Altea Active Club Inc. v. Aviva Insurance Company of Canada, 2022 ONSC 243

Court File and Parties

COURT FILE NO.: CV-20-646834 MOTION HEARD: 2021-10-05 REASONS RELEASED: 2022-01-10

SUPERIOR COURT OF JUSTICE – ONTARIO

BETWEEN:

ALTEA ACTIVE CLUB INC. Plaintiff

- and-

AVIVA INSURANCE COMPANY OF CANADA Defendant

BEFORE: ASSOCIATE JUSTICE McGRAW

COUNSEL: G. Zacher and S. Dukesz, for the Defendant D. Cox, for the Plaintiff

REASONS RELEASED: January 10, 2022

Reasons for Endorsement

I. Introduction

1This is a motion by the Defendant Aviva Insurance Company of Canada (“Aviva”) to stay this action on the basis that Manitoba is the more appropriate forum and Ontario is forum non conveniens.

II. Background

2The Plaintiff Altea Active Club Inc. (“AAC”) is a company incorporated pursuant to the laws of Canada with its head office located in Winnipeg, Manitoba. AAC, directly and through two subsidiaries, owns and operates a premier fitness facility located in Winnipeg (the “Facility”). Aviva is a licensed insurance company with its head office located in Markham, Ontario carrying on business across Canada which is a subsidiary of Aviva, plc, a company based in the United Kingdom.

3AAC is the named insured under a property insurance policy issued by Aviva for the Facility and AAC premises at the same location for the period from November 13, 2019 to November 13, 2020 (the “Policy”). AAC’s application for coverage was submitted by its broker, Hub International Manitoba Ltd. (“Hub”) to Aviva’s Manitoba office (“Aviva Manitoba”), both of which are located in Winnipeg. The Policy was negotiated between Hub and Aviva Manitoba and Aviva Manitoba completed risk pricing and quoted, approved, underwrote and administered the Policy. Aviva Manitoba issued the Policy based on a request to bind coverage submitted by Hub. Aviva Manitoba issued invoices to Hub for the Policy premiums which Hub collected and which were paid from AAC’s bank account located in Winnipeg.

4On March 11, 2020, the World Health Organization (the “WHO”) declared that the ongoing outbreak of COVID-19 was a global pandemic. Due to the spread of COVID-19 in Manitoba, on March 20, 2020, the Province of Manitoba declared a state of emergency and approved an Order pursuant to the Public Health Act (Manitoba) which, among other things, mandated the closure of all “wellness centres offering physical activities, gyms, fitness centres and athletic clubs and training facilities” (the “Shutdown Order”). As a result of the Shutdown Order, the Facility was closed until June 3, 2020.

5Shortly after the imposition of the Shutdown Order, Hub submitted a claim on behalf of AAC for coverage for business interruption incurred by AAC with respect to the closure of the Facility as result of the Shutdown Order (the “Claim”). In particular, AAC sought coverage pursuant to the restricted access and negative publicity supplemental coverages which insure against outbreaks of contagious or infectious diseases. Aviva initially assigned Stan Bodal, a claims adjuster located in Ontario, who corresponded in early April 2020 with David Wu, AAC’s President, also located in Ontario. On or about April 7, 2020, Mr. Bodal advised Mr. Wu that the Claim was being taken over by Diane Clarke, an adjuster located in New Brunswick.

6On May 11, 2020, Ms. Clarke advised Mr. Wu that Aviva was denying the Claim. Mr. Wu’s evidence is that Ms. Clarke advised him that she was relaying directions which Aviva had received from its internal and external legal counsel. Ms. Clarke sent Mr. Wu a letter dated May 15 addressed from Aviva’s office in Ontario advising him that the Claim was denied as the negative publicity and restricted access coverages in the Policy did not apply.

