Neutral Citation: 2000 ONFSCDRS 133
FSCO A98-001003
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
MELVIN BERGER
Applicant
and
LIBERTY MUTUAL INSURANCE COMPANY
Insurer
DECISION ON JURISDICTION
Before:
John Wilson
Heard:
May 28, 2000, at the Offices of the Financial Services Commission of Ontario in Toronto and by written submissions, concluding July 12, 2000.
Appearances:
Tom David for Mr. Berger
Peter Kazdan and Sandi Smith for Liberty Mutual Insurance Company
Background:
The Applicant, Melvin Berger, was injured in a motor vehicle accident on July 20, 1992. He applied for and received statutory accident benefits from Liberty Mutual Insurance Company ("Liberty Mutual"), payable under the Schedule.1 Liberty Mutual terminated weekly income benefits. The parties were unable to resolve their disputes through mediation, and Mr. Berger applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.
In his pre-hearing letter, dated May 20, 1999, Arbitrator VanderBent listed, amongst the issues identified, the question of whether Mr. Berger was entitled to receive weekly income benefits from August 27, 1996 and ongoing.
The arbitration hearing commenced before an arbitrator on March 6, 2000 and proceeded until adjourned on Friday, March 17, 2000. No decision was rendered by the hearing arbitrator. At page 28 of the transcript for the hearing, the arbitrator made the following remarks:
I don't want to prejudice this case by my absence either, particularly if all that's needed is a day or so on a preliminary issue that is discrete and separate from the merits of the medical issues.
So, if you want, we can try and set that up today, while you're here, set up a preliminary issue date. I can go to the back, get the schedule and try to find a day where we can give you an arbitrator to deal with this quantum issue. We will adjourn this Hearing pending the result of that.
No written order or other direction either confirming or setting up the June 13 hearing appears to have been made.
On March 20, 2000, the Financial Services Commission issued a Notice of Hearing which stated that a hearing would be held on June 13, 2000, "...to the issue of quantum".
There is no doubt that both parties consented to the holding of a separate hearing.
Although the Notice of Hearing identified the June 13 hearing as a hearing on the issue of "quantum", there was some confusion about the nature and the subject of this hearing.
On May 8, 2000, a Report of Mediator was issued on a dispute between the same parties arising out of the same motor vehicle accident, in which an overpayment issue was identified, as well as four issues designated as "preliminary issues". The Mediator identified these as follows:
Preliminary Issue
Mr. Berger claims the following:
Liberty should pay weekly benefits at a weekly rate greater than the weekly rate paid by Liberty;
Liberty deducted the gross amount of LTD and should deduct the net amount;
Canada Pension Plan ("CPP") benefits are not deductible; and
Liberty should pay interest.
Liberty claims that Mr. Berger's above claims cannot be mediated at this time.
On June 13, prior to proceeding with the scheduled hearing, I heard submissions from the parties as to what exactly was the issue to be decided. It became apparent that the Insurer was prepared only to argue the question of the correct formula to calculate the deduction of collateral benefits, while Mr. Berger understood that the issues identified in the above mediator's report were to be the subject of the hearing. Neither understood that they had to deal with the overall issue of "quantum", as identified in the arbitrator's comments, and the Notice of Hearing.
Since no agreement was possible on clarifying the issue, I ruled that the hearing could proceed on the issue identified in the notice of hearing, that of "quantum." Subsequently, I asked the parties for submissions on whether I had jurisdiction to hear this matter, as it was constituted. Written submissions were completed on July 12, 2000.
The question of jurisdiction can be examined in many different ways. An arbitration under the Insurance Act, however, is a creature of statute, and there must be a statutory basis for any exercise of an arbitrator's jurisdiction.
The Original hearing:
Was the quantum of benefits an issue before the hearing arbitrator ?
There is no question that the entitlement to income replacement benefits was properly before the hearing arbitrator. The issue was mediated, and an application for arbitration was filed with the Commission. The arbitrator began the hearing, and then adjourned it. At the time of adjournment she was clearly seised with the issues before her, including entitlement to income replacement benefits.
