Judgments

A-286-97

Ocean Fisheries Ltd. (Respondent) (Plaintiff)

v.

Pacific Coast Fishermen's Mutual Marine Insurance Company (Appellant) (Defendant)

Indexed as: Ocean Fisheries Ltd.v. Pacific Coast Fishermen's Mutual Marine Insurance Co. (C.A.)

Court of Appeal, Stone, Desjardins and McDonald JJ.A."Vancouver, September 30; Ottawa, October 30, 1997.

Maritime law — Insurance — Policy incorporating company's by-laws requiring certain disputes be submitted to arbitration — Appeal from order setting aside order staying action under marine insurance policy for total constructive loss of ship, referring matter to arbitration — Whether dispute required to be submitted to arbitration — Rules of construction of insurance contracts — Nature of dispute; disputes arbitration clause covers — Dispute whether claim covered by policy — S. 15 of by-laws providing disputes arising out of affairs of company between member or shareholder and company with respect to claim against company shall be determined by arbitration — Not including disputes under s. 13 — Use of —policy holder—, —claimant— in s. 13, unlike —member or shareholder— in s. 15 indicating s. 13 covering disputes under insurance policy — Dispute as to coverage between member or shareholder and company required to arise out of affairs of company to be within s. 15 — Use of —affairs—, —business— in by-laws indicating different meanings — Examples cited of disputes between member or shareholder and company arising out of latter's affairs, involving interpretation/application of by-laws or claim against company, but not under insurance policy — S. 15 not applicable to dispute herein.

This was an appeal from an order setting aside an order staying the respondent's action under a marine insurance policy for the constructive total loss of its ship, which had capsized, and referring the matter to arbitration in accordance with the terms of the policy. The insurance policy incorporated by reference the company's by-laws, which mandated that certain disputes be submitted to arbitration. Section 13 of the by-laws permitted the claimant to elect arbitration in the event of accidents whereby loss or damage resulted in a claim under the policy. Section 15 provided that disputes arising out of the affairs of the company between a member or shareholder and the Company with respect to the interpretation and/or application of the by-laws or any claim against the Company, would be determined by arbitration. Under the by-laws, policy holding and membership go hand in hand, i.e. a policy holder is a member. The Prothonotary held that the dispute fell under section 15 for settlement by arbitration. The Trial Judge held that a claim for a loss did not fall within section 15, which referred to company disputes over everything except claims under an insurance policy.

The issue was whether the dispute was, by the terms of the policy, required to be submitted to arbitration.

Held, the appeal should be dismissed.

A marine insurance contract must be construed in the same way as any other insurance contract. The primary objective is to discover and give effect to the intention of the parties as disclosed by the words used by them, the context in which those words appear, and the purpose sought by the words employed at the time the contract was entered into.

Whether the dispute was required by the terms of the policy to be submitted to arbitration depended upon (i) the nature of the dispute, and (ii) what disputes the arbitration clause covers. The dispute was whether the respondent's claim was covered by the policy. The next question was whether the dispute came within the section 15 arbitration clause. Section 15 is qualified by the phrases "between a member or shareholder thereof" and "with respect to the interpretation and/or application of these by-laws or any claim against the Company or a Director thereof". They could not include disputes arising under section 13. Other indicia of intent included use of "policy holder" and "claimant" in section 13, unlike "member or shareholder" in section 15. The former words point unmistakably to a dispute between a policy holder and the company under an insurance policy. For a dispute as to coverage between a "member or shareholder" and the company to be within section 15 it would have to arise "out of the affairs" of the appellant company rather than "under this policy". Use of "affairs" in section 15 was contrasted with the use of "business" in section 6. The use of the two words in the same by-laws indicated a distinction was to be drawn between the "business" and the "affairs" of the company. Although the treatment of a "member or shareholder" as a "holder of a subsisting policy" gave some support to the argument that section 15 was intended to include a dispute between a "policy holder" and the appellant, numerous examples were cited of potential disputes between a "member or shareholder" and the company that may arise out of the latter's "affairs" that would necessarily involve the "interpretation and/or application" of the by-laws or "a claim against the Company or a Director thereof", but would not arise under a policy of insurance. Section 15 was not intended to apply to the dispute herein, but to other kinds of disputes arising out of the "affairs" of the appellant. The dispute was not required to be submitted to arbitration.

statutes and regulations judicially considered

Commercial Arbitration Act, R.S.C., 1985 (2nd Supp.), c. 17, Schedule.