7AAC commenced this action by Statement of Claim issued on September 8, 2020 seeking a declaration that the Policy covers 60 days of business interruption losses caused by the pandemic and that by denying coverage Aviva has breached the Policy. AAC also seeks a declaration that Aviva breached its duty of good faith. AAC seeks compensatory damages in the amount of $1,000,000 for breach of contract and breach of the duty of good faith and punitive damages of $1,000,000.

8Aviva has not defended this action, however, takes the position that the restricted access clause does not provide coverage for business interruption losses resulting from the Shutdown Order because it was not made to restrict ingress to or egress from the Facility or any particular outbreak of COVID-19 that was required to be reported to government authorities as required under the terms of the Policy. Aviva submits that the Shutdown Order was made contemporaneous with other provincial shutdown orders in response to the WHO’s and Canada’s recognition of COVID-19 as a global pandemic. It is also Aviva’s position that that there is no coverage under the negative publicity clause because the alleged losses were attributable to the Shutdown Order or other general consequences of the pandemic and did not directly result from an outbreak of a contagious or infectious disease within 25 kilometres of the Facility that was required by law to be reported to government authorities as provided under the Policy.

9AAC pleads and submits that the wording of the Policy covers pandemics, global or otherwise, as long as the pandemic constitutes an outbreak of a reportable contagious or infectious disease that leads to a public order or is within 25 kilometres of the Facility. AAC argues that by denying the Claim because the pandemic is a global pandemic, Aviva has taken an unreasonable position not supported by the wording of the Policy which it adopted to take advantage of vulnerable insureds thereby breaching its duty of good faith.

10This matter first came before me at a telephone case conference on December 8, 2020. The motion was initially scheduled for March 11, 2021 and a timetable for the exchange of materials and cross-examinations was established. At another telephone case conference on February 1, 2021, counsel advised that AAC intended to bring a motion to compel Aviva to answer refusals therefore, the March 11 date was used for the refusals motion. As set out in my Endorsement dated March 11, 2021, the refusals were resolved by case management, directions and discussions between counsel and on a telephone case conference on May 6, 2021 this forum motion was scheduled to proceed on June 18, 2021. Due to court scheduling and administrative issues the motion did not proceed on June 18 and was re-scheduled for October 5.

III. The Law and Analysis

Generally

11The parties both rely on my decision in Churchill Cellars Ltd. v. Haider, 2018 ONSC 2013; aff’d 2019 ONSC 1143 (Div. Ct.) and agree that it sets out the applicable law on this motion. The relevant portions are set out below.

12Section 106 of the Courts of Justice Act (Ontario) provides that the court, on its own initiative or on motion by any person, may stay any proceeding in the court on such terms as are considered just.

13There are two questions on a jurisdiction motion:

i.) jurisdiction simpliciter: does the court have jurisdiction over the case that can be exercised?;

ii.) if the answer to i.) is “yes”, then a second question arises: is Ontario a forum conveniens to decide the case or should it be decided somewhere else? (King v. Giardina, 2017 ONSC 1588 at para. 16)

14The parties agree that the Ontario court has jurisdiction simpliciter. Therefore, the only issue on this motion is whether this Court should decline to exercise its jurisdiction and stay this action based on the doctrine of forum non conveniens. For the reasons that follow, I have concluded that the court should decline to exercise its jurisdiction as Aviva has demonstrated that Manitoba is the clearly more appropriate forum.

15The court’s discretion on a forum motion is exercised in appropriate but limited circumstances in order to assure fairness and the efficient resolution of disputes (Club Resorts Ltd. v Van Breda, 2012 SCC 17 at para. 104). To be successful, Aviva must demonstrate that Manitoba is the clearly more appropriate jurisdiction (Van Breda at para. 108).

