In the Matter of the Insurance (Vehicle) Act and the Commercial Arbitration Act and S.A, 2019 BCSC 1655

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation: In the Matter of the Insurance (Vehicle) Act and the Commercial Arbitration Act and S.A.,
  2019 BCSC 1655

Date: 20190927

Docket: S191689

Registry: Vancouver

In the Matter of the Insurance (Vehicle) Act, R.S.B.C. 1996 c.231
and The Commercial Arbitration Act, R.S.B.C. 1996 c.55 and
Amendments thereto

and

In the Matter of S.A.

Before: The Honourable Madam Justice Dillon

Reasons for Judgment

Counsel for the Petitioner: Quinlan, D., Q.C.
Counsel for S.A. and WorkSafe BC: Murphy, J., Q.C.
Place and Date of Trial/Hearing: Vancouver, B.C.

July 5, 2019

Place and Date of Judgment: Vancouver, B.C.

September 27, 2019

Introduction

[1]           The petitioner, The Insurance Corporation of British Columbia (“ICBC”), seeks leave to appeal the decision of arbitrator, Donald W. Yule, Q.C., pronounced on December 18, 2018 (the decision”). The sole issue in the arbitration was whether Workers Compensation Board (“WCB”) benefits to be paid to the claimant, S.A., were a deductible amount from his Underinsured Motorist Protection (“UMP”) compensation arising from a 2004 motor vehicle accident. The arbitrator decided that the claimant’s WCB benefits were not deductible from his UMP compensation.

[2]           The respondent did not consent to an appeal to this court. In that circumstance, leave to appeal the decision of the arbitrator is required by s. 31(1)(b) Arbitration Act, R.S.B.C. 1996, c. 55.

Background Facts

[3]           The arbitration proceeded by way of an agreed statement of facts that are similarly not in issue here.

[4]           On November 8, 2004, S.A. was the occupant of a parked truck owned by his employer when the truck was struck by a vehicle that itself had been struck by an oncoming vehicle driven by an uninsured motorist in a high speed police chase. The uninsured motorist was killed. S.A. was seriously injured and became permanently disabled. The parties agreed that the value of S.A.’s claim exceeded $1 million.

[5]           S.A. was an insured person for purposes of UMP under his owner employer’s insurance policy that had been purchased on March 14, 2004. S.A. was required to share the $200,000 uninsured motorist limit with two others who were injured in the accident.

[6]           In April 2005, S.A. submitted an application for WCB benefits but elected to pursue his tort claim. ICBC advised that the at fault motorist was uninsured and that any amount received from WCB would be a deductible amount under the UMP. S.A. commenced an action against the uninsured driver and others in October 2006.

[7]           On June 1, 2007, the Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231 (“old legislation”) was repealed and replaced with the Insurance (Vehicle) Act, R.S.B.C. 1996 c. 231 (“new legislation”) (Insurance (Motor Vehicle) Amendment Act, S.B.C. 2003, c. 94). New regulations were also enacted: particularly, s. 148.1 Insurance (Vehicle) Regulation, B.C. Reg.447/83 (“old regulation”) was revised with s. 148.1 Insurance Motor Vehicle Regulation, B.C. Reg. 166/2006 (“new regulation”). It is common ground that, under the old regulation, ICBC deducted WCB benefits received where the insured elected not to claim compensation or WCB pursued its right of subrogation. Under the new regulation, ICBC was precluded from deducting WCB benefits. Thus, at the time of the accident, ICBC was entitled to deduct from the UMP award any workers’ compensation benefits to which an insured was entitled.

[8]           Through a series of court proceedings, S.A.’s action against the defendants other than the uninsured motorist was dismissed by the British Columbia Court of Appeal in June 2013. In February 2017, the trial against the uninsured motorist was adjourned and the parties agreed to proceed to an UMP arbitration on the basis that S.A.’s claim exceeded $1 million.

