Nuru Haider v. Royal & SunAlliance Insurance Company of Canada, 2006 ONFSCDRS 11

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 11

FSCO A03-000433

BETWEEN:

NURU HAIDER

Applicant

and

ROYAL & SUNALLIANCE INSURANCE COMPANY OF CANADA

Insurer

DECISION ON A MOTION

Before:

Suesan Alves

Heard:

By telephone conference call on July 8, 2005. Written submissions were received by September 26, 2005

Appearances:

Johnathan Franko for Ms. Haider Jamie Pollack for Royal & SunAlliance Insurance Company of Canada

Issues:

Royal brought a motion at a resumption of the pre-hearing for an Order, pursuant to Rule 34 of the Dispute Resolution Practice Code, Fourth edition — Updated October 2003, based on the Applicant's failure to produce documents. Each party claimed its expenses of the motion. The conduct of the Applicant's representative raised questions as to whether he should be excluded from the hearing, pursuant to section 23 of the Statutory Powers Procedure Act, R.S.O. c. S.22.

The issues in this hearing are:

What is the appropriate remedy in this case, pursuant to Rule 34 of the Dispute Resolution Practice Code, Fourth edition —Updated October 2003, when the Applicant fails to produce documents pursuant to an undertaking and an Order?
Should Mr. Franko be excluded from the hearing under section 23 of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22 as amended?
Which party should pay the other's expenses of the motion?

Result:

The arbitration hearing is stayed until the Applicant has complied with her obligations to produce the documents the Insurer has requested, or until she has made best efforts to obtain the documents in question.
Mr. Franko is excluded from the hearing.
Mr. Franko or his firm shall personally pay the Insurer's expenses of the motion, fixed at $300.

ANALYSIS & REASONS:

These are my reasons for an Order made on December 8, 2005, and clarified on December 21, 2005.

Productions and the Arbitration Process

"Early disclosure of relevant supporting documents is a key requirement of the dispute resolution process at the Commission."¹

Such disclosure provides both parties with information about the strengths and weaknesses of their respective cases and promotes settlement. Failing settlement, the parties are then in a position to adduce relevant evidence at a hearing, thus promoting fair and just adjudication of the dispute.

Sections 32 through 34 of the Dispute Resolution Practice Code—Fourth edition, Updated October 2003, ("the Code"), address the production of documents.

Section 32.1 of the Code obliges parties to obtain and exchange documents requested in the Response to the arbitration application at least 10 days before the pre-hearing, and imposes an ongoing obligation on the parties for the exchange of documents. Section 34 of the Code provides that an arbitrator may order a party to pay expenses, including interim expenses; deny expenses to a party; exclude a document filed; impose a new timetable for compliance; draw an adverse inference against a party; and make such other order as the arbitrator considers just.

When parties fail to produce documents, arbitrators fashion remedies that address the circumstances of the case before them. Progressive steps are generally taken. Prior to the hearing, undertakings may be required and time lines set. Failing compliance, orders are made. Failing compliance with orders, the arbitration may be stayed, and the party in default may be denied its expenses, or be saddled with an Order to pay interim expenses. The object of these measures is compliance.²

At a hearing, when a party produces documents less than 30 days before the hearing, the hearing arbitrator may not permit a party to adduce the evidence. When a party fails to produce documents, the hearing arbitrator may draw an adverse inference from the failure to produce a document. Depending on the nature of the documentation which has been excluded, this may result in a party failing to meet its burden of proof. The hearing arbitrator may also stay the proceeding, or stay a discrete issue because of non-production. A party's failure to comply with undertakings and orders to produce documents may also be considered in an award of expenses.

The motion and its background

The history leading up to the resumption of the pre-hearing and the motion is an unfortunate one:

On March 26, 2003, the Applicant's representative, Mr. Johnathan Franko, filed Ms. Haider's arbitration application seeking caregiver and attendant care benefits and her arbitration expenses. The Insurer disputed entitlement, alleged material misrepresentation which would disentitle Ms. Haider from receiving any benefits, alleged that she failed to attend an attendant care DAC assessment, claimed its expenses and an award in respect of its assessment.

In its Response, the Insurer requested 11 productions in Schedule "C". Section 32.1 of the Code obliged the Applicant to obtain and provide those productions at least 10 days before the date of the pre-hearing. However, Mr. Franko did not do so.

Counsel for the Insurer also requested those 11 productions by letter on April 28, 2003. In that letter, he also informed Mr. Franko that Royal would pay the reasonable cost of obtaining the documents.

