Neutral Citation: 2008 ONFSCDRS 25 FSCO A06-001645

BETWEEN:

ALEXANDER MARYASIN (THE ESTATE OF) Applicant

and

ING INSURANCE COMPANY OF CANADA Insurer

REASONS FOR DECISION

Before: John Wilson, Arbitrator Heard: July 20, November 2, and November 23, 2007, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances: Gary Mazin, solicitor of record for the Estate of Mr. Maryasin Rita Urbonavicius for ING Insurance Company of Canada

Issues:

The late Alexander Maryasin was injured in a motor vehicle accident on October 29, 2005. He applied for certain benefits from ING Insurance Company of Canada (“ING”), payable under the Schedule.¹ The parties were unable to resolve their disputes, prior to Mr. Maryasin’s death.

Mr. Gary Mazin, a lawyer, then filed for a death benefit and funeral expense benefit in the name of the “Estate of the late Mr. Maryasin”. The matter was referred to arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The issues in this hearing are:

Should this matter be dismissed on the basis that the “Estate of Alexander Maryasin” has no standing to bring forward a claim for accident benefits in this matter?
By whom should any expense order arising from the dismissal be paid, and in what amount?

Result:

The claim by the Estate of Alexander Maryasin is dismissed without prejudice to the right of any legitimate claimant to advance an accident benefit claim within the time-limits specified by the legislation.
Mr. Mazin shall pay to ING its assessed costs and disbursements in the amount of $4,256.37.

EVIDENCE AND ANALYSIS:

This is a claim for accident benefits advanced in the name of the Estate of Alexander Maryasin. The specific benefits claimed are for a death benefit and funeral expenses pursuant to section 25 of the Schedule.

The matter was pre-heard on January 25, 2007, and scheduled to proceed to arbitration on August 14, 2007.

Mr. Mazin requested an adjournment of this matter by letter on July 6, 2007 on the basis that

“the representative of the Estate of Alexander Maryasin, Faina Maryasin is out of town and will not be returning for a few months.”

Ms. Urbonavicius was not willing to consent to the adjournment on the basis of the limited information supplied in Mr. Mazin’s letter. Consequently, on consent, the adjournment request was put over to the July 20 date for a resumption of the pre-hearing to allow both sides to speak to the adjournment.

There is some history to this arbitration that bears consideration. As noted earlier, Mr. Maryasin died prior to the filing of the Application for Arbitration.

At the time of the pre-hearing, although the arbitration was brought in the name of the estate of the deceased insured, no attempt had been made to appoint anyone as either trustee or administrator of the estate of the deceased.

It is apparent from Mr. Mazin that he considered that Ms. Faina Maryasin was a representative of the estate.

As well, the original pre-hearing letter indicates that the primary issues for arbitration were death benefits and funeral expenses, of which only the latter had any potential of directly involving the estate.²

Complicating the matter were significant delays on the part of Mr. Mazin in responding to the production requests made by ING in this matter, which meant that critical information may not have been before the arbitrator, had a hearing proceeded as scheduled. While it was not completely clear from Mr. Mazin, it seems likely that the absence of a legal representative for the estate did not expedite the release of information concerning the deceased.

While Mr. Mazin initially advised that a grant of administration for the estate was imminent, he later conceded that he was unaware of the status (if any) of any application to appoint an estate representative, and was not involved in the appointment process or the administration of the estate.

Mr. Mazin also advised that no-one in his office had been able to contact Ms. Maryasin since at least June 7, 2007, and that she had “disappeared” with no trace since that time.

All attempts to contact her were unsuccessful. Mr. Mazin reported that a woman who answered calls made to Ms. Maryasin’s telephone number, advised that Ms. Maryasin had left to an unknown destination and might return at some unknown point in the future.

There was no suggestion, however, that Ms. Maryasin was an absentee within the terms of the Absentee Act.

Mr. Mazin patently had no instructions at the time of the adjournment, either from a valid representative of the estate or from Ms. Maryasin personally, other than perhaps his original retainer. He stated, in the context of the adjournment that he was unable to complete productions due to Ms. Maryasin’s absence³ and unable to proceed with the arbitration hearing due to a need to have Ms. Maryasin herself examined by a medical practitioner prior to the hearing.⁴

I dealt with the adjournment request, granting the adjournment, while reserving on certain related conditions, including expenses.

Altogether, this was an unusual situation for an adjournment. As set out in Practice Note 9 of the Dispute Resolution Practice Code (the “Code”), a party requesting an adjournment has an obligation to provide alternative dates, an impossibility in this case, since Mr. Mazin could obtain no instructions and was unaware of Ms. Maryasin’s intentions with regard to the arbitration.

From the file record it appears that Ms. Maryasin, who was said to be the representative of the estate, participated by telephone in the original pre-hearing that set the date for this arbitration.

Ms. Maryasin would have also have received the Notice of Hearing which is dated January 30, 2007, long before she apparently vanished from the scene and should have known of her need to be available during the summer of 2007.

It was clear however that at the time of the adjournment request, Mr. Mazin had no instructing client. Consequently, I had grave misgivings about simply adjourning this matter to some future date as requested by Mr. Mazin.

However, a refusal of an adjournment in the absence of a key party and witness would have made the outcome of the claim an almost foregone conclusion. Without the presence of an authorized representative of the estate to give instructions regarding an amendment of the claim, or a new application for arbitration, it is likely that the claim for death benefits would fail.

