Unifund Assurance Co. v. Insurance Corp. of British Columbia

Unifund Assurance Co. v. Insurance Corp. of British Columbia
Collection
Supreme Court Judgments
Date
2003-07-17
Neutral citation
2003 SCC 40
Report
[2003] 2 SCR 63
Case number
28745
Judges
McLachlin, Beverley; Iacobucci, Frank; Major, John C.; Bastarache, Michel; Binnie, William Ian Corneil; LeBel, Louis; Deschamps, Marie
On appeal from
Ontario
Subjects
Constitutional law
Insurance
Notes
SCC Case Information: 28745
Decision Content
Unifund Assurance Co. v. Insurance Corp. of British Columbia, [2003] 2 S.C.R. 63, 2003 SCC 40
Insurance Corporation of British Columbia Appellant
v.
Unifund Assurance Company Respondent
Indexed as: Unifund Assurance Co. v. Insurance Corp. of British Columbia
Neutral citation: 2003 SCC 40.
File No.: 28745.
2002: December 12; 2003: July 17.
Present: McLachlin C.J. and Iacobucci, Major, Bastarache, Binnie, LeBel and Deschamps JJ.
on appeal from the court of appeal for ontario
Constitutional law — Extraterritorial limitation on provincial legislation — Applicability of reimbursement provisions of Ontario regulatory scheme to out-of-province insurer.
Insurance — Motor vehicles — Interprovincial motor vehicle liability insurance — Arbitrator — Jurisdiction — Ontario residents injured while travelling in British Columbia — Ontario residents receiving statutory accident benefits under Ontario policy from Ontario insurer — British Columbia law permitting insurer in that province to deduct from damages payable amount of benefits received by insured under automobile insurance “wherever” issued — Ontario Insurance Act not permitting deduction but providing for indemnification of no‑fault insurer by tortfeasors’ insurer for benefits paid — Jurisdiction of arbitrator appointed under Ontario Insurance Act to decide issues of jurisdiction simpliciter, forum conveniens and choice of law — Insurance Act, R.S.O. 1990, c. I.8, s. 275.
Mr. and Mrs. B, Ontario residents, were injured when their rented car was struck by a tractor‑trailer in British Columbia. All the vehicles involved in the accident were registered in British Columbia and insured by the appellant. After their return to Ontario, both Mr. and Mrs. B received substantial statutory accident benefits (SABs) under their Ontario policy from their Ontario insurer, the respondent. Subsequently they were awarded substantial damages in an action brought in British Columbia against the negligent truck owner, truck driver and truck repair shop, all of whom were insured by the appellant. Pursuant to s. 25 of the British Columbia Insurance (Motor Vehicle) Act, the appellant deducted the no-fault benefits paid to the Bs from the award of damages in British Columbia.
Both the Ontario insurer and the British Columbia insurer were parties to a Power of Attorney and Undertaking (the “PAU”) exchanged by motor vehicle insurers to denote compliance with minimum coverage requirements and to facilitate acceptance of service. The PAU is part of a reciprocal scheme for the enforcement of motor vehicle insurance claims in Canada.
Under s. 275 of the Ontario Insurance Act, the payor of the SABs is entitled to seek indemnification from the insurer of any heavy commercial vehicle involved in the accident. The respondent applied to the Ontario Superior Court of Justice for the appointment of an arbitrator to determine the question of indemnification. The appellant made a cross-motion for a stay of proceedings on the basis, inter alia, that the Ontario insurance regulatory scheme could not constitutionally apply to it on the facts of this case, or, in the alternative, on the basis that British Columbia was the more convenient forum. The motions court, applying forum non conveniens principles, granted the appellant’s cross‑motion to stay the proceedings. The Court of Appeal reversed that decision, finding that the motions judge should have declined to hear the motion for a stay and proceeded with the appointment of an arbitrator who could then deal with any issues of jurisdiction and law, including the constitutional issue.
Held (Major, Bastarache and Deschamps JJ. dissenting): The appeal should be allowed.
Per McLachlin C.J. and Iacobucci, Binnie and LeBel JJ.: The principal issue is the constitutional applicability of the Ontario Insurance Act to the appellant on the facts of this particular case, and the motions court ought to have addressed it. If the Ontario insurance scheme is wholly inapplicable to the appellant on the facts here, an arbitrator appointed under the Act is without any statutory or other authority to decide anything in this case.
There is no doubt that an arbitrator or administrative tribunal can be vested with jurisdiction to determine questions of law, even questions of constitutional law going to its own jurisdiction, provided that the legislature has made plain that intention. Assuming that the Ontario legislature intended s. 17(1) of the Arbitration Act, 1991 to be such a grant of jurisdiction, however, there is nothing in the Act to suggest that this jurisdiction was intended in all circumstances to be exclusive. When the authority of a court is invoked to appoint an arbitrator under a statute which one of the parties contends cannot constitutionally apply to it, the court should deal with the challenge.
