Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2003 ONFSCDRS 55

Variation/Revocation P02-00034

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ANDREW L. LUKACHKO

Applicant

and

ALLIANZ INSURANCE COMPANY OF CANADA

Respondent

Before:

Stewart M. McMahon

Representatives:

Andrew L. Lukachko in person

Andrew T. Graham for Allianz

Hearing Date:

April 2, 2003

VARIATION/REVOCATION ORDER

Under section 284 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

The application to vary or revoke arbitration orders dated November 30, 2001 and May 8, 2002, is dismissed.
Mr. Lukachko shall pay Allianz Insurance Company of Canada the expenses of the proceeding fixed at $500.

April 9, 2003

Stewart M. McMahon Director's Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE PROCEEDING

Mr. Lukachko was injured in a motor vehicle accident on December 7, 1998. Following the accident, he submitted various claims for statutory accident benefits to Allianz Insurance Company of Canada ("Allianz") pursuant to the SABS-1996.¹ The parties were unable to resolve a number of disputes, and ultimately an arbitration hearing was conducted. The issues in dispute included claims for income replacement benefits ("IRBs"), housekeeping and home maintenance services, the cost of a medical report, and the expenses of the proceeding. The Arbitrator's decision dated November 30, 2001, dismissed the claim for IRBs and the cost of the medical report, but allowed a portion of the housekeeping and home maintenance claim. In a supplementary decision dated May 8, 2002, the Arbitrator ordered Mr. Lukachko to pay Allianz the expenses of the arbitration assessed at $5,296.00.

Mr. Lukachko appealed both orders pursuant to s. 283 of the Insurance Act ("the Act") and Rule 50 of the Dispute Resolution Practice Code (the "Code"). He challenged the Arbitrator's rulings with respect to IRBs, housekeeping and home maintenance and arbitration expenses. He did not challenge the decision regarding the cost of the medical report. On December 9, 2002, I released a decision which substantially dismissed the appeal, but reduced the order for arbitration expenses by $500.

Following the release of the appeal decision, Mr. Lukachko filed an Application for Variation/ Revocation pursuant to s. 284 of the Act and Rule 61 of the Code. Mr. Lukachko seeks an order varying the arbitration orders as they relate to his claim for IRBs, the cost of the doctor's report, and the expenses of the arbitration. In the alternative, he seeks an order revoking the orders and a direction that the matter be remitted for a new hearing. Mr. Lukachko is not seeking to vary or revoke the Arbitrator's order relating to housekeeping and home maintenance expenses. Section 284 and Rule 61 authorize the Director of Arbitrations ("the Director") to vary or revoke an arbitrator's order in three instances:

there has been a material change in the circumstances of the insured person;
evidence not available on the arbitration has become available ("fresh evidence");
there is an error in the order.

Mr. Lukachko seeks to vary or revoke the orders on the strength of fresh evidence and on the basis that there are errors in the orders. I am not convinced by either argument and consequently, am not prepared to vary the orders or remit the matter for a new hearing. Most of the "fresh evidence" offered by Mr. Lukachko was available at the time of the arbitration. In addition, I am not convinced that it would likely have affected the outcome of the arbitration. More fundamentally, I think that Mr. Lukachko has misconstrued the purpose of s. 284. He has used a variation and revocation proceeding to re-argue the appeal. I do not think that is its purpose. In any event, Mr. Lukachko has not given me any reason to doubt the correctness of the appeal decision.

II. BACKGROUND

The facts of this case are set out in the arbitration and appeal decisions. I will reiterate them in a summary fashion only.

At the time of the motor vehicle accident Mr. Lukachko was 71 and had been retired from his employment as a graphic designer for a number of years. However, he owned a piece of rural property that he had been actively involved in improving and maintaining for many years. It contained two dwellings which he rented out.

Mr. Lukachko initially applied for a non-earner benefit, but shortly before the hearing he abandoned this claim in favour of IRBs. Mr. Lukachko variously described himself as a self-employed carpenter engaged in the business of building and maintaining the structures on his property, a property manager engaged in the business of renting the property, or a land developer engaged in the business of developing the property for resale.

