Court File and Parties

COURT FILE NO.: CV-01-212846 and 98-CV-150279CM

DATE: 20221020

ONTARIO SUPERIOR COURT OF JUSTICE

RE: EAMONN P. McENANEY, Plaintiff

-and-

CGU INSURANCE COMPANY OF CANADA, Defendant

BEFORE: FL Myers J

COUNSEL: Kevin Doan, for the plaintiff

Kevin H. Griffiths, for the defendant

HEARD: October 19, 2022

ENDORSEMENT

[1] This endorsement also applies to the second action between the plaintiff and General Accident Assurance Company of Canada, a predecessor of the defendant, under Court File No. CV-01-212846.

[2] This endorsement deals with a case conference about scheduling a very unusual and complicated set of motions sought by the plaintiff.

The 2007 Settlement

[3] In 1998 and 2001, the plaintiff brought two actions against his statutory accident benefits insurer(s) arising from a car accident that occurred in 1995. Both actions settled at mediation and were dismissed without costs on consent in 2007.

[4] In the 2007 settlement, the insurer agreed to pay $700,000 to the plaintiff in the aggregate. About 60% of the funds were paid into a structured settlement that has produced periodic payments to the plaintiff for the past 15 or so years and continues to do so on an ongoing basis. The other 40% of the settlement funds were paid to the plaintiff in a lump sum at the time of the settlement implementation.

The Plaintiff’s Grounds to set aside the Settlement

[5] The plaintiff alleges that the settlement should be set aside because:

a. The insurer failed to serve on him the mandatory disclosure notice required under s. 9.1 (2) of the version of the Automobile Insurance regulation, RRO 1990, Reg 664, that was then in force under the Insurance Act, RSO 1990 c. I.8; and

b. The insurer purported to settle with the plaintiff’s lawyer when it knew or ought to have known that the plaintiff was self-represented at the time.

The Mandatory Disclosure Notice to Settle a Claim for Statutory Accident Benefits does not apply to Court Proceedings

[6] Subsections 9.1 (5) to (7) of the Automobile Insurance regulation provide:

(5) The insured person may rescind the settlement after the period referred to in subsection (4) if the insurer has not complied with subsections (2) and (3).

(6) Subsections (4) and (5) do not apply with respect to a settlement that has been approved by a court under Rule 7 of the Rules of Civil Procedure (Parties under Disability).

(7) The insured person shall rescind a settlement under subsection (4) or (5) by delivering a written notice to the office of the insurer or its representative and returning any money received by the insured person as consideration for the settlement.

[7] These sections have been in force in some form since 2001. Subsection 9.1 (5) allows an insured person to rescind a statutory accident benefits settlement if the insurer did not provide the mandatory disclosure notice required by subsection 9.1 (2) of the regulation. The insured cannot rescind a settlement however if it was approved by the court under Rule 7 of the Rules of Civil Procedure i.e., if the plaintiff was under disability as a litigant.

[8] To rescind a settlement, s. 9.1 (7) requires the insured person to deliver notice to the insurer that he elects to rescind and he must also repay the settlement funds.[^1]

[9] Subsection 279 (2) of the Insurance Act in force in 2007 provided that any restriction on the right to litigate claims for statutory accident benefits was void.[^2] The plaintiff therefore submits that because the settlement purports to preclude further litigation and it was reached without the insurer providing the mandatory disclosure notice, it is void under the statute.

[10] This argument runs squarely into two decisions of the Court of Appeal that provide that the disclosure notice does not need to be delivered for a settlement of a claim for statutory accident benefits that was brought in court. The Court of Appeal interpreted s. 9.1 (2) as applying only to arbitrations or non-court processes. The Court of Appeal found that the notice requirement was inapplicable to court-based litigation because, among other things, litigation settlements are dealt with under Rule 49 of the Rules of Civil Procedure, RRO 1990, Reg. 194. See: Walker v. Allstate Insurance Company (2002), 2002 44970 (ON CA), 59 O.R. (3d) 636 (C.A.) 59 O.R. (3d) 636 and Igbokwe v. HB Group Insurance Management (2001), 2001 3804 (ON CA), 55 O.R. (3rd) 313 (C.A.), (leave to appeal to the Supreme Court of Canada dismissed, [2001] S.C.C.A. No. 470),

[11] Mr. Doan submits that the Court of Appeal erred by exempting litigation settlements from the mandatory disclosure notice requirement in s. 9.1 (2) of the regulation. Doing so, he submits, wrongly precludes the plaintiff from exercising his right to rescind and lets the insurer contract out of the protections provided to insured persons in s. 179 (2) of the statute.

