Neutral Citation: 2014 ONFSCDRS 108

FSCO A11-004437, A11-004496 and A11-004497

BETWEEN:

LOUIS-JACQUES MICHAUD, GUITEAU SAINTUME and ANDERSON SEGUIN

Applicants

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION ON A MOTION TO DISMISS

Before: Arbitrator John Wilson

Heard: January 31, 2014, with final deadline for further submissions May 30, 2014

Appearances: Sophia Souffront for Messrs. Michaud, Saintume and Seguin Paul Omeziri and Darrell March for State Farm Mutual Automobile Insurance Company

Issues:

The Applicants, Messrs. Michaud, Saintume and Seguin, claimed to have been injured in a motor vehicle accident on June 4, 2010. They each applied for accident benefits from State Farm Mutual Automobile Insurance Company (“State Farm”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and they applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

A motion was heard on Friday, January 31, 2014, at the offices of the Financial Services Commission. The purpose of the motion, brought by State Farm, was to enforce each insured’s obligation to attend and participate in an examination under oath, and to obtain orders for the production of certain documents that it had requested from the various Applicants in this arbitration.

The motion decision in this matter, which was issued first by letter and then by full reasons on March 5, 2014, led to the following findings:

Messrs. Michaud, Saintume and Seguin failed to make themselves available for an examination under oath.
All currently scheduled hearing dates in these matters are adjourned sine die to allow the Applicants to attend their respective examinations under oath.
Counsel for the Applicants shall provide correct and up-to-date address and contact information for each Applicant so that State Farm may make appropriate arrangements for the completion of the examinations under oath.
The benefits related to the examinations under oath are not payable after January 15, 2013 and ongoing, pending completion of the examinations under oath.
I will reserve on the dismissal of the arbitration for a period of ninety days from the date of the delivery of these reasons. Should I be advised of the completion of the examination in each case, or an agreement satisfactory to both parties on the issue within that ninety day period, I will reject the motion to dismiss this arbitration. Otherwise, I will proceed to rule on it based on the submissions and documents that were received in the context of this motion hearing.
State Farm requested an order for the production of certain documents. Should this matter proceed after the ninety day period mentioned above, I will address the productions requested at that time.

Since that time, there has been no response either collectively or individually from Messrs. Michaud, Saintume and Seguin. Correspondence has been received from their counsel advising that they intend to proceed to have themselves removed from the record in this matter. There is absolutely no evidence that Messrs. Michaud, Saintume and Seguin have made any attempt to purge their failure to participate in the examinations under oath mandated by section 33(1) of the Schedule.

Consequently, I will now deal with the issue I reserved on; namely whether these three arbitration applications should be dismissed on the basis of the ongoing refusal to participate in examinations under oath, and their conduct in this arbitration relating to the ongoing failure to participate in the examinations under oath.

EVIDENCE AND ANALYSIS:

As mentioned in the first decision in this matter, State Farm had requested the dismissal of this arbitration on the basis of the Applicants’ continued refusal to participate in examinations under oath as required by the Schedule.

Briefly, an examination under oath is provided for in section 33(2) of the Schedule:

(2) If requested by the insurer, an applicant shall submit to an examination under oath, but is not required,

(a) to submit to more than one examination under oath in respect of matters relating to the same accident; or

(b) to submit to an examination under oath during a period when the person is incapable of being examined under oath because of his or her physical, mental or psychological condition.

While there is some resemblance to discoveries in a court action, albeit one-sided, the examination under oath is clearly intended to arise from the adjustment of an insurance claim and is not dependent on litigation for its justification. Still, like a failure to attend court discoveries, there are also consequences for non-attendance at an examination under oath.

In this case, the named penalty is the suspension of benefits pursuant to section 33(6) which provides that : “(T)he insurer is not liable to pay a benefit in respect of any period during which the insured person fails to comply with subsection (1) or (2).”

Following the March 5, 2014 decision there are no benefits payable for the period when the Applicants were in default of their obligation to attend the examinations. As well, given the lack of evidence and the delayed productions, it is not at all clear that there is a viable claim for the remaining benefits prior to the commencement of that default.

In the earlier decision I found that Messrs. Michaud, Saintume and Seguin failed to make themselves available for an examination under oath and that the benefits related to the examinations under oath were not payable after January 15, 2013 and ongoing, pending completion of the examinations under oath

As discussed in the earlier decision, there was much back and forth between counsel for the parties over the attendance at the examinations. These discussions culminated at the pre-hearing on November 8, 2012 in the setting of a preliminary issue hearing on the issue of whether the matters could proceed in the absence of attendance at the examinations under oath.

A hearing date was set for January 15, 2013. Just prior to the hearing, counsel for the Applicants contacted counsel for State Farm and advised that the Applicants would attend the examinations under oath.

Counsel for State Farm then wrote the Commission to advise that the hearing would no longer be required since the claimants would be attending the examinations under oath.

