Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 189

FSCO A05-002435

BETWEEN:

ANDREI FEDOSEEV, JR.

Applicant

and

RBC GENERAL INSURANCE COMPANY

Insurer

REASONS FOR DECISION

Before: Denise Ashby

Heard: September 28, 2006, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances: Nureen Sharif for Mr. Fedoseev James Leone for RBC General Insurance Company

The Applicant, Andrei Fedoseev Jr. (Mr. Fedoseev), was injured in a motor vehicle accident on November 2, 2003. He applied for statutory accident benefits from RBC General Insurance Company ("RBC"), payable under the Schedule.¹ RBC denied medical benefits and examination expenses. The parties were unable to resolve their disputes through mediation, and Mr. Fedoseev 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:

Should Mr. Fedoseev's Application for Arbitration, dated September 28, 2005, be dismissed without hearing or be deemed to have been withdrawn pursuant to the Dispute Resolution Practice Code?
Is Mr. Fedoseev liable to pay RBC's expenses pursuant to subsection 282(11) of the Insurance Act?
Should the firm of Mazin and Rooz be removed as Mr. Fedoseev's solicitor of record pursuant to the Dispute Resolution Practice Code?

Mr. Fedoseev's Application for Arbitration, dated September 28, 2005, is deemed to have been withdrawn pursuant to Rule 70 of the Dispute Resolution Practice Code.
Mr. Fedoseev shall pay RBC's expenses pursuant to subsection 282(11) of the Insurance Act fixed at $1,000.00.
The firm of Mazin and Rooz is removed as Mr. Fedoseev's representatives of record pursuant to Rule 9 of the Dispute Resolution Practice Code.

Chronology:

On October 27, 2005, Mr. Fedoseev filed his Application for Arbitration, dated September 28, 2005, with the Commission. The Application was signed on his behalf by his then representative.

On November 21, 2005, RBC filed its Response by Insurer to an Application for Arbitration.

On December 12, 2005, a Notice of Pre-hearing was issued by the Commission, advising that the Pre-hearing had been scheduled for July 18, 2006.

On January 10, 2006, a Notice of Rescheduled Pre-hearing was issued by the Commission, advising that the Pre-hearing had been rescheduled to August 10, 2006.

On March 28, 2006, a further Notice of Rescheduled Pre-hearing was issued by the Commission, advising that the Pre-hearing had been rescheduled to September 20, 2006.

On September 20, 2006, a pre-hearing was convened before me at which Mr. Fedoseev did not attend. The issues for arbitration were confirmed, in a letter of the same date. As well, RBC brought a motion seeking to dismiss Mr. Fedoseev's claim without hearing. This motion was adjourned to be heard before me on September 28, 2006, to permit RBC time to serve its motion record on Mr. Fedoseev.

On September 28, 2006, I heard both RBC's motion to dismiss Mr. Fedoseev's claim without hearing and the firm of Mazin and Rooz's motion to be removed as solicitors of record. I ordered that the firm of Mazin & Rooz would be removed as representative of record on conditions which were set out in my letter of the same date. This letter was faxed to counsel for the parties. As well, it was couriered to Mr. Fedoseev at the address on the Commission's file which his counsel had confirmed was a current address.

There is no record that any of the Commission's correspondence, sent to Mr. Fedoseev at the address on its file, has been returned.

On September 28, 2006, Mazin and Rooz confirmed it had complied with my order of that date by providing Mr. Fedoseev a copy of RBC's motion record and the provisions of Rule 68 of the Dispute Resolution Practice Code, (Fourth Edition — Updated October 2003), (DRPC.)

EVIDENCE AND ANALYSIS:

Removal as Representatives of Record:

Mazin and Rooz's letter to Mr. Fedoseev dated September 28, 2006 satisfies me that the firm complied with my order of same date. Therefore, Mazin and Rooz is removed as representative of record for Mr. Fedoseev.

Dismissal of Claim Without Hearing:

RBC's motion to dismiss Mr. Fedoseev's claim without a hearing pursuant to Rule 68.1 of the DRPC is unopposed. On the basis of the foregoing chronology, I find that Mr. Fedoseev had notice of all proceedings scheduled, rescheduled and resumed at the Commission. Further, I find that he received a copy of RBC's motion record from his former representative on or about October 5, 2006 pursuant to Rule 7.3(b) of the DRPC. Since its receipt, Mr. Fedoseev has not communicated an intention to file submissions in response.

RBC submits that Mr. Feedoseev's failure to attend the rescheduled and resumed pre-hearings, notwithstanding notice, is a failure to participate in the process such that he meets the test set out in Rule 68.

Recently, there has been a series of cases which have dealt with the issue of applicants abandoning proceedings. The decisions have divided along two distinct lines: Dismissal without hearing pursuant to Rule 68² and a "deemed" or "constructive withdrawal" under Rule 70.³ Both strategies seek to interpret the rules in a manner which resolves abandoned proceedings in the most just, quickest and least expensive fashion.⁴

Rule 68.1 provides:

Subject to Rule 68.2, an adjudicator may dismiss a proceeding without a hearing where the proceeding is frivolous, vexatious or is commenced in bad faith;

Rule 68.2 requires the adjudicator to deliver written notice to all parties of the intention to dismiss pursuant to Rule 68.1. Rule 68.3 makes provision for a party to object to the dismissal.