A brief examination of the criteria for death benefits underlines my concerns:

Section 25 (2) of the Schedule provides for:

A payment to the insured person’s spouse of, i. $25,000, or ii. if the optional death and funeral benefit referred to in section 27 has been purchased and is applicable to the insured person, the amount fixed by the optional benefit.
A payment to each of the insured person’s dependants, and to each person to whom the insured person had an obligation at the time of the accident to provide support under a domestic contract or court order, of, i. $10,000, or ii. if the optional death and funeral benefit referred to in section 27 has been purchased and is applicable to the insured person, the amount fixed by the optional benefit.[Emphasis added]

Such a payment is clearly personal to the dependent person making the claim and does not form part of a deceased’s estate. I note that the claim for the death benefit in this matter is made by the estate of the deceased, which does not appear to have standing to make such a claim.

While the policy of the Commission has always been that adjournments must be granted sparingly, the recent judicial commentary on adjournments in Kalin v. Ontario College of Teachers⁵ suggests that refusing an adjournment is not to be done lightly:

It is a fundamental precept of our system of justice that an individual is entitled to be heard before a decision affecting his interest can be made against him. That does not mean that Tribunals must cater to the convenience of the parties at all costs. However, the interests of fairness must at least be addressed and seriously considered before a Tribunal embarks on a hearing with serious consequences for the person affected.

Other courts have taken a similar position. Laskin J. stated in Khimji v. Dhanani Estate:⁶

“Under our modern Rules non-compensable prejudice plays a pivotal role in deciding whether to grant an amendment or an adjournment.”

Thus, in the absence of considerations such as an abuse of the tribunal’s process, unless there is no way to address the prejudice to a party caused by an adjournment, either through monetary awards, or through conditions placed on the adjournment, a tribunal should grant the adjournment.

In this matter, the potential prejudice to the Insurer consisted principally of further delay and costs expended on attendance for this further pre-hearing. Both these issues could be reasonably addressed by appropriate conditions to this adjournment, and an expense award.

The obvious prejudice to the “estate”, if denied an adjournment, was the likely dismissal of the claim for accident benefits made in the name of the “estate”.

Consequently, I ordered that the hearing be adjourned sine die to permit Mr. Mazin to attempt to obtain instructions from Ms. Maryasin or a representative of the estate. I also ordered that the adjournment would be subject to conditions, including a possible award of expenses, of which I remain seised.

I also ordered that the parties attend for a further pre-hearing, and that Ms. Maryasin be present for that resumption.

Mr. Mazin was given until September 30, 2007 to advise whether he had reached his “client” and obtained further instructions, as well as to take any necessary steps to amend or re-file the Application for Arbitration to properly reflect the claims and the identity of the claimants in this arbitration, and to establish the authority under which any part of the claim involving the estate of Mr. Alexander Maryasin was proceeding.

Providing that he had taken the appropriate steps to regularize the Application for Arbitration that is the subject of this arbitration on a timely basis, a resumed pre-hearing would have dealt with the issue of expenses arising from the adjournment together with the scheduling of dates for a new substantive hearing.

Otherwise, ING would be entitled to proceed with its request to dismiss this arbitration due to its concerns expressed concerning the manner in which this arbitration has been brought and whether the solicitor had the authority to bring an action in the name of the estate.

I noted as well that given the unusual claim made by Mr. Mazin on behalf of an estate, which appeared to have no legal status, and the apparent absence or disappearance of his prinicpal, it was possible that Mr. Mazin’s actions in bringing or continuing this arbitration could be brought into question. Mr. Mazin was consequently advised that in light of the submissions made by counsel for the Insurer, he might be expected to bear part or all of any ensuing expense award relating to the adjournment.

Needless to say, Mr. Mazin did not reach his client prior to the September 30 deadline. After further correspondence from the parties I ordered a case conference, which took place on November 2, 2007 with Ms. Urbonavicius once again appearing on behalf of ING, while Ms. Mittleman appeared for Mr. Mazin, who remained solicitor of record for the “estate”.

Ms. Mittleman advised that Mr. Mazin had still been unable to make contact with Faina Maryasin, the apparent representative of Mr. Maryasin’s estate. Ms. Mittleman was unable to respond to the issues raised in my letters of October 2, 2007 and July 24, 2007, but confirmed that Mr. Mazin remained content to continue to represent Ms. Maryasin, notwithstanding any communication challenges.

Ms. Mittleman, however, confirmed that an amended Application for Arbitration had been filed in the name of Ms. Faina Maryasin, notwithstanding that Mr. Mazin was still unable to contact her.

The new “amended” Application for Arbitration in the name of Ms. Faina Maryasin was filed by Mr. Mazin on October 2, 2007. The covering letter from Mr. Mazin’s office referred to the Application as an amendment of the original application. That is consistent with the Commission file which does not indicate that an application fee accompanied the “amended” application.

Ms. Urbonavicius asked that it be noted that ING would not consent to any amendment at this time, and reiterated her request that the application from the Estate of Alexander Maryasin be dismissed as frivolous and vexatious, and an abuse of process, and that the “amendment” not be recognized as such.

