Neutral Citation: 2005 ONFSCDRS 51

FSCO A03–001830

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

KHUNDER AL-HAJAM

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

REASONS FOR DECISION

Before:

John Wilson

Heard:

January 10 and February 25, 2005, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

Mohammed Muslim for Mr. Al-Hajam

Ian D. Kirby for Allstate Insurance Company of Canada

Issues:

The Applicant, Khunder Al-Hajam, claimed to have been injured in a motor vehicle accident on January 16, 2003. He applied for statutory accident benefits from Allstate Insurance Company of Canada ("Allstate"), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mr. Al-Hajam applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

1. Is Mr. Al-Haj am entitled to receive a weekly income replacement benefit for the periods January 27 to May 30, 2003, June 27 to July 18, 2003, and from August 1, 2003 to date and ongoing, claimed pursuant to section 4 of the Schedule?

Allstate conceded Mr. Al-Hajam's disability for the period May 30 to June 26, 2003. Allstate specifically submits that Mr. Al-Hajam is not entitled to weekly income replacement benefits (IRBs) before May 30, 2003 because he did not submit a disability certificate until that date.

2. What is the amount of weekly income replacement benefit that Mr. Al-Hajam is entitled to receive pursuant to section 6 of the Schedule?

The Applicant claims a weekly IRB of $400. The Insurer submits that the correct weekly IRB is $97.03. The essence of the dispute, as I understand it, is that the Applicant submits that he was employed at the time of the accident at both Budget Carpet (as a carpet installer) and at Andorra Building Ltd. (as a cleaning person), while the Insurer argues that it has received independent supporting documentation regarding only the latter employment.

3. Is Mr. Al-Hajam entitled to payment of the following expenses claimed as medical benefits pursuant to section 14 of the Schedule:

(a) $720 for outstanding chiropractic treatment, massage and physiotherapy provided by Lawrence East Rehabilitation Clinic by invoice dated October 8, 2003; and,

(b) $106 for taxi transportation provided by Bee-Line Transportation for the period June 5 to June 11, 2003?

4. Is Mr. Al-Hajam entitled to payment of the following reports claimed pursuant to section 24 of the Schedule:

(a) $1,280 for a Mental Health Assessment dated January 21, 2003, prepared by Canada Health Assessment Centre;

(b) $960 for a January 30, 2003 In-Home Assessment prepared by Canada Health Assessment Centre;

(c) $1,140 for a January 31, 2003 Functional Assessment Report prepared by Canada Health Assessment Centre; and,

(d) $4,644.34 for a Rehabilitation Report, dated October 7, 2003, prepared by Duke Rehabilitation & Forensic Lab.

5. Is Allstate liable to pay Mr. Al-Hajam's expenses in respect of the arbitration under subsection 282(11) of the Insurance Act.

6. Is Mr. Al-Hajam liable to pay Allstate's expenses in respect of the arbitration under subsection 282(11) of the Insurance Act

7. Is Mr. Al-Hajam entitled to interest for the overdue payment of benefits pursuant to subsection 46(2) of the Schedule?

Result:

1. Mr. Al-Hajam is not entitled to receive a weekly income replacement benefit for the periods January 27 to May 30, 2003, June 27 to July 18, 2003, and from August 1, 2003 to date and ongoing, claimed pursuant to section 4 of the Schedule.

2. The amount of weekly income replacement benefit that Mr. Al-Hajam is entitled to receive pursuant to section 6 of the Schedule is zero.

3. Mr. Al-Hajam is not entitled to payment of any of the expenses claimed as medical benefits pursuant to section 14 of the Schedule:

4. Mr. Al-Hajam is not entitled to payment of any reports claimed pursuant to section 24 of the Schedule.

5. Allstate is not liable to pay Mr. Al-Hajam's expenses in respect of the arbitration under subsection 282(11) of the Insurance Act.

