Michael M. Gocan v. State Farm Mutual Automobile Insurance Company, 2001 ONFSCDRS 198

Neutral Citation: 2001 ONFSCDRS 198

FSCO A01-000799

BETWEEN:

MICHAEL M. GOCAN

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON A MOTION

Before: Suesan Alves

Heard: By written submissions received by December 10, 2001.

Appearances:

Scott M. Merrifield for Mr. Gocan

Matthew G. Duffy for State Farm Mutual Automobile Insurance Company

Issue:

State Farm seeks production of the transcript of Mr. Gocan's examination for discovery in a related tort action. Mr. Gocan opposes State Farm's request.

The issue is:

Is Mr. Gocan required to produce to State Farm a transcript of his examination for discovery in relation to a tort action?

Result:

Mr. Gocan is not required to produce a transcript.

EVIDENCE AND ANALYSIS:

State Farm seeks production of the transcript of Mr. Gocan's examination for discovery in a tort action to which State Farm is not a party. State Farm wishes to use that transcript to test Mr. Gocan's credibility at an arbitration hearing at the Financial Services Commission. Mr. Gocan does not consent to production of the transcript. The transcript sought is subject to the implied undertaking or deemed undertaking rule.

According to that rule, all parties and their counsel are deemed to undertake not to use evidence or information to which the rule applies for any purposes other than those of the proceeding in which the evidence was obtained. The common law implied undertaking rule as stated by the Ontario Court of Appeal in Goodman v. Rossi, (1995), 1995 CanLII 1888 (ON CA), 24 O.R. (3d) 359 was codified and extended by Rule 30.1.01 (1) of the Rules of Civil Procedure. That rule is referred to as the deemed undertaking rule, and provides:

30.1.01 (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)

(b) information obtained from evidence referred to 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.

The discovery process represents an intrusion on the right of privacy under the compulsory processes of the court. "The necessary corollary is that this intrusion should not be allowed for any purpose other than that of securing justice in the proceeding in which the discovery takes place."¹

In essence, in exchange for a broad right of discovery under the Rules of Civil Procedure by means of affidavits of documents, examination for discovery, by medical examination of a party and by inspection of property, parties are assured that their privacy interests will be respected.

Parties may waive that right and consent to the use of such evidence and information. However, in the absence of consent, a party who seeks to use evidence or information obtained through the discovery process must seek leave of the court. A court may order that the deemed undertaking rule does not apply to the evidence and may impose such terms and give such directions as are just. Where a party fails to seek relief and breaches the rule, a court may stay or dismiss a proceeding as an abuse of the court's process, grant an injunction, impose cost sanctions or punish that party for contempt.

The nature of the undertaking was set out in Prudential Assurance Co. v. Fountain Page Ltd; [1991] 1 W.L.R. 756 (Q.B) and referred to in Goodman v. Rossi as follows:

The expression of the obligation as an implied undertaking given to the court derives from the historical origin of the principle. It is now in reality a legal obligation which arises by operation of law by virtue of the circumstances under which the relevant person obtained the documents or information. However 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. It is thus a formulation of the obligation which has merit and convenience and enables it to be treated flexibly having regard to circumstances of any particular case." [emphasis added]

The Supreme Court of Canada has held that "The Court ultimately still retains control over the proper application of the rule of confidentiality and any problems that arise as a result of such performance."² Further, the rule of confidentiality continues to apply, during and after trial before a court.³

In my view, since the obligation is one owed to the Court, relief from the undertaking may only be sought before the court to which the undertaking is impliedly given, or deemed to have been given. In this case that court would be the one in which the tort action was commenced. It follows that I have no authority to grant relief from the implied or deemed undertaking rule in relation to the transcript of Mr. Gocan's examination for discovery.

Although Mr. Gocan does not dispute the jurisdiction of an arbitrator to grant such relief, consent cannot give me jurisdiction. I believe that it is inappropriate to seek relief before an arbitrator at the Financial Services Commission of Ontario in these circumstances.

Arbitrators have taken different approaches to the question of whether they have the authority to relieve a party from the implied or deemed undertaking rule. In the case of Reid and Royal and SunAlliance Insurance Company of Canada,⁴ Arbitrator Blackman concluded that he had authority to relieve against the deemed undertaking rule based on the implicitly inherent adjudicative jurisdiction to do so. He reasoned that "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." He went on to grant relief from the rule in relation to three defence medical reports obtained in a tort action.

In Hornick and State Farm Mutual Automobile Insurance Company (FSCO A00-000337, November 30, 2000), Arbitrator Leitch rejected the approach in Reid for two reasons. Firstly, he was of the view the analysis in Reid did not take into account "the interests of justice," including possible implications for the integrity of the discovery process. Secondly, he held that "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." Arbitrator Leitch concluded 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 agree with Arbitrator Leitch's reasons and his conclusion that relief against the implied undertaking rule can be granted only by the appropriate court; not by an arbitrator at the Financial Services Commission of Ontario.

In Chin and Coseco Insurance Co. HB/Group/Direct Protect (FSCO A00-001024, April 18, 2001), Arbitrator Allen ordered production of the discovery transcripts in a tort action where the Insurer was the same in the accident benefits case before FSCO as in the tort action. She found express authority to make such an order on the basis of sections 20 (2) and 22 (1) of the Insurance Act. Those sections state:

20.—(2) A person referred to in subsection (1) has exclusive jurisdiction to exercise the powers conferred upon him or her under this Act and to determine all questions of fact or law that arise in any proceeding before him or her and, unless an appeal is provided under this Act, his or her decision thereon is final and conclusive for all purposes.

