COURT FILE NO.: 715/02
DATE: 20051110
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Greer, chapnik & lax J.J.
B E T W E E N:
AILEEN SEED
Applicant
- and -
ING HALIFAX INSURANCE AND GREGORY R. BIRSTON
Respondents
Elliott A. Zeitz, for the Applicant
John J. Chapman, for the Respondent, ING Halifax Insurance
HEARD: September 13, 2005
LAX J.
[1] The applicant, Aileen Seed, seeks judicial review of the decision of Mr. Gregory R. Birston, an Umpire appointed by Court Order under the Insurance Act, R.S.O. 1990 c. I.8 to conduct an appraisal and determine the value of a loss that occurred at the applicant’s home on April 7, 2000. The Umpire refused her request for an adjournment on September 18, 2002 and proceeded with the appraisal in her absence. Ms Seed does not challenge the substance or merits of the Umpire’s decision, but seeks to have it set aside on the basis that the Umpire exceeded his jurisdiction and she was denied natural justice.
Facts
[2] Ms Seed’s loss occurred when water leaked from underneath her kitchen sink and caused a flood that damaged floors and carpet. In addition to the water damage, she maintained that her home and contents had been contaminated by airborne mould and that her home and most of its contents were a complete loss. She delivered a proof of loss in the amount of $683,634.96 with an insurable loss value of $309,600. ING denied the presence of mould in her home and as a result, the parties were unable to agree on the value of the loss.
[3] Beginning in August 2000, ING took the position that the property damage should be determined by the appraisal provisions under s. 128 of the Insurance Act. This required the insurer and insured to each appoint an appraiser and the two appraisers to appoint an Umpire. The appraisal process was delayed over the fall of 2000 when the parties were unable to agree on an Umpire. Ms Seed’s proposed Umpire was unacceptable to ING as he had previously inspected her home. ING proposed four Umpires. None were acceptable to Ms Seed. Over this time, Ms Seed changed lawyers; she was nonetheless able to secure expert reports on mould and related issues.
[4] In March 2001, ING instructed counsel to bring a court application under s. 128(5) of the Act for the appointment of an Umpire. Ms Seed’s new counsel and the respondent were then able to agree on Mr. Birston, a Thunder Bay solicitor, as Umpire and a consent order was made on April 5, 2001. Soon after, Mr. Frank Castaldo, ING’s appraiser and Mr. Terry Hall, Ms Seed’s appraiser, commenced the appraisal process.
[5] The parties initially agreed to appraisal dates of May 22-25, 2001, which were consensually changed to June 14-15, 2001. At a pre-hearing meeting with the Umpire on June 12, 2001, Ms Seed’s lawyer advised that he planned to call up to 96 witnesses. Given the volume of material and the number of witnesses, the Umpire established new dates in September, October and November. A site visit was arranged for June 14, at which time Mr. Hall, among others, was present. Over the summer, the appraisers sought to narrow the issues, but they were unable to make much progress due to their differing views on the presence of mould.
[6] Shortly before the appraisal was scheduled to commence in September, Ms Seed consulted new counsel. Her then counsel of record requested an adjournment which the Umpire reluctantly granted to dates in November. At the end of October, Ms Seed retained Toronto counsel, (her fourth lawyer) and delivered a Statement of Claim dated November 16, 2001, claiming damages under the insurance policy, damages for personal injuries and aggravated and punitive damages.
[7] On November 22, 2001, Mr. Justice John de P. Wright heard a motion brought by Ms Seed to stay the appraisal and direct ING to deliver a Statement of Defence. As a result, the November appraisal did not proceed. By way of Application heard at the same time, ING sought an Order compelling Ms Seed to participate in the appraisal process and to pay her equal share of the expense of the appraisal and the Umpire as required under section 128(4) of the Act.
[8] In its Application, ING sought an Order requiring the parties to direct their respective appraisers to meet with the Umpire on a date to be determined by him and to proceed with the appraisal, failing which the Umpire was authorized to proceed in the absence of a party. In Reasons for Judgment released March 13, 2002, the motion for stay was dismissed and the Court ordered the appraisal to proceed on the terms requested by ING: See, Seed v. ING Halifax Insurance (2003), 2003 3265 (ON SC), 50 C.C.L.I. (3d) 258 (Sup. Ct.).
