Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2012 ONFSCDRS 70

Appeal P12-00003

OFFICE OF THE DIRECTOR OF ARBITRATIONS

BRIJMOHAN RAMRATTAN

Appellant

and

MOTOR VEHICLE ACCIDENT CLAIMS FUND

Respondent

BEFORE:

Delegate Lawrence Blackman

REPRESENTATIVES:

Mr. Maurice Benzaquen for the Appellant, Mr. Brijmohan Ramrattan

Mr. Robert W. Kerkmann for the Respondent, Motor Vehicle Accident Claims Fund

HEARING DATE:

By written submissions received by April 4, 2012

PRELIMINARY APPEAL ORDER

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

This appeal, from a preliminary arbitration motion order that does not finally decide the issues in dispute, is rejected pursuant to Rule 51.2(c) of the Dispute Resolution Practice Code (Fourth Edition, Updated – August 2011).
If the parties are unable to agree on the legal expenses of this 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.

April 27, 2012

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. BACKGROUND AND NATURE OF THE APPEAL

The Appellant, Mr. Brijmohan Ramrattan, was injured in an October 28, 2006 hit and run motor vehicle accident. As a result, he sought statutory accident benefits under the Schedule¹ from the Respondent, the Motor Vehicle Accident Claims Fund. A dispute arose as to the Appellant’s entitlement to housekeeping and attendant care benefits. The arbitration pre-hearing discussion, held July 8, 2010, set a seven-day hearing for February 2011.

At the start of the arbitration hearing, the Appellant brought a motion that the Respondent’s counsel and his law firm be removed as solicitors of record due to the conflict of interest in counsel representing the Respondent both in this first-party arbitration and in a related, third-party court tort action.

The February 9, 2012 decision of Arbitrator Miller (the “Arbitrator”) held that counsel was entitled to remain as solicitors of record for the Respondent.

The Appellant requests that discretion be exercised under Rule 50.2 of the Dispute Resolution Practice Code (Fourth Edition – Updated August 2011) (the “Code”) to accept at this time his appeal from the Arbitrator’s decision and to stay the Arbitrator’s order.

The Appellant ultimately seeks an appellate order removing the Respondent’s counsel as solicitor of record and that the Respondent’s new counsel not utilize any information obtained contrary to the Schedule, the Code, the Rules of Civil Procedure, General Bulletin 184 of the Insurance Bureau of Canada (“IBC”) and the Personal Information Protection and Electronic Documents Act, SC 2000, c. 5 (“PIPEDA”).

The Appellant also seeks his legal expenses at first instance and on appeal.

II. SUBMISSIONS AND ANALYSIS

The parties provided written submissions on whether this appeal should be accepted and, if so, whether the requested stay should be granted. Neither party responded to my inquiry whether additional oral submissions were reasonably necessary. Exercising the discretion provided by Rule 56.5 of the Code, I am persuaded, on the basis of justice, expeditiousness and cost-effectiveness, to determine these preliminary appeal issues on the basis of the submissions filed.

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.

Delegate Makepeace, in Allstate Insurance Company of Canada and Torok, (FSCO P01-00021, May 29, 2001), held that the purpose of Rule 50.2 of the Code is 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.

Allstate Insurance Company of Canada and Al-Obaidi, (FSCO P99-00009, May 2, 2000), held that while the general thrust of the Code is to defer appeals from preliminary or interim orders until the arbitration is over, appeals have been allowed to proceed where it makes sense to do so before the parties are put to the expense and time of a full arbitration hearing. This case-by-case determination also includes considerations such as the importance of the issue, the parties’ preference, whether the decision departed from prior case law and whether hearing the appeal would significantly save time and expense or streamline the process in some way.

Subsection 283(6) of the Insurance Act, R.S.O. 1990, c. I.8, provides that an appeal does not stay the order of an arbitrator, unless decided otherwise. In Guardian Insurance Company of Canada and Armstrong, (FSCO P00-00037, July 20, 2000), Delegate McMahon adopted the following criteria in determining whether a stay should be granted:

the bona fides of the appeal;
the substance of the grounds for appeal; and,
the hardship to the respective parties if the stay is granted or refused.

