Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 77

FSCO A04-001600

BETWEEN:

TREVOR DUFF

Applicant

and

MOTOR VEHICLE ACCIDENT CLAIMS FUND

Insurer

REASONS FOR DECISION

Before: Anne L. Sone

Heard: March 15, 2006, at the offices of the Financial Services Commission of Ontario in Toronto. Final written submissions were received on May 15, 2006.

Appearances: Tripta Chandler for Mr. Duff Lorraine Takacs for the Motor Vehicle Accident Claims Fund

Issues:

The Applicant, Trevor Duff, was injured in a motor vehicle accident on March 21, 2003. He applied for statutory accident benefits for housekeeping and home maintenance from the Motor Vehicle Accident Claims Fund ("MVAC Fund"), payable under the Schedule.¹ The MVAC Fund disputed Mr. Duff's claim for benefits. The parties were unable to resolve their disputes through mediation, and Mr. Duff applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issue in this hearing is:

1. Does the Financial Services Commission of Ontario have the jurisdiction to decide a claim for expenses in relation to a matter which has been resolved prior to a preliminary issue hearing?

Result:

1. The Financial Services Commission of Ontario has the jurisdiction to decide a claim for expenses in relation to a matter which has been resolved prior to a preliminary issue hearing.

ANALYSIS

Background

Trevor Duff was seriously injured in an accident while he was driving a borrowed and uninsured dirt bike. At the time of the accident, he did not have a driver's licence. On the consent of the parties, a preliminary issue hearing was scheduled to deal with a number of issues. The issues scheduled to be determined at the preliminary issue hearing were as follows:

1. Was Mr. Duff's claim for a housekeeping and home maintenance benefit excluded from coverage because he "knew or ought reasonably to have known that he ... was operating the automobile while it was not insured under a motor vehicle liability policy", pursuant to paragraph 30(1)(a) of the Schedule?

2. Was Mr. Duff’s claim for a housekeeping and home maintenance benefit excluded from coverage because he was driving without a valid driver's licence, pursuant to paragraph 30(1)(b) of the Schedule?

The issues of the entitlement to and amount of the housekeeping and home maintenance benefit, special award, expenses and interest were to be dealt with at a hearing after the arbitrator's decision on the above two issues.

The preliminary issue hearing was scheduled to proceed on March 15 and 16, 2006. On March 14, 2006, Ms. Takacs, counsel for the MVAC Fund, sent a letter by facsimile transmission to Ms. Chandler, Mr. Duff's counsel, confirming that she had instructions not to proceed with the preliminary issue regarding section 30 of the Schedule. She also stated that she had instructions to arrange a settlement meeting, at a mutually convenient time, with a view to considering a full and final settlement of Mr. Duff's claim. She proposed late August or September, and requested the involvement of McKellar Structured Settlements Inc., presumably to offer assistance with respect to a structured settlement.

In her letter, Ms. Takacs also states as follows:

My client is prepared to consider your request for costs for the preliminary issue, which they ask be addressed at the time of the proposed settlement meeting. I confirm that you have my agreement to reserve your right to pursue costs with respect to the preliminary issue in the event the file is not settled as has been proposed.

Ms. Takacs then sent a letter dated March 14, 2006 by facsimile transmission to Ms. Chandler and the Commission which stated as follows:

Further to my telephone conversation with Ms. Shah and Ms. Chandler today, this will confirm the arbitration in the above-noted matter scheduled for Wednesday, March 15th and Thursday, March 15th, 2006, will not be proceeding.

Subsequently, by letter dated March 14, 2006, sent by facsimile transmission to the Commission and copied to Ms. Takacs, Ms. Chandler advised as follows:

I am in receipt of Ms. Takac's letter of today's date, a copy of which is attached.

Unfortunately, there appears to have been some mis-communication between Ms. Takacs and myself with respect to the settlement. While the substantive issues in dispute have been resolved, the issue of arbitration expenses remains in dispute. As such, it is our position that the hearing must proceed on March 15, 2006, but that the issue in dispute will be limited to the issue of arbitration expenses.