It is equally clear that the hearing arbitrator and to some degree the parties were of the opinion that the question of the quantum of benefits was not before the arbitrator. As the arbitrator stated at page 19 of the transcript:
The case we'll all hear, Mr. David, is that if quantum is not an issue then, of course, the arbitrator can't make an order with respect to quantum. It's not before me.
Subsection 282(3) of the Insurance Act provides that: "the arbitrator shall determine all issues in dispute, whether the issues are raised by the insured person or the insurer."
The question of whether an arbitrator or other decision-maker is seised of a particular issue is rarely addressed directly. It is dealt with indirectly in questions of issue estoppel, and res judicata. As well, the Commission has dealt with this question in the context of decisions examining whether an insurer could "add" issues at a hearing, and whether an issue had been mediated in accordance with subsection 281(2) of the Insurance Act.
In DeCicco and State Farm, (OIC A-0002777, December 18, 1991), Senior Arbitrator Naylor considered the scope of the issues before an arbitrator at a hearing.
...the scope of the issues before the arbitrator should not be defined in a narrow and technical way. The authority of the arbitrator extends to anything that reasonably and consequentially flows from the issues that are before her.
This view is consistent with a long line of court decisions examining res judicata and issue estoppel. In such cases, an analysis of the issues before a court leading to a decision is necessary since the allegation is that the issue has already been determined. The courts traditionally have broadly defined the issues before them. In the words of Somerville L.J.( Greenhalgh v. Mallard [1947] 2 All E. R 258):
I think that on the authorities to which I will refer, it would be accurate to say that res judicata for this purpose is not confined to the issues which the court is actually asked to decide but that it covers issues or facts which are so clearly subject-matter of the litigation and so clearly could have been raised that it would be an abuse of process of the court to allow a new proceeding to be started in respect of them.
For the purposes of res judicata then, a court has all the issues before it that are clearly the subject matter of the litigation, whether raised directly by the parties or not.
If this liberal view of the scope of the issues before a tribunal is extended to the present case, then it suggests that all necessarily related issues would also be before the tribunal. Hence, the question of entitlement to income replacement benefits would bring the issue of the quantum of such benefits before the tribunal, since a calculation of quantum would flow consequentially from the entitlement issue.
I find that the issue of the quantum of benefits was necessary and consequential to the overall issue of entitlement to benefits, and so was before the arbitrator during the March hearings.
It is evident, however, that the parties felt some uncertainty about proceeding with the issue of quantum, since they arranged for a mediation on that specific issue to take place in April, with the Report of Mediator issued on May 8, 2000.
The Insurance Act sets mediation as a precondition to access to the arbitration process. If the sub-issue of quantum had to be specifically mediated before it could be arbitrated, then the arbitrator may well have acted reasonably in refusing to consider quantum to be part of the arbitration hearing.
McPherson J. in Royal Insurance v. Pisani [1994] O.J. No. 2616 (Gen. Div.) remarked on the role of mediation as a precondition for litigation or arbitration and opted for a liberal approach to the interpretation of issues mediated.
I disagree with Royal's argument for two reasons. First, it is Royal that has initiated "a proceeding" relating to the matters raised by Royal in its statement of claim. That mediation has failed. To require the Pisanis to go back through another round of mediation with respect to their insurance claims arising out of the same accident would be, in my view, an overly technical interpretation of s. 281(2) of the Insurance Act. It would also create unnecessary delay and expense.
This approach to the mediation prerequisite was endorsed by Charbonneau J. in Woodman v. State Farm Mutual Insurance ( [1999] O.J. No. 521, Ont Ct. Of Justice, General Division) and most recently by Arbitrator Killoran in Kaur and CIBC Insurance, (FSCO A99-000269 May 11, 2000).
I find that the question of quantum did not need to be specifically mediated, since it was a necessary sub-issue of Mr. Berger's claim for income replacement benefits, which had already been mediated. I find, as well, that the hearing arbitrator was consequently seised with all aspects of the income benefit claim, including quantum, and pursuant to subsection 282(3) of the Insurance Act, the hearing arbitrator was required to determine that issue.
