Neutral Citation: 2002 ONFSCDRS 145

FSCO A01-000440

BETWEEN:

ROMAN VOLFSON

Applicant

and

OLGA SHUSTER and YURY SHUSTER

Insured persons

and

ROYAL & SUNALLIANCE INSURANCE COMPANY OF CANADA

Insurer

REASONS FOR DECISION

Before:

Suesan Alves

Heard:

October 19, November 9 and 30, 2001, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

R. Ipacs and E. Prutschi for Mr. Volfson

M.T. Gulycz for Mr. and Mrs. Sinister

M.J. Huclack for Royal & SunAlliance Insurance Company of Canada

Olga Shuster and Yury Shuster were injured in a motor vehicle accident on April 28, 1999. In March 2000, Mr. and Mrs. Shuster settled their claims for statutory accident benefits with Royal & SunAlliance Insurance Company of Canada, ("Royal"), and settled the outstanding treatment account at Universal Injury Treatment Centre Inc., ("Universal"). Despite this payment, about a year later, Roman Volfson, a partner and manager at Universal, commenced arbitration applications claiming payment for the cost of the Shusters' treatment. In these applications, Mr. Volfson named Olga Shuster and Yury Shuster as Applicants, and Royal as the Insurer.

Mr. Volfson seeks to withdraw the arbitration applications. He alleges that these proceedings were commenced by mistake and opposes the imposition of any terms or conditions on the withdrawal.

Mr. and Mrs. Shuster allege that Mr. Volfson filed forged authorizations with the Financial Services Commission and commenced these arbitration proceedings without their authority. They seek their costs. Royal seeks its costs, an award in respect of its assessment, and such further or other order as may seem just.

The issues in this hearing are:

Were the arbitration applications commenced with the authority of Olga Shuster or Yury Shuster?
On what terms, if any, may the arbitration applications be withdrawn?
Which party, if any, is liable to pay the other's expenses in respect of the arbitration?

The arbitration applications were commenced without the authority of Olga Shuster and Yury Shuster.
Mr. Volfson shall pay the expenses of Olga Shuster, Yury Shuster and of Royal & SunAlliance, as agreed upon or assessed. Mr. Volfson may then withdraw the arbitration applications.

1. On whose authority was this proceeding commenced?

Background

Olga Shuster and Yury Shuster were injured in an automobile accident on April 28, 1999, and obtained treatment for their injuries at Universal Injury Rehabilitation Centre Inc. Royal paid Universal $1,000 in relation to the Shusters' treatment, and disputed the remainder. Mr. and Mrs. Shuster retained Mr. Malyshev, a paralegal at Pignalosa and Associates, to apply for mediation on their behalf.

At mediation Royal agreed to pay each of the Shusters the sum of $6,500 — a total of $13,000 — in exchange for their full and final releases.

This was less money than Mr. and Mrs. Shuster hoped to obtain. They had hoped that Mr. Malyshev would persuade Royal to pay them an amount sufficient to cover the cost of their past treatment, Mr. Malyshev's fees, and a reasonable allowance for the cost of future treatment.

In the circumstances, Mr. Malyshev agreed to reduce his fees if he were paid in cash. Mr. and Mrs. Shuster approached Mr. Volfson who agreed to reduce the Universal account by $1,000, the sum which Royal had already paid. Mr. and Mrs. Shuster then paid Universal's account in the amount of $7,000 in cash.¹

Mrs. Shuster felt it would be prudent to obtain letters from Mr. Malyshev and from Mr. Volfson confirming that their respective accounts had been paid in full. In that way, at the end of the day, there would be no question that all matters related to their claims had been concluded. Thus, the releases dated March 10, 2000 showed that Royal owed the Shusters no further benefits; the letter from Mr. Malyshev dated March 17, 2000 confirmed that Mr. and Mrs. Shuster owed nothing further to Pignalosa and Associates; and the letter from Universal dated March 17, 2000 showed that the Shusters owed nothing further to the treatment centre. Based on the above documentation I find that by March 17, 2000, all the issues relating to Mr. and Mrs. Shuster's claims for statutory accident benefits as a result of the motor vehicle accident on April 28, 1999 were concluded.

Notice of Pre-hearing

Mrs. Shuster testified that she first became aware that this arbitration proceeding had been commenced in early May 2001, when she read a Notice of Pre-hearing Discussion, dated April 26, 2001, from the Financial Services Commission of Ontario, ("FSCO"). Mrs. Shuster testified that she realized the document was connected in some way with their case with Royal. Since that claim had been concluded in March 2000, she telephoned Mr. Malyshev, who represented them at mediation, to find out why she received the notice and what she was supposed to do with it.

