Joan Kennedy v. Traders General Insurance Company, 2004 ONFSCDRS 14

FINANCIAL SERVICES COMMISSION OF ONTARIO

Neutral Citation: 2004 ONFSCDRS 14 FSCO A02-001715

BETWEEN:

JOAN KENNEDY Applicant

and

TRADERS GENERAL INSURANCE COMPANY Insurer

DECISION ON A MOTION

Before: John Wilson

Heard: January 16, 2004, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances: David S. Wilson for Mrs. Kennedy Deborah G. Neilson for Traders General Insurance Company

Issues:

The Applicant, Joan Kennedy, was injured in a series of motor vehicle accidents commencing on June 23, 1997. She applied for and received statutory accident benefits from Traders General Insurance Company ("Traders"), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mrs. Kennedy applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. The pre-hearing of this matter took place on April 23, 2003. At that time a hearing date was set for February 16, 17, 18 and 19, 2004.

On January 14, 2001, Traders, by its counsel, Deborah Neilson, served and filed a notice of motion and motion record.

Ms. Neilson, by her motion, requested the following orders :

1. For production of certain documents in the hands of third parties;

2. Adding the issues of entitlement to income replacement benefits for the accidents of July 4, 1997, August 5, 1997, January 5, 1998, July 5, 1998 and November 7, 1998 to the within arbitration;

3. Adding the issue of failure to provide notice and information under sections 32 and 33 of the Schedule;

4. That a preliminary issue hearing on the alleged non-compliance with sections 32 and 33 of the Schedule be held on February 16, 2004;

5. That an adjournment be granted of the arbitration to a date to be advised.

Result:

1. Traders' motion is dismissed with expenses payable to Mrs. Kennedy.

EVIDENCE AND ANALYSIS:

Ms. Neilson relied upon the affidavit of Jennifer Zimmerman, an assistant in the offices of Dutton Brock, in support of her motion. Mr. Wilson did not file any responding affidavits nor did he call any evidence in this motion.

Essentially, Ms. Neilson's motions involved an attempt to add a further defence to the Insurer's case, and to request further productions to assist her accountant in compiling a report. The request for an adjournment would be, necessarily, consequent upon the granting of either of the two above-mentioned heads of relief.

In turn, the issues in this motion also raise questions about the essential differences and similarities between an arbitration at the Commission and a proceeding in court.²

Productions:

Ms. Neilson alleged that Mr. Wilson was remiss in not producing a complete copy of Mrs. Kennedy's long-term disability file, employment file, and a complete Canada Pension Plan file.

Although she relied on an affidavit by her assistant, in support of her contention that Mr. Wilson had undertaken to produce that documentation in its entirety, the affidavit consists of nothing more than information and belief, presumably based on Ms. Neilson's recollection of the events at the pre-hearing.

I find that there is no evidence that Mr. Wilson undertook to produce more than he did, in fact produce. There is no order from Arbitrator Wacyk, nor any correspondence acknowledging any obligation to produce more. Furthermore, I accept that Mr. Wilson has likely produced all the relevant information with regard to employment and CPP benefits that has been provided to him by the appropriate third parties.

In an arbitration hearing it is expected that production issued will be clarified and resolved prior to pre-hearing. There is also a provision for the production of documentary evidence in the hands of third parties. Given the failure to avail itself of this procedure, and indeed any positive action to compel production in the months following the pre-hearing, I find that it would be inappropriate to make such an order now.

Adding Issues and the resulting adjournment:

According to the pre-hearing letter, the issues in the arbitration were defined as:

1. Is Mrs. Kennedy entitled to receive a weekly income replacement benefit ("IRB") pursuant to section 4 of the Schedule?

More specifically, the issues are:

• whether Mrs. Kennedy is entitled to IRB's post 104 weeks following the June 23, 1997 accident; and,

• whether Mrs. Kennedy is entitled to IRB's as a result of injuries sustained in the November 7, 1998 accident.

In addition, Traders relies on section 33 of the Schedule to argue that even if Mrs. Kennedy is entitled to benefits as a result of the November 7, 1998 accident, she is precluded from receiving those benefits as she has not responded to Traders'request for production of her collateral benefits file.

2. What is the amount of weekly income replacement benefit that Mrs. Kennedy is entitled to receive pursuant to section 6 of the Schedule?

This question flows from the amount of LTD to be deducted from her IRB's.

3. Is Mrs. Kennedy entitled to interest for the cost of examinations, pursuant to section 24 of the Schedule?

While Traders has paid $5,136 in section 24 benefits which were in dispute, Mrs. Kennedy claims the interest on those amounts.

4. Is Mrs. Kennedy liable to repay Traders the benefits she received from Traders, pursuant to section 47 of the Schedule?

Mrs. Kennedy argues that section 47 does not apply and that in any event, Traders is out of time to require the repayment.