This letter was copied to counsel for the claimants.

In the circumstances of this case, it was evident that counsel for the Applicants undertook to produce the three Applicants rather than to proceed with a potentially expensive and time-consuming hearing on the issue, whose outcome would likely not be favourable.

Although for jurisdictional reasons I did not specifically order the individual Applicants to attend at the examinations under oath, I did find that each had an ongoing obligation to attend at such an examination and that each of the named Applicants was in breach of that obligation. I also ordered that both FSCO and the Insurer be provided with current and up to date contact information for each of the Applicants.

To date, nothing has been heard from any of the Applicants and no-one has attended for an examination under oath. Nor has any updated contact information been provided by either counsel or the individual Applicants.

As noted, I reserved on the issue of dismissal (motion brought concurrently by State Farm) to give the parties an opportunity to rectify their collective omission before deciding that issue.

Dismissal of an arbitration is not the inevitable result of a simple failure to attend an examination under oath. Rather, the Schedule provides for a suspension of relevant benefits for the period that an insured remains in default of his or her obligation.

However, this is more than just a simple failure to attend an examination under oath. The Insurer requested an examination under oath of all of the Applicants who had claimed benefits as the result of the same alleged motor vehicle accident. State Farm had early on indicated that it needed clarification of the factual matrix of the “accident” in order to decide whether or not it was obliged to furnish the claimed accident benefits.

An “accident”, as defined in the Schedule, is a pre-condition for any benefit entitlement under the accident benefit scheme. Clearly there were some doubts as to whether the situation of the Applicants met that definition. If the incident precipitating these claims was not an “accident”, then State Farm would have no obligation to respond to the claims for accident benefits so arising.

Under the circumstances, it was reasonable to request an examination under oath. I have already made the finding that State Farm was entitled to the Applicants’ compliance. I have already found that the Insurer’s obligation to pay benefits is suspended for the period of non-compliance. Those determinations seem to have had no effect.

The Applicants continue to advance their claims for benefits at arbitration. That is to say, that they have taken no steps to withdraw their Applications for Arbitration, even though the Insurer’s obligation to pay any further benefits to which they may be otherwise entitled is suspended.

The Insurer’s motion to dismiss addresses this stage of the arbitration, and asks whether, given this ongoing non-compliance, the Applications for Arbitration should be dismissed. In essence, State Farm proposes that the ongoing failure to engage in the claims process, while at the same time advancing the claims in arbitration could be characterized as an abuse of the arbitration process.

Separately from the powers granted under the Insurance Act to conduct arbitrations, section 23 of the Statutory Powers Procedure Act² grants adjudicators including arbitrators a wide power to control the process and prevent an abuse of that process. Penalties for abuse of process, such as dismissal or punitive costs are separate and supplemental to any sanctions contained in the SABS, since they deal with the conduct of parties in the context of an arbitration.

Firstly, there is the ongoing failure of the parties to attend the examination under oath, notwithstanding both an undertaking to produce the Applicants and a finding that the Applicants were required to attend and participate in an examination under oath.

Secondly, there is the failure of the Applicants or their counsel to provide an updated contact for each of the Applicants as was ordered.

Thirdly, there is the breach of an undertaking. The main principles relating to undertakings are summarized by J.W. Quinn J. as follows in Towne et al. v. Miller et al.:

An undertaking is an unequivocal promise to perform a certain act. I do not see any material difference between, for example, an undertaking given in the context of a real estate transaction (when lawyers undertake to do, or obtain, something necessary to complete the transaction) and an undertaking given on an examination for discovery. Each involves a promise. In an examination for discovery, the undertaking may be given by the litigant being examined or it may come from his or her counsel. Both are equally binding.³

There is also a possible inference to be drawn from the frustration of the examinations; namely that the Applicants have no interest in disclosing the circumstances of the alleged motor vehicle accident which underpins their claims and may well be intentionally frustrating the efforts of State Farm to get to the bottom of that “accident.”

The conscious avoidance of the examination under oath strongly suggests that any information that it would reveal would not favour the Applicants’ position that they have a valid claim for accident benefits.

Statutory accident benefit arbitrations take place in a no-fault, insured-friendly⁴ forum to deal with benefit entitlement in an expedited manner. Indeed, the process is meant to produce the “most just, quickest and least expensive resolution” of the dispute.⁵

However, no-fault and consumer-friendly do not translate into a process where the insured applicant has no responsibilities. As with any litigation, each party, whether insured or insurer, is expected to abide by the rules for that proceeding. They are expected to obey orders and to fulfill undertakings given in the course of the proceeding. They are expected to make timely and full disclosure of information and documents necessary to the ultimate decision of the arbitrator.

The Applicants chose this forum and put State Farm to the trouble of defending their claims. It is inappropriate that they can at the same time prevent State Farm from properly evaluating and defending itself from those same claims simply by refusing to take part in a necessary part of the claims process, the examination under oath.