On August 5, 2003, the first pre-hearing took place. Mr. Franko undertook to obtain the documents in question within 90 days of the pre-hearing, or to make best efforts to obtain them. Hearing dates of March 8, 9, 10 and 11, 2004 were scheduled on consent.

In November 2003, counsel for the Insurer requested the hearing be rescheduled. The Applicant consented to this request. The Commission rescheduled the hearing to May 10, 11, 12 and 13, 2004.

On May 5, 2004, the Insurer sought a further adjournment because its counsel was leaving the firm and there was insufficient time for the lawyer assuming carriage of the file to prepare for the hearing. The Commission granted the adjournment, peremptory to the Insurer, with expenses in the discretion of the hearing arbitrator, and rescheduled the hearing to February 7, 8, 9 and 10, 2005.

On January 27, 2005, the Insurer filed a motion for an Order that the Applicant produce the documents, and failing production, for an adjournment of the hearing.

On February 1, 2005, the Insurer requested an adjournment of the hearing based on outstanding productions and the recent death of the adjuster. This adjournment was granted on consent, peremptory to both parties. However, as productions were still outstanding, the arbitrator who dealt with the adjournment of the hearing directed a resumption of the pre-hearing.

When the case administrator attempted to schedule the resumption of the pre-hearing, the parties' representatives informed her they were unavailable until July 8, 2005.

Given the history of the case, and that productions remained outstanding almost two years after the arbitration application had been filed, I made certain orders; set out a process for the parties to identify their respective production requests; confirm the agreed upon productions; and ordered the parties to obtain them. I also provided a process for dealing with disputed productions by way of written submissions and rulings. The hope was that a productive pre-hearing and settlement discussion would take place at the resumed pre-hearing.

During the period leading up to the pre-hearing resumption, the Insurer sent a number of letters to Mr. Franko to prompt him to obtain the documents. When the letters and follow-up phone calls failed to yield the documents, the Insurer offered to obtain them, if Ms. Haider would sign the necessary authorizations. The Insurer drafted and sent authorizations to Mr. Franko for his client's signature and return. Although counsel for the Insurer followed up, once again, Mr. Franko did not provide the documents.

Royal's initial motion in relation to productions, served in January 2005, was for an order adjourning the hearing due to the Applicant's non-compliance with her production obligations. Six months later, at the resumption of the pre-hearing, given the Insurer's further efforts, Royal amended its request to seek an Order barring the Applicant from entering the documents in question into evidence at the hearing, if she should obtain them. In the alternative, Royal sought an order that an adverse inference be drawn from the Applicant's failure to produce the documents.

At the resumption of the pre-hearing, Mr. Franko admitted that he had taken no steps to obtain the Applicant's productions, although more than two years had elapsed since the date on which he filed Ms. Haider's application for arbitration. He had not arranged for Ms. Haider to come into his office to sign the authorizations the Insurer provided, and had not sent them to her for her signature. He did not appear to appreciate that his undertaking had been unconditional, the seriousness of breaching his undertaking and an Order; and the grave consequences of his conduct for his client.

When asked for an explanation for his inaction, Mr. Franko stated that he was waiting for the Insurer to produce its file, and needed to review it before he obtained the Applicant's productions. This was the first time that Mr. Franko took that position in relation to his unconditional undertaking. If there had been any sincerity to Mr. Franko's position that he needed the Insurer's file before requesting the Applicant's productions, I would have expected him to seek an Order requiring the Insurer to provide a copy of its file. However, he did not do so.

The circumstances surrounding the production of the Insurer's file are set out in the report of the initial pre-hearing. Counsel for the Insurer asked Mr. Franko to bring all issues in dispute forward in this arbitration proceeding. Mr. Franko responded that he had taken over Ms. Haider's file from another paralegal, and needed to review the Insurer's file before he could identify any further disputed issues. I find production of the Applicant's documents was not contingent on the production of the Insurer's file.

When asked when he could obtain the productions, Mr. Franko offered to "obtain what we can," and was vague about when those efforts would be made.

I find the Insurer has made significant efforts over a prolonged period of time to obtain the documents in question from the Applicant. Progressive steps have been taken to encourage compliance on the part of the Applicant and her representative. These efforts have all failed.

I appreciate the Insurer's frustration. However, I find the remedy sought by the Insurer is one that is in the province of a hearing arbitrator, whose role it is to determine what evidence is to be admitted, and the inferences to be drawn from the evidence, or the failure to produce evidence. I am loathe to make an Order which would bind the hands of the hearing arbitrator.

I find the appropriate remedy in the circumstances of this case is to stay the arbitration until the Applicant has complied with her obligations to produce the documents the Insurer has requested, or until she has made best efforts to obtain the documents in question.