Although counsel for the Insurer had stated her intention to have this matter dismissed there had been no formal notice for the dismissal motion, in accordance with Rule 67 of the Code. Consequently, I put over the hearing of the motion until Friday, November 23, 2007.

Since the authority of Mr. Mazin to continue this arbitration was clearly put into question by the Insurer, I advised Mr. Mazin through his counsel of the importance of producing his “client” for the upcoming hearing to clarify, if necessary, the nature of his retainer.

I once again reminded Mr. Mazin, through his counsel and by letter that the Insurer’s claim for dismissal appeared to bring his own actions as solicitor of record into question, and that the Insurer had advised that it would request that any order of expenses made in its favour be payable by counsel personally.

In the interval prior to the hearing of this motion Mr. Mazin both requested, and then withdrew a request to withdraw the arbitration, as well as a request to be removed as solicitor of record.

The dismissal motion was heard on November 23, 2007. At the same hearing, the expenses related to the July adjournment and the current motion were to be dealt with as well.

While Ms. Maryasin was finally present for the dismissal hearing, and provided further information as to the nature of the claims advanced, there remained a significant question about Mr. Mazin’s legal authority to bring this arbitration in the name of the “estate”.

The authority issue had at least two aspects. The authority of anyone to begin and continue an arbitration in the name of an estate was at issue. In this matter the “estate” apparently had neither trustee nor administrator, and whose purported representative had made herself unavailable for much of the pre-arbitration period. ING questioned where Mr. Mazin found his instructions to proceed, in the absence of contact with his instructing client.

The situation was compounded by a further issue of whether the estate, legally constituted or not, had the power to begin and continue this arbitration, as well as the standing to claim the death benefits and funeral expenses at issue in this arbitration.

On the face of the application, Mr. Mazin had represented himself as counsel for the estate. He, apparently, signed the application made in its name. The cheque accompanying the application was issued in the name of Mazin and Rooz, his law firm. There appears to have been no signature on the Application by anyone purporting to be a representative of the “estate.”

The Insurer, however, has alleged that Mr. Mazin did not have a valid authority to commence the arbitration proceeding on behalf of the estate, and even if he did have authority he lost it through the disappearance of his instructing client, Ms. Maryasin.

A solicitor taking steps in the name of a client is acting as their agent for a principal. While a legal retainer has attributes that are specific to it, it remains a subset of the law of agency and is governed by its principles.

Halsbury’s Laws of England makes the following observations on the relationship between an agent and a third party:

Where an agent in making a contract discloses both the existence and the name of a principal on whose behalf he purports to make it, the agent is not, as a general rule, liable on the contract to the other contracting party, whether he had in fact authority to make it or not; but a personal liability may be imposed upon him by the express terms of the contract, by the ordinary course of business, or by usage, and he will be liable for breach of warranty of authority in cases where he had no authority.

Further, the agent is personally liable on the contract if it is shown that he is the real principal, or that the principal named by him is non-existent, or incapable of making the contract in question, or is not the real principal although there might be another principal in existence.

Essentially, Halsbury’s lays out two grounds for liability of an agent that are relevant to this matter. An agent may be liable for breach of a warranty of authority, where he had no authority. An action for breach of warranty would presumably lie, at the behest of the third party. While, with the re-appearance of Ms. Maryasin, it might be argued that any actions taken on behalf of her by Mr. Mazin were retroactively validated, the same cannot necessarily be said for actions taken on behalf of the “estate.”

In the second case, where the principal is non-existent or legally incapable, the agent is seen to be personally liable. Put otherwise, the agent steps into the shoes of the supposed principal, and is personally liable for his actions in the name of the principal, as if he was the named principal.

In addition to the general principles outlined in Halsbury’s, jurisprudence in both England and Ontario, has recognized that under the common law, an agent could attract personal liability if he knowingly undertook something on behalf of another, without authority.

Such common law rules of agency found in Smout v. Ilbery⁷, as well as other 19th century English decisions, have been accepted as good law in Ontario.

The position of an agent in bringing an unauthorized action on behalf of a named party is directly analogous to the role of Mr. Mazin in the matter at hand. Although not a frequent subject of litigation, the courts have dealt specifically with the consequences of such an action.

Lord Eldon in Wright v. Castle⁸ observed:

There can be no doubt as to the course of this court’s jurisdiction, that, if a solicitor files a bill in the name of his client without having authority from him for so doing, then, if the plaintiff wishes to have the bill dismissed it will be so ordered, and the solicitor will be made to reimburse him all the expenses occasioned by its having been filed.

Armour, C.J.C.P. in Scribner v. Parcells⁹, a similar case to Wright v. Castle, indicated that Lord Eldon’s view was accepted in Ontario.

In another case where an agent acted for a non-existent principal, Chancellor Boyd observed:

No-one, therefore was bound under the terms of the contract: but the consequence in law is not that all go free, but that those are bound who are responsible for the procuring of the lease, and the enjoyment of its benefits.¹⁰

Similarly, McLennan J. in Gardiner v. Morton and Bluewater Conference Inc.¹¹ cited, with approval, Erle C.J’s statement in Kelner v. Baxter:¹²

where a contract is signed by one who professes to be signing “as agent” but who has no principal existing at the time, and the contract would be altogether inoperative unless binding upon the person who signed it, he is bound thereby.