16The courts have developed the following non-exhaustive list of factors that may be considered in assessing the connections to each forum and determining the most appropriate forum for the action:

(i) the location of the majority of the parties; (ii) the location of the key witnesses and evidence; (iii) contractual provisions that specify applicable law or accord jurisdiction; (iv) the avoidance of multiplicity of proceedings; (v) the applicable law and its weight in comparison to the factual questions to be decided; (vi) geographical factors suggesting the natural forum; and (vii) whether declining jurisdiction would deprive the plaintiff of a legitimate juridical advantage in the domestic court (Young v. Tyco International of Canada Ltd (2008), 2008 ONCA 709, 92 O.R. (3d) 161 (C.A.) at paras. 25-26; James Bay Resources Ltd. v. Mak Mera Nigeria Ltd., 2015 ONSC 1538; aff’d 2015 ONCA 781 at para. 31).

17Other factors which the court should consider are: i.) the comparative convenience and expense for the parties to the proceeding and for their witnesses, in litigating in the court or in any alternative forum; ii.) the jurisdiction where the factual matters arose; iii.) the law to be applied to issues in the proceeding; iv.) the desirability of avoiding multiplicity of legal proceedings; v.) the desirability of avoiding conflicting decisions in different courts; vi.) the enforcement of an eventual judgment; and vii.) the fair and efficient working of the Canadian legal system as a whole (Van Breda at para. 105; King at para. 21).

18In considering the relevant factors and exercising its discretion the court should be guided by 3 principles:

(i) the threshold for displacing the plaintiff's choice is high, and the existence of a more appropriate forum must be clearly demonstrated; (ii) the court should consider and balance the efficiency and convenience of a particular forum with the fairness and justice of that choice to the parties; (iii) because a forum non conveniens motion is brought early in the proceeding, the court should adopt a cautious approach to fact-finding particularly with respect to matters that are at the heart of the lawsuit; the assessment of the factors should be based on the plaintiff's claim if it has a reasonable basis in the record (James Bay at para. 32)

Judicial Case Management

19As a preliminary issue, AAC submits that Aviva has admitted by conduct that the court should accept its jurisdiction simpliciter and that this motion is an abuse of process. By letter dated October 15, 2020, Aviva’s counsel advised AAC’s counsel that there were 12 proposed class actions against Aviva in Canada arising from Aviva’s denial of business interruption losses resulting from the pandemic including 8 in Ontario. Aviva’s counsel requested whether AAC intended to hold this action in abeyance pending the disposition of the class actions and whether it would consent to this action being case managed by the same Ontario Judge (3 Judges had been appointed in Ontario to case manage other actions). AAC’s counsel responded on October 16, 2020 denying this request, advising that AAC wished to proceed with this action promptly and did not believe that case management was necessary though they remained open to discuss it. AAC submits that by taking the position that this action should be case managed by an Ontario Judge Aviva has conceded that Ontario should have jurisdiction and acted in bad faith by subsequently bringing this motion which it claims is an abuse of process.

20In my view, there is no basis for AAC’s assertions. AAC has not provided any case law or other authority in support of its submissions and I cannot conclude that counsel’s proposals and requests in the context of preliminary procedural discussions constitute an admission or concession or is a factor to be considered on this motion. Even if it were a relevant factor, it would not alter my conclusions below. In the circumstances, I am satisfied that Aviva did not make any concessions or relinquish any rights by proposing case management in Ontario and that after counsel’s unsuccessful discussions it was open to Aviva to defend this action pursuant to the Rules and to bring this motion. Discussions such as these between counsel should be encouraged as they often result in reasonable, practical resolutions which save time and costs to the parties and the court. To accept AAC’s submissions would effectively sanction Aviva for these efforts and run contrary to the most expeditious, least expensive and cost-effective resolution of this matter and Rule 1.04(1).

Location of the Majority of the Parties

21AAC’s head office and the Facility, its only business operations, are located in Manitoba. While Aviva’s head office is located in Ontario, its provincial office, Aviva Manitoba, and AAC’s broker, Hub, also located in Manitoba, had substantially all of the relevant dealings with respect to the Policy until after the Claim was submitted. This includes the negotiation, pricing, underwriting, issuance and administration of the Policy. In my view, this demonstrates a strong connection to Manitoba.

