*Since the writing of this blog the decision has been reversed.
An interesting decision from Justice Diamond regarding the applicability of the abuse of process doctrine in Priority disputes in Intact Insurance Company v Federated Insurance Company of Canada, 2016 ONSC 719.
BACKGROUND
The claimant was a passenger in a vehicle driven by his father, Patrick Cadieux. The Cadieux vehicle was involved in an accident with a transport truck insured by Federated.
While the father’s vehicle was previously insured by Intact, it was Intact’s position that as of the date of the accident, the policy had been cancelled for non-payment.
Mr. Cadieux was subsequently convicted of operating a motor vehicle without insurance.
Intact received an Application for Accident Benefits and commenced a private Arbitration to determine Priority against Federated. Intact requested that the arbitrator determine a “preliminary issue” of whether the doctrine of abuse of process applied to preclude Federated from adducing evidence and arguing that the father was an insured person as of the date of the accident.
Federated’s position has been that they may want to lead evidence at Arbitration to rebut the presumption that flows from the convictions. Intact argued that the conviction is proof that there was no insurance, and that it would be an abuse of process to allow Federated to re-litigate that issue.
On October 23, 2015, Arbitrator Bialkowski ruled that the abuse of process doctrine did not apply in the arbitration before him, and thus Federated was permitted to lead evidence and argue that the father was an insured person as of the date of the accident.
Intact appealed.
WHAT DOES THE COURT SAY
Justice Diamond held this is a pure question of law and correctness is the standard of review. He provided a summary regarding the doctrine of abuse of process, noting that the Supreme Court has held that generally speaking re-litigation is detrimental to the adjudicative process.
The Supreme Court of Canada established three so-called “exceptions” to the doctrine of abusive process. Those three exceptions are as follows:
- when the original proceeding is tainted by fraud or dishonesty;
- where fresh, new evidence, previously unavailable, conclusively impeaches the original result; or
- where fairness dictates that the original result should not be binding in the new context.
With respect to the facts of this case, the Court made the following relevant findings:
- Mr. Cadieux had a significant stake in the guilty plea, with a minimum $5000.00 fine for driving without insurance;
- Federated did not have any actual evidence that would challenge the conviction at the time of the preliminary issue hearing;
- Federated did not obtain an Order from the Arbitrator to compel Mr. Cadieux to attend at an Examination Under Oath prior to the preliminary issue hearing;
- Federated did not insist on an Order from the Arbitrator that Undertakings from Intact be answered regarding internal policies and procedures for policy cancellations; and
- The onus to lead evidence to attempt to counter the conviction was on Federated, and the time to do so was at or before the preliminary issues hearing.
Justice Diamond distinguished the current case from the decision in Duncan v. Morton (2012) ONSC 3105 (S.C.J.), which had been relied upon by the arbitrator and Federated. In Duncan, as a result of a motor vehicle accident, the plaintiff brought an action against the defendant and the uninsured insurer. The defendant had pleaded guilty to operating a motor vehicle without consent, but the insurer wanted to establish in the civil proceeding that the defendant had consent, or at a minimum implied consent, to operate the vehicle on the date of the accident.
A review of the Duncan decision, and the late Justice Lax’s decision dismissing a motion for leave to appeal, discloses that the insurer clearly led “evidence to the contrary” as required by section 22.1 of the Evidence Act. The insurer tendered the transcripts from the hearing of the defendant’s guilty plea along with two affidavits from the insurer’s investigators attaching notes of their investigation. This sort of “evidence to the contrary” was precisely what Federated hoped to find, but did not have in hand at the time of the preliminary issue hearing (or the appeal for that matter).
The appeal was allowed. It was found the doctrine of abuse of process applies to priority disputes and that to challenge the conviction in this instance would be an abuse of process.
SO YOU WANT TO CHALLENGE A CONVICTION…
While difficult, it is still not impossible to challenge a conviction under the exceptions to the abuse of process doctrine. Insurers wishing to challenge a conviction in a priority dispute will have to ensure that a complete and thorough investigation has been completed, including Examinations Under Oath of all relevant parties, and receipt of all necessary documentation before they bring the issue before an Arbitrator or the Court. Even then, that evidence will need to be compelling to meet the standard for the exceptions to the abuse of process doctrine. The “promise” or “potential” of future evidence is insufficient, and real evidence that calls the conviction into questions should be available before any adjudication of the applicability of abuse of process.
If you have any questions about this blog or a similar file please contact our Loss Transfer and Priority Disputes practice group.
