IN
THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20120503

Docket: M58505

Registry: Nanaimo

Between:

Martin Chandler

Plaintiff

And:

Raquel Gomez, Alma Nelly Gomez,
Cesar Gomez‑Vasquez and Nissan Canada Inc.

Defendants

And:

Insurance Corporation of British
Columbia

Third Party

Before: The Honourable Mr. Justice
Greyell

Oral Reasons for Judgment

In Chambers

[1]            
THE COURT: This is an application brought by
the defendant Raquel Gomez for an order, to use the terms of the application,
that this matter "be brought to trial as the issue of liability is in
question."

[2]            
The background
facts are that on December 14, 2009, the plaintiff, Mr. Chandler,
commenced an action for damages for injury, loss, and expense arising from a
motor vehicle accident which occurred May 2, 2006.

[3]            
The defendant Ms. Gomez
entered an appearance and filed a statement of defence on May 3, 2010.  In the
statement of defence, she opposed "all claims of relief".  She
further stated the plaintiff:

 . . .
was aware that the vehicle was taken without the concent [sic] of Cesar and
Alma Gomez.  Martin Chandler had full knowledge that I did not have a licence. 
Martin Chandler did not wait for the vehicle to come to a complete stop before
proceeding to exit the vehicle.

[4]            
The action named Ms. Gomez,
Alma Gomez, her mother, and Mr. Gomez‑Vasquez as defendants.  Her
mother and Mr. Gomez‑Vasquez were joined to the action as lessees of
the vehicle the plaintiff was driving.  Nissan Canada was named a defendant, as
it was the lessor of the vehicle.

[5]            
During the course
of its investigation into the accident, the Insurance Corporation of British
Columbia (ICBC) determined Ms. Gomez, who I understand from the pleadings
held a learner’s licence at the time of the accident, was in breach of her
insurance contract as she was using the vehicle without the consent of her
mother and Mr. Gomez‑Vasquez, and because there were three other
minors who were passengers in the vehicle at the time of the accident.

[6]            
ICBC therefore
joined itself to the action as a third party, pursuant to s. 21(7) and (8)
of the Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231 (the "Act"). 
The application was argued on the basis these and other sections of the Act
applied.  Accordingly, I will refer to those sections.  I note, however, that while
the Act was in effect at the date of the accident the title and various
sections were changed by the Insurance (Vehicle) Act, R.S.B.C. 1996, c.
231, in 2007 (the "new Act").  Section 21 of the Act was replaced by
ss. 76 and 77 of the new Act.  For assistance and clarity I will place the
sections of the new Act next to the sections of the Act, which were relied on
by counsel:

[7]            
ICBC then advised Ms. Gomez,
on January 5, 2010, that its investigation had determined that:  she was 100
per cent responsible for the accident; she was in breach of her insurance
contract with them; and she would be required to repay ICBC for any claims made
against her.  At that time, she was notified ICBC had, to date, paid a total of
slightly in excess of $2,000.

[8]            
The trial was
scheduled for July 25, 2011.

[9]            
On or about April
19, 2011, ICBC settled the plaintiff’s claim against all defendants in the
amount of $112,902.66.

[10]        
ICBC has now
demanded reimbursement from Ms. Gomez of the amount it paid, by way of
settlement.

[11]        
Ms. Gomez’s
counsel has maintained throughout that Ms. Gomez denies liability for the
accident and has taken the position with ICBC that, notwithstanding the
settlement, the Court in this action must make a final determination on the
issue of liability.

[12]        
As discussed,
ss. 21(7) and (8) of the Act provide ICBC with the right to issue and
serve third party notice, if ICBC denies liability to an insured, whether or
not the insured has filed a statement of defence.  ICBC is granted the right
under s. 21(8) of the Act to contest the insured’s liability in the action
and the amount claimed against such insured "as if it were a defendant in
the action".

[13]        
Section 21(2) of
the Act (s. 76(4) of the new Act) provides that:

For
the purpose of this section, the corporation may at any stage compromise or
settle the claim . . .

[14]        
Section 21(6) of
the Act (s. 77(2) of the new Act) provides that ICBC has the right to recover
any amount paid under or by way of a settlement or other payment, and I refer
to this section which provides that:

 . . .
if the corporation has paid an amount to a person under this section, by way of
settlement or otherwise, that it would not otherwise be liable to pay, and has
personally delivered or forwarded by registered mail to the last known address
of the insured a demand for reimbursement of that amount, the insured is liable
to reimburse the corporation that amount, and the corporation may enforce the
right [of] action in court.

[15]        
Accordingly,
s. 21 provides ICBC with the right to defend the action, to settle the
action, and to recover any amount paid under that settlement from an insured. 
In essence, ICBC stands in the place of such defendant when it makes itself a
third party to the action, as it has in this case, under s. 21.

