Neutral Citation: 2003 ONFSCDRS 119

FSCO A03-000439

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

ROBERT BYE

Applicant

and

AVIVA CANADA INC. (FORMERLY CGU GROUP)

Insurer

DECISION ON A PRELIMINARY ISSUE

Before:

John Wilson

Heard:

June 23, 2003, by teleconference.

Appearances:

Ava M. Hillier for Mr. Bye

Frank Benedetto for Aviva Canada Inc. (formerly CGU Group)

Issues:

The Applicant, Robert Bye, was injured in a motor vehicle accident on August 12, 2001. He applied for statutory accident benefits from Aviva Canada Inc. (formerly CGU Group) ("Aviva"), payable under the Schedule.¹ Mr. Bye applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issue is:

Is Mr. Bye's Application for Arbitration void and a nullity because, on the date when his Application for Arbitration was filed, he was a minor as defined by the Age of Majority and Accountability Act, R.S.O. 1990, c.A.7?

Result:

Mr. Bye's Application for Arbitration is not void.
Mr. Bye shall have until September 12, 2003 to ratify the Application for Arbitration made in his name, failing which this arbitration shall be stayed.

EVIDENCE AND ANALYSIS:

Mr. Robert Bye was born on September 5, 1985. On December 8, 2001, he was a passenger in a vehicle that was involved in a severe accident. The driver of the car was killed, and both Robert and his father suffered serious injuries.

At the time of the accident, Robert Bye's parents were separated, and although he had been living with his mother, he had left home prior to the accident and was then living with the Whites, a family that lived on a farm in Caledon. Following discharge from hospital, he returned to the Whites after the accident.

Mr. Bye filed a claim for income replacement benefits and housekeeping benefits with the Insurer. When he did not receive benefits, the Whites retained a solicitor, Ava Hillier, on his behalf to pursue his claim. As a result, the Commission received an Application for Arbitration on behalf of Mr. Bye on March 31, 2003.

Mr. Bye was clearly a minor at the time that the Application was filed.

Subsection 1(1) of the Age of Majority Act and Accountability Act provides that: "[e]very person attains the age of majority and ceases to be a minor on attaining the age of eighteen years."

A person's status as a minor can have important ramifications in considering capacity to enter into a contract or capacity to do a variety of things without the intervention of a guardian.

At common law, a minor or an infant had very limited rights to enter into contracts, and indeed could not be held to any contract entered into during minority, except in the case of contracts for the provision of necessities of life.

The retainer of a solicitor, or the appointment of an agent, requires that each party have the capacity to enter into a contract for the appointment or retainer to be valid.

Unlike mental incapacity, a contract with a minor was not seen as prima facie void. As noted, if it related to the supply of necessities, the minor had the power to contract. In addition, a minor always had the option to either ratify or repudiate a contract upon reaching majority.

As Lerner J. noted in Toronto Marlboro Major Junior "A "Hockey Club et al. v. Tonelli et al. (1977 CanLII 1385 (ON HCJ), 18 O.R. (2d) 21):

Generally speaking infants (minors) are not bound by their contracts which are either void or voidable. The exceptions are contracts for necessaries and contracts of service, but both must depend on the particular facts in the case under consideration.

Necessities of life usually are defined as food, shelter and necessary medical treatment. There is no jurisprudence suggesting that a contract for legal services, however important, falls within the definition of a necessity of life.

The jurisprudence has, however, differentiated between those contracts which are void ab initio and those which are voidable at the instance of the minor. The decision in Cooper v. Simmons (1862), 7 H. & N. 707 quotes a contemporary text as stating; "Deeds or contracts made by an infant from which no apparent benefit can arise to him are considered as absolutely void."

The courts in Ontario have considered and refined the common law position. In Beam v. Beatty (1902), 4 O.L.R. 554, Garrow J.A. summarized:

So that in these quotations extending over a period of 105 years we have a constant and, I think, clear expression of judicial opinion in favour of the proposition that the bond with a penalty of an infant is not merely voidable but absolutely void, while not a single authority in the shape of a decided case can be found to the contrary.

The proposition that a contract with clauses that are prejudicial to a minor's interests is void ab initio was approved by the Court of Appeal in Phillips v. Greater Ottawa Development Company (1916), 1916 CanLII 563 (ON SCAD), 33 D.L.R. 259.