This Application for Arbitration bears Mr. Mazin’s name and signature, and no other. If the named litigant, the estate of the late Alexander Maryasin had no legal status, then under common law principles, it would be open to find Mr. Mazin responsible for the consequences of any actions taken on behalf of the non-existent principal.

What was the status of the “Estate of the late Alexander Maryasin”?

The underlying facts relating to the estate are the following:

Mr. Maryasin died sometime after having put forward claims to certain accident benefits. The Insurer claims that his death was unrelated to the motor vehicle accident of October 29, 2005. Mr. Mazin was apparently involved in advancing Mr. Maryasin’s claims for accident benefits prior to his death.

Following Mr. Maryasin’s death Ms. Faina Maryasin came forward as either the heir to Mr. Maryasin, or a representative of his estate to claim on behalf of his estate. There was no will found. Presumably, Ms. Maryasin claimed authority as estate trustee without will or as some sort of personal representative of the deceased. The claims advanced by the “estate” were different from Mr. Maryasin’s. The “estate” claimed a death benefit and funeral expenses.

The first significant problem with the “estate’s” claim is that no steps were ever taken by Ms. Maryasin or anyone to administer the estate, or to otherwise establish her right to deal with the assets of the estate.

Probate matters such as this in Ontario are covered by a mixture of common law and a variety of statutes, including the Estates Act, and the Estates Administration Act.¹³

The Estates Administration Act provides at section 2:

(1) All real and personal property that is vested in a person without a right in any other person to take by survivorship, on the person’s death, whether testate or intestate and despite any testamentary disposition, devolves to and becomes vested in his or her personal representative from time to time as trustee for the persons by law beneficially entitled thereto, and, subject to the payment of the person’s debts and so far as such property is not disposed of by deed, will, contract or other effectual disposition, it shall be administered, dealt with and distributed as if it were personal property not so disposed of.

If Ms. Faina Maryasin had established her right to be the personal representative of Mr. Maryasin upon his death, then all real and personal property, including choses in action would be vested in her. Passing over for the moment the failure of Ms. Maryasin to establish her right to be considered the personal representative, the question arises of whether the subject-matter of this arbitration, death benefits and funeral expenses, would have been property vested in Mr. Maryasin at the time of his death.

If the benefits claimed by the estate in this matter had crystallized prior to Mr. Maryasin’s death, then by reason of the above section they would form part of his estate. Patently, section 25 (1) of the Schedule, the basis of this claim, provides for death benefits to be payable “in respect of an insured person” if he or she dies as result of an accident, within 180 days after the accident.

While Mr. Maryasin may have had, while living, potential claims against ING for future ongoing accident benefits, such claims would have been extinguished with his death.¹⁴ I have difficulty accepting that, either by timing or nature, the death benefit, which is claimed by a named dependant, or the funeral benefit, an indemnity for expenses which were apparently paid by Ms. Maryasin personally, could properly belong to the estate of Mr. Maryasin.

In estate matters, the executor or trustee under a will derived his or her powers from the will. These powers may be confirmed by a court having jurisdiction, but they trace from the appointment made in a will, and date from the time of death. Subject to certain restrictions, an executor may deal with property, if required, from the date that it vests in him or her as trustee.

As mentioned earlier, it is common ground in this matter that there was no will appointing Ms. Maryasin as either trustee or executor.

In the absence of a will an administrator, appointed by the courts, can trace his or her power to the appointment by a court. No property vested in an administrator, except by virtue of the appointment. ¹⁵ Consequently, an executor had the flexibility to take actions to preserve an estate from the time of the death of the testator that an administrator, or person claiming from an intestate did not have.

In order to address this problem, suffice it to say that Equity developed the concept of relation back to mitigate the impact of the strict legal rule, and to give an administrator the ability to retroactively validate necessary actions taken on behalf of the estate.

Halsbury’s¹⁶ defines the doctrine of relation back as follows:

Relation back of the administrator’s title. In order to prevent injury from being done to a deceased person’s estate without remedy, the courts have adopted the doctrine that upon the grant being made the title of the administrator relates back to the time of death. This doctrine has been consistently applied in aid of an administrator seeking to recover against a person who has dealt wrongfully with the deceased chattels or chattels real: it is also applicable against a person dealing wrongfully with the deceased’s real estate. It cannot be applied, however, to disturb the interests of other persons validly acquired in the interval or to give the administrator title to something which has ceased to exist in the interval.

Essentially, the doctrine serves to permit actions by persons acting on behalf of the estate to preserve or protect assets of the estate from wrongful injury. The cases make it clear that the actions taken by an individual must be on behalf of the estate, and not on his or her own account.

Although the provisions of the Estates Administration Act mitigate some of the difficulties of the old rules, it is clear that none of the saving principles for ratifying actions made in the name of an estate before the formalities have been completed, including relation back, are available to the “estate” named in this arbitration.

Mr. Mazin has admitted that no steps have been taken to administer the estate of Mr. Maryasin, and there is no evidence that Ms. Maryasin is, or has applied to be, the legal representative of that estate. In addition, Mr. Mazin has stated that since the estate is impecunious, there is no intention on the part of Ms. Maryasin to apply for legal authority to administer the estate.

The discussion of the powers of an estate administrator however remains important, inasmuch as it gives context to this matter, and since the related jurisprudence gives some insight into the principles to be applied where there has been no proper administration or probate.