Can an issue be severed from the main arbitration?
Severance by Consent
The parties have submitted that a portion of a hearing may be severed on the consent of the parties and the hearing arbitrator. Patently, even if an issue has been properly mediated and brought to arbitration, an arbitrator need not determine an issue that has been settled by the parties. To that degree, at least, an issue may be severed on consent from the balance of a hearing.
Severance by Section 31 of the Practice Code
Subsection 31.1 of the Dispute Resolution Practice Code (Third Edition April 15, 1997) provides:
Where the arbitrator considers it appropriate, or where the parties agree and the arbitrator approves, the arbitrator may order that an arbitration application be divided into distinct issues and the arbitrator may hear the issues separately.
Although provision is made in the Practice Code for severance of distinct issues, I find that this section does not apply to the case before me.
I have found that the question of quantum is a necessary sub-issue of the question of whether Mr. Berger is entitled to receive income replacement benefits. Consequently it is not a "distinct issue" that may be severed in accordance with this section.
Secondly, the use of the definite article "the" before the word "arbitrator" implies that the arbitrator who has carriage of the matter will also hear the severed issue, even if it is heard separately. Clearly, the June 13 hearing was intended to be heard by a different arbitrator than the balance of the application. I find that this would not be authorized by the plain meaning of section 31 of the Practice Code.
Preliminary Issue Severance
Parties may agree, and a pre-hearing arbitrator may order that an issue or issues be heard in a preliminary issue hearing, if a decision on those matters could have the effect of resolving the remaining issues in the arbitration. This is done pursuant to subsection 33.1(d) of the Practice Code, by the pre-hearing arbitrator.
In this matter, the hearing arbitrator in fact did refer to the June 13 hearing as a "preliminary issue". At page 28 of the transcript she is quoted as saying: "...So if you want, we can try and set that up today, while you're here, set up a preliminary issue date." The arbitrator repeats the same descriptive elsewhere in the transcript in relation to the resumed hearing. There is no reference to a "preliminary issue" in the pre-hearing letter issued by the pre-hearing arbitrator. Nor does the Notice of Hearing describe the June 13 hearing as a "preliminary issue hearing."
Matters commonly referred to as preliminary issue hearings range from compliance with statutory limitations, to the question of whether an accident took place at all. In all such cases a decision on the preliminary issue could determine the outcome of the entire arbitration.
The Canadian Oxford Dictionary defines "preliminary as:
introductory, preparatory:initial 1. A preliminary action or arrangement (dispense with the preliminaries) 2. A preliminary trial or contest, preparatory to; in advance of (was completed preliminary to the main event)."
The severance of an issue, once the main hearing has begun does not correspond with the sense of "preparatory to," or "in advance of that is implied in the ordinary meaning of "preliminary". Nor could a decision on the issue of "quantum" have determined the outcome of the balance of the issues in the arbitration.
Consequently, I find that any references to "preliminary issue" by the hearing arbitrator were likely inadvertent, and potentially misleading. The "quantum" hearing of June 13 does not meet any definition of a preliminary issue hearing.
From a practical point of view, I heard both parties refer to evidence presented before the hearing arbitrator in their presentations before me on June 13. The Insurer argued that the evidence and findings on certain matters already presented to the hearing arbitrator would affect the issue of quantum and its calculation. Not having been present at that hearing, I am unable to respond to such evidence and to fairly determine the issue of quantum.
If the proceedings of June 13, 2000 did not constitute a preliminary issue hearing, then the question must be asked, what is the authority for severing the quantum issue from the main hearing?
Severance under the Insurance Act
The parties at the June 13 hearing argued that their mutual consent permitted them to refer a specific issue or sub-issue to a different arbitrator to be heard separately.
It is trite law that arbitrators owe their jurisdiction to statute. Their powers are given expressly by statute, or by necessary implication in order to fulfill the statutory mandate. As Director's Delegate Naylor noted in Branchaud and Co-operators General Insurance Company Appeal (OIC P96-00048, May 2, 1997): "The parties to an arbitration cannot agree to confer jurisdiction on an arbitrator that he or she would not otherwise have."