Pacific Coast Fishermen's Mutual Marine Insurance Company Act, 1945, S.B.C. 1945, c. 82, s. 5.

cases judicially considered

applied:

Frenette v. Metropolitan Life Insurance Co., [1992] 1 S.C.R. 647; (1992), 89 D.L.R. (4th) 653; 4 C.C.L.I. (2d) 1; 134 N.R. 169; 46 Q.A.C. 161; Brissette Estate v. Westbury Life Insurance Co.; Brissette Estate v. Crown Life Insurance Co., [1992] 3 S.C.R. 87; (1992), 96 D.L.R. (4th) 609; 13 C.C.L.I. (2d) 1; 47 E.T.R. 109; 142 N.R. 104; 58 O.A.C. 10; Heyman v. Darwins, Ltd., [1942] 1 All E.R. 337 (H.L.).

considered:

Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888; (1979), 12 D.L.R. (3d) 49; 32 N.R. 488.

referred to:

Pickles v. China Mutual Ins. Co. (1913), 47 S.C.R. 429; 10 D.L.R. 323; 12 E.L.R. 300; Robertson v. French (1803), 4 East 130; 102 E.R. 779; Beatty v. First Explor. Fund 1987 & Co. (1988), 25 B.C.L.R. (2d) 377; 40 B.L.R. 90 (S.C.); Ontario v. Abilities Frontier Co-operative Homes Inc., [1996] O.J. No. 2586 (Gen. Div.) (QL); Gulf Canada Resources Ltd. v. Arochem International Ltd. (1992), 66 B.C.L.R. (2d) 113; 11 B.C.A.C. 145; 43 C.P.R. (3d) 390; 22 W.A.C. 145 (C.A.); No. 363 Dynamic Endeavours Inc. v. 34718 B.C. Ltd. (1993), 81 B.C.L.R. (2d) 359; 31 B.C.A.C. 126; 50 W.A.C. 126 (C.A.); Nanisivik Mines Ltd. v. F.C.R.S. Shipping Ltd., [1994] 2 F.C. 662; (1994), 113 D.L.R. (4th) 536; 167 N.R. 294 (C.A.); Onex Corp. v. Ball Corp. (1994), 12 B.L.R. (2d) 151 (Ont. Gen. Div.); T1T2 Limited Partnership v. Canada (1994), 23 O.R. (3d) 66; 19 B.L.R. (2d) 72 (Gen. Div.).

authors cited

MacGillivray & Parkington on Insurance Law Relating to all Risks other than Marine, 8th ed. London: Sweet & Maxwell, 1988.

Mustill, Michael J. and Jonathan C. B. Gilman. Arnould's Law of Marine Insurance and Average, 16th ed., Vol. 1, London: Stevens & Sons, 1981.

APPEAL from an order (Ocean Fisheries Ltd. v. Pacific Coast Fishermen's Mutual Marine Insurance Co., [1997] F.C.J. No. 348 (T.D.) (QL)) setting aside an order staying an action under a marine insurance policy for constructive total loss of a ship and referring the matter to arbitration (Ocean Fisheries Ltd. v. Pacific Coast Fishermen's Mutual Marine Insurance Co., [1997] F.C.J. No. 18 (T.D.) (QL)). Appeal dismissed.

counsel:

David F. McEwen for respondent (plaintiff).

Michael J. Bird for appellant (defendant).

solicitors:

David F. McEwen, Vancouver, for respondent (plaintiff).

Michael J. Bird, Vancouver, for appellant (defendant).

The following are the reasons for judgment rendered in English by

Stone J.A.: This is an appeal from an order of Teitelbaum J. of March 26, 1997 [[1997] F.C.J. No. 348 (T.D.) (QL)], setting aside an order of the Prothonotary of January 2, 1997 [[1997] F.C.J. No. 18 (T.D.) (QL)]. By his order the Prothonotary determined that an action brought by the respondent under a policy of marine insurance for constructive total loss of its ship North Land due to capsizing on March 19, 1996, should be stayed and that the matter be referred to arbitration in accordance with the terms of the policy.