Mrs. Shuster testified that Mr. Malyshev told her he did not remember and would have to look up the file. That file was in storage in a different building than his office, and not immediately available, since the person with keys to the building was away on vacation. Mrs. Shuster testified that she called Mr. Malyshev again and he did not have a definite answer for her. Mrs. Shuster testified that towards the end of June 2001, she spoke with Mr. Malyshev, who told her that he had retrieved the file. He confirmed to her that everything had indeed been finalized, stated that there had been some sort of mistake with Mr. Volfson, that the error would be taken care of and that no pre-hearing would in fact take place.²

Mrs. Shuster testified that based on her discussions with Mr. Malyshev, she expected to receive a letter notifying her that the pre-hearing, scheduled to take place on July 11, 2001, had been cancelled. On or about July 5 or 6, 2001, Mrs. Shuster realized that she had not received any cancellation notice. Mrs. Shuster testified that she then telephoned the case administrator at FSCO and was informed that the pre-hearing had not been cancelled. Mrs. Shuster testified that she explained to the case administrator that the proceedings were a mistake. She testified that the case administrator put her on hold, and telephoned Mr. Volfson, the stated representative and treatment provider in FSCO's records. Mrs. Shuster testified that the case administrator informed her that she had been unable to speak with Mr. Volfson, but had left him a message.

Mrs. Shuster testified that she then telephoned Mr. Volfson, asked him what was going on with the pre-hearing, and whether she was supposed to attend. Mrs. Shuster testified that Mr. Volfson told her that there had been a mistake, she was not to worry as he would take care of it. She did not need to attend on July 11, 2001; he would cancel the pre-hearing.

Mrs. Shuster testified that on the morning of the pre-hearing, she telephoned FSCO, spoke with the case administrator and was informed that the pre-hearing was proceeding. Mrs. Shuster testified she gave the case administrator her work telephone number and that of her husband so that they could be contacted if they were needed at the pre-hearing.

The pre-hearing

At the beginning of the pre-hearing, I informed the persons in attendance — Mr. Volfson and Mr. Malyshev for the Applicants, and Mr. Baker and Mr. Kazdan for the Insurer — of the Shusters' request to be contacted if they were needed. Mr. Volfson stated that he was representing Mr. and Mrs. Shuster, and that it was unnecessary to involve them by teleconference call.

Mr. Malyshev stated that these proceedings were a mistake. Mr. Volfson stated that he wished to withdraw the arbitration applications. Royal did not oppose the withdrawal, however, it sought its expenses, and payment of the amount it had been assessed to participate in the arbitration as terms of the withdrawal.

Arbitrators have held that they can only order the parties — an insurer or an insured person — to pay expenses. If I were persuaded to take that approach, and to impose the terms Royal requested, Mr. and Mrs. Shuster would be directly affected. At that juncture it seemed that Mr. and Mrs. Shuster had a separate interest from that of Mr. Volfson, and it would be prudent to involve them in the pre-hearing by teleconference call as they had requested.

I was unable to speak with Mr. Shuster, but reached his voice mail. On a second attempt I asked the receptionist to page him. She reported that Mr. Shuster had not responded to her page. However, I was able to reach Mrs. Shuster. Unfortunately, the phone in the Commission meeting room did not function well. Despite the difficulties, Mrs. Shuster was able to participate sufficiently to convey that she could not understand how she or her husband could be held financially responsible for an arbitration they had not started.

I informed Mrs. Shuster that there were signed authorization documents in the arbitration file in her name and in that of her husband, which appeared to authorize the commencement of the arbitration. Mrs. Shuster stated that neither she nor her husband had signed such documents. She wished the earliest possible hearing date to get to the bottom of things. Copies of these documents were sent with the pre-hearing report to Mr. and Mrs. Shuster, and to the persons who attended the pre-hearing. Mr. and Mrs. Shuster then retained counsel to represent them at the hearing.

The authorizations

Mr. Volfson commenced these proceedings by filing two arbitration applications, with two documents entitled "Authorization & Direction." One Authorization & Direction states that it relates to Olga Shuster, the other that it relates to Yury Shuster. Mr. Volfson asserted that he was the authorized representative of Mr. and Mrs. Shuster on the basis of these documents. Mr. and Mrs. Shuster deny that they signed these authorizations, or authorized Mr. Volfson to represent them or to commence the arbitration applications.

Both authorizations are directed to the Ontario Insurance Commission, Dispute Resolution Group, Arbitration Unit, and read as follows:

I/We, the undersigned, do hereby authorize and direct ROMAN VOLFSON/UNIVERSAL INJURY REHABILITATION CENTRE INC. at 491 Lawrence Avenue West, Suite 201, Toronto M5M 1C7 and any of their representatives to represent me and act on my behalf to protect my interest with respect to incurred expenses for PHYSICAL THERAPY. I also authorize the above to represent me and act on my behalf as my agent to make binding decisions on my behalf as well as, to mediate/negotiate/arbitrate or litigate and settle the above noted matter.

This Authorization and Direction by the undersigned to the above shall be a complete and sufficient authority for carrying out the foregoing.

Dated in the City of Toronto, this "12" day of "Decem" 2000.

