Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2007 ONFSCDRS 118

FSCO A06-001536

BETWEEN:

NICOLA MENDEZ

Applicant

and

SECURITY NATIONAL INSURANCE CO./MONNEX INSURANCE MGMT. INC.

Insurer

MOTION DECISION

Before:

Fred Sampliner

Heard:

April 17, 2007, at the offices of the Financial Services Commission of Ontario in Toronto, and by written submissions

Appearances:

Tina Lubman for Ms. Mendez

Christopher Caston and Alexander Lempp for Security National Insurance Co./Monnex Insurance Mgmt. Inc.

Issues:

Security National Insurance Co./Monnex Insurance Mgmt. Inc. ("Security National") requested an order removing Ms. Tina Lubman as Ms. Nicola Mendez' representative. Security National's motion was made on the second day of an arbitration hearing under the Insurance Act concerning Ms. Mendez' claim for statutory accident benefits under the Schedule¹ arising from an August 19, 2005 motor vehicle accident. The issue is:

1. Should Ms. Tina Lubman be removed as Ms. Mendez' representative?

Result:

1. Ms. Lubman is removed as Ms. Mendez' representative.

EVIDENCE AND ANALYSIS:

Background:

Ms. Mendez received treatment for her soft tissue injuries from New Age Recovery and Wellness Centre (New Age) following the August 19, 2005 automobile accident. New Age recommended that Ms. Mendez undergo a psychological evaluation. Security National rejected funding the evaluation based on a November 2005 fast-track opinion from a Designated Assessment Centre.

Despite Security National's refusal, New Age's in-house psychologist conducted the proposed evaluation in December 2005. Ms. Mendez applied for arbitration seeking payment of the $1,810 evaluation cost as a reasonable and necessary expense under section 24 of the Schedule.

New Age's owner and director, Ms. Tina Lubman, filed Ms. Mendez' arbitration concerning the psychological evaluation, and acted as her representative at the arbitration hearing. I adjourned the hearing during Ms. Mendez' cross-examination when Security National made submissions in support of its motion to exclude Ms. Lubman from continuing her representation. Ms. Mendez filed written submissions afterwards.

Security National's motion is based on Ms. Lubman's financial interest in the outcome of this matter, which arguably conflicts with her client's interests, under Rule 9.9 of the Dispute Resolution Practice Code²:

An adjudicator may exclude from a proceeding anyone, other than a duly qualified barrister and solicitor, appearing as a representative or agent on behalf of a party, or as an advisor to a witness, if the adjudicator finds that such person is not competent to properly represent or advise the party or witness or does not understand and comply with these Rules and the duties and responsibilities of a representative, agent or advisor. (emphasis added)

Ms. Lubman agrees that as the Clinic owner she may receive direct financial benefit from Ms. Mendez' claim, and that she has a conflict of interest with her client, as defined in subsection 1.2(1) of the Code of Conduct for Statutory Accident Benefit Representatives³. The central question is whether Ms. Lubman's conflict of interest results in her removal.

Security National refers to two arbitration decisions where the representative failed to properly disclose a potential financial interest in the case outcome and was removed.⁴ On this point, Ms. Lubman's situation is distinguishable because the undisputed evidence is that she did not hide her ownership interest from the outset of her relationship with Ms. Mendez.

However, I agree with both decisions endorsement of a representative's primary loyalty and good faith is to the client over the appearance of personal motivations. The Supreme Court of Canada recently emphasized the exclusivity of a lawyer's duty of loyalty to the client⁵:

A fundamental duty of a lawyer is to act in the best interest of his or her client to the exclusion of all other adverse interests, except those duly disclosed by the lawyer and willingly accepted by the client. (my emphasis added)

I agree with Arbitrator Renahan in Harris that there is no reason to draw a distinction between a paralegal's and a lawyer's primary duty of loyalty to the client. Otherwise, one would have to ask the absurd question of who the representative acts for and takes instructions.

The implicit corollary policy in this case law requiring disclosure is that the client understand the consequences of the conflict of interest. Again, I agree with Harris that a client's signed waiver is no substitute for the client's understanding of the consequences.

