Ms. M. v. Guarantee Company of North America, 2004 ONFSCDRS 183

Financial Services Commission of Ontario

Neutral Citation: 2004 ONFSCDRS 183

FSCO A02-001468

BETWEEN:

Ms. M. Applicant

and

GUARANTEE COMPANY OF NORTH AMERICA Insurer

REASONS FOR DECISION

Before: Suesan Alves

Heard: February 2, 3 and 4, 2004, at the offices of the Financial Services Commission of Ontario in Toronto. Written submissions were received by February 14, 2004.

Appearances: Neither Ms. M nor her representative appeared. Gregory Van Berkel for Guarantee Company of North America Bich Pham interpreter in Vietnamese and English

Issues:

The Applicant alleged she was injured in a motor vehicle accident on July 20, 2001, and claimed statutory accident benefits from Guarantee Company of North America ("Guarantee"), payable under the Schedule.¹ There is an indication in the arbitration file that the Applicant testified in a criminal proceeding, following which she became part of a witness protection program. For this reason I have used a pseudonym, Ms. M.

In this arbitration, Ms. M claims income replacement benefits, interest, expenses and a special award. Guarantee disputed that Ms. M. had been injured in an accident within the meaning of the Schedule, and resisted all the relief she claimed in the arbitration. Guarantee also claimed its expenses in respect of the arbitration and an award of $3,000 — the amount Guarantee had been assessed as a filing fee.

The issues in this hearing are:

1. Was Ms. M. was involved in an "accident" within the meaning of section 2 of the Schedule?

2. Is Ms. M. entitled to receive a weekly income replacement benefit of $87.50 per week from July 27, 2001 to August 2, 2001, and of $202.76 per week from August 3, 2001 to December 19, 2001, claimed pursuant to section 4 of the Schedule?

3. Is Ms. M. entitled to interest for the overdue payment of benefits pursuant to section 46(2) of the Schedule?

4. Which party is liable to pay the other's expenses of the arbitration under section 282(11) of the Insurance Act, R.S.O. 1990, c. I.8?

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

6. Is Ms. M. liable to pay an amount to Guarantee that does not exceed the amount assessed against Guarantee in respect of the arbitration, pursuant to subsection 282(11.2) of the Insurance Act, because she commenced an arbitration that is frivolous, vexatious or an abuse of process?

Result:

1. Ms. M.'s claims for income replacement benefits, interest, expenses and a special award are dismissed.

2. Guarantee is entitled to its expenses of the arbitration, fixed in the amount of $3,055.46.

3. Guarantee is not entitled to an award in respect of its assessment.

REASONS:

Background

Ms. M. alleged that she was injured in a motor vehicle accident on July 20, 2001, and claimed income replacement benefits, interest, expenses and a special award in this arbitration. Guarantee resisted all of Ms. M.'s claims on the basis that she had not been injured in an accident within the meaning of section 2 of the Schedule. Guarantee claimed its expenses of the arbitration and an award of $3,000— the amount Guarantee had been assessed as an arbitration filing fee.

Guarantee's request for dismissal

The hearing commenced as scheduled at 10:00 a.m. At that time, counsel for Guarantee was present, however, neither Ms. M. nor her representative were in attendance. Guarantee sought a dismissal of the arbitration. I recessed the hearing so that the case administrator could attempt to reach Ms. M. and her representative.

I was informed by the case administrator that attempts to reach Mr. Pham at his office telephone number and cell phone number were unsuccessful. It was not possible to leave a message for him at either number because both voice mail boxes were stated to be full. I was informed that attempts to reach the Applicant at the last two telephone numbers on file with FSCO for her were unsuccessful.

I inquired of counsel for Guarantee, Mr. Van Berkel, whether Guarantee had any earlier or other telephone numbers for Ms. M. When the case administrator attempted to contact Ms. M. at the number Mr. Van Berkel provided, she learned that telephone number was no longer in service.

Notice

The hearing dates were set following an adjournment of the initial hearing dates in August 2003. A resumption of the pre-hearing was held on October 3, 2003. According to the report of that resumption, Mr. Pham confirmed that the Applicant was ready to proceed with her hearing on February 2, 3 and 4, 2004.

I was satisfied that the Applicant and her representative were given notice of the hearing. The Notice of Hearing states in part: "If you or your representative do not attend at the hearing, the arbitrator may dispose of the case in your absence and you will not be entitled to any further notice of the arbitration proceedings."

