provisions, definitions, exclusions and statutory conditions as contained in a motor vehicle liability policy also apply to payments under the contract under subsection 265(1) of the Act.

Analysis

[18] The interplay between the statutory and regulatory provisions noted above, and the provisions of the policy which provide for uninsured automobile coverage, was considered by the Ontario Court of Appeal in Ortiz v. Dominion of Canada General Insurance Co. (2001), 52 O.R. (3d) 130, [2001] O.J. No. 27 (C.A.). There, the plaintiff had been struck by an uninsured motorist in Guatemala. His motor vehicle insurance policy contained a territorial limit that limited coverage to an incident that occurs in Canada, the United States of America or on a vessel travelling between those two countries. The motion judge had held that the territorial limit was inconsistent with the terms of the Act. The Court of Appeal disagreed, holding that there was no ambiguity or conflict between the policy limitation and the terms of the Act.

[19] The court focused on the words found at the end of s. 265(1), that the coverage is "subject to the terms, conditions, provisions, exclusions and limits as are prescribed by the regulations". It held that it was open to the Lieutenant Governor in Council to provide, by regulation, that the general provisions of the standard motor vehicle policy applied to uninsured automobile coverage.

[20] The clause in question was in clear terms. Section 5.1 of the policy, subtitled "Territory", stated this:

This Policy applies to loss or damage to persons or property caused by an incident that arises out of the ownership, operation or use of an automobile and that occurs in Canada, the United States of America or on a vessel travelling between ports of those countries.

[21] Mr. Justice Sharpe, speaking for the court, concluded the following, at para. 14: [page258]

For these reasons, I conclude that territorial limit of the policy does, by virtue of the explicit language of the Act and the Regulation, apply to limit uninsured motor vehicle coverage mandated by s. 265(1) of the Act.

[22] Uninsured automobile coverage again came under scrutiny by the Ontario Court of Appeal in Shipman v. Dominion of Canada General Insurance Co. (2004), 73 O.R. (3d) 144, [2004] O.J. No. 4160 (C.A.). In that case, the plaintiff and her daughter were struck by a vehicle, resulting in injuries to the plaintiff and the death of her daughter. The vehicle that hit them had been driven by the at-fault driver without the consent of the owner. At issue was whether the uninsured automobile provisions of the owner's policy were available to the plaintiff or whether her claim was, instead, properly against the fund.

[23] Gouge J.A., speaking for the court, held that the Act, the Regulation and the policy must all be considered in determining whether coverage applied. At paras. 7-11, he said this:

The relevant part of s. 1.8.2 is as follows:

1.8.2. Excluded Drivers and Driving Without Permission

-- Except for certain Accident Benefits coverage, there is no coverage (including coverage for occupants) under this policy if the automobile is used or operated by a person in possession of the automobile without the owner's consent . . .

The Fund agrees that the position of the motion judge cannot be sustained. It acknowledges that s. 265 of the Act, Regulation 676 and, inter alia, the exclusion provisions of the Dominion policy (including s. 1.8.2) must be read together to determine if the plaintiff is entitled to coverage under the Dominion policy. However, it says that s. 10 of Regulation 676 gives s. 1.8.2 of the policy effect only "so far as applicable" and as a result, the exclusion only applies to eliminate coverage for occupants.

In our view, the respondent was correct to concede that the motion judge erred in finding that the question before him must be answered without reference to the Regulation or the exclusion provision in the Dominion policy. The jurisprudence of this court has made clear that the Act, the Regulation and inter alia the exclusion provisions of the policy must all be considered in answering a question like the one in this case. See, for example, Ortiz v. Dominion of Canada General Insurance Co. (2001), 52 O.R. (3d) 130 (Ont. C.A.).

Moreover, we see no basis for rewriting the scope of s. 1.8.2 of the Dominion policy to limit its exclusionary effect only to occupants. The language of the exclusion says exactly the opposite. Since there is no difficulty in this case in fully applying the exclusion clause as written, there is no basis to decline to do so based on the opening words of s. 10 of Regulation 672.