5. Is Traders liable to pay a special award pursuant to subsection 282(10) of the Insurance Act because it unreasonably withheld or delayed payments to Mrs. Kennedy?

6. Is Traders liable to pay Mrs. Kennedy's expenses in respect of the arbitration under section 282(11) of the Insurance Act, R.S.O. 1990, c. I.8?

7. Is Mrs. Kennedy liable to pay Traders' expenses in respect of the arbitration under section 282(11) of the Insurance Act, R.S.O. 1990, c. I.8?

8. Is Mrs. Kennedy entitled to interest for the overdue payment of benefits pursuant to section 46(2) of the Schedule?

Following the pre-hearing, there were evidently discussions of some sort between the parties concerning matters that may have been inadvertently overlooked by the pre-hearing arbitrator in the pre-hearing letter. ³These discussions culminated in a letter written to the Commission by Mr. Wilson dated September 9, 2003 in which he stated:

Counsel had agreed that in issue at the Hearing is whether the insured is entitled to receive a weekly IRB not only with respect to the two accidents referenced, but in addition to the accidents of July 4, 1997, August 5, 1997, January 5, 1998, and July 5, 1998.

This is consistent with the Application for Arbitration, which in Schedule "A" lists the same accidents as forming part of the subject matter of the arbitration.

Although in its notice of motion the Insurer purports to request that the accidents referenced in the September 9, 2003 letter be added to the arbitration, I find that they have always formed part of the issues brought to arbitration by Mrs. Kennedy, notwithstanding Arbitrator Wacyk's apparent oversight in draughting the pre-hearing letter.

The other issues that Ms. Neilson requests to be added are not so obvious, however. The failure to provide notice pursuant to section 32 (1) of the Schedule and the failure to provide a statutory declaration pursuant to section 33(1) 2 of the Schedule do not appear in either the Insurer's Response nor in the pre-hearing report. They are also absent from any correspondence filed in support of this motion by Ms. Neilson with the exception of a December 17, 2003 letter addressed to the Commission.

While I accept that arbitrators may consider any issue in dispute whether raised by the Insurer or the Insured,⁴ I have concerns about adding important issues to an arbitration so late in the day.

Ms. Neilson has submitted that the defences were raised in the Insurer's mediation response, in February of 2003. Rules 18.1 and 18.5 of the Practice Code, however, make it clear that, with the exception of the mediator's report, there is no transfer of information from the mediation to the arbitration process.

The arbitration process is commenced by an application for arbitration. Whatever may have been mediated, it is this application that sets forth which issues will be put forward to arbitration.

Likewise the Insurer's response must include, pursuant to Rule 27.1 (a) "a response to each issue raised in the Application for Arbitration." It also must, pursuant to Rule 27.1 (b) provide "a description of any additional issues which the insurer wishes to have arbitrated, provided that the issues were submitted to mediation and failed."

The Practice Code does not further define either the application or the response, but, essentially, they form the basis of the pleadings in an arbitration. As such they define the scope of any arbitration hearing. As Swinton J. noted in Foodcor Services Corp. v. Seven-Up Canada Inc. [1998] O.J. No. 2576:

The function of pleadings is to define issues in controversy in the litigation, in order to give the opposing party fair notice of the case to be met and allow him or her to respond, and to assist the court in determining the issues of the case (National Trust Co. v. Furbacher, [1994] O.J. No. 2385 (Gen. Div.) at paragraph 9; Mazzeo v. Kingston (City) O.J. No. 1738 ( Gen. Div.)).

The arbitration process offers a further opportunity for parties to "clarify the issues to be arbitrated."⁵ At a pre-hearing an arbitrator reviews and confirms with the parties the specific issues that will proceed to an arbitration hearing. There is no evidence that the Insurer raised its potential section 32 and 33 defences at that time. Indeed, there is a complete silence on these issues until December 2003.

Mr. Wilson submitted that Mrs. Kennedy, effectively, had no notice in this proceeding of the full extent of the case she would have to meet and that, based on the Insurer's conduct in not pursuing its potential defences, Mrs. Kennedy was potentially, seriously prejudiced. In the case of the missing statutory declaration, no benefit is payable for any period before an applicant provides the document.

Mrs. Kennedy could well have provided the requisite declaration early on in the process if she knew that the Insurer was relying on section 33(1) 2. Now, potentially, benefits for the period between the filing of the Insurer's Response and the hearing may never be recovered.

From the Insurer's own affidavit it is apparent that it was aware quite early on of the potential defence that was available to it. It did not somehow obtain some late-breaking information that only brought the possibility of these defences to its attention in November or December of 2003. For some reason, either tactical, or substantive, or perhaps, oversight, it chose not to avail itself of that opportunity. Given the total absence of the mention of such a defence from the Insurer's Response, any amended response, the pre-hearing letter, or correspondence correcting the pre-hearing letter, I find that it was reasonable for Mrs. Kennedy to assume that the Insurer had no intention of relying upon such defences.