WITNESS :

"not legible"

Mrs. Shuster testified that she first saw the authorization document she was alleged to have signed after FSCO sent her a copy with the pre-hearing report. She testified she did not sign the document which purported to authorize the commencement of these proceedings, and never gave Mr. Volfson authority to act on her behalf. Although the signature on the document resembled her signature, it was not hers. The handwriting of the day and month on the authorization were definitely different from her handwriting.

Mr. Shuster testified that he first saw the authorization he was alleged to have signed when he received a copy of it from FSCO with the pre-hearing report. He testified that the signature on the document did not look like his signature and he never gave authority to Mr. Volfson or Universal to commence an arbitration. Mr. Shuster testified that when he and his wife went to Universal for treatment, they were asked to sign a number of documents. Before signing the documents, he asked for and Universal provided him with copies. Once the question of whether he had authorized the arbitration came to the fore, he searched through those papers and did not find a copy of the authorization and direction among them. This heightened his conviction that the authorization was not a document he had signed.

The date inserted in handwriting on each document is December 12, 2000. Mr. and Mrs. Shuster testified that between March 2000, when they concluded all aspects of their claims for statutory accident benefits, and March 2001, when the arbitration applications were registered by the office of the Registrar at the Financial Services Commission, they had no further contact with Mr. Volfson or his treatment centre. I accept the testimony of Mr. and Mrs. Shuster. I find the Shusters' evidence on this point significant because the authorizations filed with FSCO were dated December 12, 2000, and would not therefore have been signed by them on that date.

I find that Mr. and Mrs. Shuster have not at any point after March 2000 approached Royal for further statutory accident benefits. They have made no allegations that the settlement should be set aside. They are clear that after March 2000, they have no further entitlement to statutory accident benefits from Royal as a result of the April 28, 1999 accident. They took steps to ensure that there was documentation which confirmed that any claims against them for treatment and fees as a result of those claims had been resolved. I find it highly improbable that in these circumstances, Mr. and Mrs. Shuster would commence an arbitration or authorize the commencement of this arbitration against Royal claiming statutory accident benefits.

Mr. Volfson testified that the authorizations were in Universal's file, his secretaries prepared the applications for mediation and arbitration and he signed them. He testified that these authorization documents could have been signed by Mr. and Mrs. Shuster when they came into the clinic, or sent and returned by mail, or taken out to them by one of Universal's five drivers. Mr. Volfson acknowledged that he was unable to say whether any of these events took place in this case. I find Mr. Volfson's evidence speculative. I accept the testimony of Mr. and Mrs. Shuster that the purported authorization documents filed with FSCO were never presented to them for their signature, that they did not sign the purported authorization documents or authorize this proceeding.

Between the date of the pre-hearing, and the commencement of the hearing, Royal arranged for Ms. Diane Kruger, forensic document examiner, to determine whether the signatures on the purported authorization documents filed with FSCO were those of Mr. and Mrs. Shuster.

According to her curriculum vitae, Ms. Kruger is a lawyer and a member of the Bars in Ontario, New York and the District of Columbia. She completed a two-year training program in forensic document examination at the Centre of Forensic Sciences in Toronto, and has obtained diplomas from the Forensic Science Society of England, and the American Board of Forensic Document Examiners.

Ms. Kruger reported that she compared the signatures on copies of the documents in the FSCO file with numerous specimen signatures of the Shusters, their signatures on various documents submitted to Royal in support of their accident benefits claims, and on various official documents such as passports and drivers licences. At a later date, Ms. Kruger was able to inspect the original signatures on the documents filed with FSCO. Ms. Kruger authored reports on September 18, 2001, and further supplemental reports dated October 4, 2001.

Ms. Kruger reported that she compared characteristics such as the slant, slope, size, width, letter formation, initial and terminal strokes, pen lifts, proportions, flourishes, punctuation, arrangement, pressure, skill, line quality, and legibility. In her opinion, the signatures on the purported authorizations appeared to be heavily written with some areas of tremor, while the specimen signatures provided by Olga and Yury Shuster were written in a natural manner. While there were some similarities between the signatures on the purported authorizations and the specimen signatures, in Ms. Kruger's opinion, there were significant differences in terms of letter formation, rhythm, spacing and proportions. In Ms. Kruger's opinion, the evidence tended to indicate that there had been an attempt to simulate Mr. Shuster's signature. In her opinion, Mr. Shuster probably did not write the Yury Shuster signature or the date on the authorization filed with FSCO.

Similarly, Ms. Kruger opined that while there were general pictorial similarities between Mrs. Shuster's signature and the signature on the purported authorization filed with FSCO, there were several significant dissimilarities in the subtleties of the signature. In her opinion, the evidence was consistent with an attempt to simulate the genuine signature of Olga Shuster. There were several significant dissimilarities with the writing of the dates. In her opinion, Mrs. Shuster did not sign or date the authorization filed with FSCO.

