Javan Kiel Markus Riley v. Pafco Insurance Company, 2013 ONFSCDRS 69

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2013 ONFSCDRS 69

FSCO A12-000043

BETWEEN:

JAVAN KIEL MARKUS RILEY

Applicant

and

PAFCO INSURANCE COMPANY

Insurer

REASONS FOR DECISION

Before: Arbitrator John Wilson

Heard: January 25, 2013, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances: No-one appearing for Mr. Riley

Julie N. Singh for Pafco Insurance Company

Francesco Blasi for Lofranco Scarola Wentzel Legal Services

Issues:

The Applicant, Javan Kiel Markus Riley, claimed to have been injured in a motor vehicle accident on October 14, 2010. He applied for and received statutory accident benefits from Pafco Insurance Company (“Pafco”), payable under the Schedule.¹ The parties were unable to resolve their accident benefit disputes through mediation, and Mr. Riley applied for 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 Mr. Blasi be released as representative of record in this matter?
Should this arbitration be dismissed?
If so should Mr. Blasi and/or Mr. Riley be required to pay Pafco’s expenses in this matter?

Result:

Mr. Blasi may withdraw as representative.
The arbitration is dismissed.
Mr. Riley shall pay Pafco’s expenses in this matter which are fixed at $2,272.53 payable forthwith, inclusive of HST.

EVIDENCE AND ANALYSIS:

This matter proceeded to a pre-hearing adjournment request before Arbitrator Nastasi on August 23, 2012.

Prior to the adjournment request, Mr. Blasi requested in writing that the arbitration be withdrawn on a “without costs basis.” Mr. Blasi averted to difficulties in reaching his client on August 13, 2012, and stated that “we have lost all contact with the client since July 19, 2012.”

Pafco refused to consent to the withdrawal since they intended to pursue their expenses in defending the claim.

Arbitrator Nastasi then adjourned the pre-hearing to October 24, 2012 to allow Mr. Blasi to bring a motion to withdraw as representative of record.

The motion was heard by teleconference on October 24, 2012. Mr. Blasi, representative of record, had moved to be removed from the record due to the breakdown of the relationship between the client and his representative and the failure of Mr. Riley to respond to any communications from Mr. Blasi.

I note that although Mr. Riley was provided with notice of this pre-hearing and motion hearing, and that an attempt was made to contact him again at the outset of the hearing, he remained unavailable to participate.

Mr. Blasi submitted his own affidavit in support of this motion, which he intended to argue as well. As may be expected, appearing on one’s own motion supported by one’s own affidavit evidence in a controverted matter is problematic. Indeed, it necessitated a further adjournment. For the time being, Mr. Blasi remained on the record.

Ms. Singh, on behalf of Pafco, stated that her client would oppose the removal of Mr. Blasi as representative, at this point, since it was unclear from the correspondence attached to the affidavit and from the absence of Mr. Riley’s signature on the Application of Arbitration, whether Mr. Blasi or his firm ever had proper instructions from Mr. Riley to bring this arbitration.

Ms. Singh further advised that, if such was the case, her client would likely request that the representative of record be found liable for its expenses in this arbitration.

Given that Mr. Blasi’s removal as representative was not going to happen on a consent basis, I ruled that the affidavit submitted in support of the motion by Mr. Blasi could not be considered.

Either Mr. Blasi must find someone else to appear for him on this motion, or submit a different supporting affidavit authored by a different individual with knowledge of the circumstances relied upon by Mr. Blasi. Consequently, I adjourned this motion.

With the possibility of the issue arising of an expense claim against Mr. Blasi personally, it was important to give Pafco time to decide whether or not to proceed on its claim for expenses, and Mr. Blasi sufficient time to address the affidavit issue and, if necessary, respond to the questions raised by the Insurer as to Mr. Blasi’s authority to proceed in this matter.

While the Insurer’s allegation that Mr. Blasi may have lacked authority to bring this arbitration in the first place potentially raised costs consequences for Mr. Blasi, it also goes without saying that a finding of lack of authority would also entail the dismissal of this arbitration.

Pafco advised that it would likely bring a dismissal motion, with or without a claim for expenses payable by the representative.

I ordered that both the withdrawal motion and the dismissal motion be heard together on January 18, 2013.