Section 7 of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22, as amended, provides that where notice of an oral hearing has been given to a party in accordance with the provisions of that Act, and the party does not attend at the hearing, the tribunal may proceed in the absence of the party, and the party is not entitled to any further notice in the proceeding. I proceeded with the hearing in Ms. M.'s absence.

Dismissal

The hearing resumed at 10:40 a.m. At that time counsel for the Insurer sought an order dismissing the arbitration on two grounds - her failure to comply with undertakings to produce clinical notes and records of seven physicians, as well as her failure to attend and adduce evidence at the hearing. I granted the dismissal on the latter ground.

As the Applicant in this arbitration, Ms. M. had the onus of establishing her entitlement to the benefits she claimed. No evidence was tendered on her behalf. In the absence of any evidence, I dismissed her claims for income replacement benefits as she failed to meet her burden of proof. Since she failed to establish entitlement to income replacement benefits, it followed that no interest was payable on overdue benefits under section 46(2) of the Schedule, and Ms. M.'s claims for interest were therefore dismissed.

Ms. M. claimed entitlement to a special award. A special award is payable under section 282(10) of the Insurance Act where an arbitrator concludes that an insurer has unreasonably withheld or delayed payment of benefits. Since I dismissed Ms. M.'s claims for income replacement benefits, there was no basis on which a special award could have been made. Ms. M.'s claim for a special award was therefore dismissed.

Mr. Van Berkel wished to make written submissions with respect to Guarantee's entitlement to expenses, the amount of those expenses as well as the Insurer's claim to an award in respect of its assessment, and requested that I remain seized of those issues. I agreed to do so, and Guarantee provided its submissions by February 14, 2004.

Expenses

Both parties claimed expenses of the arbitration. An arbitrator has a discretion under section 282(11) of the Insurance Act, to grant such expenses according to criteria prescribed by regulation. Based on the decision of the Director of Arbitrations in Pembridge Insurance Company and Howden, (FSCO P02-00031, May 17, 2004), the applicable criteria are those contained in O. Reg 275/03. The criteria may be summarized as the degree of success in the outcome of the proceeding, written offers to settle, novelty of the issues, conduct of the parties and whether any aspect of the proceeding was improper, vexatious or unnecessary.

I deny Ms. M. her expenses of the arbitration because of her lack of success, non-attendance at the hearing and her failure to comply with undertakings. Mr. Pham, Ms. M's representative, undertook to provide authorizations which would permit counsel for the Insurer to obtain the clinical notes and records of seven physicians. Counsel for the Insurer advised that despite repeated requests this documentation was not forthcoming.

I grant the Insurer's claim for expenses based on its success. I fix those expenses, inclusive of disbursements at $3,055.46.

Section 282(11.2) award:

Guarantee claimed an award in respect of its assessment under section 282(11.2) of the Insurance Act on the basis that this arbitration application was frivolous, vexatious, or an abuse of process.

At the time the arbitration was commenced, section 282 (11.2) of the Insurance Act, R.S.O. 1990, c 1.8 as amended by S.O. 1993, c. 10 provided:

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.

This section permitted an arbitrator to make an award, in favour of the insurer, to be paid by the insured person, where an arbitrator was of the opinion that the insured person commenced an arbitration which was frivolous, vexatious or an abuse of process.

The above provision was repealed effective October 1, 2003. Generally, provisions which are repealed no longer have any force or effect. At the date of the hearing, section 282(11.2) of the Insurance Act provided a different remedy, as follows:

Liability of representative for costs

1. (11.2) An arbitrator may make an order requiring a person representing an insured person or an insurer for compensation in an arbitration proceeding to personally pay all or part of any expenses awarded against a party if the arbitrator is satisfied that,

(a) in respect of a representative of an insured person, the representative commenced or conducted the proceeding without authority from the insured person or did not advise the insured person that he or she could be liable to pay all or part of the expenses of the proceeding;

(b) in respect of a representative of an insured person, the representative caused expenses to be incurred without reasonable cause by advancing a frivolous or vexatious claim on behalf of the insured person; or

(c) the representative caused expenses to be incurred without reasonable cause or to be wasted by unreasonable delay or other default. 2002, c. 22, s. 127.

Non-application to solicitors

(11.3) Clause (11.2) (a) does not apply to a barrister or solicitor acting in the usual course of the practice of law. 2002, c. 22, s. 127.

Opportunity to make representations

(11.4) An order under subsection (11.2) shall not be made unless the representative is given a reasonable opportunity to make representations to the arbitrator. 2002, c. 22, s. 127.