While there is a line of jurisprudence under the heading of “executor a son tort” protecting beneficiaries and others from persons meddling with an estate without the legal right to so do, there is another doctrine which has evolved to protect third parties from illegal actions taken in the name of an estate that is not properly constituted.

One such Ontario case would appear to support the Insurer’s proposition that, having brought an application in the name of a “non-existent” estate, Mr. Mazin should be found responsible for the resulting costs from this arbitration.

In McEllistrum v. Etches¹⁷, the Court of Appeal concluded that a writ issued on behalf of an estate prior to the issue of letters of administration is necessarily a nullity. Laidlaw J.A. speaking for the Court stated:

I hold, following the high authority of Lord Parker of Wadington in Meyappa Chetty v. Supramaniam Chetty ( [1916] 1 A.C. 603), and the subsequent cases in England to which I have referred, that an action under s. 37 of the Trustee Act for torts or injuries to the person of the deceased cannot be instituted by a person in the capacity of administrator before the grant of letters of administration. In accordance with that view I conclude that the writ of summons and subsequent proceedings in the action, so far as they relate to a claim under the Trustee Act are a nullity.

There is however, the question of the new application for arbitration filed by Mr. Mazin on behalf of Ms. Maryasin, personally. Although the Insurer did not consent to this “amendment”, it is important to consider its effect on the status of this arbitration.

There is some jurisprudence to suggest that a proceeding commenced in the name of or against a person who has died before its commencement should not be treated as a nullity, and that a court may order that the proceeding be continued by or against the executor or administrator or a litigation administrator appointed for the purpose of the proceeding, with the title of the proceeding being amended accordingly.¹⁸

There is however absolutely no evidence in this matter that Ms. Maryasin is the personal representative, executor, or administrator of the estate. There is no evidence that any effort has been made to “regularize” the matter by the appointment of an estate trustee or administrator, notwithstanding Mr. Mazin’s earlier statements to the contrary.

For that matter, there is no evidence, other than an unsustainable assertion by Mr. Mazin, that his ostensible client has any standing at all on behalf of the estate to bring this action.

Even more importantly, as noted earlier, it is not at all clear that Mr. Maryasin’s estate, even if validly constituted would have any standing to bring forward the claims that are supposed to be subject to this arbitration.

As mentioned earlier, it is clear from section 25 of the Schedule that an action for death benefits is personal to the named dependant who brings the claim forward. There is simply no provision for the payment of a death benefit to an estate where there is no qualified dependant who may bring a claim forward.

I find, as well that the attempt to cure the defect in pleading by amending the application could not, in effect cure a nullity. In one of the leading cases, where the action was commenced in the name of a dead man, Bramwell J. stated:¹⁹

This is not a case where it can be said that persons, not formally entitled to be parties, have brought an action to try certain matters perfectly well known to both sides, which is the explanation of Blake v. Done 7 H. & N. 465; 31 L.J. (Ex.) 100, and La Banca Nazionale v. Hamburger 2 H. & C. 330. But here the plaintiff is altogether wrong, or rather there is no plaintiff; the man in whose name the action was brought was dead. It cannot be said that this is an amendment “necessary for the purpose of determining in the existing suit the real question in controversy between the parties,” nor is this an application made between the parties to the suit; for there is no plaintiff, and, therefore, no existing suit, and no question in controversy between the parties.

The generally accepted principle in Ontario, however, is that an action will be a nullity if the party named is a totally different person from the person who ought to have been named, and will be irregular if the party as named only “misdescribes” the person who ought to have been named.²⁰

The power of amendment, however, is limited to cases where there was originally a party suing, possessed, though with a variation in legal description, of the same interest with the party to be substituted.

Given the failure, and, indeed the apparent lack of intention on behalf of Ms. Maryasin to be confirmed as personal representative of the deceased, and the specific wording of the Schedule with regard to death benefits, I do not accept that Ms. Maryasin in her personal capacity is the same, “misdescribed” person or interest as the estate of the late Mr. Maryasin.

While a new application for arbitration may serve to bring forward Ms. Maryasin’s personal claim for death benefits and compensation for the monies she may have expended on funeral expenses, subject to any limitation issues, it is insufficient to rectify what is, on its face, a void application in the name of the estate.

As noted, the estate has no claim for death benefits, and the funeral expenses were paid by Ms. Maryasin personally. There are no expenses for which ING can be found liable to indemnify the estate. Consequently, whether or not this matter proceeded to a hearing with full evidence there could be no possibility of success. I accept that this conclusion alone, would support a finding that the arbitration should be dismissed as both a nullity, and frivolous and vexatious litigation under section 4(6) (1) of the Statutory Powers and Procedures Act (SPPA).

Responsibility for “advancing a frivolous or vexatious claim”

From the forgoing, it is clear that both at the time the Application for Arbitration was filed and the hearing on the dismissal motion, the “estate” of Mr. Maryasin had no legal existence, and on the limited evidence before me, no likelihood of being brought into existence. However, according to the Application for Arbitration, the “estate” was represented as the insured on whose behalf the arbitration was undertaken, and the client giving instructions to Mr. Mazin who signed on behalf of the “estate”. On the face of the application, the “estate” has no claims against the Insurer for the principal matters set out as issues in this arbitration.

There are significant consequences for bringing an action with absolutely no chance of success. Such actions are often characterized as frivolous and vexatious, since they serve no legal purpose, other than to cause the opposite party to incur costs in defending the action.