[9]           On February 7, 2018, S.A. re-elected to claim WCB benefits rather than proceed with his claim. Worksafe BC became subrogated to S.A.’s tort and UMP claims. The value of the WCB benefits at issue is between $500,000 to $600,000.

[10]        On February 18, 2018, ICBC and Worksafe BC, pursuant to its right of subrogation, participated in the UMP arbitration pursuant to Part 10, Division 2 of the new legislation and the Commercial Arbitration Act, R.S.B.C. 1996, c. 55.

[11]        This case, and possibly one other, are the only outstanding UMP claims that pre-date June 1, 2007.

The Decision

[12]        The arbitration proceeded under an agreed statement of facts, particulars of which are set out above. The sole question for decision was whether the WCB benefits paid to S.A. were deductible from his UMP compensation. The answer depended upon whether the 2007 change to the new legislation applied to his claim (decision para.1).

[13]        The arbitrator began by setting out the applicable legislation, old and new. The statutory scheme required compensation to be calculated and then reduced by the sum of applicable deduction amounts. Under the old provision, the WCB benefit was deductible without exception. Under the new legislation, the benefit was deductible unless the Workers Compensation Board pursued its right of subrogation, as here (s. 148.1(1)(f)(ii) new regulation). He also set out the transitional provision, s. 81(1) of the Insurance (Motor Vehicle) Amendment Act as follows:

81(1) The Insurance (Motor Vehicle) Act and the regulations under that Act as they read before the coming into force if this Act apply to

(a)  Insurance under that Act that took effect before the coming into force of this Act,

(b)  claims under that insurance, and

(c)  insureds and the corporation in relation to that insurance.

[14]        Other transitional provisions were also detailed (decision paras.9-16). The arbitrator noted that these transitional provisions applied across the whole range of legislative changes and were not specific to the problem addressed in new regulation s. 148.1 (decision para.74).

[15]        The arbitrator then set out the provisions of the Interpretation Act, R.S.B.C. 1996, c. 238 that applied where an Act is repealed and another Act substituted for it, the situation relevant to the old and new legislation here. Particularly, the arbitrator cited s. 36(1)(b) Interpretation Act wherein every proceeding commenced under the former enactment must be continued under and in conformity with the new enactment so far as may be done consistently with the new enactment (decision paras. 17-18). S.8 Interpretation Act, that requires every enactment to be construed as being remedial and that mandates a fair, large, and liberal interpretation to best ensure attainment of its objects, was also cited (decision para. 19).

[16]        The arbitrator then noted the parallel change to hit and run or unidentified motorist claims as to uninsured motorist claims in the new legislation, so opening the door to case law comparison later (decision paras. 20-21).

[17]        In summarising the positions of both parties, the arbitrator detailed the claimant’s third submission, that the overall purpose of the universal compulsory auto insurance scheme is far more important than the wording of the statutory auto insurance contract and that the transitional provisions of the Insurance (Motor Vehicle) Amendment Act must be applied in a manner consistent with the overall statutory scheme (decision para. 27). The petitioner says that the arbitrator erred in accepting this submission. Significantly, both parties agree with the arbitrator’s analysis until the point that he embarked upon and accepted this submission.

[18]        The arbitrator then reviewed relevant case law including Buxton v. Tang, 2007 BCSC 1101 (CanLII) (an uninsured motorist claim), Ayres v. John Doe, 2008 BCSC 48 (CanLII), 2009 BCCA 552 (a hit and run claim), Hicks v. Bieberbach Estate, 2011 BCSC 226 (CanLII) (an uninsured motorist claim), and Kovacs v. ICBC, No.924468 Vancouver Registry, January 7, 1994 (an underinsured motorist claim). The arbitrator distinguished Kovacs from the other cases on the basis that the other cases were not claims included in a statutory contract of insurance with ICBC but had rested upon statutory claims (decision paras. 42, 43, 53-55, 70-73). Using that distinction, the court in Kovacs was able to determine that a new deductible amount that came into effect after the contract of insurance was entered into but before the accident date was not applicable to the claimant.

