Wayne Webber v. State Farm Mutual Automobile Insurance Company, 2007 ONFSCDRS 245

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2007 ONFSCDRS 245

FSCO A06-002695

BETWEEN:

WAYNE WEBBER

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON A MOTION

Before: John Wilson

Heard: November 16, 2007, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances: Gordon Good for Mr. Webber

Angela James for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Wayne Webber, was injured in a motor vehicle accident on November 14, 1995. He applied for statutory accident benefits from State Farm Mutual Automobile Insurance Company (“State Farm”), payable under the Schedule.¹

Mr. Webber applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. A pre-hearing was held by teleconference on July 17, 2007 in which the issues were defined and a framework and time-lines created for the hearing of the dispute.

The schedule for the hearing included dates for a preliminary issue hearing on the appropriate interpretation of sections 29 (1) and 29 (3) of the Bill 164 Schedule. The preliminary hearing was set for December 18 and 19 in London Ontario

The issues of entitlement to benefits and entitlement to a special award were scheduled to be heard on February 11, 12, 13, 14, 18, 19 20, and 21, 2008 at a separate hearing in London. In accordance with Rule 33.1(d) of the Dispute Resolution Practice Code, and general practice at FSCO arbitrations, the preliminary issue was set down to be heard by the same arbitrator who presided at the pre-hearing.

Issues:

Should the same arbitrator who presided at the pre-hearing process be barred from hearing the preliminary issue in this arbitration?

Result:

There is no reason for the pre-hearing arbitrator to recuse himself from hearing a preliminary issue in this arbitration.

EVIDENCE AND ANALYSIS:

On October 5, 2007, State Farm filed a motion to have the arbitrator precluded from hearing the preliminary issue hearing on the grounds of potential bias.

A motion hearing in this matter was held at the offices of the Financial Services Commission on Friday, November 16, 2007. The motion was brought by State Farm to have the arbitrator barred from hearing any further issues in this arbitration due to having presided at the initial pre‑hearing. Principally, Ms. James, counsel for State Farm, relied on Rule 33.5(1) as the basis for her motion. Rule 33.5 of the Dispute Resolution Practice Code, referred to by Ms. James, reads as follows:

33.5 An arbitrator who presides at a pre-hearing discussion at which the parties attempt to settle some or all of the issues in dispute will not preside at the hearing unless the parties consent. [emphasis added]

The motion proceeded based on affidavits and oral submissions by counsel for both parties.

Although State Farm objected to the affidavit based on information and belief filed on

behalf of Mr. Webber, I accept that, given the interlocutory nature of this motion and the

requirements of Rule 1.1 of the Dispute Resolution Practice Code, there is no reason why there

should be an absolute prohibition on the use of such affidavits in the context of interlocutory

proceedings at the Commission.

Even in the courts, affidavits on information and belief are admissible as the evidentiary basis

of motions pursuant to Rule 39.01(4) of the Rules of Civil Procedure, providing that the source of the information is identified in the affidavit. There are no such strict lines in arbitration. Obviously in a highly contested factual situation, or when the motion could ultimately dispose of the entire dispute, there are significant problems in accepting affidavits of information and belief. Both the Best Evidence Rule and the Hearsay exclusionary rules suggest that the person having direct knowledge of the facts referred to in the affidavit should be the source of that evidence for any tribunal. As C. Hill J. noted:

These observations aside for the moment, the contested evidence in the filed affidavits, such as they are, does not permit this court to confidently identify sufficient definition in the factual circumstances to conclude this is a clear case meriting immediate judgment. Conflicts and gaps in the evidence are not properly resolvable without trial.²

The exclusion of affidavits of information and belief would be even more justifiable in situations where there was an expressed intention to challenge the information contained in the affidavit by the cross-examination of its maker. Clearly, the utility of cross-examination of a person with only second or third-hand knowledge of the facts would be limited.

The courts, however, have a more rigourous approach to hearsay exclusion than administrative tribunals including arbitrators at FSCO. Unlike the Rules of Practice, the Dispute Resolution Practice Code does not specifically address the issue of affidavits in motions. Rather, a wide discretion is allowed to arbitrators to craft a procedural solution that incorporates both efficiency and fairness. In this matter, both efficiency and fairness suggest that the affidavits may be admitted without seriously prejudicing either party.

