Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2005 ONFSCDRS 164

FSCO A05-000655

BETWEEN:

ALEXANDER ARSEN KARAGOZ

Applicant

and

AVIVA CANADA INC.

Insurer

PRE-HEARING DECISION

Before:

John Wilson

Heard:

October 13, 2005, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Dejan Ristic for Mr. Karagoz

Raymond Murray for Aviva Canada Inc.

Issues:

Should the resumption of this pre-hearing take place by teleconference or in person at the offices of the Financial Services Commission?

The Applicant, Alexander Arsen Karagoz, was injured in a motor vehicle accident on April 29, 2003. He applied for and received statutory accident benefits from Aviva Canada Inc. ("Aviva"), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mr. Karagoz 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 discussion of this case was held on October 13, 2005, by teleconference. Since Aviva had retained counsel in Ottawa to defend the action it wanted the matter dealt with electronically, by teleconference. It had also, coincidentally, transferred responsibility for the handling of the claims procedure to an adjuster in its Thunder Bay office.

Mr. Karagoz is a resident of Markham Ontario, within the greater Toronto area. His counsel is in Toronto, and in the application for arbitration he had indicated that he wished the hearing to take place in the greater Toronto area. His application also indicated that he declined to consent to either an electronic or written hearing of his case.

The usual procedure at the Commission is that where the parties are located in the greater Toronto area, the hearing and all subsidiary hearings, including the pre-hearing, take place in person at the offices of the Financial Services Commission. In this matter, because of Aviva's retainer of an out-of town lawyer, the Commission, over Mr. Karagoz's objections, scheduled the pre-hearing to take place by telephone rather than in person.

At the scheduled telephone pre-hearing, limited progress in narrowing or resolving issues was made. Indeed, counsel for the Insurer took the unusual position that Aviva would not consider any settlement offers made during the pre-hearing. As well, Aviva's adjuster did not take part in the telephone pre-hearing.

Noting the limited progress made at the pre-hearing and the necessity of further documentary production, I ordered that "(U)nless this matter is resolved in the interim, the pre-hearing in this matter should be resumed sometime in the new year, following the production of the Insured's employment records from Dell."

Aviva immediately took the position that any resumption must be held by teleconference due to the expense of bringing Ottawa counsel to Toronto, while Mr. Ristic, for the Applicant, once again took the position that the pre-hearing should take place in person in Toronto. I reserved on the issue of the location of the pre-hearing to allow the parties to make further submissions if so advised.

Result:

Any resumption of this pre-hearing should take place in person at the offices of the Financial Services Commission, unless otherwise ordered.

EVIDENCE AND ANALYSIS:

While, as noted, the practice at the Commission has been to hold pre-hearings in person wherever possible², neither the Statutory Powers Procedure Act, R.S.O. 1990, C. S.22, (SPPA), nor the Dispute Resolution Practice Code provide much guidance as to the location or manner of pre-hearings. There are, however, general policy statements and directions that provide insight into the considerations in setting the manner in which a pre-hearing can take place.

Rule 33.2 of the Dispute Resolution Practice Code makes it clear that the manner in which the pre-hearing will be held is at the discretion of the arbitrator - in this case the pre-hearing arbitrator who must decide what is appropriate.

Rule 33.1 which sets out the purposes of the pre-hearing must be read in the context of Rule 1, which provides for the "most just, quickest and least expensive resolution of a dispute."

Rule 33.1 lists some of the activities provided for in a pre-hearing. In addition to identifying and narrowing issues, setting dates for the hearing and noting witness lists, an arbitrator is expected to deal with procedural and preliminary issues, and requests for interim relief. In this latter mandate, pre-hearings at the Commission go far beyond the description of "pre-hearing conferences" provided in section 5.3(1) of the SPPA.

Practice Note 7 further details the expectations of pre-hearings. It provides for "settlement" as the first goal for a pre-hearing. It also notes that "the pre-hearing discussion can be held in person or by telephone conference, at the arbitrator's discretion."

A pre-hearing, then, is a step in a proceeding that is an opportunity to facilitate settlement, and also a formal proceeding to deal with procedural and interlocutory issues.