[9] On April 15, 2002, the Umpire wrote to the parties to suggest dates in May and July for the appraisal to proceed. The Umpire had some reason to believe that Mr. Hall might withdraw from the appraisal process and in his letter, he asked Ms Seed’s counsel for confirmation that he would continue to act as Ms Seed’s appraiser. There was no response and as we will come to, the Umpire did not learn that Mr. Hall was withdrawing until the eve of the appraisal.
[10] Ms Seed brought a motion for leave to appeal the decision of de P. Wright J. and took the position that the appraisal was stayed pending the hearing of the motion. The motion for leave to appeal was heard on June 27, 2002 and reserved.
[11] On July 3, July 13 and July 17, ING’s counsel wrote to counsel for Ms Seed seeking to arrange a tentative date for a meeting between the Umpire and the appraisers in order to avoid further delay. He also sought confirmation of Mr. Hall as Ms Seed’s appraiser. On July 4, Ms Seed’s counsel replied to the first of these letters, but would not agree to dates and did not confirm Mr. Hall’s participation. On August 7, 2002, the motion for leave to appeal the decision of de P. Wright J. was dismissed.
[12] On August 15, 2002, the Umpire wrote to the parties and established dates for the appraisal on September 18 and 19, October 31 and November 1, 2002.
[13] By letter dated August 27, counsel for Ms Seed advised ING’s counsel that Ms Seed had appointed a new appraiser, Mr. Robert Watson, and would be seeking a postponement of the appraisal. He also expressed concern for the first time about the suitability of Mr. Birston acting as Umpire and suggested alternative umpires. ING did not agree to change umpires or to postpone the appraisal, pointing out that any difficulties with dates were solely caused by Ms Seed’s refusal to co-operate with the appraisal process, that the appraisal had already commenced in April 2001 and that it would be counter-productive to start over again with a new Umpire and different appraisers.
[14] Ms Seed knew by at least July 15 that Mr. Hall was withdrawing as her appraiser. This was not communicated to ING or the Umpire until August 27, 2002, approximately six weeks later. No explanation was given, although the Umpire had specifically inquired about this as early as April and ING had asked in July.
Decision of the Umpire on Request for Adjournment
[15] In his decision, the Umpire reviewed the history of the proceedings that led to the Order of de P. Wright J., which provides in paragraph 2:
- AND THIS COURT ORDERS that the parties direct their respective appraisers to meet with the Umpire on a date to be determined by him and to proceed with the appraisal failing which the Umpire is authorized to proceed in the absence of one party.
[16] The Umpire noted that after Ms Seed’s motion for leave to appeal was dismissed on August 7, he told the parties that the appraisal would begin in his office on September 18 at 9:00 a.m. and continue on the other dates mentioned. The appraisal dates of September 18 and 19 were again confirmed in writing to the parties on August 29 and September 16, 2002.
[17] On September 18, Ms Seed attended with her new appraiser, Mr. Robert Watson. A request for adjournment was made and refused. Mr. Watson then commenced the appraisal process by outlining the issues. Procedures were discussed and agreed upon with respect to the calling of evidence by the appraisers, as well as the presence of expert witnesses. The Umpire then called on Mr. Watson to present Ms Seed’s position and call any evidence to support it.
[18] Mr. Watson advised that he proposed to call Mr. Terry Hall (the applicant’s former appraiser) as his first witness. Mr. Hall was not in attendance and no arrangements had been made for his attendance. Mr. Watson acknowledged that he was in possession of expert reports from Mr. Hall and others, but it was his preference to call Mr. Hall as a witness. An adjournment was granted to permit Mr. Watson to contact Mr. Hall.
[19] When the appraisal resumed, Mr. Watson advised the Umpire that he had spoken with Mr. Hall, but he was not available as he was involved in union negotiations. The Umpire adjourned the appraisal a second time to canvass the possibility of Mr. Castaldo and ING’s expert witness rearranging their schedules to allow the appraisal process to extend into the evening. An offer was extended to Mr. Watson to adjourn until 5:00 p.m., but Mr. Watson requested an adjournment to another date. It was the Umpire’s view that the Order of de P. Wright J. required him to proceed unless ING consented to the adjournment, which was not forthcoming.
[20] Although the Umpire urged and encouraged Mr. Watson to offer evidence either viva voce or by filing written reports or providing submissions, Mr. Watson declined and left the appraisal proceedings with Ms Seed at 1:15 p.m. The Umpire proceeded with the appraisal and heard evidence presented by ING. He determined that the value of the loss for the building and its contents to be $18,155.20.