The Arbitrator found that Mr. Lukachko was no longer capable of the heavier tasks involved in maintaining the property, but rejected his assertion that he was self-employed. He found that Mr. Lukachko's attempt to characterize himself in this light was "an after the fact attempt to match his activities in respect of the property with a remedy provided by the Schedule." He stated that "[w]hatever limited revenue the property might have generated was as a consequence of the ownership of the property and not derived from employment." He went on to state that even if Mr. Lukachko had been able to establish that he was self-employed, he had not earned an income from that employment in the 52 weeks preceding the accident, and hence his IRB would be nil. The Arbitrator addressed some of the additional expenses Mr. Lukachko was incurring to maintain the property, by way of his order for home maintenance expenses.

In dismissing the appeal I stated that it was not a close case and that there were numerous reasons why Mr. Lukachko's claim for IRBs could not succeed. I agreed with the Arbitrator's conclusion that Mr. Lukachko was not employed in the sense contemplated by the SABS-1996, and that whatever income he earned was better characterized as investment income, rather than income from employment. I also agreed with the Arbitrator's conclusion that if Mr. Lukachko was self-employed, he had not established what, if any, net income he earned from that employment in the 52 weeks preceding the accident. Sections 6 and 62 of the SABS-1996 provide that a self-employed person's income (on which their IRB is based) shall be determined in the same manner as the person's profit would be determined under the Income Tax Acts. In general terms this means the person's income is calculated by subtracting expenses from revenues. Mr. Lukachko failed to provide the Arbitrator with even a modicum of the evidence necessary to establish either the rents he collected in the year preceding the accident, or the expenses he incurred to generate those rents.

As noted earlier, Mr. Lukachko seeks to vary or rescind the Arbitrator's ruling rejecting his claim for IRBs.

Prior to the arbitration hearing Mr. Lukachko's previous lawyer arranged to have him examined by an orthopaedic surgeon, and when Allianz refused to pay for the report, Mr. Lukachko claimed the expense pursuant to s. 24 of the SABS-1996. However, just before the start of the arbitration hearing Allianz paid the doctor directly. Notwithstanding this payment, Mr. Lukachko continued to demand a further payment equal to the cost of the report. The Arbitrator dismissed the claim summarily, stating that in light of the payment to the doctor there was no basis for Mr. Lukachko's ongoing demand. However, he awarded Mr. Lukachko interest to the date the payment was made to the doctor. Mr. Lukachko did not appeal the order, but now seeks to challenge the ruling by way of this proceeding.

Following the principal decision, the Arbitrator released a supplementary decision in which he awarded Allianz a portion of its expenses of the arbitration. The Arbitrator referred to three criteria in support of the award: Mr. Lukachko's limited success, conduct on the part of Mr. Lukachko that tended to lengthen the proceeding, and the considerable efforts made by Allianz to settle the matter. In coming to this decision the Arbitrator correctly differentiated the offers to settle for a full and final release from the offers to settle the discreet issues in dispute at the hearing. He noted that the offers to settle the discreet issues exceeded the amount Mr. Lukachko was ultimately awarded. On appeal, I reduced the award by $500 because I concluded that the Arbitrator had not given Mr. Lukachko sufficient credit for the expenses he incurred prior to Allianz making any offer to settle. Mr. Lukachko now seeks to further vary or revoke the Arbitrator's order, by way of this proceeding.

III. THE VARIATION/REVOCATION PROCEEDING

A. Should the arbitration orders be varied or revoked on the basis that there are errors in the orders?

Mr. Lukachko submits there is an error in the order because it does not state that he was entitled to IRBs. More specifically, he argues that the Arbitrator misconstrued the definition of self-employed in the SABS, and ignored or misinterpreted crucial evidence. Mr. Lukachko also submits there is an error in the order because he, not Allianz, should have been awarded the expenses of the arbitration proceeding. All of these submissions mirror the arguments Mr. Lukachko made on appeal.

The scope of the Director's power to vary or revoke an order pursuant to s. 284 of the Act and Rule 61 of the Code must be considered in light of the fact that s. 283 and Rule 50 provide a right of appeal. Although both types of proceedings deal with errors in the order, they are designed to address different types of situations, and the Act and Rules should be interpreted in a way that avoids duplication.

