



COURT OF APPEAL FOR ONTARIO

CITATION: Trade Finance Solutions Inc. v. Equinox Global
    Limited, 2018 ONCA 12

DATE: 20180111

DOCKET: C63243

Doherty, LaForme, and Miller JJ.A.

BETWEEN

Trade Finance Solutions Inc.

Plaintiff (Respondent)

and

Equinox Global Limited and Lloyds Underwriters

Defendants (Appellants)

Ryan Morris and John Mather for the appellants

Alan DSilva and Mark Walli for the respondent

Heard: September 22, 2017

On appeal from the order of Justice Grant R. Dow of the
    Superior Court of Justice, dated 30 December, 2016.

CIVIL - Contractual interpretation  insurance policy
     arbitration clause  legal test for stay in favour of arbitration 
    International Commercial Arbitration Act

LaForme J.A.:

OVERVIEW

[1]

This appeal involves the proper effect to be given to an international
    insurance agreement that contains both an arbitration provision and an Action
    Against Insurer clause. It considers whether an Ontario action brought by an
    insured for breach of that agreement must be stayed and referred to
    arbitration.

[2]

In the circumstances of this case, I agree with the appellants, Equinox
    Global Limited and Lloyds Underwriters (the Insurers) that the action
    against them must be stayed and referred to arbitration in London, England.
    There are two reasons for this.

[3]

First, when the insurance policy is interpreted objectively, in a manner
    that gives meaning to all of its terms, mandatory arbitration in London,
    England was agreed to by the parties as the sole method of dispute resolution.

[4]

Second, Ontario has chosen to adopt the
UNCITRAL Model Law on
    International Commercial Arbitration
(the Model Law).
[1]
That law requires a court before which an action is brought in a matter that is
    the subject of an arbitration agreement to refer the parties to arbitration if
    it is arguable that: (i) the arbitration agreement is binding on the parties;
    and (ii) the claims at issue fall within the scope of the agreement. I conclude
    that this law applies.

[5]

I would allow the appeal and stay the within action, referring the
    parties to arbitration in London, England.

BACKGROUND

[6]

The respondent, Trade Finance Solutions Inc. (TFS) is an Ontario company
    having its head office in Ontario. It is in the business of providing short
    term financing and trade credit to small and medium size businesses. For a fee,
    it will immediately advance funds to the contracting business in return for that
    business assigning its receivables to TFS which gets paid over time (referred
    to as factoring). While TFS is based in Toronto, it does business globally.
    Much of its business appears to occur in North America, primarily in Canada and
    in Florida.

[7]

Because not all invoices get paid, or problems arise in payment, TFS
    obtains trade credit insurance on its factored accounts, which is available
    from Equinox Global Limited. Equinox is headquartered in London, England.

[8]

TFS retained an insurance broker in Ontario, as well as in England, to
    assist in securing an insurance policy to provide the required coverage. Equinox
    was approached and asked to provide insurance on an expedited timeline: TFSs
    existing trade credit policy was set to terminate in approximately 26 days.

[9]

Most of the negotiation between TFS, its agents, and Equinox took place
    by email communication, and concerned a document entitled Schedule, which
    sets out terms specific to the policy, including the effective date, identity
    of insured, policy limits, and premium. It also included certain endorsements
    dealing with a number of related topics. There was also a standard form excess
    of loss insurance contract (the base policy) containing terms about TFSs
    and Equinoxs mutual responsibilities under the insurance contract. This base
    policy was incorporated into the Schedule by reference, and conveyed to TFS and
    its brokers early on in the process.

[10]

A
    contract of insurance was subsequently issued with Equinox and Lloyds
    Underwriters. Equinox signed and stamped the Schedule, and TFS agree to bind
    the policy, subject to certain amendments which were ultimately made.

[11]

Clause
    8(j) of the base policy contains the following arbitration provision:

This policy shall be governed by the laws of England and
    Wales. Any dispute arising in connection with this contract, including any
    question regarding its existence, validity or termination, shall be referred to
    and finally resolved by arbitration under the LCIA Rules,
[2]
which Rules are deemed to be incorporated by reference into this clause. The
    number of arbitrators shall be three. The seat, or legal place of, the
    arbitration, shall be London. The language used in the arbitral proceedings
    shall be English. [Footnote added.]

