SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-10-398875, 2013 ONSC 2482
DATE HEARD: 2013/04/25

RE: SUNDRAM v SIMPSON et al.

BEFORE: MASTER RONNA M. BROTT

COUNSEL:
Alexander Voudouris, for the Plaintiff/Moving Party
Jordan Halpern, for Wawanesa/Responding Party
Marie Sydney, for The Superintendent of Financial Services/Responding Party

ENDORSEMENT

[1] This is a motion by the plaintiff for an Order setting aside the Notices of Discontinuance filed as against The Wawanesa Mutual Insurance Company (“Wawanesa”) and The Superintendent of Financial Services of Ontario (“Superintendent”).

[2] This action arises out of a motor vehicle accident that occurred on August 7, 2008. The plaintiff was a passenger in a motor vehicle operated by the defendant Kimberly Simpson (“Simpson”) and owned by 2171410 Ontario Incorporated o/a Autohire Rent-A-Car (“Autohire”). Simpson lost control of the vehicle, struck a curb and then came into contact with a parked, unoccupied vehicle owned by Mr. Vargas. The police records reveal that Simpson fled the scene of the accident.

[3] The plaintiff’s evidence is that at the time of the accident the plaintiff did not have a license nor did she own a vehicle. As such, she did not have insurance. The Autohire vehicle was insured by ACE INA Insurance (“ACE INA”). The Vargas vehicle was insured by Wawanesa. The Superintendent is called upon to make payments out of the Motor Vehicle Accident Claims Fund in the event that no payment can be made under a policy of insurance.

[4] The Statement of Claim was issued on March 11, 2010 naming, inter alia, the Superintendent, ACE INA and Wawanesa. These insurers were named out of an abundance of caution as the plaintiff, at that time, was uncertain as to which one would provide insurance coverage to the plaintiff for the alleged damages caused by the involvement of uninsured motorist.

[5] Simpson delivered a Statement of Defence on or about April 14, 2010 wherein she denied being the driver of the vehicle. ACE INA delivered a Statement of Defence on October 5, 2010. Neither Wawanesa nor the Superintendent filed Statements of Defence.

[6] On or about August 25, 2008 the plaintiff applied to American Home Assurance Inc., the predecessor to ACE INA, for accident benefits. In October 2008 RGM Claims Services Inc., an independent adjuster company acting on behalf of ACE INA, advised that ACE INA was initiating a priority dispute regarding payment to the plaintiff of accident benefits. On December 8, 2008 the plaintiff received confirmation from ACE INA that it holds priority for payment of accident benefits and was responsible for paying accident benefits. Later in December 2008 ACE INA retained counsel and disputed its priority to pay accident benefits. By correspondence dated March 17, 2010 counsel for ACE INA advised that it had abandoned its dispute and accepted that it was the insurer in priority and was responsible for paying accident benefits. On May 14, 2010 the plaintiff resolved her accident benefits claim on a full and final basis with the accident benefits insurer, ACE INA.

[7] In April 2010, after ACE INA had abandoned its priority dispute, Wawanesa and the Superintendent (the “former defendants’) requested that the action be discontinued as against them, relying on the Court of Appeal decision in McArdle v Bugler 2006 63729 (ON SC), [2006] O.J. 3508 which stands for the proposition that an insurer’s payment of accident benefits to an uninsured plaintiff effectively makes that insurer the responsible party for uninsured motorist coverage for the purposes of section 265 of The Insurance Act. Plaintiff’s counsel filed Notices of Discontinuance with regards to the plaintiff’s claims against Wawanesa and The Superintendent on or about November 10, 2010. The defendant Autohire was noted in default on or about November 18, 2010.

[8] There is a companion action which was commenced by another passenger in the Simpson vehicle. That action names the same parties as defendants, including Wawanesa and The Superintendent. The Superintendent has filed a Statement of Defence in the companion action. Wawanesa has not done so. Common examinations for discovery for the within action and the companion action have been consented to and plaintiff’s counsel expects that the two actions will be mediated and tried together.

[9] On April 25, 2012 the common examinations for discovery were aborted when plaintiff’s counsel was told by counsel for ACE INA, that ACE INA had paid accident benefits by mistake and that it was taking the position that McArdle, supra, does not apply. Further, ACE INA advised that they believe that Simpson actually had a personal vehicle which was insured by RBC Insurance (“RBC”). RBC maintains that the insurance was cancelled for non-payment on July 31, 2008 (prior to the date of the motor vehicle accident). ACE INA refused to conduct examinations for discovery until RBC produces its insurance documents including termination documents. RBC is not a party to either action.

THE MOTION

[10] The plaintiff brings this motion seeking an Order to set aside the Notices of Discontinuance served on The Superintendent and Wawanesa on November 10, 2010 and an Order permitting the action to proceed against the former defendants.