Expenses

Both parties claimed expenses of the motion. The motion was brought as a result of Mr. Franko's non-compliance with his undertaking and with an Order. I find the Insurer is entitled to its expenses of the motion, and I fix those expenses at $300.00.

In certain circumstances, an arbitrator may order a person representing a party for compensation to personally pay all or part of any expenses awarded against a party. I find such an order is appropriate in the circumstances of this case.

Section 282(11.2) and subsection (c) of the Insurance Act, state that:

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,

(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.

I find that in failing to take any steps to secure the productions in question, Mr. Franko caused delay and caused expenses to be incurred without reasonable cause. At the time of the motion, there was no suggestion by Mr. Franko that any delay was attributable to the conduct of the Applicant. As noted below, Mr. Franko subsequently attempted to attribute the delay to his client, however, I reject those submissions.

Mr. Franko telephoned the case administrator and sought to clarify whether he was to pay the expenses and if so, to whom. By letter dated December 21, 2005, I clarified that the amount was to be paid by Mr. Franko, personally, or by his firm and not by his client, and that the amount should be paid to counsel for the Insurer in trust.

Mr. Franko's conduct

Mr. Franko's defaults, his conduct at the motion, and his submissions on expenses caused me to conclude that he does not understand the duty of an advocate and that he should therefore be excluded from the hearing.

Subsection 23(3) of the Statutory Powers Procedure Act, R.S.O. c. S.22 ( "SPPA"), as amended, provides that:

A tribunal may exclude from a hearing anyone, other than a barrister and solicitor qualified to practise in Ontario, appearing as an agent on behalf of a party or as an adviser to a witness if it finds that such person is not competent properly to represent or to advise the party or witness or does not understand and comply at the hearing with the duties and responsibilities of an advocate or adviser. R.S.O. 1990, c. S.22, s. 23 (3).

The SPPA defines a "hearing" as "a hearing in any proceeding; ('audience’)" and thus includes a pre-hearing.

Under the Superintendent's Code of Conduct for Statutory Accident Benefit Representatives — July 2003, ('Code of Conduct"), Part 2, paralegal representatives are required to have a reasonable understanding of the substantive law and procedural requirements governing statutory accident benefit claims. Under the Code of Conduct, this includes a reasonable understanding of the relevant requirements of the Insurance Act, the Statutory Powers Procedure Act, the Dispute Resolution Practice Code, and case law. Paralegal representatives are also obliged to act with courtesy and honesty, to comply with all procedural requirements that apply to the proceedings including those contained in the Dispute Resolution Practice Code, and with any orders or directions given by a mediator or adjudicator.

In my view, what was required of Mr. Franko on the return of the motion, was a frank admission, an explanation, an apology to the Insurer and to the Commission, and a commitment to act expeditiously to obtain the documents. When asked, Mr. Franko admitted that he had taken no steps to obtain productions. There was no apology, nor was there a commitment to act expeditiously.

I asked Mr. Franko if he was familiar with the Code of Conduct which governs paralegals. He responded that he was. I asked if there was any reason why he should be permitted to continue to represent Ms. Haider. Mr. Franko stated that he would "represent her to the best of my abilities." He also stated that he believed that she was "in good hands." I was unconvinced, given the history of this case.

When I asked Ms. Haider why I should allow Mr. Franko to continue to represent her, she complained about the Insurer's non-payment of her benefits. Counsel for the Insurer took no position, noting that the Applicant could find herself another representative if she wished

Parties generally have the right to choose their representatives. One approach is to treat Ms. Haider's decision to have Mr. Franko represent her as sacrosanct, and simply allow a process to unfold, recognizing that the damage will have been done by the time she gets to a hearing. Whatever the merits of her case, her testimony is unlikely to be supported by documentary evidence. She is therefore unlikely to succeed and may be exposed to an order that she pay the Insurer's expenses.

The other approach is to intervene at this point and exclude Mr. Franko from the hearing due to his lack of competence. I was mindful that such an order would be intrusive, might result in delay of the hearing, and, depending on the terms of Mr. Franko's retainer, might cause Ms. Haider to incur additional expense.

Four days after the motion, Mr. Franko wrote the Commission, wishing to withdraw as Ms. Haider's representative. He enclosed a copy of a letter to his client in which he alleged that there had been a "continuous and ongoing lack of co-operation and break down of communication between yourself and our office."

In his submissions on expenses, Mr. Franko stated in part:

As you are aware any and all requested documentation by the Insurer, and the subsequent submission of various authorization, by the representative for the insurer, were in fact reviewed with our client, and her response was that the insurer already has all of this information, henceforth she refused to sign the said authorizations.