[12] Mr. Doan submits that the Court of Appeal impermissibly interpreted a regulation, the Rules of Civil Procedure, as trumping the consumer protection purpose of the Insurance Act which is a statute. Unfortunately for the plaintiff, Mr. Doan has already tried that argument in another case and was unsuccessful. In fact, in that case, the Court of Appeal quite recently re-asserted the correctness of its prior decisions. See: Sidhu v. Aviva Canada Inc., 2019 ONCA 444.

[13] Undaunted, Mr. Doan now proposes to bring a constitutional question to argue that the Court of Appeal decisions violate s. 92 (13) of the Constitution Act, 1867. He wishes to argue that the common law principles of statutory interpretation under which the Court of Appeal interpreted the scope of the Automobile Insurance regulation exceed the legislative competence and are ultra vires the Province of Ontario. Mr. Doan was unable to point to any constitutional basis for the proposed submission that a province cannot make laws concerning the interpretation of its own laws. But he wishes to argue that the Court of Appeal’s decisions are inconsistent with the division of powers and are therefore void under s. 52 of the Constitution Act, 1982.

The Plaintiff’s Proposed Simple Motion to set aside the Settlement

[14] Procedurally, Mr. Doan proposes to advance the plaintiff’s constitutional issues as part of proposed motions under Rule 59.06 of the Rules of Civil Procedure to set aside the settlement of the litigation in 2007. He intends to seek a declaration from the Superior Court that the three Court of Appeal decisions are unconstitutional as part of a motion to set aside the consent dismissal orders.

[15] Mr. Doan asks the court to schedule a single, early, three-hour hearing for all these issues to be argued as matters of law with minimal facts.

[16] Rule 59.06 provides:

Amending, Setting Aside or Varying Order

Amending

59.06 (1) An order that contains an error arising from an accidental slip or omission or requires amendment in any particular on which the court did not adjudicate may be amended on a motion in the proceeding. R.R.O. 1990, Reg. 194, r. 59.06 (1).

Setting Aside or Varying

(2) A party who seeks to,

(a) have an order set aside or varied on the ground of fraud or of facts arising or discovered after it was made;

(b) suspend the operation of an order;

(c) carry an order into operation; or

(d) obtain other relief than that originally awarded,

may make a motion in the proceeding for the relief claimed.

[17] I have a problem scheduling the motions as sought. I do not understand how a litigant can seek a final constitutional declaration of right on a motion to re-open a settlement. I do not understand how a motion to set aside or vary a consent order can be a vehicle for commencing a constitutional challenge let alone one that challenges three Court of Appeal decisions in other litigation that is not before the court.

[18] In my view, if a party seeks a constitutional declaration of right, he needs to commence a proper proceeding and to create a fact base on which a constitutional question can be stated and considered. Constitutional remedies are not sought or granted as simple arguments of law on an interlocutory, procedural motion with no facts. See: Kitkatla Band v. British Columbia (Minister of Small Business, Tourism and Culture), 2002 SCC 31, at para. 46

The Second Basis Proposed to set aside the Settlement

[19] The plaintiff also seeks to set aside the 2007 settlement because the defendant allegedly abused the plaintiff by concluding a settlement with the lawyer that the plaintiff brought with him to the mediation. Mr. Doan advises that the plaintiff was self-represented and brought to the mediation a lawyer whom he had previously used in the proceeding on a limited retainer. He says that the plaintiff was not feeling well and left the mediation. Counsel then settled in the plaintiff’s absence. Mr. Doan says that the plaintiff will argue that by settling, counsel for the plaintiff exceeded his authority to the knowledge of counsel for the insurer.

[20] This is a very fact-heavy set of allegations. The allegations invite an inquiry into how the case settled if the plaintiff’s counsel acted without authority in the plaintiff’s absence. It invites inquiry into the relationship and retainer between the plaintiff and the lawyer who attended the mediation with him that day. It invites questions as to why the plaintiff signed the settlement documents, consented to the dismissal of the lawsuits, accepted the $700,000, and accepted 15 years of distributions from the structured settlement fund if he did not agree to the settlement reached for him by the lawyer he brought to the mediation? Was the settlement unfair? Was the plaintiff abused to the insurer’s knowledge? Has he condoned the settlement regardless? This is not a simple issue of law for a quick motion.