Indeed, the Insurer showed no interest in cross-examination on the facts outlined in the affidavit submitted on behalf of Mr. Webber.

The hearing process would not have been improved by having Mr. Good swear an affidavit and hire another counsel to appear on the motion. Such an outcome, while expending more resources would not have advanced the fairness of the process one iota.

Mr. Good also noted that the objection to the affidavit was not raised until the commencement of the hearing, notwithstanding the earlier service of the affidavit. It was raised only when it would be impossible to rectify the situation without further delay and expense.

In this matter, the underlying facts were not really at issue. No-one states that settlement offers were exchanged or discussed. The dispute is really whether the normal give and take with regard to the definition of issues for the arbitration constitutes a sort of discussion of resolution in itself. Certainly that seems to be the gist of Mr. Schrieder’s complaint that he was perhaps more frank and forthright than he would have been had he realized that the same arbitrator would hear the preliminary matter.

Ms. Angela James represented State Farm at the motion hearing. It was State Farm’s position

that although no settlement offers were exchanged at the pre-hearing, the pre-hearing was

indeed a process “at which the parties attempt to settle some or all of the issues in dispute” thus

invoking the exclusionary rule contained in Rule 33.5 of the Dispute Resolution Practice Code.

Mr. Good, counsel for Mr. Webber, did not agree with the characterization of the pre-hearing

discussions as entailing an attempt to settle all or some of the issues in dispute.

Rather than a controversy about what actually happened during the pre-hearing we have

a dispute over what the draughters of the Code meant by an attempt “to settle all or some of the

issues in dispute” and its application to this matter.

There is sound policy in keeping settlement discussions separate from hearings. Both courts and

administrative tribunals have recognized this.

The mentioning of another party’s offer to settle undermines the entire settlement process that our system is designed to encourage. Parties cannot be expected to make sincere and comprehensive settlement proposals if these offers are going to be used against them in court. ³

Arguably, Rule 33.5 is the attempt at FSCO to recognize the common sense proposition that formal hearings and settlement discussions do not mix.

Any discussion of what was intended by Rule 33.5 of the Dispute Resolution Practice Code must

be done however in the context of the statutory accident benefits arbitration system itself.

The Insurance Act provisions regarding the appointment of an arbitrator are quite specific and provide a clear mandate for the arbitrator to deal with all necessary hearing matters related to the arbitration.

(1) An insured person seeking arbitration under this section shall file an application for the appointment of an arbitrator with the Commission. R.S.O. 1990, c. I.8, s. 282 (1); 1996, c. 21, s. 38 (1).

Arbitrator’s appointment

(2) The Director shall ensure that an arbitrator is appointed promptly. R.S.O. 1990, c. I.8, s. 282 (2).

Determination of issues

(3) The arbitrator shall determine all issues in dispute, whether the issues are raised by the insured person or the insurer. 1996, c. 21, s. 38 (2).

The governing legislation clearly foresees the appointment of a single arbitrator by the Director to hear and determine “all issues in dispute.” Such an arrangement is not at all that unusual in various dispute resolution schemes. Indeed, it mirrors the situation under the Arbitrations Act and is comparable to many situations in labour and industrial relations. Patently, according to the Insurance Act, an arbitrator appointed to handle all disputes also handles every stage of the dispute from start to finish, unless otherwise provided for.

Under the “Otherwise” heading however would be the provisions of section 5.3(4) of the Statutory Powers Procedure Act which reads as follows:

5.3(4) A member who presides at a pre-hearing conference at which the parties attempt to settle issues shall not preside at the hearing of the proceeding unless the parties consent. 1994, c. 27, s. 56 (11).

Rule 33.5 is obviously an attempt to rationalize the provisions of Section 5.3(4) of the SPPA with section 282 of the Insurance Act.

In examining any tension between the provisions of specific rules and the governing

legislation, it is important to bear in mind the exact status of the Rules outlined in the Code.

Unlike the Rules of Civil Procedure, the Dispute Resolution Practice Code is neither primary

nor delegated legislation. Nor is the Director delegated by the legislation the power to alter

substantive law. Although reference is made in the Code to the SPPA, the Code, for reasons that

are obvious, primarily derives its authority from section 21 of the Insurance Act which reads as

follows:

Subject to the regulations made under paragraph 25 of subsection 121 (1), the Director may make rules for the practice and procedure to be observed in mediations under section 280, in performing evaluations under section 280.1, and in proceedings under this Act before the Director or an arbitrator.