The new remedy permits an arbitrator, under certain circumstances, to order a representative who is not a lawyer, to personally pay all or part of an expenses award against a party to an arbitration. I appreciate that Guarantee would have had difficulty notifying Mr. Pham of its intentions to seek a remedy under the amended legislation as Mr. Pham's office appeared to have ceased to function.

Guarantee submitted that despite the repeal of the provision, an arbitrator still had the power to grant the remedy in effect on the date the arbitration was commenced, because the remedy provided under the old section 282(11.2) was substantive. Guarantee also submitted: "The provisions gave the insurer the right to advance a claim for an award if an insured person commenced an arbitration that was frivolous, vexatious or an abuse of process. It effectively created a cause of action. The provision did not provide for the manner of the conduct of a hearing and therefore was not simply procedural in nature. It was substantive and therefore the presumption against retroactivity should apply."

The term retroactivity is used in two ways. Professor Ruth Sullivan, in Dredger on the Construction of Statutes,² states that "One meaning is that the legislation itself contains provisions which indicate that it is intended to apply to facts that were already past when the legislation came into force. The second meaning is that legislation if applied immediately and generally to ongoing facts, would result in new prejudicial consequences." I will address both meanings.

With respect to the first meaning, I note that the amended legislation contains no transitional provisions. At common law, legislation is presumed to apply immediately and generally to all facts that come within its apparent scope.³ Based on this presumption, on October 1, 2003, the new legislation would apply to arbitration applications such as this one, which were commenced when the old section 282(11.2) was in force, and which were still in progress in October 2003.

Guarantee submitted that the new provision was substantive, and there is a presumption that substantive provisions will not be retroactive. However, the general rule is that the presumption against retrospective operation does not apply to statutory amendments that are merely procedural. In the case of Pembridge and Howden, (op. cit.), the Director of Arbitrations concluded that provisions which relate to expenses are procedural. I would characterize the new provision as procedural because it relates to expenses, and because expenses are used to control the manner in which the arbitration process is commenced or engaged by representatives. The remedy is designed to control the process, to penalize representatives who abuse the process and is an incident of an arbitration proceeding, not an independent cause of action or a substantive remedy.

In the case of Gimondo and Royal & SunAlliance Insurance Company of Canada (FSCO A02-000654, April 16, 2004), Arbitrator Allen dealt with the second meaning of retroactivity. She considered the nature of the remedy provided by the former section 282(11.2), whether it created a vested right, and whether there was any unfairness or prejudice to the insurer in applying the new amendment to ongoing facts. She reasoned as follows:

Although Royal paid the $3,000 assessment fee in June 2002, before the legislative change, I find the mere payment of the filing fee under the predecessor provision does not entitle Royal to rely on that provision to make a claim for an award after that provision has been repealed. According to Driedger's analysis, Royal would be required to have a right to such an award that arose under the predecessor provision. I find this would mean the right or interest would have had to have vested, accrued or been accruing before the new legislation came into effect. Royal was not in that position on October 1, 2003 when the legislation changed. I therefore do not see that any unfairness or prejudice results from my determination. I find that the payment of an assessment fee allows an insurer a limited right or expectation to participate in the arbitration process and, absent a determination or order by an arbitrator, no right or expectation of obtaining an award based on this fee would exist at that time.

I agree with Arbitrator Allen's reasons.

For these reasons, I conclude that I do not have the authority to make an award in respect of the assessment which Guarantee paid and dismiss Guarantee's claim for an order in respect of its assessment.

Order:

1. Ms. M.'s claims for income replacement benefits, interest, expenses and a special award are dismissed.

2. Ms. M. shall pay Guarantee's expenses in respect of the arbitration, fixed at $3,055.46.

3. Guarantee's claim for an award in respect of its assessment is dismissed.

December 7, 2004

Suesan Alves Arbitrator

Date

Neutral Citation: 2004 ONFSCDRS 183

FSCO A02-001468

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

Ms. M. Applicant

and

GUARANTEE COMPANY OF NORTH AMERICA Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. Ms. M.'s claims for income replacement benefits, interest, expenses and a special award are dismissed.

2. Ms. M. shall pay Guarantee's expenses in respect of the arbitration, fixed at $3,055.46

3. Guarantee's claim for an award in respect of its assessment is dismissed.

December 7, 2004

Suesan Alves 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. 23rd edition. Butterworths Canada Ltd. 1994, "The Temporal Operation and Appiication of Legislation at pages 508-552
3. 3Ibid at page 517