Section 275 of the Ontario Insurance Act is constitutionally inapplicable to the appellant because its application in the circumstances of this case would not respect territorial limits on provincial jurisdiction. This territorial restriction is fundamental to our system of federalism in which each province is obliged to respect the sovereignty of the other provinces within their respective legislative spheres, and expects the same respect in return.
The territorial limits on the scope of provincial legislative authority prevent the application of the law of a province to matters not sufficiently connected to it. Different degrees of connection to the enacting province may be required according to the subject matter. A “real and substantial connection” sufficient to permit the court of a province to take jurisdiction over a dispute may nevertheless not be sufficient for the law of that province to regulate the outcome. What constitutes a “sufficient” connection depends on the relationships among the enacting jurisdiction, the subject matter of the legislation and the individual or entity sought to be regulated by it. The applicability of an otherwise competent provincial regulatory scheme to an out‑of‑province defendant is conditioned by the requirements of order and fairness that underlie our federal arrangements.
Under ordinary constitutional principles the Ontario Insurance Act is inapplicable to the out‑of‑province appellant in this case. Not only is the appellant not authorized to sell insurance in Ontario, it does not in fact do so. Its insured vehicles in this case did not venture into Ontario. The accident did not take place in Ontario, and the appellant did not benefit from the deduction of the SABs by virtue of Ontario law but by the law of British Columbia. If the respondent were correct, Ontario could attach whatever benefits it liked to an out-of-province accident and require the appellant to come to Ontario to reimburse the Ontario insurer irrespective of whether or not British Columbia law permitted any deduction in that respect from the judgment award.
The PAU signed by the appellant has no application to the facts of this case. Its operation is explicitly limited to a proceeding “arising out of a motor-vehicle accident in any of the respective Provinces or Territories”. The “respective Provinces or Territories” are those thereafter listed, namely (in this instance) provinces and territories other than British Columbia, whose name was crossed out on the standard form. The interpretation that the PAU is directed to out-of-province accidents is confirmed by the wording of the undertakings set out in the PAU itself. Moreover, even if the PAU could be interpreted to require the appellant’s appearance to defend the respondent insurer’s claim in Ontario, the appellant would not thereby be precluded from contesting the application of the Ontario Insurance Act to impose a civil obligation on an out‑of‑province insurer in respect of an out‑of‑province motor vehicle accident.
The PAU should not be interpreted as a general attornment by the appellant to Ontario insurance law in respect of a motor vehicle accident that occurred in British Columbia. The fact that the appellant has on occasion attorned to Ontario in defending British Columbia motorists involved in accidents in Ontario does not constitute a general attornment to Ontario in respect of all accidents wherever they take place and any consequent proceedings.
Since the Ontario regulatory scheme does not apply to the out‑of‑province appellant on the facts of this case, the issue of forum non conveniens is moot. There is no statutory cause of action available to the respondent to sue upon in Ontario or in British Columbia.
Per Major, Bastarache and Deschamps JJ. (dissenting): A superior court judge must decide the issues of jurisdiction simpliciter and forum conveniens. Even though it may be difficult to isolate these two issues of jurisdiction perfectly, the Court of Appeal could not decide to submit the whole matter to an arbitrator without inferentially deciding that the Ontario Insurance Act applied, since the appointment of the arbitrator depends on the application of s. 275 of that Act.
A link with the subject matter of the claim is sufficient to establish the jurisdiction simpliciter of a forum given the flexible approach that has been endorsed by this Court. On the facts of this case, the appellant has accepted the jurisdiction of Ontario in this matter by signing a PAU, which constitutes a sound foundation for the application of the Ontario Insurance Act to the parties in this case. The insurers, by signing the PAU, have recognized the interrelationship of insurance regimes across Canada and accepted that insurers in one province will sometimes be sued in other provinces. It is therefore reasonably foreseeable that the appellant will sometimes have to appear in Ontario to defend an action brought in that jurisdiction as a result of an accident having occurred in British Columbia. The appellant is, at least notionally, an insurer in Ontario, or one carrying out business in that province. It is not unfair that insurers involved in the interprovincial scheme underlying this appeal, and having accepted the risk of harm to extraprovincial parties to the agreement, be considered to have attorned to the jurisdiction of Ontario’s courts. All of the reasons justifying a widened jurisdiction in Morguard apply in this case. Most importantly, the demands of Canadian federalism strongly favour this result. It is unreasonable, when deciding the issue of jurisdiction simpliciter, to enter into a piecemeal interpretation of the regime providing for the integration of insurance protection across Canada and to establish distinctions between benefits payable to the insured, on the one hand, and the indemnification of their insurers, on the other hand. There are a number of considerations which, taken together with the general language of the PAU, indicate that the appellant is subject to Ontario’s jurisdiction. The benefits paid by the respondent to an Ontario resident that were later deducted by the appellant, the general undertaking to appear by the appellant, and its limited undertaking not to present certain defences in Ontario actions all militate in favour of a finding that jurisdiction simpliciter is made out.