Black’s Law Dictionary defines Procedure as:

A specific method or course of action. 2. The judicial rule or manner for carrying on a civil lawsuit or criminal prosecution

Likewise Practice is defined as:

the procedural methods and rules used in a court of law .

Clearly, the scope of the Director’s rule-making is limited to practice and procedure at arbitrations. It cannot be seen to amend the appointment of the section 282 arbitrators nor to constrain their jurisdiction.

According to Professor Ruth Sullivan⁴, there is a hierarchy of legislative provisions, with

statute law being paramount where there is a conflict between the provisions of a statute and

subordinate legislation. As LaForest J. noted in Friends of Oldman River⁵: “Just as subordinate

legislation cannot conflict with its parent legislation… so too it cannot conflict with other Acts

of Parliament.” LaForest J. went on to note that “as a matter of construction a court, where

possible, [should] prefer an interpretation that permits reconciliation of the two.”

Thus, if Rule 33.5 were to run counter to the meaning of section 282(1) of the Insurance Act, the

provisions of the Act would prevail. If possible, however, the two provisions should be

interpreted in a manner that is consistent with both.

In addition to the Code and the Insurance Act, the SPPA contains further provisions that assist in

understanding the meaning of Rule 33.5. Section 5.3(1.1) states:

(1.1) The tribunal’s power to direct the parties to participate in a pre-hearing conference is subject to any other Act or regulation that applies to the proceeding. 1997, c. 23, s. 13 (10).

(2) The chair of the tribunal may designate a member of the tribunal or any other person to preside at the pre-hearing conference.⁶

It is of some significance that the Insurance Act does not provide for a “chair” only a Director whose responsibility is to appoint an arbitrator to decide all issues in a dispute.

While strictly speaking section 282(1) of the Insurance Act provides for a single appointment of

an arbitrator to decide the entire dispute, it is important to note the long-standing practice at the

Commission that the pre-hearing arbitrator stands aside and allows the Director to appoint a

different arbitrator to hear the arbitration of any substantive issues. In such a situation, the

Director, even though he has already exercised his power of appointment, clearly has the

residual power to nominate anew and fill the void.

As long as an arbitrator retains jurisdiction in a matter however, he or she has considerable

powers. These may be usefully compared to a case management judge in the courts. The Code,

in providing for the arbitrator presiding at a pre-hearing to hear interim and preliminary matters,

has recognized this fact. The role of a case management judge has been observed as follows:

A case management judge or master’s accumulated knowledge of a case is a central feature of the case management system and furthers its goals of facilitating settlement, narrowing the issues, reducing delays and minimizing litigation costs. As such, under case management, a judicial officer’s previous involvement in the action and the ability of that judicial officer to have a more thorough understanding of the context of any particular proceeding is a benefit of, and not a detriment to, case management.⁷

Master Beaudoin in another matter summed up some of the considerations case management

raises in the context of bias:

In the case at bar, given the purpose of the case management rules, the public interests they address and the discretionary powers they give to the case management judge, I am of the opinion that the applicant must establish an apprehension, reasonable in the circumstances, that the case management judge’s views are such that she is no longer capable of being persuaded by evidence to be filed (if any) and legal arguments to be raised in subsequent motions, in order for her to be disqualified. ⁸

However, as McEachern J C.J.B.C. noted in G.W.L. Properties Ltd. v. W.R. Grace & Co. of

Canada Ltd., there will be:

... the great waste and inconvenience which will arise by reason of the knowledge and familiarity of the pre-trial management judge being wasted; ...⁹

However, as noted in Authorson,¹⁰ if the circumstances warrant disqualification because of

either a reasonable apprehension of bias or prejudgment, then it does not matter that judicial time

is wasted. That is not, however, to diminish the difficulties for both the parties and the tribunal of

dealing with allegations of bias.

The party alleging an apprehension of bias has the onus of proof. Allegations alone are insufficient. As described in Authorson, supra, a careful examination of the facts must reveal a “real likelihood" or"probability” of bias. The court must not be intimidated by a litigant who makes unfounded allegations because he is unhappy with decisions made against him. If a judge or master steps aside merely for the asking then justice would neither be done nor be seen to be done. ¹¹

Before deciding the bias issue in this matter, the effect of Rule 33.5 must be determined.

