Neutral Citation: 2000 ONFSCDRS 216

FSCO A00-000337

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

WHITNEY HORNICK

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON A PRODUCTION ISSUE

Before:

David Leitch

Heard:

Written submissions were completed on November 10, 2000.

Submissions Received From:

James E. S. Allin for Mr. Hornick

Lawrence R. McRae for State Farm Mutual Automobile Insurance Company

Production Issue:

The Insurer seeks production of a transcript of the Applicant's examination for discovery in a court action commenced as a result of the same accident which gives rise to this arbitration proceeding. The Applicant does not consent to this disclosure and contests the jurisdiction of an arbitrator to order it.

Result:

The Insurer's request for production of a transcript of the Applicant's examination for discovery is denied. In accordance with Rule 30.1.01 the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the Applicant may consent to produce the transcript, under subsection 4 of that Rule, but he cannot be required by an arbitrator to produce the transcript unless one of the other exceptions recognized by the Rule applies. The exceptions recognized by subsection 5 of the Rule do not apply on the facts of this case. The exceptions recognized by subsections (6) and (7) of the Rule do not apply to an arbitration proceeding. Only a court has the authority to determine whether the exception recognized under subsection (8) of that Rule applies in a particular case.

ANALYSIS:

The parties acknowledge that I must decide the issue they have placed before me in accordance with the "implied undertaking rule." They agree that this rule limits the uses which can be made of evidence and information obtained by parties to a court action through the various forms of pre-trial "discovery," including examinations for discovery. They disagree about whether one of the exceptions to the rule applies in this case and about whether an arbitrator has the authority to grant relief under another exception to the rule. In my view, these disagreements can be resolved by reference to the original rationale for the rule, and for its exceptions, as explained by the Ontario Court of Appeal in the case of Goodman v. Rossi (1995) 1995 CanLII 1888 (ON CA), 24 O.R. (3d) 359 and by reference to the current expression of the rule, and its exceptions, as found in Rule 30.1.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

At p. 369 of Goodman v. Rossi, Mr. Justice Morden quoted with approval the following passage from a 1992 English text entitled Discovery:

The primary rationale for the imposition of the implied undertaking is the protection of privacy. Discovery is an invasion of the right of the individual to keep his own documents to himself. It is a matter of public interest to safeguard that right. The purpose of the undertaking is to protect, so far as is consistent with the proper conduct of an action, the confidentiality of a party's documents. It is in general wrong that one who is compelled by law to produce documents for the purpose of particular proceedings should be in peril of having those documents used by the other party for some purpose other than the purpose of the particular proceedings and, in particular, that they should be made available to third parties who might use them to the detriment of the party who has produced them on discovery. A further rationale is the promotion of full discovery, as without such an undertaking the fear of collateral use may in some cases operate as a disincentive to proper discovery. The interests of proper administration of justice require that there should be no disincentive to full and frank discovery. (My emphasis)

This passage obviously dealt with documentary discovery but Mr. Justice Morden confirmed at p. 376 of his judgment that "having regard to the compulsory nature of oral discovery and its impingement on the right of privacy, it is difficult to see why, as a matter of principle, the rule would not apply to this form of discovery."

The necessity for the court to ensure the integrity of its own processes was underlined by Mr. Justice Morden when he quoted the following passage from the case of Prudential Assurance Company v. Fountain Page Ltd., [1991] 1 W.L.R. 756 (Q.B.) at pp. 764-65:

...treating it as having the character of an implied undertaking continues to serve a useful purpose in that it confirms that the obligation is one which is owed to the court for the benefit of the parties, not one which is owed simply to the parties; likewise, it is an obligation which the court has the right to control and can modify or release a party from. It is an obligation which arises from legal process and therefore is within the control of the court, gives rise to direct sanctions which the court may impose (viz. contempt of court) and can be relieved or modified by an order of the court. (My emphasis)

