Neutral Citation: 2001 ONFSCDRS 50
FSCO A00-000852
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
THE LATE KOK KEUNG AU
Applicant
and
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
Insurer
DECISION ON A PRELIMINARY ISSUE
Before:
John Wilson
Heard:
March 1, 2001, by written submissions
Written submissions were received on February 27, 2001 and March 1, 2001
Appearances:
David F. Longley for the late Mr. Au
Dana Bruce Hanson for State Farm Mutual Automobile Insurance Company
Issues:
The Applicant, The Late Kok Keung Au, was injured in a motor vehicle accident on May 29, 1997. He applied for and received statutory accident benefits from State Farm Mutual Automobile Insurance Company ("State Farm"), payable under the Schedule.1 State Farm refused to pay for certain rehabilitation benefits. The parties were unable to resolve their disputes through mediation, and the firm of Longley Vickar applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended, ostensibly on behalf of Mr. Au, who was deceased.
The preliminary issues are:
Is the Applicant's application for arbitration a nullity due to the lack of authorization from a duly appointed representative of the estate of the late Kok Keung Au?
Is the party acting in the name of Mr. Au precluded from proceeding to arbitration because his application for arbitration was filed beyond the two-year limitation period set out in subsection 281(5) of the Insurance Act and subsection 51(1) of the Schedule?
Result:
The application for arbitration brought in the name of Mr. Au is a nullity.
The second question is moot, due to the application for arbitration being a nullity.
EVIDENCE AND ANALYSIS:
Mr. Kok Keung Au, following his motor vehicle accident on May 29, 1997, apparently sought treatment from Backcare and Sports Injuries Rehabilitation Centre. The Centre's claim for its accounts with Mr. Au was not satisfied by his Insurer. At some point, prior to the Application for Arbitration, Mr. Au died of causes not explained in the materials before me.
Mediation and ultimately arbitration were sought on behalf of Mr. Au. Although I do not have the Application for Mediation before me, the mediator's report lists the applicant as "The Late Mr. Kok Keung Au," and his representative as Mr. Paul Caprani, Law Clerk at Vickar & Associates, a law firm.
The subsequent Application for Arbitration lists the applicant as "Mr. Kok Keung Au" with no reference to his death. The application is signed by the same Paul Caprani named in the mediator's report, and identified as a Law Clerk with Vickar and Associates.
In a letter to the Commission under the letterhead of Longley L.L.P. Vickar, dated February 27, 2001, Mr. David Longley wrote: "This matter is being pursued by the Backcare & Sports Injuries Rehabilitation Centre relating to their outstanding accounts to the deceased applicant."
A note in the Financial Services Commission file, written by the case administrator in this matter, confirms a telephone call received by her from Mr. Au's son-in-law. It outlines the caller's comments that the family did not know anything about the arbitration, nor had they ever heard of Mr. Longley, or his representation of the late Mr. Au.
Mr. Longley's letter of February 27, 2001, mentions something of this aspect of the case.
I wrote to the clinic on December 19, 2000 asking for instructions in this matter since we are unable to take instructions from the Estate of Mr. Au. I have not heard from the clinic since December 19, 2000 and I can only assume that they are no longer interested in pursuing this matter.
The letter did not elaborate on just what prevented him from taking instructions from the estate. In the light of the case administrator's note, a reasonable inference was that the estate had no intention of either retaining him, or giving him instructions. In any event, Mr. Longley made it abundantly clear in his February 27, 2001, letter that he was retained by the clinic, not the estate.
Accordingly, I find that this is a situation where an application was brought in the name of a deceased person, by a solicitor who was retained neither by the family nor the estate, and who was aware that his supposed client was deceased.
The death of a person has civil as well as temporal consequences. An executor or administrator is appointed, pursuant to the law, to deal with the estate of a deceased. Subject to very limited exceptions, only the duly appointed representative of the deceased's estate can deal with the property of an estate, including choses in action.
As Trotter D.C.J. noted in Raiz v. Vaserbakh, [1986] O.J. No. 1920, "As a matter of estate law, only an executor or administrator has the authority to act on behalf of an estate." Mr. Au's estate has not authorized this application, nor is there any record of an application to court pursuant to the Rules of Civil Procedure to appoint a litigation administrator, or confirm a transmission of interest. There, in fact, is no evidence of compliance with any of the normal rules of estate litigation.