There is important jurisprudence dealing with the consequences of such an action.

Lord Eldon in Wright v. Castle²¹ observed:

There can be no doubt as to the course of this court's jurisdiction, that, if a solicitor files a bill in the name of his client without having authority from him for so doing, then, if the plaintiff wishes to have the bill dismissed it will be so ordered, and the solicitor will be made to reimburse him all the expenses occasioned by its having been filed.

Armour, C.J.C.P. in Scribner v. Parcells²², a similar case to Wright v. Castle, indicated that Lord Eldon’s view was accepted in Ontario. In another Ontario case where an agent acted for a non-existent principal, Chancellor Boyd observed:²³

No-one, therefore was bound under the terms of the contract: but the consequence in law is not that all go free, but that those are bound who are responsible for the procuring of the lease, and the enjoyment of its benefits.

Similarly, McLennan J. in Gardiner v. Morton and Bluewater Conference Inc.²⁴, cited, with approval, Erle C.J’s statement in Kelner v. Baxter:²⁵

where a contract is signed by one who professes to be signing “as agent” but who has no principal existing at the time, and the contract would be altogether inoperative unless binding upon the person who signed it, he is bound thereby.

While the common law provides support for the proposition that an agent, even if that agent is a lawyer, may be personally responsible for the consequences of acting on behalf of a non-existent or incapable principal, there are other grounds for a solicitor’s liability.

Section 282 11.2 of the Insurance Act sets out consequences for advancing a proceeding that can be construed as “frivolous and vexatious”. That section reads as follows:

Liability of representative for costs

11.2 An arbitrator may make an order requiring a person representing an insured person or an insurer for compensation in an arbitration proceeding to personally pay all or part of any expenses awarded against a party if the arbitrator is satisfied that,

(a) in respect of a representative of an insured person, the representative commenced or conducted the proceeding without authority from the insured person or did not advise the insured person that he or she could be liable to pay all or part of the expenses of the proceeding;

(b) in respect of a representative of an insured person, the representative caused expenses to be incurred without reasonable cause by advancing a frivolous or vexatious claim on behalf of the insured person; or

(c) the representative caused expenses to be incurred without reasonable cause or to be wasted by unreasonable delay or other default.

These same words: “frivolous and vexatious” are also used in a variety of contexts that are relevant to this arbitration such as section 4.6(1) of the SPPA which provides for the dismissal of a matter without a hearing.

“Vexatious” as used in both the SPPA and the Insurance Act is not a common term. Rather, it is a term of art used in legal decisions and law to describe a specific manner of conduct.

The courts have examined the meaning of “vexatious” in the context of “hopeless” litigation. Vexatious litigation includes situations where the court has no power to grant the relief sought²⁶; if no reasonable person can possibly expect to obtain relief in it²⁷, or if the applicant has no proper authority to pursue the remedy.²⁸

I have no difficulty in concluding that this arbitration brought in the name of a non-existent entity with patently no right to the benefits claimed would constitute a vexatious or hopeless litigation as provided for in section 282 (11.2) of the Insurance Act.

Rule 57.07 of the Rules of Civil Procedure also deals with awards of costs against a solicitor and cases arising under it can give us some understanding of how the Insurance Act provisions might be addressed.

Notwithstanding the clear power to make costs orders against solicitors, the courts have often been wary about routinely making such orders. McLachlin J. in dealing with a court’s powers to order costs payable by a solicitor in a highly contentious matter stated²⁹:

The basic principle on which costs are awarded is as compensation for the successful party, not in order to punish a barrister. Any member of the legal profession might be subject to a compensatory order for costs if it is shown that repetitive and irrelevant material, and excessive motions and applications, characterized the proceedings in which they were involved, and that the lawyer acted in bad faith in encouraging this abuse and delay. It is clear that the courts possess jurisdiction to make such an award, often under statute and, in any event, as part of their inherent jurisdiction to control abuse of process and contempt of court. But the fault that might give rise to a costs award against Mr. How does not characterize these proceedings, despite their great length and acrimonious progress. Moreover, courts must be extremely cautious in awarding costs personally against a lawyer, given the duties upon a lawyer to guard confidentiality of instructions and to bring forward with courage even unpopular causes. A lawyer should not be placed in a situation where his or her fear of an adverse order of costs may conflict with these fundamental duties of his or her calling.

While McLachlin J. cautioned against routine cost orders against solicitors, it is important that she begins her analysis by acknowledging that “Any member of the legal profession might be subject to a compensatory order for costs if it is shown that repetitive and irrelevant material, and excessive motions and applications, characterized the proceedings in which they were involved, and that the lawyer acted in bad faith in encouraging this abuse and delay.”

While there has been some discussion in the jurisprudence that a finding of bad faith might be a pre-condition for a cost order against a solicitor, recent caselaw seems to suggest otherwise.