Mr. Riley’s continued failure to respond to the notices directed at him and to participate in the hearing process remained a concern. Indeed, I wrote to all parties including Mr. Riley:

Mr. Riley should be warned that a continued failure to respond or participate in his arbitration could result in a dismissal of his claim and, potentially, an expense award against him. This is a serious matter. I would urge him to contact his representative if he intends to proceed with his claim.

Ultimately the date of the motion hearing was put over until January 25, 2013, one week later.

Mr. Riley did not appear at this date either, nor did he write to, or call the Commission, his representative or the Insurer.

Mr. Blasi appeared on his motion to withdraw as representative. His evidence this time contained in an affidavit from Sophia Domenichiello of his office, was of a continuing attempt to contact Mr. Riley dating from April 26, 2011 to September 2012. The documentation included correspondence with Centurion Process Servers Inc. which indicated that Mr. Riley was personally handed the correspondence from Mr. Blasi’s firm by the process server on August 17, 2012.

No-one challenged the information contained in the affidavit and I accept that Mr. Riley was informed in a timely fashion of Mr. Blasi’s intention to be removed from the record.

What the affidavit materials did not address was the question raised by Pafco as to whether Mr. Riley had ever formally retained the Lofranco Scarolo Wentzel Legal Services law firm and Mr. Blasi. This question, of course, stemmed from the lack of an applicant’s signature on the Application for Arbitration and was reinforced by the tenor of the letters filed with the affidavit, not to mention the attempt to withdraw the arbitration at a time when Mr. Blasi’s firm had no contact and hence no instructions from him.

Mr. Blasi was adamant that he had a written retainer from Mr. Riley, but that somehow it had been missed when assembling the documents for the motion. Given the potentially serious consequence to Mr. Blasi of a finding that he initiated this arbitration without authorization, I gave Mr. Blasi more time to produce the retainer before making any final decision on the nature of his involvement in this arbitration.

In fact, Mr. Blasi was ultimately able to produce the document, dated October 15, 2010, which suggested that he had been retained as a representative and, consequently, was not without the authority to begin the arbitration process.

This final piece of the puzzle dealt with two out of the three issues to be decided. If Mr. Blasi was properly retained, then he could just as properly sever his links with the client, provided only that the procedures outlined in Rule 9.7 of the Dispute Resolution Practice Code were followed. I find that the provisions of Rule 9.7 were indeed met and it is appropriate to allow Mr. Blasi’s withdrawal.

Since Pafco’s claim for expenses personally against Mr. Blasi turned on a supposed breach of the warranty of authority, that claim too fell away with the evidence of a retainer.

What remains is the issue of whether the arbitration should be dismissed at this time and, if so, whether an order for expenses should be made, as claimed by Pafco.

In essence, Pafco maintains that Mr. Riley, as demonstrated by his repeated non-appearance and failure to reply to correspondence, “has no intention of pursuing this arbitration.”

The Statutory Powers Procedure Act and the Dispute Resolution Practice Code provide specifically for the dismissal of arbitrations without the necessity of a hearing of the merits. At least three potential bases for an early decision dismissing an arbitration are found in the SPPA, a law which applies to all arbitrations. Section 4.6 of the SPPA contains the following provisions:

4.6(1) Subject to subsections (5) and (6), a tribunal may dismiss a proceeding without a hearing if,

(a) the proceeding is frivolous, vexatious or is commenced in bad faith;

(b) the proceeding relates to matters that are outside the jurisdiction of the tribunal; or

Section 4.6(2) provides some preconditions for a dismissal on this basis:

(2) Before dismissing a proceeding under this section, a tribunal shall give notice of its intention to dismiss the proceeding to,

(a) parties to the proceeding if the proceeding is being dismissed for reasons referred to in clause (1)(b); or

(b) the party who commences the proceeding if the proceeding is being dismissed for any other reason.

(3) The notice of intention to dismiss a proceeding shall set out the reasons for the dismissal and inform the parties of their right to make written submissions to the tribunal with respect to the dismissal within the time specified in the notice.

