The Estate of the late Jack Bittan v. CGU Insurance Company of Canada, 2001 ONFSCDRS 172

Financial Services Commission of Ontario

Neutral Citation: 2001 ONFSCDRS 172 FSCO A00-001005

BETWEEN:

The Estate of the late JACK BITTAN Applicant

and

CGU INSURANCE COMPANY OF CANADA Insurer

DECISION ON A PRELIMINARY ISSUE

Before: John Wilson

Heard: October 1, 2001, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances: David R. Neill for the estate of Mr. Bittan Frank Benedetto for CGU Insurance Company of Canada

Issues:

The deceased, Jack Bittan, also known as Jacob Bittan, was injured in a motor vehicle accident on September 19, 1997. He applied for and received statutory accident benefits from CGU Insurance Company of Canada ("CGU"), payable under the Schedule¹ prior to his death on September 21, 2000. CGU terminated weekly income replacement benefits and the solicitors for Mr. Bittan applied for arbitration on his behalf at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. His solicitors subsequently learned of Mr. Bittan's death and advised the Insurer. Mr. Leon Bittan was ultimately appointed as estate trustee without will by the Superior Court of Justice on September 26, 2001.

The preliminary issue is:

1. Is the application for arbitration made on behalf of Mr. Bittan a nullity due to his death, intestate, on September 21, 2000, prior to the issuance of the application for arbitration and prior to the appointment of Mr. Leon Bittan as estate trustee without will?

Result:

1. The Estate Trustee, on behalf of the late Mr. Bittan may proceed with the arbitration.

EVIDENCE AND ANALYSIS:

This preliminary issue turns on the question of whether an Application for Arbitration made in the name of a deceased, prior to the appointment of an administrator, or estate trustee without will, may be validated by the subsequent appointment of such a trustee.

The Insurer has submitted that "even if an "estate trustee" or 'litigation administrator' is appointed for the estate of the late applicant, and the title of the proceeding is amended accordingly, the application for arbitration is still a nullity and it cannot proceed."

In the past few years, there has been a reform of probate law which has seen the disappearance of traditional terms such as "executor" and "administrator." Given the predominance of the old terminology in the cases and the literature, I have used the terms "administrator" and "estate trustee without will" virtually interchangeably in this matter.

Fundamentally, the Insurer relies on the Common Law, as summarized by the legal maxim actio personalis moritur cum persona. Black's Law Dictionary renders its meaning as "A personal action dies with the person." The dictionary editors further comment:

The maxim was originally applied to almost every form of action, whether arising out of contract or tort, but the common law was modified by the Statute of 4 Edward the III.

A personal action, or actio in personam or personalis is an action against a person, as distinguished from an action in rem, which is a proceeding against the thing. Most modern causes of action are personal actions, with some exceptions, including certain admiralty and divorce matters, where a decree or judgement alters or operates upon the status of the suitor.

The rule that an action died with the person has evolved through both statute and legal interpretation. Equity, as opposed to Law frequently applied quite different rules. Traditionally, the courts of Equity had jurisdiction over estate matters.

In estate matters, the executor or trustee under a will derived his or her powers from the will. These powers may be confirmed by a court having jurisdiction, but they trace from the appointment made in a will, and date from the time of death. Subject to certain restrictions, an executor may deal with property, if required, from the date that it vests in him or her as trustee.

At Common Law, an administrator, appointed by the courts traced his or her power to the appointment by a court. No property vested in an administrator except by virtue of the appointment. Consequently, an executor had the flexibility to take actions to preserve an estate from the time of the death of the testator that an administrator, or person claiming from an intestate did not have.

Without providing a detailed account of the evolution, suffice it to say that Equity developed the concept of relation back to mitigate the impact of the strict legal rule, and to give an administrator the ability to retroactively validate actions taken on behalf of the estate.

Halsbury's (16 Hals., 3rd, at p. 135) defines the doctrine of relation back as follows:

Relation back of the administrator's title. In order to prevent injury from being done to a deceased person's estate without remedy, the courts have adopted the doctrine that upon the grant being made the title of the administrator relates back to the time of death. This doctrine has been consistently applied in aid of an administrator seeking to recover against a person who has dealt wrongfully with the deceased chattels or chattels real: it is also applicable against a person dealing wrongfully with the deceased's real estate. It cannot be applied, however, to disturb the interests of other persons validly acquired in the interval or to give the administrator title to something which has ceased to exist in the interval.

Essentially the doctrine serves to permit actions by persons acting on behalf of the estate to preserve or protect assets of the estate from wrongful injury. The cases make it clear that the actions taken by an individual must be on behalf of the estate, and not on his or her own account.

Since the passage of the Judicature Act (R.S.O. 1887 c. 44) in the late nineteenth century, which merged the courts of equity with the law courts, the rule of equity prevails, as against the rule of law. Thus, where there is a conflict between the strict rule of law and equity, the rule in equity prevails.