The same arguments that justify having a court of justice, not an arbitrator, decide the issue of jurisdiction simpliciter in this case apply to the issue of whether the former or the latter should determine whether there exists a more convenient forum. The forum non conveniens inquiry is a preliminary one that must be raised at the earliest opportunity and its determination is necessary before the jurisdiction of an arbitrator can be effective in a case such as this. The proper test is to ask whether the existence of a more appropriate forum has been clearly established to displace the forum selected by the plaintiff. If neither forum is clearly more appropriate, the domestic forum wins by default. The application of the balance of convenience by the motions judge constituted an error of law since a party whose case has a real and substantial connection with a forum has a legitimate claim to the advantages that that forum provides. In staying the proceedings in part because he was not satisfied that there would result a loss of a juridical advantage to the respondent, the motions judge established an unduly high threshold. Given the respondent’s real and substantial connection to Ontario, it has a legitimate claim to take advantage of the interinsurer indemnification scheme which Ontario provides. There is a fair possibility that the respondent will gain an advantage by prosecuting the action in Ontario. The appellant did not provide any evidence that British Columbia was clearly the more appropriate forum. This action is altogether independent of the one before the British Columbia court; it was started in Ontario on the basis of payments made under an insurance policy contracted in Ontario. Many factors link the parties to Ontario. Furthermore, the possibility of interinsurer indemnification is the product of an Ontario statutory regime.
Valid provincial laws can affect matters which are sufficiently connected to the province. The respondent has shown that the subject matter which the Insurance Act covers, interinsurer indemnification, falls within provincial jurisdiction and is sufficiently connected to Ontario so as to render the statute applicable to the appellant.
Cases Cited
By Binnie J.
Distinguished: Jevco Insurance Co. v. Continental Insurance Co. of Canada (2000), 132 O.A.C. 379, aff’g [1999] O.J. No. 2267 (QL); Broken Hill South Ltd. v. Commissioner of Taxation (N.S.W.) (1936‑1937), 56 C.L.R. 337; R. v. Thomas Equipment Ltd., [1979] 2 S.C.R. 529; Union Steamship Co. of Australia Proprietary Ltd. v. King (1988), 166 C.L.R. 1; International Shoe Co. v. State of Washington, 326 U.S. 310 (1945); Allstate Insurance Co. v. Hague, 449 U.S. 302 (1981); referred to: Brennan v. Singh (2000), 75 B.C.L.R. (3d) 93, 2000 BCCA 294; Ruckheim v. Robinson (1995), 1 B.C.L.R. (3d) 46; Potts v. Gluckstein (1992), 8 O.R. (3d) 556; Citizens Insurance Co. of Canada v. Parsons (1881), 7 App. Cas. 96; Tolofson v. Jensen, [1994] 3 S.C.R. 1022; Douglas/Kwantlen Faculty Assn. v. Douglas College, [1990] 3 S.C.R. 570; Cuddy Chicks Ltd. v. Ontario (Labour Relations Board), [1991] 2 S.C.R. 5; Cooper v. Canada (Human Rights Commission), [1996] 3 S.C.R. 854; St. Anne Nackawic Pulp & Paper Co. v. Canadian Paper Workers Union, Local 219, [1986] 1 S.C.R. 704; Weber v. Ontario Hydro, [1995] 2 S.C.R. 929; Regina Police Assn. Inc. v. Regina (City) Board of Police Commissioners, [2000] 1 S.C.R. 360, 2000 SCC 14; Attorney General of Canada v. Law Society of British Columbia, [1982] 2 S.C.R. 307; Northern Telecom Canada