Since the beginnings of arbitration at the Commission, the pre-hearing process has evolved and become, perhaps, the most important stage of this dispute resolution proceeding. It often functions as the equivalent of an oral discovery, the equivalent of motions court, and the equivalent of the pre-trial process in the civil litigation process. Even if settlement is not achieved at the pre-hearing itself, it often lays the groundwork for later resolution through the process of narrowing issues and documentary production.

As noted earlier, a practice at the Commission has been that pre-hearings, at least in the Toronto region, take place in person, at the offices of the Commission. This practice has not arisen without some solid, practical reasons for its existence. The discovery process works when the parties are able to visually observe and evaluate each other. Anecdotally, every arbitrator can recall a settlement achieved simply because a party was solidly convincing and credible at pre-hearing.

Face-to-face meetings give an arbitrator an opportunity to engage the parties themselves in the process at the pre-hearing. A party participating by a silent telephonic watching brief does not benefit from the subtle facial communication that often says much about a position being taken and can serve as a vital cue to further discussions.

It should be noted as well that pre-hearings also frequently entail the physical transfer of documents between parties, where one party has obtained a critical document that is not already in the hands of the opposing party.

As noted earlier, the pre-hearing also functions as a motions court, and often is the forum for both major and minor interlocutory matters. Indeed, a pre-hearing usually is the only formal proceeding in an arbitration for the majority of applicants. With very few cases finishing the complete hearing process, pre-hearings are the face of the arbitration system most seen by the general public.

Although statutory arbitration at the Commission is a relatively new process, the courts have been dealing with similar issues for centuries, and have identified many of the concerns involved in the choice of a venue for litigation. A comparison to court proceedings is an important one – in this case, since arbitrations replace court access to parties who have so elected.

Decisions on the location or venue of a hearing have a long history in the court system. Setting aside questions arising specifically from the territorial jurisdiction of certain courts, the fundamental common law principle that can be discerned is that the person launching an action makes the primary election of where it should be heard. As Richards J. noted in St. John v. Wrong et al.³:

Before the passing of the Statute 8 Vic., ch 36, if a plaintiff living in the county of Lincoln wished to lay the venue in Toronto, when the defendant resided in the Niagara District, he issued a testatum writ out of the principal office at Toronto, pre-supposing an original to the sheriff of the Home District.

Richards J. continued:

Or if he thought proper, have issued a writ from the principal office at Toronto, directed to the sheriff of the Niagara District, and the notice to the defendant would be to appear at Toronto, by filing his appearance in the principal office here, and all subsequent proceedings would have been carried on in the principal office.

As noted by Richard J., the common law provisions were gradually altered by a variety of legislative provisions, including the Common Law Procedure Act⁴ which provided at section 8, for a change of venue on motion by a party, but left as the default the principle that all proceedings to final judgement were to be carried out from the office from which the first process in the action was sued out.

By the 1860's a recognizably modern version of venue began to develop. While the plaintiff clearly remained dominus litis and was entitled to choose a venue to his or her convenience, such a choice was subject to the rules of the court.

Richards C.J. in Moor v. Boyd ⁵ cited the ruling in Helliwell v. Hobson that "the Court will not deprive the plaintiff of the right to lay his venue where he pleases, unless there is a manifest preponderance of convenience in a trial at the place to which it is sought to change the venue." His restatement of the grounds for a change of venue in civil matters has remained central to the jurisprudence on this issue.

While the Rules of Civil Procedure, under the Courts of Justice Act, are not binding on arbitrations at the Commission, court cases on venue are illustrative of how common law rights to choose the location of a hearing interact with institutional imperatives such as Rule 1 of the Dispute Resolution Practice Code which addresses the need for the "most just, quickest and least expensive resolution of the dispute."

The contemporary Rules of Civil Procedure at Rule 13.1.02(2) list some of the factors to be considered in the choice of venue. These include whether or not a fair hearing can be held in the place selected, whether the place selected is where a substantial part of the event in issue took place, where damages were sustained, where the subject matter of the proceedings was located, the interest of the community in the proceedings, the convenience of the parties, the witnesses and the court, the availability of court facilities, and any advantage or disadvantage with regard to securing the most just, expeditious and least expensive determination of the proceeding on its merits.

