Vladimir Chek v. ING Insurance Company of Canada, 2007 ONFSCDRS 208

Financial Services Commission of Ontario

Neutral Citation: 2007 ONFSCDRS 208 FSCO A06-001637

BETWEEN:

VLADIMIR CHEK Applicant

and

ING INSURANCE COMPANY OF CANADA Insurer

DECISION ON A MOTION

Before: Arbitrator Suesan Alves Heard: By telephone conference call on August 3, and September 11, 2007.

Appearances: Mr. Jaffer, student-at-law, for Mr. Chek on August 3, 2007; Ms. S. Mittleman, student-at-law, for Mr. Chek on September 11, 2007 Mr. Donald G. Cormack for ING Insurance Company of Canada

Issues:

Mr. Chek was injured in a motor vehicle accident on December 12, 2005 and claimed statutory accident benefits payable under the Schedule from ING Insurance Company of Canada.¹ Mr. Chek applied for arbitration in relation to his claims for income replacement benefits, house-keeping and home maintenance benefits, expenses and a special award at the Financial Services Commission of Ontario, under the provisions of the Insurance Act, R.S.O. 1990, c I.8 as amended.

ING seeks Orders compelling the Applicant to comply with undertakings given at the pre-hearing and compelling him to produce documents. ING also seeks an Order suspending interest and awarding its expenses of the motion. The Applicant’s representative submits that best efforts were made and that this motion should be dismissed.

The issues are:

1. Should the Applicant be ordered to comply with his undertakings?
2. Should the Applicant be ordered to produce documents the Insurer requested?
3. Should interest on overdue benefits be suspended?
4. Should there be an expense award in favour of the Insurer? If yes, should the expenses be paid by the Applicant or by his representative?

Result:

1. Counsel for the Applicant is ordered to comply with his undertakings.
2. The Applicant is ordered to produce the documents ING requested with the exception of the pleadings in the tort action and any tort defence medicals.
3. I am not persuaded that I have the authority to suspend interest on overdue benefits.
4. There should be an expense award in favour of ING. Mr. Gary Mazin of the law firm of Mazin Rooz Mazin shall pay ING’s expenses, fixed in the amount of $350

EVIDENCE AND ANALYSIS:

Background

ING seeks Orders compelling the Applicant to comply with his undertakings given at the pre-hearing before Arbitrator Slotnick. It also seeks Orders compelling him to produce several documents which it repeatedly requested. ING further seeks an order suspending interest on any benefits which may be awarded at the hearing and its expenses of the motion.

The Applicant’s representative submits that best efforts were made and that this motion should be dismissed.

Specific undertakings

The initial pre-hearing in this case took place before Arbitrator Slotnick, on January 29, 2006. At that time, counsel for the Applicant, Mr. Gary Mazin, attended with his client, as did counsel for the Insurer, Mr. Donald Cormack, with his client.

Based on the pre-hearing report of Arbitrator Slotnick, I find that Mr. Mazin gave two specific undertakings. The first was to provide full particulars of the special award claim within 30 days of the pre-hearing. I find that Mr. Mazin complied with this undertaking, albeit belatedly, some six months following the pre-hearing. It is unclear whether this took place on the day of the pre-hearing resumption, when ING brought its motion, or sometime after the pre-hearing resumption on August 8, 2007. The letter providing those particulars, dated August 3, 2007, was addressed to counsel for ING and faxed to the arbitration unit of the Financial Services Commission on August 8, 2007.

I find that Mr. Mazin also specifically undertook that within 60 days of the pre-hearing he would provide ING “with particulars of the income replacement benefit claim, whether it includes a claim for lost income from Mr. Chek’s self-employment, and particulars of the claim with regard to deductibility.” I find that as of August 3, 2007, Mr. Mazin failed to provide particulars of the income replacement benefit claim, and thus breached that undertaking.

Although the pre-hearing reports issued by the Financial Services Commission of Ontario typically record the parties as the persons who have given the undertakings, this is done with a view to binding parties to undertakings even if they subsequently change counsel. However, the usual practice where parties are represented by counsel is that the undertakings are made by their counsel and that counsel with the assistance of their clients, obtain and provide the required documents.

In this case in addition to the standard undertaking to make best efforts, Arbitrator Slotnick recorded specific undertakings in the portion of the report where the issues in dispute are identified. Thus, the undertaking concerning the special award claim was inserted next to the description of special award issue. Similarly, the undertaking to provide particulars of the claim for income replacement benefits was inserted next to the description of the income replacement benefit issue. Further, the undertaking with respect to the IRB claim refers to Mr. Chek in the third person. For these reasons, I find that Mr. Mazin was the person who gave the specific undertakings at the pre-hearing.

