Neutral Citation: 2005 ONFSCDRS 70
FSCO A04-001086
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
GRETA WACHMENKO
Applicant
and
PRIMMUM INSURANCE CO.
Insurer
DECISION ON A MOTION
Before:
John Wilson
Heard:
May 16, 2005, at the offices of the Financial Services Commission of Ontario in Toronto.
Appearances:
Mrs. Wachmenko, on her own behalf
Stanley C. Tessis for Primmum Insurance Co.
Guy A. Hurtubise was present by teleconference
Issues:
The Applicant, Greta Wachmenko, was injured in a motor vehicle accident on September 12, 1994. She applied for and received statutory accident benefits from Primmum Insurance Co. ("Primmum"), payable under the Schedule.1 Primmum terminated weekly income replacement benefits. The parties were unable to resolve their disputes through mediation, and Mrs. Wachmenko applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.
An earlier arbitration application relating to income replacement benefits was dismissed by preliminary issue decision by reason of Mrs. Wachmenko's failure to bring the application within the time limits set by the Schedule.
The current arbitration was brought by Mrs. Wachmenko on May 14, 2004.
Following pre-hearings and various interlocutory motions at the Commission, the parties agreed to hold a private mediation before William McCorriston on February 10, 2005, to encompass all issues arising between Mrs. Wachmenko and her insurer.
Mrs. Wachmenko, her counsel Mr. Hurtubise, and Ms. Jill Stevens, Mrs. Wachmenko's "facilitator," were all present and participated in the mediation.
At the end of the day, an agreement was reached to settle on a full and final basis all past, present and future accident benefit claims arising out of the September 12, 1994 motor vehicle accident.
As part of this settlement Mrs. Wachmenko executed certain settlement documents. Mr. Hurtubise also certified that he had explained the full significance of the release, and that Mrs. Wachmenko did not suffer from any incapacity that would prevent her from understanding and executing a valid release.
Subsequently, the solicitors for Mrs. Wachmenko were paid a sum of money in trust on her behalf that represented the sum agreed to in the mediation.
At the motion hearing there was no dispute as to Mrs. Wachmenko's presence and participation at the mediation, that settlement documents were issued as a result of that mediation that purported to settle all issues on a full and final basis, and that Mrs. Wachmenko did affix her signature to those documents.
Subsequently, Mrs. Wachmenko sent a letter to the Commission, dated February 11, 20052 in which she complained of Canada Life's (Primmum's) conduct and implied that she was pressured into an improvident settlement.
When the letter was brought to my attention, I wrote to Mrs. Wachmenko3, asking for clarification. She replied on March 19, 2005 that it was "definitely my intention to proceed to a hearing of my claims." Clearly, Mrs. Wachmenko intended to resile from any settlement reached on February 10, 2005.
Although Mrs. Wachmenko's outstanding appeals were dismissed, no order dismissing her arbitration was issued prior to her notice that she intended to proceed with the arbitration.
When the order was made setting up this motion hearing, each party was given a strict timeline for the service and filing of motion materials, including any evidence to be relied on in this motion.
Primmum served and filed its motion record and supporting affidavit within the time set out. Mrs. Wachmenko filed neither evidence nor submissions within the time provided. She did not request leave to file evidence at the motion hearing.
Consequently, the motion hearing proceeded on the evidentiary basis of the record, of materials filed by Primmun and submissions made by both parties.
The issue in this motion is:
- Is Mrs. Wachmenko precluded from proceeding to arbitration due to a full and final settlement arising from a private mediation on February 10, 2005?
Result:
- Mrs. Wachmenko is precluded from proceeding to arbitration due to a full and final settlement arising from a private mediation on February 10, 2005.
EVIDENCE AND ANALYSIS:
Settlements of accident benefit matters are governed by the Settlement Regulation4, which provides a framework for agreements that finally dispose of a claim or a dispute in respect of a person's entitlement to Statutory Accident Benefits.5
The Regulation sets out requirements for an insurer to issue certain documents including a "disclosure notice" containing, inter alia, a description of the available benefits and the offer to settle made by the insurer, a statement recommending independent legal advice, and an acknowledgement by the insured that he or she read the disclosure notice and considered seeking independent legal, medical or financial advice before signing.