E.M. Macdonald J. in Joseph v. Lefaivre Investments (Ottawa)⁶ characterized these criteria as balance of convenience issues and summarized them as follows:

The overarching consideration infusing the exercise of this court's discretion are as follows: (1) the presence of related class proceedings in Toronto; (2) the plaintiff's right to choose the place of the commencement of the action which right is not to be abrogated lightly; and (3) the costs to the plaintiff class if the matter proceeds in Ottawa which are stated to be substantially more than if the action continues in Toronto.

There are at least two elements considered by E.M. Macdonald J. that are directly relevant to arbitrations at FSCO. The concept of "any advantage or disadvantage with regard to securing the just, most expeditious and least expensive determination of the proceeding on its merits", echoes Rule 1 of the Dispute Resolution Practice Code whose principles govern the arbitration process.

The second element, "the plaintiff's right to choose the place of the commencement of the action which right is not to be abrogated lightly", relates directly to the election that each applicant makes in section 1, page 2, line 6 of the Application for Arbitration, where the applicant lists his or her choice of location for a hearing. It is also important that an applicant is asked whether he or she will consent to "holding a written or electronic hearing."⁷

In an arbitration proceeding, an order altering the location of a hearing and its subsidiary elements must be subject to a balance between the applicant's choice, and the need to proceed as fairly and efficiently as possible to a resolution of the issues in dispute.

It should also be remembered that since the public has an interest in arbitration proceedings⁸ being open to the general public, the creation of closed electronic hearings as a matter of course for any part of the arbitration process should be approached with great caution.

We must consider if the same considerations on venue that are applicable to trials and hearings should apply to subsidiary proceedings and pre-hearings. As was noted earlier, a pre-hearing is a flexible procedure that contemplates both substantive and procedural orders being made, and an attempt to resolve some or all of the issues in litigation.

The traditional safeguards maintaining access to the adjudication system, and the wishes of the applicant should not be abandoned merely because a proceeding can be described as interlocutory or procedural.

A pre-hearing that, in accordance with Rule 33.1(d), deals with procedural and preliminary issues may well have the effect of deciding the arbitration once and for all. To hold such a proceeding, without the consent of both parties, in a place other than that elected by the applicant, without either an order or an opportunity by the other side to address the request would reduce the choice of venue given to the applicant to a travesty.⁹

Unless the pre-hearing is specifically restricted only to settlement discussion, and the possibility of substantive orders totally excluded, it constitutes part of the continuum of the proceeding both in the context of arbitration, and the SPPA. As such it must respect both the principles of openness and the wishes of the applicant as dominus litis¹⁰ which are "not to be abrogated lightly."

Such a conclusion is also consistent with the view of the courts. Richards J. in St. John v. Wrong¹¹ suggested that all "subsequent proceedings"¹² to the issuance of the writ should proceed in the place set out by the plaintiff. This coincides with the more modern view of Sanderson J. in Dickie v. Dickie¹³ and Winkler J. in Hickey-Button v. Loyalist College of Applied Arts & Technology.¹⁴

Given nature of the referral to arbitration, the choice of hearing location provisions of the application for arbitration, the provisions of Rule 33.1 of the Dispute Resolution Practice Code and the common law on venue for hearings in general, it would seem that, prima facie, the pre-hearing as well as the hearing should take place in the venue selected by the applicant. An applicant is, of course, entitled to waive that right if so advised and agree to another manner or place of hearing.

An insurer has the right to request that a hearing be held in a manner or location other than that suggested by an applicant, based on the principles contained in Rule 1. If it can make out that the preponderance of a balance of convenience clearly favours the holding of a telephone pre-hearing or a hearing in some other place than chosen by the applicant, then an arbitrator is entitled to make such an order pursuant to Rule 33.1. This did not happen in Mr. Karagoz's case.