The issues

The primary issue in this appeal is whether Teitelbaum J. erred in setting aside the stay granted by the Prothonotary and, in particular, whether he erred in deciding that section 15 of the appellant's by-laws does not require the dispute to be submitted to arbitration, and in applying the doctrine of contra proferentem to the interpretation of section 15.

Background

The statement of claim in the action alleges the following facts with respect to the loss:

5. At the time of the accident referred to in the previous paragraph, the vessel "North Land" was being operated by Joseph Campbell, and was travelling together with the vessel "Lynwood", which at the time of the accident, was approximately 200 yards away, and being operated by David Campbell.

. . .

7. A claim was made under the policy of insurance by the Plaintiff.

8. On April 19, 1996, the Defendant denied the claim under the policy on the basis that at the time of the loss, the vessel was being operated by Joseph Campbell rather than the approved captain David Campbell.

9. Joseph Campbell is a certified master mariner holding a certificate permitting him to operate a vessel up to 350 tons, David Campbell does not hold such a certificate, and the operation of the vessel by Joseph Campbell did not in any way cause or contribute to the capsize of the vessel.

At the time of the loss the North Land was insured under Policy No. 11244 dated June 2, 1995, issued by the appellant at an agreed value of $325,000 for a premium of $9,750. It is not disputed that the policy expressly incorporated by reference "the By-laws of the Company, as amended from time to time" or, as is stated in clause 28 of the Canadian Hulls (Pacific) Clauses attached to the policy:

28. Notwithstanding any other clauses contained in the insurance, the coverage provided at a time of loss is subject to the then current by-laws of the Company and all rules and regulations circulated to its members respecting risks, rates, things covered and all persons and matters dealt with by way of limitation in favour of the Company therein, which shall prevail in the event of a conflict with any of the preceding clauses.

The appellant is a mutual insurance company incorporated under the Pacific Coast Fishermen's Mutual Marine Insurance Company Act, 1945, S.B.C. 1945, c. 82. By section 5 of the statute the appellant is empowered to contract as follows:

5. The Company may make and effect contracts of insurance with any person or corporation actively engaged in the business of catching, transporting, processing, storing, or selling fish or any product thereof within the Province of British Columbia and within or on the waters adjacent thereto against loss or damage from storm, collision, wreck, enemies, lightning, fire, theft, or accident to ships, boats, scows, barges, cargoes, gear, apparel, engines, machinery, plant, equipment, chattels, and effects employed in the said business of catching, transporting, processing, storing, or selling fish or any product thereof within the territory or the waters aforesaid.

The appellant's by-laws

It was agreed by the parties that the by-laws in effect on March 19, 1996, when the loss is alleged to have occurred, are not materially different for present purposes from those that were in effect on June 2, 1995 when the insurance contract was entered into. I shall therefore confine myself to an examination of the 1996 by-laws, to which I shall refer as "the by-laws".

The by-laws contain two sections which were the focus of much argument before this Court. Both mandate that certain disputes must be submitted to arbitration in accordance with their terms. Section 13, entitled "Claims", provides in paragraph (a) as follows:

(a) In the event of accidents whereby loss or damage may result in a claim under this policy, the policy holder . . . shall . . . .

Paragraphs 13(e) to (i) read as follows:

(e) Within thirty days of the occurring of any event giving rise to any claim under any policy issued by the Company, the claimant shall file an application for claim in the form and manner prescribed by the Directors, provided, however, that the Directors may in their discretion extend the time for the filing thereof.

(f) Upon such claim being filed and upon the Directors or a Committee authorized by the Directors, receiving a report from the surveyor or surveyors, or such other person or persons as may be authorized and appointed by the Directors or said Committee, to evaluate the extent and value of the damage to or loss of the property insured, and such other reports as to the cause, nature and extent of the damage or loss as the Directors or said Committee deem necessary to determine the liability of the Company, if the Directors or said Committee on behalf of the Company is not willing to pay the claim in full in the amount claimed by the claimant, the Directors, or said Committee, shall notify the claimant as to the terms upon which the Company is prepared to settle the said claim.

