Court File and Parties
COURT FILE NO.: 553/03
DATE: 20051024
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
LANE, JENNINGS AND MOLLOY JJ.
B E T W E E N:
ROYAL & SUNALLIANCE INSURANCE COMPANY OF CANADA Applicant
- and -
ROMAN VOLFSON, OLGA SHUSTER, YURI SHUSTER AND THE FINANCIAL SERVICES COMMISSION OF ONTARIO Respondents
Michael Hucklack, for the Applicant Robert Ipacs, for the Respondent Volfson Robert Conway for the Respondent Financial Services Commission of Ontario
HEARD: May 9, 2005
JENNINGS J.:
[1] This application for judicial review is concerned with the extent to which a tribunal can control its own process in the face of flagrant abuse.
The Application
[2] The applicant seeks judicial review of the decision of the Director’s Delegate of the Financial Services Commission of Ontario dated August 7, 2003, overturning the decision of the Arbitrator. The Arbitrator concluded that she had jurisdiction to add the respondent Volfson as a party to the arbitration before her and to order that he pay to the Shusters and to the applicant their expenses of the arbitration. The Director’s Delegate concluded that the Arbitrator exceeded her powers in making an expense order against someone other than an insured person or an insurer, although she concluded that fairness called for Volfson to pay those expenses.
Background
[3] The Shusters were injured in a motor vehicle accident on April 28, 1999. They applied for mediation with the applicant with respect to their claims for statutory accident benefits and particularly outstanding treatment expenses incurred at Universal Injury Rehabilitation Centre Inc. (“Universal”). Mr. Volfson is the principal of that company. At mediation in March 2000 the Shusters signed a full and final release in exchange for the applicant’s agreement to pay them a total of $13,000.00. $7,000.00 of that went directly to Universal, in return for a written release from Universal acknowledging that the Shusters owed them nothing further.
[4] That notwithstanding, in March 2001 Volfson signed and submitted an application for arbitration. The Shusters were unaware that an arbitration had been commenced until they received a notice of pre-hearing. They contacted Volfson and were advised that the arbitration would be cancelled and they need not attend. At the pre-hearing Volfson sought to withdraw the arbitration. The applicant did not oppose the motion but sought an order for payment of its arbitration expenses under s. 282(11) of the Insurance Act, and its assessment of $3,000.00 paid pursuant to s. 282(11.2) of the Insurance Act in order to permit it to participate in the arbitration. As the claim for costs would be made against the Shusters, the Arbitrator contacted them and learned that they denied signing any authorization for the arbitration to go forward. As a result, the Arbitrator decided there should be a hearing to determine whether the arbitration application was commenced with the Shusters’ authority. The hearing commenced on October 19, 2001. The Arbitrator ruled that Volfson should be treated as a party with the right to counsel, to call and cross-examine witnesses and to be present at all times.
[5] After hearing evidence the Arbitrator concluded that the Shusters had not signed the authorization documents and that their signatures on the documents were forged. The applicant thereupon abandoned its claim for costs against the Shusters but pursued them against Volfson. The Arbitrator concluded that Volfson commenced the arbitration on his own account and was therefore a party to the proceedings. She concluded that she had authority to order Volfson to pay the Shusters’ and Royal’s arbitration expenses noting his “flagrant abuse in this case”. She found however that she did not have authority to order Volfson to pay Royal’s assessment under s. 282(11). Volfson appealed to the Director.
[6] On the appearance before the Director’s Delegate, none of the findings of fact of the Arbitrator were challenged. They can be summarized as follows:
i. the accident benefit claim was settled and the treatment provider paid in full;
ii. the authorization to Volfson to pursue arbitration was forged in that the signatures are not those of the Shusters;
iii. Volfson himself signed the application for arbitration one year post-settlement.
iv. In attempting to be paid twice when he knew that no moneys were owing and that there was no basis for an arbitration Volfson abused the Commission’s process.
[7] The Director’s Delegate agreed with the Arbitrator’s conclusion that Mr. Volfson abused the Commission’s process. The Director’s Delegate had this to say about the conduct of Mr. Volfson:
“Mr. Volfson’s refusal to take responsibility for his conduct is appalling. It was Mr. Volfson who commenced the proceeding by signing the application for arbitration and presenting authorizations bearing signatures that appeared to be those of Olga Shuster and Eurie Shuster. Commission staff took steps to confirm his authority:
“When the Registrar’s office received Mr. Volfson’s applications for arbitration, that office was prompted to make an inquiry of Mr. Volfson. According to a note at the bottom of one of the arbitration applications dated March 26, 2001. “Spoke to Mr. Volfson. He confirmed that the insurance co only after mediating refuses to pay” (Arbitration Decision, page 22).
It was only the Shusters’ vigilance that brought bought the matter to light before the pre-hearing.
Mr. Volfson then moved to withdraw the application. When Royal insisted on reimbursement for its arbitration expenses, Mr. Volfson forced the matter to a hearing, challenging the Shusters’ credibility, and forcing Royal to call a forensic document examiner to prove the authorizations were forged. Mr. Volfson’s pursuit of this matter is inconsistent with his claim that he was the victim of a mistake the Commission should have caught. His conduct does not meet the standard of conduct expected of a representative in accident benefits proceedings.