The insurer must also give written advice as to certain consequences of settlement and the availability of a right to rescind the settlement within two business days of the execution of the disclosure notice.6
If the requirements of section (3) of the Regulation are not complied with, an insured person may rescind the settlement at any time.
Pursuant to section 9.1(3) rescision of the settlement is communicated by "delivering a written notice to the office of the insurer or its representative."
In addition to the statutory rescision procedure for accident benefit settlements, settlement agreements, as ordinary contracts, may be found void or voidable for reasons based on the common law of contracts, including mistake, misrepresentation, duress, and fraud.
Compliance with the Settlement Regulation:
Primmum's motion materials contained copies of the settlement materials and the disclosure notices duly signed by Mrs. Wachmenko. Mrs. Wachmenko raised no issue of non-compliance with the required form or content of the material and admitted signing and initialling the forms.
On examination, the forms appear to be in compliance with the requirements set out in section 9 of the Settlement Regulation.
I find no reason to set aside the settlement based on non-compliance with the Regulation.
Capacity:
Although Mrs. Wachmenko did not specifically plead incapacity, she has made reference both in correspondence and in submissions to being brain-injured.7
It goes without saying that the mental capacity of a party is relevant to the validity of any agreement or contract. Both the common law and statutes make it clear that a contract with an incapable person may be unenforceable.
As Cheshire & Fifoot noted in the Law of Contract:8
The first question in all cases is whether the party at the time of contracting was suffering from such a degree of mental disability that he was incapable of understanding the nature of the contract. If so, the contract is not void but voidable at the mental patient’s option, provided that his mental disability was known or ought to have been known by the other contracting party. The burden of proving this knowledge lies upon the person mentally disordered. [footnotes omitted]
Capacity is highly problematic. The requisite level of capacity required to undertake a task varies with its complexity and importance. At one end of the scale, it is generally accepted that contracting marriage, or appointing an attorney under a power of attorney require a fairly basic level of comprehension, while the making of wills, and the conduct of complex legal matters may require a much more intact reason.
Statutorily, the Substitute Decisions Act, 1992, S.O. 1992, c. 30, (SDA) sets out a test for capacity with regard to property. Sections 6 and 45 of the SDA deal with the inability to manage one's own affairs. In essence, they codify the common law definition of capacity as it relates to the handling of property.
Section 6 states:
A person is incapable of managing property if the person is not able to understand information that is relevant to making a decision in the management of his or her property, or is not able to appreciate the reasonably foreseeable consequences of a decision or lack of decision.
Words such as "appreciate" and "foreseeable" in conjunction with an understanding of the information relevant to making a decision bring to mind testamentary cases, where similar tests have developed over the centuries. In Banks v. Goodfellow (1870) L.R. 5 Q.B. 549, Cockburn, C.J. said:
It is essential to the exercise of such a power that a testator shall understand the nature of the act and its effects; shall be able to comprehend and appreciate the claims to which he ought to give effect; and, with a view to the latter object, that no disorder of the mind shall poison his affections, pervert his sense of right or prevent the exercise of his natural faculties — that no insane delusion shall influence his will in disposing of his property, and bring about a disposal of it which, if the mind had been sound, it would not have been made.
Certainly, the resolution of a long and involved insurance claim raises complex issues that must be addressed by the party consenting to the settlement. As noted in the settlement documents, the settlement precludes further claims for past, present and future benefits, and puts a stop to any further litigation or arbitration of accident benefit claims arising from the accident.
If anything, Mrs. Wachmenko's comments on the fairness of the settlement and its shortcomings display a critical awareness of the consequences of the settlement in question.
Other than the broad assertion by Mrs. Wachmenko that she is brain-damaged, there is no evidence that she is not able to understand information that is relevant to making a decision in the management of his or her property, or is not able to appreciate the reasonably foreseeable consequences of a decision or lack of decision."
Indeed, there is the certification by Mr. Hurtubise contained in the settlement documents that Mrs. Wachmenko "understood the significance of the Full and Final Release and was under no incapacity of any nature when it was executed and explained to her."