I was not provided with any explanation for Mr. Mazin’s delay and non-compliance with these undertakings.

General undertaking

The pre-hearing report states that Mr. Mazin also gave a general undertaking to “comply with the undertakings given (or provide proof of best efforts to comply, in the case of documents not in a party’s possession, control, or power) within 60 days of this pre-hearing.” It may be that this refers to the production requests the parties made of each other at the pre-hearing.

Between October 2006 and May 2007, counsel for the Insurer requested production of various documents of counsel for the Applicants on six occasions. Initially, 15 documents were requested. The list later expanded to 17 documents. The requests were made before the pre-hearing in January 2007 and continued to be made after the pre-hearing. Since the Insurer’s production requests pre-date the pre-hearing, it seems likely that these requests would have been addressed at the pre-hearing, and would therefore be caught by the general undertaking to make best efforts.

The Applicant’s representative submits that he made best efforts in that whatever documents came into the firm were promptly sent to counsel for the Insurer. I disagree that the Applicant’s representative made best efforts and will now address that submission.

In the case of Gheslaghi et al v. Kassi et al² Justice Power stated:

A promise to use one’s best efforts is, in my opinion, an undertaking – an undertaking that must be complied with. On the one hand, it is not a guarantee that the relevant information/documents will be produced. The promise, or undertaking, cannot be ignored. A promise to use one’s best efforts, as aforesaid, is an undertaking which a court will enforce and, in appropriate cases, apply sanctions for non-performance where serious efforts have not been undertaken. “Best efforts” mean just what one would expect the words to mean. The words mean that counsel and his/her client will make a genuine and substantial search for the requested information and/or documentation. The undertaking is not to be taken lightly – a cursory inquiry is not good enough. The word “best” is, of course, the superlative of the adjective “good” (good-better-best) and must be interpreted in that light. If a party and/or counsel is/are not able to discover the subject of the undertaking, he/she/it must be able to satisfy a court that a real and substantial effort has been made to seek out what is being requested by the other party.

I agree with that definition of the best efforts undertaking. In practical terms, in the arbitration process, the term “best efforts” is often interpreted to mean that at least two written requests are made for the documents, accompanied by the requisite authorizations, within the sixty day period following the pre-hearing, together with telephone follow up as necessary.

Proof of best efforts is often provided by copying the other party with the written requests, either at the time the requests are made, or alternatively towards the end of the sixty day period. In either case, if the documents have not been obtained by these efforts, there should also be advice of the efforts made in telephone follow-up.

The party who has been provided with evidence of best efforts is then in a position to decide on any next steps it wishes to take to obtain the documents. There may be other ways of obtaining similar information, or the search for the documents may be abandoned. That party is also then able, if it is so advised, to bring a motion before an arbitrator, on notice to the custodian of the documents and the other party to the arbitration, for an Order to compel the third party to produce a copy of the documentation. The copies of the correspondence are then readily available to be annexed as exhibits to an Affidavit in support of such a motion.

Alternatively, counsel may decide to summons the records in question, obliging the custodian to produce the documents at a hearing before an arbitrator at the Commission. The sole purpose of that hearing, sometimes referred to as a “dummy” hearing, is to obtain production of the records prior to the arbitration hearing at which the issues in dispute are decided.

In this case, Mr. Mazin’s first response to ING’s production requests occurred in July, 2007. By that time, counsel for ING had sent him six letters requesting the documents over a six month period. This initial response took place two months after counsel for ING put Mr. Mazin on notice that he would seek a resumption of the pre-hearing to deal with production issues.

In July, 2007, Mr. Mazin sent seven consents and authorizations executed by Mr. Chek to Mr. Cormack, counsel for the Insurer. These authorizations would permit counsel for the Insurer to obtain documents and send copies of them to counsel for the Applicant.³ I am not persuaded that these were best efforts. I find that counsel for the Applicant failed to comply with his general undertaking to make best efforts to fulfill the undertakings made.

However, counsel for the Insurer advised that he first learned of the Applicant’s position with respect to the remaining production requests on August 3, 2007, the date of the motion made at the resumed pre-hearing. This suggests that some or all of the production requests may not have been addressed at the pre-hearing, as sometimes may occur. I will therefore deal with these on the alternative basis that they were production requests which were repeatedly made by the Insurer, to which counsel for the Applicant failed to respond.