The accident took place some four years ago on June 4, 2010. The first requests for information were made early on in the claims process. Now in June of 2014, even after having been given further time to comply, they have chosen not to do so. They cannot at the same time continue to advance a claim for benefits and resist participating in a key element of that claims process.

It should be noted again that the Applicants collectively, through their counsel specifically agreed to attend and participate in the examinations under oath. Consequently, the Applicants are in breach of an undertaking in failing to attend.

This is not a single act or refusal but conduct that predates the arbitration pre-hearing. It is a continuous, and ongoing attempt to distort the arbitration process, and cumulatively, it can be found to be an abuse of that process.

There is a close interrelationship between abuse of process and vexatious behavior in the context of litigation.

The Practice Code at Rule 68 deals with the dismissal of matters that are found to be “frivolous and vexatious”:

Dismissal of proceeding without hearing

68.1 Subject to Rule 68.2, an adjudicator may dismiss a proceeding without a hearing where the proceeding is frivolous, vexatious or is commenced in bad faith.

68.2 Before dismissing a proceeding under this Rule, an adjudicator shall deliver written notice to all parties of the intention to dismiss the proceeding on the grounds set out in Rule 68.1.

Vexatious proceedings do not need to have been so ab initio but may become vexatious through their conduct. As Cameron, J. remarked: “the categories of vexatious proceedings are never closed and must be determined by an objective standard.”⁶ He further noted that: “(A)n action that initially had some merit might be rendered vexatious through subsequent conduct.”

Although in this matter there has not been a final arbitration hearing, I am comfortable that it is in the spirit of the dispute resolution system to accept the Insurer’s dismissal motion and dismiss the Applicants’ arbitration claims at this stage in the proceedings, on the basis of a continuance in the face of an ongoing refusal to fulfill the undertaking to appear.

I find that the words of Lord Robert Reed of the Supreme Court of the United Kingdom in a speech give October 26, 2012 are particularly relevant to this matter:

Where a litigant has demonstrated that his object is to prevent a fair trial, he is merely purporting to invoke his right of access to the court: his real object is not to have a fair trial at all. It seems to me that a court which declines to entertain such a litigant’s case is merely drawing a reasonable conclusion from his refusal to accept the rules of the institution whose processes he is seeking to abuse⁷

State Farm brought this motion to dismiss on notice to all the parties and their counsel. On a motion to dismiss it is trite law that while the burden of proof is on the moving party, both parties must put their best foot forward.

While counsel for the Applicants at the hearing spoke to the validity of the requirement to attend, no evidence was proffered to displace any inference that might arise from the failure to attend.

There was no evidence of the bona fides of the Applicants in continuing with this arbitration in the face of the ongoing non-attendance, nor any explanation proffered for their non-attendance.

Lord Blackburn observed in Metropolitan Bank Ltd.:

(T)he Court had inherently in its power the right to see that its process was not abused by a proceeding without reasonable grounds, so as to be vexatious and harassing.⁸

As noted, the Applicants have provided no “reasonable grounds” for their ongoing non-attendance and breach of undertakings.

In Dickie v. Dickie⁹, the Supreme Court of Canada affirmed the general rule that a court will not hear a litigant who has wilfully breached a court order until the litigant has cured the breach. Likewise, a wilful failure to follow through on an undertaking, one that was given in the context of litigation and to forestall a further hearing, engages the power of a tribunal to prevent the misuse of its procedure. It would be manifestly unfair to a party to the litigation and could be said to bring the administration of justice into disrepute. ¹⁰

Since maintaining a vexatious proceeding amounts to an abuse of process, I also have jurisdiction to fashion an appropriate remedy to address such abuse, including dismissal.

Having regard to the spirit of Rule 1.1 of the Practice Code that promotes a process that is “most just, quickest and least expensive”, I find that the continuation of this arbitration would run against the spirit of the process. The Insurer would be irrevocably prejudiced by any continuation of the arbitration process beyond this point due to the wilful failure of the Applicants to provide answers to the questions raised by the Insurer as to the foundations of this accident benefit claim, particularly the circumstances of the “accident.”

Consequently, the claims of Messrs. Michaud, Saintume and Seguin against State Farm are dismissed.

EXPENSES:

I would leave the issue of expenses to the parties to resolve. If this is not possible then I may be spoken to on that issue. In that case, the party claiming expenses shall serve and file a brief costs summary together with submissions of no more than three pages indicating why and by whom an expense order shall be payable no later than 30 days from the date of this decision. Any responding submissions shall be served and filed within a further seven days.

June 27, 2014

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 claims of Messrs. Louis-Jacques Michaud, Guiteau Saintume and Anderson Seguin against State Farm are dismissed.
Should the parties be unable to agree on expenses, I may be spoken to on that issue. The party claiming expenses shall serve and file a brief costs summary together with submissions of no more than three pages indicating why and by whom an expense order shall be payable, within 30 days of this decision. Any responding submissions shall be served and filed within a further seven days.