SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: CV-14-498381
DATE: 20150928

RE: PRO-DEMNITY INSURANCE COMPANY

Applicant

• and –

FINANCIAL SERVICES COMMISSION OF ONTARIO and ATTORNEY GENERAL OF ONTARIO

Respondents

BEFORE: D.L. Corbett J.

COUNSEL: Mark Frederick, for the Applicant

Robert Ratcliffe, for the Respondents

D.L. CORBETT J.

DECISION

[1] The applicant seeks a declaration that the proposed expansion of the scope of its insurance business is not inconsistent with s. 2(5) of the Architects Act.[^1] If this declaration is granted, this would remove one “concern” raised by the Financial Services Commission of Ontario (“FSCO”) about the applicant’s proposal.[^2]

[2] At the first appearance the court raised concerns about the jurisdiction of the court to decide this issue. The court referred the parties to Mahar v. Rogers Cablesystems Ltd. and cases following it.[^3] Two questions arise from these cases:

(i) does this Court have jurisdiction at all, given the regulatory framework that applies to this issue?

(ii) if this Court technically has jurisdiction, should it decline to exercise that jurisdiction and defer to the Financial Services Commission of Ontario (“FSCO”) to decide the issue, subject to whatever rights of appeal and/or judicial review that may flow from FSCO’s decision?

[3] On the original return date of this application, counsel responded to the Court’s concerns as best they could, given that they had no notice of it. I concluded that the jurisdictional issue was sufficiently important that the application should be adjourned to permit counsel to address the issue properly.

[4] With the benefit of full argument on this issue, for the reasons that follow, I conclude that this court should decline jurisdiction. Regulation of the insurance industry is squarely within the mandate and competence of FSCO and it would undercut that regulatory framework for this court to issue rulings on points of law which should be considered and decided, in the first instance, by FSCO in the course of discharging its regulatory mandate.

Background

(i) OAA Authorized to Own Pro-Demnity

[5] The Architects Act (the “Act”) provides for regulation and licensing of architects in Ontario by the Ontario Architects’ Association (“OAA”).[^4] No person shall engage in the practice of architecture in Ontario unless licensed by the OAA under the Act.[^5] No member of the OAA shall practice architecture in Ontario unless insured against professional liability in accordance with the Act and its regulations.[^6]

[6] As a result of a liability insurance “crisis” in the late 1980’s, commercial liability insurance for architects became unaffordable or unsuitable in the judgment of the OAA. In response, the OAA created an indemnity plan for architects which it operated successfully from 1987 to 2002.

[7] The applicant, Pro-Demnity was incorporated by the OAA in 2002 as a successor to the indemnity plan operated by the OAA for the previous fifteen years. Pro-Demnity has provided professional liability insurance to Ontario architects since 2003. This insurance coverage is mandatory for Ontario architects.

[8] OAA’s interest in Pro-Demnity is authorized by s.2(5) of the Architects, which provides:

The [OAA] may own shares of or hold a membership in an insurance corporation incorporated for the purpose of providing insurance to,

(a) members of the [OAA], holders of certificates of practice and holders of temporary licenses; and

(b) persons authorized to engage in the practice of architecture in a jurisdiction other than Ontario.

(ii) Pro-Demnity Licensed As An Insurer

[9] The Act authorizes the OAA to own an interest in an insurance corporation incorporated for the purpose of providing insurance to architects. The Act does not authorize that insurance corporation to sell insurance.

[10] Authority to sell insurance in Ontario requires a license granted under the Insurance Act. Section 27 of the Insurance Act confers on the Superintendent of Financial Services (the “Superintendent”) power “to determine the right of an insurer in Ontario to be licensed.”[^7]

[11] The Superintendent has exclusive jurisdiction to exercise the powers conferred on the Superintendent under the Insurance Act. The Superintendent is authorized to determine all questions of fact and/or law that arise in any proceeding before him or her.[^8]

[12] Pro-Demnity holds a license under the Insurance Act.

[13] Pro-Demnity seeks amendments to its insurance license to permit it to sell additional classes of insurance and to sell insurance to non-architects.

[14] Sections 40 to 55 of the Insurance Act set out the basic licensing regime for an insurer’s license and for amendment of existing licenses. The question of Pro-Demnity’s legal capacity to sell insurance to the general public is an issue to be decided in the licensing process.

[15] This court has jurisdiction to interpret s.2(5) of the Architects Act. However, it does not have jurisdiction to decide whether the applicant should be licensed to sell insurance to the general public.