6. Mr. Al-Hajam is nominally liable to pay Allstate's expenses in respect of the arbitration under subsection 282(11) of the Insurance Act. However, Mr. Muslim, counsel of record for Mr. Al-Hajam, is primarily liable for all of the Insurer's expenses, which I assess at $4,205.61, inclusive of GST.

7. Mr. Al-Hajam is not entitled to interest for overdue payment of benefits, pursuant to subsection 46(2) of the Schedule.

EVIDENCE AND ANALYSIS:

An arbitration hearing was first scheduled in this matter to commence January 10, 2005, at the offices of the Financial Services Commission in Toronto. All parties, including Mr. Al-Hajam, were provided with notice of the hearing.

The pre-hearing letter, dated June 16, 2004, indicates that Mr. Al-Hajam was present and participated when the hearing dates were set.

At the commencement of the January 10 hearing, although Mr. Kirby was present for the Insurer, neither the Applicant nor his counsel attended. After waiting some 15 minutes, I telephoned Mr. Muslim, the counsel of record for Mr. Al-Hajam.

Mr. Muslim indicated that he was having trouble reaching Mr. Al-Hajam, and, consequently, could not obtain instructions from his client. Mr. Muslim also noted that he wished to be removed as counsel of record.

I recessed the hearing to allow time for Mr. Muslim to attend.

When the hearing resumed, Mr. Muslim reiterated that he was requesting an adjournment on behalf of Mr. Al-Hajam, but that he wished to have himself removed as counsel of record. He also confirmed that Mr. Al-Hajam was aware of the arbitration hearing.

Mr. Kirby indicated that he was ready and willing to proceed with the hearing, and that the Insurer would be claiming its expenses if the hearing was either adjourned or dismissed. He also stated that the tribunal should bear in mind the conduct when making any decision to either adjourn or dismiss this matter. Such conduct would include Mr. Al-Hajam's actions of failing to carry out the orders of the pre-hearing arbitrator, and in failing to attend at this scheduled hearing.

Rule 68 of the Dispute Resolution Practice Code provides for the dismissal of a proceeding where the proceeding is frivolous, vexatious, or is commenced in bad faith. The failure to obey specific arbitral orders, the institution of an arbitration that one has no intention of completing, and the failure to attend at an arbitration that one has requested, without notice or excuse, could each constitute conduct that would bring a party within this Rule.

I adjourned this matter until February 25, 2005 to give Mr. Muslim time to bring a motion to be excused as counsel of record, and to bring his request into compliance with Rule 9.7 of the Practice Code, which governs the withdrawal of counsel from an arbitration.

I note that Mr. Muslim was present when I made the adjournment order, and the order requiring to file motion materials to be taken off the record at least two weeks prior to the hearing date. He clearly acquiesced to the conditions of the order and, indeed. made representations about the adjournment.

He also undertook to provide a contact address and telephone number for his client. The substance of my order was incorporated into a letter which was sent to all the parties and their counsel on January 12, 2005.

By Friday, February 25, the date scheduled for the resumption of the hearing, there had been no application from Mr. Muslim to be removed as solicitor of record.

I am satisfied from the Commission's records that a notice of the new hearing date was sent both to Mr. Al-Hajam and Mr. Muslim at the addresses they had provided to the Commission. In addition, of course, Mr. Muslim was present when the resumption date was set.

At the scheduled commencement of the hearing, neither Mr. Muslim nor Mr. Al-Hajam were present. After waiting a further 15 minutes I opened the hearing. Mr. Kirby for the Insurer, Allstate, moved that Mr. Al-Hajam's arbitration application be dismissed, with expenses to be payable to Allstate.

In default of the appearance of either Mr. Al-Hajam or his counsel of record, I dismissed the arbitration and ordered expenses to be payable. I accepted that, for the purposes of Rule 68, the conduct of this arbitration could be considered frivolous and vexatious, and an abuse of process.

