Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2006 ONFSCDRS 30 FSCO A05-001236
BETWEEN:
AMALARAJ PREMANANDA Applicant
and
RBC GENERAL INSURANCE COMPANY Insurer
DECISION ON EXPENSES
Before: John Wilson Heard: Written submissions received by February 7, 2006.
Appearances: Alon Rooz and David Levy for Mr. Premananda John D. Dean for RBC General Insurance Company
Issues:
The Applicant, Amalaraj Premananda, was injured in a motor vehicle accident on October 11, 2004 and made certain claims for accident benefits. An application for arbitration was received on his behalf and a pre-hearing discussion in this case was held on February 2, 2006, at 10:00 a.m., at the offices of the Financial Services Commission of Ontario. Mr. Premananda participated. Mr. Rooz, legal counsel, represented Mr. Premananda. Mr. Dean, legal counsel, represented RBC General Insurance Company ("RBC").
Counsel for the Insurer had earlier filed a request to adjourn the pre-hearing due to the unavailability of its adjuster. The request for an adjournment was denied by Arbitrator Ashby, who ordered that "RBC's representative or someone in her stead will attend with the requisite authority." This decision was sent to all parties, and Mr. Dean acknowledged its receipt at the pre-hearing.
Mr. Dean, counsel for RBC, attended without the presence of either RBC's designated representative, or an alternative representative with the requisite authority "to bind the party he or she represents." Mr. Dean also advised that RBC had given him instructions as to its position on the matters before the arbitrator, but that he was not authorized to change RBC's position in this arbitration in any significant way without returning to his client for further instructions.
Having pointed out the problems raised by the Insurer's non-attendance, I invited Mr. Dean to provide brief written submissions as to whether he or the Insurer is in breach of the Arbitrator's order and section 279(5) of the Insurance Act which reads as follows:
(5) If an insurer or an insured is represented in a mediation under section 280, an evaluation under section 280.1, an arbitration under section 282, an appeal under section 283, or a variation under section 284, the mediator, person performing the evaluation, arbitrator or Director, as the case may be, may adjourn the proceeding, with or without conditions, if the representative is not authorized to bind the party he or she represents.
Mr. Dean complied with my request, and submissions on this issue were received on February 7, 2006. Counsel for Mr. Premananda advised that they had nothing to add to Mr. Dean's submissions.
The issue is:
- Was there was a breach of Arbitrator Ashby's order, and/or section 279(5) of the Insurance Act?
- If so, what consequences should flow from the breach?
Result:
- RBC is in breach of Arbitrator Ashby's order.
- RBC shall pay an award of expenses of $400 to Mr. Premananda, to be paid in any event of the cause. The payment of the order is suspended until such time as the arbitration has been completed and an overall expense order made by the hearing arbitrator.
EVIDENCE AND ANALYSIS:
The arbitration process leading to a determination of statutory accident benefits disputes is unique. Despite many similarities to the litigation process, and to private arbitrations, it has its own ways of proceeding that are not directly replicated in other forums.
The Introduction to the Dispute Resolution Practice Code (4th edition, October 2003) (the Practice Code), which governs arbitrations at the Commission, notes that our procedural rules aim to promote "timely, cost-effective and fair dispute resolution services." Since the principal alternative to arbitration of accident benefits disputes at the Commission is a legal proceeding instituted in the Ontario Superior Court of Justice, the measure of the timeliness and effectiveness of arbitration must be in relation to those courts.
As part of this commitment to achieve timely resolution of arbitrations, the Practice Code at Rules 9.2 and 9.3 and Practice Note 3 reiterate the provisions of the Insurance Act mandating the attendance of persons with authority to bind the parties at an arbitration or its component parts.
The Rules in the Practice Code are designed to provide for the speedy resolution of disputes over accident benefits. This is consistent with the purpose of the accident benefit legislation as characterized by Cameron J. in Youden v. Economical:
The Regulation provides for prompt payment of an income benefit to replace income lost due to the accident without need to prove fault and in lieu of any amount the plaintiff might have been awarded and recovered at common law.1
With case management in the courts now, cases there have the potential to move at a somewhat quicker pace in that forum as well.