That the doctrine of relation back should be available to administrators in Ontario has been approved in a number of cases including Chard v. Rae (1899), 18 O.R. 371 and Johnson v. General Accident (1928) 63 O.L.R. 297.

There is at least one anomalous Ontario case which could be read to support the Insurer's proposition. In McEllistrum v. Etches, 1954 CanLII 131 (ON CA), [1954] O.R. 814, the Court of Appeal appeared to conclude that a writ issued on behalf of an estate prior to the issue of letters of administration is necessarily a nullity. Laidlaw J.A. speaking for the Court stated:

I hold, following the high authority of Lord Parker of Wadington in Meyappa Chetty v. Supramaniam Chetty ( [1916] 1 A.C. 603), and the subsequent cases in England to which I have referred, that an action under s. 37 of the Trustee Act for torts or injuries to the person of the deceased cannot be instituted by a person in the capacity of administrator before the grant of letters of administration. In accordance with that view I conclude that the writ of summons and subsequent proceedings in the action, so far as they relate to a claim under the Trustee Act are a nullity.

I do not accept that Laidlaw J.'s statement is necessarily applicable to the application for arbitration submitted on behalf of the late Mr. Bittan .

It is clear from the cases cited by the Court of Appeal, that it founded its reasoning on more recent English cases, rather than earlier Ontario precedents, notwithstanding significant differences in vesting between the English and Ontario practice. As well, on appeal to the Supreme Court of Canada, (McEllistrum v. Etches [1956] CCS 982,) that court specifically declined to approve the notion that the doctrine of relation back was not applicable to administrators in Ontario

More importantly, McEllistrum refers to actions for tort or injuries to the deceased. The estate of Mr. Bittan is claiming for amounts claimed due under contract of insurance, not for liability under tort. As such, Mr. Bittan's contractual claim crystallized prior to his death, and forms part of his estate in the same way as a claim under a bill of exchange or other contractual obligation. As Parke, J. stated in Bodger v. Arch (1854), 10 Ex.333:

and this being a contract with a person acting on behalf of the intestate's estate, and not for his own account, the administration would have relation back in order not to lose the benefit of that contract, upon the same principle that an action in trover is maintainable for a conversion of goods of an intestate after his death and before the grant of administration...

I accept that a claim for statutory accident benefits, under a contract of insurance, which crystallized prior to the death of an applicant is properly subject to the doctrine of relation back. As such, an application for arbitration issued subsequent to the death of an insured, but prior to the grant of administration is not a complete nullity, and may be validated by the duly appointed estate representative.

In the event, however, that it is found that an action under contract is not subject to the doctrine of relation back, I find that the provisions of Rule 9.03 of the Rules of Civil Procedure act to save the application for arbitration. The rule reads as follows:

A proceeding commenced in the name of or against a person who has died before its commencement shall not be treated as a nullity, but the court may order that the proceeding be continued by or against the executor or administrator or a litigation administrator appointed for the purpose of the proceeding, and the title of the proceeding shall be amended accordingly.

As an historical note, Rule 9.03, itself, replaces section 38 of the Trustee Act R.S.O. 1980 c.512 which provided for the maintenance of actions against, and on behalf of estates not represented by an executor or an administrator under certain circumstances. These provisions were repealed, and thenceforward, the matter was dealt with under the court Rules, which are regulations under the Courts of Justice Act.

Rule 1.03 of the Rules defines a proceeding as "an action or application." It further defines "action" as "a proceeding that is not an application and includes a proceeding commenced by (a) statement of claim... "

Black's Law Dictionary describes "proceeding" as:

In a general sense, the form and manner of conducting juridical business before a court or judicial officer; regular and orderly progress in form of law, including all possible steps in an action from its commencement to the execution of judgement.

The Oxford Canadian Dictionary defines "proceeding" as "(in full legal proceedings) an action at law; a lawsuit." The same dictionary describes "arbitration" as: n. law the hearing and resolution of a dispute by a referee, usu. chosen and agreed upon by all disputants, who has the power to impose a settlement.

In common parlance the arbitration process is usually referred to as an "arbitration proceeding." The same usage also appears in subsection 282 (11) of the Insurance Act. An arbitration proceeding clearly involves the conduct of juridical business from its inception through to judgement. Like a court, it adjudicates legal rights and issues a binding decision.

In the resolution of accident benefit disputes, an insured can elect to proceed in court, or by way of arbitration. It would be odd, to say the least, if this election, in itself served to determine the outcome of the proceedings by preventing an administrator from exercising his or her option to invoke the doctrine of relation back to protect the estate when arbitration is the chosen forum.

Arbitrators must be seen to apply the same standards and law as judges in cases that come before both forums. To do otherwise would lead to an absurdity that was not contemplated by either the legislature or the Rules Committee in repealing s. 38 of the former Trustee Act and bringing forward the present Rules.

I find that an arbitration proceeding, as an adjudication of legal rights, is a "proceeding" as contemplated in Rule 9.03 of the civil Rules.