[12]

The
    following are some of the more relevant endorsements and declarations:

·

An "insuring in Canada a risk" endorsement providing
    that the policy was issued in the course of Lloyd's business in Canada;

·

A complaint protocol endorsement providing TFS with rights to
    lodge complaints with Lloyd's in Montreal and with various Ontario and federal
    regulatory agencies;

·

A consumer rights endorsement providing that TFS's rights were
    grounded in the insurance contract and the laws of its province (Ontario); and

·

An "Action Against Insurer" provision in the
    declarations providing that, [i]n any action to enforce the obligations of the
    Underwriters they can be designated or named as Lloyds Underwriters and that
    the [s]ervice of such proceedings may validly be made upon the Attorney In Fact
    in Canada for Lloyds Underwriters in Montreal.

[13]

All
    of the endorsements state that they prevail over any conflicting wording in the
    underlying policy. On its face, there is said to be a conflict between the
    arbitration clause in the base policy and the Action Against Insurer
    endorsement.

[14]

Ultimately,
    TFS made several claims for loss under the policy. In response, the Insurers identified
    a number of concerns related to the claim, and made requests for further
    information relating to them. TFS viewed the response by the Insurers as an
    attempt to frustrate the claims process.

[15]

TFS
    commenced an action against the Insurers in Ontario for losses under the
    insurance contract. Its statement of claim alleges breach of contract, unjust
    enrichment, and punitive damages. In response, the Insurers asserted that any
    dispute relating to the insurance contract had to be submitted to arbitration
    under the LCIA rules, in accordance with clause 8(j). Accordingly, the Insurers
    brought a motion to stay, which was dismissed below and is the subject of this
    appeal.

THE MOTION JUDGES DECISION

[16]

The
    motion judge refused to stay TFSs action. In his view, both the arbitration
    clause and the Action Against Insurer clause provided for alternative,
    optional methods of dispute resolution. He was not prepared to agree with TFSs
    submission that the Action Against Insurer clause effectively excluded the
    arbitration clause as part of the contract. Neither did he accept the Insurers
    argument that the Action Against Insurer endorsement clause was a mere service
    of suit clause, in that it simply designated the party who would accept
    "service of process" on behalf of the insurer. He held that the words
    were wider than that purpose, and that the parties could easily have inserted
    wording making any such intent clear, as had occurred in
Oppenheim v.
    Midnight Marine Limited,
2010 NLCA 64, 325 D.L.R. (4th) 254.

[17]

The
    motion judge also rejected the Insurers argument that art. 8 of the Model Law contained
    the appropriate test for granting a stay. Reading the contract as a whole, he
    said, provided two alternative methods of dispute resolution: (i) international
    arbitration pursuant to clause 8(j) of the base policy, and (ii) domestic
    proceedings pursuant to the Action Against Insurer endorsement. Given this, he
    concluded the Model Law did not apply because its application was limited to
    situations where the parties have agreed to arbitration as the sole method of
    dispute resolution.

[18]

The
    motion judges conclusion on the application of the Model Law was, he said,
    supported by s. 123 of Ontarios
Insurance Act
, R.S.O. 1990, c. I.8,
    which provides that insurance delivered to an insured person resident in
    Ontario is deemed to be a contract made in Ontario. Therefore, the insurance
    contract, being an Ontario contract, required the inclusion of the Insuring in
    Canada a risk endorsement, which in turn provided that the endorsement would
    prevail in the face of a conflict between it and the base policy.

[19]

In
    the motion judges opinion, although the parties had agreed to an arbitration
    clause in the base policy, they had also agreed to Canadianize the insurance
    contract by allowing domestic actions against the insurer under the Action
    Against Insurer provision. To prevent clause 8(j) from being rendered
    ineffective, he further held that the arbitration clauses use of the word
    shall, should be changed to may.