[11] The motion materials were served on the former defendants on October 3, 2012 and the motion was initially scheduled to be heard on December 5, 2012. By correspondence dated October 25, 2012 the Superintendent advised plaintiff’s counsel that it would not be opposing the plaintiff’s motion to set aside the Notice of Discontinuance against the Superintendent and further advised that they may attend to support the plaintiff to set aside the Notice of Discontinuance against Wawanesa.

[12] On November 23, 2012 counsel for Wawanesa requested an adjournment to conduct a cross-examination and the motion was adjourned to February 8, 2013. No cross-examination was ever conducted. On January 16, 2013 counsel for Wawanesa advised that they were instructed to oppose the plaintiff’s motion. Despite its previous position on this motion, the parties learned on or about February 1, 2013 when they were served with the Superintendent’s materials, that the Superintendent had changed its position and it was opposing the plaintiff’s motion.

DISCONTINUANCE

[13] Rule 23.01(1) states that a plaintiff may discontinue all or part of an action against any defendant. The Rules of Civil Procedure do not specifically address the setting aside of a Notice of Discontinuance however caselaw is clear that courts do have inherent jurisdiction “to set aside a Notice of Discontinuance in proper circumstances where the interests of justice require as well as in cases where there has been inadvertence or misapprehension of the circumstances” (Daniele v Johnson (1999), 1999 19921 (ON SCDC), 123 O.A.C. 186, 45 O.R. (3d) 498, 90 O.T.C. 240, 1999 CarswellOnt 2096.).

[14] In Daniele, supra, the appellants knowingly, after five days of consideration, accepted $6000.00 and signed a Release on condition that they file a Notice of Discontinuance. When they tried to set aside the Notice of Discontinuance, the Divisional Court held that it was “not a proper one in which to exercise discretion, since there was no inadvertence, mistake or misapprehension of the client’s instructions, and no exceptional circumstance.”

[15] Both Wawanesa and the Superintendent submit that the plaintiff has failed to show inadvertence, misapprehension or mistake. They assert that the plaintiff admits to knowingly serving and filing the Notices of Discontinuance.

Inadvertence

[16] There is no question that once the plaintiff, as well as Wawanesa and the Superintendent received the correspondence dated March 17, 2010 from the solicitors for ACE INA stating “I have received instructions from my client not to proceed with this dispute.”, the plaintiff thereafter knowingly served and filed the Notices of Discontinuance. I therefore find that the Notices of Discontinuance were not served and filed as a result of any inadvertence.

Misapprehension

[17] Wawanesa submits that misapprehension must be in regards to instructions from one’s own client relating to procedural aspects or steps and the consequences thereof, as was the situation in SemCanada Energy v Joseph Brant Memorial Hospital Corp. [2011] O.J. No. 3127. There the court found that the Notices of Discontinuance were filed because counsel misunderstood the client’s instructions and because the Notices were held to have been filed under misapprehension, Marocco, J. set aside the Notices of Discontinuance.

[18] As Master Davidson stated at p. 128 in Cusack v City Press Ltd. v Garden City Press Ltd. (1978), 1978 1506 (ON SC), 22 O.R. (2d) 126 (Ont. Master):

“I feel it must always be open to the Court in proper circumstances to relieve against an act done either by way of inadvertence or misapprehension and that this should be particularly so where no real prejudice to the other side is demonstrated.”

[19] The only evidence of prejudice to the former defendant Wawanesa is weak its inability to conduct surveillance once the Notice of Discontinuance was filed. Although the superintendent did not file any affidavit evidence, it submitted in argument that the passing of the limitation period has created a presumption of prejudice.

[20] In the related action all parties, including the former defendants, have consented to common examinations for discovery. The other defendants in this action would no doubt be pleased to have Wawanesa and the Superintendent share in the cost of any investigation or surveillance that may have been conducted on the plaintiff since November 10, 2010.

[21] On the limitations issue, Marocco, J. held in SemCanada Energy Company, supra, at para. 28 that the setting aside of the Notice of Discontinuance “simply permits the discontinued action to proceed as it would have but for the filing of the Notice of Discontinuance. The discontinued action was commenced within the limitation period.”

[22] As of March 17, 2010, the plaintiff, Wawanesa and the Superintendent all understood that ACE INA had accepted their priority position for payment of accident benefits which carried with it the responsibility for underinsured and unidentified coverage. All parties misapprehended the position taken by ACE INA in the same way, at the same time and on the same basis. For one party to be prejudiced while the other two are completely exonerated would be grossly unfair. As Marocco, J stated at para. 25 in SemCanada Energy, supra, the filing of the Notices of Discontinuance “conferred a windfall tactical and substantive advantage upon all of the defendants which would be lost if the original action continues. This is not a prejudice which should result in the court refusing to exercise its discretion.” I am satisfied on the evidence that the real prejudice would be suffered by the plaintiff if the Notices of Discontinuance are not set aside.