Ltd. v. Communication Workers of Canada, [1983] 1 S.C.R. 733; Royal Bank of Canada v. The King, [1913] A.C. 283; Gray v. Kerslake, [1958] S.C.R. 3; Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077; Hunt v. T&N plc, [1993] 4 S.C.R. 289; Holt Cargo Systems Inc. v. ABC Containerline N.V. (Trustees of), [2001] 3 S.C.R. 907, 2001 SCC 90; Spar Aerospace Ltd. v. American Mobile Satellite Corp., [2002] 4 S.C.R. 205, 2002 SCC 78; R. v. Jameson, [1896] 2 Q.B. 425; Pennoyer v. Neff, 95 U.S. 714 (1877); Attorney General for Ontario v. Scott, [1956] S.C.R. 137; Interprovincial Co‑Operatives Ltd. v. The Queen, [1976] 1 S.C.R. 477; Credit Foncier Franco‑Canadien v. Ross, [1937] 3 D.L.R. 365; Beauharnois Light, Heat and Power Co. v. Hydro‑Electric Power Commission of Ontario, [1937] O.R. 796; Kalenczuk v. Kalenczuk (1920), 52 D.L.R. 406; The Queen in Right of Manitoba v. Air Canada, [1980] 2 S.C.R. 303; Moran v. Pyle National (Canada) Ltd., [1975] 1 S.C.R. 393; Ladore v. Bennett, [1939] A.C. 468; Reference re Upper Churchill Water Rights Reversion Act, [1984] 1 S.C.R. 297; Global Securities Corp. v. British Columbia (Securities Commission), [2000] 1 S.C.R. 494, 2000 SCC 21; Ratych v. Bloomer, [1990] 1 S.C.R. 940; Cunningham v. Wheeler, [1994] 1 S.C.R. 359; Insurance Corp. of British Columbia v. Royal Insurance Co. of Canada, [1999] I.L.R. ¶I‑3705; MacDonald v. Proctor (1977), 86 D.L.R. (3d) 455, aff’d [1979] 2 S.C.R. 153; Healy v. Interboro Mutual Indemnity Insurance Co. (1999), 44 O.R. (3d) 404, leave to appeal refused, [2000] 1 S.C.R. xiii; Corbett v. Co‑operative Fire & Casualty Co. (1984), 14 D.L.R. (4th) 531.
By Bastarache J. (dissenting)
Morguard Investments Ltd. v. De Savoye, [1990] 3 S.C.R. 1077; Spar Aerospace Ltd. v. American Mobile Satellite Corp., [2002] 4 S.C.R. 205, 2002 SCC 78; Brennan v. Singh, [1999] B.C.J. No. 520 (QL); Brennan v. Singh (2000), 75 B.C.L.R. (3d) 93, 2000 BCCA 294, aff’g (1999), 70 B.C.L.R. (3d) 342; Brennan v. Singh (2001), 15 C.P.C. (5th) 17, 2001 BCSC 1812; Hunt v. T&N plc, [1993] 4 S.C.R. 289; Tolofson v. Jensen, [1994] 3 S.C.R. 1022; Canada Labour Relations Board v. Paul L’Anglais Inc., [1983] 1 S.C.R. 147; Moran v. Pyle National (Canada) Ltd., [1975] 1 S.C.R. 393; Muscutt v. Courcelles (2002), 60 O.R. (3d) 20; Long v. Citi Club, [1995] O.J. No. 1411 (QL); Brookville Transport Ltd. v. Maine (1997), 189 N.B.R. (2d) 142; Negrych v. Campbell’s Cabins (1987) Ltd., [1997] 8 W.W.R. 270; McNichol Estate v. Woldnik (2001), 150 O.A.C. 68; Oakley v. Barry (1998), 158 D.L.R. (4th) 679; O’Brien v. Canada (Attorney General) (2002), 210 D.L.R. (4th) 668; Pacific International Securities Inc. v. Drake Capital Securities Inc. (2000), 194 D.L.R. (4th) 716; Cook v. Parcel, Mauro, Hultin & Spaanstra, P.C. (1997), 143 D.L.R. (4th) 213; Insurance Corp. of British Columbia v. Royal Insurance Co. of Canada, [1999] I.L.R. ¶I‑3705; Berg (Litigation guardian of) v. Farm Bureau Mutual Insurance Co. (2000), 50 O.R. (3d) 109; Amchem Products Inc. v. British Columbia (Workers’ Compensation Board), [1993] 1 S.C.R. 897; Holt Cargo Systems Inc. v. ABC Containerline N.V. (Trustees of), [2001] 3 S.C.R. 907, 2001 SCC 90; Avenue Properties Ltd. v. First City Development Corp. (1986), 32 D.L.R. (4th) 40; Reference re Upper Churchill Water Rights Reversion Act, [1984] 1 S.C.R. 297.
Statutes and Regulations Cited
Arbitration Act, 1991, S.O. 1991, c. 17, ss. 7(1), (2), (3), 8(2), (3), 10, 17, 48(1)(c).
Automobile Insurance Regulations, R.R.O. 1990, Reg. 664, s. 9.
Constitution Act, 1867, s. 92 .
