



COURT OF APPEAL FOR ONTARIO

CITATION: Intact Insurance Company v. Allstate Insurance
    Company of Canada, 2016 ONCA 609

DATE: 20160804

DOCKET: C61124

Sharpe, LaForme and van Rensburg JJ.A.

BETWEEN

Intact Insurance Company

Applicant (Respondent)

and

Allstate Insurance Company of Canada

Respondent (Appellant)

Todd J. McCarthy and Frank A. Bennedetto, for the
    appellant

Douglas A. Wallace and Tori Chapman, for the respondent

Heard: April 21, 2016

On appeal from the order of Justice Russell M. Raikes of
    the Superior Court of Justice, dated July 2, 2015, with reasons reported at 2015
    ONSC 4264, 51 C.C.L.I. (5th) 231, allowing an appeal from the award of
    Arbitrator Kenneth J. Bialkowski, dated October 16, 2014, with reasons reported
    at (2014), 40 C.C.L.I. (5th) 323.

H.S. LaForme J.A.:

[1]

Either the appellant,
Allstate Insurance
    Company of Canada (Allstate), or the respondent, Intact Insurance Company
    (Intact), is responsible for statutory accident benefits owed to Paula
    Chartrand and
her two daughters (the Claimants) after they
    were injured in an accident on August 21, 2010. Who bears that responsibility depends
    on the answer to the central question in these proceedings: were the Claimants
    principally dependent for financial support on Kyle Houghton at the time of the
    accident?

[2]

The parties submitted their priority dispute
    to an arbitrator, who decided that the Claimants were not principally dependent
    for financial support on Kyle at the time of the accident. Therefore, Intact
    was responsible for the accident benefits. The arbitrator summarized his
    rationale as follows:

In the final analysis I find that it would be inappropriate to
    use the seven week period pre-accident, when the claimants were principally
    dependent on Kyle Houghton for financial support,
as in
    my view the relationship was not one of permanence
. Using the
    traditional 12 month period pre-accident the claimants clearly were not
    principally financially dependent on Kyle Houghton for financial support.
[Emphasis added.]

[3]

Intact appealed. The appeal judge concluded that
    the arbitrator had committed an error of law by importing a permanency
    requirement into the analysis and an error in principle by speculating about
    future events. Because of these errors, the appeal judge reviewed the
    arbitrators decision on a correctness standard of review, set aside his
    decision, and concluded that Allstate was responsible for paying the accident
    benefits owed to the Claimants.

[4]

Allstate sought and obtained leave to appeal to
    this court. It argues that the appeal judge erred by reviewing the arbitrators
    decision on a correctness standard and that the arbitrators decision should be
    restored because it was reasonable. Intact resists both arguments and submits
    that the appeal judge did not err by setting aside the arbitrators decision.

[5]

For the reasons that follow, I would dismiss the
    appeal. Although the appeal judge erred by reviewing the arbitrators decision
    on a correctness standard, the arbitrators decision was an unreasonable one
    and, therefore, should not be restored.

I.

BACKGROUND

[6]

The relationship between Paula and Kyle forms
    the factual background for this priority dispute.

[7]

Until January 2010, Paula was living in Sudbury,
    Ontario, with her husband, Yvan Restoule, and her two daughters, Destiny
    Chartrand and Athena Restoule.

[8]

In January or February 2010, Paula began working
    at the Triple Play Sports Bar in Sarnia, Ontario. She met and began dating Kyle
    at the same time.

[9]

Between February and June 2010, Paula would
    spend three weeks of each month in Sarnia. She would spend the remaining week in
    Sudbury with Yvan and her daughters at their apartment.

[10]

Paula decided to leave Yvan and move to Sarnia
    with her daughters in June 2010. In early July, Paula asked her mother to drive
    her and her daughters from Sudbury to Parry Sound where they met Kyle at a gas
    station. They transferred their belongings to Kyles vehicle, including their
    clothes, toys, blankets, and sheets. Kyle brought the Claimants back to his
    house in Sarnia.

[11]

The evidence indicated that the move was
    intended to be a permanent one. Yvan testified that his relationship with Paula
    had been deteriorating for a while, and that she told him that she would be
    leaving him and permanently moving to Sarnia with her daughters. Paulas mother
    said that she thought the move was a permanent one.