(g) If the claimant is not willing to accept the said terms of settlement in full satisfaction of his claim, he must within thirty (30) days or within such longer period as the Directors may in their sole discretion allow, from the mailing of such notice communicate to the Directors in writing, his refusal to accept the same, and if he fails so to do within such time he shall be bound to accept the same in full satisfaction of his claim.

(h) Within thirty days after communicating his refusal to accept the terms of settlement set forth in the Directors' notice, the claimant may elect to apply for arbitration of his claim in one of the manners hereinafter provided and such election shall be final; that is to say:

1. By giving notice to the Company within such period that he desires an informal arbitration of his claim, or

2. By giving such notice within thirty days that he desires arbitration of his claim in accordance with the provisions of the Commercial Arbitration Act of British Columbia, S.B.C. 1986, c. 3, hereinafter called formal arbitration.

(i) If the claimant fails to give such notice or take such proceedings to either an informal arbitration or a formal arbitration, he shall be deemed to have accepted the terms of settlement set forth in the Directors' notice, and shall be estopped from claiming any sum in excess thereof.

Section 15 of the by-laws, entitled "Disputes", deserves to be quoted in full:

15. Disputes

(a) Any dispute arising out of the affairs of the Company between a member or shareholder thereof, or any person aggrieved who at any time has been a member or shareholder of the Company, or any person claiming through such member or person aggrieved, and the Company or any Director thereof with respect to the interpretation and/or application of these by-laws or any claim against the Company or a Director thereof, shall be determined by arbitration.

(b) The provision for arbitration provided in Section 13 of these bylaws shall apply with respect thereto insofar as applicable. Where not applicable, the provisions of the Commercial Arbitration Act of the Province of British Columbia, S.B.C. 1986, c. 3, shall apply and the reference shall be to two arbitrators who may appoint an additional person to act as an umpire who, if the two arbitrators appointed cannot reach a majority decision on any matter before them, shall decide the matter and his decision shall for all purposes be the decision of the arbitrators.

(c) The decision of a majority of the arbitrators shall be final and conclusive and shall be binding upon the parties to the arbitration.

(d) Any person seeking such arbitration who is not at the time of seeking the same a member or shareholder of the Company, may be required by the arbitrators upon the application of any other party, to put up security for the costs of such arbitration in a sum not in excess of $1,000 and until such security is provided, arbitration proceedings shall be stayed.

Before undertaking a more detailed examination of sections 13 and 15, it is important to keep in mind the overall scheme of the by-laws. "Membership" in the appellant is regulated by section 2 of the by-laws which makes clear that, in general, policy holding and membership are intended to go hand in hand. Thus paragraph 2(a) provides that a "person upon becoming a holder of a subsisting policy of the Company shall thereupon become a member . . . and shall continue to be a member . . . for so long as he shall continue to be such a holder . . . and no longer". Paragraph 2(f) requires every member to "apply for shares in the Company" and that the obligation to do so may be waived by the directors in the circumstances therein described. Paragraph 3(i) appears to contemplate the possibility that a person other than a member/policy holder may be a shareholder by referring to "[a] shareholder . . . who is not otherwise a member". Money subscribed for shares constitutes the appellant's "guarantee fund" which, as provided in paragraph 3(j), is "liable for all . . . debts and losses" of the appellant. Sections 4 and 5 of the by-laws regulate the holding of meetings"principally of shareholders"and for voting at such meetings. The number of directors, their election and their powers are outlined in section 6 which confides the direction and supervision of "[t]he business of the company" to the directors. Provision for the keeping of accounts, for the appointment of auditors and for other matters of a financial nature are set forth in section 7. Sections 8 to 13 pertain directly to the appellant's insurance business. The establishment of the "rates" to be charged is provided for in section 8; the fixing of "risks" to be covered, in section 9; the "premiums" to be charged, in section 10; the making of "applications" for insurance in section 11; the form and wording of "policies", in section 12, and the making of "claims", in section 13.