It goes without saying that the Rules generally encompass practice before the Ontario courts. They also, however can and do reach beyond mere court procedure to codify aspects of public policy and the greater judicial role in society. A noteworthy example of this is Rule 7 which asserts the court's jurisdiction over parties under a disability. Subrule 7.08 (1) provides that no settlement of a claim by or against a person under a disability may be made without court approval. Subrule 7.08(3) makes it clear that this requirement affects claims even where no proceeding has been commenced.

I accept that the impact of the Rules of Civil Procedure is not restricted to matters directly before a court in Ontario. The FSCO Dispute Resolution Practice Code, for example, recognizes the wider implications of the Rules in Rule 10, specifically in subrule 10.7, which provides that settlements with parties who lack capacity should be subject to the Rules of Civil Procedure and the jurisdiction of the courts.

Of course, the Practice Code itself does not deal directly with probate or estate issues. It is not an exhaustive document and provides latitude for adjudicators and others to develop appropriate procedural directives. Rule 1 of the Code, the interpretation section, provides for arbitrators to decide on matters not specifically covered by the Code by referring to similar Rules in the Code. I find that, following the example of Rule 10.7 of the Code, reference may be made to the Rules of Civil Procedure, where appropriate.

It is entirely appropriate that the general policy statement contained in Rule 9.03 of the Rules be incorporated in such a manner into practice at the Commission. The Rule sets out clearly that a proceeding commenced in the name of the deceased is not a nullity, and may be saved by the appointment of an executor or administrator. It is, as I have found, a rule of general application to all proceedings.

To not accept the authority of the Rules in this matter, would be to create a lacuna in the legislative dispute resolution scheme. The Commission has not been granted the legislative authority to make representation orders or appoint estate administrators, which would be necessary if Rule 9.03 were not applicable to matters at the Commission.

Claims for benefits under the Schedule are subject to strict time limitations. A cause of action on behalf of an estate could be easily barred prior to the appointment of an administrator and the estate deprived of an important asset. This is clearly within the scope of the "mischief" addressed by both Rule 9.03 and the former provisions of the Trustee Act which it replaced.

I accept, therefore, that proceedings at the Commission are subject to Rule 9.03 of the court Rules.

I find, for all the reasons enunciated above, that once administration, or its current equivalent, is granted, by a court of competent jurisdiction, it is open to an administrator to retroactively validate a proceeding to enforce a contractual claim issued prior to the grant, whether before the courts or the Commission.

Mr. Neil, on behalf of the estate of Mr. Bittan, has submitted a copy of the certificate of appointment of estate trustee without will issued by the Ontario Superior Court of Justice, naming Leon Bittan as estate trustee in the estate of one Jacob Bittan Levy, a name of the Applicant in this matter. It appears to be validly issued by an appropriate court having jurisdiction over such matters. Indeed, the Insurer has not filed any evidence, nor made submissions to contradict its validity.

I find therefore, that, pursuant to the powers of an estate trustee duly appointed, Leon Bittan has the power to validate the arbitration application made on behalf the late Jack Bittan. The application for arbitration filed with the Commission was made in the name of Jack Bittan and not the estate. His representative may now confirm to the Commission his intention to continue the action in the name of the estate and to request to have the style of cause amended appropriately.

The Insurer, in its submissions, has also raised questions about the jurisdiction of an arbitrator to provide what it characterizes as equitable relief.

I find that, following Branchaud (Branchaud and Co-operators General Insurance Company, OIC P96-00048, February 2, 1997) and a line of subsequent cases at the Commission that to make such a finding, it is not necessary for the Commission to have equitable jurisdiction.

As Director's Delegate Naylor noted in Branchaund, an arbitrator has the power to apply equitable principles in the ordinary exercise of his or her statutory jurisdiction. In this case I have found that the appointment of an administrator or estate trustee without will by a court of competent jurisdiction gives that administrator rights that may arise under equity, including the relation back of the grant.

I further find that such recognition is not an assumption of equitable jurisdiction by either the arbitrator or the Commission, but merely a restatement of the general law as it applies to the fact situation before me. As such it is an exercise of my statutory jurisdiction as arbitrator under the Insurance Act.

EXPENSES:

I exercise my discretion to award the estate of Mr. Bittan its expenses incurred in this preliminary issue hearing.

November 27, 2001

John Wilson Arbitrator

Date

Neutral Citation: 2001 ONFSCDRS 172 FSCO A00-001005

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

Estate of the late Jack BITTAN Applicant

and

CGU INSURANCE COMPANY OF CANADA 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 arbitration application made on behalf of the late Mr. Jack Bittan may proceed.

2. The duly appointed representative of the estate of the late Jack Bittan shall have 60 days from the date of this decision to confirm, in writing, the continuance of this matter, and to formally request an appropriate change in the style of cause.

3. The estate of the late Leon Bittan shall have its expenses in this matter. If the parties are unable to agree on the amount of such expenses, I remain seized of this matter and may be spoken to.

November 27, 2001

John Wilson Arbitrator

Date

Footnotes

1. 1The 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.