Thank you for your co-operation.

In light of this correspondence, the parties appeared before me on March 15, 2006, and indicated that they wished me to determine whether the Commission has the jurisdiction to decide a claim for expenses in relation to a matter which has been resolved prior to a preliminary issue hearing.

Statutory Framework

Section 4 of the Dispute Resolution Practice Code, (Fourth Edition, updated October 2003), ("the Code”) defines a "proceeding" as a matter requiring the exercise of a statutory power of decision. By contrast, a "hearing" is defined as the opportunity to state one's case before an adjudicator.

Subsection 282(3) of the Insurance Act provides that, "The arbitrator shall determine all issues in dispute, whether the issues are raised by the insured person or the insurer."

Subsection 282(11) of the Insurance Act provides that, "The arbitrator may award, according to criteria prescribed by the regulations, to the insured person or the insurer, all or part of such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations, to the maximum set out in the regulations."

Subsection 282(11.1) of the Insurance Act provides that, "The Arbitrator may at any time during an arbitration proceeding make an interim award of expenses, subject to such terms and conditions as may be established by the arbitrator."

Mr. Duff's Submissions

Insurance Act and Dispute Resolution Practice Code

Mr. Duff submits that the provisions of the Insurance Act set out above provide authority to an arbitrator to determine all issues in dispute, including the issue of expenses incurred in respect of an arbitration proceeding.

He also submits that these provisions confer a "statutory power of decision" on an arbitrator, as defined in the Code; specifically, in this case, the power to award expenses.

Further, Mr. Duff submits that the use of the term "in respect of" in subsection 282(11) of the Insurance Act is a clear indication that the legislature did not intend to limit recovery to expenses incurred during an arbitration hearing. Rather, the power to award expenses extends to expenses incurred prior to, and following, an arbitration proceeding.

In addition, he submits that the use of the term "proceeding" in subsection 282(11) of the Insurance Act (as opposed to the term "hearing") also indicates that an arbitrator's power to award expenses is not limited to circumstances in which there has been an arbitration hearing pertaining to issues other than expenses.

Mr. Duff observes the use of the term "proceeding" is repeated in all of the expense provisions in the Code. In Rule 75, "Award of Expenses," all of the provisions specifying those criteria an arbitrator must consider when making an award of expenses refer to the "proceeding" rather than to the "hearing." The term "proceeding" is also exclusively used in the Dispute Resolution Practice Code, Section F, "Expense Regulation."

Mr. Duff notes that Rule 70 of the Code provides that, when a party withdraws all or part of a dispute, an arbitrator may award expenses to either party. Although this Rule applies to "hearings", this means that an arbitrator has jurisdiction to award costs when the substantive issue in dispute has not been resolved by arbitral order.

Caselaw

Mr. Duff referred to the decision of Arbitrator Leitch in Khoury and Zurich Insurance Company,² as the only arbitral decision directly on point. In this case, Mrs. Khoury's entitlement to statutory accident benefits was settled by the parties on terms which included an agreement to have Mrs. Khoury's expenses "assessed" by the Commission. The issue was whether the Commission had jurisdiction to decide a claim for expenses in relation to a matter which had been settled prior to the arbitration hearing. The parties jointly submitted that they sought an assessment of the applicant's expenses on the assumption that a Commission arbitrator has jurisdiction to award expenses despite the fact that all other disputes between the parties were settled prior to an arbitration hearing.

In Khoury, Arbitrator Leitch refers to subsection 282(11) of the Insurance Act, (which is identical to the current section), as well as the repeated use of the term "proceeding" in the expense regulations. At the time the Khoury decision was rendered, the term "proceeding" was not defined in the Insurance Act or the regulations and therefore, Arbitrator Leitch relies on judicial commentary regarding the meaning of the term. Arbitrator Leitch states that, on application of the definition established by the Ontario Court of Appeal in Ontario (Attorney General) v. Palmer,³ a matter becomes a "proceeding" when the Application for Arbitration is filed.