Mr. Mazin’s failure to respond to correspondence from counsel for the Insurer was discourteous. Counsel for the Insurer submitted that ING was unable to adjust Mr. Chek’s claims for accident benefits due to non-disclosure of the Applicant’s financial and medical information. The failure and delay in providing such information did little to advance Mr. Chek’s case as detailed in the Expenses section, below.

I find some of the responses were inadequate. For example, the Insurer retained an accountant to calculate Mr. Chek’s income replacement benefits. In June 2006, that accountant requested a number of documents in order to perform the calculation. As the documents were not produced, the documents were again requested by counsel for the Insurer as set out in the footnote, below.

Instead of providing a meaningful response, counsel for the Applicant provided counsel for the Insurer with a copy of the documentation included in the report of McCully & Associates Inc. The Appendix to that report consists of the list of documentation the accountant required and a Permission to Disclose Employment Earnings information form.

Even if this response was due to confusion on the part of the offices of counsel for the Applicant, it is still an inadequate response to the request, and indeed did not respond to the request.⁴

Further, in my view, some of the responses provided were improper. For example, the Insurer requested a prescription history of the Applicant from one year prior to the accident. The advice on the motion that, the authorization was sent to our client who did not sign and return it, because the “client says he went to different pharmacies” is not sufficient. The client should not be the person determining that it was inconvenient or too onerous to provide the authorization in question. In my view, the client cannot be expected to know the extent of his obligation to disclose documentation. Such a response from the client must be met with an explanation from counsel of the client’s obligation to search for and disclose the information.

The Applicant’s representative blamed the Applicant for failing to produce the ultrasound of his shoulder, copies of x-rays, MRI’s and other diagnostic tests from one year pre-accident to the present. The Applicant was not present on the motion conducted by teleconference call. In light of the way the case has unfolded, I was not prepared to accept that explanation in the absence of the client.

The Applicant’s representative advised that he expected that the remaining documents would be available within a week or two. I determined that 16 of the 17 production requests were relevant and ordered them produced in ten days, reserving on whether one of the items requested by the Insurer should be ordered produced.

The parties’ representatives agreed that a further resumption of the pre-hearing was advisable as the hearing was scheduled to commence on October 15, 2007. Under the provisions of the the Dispute Resolution Practice Code—Fourth Edition, Updated October 2003 the parties were obliged to exchange all the documents they intended to introduce at the hearing, by mid September. A resumption of the pre-hearing was scheduled for September 11, 2007. I ordered that the Applicant attend at that proceeding via teleconference call and adjourned the matter.

With respect to the suspension of interest remedy which ING sought, I find that mandatory language is used in the Schedule to prescribe the payment of interest on overdue benefits. Section 46(2) of the Schedule states that “If payment of a benefit under this Regulation is overdue, …the insurer shall pay interest on the overdue amount for each day the amount is overdue from the date the amount became overdue at the rate of 2 per cent per month compounded monthly.” [emphasis added] Accordingly, I was not persuaded that I have the authority to deny the Applicant interest on overdue benefits, and declined to grant that remedy.

I awarded ING expenses of the motion, but reserved on the amount and on the question of whether they would be paid by the Applicant or by his representative.

At the resumption of the pre-hearing on September 11, 2007, Mr. Chek attended. I informed the parties that I had not been persuaded by the submissions that the Applicant should be required to provide the pleadings in the tort action. I was not persuaded that defence medicals from the tort action should be provided for the reasons given in Sandhu and CAA Insurance - Appeal 2.⁵

I also informed the parties that I had fixed costs of the August 3, 2007 motion in the amount of $350 and determined that they should be paid by counsel for the Applicant, for reasons to follow.⁶

The following are my reasons for the expenses award.

EXPENSES:

ING seeks its expenses of the motion and asks that they be paid by Mr. Chek, and/or by his counsel. The Applicant’s representative opposed an award of expenses on the basis that best efforts had been made. For the reasons set out above, I disagree with that submission.

The Applicant’s representative did not adduce evidence on the motion that Mr. Mazin made any effort to comply with the specific undertakings. At best, some effort was made to provide particulars of the special award claim on the day of the motion, or, perhaps this was done days after the motion.

In the case of Sofantzidelis and AXA Insurance (Canada), Arbitrator Manji stated that “Undertakings given by parties or their representatives at pre-hearing discussions must be strictly and scrupulously complied with.”⁷ I agree with Arbitrator Manji.

