Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2012 ONFSCDRS 157

Appeal P12-00034

OFFICE OF THE DIRECTOR OF ARBITRATIONS

PRIMMUM INSURANCE CO.

Appellant

and

RISHNA RAJASEKARAM

Respondent

BEFORE:

Delegate Lawrence Blackman

REPRESENTATIVES:

Ms. Donata Di Iorio for the Appellant, Primmum Insurance Co.

Mr. Harley Kruger for the Respondent, for Mr. Rishna Rajasekaram

HEARING DATE:

By written submissions received by November 19, 2012

PRELIMINARY APPEAL ORDER

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

1. Pursuant to Rule 51.2(c) of the Dispute Resolution Practice Code (Fourth Edition, Updated August 2011), this appeal from the Arbitrator’s August 31, 2012 decision on a motion is rejected on the basis that the appeal is from a preliminary or interim arbitration order that does not finally decide the issues in dispute.

2. If the parties are unable to agree on the legal expenses of this present appeal, pursuant to Rule 79.1 of the Code an expense hearing shall be requested, as set out below, within thirty days of the date of this decision.

December 4, 2012

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

The Appellant, Primmum Insurance Co., appeals the August 31, 2012 decision on a motion of Arbitrator Lee (the “Arbitrator”). The Arbitrator held that the arbitration file had not been closed by administrative dismissal or by other means and that the Respondent, Mr. Rishna Rajasekaram, could resume his pre-hearing discussion at the Commission.

This preliminary appeal decision addresses (1) whether this Notice of Appeal is an appeal from a preliminary or interim order and, if so, (2) whether the appeal should be accepted at this time.

I find that this appeal is from a preliminary or interim arbitration order. Applying the criteria set out, in part, in Allstate Insurance Company of Canada and Torok, (FSCO P01-00021, May 29, 2001), I exercise my discretion under Rule 51.2(c) of the the Dispute Resolution Practice Code (Fourth Edition, updated August 2011) (the “Code”), to presently reject this appeal from a preliminary order that does not finally decide the issues in dispute.

II. BACKGROUND AND ANALYSIS

The Respondent was born February 28, 1992. When he was thirteen, the Respondent was injured in a February 4, 2006 car accident. He subsequently received statutory accident benefits under the Schedule¹ from the Appellant, his first-party automobile insurer.

An arbitration pre-hearing was held on March 10, 2008 regarding benefits in dispute between the parties. The Respondent was then sixteen. Both parties were represented at the pre-hearing by counsel. Rule 10.7 of the Code provides, in part, that the representative of a person under a disability under Rule 10.02 (that includes a minor) shall comply with the approval of the settlement requirements of Rule 7.08 of the Rules of Civil Procedure.

Following the pre-hearing discussion, the pre-hearing arbitrator sent a letter stating, in part:

The parties advised that they reached a settlement of this matter during the pre-hearing discussion, subject to compliance with sections 9.1 and 9.2 of Ontario Regulation R.R.O. 664, as amended.

Pursuant to Rule 69.2(b), we intend to close the file in 20 days on the basis of the reported settlement. I would like to thank the parties for their assistance in bringing this matter to a negotiated resolution.

The Appellant submits that under Rule 69.2(b) of the Code, this letter closed the arbitration proceeding by administrative dismissal. It further argues that Rule 69.3 requires prompt notification by a party objecting to the closure of the file.

The Appellant submits that the Respondent’s September 21, 2011 letter to the Commission, advising that the matter had not settled and asking that the pre-hearing discussion resume as soon as possible, represented a three and a half year delay. The Appellant argues that this is not prompt notification and that it was prejudiced by the delay. It further argues that allowing the Respondent to proceed to a pre-hearing violates the principles of finality required in litigation.