THE ISSUES

[20]

The Insurers submit that the motion judge in this case committed
    two errors of law, namely
:

I.        He
    did not apply the correct principles of contractual interpretation so as to
    give meaning to all of the insurance policys terms. Instead, he altered the
    wording of the policy to provide for a dual-track dispute resolution process
    contrary to the objective terms of the agreement.

II.       He
    did not apply the correct legal test for a stay under the
International
    Commercial Arbitration Act,
R.S.O. 1990 c. I.9 (the 
ICAA
) and
    the Model Law. That Act and the jurisprudence interpreting it provides that a
    stay should be granted if it is arguable that a dispute falls within the
    terms of an arbitration agreement.

[21]

The
    Insurers submit that should this court find the motion judge to have committed
    one of the errors alleged, this court should stay the action and refer the
    parties to arbitration in England.

ANALYSIS

[22]

The
    Insurers argue that the existence of an arbitration clause in the contract
    demands that questions about the proper forum for dispute resolution, as well
    as the underlying dispute, ought to be determined by the arbitrator, pursuant
    to the competence-competence principle.

[23]

Generally
    speaking, the approach in Ontario is that in cases where the "existence or
    validity of the arbitration agreement" is not clear (i.e. the agreement is
    arguably, but not clearly: (a) null and void; (b) inoperative; or (c) incapable
    of being performed) it is preferable for the arbitrator to decide the issue:
Dalimpex
    Ltd. v. Janicki
, (2003), 64 O.R. (3d) 737 (Ont. C.A.), at paras. 21-22. Thus,
    it would seem that an answer to issue two could be dispositive of this appeal.

[24]

On
    my reading of the decision below, the motion judge held that the arbitration
    provision was clearly inoperative in the circumstances, because the contract
    contemplated both arbitration in England and a civil action in Ontario as
    optional methods of dispute resolution. TFS having chosen to commence an action
    in Ontario, it could not be said that the dispute was subject to the
    arbitration clause, or that the arbitration clause was operative in the
    circumstances. The motion judges modification of the arbitration provisions
    language re-enforced this conclusion.

[25]

In
    order to review this decision, it is necessary to re-visit the interpretation
    of the insurance contract. This is because if the motion judges interpretation
    of the contract is correct, then the parties did not agree to submit the
    dispute in question to mandatory arbitration, and it is possible that a stay of
    proceedings is inappropriate in the circumstances.

[26]

I
    note that Lauwers J.A., in the recent case of
Haas v. Gunasekaram,
2016
    ONCA 744, 62 B.L.R. (5th) 1 at para. 17, created an analytical framework
[3]
applicable to motions to stay proceedings under the
Arbitration Act, 1991,
S.O.
    1991, c. 17, which may also be applicable to such motions under the
ICAA.
But I need not adopt this framework in this case. Its application was not
    argued, and this appeal effectively turns on a single issue: whether there was
    arguably an operative arbitration agreement in the contract.

[27]

It
    appears to me that none of the parties to this dispute take any serious issue
    with this approach. Consequently, I intend to decide the two issues as proposed
    by the Insurers, responded to by TFS, and as decided by the motion judge.

(1)

The Standard of Review

[28]

The
    standard of review for the issues involved in the interpretation of the
    insurance policy in this case is, in my view, correctness.

[29]

The
    motion judge committed an extricable error of law in his interpretation of the
    policy. Specifically, notwithstanding rehearsing the well-established principle
    of contractual interpretation that courts must, if possible, adopt an
    interpretation that renders each of its terms effective, he failed to actually
    apply that principle. As a result, a correctness standard applies:
Sattva
    Capital Corp. v. Creston Moly Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633, at
    para. 53;
Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc.,
2017
    ONCA 293, 135 O.R. (3d) 241 at paras. 71-76, leave to appeal refd 2017
    CarswellOnt 16214, 2017 CarswellOnt 16215.