Despite its importance for the administration of justice, Mr. Justice Morden acknowledged at p. 377 that "it is a necessary and appropriate part of the implied undertaking rule that the court have the power to grant relief from its application." He noted at p. 375 that a party seeking leave might want to use evidence or information obtained through discovery for impeachment purposes and that "it could defeat the impeachment process to require the leave of the court before discovered material could be used for this purpose." Further, at p 378, he observed:

Of course, there will be cases where the interests of the discovered party sought to be protected by the rule will not be seriously affected, or affected at all, by a collateral use of discovered document[s], but those of the discovering party would be seriously affected if use could not be made of the documents. This is the kind of case where it would reasonably be thought that the discovered party would give his or her consent to the use of the documents but, failing this, would be a proper case for granting relief.

However, Mr. Justice Morden indicated at pp. 377-378 that he did not intend to deal "exhaustively or definitively" with the grounds on which relief from the implied undertaking rule could be claimed, noting simply that the grounds for relief "should not be so broadly based that the integrity of the rule is routinely infringed." Referring again to the case law, he re-emphasized the potential for exceptions to the rule to create injustice for the person being discovered and to undermine full and frank disclosure at discovery. In the case before him, Mr. Justice Morden considered, at pp. 378-379, the potential prejudices to each party in granting relief from the rule but he also considered "the injustice of being penalized for having made full discovery."

While concluding on p. 374 that "the recognition of the implied undertaking rule in Ontario is properly supported on the basis of precedent and policy," Mr. Justice Morden perceived "the advantage of incorporating the law on this subject into the Rules of Civil Procedure "where it could be dealt with "completely and comprehensively, something that is not really possible or proper with the confines of a single case." This observation did not go unnoticed by the Rules Committee. The implied undertaking rule, and its exceptions, were codified the next year and find their current expression in Rule 30.01(1) which reads as follows:

30.01(1) This Rule applies to,

(a) evidence obtained under,

(i) Rule 30 (documentary discovery),

(ii) Rule 31 (examination for discovery),

(iii) Rule 32 (inspection of property),

(iv) Rule 33 (medical examination),

(v) Rule 35 (examination for discovery by written questions); and

(vi) [Revoked. O. Reg. 627/98, s.3]

(b) information obtained from evidence referred to it in clause (a).

(2) This Rule does not apply to evidence or information obtained otherwise than under the rules referred to in subrule (1).

(3) Deemed undertaking — All parties and their counsel are deemed to undertake not to use evidence or information to which this Rule applies for any purposes other than those of the proceeding in which the evidence was obtained.

(4) Exceptions — Subrule (3) does not prohibit a use to which the person who disclosed the evidence consents.

(5) Subrule (3) does not prohibit the use, for any purpose, of,

(a) evidence that is filed with the court;

(b) evidence that is given or referred to during a hearing;

(c) information obtained from evidence referred to in clause (a) or (b).

(6) Subrule (3) does not prohibit the use of evidence obtained in one proceeding or information obtained from such evidence, to impeach the testimony of a witness in another proceeding.

(7) Subrule (3) does not prohibit the use of evidence or information in accordance with subrule 31.11(8) (subsequent action).

(8) Order that undertaking does not apply — If satisfied that the interests of justice outweigh any prejudice that would result to a party who disclosed evidence, the court may order that subrule (3) does not apply to the evidence or to information obtained from it, and may impose such terms and give such directions as are just. O. Reg. 61/96, s.2.

The parties before me acknowledge this codification of the rule and its exceptions but they disagree about whether the exception recognized in subsection 6 applies in this case and about whether an arbitrator has the authority to grant relief under the exception recognized in subsection 8. The exception recognized in subsection 4 does not apply because the Applicant does not consent to the use in the arbitration proceeding of the transcript of his examination for discovery in the related court action. The Insurer does not argue that the exceptions recognized in subsections 5 and 7 apply to the facts of this case.

