Financial Services Commission of Ontario

Commission des services financiers de l'Ontario

Neutral Citation: 2009 ONFSCDRS 115

Appeal: P08-00033

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ALNOOR JADAVJI Appellant

and

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

BEFORE: Delegate Lawrence Blackman

REPRESENTATIVES: Mr. Arvin Gupta for Mr. Alnoor Jadavji Mr. Gaspare Di Salvo for Security National Insurance/Monnex Insurance Mgmt. Inc.

HEARING DATE: By written submissions received by August 18, 2009

APPEAL ORDER

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

1. The Appellant's July 2, 2009 motion is now redundant. The Appellant is entitled to his reasonable legal expenses of this motion.

2. The July 28, 2009 motion by Mr. Rooz in his personal capacity is not accepted or, in the alternative, is dismissed.

3. By August 31, 2009 (a) the Respondent shall serve and file an updated Bill of Costs, excluding any expenses regarding the two preliminary expense motions herein, but including any anticipated legal expenses up to and including the expense hearing, and (b) the Appellant shall serve and file his Bill of Costs solely regarding his July 2, 2009 motion.

August 24, 2009

Lawrence Blackman Director's Delegate

Date

REASONS FOR DECISION

My May 22, 2009 decision herein dismissed the September 26, 2008 Notice of Appeal, confirmed the Arbitrator's July 15, 2008 decision and advised that if the parties were unable to agree on entitlement to and/or the quantum of the legal expenses of this appeal, an expense hearing could be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003) (the "Code"). The Respondent's June 15, 2009 letter advised that the parties were unable to agree on the legal expenses of this appeal.

Following the exchange of correspondence from the parties set out below, my July 21, 2009 letter confirmed Mr. Gupta's July 2, 2009 letter on behalf of the Appellant requesting a motion prior to the appeal expense hearing for an order, amongst other things, that the Appellant's testimony at the expense hearing was inadmissible. The Respondent had previously expressed its wish to subpoena the Appellant to testify at the expense hearing as to the knowledge he had of the appeal and whether his counsel had explained to him the cost consequences of same.

Exercising my discretion under Rule 56.5 of the Code, I was persuaded, in accordance with Rule 1.1 of the Code, that it would be most just, expeditious and least expensive to the parties to:

1. Determine, prior to the appeal expense hearing, any preliminary expense issues, including any issues regarding what evidence may be received at the appeal expense hearing;
2. That all such issues be determined in accordance with the time lines set out below; and,
3. That these preliminary issues be determined on the basis of written submissions.

In this regard, I set the following time lines:

1. All initiating motion material from either party was to be served and filed by July 29, 2009;
2. Any responding material was to be served and filed by August 5, 2009; and,
3. Any reply material from an initiating party was to be served and filed by August 12, 2009.

Prior to my July 21, 2009 letter I had received from the parties the following correspondence:

1. Mr. Di Salvo's May 29, 2009 letter on behalf of the Respondent, with an attached Cost Outline and dockets;
2. Mr. Di Salvo's June 15, 2009 letter requesting, in part, an expense hearing;
3. Mr. Di Salvo's June 17, 2009 letter clarifying the preliminary issue raised;
4. Mr. Di Salvo's June 24, 2009 letter enclosing a Cost Outline and supporting materials;
5. Mr. Gupta's June 30, 2009 letter, with attached written submissions;
6. Mr. Gupta's July 2, 2009 letter as to the Appellant's motion opposing fresh evidence; and
7. Mr. Di Salvo's July 14, 2009 letter, with written submissions.

The following documentation was received from the parties subsequent to my July 21, 2009 letter:

1. Letter of July 28, 2009 from Mr. Alon Rooz, of Mazin Rooz Mazin, seeking, by way of motion, specific relief on his own behalf, including particulars of his personal liability, disclosure and production of evidence in support of same, bifurcation of the expense hearing, leave to bring further motions and legal costs;
2. Letter of July 29, 2009 from Raffi Akelian, Law Student, at Mazin Rooz Mazin, enclosing two executed Statements of Service;
3. Letter of August 4, 2009 from Mr. Di Salvo regarding the two motions;
4. Letter of August 11, 2009 from Mr. Rooz;
5. Letter of August 14, 2009 from Mr. Di Salvo;
6. Letter of August 17, 2009 from Mr. Rooz; and,
7. Letter of August 18, 2009 from Mr. Di Salvo.

The final date set for submissions on any preliminary appeal expense hearing issues, being August 12, 2009, having now passed, in accordance with my July 21, 2009 letter I will now determine the two preliminary appeal expense motions on the basis of written materials received.