[19]        The arbitrator also reviewed the cases central to the claimant’s third submission, Niedermeyer v. Charlton, 2014 BCCA 165 (CanLII), Felix v. ICBC, 2015 BCCA 394 (CanLII), and Symons v. ICBC, 2016 BCCA 207 (CanLII), before beginning his discussion and analysis.

[20]        The arbitrator began his analysis by noting that the onus of proving the deductible amount lay with ICBC (decision para. 65). The changes to the legislation were remedial in nature, intended to eliminate the double deduction of benefits to the detriment of an injured insured (decision para. 66). The transitional provisions applied to a statutory contract of insurance and the claim here was brought under a pre-existing contract of insurance (decision paras. 68 and 72).

[21]        The arbitrator concluded that the legislative changes were prospective in nature: but, he went on to say that where a statutory contract of insurance was in effect prior to the change, “…the contract would not be altered to the detriment of the insured without specific language in the legislation indicating a retroactive effect” (decision paras. 74-75). The petitioner agreed with this analysis so far, except for the words “to the detriment of the insured”. The arbitrator went on to follow the decision in Kovacs to conclude that in the case of a pre-existing contract of insurance, the old regulation requiring deduction of benefits remains part of the contract (decision para. 77). So far so good for the petitioner here.

[22]        The arbitrator then stated that the application of Kovacs did not end the matter and there was the further consideration of the claimant’s third submission, “that the context of the legislative scheme to provide a universal compulsory insurance program and access to compensation for those who suffer losses from motor vehicle accidents must be taken into account both in interpreting the transitional legislative provisions and in considering the enforceability of a contractual term” (decision para. 77). The decision shifts here to the statutory interpretation established in Rizzo and Rizzo Shoes Ltd. (Re), (1998) 1998 CanLII 837 (SCC), 1 S.C.R. 27: that a plain language alone interpretation of legislation is not sufficient. On this basis, the clear literal meaning of the transitional provisions had to be considered within the context of the benefit that the legislation was intended to confer, the problem that it was trying to correct. After further considering Rizzo and Niedermeyer and Symonsthe arbitrator concluded:

[88]      In the present case a similar absurdity occurs. An insured who took out a contract of automobile insurance on June 1, 2007 would not have WCB benefits deducted from their UMP claim. An insured who took out a contract of automobile insurance on May 31, 2007 would have WCB benefits deducted from their UMP claim notwithstanding the legislative change removing the deduction because of its acknowledged unfairness.

[89]      To adopt the language of Rizzo, it would be extremely inequitable and hence an absurd consequence to apply a deduction that the legislation has just removed as being unfair to injured UMP claimants.

[90]      What distinguishes the present case from Kovacs is that the amending legislation in Kovacs was detrimental to the interests of the insured because it added an additional deductible amount. In the present case, the legislative change was conferring a benefit on insureds by relieving them of the inequity of a double deduction of WCB entitlement in UMP claims.

[91]      … In my view, applying the Kovacs analysis and the transitional Section 81(1), that change would not apply to claims under contracts of insurance in existence prior to June 1, 2007.

[92]      In my view, to require the deduction of WCB entitlement in this case under the Old Regulation would be inconsistent with the overall scheme of providing universal compulsory automobile insurance and in particular the purpose of deductible amounts in calculating UMP compensation; it would be contrary to the principles of statutory interpretation requiring a broad and generous manner of interpreting benefits conferring legislation; and it would be unfair and unjust to this Claimant to saddle him with a deduction that the legislature has abolished for other UMP claims.

Positions of the Parties

[23]        The petitioner says that the arbitrator correctly concluded that S.A.’s UMP claim was governed by the terms of the 2004 statutory contract of insurance, that the change to the legislation was prospective, and that the transitional provisions made it clear that the legislation was not to apply retrospectively. The error occurred when the arbitrator went further than statutory interpretation of the transitional provision and found that it was unfair and unjust to this claimant to saddle him with a deduction that the legislature had abolished, based upon the Risso, NiedermeyerFelixand Symons decisions that required a principled approach to interpretation based upon the overall legislative scheme. The petitioner argued that the intention of the legislative was clear in the transitional provisions and the arbitrator should have followed the clear wording of the provision. “To ignore the statutory presumption and transitional provision because the arbitrator was of the view that it would be unfair to the claimant is wrong”.