I accept that the giving of undertakings and the compliance with undertakings are part of the usual course of the practice of law. A lawyer’s undertaking is acceptable and is accepted precisely because lawyers, as officers of the court, are duty bound to comply with undertakings they have given. However, I am not persuaded that non-compliance with undertakings should be considered to be acting in the usual course of the practice of law.

I find that the conduct of counsel in failing to comply with specific undertakings made at the pre-hearing has hindered the proceeding. Initial entitlement to an income replacement benefit was in issue, as was the amount of that benefit. Particulars were needed so that ING would know which of Mr. Chek’s pre-accident earnings were to be included in calculating his income, whether the claim included income from self-employment, and whether there were collateral benefits or post-accident earnings to be deducted.

Throughout the dispute resolution process, the Financial Services Commission of Ontario encourages parties to exchange relevant documentation. This enables both parties to assess the merits of the claims with much the same information and to resolve the dispute.

ING submitted that on the eve of the hearing, it still did not know the nature of the claim being advanced, was unable to calculate the amount of Mr. Chek’s benefit, yet the Applicant was claiming a special award for which the Insurer had no particulars.

I find the failure to provide particulars of Mr. Chek’s income replacement benefit claim hindered the proceeding by delaying the adjustment of the claim, and by making a possible resolution of the dispute highly unlikely. If no resolution was possible, a hearing was scheduled at which Mr. Chek would likely face significant difficulty proving his claim, and ING would not know the case it had to meet before the hearing. Mr. Mazin’s failure to respond to ING’s production requests and to provide the requested financial documentation only made matters worse. The likely result was that one party, and perhaps both, would seek an adjournment of the hearing.

I find that ING has been put to unnecessary expense in corresponding with and bringing a motion to obtain relevant productions in this case. I find that ING’s motion should not have been necessary.

I find that counsel for the Applicant caused expenses to be incurred and wasted by failing to comply with his undertakings and failing to respond to ING’s production requests.

The failure to respond to the production requests on the part of counsel for the Applicant was discourteous, and tended to prolong, obstruct and hinder the proceedings. This is one of the criteria I am required to consider in making an award of expenses⁸ under Rule 75.2 (d) of the Code. Mr. Mazin’s conduct caused the bringing of the motion and caused ING unnecessary expense.

Pursuant to section 282 of the Insurance Act R.S.O. 1990, c. I.8 as amended, I award ING expenses of the motion of August 3, 2007, based on its significant degree of success; the failure of counsel for Mr. Chek to comply with the two specific undertakings and his delay and failure to respond to six production requests made during a six month period.

The question then becomes who should bear these expenses—Mr. Chek, or his representative?

Generally, parties to an arbitration proceeding bear the expenses of the arbitration. However, in certain circumstances the representative of the insured person may be liable to personally pay those expenses under the provisions of the Insurance Act.

Subsection 282(11.2)(c) of the Insurance Act provides that an arbitrator may order an insured person’s representative “to personally pay all or part of any expenses awarded against a party if the arbitrator is satisfied that, … the representative caused expenses to be incurred without reasonable cause or to be wasted by unreasonable delay or other default.”

For the reasons set out above, I am satisfied that Mr. Gary Mazin, Mr. Chek’s representative caused expenses to be incurred without reasonable cause by his default in complying with two specific undertakings and his failure to respond to ING’s production requests for relevant documents. Mr. Gary Mazin of the firm of Mazin Rooz Mazin shall therefore pay ING’s expenses in relation to the August 3, 2007 motion, fixed in the amount of $350.

Mr. Mazin sent two students-at-law to attend the resumptions of the pre-hearing. In my view, they were poorly briefed, and sent like lambs to the proverbial slaughter to respond to ING’s allegations and concerns in relation to Mr. Mazin’s actions and inaction. Although the students appeared and represented the Applicant at the resumptions of the pre-hearing, I do not believe that it would be appropriate to hold either responsible for the expenses award.

October 29, 2007

Suesan Alves Arbitrator

ARBITRATION ORDER

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

1. Mr. Gary Mazin, counsel for the Applicant, shall comply with his undertaking to provide particulars of Mr. Chek’s income replacement benefit calculation.

2. Mr. Chek shall produce the remaining documents requested by the Insurer within ten days, with the exception of the documents requested as item fourteen in the Insurer’s list dated October 25, 2006. The Applicant shall produce to the Insurer the following within ten days:

   (1.) Complete clinical notes and records and/or hospital records regarding Mr. Chek’s shoulder surgery.