Analysis
[21] The procedure for the determination of the value of a loss is found in section 128 of the Act, which provides:
128(1) This section applies to a contract containing a condition, statutory or otherwise, providing for an appraisal to determine specified matters in the event of a disagreement between the insured and insurer.
(2) The insured and the insurer shall each appoint an appraiser, and the two appraisers so appointed shall appoint an umpire.
(3) The appraisers shall determine the matters in disagreement and, if they fail to agree, they shall submit their differences to the umpire, and the finding of any two determines the matters.
[22] Ms Seed submits the Umpire committed a procedural error by refusing to adjourn absent the consent of the insured and continuing with the appraisal in her absence and that this is to be reviewed on a standard of correctness. ING submits that the appropriate standard is reasonableness and the appropriate question is whether the Umpire acted unreasonably in refusing the adjournment.
[23] The purpose of the appraisal process under s. 128 of the Insurance Act is to provide an expeditious and easy manner for the settlement of claims for indemnity under insurance policies. It is intended to be a final and binding determination of the loss: Re Krofchick et al. and Provincial Insurance Co. Ltd. (1978), 1978 1304 (ON SC), 21 O.R. (2d) 805 (Div. Ct.); Trentmar Holdings Ltd. (c.o.b. Athena Restaurant) v. Williams (1984), 1984 6003 (ON SC), 6 C.C.L.I. 180 at para. 10. Courts have afforded substantial deference to an appraisal under the Insurance Act and the appraisal process, which is not subject to the provisions of the Statutory Powers Procedure Act, R.S.O. 1990, c.22. Unless there is proof of misconduct or that the appraisers or Umpire exceeded their jurisdiction, courts have been reluctant to interfere.
[24] Re Krofchick illustrates this approach. In that case, the parties each appointed an appraiser who in turn appointed an Umpire. The insured’s appraiser informed the insured’s solicitors that the “preliminary view” of the appraisers was that the loss was in the range of $50,000. The insured’s solicitor asked the insured’s appraiser not to make any decision until an engineering report was provided. The request was ignored. The appraisers met with the Umpire and agreed on a determination of loss that was embodied in a unanimous appraisal award. The Court was asked to interfere with the decision on the basis that there was a denial of natural justice. In refusing to do so, the Court stated at pp. 811-812:
The function of the appraisers and umpire was not to hear evidence, but rather to arrive at a decision on the basis of their own knowledge and expertise. If they were not required to hold a hearing, as we have found, then they could not have been under any obligation or duty to postpone a decision in order to consider a piece of evidence that one party wanted to put before them.
… To find that the appraisers were obliged to consider the report from the insured's engineer would be quite inconsistent with our finding that they were not obliged to hold a hearing.
There is no evidence before us as to whether the insured's appointee informed the other appointee and the umpire of his conversation with the insured's solicitors, and, if so, the reason why the three men proceeded to make their decision without waiting. Perhaps they thought they already had sufficient engineering advice. We are not prepared to assume that any of the appraising group acted unfairly or unreasonably. We are of the opinion that the appraisers and umpire properly acted within their authority and, no misconduct having been shown, the application is dismissed with costs.
[25] Ms Seed relies on Shinkaruk Enterprises Ltd. v. Commonwealth Insurance Co. (1990), 1990 7738 (SK CA), 71 D.L.R. (4th) 681 (Sask. C.A.), but this is simply an example of an Umpire misconceiving his function and purporting to act as an arbitrator by taking into account the wording of the insurance policy, construing its clauses and making findings of fact. The only decision brought to our attention where a defect in the process led to the setting aside of an appraisal award is Gorieu v. Simonot, [1986] S.J. No.108 (Sask. C.A.). In that case, the Umpire’s failure to notify one of the appraisers of the time of the appraisal rendered the award non-binding.
[26] Gorieu is clearly distinguishable on its facts. Here, both appraisers had the opportunity to participate in the process, but Ms. Seed’s appraiser voluntarily chose to withdraw from the process. This was the situation in Re Windsor Airline Limousine Services, (1980) 1980 1897 (ON SC), 30 O.R. (2d) 732 (Div. Ct.), rev’d on other grounds (1983), 1983 1936 (ON CA), 44 O.R. (2d) 560 (C.A.), where the company left a certification hearing after an adjournment request was refused and the Ontario Labour Relations Board proceeded in its absence. The Court refused to interfere on the basis of a denial of natural justice and stated at p. 739:
It has for some time been made plain in a number of decisions that one who chooses to leave on the ground that a tribunal is incompetent runs the risk of being foreclosed from any later complaint…(citations omitted)
A similar situation prevails, and is becoming more apparent all the time, where an application for an adjournment is made unsuccessfully. The risk that a person who “walks out” will deprive himself of the right to complain later is a real one.