[30]

Also,
    the motion judges interpretation of the Action Against Insurer Clause
    conflicts with other decisions in Canada and elsewhere, creating uncertainty in
    the law about how similarly worded insurance policies ought to be interpreted.
    The provisions at issue in this case seem to appear frequently in cases
    involving U.K.-based insurers.
[4]
In my view, this case raises an issue that will have an impact beyond the
    parties to the dispute. This court, therefore, should review the decision on a
    standard of correctness to address the uncertainty it has created in the law:
Ledcor
    Construction Ltd. v. Northbridge Indemnity Insurance Co.
, 2016 SCC 37,
    [2016] 2 S.C.R. 23, at para. 46, and
Biancaniello v. DMCT LLP,
2017
    ONCA 386, 411 D.L.R. (4th) 367, at paras. 20-22.

[31]

The
    standard of review applicable to the motion judges interpretation of the Model
    Law and
ICAA
, as an issue of law,

is also correctness:
Canadian
    National Railway Co. v. Canada (Attorney General),
2014 SCC 40, [2014] 2
    S.C.R. 135, at para. 33.

(2)

Did the Motion Judge Correctly Interpret the Contract?

[32]

On
    the motion, TFS argued that the arbitration clause in the base policy was
    rendered inoperative by the endorsements and declarations. The motion judge
    essentially agreed and held that, while there was an agreement to an arbitration
    clause in the base policy, there was also agreement to allow domestic actions
    against the insurer under the Action Against Insurer endorsement.

[33]

In
    reaching his decision, the motion judge gave two reasons: (i) the Action
    Against Insurer endorsement was not limited to a mere service of suit clause;
    and (ii) part of the Canadianization of the policy was to allow actions against
    the insurer to enforce the obligations of the Underwriters. I disagree.

[34]

The
    general principles of contractual interpretation are straightforward: the
    court construes the contract as a whole, in a manner that gives meaning to all
    of its terms, and avoids an interpretation that would render one or more of its
    terms ineffective:
Salah v. Timothy's Coffees of the World Inc.,
2010
    ONCA 673, 74 B.L.R. (4th) 161, at para. 16. The motion judge, at para. 8,
    expressed an appreciation of these principles and said he was proceeding with
    his analysis accordingly.

[35]

With
    respect, although the motion judge expressed the correct legal principles, he
    was in error when he interpreted the Action Against Insurer endorsement clause
    as an alternative dispute resolution provision. It was unnecessary and an error
    for him to widen the meaning to the Action Against Insurer endorsement clause
    and turn it into an alternative dispute resolution provision in order to give
    it effect. This is because the plain language of the clause can be given
    meaningful effect without conflicting with the mandatory language of the
    arbitration clause, thereby giving effect to all of the terms of the insurance
    policy.

[36]

I
    conclude that the Action Against Insurer endorsement does not clearly provide
    for an alternative right of the insured to commence a domestic action against
    the Insurers. As I will explain, it is arguably a service of suit clause, which
    I will define in more detail below. As a result, it cannot be said that the
    arbitration provision was clearly inoperative on the facts of this case.

[37]

The
    Action Against Insurer clause in this case provides as follows:

In any action to enforce the obligations of the Underwriters
    they can be designated or named as "Lloyd's Underwriters" and such
    designation shall be binding on the Underwriters as if they had each been individually
    named as defendant. Service of such proceedings may validly be made upon the
    Attorney In Fact in Canada for Lloyd's Underwriters, whose address for such
    service is 1155 rue Metcalfe, Suite 2220, Montreal, Quebec H3B 2V6.

[38]

The
    motion judge rejected the Insurers argument that the Action Against Insurer
    provision can be interpreted as referring to service of actions to compel
    arbitration or enforce an arbitral award. TFS argues that this suggested
    interpretation would render the plain language of this clause completely
    ineffective, as the motion judge found at para. 13. As already noted, I do not
    accept the submission of TFS.

[39]

The Insurers contend that the
Action Against
    Insurer clause
is actually a service of suit
    clause. That is, the clause simply defines the circumstances under which the
    insurer will accept service of a suit, if that insurer is out of the
    jurisdiction or constitutes a syndicate of many individual insurers. I agree
    with the Insurers.
[5]

[40]

The
    word action and the word defendant, when they appear in a clause about the
    identification and service of underwriters in the context of claims for
    breaches of the obligations under the insurance agreement, do not necessarily
    refer to a civil action, or to a defendant in a civil action. They can easily be
    read as referring to any proceeding in which a claim is made against the
    underwriters. An arbitration is a proceeding in which a claim is advanced
    against the underwriters. The reference to the underwriters as defendant is a
    description of their role in the proceeding.

