Neutral Citation: 1999 ONFSCDRS 61

FSCO A97-000239

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

ANTHONY PERSAUD

Applicant

and

COMMERCIAL UNION ASSURANCE COMPANY

Insurer

REASONS FOR DECISION

Before:

John Wilson

Heard:

March 23, 1999, at the Offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Mr. Persaud did not appear and was not represented by counsel.

Christopher J. Schnarr for Commercial Union Assurance Company

Issues:

The Applicant, Anthony Persaud, was injured in a motor vehicle accident on January 23, 1995. He applied for and received statutory accident benefits from Commercial Union Assurance Company ("Commercial Union"), payable under the Schedule.¹ Commercial Union terminated weekly income replacement benefits on May 23, 1996. The parties were unable to resolve their disputes through mediation, and Mr. Persaud applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

Is Mr. Persaud entitled to weekly income replacement benefits, pursuant to section 7 of the Schedule, from May 24, 1996 and onwards?
What is the correct amount of the weekly income replacement benefits?
Is Commercial Union entitled to repayment of benefits already paid pursuant to section 70 of the Schedule?
Is Mr. Persaud entitled to interest on any amounts owing?
Is Mr. Persaud required to pay an award to the Insurer, pursuant to section 282 (11.2) of the Insurance Act, on the grounds that he commenced an arbitration that is frivolous, vexatious or an abuse of process?

Both parties seek expenses of the arbitration proceeding.

Result:

Mr. Persaud is not entitled to weekly income replacement benefits from May 24, 1996 pursuant to section 7 of the Schedule.
I heard no evidence on the amount of the weekly income replacement benefits.
Commercial Union is not entitled to repayment of benefits already paid.
Mr. Persaud is not entitled to interest.
Commercial Union is not entitled to an award pursuant to section 282 (11.2) of the Insurance Act.
Commercial Union is entitled to its expenses in this arbitration.

EVIDENCE AND ANALYSIS:

Mr. Persaud was not present at the hearing, nor was he represented by an agent or legal counsel. The hearing date was chosen as a result of his request for an adjournment of the hearing originally scheduled for July 13, 1998. From the copy of the Notice of Hearing on file, I find that the notice of this hearing was mailed to Mr. Persaud at the address indicated on his Application for Arbitration and that the notice of the hearing date for the arbitration indicated that if he did not attend at the hearing, the arbitrator could dispose of the case in his absence.

I have no information to explain Mr. Persaud's non-attendance.

After waiting for one half hour, I proceeded with this hearing in the absence of Mr. Persaud. Mr. Persaud did not file any evidence.

At the hearing, Mr. Schnarr, counsel for Commercial Union, abandoned the claim for repayment by Mr. Persaud and proceeded to call evidence only on issues relating to an assessment pursuant to section 282 (11.2) of the Insurance Act and its claim for expenses of the arbitration proceeding.

The Insurer filed a document brief as Exhibit "1", as well as seven other documentary exhibits as part of its case.

Mr. Persaud filed an Application for Arbitration on the 20th of January, 1997. At that time, he was represented by a lawyer. A pre-hearing conference was set for July 30, 1997. Mr. Persaud did not attend this pre-hearing conference, but was represented by his lawyer.

At the pre-hearing conference, the arbitrator set a hearing date of March 9, 10, and 11, 1998, and made fourteen separate production orders against Mr. Persaud.

On the 2nd of December 1997, Commercial Union requested a resumption of the pre-hearing to deal with outstanding productions from Mr. Persaud, and to request an interim award against Mr. Persaud pursuant to section 282 (11.2) of the Insurance Act.

A resumption of the pre-hearing took place on the 3rd of February 1998, by telephone conference call arranged by the Commission. Mr. Persaud did not to participate but was represented by his lawyer.

In Arbitrator Alves' pre-hearing letter dated the 10th of February 1998, the arbitrator held that the proper time to entertain a request for an order under section 282 (11.2) was after all the issues, evidence and arguments have been placed before an arbitrator at the hearing of the arbitration. Arbitrator Alves also reiterated that Mr. Persaud continued to be bound by the production orders made in July of 1997.

On the 17th of February 1998, Commercial Union wrote to the Registrar of the Commission, requesting an adjournment of the hearing on the grounds that the Applicant had still not complied with his production obligations.

On the 23rd of February 1998, the Registrar adjourned the hearing. A new hearing date was set for July 13, 14, and 15, 1998.

On the 10th of July 1998, Mr. Persaud faxed a further request for adjournment to the Commission on the grounds that he had dismissed his counsel and needed to retain a new lawyer.