[8] Notwithstanding her agreement and those comments, the Director’s Delegate held that in ordering Volfson to pay arbitration expenses as a party to the proceedings, the Arbitrator exceeded her authority.
[9] On the hearing before us Volfson’s counsel acknowledged that in his words, “the client’s actions were way out of line.” We were advised that Volfson has apologized for his conduct.
Standard of Review
[10] The standard of review was not addressed by the applicant in its Factum.
[11] The Respondent Volfson concedes in paragraph 9 of his Factum that “…the decision of the Director’s Delegate regarding her power to award costs was a determination of jurisdiction and is as such reviewable on a standard of correctness.”
[12] Mr. Conway, on behalf of the respondent the Financial Services Commission of Ontario, who made submissions solely with respect to the standard of review, submitted that generally, the standard of review on a question of law is correctness. He submits however that the legislature has established a specialized statutory regime to resolve disputes about entitlement to statutory accident benefits. He submits that the standard of review is more towards reasonableness when reviewing a question of law in a decision of the Director or his Delegate.
[13] To determine the standard of review we are required to apply a pragmatic and functional approach in relation to the following four factors:
i. Presence of a Privative Clause
Section 20 of the Insurance Act constitutes a true privative clause. There is no statutory right of appeal from a decision of the Director or his Delegate.
ii. Expertise of the Panel
The question to be determined involves the application of the procedural powers granted to the tribunal by s. 23(1) of the Statutory Powers Procedure Act. It did not involve per se a consideration of the tribunal’s constituent statute. The undoubted expertise of the tribunal in resolving claims to accident benefits is not engaged.
iii. Purpose of the Legislation
The purpose of the legislation is to create a comprehensive scheme for the settlement of claims to accident benefits within the no fault insurance regime providing for mediation in arbitration with a right of appeal to the Director only on a question of law.
iv. Nature of the Question
It is conceded by all parties that the issue before the Director’s Delegate involves a question of law. Indeed there is no appeal to the Director’s Delegate other than on a question of law.
[14] Applying these four factors, in my opinion the appropriate standard of review is one of correctness. Once she had agreed with the Aribtrator that there had been an abuse of the process, the Director’s Delegate had no special expertise relative to that of the court to determine the pure question of law as to the extent of a tribunal’s power to deal with an abuse of process under s. 23(1) of the Statutory Powers Procedure Act. On pure questions of law, particularly outside the constituent statute and involving general principles of law, the standard of review is typically one of correctness and I am not persuaded that we should vary from that standard in this case, notwithstanding the presence of the privative clause.
Analysis
[15] The Director’s Delegate relied on her own earlier decision in D’Angelo v. Wawanesa Insurance Company (F.S.C.O. PO1 – 00010 April 23, 2003) in which she held that adjudicators had no authority to order a representative or other non-party to pay arbitration expenses under s. 282(11) of the Insurance Act. She then acknowledged that D’Angelo differs from this case because Volfson had been made a party. Accordingly she defined the issue in these words:
“… the essential question is whether someone who is neither an insured person nor an insurer can be a party to an arbitration proceeding”
[16] Relying on her decision in Adusei v. Royal Insurance Company of Canada (OIC A-004404, March 3, 1994) she concluded that a party must be someone who has standing to commence an arbitration. She concluded that in making Volfson a party the Arbitrator exceeded her jurisdiction because Adusei held that Volfson was not entitled to commence an arbitration proceeding either in his own name or in that of his company Universal.
[17] With respect I believe she misapplied her earlier decisions.
[18] The question is not whether Volfson could launch an application for arbitration. He had already done so, using a forged authorization for that purpose. Both the Arbitrator and the Director’s Delegate agree that in doing that, armed as he was with the knowledge that no money was owing, he abused the Commission’s process. Indeed I find it difficult to imagine a more egregious example of abuse.
[19] The question is not whether Volfson had standing under the Insurance Act to launch an arbitration. Rather, the question is what remedial power the Tribunal has in the face of Volfson’s abuse of process in wrongfully launching an arbitration.
[20] Section 23(1) of the Statutory Powers Procedure Act, R.S.O. 1990 C.S. 22 provides:
A tribunal may make such orders or give such directions in proceedings before it as it considers proper to prevent abuse of its process.
[21] Surprisingly I could find only two cases that have considered this provision of the statute. The most recent Lifford Wine Agencies Ltd. v. Ontario (Alcohol and Gaming Commission) (2003), 179 O.A.C. 76. (appeal to the Court of Appeal dismissed July 18, 2005) which simply referred to the jurisdiction granted to the Board by s. 23(1) “to control its own process and to prevent an abuse of its process”.