Subsection 281(1)(b) of the Insurance Act provides that: "the insured person may refer the issues in dispute to an arbitrator under section 282:"( My emphasis). Clearly referral to an arbitrator acting under the Insurance Act is a referral of all the issues in dispute. This was what was done when Mr. Berger applied for arbitration at the Commission.
Subsection 281(1)(c) provides for the referral, on consent, of "...any issue in dispute" to an arbitrator, acting under the Arbitrations Act of 1991.
The clear intention of the legislature is that parties may consent to the splitting off of a single issue, to be heard separately by another adjudicator, only in the context of a private arbitration under the Arbitrations Act.
Having dealt directly with the issue of the severance of issues, and provided a specific manner in which it could be achieved, it is not open to an arbitrator to proceed to sever issues in any other manner than specifically provided for by the Act.
The Notice of Hearing that was sent to the parties for the March 6, 2000 hearing specifically referred to the Insurance Act, and the determination of all issues under the Statutory Accident Benefits Schedule.
The Notice for the June 13 hearing makes no reference to the Arbitrations Act or the severance of specific issues pursuant to subsection 281(1)(c) of the Insurance Act. Furthermore, I specifically opened the June 13 hearing as a hearing under the Insurance Act. I find, therefore, that there was no severance of "quantum" under s. 281(1)(c) of the Insurance Act, and the original hearing arbitrator remained seised with this issue.
Even if I am wrong, and a hearing arbitrator has authority to sever issues during a hearing, on consent, I find that there was no consensus between the parties as to which specific issue should be severed. Even though it is plain that the parties agreed to the holding of a separate hearing, there is no evidence that they agreed on what was to be the issue. My reading of the hearing transcript and the confusion prior to the June 13 hearing over the issue to be heard on that day leads me to the conclusion that the parties were not ad idem, and there was no consent to the severance of the specific issue of "quantum".
Severance by the Arbitrator
As has been noted, the jurisdiction of an arbitrator derives from statute. In the absence of statutory authority, an arbitrator has no power. An order or action of an adjudicator in the absence of statutory authority is a nullity and has no effect.
I am aware of no statutory authority that permits an arbitrator, in the process of hearing a matter, to delegate part of the final decision-making process, including a single issue, to another person. It would fly in the face of the traditional maxim, Delegatus nonpotest delegare. As Sara Blake noted in Administrative Law in Canada (: 2d Edition, Butterworths, Toronto, 1997 at page 128):
There is a general rule that, unless expressly authorized, a tribunal may not delegate its powers to another. The Latin maxim states "delegatus non potest delegare". Thus a tribunal must itself make all decisions it is empowered to make.
I find that, in the absence of specific statutory authority, an arbitrator does not have jurisdiction to delegate any part of his or her decision-making power to another person.
If the June 13 hearing could not be severed from the main arbitration, then is there other authority to give jurisdiction to the arbitrator at the second hearing?
Continuation of the original hearing
Section 4.4 (1) of the Statutory Powers Procedure Act ("S.P.P.A.") provides that:
If a member of a tribunal who has participated in a hearing becomes unable, for any reason, to complete the hearing or to participate in the decision, the remaining member or members may complete the hearing and give a decision.
It might be possible to characterize the June 13 hearing as a completion of a portion of the hearing begun by the original hearing arbitrator, at least with regard to the issue of "quantum". The arbitrator does refer in the hearing transcript, to a wish that her "absence" not prejudice the case. This could be taken to mean that she is unable, for some reason to complete the hearing, and hence permit the invocation of subsection 4.4 (1) of the S.P.P.A.
"Tribunal" is defined in the definition section of the Act as:
...one or more persons whether or not incorporated and however described, upon which a statutory power of decision is conferred by or under a statute.
Subsection 8(1) of the Insurance Act provides:
The Superintendent shall establish and maintain a roster of candidates chosen by the Superintendent from the persons recommended to conduct arbitrations under this Act by the committee appointed under section 7.
Subsection (2) in turn provides that "The Director shall appoint arbitrators only from the roster of candidates."