Insurance Act, R.S.O. 1990, c. I.8, ss. 267.1(8)2(i) [ad. 1993, c. 10, s. 25], 268(1) [rep. & sub. idem, s. 26], (2), 275 [am. idem, ss. 1, 31].
Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231, ss. 18, 25.
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 17.06.
United States Constitution, art. IV, Fourteenth Amendment.
Authors Cited
Black, Vaughan. “Interprovincial Inter‑Insurer Interactions: Unifund v. ICBC” (2002), 36 Can. Bus. L.J. 436.
Castel, Jean‑Gabriel, and Janet Walker. Canadian Conflict of Laws, 5th ed. Markham, Ont.: Butterworths, 2002 (loose‑leaf updated December 2002, Issue 3).
Fortier, L. Yves. “Delimiting the Spheres of Judicial and Arbitral Power: ‘Beware, My Lord, of Jealousy’” (2001), 80 Can. Bar Rev. 143.
Hogg, Peter W. Constitutional Law of Canada, vol. 1, loose‑leaf ed. Scarborough, Ont.: Carswell, 1997 (updated 2002, release 1).
Sullivan, Ruth E. “Interpreting the Territorial Limitations on the Provinces” (1985), 7 Supreme Court L.R. 511.
Tribe, Laurence H. American Constitutional Law, vol. 1, 3rd ed. New York: Foundation Press, 2000.
United Nations. Commission on International Trade Law. UNCITRAL Model Law on International Commercial Arbitration, U.N. GAOR, 40th Sess., Supp. No. 17, U.N. Doc. A/40/17 (1985), Annex I, arts. 8(1), 16.
Watson, Garry D., and Frank Au. “Constitutional Limits on Service Ex Juris: Unanswered Questions from Morguard” (2000), 23 Advocates’ Q. 167.
APPEAL from a judgment of the Ontario Court of Appeal (2001), 204 D.L.R. (4th) 732, 146 O.A.C. 162, 28 C.C.L.I. (3d) 38, [2001] O.J. No. 1885 (QL), reversing a decision of the Superior Court of Justice (2000), 23 C.C.L.I. (3d) 96, [2000] O.J. No. 3212 (QL). Appeal allowed, Major, Bastarache and Deschamps JJ. dissenting.
Avon M. Mersey, Alan L. W. D’Silva, Michael Sobkin and Sophie Vlahakis, for the appellant.
Leah Price and Gerald George, for the respondent.
The judgment of McLachlin C.J. and Iacobucci, Binnie and LeBel JJ. was delivered by
Binnie J. —
I. Introduction
1 This appeal raises important questions regarding an alleged extraterritorial application of a provincial regulatory statute. The respondent insurer seeks to recover in Ontario from the appellant British Columbian insurer about $750,000 under certain statutory provisions of Ontario insurance law.
2 The dispute between these insurance companies stems from a serious motor vehicle accident in British Columbia. The appellant, a British Columbia insurer, responded there on behalf of the defendants. The injured plaintiffs returned to Ontario and collected statutory no-fault benefits from the respondent, an Ontario insurer, which now seeks reimbursement by subjecting the appellant to the loss transfer provisions of the Ontario scheme.
3 The appellant says it does not have any real and substantial connection with Ontario and therefore Ontario insurance law cannot impose on it a civil obligation arising out of a British Columbia accident. I agree that the respondent seeks to give the Ontario statute impermissible extraterritorial effect. In my view, the appeal should be allowed.
II. The Facts
4 Marcia and Ronald Brennan, who made their home in Cambridge, Ontario, flew to Vancouver in August 1995 for the wedding of one of their sons. While in British Columbia, they rented a car. Driving along the Upper Levels Highway in North Vancouver, the Brennans’ rental car was struck from behind by a tractor trailer driven by Baljinder Singh, the impact of which catapulted their car across the centre line concrete barrier into the path of oncoming traffic. In a collision the trial judge described as “horrendous”, the Brennans, particularly Mrs. Brennan, suffered terrible injuries. After their return to Ontario, the Brennans’ home needed to be extensively renovated, a modified vehicle was purchased, and 24-hour attendant care was provided to Mrs. Brennan, who eventually died from her injuries in March 2001. The amount paid as statutory accident benefits (“SABs”) has yet to be finally quantified but is about $750,000.
5 Meanwhile, the Brennans brought an action for damages in the Supreme Court of British Columbia and, on March 4, 1999, were awarded approximately $2.5 million.