[21] There is a more fundamental question for the purposes of scheduling, however. This ground to set aside the consent dismissal orders does not turn on the plaintiff’s right to rescind the settlement under the Automobile Insurance regulation. So, what is the legal basis on which these allegations might be used to set aside the settlement and the consent dismissal orders?

[22] Before subjecting the parties to a lengthy and expensive foray into facts from 15 years ago, and monthly since that time, perhaps the plaintiff should identify a basis outside of the Automobile Insurance regulation, i.e. at common law, on which he can purport to avoid a settlement contract 15 years after making it, consenting to the dismissal of the proceedings, and receiving the settlement proceeds, all done with the knowledge that his lawyer settled in his absence from the mediation. I do not see anything in Rule 59.06 that seems to invite this type of inquiry.

Must the Plaintiff Repay the Settlement Funds Before he brings any Proceeding to set aside the Settlement?

[23] As set out above, s. 9.1 (7) of the Automobile Insurance regulation requires that an insured person who wants to rescind a settlement must give notice to the insurer and repay the settlement funds. A party who claims that an agreement is never validly made cannot keep the proceeds of the agreement. He must make restitutio in integrum and return the parties to the status quo ante. Mr. Doan proposes that the issue of whether and how much his client must repay to the insurer should await the return of the motion.

[24] The plaintiff wants to keep the benefit of the settlement agreement, including receiving ongoing payments on his structured settlement, while asserting that the agreement has been rescinded. Mightn’t receipt of even a single payment after announcing one’s intention to rescind amount to affirmation of the agreement? This too is not a simple issue. How does one repay a structured settlement 15 years on? Presumably, the capital is not readily accessible by the plaintiff. Moreover, valuation of the amount received by the plaintiff since 2007 is likely quite complex.

[25] Mr. Doan advises that he is aware of a case in which a judge rescinded a settlement and then stayed the action pending repayment of the proceeds by the plaintiff.

[26] Before scheduling an expensive factual inquiry, I agree with Mr. Griffiths that the issue of whether the plaintiff first needs to repay the settlement proceeds to rescind the settlement should be resolved.

[27] That begs yet another issue. What is the proper forum for these issues to be heard?

The Current Dispute Resolution Process for Statutory Accident Benefits Claims

[28] In 2007, when the settlement was made, statutory accident benefits claims could be brought in two ways – by litigation in court or through arbitration under the auspices of the Financial Services Commission of Ontario.

[29] On April 1, 2016, amendments to s. 280 of the Insurance Act came into force to change the dispute resolution process. Since then, under s. 280 (2) of the statute, all claims for statutory accident benefits fall within the exclusive jurisdiction of the Licence Appeal Tribunal.

[30] Subsection 280 (3) of the Insurance Act now expressly precludes court proceedings in respect of a person’s entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled.

[31] It is also clear that claims to rescind a settlement relating to statutory accident benefits under s. 9.1 of the Automobile Insurance regulation are also to be brought to the tribunal. Subsection 9.1 (8) of the regulation provides:

(8) No person may apply to the Licence Appeal Tribunal under subsection 280 (2) of the Act with respect to benefits that were the subject of a settlement or a purported settlement unless the person has returned the money received as consideration for the settlement.

[32] This subsection shows both that motions to rescind a settlement under s. 9.1 are to be brought to the tribunal and that before that can be done, the settlement funds must be repaid.

[33] There are also complicated transition rules in s. 9.2 of the Automobile Insurance regulation because of the changes in the processes over time. Mr. Doan advises that there were few changes of any real substance to the key provisions on which the plaintiff relies.

[34] Mr. Griffiths submits that under the current regulation, the plaintiff is required to bring his request to set aside the settlement to the tribunal and not to the court. He agrees that the tribunal cannot set aside the court’s dismissal orders. Rather, he submits that if the tribunal finds that the settlement is rescinded, then the plaintiff can ask the court to set aside the consent dismissal orders. That may be a matter of form alone given that the settlement underpinning the order will have then been vitiated ab initio.

[35] In fact, should the tribunal confirm that the plaintiff has effectively rescinded the settlement, one might question whether the plaintiff would be entitled to go ahead to try to prove his entitlement to statutory accident benefits afresh before the tribunal without bothering to re-open this litigation.