Rule 68 is similar to Section 4.6(1) of the Statutory Powers Procedure Act, R.S.O. 1990, Chapter S-22, (SPPA), which provides for dismissal without hearing where the proceeding is frivolous, vexatious or is commenced in bad faith; relates to matters beyond the jurisdiction of the tribunal or some aspect of the statutory requirements for bringing the proceeding has not been met.

The phrase "frivolous, vexatious or brought in bad faith" is undefined in the Insurance Act, the Schedule, the DRPC and the SPPA. Black's Law Dictionary 6th Edition provides some assistance. It defines "frivolous" as:

of little weight or importance. A pleading is "frivolous" when it is clearly insufficient on its face, and does not controvert the material points of the opposite pleading, and is presumably interposed for mere purposes of delay or to embarrass the opponent. A claim or defense is frivolous if a proponent can present no rational argument based upon the evidence or law in support of that claim or defense.⁵

Further, it defines vexatious proceeding as: "a proceeding which is instituted maliciously and without probable cause."⁶

Finally, it defines "Bad Faith" as:

The opposite of "good faith," generally implying or involving actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake as to one's rights or duties, but by some interested or sinister motive. Term "bad faith" is not simply bad judgment or negligence, but rather it implies the conscious doing of a wrong because of dishonest purpose or moral obliquity; it is different from the negative idea of negligence in that it contemplates a state of mind affirmatively operating with furtive design or ill will.⁷

The foregoing definitions suggest that a litigant must wilfully bring an unmeritorious claim, conduct the action deceptively, maliciously or fail to fulfill a duty or obligation in a manner inconsistent with honest mistake.

Arbitrators have frequently considered the standard of conduct required to meet the frivolous, vexatious and abuse of process test in the context of the expense regulation. In the appeal decision in Murray and TTC, the Director's Delegate upheld the arbitrator's awarding of expenses to Ms Murray notwithstanding the arbitrator had questioned the veracity of Ms Murray's evidence.⁸

In Almaliah and Dominion, the arbitrator declined to dismiss an application pursuant to Rule 68, in part, because the motion had not been properly brought. However, he did consider the meaning of "frivolous" in the context of denying an award of expenses against the firm which was seeking to be removed. He stated:

For a finding to be made that the Application is "frivolous", as the term is used in section 282(11.2) of the Insurance Act, I must be satisfied that the Application, when filed, was groundless or had little prospect of success. That finding necessarily involves assessing the merit of the claims made. The merit of the claims was not addressed on this motion.⁹

The threshold of "frivolous, vexatious or brought in bad faith" as set out both in Rule 68 and the SPPA is necessarily high. Dismissal of a claim without hearing extinguishes the party's right to advance their claim. In the present case, Mr. Fedoseev’s Application for medical benefits and examination expenses was signed by his former counsel.¹⁰ Following the filing of the Application, Mr. Fedoseev had no other involvement in the arbitration process. His unexplained absences do not evidence a groundless claim or a malicious purpose or dishonest conduct. However, his non-participation does interfere with the proper administration of the dispute resolution process. It hinders RBC's right to a speedy and inexpensive resolution of the matter. In the absence of a rule which deals with abandoned claims, Rule 70, the rule respecting withdrawal, provides an alternative.

Rule 70.3 provides an adjudicator the authority to permit a withdrawal even in the face of a party’s objection on such terms and conditions as he or she considers just and expenses may be awarded to either party. As Mr. Fedoseev has not communicated with his counsel or participated in any of the proceedings, I infer that he has withdrawn from the process. I find that this broad interpretation of Rule 70.3 is consistent with Rule 1.1 that the Rules should be interpreted broadly to produce the most just, quickest and least expensive resolution of the dispute. This result provides the Commission with a procedure to administratively close its file. It provides RBC a basis for concluding that further proceedings are unlikely unless Mr. Fedoseev is able to show a reasonable basis for his failure to participate in proceedings of which he had notice. It does not extinguish Mr. Fedoseev’s claim.

EXPENSES:

Rule 70.3 provides an arbitrator with the authority to award expenses where a claim is withdrawn. Mr. Fedoseev has failed to communicate with either his former representative or the Commission in respect of his intentions to proceed with his Application. He has failed to provide an explanation for his absences at proceedings of which he had notice. As a consequence, RBC has incurred unnecessary legal expenses. Therefore, I find that Mr. Fedoseev is liable to pay RBC's expenses pursuant to subsection 282(11) of the Insurance Act.

As part of its motion record, RBC provided a Bill of Costs. It claims legal fees of $1,124.71, at the legal aid rate, including an estimated appearance fee for the September 28, 2006. As well, RBC claims $3,550.50 in disbursements which include the arbitration and mediation fees.¹¹ I am not prepared to award RBC either the mediation or arbitration assessments. I fix expenses for RBC's attendance at the pre-hearing and its resumption including the cost of preparing the motion record at $1,000.00.

December 6, 2006

Denise Ashby Arbitrator

Date