A straightforward reading of the exceptions recognized in subsections 6 and 8 of Rule 30.1.01, and of the definition section of the Rules of Civil Procedure, favours the position taken by the Applicant on both counts. The exception recognized in subsection 6 uses the word "proceeding," a word which is defined in section 1.03 of the Rules to mean "an action or application." This definition does not include an arbitration proceeding under the Insurance Act. The exception recognized in subsection 8 uses the word "court," a word whose definition under section 1.03 of the Rules does not include an arbitrator appointed under the Insurance Act.

The Insurer nevertheless argues that "it would be an affront to the concept of justice to allow the implied undertaking rule to operate so as to prevent a comparison of sworn testimony,"¹ that is, the sworn testimony contained in the transcript of the Applicant's examination for discovery and the sworn testimony the Insurer anticipates the Applicant will give in the arbitration proceeding. The Insurer further submits that "the issues in the civil action and the OIC [arbitration] proceedings are virtually the same, namely liability for damages, and degree of physical, mental and psychological impairment of the applicant"² and that the Dispute Resolution Practice Code recognizes an arbitrator's authority to order the production of all documents which are relevant to the issue he/she is required to determine.

In support of its position, the Insurer cites Reid and Royal and SunAlliance Insurance Company of Canada,³ a FSCO case in which the arbitrator had to decide whether he would take into consideration the defence medical reports "generated in court actions pursuant to Rule 33 of the Rules of Civil Procedure." Since this form of discovery is covered by Rule 30.1.01(1) (a)(iv), the Applicant argued that the resulting reports should not be considered by the arbitrator. In rejecting this argument, the arbitrator held as follows:

Ms. Reid submits that Rule 30.1 of the Rules of Civil Procedure (the "deemed undertaking" rule) prohibits the use of such documentation "for any purposes other than those of the proceeding in which the evidence was obtained," subject to specific exceptions, including consent. Ms. Reid does not consent to the disclosure of this evidence in this proceeding.

Rule 30.1 codified and refined the common law rule established in Goodman v. Rossi (1995), 1995 CanLII 1888 (ON CA), 24 O.R. (3d) 359. Rule 30.1.08 provides that a court may order that the deemed undertaking rule does not apply if "satisfied that the interests of justice outweigh any prejudice that would result to a party who disclosed evidence."

Director's Delegate Makepeace recently agreed in Haripersaud and State Farm Mutual Automobile Insurance Company (FSCO P98-00018, January 6, 2000) with Director's Delegate Naylor's decision in Branchaud and Co-operators General Insurance Company (OIC P96-00048, May 2, 1997) that arbitrators "have the powers that are conferred on them either expressly by the legislation or by necessary implication." If the deemed undertaking rule is part of the general law of Ontario, then implicitly, the adjudicative discretion inherent in the common law rule is also accorded to this Commission.

Ms. Reid did not cite any specific prejudice to her resulting from the collateral use of the above-noted reports beyond the important primary rationale for the implied undertaking rule, being protection of privacy. On the other hand, I find these reports to be prima facie relevant, in that they address the injuries which Ms. Reid states that she sustained in the car accident which is the subject of this arbitration. They further speak, either directly or indirectly, to the need for treatment. More importantly, I note that there is no provision under this Schedule for insurers' or Designated Assessment Centre examinations for the medical issues in dispute, and hence, without the above-noted reports, Royal would be significantly prejudiced in responding to this application for arbitration.

I am satisfied, in this case, that the interests of justice outweigh the prejudice to Ms. Reid. Accordingly, I find that the deemed undertaking rule does not apply in this application to the disputed medical reports and I shall consider these reports.

With respect for the arbitrator who reached this conclusion, I cannot reach a similar conclusion in this case for two reasons.

First, the arbitrator appears to have granted relief from the implied undertaking rule on the ground that whereas this would not result in prejudice to the Applicant, apart from some loss of privacy, significant prejudice would result to the Insurer if he refused to grant such relief. In my view, this analysis, while perhaps sound as far as it went, did not fully reflect the rationale for the implied undertaking rule, as explained in Goodman v. Rossi, or the test created by Rule 30.1.01(8). Both confirm that a decision to grant relief from the implied undertaking rule involves more than a consideration of the relative prejudices of specific parties. It also involves consideration under the general heading of "the interests of justice," including possible implications for the integrity of the discovery process.