In his August 31, 2012 “Decision on a Motion,” the Arbitrator found that:

1. All parties were aware that the Respondent was a minor at the time of the purported March 10, 2008 settlement.
2. Under Rule 10.7 of the Code, the settlement required Court approval.
3. The delay in this file was attributable to both sides. The documentation was not submitted for Court approval until February 2009. In the interim, counsel for the Respondent had sent numerous letters to the Appellant’s counsel seeking that documentation. The Appellant’s counsel was slow in responding.
4. The Court refused to approve the putative settlement and returned the application record with an endorsement dated February 20, 2009.
5. There was no evidence tendered to persuade the Arbitrator that the failure to obtain Court approval was due to any fault of the Respondent or his counsel.
6. On or about March 12, 2009, the Respondent’s Litigation Guardian instructed counsel for the Respondent to refrain from settling the matter.
7. It was clear that there were discussions to reschedule the pre-hearing discussion long before the Respondent’s September 21, 2011 letter to the Commission requesting that the pre-hearing discussion be resumed.
8. In at least one December 2009 telephone conversation, the Respondent’s counsel informed the Appellant that the Respondent was seeking to rescind the original settlement. The Respondent’s counsel made further attempts to contact the Appellant’s counsel by telephone. The Respondent’s counsel sent a letter to the Appellant on or about July 8, 2011 seeking either further settlement discussions or a pre-hearing resumption.
9. The Appellant agrees that this matter was never settled.
10. The possibility of fading memory and lost evidence as a consequence of litigation delay applies to both parties.
11. The Appellant presented no evidence of actual prejudice.
12. The Appellant never paid the settlement funds. Nonetheless, the Appellant’s counsel maintained a mistaken belief, as late as January 2010, that the settlement funds had been paid. The Appellant’s misunderstanding was not attributable to any act or omission by the Respondent or his counsel.
13. At the latest, by December 2009, the Appellant’s counsel had actual knowledge that the Respondent was seeking to resume the pre-hearing. While the Respondent’s counsel could have informed the Appellant as early as March 2009, the Arbitrator was not persuaded that this nine-month delay warranted barring the Respondent from arbitration.
14. The prejudice to the Respondent in barring his proceeding in arbitration greatly outweighed any presumed prejudice to the Appellant.

The Arbitrator found that as Court approval of the settlement was never obtained, the file was not closed by the Commission, either administratively or otherwise. The Arbitrator was not persuaded that the March 10, 2008 pre-hearing letter constituted an administrative dismissal. Rather, it was “little more than an acknowledgement that the parties had reported a settlement during the pre-hearing discussion.”

The Arbitrator did not find Rule 48.14 of the Rules of Civil Procedure (pertaining to status notices and status hearings) applicable. Nor did he find Rule 69.2(b) of the Code of assistance to the Appellant. Rule 69.2(b) provides that if a dispute is settled, the Dispute Resolution Group will close its file twenty days following notice of its intention to close the file on the basis of a reported settlement.

The Appellant, in its September 28, 2012 Notice of Appeal, checked off that this was not an appeal from a preliminary or interim order. The Appellant stated that it was relying upon the evidence delivered for the arbitration hearing.

My October 5, 2012 letter, acknowledging receipt of this Appeal, noted that:

Rule 50.2 of the Code provides that a party may not appeal a preliminary or interim order of an arbitrator until all of the issues in dispute have been finally decided, unless ordered otherwise. Rule 51.2(c) states that an appeal may be rejected if it is from a preliminary or interim order that does not finally decide the issues in dispute.

I stated that it was presently unclear how the Arbitrator’s decision, noted as being on a motion, had finally decided all of the issues in dispute when the Respondent was permitted to resume the pre-hearing. I noted that Delegate Makepeace held in Torok that the purpose of Rule 50.2 was to:

… facilitate the most cost-effective resolution of disputes by minimizing the time and money spent on procedural or collateral matters. The decision whether to hear an appeal of a preliminary order is discretionary … the over-arching principle guiding the exercise of the discretion is that the rule “should be broadly interpreted to produce the quickest, most just and least expensive resolution of the dispute.” The criteria to be considered include the apparent strength of the appeal, the importance or novelty of the issue raised, and whether rejecting the appeal or hearing it will prejudice either party.