However, one of the situations in which such an award is appropriate is where one party to the litigation has behaved in an abusive manner, brought proceedings wholly devoid of merit, and unnecessarily run up the costs of the litigation: Shier v. Fiume (1991), 1991 CanLII 7188 (ON CTGD), 6 O.R. (3d) 759 Ont. Court, General Division);…Mr. Masters submits that before a lawyer can be found personally responsible for costs, there must be a finding he acted in bad faith or has been derelict in his duty to his client or the court, relying on the historic roots of the power to make such an order as articulated in cases such as Myers v. Elman, [1939] 4 All E.R. 484 (H.L.); R. & T. Thew Ltd. v. Reeves (No. 2), [1982] 3 All E.R. 1086 (Q.B.). While those cases still apply to a residual discretion in the court at common law to award costs against a solicitor, I do not believe that is the applicable test now in Ontario.³⁰

Likewise, the decision of Pockele J. in Children’s Aid Society of Huron County v. T.V. ³¹ makes it clear that lengthy and ill-prepared argument, prolixity, the lack of serious preparation, and a lack of acquaintance with the applicable law can, together, form the pre-condition for an order of costs against a lawyer. In other words, the competence, or absence thereof, of the lawyer having carriage of the matter can be a factor in sustaining an award of costs against the solicitor personally.

Whatever the rule in the courts may be, I find that, given the clear wording of the Insurance Act provisions, there is no need to import the concept of bad faith as a pre-condition to an award of expenses pursuant to section 282 (11.2).

In this matter, the primary conduct which is at issue is the bringing and maintaining of a matter in the name of the estate, when the legislation was clear that the estate had no standing in this matter. While Ms. Maryasin, who is supposed to have instructed Mr. Mazin, might not be expected to know the exact provisions of the law relating to accident benefits, the same cannot be said for Mr. Mazin as a solicitor taking on such cases.

Although there is little jurisprudence as to what precise conduct may trigger the provisions of section 282 (11.2), it is clear from the use of words and phrases such as “caused expenses to be incurred without reasonable cause or to be wasted by unreasonable delay or other default” and “caused expenses to be incurred without reasonable cause by advancing a frivolous or vexatious claim on behalf of the insured person” indicates that the competence of counsel in bringing a matter forward may be at issue, as well as any intentional misfeasance.

The Law Society’s Rules of Professional Conduct outline the standards that may be reasonably expected of a lawyer in Ontario. Rule 2.01 reads as follows:

“competent lawyer” means a lawyer who has and applies relevant skills, attributes, and values in a manner appropriate to each matter undertaken on behalf of a client including

(a) knowing general legal principles and procedures and the substantive law and procedure for the areas of law in which the lawyer practises, [Amended - June 2007]

(b) investigating facts, identifying issues, ascertaining client objectives, considering possible options, and developing and advising the client on appropriate courses of action,

(c) implementing, as each matter requires, the chosen course of action through the application of appropriate skills, including,

(i) legal research,

(ii) analysis,

(iii) application of the law to the relevant facts,

(iv) writing and drafting,

(v) negotiation,

(vi) alternative dispute resolution

(vii) advocacy, and

(viii) problem-solving ability

(d) communicating at all stages of a matter in a timely and effective manner that is appropriate to the age and abilities of the client,

(e) performing all functions conscientiously, diligently, and in a timely and cost-effective manner,

(f) applying intellectual capacity, judgment, and deliberation to all functions,

(g) complying in letter and in spirit with the Rules of Professional Conduct,

(h) recognizing limitations in one's ability to handle a matter or some aspect of it, and taking steps accordingly to ensure the client is appropriately served,

According to the Law Society, one may be able to reasonably expect that a competent lawyer in Ontario will be aware of the “general legal principles and procedures and the substantive law and procedure for the areas of law in which the lawyer practises.” Expressed otherwise, it would be unreasonable for a lawyer not to know the fundamentals of the law in the area of his or her practice.

This is not significantly different than the expectations set out in cases involving solicitor’s negligence. Smith J. examined what the reasonable expectations are of the conduct of a reasonably competent lawyer with regard to a retainer:

In the case at bar, s. 4 of the Interest Act, has existed in its present form since 1900. The Act which is not an obscure one, has been litigated with relative regularity. Whether or not a competent commercial law specialist or general practitioner would know of it is in part a matter of evidence. However, it seems to me that a reasonably competent genera practitioner, and certainly a reasonably competent commercial law specialist, would have known of the existence of s. 4. Who else would know of its existence?

The expert evidence led by both parties is of limited assistance. It takes us to a draw. It can bear only on the question of reasonableness, the answer to which rests ultimately with the Court. And in my view, a failure on the part of the solicitor to know or to twig to that kind of enactment if asked to draft contracts providing for interest, falls short of the standard to which the public is entitled.³²

While we are not concerned with the Interest Act, lawyers appearing before arbitrators at the Financial Services Commission might be expected to have more than a passing acquaintance of the relevant accident benefit scheme.

Following this analysis in this matter, had Mr. Mazin been acquainted with section 25 of the Schedule, or taken the time to read that relatively brief provision, the costs related to this motion and the dismissal of the arbitration would not likely have been incurred, since the arbitration would not have been brought in the name of the estate but rather in the name of any beneficiary entitled under the provision.

Mr. Mazin is not a neophyte at the accident benefit claims business. He should have been aware of the governing law. Even if he, somehow, was unsure of the estate’s standing to claim benefits, he could have checked the provisions of the Schedule before proceeding.

He could have asked to proceed under the name of Ms. Maryasin early on in the process before costs were incurred in preparing for a hearing. It is important that notwithstanding notice that the arbitration may have been brought incorrectly at the time of the adjournment request, he continued to maintain the action in the name of the estate, taking no action until such time as a dismissal motion was pending.