Second, and again reflecting on both the analysis set out in Goodman v. Rossi and the language of Rule 30.1.01(8), a court must ensure the integrity of its own processes. Oral discovery is a compulsory part of the court process; it is not any part of the process before this tribunal. I, therefore, find that it is a court, and not this tribunal, which must determine whether, in particular cases, relief against the implied undertaking rule is in the interests of justice or whether it undermines full and frank disclosure at discovery.

I note that this finding does not mean that evidence or information obtained at an examination for discovery cannot be used in proceedings before this tribunal. It only means that where the other exceptions recognized by Rule 30.1.01 do not apply, the party seeking to make use of the evidence or information must seek relief, not from this tribunal, but from a court under subsection 8 of that Rule. Indeed, the case of Leach v. Assaly (1998) 28 C.P.C. (4th) 240, cited by the Insurer, is an example of a Master granting relief from the implied undertaking rule so that a respondent in an Employment Standards proceeding could make use of a transcript of the complainant's examination for discovery as plaintiff in a related court action.

In my view, where none of the exceptions recognized by Rule 30.1.01 applies, the implied undertaking rule makes a transcript of the Applicant's examination for discovery inadmissible in an arbitration hearing. In other words, I find that an arbitrator's power to admit relevant evidence under section 15(1) of the Statutory Powers Procedure Act, R.S.O. 1990, Chap. S. 22 does not override the implied undertaking rule. On the contrary, I find that Rule 30.1.01 constitutes a provision of "any other statute" or "any Act" within the meaning of sections 15(2)(b) and (3) of the Statutory Powers Procedure Act and hence overrides an arbitrator's power under section 15(1) of that statute. Sections 15(1), (2) and (3) read as follows:

15(1) What is admissible in evidence at a hearing — Subject to subsections (2) and (3), a tribunal may admit as evidence at a hearing, whether or not given or proven under oath or affirmation or admissible as evidence in court,

(a) any oral testimony; and

(b) any document or other thing, relevant to the subject-matter of the proceeding and may act on such evidence, but the tribunal may exclude anything unduly repetitious.

(2) What is inadmissible in evidence at a hearing — Nothing is admissible in evidence at a hearing,

(a) that would be inadmissible in a court by reason of any privilege under the law of evidence; or

(b) that is inadmissible by the statute under which the proceeding arises or any other statute.

(3) Conflicts — Nothing in subsection (1) overrides the provisions of any Act expressly limiting the extent to or purposes for which any oral testimony, documents or things may be admitted or used in evidence in any proceeding.

EXPENSES:

I exercise my discretion to award Mr. Hornick his expenses incurred in this production issue hearing.

November 30, 2000

David Leitch Arbitrator

Date

Neutral Citation: 2000 ONFSCDRS 216

FSCO A00-000337

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

WHITNEY HORNICK

Applicant

and

STATE FARM MUTUAL AUTOMOBILE 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:

1. The Insurer's request for production of a transcript of the Applicant's examination for discovery is denied. In accordance with Rule 30.1.01 the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, the Applicant may consent to produce the transcript, under subsection 4 of that Rule, but he cannot be required by an arbitrator to produce the transcript unless one of the other exceptions recognized by the Rule applies. The exceptions recognized by subsection 5 of the Rule do not apply on the facts on this case. The exceptions recognized by subsections (6) and (7) of the Rule do not apply to an arbitration proceeding. Only a court has the authority to determine whether the exception recognized under subsection (8) of that Rule applies in a particular case.

November 30, 2000

David Leitch Arbitrator

Date

Footnotes

1. 1Insurer's Brief, p. 6.
2. 2Insurer's Brief, p. 9. The Schedule applicable to this case is The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended by Ontario Regulations 462/96, 505/96, 551/96 and 303/98.
3. 3FSCO A99-000959, January 19, 2000.