I set time lines for written submissions on the initial appeal issues whether this Notice of Appeal was from a preliminary or interim order and, if so, whether the appeal should be accepted at this time. The Respondent not objecting, a time extension was subsequently granted to the Appellant.

My October 5, 2012 letter noted that Rule 56.5 of the Code provides that an appeal may be decided in a manner considered appropriate. Applying Rule 1.1 of the Code, I was of the view, subject to the submissions of the parties, that the most expeditious, least costly and most just means of determining the initial appeal questions was by written submissions. The written submissions did not request an opportunity to provide additional oral submissions. Applying Rule 56.5 of the Code, my appeal decision on the preliminary issues follows.

The Appellant submits that on its face, the motion before the Arbitrator was finally deciding the issues in dispute. The Appellant further argues that the appeal is from a substantive, not a procedural order. It also submits that the appeal raises a question of law, as required by subsection 283(1) of the Insurance Act. In the alternative, the Appellant requests leave to appeal.

I find that:

1. Rule 51.2(b) of the Code provides adjudicative discretion to reject an appeal that does not raise a question of law. Notwithstanding that an appeal raises a question of law, Rule 51.2(c) allows an appeal to be rejected if it is from a preliminary or interim order that does not finally decide the issues in dispute.
2. The determining criterion in Rule 51.2(c) is not whether the order sought to be appealed is substantive or procedural. It is whether the order finally decides the issues in dispute.
3. The Arbitrator’s decision not to allow the Respondent to proceed would finally decide the issues in dispute. The Arbitrator’s actual order did not finally decide the issues in dispute. Rather, the Respondent was permitted to resume his pre-hearing discussion. Under Rule 33.1(f) of the Code, one of the purposes of a pre-hearing discussion is to set dates for the arbitration hearing to determine the substantive issues in dispute.
4. Accordingly, I find that this appeal is from a preliminary order on a motion and, as such, I have authority under Rule 51.2(c) of the Code to reject this appeal.

The parties agree on the criteria whether to accept an appeal from a preliminary or interim order:

1. The apparent strength of the appeal.
2. The importance or novelty of the issues raised.
3. Whether rejecting or hearing the appeal will prejudice either party.
4. The preference of the parties.
5. Whether the arbitration decision represents a departure from prior cases.
6. Whether rejecting or hearing the appeal would provide the quickest, most just and least expensive way of disposing of the issues between the parties.

Rules 69.2 and 69.3 of the Code state that:

69.2 If a dispute is settled, the Dispute Resolution Group will close its file:

(a) immediately upon receipt of written confirmation from the parties that the entire matter is settled; or

(b) 20 days following notice of the Dispute Resolution Group's intention to close the file on the basis of a reported settlement.

69.3 Where a party objects to the closure of a file under Rule 69.2(b), the party must promptly notify the Dispute Resolution Group and all other parties, in writing, setting out the reasons for the objection. [emphasis added]

Rule 50.2 of the Code provides that a party may not appeal a preliminary or interim order of an arbitrator until all of the issues in dispute in the arbitration have been finally decided. Rule 5.1(c) provides an appellate officer discretion regarding the application of the general rule. Accordingly, the onus is on an appellant to establish that such discretion should be granted.

I am not persuaded to exercise my discretion to accept this appeal from a preliminary order that does not finally decide the issues in dispute and I presently reject this appeal under Rule 51.2(c) for the following reasons:

1. I am not persuaded as to the apparent strength of the appeal.

The Appellant argues that the Arbitrator made findings that are not reasonably supported by the evidence, failed to consider all of the evidence and assumed incorrect facts that are not part of the evidence. However, no details are provided.

The application of Rules 69.2(b) and 69.3 of the Code are dependent on a dispute being settled. The March 10, 2008 pre-hearing letter was a standardized letter. It stated that the settlement was subject to compliance with sections 9.1 and 9.2 of R.R.O. 1990, Reg. 664, as amended.