[12]

Kyle acknowledged, as noted by the arbitrator,
    that he did not know if his relationship with Paula would survive and said that
    you hope for the best and expect the worst. Essentially Kyle was
    acknowledging that he could not predict what would happen in the future,
    especially given that his relationship with Paula had started only recently.
    However, on the whole, his evidence also confirmed that the Claimants move was
    intended to be a permanent one. According to Kyle, the plan was that Athena and
    Destiny would be enrolled in school in Sarnia in September and that Paula would
    look for a job at that time. There was some discussion of Paula and Kyle
    getting married as well.

[13]

After their move to Sarnia, Kyle was responsible
    for most of the Claimants expenses as Paula was not contributing to household
    expenses or paying any of the bills. She would occasionally buy some groceries
    or alcohol, or would pay for a dinner. During the seven weeks after the move
    and before the accident, Kyle paid for at least 64 percent of the Claimants
    financial needs.

[14]

On August 18, 2010, Paulas friend drove the
    Claimants to Canadas Wonderland and then
to Sudbury, to
    visit Paulas mother and to retrieve the rest of their belongings
. On their way back to Sarnia, on August 21, 2010, they were
    involved in an accident. Paula suffered relatively minor injuries, but Destiny
    and Athena sustained catastrophic injuries.

[15]

The Claimants applied for and received accident
    benefits from Intact, the insurer of the vehicle they were riding in at the
    time of the accident. However, Intact argued that Allstate, who insured two
    vehicles owned by Kyle, should pay those benefits. Intact took the position
    that Allstate was obligated to pay because the Claimants were dependent on Kyle
    at the time of the accident and, consequently, they were insureds under
    Allstates policies with Kyle.

II.

Legal framework

[16]

Section 268 of the
Insurance Act
,
    R.S.O. 1990, c. I-8, deals with statutory accident benefits in motor vehicle
    liability policies. Section 268(1) provides that every such policy shall be
    deemed to provide forstatutory accident benefits.  For cases where an
    individual might seek benefits under more than one policy, s. 268(2) sets out
    priority rules. As the Claimants were occupants of a vehicle at the time of the
    accident, the following rules apply:

(i)      the occupant has
    recourse against the insurer of an automobile in respect of which the occupant
    is an insured;

(ii)      if recovery is
    unavailable under (i), the occupant has recourse against the insurer of the
    automobile in which he or she was an occupant;

(iii)     if recovery is
    unavailable under (i) or (ii), the occupant has recourse against the insurer of
    any other automobile involved in the accident from which the entitlement to
    statutory accident benefits arose; and

(iv)     if recovery is
    unavailable under (i), (ii) or (iii), the occupant has recourse against the
    Motor Vehicle Accident Claims Fund.

[17]

Section 2(1)
of the
Statutory Accident Benefits Schedule  Accidents
    on or after November 1, 1996
, O. Reg. 403/96 (
SABS
), provides that any dependant of the named insured is an
    insured person for any motor vehicle policy. Section 2(6) of the same
    regulation provides that a person is dependent on another 
if the person
    is principally dependent for financial supporton the other person.

[18]

Also
    relevant for this appeal is
Disputes Between Insurers
, O. Reg. 283/95
    (the Regulation). It provides that all disputes under s. 268 shall be settled
    through arbitration conducted in accordance with the
Arbitration Act, 1991
,
    S.O. 1991, c. 17.

[19]

Section
45 of the
Arbitration Act, 1991
provides that, presumptively, parties can appeal only on points of law with
    leave. However, the parties can provide for broader rights of appeal in their
    arbitration agreement. In this case, Allstate and Intact agreed that either
    could appeal the Arbitrators decision on a point or points of law or mixed
    fact and law to a judge of the Superior Court of Justice.

III.

Issues on appeal

[20]

Intact
    argues that the appeal judge erred by (i) reviewing the arbitrators decision for
    correctness; and (ii) setting aside the arbitrators decision even though it
    was reasonable. As noted, I accept the first argument but not the second. I
    will first address the standard of review. Then I will explain why the
    arbitrators decision was unreasonable.

IV.

THE STANDARD OF REVIEW

[21]

The
    parties disagreement is founded upon their conflicting characterization of the
    question before the appeal judge. Allstate argues that determining dependency
    for purposes of
SABS
is a mixed fact and law exercise and, therefore,
    the appeal judge should have applied a deferential standard of review. Intact,
    on the other hand, insists that the arbitrator committed an extricable legal
    error and so his decision was properly reviewed on a correctness standard.