1. The Appellant's July 2, 2009 Motion

The Appellant's July 2, 2009 motion sought an order that the testimony of the Appellant at the appeal expense hearing (requested by the Respondent) was inadmissible and that any summons served on the Appellant for the purpose of attending the hearing was of no force or effect. The Appellant also requested his costs of this motion.

The Respondent's August 4, 2009 letter stated that it agreed "not to summons Mr. Jadavji to the Expense Hearing for the Appeal." Accordingly, there would appear to be no further need for the Appellant's motion. The Respondent's more recent correspondence of August 14, 2009, however, urged the Commission "to issue the appropriate Order which will afford Mr. Jadavji consumer protection."

The order sought is that I, as adjudicator, acting on my own initiative rather than by motion brought by the Respondent, require Mr. Jadavji to attend the expense hearing to answer questions that I put to him whether he had knowledge of this appeal and whether he was made aware by his counsel of the cost consequences of same. The purpose of these questions would be to establish whether it is Mr. Jadavji or his counsel who should be held responsible for the Respondent's legal expenses of this appeal, if such expenses are allowed.

My June 22, 2009 letter set out for the parties' consideration and submissions subsection 15(2) of the Statutory Powers Procedure Act (the "SPPA") and Rule 39.3(a) of the Code. These provisions provide that nothing is admissible in evidence at a hearing that would be inadmissible in a court by reason of any privilege under the law of evidence.

The Respondent's August 4, 2009 letter did not address these provisions noted directly, but rather stated that it was prepared to accept a cost order against whomever the Commission was comfortable and prepared to find responsible and that, ultimately, it was of no consequence to it who was ordered to pay its costs, but that fairness to the Appellant should be the determining factor. The Respondent's letter of August 14, 2009, however, stated that asking Mr. Jadavji about whether he was made aware by counsel of the cost consequences of the appeal would not in anyway compromise solicitor-client privilege.

Subsection 282(11.2) of the Insurance Act, R.S.O. 1990, c. I.8, sets out the liability of representatives for costs. Clause 282(11.2)(a) provides that:

(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 …

However, subsection 282(11.3) of the Insurance Act states that clause 282(11.2)(a) "does not apply to a barrister or solicitor acting in the usual course of the practice of law." Subsection 283(7) of the Insurance Act provides that subsections 282(10) to (11.2) apply, with necessary modifications, to appeals before the Director. It is presently unclear why subsection 282(11.3) would not apply equally.

Rule 67 of the Code provides the procedure for a party, either in arbitration or appeals, to request a preliminary or interim order. The Respondent raised the issue of subpoenaing the Appellant in its June 17, 2009 letter. This led to the Appellant's July 2, 2009 motion. My July 21, 2009 letter set out time lines for any preliminary motions to be brought. The Respondent failed to bring any motion. The Respondent's August 4, 2009 letter retracted its wish to summons Mr. Jadavji. At the same time, the Respondent's August 4, 2009 letter and subsequent correspondence have endeavoured to obtain the same result while circumventing the requirements of Rule 67.

To allow such a "backdoor" approach in this case, by ordering, on my own supposed initiative, the Appellant's attendance at the appeal expense hearing to answer questions proffered by the Respondent would be to undermine the procedural safeguards contained in Rule 67, and I decline to do so.

Mr. Jadavji has been copied on Commission correspondence to his home address. Mr. Jadavji was so served with the January 8, 2009 Notice of the April 29, 2009 appeal hearing. Mr. Jadavji is being copied on this decision. Mr. Jadavji will be served with written notice of the appeal expense hearing.

I confirm for Mr. Jadavji's benefit that the Respondent, Security National Insurance Co., is specifically seeking at the appeal expense hearing the present sum of $7,111.68 directly against him and that the sum sought may increase, as set out below. It is Mr. Jadavji's right to attend the expense appeal hearing. There being no order to the contrary, it is also his right not to attend the expense appeal hearing, if that is his wish.

I remind the parties that pursuant to Rule 58.2 of the Code where a Notice of Hearing has been delivered to a party and the party does not attend, the appeal adjudicator may proceed with the oral submissions or the hearing in the absence of the party, and the party is not entitled to any further notice in the proceeding.

In conclusion, on the basis of the Respondent's failure to pursue a proper motion and its retraction of its wish to summons Mr. Jadavji, there is no need to address further the Appellant's July 2, 2009 motion, other than the issue of the legal costs of this motion.