[41]

Indeed,
    even if action and defendant do refer to a civil action, the Action Against
    Insurer endorsement does not conflict with the mandatory arbitration clause.
    Notwithstanding the latters operation, there are still civil actions available
    to TFS: actions to determine jurisdiction or compel arbitration, actions to
    enforce arbitral awards, and appeals of arbitral awards are all examples of
    such actions.

[42]

Further
    supporting this conclusion is the fact that the Action Against Insurer clause
    says nothing about where or how claims to enforce obligations under the
    agreements are to be determined. As pointed out in oral argument, the provision
    does not even deal with all of the potential defendants to an enforcement claim
    (i.e. Equinox). The plain wording of the endorsement does not need to be
    widened into an alternative dispute resolution process in order for it to
    have meaning and be effective.

[43]

TFS
    argues that it insisted that Equinox Canadianize the policy (i.e. issue the
    policy in Ontario and ensure compliance with Canadian insurance regulations),
    intending and believing that doing so would permit it to sue in court. But
    contractual interpretation does not turn on these types of subjective
    expectations:
Salah,
at para. 16. TFS admits that neither party
    specifically raised the issue of how, when, or where dispute resolution would
    take place. The plain wording of the insurance contract is clear and
    unambiguous.

[44]

Similar
    clauses were at issue in
Ace Capital Ltd. v. CMS Energy Corp.,
[2008] E.W.H.C.
    1843 (Comm.), 2 C.L.C. 318 and
Midnight Marine
. In both cases the
    court held that the Action Against Insurer clause and a mandatory arbitration
    clause did not conflict and that both clauses could be given meaningful effect
    without nullifying or otherwise modifying the arbitration clause.

[45]

In
Ace Capital
, there was no conflict because even if the mandatory arbitration
    clause was given full effect, there were certain civil actions which could
    still be brought. This could include: to compel arbitration, to declare the
    validity of an award, to enforce an award, or to confirm the jurisdiction of US
    courts on the merits in the event that the parties agree to dispense with
    arbitration. The Action Against Insurer clause would apply to those civil
    proceedings. That court premised its decision, in part, upon the principle that
    [a] clause should not be rejected unless manifestly inconsistent with or
    repugnant to the rest of the agreement. (at para. 70).

[46]

In
Midnight Marine
the relevant clause in
    the insurance policy under consideration was headed, 
Service of Suit
    Clause (Canada)  (Action against Insurer). The clause itself was materially
    identical to that in this case.
Relying on
Ace
    Capital
,
Barry J.A. concluded that
    the mandatory arbitration clause and the service of suit provisions did not
    conflict. At para. 56, he held that the service of suit (Action against
    Insurer) clause could be given meaningful effect without nullifying or
    otherwise modifying the arbitration clause:

A meaningful scope may be given to the Service of Suit Clause,
    without concluding it nullifies the exclusive (in the first instance)
    jurisdiction of English arbitrators and courts provided for by Clause
    I. The Service of Suit Clause may still be applied to actions seeking to
    declare the arbitrable nature of a dispute, to compel arbitration, to declare
    the validity of an award, or to enforce an award.

[47]

In
    our case  just as it was in
Ace Capital
and
Midnight Marine
 after interpreting the insurance contract as a whole, it is possible to give
    meaningful effect to both the mandatory arbitration clause and the Action
    Against Insurer clause. Interpreting it this way gives meaning to all of its
    terms, and avoids an interpretation that would render the mandatory arbitration
    clause merely optional and thus ineffective. In contrast, the motion judges
    interpretation required the modification of the wording of the arbitration
    clause, which was accomplished by changing the word shall to may.

[48]

In
    sum, the arbitration provision was at least arguably operative in the
    circumstances. The motion judge failed to give effect to the mandatory language
    of the arbitration clause that provides that any dispute under the policy
    shall be referred to and finally resolved by arbitration. In finding that the
    Action Against Insurer clause allowed TFS to also commence court proceedings in
    Ontario, the motion judge erroneously nullified this mandatory language. He was
    in error in doing so.