[16]        
The necessary
result of a combined reading of ss. 21(2), (6), (7), and (8) is that, upon
settlement, the tort action has been concluded.  ICBC has acted pursuant to its
statutory authority as insurer to settle the action.

[17]        
As stated by Madam
Justice Gray in Insurance Corp. of British Columbia v. Schmidt, 2004
BCSC 1786, a case which raises similar issues to those present in this case:

[22]      ICBC’s
third party notice is an unusual form of pleading.  It does not purport to make
a claim against Mr. Schmidt.  Instead, it denies liability for indemnity
and claims the right to defend the action as well.  It does not constitute a
claim by ICBC for payment from Mr. Schmidt.

[23]      In
fact, no claim against Mr. Schmidt under s. 21(6) could have arisen at
the time of the third party notice.  Such a claim can arise only after payment
and after delivery of the demand for reimbursement as required.

[24]      The
issues in this litigation, a form of lawsuit sometimes termed a “recovery
lawsuit,” are whether ICBC has met the terms of the statute giving it a right
to recover, and whether the settlement was reasonable and effected by the
insurer in good faith.  See the discussion of the respective issues in ICBC
v. Doyle, [1984] B.C.J. No. 889, a decision of Judge Boyle when he was
a County Court judge.

[26]      Bearing
in mind this articulation of the issues in any recovery action, the issue
before me is whether ICBC’s settlement was reasonable and made in good faith. 
If ICBC had paid money to Mr. Neumann following the entry of a dismissal
order, it is likely that any payment by ICBC would have been unreasonable.  But
I must judge the reasonableness of ICBC’s conduct at the time that settlement
was achieved.  At that time, the consent dismissal order had not been made.

[33]      While
s. 21(2) permits ICBC to compromise or settle the claim at any stage, Mr. Straith
argued that once ICBC becomes a third party in a tort lawsuit, the issues
between ICBC and the driver over liability ought to be resolved in that
lawsuit.  Mr. Straith suggested that if ICBC wanted to be able to proceed
against Mr. Schmidt, ICBC ought to have reserved its rights, or proceeded
to trial, or obtained an assignment from Mr. Neumann of his claim against Mr. Schmidt,
or compromised with a judgment against Mr. Neumann and obtained an
assignment of that judgment.

[34]      There
is nothing in s. 21 which restricts ICBC to proceed under only one of the
subsections, or requiring it to proceed as suggested by Mr. Straith. 
Section 21(6) and the case law provide adequate protection for a driver who is
denied indemnity by ICBC.  Any compromise ICBC enters into can be recovered
from the driver only if the settlement were reasonable and entered into in good
faith.

[18]        
The decision of
Madam Justice Gray sets out a clear distinction between the tort action or the
issues in the tort action which are between plaintiff and defendants, and ICBC pays
out funds pursuant to s. 21.

[19]        
The lis
between the parties in the tort action has been resolved by way of the
settlement.  Whether the settlement was reasonable and whether it was effected
in good faith is not a subject matter for determination in this case.  That
issue must be determined when ICBC seeks to recover the amount it has paid by
way of settlement.  The issue as stated is then between ICBC and Ms. Gomez
as to whether that settlement was effected reasonably in all the circumstances
of the case.

[20]        
As was stated in a
May 30, 2011, letter from Ms. Laurie, counsel for ICBC, which was written
in the context of counsel for Ms. Gomez refusing to sign a consent
dismissal order subsequent to the settlement:

. . .
I have advised you that your signing of the Consent Dismissal Order is without
prejudice to your client’s right to argue the reasonableness of the settlement
when ICBC seeks recovery from her.

[21]        
That point was
further made in a letter of May 31, 2011, from Ms. Laurie:

I
understand that your client feels the settlement was not reasonable.  However,
the forum for determining this allegation will be in the action, when ICBC
seeks recovery from your client, if the corporation chooses to proceed in this
fashion.

[22]        
I accept counsel
for ICBC’s interpretation of the issue remaining to be determined between the
third party ICBC and the defendant Ms. Gomez.  The forum for determination
of that issue is in what is commonly referred to as a recovery action by ICBC. 
It is not in these proceedings.

[23]        
Accordingly, the
application is dismissed.  Are there other matters, counsel?

[24]        
MS. LAURIE: 
No, that’s all, My Lord, thank you.

[25]        
MR. CARR: 
No, thank you, My Lord.

[26]        
THE COURT:  Thank
you.

"GREYELL
J."

NOTE:  All references to the various
sections of the Insurance (Vehicle) Act R.S.B.C. 1996, c. 231 were
added after the delivery of my oral reasons.