COURT FILE NO.: CV-20-00073937-0000
DATE: July 22, 2021
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
OLD REPUBLIC INSURANCE COMPANY OF CANADA
Plaintiff
Vanda A. Santini and M. Edward Key, Counsel for the plaintiff (defendant to the counterclaim)
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WORLDSTRIDES CANADA INC. and EXPLORICA CANADA, INC. o/a EXPLORICA BY WORLDSTRIDES
Defendants
A N D B E T W E E N:
WORLDSTRIDES CANADA INC. and EXPLORICA CANADA, INC. o/a EXPLORICA BY WORLDSTRIDES
Plaintiffs by counterclaim (Moving Parties)
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OLD REPUBLIC INSURANCE COMPANY OF CANADA and ARCH INSURANCE CANADA, LTD.
Defendants by counterclaim (Respondents)
Iris Antonios and Daniel Szirmak, Counsel for the defendants (plaintiffs by counterclaim)
Iris Antonios and Daniel Szirmak, Counsel for the defendants (plaintiffs by counterclaim)
Vanda A. Santini and M. Edward Key, Counsel for the plaintiff (defendant to the counterclaim)
Arthur Hamilton and Ara Basmadjian, Counsel for the Defendants to the Counterclaim, Arch Insurance Canada Ltd.
HEARD: May 20, 2021
JUDGMENT
The Honourable Mr. Justice H. S. Arrell
INTRODUCTION:
[1] The defendants represented by Explorica have brought two motions before me as the case management judge in the above captioned matter.
[2] The first motion is under Rule 21.01(1)(a) of the Rules of Civil Procedure is asking this court to answer a number of questions which it alleges arise from the pleadings. The second motion is to quash a summons issued by the plaintiffs Arch and Old Republic under Rule 39.03 to examine a representative of Explorica. The representative to be examined, who is the general manager of Explorica, has sworn two affidavits in this action, one of which pertains to the Rule 21 motion.
[3] The plaintiffs, represented by Arch in these motions, seek to have both motions dismissed so that they can proceed with the examination of the representative of Explorica.
[4] Counsel advise that the plaintiff Old Republic has withdrawn its summons to witness and in turn Explorica has withdrawn its Rule 21 motion against Old Republic.
[5] My decision on both motions is set out in the following reasons.
FACTS:
[6] Explorica sells and arranges packages of tours for individuals and groups, such as schools. These trips are both in North America and overseas and will include all or just parts of a trip. Explorica has terms and conditions in its contracts with its customers setting out its refund and cancelation policies.
[7] Basically, these terms and conditions apply when a customer cancels for various reasons and the timing of such cancellations prior to the departure date. In essence the longer the time between the cancellation notification and the trip commencement, the larger the refund. If Explorica cancels, the refund policy is also set out.
[8] Explorica recommended to its customers that they should enroll in trip cancellation insurance with the plaintiffs if they so wished at an additional cost strictly payable by the customeRule Explorica made it clear that any such trip cancellation insurance was independent of it.
[9] A large number of Explorica’s customers did indeed buy trip cancellation insurance from the plaintiffs to protect themselves in case they did not fall within the Explorica refund policy.
[10] Due to COVID virtually all the trips sold by Explorica with commencement dates of March 2020 and thereafter were indeed cancelled.
[11] Many of the customers who had purchased trip cancellation insurance from the plaintiffs have sought refunds from these policies, less any refunds received from Explorica under its terms and conditions.
[12] Explorica has also sought refunds from its suppliers, hotels and airlines for any funds it paid out in advance for these cancelled trips. It is unknown what amounts it has received back from these suppliers, as Explorica claims this is confidential information that the plaintiff insurers have no right to, nor do its customers. As a result, these lawsuits were commenced as well as others which are being dealt with elsewhere.
[13] The plaintiffs issued a summons to examine a representative of Explorica to obtain this information hence the motion to quash that summons by Explorica.
[14] Explorica takes the position it is not a party to the Insurers’ insurance policies with its customers. Explorica is party to the Terms and Conditions with its customers, pursuant to which it sells its trips. Where customers cancel trips, the Terms and Conditions each provide that a customer is entitled to a graduated refund scale depending on how far in advance of a trip a customer provides notice of cancellation.
[15] Explorica agrees the plaintiffs are entitled to know what trips it cancelled and what trips were cancelled by its customers. It advises this court that that information has been provided. It further agrees that it must advise the plaintiffs of any refunds it provided to its customers under the terms and conditions of its customer contracts. It advises the court it has done this. It has not however advised the plaintiffs of any refunds it received from third party suppliers which have not been passed on to its customers which it says it is not obligated to pass on to its customers under the terms of its contracts.