The Prothonotary determined that the dispute fell under section 15 of the by-laws for settlement by arbitration. He found that section to be clear and unambiguous in imposing this requirement. Teitelbaum J., in allowing the appeal, concluded, at paragraph 25 of his reasons:

As well, I am satisfied from the facts of this case, that the dispute does not fall within Section 15 of the by-laws. Section 15 deals with a dispute "arising out of affairs of the Company". A claim for a loss would, I am satisfied, not fall within this by-law. This by-law refers to matters involving company disputes over the administration of Mutual or everything except claims under an insurance policy. In the alternative, at the very least, Section 15 is ambiguous and therefore must be interpreted against the Respondent.

The parties' submissions

The appellant contends that the dispute between the parties falls within section 15 of the by-laws because it is one "arising out of the affairs of the company between a member or shareholder thereof . . . with respect to . . . any claim against the Company". As such, the appellant submits that the dispute must be submitted to arbitration. That was the conclusion of the Prothonotary who stated, at paragraph 32 of his reasons:

As I have said, section 15 of the by-laws clearly deals with dispute resolution, as opposed to the handling and resolution of claims. Indeed, on this interpretation there is again no ambiguity to account for as the dispute clearly falls within the category of a dispute between an insured member and shareholder on the one hand and the Mutual on the other hand which shall be determined by arbitration under section 15(a) of the by-laws.

The appellant submits that sections 13 and 15 of the by-laws must be interpreted so as to produce a "sensible commercial result", and that this is accomplished by construing section 13 as applying to a dispute respecting the quantum of a claim and section 15 as pertaining to a dispute respecting coverage. Otherwise, only disputes as to quantum would require settlement by arbitration, leaving disputes as to coverage to be determined by the courts with the attendant cost and delay to the parties concerned. This argument is founded on the views of Estey J. with respect to the construction of an insurance policy in Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888, where he stated at page 901:

. . . the normal rules of construction lead a court to search for an interpretation which, from the whole of the contract, would appear to promote or advance the true intent of the parties at the time of entry into the contract. Consequently, literal meaning should not be applied where to do so would bring about an unrealistic result or a result which would not be contemplated in the commercial atmosphere in which the insurance was contracted. Where words may bear two constructions, the more reasonable one, that which produces a fair result, must certainly be taken as the interpretation which would promote the intention of the parties. Similarly, an interpretation which defeats the intentions of the parties and their objective in entering into the commercial transaction in the first place should be discarded in favour of an interpretation of the policy which promotes a sensible commercial result.

The appellant contends further that the circumstances are not such as call for the application of the contra proferentem doctrine, because section 15 clearly requires arbitration of the dispute. See Consolidated-Bathurst, supra, per Estey J.) at pages 899-901; MacGillivray & Parkington on Insurance Law Relating to all Risks other than Marine, 8th ed. (London: Sweet & Maxwell, 1988), at page 454. In addition the appellant argues that the doctrine should not be applied in any event because of the special nature of the relationship between the parties under a "mutual" insurance contract as that relationship was explained in Pickles v. China Mutual Ins. Co. (1913), 47 S.C.R. 429, per Idington J., at page 435 and per Duff J., at pages 437-438. See also Mustill and Gilman, Arnould's Law of Marine Insurance and Average, Vol. 1, 16th ed. (London: Stevens & Sons, 1981), at page 76.

The respondent submits that if disputes of this kind were intended to be included in section 15, apt language to that effect could readily have been written into it. By its very terms, section 15 applies only to disputes arising out of the "affairs" of the appellant between a "member or shareholder" and the appellant. The dispute at hand is not one of those kinds. If section 15, indeed, is ambiguous, then the contra proferentem doctrine should be applied notwithstanding that the dispute arises under a mutual insurance policy.