[22]

I
    approach this question in a different way than the parties. As the choice of
    standard of review is a question of law, this court is not bound by the
    parties positions and must determine the correct standard of review:
Monsanto
    Canada Inc. v. Ontario (Superintendent of Financial Services)
, 2004 SCC
    54, [2004] 3 S.C.R. 152, at para. 6.

[23]

I
    begin by considering the framework for choosing the appropriate standard of
    review. Then I will apply that framework to determine the standard of review
    that should be applied by this court and the one that should have been applied
    by the appeal judge.

(1)

The Framework for Determining the Standard of Review

[24]

There are two different frameworks for
    determining the standard of review on an appeal:
(i)
the appellate framework articulated in
Housen v.
    Nikolaisen
, 2002 SCC 33, [2002] 2 S.C.R. 235; and (ii)
the
    administrative law framework associated with
Dunsmuir v. New Brunswick
,
    2008 SCC 9, [2008] 1 S.C.R. 190.

[25]

In my view, the administrative law framework must be applied to
    determine the standard of review on an appeal from an insurance arbitration. In
    general, decisions rendered by non-judicial decision makers should be reviewed
    under that framework, even when that review is styled as an appeal.

[26]

The Supreme Court recently discussed the
    selection of the appropriate framework in
Mouvement laïque québécois
    v. Saguenay (City)
, 2015 SCC 16, [2015] 2 S.C.R. 3.
    Justice Gascon highlighted the distinction between the two frameworks and concluded
    that the Quebec Court of Appeal had erred by applying the appellate framework
    to appeals from the Quebec Human Rights Tribunal. At para. 38, he held that
    whenever a court reviews a decision of a specialized administrative tribunal, whether
    on a judicial review or a statutory appeal, the standard of review must be
    determined on the basis of administrative law principles
.
[1]

[27]

At paras. 39-42 of
Saguenay,
Gascon J. provided the following reasons for why the administrative
    law framework should have been applied: the Tribunal was not a court subject to
    the
Courts of Justice Act
, C.Q.L.R., c. T-16, but
    rather a specialized decision maker; the Tribunal had its own, different
    procedure that reflected its function; and the Tribunals enabling legislation
    contained a privative clause and a supporting clause that protected the
    Tribunals jurisdiction.

[28]

The analysis from
Saguenay

leads to the same result in this case, namely that the
    administrative law framework must be applied to determine the standard of
    review.

[29]

Insurance arbitrations are not court proceedings.
    Rather, as a result of the Regulation, priority disputes like this one are
    adjudicated by arbitrators with relevant expertise:
Oxford Mutual
    Insurance Co. v. Co-operators General Insurance Co.
(2006),
    83 O.R. (3d) 591 (C.A.),

at para. 23
;
Chisholm v. Liberty
    Mutual Group
(2002), 60 O.R. (3d) 776 (C.A.), at para. 21.

[30]

In addition, the Regulation has put in place a
    distinct regime that efficiently resolves priority disputes between insurers
    while ensuring that beneficiaries receive their benefits promptly:
Lombard
    Canada Ltd. v. Royal & SunAlliance Insurance Co.
(2008), 94 O.R. (3d) 62 (S.C.), at para. 39.

[31]

The limited rights of appeal that presumptively
    apply in arbitrations are similar to a privative clause. More broadly, arbitrations
    governed by the
Arbitration Act, 1991
occur
    against the background of a tightly defined regime under which judicial
    intervention is generally unwarranted:
Ottawa (City) v. Coliseum
    Inc.,
2016 ONCA 363,

85 C.P.C. (7th) 213, at paras. 32-34.

[32]

Therefore
, I conclude that
the standard of review applicable in this case must be determined
    by applying administrative law principles.

(2)

The Role of this Court

[33]

This court must apply the appellate standard of
    review to the appeal judges decision and review his choice of standard of
    review for correctness:
Dr. Q v. College of Physicians and Surgeons
    of British Columbia
, 2003 SCC 19, [2003] 1 S.C.R. 226, at
    para. 43. In other words, this court should determine if the appeal judge
    identified the correct standard of review and whether he applied it properly:
Agraira
    v. Canada (Public Safety and Emergency Preparedness)
,
    2013 SCC 36, [2013] 2 S.C.R. 559, at paras. 45-47.