Ms. Mendez initially filed her claims for accident benefits through Mr. Michael Agulefo's paralegal office. His written statement says he explained Ms. Lubman's financial interest to Ms. Mendez during a November 2006 meeting.

However, Mr. Agulefo's statement contains no indication he explained the implications for Ms. Mendez of Ms. Lubman's compromised loyalty respecting her claims. Ms. Mendez' evidence that she did not understand she could possibly be held liable for Security National's costs⁶ exemplifies her lack of understanding about the process initiated by her representative. I find that Ms. Mendez was not provided with a full understanding of the arbitration process by Ms. Lubman. Ms. Lubman submits that Mr. Agulefo's advice qualifies as an independent legal opinion. Lawyers undergo years of intensive education, professional training under the tutelage of an experienced practitioner and are required to pass rigorous qualification exams. Lawyers are trained, equipped and duty-bound to provide clients with adequate decision-making information. Paralegals have been unregulated until recently-enacted legislation, and do not possess similar education, training or standards of qualification.

Although Mr. Agulefo's written statement says he told Ms. Mendez that Ms. Lubman owned the Clinic, she already knew this simple fact beforehand, and his advice added nothing to her understanding of how her representative's conflicted interest might affect her. I find that Mr. Agulefo's advice to Ms. Mendez does not qualify as an independent legal opinion because there is no evidence he is trained and qualified to provide a sophisticated legal opinion, and the evidence also indicates he did not adequately explain the ramifications of Ms. Lubman's compromised loyalty.

I am not persuaded that Ms. Mendez understood the extent to which Ms. Lubman's Clinic ownership compromised her representative's ability to provide advice and loyalty to her. I find that Ms. Mendez did not make an informed decision to waive Ms. Lubman's conflict of interest.

CONCLUSION:

The evidence is that Ms. Mendez did not have a sufficient understanding she assumed the entire risk she might have to pay Security National's arbitration expenses if she lost, and would receive nothing from this arbitration if she won because the money would go to Ms. Lubman's company. The purpose of the Guideline is to avoid this type of impropriety.

These facts tip the balance towards ensuring the fair administrative of justice as opposed to the Ms. Mendez' right to choose legal assistance.⁷ I have little confidence in Ms. Lubman's ability to put aside her clear financial conflict of interest with Ms. Mendez because it is clear that Ms. Mendez had an insufficient understanding of the potential consequences that the conflict of interest might pose to her.

I find that the interests of justice are not served by Ms. Lubman continuing to act for Ms Mendez because of the clear self-interest. The order is to remove Ms. Lubman as Ms. Mendez' representative, and I have directed the caseworker to schedule a teleconference pre-hearing with the parties shortly to discuss resumption of the hearing.

EXPENSES:

I defer the issue of the parties' claims for their expenses until the hearing is concluded.

June 12, 2007

Fred Sampliner Arbitrator

Date

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2007 ONFSCDRS 118

FSCO A06-001536

BETWEEN:

NICOLA MENDEZ

Applicant

and

SECURITY NATIONAL INSURANCE CO./MONNEX INSURANCE MGMT. INC.

Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. Ms. Lubman is removed as Ms. Mendez representative.

2. The parties' claims for their expenses of this motion are deferred until the hearing concludes.

June 12, 2007

Fred Sampliner Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2(Fourth Edition, Updated — October 2003), see also Subsection 23.3 of the Statutory Powers Procedure Act, R.S.O. 1990, as amended
3. 3Effective November 2003
4. 4Sujatha Mahendrarajah et. al. and American Home Insurance Company (FSCO File Nos. A04-001268 and A04-001270, August 22, 2005), Darryl Harris and Wawanesa Mutual Insurance Company (FSCO File No. A04-002032, August 16, 2005)
5. 5David & Company, et. al. v. 3464920 Canada Inc., et. al. (Appeal heard October 11, 2006) (30838)
6. 6Pursuant to subsection 282(11.2) of the Insurance Act
7. 7Avta Thind and ING Insurance Company of Canada (FSCO No. A04-001459, August 24, 2005)