Aspects of the case-management system in the courts are also of interest as an indication of the reasonable expectation of parties to a judicial process. Settlement conferences and pre-trials which have some similarity to the pre-hearing process in arbitration have been set up as a key portion of the court process. In Family Courts, Rule 17 of the Family Law Rules provides for enhanced case handling in a manner that resonates with our practice at FSCO.
Rule 17(15) of the Family Law Rules mandates attendance of the parties and their counsel unless the court orders otherwise. While subrule 17(16) allows the court to permit parties to participate in settlement conference by telephone where necessary, it only excuses direct participation "with permission obtained in advance by the judge who is to conduct a conference." Likewise Rule 24.1.11(1) of the Rules of Practice, which covers the procedure for mandatory mediations in civil matters, provides for the presence of the parties and their lawyers at mediations.
As in the case of pre-hearings at FSCO, there is a strong functional argument for the presence of the parties themselves at settlement conferences. In a process where time is of the essence, it is important that the parties to litigation be in a position to make decisions in real time - that is, as information becomes available and as questions are raised in the course of a settlement conference. Otherwise the opportunity may be missed and the matter will continue to proceed to resolution by a hearing.
In Magahaes v. Lusitania Portugese Recreation Club2, Master Beaudoin underlined the utility of the attendance by the parties themselves:
The fact that counsel attends with access to someone in authority does not constitute attendance by a party; nor can this be considered to a mediation. There are occasions where it is not necessary or practical that the named party attend the mediation session. This is particularly true in cases where the plaintiffs claim is insured. Generally, a representative of the insurer, typically the adjuster, will attend in their place. At other times, namely, where cases allege professional negligence, it may be critical that the named party attends.
In addition to the strict case management in place for arbitrations, the Insurance Act has attempted to create an atmosphere surrounding the arbitration process that can lead to early resolution of the claims. As part of this process section 279(5) of the Insurance Act specifically mandates the presence of a person "authorized to bind the party he or she represents."3 This involves more than just the presence of counsel for the party. It means that someone with appropriate authority has to be present who can "impose one or more legal duties on a person or institution."4
The legislative framework for the arbitration system contained in the Insurance Act is rather thin. In a legislative enactment that runs to some four hundred and forty-nine sections and innumerable sub-sections, only some twenty of these deal with the dispute resolution system, including mediation, arbitration, and neutral evaluation. Out of these twenty provisions, the legislature has deemed it necessary to make one a rule on attendance by parties at each stage of the dispute resolution process.
One can only conclude that the legislature, in attaching this proviso to the enactments creating the dispute resolution system under the Insurance Act, was identifying section 279(5) as a fundamental part and a guiding principle of the dispute resolution system.
Pre-Hearing:
Practice Note 7 details the expectations of pre-hearings. It provides for "settlement" as the first listed goal of 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."
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. In the absence of formal discoveries, the pre-hearing fulfills that function as well, although on an informal basis. Face-to-face meetings with all parties present give an arbitrator an opportunity to engage the parties themselves in the process at the pre-hearing. A party participating by telephone 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.
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.
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 a small percentage of cases finishing the complete hearing process, pre-hearings are the face of the arbitration system most seen by the general public.
A pre-hearing, then, is a crucial step in a proceeding that is an opportunity to facilitate settlement, and also a formal proceeding to deal with procedural and interlocutory issues. In this context, it is easy to see why Arbitrator Ashby insisted on the enforcement of the principles contained in section 279(5).
All this, however, is background. It serves to place in context the order of Arbitrator Ashby denying the Insurer its adjournment and ordering that "RBC's representative or someone in her stead will attend with the requisite authority."
It is the apparent failure of RBC to follow this order that is at the centre of this controversy. Mr. Dean, in his submissions on this issue, has stated that "the insurer was in compliance with the order of Arbitrator Ashby." He elaborated:
I further confirm that I had advised you that I had thoroughly canvassed with the insurer, in preparation for the Pre-Arbitration Hearing, their position on all of the issues in dispute and had received their instructions regarding potential settlement of the claims. I had the ability to contact a representative of the insurer by telephone, if necessary, to obtain further instructions."
According to Mr. Dean, "the insurer was in attendance by their availability to participate by telephone conference call, and the available individual did have the requisite authority to deal with all issues in dispute." He also points to the failure of Arbitrator Ashby to add the words "in person" following "attendance" as support for his submission that neither the Insurer nor Mr. Dean were in breach of the order.