Section 12 of R.R.O. 1990 Regulation 664, as amended, sets out the criteria upon which an award of expenses may be made by an arbitrator. Rule 75 of the Code sets out criteria for adjudicators regarding awards of expenses.

The Respondent has retracted its wish to summons the Appellant, making the Appellant's motion redundant. Given each party's degree of success (criterion "a" of Rule 75.2) and significant concerns as to whether the Respondent's initial intent to summons the Appellant was improper or unnecessary (criterion "e"), I find the Respondent responsible for the Appellant's reasonable ensuing legal expenses of its July 2, 2009 motion. I leave the issue of the quantum of the Appellant's legal expenses in this regard, as set out below, to the appeal expense hearing to be arranged.

2. Mr. Rooz' July 28, 2009 motion

Mr. Rooz' July 28, 2009 letter states that he is writing in his personal capacity and not on behalf of his client, Mr. Jadavji, as the Respondent is seeking costs against Mr. Rooz personally. Mr. Rooz asks that all further correspondence be forwarded to him, not to Mr. Gupta of his office.

Rule 2.04(1) of the Law Society of Upper Canada's Rules of Professional Conduct defines a "conflict of interest" or a "conflicting interest" as an interest that would be likely to affect adversely a lawyer's judgment on behalf of, or loyalty to, a client or prospective client, or that a lawyer might be prompted to prefer to the interests of a client or prospective client.

Rule 2.04(3) of the Rules of Professional Conduct states that a "lawyer shall not act or continue to act in a matter when there is or is likely to be a conflicting interest unless, after disclosure adequate to make an informed decision, the client or prospective client consents."

Succinctly, Mr. Rooz' written submissions request that the expense hearing be bifurcated to first address whether the Respondent is entitled to its legal expenses and if so, in what amount, and then, if there is an award of expenses granted, address whether it is Mr. Jadavji or Mr. Rooz who should pay those expenses.

Section 5 of the SPPA provides that the "parties to a proceeding shall be the persons specified as parties by or under the statute under which the proceeding arises or, if not so specified, persons entitled by law to be parties to the proceeding."

In Mazin and Personal Insurance Company of Canada et al., (FSCO P07-00028, April 25, 2008), I cited the Divisional Court in Royal & SunAlliance Insurance Company of Canada and Volfson et al., 2005 CanLII 38902, that:

Volfson had a direct interest in the outcome of the hearing. It was therefore necessary and appropriate to give Volfson the opportunity to participate fully in the proceeding in his own right, whether that be by formal party status or otherwise, and the Arbitrator correctly gave him that opportunity.

I further referred to Rule 2.04(5) of the Rules of Professional Conduct that addressed when a lawyer's partner or associate could act in a new matter against the lawyer's former client, where the lawyer had obtained in the initial matter confidential information relevant to the new matter. The Rules of Professional Conduct provide that the partner or associate could act if the law firm establishes that it was in the interests of justice.

In Mazin, I was not persuaded that it was:

… in the interests of justice that there must be a blanket barrier to appeals by legal representatives when expense awards have been made personally against them. However, the appellate officer, in controlling the proceedings under section 23 of the SPPA, has the right to decide what, if any, evidence may be admitted from the representative and what submissions may be advanced, without improperly compromising the representative's duty to his or her present, or former, client.

In this case, Mr. Gupta of Mr. Rooz' firm is still counsel of record for Mr. Jadavji and will have the opportunity to fully and appropriately participate at the appeal expense hearing and argue against the Respondent's claim for its legal expenses. I am not persuaded, based on Rule 2.04 of the Rules of Professional Conduct, that it is in the interests of justice that Mr. Rooz act on his own, separate and independent of Mr. Jadavji, while his firm continues to represent Mr. Jadavji. I am thus not persuaded that Mr. Rooz is presently entitled by law, using the wording of section 5 of the SPPA, to be a party to this proceeding.

Accordingly, I am not accepting Mr. Rooz' motion on his own behalf. However, if I am incorrect and Mr. Rooz does presently have personal standing to bring his motion, I would dismiss the motion for the following reasons:

1. As noted in part above, Mr. Rooz asks for particulars of the Respondent's allegations regarding his personal liability, disclosure and production of all the evidence upon which the Respondent relies respecting such personal liability, a timetable for the exchange of materials, notice from the Commission of the potential grounds for Mr. Rooz' liability, if any, and leave to bring further motions.

My June 16, 2009 letter set a time limit of June 30, 2009 for any party seeking its legal expenses to provide, amongst other things, their written submissions regarding entitlement to expenses, if same was in issue. By letter dated June 24, 2009, the Respondent provided its Cost Outline. Only by letter dated July 14, 2009 did the Respondent provide written submissions. The Respondent has not sought leave to extend the time for its written submissions. Such leave has not been granted.