I also note that Mrs. Wachmenko’s conduct of the motion hearing was consistent with Mr. Hurtubise’s observations at the time of the settlement.
It is also important to note that section 2 of the SDA sets out a general presumption of capacity, which may be relied upon by a third party "...unless he or she has reasonable grounds to believe that the other person is incapable."
As Cheshire & Fifoot noted, "the burden of proving this knowledge lies upon the person mentally disordered."
Mr. Justice Quinn of the Ontario Court (General Division) in Re Koch (1997 CanLII 12138 (ON CTGD), 33 O.R. (3d) 485) stated:
Compelling evidence is required to override the presumption of capacity found in s. 2(2) of the SDA (Substitute Decisions Act) and s. 4(1) of the HCCA (Health Care Consent Act). The nature and degree of the alleged incapacity must be demonstrated to be sufficient to warrant depriving the appellant of her right to live as she chooses. Notwithstanding the presence of some degree of impairment, the question to be asked is whether the appellant has retained sufficient capacity to satisfy the statutes.
While I accept that Mrs. Wachmenko may well have suffered a brain injury, and may even be handicapped in some way due to ongoing problems, I find that there is no such compelling evidence before me of incapacity, such as to allow her to vitiate the settlement agreement.
Duress:
Mrs. Wachmenko, in her correspondence with the Commission, the Minister of Finance, and the Right Honourable Paul Martin, stated clearly that she felt that she had been pressured into making an improvident settlement with Primmum. In her February 11 letter to the Commission Mrs. Wachmenko stated:
I believe that I was put under undue stress for a number of reasons. And as everyone is aware, I have brain damage.
I need twenty-four hour care and transportation and many expenses that I will not be able to afford.
I believe that I should have been given at least a day to think it over. If I had not been so stressed out, I would not have signed.
As Cheshire & Fifoot note, "Since agreement depends on consent, it should follow that agreement obtained by threats or undue persuasion is insufficient."
While at common law duress consisted only of actual violence or threats of violence, equity allowed a wider range of pressures that resulted in unconscionable bargains. Thus in Ontario, economic duress can be considered as a factor in vitiating contracts.9
The definition of economic duress was clearly outlined by Finlayson J.A. in Stott v. Merit Investment Corp.10
The term economic duress" as used in recent cases, particularly in England, is no more than a recognition that in our modern life the individual is subject to societal pressures which can be every bit as effective, if improperly used, as those flowing from threats of physical abuse. It is an expansion in kind but not class of practices that the law already recognizes as unacceptable such as those resulting from undue influence or from persons in authority. But not all pressure, economic or otherwise, is recognized as constituting duress. It must be a pressure which the law does not regard as legitimate and it must be applied to such a degree as to amount to "a coercion of the will", to use an expression found in English authorities, or it must place the party to whom pressure is directed in a position where he has no "realistic alternative" but to submit to it....
In addition, relevant to the question of whether duress has been made out is also whether the party was independently advised and whether the party took appropriate steps to avoid the contract.11
I have no doubt that Mrs. Wachmenko was under some pressure during the mediation. The very nature of settlement discussions can raise the level of anxiety in most people. One must often make decisions to accept or reject offers within a tight time frame, that can have important ramifications for a party’s future.
Mrs. Wachmenko, in her correspondence and her submissions, complained of Primmum’s conduct in putting short time limits on its offers and so raising the pressure on her. As trying as such tactics may be to deal with by a party in mediation, I cannot characterize them as illegitimate, especially in the light of the statutory "cooling-off" period provided by the Regulation.
Mrs. Wachmenko was at all times represented by experienced counsel during the mediation and settlement process. Whatever the disclosure obligations of the Insurer may have been, Mrs. Wachmenko was advised by counsel, independent of the Insurer.
Nor can I accept Mrs. Wachmenko’s characterization of the settlement as necessarily improvident or unwise due to the discrepancy between the starting amount of her claim and the settlement amount included in the agreement.