The exclusion clause therefore excludes coverage for the plaintiff under the Dominion policy. This leaves her to resort to the Fund.

[24] The chain of reasoning of the court is simple. Section 265(1) of the Act mandates the inclusion of uninsured automobile [page259] coverage, but states that it is subject to the terms, conditions, provisions, exclusions and limits as are prescribed by the regulations. Regulation 676, s. 10, dictates that the terms of the policy apply to the coverage provided under s. 265(1). Since the relevant term of the policy is that there is "no coverage" where the vehicle is operated without the owner's consent, the obvious conclusion is that uninsured automobile coverage is unavailable.

[25] The situation is not so clear, however, in the case at bar.

[26] I will deal first with statutory condition 4(1), which is reproduced above. There is no question that this condition was breached, because the vehicle was knowingly operated by a disqualified driver. The question, though, is whether the statutory conditions apply to uninsured automobile coverage.

[27] Section 234(3) of the Act is reproduced above, and clearly states that statutory conditions do not apply to the uninsured automobile coverage that is provided for in s. 265, "except as otherwise provided in the contract". It makes no provision for statutory conditions to be incorporated into this class of coverage by way of regulation.

[28] Section 10 of Reg. 676 purports to make statutory conditions apply to the uninsured automobile coverage provided by s. 265. In so doing, it is in direct conflict with s. 234(3).

[29] Mr. Schwarzman, for CAA, concedes that there is a conflict between s. 234(3) and s. 10. He further agrees that it is an established principle of statutory interpretation that regulations are subordinate legislation, and where there is a conflict between a regulation and a statute, the statute prevails. If any authority is required for that proposition, see Ruth Sullivan, Sullivan on the Construction of Statutes, 5th ed. (Markham, Ont.: LexisNexis, 2008), at p. 341; and Friends of Oldman River Society v. Canada (Minister of Transport), [1992] 1 S.C.R. 3, [1992] S.C.J. No. 1.

[30] I am satisfied that an irreconcilable conflict exists between s. 234(3) of the Act and s. 10 of the regulation such that the provisions of the Act must prevail. That means that the statutory conditions, including s. 4(1), do not apply to uninsured automobile coverage, "except as otherwise provided in the contract". I have carefully reviewed the contract, and can find no provision that states that the statutory conditions do apply to this class of coverage, nor have I been directed to any such provision during the course of argument.

[31] Indeed, the relevant terms of the contract point to the opposite conclusion. The coverage mandated by s. 265(1) is contained in s. 5 of the policy, entitled "Uninsured Automobile [page260] Coverage". Section 5.9 is subtitled "Limitations on Legal Action", and the first subparagraph thereunder is 5.9.1, entitled "Conditions of This Policy Must be Met". It reads as follows:

No person has a right to sue us for compensation under this Section for injury or damage caused by an accident involving an uninsured or unidentified automobile, unless the conditions in this Section of your policy (Uninsured Automobile Coverage) have been met.

[32] It is important to note that this paragraph does not say that failing to comply with a statutory condition, or any other condition of the policy, will disentitle the claimant from coverage. Instead, it is only a breach of "the conditions in this Section of your policy (Underinsured Automobile Coverage)" that will result in a denial of compensation.

[33] There is no condition or term in s. 5 that provides for a denial of coverage where the vehicle is driven, or permitted to be driven, by a person who is not authorized by law to drive.

[34] I conclude, therefore, that CAA cannot rely on a breach of statutory condition 4(1) as a basis for denying this coverage because statutory conditions do not apply to such coverage unless the contract so provides, and the contract does not so provide.

[35] That is not the end of the matter, however. CAA also relies on a breach of para. 1.4.5 of the contract. It is found in s. 1 of the policy, entitled "Introduction". Paragraph 1.4 is entitled "Your Responsibilities", and states the following:

If you fail to meet your responsibilities, claims under this policy, with the exception of certain Accident Benefits, may be denied. (Emphasis added)

[36] Paragraph 1.4.5 is found below para. 1.4, and reads as follows:

You agree not to drive or operate the automobile, or allow anyone else to drive or operate the automobile, when not authorized by law.