The "error in the order" ground for a variation or revocation order has not been used very often, and there is some room for discussion about its parameters.² However, I can say with confidence that it is not designed to allow a party to reargue their appeal. A party seeking to challenge an arbitration order on the grounds of an error in the order must determine whether they should appeal pursuant to s. 283, or seek to vary or rescind the order pursuant to s. 284. They cannot chose one option and then, if they are unsuccessful, pursue the other. If Mr. Lukachko was unhappy with the outcome of the appeal, his option was to consider an application for judicial review. It was not open to him to re-argue the appeal in the guise of an application for variation or revocation. Accordingly, I dismiss Mr. Lukachko's application as it relates to his assertion that there are errors in the orders relating to either the IRB issue or the expenses of the arbitration proceeding.

The challenge to the Arbitrator's order concerning the cost of the doctor's report raises a slightly different issue. It also involves a submission that the Arbitrator erred, and consequently would have been the proper subject matter of an appeal. However, Mr. Lukachko chose not to include that issue when he appealed. He would be out of time if he attempted to appeal that part of the order now. See Rule 52. In Sittler and Canadian General Insurance Company, (P-000951 and V-000951), and Sittler and Pilot Insurance Company, (OIC P-004495 and OIC V-004495, August 11, 1995), the Director of Arbitrations stated that a party cannot use a variation or revocation proceeding to circumvent the time limits contained in s. 283. I agree, and for this reason dismiss this aspect of the application.

B. Should the arbitration orders be varied or revoked on the strength of fresh evidence?

The fresh evidence Mr. Lukachko is asking me to consider can usefully be divided into three groups:

documents relating to the IRB claim that I had previously refused to admit as fresh evidence in the appeal proceeding;
additional statements and documents relating to the IRB claim that were not offered during the arbitration or appeal proceedings;
evidence concerning the subsequent settlement of an additional issue that goes to the order for expenses.

My reasons for declining to re-visit the arguments about errors in the order apply equally to the request that I re-visit my earlier refusal to admit the document in the first group. I am also inclined to think that it would be a proper ground for rejecting the second group of documents. However, even if they are properly admissible in this proceeding, I do not think they can support an order revoking or varying the arbitration order.

There is a well developed body of jurisprudence commenting on the considerations governing the admission of fresh evidence on appeal. The leading case is Palmer v. The Queen, 1979 CanLII 8 (SCC), [1980] 1 S.C.R. 759, where the Supreme Court of Canada set out the following criteria:

The evidence should generally not be admitted if, by due diligence, it could have been adduced at trial;
The evidence must be credible, in the sense that it is reasonably capable of belief;
The evidence must be relevant in the sense that it bears upon a decisive or potentially decisive issue in the trial; and
The evidence must be such that, if believed, it could reasonably, when taken with the other evidence adduced at trial, be expected to have affected the result.

In Budd and Personal Insurance Company of Canada, (FSCO P99-00032, January 8, 2000), I noted that these principles had generally been adopted in FSCO's jurisprudence. I also referred to a suggestion in Mercer v. Sijan (1977), 14 O.R. (2d) 13 (Ont. C.A.), about the need to avoid the affront to common sense involved in the court shutting its eyes to a fact which falsifies the lower court's assessment. I concluded that the need to balance the competing goals of finality and correctness meant that the factors set out in Palmer must be weighed together, rather than in isolation.

Given that appeals are now limited to questions of law, variation and revocation proceedings are arguably the more appropriate vehicle for challenging an arbitration decision on the basis of fresh evidence, and we might expect to see more jurisprudence on the use of fresh evidence in these proceedings in the future. At present, there is only one decision dealing with this issue, Ready and Progressive Insurance Company and Zurich Insurance Company, (OIC V-004769 and V-005403, June 25, 1997). Director's Delegate Naylor suggested that the criteria for fresh evidence in a variation or revocation proceeding may be somewhat different depending on the nature of the case. However, she stated that generally, the fresh evidence should only be admitted if a diligent party could not have been expected to have presented it at arbitration, and it could reasonably be expected to have had an important influence on the decision. I adopt this approach, subject to the caveat that all the applicable factors must be weighed together.