On the 13th of July 1998, the parties appeared before Arbitrator Novick, at which time Mr. Persaud reiterated his request for an adjournment to instruct new counsel. He represented that he had already retained a lawyer, but was uncertain of his full name or address.

New hearing dates were set with the parties, for March 22, 23, and 24, 1999.

On August 21, 1998, Commercial Union wrote to the Commission requesting a further resumption of the pre-hearing to deal with the outstanding production orders and the fact that Mr. Persaud had still not identified his new lawyer.

On the 11th of December 1998, the pre-hearing was resumed by teleconference before Arbitrator Novick. Commercial Union participated. The arbitrator telephoned Mr. Persaud at the number he had provided in his Application for Arbitration, but no one answered. Arbitrator Novick made a further production order, together with an order of expenses against Mr. Persaud. Arbitrator Novick stated in her pre-hearing letter that:

"...I am of the view that at this point, some 10 months and two adjournments later, the Applicant should bear the consequences of his behaviour that has repeatedly prolonged this proceeding."

At this hearing on March 23, 1999, the Insurer presented evidence relating only to its claim for expenses and for an award pursuant to section 282 (11.2) of the Insurance Act.

Issue 1: Weekly Income Replacement Benefits - Eligibility:

Mr. Persaud had the onus of proving his claim for weekly income replacement benefits on the balance of probabilities. In the absence of any evidence, I dismiss his claim.

Issue 2: Weekly Income Replacement Benefits-Amount:

In the absence of any evidence on this issue, I make no determination.

Issue 3: Repayment:

At the hearing, the Insurer abandoned any claim to repayment of benefits already paid.

Issue 4: Interest:

There is no finding of outstanding payments by the Insurer and hence no interest payable.

Issue 5: Award against Mr. Persaud pursuant to section 282 (11.2) of the Insurance Act

Section 282(11.2) provides:

If an insured person commences an arbitration that, in the opinion of the arbitrator, is frivolous, vexatious or an abuse of process, the arbitrator may award an amount to be paid by the insured person to the insurer that does not exceed the amount assessed against the insurer in respect of the arbitration under section 14.

The Insurer produced a witness, Mrs. Fay Robinson, an eligibility officer in the Social Services Department of the Region of York who provided information from Mr. Persaud's social assistance application file.

She testified that Mr. Persaud listed his employment prior to July 11, 1995, as occasional odd jobs for cash, and that his answers to the employment questions on his application for social assistance contained no reference to employment with Bloomsbury & Butterfield Ltd., Mr Persaud's employer at the time of the accident on the 11th of January 1995.

The "Application for Accident Benefits" dated the 19th of April 1995, and filed on behalf of Commercial Union as Exhibit 2, at page five, lists employment with Bloomsbury & Butterfield from December 02, 1994 to the 20th of January 1995.

Mrs. Robinson's testimony established that Mr. Persaud was inconsistent in his representation of his employment. He either misled the Social Services Department, in order to obtain welfare, or he attempted to mislead the Insurer in order to obtain accident benefits.

The Insurer filed a report from the firm of Hayes Smith and Associates, Investigative Accountants, as Exhibit "6" which analysed the employment information submitted by Mr. Persaud.

Commercial Union submitted that discrepancies in the statement of income submitted by Mr. Persaud's employer, the T4 presented by Mr. Persaud from Bloomsbury and Butterfield, (contained in the appendix to Exhibit "6") and the questions raised by the report of the Insurer's investigative accountants concerning the validity of the T4, taken together with Mr. Persaud's statements to Social Assistance support the finding that he was not indeed "employed" for the purposes of his accident benefits application, and so knowingly advanced a claim that was without value or substance.

However, I find some evidence that Mr. Persaud was employed as a rug auctioneer with Bloomsbury & Butterfield, and that Mr. Persaud chose not to disclose that arrangement for the purposes of obtaining welfare. Neither conclusion reflects well on Mr. Persaud, but the latter conclusion would at least support a claim for statutory accident benefits for injuries arising out of the Quebec accident.

I have heard no argument that Mr. Persaud was not involved in an accident, nor that he did not suffer some injury or impairment at that time that could have been attributable to the accident. Mr. Persaud could reasonably have believed that he came within the criteria of Section 7(1) of the Schedule.

The Concise Oxford Dictionary defines frivolous as "lacking seriousness, given to trifling, or silly." None of these words would necessarily characterize Mr. Persaud's decision to apply for arbitration. He could well have felt that he had a serious claim to ongoing accident benefits, notwithstanding the hurdles of evidence and credibility that he faced.