The Insurer at the mediation, pre-hearing, and in its submissions to the preliminary issue hearing has challenged the right of Mr. Longley's office to bring this matter to arbitration. Mr. Longley now wishes simply to withdraw as counsel for the applicant.
Rule 9.5 of the Practice Code permits the withdrawal of counsel with the consent of the party, upon such terms as an adjudicator may find appropriate. There is no actual evidence of consent by the party, with the possible exception of Mr. Longley's reference to the treatment provider.
The February 27, 2001, letter from Mr. Longley stated that "I can only assume that they are no longer interested in pursuing this matter." An inference that can be drawn from Mr. Longley's letter is that both he and the treatment provider wish to withdraw the matter from arbitration.
As noted, this arbitration is brought in the name of the deceased, without the involvement of his estate, or anyone duly authorized to act on its behalf.
As Trotter, D.C.J. commented in Raiz v. Vaserbakh (supra):
At common law, the maxim actio personalis moritur cum persona provides that a personal right of action dies with the person. In other words, both the procedural and the substantive right to sue or be sued dies with the original party litigant.
Subrule 9.03(3) of the Rules of Civil Procedure acts to save any court action commenced in the name of a deceased person from being a nullity. These provisions of the Rules replace former provisions in the Trustee Act, R.S.O. 1990 c. T-23, which have now been repealed. There is no similar saving provision in the Insurance Act, the Schedule or the Dispute Resolution Practice Code.
Nor is there a question of "relation back," an equitable doctrine that can protect a cause of action retrospectively, until such time as an administrator is appointed. There is no evidence that the action of launching the arbitration has been validated by a subsequent administrator or executor of the estate.
Indeed, I can find no authority that would provide a legal foundation for the Application for Arbitration that was brought in the name of Mr. Au, without the involvement of his estate. This Application for Arbitration is patently a nullity. As such, it cannot proceed.
The same conclusion can be reached through an analysis of the role of who may apply for arbitration As noted previously, section 282 of the Insurance Act is explicit that only an insured person may launch an arbitration. Any claim that authority to proceed with this claim derived through the law of agency, with the law firm, or perhaps the treatment provider, pursuing the claim on his behalf, is equally without merit.
Subsection 224(1) of the Insurance Act defines the word "insured" as used in section 282:
"Insured" means a person insured by a contract whether named or not and includes every person who is entitled to statutory accident benefits under the contract whether or not described therein as an insured person.
Mr. Au, while living, would have qualified as an "insured" and would have been entitled to be a party. Upon his death, his estate, subject to the correct procedures, could stand in his shoes and be a party to an arbitration. There is, however, no evidence that the estate has become involved in this matter at all.
A service provider, such as Backcare is not an "insured person." At the very best, it may be an agent or an assignee of an insured. Although it may be claiming payments arising out of Mr. Au's policy of insurance, it is not "entitled to statutory accident benefits under the contract." There has been no record of an assignment or continuation of Mr. Au's potential claim filed with the Commission, or produced as evidence. Indeed, even assuming that a valid assignment could take place, the style of cause of this arbitration, brought in the name of Mr. Au personally, does not reflect the participation of an assignee of a chose in action in this arbitration.
The law firm of Longley Vickar L.L.P., purported to act as agent for Mr. Au in commencing the arbitration. Neither Mr. Au, nor a representative of his estate signed the application. The signature of Longley Vickar's law clerk, Paul Caprani, is the sole signature on the Application for Arbitration dated August 15, 2000.
The law firm, however, received its instructions, and indeed, acted for the treatment provider (Backcare). Mr. Longley does not claim to hold a retainer from Mr. Au directly, or his estate. I find that there is no evidence that the law firm could reasonably have believed that it represented the estate of the late Mr. Au.
A lawyer, essentially, acts as an agent for his or her client or principal. Evans J.A. in Scherer v. Paletta 1966 CanLII 286 (ON CA), [1966] 2 O.R., 524 Ont. C.A. summarized this aspect of a lawyer's role.