(3)

Standard of Review on Appeal from Insurance
    Arbitration to Superior Court

[34]

Recently, in
Intact Insurance Company v. Old Republic
    Insurance Company
, 2016 ONSC 3110, at para. 15, Goldstein J. observed that
    the standard of review on appeals from insurance arbitrations has been the
    subject of a spirited debate and extensive analysis in the Superior Court. In
Zurich
    Insurance Co. v. Personal Insurance Co.
(2009), 73 C.C.L.I. (4th) 301
    (Ont. S.C.), Brown J. (as he then was) reviewed the jurisprudence on this
    issue, demonstrating the different, and arguably inconsistent, results reached
    by different judges.

[35]

Generally, determining whether a person is
    principally dependent on another is a question of mixed fact and law:
Oxford
    Mutual,
at para. 23. Such questions are presumptively
    reviewed for reasonableness:
Tervita Corp. v. Canada (Commissioner
    of Competition)
, 2015 SCC 3, [2015] 1 S.C.R. 161, at
    para. 40. And this court has already confirmed that, on appeals from insurance
    arbitrations involving an interpretation of dependency under
SABS
, mixed fact and law questions are reviewed for reasonableness:
Oxford
    Mutual
, at para. 23.

[36]

Intact, however, argues that the arbitrator
    committed an extricable legal error by importing a permanence requirement. I
    note that it is possible to extricate a legal question from a question of mixed
    fact and law under the administrative law framework:
Rogers
    Communications Inc. v. Society of Composers, Authors and Music Publishers of
    Canada
, 2012 SCC 35, [2012] 2 S.C.R. 283, at para. 20. However,
    this court has not addressed the standard of review for a question of law on appeals
    from an insurance arbitration. Therefore, assuming that an extricable legal
    question can be identified in this case, we must determine the standard of
    review that should be applied to that extricated legal question.

[37]

Dunsmuir
, at para. 62, provides a
    two-step process for determining the standard of review under administrative
    law principles:

First, courts ascertain whether the
    jurisprudence has already determined in a satisfactory manner the degree of
    deference to be accorded with regard to a particular category of question.
    Second, where the first inquiry proves unfruitful, courts must proceed to an
    analysis of the factors making it possible to identify the proper standard of
    review.

[38]

Before turning to the two steps, I note that the
    category of question should not be construed broadly as just a question of
    law. Rather, the category must be determined more precisely in light of the
    issues raised on appeal or application for judicial review. For instance, in
Dunsmuir
, the court considered the standard of review for an adjudicators
    interpretation of the [
Public Service Labour Relations Act
], in particular ss. 97(2.1) and 100.1, and s. 20 of the
Civil
    Service Act
: para. 65.

[39]

In this case, we must determine t
he standard of review for an insurance arbitrators interpretation
    of
SABS
and, in particular, the meaning of
    dependency for purposes of that regulation.

(a)

Prior Jurisprudence

[40]

In my view, the existing jurisprudence has
    settled the standard of review in such cases and the reasonableness standard
    applies.

[41]

Justice Rothstein in
Sattva Capital Corp. v. Creston Moly
    Corp.
, 2014 SCC 53, [2014] 2 S.C.R. 633, at para. 106,
    stated that

[i]n the context of commercial arbitration, where appeals are
    restricted to questions of law, the standard of review will be reasonableness
    unless the question is one that would attract the correctness standard, such as
    constitutional questions or questions of law of central importance to the legal
    system as a whole and outside the adjudicators expertise. [Citation omitted.]

[42]

In
Coliseum
,
    this court followed
Sattva
and applied the
    reasonableness standard to an appeal from an arbitration governed by the
Arbitration
    Act, 1991
. As noted, under the Regulation, the
Arbitration
    Act, 1991
governs insurance arbitrations and appeals from
    those arbitrations.

[43]

I note that the parties arbitration agreement
    provides that they can appeal on both points of law and mixed fact and law.
    Unlike in
Sattva
, the parties are not
    restricted to appealing on questions of law only. However, in my view, that
    does not make the decision in
Sattva
inapplicable.

[44]

In
Sattva
, at
    para. 105, Rothstein J. identified a number of reasons why a reasonableness
    standard should apply: a presumption that the arbitrator will have relevant
    expertise, jurisprudence regarding non-judicial decision-makers, and the
    limited scope of appellate review of arbitral decisions. The broader right of
    appeal available to the parties in this case displaces none of those reasons. Significantly,
    the parties right to appeal is still comparatively restricted as they cannot
    appeal on points of fact.

[45]

The question at issue
    here  determining dependency for purposes of
SABS
and insurance priority disputes  does not
    rebut the presumption of reasonableness review established in
Sattva
. It is not a question of jurisdiction, a
    constitutional question, or a general question of law that is of central
    importance to the legal system as a whole and outside the
adjudicators
    expertise
.