The Appellant submits that this appeal should be accepted at this time and a stay granted, for the following reasons:

Not staying the arbitrator’s decision and rejecting this appeal will irreparably prejudice the Appellant as the arbitration will proceed with “ill-gotten information” breaching the Appellant’s privacy rights under “PIPEDA, statute, common law, FSCO case law and guidelines and Insurance Bureau of Canada Bulletins and would bring the administration of justice into disrepute.”
This appeal is substantive and bona fide, addressing long established statute and case law. The IBC’s 1997 General Bulletin No. 184 states: “insurers agree, as a matter of corporate policy, that they shall not gather medical information … without the written consent of the patient, subject only to any right to such information under law or rules of practice.”

The Bulletin provides that a wall should be set up “so that information … regarding the accident benefits claim does not become available to the tort adjuster, unless the insured so authorizes.” The Appellant submits that the Arbitrator erred in ruling that the Bulletin did not disallow an insurer from retaining one counsel to defend both a claim for accident benefits and a tort claim.

The Respondent’s counsel is in an irreparable conflict of interest under Rule 2 of the Law Society’s Rules of Professional Conduct as he is in possession of prohibited information. As held in Caughey v. Gareau, 2003 CarswellOnt 3690, “the possibility of a conflict of interest and the appearance of impropriety alone can be sufficient to remove a solicitor of record unless positive steps are taken to avoid the possible conflict.”

Thus, as stated by Ferrier J. at first instance in Klingbeil (Litigation guardian of) v. Worthington Trucking Inc., 1997 CarswellOnt 4870:

Any insurer … for both the no-fault benefits and for a tort claim, should follow the policy expressed in general bulletin 184 of the Insurance Bureau of Canada. Further, if solicitors are to be retained, separate firms of solicitors should be retained to deal with the respective claims. Only with the consent of the claimant of the no-fault benefits could an insurer transfer information from one file to the other, and only with the consent of the claimant could one firm of solicitors be retained to act on both matters.

Delegate Draper, in McLennon and Pilot Insurance Company, (FSCO P98-00055, April 28, 1999), citing Ferrier J., stated that the “concern underlying the IBC memorandum and the Klingbeil decision is the confidentiality of medical records provided to an insurer for a particular purpose. An insurer should not be advantaged by the fact that it is responding to two claims. Rather, it should play by the rules applicable to each claim.” The Appellant notes, in part, the Commission’s different scope of document exchange from the courts, and the Commission’s approach to tort surveillance, transcripts and defence medical reports in its proceedings.

Having considered both parties’ written submissions, I exercise my discretion under Rule 50.2 of the Code to reject this appeal from a preliminary order, for the following reasons:

The Appellant submits that he has already suffered irreparable harm as the tort insurer and the accident benefit insurer have become privy to his private information without his consent. This harm, he argues, can be minimized by removing the present counsel and ordering that the Respondent cannot, either as first-party or third-party insurer, utilize in any proceeding any information obtained through this breach, and by further sanctioning the Respondent from repeating this conduct in the future.

This Commission obviously has no authority to control the court tort action.

Nonetheless, there is no indication that any similar motion has been brought in the court proceeding. Rather, the Respondent submits that the Appellant was content to proceed with examinations for discovery in the tort action with the Respondent’s counsel.

Rule 2.04(1) of the Rules of Professional Conduct defines a “conflict of interest” or “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.”

The Arbitrator held that there was no conflict of interest under Rule 2 as the Appellant was not the client of the Respondent’s counsel. The Appellant does not dispute the Arbitrator’s finding that the Respondent’s counsel had only one client, the Respondent. Rather, the thrust of the Appellant’s argument is that there is a conflict between the duty of utmost good faith of the Respondent’s counsel towards the first-party applicant in this proceeding versus counsel’s adversarial role in the third-party court process.

The Appellant argues that I should follow the first-level decision in Klingbeil. However, that decision was overturned by the Divisional Court in Klingbeil (Litigation guardian of) v. Worthington Trucking Inc. 1999 CanLII 19927 (ON CTGD), [1999] O.J. No. 867. The Divisional Court had before it the IBC’s General Bulletin 184. Nonetheless, the Court unanimously held that there was no requirement that an insurer retain separate counsel to represent its interests in a statutory no-fault accident benefits claim and those relating to the defence of a tort claim where the plaintiff claims statutory no-fault benefits from the defendant’s insurer and the insurer is or may be obliged under the Insurance Act to act in both capacities.