22As set out below, AAC submits that, based on the disputed issues, the location of witnesses and evidence and other factors, the relevant parties are located in Ontario. This includes the fact that Mr. Wu and other AAC and Aviva executives are located Ontario. For many of the same reasons as below, I reject AAC’s submission that the relevant parties are located in Ontario and I conclude that the connections between the parties and Ontario are insufficient to overcome the weight of the strong connection to Manitoba.

23This factor favours Manitoba.

Jurisdiction Where Factual Matters Arose

24This action is undefended and in the very early stages. Therefore, in considering the jurisdiction where the factual matters arose I have proceeded based on the facts as pleaded in the Statement of Claim and undisputed facts (James Bay at para. 32; Tyco at para. 32). The parties largely agree on the disputed issues, namely that this is a breach of contract claim for business interruption coverage requiring interpretation of the relevant provisions of the Policy and whether Aviva breached its duty of good faith. However, they differ on what facts are relevant to the court’s determination of these issues and whether, as AAC submits, the emphasis should be on facts related to the handling and denial of the Claim and the allegations of bad faith.

25The underlying factual matters arose from the imposition of the Shutdown Order in Manitoba by the Province of Manitoba under Manitoba statutes and regulations due to the spread of COVID-19 in Manitoba resulting in the closure of the Facility. This in turn resulted in the filing of the Claim under the Policy which was negotiated, issued and administered in Manitoba and is subject to Manitoba law. AAC concedes that these facts are relevant to the pandemic and the administration of the Policy but argues that they are undisputed, not relevant to the resolution of the disputed issues and that more facts and “far more relevant facts” favour Ontario.

26Aviva has admitted that, in consultation with external counsel, the primary individuals involved in the decision to deny coverage were its General Counsel and Chief Legal Officer; Assistant Vice-President, National Litigation Strategy Counsel; and Assistant Vice-President, Technical Property Claims Lead all of whom are based in Ontario. AAC submits that the decisions to wrongfully deny coverage which were made by these 3 Aviva representatives located at its head office in Ontario are more relevant to its contractual claim and whether Aviva acted in bad faith than facts related to the administration of the Policy, the Shutdown Order and other facts arising in Manitoba. AAC also submits that Aviva “controlled” the wording of the Policy in Ontario.

27I agree with AAC that the facts with respect to handling and denying the Claim are relevant to the disputed issues and part of the factual matrix. However, I disagree with the weight which AAC asks the court to place on these facts relative to the facts related to the administration of the Policy, the pandemic, the Shutdown Order and the interpretation of the Policy. In my view, AAC’s characterization of the relevant facts minimizes these underlying, material facts and places too much weight on facts related to the activities of its own and Aviva’s executives and representatives in Ontario. This is not an accurate reflection of the facts which are relevant to what the court must decide.

28More specifically, in determining AAC’s contractual claim under the Policy, and consistent with AAC’s Statement of Claim, the court will have to consider whether the pandemic was an outbreak of a contagious or infectious disease within 25 kilometres of the Facility which was required by law to be reported to government authorities resulting in the Shutdown Order and if, as a direct result of the outbreak, AAC sustained a loss of business income. These determinations are almost entirely based on facts which arose or occurred in Manitoba, including the location of the outbreak as within 25 kilometres of the Facility, the Shutdown Order and AAC’s allegations that the actual loss of business income at the Facility is comprised of unpaid membership dues; credits issued to customers; decreases in personal training revenues and new memberships; and decreases in the sale of ancillary products and services such as day passes, food and rentals.