I reserved, however, on the issue of expenses, both the appropriate amount and the question of by whom the expenses should be paid.

Although the arbitrators at the Commission, as an administrative tribunal and creatures of statute, do not have the inherent jurisdiction of the courts, subsection 23(1) of the Statutory Powers Procedure Act (SPPA) specifically grants a mandate to control abuses of process.

An abuse of process is not defined in the Schedule, the regulations or in the Insurance Act. The phrase, however, has a long history, especially in the context of vexatious proceedings.

Lord Blackburn observed in Metropolitan Bank Ltd. et al. V. Pooley (1885) 10 App. Cas. 210:

(T)he Court had inherently in its power the right to see that its process was not abused by a proceeding without reasonable grounds, so as to be vexatious and harassing.

The courts have also examined the meaning of "vexatious" in the same context. Vexatious litigation includes situations where the court has no power to grant the relief sought (see Dreyfus v. Peruvian Guano Co. (1889) 41 Ch.D. 151); if no reasonable person can possibly expect to obtain relief in it, (see Lawrance v. Lord Norreys et al. (1888) 39 Ch. D. 213); or if the applicant has no proper authority to pursue the remedy (see R. ex rel. Tolfree v. Clark et al. [1943] O.R. 314).

As Cameron J. remarked recently,² "the categories of vexatious proceedings are never closed and must be determined by an objective standard." He further noted that "(A)n action that initially had some merit might be rendered vexatious through subsequent conduct."

In this matter, while there may well have been some substance to the original claims, the manner in which the arbitration was conducted was far from exemplary.

Prior to the original arbitration hearing date, Mr. Kirby wrote to the Commission enclosing the orders of Arbitrator Blackman made at pre-hearing, together with copies of correspondence directed to Mr. Muslim in an attempt to obtain compliance with the orders. He also enclosed a confirming letter sent following the pre-hearing in which he confirmed "your agreement that you will use best efforts to comply with all of the above production requests within 60 days of the pre-arbitration."

There is no evidence that Mr. Al-Hajam complied with Arbitrator Blackman's orders, nor even any evidence that Mr. Muslim made any efforts, let alone his best efforts to obtain compliance.³

In addition, an applicant in an arbitration has an onus to prove, on the balance of probabilities, that he or she is entitled to the benefits claimed under the insurance contract. In this arbitration, Mr. Al-Hajam provided no evidence of his entitlement to the benefits claimed. Indeed, given the apparent lack of preparation by counsel of record for Mr. Al-Hajam, I have no hesitation in finding that no reasonable person could have possibly expected Mr. Al-Hajam to obtain the relief requested in his application for arbitration.

Rule 75.1 of the Practice Code provides that:

An adjudicator may award expenses to a party if the adjudicator is satisfied that the award is justified having regard to the criteria set out in Rule 75.2 ...

Rule 75.2 sets out various criteria including a party's success, the conduct of an insured or an insurer, and whether any position taken by the insured or insurer was manifestly unfounded.

At the hearing of this matter, I made an oral award of expenses to the Insurer. This award was based on the non-appearance of Mr. Al-Hajam and his counsel of record and the consequent dismissal of his arbitration.

Mr. Kirby, on behalf of the Insurer, duly served and filed a Bill of Expenses, which totalled $4,021.68, exclusive of the costs of the further attendance on February 25. I disallowed the court reporter's fees for January 10, 2005 as having been incurred at the option of the Insurer, without notice to the Applicant.

I allowed the same expense for the February 25 appearance, however, the reporter's further presence having been found being a reasonable request under the circumstances, and one that was useful to the hearing process in this matter.

Consequently, there was no net change in the global amount assessed, save to add a further 2 hours for the appearance and preparation of Mr. Kirby. This, with GST, would give a final amount of $4,205.61 for expenses, which I find both reasonable and appropriate.

As noted earlier, I reserved on the issue of by whom the expenses were to be payable.