(b)

Contextual Analysis

[46]

In any event, the conclusion that a
    reasonableness standard of review applies is confirmed by the second step,
    which has been called a contextual analysis in the post-
Dunsmuir
jurisprudence:
Nor-Man Regional Health Authority Inc. v.
    Manitoba Association of Health Care Professionals
, 2011
    SCC 59, [2011] 3 S.C.R. 616, at para. 39. The analysis at this second stage is
    driven by the nature of the issue before the decision maker under review.
    Factors considered include the presence or absence of a privative clause, the
    specialization of the decision maker, and the nature of the question under
    review:
Canada (Canadian Human Rights Commission) v. Canada
    (Attorney General)
, 2011 SCC 53, [2011] 3 S.C.R. 471 (
Mowat
), at para. 16.

[47]

As a starting point, there is a presumption that
    a reasonableness standard of review will apply where a decision maker is
    interpreting its home statute or statutes closely connected to its function:
McLean
    v. British Columbia (Securities Commission)
, 2013 SCC 67,
    [2013] 3 S.C.R. 895, at para. 21. As noted, insurance arbitrators are
    recognized as having expertise and experience in interpreting insurance laws;
    as such, the presumption applies here.

[48]

Limitations on parties appeal rights  which
    have the same effect as privative clauses  will differ from case to case since
    appeal rights may be determined by the parties arbitration agreement. However,
    the jurisprudence has reduced the importance of privative clauses and,
    therefore, the absence of limits on appeal rights in a particular case will not
    be important:
Mowat
, at para. 17.

[49]

The expertise of insurance arbitrators favours a
    reasonableness review. Courts have recognized the expertise of insurance arbitrators
    in a number of different contexts:
Chisholm
, at
    para. 21;
Ayr Farmers Mutual Insurance Company v. Wright
, 2015 ONSC 6219, at paras. 10-11;
Aviva Insurance Co. of
    Canada v. Royal & SunAlliance Insurance Co.
(2008),
    66 C.C.L.I. (4th) 262 (Ont. S.C.); and
Oxford Mutual
, at para. 23.

[50]

Moreover, as with other private arbitrations,
    the fact that parties are able to select their decision maker creates a
    presumption that they will choose someone with relevant expertise:
Sattva
, at para. 105. As noted by Strathy J. (as he then was) in
Lombard
    Canada Ltd.
, at para. 41,

[a]lthough the selection of the tribunal is
    left entirely to the private choice of the parties, and is not a creation of
    the Regulation, the reality is that the parties  automobile insurers  are
    highly sophisticated litigants, represented by specialist counsel, and they
    invariably select arbitrators who are themselves accomplished, experienced and
    respected.

[51]

Finally, the nature of the question under review
    also suggests that a reasonableness standard of review applies. The nature of
    the question has rebutted the presumption of reasonableness review in two kinds
    of cases. The first is where the decision maker at issue and the courts share
    jurisdiction over the same legal question at the first instance:
McLean
, at para. 24. The second is where the question is one of those
    exceptional kinds of questions  questions of jurisdiction, constitutional
    questions, or general questions of law that are both of central importance to
    the legal system as a whole and outside the adjudicators specialized area of
    expertise  where courts will apply a correctness standard of review:
McLean
, at paras. 25-26.

[52]

Courts and arbitrators do not share jurisdiction
    over priority disputes at the first instance; under the Regulation, an
    arbitrator must hear those disputes before they are potentially appealed to a
    court. And, as noted, the interpretation of
SABS
is not the kind of exceptional question that can rebut the
    presumption of reasonableness review.

(c)

Conclusion on Standard of Review on Appeal to Superior
    Court

[53]

In
    general, an appeal to the Superior Court from an insurance arbitration
    regarding a priority dispute will engage questions of mixed fact and law that
    must be reviewed for reasonableness. Even if the appeal involves an extricable
    question of law regarding
SABS
, a reasonableness standard of review
    will still generally apply. In the unlikely scenario that the issue before the
    insurance arbitrator is an exceptional question (one of jurisdiction, a
    constitutional question, or a general question of law that is both of central
    importance to the legal system as a whole and outside the adjudicators
    specialized area or expertise), a correctness standard of review may be
    applicable.

[54]

In
    this case, there was no basis for applying a correctness standard of review.
    Therefore, this court must correct the appeal judges error by reviewing the
    arbitrators decision under a reasonableness standard:
Dr. Q
, at para.
    44. I now turn to the arbitrators decision.