Ms. Kruger's reports set out the facts and documents on which she relied and the basis of her opinions, and I accept those opinions. I find the documents in question were not signed by Olga Shuster or by Yury Shuster. I also accept the Shusters' testimony in this regard. Accordingly, I conclude that the documents which Mr. Volfson provided to FSCO were forged, and there was no authorization from Olga Shuster or Yury Shuster to commence these proceedings.

Mr. Volfson wished to obtain an expert opinion from a document examiner of his choice, and I made orders and set time lines to facilitate this. Pursuant to my order, Mr. Volfson's document examiner attended at FSCO on October 30, 2001. When the hearing resumed on November 9, 2001, counsel for Mr. Volfson advised that for purposes of the hearing Mr. Volfson no longer disputed the Shusters' allegation that they had not signed the authorizations. However, Mr. Volfson submitted that his reliance on the authorizations was not an admission of any wrongdoing. He did not concede that he was a party who would be liable for costs.

Credibility

I find Mr. and Mrs. Shuster were credible witnesses. They identified Mr. Volfson as the person with whom they met when they first went to the clinic, with whom they negotiated the settlement of their treatment account, and as the person to whom they gave the cash payment of $7,000 in March 2000.

Mr. Volfson testified that Mr. and Mrs. Shuster met with his partner, Alex Govrilenko, not him, when they initially went to Universal. He testified that the Shusters also negotiated the settlement with his partner, and that his partner signed the letter confirming that the treatment account had been satisfied.

I prefer the Shusters' evidence to that of Mr. Volfson. I find that their memory of the identity of the person at Universal with whom they had dealings is more likely to be accurate than that of Mr. Volfson who may speak with many of the 800 patients per year seen at the clinic. I accept Mr. and Mrs. Shuster's testimony. I find support for their testimony in the letter from Universal acknowledging satisfaction of the account which was prepared for Mr. Volfson's signature.

It would make no sense for this letter to have been prepared for Mr. Volfson's signature had he not been the person who negotiated the settlement.

Mr. Malyshev testified that on the two or three occasions when Mrs. Shuster spoke with him between May and June 2001, he would in turn telephone Mr. Volfson with respect to this matter. This again tends to support the Shusters' evidence that the person at Universal who was most familiar with their case and with whom they dealt was Mr. Volfson.

Mr. Volfson alleged that his partner made a mistake in that he failed to make the accounting entry showing that the Shusters paid $7,000 in satisfaction of their treatment account, and that his partner did not enter the payment in Universal's monthly records. Similarly, Mr. Volfson testified that after he received a telephone call from Mr. Malyshev in May 2001 (as a result of a call from Mrs. Shuster), he sought confirmation from his partner Mr. Govrilenko that Mr. and Mrs. Shuster paid their accounts in cash. This evidence tends to distance Mr. Volfson from direct involvement in dealing with the Shusters and with their payment. However, Mr. Volfson did not call Mr. Govrilenko to corroborate his evidence.

The hearing proceeded with the Shusters presenting their case first, then Royal, then Mr. Volfson. Mr. Govrilenko's alleged involvement came out during Mr. Volfson's testimony, as part of Mr. Volfson's case. By this time Royal had closed its case. Counsel for Royal established that Mr. Govrilenko continued to be Mr. Volfson's partner and continued to work at Universal. Mr. Govrilenko was therefore available to testify. I draw an adverse inference from Mr. Volfson's failure to call Mr. Govrilenko to corroborate his evidence. I infer that had he been called, Mr. Govrilenko would have adduced evidence which was unfavourable to Mr. Volfson, in particular that Mr. Volfson dealt with the Shusters and received the cash payment from the Shusters.

In my view, the payment of $7,000 cash by the Shusters was an unusual transaction at Universal. In part, this was because most of the payments Universal received were made by cheque, and the accounting and record keeping process reflected this. Assuming that the clinic's charges per treatment session were similar to the amounts charged Mr. and Mrs. Shuster, the amount of cash the Shusters paid likely approximates the clinic's billings for a day. Given the amount of the payment, and the fact that it was made in cash, I find it highly probable that a staff person who handled the negotiation and took the cash was likely to remember the transaction.

Mr. Volfson testified that the cash was spent over a period of up to 6 months on juices for the clients and for expenses like paper.

Mr. Volfson testified that his secretaries prepared the mediation and arbitration applications; he read them over, at best cursorily, and signed them. Mr. Volfson also testified that the authorization documents were in the file when he received it from one of his secretaries for signature of the mediation and arbitration application forms. He did not know the Shusters and there was nothing to put him on his inquiry that the authorizations had been forged. Mr. Volfson noted that the authorizations had not been witnessed. He testified that this was because he has been filing such authorizations unwitnessed at FSCO for years now without any difficulty. Universal's practice was to simply insert a date in the authorization shortly before they were needed for mediation and arbitration.