[37] Again, there has been a clear breach of this provision. The question remains whether this provision applies to uninsured automobile coverage.

[38] It is immediately obvious that the contract does not clearly provide for a denial of coverage where this term is breached. Instead, it states only that claims "may" be denied. That implies the possibility that claims may not be denied as well. The word "may" is capable of several interpretations, and the one most favourable to the insured is that it is synonymous with the word "might". That is a far cry from the wording of the relevant [page261] section in Shipman, supra, where the policy clearly stated that there was "no coverage".

[39] It is also markedly different from the words used in para. 1.8 of the CAA policy, entitled "Who and What We Won't Cover". In that portion of the policy, the contract sets out a list of instances where there is "no coverage", including use or operation without the owner's consent; use as a taxi cab; use as a rented vehicle; and so on. Notable by its absence is any statement that there will be no coverage where the driver is not licensed to drive.

[40] In Matt v. Crawford (2010), 2010 ONSC 3980, 103 O.R. (3d) 715, [2010] O.J. No. 3622 (S.C.J.), Mullins J. considered this same provision in the standard automobile insurance policy. She reviewed the authorities that hold that insurance coverage provisions are to be interpreted broadly and exclusions narrowly, and that ambiguities are to be resolved in favour of the insured. At para. 14, she concluded that a clause that states only that claims "may be denied" cannot clearly be found to preclude access to uninsured automobile coverage. I agree with her conclusion.

[41] That conclusion is reinforced by the comments of the Ontario Court of Appeal in Chambo v. Musseau (1993), 15 O.R. (3d) 305, [1993] O.J. No. 2140 (C.A.). At para. 11, Osborne J.A., speaking for the court, said this:

Uninsured motorist coverage became part of the standard form of automobile insurance policy in March 1980. It was part of a broad statutory scheme which required that all motor vehicles in Ontario be insured and which provided that all automobile insurance policies issued in Ontario had to include, among other things, uninsured motorist coverage. The coverage is statutory in the sense that its basic elements are set out in s. 231 of the Insurance Act. The legislative intent was to internalize costs to the activity (driving a motor vehicle) which created them. Before March 1980 the costs resulting from the negligence of an uninsured driver were externalized, in that they were paid by the taxpayers generally, through the Motor Vehicle Accidents Claim Fund. In my view, the uninsured motorist coverage legislation is remedial and should be given a broad and liberal interpretation.

[42] Furthermore, the wording of s. 5.9.1 of the policy also supports the conclusion that a breach of s. 1.4.5 will not disentitle the claimant to coverage. As already discussed, I interpret that provision to mean that it is only a breach of one of the conditions in that s. 5 (Uninsured Automobile Coverage) that will take away the right to that class of coverage. If it was intended that a breach of other conditions found elsewhere in the contract would disentitle the claimant to this coverage, s. 5.9.1 could have said so. Since it did not, I conclude that s. 1.4.5 does not apply to a claim for coverage under s. 5. [page262]

[43] Since s. 5 contains no other condition that would disentitle a claimant to coverage where the vehicle is driven, or permitted to be driven, by a person not authorized by law to drive, I conclude that uninsured automobile coverage is available to the plaintiff. The motion of CAA seeking the summary dismissal of the claims and cross-claims on this ground must, therefore, fail.