The legal doctrine of laches or estoppel by laches was developed to address such conduct. Laches are defined by the Canadian Oxford Dictionary as:

unjustifiable, inexcusable, or unreasonable delay in performing a legal duty, asserting a right, claiming a privilege etc.

The courts have recognized that laches comprise more than mere delay.

Two circumstances, always important in such cases, are, the length of the delay and the nature of the acts done during the interval, which might affect either party and cause a balance of justice or injustice in taking the one course or the other, so far as relates to the remedy.⁶

The same circumstances of delay and prejudice continue to be recognized and applied by Canadian courts.⁷

I accept that Mrs. Kennedy would be seriously prejudiced if the Insurer was permitted to raise a new statutory defence to her claims at this late date. No doubt the Insurer will suffer some prejudice as well if it may not avail itself of these defences.

The Supreme Court in M (K) v. M (H) (supra), reminds us that "Ultimately, laches must be resolved as a matter of justice between the parties, as with the case with any equitable doctrine."

The practice of the courts in adding issues is also useful in arriving at an understanding of how the issue of "prejudice" can be handled in this context. The default response by the courts has been to permit an issue to be added unless the prejudice to the other side cannot be addressed by either costs or an adjournment or both. Indeed, to some extent, these principles have crept into some of the earlier cases at the Commission⁸.

Certainly, the question of whether the prejudice claimed can be fairly addressed bears on any weighing of "justice between the parties".

Mr. Wilson submitted that, at least with regard to the statutory declaration, Mrs. Kennedy would irretrievably lose benefits, which would only recommence if and when a new statutory declaration was produced. Neither an adjournment nor an expense order could be seen to address that prejudice. Nor was the Insurer prepared to accept a waiver of its rights under section 32 for that time before it gave notice of its reliance on that defence.

Unlike the courts, the arbitration system is designed to work on strict time discipline.⁹ Hearing dates are set on the consent of both parties, and are subject to revision only in cases of personal emergencies, the prospect of imminent settlement, or the unforeseen unavailability of critical evidence, or the involvement of counsel in an ongoing proceeding that was scheduled to conclude before the time scheduled for the arbitration.

As noted earlier, the commencement of the hearing in this matter was set, by consent, for February 16, 2004. At the pre-hearing the parties not only agreed to set the date for the hearing, but agreed that it could be conducted in four days. Barring the occurrence of circumstances such as those described above, they are expected to be able to proceed within the agreed time-frame. This is consistent with a system that is designed to be "quicker, less expensive and less formal"¹⁰than the courts.

While time-lines in the courts may have tightened somewhat, since the introduction of case management, their pace is still positively majestic compared to what is expected of arbitrations.

The Practice Code ¹¹ provides that:

7. An Application for Arbitration in Form C will be registered and assigned to an arbitration case administrator within 5 business days of receipt of an Application completed in accordance with Rule 25.1.

8. Dates for holding an arbitration pre-hearing discussion (Rule 33) will be available to the parties within 6 to 8 weeks from the registration of a completed Application for Arbitration.

9. Dates for holding an oral arbitration hearing will be available to the parties within 4 to 6 months from the conclusion of the pre-hearing discussion.

10. An oral arbitration hearing is generally concluded within 3 days.

11. An arbitration order from an oral hearing will be issued within 60 to 85 days from the conclusion of the oral hearing.

Thus, according to the Practice Code, an insured may reasonably expect a ruling on benefit entitlements in less than a year from the commencement of the arbitration process.¹²

Rule 26 of the Rules of Civil Procedure provides in mandatory terms for the granting of leave to amend pleadings at any stage of an action "on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment."¹³

There is no corresponding rule in the Commission's Practice Code, since, in the arbitration system timing is critical. If amendments and adjournments are granted as a matter of right, the expectation of a ruling and final decision on an issue in less than a year from its commencement could not be met. Likewise the restricted costs-power of arbitrators which do not provide for costs on a full indemnity basis limits the use of costs to fully compensate for any prejudice to a party.

Even faced with the mandatory aspects of Rule 26, the courts still refuse amendments from time to time, especially when pleadings have been "amended from time to time and (were) refined in pre-trial proceedings."¹⁴ As Sharpe J. observed in one case¹⁵:

The defendants had carefully chosen their ground upon which to defend the action, and then, after the case had been submitted, sought to alter the ground to the point of contradicting the version they originally had put to the court on a central issue.

In that case, the amendments were not allowed as being "palpably unjust."