As was evident from McLachlin J.’s comments in Young v. Young³³ the courts have weighed the issues in awards against solicitors from different perspectives. The more conservative view of costs awards against solicitors may be summarized as follows:

It is only when a lawyer pursues a goal which is clearly unattainable or is clearly derelict in his or her duties as an officer of the court that resort should be had to R. 57.07.

Even if such a restrictive view of costs against a solicitor were to apply to section 282 (11.2) matters, I would find that Mr. Mazin still met the test for such an award. The goal of this arbitration-payment of a death benefit to a deceased’s estate was clearly unattainable, and for reasons which follow, Mr. Mazin was derelict in the performance of his duties to the tribunal, and as an officer of the court.

While I believe that the compounded “error” in naming the estate as the applicant could justify an award against Mr. Mazin in itself, the matter does not end there. Mr. Mazin also engaged in further conduct that should be considered in the context of an award of expenses.

Mr. Mazin actively attempted to mislead both the arbitrator and the Insurer at the time of the adjournment request by stating that the formal administration of Mr. Maryasin’s estate was pending and would be concluded in a short time, a statement that he acknowledged as untrue.

Later he stated that another firm was handling the estate. Still later he acknowledged that no action was being taken to have a personal representative appointed since the estate was impecunious and the costs of administration could not be justified. It is hard to know what to believe from Mr. Mazin in this matter.

It is important to bear in mind the provisions of Rule 4.01 (1) of the Rules of Professional Conduct, governing the conduct of lawyers, which provides:

When acting as an advocate, a lawyer shall represent the client resolutely and honourably within the limits of the law while treating the tribunal with candour, fairness, courtesy, and respect.

The apparent misrepresentation of the status of the “estate” and the clear failure to correct that misrepresentation do not constitute “treating the tribunal with candour, fairness, courtesy, and respect”. I find that Mr. Mazin not only advanced a claim that was patently incapable of success, but that in the handling of that claim he “is clearly derelict in his or her duties as an officer of the court”.

In summary, Mr. Mazin may be found liable for ING’s expenses in this unfortunate arbitration on the basis of the common law principles outlined in Wright v. Castle³⁴ as well as the provisions of section 282 (11.2) of the Insurance Act, and I so find.

I find as well that Mr. Mazin alone should be responsible for the ING’s expenses, since the error at the base of the dismissal should have been apparent to him as a reasonably competent solicitor. Mr. Mazin alone should bear the responsibility for this ill-advised Application for Arbitration, one that was draughted and signed by him alone.

AMOUNT OF EXPENSES:

Ms. Urbonavicius has served and filed a Bill of Costs on behalf of the Insurer. Mr. Mazin has not filed any response to the Bill of Costs, nor indicated that he takes issue with the amounts claimed. While I have no intention of reviewing the Bill of Costs on a line by line basis, there is one aspect that I find somewhat questionable.

The Expense Regulation uses the term “expenses” instead of the more usual word “costs” in the context of a reimbursement of legal expenses incurred by a party to an arbitration.

While the legislature in using the word “expense” may originally have meant to indemnify a party for its actual incurred expenses up to any statutory limit, such limits kick in early. While I doubt that Ms. Urbonavicius has charged the full market rate for experienced major firm solicitors, in this matter she has greatly exceeded the limits set in Rule 78 for insurer’s counsel.

Rule 78 of the Code provides for maximum amounts to be allowed for legal services, based on the legal aid tariff, with an exception for experienced applicant’s counsel of $150 per hour.

While the limits in the Code with regard to legal fees do not form part of either the primary or subsidiary legislation³⁵, they exist, at the very least as a presumptive guideline, albeit one potentially subject to the ultimate discretion of the arbitrator to set aside under the wide-ranging provisions of Rule 81.

Indeed in a fact situation such as the present arbitration, in another forum there would be justification for an award of costs based on a higher tariff³⁶ given the finding that the proceedings were wholly devoid of merit, and counsel unnecessarily ran up the costs of the litigation. Patently conduct that would be an abuse of process³⁷ should not be rewarded.

However, given that I received no request to dispense with the application of the relevant rule to permit an award in excess of the amounts set out by the Code, nor any submissions as to why I should make such an extraordinary order, Ms. Urbonavicius is restricted to the legal aid rate in her billings. In her case she would be entitled to $96.95 per hour rather than the $150 per hour billed and her clerk to the $23 per hour actually billed.

Consequently, while I accept that the disbursements shown of $668.26 including GST are reasonable, I would reduce Ms. Urbonavicius’ billings by some $1,751.22, the difference between the two tariff rates.

I find that Mr. Mazin should pay to ING its assessed costs and disbursements in the amount of $4,256.37. This amount is payable forthwith.

Given my finding that responsibility for the misnomer in the application for arbitration should rest primarily with the solicitor, I make no order as to payment by either Ms. Maryasin, or the “estate”.

February 22, 2008

John Wilson Arbitrator

ARBITRATION ORDER

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

The claim by the Estate of Alexander Maryasin is dismissed without prejudice to the right of any legitimate claimant to advance an accident benefit claim within the time-limits specified by the legislation.
Mr. Mazin shall forthwith pay to ING its assessed costs and disbursements in the amount of $4,256.37.