It is Mr. Duff's position that the newer Code definition leads to a finding that an application for determination of expenses in the circumstances of the present case falls within the definition of a "proceeding."

Further, Mr. Duff submits that the legislature's choice of the term "proceeding" as opposed to the narrower term "hearing" in the expense regulations clearly demonstrates its intention to confer the power to award expenses outside the confines of an arbitration hearing itself. In this regard, Arbitrator Leitch's interpretation of the term "proceeding," that an arbitration proceeding does not cease once settlement is reached, can be equally applied to the term as it is now defined under the Code.

Mr. Duff states that a contrary reading of the relevant legislation would be inconsistent with the purpose of the dispute resolution provisions of the Insurance Act, which purport to create an accessible forum for the resolution of all disputes relating to statutory accident benefits between insured persons and their insurers.

He also submits that to "read in" restrictions which are not present in the legislation would be to force parties to seek the recovery of necessary legal expenses by commencing separate court proceedings, which would in turn result in additional expense and a multiplicity of proceedings. This was also a concern of the parties in the Khoury case.

The MVAC Fund's Submissions

Insurance Act and Dispute Resolution Practice Code:

The MVAC Fund submits that jurisdiction to award expenses must be found in the Insurance Act or its regulations. It states that pursuant to subsection 20(2) of the Insurance Act, an arbitrator at the Commission has "exclusive jurisdiction to exercise the powers conferred upon him or her under this Act and to determine all questions of fact or law that arise in any proceeding before him or her..." It further submits that an arbitrator's jurisdiction for statutory accident benefits can be found in sections 279 to 282 of the Insurance Act. Subsection 279(4) confers jurisdiction on arbitrators to "determine issues before them by order..."

Subsection 282(3) provides that the "arbitrator shall determine all issues in dispute, whether the issues are raised by the insured person or the insurer."

Pursuant to subsection 282(11), the "arbitrator may award, according to criteria prescribed by the regulations, to the insured person or the insurer, all or part of such expense incurred in respect of an arbitration proceeding as may be prescribed in the regulations, to the maximum set out in the regulations."

The MVAC Fund submits that the provisions confer specific, defined authority only. It also states that a common sense interpretation of the wording implies that a hearing of the issues in dispute takes place further to an arbitration proceeding. According to the MVAC Fund, this suggests that evidence on the merits must be heard.

Pursuant to the definitions in Rule 4 of the Code:

"hearing" means the opportunity to state one's case before an adjudicator in the context of an oral, written or electronic hearing;

"proceeding" means a matter requiring the exercise of a statutory power of decision.

The MVAC Fund submits that the definition of "proceeding" mandates a statutory power of decision, and therefore any other procedural steps incidental to an arbitration do not constitute a proceeding.

The MVAC Fund also refers to Rule 37.6 of the Code pertaining to hearings. This Rule states that the "arbitrator will determine all issues in dispute and such other issues as the parties may agree, where mediation has taken place." The MVAC Fund submits that where an arbitrator has not determined "all issues in dispute" or "as the parties may agree," the arbitration proceeding to that date constitutes neither a hearing nor a proceeding. Therefore, according to the MVAC Fund, where the parties have resolved one or more issues which would otherwise have been before the arbitrator, the arbitrator has not, and cannot, exercise a statutory power of decision. It states that for expenses to be awarded under subsection 282(11) of the Insurance Act, the Expense Regulation only deals with "an arbitration proceeding." According to the MVAC Fund, the criteria to be applied to a determination of expenses all use the term "proceeding," which statutorily requires an exercise of a statutory power. It submits that there is no proceeding and hence, no jurisdiction to award expenses, save any other specific conferred jurisdiction in the applicable statute or regulation.