The parties had until July 29, 2009 to serve any initiating motion material regarding preliminary appeal expense issues, "including any issues regarding what evidence may be received at the appeal expense hearing." No motion has been brought by the Respondent nor has the latter indicated that it is seeking to introduce any evidence other than its dockets and disbursement expenses. Rather, as noted, the Respondent's August 4, 2009 letter states that it is not seeking to summons the Appellant.

Given the instructions and time lines I have already provided, I am not persuaded that additional time lines are required.

2. Mr. Rooz wishes to bifurcate the appeal expense hearing. Rule 1.1 of the Code sets out the fundamental goals of the Commission, stating that the Rules will be broadly interpreted to produce the most just, quickest and least expensive resolution of the dispute. I am not persuaded that having an initial expense hearing to determine the Respondent's entitlement to and quantum of legal expenses and a second hearing to determine who will pay that amount is consistent with Rule 1.1.

Rather, I am persuaded that it is more expeditious, less expensive and equally just to have a single appeal expense hearing. Mr. Rooz' written submissions speculate that Mr. Jadavji may potentially have different interests than his own. However, Mr. Rooz has already sought to separate his personal interests from those of his firm's client.

If Mr. Gupta is of the view that, to cite Rule 2.04(3) of the Rules of Professional Conduct, "there is or is likely to be a conflicting interest" between he and Mr. Jadavji then Mr. Gupta should (a) move to get off the record, or (b) after disclosure adequate to allow Mr. Jadavji to make an informed decision, obtain Mr. Jadavji's written consent that he continue to act and confirm same.

3. Mr. Rooz seeks his costs of his motion. Given the results of this motion, I am not persuaded that he is entitled to same. The Respondent, while indicating that it did not wish to continue in "fruitless banter with Mr. Rooz," did not seek its legal costs of this motion. Accordingly, none are granted.

The Commission will now contact the parties to set an appeal expense hearing date and will confirm same by Notice of Expense Hearing. I am persuaded that it would be most just and would best ensure the appropriate opportunity of participation by all persons properly involved in this matter to have the expense hearing held in person at the offices of the Commission.

My June 16, 2009 letter stated that any party seeking its legal expenses of this appeal was to serve and file by June 30, 2009, amongst other materials, their account describing each of the legal expenses claimed, services received and the costs. Mr. Gupta's letter of June 30, 2009 sets out an hourly rate sought by the Appellant, but does not provide an account. The Respondent has provided an account within the time limits specified. Accordingly, the only accounts that will be addressed at the oral expense hearing will be:

1. The Respondent's Cost Outline, dated May 29, 2009;
2. The Appellant's legal expenses solely of his July 2, 2009 motion.

By Monday, August 31, 2009, at 4:45 p.m., the Respondent shall serve on the Appellant and file with the Commission an updated Bill of Costs, excluding any expenses regarding the two preliminary expense motions herein, but including any anticipated legal expenses up to and including the expense hearing.

Also by Monday, August 31, 2009, at 4:45 p.m., the Appellant shall serve on the Respondent and file with the Commission his Bill of Costs solely regarding his July 2, 2009 motion.

At the oral expense hearing, I expect to hear final argument regarding all issues regarding entitlement to, liability for and the quantum of the above noted two areas of legal expenses set out on page nine herein, including any offers to settle. In my earlier May 22, 2009 decision, I stated that:

… although it may not be the usual practice, I am not persuaded that there is a blanket prohibition against applying the bifurcation of legal expenses under section 77 of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003) (the "Code") to expense hearings themselves, as is appropriate and with necessary modifications …It is, however, still to be remembered that the prime consideration of the Code, as enunciated by Rule 1.1, is that the Rules will be broadly interpreted to produce the most just, quickest and least expensive resolution of the dispute.

I am persuaded that in this case it would be contrary to Rule 1.1 of the Code and to the fundamental aims of this alternate dispute system to be quicker, cheaper, less complicated and fairer, to further complicate, delay and extend this proceeding, with consequent increased expense to both parties, by bifurcating the oral expense hearing regarding any offer to settle.

This decision is being forwarded to both the Appellant and to his counsel of record, Mr. Gupta, rather than Mr. Rooz of the same office, as Mr. Rooz indicates that he is representing himself, not the Appellant and, as stated, I am not persuaded that Mr. Rooz, personally, presently, has standing in this matter.

August 24, 2009

Lawrence Blackman Director's Delegate

Date