The Court agreed with Matlow J. in Stratton v. Senger [1996] O.J. No. 4774, that there was no “appearance of impropriety” or “possibility of unfairness” in permitting the same law firm to represent the insurer in both capacities in these situations.

The Appellant submits that the Divisional Court decision in Klingbeil was wrongly decided. He argues that it sets an unsustainable precedent allowing an insurer facing both tort and no-fault claims to bypass all statutory, common law and institutional barriers requiring that a wall be maintained between the two files, by simply allowing the insurer to retain the same counsel in both proceedings.

Commission adjudicators are bound by the Divisional Court. The appeal in McLennon appears to have been decided without the Delegate having the benefit of the Divisional Court decision. The most expeditious means to address whether the Divisional Court erred in law would be for this appeal from a preliminary arbitration decision to be presently rejected and an application for judicial review immediately commenced.

The specific relief sought by the Appellant in this appeal is that the Respondent’s counsel be removed as solicitor of record. His submissions, however, address broader concerns as to the use of information by any new counsel and by the Respondent itself.

The hearing arbitrator has the responsibility of determining under section 15 of the Statutory Powers Procedure Act, R.S.O. 1990, c. S. 22, as to what evidence may be admitted at a hearing. Under subsection 23(1), the hearing arbitrator may make such orders or give such directions as is proper to prevent abuse of the process.

Internal appeals at the Commission are restricted to errors of law. Even if the Appellant were successful in this appeal, the only thing that would presently change would be the Respondent’s counsel. The Respondent would still be in possession of the same allegedly improper documentation and the question would remain for the hearing arbitrator’s determination whether such information should properly be received as evidence.

The evidence before the Arbitrator, by way of affidavit, was that the Respondent’s counsel served a Statement of Defence in the tort action on November 19, 2008. On May 13, 2009, the Appellant’s present counsel served on the Respondent’s counsel a Notice of Change of Solicitors, becoming the Appellant’s counsel in the tort action.

The Application for Arbitration, prepared by the Appellant’s present counsel, was submitted to the Commission on or about December 22, 2009. The Response to an Application for Arbitration, signed by the Respondent’s counsel, was sent to the Appellant’s counsel on January 23, 2010. Accordingly, it is submitted that the Appellant’s counsel has known, or should have known, since January 23, 2010 that the Respondent had the same counsel for both the tort and no-fault actions.

The Appellant does not dispute this evidence.

The Appellant brought his motion on February 15, 2011, at the start of the arbitration hearing. The almost inevitable result was that the hearing was adjourned. This is notwithstanding that the motion was brought more than seven months after the hearing date was set at the July 8, 2010 pre-hearing discussion, and more than a year after the evidence indicates the Appellant knew or should have known the Respondent had the same counsel in both proceedings.

The Respondent states that the parties have agreed to a continuation of the arbitration hearing for October 22, 2012, for two weeks. Parties need a realistic period in advance of a hearing to know whether it is going ahead, especially if it is two weeks in duration. If this appeal is accepted, regardless of the result and even if judicial review is not sought (which would seem most unlikely were I not to follow the Divisional Court), it is highly questionable the parties would be able to proceed in the fall, leading to further delay of a hearing of issues that arose as far back as October 2006.

Accordingly, on the basis of (1) the apparent limited strength of the appeal, specifically in the face of the appellate decision in Klingbeil, (2) the Appellant’s underlying concerns as to the admissibility of evidence requiring determination at arbitration, (3) the bona fides of the appeal being challenged, in part, based on the absence of a similar court motion, and (4) the delay and extra expense in hearing this appeal that will not serve to streamline this process, I exercise my discretion under Rule 50.2 of the Code to reject this appeal from a preliminary order.

Having not accepted this appeal from a preliminary decision, the question of the requested stay of the Arbitrator’s decision is moot. Regardless, a stay, if granted, would serve no purpose, as it would, by itself, neither remove nor restrict Respondent’s counsel.

III. EXPENSES

If the parties are unable to agree on the legal expenses of this request for leave to appeal, pursuant to Rule 79 of the Code, an expense hearing shall be requested within thirty days of the date 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 entitlement to and/or the quantum of such legal expenses, as are in dispute.

The parties are referred to arbitration regarding any issue as to the determination of legal expenses at first instance.