6 The respondent, Unifund Assurance Company (“Unifund”), had issued a motor vehicle insurance policy to the Brennans in Ontario. The policy included the mandatory, no-fault coverage (or SAB) payments, for which the Brennans paid a premium. The Ontario Insurance Act, R.S.O. 1990, c. I.8 (also referred to as the “Ontario Act”), provides that SABs are payable under an Ontario policy when insured persons are injured in motor vehicle accidents occurring anywhere in North America. Unifund, a Newfoundland company, was licensed to carry on business in Ontario, but not, at the time of the accident, in British Columbia.
7 The appellant Insurance Corporation of British Columbia (“ICBC”) insured the negligent truck owner, truck driver, and truck repair shop in British Columbia. It is on the hook for the $2.5 million award of damages, but, under the law of that province, it is entitled to deduct any no-fault payments paid to the Brennans, even though it actually paid no part of that amount.
8 Unifund understandably feels aggrieved that the appellant, having contributed nothing to the payment of the no-fault benefits, is nevertheless taking a $750,000 deduction created at Unifund’s expense. Unifund contends that the appellant should pay it the $750,000.
III. The Statutory Cause of Action
9 Unifund’s problem is to find a cause of action. In this appeal, we are dealing only with Unifund’s quite separate and distinct claim under s. 275 of the Ontario Act, which provides a statutory mechanism for transferring losses between Ontario insurance companies arising out of the payment of SABs under the Ontario Act.
10 It is important to emphasize that Unifund asserts no common law or equitable cause of action against the appellant, ICBC, in these proceedings. In the case before us, Unifund either has a statutory cause of action against the British Columbia insurer under the Ontario Act or it has no cause of action at all.
11 The deduction of about $750,000 claimed by the appellant, ICBC, is also a creature of statute. Under s. 25(5) of the British Columbia Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231, the British Columbia court is directed to deduct from a damages award “benefits” which include “accident insurance benefits similar” to British Columbia’s no-fault benefits “provided under a contract . . . of automobile insurance wherever issued . . .” (s. 25(1) (emphasis added)). The British Columbia Court of Appeal ordered the $750,000 to be deducted from the $2.5 million awarded to the Brennans, even though the appellant contributed nothing to the payment, because, in its view, the legislative purpose of s. 25(5) is to “prevent double recovery by allowing parties to deduct the ‘benefits’ that a claimant receives, or to which a claimant is entitled, from the award of damages”: Brennan v. Singh (2000), 75 B.C.L.R. (3d) 93, 2000 BCCA 294, at para. 4; see also Ruckheim v. Robinson (1995), 1 B.C.L.R. (3d) 46 (C.A.), at paras. 50-54. The deductibility approach was perhaps adopted in British Columbia because the appellant, ICBC, as the sole provider of motor vehicle insurance in the province, is generally the payor of both the no-fault benefits and the final award. For the same reason, the British Columbia legislation does not contain a loss transfer provision similar to s. 275 of the Ontario Act to redistribute the cost of no-fault benefits amongst insurance companies.
12 The Ontario insurance scheme, on the other hand, which regulates numerous competing motor vehicle insurers, adopts a different approach. The non-pecuniary damages are calculated “without regard to” SABs (s. 267.1(8)2(i)). However, the payor of the SABs (usually the victim’s insurer) is entitled by statute to indemnification from the insurer of any “heavy commercial vehicle” (Automobile Insurance Regulations, R.R.O. 1990, Reg. 664, s. 9) involved in the motor vehicle accident in question, “according to the respective degree of fault of each insurer’s insured as determined under the fault determination rules” (s. 275(2)), i.e., allocated not by general principles of tort but by the rules set out in Ontario regulations. Section 275(4) of the Ontario Act provides that disputes about indemnification are to be resolved by arbitration, pursuant to the Ontario Arbitration Act, 1991, S.O. 1991, c. 17. There is no doubt that if the appellant were an Ontario insurer, it would be required to arbitrate Unifund’s claim.
13 It is perhaps important to emphasize that if the Ontario Act applies, the respondent would be entitled to recover even if the appellant were not permitted to deduct the $750,000 from the Brennans’ award. This is because the two provincial regulatory schemes function independently of one another, and deductibility by one insurer is not a condition precedent to recovery by the other insurer under s. 275 of the Ontario Act.
14 We are told that there is no legislation in British Columbia under which Unifund could pursue a statutory claim for reimbursement against the appellant in that province. The constitutional question of whether the Ontario Insurance Act applies to provide Unifund with a statutory cause of action is therefore dispositive of the respondent’s claim.
IV. The Statutory Arbitration
15 Unifund applied to the Ontario Superior Court of Justice for the appointment of an arbitrator pursuant to s. 275(4) of the Ontario Act. The appellant, ICBC, responded with a motion for an order “staying or dismissing” the application on the basis, inter alia, that “Ontario law, specifically the Ontario Insurance Act, and any procedure under it is not applicable in this matter and does not define the relationship between the parties”. In effect, the appellant’s motion alleged that Unifund’s application disclosed no cause of action against the out-of-province insurer on the facts of this case.