The Limitations Act Issue

[44] The timeline of this action can be summarized as follows:

-- statement of claim issued on December 4, 2008;

-- the defendant Kyle Cresswell was served with the statement of claim on January 27, 2009;

-- pleadings were noted closed against the defendant Kyle Cresswell on October 6, 2009;

-- a notice of default as required under the Motor Vehicle Accident Claims Act, R.S.O. 1990, c. M.41 was sent to the fund by courier on November 5, 2009;

-- on December 4, 2009, counsel for the fund responded by letter, and advised that they had been retained to represent the fund's interests in the matter. However, they were unable to file a defence because it appeared that both defendants were represented by their own counsel, thereby precluding intervention by the fund;

-- over the months that followed, correspondence was exchanged among all involved counsel as to whether the defendants would continue to be represented by private counsel. According to a letter from Ms. Sargeant-Kerr, for the plaintiff, dated July 22, 2010, it was the intention of defence counsel, Mr. Parker, to remove himself as lawyer of record in order that the fund could become involved;

-- on March 25, 2011, counsel for the fund forwarded to other counsel, by fax and regular mail, a statement of defence and cross-claim on behalf of the defendant Kyle Cresswell, which formally launched the cross-claim against CAA;

-- on April 4, 2011, a requisition was filed by counsel for the fund, requesting that the noting of default of the defendant Kyle Cresswell be set aside on the grounds that the Minister of Finance intends to defend the action in his name. The [page263] statement of defence and cross-claim was formally filed with the court on May 26, 2011.

[45] The argument of CAA is based upon s. 18(1) of the Limitations Act, 2002, which reads as follows:

18(1) For the purposes of subsection 5(2) and section 15, in the case of a claim by one alleged wrongdoer against another for contribution and indemnity, the day on which the first alleged wrongdoer was served with the claim in respect of which contribution and indemnity is sought shall be deemed to be the day the act or omission on which that alleged wrongdoer's claim is based took place.

[46] In other words, for purposes of establishing the start date of the basic limitation period of two years, the claim of a defendant who is seeking contribution or indemnity from another party is deemed to have taken place on the day that the first defendant is served with the statement of claim.

[47] CAA argues, therefore, that the limitation period for claims for contribution or indemnity started to run on January 27, 2009, which is the day Kyle Cresswell was served with the statement of claim. When the cross-claim was served on March 25, 2011, CAA submits that the two-year limitation period had already expired.

[48] While this argument would certainly have merit if this were an ordinary cross-claim by an ordinary defendant, that is not the case we are dealing with. The fund has statutory rights to defend this action, and to take any other action it considers appropriate, including the issuance of cross-claims and third party claims. The case law is clear that those rights cannot be taken away through the default of the defendant personally.

[49] The basic scheme of the Motor Vehicle Accidents Claims Act is set out in ss. 7 and 8, which are reproduced below:

Application for payment of judgment

7(1) Subject to section 8, where a person recovers in any court in Ontario a judgment for damages on account of injury to or the death of any person or loss of or damage to property occasioned in Ontario by a motor vehicle owned or operated by the judgment debtor within Ontario, upon the determination of the proceeding, including any appeals, the person may apply, in the form approved by the Director, for and the Minister shall pay the amount of the judgment or of the unsatisfied portion thereof out of the Fund, provided that, in respect of a judgment for loss of or damage to property, only that amount by which the judgment exceeds $100 is payable out of the Fund.

Where Minister objects to payment

(2) Where an application is made to the Minister under subsection (1), the Minister at any time within thirty days of the receipt of the application or within such further time as may be allowed upon application to a judge of [page264] the Superior Court of Justice give written notice to the applicant of any objection to payment of the judgment or part of the judgment, and, where the Minister gives the notice, the applicant may apply to a judge of the Court for a finding or determination in respect of any matter in connection with the application for payment out of the Fund.

Action against all persons reasonably liable to be sued

(3) The Minister shall not pay out of the Fund any amount in respect of a judgment unless the judgment was given in an action brought against all persons against whom the applicant might reasonably be considered as having a cause of action in respect of the damages in question and prosecuted against every such person to judgment or dismissal.