[16] The applicant argues that the court should exercise its jurisdiction because the Superintendent has indicated, informally, that she does not believe that the applicant can be licensed to sell insurance to the general public so long as it is owned by the OAA, by virtue of the language of s.2(5). The applicant does not wish to go through a long and expensive process to seek a decision from the Superintendent on all aspects of its request if it is a foregone conclusion that the request will be denied on this one point of law. A decision from this court will put an end to the proposal (if the decision goes against the applicant), or will dispose of an impediment to the process (if the decision is favourable to the applicant).

[17] I understand why the applicant sees a court application as a practical way forward. Still, I conclude that this court should decline to exercise jurisdiction to interpret s.2(5) in this context. In my view, to exercise jurisdiction would be to subvert the clear intention of the legislature that such questions be decided at first instance by the Superintendent.

[18] Sharpe J. (as he then was) cautioned against permitting divided jurisdiction between generalist courts and a specialized agency or tribunal “where [the Legislature] has created a statutory regime which includes both rights and a procedure for their resolution”.[^9] In different but analogous circumstances, the Court of Appeal used stronger language:

… the legislature has given the Superintendent the power in the first instance to determine whether to initiate wind up proceedings and it has given the Tribunal exclusive jurisdiction to decide that matter at or after the hearing. If the court were to [directly adjudicate on the matter], it would violate the legislative scheme and amount to an unauthorized usurpation of the authority delegated to the Superintendent and the Tribunal.[^10]

[19] The concerns raised in this jurisprudence are clearly present in the instant case. The OAA is not the only professional body that provides insurance or indemnity services to its members. The regulation of these businesses, within the context of the regulation of the insurance sector as a whole, is a matter within the expertise of the Superintendent. The proposed question for this court is but a subset of the general question within the exclusive jurisdiction of the Superintendent: the jurisdiction to “determine the right” of the applicant “to be licensed” as it requests. This court should not usurp a portion of the task reserved to the exclusive jurisdiction of the Superintendent.

[20] This is not to say that the applicant’s fears will come to pass. First, it is open to the applicant to seek a preliminary determination of the specific issue it raises with this court from the Superintendent. It is within the Superintendent’s bailiwick to determine the processes and procedures to be followed. Once there is a decision from the Superintendent, then the applicant may pursue appeal or review rights as may be permitted by law.

[21] Pro-Demnity argues:

If the Court defers to FSCO to rule on s.2(5) of the Architects Act, it is inevitable that the issue will return to the Court via judicial review…. (I)n the interest of promoting judicial economy, it is Pro-Demnity`s submission that the Court should proceed to hear its application.

It would be an error in principle for this court to hear a matter properly before the Superintendent in the interests of speeding up the process. The prime focus of modern administrative law is to defer to administrative tribunals in the exercise of their jurisdiction, so that the expertise and procedures of those tribunals may be brought to bear on the issue at hand. This case presents a good example. The decision should be made, at first instance, by the Superintendent. Once all internal appeals and reviews had been exhausted, either side could then seek judicial review, not in civil motions court, but before a panel of three judges in the Divisional Court. That review would be based on deference to the findings below: the standard of review is reasonableness. And, although the Architects Act is not the Superintendents home statute, regulating of liability insurers is core to the Superintendents mandate. It is certainly at least arguable that the Superintendent`s interpretation and application of s.2(5) would be conducted on a standard of reasonableness, not correctness.

[22] This issue should be determined by the Superintendent in the context of an application by the applicant to a change in its licensing conditions. It should not be decided in the abstract at first instance by this court.

[23] The application is dismissed.

[24] If the parties cannot agree on costs then counsel shall schedule a brief teleconference with me before October 30, 2015.

D.L. Corbett J.

DATE: September 28, 2015

[^1]: R.S.O. 1990, c. A.26, s.2(5)

[^2]: Both parties agree that FSCO expressed a concern about s.2(5), but did not make a decision about it.

[^3]: (1995). 1995 7129 (ON SC), 25 O.R. (3d) 690 (Gen. Div.), per Sharpe J. (as he then was), and Ontario Hydro v. Kelly, 1998 14678 (ON SC), 39 O.R. (3d) 107 (Gen. Div.), per Macpherson J. (as he then was) and Toronto (City) v. 1095909 Ontario Ltd., 2012 ONSC 1344, per McEwen J.

[^4]: Architects Act, R.S.O. 1990, c. A.26.

[^5]: Architects Act, s.11.

[^6]: Architects Act, s.40.

[^7]: Insurance Act, R.S.O. 1990, c. I.8, s.27.

[^8]: Insurance Act, s.20(1), s.20(2).

[^9]: Mahar v. Rogers Cablesystems Ltd. (1995), 1995 7129 (ON SC), 25 O.R. (3d) 690.

[^10]: Lomas v. Rio Algom Ltd., 2010 ONCA 175, paras. 75, 78. See also City of Toronto v. 1095909 Ontario Limited, 2012 ONSC 1344 at paras. 5, 9, 10.