In attempting to reconcile the provisions of Rule 33.5 with Rules 33.1(c) and (d), Rule 77 of the

Code, section 282(3) of the Insurance Act, and section 5.3(4) of the SPPA, it is clear that the

Mischief addressed by Rule 33.5 is the communication of a concrete settlement position that

clearly compromises the outcome of a dispute – not merely the provision of further particulars or

information framing a dispute.

Indeed, both Rule 33.1 (d) and section 282(3) of the Insurance Act specifically anticipate

that the same arbitrator will deal with the pre-hearing, procedural issues, preliminary issues and

interim relief. Given the practice at the Commission referred to above and my decision not to

hear the substantive issue in this matter, I need make no decision as to whether section 282(3)

overrides section 5.3(4) of the SPPA. Given the current practice and the situation in the case at

bar, there is no necessary tension between these two provisions.

Notwithstanding State Farm’s submission on this motion, that the issue of the interpretation of

the PEC calculation was the substantive dispute, that issue was clearly identified by both parties

at the pre-hearing as a preliminary issue and remains so. As such, it is clearly within even the

narrower concept of the jurisdiction of the arbitrator conducting the pre-hearing contained in

Rule 33.

Although the issue of bias itself was given less emphasis by the Insurer than the interpretation of

Rule 33.5, it is at the true basis of this motion, whether addressed directly or indirectly through

Rule 33.5.

An allegation of bias is a fundamental attack on the fairness of a process. If a process is rendered

unfair through the closed mind or bias of the decision-maker, then a sense of justice would

suggest that the adjudicator should be removed from the process on a timely basis.

The Divisonal Court in Authorson reviewed the current approach as to allegations of bias¹²:

If the evidence shows that there is a reasonable apprehension of bias or of prejudgment, then a judge ought to be disqualified. However if it does not, then a judge ought not to be disqualified (nor shrink from his judicial obligations). It would be inappropriate for a party to bring a disqualification motion if the essential purpose of that step were to be a form of reverse “judge shopping” because of subjective dissatisfaction either with the judge drawn or with previous decisions or directions of that judge.

The court went on to review a variety of authorities on bias and stated:

… the apprehension of bias must be a reasonable one, held by reasonable and right-minded persons, applying themselves to the question and obtaining thereon, the required information. [T]hat test is: “what would an informed person, viewing the matter realistically and practically - and having thought the matter through - conclude? Would he think that it is more likely than not that [the decision maker], whether consciously or unconsciously, would not decide fairly?” Committee for Justice and Liberty v. Canada (National Energy Board), 1976 CanLII 2 (SCC), [1978] 1 S.C.R. 369

In this matter, I note that I advised both parties at the pre-hearing that I would be following the

usual practice at the Commission of withdrawing from the hearing of the substantive issues,

including the Special Award. Consequentially, there could be no potential for bias arising out of

any disclosure of particulars of that issue.

Given the high threshold for a motion for removal of an adjudicator on the basis of bias,

I do not accept that State Farm has met the burden of establishing that there is in this

matter a real potential for either actual bias or the appearance of bias, sufficient for me to recuse

myself from hearing the preliminary issue in this matter.

In the context of bias, however, I would also like to comment on one of Mr. Schrieder’s

allegations in his affidavit: that he was somehow lulled into being more frank and forthright

about his client’s defence than he might have been had he foreseen my hearing the preliminary

issue.

There is nothing wrong with being frank and forthright, especially in the context of preliminary

and pre-hearing matters in an arbitration. Unlike a full court action, an arbitration lacks complete

pleadings and discoveries, all of which can force the parties to focus the process on the key

matters in dispute.

In this matter, the Application for Arbitration and the Insurer’s Response effectively constitute

the pleadings. I note that the Insurer’s Response filed by Mr. Schrieder constitutes basically a

traverse of the issues raised by Mr. Webber together with generalized allegations of non-

compliance with unspecified limitation periods “prescribed by the Regulation or other applicable

law” and seeking “the remedies available at law.” Other than denying Mr. Webber’s claims for

benefits it is not at all clear from the Response just what the Insurer’s actual position is on the

issues in this arbitration.