I find the authorization documents in FSCO's file were provided by Mr. Volfson. In light of the overwhelming evidence that the documents were forged, the onus shifts to Mr. Volfson to establish how these forged documents came to be in Universal's possession. Mr. Volfson did not adduce evidence from his secretaries or his partner which could shed some light on how the documents came to be forged. Given Mr. Volfson's failure to adduce such evidence, I draw an adverse inference that had those witnesses been called, they would have given evidence which was unfavourable. In particular, I infer that such evidence would establish that Mr. Volfson, and not Mr. Govrilenko, was the person at Universal who had direct involvement with the Shusters, and that a staff member, if called, would testify as to his or her knowledge of the circumstances surrounding the forgery of the authorizations.

Mrs. Shuster testified that she spoke with Mr. Malyshev by telephone in late May 2001. Mr. Malyshev testified that on that occasion and each time Mrs. Shuster called him, he would telephone Mr. Volfson and speak with him. Mr. Volfson agrees that he was contacted in late May by Mr. Malyshev. Mr. Malyshev testified that Mr. Volfson told him he would take all steps to try and fix the matter. Mr. Volfson testified that as a result of the discussion with Mr. Malyshev, he spoke with his partner, Mr. Govrilenko, who reminded him that Mr. and Mrs. Shuster's treatment account had been paid in full in cash in March 2000. At the latest then, by the end of June 2001, on his own evidence and that of Mr. Malyshev, Mr. Volfson had actual knowledge from his conversations with Mr. Malyshev and with Mr. Govrilenko that Universal's account had been paid and there was no basis for the arbitration.

Mr. Peter Kazdan, a lawyer who appeared at the pre-hearing as counsel for Royal, testified that he received a telephone message from Mr. Volfson in late June 2001, which he returned in July 2001.

According to Mr. Kazdan, Mr. Volfson asked him what Royal was prepared to do to resolve the matter. Mr. Kazdan pointed out that Royal had signed releases. Mr. Volfson went on to suggest payment of $5,000. Mr. Kazdan testified that he understood Mr. Volfson was asking Royal to pay him $5,000 to settle the arbitration. Mr. Volfson testified that he was offering to pay Royal $5,000 to settle the matter, and that Mr. Kazdan misunderstood him.

I accept that English is not Mr. Volfson's mother tongue. However, I find it likely that as a business manager who does collections, mediations and pre-hearings for Universal, Mr. Volfson was able to communicate quite clearly when he intends to be paid money, and when he wishes to pay money to someone. I prefer Mr. Kazdan's evidence.

I find that in attempting to be paid twice for the Shusters' treatment account when he knew that no moneys were owing and that there was no basis for the arbitration, Mr. Volfson abused the Commission's process.

Mr. Volfson's status

After Royal received Ms. Kruger's reports, Royal abandoned its claims against Mr. and Mrs. Shuster for expenses and an award in respect of its assessment. Instead, Royal pursued these claims against Mr. Volfson, and sought an order that he was a de facto party to these proceedings at the beginning of the hearing. Counsel for Mr. Volfson submitted that Mr. Volfson was a witness whose attendance had been secured by a summons from the Insurer, and who was represented by counsel, not a party responsible for costs.

I declined to make a ruling at that time, since this was one of the issues I would determine on the basis of the evidence which would be adduced.³ However, given the nature of the allegations, and because Mr. Volfson could be affected by my decision, I ruled that Mr. Volfson should be treated as if he were a party, with the right to be represented by counsel, to call and cross-examine witnesses, and to be present throughout the proceeding.

I find that Mr. and Mrs. Shuster have no interest in the claims made in the arbitration application, and there is no issue in dispute between them and the Insurer, nor one between Universal and Royal. I find that there was no legislative authority to commence this proceeding. However, the Commission's process was in fact engaged by Universal and Mr. Volfson. There is no evidence that this proceeding was commenced for the benefit of anyone other than Mr. Volfson and Universal, a treatment facility in which he is a partner. I find Mr. Volfson commenced this arbitration on his own account and is therefore a party to these proceedings. I agree with the submission of counsel for Mr. and Mrs. Shuster that in doing so he used the names of Olga Shuster and Yury Shuster as hollow, false labels. I have therefore amended the style of cause to reflect this finding, so that Mr. Volfson is listed as the applicant, Mr. and Mrs. Shuster as insured persons and Royal as the insurer of Mr. and Mrs. Shuster.

2. Motion to withdraw

I am satisfied that this arbitration proceeding should never have been commenced. As there is no basis for the claims Mr. Volfson advanced in these applications, I am prepared to permit him to withdraw them, and will now address the appropriateness of terms.

EXPENSES

Mr. Volfson alleges that the proceedings were commenced by mistake, and he should be permitted to withdraw the arbitration applications without terms or conditions. Royal submits that Mr. Volfson deliberately attempted to use the Commission's process to obtain double recovery of the Shusters' treatment account at Universal. Royal claims its costs and an award in respect of its assessment. Counsel for Mr. and Mrs Shuster submits that his clients retained him because of their concern that their identities had been misappropriated, and because they were being asked to pay expenses and an award in respect of an assessment when they had not authorized or initiated the arbitration. Mr. and Mrs. Shuster seek their costs from Mr. Volfson. Mr. Volfson submits each party should bear its own costs.

