This priority dispute between Intact and Federated gave the Court of Appeal a chance to discuss the scope of abuse of process in the context of a private arbitration.

Mr. C was operating a vehicle that had been previously insured by Intact which collided with a truck that was insured by Federated. Under the Dispute Regulation, if Intact had validly cancelled the policy, Federated would be in priority to pay Statutory Accident Benefits.

Federated disputed the cancellation and filed transcripts of examinations of two Intact employees which raised “legitimate questions about Intact’s notification to Mr. C of the policy cancellation”. However, Mr. C had been convicted of driving without insurance at contrary to s. 2(1) of the Compulsory Automobile Insurance Act. As such, Intact sought to prevent Federated from leading evidence on the cancellation of the policy based on the principles of abuse of process and the fact that Federated was seeking to re-litigate the prior conviction.

At the preliminary issue hearing, Arbitrator Bialkowski held that Federated had been afforded no opportunity to participate in the initial proceeding regarding the conviction. He held that it would be “unfair to deny a party of opposite interest an opportunity to lead evidence contrary to the initial conviction in the context of a priority dispute”.

During judicial review at the Divisional Court, Justice Diamond disagreed with Arbitrator Bialkowski and held that the abuse of process doctrine applied to prevent Federated from re-litigating the conviction. In coming to this conclusion, the application judge found that s. 22.1 of the Evidence Act, provided that proof of a prior conviction is proof that the crime was committed by the convicted person “in the absence of evidence to the contrary”. The application judge found that Federated had failed to lead any credible evidence to the contrary relating to Mr. C’s conviction and as such the abuse of process doctrine applied.

The Court of Appeal held that the application judge had made an error in law regarding the interplay between s. 22.1 of the Evidence Act and the abuse of process doctrine.

Section 22.1 of the Evidence Act is a rule of evidence intended to expedite the proof of facts decided in a prior criminal proceeding. Proof of a prior conviction constitutes proof of all facts essential to that conviction absent “evidence to the contrary”. As such, the presumptive “proof” can be rebutted by introducing “evidence to the contrary”. “Evidence to the contrary” under s. 22.1 refers to evidence that contradicts the facts essential to the prior conviction. The court held that evidence that a driver who had been convicted of driving without insurance was in fact insured at the relevant time would constitute “evidence to the contrary” under s. 22.1.

The abuse of process doctrine was developed by the courts to determine when a party should be allowed to lead “evidence to the contrary” under s. 22.1 and when they should be prevented from leading evidence to the contrary in the interests of protecting the integrity of the administration of justice.

The Court of Appeal highlighted the following points regarding Abuse of Process as outlined by the Supreme Court of Canada in Toronto (City) v. CUPE (“CUPE”):

• The abuse of process doctrine is a manifestation of a court’s inherent power to prevent misuse of its process by re-litigation of previously decided facts: CUPE, at para. 37

• The doctrine is primarily focused on preserving the integrity of the administration of justice rather than protecting the interests of individual litigants: CUPE, at para. 43;

• Re-litigation inevitably has a detrimental effect on the due administration of justice. It can lead to inconsistent and even irreconcilable results, devalue finality, and cause the expenditure of resources, both public and private, on further proceedings with no guarantee that the second result will be more accurate than the first: CUPE, at paras. 38, 51-52;

• Re-litigation should thus be avoided unless “the circumstances dictate that re-litigation is in fact necessary to enhance the credibility and the effectiveness of the adjudicative process as a whole”: CUPE, at para. 52;

• There is no closed list of the circumstances in which re-litigation is necessary. Courts will permit re-litigation if in the specific circumstances “fairness dictates that the original result should not be binding in the new context”: CUPE, at paras. 52-53.

In the context of the current case, the court held that neither Federated nor Intact were parties to the initial proceeding by the Crown against Mr. C and shared no common interest. The Court held that the non-involvement of a party seeking to re-litigate is a significant factor in determining whether re-litigation constitutes an abuse of process. The fact that Federated was not involved in the prior proceeding was considered to “strongly support” Federated’s position.

The nature of the initial proceedings was a pseudo criminal context with proof beyond a reasonable doubt and strong evidentiary rules. A conviction carries significant penalty and potential license suspension. As such, it as assumed that a person facing this charge would feel that the proceedings were important would lead a “full and robust” defence. These factors mitigated against Federated re-litigating the issue.

Finally, the court examined whether allowing re-litigation of the facts in the specific context would have a “profoundly negative impact” on the administration of justice. It was generally accepted that re-litigation of any facts will have a negative impact on the administration of justice, but the Court held that re-litigation in the context of a private arbitration to determine which private insurer is in priority to pay Statutory Accident Benefits has little implication to public interest. Further, both Intact and Federated have the means and expertise to fully litigate the issue and the court held that the re-litigation in the context of the private arbitration was likely to enhance the credibility and effectiveness of this adjudicative process.

The Court of Appeal ultimately determined that fairness “strongly” dictated that Federated should have the opportunity to lead “evidence to the contrary” to dispute the prior conviction. The decision relied heavily on the fact that re-litigation in the context of a private arbitration has “no negative impact on the integrity of the overall adjudicative process and may in fact enhance that integrity by generating a more reliable result”.

This decision is strong guidance from the Court of Appeal that abuse of process will not generally act to prevent an insurer from re-litigating the legality and appropriateness of a policy cancellation in the context of a private arbitration even when there has been a prior conviction flowing from that same cancellation.