In Loan Away Inc. v. Western Live Assurance Company, 2019 ONSC 657, Madam Justice Harriet E. Sachs issued a costs order stemming from her earlier decision in Loan Away Inc. v. Western Life Assurance Company, 2018 ONSC 7229 in which she stayed plaintiff’s litigation in favour of arbitration and refused to consolidate that arbitration with an ongoing one between defendant and a third party. Despite respondents’ claims for costs on a substantial indemnity, Sachs J. ordered costs on a less-than partial indemnity basis. She observed that the motions were important and of “more than average complexity” but required modest written materials and evidence and less than a day to argue.
Loan Away Inc. (“Loan Away”) offers small, short-term loans to consumers in Canada. Western Life Assurance Company (“Western”), an insurance company head quartered in Winnipeg, offers group creditor insurance, as well as other forms of coverage.
By December 2016 Marketing Agreement between Loan Away and Western, Loan Away obtained the right to market Western’s insurance policies to Loan Away’s customers who wished to obtain insurance coverage for their loans. In return, Loan Away received payments. A third corporation, IWS Creditor Group Inc. (“IWS”), also signed the Marketing Agreement.
The Marketing Agreement contained no financial terms between Loan Away and IWS. The financial terms for IWS were set out in a separate contract between only IWS and Western (“Financing Contract”). Loan Away was not a party to that contract. IWS and Western were already involved in an arbitration under that Financing Contract.
The Marketing Agreement provided for a group policy, with Loan Away being the policy holder. IWS served as agent and administrator for Western for delivery of the policies. Loan Away would enrol its borrowers as certificate holders under the group policy and, following a borrower submitting an accepted proof of claim, the benefits would be paid directly to Loan Away.
Loan Away would collect the premiums due under Western’s policies as part of the total loan obligation and remit to Western amounts which accumulated into a reserve held by Western. Western was obligated to remit to Loan Away a portion of that reserve each month (“Contingent Compensation”).
Due to disputes stemming from a September 2017 order from the Financial Institutions Commission of British Columbia and subsequent alleged breaches, Western purported to terminate the Marketing Agreement in August 22, 2018 and, in doing so, also withheld Contingent Compensation which Loan Away claimed were owing.
Loan Away applied to the Ontario Superior Court for injunctive relief stated as follows:
“(a) An interim order, pending the return of the interlocutory relief sought in the Statement of Claim, or pending the determination of this matter, restraining the Defendant from terminating the contracts of insurance sold by the Plaintiff to borrowers on behalf of the Defendant;
(b) An interlocutory order, pending determination of this matter;
(i) Restraining the Defendant from terminating the contracts of insurance sold by the Plaintiff to borrowers on behalf of the Defendant; and
(ii) Requiring the Defendant to:
(1) Remit to the Plaintiff the improperly withheld amount due under the parties agreement; or, in the alternative
(2) To pay such amount into Court.”
In her first decision, Sachs J. dismissed Loan Away’s application due to its failure to provide an undertaking for damages as required by Rule 40.03 of Ontario’s Rules of Civil Procedure, RRO 1990, Reg 194.
In the event that she was mistaken on her application of Rule 40.03 to Loan Away’s facts, at paras 37-60 of her reasons she considered the three-part test for issuing an injunction. Her reasons set out her analysis distinguishing between mandatory and prohibitive injunctions and the competing tests for each for on the first part of the three-part test. “If the injunction is prohibitive the moving party must demonstrate that there is a serious question to be tried. If it is mandatory, the moving party must demonstrate a strong prima facie case that it will succeed at trial.” She referenced R. v. Canadian Broadcasting Corp.,  1 SCR 196, 2018 SCC 5.
Sachs J. determined that Loan Away had effectively sought a mandatory injunction and therefore needed to demonstrate a strong prima facie case. She devoted most of her analysis to this first part, at paras 42-52 of her reasons. For the allegations of bad faith, she determined that Loan Away’s record did not provide a strong prima facie case that Western’s decision to terminate was improperly motivated.
“ In terms of the decision to terminate the Group Policy, Western did not have to give a reason for this termination. Further, it is not surprising that it would want to end its business relationship with Loan Away when it was not complying with its obligations and when it was suing them.”
“ Finally, as the recent decision of the Supreme Court of Canada in Churchill Falls (Labrador) Corp. v. Hydro-Quebec, 2018 SCC 46 (CanLII), the concept of good faith between the parties cannot be used “to undermine the contract’s paradigm.” As put by the court “good faith takes its form from the terms of the contract” (para. 120). In this case Western did no more than act in accordance with the terms of the contract.”