Application of s. 7

8(1) Section 7 does not apply in the case of a judgment that has been signed in an action in which, (a) Repealed: 1993, c. 27, Sch. (b) the defendant did not file a statement of defence; or (c) the defendant did not appear in person or by counsel at the trial; or (d) the defendant did not appear in person at an examination for discovery; or (e) judgment was signed upon the consent or with the agreement of the defendant,

unless the Minister has been given notice of such failure, consent or agreement and has been afforded an opportunity to take such action as he or she may consider advisable under subsection (2).

Rights of Minister

(2) Within thirty days after receiving notice under subsection (1), the Minister may file a defence, make payment into court, appear by counsel at the trial or take such other action as he or she considers appropriate on behalf and in the name of the defendant, and may thereupon, on behalf and in the name of the defendant, conduct the defence, and may, where he or she considers it advisable to do so, consent to judgment in such amount as he or she may consider proper in all the circumstances, and all acts done in accordance therewith shall be deemed to be the acts of such defendant.

Notice of Default set aside

(3) Where the Minister or defendant is noted in default, the Minister may give notice to the local registrar or clerk of the court, as the case may be, that he or she intends to defend the action on behalf of and in the name of the defendant, and may require the noting of default to be set aside.

Minor defendant

(4) The Minister, without the appointment of a litigation guardian, may exercise the rights and take the action referred to in subsection (2) and assert a counterclaim on behalf of a defendant who is a minor. [page265]

Deceased defendant

(5) Where a deceased person, if living, would be the defendant or the defendant in the action dies and the personal representative, if any, of the deceased person does not defend the action and no litigation administrator is appointed, the Minister may exercise the rights and take the action referred to in subsection (2) in the name of the deceased and may assert a counterclaim on behalf of the estate of the deceased.

[50] Under s. 8(2), the minister has the right to conduct the defence, and take other action as he or she considers appropriate. In Levesque v. Levesque, [2002] O.J. No. 4230, [2002] O.T.C. 843 (S.C.J.), Wright J. held that this included, by implication, the right to bring the defendant's insurers into the lawsuit through a third party claim. The same reasoning would entitle the minister to bring a cross-claim against the defendant's insurers, who are already parties to the action as named defendants.

[51] During argument, I raised a point which had not been dealt with in the factums, as to the requirement under s. 8(2) that certain action be taken "within thirty days" after receiving notice. Neither counsel was able to point to any authority that dealt with the impact of these words in the section. On reviewing its terms, I am satisfied that it requires only that the minister get involved in the action in some respect, within 30 days after receiving the notice of default. Reading the section literally could mean that each and every action enumerated in the section, including conducting the defence and consenting to judgment, would have to be taken within 30 days. That would be an absurd result, given the reality that lawsuits routinely take several years to bring to a conclusion.

[52] Here, counsel for the fund did get involved in the action within 30 days after service of the notice of default, but was unable to formally get on record due to the apparent representation of the defendants by independent counsel. It can, therefore, be said that counsel took such action as he or she "considers appropriate", given the prevailing circumstances. Having done so, the 30-day time limit was satisfied, and counsel was "thereupon" entitled to conduct the defence, which of necessity would take well beyond 30 days to carry out.

[53] To illustrate the point that a defendant who is being represented by the fund is treated differently than a regular defendant, consider the decision of Master Dash in Larkman Estate v. Briginshaw, [2007] O.J. No. 1656, 157 A.C.W.S. (3d) 71 (S.C.J.). There, the fund had assumed carriage of the defence for an uninsured defendant. When the named defendant could not be located and produced for an examination for discovery, the [page266] plaintiffs moved to strike the statement of defence, and the defendant's alleged insurer moved to strike the third party claim.

[54] Relying on the decision of the Divisional Court in Van Kooten v. Doy (1980), 31 O.R. (2d) 247, [1980] O.J. No. 3852 (Div. Ct.), Master Dash held that the minister's right to defend under s. 8 of the Act cannot be taken away by an inability to produce the defendant for discovery. He observed [at para. 3] that the court in Van Kooten "specifically rejected the submission that the Minister, in defending on behalf of the defendant, has no greater rights than the defendant".