[24]        The petitioner argued that the legal question at issue had arguable merit within the meaning of s. 31(2)(a) Arbitration Act and was therefore appropriate for appellate review. The amount of benefits in issue ($500,000 – $600,000) and the principle involved justified court intervention under s. 31(2)(b) and (c). The uncertainty introduced to the interpretation of any given benefit conferring piece of legislation justified intervention because of the importance to that class of persons of which the claimant and ICBC are members. There was no basis upon which to exercise overriding discretion.

[25]        The respondent argued that the decision was correct – end of story. The arbitrator was correct to interpret the legislation, realize that the claimant did not get the benefit of the new legislation, realize that this created an absurdity, and then apply public policy. The respondent said that the arbitrator did not go on a tangent but applied the process in Symons and Niedermeyer to give the claimant the benefit of the change, as was done in most of the cases, one way or the other. The key to the respondent’s position was to look not at only the transition provision but the whole of the legislative automobile insurance scheme or intent to determine the meaning of the provision.

[26]        The respondent said that the requirement of s. 31(2)(a)(b)(c) Arbitration Act were not met because this was a one only case of its kind and there is no general or public importance because the issue pertains to only this single claimant. Also, the residual discretion of the court should be exercised because the deferential standard of review, reasonableness, was met when the arbitrator reached a decision consistent with case law and consistent with the universal compulsory scheme of auto insurance in this province. The double deduction result without the favourable interpretation would be inconsistent with the overall scheme of the legislation and unfair and unjust to S.A.

The Test for Leave to Appeal: s. 31 Arbitration Act

[27]        A party to an arbitration may appeal to the court on a question of law arising out of an award if the court grants leave to appeal, the parties here not having consented to an appeal (s. 31(1) Arbitration Act). The test for leave to appeal is set out in s. 31 (2) Arbitration Act as follows:

31 (2)   In an application for leave under subsection (1)(b), the court may grant leave if it determines that

(a)  the importance of the result of the arbitration to the parties justifies the intervention of the court and the determination of the point of law may prevent a miscarriage of justice,

(b)  the point of law is of importance to some class or body of persons of which the applicant is a member, or

(c)  the point of law is of general or public importance.

(3)        If the court grants leave to appeal under subsection (2), it may attach conditions to the order granting leave that it considers just.

[28]        The availability of s. 31 depends upon identification of a question of law for which leave is sought (Satvva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 (CanLII) at para. 42). Limiting appeals to questions of law limits intervention of appellate courts to cases where the results have an impact beyond the parties to the particular dispute (Sattva at para. 51).

[29]        Once a question of law has been identified, the court may grant leave if one of the statutory conditions set out in s. 31(2)(a)(b) or (c) are met (BCIT (Student Association) v. BCIT, 2000 BCCA 496 (CanLII) at para. 9). Thus, one of the requirements of s. 31(2) (a), (b), or (c) must be met and, even if met, there is residual discretion to deny leave (Satvva at paras. 39 and 85; BCIT (Student Association) at para. 9).

A Question of Law

[30]        The legal issue here is whether, after having found that the new legislation was prospective and the transition provisions clear, the arbitrator fell into error by going further and finding that it would be unfair and unjust to deny this claimant the benefit of the new legislation, based upon the principled approach adopted in Rizzoand then applying an interpretation of the overall scheme of the legislation and a broad interpretation of benefits conferring legislation nothwithstanding a clear transition provision. The petitioner argued that the arbitrator ignored the intention of parliament, part of the principled approach established in Rizzo at para. 21. The arbitrator also went beyond his mandate by embarking on his own inquiry into fairness without a legal framework.