The Marketing Agreement contained a governing law clause, stipulating that it would be governed and construed in accordance with Alberta law and a mandatory dispute resolution clause providing for mediation and arbitration of disputes.
“14.18 Dispute Resolution – If any dispute occurs between the Parties concerning any matter governed by this Agreement, the disputing Party will promptly advise the other Party in writing and the Parties together will use commercially reasonable efforts to resolve the dispute informally. If the Parties are unable to resolve the dispute informally, within ten (10) Business Days of one Party advising the other of the dispute, either Party may send a written request for formal resolution of the dispute to the other Party. Within thirty (30) days after receipt of such written request, the Parties will meet for one day with a mutually agreed upon mediator in Winnipeg, Manitoba and if the Parties are unable to resolve the dispute through such mediation, then the dispute will be settled by arbitration, with no right of appeal, even on questions of law, pursuant to the National Arbitration Rules of the ADR Institute of Canada, Inc.. The arbitration proceedings will take place in Winnipeg, Manitoba, unless otherwise mutually agreed by the Parties. The language of the arbitration will be English. This Section 14.18 will not apply to disputes under Article 13 or Section 14.5 or to any dispute involving an application for a temporary restraining order or other forms of injunctive relief. Under no circumstances, including non-payment of amounts in dispute, may either Party cease to perform its obligations under this Agreement in accordance with the terms and conditions hereof and the Group Policy while any dispute is being resolved.”
Sachs J. held that the exception for an application for temporary injunctive relief applied.
Having noted Alberta law as the chosen law, Sachs J. excerpted section 7(1) of Ontario’s Arbitration Act, 1991, SO 1991, c 17, observing that it was identical to the provisions in Alberta’s Arbitration Act, RSA 2000, c A-43. She summarized each party’s position.
“ Loan Away submits that a stay should not be granted for two reasons – the action contains a request for a permanent as well as an interlocutory injunction and it would be unfair for it to have to litigate the same issues in two forums.
 As already noted, the Marketing Agreement’s Dispute Resolution clause contains an exception for requests for a temporary restraining order or other forms of injunctive relief. Loan Away argues that its request for a permanent injunction falls under the category of “other forms of injunctive relief”. Western responds by saying that the operative word in the exception is “temporary” and it is meant to apply to requests for temporary as opposed to permanent forms of injunctive relief.”
Referring to Dancap Productions Inc., v. Key Brand Entertainment, Inc., 2009 ONCA 135, Sachs J. confirmed that, where it is “arguable” that a dispute falls within the scope of an undertaking to arbitrate, the could should grant a stay and refer the parties to arbitration so that the arbitrator can decide jurisdiction. She held that, in the case before her, it was arguable that whether a permanent injunction fell within the terms of the section 14.18 and therefore agreed that jurisdiction should be referred to the arbitrator for determination.
Sachs J. also dismissed Loan Away’s argument it would be unfair to have Loan Away litigate the same issue in two (2) forums.
“ With respect to the issue of fairness, since all of the remaining issues will be referred for arbitration there is no danger that Loan Away will have to litigate in two separate forums. Further, the possibility of having to litigate in two separate forums is expressly contemplated by both the Ontario and Alberta Arbitration Acts. Both contain a clause allowing for the court to stay the proceeding with respect to the matters dealt with in the arbitration agreement and allowing it to proceed with respect to other matters if the matters can reasonably be separated.”
Sachs J. briefly noted Loan Away’s request to order that an arbitration between Loan Away and Western be consolidated with an existing arbitration between Western and IWS. Loan Away argued that the factual issues in both arbitrations will overlap.
Relying on section 8(4) of Ontario’s Arbitration Act, identical to Alberta’s, Sachs J. identified the court’s authority to consolidate arbitrations but underlined that consolidation could only be made on the application of all the parties to more than one arbitration. Only Loan Away sought consolidation and Western and IWS both objected. “Thus, I have no jurisdiction to make the order requested”.
On consolidation under Alberta’s legislation, see two (2) prior ArbitrationMatters notes: “Alberta court consolidates international and domestic arbitrations without consent of all parties” regarding Japan Canada Oil Sands Limited v Toyo Engineering Canada Ltd, 2018 ABQB 844; and, “Alberta court determines that all parties must consent to consolidation under international commercial arbitration legislation” regarding Alberta Motor Association Insurance Company v Aspen Insurance UK Limited, 2018 ABQB 207.