In an arbitration hearing, in the absence of a Rule 26, on much tighter time-lines than a court action, and with the benefit of an intervening pre-hearing where parties have an opportunity to clarify the issues, the time when it is judged to be palpably unjust to add issues without the consent of the other party must, necessarily, arrive significantly earlier in this process than in a court action.¹⁶

I find that, in this matter, the Insurer has waited too long to raise the further defences under sections 32 and 33 of the Schedule. These issues were known to it at the time of their response and the pre-hearing, yet they were not advanced.

Traders has not demonstrated that there are compelling reasons to add further issues to this arbitration.

I find, as well that Mrs. Kennedy would be prejudiced, in a manner that cannot be addressed by either an expense order or an adjournment by the addition of these further issues on the eve of the scheduled hearing.

I accept that Mr. Wilson, on behalf of Mrs. Kennedy, has made out a case for the application of the doctrine of laches.

Therefore, I decline to allow the Insurer to add the further issues to this arbitration.

Since the issues are not to be added, the question of bifurcating the hearing to permit them to be heard separately is moot.

Nor has Traders made out a case of exceptional circumstances that would justify an adjournment of the hearing at this time. While counsel may have had second thoughts about the appropriate course of the arbitration, that does not fall within the reasons for adjournment outlined in Practice Note 9.

EXPENSES:

Both parties made submissions on the issue of expenses. Mrs. Kennedy was successful on all counts in this motion.

Ms. Neilson originally brought this motion as a resumption of a pre-hearing, and accordingly provided no documentation or evidence for her proposed motion.

She was given an opportunity to bring her motion into compliance with Rule 67.3, and, ultimately filed a notice of motion, motion record and affidavit in support.

The hearing of the motion itself took the best part of an afternoon.

While I make no suggestion that the motion itself was either frivolous or vexatious, the failure to serve and file proper materials prior to the original motion had the effect of unduly delaying the process.

Given the complete success of the Applicant, and the initial failure of the Insurer to comply with Rule 67, I exercise my discretion to award Mrs. Kennedy her fixed expenses incurred in this preliminary issue hearing, which I set at $650.

John Wilson Arbitrator

Date

Neutral Citation: 2004 ONFSCDRS 14 FSCO A02-001715

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

JOAN KENNEDY Applicant

and

TRADERS GENERAL 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:

1. Traders' motion to order further productions, add further issues, adjourn the matter and order a preliminary issue hearing is dismissed.

2. The arbitration hearing shall proceed on February 16, 17, 18 and 19, 2004 as scheduled.

3. Traders shall pay to Mrs. Kennedy $650 forthwith as her fixed expenses in this motion.

February 3, 2004

John Wilson Arbitrator

Date

Footnotes

1. 1The 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, 303/98, 114/00 and 482/01.
2. 2The Introduction to the Practice Code at p. 10 defines arbitration as: "Arbitration is a decision making process, similar to court. The advantages of arbitration over the court process are that it is quicker, less expensive and less formal."
3. 3The Insurer filed as part of its material, a copy of a July 24, 2003 letter from Mr. Wilson to Ms. Neilson discussing this matter.
4. 4Section 282(3) of the Insurance Act
5. 5See Practice Note 7 The Arbitration Pre-Hearing Discussion
6. 6Lindsay Petroleum Co. v. Hurd (1874), L.R. 5 P.C. 221
7. 7See M (K) v. M. (H) 1992 CanLII 31 (SCC), [1992] 3 S.C.R. 6
8. 8See Colussi and General Accident Assurance Company of Canada (OIC A-009880, March 11, 1996) where Arbitrator Manji appeared to conclude that the prejudice to an applicant could be addressed by an adjournment, and ordered the issue of a repayment added to the arbitration.
9. 9Even the courts under case management have adopted a more stringent attitude towards time. A plaintiff chooses the "track" for the litigation. Once something is fast-tracked "the parties will have to provide very compelling reasons before a case management judge will permit any changes of track or to the timetable." Introduction - Case Management Rules Ontario Annual Practice. It is important that Rule 77- Case Management-prevails over any preceding Rule.
10. 10Practice Code Introduction at p.10
11. 11Practice Code Introduction at p.13
12. 12Historically arbitration has been seen as an efficient, time-sensitive alternative to the courts. In 1856 Lord Campbell in Scott v. Avery 5 H.L. Cas. 811 remarked: "Is there anything contrary to public policy in saying that the company shall not be harassed by actions to be brought against them, the costs of which might be ruinous, but that any dispute that arises shall be referred to a domestic tribunal, which may speedily and economically determine the dispute?
13. 13Subject of course to the overriding provisions of the timetable set pursuant to Rule 77 of The Rules of Civil Procedure.
14. 14Pace v. DelZotto [1966] O.J. No. 143
15. 15Pace v. DelZotto (supra)
16. 16Obviously this will vary with the facts of each case with consideration given to previous knowledge of the issue to be added, and the equities of the situation between the parties.