The ordinary sense of the word "attend" connotes being present at a particular location.5 In this case, the representative for the insurer was physically absent from the place where the pre-hearing was held. In any ordinary sense of the word, that person was not in attendance and did not "attend" the pre-hearing. I agree with Master Beaudoin6 that "the fact that counsel attends with access to someone in authority does not constitute attendance by a party." To insist that the words "in person" must accompany the word "attendance" is to insist on redundancy.
Mr. Dean is right in his submission that parties at FSCO frequently utilize teleconferencing as a way of minimizing expense and moving proceedings along on a timely basis. However, when they do so, it is with the permission of the arbitrator and not in the face of an order to the contrary. Provision is made in the Practice Code for arbitrators to hold electronic hearings in accordance with the SPPA. However, Rule 33.2 makes it clear that the type of pre-hearing depends specifically on what the arbitrator considers appropriate.
Arbitrator Ashby considered that the pre-hearing should take place in person with the attendance of the Insurer's representative. While I have no reason to disagree with Arbitrator Ashby's decision, any evaluation of the correctness of her order is irrelevant. This is not an appeal. Rather, what is at stake is whether RBC and Mr. Dean decided that they were somehow immune from it, and chose, unilaterally, to disobey.
Pitt J. commented in 509521 Ontario Ltd. v. Canadian Imperial Bank of Commerce:
It is my view that there comes a time when it is vital to emphasize the need for compliance with orders of the court. We hear judges lecturing young people, and people in other courts, of the importance of preserving the institution of law and order and we have here some of the pillars of the community, the Canadian Imperial Bank of Commerce and Ernst & Young Inc. acting as if what the judge said didn't matter.
While an arbitrator is not a judge,7 his or her orders can be filed with the courts and so enforced.8 They should not be disobeyed lightly.
Mr. Dean has not argued that it was impossible for RBC to comply with Arbitrator Ashby's order, nor that he somehow made best efforts to comply with the order.
The excuse proffered was simply that "our client will not be available.9 "As Mr. Rooz, counsel for Mr. Premananda, noted in his letter of January 31, 2006, "the pre-hearing discussion has been scheduled since July 2005 (and) your client had enough time to make herself reasonably available." In any event, Mr. Dean asserts that he had a responsible person standing by to take his calls. If there was someone responsible available in that time frame they should have been present at the pre-hearing in accordance with the order.
I find that RBC, the insurer in this matter, was knowingly in breach of Arbitrator Ashby's order when it unilaterally decided that it was not required to attend at the pre-hearing. I find, as well, that the non-attendance violated the intent and the spirit of 279(5) of the Insurance Act. In addition, I find that the knowing disobedience of an order of which RBC was clearly aware, constitutes an abuse of the arbitration process.
Sanctions:
Section 23(1) of the SPPA provides that: "(A) tribunal may make such orders or give such directions in proceedings before it as it considers proper to prevent abuse of its processes." This is a wide, discretionary power. Jennings J. writing for a panel of the Divisional Court in Royal & SunAlliance v. Volfson10 remarked: "limiting tribunals in the face of abuse cannot have been the intention of the legislature when it gave tribunals the powers in s.23(1) to control process."
As noted in my pre-hearing letter, a finding that the Insurer was in breach of Arbitrator Ashby's order could lead to potential sanctions ranging from a mild admonition through an expense award against the party or the solicitor personally to, in the extreme, action under section 13 of the SPPA.
Mr. Dean pointed out in his submissions that at least some formal aspects of the pre-hearing were successfully completed notwithstanding the absence of the Insurer's representative. If the failure to abide by the arbitrator's order is to be construed as an instance of a party figuratively thumbing its nose at the tribunal, then, given the relatively benign circumstances of the Insurer's breach of the order, it was a discreet and polite thumbing of the nose. It is certainly not a case for resort to contempt procedures.
Nor is there any evidence that Mr. Dean was acting on some frolic of his own in advising a party to absent itself from the proceeding. All the evidence points to the decision not to attend being made by RBC itself, and not Mr. Dean. My impression is that Mr. Dean made the best of the difficult situation he was put in by his client. I find, therefore, that there are no grounds for the imposition of costs or expenses personally on Mr. Dean, pursuant to section 282(11.2) of the Insurance Act.