16 The Ontario Court of Appeal directed the appellant to make its objection before an arbitrator appointed pursuant to the Ontario Act. The appellant says that it ought not to be ordered to appear before an arbitrator appointed pursuant to the Ontario Act unless and until it is first determined that the appellant is subject to the Ontario Act with respect to the matters in dispute.
17 I think the appellant is correct on this procedural question as well as in objecting to the substantive application of the Ontario statute to this dispute. If the Ontario insurance scheme is wholly inapplicable to the appellant on the facts here, an arbitrator appointed under the Ontario Act is without any statutory or other authority to decide anything in this case. Practicality as well as principle required the constitutional issue raised by the appellant to be resolved by the superior court to which it was addressed, and it should have been answered, in my view, in the appellant’s favour.
V. The Power of Attorney and Undertaking
18 In order to assist motorists who travel outside their province or state of residence, all Canadian insurers of motor vehicles, and many insurers in the United States, have exchanged what is called a “Power of Attorney and Undertaking” (“PAU”) which denotes “compliance with minimum coverage requirements and facilitat[es] acceptance of service”. The PAU is part of a “reciprocal scheme for the enforcement of motor vehicle liability insurance policies in Canadian provinces and territories”: Potts v. Gluckstein (1992), 8 O.R. (3d) 556 (C.A.), at p. 557. As the terms of the PAU are important to the respondent’s position, I set out its relevant terms hereunder:
POWER OF ATTORNEY AND UNDERTAKING
(Denoting compliance with minimum coverage requirements
and facilitating acceptance of service)
INSURANCE CORPORATION OF BRITISH COLUMBIA
the head office of which is in the City of North Vancouver
in the . . . Province of British Columbia
In . . . Canada, hereby, with respect to an action or proceeding against it or its insured, or its insured and another or others, arising out of a motor-vehicle accident in any of the respective Provinces or Territories, appoints severally the Superintendents of Insurance of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland, Quebec, and Yukon Territory and the Northwest Territories, to do and execute all or any of the following acts, deeds, and things, that is to say: To accept service of notice or process on its behalf.
. . .
Insurance Corporation of British Columbia aforesaid hereby undertakes:-
A. To appear in any action or proceeding against it or its insured in any Province or Territory in which such action has been instituted and of which it has knowledge:
B. That upon receipt from any of the officials aforesaid of such notice or process in respect of its insured, or in respect of its insured and another or others, it will forthwith cause the notice or process to be personally served upon the insured:
C. Not to set up any defence to any claim, action, or proceeding, under a motor-vehicle liability insurance contract entered into by it, which might not be set up if the contract had been entered into in, and in accordance with the laws relating to motor-vehicle liability insurance contracts or plan of automobile insurance of the Province or Territory of Canada in which such action or proceeding may be instituted, and to satisfy any final judgement rendered against it or its insured by a Court in such Province or Territory, in the claim, action or proceeding, in respect of any kind or class of coverage provided under the contract or plan and in respect of any kind or class of coverage required by law to be provided under a plan or contracts of automobile insurance entered into in such Province or Territory of Canada up to the greater of
(a) the amounts and limits for that kind or class of coverage or coverages provided in the contract or plan, or
(b) the minimum for that kind or class of coverage or coverages required by law to be provided under the plan or contracts of automobile insurance entered into in such Province or Territory of Canada, exclusive of interest and costs and subject to any priorities as to bodily injury or property damage with respect to such minimum amounts and limits as may be required by the laws of the Province or Territory. [Emphasis added.]
(Note that the words “British Columbia” in the lead paragraph are crossed out in the original PAU.)
VI. Judicial History
A. Ontario Superior Court of Justice (2000), 23 C.C.L.I. (3d) 96
19 Campbell J. had before him the respondent’s motion to appoint an arbitrator and the appellant’s cross-motion to stay the proceedings for want of jurisdiction, or, in the alternative, for forum non conveniens. In his view the purpose of the arbitration under the Ontario Act “is to deal with matters that are clearly in issue within the rules applicable in Ontario” (para. 43). It is not, he concluded, designed to resolve legal issues that may arise because of conflict in the legislation in two different provinces. However, he did not dismiss the Ontario action. He applied forum non conveniens principles and ruled that “the balance favours the stay of the Ontario arbitration” (para. 43). While he did not specifically make a finding with respect to jurisdiction simpliciter, he stayed Unifund’s action rather than dismissing it. This disposition presupposed that, while the Ontario court had jurisdiction, it would not be appropriate in all the circumstances to exercise it.