The SPPA also provides at section 1.7(1):

Effect of non-attendance at hearing after due notice

7(1) Where notice of an oral hearing has been given to a party to a proceeding in accordance with this Act and the party does not attend at the hearing, the tribunal may proceed in the absence of the party and the party is not entitled to any further notice in the proceeding. R.S.O. 1990, c. S.22, s. 7; 1994, c. 27, s. 56(14).

In this matter, I am satisfied that Mr. Riley did not attend two motion hearings, notwithstanding the fact that he was duly served with the notices. He was also advised by letter from the arbitrator that his claims could be dismissed if he did not participate in the process. As well, the dismissal motion materials served on him by Pafco were clear that the dismissal of his claims was being requested and that furthermore there were claims for costs or expenses being made against him as a result of his failure to participate in the arbitration process.

It is also important to note as well that pursuant to section 279(5) of the Insurance Act, all parties are expected to attend and directly participate in all matters before an arbitrator unless specifically excused by leave of an arbitrator.

The references in section 4.6(1)(a) of the SPPA to “frivolous” and “vexatious” matters are not just attempts to provide colour to drab legislation. “Vexatious” in particular is a term of art used in law for centuries to describe specific conduct.² It clearly includes cases where no-one can reasonably expect a positive outcome.³

In this matter, Mr. Riley cannot expect to succeed if he neither participates directly nor retains and instructs counsel. He has the burden of pursuing and making his case, a burden which he appears to be taking lightly to say the least. As circumstances stand now, I accept that his claims have no possibility of success should they proceed to a substantive hearing.

Riddell J.A. in R. ex rel Tolfree v. Clark⁴ et al. wisely commented:

The power to strike out proceedings should be exercised with great care and reluctance. Proceedings should not be arrested and a claim for relief determined without trial, except in cases where the Court is well satisfied that a continuation of them would be an abuse of procedure.

Given the track record of Mr. Riley to date, it would be an absurdity and indeed an abuse of process to continue to schedule this matter, to send out notices of pre-hearings and hearings and to have him continually not attend. Every further stage of this process not only involves Mr. Riley, but also Pafco, which must dutifully retain and instruct counsel and appear at FSCO as requested. In my mind, to allow Mr. Riley to drag Pafco through further proceedings would be simply vexatious.

Lord Esher observed that “The court has an inherent authority and duty to protect a party to an action against frivolous and vexatious proceedings.”⁵

Lord Esher’s comments apply to arbitrators as well, especially in a system that is, in the words of Rule 1.1 of the Dispute Resolution Practice Code, supposed to “produce the most just, quickest and least expensive resolution of the dispute.” The insurer has a right to closure, just as an insured does. Consequently, I find that it is appropriate to finally dismiss this arbitration.

EXPENSES:

Pafco filed its Bill of Costs in this manner. It also sent copies to Mr. Riley.

While initially it claimed its expenses against Mr. Blasi, pursuant to section 282(11.1) of the Insurance Act, on the basis that he lacked the authority to begin this arbitration, I have already found that Mr. Riley had executed a proper retainer that authorized Mr. Blasi and his firm to begin the arbitration process.

However, Pafco also claimed its expenses against Mr. Riley who, as a named party, is primarily exposed to an expense order.

Pafco was successful in this arbitration. I have found that the repeated failure of Mr. Riley to appear on pre-hearings and motions, without withdrawing his claim, was vexatious behaviour. Each of these elements would justify an expense order.

Consequently, I find that Mr. Riley should be required to pay Pafco’s reasonable expenses in this matter.

Pafo claimed some $2,272.53 in costs or expenses. This figure is made up of some 22.5 hours of Ms. Singh’s time throughout the course of the arbitration. The rate of remuneration claimed is 101.01 per hour which appears to approximate the experience rating for someone in her year of call. It is clear, however, that Pafco is not asking for full indemnity rates.

Since Mr. Riley did not deign to appear to object to the expenses claimed, despite being properly served with the Bill of Costs and notice of the hearing, I do not propose to enter into a detailed examination of the amounts claimed.

While the hours worked may be on the high side for what turned out to be an unopposed motion, I find that they are still within an acceptable range, given the number of appearances and re-appearances necessitated by Mr. Riley’s failure to participate in the arbitration. Therefore, I order that Mr. Riley pay the full amount claimed by Pafco as expenses.

June 3, 2013

John Wilson

Arbitrator

Date