I am not satisfied that the Applicant's case was so totally devoid of merit or substance as to be found "frivolous" at the time of his application for arbitration.

The Insurer may have found Mr. Persaud's inconsistencies and lack of openness during the arbitration process"vexatious", but I find no evidence to suggest that the Applicant commenced the action out of spite, or to vex the Insurer. He wished to claim the continuation of benefits to which he felt some entitlement.

In Richard and Lombard, (OIC A97-001526, April 29, 1998) at page 10, Arbitrator McMahon considered the criteria for applying s. 282(11.2) of the Insurance Act.

The insurer is only entitled to relief under this section if it is called upon to respond to, and pay a filing fee in respect of, cases that are so devoid of merit as to be frivolous, or were launched to vex the insurer, or are in and of themselves an abuse of process. The insertion of the word "commences" focus the inquiry on the state of affairs as they existed at the time the action was launched, and not on later procedural steps.

The arguments advanced by the Insurer, related to abuse of process and the delays by the Applicant tend to address the criteria of a claim for expenses under s. 282 (11) of the Insurance Act rather than a claim under s.282 (11.2) of the Insurance Act, in that, with the exception of the employment evidence, they do not address specifically the state of affairs as they existed at the time he commenced the arbitration.

I find that at the time of the application, there were issues of substance between the Insurer and the Applicant that could reasonably have been arbitrated.

Mr. Persaud's Expenses:

Mr. Persaud claimed his expenses in this arbitration. Since McCormick and Economical Mutual Insurance Company (November 10, 1991, OIC A-000139), applicants have generally received their expenses, whether successful or not, unless the application was frivolous, or vexatious, or the applicant's conduct unreasonably prolonged the proceedings. In addition, arbitrators, in exercising their discretion to make an award of expenses, for applications filed after November 1, 1996, also consider the criteria of Rule 73.2 of the Code.

At the final pre-hearing, Arbitrator Novick found that the behaviour of Mr. Persaud had repeatedly prolonged this proceeding. By consistently failing to obey the production orders, delaying the hearing process, and failing to appear for pre-hearings and the arbitration hearing, Mr. Persaud caused the Insurer to incur unnecessary expense and delay. His actions unreasonably prolonged the proceedings. It would run counter to common sense and undermine the legislative scheme for speedy and inexpensive dispute resolution set up under the Insurance Act to reward the Applicant's apparent disrespect for the arbitration process with an award of his expenses.

Commercial Union's Expenses:

Section 282 (11) of the Insurance Act provides that the arbitrator may award expenses incurred in the arbitration to either the insured or the insurer.

Rule 73 of the Dispute Resolution Practice Code sets out more detailed criteria for the award of expenses. Pursuant to Rule 73(b) of the Code, an arbitrator may consider conduct of a party that tended to prolong, obstruct or hinder the proceedings. This would include a failure to comply with undertakings or orders.

Rule 73(c) deals with the consideration of whether the proceeding was "manifestly unfounded, frivolous, vexatious, fraudulent or an abuse of process." Unlike subsection 282 (11.2) of the Insurance Act, there is no temporal linkage between the frivolous nature of a proceeding and the commencement of the arbitration.

Commercial Union raised suspicions of fraud, and called into question the applicant's credibility. Allegations of fraud are a serious matter. Even though the civil burden of proof still applies, evidence of such conduct should be examined rigorously. While the Insurers raised significant doubts about the veracity of statements that Mr. Persaud made concerning his employment, they did not adduce convincing evidence that would persuade me that Mr. Persaud's claim was manifestly unfounded and fraudulent.

Mr. Schnarr, for Commercial Union, suggested that the failure to abide by production orders, and the conduct of the Applicant in causing the adjournment of pre-hearings and hearings is an abuse of process. I find that Mr. Persaud showed a consistent disrespect for the arbitration process that in combination with the above-mentioned failure to obey orders of the pre-hearing arbitrators and attend scheduled pre-hearings, constituted an abuse of process.

On the basis of the history of this arbitration, the previously cited comments of pre-hearing Arbitrator Novick concerning Mr. Persaud's conduct and his failure to comply with production orders, I find as well that Mr. Persaud's conduct tended to prolong, obstruct and hinder the proceeding.

I therefore order Mr. Persaud to pay Commercial Union its expenses in this arbitration proceeding.

AMOUNT OF EXPENSES:

The question of the amount of expenses was deferred until all other issues in dispute were decided. Therefore, the issue of the amount of Commercial Union's expenses of this arbitration proceeding may now be addressed.

April 14, 1999

John Wilson Arbitrator

Date