[49]

For
    these reasons, I would allow this ground of appeal.

(3)

Did the Motion Judge Correctly Consider the ICAA and the Model Law?

[50]

For
    context, it should be kept in mind that alternative dispute resolution
    mechanisms, including arbitration, are among the means the international
    community has adopted to increase efficiency in economic relationships:
Dell
    Computer Corp. v. Union des consommateurs
, 2007 SCC 34, [2007] 2 S.C.R.
    801, at para. 1. And, unless there is legislative intervention, the courts will
    generally give effect to the terms of a commercial contract freely entered
    into, including an arbitration clause:
Seidel v. TELUS Communications Inc
.,
2011 SCC 15, [2011] 1
    S.C.R. 531, at para. 2
. It is a well-settled policy in Canada to
    enforce arbitration agreements and forum selection clauses.

[51]

On
    the motion, the Insurers argued that the
ICAA
mandates that the Model
    Law governs this dispute. As already noted, the motion judge rejected the
    application of the Model Law saying, at para. 11:

In my view, this is for situations where the parties to the
    agreement have agreed to arbitration as the sole method of proceeding and not
    where the parties have also agreed or contemplated an alternative, being an
    action to enforce the obligations of the Underwriters.

[52]

In
    the motion judges opinion, the contract read as a whole provides for
    alternative methods of proceeding, that is by arbitration pursuant to Clause 8j)
    and by an action under the Declarations endorsement which clearly states and
    contemplates an action to enforce the obligations of the Underwriters.

[53]

I
    have already concluded that the insurance policy did in fact provide for
    mandatory arbitration as the sole method of resolving disputes under the
    policy. It might seem, therefore, that such a conclusion resolves this appeal
    without the need to address this issue. However, given its importance to
    international commercial agreements, I believe it is helpful to clarify the law
    in this regard.

[54]

In
    my view, to the extent that the motion judge held that arbitration must be the
sole
    method
of dispute resolution agreed to between the parties in order to
    attract the operation of the Model Law, doing so was wrong in law. Simply
    stated, the Model Law is not restricted in its application to international
    commercial agreements that provide for arbitration as the sole method of
    dispute resolution. While I agree that a purely
optional
arbitration
    provision does not necessarily attract the application of art. 8 of the Model
    Law, an agreement by the parties to submit
certain,
but not all
    disputes in a contract to arbitration does attract its application. This conclusion
    is supported by the jurisprudence and consistent with a plain reading of the
ICAA
and the Model Law.

[55]

First,
    the Model Law specifically contemplates arbitration agreements whereby parties
    only agree to submit
certain
disputes to arbitration. It defines
    arbitration agreement as

an agreement by the parties to
    submit to arbitration all or certain disputes which have arisen or which may
    arise between them in respect of a defined legal relationship, whether
    contractual or not. An arbitration agreement may be in the form of an
    arbitration clause in a contract or in the form of a separate agreement.

Implicit in this definition is the notion that certain
    disputes under the contract may be resolvable by methods other than
    arbitration, like civil action or mediation.

[56]

Second,
    there are cases from this province applying the Model Law to contractual
    arbitration clauses contemplating the submission of a circumscribed set of
    disputes under a contract to arbitration:
Jean Estate v. Wires Jolley LLP,
2009
    ONCA 339, 96 O.R. (3d) 171, per Juriansz J.A. writing in concurrence, and
1338121
    Ontario Inc. v. FDV Inc.,
2011 ONSC 3816, 92 B.L.R. (4th) 1.

[57]

Third,
    the Model Law may apply to an arbitration agreement even if the right of
    arbitration is merely optional. If the parties agree that arbitration is an
    optional method of dispute resolution, and one of the parties chooses to
    commence arbitration, there is no reason why art. 8 of the Model Law should not
    apply to stay any duplicative court actions in Ontario. Since, after electing
    to commence an arbitration, the parties agreed to respect that choice, and at
    that point it may be said that the parties have agreed to submit the dispute to
    arbitration.

