Executive Summary: Key Legal and Evidentiary Issues

• Plaintiff alleged that a 2016 accident benefits settlement was unconscionable and sought to have it rescinded.

• Defendants moved to strike the claim, arguing that the Superior Court lacked jurisdiction and the action disclosed no cause.

• Central issue was whether the Licence Appeal Tribunal (LAT) or the Superior Court has authority over rescission of SABs settlements.

• The court reaffirmed that LAT lacks jurisdiction to grant equitable remedies such as rescission.

• Allegations of inequality of bargaining power and a grossly improvident settlement raised a legitimate claim of unconscionability.

• Motion to strike was dismissed, allowing the claim to proceed to trial.

Facts of the case

In Birtles v. State Farm Mutual Automobile Insurance Company, 2025 ONSC 3282, the plaintiff, Scott Birtles, was injured in a 2005 motorcycle accident and received statutory accident benefits from his insurer, State Farm. In 2016, over a decade after the accident, Birtles entered into a full and final settlement for $35,000, including all past and future benefits, plus a lump sum for legal costs. The settlement was executed under the Statutory Accident Benefits Schedule (SABS) as governed by Ontario Regulation 776/93.

In 2023, Birtles initiated an action in the Superior Court of Justice, seeking to have the settlement rescinded. He alleged that the agreement was unconscionable due to significant inequality in bargaining power and the absence of full and fair disclosure regarding his future medical needs. He claimed to have entered the settlement without independent legal advice and alleged that he was vulnerable, medically fragile, and lacked capacity to assess the fairness of the offer.

State Farm and its successor company, Desjardins General Insurance Group, brought a motion to strike the action under Rules 21 and 25 of Ontario’s Rules of Civil Procedure. They argued that Birtles’s claim disclosed no reasonable cause of action, was an abuse of process, and should have been brought before the Licence Appeal Tribunal (LAT), which holds exclusive jurisdiction over accident benefits disputes under the Insurance Act.

Legal analysis and findings

Justice A.K. Mitchell of the Ontario Superior Court dismissed the motion to strike. She held that the court had jurisdiction to hear the plaintiff’s claim because Birtles was not challenging entitlement to benefits per se, but instead seeking rescission of the 2016 settlement on equitable grounds—a remedy not within LAT’s statutory authority. LAT can resolve entitlement and quantum disputes but cannot issue declaratory or equitable relief such as rescission or rectification of a contract unless expressly provided by law.

Justice Mitchell noted that the plaintiff had pleaded material facts that, if proven, could satisfy the test for unconscionability. Following the Supreme Court of Canada’s guidance in Uber Technologies Inc. v. Heller, a two-part analysis applies: (1) a significant inequality of bargaining power, and (2) an improvident bargain resulting from that imbalance. Birtles alleged both. His assertions regarding lack of legal advice, his vulnerable medical condition, and his limited understanding of the release terms were sufficient to raise a triable issue.

The court also found that the pleading was not scandalous, frivolous, or vexatious, nor was the action res judicata or subject to estoppel. The fact that a signed release existed did not automatically foreclose a claim of unconscionability. Justice Mitchell emphasized that motions to strike must be approached with caution, especially where facts are disputed and credibility is at issue.

Outcome

The Ontario Superior Court dismissed the defendants’ motion to strike the claim. The court held that the plaintiff had properly pleaded a cause of action in unconscionability, and that the Superior Court—not LAT—was the correct forum to seek rescission of the settlement agreement. The case will proceed to trial, where the plaintiff will have the opportunity to prove the alleged inequities and improvidence of the 2016 settlement. The defendants were ordered to pay the plaintiff $7,500 in costs.