29I do not accept AAC’s submission that the negotiation of the Policy is irrelevant to the factual matrix and the interpretation of the Policy because it was a standard form, “take it or leave” it contract. The record demonstrates that while the Policy contains certain standard language, it was still open to Hub, on behalf of AAC, both sophisticated parties, to negotiate and/or select specific coverages, extensions and endorsements depending on AAC’s business requirements. AAC relies on Ledcor Construction Ltd. v. Northbridge Indemnity Insurance Co., 2016 SCC 37, where a standard-form exclusion was a pre-requisite to the purchase of the policy, not an optional extension to the Policy as in the present case (Ledcor at paras. 9-10). Further, the words of a contract must be read as a whole and consistent with the surrounding circumstances known to the parties at the time of contract formation (Creston Moly Corp. v. Sattva Capital Corp., 2014 SCC 53 at paras. 46-47). Even when interpreting standard form contracts, the court may consider the dealings between the parties, the purpose of the contract, the nature of the relationship it creates and the market in which it operates (Ledcor at paras. 30-31, 46).

30Similarly, I also reject AAC’s submission that the facts relevant to the quantification of AAC’s alleged losses are based on its own executive decision-making in Ontario, financial records maintained online in Ontario and reviewed by its Ontario accountants and an independent Ontario expert it has retained to advise on damages. As set out above, the losses claimed by AAC were allegedly incurred at the Facility in Manitoba. Given that AAC represents that all of its relevant evidence is available electronically and the only business operation generating the financial information is located in Manitoba, I place little to no weight on the fact that this information was maintained online in Ontario. While I give some weight to the review by Ontario accountants, I do not consider it appropriate for the purposes of this motion to consider the location of an independent expert retained by AAC in Ontario to advise it with respect to the losses it is claiming in this litigation.

31Overall, I conclude that the facts cited by AAC as favouring Ontario are insufficient to overcome the stronger connection to the underlying, material facts in Manitoba giving rise to this action.

32This factor favours Manitoba.

Location of Key Witnesses and Evidence

33I reject AAC’s assertions that all key witnesses are located in Ontario and none are based in Manitoba.

34AAC submits that 10 of its 12 likely witnesses are based in Ontario while Ms. Clarke is located in New Brunswick and an AAC executive is based in Maryland, United States. I agree that it will be necessary to have witnesses from Ontario. Mr. Wu is a key witness and other Ontario-based executives from both AAC and Aviva, together with Mr. Bodal, will be necessary witnesses. AAC also suggests that it may call a Hub executive from Ontario.

35However, as discussed above, I do not accept AAC’s retention of an Ontario-based expert retained to advise on damages in the litigation as a proper factor on a forum motion. I am also not convinced that one of AAC’s co-founders, who maintains its online financial software, is a key witness. Further, AAC states that it will call Aviva’s General Counsel and Chief Legal Officer, National Litigation Strategy Counsel and Assistant Vice-President, Technical Property Claims Lead who are all located in Ontario. However, 2 of these individuals are in-house legal counsel and given their consultation with external legal counsel, Aviva is asserting that the evidence of all 3 with respect to coverage decisions is privileged and inadmissible.

36Consistent with my conclusions above regarding the location of the factual matters, Manitoba witnesses will be required. Even AAC acknowledges that evidence may be required from Manitoba health officials with respect to the pandemic, specifically whether there was an “outbreak” within 25 kilometres of the Facility. AAC’s suggestion that this evidence could be introduced by Letters Rogatory in Ontario is insufficient given the importance of the issue and supports Manitoba as a forum. Further, Aviva submits that it will call a Hub representative from Manitoba and witnesses from Aviva Manitoba with respect to the negotiation and administration of the Policy. I also agree that AAC representatives or employees from the Facility may be required with respect to the disputed issues particularly damages.

37As all of the relevant documents are accessible electronically, the location of evidence is a neutral factor. Similarly, the parties may also consider the virtual attendance of witnesses which has become a more frequent and accepted practice during the pandemic.

38These are neutral factors.