The relevant portion of section 22 states:

22.—(1) For the purpose of exercising the powers and performing their duties under this Act the Director and every arbitrator has the same power to summon and enforce the attendance of witnesses and compel them to give evidence on oath or otherwise, and to produce documents, records and things, as is vested in the Ontario Court (General Division) for the trial of civil actions.

Arbitrator Allen reasoned "I find that section 22 of the Act expressly vests in arbitrators the same powers as the Ontario Court, General Division, to among other things, order the production of documents. Section 20 authorizes arbitrators to decide any question of fact or law brought before them. I find that by extension, arbitrators have the authority to grant the relief provided by the Rule 30.1.01(8) exception to the implied undertaking rule. In exercising this power, like the courts, arbitrators should be guided by considerations of relevance, the balance between competing access and privacy rights, fairness and any possible prejudice to a party."

Arbitrator Allen noted that Arbitrator Leitch had not considered arbitrators' exclusive jurisdiction under sections 20(2) and 22 of the Insurance Act. Arbitrator Allen's approach in Chin has been followed by Arbitrator Wacyk in the cases of Sandhu and CAA Insurance Company (Ontario) (FSCO A99-001031, October 3, 2001), and J. V. and State Farm Mutual Automobile Insurance Company, (FSCO A00-001002, November 27, 2001) and by Arbitrator Sone in Mizzi and York Fire & Casualty Company (FSCO A01-000176, November 9, 2001). In Sandhu Arbitrator Wacyk noted that "This parallel authority avoids the inefficiency and delay which would otherwise result from having to deal with a single matter in two different forums."

With respect, I disagree with the views of Arbitrators Blackman, Allen, Wacyk, and Sone, that an arbitrator at FSCO has jurisdiction to decide these questions. The undertaking is made before the Court. In my view, the only adjudicative body with the authority to make such a decision to relieve against the implied or deemed undertaking would be the court before which the undertaking was given, namely the court in which the applicant’s tort action was commenced.

Although a FSCO arbitrator enjoys concurrent jurisdiction with a court in relation to claims for entitlement to and the amount of statutory accident benefits under the Insurance Act, in my view, a FSCO arbitrator should no more entertain a motion which is properly before a court in relation to a court action, than it should hear other motions in an action commenced in a court. For these reasons, I conclude that I do not have the authority to grant relief from an implied undertaking.

The arbitration hearing is scheduled for late January 2002. In the event I am wrong with respect to the jurisdictional question, and in the interest of completeness, I will briefly express my views on the merits.

State Farm submits the interests of fairness and justice outweigh any possible prejudice that could result to the Applicant from the production of the transcript and it would be unfair to deny State Farm the opportunity to employ the transcripts to test the Applicant's credibility. Further, State Farm submits there is very little prejudice that could arise to the Applicant from the production of these transcripts. Mr. Gocan submits that he has already provided the Insurer with full documentary disclosure in relation to his pre-accident health and employment records, and attended insurer medical examinations and DACs which were arranged. He submits that the order sought by State Farm would infringe on his privacy.

In Goodman v. Rossi, the Ontario Court of Appeal stated that "the accepted grounds for granting relief from the implied undertaking rule should not be so broadly based that the integrity of the rule is routinely infringed." As Arbitrator Wacyk noted in Sandhu and CAA Insurance Company, (FSCO A99-00103, October 3, 2001) "In most instances, elements of the tort file will be relevant. In many instances, credibility will be in issue. To grant relief in all such circumstances would result in the integrity of the implied undertaking rule being routinely infringed."

Courts "have generally been reluctant to grant relief from the rule, but have done so, for example, where the information is to be used in similar or related proceedings between the parties to the action in which the information was disclosed.⁵ The cases appear to be fact driven, and the adjudicators appear to balance competing interests, fairness, the need for justice, the desire to have all relevant facts before the trier of fact, to protect the integrity of the discovery process, and to avoid giving either party a leg up which would alter the balance of power between the parties.

The onus is on the person seeking relief to demonstrate that in the particular circumstances their particular legislated rights to information in proceedings before the Commission are not sufficient and the interests of justice outweigh any prejudice resulting to the party whose evidence is disclosed.

I am not persuaded by the submissions that the credibility dispute in this case which the Insurer raises is significantly different from the usual disputes concerning facts and opinions raised in most arbitration cases dealing with entitlement to income replacement benefits.

For these further reasons I am not persuaded that the Applicant is required to produce the transcript from his examination for discovery in this arbitration and decline to make the order sought on this motion.

In addition, I note the troubling absence of factual detail in the materials filed on the motion. For example, I do not know if the transcript is in existence. State Farm states in its submission. "State Farm was advised that discoveries in the tort action were scheduled for March 24, 1999 and presumes that same proceeded." Mr. Gocan did not specifically deny the existence of the transcript. This is a relevant factor, because in Orr and Motors Insurance Corporation (OIC A96-001064, January 27, 1997), Arbitrator Manji expressed doubt that she had the power to order the creation of a transcript which was not already in existence. I do not know the status of the tort action— whether it has been settled or a trial held at which the discovery transcript was read in or if a trial is pending. I do not know in which court the tort action was commenced. It can be inferred that the tort action likely arose from the same motor vehicle accident. For these additional reasons, I would also decline to make the Order sought based on the material before me.

EXPENSES:

The expenses of this motion are in the discretion of the hearing arbitrator.

December 31, 2001

Suesan Alves Arbitrator

Date