Filing a signed Settlement Disclosure Notice under section 9.1 of the Settlement Regulation is but one prerequisite protecting both parties before a consent dismissal order can be obtained under Rule 69.4 of the Code. Rule 69.4(a) also provides as a prerequisite to a consent dismissal order that the parties must file a signed consent confirming that no party to the proceeding is under a disability. Under Rule 10.2 of the Code, a minor is a party under a disability.

As held by the Arbitrator, Rule 10.7 of the Code applied to this putative settlement. Rule 10.7 mandates that the representative of a person under a disability shall comply with the approval of the settlement requirements of Rule 7.08 of the Rules of Civil Procedure. The Appellant agrees that Court approval was never obtained and that this matter was never settled. If the arbitration file in this case was indeed closed, it would appear to have been closed prematurely and/or in error.

In any event, Rule 81 of the Code provides that an adjudicator may, subject to the requirements of the Insurance Act and the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22, on such terms as he or she considers just, set aside any time limit in the Code for doing any act or serving any notice. The Arbitrator set out numerous grounds for the exercise of any necessary discretion in allowing the pre-hearing discussion to resume.

2. The Appellant argues that there “exists case law, arbitral decisions, legislation or Rules of the Dispute Resolution Practice Code, which conflict with the decision of the Arbitrator.”

The Appellant, however, also argues that there do not appear to be any prior Commission decisions on what it asserts is a novel, broadly important and unsettled area of law regarding limitation periods and the reasonable interpretation of Rules 69.2(b) and 69.3.

Protecting vulnerable individuals by having their settlements approved by the Court is of broad importance. It is unclear how excluding the Respondent from arbitration, specifically when the Arbitrator found that the Appellant had contributed to the delay, is consistent with this fundamental principle.

3. Considering the wishes of the parties commonly pertains to where the parties jointly request that an appeal from a preliminary or interim arbitration order be accepted. In this case, there is no such joint request.
4. The Appellant argues that it will be prejudiced if this appeal is rejected as it would have no ability to respond to the issues in dispute and, with the passage of time, witnesses and their evidence are unavailable. However, the Arbitrator found that the Appellant presented no evidence of actual prejudice.

The Appellant further argues that it would face disproportionate, unjust and punitive interest and special award claims.

Attavar v. Allstate Insurance Co. of Canada, 2003 CanLII 7430 (ON CA), however, held that the interest provision under the Schedule is not punitive but, rather, designed to compensate insured persons for the time value of money.

A special award is dependent on (1) a finding of an insured’s benefit entitlement, and (2) a finding of the insurer’s unreasonable withholding or delay in paying a benefit. Special awards have a statutory cap based on the combined substantive award and interest components.

In this case, the Appellant states that the only issue in dispute other than interest, legal expenses and a special award is $758.25 for massage and physiotherapy treatment. The Appellant argues that cost-effectiveness mandates that this appeal be addressed prior to arbitration.

I am persuaded that there would be significant prejudice to the Respondent in accepting this appeal when the legal costs of the appeal may well exceed the amounts in dispute. I am not persuaded that accepting this appeal will provide the quickest, most just, least expensive and cost-effective resolution of the issues in dispute. Rather, I am persuaded that accepting this appeal at this time will lead to a disproportionate expenditure of time, effort and expense on an appeal of questionable strength on a preliminary issue.

I am not persuaded that the absence of the Appellant seeking a stay of the Arbitrator’s order mitigates this prejudice.

IV. EXPENSES

If the parties cannot agree on the legal expenses of this present appeal, pursuant to Rule 79.1 of the Code an expense hearing shall be requested within thirty days of this decision. The request shall be accompanied by a Bill of Costs describing the expenses claimed, the services received and the costs, as well as submissions on such entitlement or quantum expense issues as are in dispute.

December 4, 2012

Lawrence Blackman Director’s Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.