The respondent points out that the word "claim" or "claims" is employed no fewer than 17 times in the Canadian Hulls (Pacific) Clauses attached to the policy and that the context in which either of these words appears suggests that they include issues regarding both quantum and coverage. Counsel highlights the correspondence that ensued between the parties with respect to the loss as indicating that the appellant itself treated the entire matter"both coverage and quantum"as a "claim", referring to the claim as such in the body of the correspondence and assigning "Claim #25-96" even after rejecting it. Section 13 explicitly addresses the making and processing of insurance claims. The opening words of paragraph 13(a) signify that a "claim under a policy" must flow from "accidents whereby loss or damage may result", and be thus presented by the "policy holder" and "claimant". The only circumstances requiring arbitration of a "claim" as provided in paragraphs 13(g) to (i), are those in which quantum is in dispute.

Analysis

While we are here concerned with the construction of a contract of marine insurance, such a contract is to be construed in the same way as any other contract of insurance: Robertson v. French (1803), 4 East 130, per Lord Ellenborough C.J., at page 135; 102 E.R. 779, at page 781. The primary objective is to discover and give effect to the intention of the parties as disclosed by the words used by them, the context in which those words appear and the purpose sought by the words employed at the time the contract was entered into. Two recent decisions of the Supreme Court confirm this approach. In Frenette v. Metropolitan Life Insurance Co., [1992] 1 S.C.R. 647, L'Heureux-Dubé J. stated for the Court, at pages 667-668:

In construing the terms of an insurance contract, it is now well recognized that the principles of construction which apply are the same as those generally applicable to commercial contracts . . . . Thus, should a contract need interpretation, the cardinal rule is that the intention of the parties must prevail . . . . In the search for this intention, particular consideration must be given to the terms used by the parties, the context in which they are used and finally the purpose sought by the parties in using these terms. (Jean-Guy Bergeron, Les contracts d'assurance (1989), vol. 1, at p. 106). It is only where all the rules of construction have failed in assisting in the discovery of the true intention of the parties, that the court is entitled to resort to the contra proferentem rule in which case the contract is interpreted against the stipulator (Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888, at pp. 900-901) . . . .

In Brissette Estate v. Westbury Life Insurance Co.; Brissette Estate v. Crown Life Insurance Co., [1992] 3 S.C.R. 87, Sopinka J., for the majority, summarized, at pages 92-93, the applicable rules of construction as follows:

In interpreting an insurance contract the rules of construction relating to contracts are to be applied as follows:

(1) The court must search for an interpretation from the whole of the contract which promotes the true intent of the parties at the time of entry into the contract.

(2) Where words are capable of two or more meanings, the meaning that is more reasonable in promoting the intention of the parties will be selected.

(3) Ambiguities will be construed against the insurer.

(4) An interpretation which will result in either a windfall to the insurer or an unanticipated recovery to the insured is to be avoided. See Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co., [1980] 1 S.C.R. 888.

The question before us in the present case is whether the dispute between the parties is, by the terms of the policy, required to be submitted to arbitration. The correct approach to this particular question was articulated in Heyman v. Darwins, Ltd., [1942] 1 All E.R. 337 (H.L.), by Viscount Simon, L.C. at page 339:

The answer to the question whether a dispute falls within an arbitration clause in a contract must depend on (a) what is the dispute, and (b) what disputes the arbitration clause covers.

and by Lord Macmillan, at page 345:

Where proceedings at law are instituted by one of the parties to a contract containing an arbitration clause and the other party, founding on the clause, applies for a stay, the first thing to be ascertained is the precise nature of the dispute which has arisen. The next question is whether the dispute is one which falls within the terms of the arbitration clause . . . .

Arbitration clauses in contracts vary widely in their language, for there is no limitation on the liberty of contracting parties to define as they please the matters which they desire to submit to arbitration. Sometimes the reference is confined to practical questions arising in the course of the execution of the contract; sometimes the most ample language is used so as to embrace any question which may arise between the parties in any way relating to the contract.

This approach was applied in the very recent case of Ontario v. Abilities Frontier Co-operative Homes Inc., [1996] O.J. No. 2586 (Gen. Div.) (QL), per Sharpe J., at paragraph 10.