The other option that is available is an order of expenses pursuant to Rule 75 of the Practice Code. Expenses, while usually viewed as compensatory, also have a punitive aspect. This is clear from the various criteria under Rule 75 for the ordering of expenses.
Rule 75.2(d) provides for the award of expenses to a party based on "the conduct of a party or a party's representative that tended to prolong, obstruct or hinder the proceeding, including a failure to comply with undertakings and orders."
Unquestionably the failure to observe the order in question has contributed to delays in the arbitration process. It is one reason that I ordered a further pre-hearing to be held in June of 2006.
Mr. Dean submitted in RBC's defence that, in any case, no settlement would have been expected at the pre-hearing because the "Applicant's demands contemplated a significant payment on the various issues in dispute." Therefore, he argued "settlement would not be possible at this time." This submission, however, misses the point of this exercise.
No-one is required to settle at a pre-hearing. The failure to settle is not a reason to conclude that a pre-hearing was a waste of time. It is expected, however, that parties will, in good faith, be in a position to seriously consider both settlement options, and also react to new and relevant information. Patently, Mr. Dean was not in a position to do this and alter the Insurer's position, without resort to outside authorization, so any discussion of whether settlement could or could not have resulted is merely speculative.
As indicated earlier, the point here is not whether settlement was delayed or obstructed by the Insurer's absence, but whether or not RBC knowingly flouted the arbitrator's order. Such conduct is more directly dealt with under Rule 75.2(e) which permits consideration of "whether any aspect of the proceeding was improper, vexatious or unnecessary." I have no hesitation in finding that an intentional disregard of an arbitrator's order is improper conduct.
I therefore order RBC to pay an award of expenses to Mr. Premananda. While the order is punitive, and not tied directly to expenses incurred by the Applicant, I would fix the award at $40011, to be paid in any event of the cause. There are, however, other circumstances that cause me to modify this order somewhat.
Mr. Premananda, at the time of the hearing, was not in full compliance with the level of preparation for a pre-hearing expected by the Commission. Mr. Levy, the student who appeared at the pre-hearing on his behalf, stated only that they were prepared to obtain authorizations for release of some of the documents requested. He had done little, if anything, to fulfill production obligations prior to pre-hearing as outlined in Rule 32.12
I will, therefore, suspend the payment of the order until such time as the arbitration has been completed and an overall expense order made by the hearing arbitrator. As such, the expense award may be added to the final expense award, or set off against any expense award made against the Applicant, if such is the outcome.
February 21, 2006
John Wilson Arbitrator
Date
Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2006 ONFSCDRS 30 FSCO A05-001236
BETWEEN:
AMALARAJ PREMANANDA Applicant
and
RBC GENERAL INSURANCE COMPANY Insurer
ARBITRATION ORDER
Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
- RBC shall pay an award of expenses of $400 to Mr. Premananda, to be paid in any event of the cause. The payment of the order is suspended until such time as the arbitration has been completed and an overall expense order made by the hearing arbitrator.
February 21, 2006
John Wilson Arbitrator
Date
Footnotes
- Youden v. Economical Insurance Co. 1996 CanLII 8010 (ON CTGD), [1996] O.J. No. 2044.
- Magahaes v. Lusitania Portugese Recreation Club [1999] O.J. No. 3754
- I note that Practice Note 3 explaining the pre-hearing process and the concept of binding authority is sent to all parties and their counsel with the notice of pre-hearing.
- "Bind" definition from Black's Law Dictionary 8th Edition
- The Canadian Oxford Dictionary lists: "attend 1. a be present at (attend the meeting) b go regularly to (attend school) 2. a be present (many members failed to attend)
- Magahaes v. Lusitania (supra)
- See Toronto R. W. Co. and Toronto (City) (re) [1918] O.J. No. 39 in which Meredith C.J.O. put forth the proposition that "a body which is in pith and substance a Court is none the less a Court because it is not called by that name" and that a court word enforce compliance with its orders.
- Section 19(1) of the SPPA
- Mr. Dean mentioned participation in a training seminar as a reason for non-availability.
- Royal & SunAlliance Insurance Company of Canada v. Roman Volfson et al. [2006] O.J. No. 209
- This would also address the preparation time and attendance at the arbitration pre-hearing of the Applicant's solicitors.
- This provides that all documents listed in the Application and Response must be exchanged at least ten days prior to the pre-hearing.