   (2.) His prescription history from one year pre-accident to present.

   (3.) Copies of all of his x-rays, MRI’s and other diagnostic tests from one year pre-accident to present.

   (4.) Copy of his MRI conducted in April 2006.

   (5.) Ultrasound of his shoulder conducted in or around May 2006.

   (6.) Particulars of collateral benefits available to him and copies of policies.

   (7.) The complete name, address and phone number of Ms. Alexandra Savtanskiy, to advise of her relationship to the Applicant and to provide particulars of the amounts paid and the particulars of the services provided including dates and times.

   (8.) Written advice that there are no employment files from one year pre-accident to present.

   (9.) The documentation listed in correspondence from McCully & Associates Inc. dated June 22, 2006, as follows:

   (1.) 2005 personal income tax return, including all T4s, T4As, financial statements, statements of business activities, etc;

   (2.) 2005 personal income tax Notice of Assessment;

   (3.) Details and documentation of the income and expenses of his part-time business through VC Engineering for the period from January 1, 2004 to the present, including the post accident period of incapacity. Such documentation to include, but not limited to:

     i. All banking records, including bank statements, bank books, deposit slips and all other evidence of receipt of income;
   
     ii. All sales invoices, receipts, etc.;
   
     iii. All sales contracts and contracts for service;
   
     iv. All expense invoices, receipts, bills, vouchers and all other evidence of expenses incurred;
   
     v. All GST returns;
   
     vi. All accounting records that have already been prepared, including print-outs of general ledgers, and other related summaries of total daily, weekly or monthly revenue and expenses.
   

   (4.) Details and documentation of income Vladimir Chek received from ABB Inc. and ATS Reliance during the period from January 1, 2004 to the present, including the post accident period of incapacity. Such documentation to include, but not limited to:

     i. All pay stubs or a print outs of payroll records showing Mr. Chek’s earnings during each pay period summaries, time cards, etc.;
   
     ii records of Employment received after December 31, 2003;
   
     iii. All bank statements, bank books and all other evidence of receipt of income.
   

3. ING Insurance Company of Canada is entitled to its expenses of the motion, fixed at $350. Mr. Gary Mazin, of the law firm of Mazin Rooz Mazin, shall pay those expenses.

October 29, 2007

Suesan Alves Arbitrator

Footnotes

1. 1The Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 22003 CanLII 7532(ON S.C.)
3. 3The authorizations were for a decoded OHIP summary, the ambulance call report, the clinical notes and records of the family physician, treatment providers and the records of Canada Customs and Revenue Agency (CCRA).
4. 4The documents requested were as follows: 1. 2005 personal income tax return, including all T4s, T4As, financial statements, statements of business activities, etc; 2. 2005 personal income tax Notice of Assessment; 3. Details and documentation of the income and expenses of his part-time business through VC Engineering for the period from January 1, 2004 to the present, including the post accident period of incapacity. Such documentation to include, but not limited to: i. all banking records, including bank statements, bank books, deposit slips and all other evidence of receipt of income; ii. All sales invoices, receipts, etc.; iii. All sales contracts and contracts for service; iv. All expense invoices, receipts, bills, vouchers and all other evidence of expenses incurred; v. All GST returns; vi. All accounting records that have already been prepared, including print-outs of general ledgers, and other related summaries of total daily, weekly or monthly revenue and expenses. 4. Details and documentation of income Vladimir Chek received from ABB Inc. and ATS Reliance during the period from January 1, 2004 to the present, including the post accident period of incapacity. Such documentation to include, but not limited to: i. All pay stubs or print outs of payroll records showing Mr. Chek’s earnings during each pay period, summaries, time cards, etc.; ii. Records of Employment received after December 31, 2003; iii. All bank statements, bank books and all other evidence of receipt of income.
5. 5(FSCO P01-00044, January 18, 2002)
6. 6At the resumption on September 11, 2007, much of the documentation remained outstanding. Counsel for the Insurer raised the issue of whether a further award of expenses should be made against the Applicant. The Applicant’s representative sought an adjournment of the hearing. Mr. Chek participated by telephone conference call, was able to provide information and the parties were able to settle the arbitration issues. As the settlement took into account the expenses award, these reasons are being issued.
7. 7(OIC A95-000384, May 7, 1997)
8. 8Rule 75.2(d) of the Code requires an arbitrator to consider “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;”