[16] Explorica requests that this court answer the following questions under its Rule 21 motion:
(a) Whether under the Explorica Terms and Conditions, customers are entitled to refunds or credits which Explorica’s Third Party Suppliers may have given to Explorica;
(b) Whether pursuant to the Travel Industry Act, Explorica customers are entitled to refunds or credits which Explorica’s Third Party Suppliers may have given to Explorica;
(c) Whether the credits or refunds that Explorica’s Third Party Suppliers may have given to Explorica come within the meaning of “replacement travel options” in the Coordination of Benefits section of the Old Republic Policy or are otherwise to be calculated in the payment of benefits under the Old Republic Policy;
(d) Whether as a matter of contract Old Republic is entitled to or requires information regarding refunds or credits which Explorica’s Third Party Suppliers may have given to Explorica prior to paying benefits to policyholders under the Old Republic Policy;
(e) Whether such Third Party Supplier refunds and credits, if any, are to be calculated in the payment of benefits to policyholders under the Arch Policy under the Excess Insurance section of the Arch Policy or otherwise; and
(f) Whether as a matter of contract Arch is entitled to or requires information regarding refunds or credits which Explorica’s Third Party Suppliers may have given to Explorica prior to paying benefits to policyholders under the Arch Policy.
POSITION OF THE PARTIES:
[17] Explorica urges this court to find that the terms and conditions in its contracts with its customers regarding refunds are clear and unambiguous and are the complete answer to both motions. It argues that the contract with its customers does not in any way involve the plaintiffs. It further takes the position that its customers have no right to any amount a third party supplier may have refunded Explorica for cancelled trips as the customers are only entitled to what is set out in the terms and conditions of its cancellation policy in the trip contract. Any further funds that the customer may be entitled to is dependent on any trip cancellation insurance they may have purchased separately and has nothing to do with Explorica.
[18] There is no provision in the Terms and Conditions which makes entitlement to the refunds or credits to customers dependent upon the amount of any refunds or credits Third Party Suppliers may provide to Explorica, it submits.
[19] The plaintiffs urge this court to find this is not a proper Rule 21 motion but is in fact a partial summary judgment motion without a full record being before the court. It is further argued that there is an issue as to whether Explorica and certain school board customers of Explorica, engineered these cancellations to allow claims to be made on the plaintiff’s trip cancellation policies and this must be explored. It also questions why refunds and credits received by Explorica and not passed on to its customers would not be considered “indemnity” under the plaintiff’s policy of insurance with Explorica customers. In effect the plaintiff argues any refunds received by Explorica are in reality money of its customer who paid deposits for these cancelled trips. Without this information the court cannot possibly decide this motion on its merits.
[20] The plaintiffs argued that there are indeed facts in dispute and without a full record the court is unable to properly adjudicate this motion. The only way to get the full record and all the disputed facts before the court according to the plaintiffs is to conduct an examination of the Explorica representative on funds received from third party suppliers for customers who have made a claim on the policies of the plaintiffs.
[21] The plaintiffs further urge this court to find that the Travel Industry Act is in issue and resolution of that also requires a complete factual matrix.
[22] Quite simply the plaintiffs argue that Explorica will receive a windfall of funds from third party suppliers while its customers only recourse is through the trip cancellation policies of the plaintiffs if the cancellations of the trips are outside the scope of the terms and conditions of the trip contract between Explorica and its customers. Such a result according to the plaintiffs would be grossly unfair to the plaintiffs.
ANALYSIS:
[23] Rule 21.01(l)(a) allows for the determination of a question of law where it may dispose of the whole or part of the action or where the determination of the question may substantially shorten the trial or result in a substantial savings of costs. No evidence is admissible on such a motion, except with leave of a judge or on consent of the parties. (See Rule 21.01(2)(a)).
[24] For a motion under Rule 21.01(1)(a), the issue to be determined must be an issue of law raised by the pleading. (See, McLean v. Vassel, 2001 CarswellOnt 2767 (OSC) at para. 33). An issue of fact or of mixed fact and law cannot be determined on a motion under this rule.(See, McLean v. Vassel). If there is a factual dispute or if a full factual record is necessary to decide the issue of law, the court should decline to hear the motion under Rule 21.01(1)(a). (See, Portuguese Canadian Credit Union v. CUMIS, 2010 ONSC 6107 at para. 23).