Authority to order a party to pay expenses

Mr. Volfson relied on a series of cases in which arbitrators concluded that they had no authority to order a party's representative to pay expenses, but could only order the parties, namely the insurer and the insured person, to pay expenses.⁴ In my view, those cases are distinguishable on their facts from the present case. In each of those cases the applicant was the insured person, and the agent was acting as the representative of the insured person, not on their own account, or as a party. However, where the arbitration has been commenced in the name of a person who has not validly authorized the commencement of the arbitration proceeding, Arbitrator Wilson has concluded that persons who commenced the arbitration on their own account, are parties, and can be held personally responsible for expenses. I agree with Arbitrator Wilson’s conclusions.

In the case of Piotto and Kingsway General Insurance Company, (FSCO A00-001061, March 22, 2002), an arbitration was commenced by Rod Hare of Profile Evaluations, who relied on the signature of Ms. Piotto, a minor, to authorize his commencement of an arbitration. Arbitrator Wilson held that this document did not provide Mr. Hare with valid legal authority to commence the arbitration. Consequently, the arbitration was unauthorized and the service provider could be found personally liable for costs. Arbitrator Wilson concluded that Ms. Piotto was not a party to the arbitration.

In the case of Gurevich and Royal & SunAlliance Insurance Company of Canada, (FSCO A01-000936, April 29, 2002), the treatment provider, Mr. Volfson, claimed compensation for treatment undertaken by Universal on behalf of Mr. and Mrs. Gurevich. Although the arbitration was brought in the name of the insured persons who underwent treatment, it was undertaken by the owner of the treating clinic. In that case, Arbitrator Wilson found that Mr. Volfson filed two applications for arbitration when all of the issues between the named parties had been mediated and resolved and there were no issues in dispute. Arbitrator Wilson concluded that this was an abuse of this tribunal’s process.

Arbitrator Wilson noted the lack of an applicant's signature on the application for arbitration, the refusal of Mrs. Gurevich to participate in the pre-hearing, the potential irregularities in the authorizations provided, and the insurer's allegations that the application was brought without proper authority." Arbitrator Wilson ordered Mr. Malyshev, Mr. Volfson's representative, to obtain an authorization which was legibly signed, witnessed and dated, containing an acknowledgement that Mr. Malyshev is not a lawyer nor subject to any discipline, and that Mrs. Gurevich, as the named applicant, may be responsible for paying any expense order made against her at the hearing, failing which her claim would be dismissed subject to the Insurer's right to submit any claim for expenses against the party who brought the arbitration.

I find that Arbitrator Wilson's approach does not offend the provisions of section 282(11) of the Insurance Act. That section gives an arbitrator at this tribunal authority to make an award of expenses, and provides :

The arbitrator may award, according to criteria prescribed by the regulations to the insured person or the insurer, all or part of such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations, to the maximum set out in the regulations.

Section 282(11) thus permits an arbitrator to make an award of expenses to an insured person or the insurer according to the criteria and amounts prescribed in the regulations. It does not state by whom those expenses must be paid.

Turning then to the relevant regulation — Regulation 664, R.R.O. 1990, as amended by section 12(2) of Ontario Regulation 464/96, which came into force on November 1, 1996, provides:

An arbitrator may award expenses to an insurer or insured person under subsection 282 (11) of the Act if the arbitrator is satisfied that the award is justified, having regard to the following criteria:

Each party's degree of success in the outcome of the proceeding.
Conduct of the insurer or the insured person that tended to shorten or facilitate the proceeding or that tended to prolong, obstruct or hinder the proceeding, including failure to comply with undertakings or orders.
Whether the proceeding or any position taken by the insurer or the insured person during the proceeding was manifestly unfounded, frivolous, vexatious, fraudulent or an abuse of process.
The degree of complexity, novelty or significance of the factual or legal issues raised in the proceeding.
If the insurer or the insured person requests, any written offers to settle made after the conclusion of mediation and before the conclusion of the arbitration in accordance with the rules of practice and procedure applicable to the proceeding, including the terms of the offers, the timing of the offers and the responses to the offers, having regard to the result of the proceeding.
Any other matter related to the proceeding that the arbitrator considers relevant to the issue of whether an award of expenses is justified.

While some of the criteria apply specifically to insured persons and insurers, criteria one specifically applies to a party; criteria one and six are of general application.

Section 17 of the Statutory Powers Procedure Act, R.S.O. 1990, c.S.22, as amended, ("SPPA") provides a further source of authority to a FSCO arbitrator to make an award of expenses. That section provides:

17.1 (1) Subject to subsection (2), a tribunal may, in the circumstances set out in a rule made under section 25.1, order a party to pay all or part of another party's costs in a proceeding.