Comparative Convenience and Expense to the Parties and Their Witnesses

39AAC submits that it would incur greater inconvenience and expense as a small business litigating against a multi-national insurance company given that it intends to call numerous witnesses from Ontario (We Serve Health Care LP v. Onasanya, 2018 ONSC 1758 at paras. 77-78). Based on my conclusions above regarding witnesses, I am not satisfied that the actual burden on AAC will be as great as it claims, and that any disparity will be limited and/or offset by the fact that any Manitoba witnesses will not have to travel to Ontario and that Aviva’s Ontario witnesses will also have to travel to Manitoba. The use of virtual attendances may also assist in limiting inconvenience and expense.

40This is a neutral factor.

Contractual Provisions re: Applicable Law or Jurisdiction/Applicable Law and Weight in Comparison To Factual Issues

41The parties agree that the Policy is governed by the law of Manitoba based on section 116 of The Insurance Act (Manitoba) which provides that a contract is deemed to have been made in Manitoba if its subject matter is property that is located in Manitoba or it insures an insurable interest of a resident in Manitoba. Notwithstanding this admission, AAC submits that since Aviva has not tendered expert evidence proving any differences between Manitoba and Ontario law, this Court must assume that Ontario law is the same as Manitoba (ABN Amro Bank N.V. v. B.C.E. Inc. at paras. 13, 22 and 26).

42In my view, ABN Amro does not stand for the general proposition that expert evidence is required in all cases to establish that the foreign, non-Ontario law at issue is different than Ontario law barring which Ontario law is presumed to be the same. Further, ABN Amro is fundamentally distinguishable given that the foreign law in that case, Quebec or New York, was agreed to by the parties in a credit agreement and not proscribed by statute as in the present case. Further, the case law with respect to the duty of good faith is largely guided by Supreme Court jurisprudence and therefore is neutral to both jurisdictions.

43This factor strongly favours Manitoba.

Avoidance of Multiplicity of Proceedings and/or Conflicting Decisions and Enforcement of Judgment and Juridical Advantage

44The parties agree that these are neutral factors.

Fair and Efficient Working of the Canadian Legal System

45The court must assess the fairness of the overall justice system when there are competing Canadian jurisdictions (King at para. 73).

46AAC elected to open and operate the Facility and locate its head office in Manitoba. It also chose Hub, a Manitoba based broker, who dealt with Aviva Manitoba on its behalf to purchase the Policy which, pursuant to Manitoba statute, is governed by Manitoba law. Aviva set up operations in Manitoba to deal with businesses like AAC seeking to insure property in Manitoba and brokers like Hub, who established similar operations in Manitoba. The Policy was administered and paid for in Manitoba. Forced to close due to the Shutdown Order, AAC filed the Claim for business losses related to the Facility through Hub with Aviva Manitoba. The Claim was subsequently handled by Aviva in Ontario and New Brunswick.

47In my view, in these circumstances, it would not be fair or efficient to litigate claims in Ontario arising from business operations and alleged losses in Manitoba due to Manitoba’s Shutdown Order based in large part on the fact that AAC’s senior management team chooses to reside and work from Ontario even though AAC only has business operations in Manitoba. This conclusion is supported by the fact that a Manitoba statute provides that the Policy, the contract at issue in this litigation, is governed by Manitoba law. In my view, it would be inconsistent with fairness, efficiency and comity between Canadian jurisdictions for AAC to arrange its affairs in this manner and then litigate disputes in Ontario in these circumstances, particularly where the Province of Manitoba has legislated that Manitoba law applies the Policy and the Shutdown Order causing the alleged losses during the pandemic was also made under Manitoba law.

48This factor favours Manitoba.

49Having considered, balanced and weighed all of the relevant factors and circumstances, I conclude that Aviva has demonstrated that Manitoba is clearly a more appropriate forum and that the court should exercise its discretion to stay this action.

IV. Disposition

50Aviva’s motion is granted. Order to go staying this action.

51If the parties cannot agree on the costs of this motion, they may file written costs submissions not to exceed 3 pages (excluding costs outlines) with me on a timetable to be agreed upon by counsel.