[25] The test on a motion for the determination of an issue before trial under Rule 21.0l(l)(a) is whether the determination of the issue is "plain and obvious." (See, MacDonald v. Ontario Hydro, 1994 7294 (0SC) at pg. 8). For the purposes of the motion, allegations in the statement of claim are taken to be true. (See, John v. Attorney General, 2016 ONSC 2529 at para. 16).
[26] The court's jurisdiction to decide a question of law raised by a pleading depends upon the quality of the factual foundation for the motion. The court will not decide an issue of law without an adequate factual foundation or if there is a significant factual controversy. (See, Rhone-Poulenc Canada Inc. v. Reichhold Ltd. , 1998 CarsweLIOnt 2548 (OCJ GD) at paras. 14-15).
[27] Where a party serves a summons to examine a witness for a pending motion, an opposing party may move to quash the summons for the examination of the witness on the grounds that the evidence sought is not relevant to the motion or that the examination or the underlying proceeding would amount to an abuse of process. (See, PowerServe Inc. v. Ontario College a/ Trades, 2015 0SC 857 at para. 15).
[28] If the summons to the witness is challenged, the party seeking the examination should be prepared to show that the evidence is relevant to the pending motion and that the party to be examined is in a position to provide the evidence. The onus on the party seeking to conduct an examination pursuant to Rule 39.03(1) is "not a high one."(See, Bearden v. Lee, 2005 134530 SC at para. 18).
[29] I conclude that the plaintiffs are correct and answering the questions on this motion will not significantly shorten the trial as argued by Explorica. There are a number of claims that will continue, such as the intentional interference with economic relations/unlawful means, common law trust obligations, and unjust enrichment. Indeed, Explorica admits that it does not seek a determination of these significant issues on its Rule 21.0l(l)(a) motion. These claims will of necessity have to proceed to oral and documentary discovery, and ultimately trial. It seems to this court that the issues in all claims should be resolved at the same time to avoid the risk of inconsistent judicial findings and so that ultimately at the trial all facts and a complete record are before the court so a determination on the merits can properly be made. It also appears to the court that all of the same evidence will be necessary to determine the above outstanding issues as are requested by the plaintiffs now. In other words, the representative of Explorica is still going to be examined and will need to provide the same information currently being requested.
[30] The court concludes that the plaintiffs’ policies are in excess of all other sources of coverage or indemnity. Section V1 (General Provisions) provides as follows in the Arch policy:
Excess Insurance: Insurance provided by this policy shall be in excess of all other valid and collectible insurance or indemnity (except for Accidental Death & Dismemberment; Accident and Sickness Medical Expense; Medical Evacuation; Repatriation of Remains; Baggage and Personal Effects; and Baggage Delay) or as required by state or provincial law. If at the time of the occurrence of any loss there is other valid and collectible insurance or indemnity in place, We shall be liable only for the excess of the amount of loss, over the amount of such other insurance or indemnity, and applicable deductible. Recovery of losses from other parties does not result in a refund of premium paid.
[31] Based on the position taken by Explorica, this court would be unaware of what funds were paid back to Explorica based on whatever arrangements it made with its airline travel and overseas partners on behalf of its customers for cancelled trips. These funds were not reimbursed to those customers because the cancellations fell outside the terms and conditions of the contracts. Those would be windfall funds paid to Explorica which may have kept its individual customers funds as well if the cancellations did not fall within the terms of the customers’ contracts. In reality, in those cases, Explorica is seeking to be paid twice for a cancelled trip. This is a result, this court finds, would be inequitable and unfair both to the individual customers who may not have purchased other trip cancellation insurance and would receive nothing, or to the plaintiffs which may be obligated to pay out on its policies while Explorica is paid twice.
[32] The Travel Industry Council of Ontario ("TICO") conducted an "audit" on some cancelled trips and ordered Explorica to pay out refunds in addition to its terms and conditions for a number of travellers. It is unknown to this court what audits were conducted or what funds were returned to customers or why. Nor does the court know what evidence was presented to TICO as Explorica takes the position that the plaintiffs are not entitled to this disclosure. It would seem to this court that this is relevant information that should be before it for a complete record to this R. 21 motion and clearly this is information Explorica possesses.
[33] The plaintiffs seek to examine a representative of Explorica because it has information relating to:
a. Relevant trip information pertaining to trips insured under the plaintiffs’ insurance plans;
b. Vendors that were contracted by Explorica to provide the goods and services for the trips at issue;
c. Correspondence between Explorica, school boards, travellers, and the parents or educational groups regarding school trip cancellations;
d. Insurance policies or instruments of indemnification held by Explorica or providing potential or actual coverage for refund liabilities or losses sustained by Explorica for the trips at issue; and
e. The details of any refunds issued to travellers that were insured under the policies.