It is, of course, clear what the present dispute comprises. It is whether the respondent's claim is covered by the policy. The next question then is, having regard to the case law already cited, whether this dispute comes within the section 15 arbitration clause. As set out above, section 15 applies to a dispute "arising out of the affairs of the Company between a member or shareholder thereof, or any person aggrieved who at any time has been a member or shareholder of the Company, or any person claiming through such member or person aggrieved, and the Company or any Director thereof with respect to the interpretation and/or application of these by-laws or any claim against the Company or a Director thereof". The opening words of the section are undoubtedly broad. Broad though they be, they are clearly not open-ended for they are followed immediately by the qualifying phrase "between a member or shareholder thereof" and, later on, by the words "with respect to the interpretation and/or application of these by-laws or any claim against the Company or a Director thereof". They cannot include disputes arising under section 13.

Some further indicia of intent may be gleaned by contrasting the words "member or shareholder" in section 15 with "policy holder" and "claimant" in section 13. These latter words, unlike "member or shareholder", point unmistakably to a dispute between a policy holder as such and the appellant under a policy of insurance. Even if it could be said that a dispute as to coverage is one that may exist between a "member or shareholder" and the appellant, for such dispute to be within section 15 it would have to arise "out of the affairs" of the appellant company rather than "under this policy" as provided in section 13. The word "affairs" in the by-laws is to be contrasted with the word "business" in section 6. It is apparent that the appellant's "business" does not correspond exactly with its "affairs". The use of the two words in the same by-laws indicates that the one was not intended to mean the other, and that to the drafter a distinction was to be drawn between the "business" and the "affairs" of the appellant. Compare e.g. Beatty v. First Explor. Fund 1987 & Co. (1988), 25 B.C.L.R. (2d) 377 (S.C.).

The treatment of a "member or shareholder" as a "holder of a subsisting policy" lends some support to the argument that despite the appearance in section 15 of the words "member or shareholder", that section is intended to include a dispute between a "policy holder" and the appellant. It is to be noted, however, that a number of potential disputes between a "member or shareholder" and the appellant may arise out of the latter's "affairs" that would necessarily involve the "interpretation and/or application" of the by-laws or a "claim against the Company or a Director thereof", but would not arise under a policy of insurance. For example, the circumstances in which the appellant may cancel a policy under paragraph 2(c), or cancel shares and call upon a shareholder to indemnify it before paying the redemption price pursuant to paragraph 3(d), or to declare the forfeiture of shares for non-payment of calls under section 3(f)(2) and (3), are peculiar to the status of shareholder or member rather than that of a policy holder.¹ Disputes of this kind may arise between the appellant and a shareholder who happens to be a member, or one that is not. In my view such disputes would truly arise "out of the affairs of the Company . . . with respect to the interpretation and/or application of these by-laws or any claim against the Company or a Director thereof". The words "member or shareholder" and the word "affairs" in section 15, when contrasted with the words "policy holder" and "claimant" in section 13, serve to reinforce the argument that section 15 is not intended to apply to the dispute at hand but, rather, to other kinds of disputes arising out of the "affairs" of the appellant.

On the basis of the foregoing analysis, I have concluded it was not intended that the dispute between the parties be submitted to arbitration pursuant to section 15 of the by-laws.

Before disposing of this appeal I should refer to a final submission made by the appellant, that is based upon certain provisions of the Commercial Arbitration Code (the Code) in the schedule to the Commercial Arbitration Act, R.S.C., 1985 (2nd Supp.), c. 17. The appellant contends that if there is doubt of whether section 15 of the by-laws requires arbitration of the dispute, the jurisdiction of the arbitral tribunal should be left for its determination in accordance with those provisions. The respondent submits that as section 15 of the by-laws is clearly inapplicable, the circumstances are not such as would justify leaving the jurisdiction of the arbitral tribunal to be so determined. Article 5 of the Code stipulates that: "In matters governed by this Code , no court shall intervene except where so provided in this Code". Articles 8(1) and 16, also relied upon, read as follows:

Article 8

Arbitration Agreement and

Substantive Claim before Court

(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative or incapable of being performed.

. . .

Article 16

Competence of Arbitral

Tribunal to Rule on its

Jurisdiction

(1) The arbitral tribunal may rule on its own jurisdiction, including any objections with respect to the existence or validity of the arbitration agreement. For that purpose, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.