I agree with Arbitrator Wilson that this authority under the SPPA is complementary to the expenses power in the Insurance Act.⁵

In order for a tribunal to exercise authority to order a party to pay costs under the SPPA, a tribunal must have made rules under section 25.1 of the SPPA which address ordering of costs, including the circumstances in which costs may be ordered, and the amount of costs, or the manner in which the amount of the costs is to be determined.⁶ Section 17(3) provides that the amount of costs which may be awarded "under this section shall be determined in accordance with the rules made under section 25.1."

I conclude that this tribunal has made the requisite rules. Rule 1.4 of the Dispute Resolution Practice Code —Fourth Edition (the "Code") states, "These Rules are made by the Director under the authority of section 21 of the Insurance Act and section 25.1 of the Statutory Powers Procedure Act." Rule 75 of the Code provides that expenses may be awarded to a party. Rule 75 also incorporates the criteria in the Expense Regulation, set out at page 19 of this decision. Since I have found that Mr. Volfson is a party to these proceedings, I conclude that I have the authority to order him to pay expenses to the other parties, namely Mr. and Mrs. Shuster, insured persons, and to Royal, insurer. The amounts are limited to those prescribed by the Regulation.

Considerations for expenses award against Mr. Volfson

Section 17.1(2)(a) of the SPPA provides that an order for costs can only be made against a party on the grounds that "the conduct or course of conduct of a party has been unreasonable, frivolous or vexatious or a party has acted in bad faith."

Mr. Volfson alleged that he was an authorized agent of Mr. and Mrs. Shuster in bringing this arbitration. As an agent he is obliged carry out his duties with reasonable care. I find that Mr. Volfson engaged in a course of conduct which was inconsistent with his duties and obligations as an agent.

I find Mr. Volfson had an obligation to establish that there was a basis for the claim before he applied for arbitration. Mr. Volfson testified that Universal maintains three files in relation to a client: a treatment file containing details of the client's treatment; a correspondence file, containing documentation and correspondence, applications for mediation and arbitration; and a computer file in which billings and payments received on the account are recorded. A hard copy of these invoices is generated prior to mediation.

Mr. Volfson provided Mr. and Mrs. Shuster with a letter sent by fax, confirming that their account had been paid in full. That letter states that only the original of the letter is valid, not a copy. Mrs. Shuster testified that they had been unsuccessful in their attempts to obtain the original letter from Mr. Volfson. The correspondence file should therefore have contained the original as well as the file copy of the letter. Mr. Volfson testified that there was no such letter in the file when he received it.

Thus, two of Universal’s files should have reflected that no moneys were owed in relation to the Shusters' treatment — the computer file showing payments received, and the correspondence file containing the original and perhaps a file copy of Mr. Volfson’s letter of March 16, 2000.

When Mr. Volfson applied for mediation in relation to the Shusters' account, the mediation staff at FSCO sent him a letter. According to the letter, FSCO's records "indicate that entitlement to benefits arising from the above accident were settled in a previous mediation in March 2000." However, Mr. Volfson chose to rely on the sentence in that letter which stated, "If you wish to continue to dispute your claim . . . [you may apply] for arbitration" as authority for the commencement of this arbitration.

Mr. Volfson testified that after he obtained a copy of the Report of Mediator from Mr. Malyshev’s office, he did not read the report. Instead, he surmised that, although the matter had been settled, Universal’s account had not been included or paid. However, the Report of Mediator clearly states that the settlement included Universal's account in relation to both Mr. and Mrs. Shuster.

When the Registrar's office received Mr. Volfson's applications for arbitration, that office was prompted to make an inquiry of Mr. Volfson. According to a note at the bottom of one of the arbitration applications dated March 26, 2001, "Spoke to Mr. Volfson. He confirmed that the insurance co. after mediating refuses to pay." The arbitration applications were registered the next day as one file so that each of Mr. Volfson and Royal paid one "filing fee."

The Responses from Royal set out its concerns in some detail and were accompanied by copies of the releases and documents prepared in compliance with the Settlement Regulation. According to the Statement of Service filed, Royal sent its Response to Mr. Volfson by fax on two consecutive days and then by mail. By my count Mr. Volfson had at least six opportunities to see that there was no point in proceeding with this matter.

I find that in failing to read the various documents which relate to this case, Mr. Volfson was wilfully blind. In the case of R. v. Sansregret (1985), 1985 CanLII 79 (SCC), 18 C.C.C. (3d) 223 (S.C.C.) at p. 235, McIntyre J. explained wilful blindness as:

Wilful blindness . . . arises where a person who has become aware of the need for some inquiry declines to make the inquiry because he does not wish to know the truth. He would prefer to remain ignorant." . . . [There is a deliberate] failing to inquire when he knows there is reason for inquiry.

Mr. Volfson testified that he made a mistake. He submitted that Universal has now taken steps to ensure that it would never again find itself in the embarrassing position it did in this case. Universal has changed its practice so that the authorizations are witnessed as soon as they are signed. The dates are filled in when Universal decides to commence a mediation or arbitration. Before this, the authorizations were not witnessed.