The MVAC Fund also submits that, in addition to the narrowly defined jurisdiction set out in the Insurance Act, the Rules in the Code confer specific jurisdiction, which is only as specifically set out, no more and no less. For example, Rules 65 and 67 of the Code pertaining to Orders confer no jurisdiction within themselves to consider an order, interim or otherwise, for expenses.

Further, an arbitrator has express jurisdiction in Rule 68 to dismiss a proceeding without a hearing. The MVAC Fund submits that this Rule includes a requirement to have either written or oral submissions made to the arbitrator before such an order can be made. According to the MVAC Fund, Rule 68 implies that some form of evidence, documentary or otherwise, must be before an arbitrator in order to confer jurisdiction to make an order.

In addition, the MVAC Fund submits that although the Code specifically deals directly with settlement of "any or all issues in dispute" in Rule 69, there are no provisions with respect to expenses. The MVAC Fund submits that the absence of language conferring jurisdiction to deal with expenses under Rule 69 supports its position that an arbitrator has no jurisdiction to order expenses in a settlement or resolution.

Looking at Rule 79 pertaining to assessment of expenses, the MVAC Fund submits that expense disputes only arise following a decision on the benefits in dispute (a proceeding) as per the criteria, which are mandatory and have not been met in this case.

Case law

The MVAC Fund has attempted to distinguish Khoury on the basis that the term "proceeding" has now been defined more restrictively in the Code, whereas Arbitrator Leitch relied on the ordinary meaning of the word.

The MVAC Fund refers to Farella and Security National Insurance Company,⁴ where Arbitrator Allen notes that the authority to award expenses is derived from powers granted an arbitrator under the Insurance Act. In this decision, she declined to order expenses against a non-party as she found she had no jurisdiction in the Act to do so.

Chapman and Allstate Insurance Company of Canada and Wellington Insurance Company⁵ involved an appeal of a preliminary order concerning a priority dispute. Wellington, the appellant, sought to withdraw their appeal and Allstate sought its costs. Director Sachs found that there was no jurisdiction to make the award requested. She did not agree with Allstate that any residual discretion existed in the Code itself to grant it expenses.

In Haripersaud and State Farm Mutual Automobile Insurance Company,⁶ Director's Delegate Makepeace dealt with the issue of whether the arbitrator had jurisdiction to enforce a settlement agreement. She found that arbitrators have the powers that are conferred on them either expressly by the legislation or by necessary implication. This includes jurisdiction to deal with those questions which must be answered in order to make a ruling on the applicant's entitlement to benefits, including whether the settlement agreement governed the benefits claimed. The MVAC Fund submits that expenses are not a benefit under the regulation, and therefore, the Commission does not have the jurisdiction to deal with them in this case.

In Alexander and Constitution Insurance Company of Canada,⁷ Arbitrator Manji dealt with what issues should be included in the arbitration. She noted that an arbitrator cannot expand the scope of the arbitration to include a question or concern unrelated to the matter referred by the insured person to arbitration.

Further, the MVAC Fund submits that an arbitrator cannot determine an issue without hearing evidence. It states that cases involving enforcement of settlements involve hearing direct evidence.

Conclusion

Based on the provisions of the Insurance Act and the Code, an arbitrator has the authority to determine all issues in dispute between the parties. In addition, the power to award expenses at any time during an arbitration proceeding is granted explicitly in subsections 282(11) and 282(11.1) of the Insurance Act.

The MVAC Fund's narrow reading of Rule 37.6 of the Code does not apply here, since this Rule applies to an arbitrator's jurisdiction during a "hearing." In the Code, a "hearing" is distinguished from a "proceeding," which is accorded a broader definition.

Similarly, the MVAC Fund's analysis of Rules 65, 67 and 68 of the Code does not apply here, since these Rules apply to orders made by an arbitrator during a "hearing." In fact, these Rules are set out in Part 6 of the Code, which is entitled "General Procedures for Hearings."

Further, Rules 69.2 and 69.4 of the Code do not apply here as there is not a consent order being requested to dismiss the proceeding. Besides the issue of expenses of the preliminary issue proceeding, the issue of the Applicant's entitlement to housekeeping and home maintenance benefits, which forms the subject matter of the arbitration, has not been settled.