In this case, Mr. Lukachko's reasons for not including the "fresh" evidence on the IRB issue, at the time of the arbitration proceeding, are very weak. However, even if his explanations are sufficient, I do not think any of the documents, when considered together with the evidence submitted at the arbitration hearing, could be expected to have had an important influence on the decision.

Some of the documents, such as evidence of tenancy agreements that post-date the accident, are simply irrelevant. Others bolster the evidence that suggested both residences were rented at the time of the accident, but that fact appears to have been accepted by the Arbitrator. None of these documents could be expected to have had an impact on the fundamental question of whether Mr. Lukachko was self-employed. Nor do they, in any significant way, assist Mr. Lukachko in establishing what, if any, income he earned in the 52 weeks preceding the accident. Similarly, the further documents concerning the appreciation in the value of the property would not have affected the outcome because they do not change the fact that Mr. Lukachko had not sold or entered into an agreement to sell the property.

One piece of evidence deserves specific comment. Mr. Lukachko stated in a letter to Allianz's counsel that he had not reported any rental income to Revenue Canada because his net income from the leases was far less than his capital cost allowances. The Arbitrator relied on this statement when he found that Mr. Lukachko had not proven he earned an income from renting out the residences. Mr. Lukachko now asserts that the capital cost allowance was only a fraction of the rents he collected and, contrary to his earlier statement, he did declare income to Revenue Canada. However, notwithstanding ample opportunity, Mr. Lukachko did not provide copies of the tax returns to substantiate this statement. In light of this, I do not think his present assertions are believable, and hence could not be expected to have affected the outcome of the proceeding.

The fresh evidence relating to the Arbitrator's decision to award Allianz a portion of its expenses raises different concerns, in the sense that it was not evidence that existed at the time of the arbitration hearing, and Mr. Lukachko could not have put it before the Arbitrator.

In the months preceding the arbitration hearing, Mr. Lukachko and Allianz were unable to reach an agreement about a supplementary medical claim. Mr. Lukachko wanted to add this issue to the hearing, but Allianz resisted on the grounds that the dispute had not yet been mediated. Notwithstanding this resistance, a number of the offers to settle delivered in the months preceding the hearing were for full and final releases and, by implication, included the claim for a supplementary medical benefit.

After the arbitration and the appeal hearings, the parties ultimately settled the supplementary medical benefit issue on the basis of a further payment to Mr. Lukachko.

Mr. Lukachko submits that this subsequent settlement invalidates the Arbitrator's rulings on expenses, because it undermines the suggestion that the amounts he ultimately recovered were less than what was offered by the Insurer. I do not agree. First, it is clear that the Arbitrator's principal concern was with the offers that dealt only with the issues to be arbitrated. The fact that another issue was ultimately settled would not have affected his finding that these offers were ultimately more generous than the amounts he ordered Allianz to pay. Secondly, even if the amount Allianz subsequently agreed to pay in respect of the supplementary medical benefits is factored in, three of its offers exceeded the grand total Mr. Lukachko recovered through the combination of the Arbitrator's order and subsequent settlement of the additional issue. In light of this, I do not think the subsequent event undermines appropriateness of the Arbitrator's original order. I do not believe the evidence concerning the subsequent settlement can support an order revoking or varying the Arbitrator's orders regarding the expenses of the Arbitration.

In conclusion, Mr. Lukachko's application to vary or revoke the arbitration orders dated November, 30, 2001 and May 8, 2002, on the basis of errors in the order or on the basis of fresh evidence, is dismissed.

IV. EXPENSES

Each party has asked for their expenses of this proceeding.

I made no order for expense on the appeal, in part because Mr. Lukachko enjoyed some modest success on the question of expenses of the arbitration. However, he was completely unsuccessful on this application. I agree with Allianz's submission that, in light of the fact Mr. Lukachko's claims have been the subject of two earlier decisions, it should be entitled to expenses of this proceeding. The time spent by Allianz's counsel was quite modest. I fix the expenses payable by Mr. Lukachko at $500.