V.

the Arbitrators Decision Was UnReasonable

[55]

As
    noted, in my view, the arbitrators decision was unreasonable. To explain my
    conclusion, I will first summarize the arbitrators reasoning process and
    decision. Then I will outline principles relevant to conducting a
    reasonableness review. Finally, I will explain why the arbitrators decision
    was unreasonable.

(1)

The Arbitrators Decision

[56]

After reviewing the evidence, the arbitrator
    correctly identified the applicable legal principles, articulated in this
    courts decisions in
Miller v. Safeco Insurance Co. of America
(1985), 50 O.R. (2d) 797 (C.A.), affing, 48 O.R. (2d) 451
    (H.C.J.), and
Oxford Mutual
. He summarized
    these principles as follows:

(a) The 51% principle from
Liberty
    Mutual Insurance v. Federation Insurance
should be
    applied. It is not sufficient that the claimant simply be dependent, but rather
    must be principally dependent. If the claimant had sufficient resources to fund
    51% of their financial needs then the person could not be dependent upon
    others.

(b) The time frame to be looked at may
    encompass days, weeks or even years. One does not simply look at a "snap
    shot" of the actual day of the Accident to determine the issue of
    dependency.

(c) The factors from
Miller v.
    Safeco
should be considered:

(i) the duration of the dependency

(ii) the amount of dependency

(iii) the financial or other needs of the
    alleged dependent

(iv) the ability of the alleged dependent
    to be self-supporting.

(d) Each case must be factually driven.

(e) The ability to be self-supporting must be
    taken into account when measuring dependency.

[57]

The arbitrator had evidence relating to two
    different time frames before him. He was satisfied that if he were to look at
    the seven-week period before the accident then the Claimants were financially
    dependent on Kyle; on the other hand, if he looked at a year-long period before
    the accident, they were not. As the arbitrator observed, the result in this
    case is totally dependent on the appropriate time frame to use for the
    calculation of financial dependency.

[58]

Then, turning to the jurisprudence he considered
    relevant, the arbitrator observed that courts and arbitrators have struggled
    when asked to determine financial dependency in cases involving new
    relationships or relationships that have experienced a significant change in
    the recent past. The arbitrator acknowledged that other arbitrators and courts
    had considered a short time frame in some cases. The arbitrator thought that
    there was a rule or principle that he could draw from these cases:

The common theme through these cases where a
    short time frame was considered appears to be that each arbitrator wrestled
    with the question as to whether the relationship existing during that period
    was of permanence and likely to continue into the future or was it
    transitional. The same analysis must be done here.

[59]

Then the arbitrator made the following
    conclusion as to the time frame in which to consider whether the Claimants were
    financially dependent on Kyle:

On the evidence before me Intact has failed to satisfy the onus
    upon it to establish the relationship between [Kyle] and [Paula] was on the
    balance of probability likely to be permanent. As a result I find that a seven
    week time frame for the analysis of financial dependency is inappropriate. Accordingly,
    one must look at the big picture.

[60]

After looking at the big picture, the arbitrator
    concluded as follows:

What we have here is a case complicated by
    relationships involving people on the fringe of society, stripping,
    prostitution, addiction, depression, criminality and CAS involvement. There is
    no hallmark of stability. The closest thing to stability is Paulas on and off
    relationship (mainly on) with [Yvan]. This would encompass a period of several
    years and certainly the better part of the 12-month period pre-accident. In my
    view this better represents the "big picture" and true nature of the
    relationship. Paula and Yvan had separated before but Paula returned. During
    the 12 month period pre-accident that I have chosen as the appropriate
    timeframe for analysis the three claimants were
not
principally dependent for financial support on Kyle. [Emphasis in
    original.]

[61]

I note that the parties disagree on exactly what the arbitrator
    did in this case. Allstate argues that he looked at all of the evidence and
    came to a decision about the appropriate timeframe based on the facts as a
    whole. Intact, on the other hands, submits that he created a permanency
    requirement and that this was the only basis for his decision.

[62]

I agree with Intacts characterization of the decision. As noted,
    the arbitrator chose the year-long period solely because, in his view,

it would be inappropriate to use the seven week period
    pre-accidentasthe relationship was not one of permanence. Therefore, it is
    that rationale and the resulting outcome that must be reviewed for
    reasonableness.