B. Ontario Court of Appeal (2001), 204 D.L.R. (4th) 732
20 The Ontario Court of Appeal reversed the motions judge on the basis that “he should have declined to hear the motion [for a stay] and proceeded with the appointment of the arbitrator who could then deal with any issues of jurisdiction and law” (para. 3). Feldman J.A. approached the appeal as one relating to procedure. It was within the jurisdiction of the arbitrator appointed under the Ontario Act to make the initial determination of jurisdiction. In her view, the appellant’s execution of the PAU obliged it to participate in the Ontario arbitration. Further, an arbitrator appointed under the Ontario legislation is empowered to decide issues of forum non conveniens. The appeal was allowed on those procedural grounds.
VII. Relevant Statutory Provisions
21 The relevant provisions of the Insurance Act, R.S.O. 1990, c. I.8, and the Arbitration Act, 1991, S.O. 1991, c. 17, are set out in the Appendix.
VIII. Constitutional Question
22 On August 27, 2002, the Chief Justice stated the following constitutional question:
Is s. 275 of the Insurance Act, R.S.O. 1990, c. I.8, as amended, constitutionally inapplicable to the appellant because its application in the circumstances of this case would not accord with territorial limits on provincial jurisdiction?
IX. Analysis
23 It is well established that motor vehicle insurance within a province is a matter within provincial legislative competence: Citizens Insurance Co. of Canada v. Parsons (1881), 7 App. Cas. 96 (P.C.). Since 1881, of course, the mobility of Canadians has increased exponentially. Tractor-trailer trucks rumble across the country. Holiday makers are enticed to take their holidays in distant provinces and many travel by car. Other Canadians, like the Brennans, fly to their destination and rent a car upon arrival. Still others regularly drive south to Florida or Arizona for some respite from winter.
24 People assume that their insurance follows them and their car wherever they go, and so it does. If the Brennans had taken their car instead of an airplane to British Columbia, and become involved in the same accident, the PAU scheme would have ensured that their Ontario insurer, Unifund, could have been served with a British Columbia Statement of Claim through the Superintendent of Insurance, and could not have raised in the resulting British Columbia proceedings a defence not open to a British Columbia insurer in the same circumstances.
25 Similarly, if Baljinder Singh had driven the tractor-trailer east to Ontario and collided with the Brennans on Highway 401 near their home in Cambridge, the PAU would have permitted the appellant, ICBC, to be served through the Superintendent of Insurance. In that case, the appellant could not have raised any defence not open to an Ontario insurer under comparable coverage. Moreover, Ontario law would apply as the law of the place where the accident happened: Tolofson v. Jensen, [1994] 3 S.C.R. 1022. The PAU would have facilitated service on, and the holding responsible of, the out-of-province tortfeasors and their out-of-province insurer.
26 In this case, the accident and all the lawsuits arising directly from the accident took place in British Columbia. It is only the quite separate statutory procedure initiated by Unifund against the appellant that is brought in Ontario.
27 The constitutional question stated by the Chief Justice identifies the dispositive issue:
Is s. 275 of the Insurance Act, R.S.O. 1990, c. I.8, as amended, constitutionally inapplicable to the appellant because its application in the circumstances of this case would not accord with territorial limits on provincial jurisdiction?
While at one level, the argument is about which court has jurisdiction over the dispute (and if more than one court qualifies, then whether Ontario is the convenient forum for its resolution), the underlying issue is whether, in light of the territorial limitation on provincial legislation, the respondent, Unifund, has a viable cause of action at all against the out-of-province appellant. If it is concluded, as the constitutional question asks, that s. 275 of the Ontario Act is “constitutionally inapplicable to the appellant . . . [because of] territorial limits on provincial jurisdiction”, then Unifund’s action under the Ontario Act should be stopped irrespective of where it is brought.
28 The general policy objectives of order and fairness that underlie territorial limits were discussed by La Forest J. in Tolofson, supra, at pp. 1050-51, as follows:
Ordinarily people expect their activities to be governed by the law of the place where they happen to be and expect that concomitant legal benefits and responsibilities will be defined accordingly. The government of that place is the only one with power to deal with these activities. The same expectation is ordinarily shared by other states and by people outside the place where an activity occurs. If other states routinely applied their laws to activities taking place elsewhere, confusion would be the result. In our modern world of easy travel and with the emergence of a global economic order, chaotic situations would often result if the principle of territorial jurisdiction were not, at least generally, respected. [Emphasis added.]
29 The respondent, as stated, asserts only an Ontario statutory cause of action. Its request for the appointment of an arbitrator could only be granted if the loss transfer scheme of the Ontario Act applies. Section 275(4), to repeat for convenience, provides t