Settlement offer held valid on appeal

September 13, 2017, Kitchener, Ontario

Posted by: Robert Deutschmann, Personal Injury Lawyer

Sidhu and Aviva Canada

Date of Decision: July 21, 2017
Heard Before: Adjudicator Jeffrey Rogers           

APPEAL ORDER              

It is ordered that:

1. This appeal is dismissed.

REASONS FOR DECISION            

Mr. Sidhu submits that the Arbitrator erred in finding that the Full and Final Release he signed on December 2, 2003, precludes him from proceeding to arbitration.

For the reasons that follow, Adjudicator Rogers agrees with the Arbitrator’s conclusion.

At the time of the accident, Mr. Sidhu was insured by General Accident Assurance Company, since subsumed by Aviva. Mr. Sidhu applied for and was paid accident benefits. Income Replacement Benefits (IRBs) were terminated in 1993 and Mr. Sidhu applied for mediation. After mediation failed, he brought an action in the Ontario Court (General Division). The parties negotiated a settlement of the action. The action was dismissed, on consent, on December 1, 2003 and Mr. Sidhu signed the FFR on December 2, 2003.

In the FFR, Mr. Sidhu released Aviva from “all actions, causes of actions, damages, claims and demands whatsoever which I ever had, now have or which I… may have with respect to any past or future claims under Parts I through VIII of The Statutory Accident Benefits Schedule – Accidents before January 1, 1994 against Aviva”. In February 2014, Mr. Sidhu purported to rescind the 2003 settlement and indicated that he intended to claim further IRBs. Aviva refused to pay. He applied for arbitration after mediation did not resolve the dispute. The pre-hearing Arbitrator referred two preliminary issues for hearing:

1. Should Arbitration proceed, as the Applicant signed a Full and Final Release (“FFR”) on December 2, 2003?
2. Should the Applicant’s claim for entitlement to income replacement benefits be time-barred, as this benefit was stopped by Aviva on July 30, 1993?

The Arbitrator decided the arbitration could not proceed. As a result, she found it unnecessary to decide the second issue. The Arbitrator reasoned that Mr. Sidhu could only rescind the settlement if the Settlement Regulation applied and it was breached. She ruled that the Settlement Regulation does not apply and therefore any breach of it by Aviva was irrelevant. She rejected Mr. Sidhu’s submission that Igbokwe and Walker were not decided in the context of interpretive principles applicable to consumer protection legislation.

Igbokwe and Walker are binding. Adjudicator Rogers agreed with the Arbitrator that the decisions in Igbokwe and Walker dictate the result in this case and endorsee her reasons.  Igbokwe and Walker are binding decisions which cannot be distinguished on the facts or avoided by any subsequent changes in the law.

Rule 49 of the Civil Procedure is intended to encourage settlements of litigation and it carries costs consequences. Section 9.1 is concerned with the right of rescission within a cooling-off period once an agreement between the insurer and a claimant has been reached for benefits (SABs). Its purpose is to provide a claimant with adequate information prior to the commencement of an action in order to avoid a quick and uninformed decision as to the benefits the claimant is entitled to receive from the insurer. Once an action is commenced, any such relevant information would be available in the course of litigation, something an insured would not otherwise be entitled to receive but for the requirements of s. 9.1.

Aviva submits that Igbokwe is limited to Rule 49 offers. Adjudicator Rogers rejected that submission as it is clear that if litigation has been commenced, s. 9.1 of the regulation has no further effect.

Mr. Sidhu conceded that the Settlement Regulation does not apply, once an action has been commenced.  However, he now submits that these cases can be distinguished because of a new interpretive argument the Court did not consider. Namely that Rule 49 is subordinate to s. 279 of the Insurance Act, and therefore to the Settlement Regulation. Assuming that one can “distinguish” binding precedent on the basis of an argument the appellate body did not consider, this submission is rejected for two reasons.

1. S. 279 and hence s. 9.1 of the regulations have no application once the parties are in litigation.
2. Second, Walker removes Rule 49 from the analysis. In that case there was no Rule 49 offer.  The only requirement for exclusion of the Settlement Regulation is that the settlement occurred after an action was commenced.

The Adjudicator was not persuaded by the Applicant’s argument that the Igbokwe and Walker cases were not decided in the context of interpretive principles applicable to consumer protection legislation. The Court of Appeal in Igbokwe and Walker is clearly concerned with the policy underpinning of the accident benefits system. The Adjudicator agreed with the Arbitrator that the Court addressed the issue of consumer protection in Igbokwe and Walker. The Court concluded that the consumer protection issues that the Settlement Regulation is intended to address are not engaged in the context of settlement of a court action.

Mr. Sidhu submits that the agreement to settle required compliance with the Settlement Regulation. At the time of the settlement, Mr. Sidhu executed both an FFR and a Settlement Disclosure Notice (SDN) that Aviva sent him. Aviva disputes that execution of the SDN was a term of the settlement.  The Arbitrator rejected this argument because the facts are the same as in Walker, where the plaintiff also executed an SDN. She stated:

Aviva submits that the facts of Walker are similar to the facts of this case, the essential elements being a negotiated settlement, a Release and SDN provided by the Insurer and signed by the Insured, and consent to the action being dismissed. The allegation in Walker, as here, was that the SDN was non-compliant and an application was brought for a declaration that the settlement agreement had been rescinded. The Court of Appeal held that the right to rescind contained in the Settlement Regulation did not apply in these circumstances.

The Adjudicator did not accept Mr. Sidhu’s submission that Walker can be distinguished on the grounds that the Court did not consider the argument that the right to compliance with the Settlement Regulation arose from a contract between the parties. Rejection of that argument is implicit in the Court’s decision. Further, even if execution of the SDN were a term of the contract, that does not mean that any deficiencies in the SDN would give Mr. Sidhu a right to rescind the settlement.  There is no suggestion that there was any agreement to incorporate the entire Settlement Regulation.

Where the Settlement Regulation applies, the right to rescind after the cooling off period is not derived from execution of the SDN. It is derived from other provisions in the Settlement Regulation that allow rescission where the insurer has breached the disclosure requirements. Here, the right would have to arise from the terms of the contract or from a rule of law of general application that gives a right to rescind a contract. There is no suggestion that the parties agreed to include a right to rescind, or that any general rule of law applies.

The Adjudicator also ruled that amendments to Settlement Regulation do not change result. The Adjudicator agreed with Mr. Sidhu that the Legislature was not required to explicitly “overrule” Igbokwe and Walker in order to change the principle they established, but he amendments do not mean that the Settlement Regulation now applies to all settlements in the context of court actions.

Adjudicator Rogers Agreed  with Aviva that the amendments must be interpreted in the context of the exception that Igbokwe and Walker established.  In that context, sections 9.6 (10) and 9.6 (11) are seen to recognize the mischief of premature settlements, but also acknowledge that the mischief is diminished in the context of a court action, as the Court did in Igbokwe and Walker.  I agree with Aviva that, having recognized that settlements in the context of court actions require less protection, the Legislature would have employed specific, clear and unambiguous language, if it also intended to erode the exception that Igbokwe and Walker created.

On this basis Adjudicator Rogers agreed with the Arbitrator that he is precluded from proceeding to arbitration and I therefore dismiss this appeal.

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