Section 282(11.2) of the Insurance Act, now specifically gives an arbitrator the right to hold a representative liable for costs arising from such abuses.

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.

While subsection (a) of section 282(11.2) specifically does not apply to lawyers, (b) and (c) are not subject to this exemption.

Although the conduct of lawyers before tribunals is, to a certain degree, an issue for their professional regulator⁴, each tribunal, whether judicial or administrative has a responsibility to secure its own processes against abuse.

To this end, the Financial Services Commission has established minimum standards for the conduct of representatives during the arbitration process. The Code of Conduct for Statutory Accident Benefit Representatives issued by the Superintendent of Financial Services (effective November 1, 2003) sets out obligations of honesty, competency, and courtesy, among others.

The expectations set by the Law Society for legal practitioners before tribunals such as arbitrations at the Financial Services Commission are even more exacting.⁵

In this matter, the standard of conduct of Mr. Muslim as counsel for Mr. Al-Hajam became an issue due to his failure to appear on this matter while counsel of record, and his apparent failures to honour undertakings to the parties and the Commission.

Although the new Insurance Act costs provisions do not specify the type of conduct that constitutes "reasonable cause" and hence potential liability for costs, the courts have long considered the issues raised by cost orders against representatives, and lawyers.

McLachlin J. stated in Young v. Young 1993 CanLII 34 (SCC), [1993] 4 S.C.R. 3 (S.C.C.):

The basic principle on which costs are awarded is as compensation for the successful party, not in order to punish a barrister. Any member of the legal profession might be subject to a compensatory order for costs if it is shown that repetitive and irrelevant material, and excessive motions and applications, characterized the proceedings in which they were involved, and that the lawyer acted in bad faith in encouraging this abuse and delay. It is clear that the courts possess jurisdiction to make such an award, often under statute and, in any event, as part of their inherent jurisdiction to control abuse of process and contempt of court. But the fault that might give rise to a costs award against Mr. How does not characterize these proceedings, despite their great length and acrimonious progress. Moreover, courts must be extremely cautious in awarding costs personally against a lawyer, given the duties upon a lawyer to guard confidentiality of instructions and to bring forward with courage even unpopular causes. A lawyer should not be placed in a situation where his or her fear of an adverse order of costs may conflict with these fundamental duties of his or her calling.

Returning to section 282(11.2) of the Insurance Act, it is apparent that the application of this provision is contingent upon some serious default by the representative of an insurer or an insured. It is not meant to be a routine sanction for counsel or representatives whose practices offend an adjudicator. It is meant to apply to egregious cases where the conduct of a representative, if unchecked, would tend to bring the arbitration system and the administration of justice into disrepute, as enunciated in Young and Marchand⁶ cases.

The decision of Pockele J. in Children's Aid Society of Huron County v. T.V.⁷ makes it clear that lengthy and ill prepared argument, prolixity, the lack of serious preparation, and a lack of acquaintance with the applicable law can, together, form the pre-condition for an order of costs against a lawyer.

In this case, I find that the failure of a representative to arrange for witnesses on a timely basis, to prepare for an arbitration, or even contact his client to obtain instructions concerning representation, fall below the standard expected of a representative or counsel at this tribunal.

I also have concerns about the failure to notify the Commission of changes in his status and the failure to appear at hearings, while remaining as counsel of record for Mr. Al-Hajam.

Rule 2.13 of the Code of Conduct provides that a representative must comply with "any orders or directions given by a mediator or adjudicator." This is mirrored in Rule 4 of the Rules of Professional Conduct of the Law Society which provides that a lawyer "shall be courteous, civil, and act in good faith to the tribunal, as well as "strictly and scrupulously carry out an undertaking given to the tribunal or to another lawyer in the course of litigation.