In Toronto Marlboro Major Junior "A "Hockey Club et al. v. Tonelli et al., Lerner J. summarized his view of the current contractual liability for minors:

In summary, the authorities state that all infant's contracts, except (i) those for necessaries, (ii) beneficial contracts of service and (iii) voidable contracts which are not repudiated and are ratified, are void. With voidable contracts, depending upon the facts of each case, there must be (a) repudiation within a reasonable time; or (b) ratification upon attaining the age of accountability.

The characterization of the contract itself is an important factor in determining whether a contract is void or merely voidable.

As noted earlier, Mr. Bye suffered serious injuries arising from the accident. He has since had serious difficulties getting his life back together post-accident. Until he consulted a lawyer, the Insurer had paid him no benefits. Following the retainer of Ms. Hillier, the Insurer was persuaded to at least advance some money on a "without prejudice" basis.

The retainer of counsel on behalf of Mr. Bye appears, on the face of it, to have produced some benefits for him. It is not the sort of arrangement referred to in Cooper v. Simmons where " no apparent benefit can arise to him."

I note as well that Mr. Bye has given no indication of any intention to repudiate the solicitor-client relationship following his majority on September 5, 2003. Unlike the situation in Piotto and Kingsway General Insurance Company (FSCO A00-001061, March 22, 2002), the retainer contract appears to fit more closely amongst the classification of voidable rather than void contracts. Consequently, neither the retainer nor the Application for Arbitration is necessarily void ab initio.

I find, therefore that the retainer of Ms. Hillier and the subsequent Application for Arbitration is voidable at the instance of Mr. Bye, but not void ab initio.

Counsel for Aviva also submitted that Mr. Bye's Application for Arbitration was inconsistent with Rule 10 of the Dispute Resolution Practice Code (Fourth Edition, May 31st, 2001) ("the Code"), which deals with incapacity, and that the consequence of such non-compliance is that the Application is a nullity.

Rule 10.2 of the Code provides:

A minor, or a person who has been declared mentally incapable, within the meaning of Sections 6 or 45 of the Substitute Decisions Act, 1992, (SDA) must commence a mediation or other proceeding through:

(C) in the case of a minor,

(i) a parent with whom the minor resides

(ii) a person with lawful custody of the minor;

(iii) a court appointed guardian of the property under the provision of the Children's Law Reform Act; or,

(iv) the Children's Lawyer, in the event there is no person available under subparagraphs (i), (ii), (iii) or if there is a conflict of interest between the minor and such person.

Mr. Bye does not fit easily into any of the categories outlined in Rule 10. The Insurer maintains that he was not living with his parents at the time, so neither of them is eligible to act as litigation guardian.

No guardian of the minor's property has been appointed by the court. In addition, the Children's Lawyer has not been involved on behalf of Mr. Bye.

Ms. Callista Young, Mr. Bye's mother, also had an ongoing parental relationship with him, notwithstanding his absences from the home due to conflict with his stepfather. While he would frequently stay with the Whites at their farm, he had a history of returning to his mother's home, only to leave again when familial conflict became intolerable for him.

Perhaps because of the difficulty in finding the appropriate person to act, or just oversight by the solicitors, no litigation guardian was named on the Application for Arbitration.

The result is, according to the Insurer, that Mr. Bye's Application for Arbitration is void by reason of non-compliance with Rule 10.

If successful, the Insurer's argument would result in the dismissal of Mr. Bye's Application for Arbitration on a technicality, and before sufficient evidence can be tendered to sort out Mr. Bye's actual relationship to his parents or the Whites. The irony of such a summary judgement would be that it would come barely six weeks prior to Mr. Bye's majority in September, which would put all such technical arguments to rest.

Although no evidence was filed on this motion, it would seem that Ms. Hillier was retained by the Whites who were neither Mr. Bye's parents, nor persons with lawful custody of him. The Insurer alleges that they, too, are ineligible to act as litigation guardians since they did not have lawful custody of Mr. Bye.

Mr. Bye, however, lived on the farm in Caledon with the Whites at the time of the accident, and was provided room and board as well as pay for any farm work he performed. There appears to have been a connection with the Whites that went beyond a mere employment relationship.

There are also significant similarities between Mr. Bye's situation and that of J.B. in J.B. (Minor) and Liberty Mutual Insurance Company (OIC A96-00008, July 30, 1996), a case which involved a claim for a death benefit on behalf of the daughter of an accident victim who was living with her grandparents at the time of the accident rather than with the deceased. In that case, Arbitrator Blackman stated:

I am satisfied on the evidence presented, that at the time of the accident, J.B.'s stay at her grandparents was a temporary response to an unfortunate home situation. I am further satisfied that both J.B. and her mother intended J.B. to return to her mother's home, and in fact plans were in place at the time of the accident for such a return.