(4)

The Remaining Issues

[58]

On
    the motion and again on appeal, TFS asserted that the arbitration agreement
    should not be enforced because it is clearly null and void. It is null and void,
    it says, because s. 124(1) of the
Insurance Act
, R.S.O. 1990, c. I.8
    states that no term of an insurance contract is valid or admissible in evidence
    to the prejudice of the insured unless it is set out in full in the policy or
    by writing securely attached to it when issued. TFS argues that when Equinox
    emailed them the final set of signed policy documents to issue the contract,
    the email only contained the Schedule, and not the base policy.

[59]

In
Sams Auto Wrecking Co. v. Lombard General Insurance Co. of Canada,
2013
    ONCA 186, 114 O.R. (3d) 730 the parties had amended their insurance contract by
    issuing an endorsement that referred to policy wording located in documents
    possessed by the insured and its broker. Laskin J.A. held that the amendment
    was valid and complied with s. 124(1) of the Act. Similarly, in this case, the
    base policy was in the possession of TFS and its brokers on the date they
    agreed to bind the contract. Accordingly, in my view, the arbitration clause is
    not clearly void and this issue should be left to the arbitrator:
Dalimpex,
at paras. 21-22.

[60]

Finally,
    TFS argues that s. 123 of the
Insurance Act,
R.S.O. 1990, c. I.8
    mandates that Ontario law apply to contracts of insurance made in Ontario. In its
    view, this statutory provision conflicts with clause 8(j) in that the latter
    purports to make the contract subject to the laws of England and Wales. The
    question of whether the arbitration agreement controls the determination of the
    proper forum to resolve the dispute is distinct from the question of what law
    should be applied in determining the dispute. Given my decision that the
    arbitration provision applies, it will be for the arbitration panel to
    determine the appropriate law to apply.

DISPOSITION

[61]

For
    the reasons given, I would allow the appeal and stay the action, referring the
    parties to arbitration before three arbitrators seated in London, England
    pursuant to the terms of the insurance contract.

[62]

Pursuant
    to the parties agreement I would award the Insurers their costs of this appeal
    in the amount of $25,000 inclusive of disbursements and HST. Further, I would
    award the Insurers their costs of the motion below, which is to be the same
    amount awarded to TFS by the motion judge.

Released: DD JAN 11 2018

H.S. LaForme J.A.

I agree. Doherty
    J.A.

I agree. B.W. Miller
    J.A.





[1]
The Model Law was adopted in the
International Commercial Arbitration Act,
R.S.O.
    1990, c I.9, and subsequently the
International Commercial Arbitration Act,
    2017,
S.O. 2017, c 2, Sch. 5.



[2]
The LCIA (the London Court of International Arbitration) is an institution
    based in London, England that provides international arbitration services
    pursuant to its own rules and procedures, which it promulgates.



[3]

Justice Lauwers suggested that judges take the following approach
    when considering a stay under the
Arbitration Act
:

(1) Is there an arbitration
    agreement?

(2) What is the subject matter of
    the dispute?

(3) What is the scope of the
    arbitration agreement?

(4) Does the dispute arguably fall
    within the scope of the arbitration agreement?

(5) Are there grounds on which the
    court should refuse to stay the action?



[4]

See, for example,
Ace Capital Ltd. v. CMS Energy
    Corp.,
[2008] E.W.H.C. 1843 (Comm.), 2 C.L.C. 318 and
Oppenheim v.
    Midnight Marine Limited
, 2010 NLCA 64, 325 D.L.R. (4th) 254.



[5]

I note that modern iterations of service of suit clauses
    take many forms. Some broader examples of these clauses are akin to choice of
    law and jurisdiction clauses (see, for example,
Dinallo v. Dunav Insurance Co.
, 672 F. Supp. 2d 368, 370 (S.D.N.Y. 2009) and Masters, L. et al.,
Insurance Coverage Litigation
, loose-leaf, 2d. ed., (Aspen Publishers, 1999), ss. 6.03[B] at
    6-25) while narrower examples of these clauses, like the one in this case,
    simply define the circumstances under which an insurer will accept service of a
    suit.