(2)

Reasonableness Review

[63]

In
Dunsmuir
, at
    para. 47, Bastarache and LeBel JJ. explained that

[a] court conducting a review for
    reasonableness inquires into the qualities that make a decision reasonable,
    referring both to the process of articulating the reasons and to outcomes. In
    judicial review, reasonableness is concerned mostly with the existence of
    justification, transparency and intelligibility within the decision-making
    process. But it is also concerned with whether the decision falls within a
    range of possible, acceptable outcomes which are defensible in respect of the
    facts and law.

[64]

When reviewing a decision for reasonableness, a
    court must consider the reasons proffered and the substantive outcome in light
    of the legal and factual context in which the decision was rendered:
Re
    Carrick,
2015 ONCA 866, 128 O.R. (3d) 209, at paras.
    25-26;
Loewen v. Manitoba Teachers Society
,
    2015 MBCA 13, 315 Man. R. (2d) 123, at paras. 74-75.

[65]

A decision may be unreasonable where a decision maker fails to carry
    out the proper analysis or where the decision is inconsistent with underlying
    legal principles:

Halifax (Regional
    Municipality) v. Canada (Public Works and Government Services)
, 2012 SCC 29, [2012] 2 S.C.R. 108, at paras. 43 and 47. A decision
    may also be unreasonable where the outcome ignores or cannot be supported by
    the evidence:
Halifax
, at paras. 47-49.

(3)

The Arbitrators Decision was Unreasonable

[66]

With the principles just noted in mind, I turn
    to the ultimate issue in this appeal: the reasonableness of the arbitrators
    decision. That decision was unreasonable for two reasons. First, the arbitrator
    failed to conduct the requisite analysis and his permanence requirement is
    simply incompatible with the applicable legal principles. Second, the
    arbitrators decision is inconsistent with the evidence and the result of
    indefensible speculation.

(a)

Permanence Requirement Inconsistent with
    Applicable Legal Principles

[67]

As noted, arbitrators and courts asked to
    determine dependency must sometimes fit fluid and transient human relations
    into rigid legal categories. It is not always a comfortable fit. The nature of
    the challenge was aptly described by Arbitrator Samis in
St. Paul
    Travellers v. York Fire & Casualty Insurance Co.
(August 11, 2011 award),
[2]
as follows:

The law with respect to dependency cases has evolved over the
    past two decades to recognize the challenges associated with applying the
    dependency principle to real life fact situations. Amongst the most challenging
    situations are those where the recent pre-accident history shows a changing
    environment. The case law calls for us to identify a time period for the
    purpose of evaluating dependency. It is often not useful, or even sometimes
    misleading, to look at circumstances in too narrow a time frame (often referred
    to as a snapshot). To arrive at an appropriate determination of dependency
    status, we have to look at the status of a person's needs and resources over a
    time period. Then, within a selected timeframe, we can approach the issue of
    financial needs and resources in order to determine the person's dependency
    status.

[68]

How did the arbitrator respond to this challenge
    in this case? He responded, based on his review of the jurisprudence, by creating
    and applying a permanence test. Specifically, the arbitrator concluded that
    he should accept a short time frame only in cases where the relationship at
    issue is likely permanent.

[69]

That approach conflicts with the legal
    principles laid down in the jurisprudence. It is well established that, when
    conducting a dependency analysis, the arbitrator was required to look at the
    relationship between the Claimants and Kyle during a period of time which
    fairly reflects the status of the parties
at the
    time of the accident
 (emphasis added):
Oxford
    Mutual
, at paras. 26-27; see also
Dominion of
    Canada
, at paras. 29-31;
Gore Mutual Insurance
    Co. v. Co-operators General Insurance Co.
(2008), 93 O.R.
    (3d) 234 (S.C.), at para. 8. The time period chosen for a dependency analysis must
    reflect the facts of the case:
Oxford Mutual
,
    at para. 26. Simply put, the jurisprudence has rejected a categorical or
    one-size-fits-all approach.

[70]

In contrast the arbitrator carved out the
    category of transient or recent relationships and created a permanence
    requirement for all of them. Then the arbitrator relied on his conclusion that
    the relationship between Paula and Kyle was unlikely to succeed when choosing a
    one-year time period over a seven-week time period. Reading the arbitrators
    decision, it is clear that this is the only reason why he chose a year-long
    period where the Claimants were not dependent on Kyle over a seven-week period where
    they were. In my view, the arbitrator applied a categorical approach. This
    approach is unreasonable because it is inconsistent with the applicable legal
    principles and is simply too divorced from the actual question: what time
    period accurately reflects the true nature of the particular relationship at
    issue at the time of the accident?