[31]        A strict interpretation of prospective benefits conferring legislation was made in the Buxton v. Tang line of cases. Transitional provisions provide express guidance as to whether amendments that affect substantive rights are to apply retrospectively (R. v. Dineley, 2012 SCC 58 (CanLII) at para. 3). It is only when there are no such provisions that resort must be had to general principles (Dineley at paras. 3 and 10). There must be clear legislative intent that new legislation that affects substantive rights is to be applied retrospectively (Dineley at para. 10). There appears to have been no discussion of the effect of a transitional provision in the NiedermeyerFelixand Symons line of cases.

Section 31(2)(a)

[32]        Section 31(2)(a) requires that the result of an arbitration must be sufficiently important in terms of principle or money to the parties to justify the expense and time of court proceedings (Sattva at para. 41).

[33]        Section 31(2)(a) also requires that the determination of the question of law may prevent a miscarriage of justice. The applicant must demonstrate that the point of law on appeal is material to the final result and has arguable merit (Sattva at para. 79). The alleged error must pertain to a material issue in the dispute which, if decided differently, would affect the result of the case (Sattva at para. 70). This could only be established if the appeal has some possibility of succeeding (Sattva at para. 71). The full merits of the case are not to be considered but only whether there is a potential to succeed and so change the results of the case (Sattva at para. 72). The threshold is establishment of arguable merit (Sattva at paras. 73-74). Assessment of whether the issue raised has arguable merit asks whether there is any arguable merit to the position that the arbitrator’s decision is unreasonable (Sattva at para. 75; The New Forest Woodland Inc. v. The Nature Trust of British Columbia, 2015 BCSC 111 (CanLII) at para. 43). This is not the time to determine whether the decision was actually unreasonable: it is the time to determine whether the petitioner has an arguable case that it was.

[34]        Although retrospective application of the new legislation affects a very few, the amount involved is not insignificant. However, it is the principle involved that attracts the most attention of s. 31(2)(a) here. Whether application of an interpretation of the purpose of a universal scheme of legislation as benefit conferring can be used to retrospectively apply substantive rights conferring legislation in the face of clear statutory intention to the contrary is a significant issue of importance to justify intervention of the court. There is scope here to find the arbitrator’s award to be unreasonable in the face of the Dineley assertion of the importance of a transition provision (at para. 10) within the Rizzo statement of statutory interpretation based not only upon the scheme and object of the act but also upon the intention of parliament as expressed in the wording of the legislation. Whether a policy interpretation broadly favouring the conferral of benefits can trump clear legislative intent expressed in a transition provision is an open issue when the question is not purely one of statutory interpretation but a question of whether certain legislation should apply. There is also the question of the application of Rizzo to the transition provision itself and not only to the statutory language conferring benefits. If the transition provision were applied here, the result would have been entirely different.

Sections 31(2)(b) and (c)

[35]        The parties did not focus on these sections and in view of my decision under section 31(2)(a), it is not necessary to further consider these sections.

Residual Discretion to Deny Leave

[36]        The considerations that apply in the exercise of the residual discretion to deny leave are non-exhaustive and include the conduct of the parties, the existence of alternative remedies, undue delay, and the urgent need for a final answer (Sattva at para. 91). The denial is to be exercised with caution, carefully weighing the discretionary factors (Sattva at para. 92).

[37]        There is no basis upon which to deny leave here.

Conclusion

[38]        Leave is granted for the petitioner to bring an appeal of the arbitrator’s decision on the issue of whether the arbitrator erred on the following issues:

  1. in declining to apply s. 148.1 of the Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231 (the “Old Regulation”) to the contract of insurance under which the respondent, S.A. was an insured;
  2. in applying the statutory interpretation principles set out in Rizzo v. Rizzo Shoes Ltd., 1998 CanLII 837 (S.C.C.), to the incorrect piece of legislation; and
  3. in making an inquiry into “fairness” and ignoring the applicable legislation in the absence of a legal framework in which to do so.

[39]        Costs are in the cause of the appeal.

“Dillon J.”