Although Mrs. Wachmenko may have been entitled to certain benefits under her contract of insurance, all such entitlement was contingent upon satisfying the conditions of the policy and the governing legislation. There had already been a negative finding on a preliminary issue as to her right to bring an arbitration in her claim for statutory accident benefits due to the expiry of the limitation period relevant to statutory accident benefits. If that decision were to be upheld on the pending appeal, the value of her claim would be almost nil. Although less than the policy limits or the total claimed, Mrs. Wachmenko's settlement far exceeded this amount.
As noted earlier, the Settlement Regulation sets out clearly the time and the manner in which a settlement agreement can be avoided. These requirements are clearly set out in the disclosure documents signed by Mrs. Wachmenko following the settlement.
There is no dispute that Mrs. Wachmenko did not inform the Insurer or its counsel of her decision to rescind the settlement within the time set out by the Regulation. She instead wrote a letter, dated February 11, 2005, but received much later, to the Commission expressing dissatisfaction with the settlement.
Given that Mrs. Wachmenko was provided with information about rescission and enjoyed independent legal advice, I do not accept that her letter to the Commission constituted sufficient notice to avoid the enforcement of her settlement agreement.
In the context outlined above, I do not accept that Mrs. Wachmenko necessarily made an improvident settlement due to the economic and time pressure put on her by Primmum and its counsel.
Consequently, I find that there are no grounds for setting aside the settlement agreement arrived at on February 10, 2005 between Mrs. Wachmenko and Primmum Insurance. Accordingly, an order will go, as requested, dismissing her arbitration application.
EXPENSES:
Primmum has requested its expenses in this motion. It was successful in its claim for the dismissal of Mrs. Wachmenko’s arbitration. While Mrs. Wachmenko, in good faith, may have felt a strong need to set aside what she perceived as an improvident and unfair settlement, I have found that she had no legal grounds for so doing.
The motion hearing was short and, outside of drafting the motion materials, would have required little preparation on the part of Mr. Tessis.
Consequently, it is appropriate that she be responsible for the Insurer’s expenses in bringing this dismissal motion, which I fix at $500.00.
May 24, 2005
John Wilson
Arbitrator
Date
Neutral Citation: 2005 ONFSCDRS 70
FSCO A04-001086
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
GRETA WACHMENKO
Applicant
and
PRIMMUM INSURANCE CO.
Insurer
ARBITRATION ORDER
Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
Mrs. Wachmenko is precluded from proceeding to arbitration due to a full and final settlement arising from a private mediation on February 10, 2005. Her arbitration application is hereby dismissed.
Mrs. Wachmenko shall pay to Primmum Insurance its fixed costs of $500.00.
May 24, 2005
John Wilson
Arbitrator
Date
Footnotes
- The Statutory Accident Benefits Schedule — Accidents after December 31, 1993 and before November 1, 1996, Ontario Regulation 776/93, as amended by Ontario Regulations 635/94, 781/94, 463/96 and 304/98. O.R. 776/93 was extensively modified by O.R. 781/94; accordingly, where necessary, "1994 Schedule" refers to the original O.R. 776/93, and "1995 Schedule" refers to O.R. 776/93 as amended.
- The letter is date-stamped by the Commission as having been received February 24, 2005.
- All correspondence was copied to both parties and counsel.
- Section 9 of Ontario Regulation 664
- The Court of Appeal in Igbokwe v. H.B. Group Insurance Management Ltd. (2001), 2001 CanLII 3804 (ON CA), 55 O.R. (3d) 313 held that the Settlement Regulation did not apply once litigation was commenced in the courts. The Regulation, however, continues to apply during arbitration proceedings.
- Section 9.1(3) includes the condition: of "returning any money received by the insured person as consideration for the settlement."
- For example, in her February 11, 2005 letter to FSCO, Mrs. Wachmenko remarked And as everyone is aware, I have brain damage."
- Cheshire, Fifoot & Furmston, Cheshire and Fifoot's Law of Contract (8th ed. London 1972), p. 414
- See Triathlon Leasing Inc. v. Bryan Easton Logging Ltd. [2000] O.J. No. 10
- (1999) 1988 CanLII 192 (ON CA), 63 O.R. (2d) 545 (C.A.)
- Ronald Elwyn Lister Ltd. v. Dunlop Canada Ltd. (1979) 1979 CanLII 75 (ON CA), 27 O.R. (2d) 168 (C.A.)