Mistake

[23] The defendant ACE INA delivered its Statement of Defence on October 5, 2010. In paragraph 9 of the Statement of Defence, it “denies that it affords insurance coverage to any of the named defendants or to the plaintiff”. The former defendants submit that the plaintiff knew, as of the time of being served with the Statement of Defence that the plaintiff would not be entitled to insurance coverage under the ACE INA policy.

[24] The Statement of Defence of ACE INA is simply a bald denial of any obligation to pay. The boilerplate Statement of Defence is also deliberately ambiguous. The pleading in no way affected the position of any of the former defendants or the plaintiff with respect to the Notices of Discontinuance.

[25] In Wheeler v CGU Insurance Co. 2005 10906 (ON SC), [2005] O.J. 1364 Justice Flynn held that where “the grounds for setting aside a Notice of Discontinuance amount to a misinterpretation of the law, or to a change of heart based on a deliberate consideration of the law and facts as to the likelihood of success, that is simply not enough.”

[26] Wawanesa submits that in order to set aside a Notice of Discontinuance on the basis of a mistake, the mistake must be on behalf of the party moving to set aside the Notice of Discontinuance. Because the plaintiff is attempting to rely on ACE INA’s mistake, Wawanesa submits that the plaintiff cannot be successful.

[27] The plaintiff draws a distinction between a mistake of law and a mistake of fact. It is the plaintiff’s submission that the plaintiff, Wawanesa and the Superintendent all agreed to the filing of the Notice of Discontinuance on the basis of ACE INA’s priority. ACE INA then, two years later, changed it position stating that, despite the fact that they had paid accident benefits, they did so only because they had to, and it was a mistake to do so. It is the plaintiff’s assertion that all of the parties erred (or made a ‘mistake’) with respect to delivery of the Notices of Discontinuance. This was a mistake of fact.

[28] The plaintiff, Wawanesa and the Superintendent understood that ACE INA was paying accident benefits because they had to. The “mistake” was a mistake of all participants to the Notices of Discontinuance – the plaintiff and the former defendants – and all parties should, in the interests of justice, be treated on the same basis.

Exceptional Circumstance

[29] In GasTops Ltd. v Forsyth [1998] O.J. 4570 Bell, J. held that on the facts of that case there was no inadvertence, mistake or misapprehension on the part of the plaintiff when the instructions to abandon were given. He stated at para 28:

“Further, the plaintiff has not demonstrated on the facts before me some special circumstances of a compelling nature which would provide other grounds upon which to exercise my discretion in favour of the plaintiff on this motion.”

[30] In Davis v Campbell 1986 CarswellOnt 594 at para 11 Rosenberg, J. states that the cases establish that “in appropriate circumstances where the interests of justice require, the court has inherent jurisdiction to set aside a Notice of Discontinuance.”

[31] The fact that all parties to this motion acted/re-acted to the position of ACE INA in an identical fashion at the same time is ‘special’. By letter dated April 15, 2010 Wawanesa wrote to plaintiff’s counsel stating that they should be let out of the action on the basis that ACE INA accepts priority. Similarly on April 27, 2010, FSCO stated that “it appears that your client will have coverage through an insurance policy”.

[32] For Wawanesa and the Superintendent to now assert that because the plaintiff delivered its Notice of Discontinuance deliberately after having adequate time to consider the issues and the effect of the discontinuance, is disingenuous. The former defendants themselves made the identical considerations so to now point a finger and suggest that plaintiff’s counsel’s recourse should be to his liability insurer is in my view inappropriate. This is particularly so vis-à-vis the Superintendent who, had the motion proceeded as scheduled, would have actually supported the plaintiff’s position on this motion.

[33] If at trial ACE INA is successful in arguing that their payment and settlement of the accident benefits claim was a mistake, then the plaintiff, if the Notices of Discontinuance are not set aside, will potentially have no right of recovery. Clearly that creates a situation of prejudice to the plaintiff. On balance, I find that the potential prejudice to the plaintiff far outweighs the prejudice to the former defendants.

[34] The events leading to the filing of the Notices of Discontinuance in this action are special and exceptional. It is clearly in the interests of justice to put the plaintiff and the former defendants on a level playing field.

ORDER

[35] The Notices of Discontinuance served on the Superintendent and Wawanesa are hereby set aside. The action shall proceed as it would have, but for the filing of the Notices of Discontinuance dated November 10, 2010.

[36] If the parties are unable to agree within thirty (30) days on the issue of costs, they shall each serve and file brief costs submissions (1 – 2 pages) together with costs outlines within forty five (45) days of today’s date. No reply submissions may be filed without leave.

RONNA M. BROTT

Date Released: April 25, 2013