[36] In Stegenga v. Economical Mutual Insurance Company, 2019 ONCA 615 the Court of Appeal commented on the purpose of the 2016 amendments to the dispute resolution process as follows:

[38] The purpose of the amendments that led to the current s. 280 has been described as reducing both insurance rates and insurance fraud, and speeding up dispute resolution, in large part by providing an efficient, fair and accessible mechanism for resolving disputes: "Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014", 1st reading, Ontario, Legislative Assembly, Official Report of Debates (Hansard), 41st Parl., 1st Sess., No. 8 (July 15, 2014) at 1510 (Hon. Charles Sousa); see, also, 2014 Ontario Automobile Insurance Dispute Resolution System Review, Final Report, by The Hon. J. Douglas Cunningham (Toronto: February 25, 2014), at pp. 2-3, 13, 31-33, the report that formed the basis for the amendments to the dispute resolution provisions. The amendments removing disputes from the courts and empowering the LAT to deal with them are among the "cornerstones" of the legislation passed to effect the above purpose: Hon. Charles Sousa, at 1510.

[39] The purpose of the current s. 280 has two important implications. First, the purpose of reducing insurance rates by providing for efficient dispute resolution through the LAT would not be served by an overly restrictive reading of the LAT's jurisdiction and the corresponding limit on the court's jurisdiction. The legislature must be taken to have considered the importance of its objectives of efficiency and cost reduction to outweigh the loss of insured individuals' access to the courts and to the full range of remedies available there.

[40] Second, while the legislature's intention that the dispute resolution provisions continue to be a complete code does not, on its own, determine which disputes fall within it, it does suggest that the legislature did not intend the same, similar, or overlapping issues to be adjudicated in more than one forum.

[37] In other words, am important purpose of the statutory accident benefits regime is to try to get money to insured persons sooner and at less cost by removing disputes over statutory accident benefits from the courts.

[38] There is therefore an issue that needs to be decided at the outset as to whether the effort to set aside the settlement in 2007 is properly advanced in these actions or before the tribunal.

[39] The same question needs to be asked about the obligation to repay the settlement proceeds. Is the question of whether the plaintiff is required to repay the settlement proceeds before moving to rescind the settlement to be decided here or before the tribunal?

Analysis

[40] In my view, it would be uneconomical, inefficient, and a procedural nightmare to try to bring all of this on in one simple, little, three-hour motion on minimal evidence as suggested by Mr. Doan. It is a morass of procedure, transitional provisions, and interlocking jurisdictional questions, all before one gets to the merits of the requests to set aside the settlement (including a constitutional declaration).

[41] To unlock the Gordian knot, first one needs to determine if the matter can even be heard in the court or if it needs to go before the tribunal. Where does that preliminary question get decided? Plus, in either case, there is a need to determine if the plaintiff is entitled to even ask the question without repaying the settlement proceeds first.

[42] While the current statutory scheme would seem to preclude proceedings in this court, I am not prepared to foreclose the plaintiff from trying to argue before a judge that the court should hear the issue of whether a proceeding to rescind the settlement should be heard in court (to deal with the consent dismissal orders) or before the tribunal. That will then let the insurer raise the issue of repayment as a preliminary objection.

[43] It seems rather apparent that bringing everything before the tribunal would avoid a potential hopscotching of proceedings back and forth. A judge who considers whether it is appropriate for the court to hear a request to set aside the consent orders for example, might still determine that before he or she can hear that question, the parties need to have the repayment timing issue resolved at the tribunal.

[44] All that I am finding today then, is that it is premature to schedule fact-laden inquiries on the merits on either basis by which the plaintiff proposes to set aside the consent dismissal orders. The plaintiffs’ proposed issues cannot be resolved by a single, simple, early motion on issues of law.

[45] For now, counsel are directed to discuss whether one or the other will move to determine the proper forum for the plaintiff’s proposed attacks on the settlement and where that question will be brought. Counsel should also discuss how and where the question of the timing of the obligation to repay the settlement funds is to be brought.

[46] If the parties can agree, they should send me a draft consent order with their timetable of motion(s) or simply advise me that they do not need to schedule further court proceedings at this time. If they cannot agree, I will hear them solely on the preliminary issue of whether to schedule a motion or other summary resolution process before the court to consider the appropriate forum for the plaintiff’s proposed challenges and when and where the repayment issue is to be heard.

FL Myers J

Date: October 20, 2022

[^1]: Under s. 9.1 (9) of the regulation, if the validity of the rescission is contested, then the insurer is required to hold in trust the funds that it receives from the plaintiff pending the outcome of the dispute.

[^2]: The section provides an exception “as provided in the regulations” that may be relevant. But I do not need to address that issue for today’s purposes.