(b)

Arbitrators Decision is Not Supported by the
    Evidence

[71]

In large part because of the approach he
    adopted, the arbitrators decision is inconsistent with the evidence in this
    case. When considered in light of the facts of this case, it is clear that the
    seven-week period accurately reflects the nature of the relationship between
    Kyle and the Claimants at the time of the accident.

[72]

According to Yvan, his marriage with Paula had
    been deteriorating for some time and Paula said she was leaving him in June
    2010. At this time, Paula had been dating Kyle for a few months and spent most
    of her time in Sarnia, with him. In July 2010, she moved her two daughters to
    Sarnia to live with Kyle. All of the witnesses who provided evidence (Kyle,
    Yvan, and Paulas mother) indicated that this move was intended to be a
    permanent one.

[73]

Significantly, the evidence indicates that Kyle
    and Paula believed that they were building a real relationship. They had a plan
    to enroll Athena and Destiny in a school in Sarnia. Paula was supposed to find
    a new job to help support this new household. There was even some talk of Paula
    and Kyle getting married.

[74]

During the seven weeks after the move, while
    they were trying to implement this plan, Kyle was paying for almost all of the
    household expenses and was responsible for the majority of the Claimants
    needs.

[75]

As I read his decision, the arbitrator did not
    question and largely accepted all of that evidence. However, he chose to focus
    on something else. He chose to focus on the permanence of the Paula-Kyle
    relationship. And he concluded that this relationship was unlikely to survive
    based on his conclusion about the kind of person Paula was. He focused on
    Paulas psyche and the fact that she was a troubled woman, the fact that she
    was not completely honest with Kyle, and his conclusion that the Paula-Yvan
    relationship was a more stable feature of her life.

[76]

There are at least two problems with such an
    approach.

[77]

First, it is difficult to see how any of these
    facts shed any light on the nature of the Claimants relationship with Kyle at
    the time of the accident. The uncontroverted evidence was that the move was
    intended to be a permanent one and that Kyle was contributing the vast majority
    of the expenses of this new household. The odds of Paula and Kyles
    relationship surviving into the future has very little to do with whether the
    Claimants were principally dependent for financial support on Kyle at the time
    of the accident.

[78]

Second, the arbitrator did not have any evidence
    suggesting that anyone saw Paula and Kyles relationship as temporary. The arbitrators
    conclusion to the contrary was based on his assessment of Paulas psyche and
    his conclusion based on what the arbitrator knew about Paulas past life.

[79]

This analysis is simply too speculative and
    unreliable. I agree with the appeal judge that [s]peculation of this sort is a
    mugs game. There are simply too many variables at play and it is extremely
    doubtful that any decision maker can predict the future course of a
    relationship in the way the arbitrator purported to. Because that analysis was
    the sole basis for the arbitrators decision, in my view, it renders his
    overall decision unreasonable as well.

(c)

Conclusion on Arbitrators Decision

[80]

The arbitrator adopted an unreasonable approach
    by asking, as the central and determinative question, whether the relationship
    between Paula and Kyle was permanent. Because of this approach, the
    arbitrators analysis relied on speculation and unreliable inferences. His
    substantive outcome cannot be supported by the evidence before him.

[81]

When considered under the proper approach, the
    seven-week period preceding the accident does not merely present a snapshot
    of the relationship between Kyle and the Claimants. Rather, the seven-week
    period is the one that appropriately represents the true nature of the
    relationship at the time of the accident: a nascent but real relationship
    wherein the Claimants were principally dependent on Kyle for financial support.

[82]

As such, even though the appeal judge erred in
    the standard of review, he did not err by setting aside the arbitrators
    decision.

VI.

DISPOSITION

[83]

I would dismiss the appeal. In line with the parties agreement, I
    would award costs of the appeal and the motion seeking leave to this court to
    Intact, fixed at $15,000, all inclusive.

Released: KMvR  AUG 4, 2016

H.S. LaForme J.A.

I agree. Robert J. Sharpe J.A.

I agree. K. van Rensburg J.A.





[1]
Although Gascon J. referred to specialized administrative tribunals, the
    administrative law framework applies when a court reviews a decision rendered
    by a single decision maker as well: see, for example,
Dunsmuir
.



[2]

Cited in
Dominion of Canada General Insurance Co. v.
    Ontario,
2013 ONSC 4717, 25 C.C.L.I. (5th) 125, at para. 31.