As a practical matter, the operations of the Commission are centralized in Toronto. Arbitrators are not generally available on a daily basis to conduct pre-hearings at all locations in Ontario. At times, the efficient use of resources, and the need for an arbitration to proceed to the pre-hearing and hearing process as quickly as possible will favour the holding of a pre-hearing by teleconference.

This is consistent with cases such as Laurin v. Favot¹⁵ in which Borins J. recognized that a consideration could be delays in reaching the hearing process due to inadequate court resources in the city selected by the plaintiff. Administrative convenience alone, however, does not excuse a blanket denial of in-person hearings in an arbitration process that applies equally across all of Ontario.

Borins J. also recognized that the evaluation of balance of convenience could include the location of witnesses, the relative cost to the parties and the relationship of the subject-matter to the location of the hearing. Winkler J. in Hickey-Button v. Loyalist College¹⁶ would also add to the latter consideration the community interest in access to the judicial process.

Although some cases have considered the location of the solicitors for one or both parties as a consideration in assessing the balance of convenience, the consensus is that it does not, in itself, trump the plaintiff's choice of venue.¹⁷

In this case, some pertinent facts are important. Mr. Karagoz lives in Markham Ontario, in the greater Toronto area. He purchased car insurance from Aviva, which carries on business in the Toronto area. When he had an accident and claimed accident benefits from Aviva, the report of the mediator indicates that his claim was dealt with by a quality insurance supervisor for Aviva located at 5140 Yonge Street in North York, an office building in the same complex as the hearing rooms at FSCO.

Only on May 4, 2005, following the filing of Mr. Karagoz's application for arbitration on April 5, 2005 and Mr. Karagoz's election for an in-person proceeding at FSCO, was counsel retained by Aviva.¹⁸ The counsel retained by Aviva are located in Ottawa. As a consequence, and apparently at the request of Aviva, over the protests of Mr. Karagoz, the pre-hearing was set up as a telephone conference.

No order, however, was obtained by Aviva to change the venue and the type of hearing requested by Mr. Karagoz. Nor was Mr. Karagoz given an opportunity, in accordance with section 5.2(2) of the SPPA, to speak to any prejudice caused by the switch to an electronic format for the pre-hearing.

D.G. Stinson J. commented in Eveready Industrial Services Corp. v. Jacques Daoust Coatings Management Inc.¹⁹:

A party who chooses to retain counsel who practises in a judicial centre that has no connection with the events in dispute should not be permitted to point to the expense involved in having counsel attend at a trial at a venue closer to the location at which the events occurred as justification for resisting that transfer.

His comments apply equally to the matter at hand.

Aviva is fully entitled to retain any lawyer it wishes to represent it at a FSCO arbitration, but it should not expect the location of its counsel to drive the location and manner in which a pre-hearing is held.

While I am a bit puzzled by its choice of Ottawa counsel²⁰ over someone located in the Toronto area as well as by the apparent transfer of the accident benefit file to an employee working out of Thunder Bay, instead of the Toronto office, there is no evidence before me that Aviva intentionally dispersed its files to outlying areas in order to avoid in-person pre-hearings. Had this been the case it would have been a clear abuse of the arbitration process and appropriately sanctioned.

From the point of view of the mandate to explore settlement and narrow issues, little progress was achieved at the pre-hearing. In retrospect, the physical presence of the parties at the pre-hearing might well have helped each party understand the other's case. No-one is obliged, however, to settle or compromise their case, only to participate in the process in good faith.

More importantly, however, the failure of the Commission to honour the applicant's election for the type and place of this important step in the formal hearing process, without due process, is highly problematic. There was no analysis by an adjudicator of the rationale behind the change of venue.

Instead, at the request of one party the Commission acceded to the change, presenting the Applicant with a fait accompli. Such a process, if repeated, risks creating a perception of bias, of favouring one, more powerful party over the weaker. Ultimately, such a perception, if it develops, cannot but bring the arbitration process into disrepute.

For the above reasons the resumption of the pre-hearing which I have ordered in this matter shall take place in person at the Offices of the Financial Services Commission of Ontario in Toronto. The venue of all further proceedings in this matter shall be in Toronto unless changed by arbitral order.

November 18, 2005

John Wilson Arbitrator

Date