Subsection 279(4) of the Insurance Act provides that: "The Director and every arbitrator appointed by the Director shall determine issues before them and make an order subject to such conditions as are set out in the order."
In an arbitration under the Insurance Act, the arbitrator appointed by the Director exercises the statutory power of decision in a particular matter. I find that the "tribunal", for the purposes of subsection 4.4(1) of the S.P.P.A. consists of that arbitrator.
Arbitrators at the Financial Services Commission sit alone, and not in a tripartite panel. Hence, in the event of the incapacity of an arbitrator, there are no "remaining members" to complete the hearing. Certainly, a member of the roster of arbitrators created pursuant to subsection 8(1) of the Insurance Act would not constitute a member of the tribunal, capable of completing the hearing.
Without discussing in depth the serious natural justice implications of changing "horses" (or arbitrators) in mid-stream, I will defer to the gloss put on this issue by Evans et al. in Administrative Law at page 521, (4th edition, Emond Montgomery Publications, Toronto, 1995):
A simple illustration is that it will normally be a breach of the duty of fairness for a member of a hearing panel who is unable to attend for part of the hearing to resume sitting and to participate in making the decision.
The Decision must be made by the members who heard all the evidence and argument, provided of course, that they constitute a quorum. If they do not, the proceeding must be abandoned and started afresh.
On the basis of my reading of the S.P.P.A. and the rules of procedural fairness, I find that the hearing of June 13 could not be considered simply a continuation of the hearing commenced by the original hearing arbitrator, with another member of the tribunal presiding.
The May 8, 2000 Mediation
I have already referred to the "preliminary issues" raised by the May 8, 2000 mediator's report. Although I have found that issues relating to the quantification of the income replacement benefit flowed from and were part of the entitlement issue, many parties take the view that each narrow question itself must be mediated, if it is to be arbitrated.
Mediation by itself is not sufficient to precipitate a hearing of an issue under the Insurance Act. The insured must first file an Application for Arbitration consistent with section 25 of the Practice Code. An examination of the Commission's file discloses no Application for Arbitration dealing specifically with the above issues. This would appear to preclude the consideration of the mediated issues as constituting the subject matter of a free-standing hearing, independent of the March hearing.
Conclusion
While I recognize that the attempt to split off the issue of quantum from the balance of the arbitration stems from the best of intentions, I find that the resulting June 13, 2000 hearing was a nullity, since the hearing arbitrator remained seised of the issue, and there was no statutory authority for me to hear it. As Monnin J.A. noted in Investor's Syndicate Limited v. Pro-Fund Distributors Limited et al. ( 1980) 1981 CanLII 3537 (MB CA), 12 Man.R. (2d) 101 at p. 103:
Over the years, both at trial and upon appeal, experience has taught me that most attempts to split trials into separate portions lead to opposite results. It is a meritorious attempt to hasten matters, to save time, to settle one issue first and then to move onto the next, but in the long run it seldom proves successful.
I am afraid that the hearing which took place on June 13 was an example of one of those meritorious attempts that was doomed from the start.
That being said, there are several potential courses of action open to the parties, if they wish to have their issues dealt with promptly, within the arbitration process. They may renew settlement discussions, refer an issue or issues to private arbitration pursuant to subsection 281(1)(b) of the Insurance Act, or bring a motion to determine a question of law pursuant to Rule 65 of the Practice Code.
Without the co-operation and agreement of the parties, however, as to the specific direction that this matter should take, resolution of this matter will likely be held up until the scheduled completion of the main hearing.
I strongly urge the parties to contact the case administrator to arrange a case conference to find a means of expediting this matter and putting the hearing of Mr. Berger's application back on the rails.
July 18, 2000
John Wilson Arbitrator
Date
Neutral Citation: 2000 ONFSCDRS 133
FSCO A98-001003
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
MELVIN BERGER
Applicant
and
LIBERTY MUTUAL INSURANCE COMPANY
Insurer
ARBITRATION ORDER
Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
- The issue of quantum remains to be decided by the hearing arbitrator as part of the hearing adjourned on March 17, 2000.
July 18, 2000
John Wilson Arbitrator
Date