[27] In our view, the case at bar is stronger. While the decision to grant or refuse an adjournment is normally a discretionary one, it is arguable that the Court removed any discretion the Umpire had to grant the adjournment. At the very least, the Order was a strong judicial signal that no further delay was acceptable. The Umpire did not have unrestrained control of the process. The Court had ordered the parties and their appraisers to attend on a date fixed by the Umpire and to proceed with the appraisal failing which the Umpire is authorized to proceed in the absence of one party. It is difficult to imagine any stronger language or clearer direction from the Court. As we read this language, it was the Court and not the Umpire that compelled Ms Seed and her appraiser to attend and to proceed. The Umpire’s sole function under the first part of the Order was to determine the date of the appraisal.
[28] We accept that the result of the Umpire’s refusal to grant the adjournment has serious consequences for Ms Seed, but did he exceed his jurisdiction or unfairly exercise his discretion? On the authority of Re Krofchick, an appraisal under the Insurance Act requires neither a hearing, nor a consideration of evidence. The Umpire had chosen to hold a hearing and had established dates for this purpose from the time of the pre-hearing meeting in June 2001. Mr. Hall had told the Umpire that he planned to call a large number of witnesses. This may explain why Mr. Birston decided to proceed in this manner.
[29] It was anticipated that Ms Seed’s evidence alone would take the better part of two days. It is difficult to understand why she refused to proceed with her own evidence on September 18 and 19. The next scheduled hearing date was six weeks later on October 31. This would have given Mr. Watson time to prepare and to arrange for Mr. Hall’s attendance, but as of September 18, no attempt had been made to arrange for the attendance of any witness.
[30] The change of appraisers on the eve of the hearing, the untimely notice to the Umpire and ING, the attempt to disqualify Mr. Birston at the eleventh hour, the failure to arrange for the attendance of Mr. Hall, the refusal to adduce any evidence or file reports or make any submissions, cries out for a credible explanation, but none has been provided. Ms Seed had almost one and a half years from the time of the consent order in April 2001 to prepare for the appraisal. In one way or another, she appears to have attempted from the outset to disrupt the appraisal process for strategic or other reasons that one can only surmise.
[31] The Umpire gave Ms Seed and Mr. Watson every opportunity to participate in the appraisal before proceeding in her absence. The Order of de P. Wright J. unequivocally authorized him to do this. In seeking the consent of the insurer to the adjournment, the Umpire was only attempting to find a way to accommodate Ms Seed in the face of the Order. It seems to us that she was offered every reasonable accommodation that the Umpire was in a position to offer, given the strong language of the Order. We find no error in the manner in which he proceeded even if the standard of review is correctness. In declining to offer evidence and in choosing to withdraw from the appraisal, Ms Seed ran the risk of being foreclosed from further complaint.
[32] The Umpire’s decision was made against a lengthy background of delay, in the context of a legislative scheme that is intended to provide an expeditious and easy manner of settling indemnity claims and in the face of an Order compelling the parties to attend and proceed. In all of the circumstances, we can find no procedural unfairness, no loss of jurisdiction, no improper exercise of discretion and no denial of natural justice: Lapedus v. Institute of Chartered Accountants of Ontario, [1997] O.J. No. 409 (Div. Ct.); Regina v. Ontario Labour Labour Relations Board, Ex parte Nick Masney Hotels Ltd., 1970 478 (ON CA), [1970] 3 O.R. 461 (C.A.); Stolove v. College of Physicians and Surgeons of Ontario, [1988] O.J. No. 1426 (QL) (Ont. Div. Ct.).
[33] The application for judicial review is therefore dismissed with costs to ING, fixed in the total amount of $5,000, as agreed by the parties.
LAX J.
CHAPNIK J.
Released: November 10, 2005
COURT FILE NO.: 715/02
DATE: 20051110
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Greer, chapnik & lax J.J.
B E T W E E N:
AILEEN SEED
Applicant
- and -
ING HALIFAX INSURANCE AND GREGORY R. BIRSTON
Respondents
REASONS FOR JUDGMENT
Lax J.
Released: November 10, 2005