Furthermore, discussion took place prior to the July 8, 2005 hearing and as a result I was able to convince her that it would be in best of her interest to sign them and she finally agreed to do so, while in attendance at our office prior to the said hearing.

Mr. Franko made no attempt to reconcile these statements with what took place at the motion. Even if I ignored everything that had been said on the motion, and accepted the contents of his letter as accurate, it would account for four months of inaction on his client's part, at most. It would not explain Mr. Franko's inaction and non-compliance over the course of two years. In any event, I prefer the statements made during the motion, because they were made in the presence of his client.

Mr. Franko's submissions claiming expenses raised issues of Mr. Franko's honesty. That tipped the scale in determining whether he should be excluded as Ms. Haider's representative at this time. Having admitted at the motion that he had taken no steps to obtain productions, and having filed no materials on the motion, Mr. Franko claimed that he expended 12 hours of preparation time for the failed motion. In my view, his claim was spurious on its face. Section 2.2 Code of Conduct states that "A representative must not put forward any information he or she knows is untrue." The Code of Conduct imposes a duty to act honestly in dealing with FSCO and all participants in any dispute resolution process.

In 781332 Ontario Inc. v. Mortgage Insurance Company of Canada (1991), 1991 CanLII 7076 (ON CTGD), 3 C.P.C. (3d) 33, Hoillett J. said:

This court needs not impute motive, nor does it need to find impropriety. But it must be concerned with appearances which reflect adversely on the integrity of the administration of justice. Mindful of that paramount consideration, therefore, I am of the opinion that the litigant's right to be represented by counsel of his/her choice must yield to the paramount public interest in preserving the integrity of the system, as well as its appearances.

I agree with Justice Hoillett's reasons. Given Mr. Franko's failings in this case and his spurious claim for expenses, I am not persuaded that he understands the duty of an advocate before this tribunal. In my view, Ms. Haider's right to have a representative of her choice must be intruded upon, and I exclude Mr. Franko from the hearing.

In the Order of December 8, 2005, I stated that "Mr. Franko is removed as Ms. Haider's representative." However, I note that section 23 of the SPPA uses the language of "excluding a representative from a hearing," rather than "removing a representative." There seems to be no difference in the effect. I therefore amend the Order to provide for Mr. Franko's exclusion at the hearing.

Next steps

As Mr. Franko is excluded from the hearing, I define what would qualify as best efforts on Ms. Haider's part, in the context of this case, to get this matter back on the rails. In the circumstances of this case, the Insurer is to send the authorizations in question directly to Ms. Haider for her signature by December 30, 2005.

Ms. Haider is to sign and return them to counsel for the Insurer by January 13, 2006. Counsel for the Insurer is to promptly request the documents with those authorizations and provide copies to the Applicant within 30 days of receiving them. Once that has happened, the Applicant is to contact the case administrator and arrange a further pre-hearing.

Royal does not appear to have provided the Applicant with a copy of the accident benefits file. Royal did not dispute Mr. Franko's request for the file. As Mr. Franko has been excluded, I ordered the Insurer to provide a copy of its file directly to the Applicant. The Insurer sought clarification of the period during which the file was to be produced. By letter dated December 21, 2005, I clarified that the Insurer was to produce its file between the date of the accident and the date of mediation. The Order, as clarified and amended, is as follows:

Order

The arbitration hearing is stayed and will not proceed, until the Applicant produces the documents that she has been ordered to produce, or makes best efforts to do so.
Mr. Franko or his firm shall pay the costs of motion, which I fix at $300. The amount is not to be paid by Ms. Haider. The moneys are to be paid to counsel for the Insurer, "in trust."
Mr. Franko is excluded from the hearing. Ms. Haider may either represent herself, or seek the assistance of another representative, who may be a relative, friend, paralegal or a lawyer.
As I have excluded her representative, the following will qualify as best efforts on Ms. Haider's part, in the circumstances of this case:

The Insurer is to send the authorizations in question directly to Ms. Haider for her signature by December 30, 2005. Ms. Haider is to sign and return them to counsel for the Insurer by January 13, 2006. Counsel for the Insurer is to promptly request the documents with those authorizations and provide copies to the Applicant within 30 days of receiving them. Once that has happened, the Applicant may contact the case administrator and arrange a further pre-hearing.

The Insurer is to provide the Applicant with a copy of her accident benefits file in the possession of the Insurer, from the date of the accident to the date of mediation, with the exception of information on reserves, or documents for which privilege is claimed, by December 30, 2005.

January 25, 2006

Suesan Alves Arbitrator

Date

Financial Services Commission of Ontario