[34] This court agrees with the plaintiffs that such information is reasonable and necessary for the proper determination of this motion and ultimately this case; both from the insurer’s perspective as well as the individual customers. This court cannot decide, without the above information, whether on this Rule 21.0l(l)(a) motion, or otherwise, that it is plain and obvious that there is a juristic reason for Explorica' s possible enrichment and the corresponding deprivation of others. The court also concludes that the evidence being sought by the plaintiffs is “possibly” relevant to the issues, and therefore the burden is on Explorica which seeks to quash the summons in the companion motion before me that such an examination would be an abuse of process. (See PowerServe Inc. at para. 35).
[35] Explorica, in this court’s opinion, has not met that burden. It is also difficult for this court to conclude that the general manager of Explorica, who the plaintiffs seek to examine, would not have relevant information and facts to assist in determining these issues.
[36] This court agrees with the submission of the plaintiffs that Explorica’s motion raises many of the same concerns identified by the Court of Appeal in Malik v. Attia, 2020 OCA 787 at para. 62. The facts and causes of action on which Explorica' s apparent Rule 21.0l(l)(a) motion are sought cannot be said to be discrete or readily bifurcated from the unlawful means and unjust enrichment claims where a risk of duplication or inconsistent verdicts exists.
[37] This court sees nothing in Explorica's terms and conditions that preclude customers from receiving refunds or credits that Explorica has received from its suppliers, and to hold otherwise is in effect reading such a term into the terms and conditions and this will likely be an issue for trial once the full matrix of facts are available to the court. Such an issue should not be determined by this court now without all the facts before it which is what I conclude Explorica is requesting.
[38] This court concludes that likely Explorica received refunds and credits from third party suppliers, based on its submissions, however, the court does not have information as to which trips received these refunds and credits nor how or why Explorica received such refunds and credits. For example, did it receive such refunds based on the representation or expectation that they would flow through to its customers; or was it part of a government directive; or was it based on contracts with the suppliers.
[39] This court concludes that the factual record before it is incomplete, and material facts are in dispute. As a result, the court is unable to make a proper determination on this motion under Rule 21.0l(l)(a). The plaintiffs submit they only know about claims from uncompensated insured travellers. They allege they know essentially nothing about uninsured travellers, and whether Explorica interpreted its terms and conditions to deny refunds or credits from third party suppliers. I accept the plaintiffs’ assertions that there is evidence that suggests that Explorica may have interpreted its terms and conditions differently for uninsured travelers’.
[40] The plaintiffs also suggest that there is evidence to suggest that Explorica coached travellers about how to strategically time trip cancellations to maximize their cash refunds through insurance. As well there is no information before the court of what trips Explorica cancelled and why such cancellations occurred. This is information this court needs to properly adjudicate this matter under Rule 21. For these reasons, this court determines that it is not plain and obvious whether, under Explorica' s terms and conditions, customers are not entitled to refunds or credits which Explorica's third party suppliers may have returned to it.
[41] This court concludes that it is not plain and obvious that Explorica's third party supplier refunds and credits are not to be calculated in the payment of benefits to policyholders under the plaintiff’s policies, under the Excess Insurance section of those policies or otherwise.
CONCLUSION:
[42] The motion to quash the Rule 39 summons by Explorica is dismissed and the examination of the representative of Explorica will proceed.
[43] The motion under Rule 21 is dismissed without prejudice to such a motion being brought back at a later date if the parties are so advised and there is a fulsome and complete record before the court.
[44] Counsel agreed that costs should follow the result of this motion. I expect that the parties can agree on costs but if they cannot the plaintiffs may make brief written submissions of no more than 4 pages double spaced in addition to any relevant offers or draft bills of costs within 30 days of the release of this judgment. Explorica may respond with its written submissions and its draft bill of costs 21 days after being served with the plaintiffs cost submissions.
Arrell, J.
Released: July 22, 2021
COURT FILE NO.: CV-20-00073937-0000
DATE: July 22, 2021
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
OLD REPUBLIC INSURANCE COMPANY OF CANADA
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WORLDSTRIDES CANADA INC. and EXPLORICA CANADA, INC. o/a EXPLORICA BY WORLDSTRIDES
A N D B E T W E E N:
WORLDSTRIDES CANADA INC. and EXPLORICA CANADA, INC. o/a EXPLORICA BY WORLDSTRIDES
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OLD REPUBLIC INSURANCE COMPANY OF CANADA and ARCH INSURANCE CANADA, LTD.
JUDGMENT
HSA
Released: July 22, 2021