In my view, the Farella decision relied on by the MVAC Fund has no application to this matter. Farella concerned the authority of an arbitrator to award expenses against non-parties. In that case, the treatment provider and legal representative of the applicant allegedly filed an Application for Arbitration without the applicant's consent or knowledge.

The Chapman decision relied on by the MVAC Fund is also distinguishable. In Chapman, the sole issue determined by Director Sachs was whether an arbitrator may order that expenses be paid by one insurer to another. No expenses were sought by the insured person in that case.

The MVAC Fund submitted the Haripersaud decision stands for the proposition that expenses are not a benefit under the regulation, and therefore the Commission does not have the jurisdiction to deal with them in the case currently before me. I do not agree. In Haripersaud, the applicant was awarded her costs of the hearing, and further, the factual background of the dispute bears no resemblance to the factual background of this matter.

The MVAC Fund also takes the position that since the issue of expenses is not addressed in the Schedule, arbitration expenses cannot be characterized as "benefits" under the Schedule. Therefore, in its view, an arbitrator has no jurisdiction to award expenses. I find this view untenable, as it is explicitly clear from subsections 282(11) and 282(11.1) of the Insurance Act and Rule 75 of the Code that an arbitrator's discretion extends to the making of an expense award.

I agree with Mr. Duff's assertion that the Alexander decision relied on by the MVAC Fund is irrelevant to the issue of an arbitrator's jurisdiction to award expenses. The Alexander decision deals solely with the issue of whether an arbitrator is permitted to add an issue raised by an insurer to an existing arbitration application. The issue of expenses was not considered. Further, in the case before me, the issue of Mr. Duff's entitlement to expenses was raised by him as an issue to be determined in his Application for Arbitration.

The decision which is closest to this case is Khoury. In that case, Arbitrator Leitch determined that the Commission has jurisdiction to decide a claim for expenses in relation to a matter which has been settled prior to an arbitration hearing. The facts of Khoury are not identical to the case before me, in that in Khoury, the case had settled before the arbitrator was asked to make a ruling on expenses. However, I find that its fact situation is similar enough to make it supportive of a similar decision in this case.

For all the reasons set out above, I find that the Commission has the explicit jurisdiction to decide a claim for expenses in relation to a matter that has been resolved prior to a preliminary issue hearing and specifically prior to the main hearing under subsection 282(11.1). To force an applicant to go to court to obtain costs would be inconsistent with the interpretation section in Rule 1.1 of the Code which provides that these Rules are to be "broadly interpreted to produce the most just, quickest and least expensive resolution of the dispute."

EXPENSES:

Pursuant to Rule 79 of the Code, if the parties cannot agree on the entitlement to or the amount of the expenses of the preliminary proceeding, either party may request, in writing, an appointment before an adjudicator to determine expenses provided that the request is made within 30 days from the date this decision.

May 16, 2006

Anne L. Sone Arbitrator

Date

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 77

FSCO A04-001600

BETWEEN:

TREVOR DUFF

Applicant

and

MOTOR VEHICLE ACCIDENT CLAIMS FUND

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 Applicant may, within 30 days from the date of this decision, request an appointment with an arbitrator to determine expenses in accordance with Rule 79 of the Dispute Resolution Practice Code, (Fourth Edition, updated October 2003).

May 16, 2006

Anne L. Sone Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2(FSCO A97-000321, December 15, 1999).
3. 3(1979), 1979 CanLII 1633 (ON CA), 108 D.L.R. (3d) 349 at 358, 359, 28 O.R. (2d) 35, 15 C.P.C. 125 (C.A.).
4. 4(FSCO A98-001162, June 25, 1999)
5. 5(OIC P-001897 & P-001898, October 6, 1994).
6. 6(FSCO 98-00018, December 17, 1999).
7. 7(OIC A-007573, November 25, 1997).