Mr. Muslim's failure to either appear or have himself properly removed as counsel in accordance with Rule 9 of the Practice Code prior to the hearing resumption on February 25 reflects a failure to follow such an order or direction, not to mention an undertaking to the tribunal.⁸

Mr. Muslim’s failure to keep undertakings to the tribunal also casts doubt upon the reliability of any other claims he has made in the context of this arbitration, including those relating to the status and availability of his client, Mr. Al-Hajam. It is not hard to see how such questionable conduct, whether intentional or not, could bring the arbitration process itself into disrepute.

I find that, under the circumstances of this case, the conduct of Mr. Muslim in this matter, including his non-appearance, his failure to honour undertakings, to remove himself as solicitor of record, not to mention his apparent abandonment of his client, constitutes conduct that, taken together, "caused expenses to be incurred without reasonable cause or to be wasted by unreasonable delay or other default."⁹

I find, as well, that this conduct, if unchecked, would tend to bring the arbitration system and the administration of justice into disrepute.¹⁰

Consequently, I find that it is appropriate that the award of expenses made at the dismissal of this arbitration be payable by Mr. Muslim, counsel for the Applicant, personally.

Section 23(3) Statutory Powers Procedure Act

Although the matter may well now be moot, I find that Mr. Muslim's conduct in this matter would have been sufficient to bar him from this proceeding, pursuant to section 23(3) of the SPPA, had he appeared as agent or adviser in these matters rather than as a barrister and solicitor.

The exemption granted to a lawyer under section 23(3), however, is restricted to "a barrister and solicitor qualified to practise in Ontario." I have no evidence as to Mr. Muslim's current qualifications. Indeed, his current conduct suggests that he may well have abandoned his practice.

I therefore direct that the Commission send copies of this decision to both Mr. Muslim at his last known business address, and the Law Society of Upper Canada, which may, if so advised, respond to the issue of Mr. Muslim's current status.

Mr. Muslim, and any other interested party, including the Law Society, shall have 30 days from the date of this decision to file any material related to the status of Mr. Muslim as a "barrister and solicitor qualified to practise in Ontario."

Consequently, pending a response from either Mr. Muslim and/or the Law Society of Upper Canada confirming status and his eligibility to claim this exemption, I will remain seised of the issue of whether Mr. Muslim is barred from appearing in the capacity of agent, advocate or representative in any further stage of this proceeding.

April 21, 2005

John Wilson

Arbitrator

Date

Neutral Citation: 2005 ONFSCDRS 51

FSCO A03–001830

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

KHUNDER AL-HAJAM

Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA

Insurer

ARBITRATION ORDER

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

1. The arbitration is dismissed.

2. Mr. Al-Hajam is nominally liable to pay Allstate's expenses in respect of the arbitration under subsection 282(11) of the Insurance Act.

3. Pursuant to Section 282 (11.2) of the Insurance Act, Mr. Mohammed Muslim, counsel of record for Mr. Al-Hajam, is primarily liable for all of the Insurer's expenses, which I assess at $4,205.61, inclusive of GST.

April 21, 2005

John Wilson

Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Canada (Attorney General) v. Hainsworth [2004] O.J. No. 2730
3. 3In Button v. Jones [2004] O.J. No. 3307, Hambly J. framed the question of the limits of the conduct of a lawyer in a similar matter as follows: "The question then becomes whether his failure to do so necessitates an order that he pay costs flowing from the omission to produce the documents. Myers v. Ellman supra held that it did."
4. 4See Wilder et al. v. Ontario Securities Commission 53 O.R. (3d.) 519
5. 5See the Rules of Professional Conduct adopted by Convocation June 22, 2000
6. 6Marchand [litigation guardian of] v. Public General Hospital of Chatham [1999] O.J. No. 670
7. 7[2002] O.J. No. 3297
8. 8In the same context, Mr. Muslim was ordered to provide the current address and contacts for Mr. Al-Hajam.
9. 9Paragraph 282(11.2)(c) Insurance Act
10. 10See Young v. Young supra