[55] He went on to say the following, at paras. 6-7:

There is a further reason to dismiss the motion of the third party. Section 22 of the Act provides that no payment on a claim or judgment shall made out of the Fund "of an amount paid or payable by an insurer by reason of the existence of a policy of insurance." Section 7(1) of the Act allows a plaintiff to apply to the Minister for payment out of the Fund, however under section 7(2) the Minister may within 30 days object in writing to payment, in which case the applicant may apply to a judge to determine any matter in connection with the application for payment. The third party insurer has denied the existence of a valid policy of insurance on the grounds that it had been cancelled for non- payment of premiums prior to the date of the accident. The Minister opines that the policy was not properly cancelled. If the plaintiffs obtain judgment in the action against the defendant they would have the right to apply directly to the insurer under section 258(1) of the Insurance Act, R.S.O. 1990, c. I-8 for payment of the judgment if indemnity is provided to the defendant under a motor vehicle insurance policy. Since the insurer has denied the existence of such policy the court in that proceeding would have to determine whether it was properly cancelled and therefore no longer in existence. Whitelaw v. Wilson, [1969] I.L.R. 813 (S.C.O.) stands for the proposition that the plaintiffs are not obliged to commence such proceeding against the insurer and that either the defendant or the Minister could proceed to determine the issue as against the insurer. If the defendant asserts the validity of the policy of insurance, she would have the right to issue a third party claim for indemnity under the policy, in which case the existence of such policy would be determined in that third party proceeding. The Minister, exercising its statutory right to defend in the name of the defendant, has done just that. Alternatively the Minister could wait until after judgment and application by the plaintiff for payment from the Fund and then bring a separate proceeding in its own name to determine whether a valid policy of insurance was in existence.

Since the Minister has no obligation to make payment if there is an insurance policy providing coverage, it would be pointless to dismiss the third party action now as the issue of coverage would then have to be dealt with on application by either the plaintiffs or the Minister after judgment is rendered in the tort action. This would create a multiplicity of proceedings, which is to be avoided as far as possible: section 138 of the Courts of Justice Act. All parties concerned with the validity of the policy are now before the court: the plaintiffs, the insured (or formerly insured) defendant, the insurer and the Fund. Furthermore, the third party has defended not only the third [page267] party claim, but also the main action and it would therefore be bound by the determination of the issues related to liability and damages in the context of the existing proceeding.

[56] This reasoning is persuasive, and applies with equal force to the case at bar. It would be pointless to dismiss the cross-claim at this juncture, since the minister could simply wait for judgment to be rendered and then bring the same claim before the court for a determination as to the obligation of CAA to pay the judgment. It would avoid a multiplicity of proceedings to have that issue dealt with in this proceeding by way of the cross-claim, particularly since the same relief has already been claimed by the plaintiff, and since I have just made a ruling, binding upon CAA, that the coverage in question has not been lost due to the fact that the plaintiff was not authorized by law to drive.

[57] While it is true that the cross-claim is brought in the name of the defendant Kyle Cresswell, whereas an application under s. 7(2) [of the Motor Vehicle Accident Claims Act] would be in the name of the minister, the reality of the situation is that the real party in both cases is the fund. To dismiss the cross-claim now and force the minister to commence a later proceeding to deal with the same issues would be to allow form to triumph over substance.

[58] The bottom line is that it cannot be said that the right of the fund to seek recourse against CAA has been extinguished by the Limitations Act, 2002. Those rights remain in full force and effect pursuant to the terms of the Motor Vehicle Accident Claims Act.

[59] Accordingly, the claims of CAA for relief based on this ground must fail as well.

[60] The motion is, accordingly, dismissed. If the parties cannot agree on costs, I will accept written submissions from counsel for the fund within 20 days, with responding submissions from counsel for CAA within 15 days thereafter, and any reply within ten days thereafter. Having taken no part in this motion, the plaintiff will be neither entitled to, nor subject to, any order for costs.

Motion dismissed.