Bowstead on Agency, 12th ed., pp. 65-66, reviews the scope of the implied authority of a solicitor and counsel and states that the relationship of a solicitor to his client is in general one of agent to principal. The authority of a solicitor arises from his retainer and as far as his client is concerned it is confined to transacting the business to which the retainer extends and is subject to the restrictions set out in the retainer.
Mr. Longley's law firm was retained by the treatment provider. Backcare could well have had an assignment or agency agreement with Mr. Au in order to pursue his claims for statutory accident benefits. No evidence of such an assignment has been produced.
Nor would the law firm find much comfort in an agency agreement signed by Mr. Au before his death, if indeed there was one.
As Lieff J. noted in Mackenzie et. al. V. Carroll et al. (1975) 1974 CanLII 508 (ON HCJ), 6 O.R. (2d) 706:
On the first issue, except in cases of irrevocable authority, the death of the principal terminates a contract of agency: Halsbury's Laws of England, 3rd ed. Vol. 1 p. 244.
The question of the effect of the death of a principal on an agency relationship has been examined in a series of cases spanning the nineteenth century from Blades v. Free (1829) 9 B & C 167 to Smout v. Ilbery 10 M. & W. 1 and Halbot v. Lens [1901] 1 Ch 344.
In Blades v. Free (supra) Bayley J., in examining the responsibility of a woman for debts incurred in the name of her deceased common-law spouse addressed the issue:
What then is the inference of the law? That the woman had the same authority to bind the deceased by her contracts as if she had been his wife, and that such authority would be revoked by his death.
Campanari v. Woodlawn, 15 C.B. 400 is a case in which the deceased gave a dealer authority to sell a painting on his behalf, prior to his death. The agent sold the painting, despite the fact that, unbeknownst to him, the owner of the painting had since died. In an action for the agreed commission on the sale of the painting, Jervis C.J. concluded "His death was a revocation by the act of God and the administratrix is not, in my judgement, responsible for anything."
It is fair to state, that the general rule of law still is that an agency is terminated by the death of the principal. As Addy J. remarked in Wilkinson v. Young 1972 CanLII 632 (ON HCJ), [1972] 2 O.R. 239, "in all cases where the agency is gratuitously created and is created merely for the benefit of the principal, it terminates at law with the latter's death or mental incompetency." While the law recognizes some irrevocable assignments that survive the death of a principal, a legal retainer is not one of them.
Even if Longley Vickar had been properly retained by Mr. Au at some time before his death, I find that the retainer ended with his passing.
I find, therefore, that Longley Vickar commenced the arbitration on the part of a deceased person without the authorization of either Mr. Au or his estate.
I find it disconcerting that a respected law firm would have permitted an Application for Arbitration to be filed that was without authority. It is also troubling that the Commission accepted an Application for Arbitration that was patently flawed.
At common law, an agent could attract personal liability if he knowingly undertook something on behalf of another without authority. (see Smout v. Ilbery supra). In Yonge v. Toynbee (1910) 1 KB 215, the court even awarded costs against a solicitor personally, who, unknowingly brought an action without proper authority. While an argument might be made that the conduct of Longley Vickar rendered it potentially liable for the expenses incurred by the Insurer in responding to this application, I am not convinced that the Commission has the necessary jurisdiction to make such an order.
In light of the fact that this matter was not authorized by the estate of the late Mr. Au, I do not believe that it is appropriate to make an expense award against the estate. Should the parties, however, still wish to make submissions on the matter of expenses, I will remain seised of the matter.
Given the unusual fact situation in this matter, and my finding that the application for arbitration itself is a nullity, this may well be an appropriate situation for the Insurer to request a refund of its assessment from the Commission.
April 3, 2001
John Wilson
Arbitrator
Date
Neutral Citation: 2001 ONFSCDRS 50
FSCO A00-000852
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
THE LATE KOK KEUNG AU
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:
The application for arbitration brought in the name of Mr. Au is a nullity.
The second question is moot, due to the application for arbitration being a nullity.
April 3, 2001
John Wilson
Arbitrator
Date
Footnotes
- 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.