Should the evidence agree with the Applicant's submissions, it is quite possible that an arbitrator might find that Mr. Bye actually resided with his mother in the same manner as J.B. was found to reside with her mother.

Likewise, following the reasoning in Taggart (Litigation Guardian of) v. Simmons (2 O.R. (3d) 704 C. of A.), there is support for the proposition that the Whites could well be the appropriate litigation guardians. In that case, Goudge J.A. extended the application of the term "relative" in a policy:

Given these considerations I think, a liberal approach to the term "relative" requires that the coverage extend to someone with whom the named insured has a de facto parent-child relationship. In this case, Mr. Tessier regarded John Taggart as his son and vice-versa. John's natural father has not been around for many years. Mr. Tessier and John Taggart have been living together as family with Mr. Tessier supporting him, looking after him and seeing to his education as any father would.

In these circumstances, it is my view that the family protection coverage provided by this endorsement extends to John Taggart as a "relative of Mr. Tessier, provided he can demonstrate at trial the dependency also required by s. 1.2 (b) of the endorsement. It is just and equitable that this endorsement provide coverage not just for those tied by blood, marriage and adoption to the named insured, but also to those like John Taggart linked by the reality of a de facto parental relationship. His claim for indemnity on this basis should not have been dismissed on summary judgement.

While the word "relative" does not figure in Rule 10 of the Code, the Court's comments about the "reality of a de facto parental relationship" and its refusal to restrict itself to the narrow dictionary meaning of the word should apply equally to the words "parent" or "legal custody."

Following this logic, it is conceivable that either Rule 10(c)(i) or (ii) could apply to the Whites.

Consequently, I do not accept the Insurer's assertion that neither Ms. Callista Young nor Ms. Sonja White would be able to act as litigation guardian in this matter. Any such determination is premature.

While it is possible that either Ms. Young or Ms. White could have acted as litigation guardian for Mr. Bye, there is no indication on the record that they, indeed, did act in such a capacity. On its face, in the absence of a litigation guardian, the Application for Arbitration is not in conformity with Rule 10 of the Code. What, then, is the consequence of such non-conformity?

Unlike the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, which are Regulations made under the Courts of Justice Act, R.S.O. 1990, c.C.43, the effect of the Rules contained in the Code is ambiguous. The Rules are, in effect, procedural directions made under section 21 of the Insurance Act and section 25.1 of the Statutory Powers Procedure Act, R.S.O. 1990, c.S.22 ("SPPA").

Section 25.1 of the SPPA provides that "A tribunal may make rules governing the practice and procedure before it."

Procedural rules relating to practice, which are not laws or regulations according to subsection 25.1(5), cannot alter substantive rights. Indeed, subsection 25.1(3) requires that all rules be consistent with the SPPA and the other Acts to which they relate, in this case, the Insurance Act.

Importantly, Rule 1.3 of the Code recognizes that a defect in form or other technical breach will not make a proceeding invalid. In other words, a mere failure to comply with a procedural direction, such as Rule 10, will not prevent Mr. Bye or any other applicant from exercising his statutory right to claim accident benefits. Clearly, the failure to appoint a proper litigation guardian in this matter does not invalidate the claim.

The Rules, however, cannot simply be ignored. While the claim will not be struck out as a nullity, neither may it proceed further in the process until the deficiency has been addressed in some way.²

Practically speaking, in Mr. Bye's case, with his majority fast approaching, it is likely that he will be of full-age before a litigation guardian could be appointed, at which time the question of such an appointment will be moot.

Having found that Mr. Bye's retainer of a lawyer and commencement of an arbitration is voidable rather than void, that Mr. Bye has given no indication of any intent to repudiate Ms. Hillier's retainer, and that a non-compliance with Rule 10 alone does not provide grounds to declare his Application for Arbitration a nullity, it is appropriate that this arbitration be allowed to proceed, once Mr. Bye has re-affirmed his retainer of Ms. Hillier and his Application for Arbitration following his eighteenth birthday on September 5, 2003.

A resumption of the pre-hearing will be set for September 12, 2003 to deal with this matter.

Should Mr. Bye fail to ratify his solicitor's actions in bringing forward this arbitration by the resumption of the pre-hearing, then this arbitration shall be stayed and the Insurer may move to have the Application for Arbitration dismissed. It may also, at that time, move for any order with regard to expenses that it feels appropriate.

EXPENSES:

I leave any question of expenses in this matter to the arbitrator ultimately disposing of this case.

August 6, 2003

John Wilson Arbitrator

Date