(2) A plea that the arbitral tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence. A party is not precluded from raising such a plea by the fact that he has appointed, or participated in the appointment of, an arbitrator. A plea that the arbitral tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope of its authority is raised during the arbitral proceedings. The arbitral tribunal may, in either case, admit a later plea if it considers the delay justified.

(3) The arbitral tribunal may rule on a plea referred to in paragraph (2) of this article either as a preliminary question or in an award on the merits. If the arbitral tribunal rules as a preliminary question that it has jurisdiction, any party may request, within thirty days after having received notice of that ruling, the court specified in article 6 to decide the matter, which decision shall be subject to no appeal; while such a request is pending, the arbitral tribunal may continue the arbitral proceedings and make an award.

The parties are in agreement on the effect of these provisions. If it is clear that the dispute is within the section 15 arbitration clause, the action was correctly stayed by the Prothonotary. The converse, of course, is true if it is clear that the dispute is not within the section 15 arbitration clause. These views are confirmed by the case law: Gulf Canada Resources Ltd. v. Arochem International Ltd. (1992), 66 B.C.L.R. (2d) 113 (C.A.); No. 363 Dynamic Endeavours Inc. v. 34718 B.C. Ltd. (1993), 81 B.C.L.R. (2d) 359 (C.A.); Nanisivik Mines Ltd. v. F.C.R.S. Shipping Ltd., [1994] 2 F.C. 662 (C.A.); Onex Corp. v. Ball Corp. (1994), 12 B.L.R. (2d) 151 (Ont. Gen. Div.); T1T2 Limited Partnership v. Canada (1994), 23 O.R. (3d) 66 (Gen. Div.).

I have concluded that section 15 is clear and unambiguous and that it does not require the dispute in the present case to be submitted to arbitration. That being so, there is no need to further consider the argument based on articles 8 and 16 of the Code, or that related to the doctrine of contra proferentem.

I would dismiss the appeal with costs.

Desjardins J.A.: I concur.

McDonald J.A.: I agree.

¹ Ss. 2(c), 3(d) and 3(f)(2) and (3) read:

2.(c) The Directors shall have full power and complete authority in the manner hereinafter prescribed to cancel any policy or policies of insurance held by any member whom they deem to have conducted himself in a manner which is detrimental to the Company.

. . .

3.(d) The Directors may, on behalf of the Company, redeem and reissue its shares of guarantee stock at such times and in such manner as the Directors shall deem expedient; Provided always that:

1. The Directors may at any time require any shareholder to present his share certificate for cancellation upon notice offering to pay to him the amount paid to the Company for each share represented thereby. If such notice is not complied with by the shareholder within sixty days, his share shall thereupon be deemed to have been redeemed, and payment shall only be made to such shareholder upon his agreeing in writing to indemnify the Company for all expenses and liabilities to which it may be put by reason of such certificate not being rendered.

2. Any person so required to surrender his share certificate shall not by reason thereof cease to be a member of the Company, despite any provision made pursuant to these by-laws requiring members to be shareholders.

3. Any member may apply to the Directors of the Company at any time requesting the Company to redeem any share of the Company held by him and shall accompany such application with the share certificate issued with respect to the said share. Upon receipt of such application the Directors shall, as soon as they consider it expedient having regard to the best interest of the Company, redeem such share.

4. The Company may reissue any share redeemed pursuant hereto.

 . . .

3.(f). . .

2. The Directors may from time to time, make calls upon the shareholders in respect of any moneys unpaid on their shares in the guarantee stock of the Company, as the exigencies of the Company may render necessary, and a call shall be deemed to have been made at the time when the resolution of the Directors authorizing the call was passed; Provided that a notice thereof is given forthwith to such shareholder or shareholders.

3. If default is made by a shareholder in payment of any call upon his shares for a period of two months after the call is due, the Directors may, on giving one month's notice to the shareholder by registered letter mailed to his last known postal address, declare the shares of such defaulter, and all sums previously paid thereon, to be forfeited to the Company, and they may thereafter, unless within the said one month the amount due on the call is paid to the Company, either cancel the shares, or sell and reissue them at such price or prices as they may deem sufficient and for the benefit of the Company only; or in the option of the Directors they may sue for and compel payment of the unpaid calls on the shares.