I am not persuaded that what took place in this case can be called a mistake, as the term is usually understood. Mr. Volfson's limited analysis of the nature of the problem displays a fundamental misunderstanding or perhaps a denial of his role in the problem.

In light of the evidence as to the problems in Universal's systems, and in light of Mr. Volfson's failure to take reasonable care to discharge the duties of the agent he purported to be, I am not persuaded that Mr. Volfson's solution of having the signatures promptly witnessed will avoid a recurrence of the problems in this case.

In Gurevich, Arbitrator Wilson stated:

Vexatious litigation includes situations where the court has no power to grant the relief sought (see Dreyfus v. Peruvian Guano Co. (1889) 41 Ch.D. 151), if no reasonable person can possibly expect to obtain relief in it, (see Lawrance v. Lord Norreys et al. (1888) 39 Ch. D. 213), or if the applicant has no proper authority to pursue the remedy (see R. ex rel. Tolfree v. Clark et al. [1943] O.R. 314).

Applying these principles to this case, I find Mr. Volfson engaged in conduct which was both unreasonable and vexatious. There was no "issue in dispute" which Mr. Volfson could bring before this tribunal under the provisions of the Insurance Act. Secondly, there was no reasonable possibility that this tribunal would order payment of moneys when Universal's account had been paid, and when Mr. Volfson had provided a written acknowledgement that the account had been satisfied. Thirdly, because the purported authorizations are forged documents, Mr. Volfson had no proper authority to pursue a remedy before this tribunal.

I also find that Mr. Volfson further abused the Commission’s process in attempting to collect moneys in his discussions with Mr. Kazdan when he knew that the account had been paid.

Mr. Volfson was successful on his request to withdraw the arbitration applications. However, he put others to unnecessary expense, and to the extent possible, I find he should be made to pay the other parties for the consequences of his actions.

AWARD IN RESPECT OF ASSESSMENT

Section 282(11.2) of the Insurance Act provides:

(11.2) If an insured person commences an arbitration that, in the opinion of the arbitrator, is frivolous, vexatious or an abuse of process, the arbitrator may award an amount to be paid by the insured person to the insurer that does not exceed the amount assessed against the insurer in respect of the arbitration under section 14.

As noted earlier, I have found this case vexatious and an abuse of the Commission's process. This was a proceeding which should never have been commenced. However, I have also concluded that neither of the insured persons named as applicants in this arbitration commenced the arbitration or had any interest in the claim asserted in the arbitration. The person who commenced this arbitration was Mr. Volfson. Since an award in respect of an assessment is only payable by an insured person, in my view I am unable to make an award in this case.

OTHER RELIEF

Although I have made an award of expenses, the amount payable is limited by the Regulation, and does not reimburse the Shusters or Royal for their actual expenses in responding to this arbitration application.

In my view, the proper remedy in this case would be to put the Shusters and Royal in the same position as they would have been had this arbitration not been commenced. Were it within my power, I would not hesitate to make an order for Mr. Volfson to pay the solicitor and client costs of both parties, and an award in respect of Royal’s assessment. Since the damage was done by abusing the Commission’s process, this tribunal should be able to grant the appropriate remedy. Royal and the Shusters ought not to be placed in the position of having to commence yet another legal proceeding to recover their actual losses as damages.

Royal may take some comfort in the fact that it may treat the difference between the expenses award and the actual expenses it incurred as a business expense. The Shusters, however, will bear this loss personally. They netted $4,800 for future treatment and now face a solicitor-client account approaching $9,000.

In my view the administration of justice has also been harmed by Mr. Volfson’s actions. Section 23 of the SPPA provides a tribunal with a general power to maintain its authority and to prevent its process being obstructed and abused. However, the specific limitations on the cost power limits this provision. In my view, this case illustrates the need for a general equitable power so that in exceptional circumstances, solicitor and client costs may be ordered when that is appropriate.⁷

Lawyers who appear before this tribunal are governed by the Law Society of Upper Canada. Competent and ethical paralegals have appeared at this tribunal. However, they remain an unregulated group. In my view, if paralegals, who are governed by no one and are answerable to no one are going to be allowed to attend before this tribunal, it is important that arbitrators be given the power to deal with such an egregious abuse of the Commission’s process. Royal requested that I ban Mr. Volfson from appearing before this tribunal for a period of time.

The present legislation gives an arbitrator power to deal with issues as they present on a case-by-case basis. Thus, I do not have the authority to ban Mr. Volfson from appearing in relation to future cases. I have concerns about the control of future abuse of the Commission's process by Mr. Volfson, because of the flagrant abuse in this case. Concerns have been raised by other arbitrators as to whether Mr. Volfson's clients exist, and if so, whether they authorized the proceedings.⁸ I would urge Mr. Volfson in the strongest possible terms to consider removing himself as an agent before this tribunal.

September 13, 2002

Suesan Alves Arbitrator

Date