While there is a certain institutional tolerance for boiler plate pleading, one can see the necessity

for “identifying and obtaining agreement as to the issues for arbitration” as prescribed by Rule

33.1 for pre-hearings. Cameron J. in Rosenhek v. Kerzner commented on the crucial importance of particulars in pleading:

I am bound by judicial authority that failure to give notice of the particulars of the cause of action within the statutory limitation period is fatal to the claim in the absence of evidence that there was no prejudice or of extraordinary or unusual circumstances ¹³

Archie Campbell J., speaking for the Divisional Court, addressed the policy reasons for good pleading:

The desire to preserve the option of arguing any and every particular point that may be in issue becomes almost irresistible. But, practically speaking, each party needs to know the position of the opposite party. A distinction must, therefore, be drawn between final legal argument and the position being taken by a party on a particular point or issue.

Without the answers sought the litigation will remain unfocused. The issues need

to be narrowed or at least joined or the trial could become unmanageable. Canada takes the position that there is no mechanism under the Rules by which the plaintiff can compel Canada to confirm or clarify its legal position in respect of any issue of law prior to trial, that position is not consistent with the policy underlying the Rules which is to encourage full and frank disclosure prior to trial so as to minimize costs and expedite the just resolution of claims. Further, it is not an interpretation of the Rules which is in accordance with their plain and ordinary meaning. ¹⁴

While Mr. Webber’s claim is not as complex as the resolution of the centuries-old land claim

dispute referred to by Campbell J., the same general principles apply. For an arbitration to

remain consistent with the spirit of Rule 1.1 of the Dispute Resolution Practice Code, “full and

frank disclosure prior to trial” is a necessity, not a regrettable lapse as characterized by Mr. Schrieder in his affidavit.

There is yet another aspect of this motion that is a cause for concern. But for Mr. Schrieder’s

affidavit I would dismiss this motion on the basis of timeliness. The pre-hearing in this matter

was held on July 17, 2007. The pre-hearing letter advised that a pre-hearing would be resumed

to deal with “procedural as well as outstanding production issues” since there were clear disputes

as to the range of productions necessary by the Insurer.

Although the Commission file discloses subsequent correspondence from Ms. Angela James on

behalf of Mr. Schrieder, Insurer’s counsel only advised that there was a motion alleging bias on

October 5, 2007 – the date of the resumed pre-hearing.

It is trite law that a motion for bias must be brought in a timely manner. A delay of almost

three months would not constitute timeliness in this context.

Mr. Schrieder in his affidavit alleges that I advised him that he must bring any motion for bias at

the resumed pre-hearing. In a somewhat analogous situation involving a case conference before

Brockenshire J., the Divisional Court observed:

There is no transcript, and there is some dispute amongst the parties, as to exactly what and how certain statements were made. In such circumstances, a certain degree of deference has to be given to a judge.¹⁵

While I note that the record in this arbitration does not reflect that I gave any advice to any party

on the issues in this motion, I think that it would be improper for me, in the absence of a

transcript, to introduce my own version of events, and to allow myself to be drawn into any

resulting controversy. Consequently, while timeliness is certainly relevant, and indeed critical, I do not rely on it in rejecting the Insurer’s motion.

I do, however, ultimately reject the Insurer’s motion that I recuse myself from further hearings in

this matter. I do so because I do not agree that the Insurer has demonstrated any factual basis

for a perception of bias in this matter. As the Supreme Court stated in R. v. R.D.S.:

The jurisprudence indicates that a real likelihood or probability of bias must be demonstrated and that a mere suspicion is not enough. The existence of a reasonable apprehension of bias depends entirely on the facts. The threshold for such a finding is high and the onus of demonstrating bias lies with the person who is alleging its existence. ¹⁶

I do not accept that the Insurer has met that onus.

Nor do I accept that the provisions of Rule 33.5 imply that an arbitrator who presides at a pre-hearing conference should not, in the absence of overt attempts to settle the matter, be barred from presiding at further proceedings within an arbitration. Rather, I find that a reading of the Dispute Resolution Practice Code as a whole, together with the enabling legislation suggests a more ongoing and activist role for arbitrators in the pre-hearing and hearing process, one that is similar to that of a case management judge.

For all of the above reasons I reject the Insurer’s motion.

EXPENSES:

Given his success in this motion, I should exercise my discretion to award Mr. Webber his expenses incurred in this preliminary issue hearing. However, I will allow the parties 7 days from the date of this decision to resolve the issue of expenses, failing which they may provide short written submissions as to an appropriate order.

December 10, 2007

John Wilson

Arbitrator

Date