[22] The second decision is J.C. v. Dr. Glenn Cameron (1992), 3 Admin. L.R. (2d) 223 (Ont. Court (General Division)). The case deals with a decision of the Psychiatric Review Board in which the Board revoked the certificate of renewal of involuntary status of J.C., who had been an involuntary patient in mental health centres for many years. The hospital appealed the decision but abandoned the appeal before it was heard and proceeded to have J.C. recommitted as an involuntary patient. J.C. then applied to the Board under s. 31 of the Mental Health Act for a review of his continuing status as an involuntary patient. In the context of that proceeding preliminary questions were raised as to the scope of the review to be conducted by the Board. The Board held that it had jurisdiction to deal with Charter issues and grant Charter relief and as well that s. 23(1) of the Statutory Powers Procedure Act gave a broad discretion to fashion appropriate remedies to control its own process. That preliminary finding was appealed to a judge of what was then the Ontario Court of Justice (General Division).
[23] The Court on appeal held that there was nothing in the legislation prohibiting the abandonment of the appeal and hence, by implication, there was no abuse of process. Further, the Court held the Board had no jurisdiction to deal with Charter issues or to grant Charter relief. The Court pointed out that the obligation of the Board was to review the patient’s status at the time of the hearing and it could not make a remedial ruling preventing it from a full consideration of that issue. It is against that background that the Court’s finding that s. 23(1) authorizes a tribunal to make orders to prevent an abuse of its process but does not authorize the expansion of the jurisdiction of the Board, must be considered. To the extent that there was no abuse of the process, the statement may be considered obiter.
[24] It does not appear to me that either of these two cases are directly on point and accordingly they are of little assistance.
[25] Before us, Volfson relied on a number of arbitral decisions referred to in the reasons of both the Arbitrator and the Director’s Delegate, which held that an Arbitrator has no authority to order a party’s representative to pay expenses. I agree with the Arbitrator in this case when she held that the arbitral decisions are all distinguishable in that the arbitrations were each launched by the insured and the agents were acting on the assured’s account. In this case Volfson was acting on his own account or that of his company, fraudulently posing as a lawfully authorized agent.
[26] In two somewhat similar cases Piotto v. Kingsway General Insurance Company (FSCOA00 001061) and Gurevich and Royal and. Sun Alliance Insurance Company of Canada (FSCOA01 000936) both referred to by the Arbitrator, Arbitrator Wilson held that the service providers, acting without lawful authorization, could be found liable for costs because they, not the insured’s, were the party. In the latter of these decisions (also involving Mr. Volfson) the Arbitrator found abuse of process.
[27] The approach of Arbitrator Wilson makes sense. If s. 23(1) is to have any meaningful effect, it must be interpreted as enabling a tribunal to bring before it the person who had wrongly engaged its process. It is not necessary in this case to determine whether the Arbitrator acted appropriately in adding Volfson as a party to the proceeding already before the tribunal. Even without making Volfson a party, the tribunal had jurisdiction under s. 23(1) of the Statutory Powers Procedure Act to prevent an abuse of its process. It was Volfson who invoked the jurisdiction of the tribunal by commencing the application he did. In order to get to the truth, the Arbitrator was required to conduct a hearing, which resulted in expense and inconvenience to both the innocent insurer and the innocent insureds. Given the nature of this issue raised by the Shusters and the implications of a determination in their favour, 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. Volfson’s conduct was improper, was an abuse of the process of the tribunal and resulted in expenses being incurred by the Shusters and Royal before the Tribunal. It must surely be part of a tribunal’s power to prevent abuse to ensure that those who perpetrate such abuse not be permitted to do so with impunity. Accordingly, requiring Volfson to pay the expenses of the innocent parties must be seen as a logical and necessary extension of the tribunal’s control of its own process and its power to prevent them from being abused.
[28] The effect of the decision of the Director’s Delegate on the hopefully-rarely-occurring factual situation that is before us is to limit the tribunal, having been forced by the bogus applicant to put the innocent insured and insurer to the expense of a hearing to determine the legitimacy of the application, to admonishing the abuser to go and sin no more. It is, with respect, illogical to suggest that to control abuse the tribunal is limited to denying the abuser the right to bring the application for arbitration. So limiting tribunals in the face of abuse cannot have been the intention of the legislature when it gave to the tribunals the powers in s. 23(1) to control process. Volfson already did not have the right to bring the application, by virtue of the legislation itself, but that did not stop him from bringing it anyway and causing considerable expense and inconvenience to all involved. It is inconsistent with the purpose of s. 23 of the Statutory Powers Procedure Act to leave the tribunal without any power in the face of such abuse. I therefore conclude that the Arbitrator did have the jurisdiction to prevent abuse of the tribunal’s process by requiring the abuser to compensate those who had been caused expense as a result of the abuse of process.
Conclusion
[29] I would allow the application quash the decision of the Director’s Deputy, confirm the decision of the Arbitrator and remit the matter to her to assess the expenses of the applicant and the Shusters.
Costs
[30] Counsel for the Commission does not seek costs.
[31] Counsel for the applicant may make written submissions within ten days of the release of this decision and counsel for the respondent may make submissions within 10 days thereafter.
Jennings J.
Lane J.
Molloy J.
Released: October , 2005
COURT FILE NO.: 553/03
DATE: 20051024
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
LANE, JENNINGS AND MOLLOY JJ.
B E T W E E N:
ROYAL & SUNALLIANCE INSURANCE COMPANY OF CANADA
- AND –
ROMAN VOLFSON, OLGA SHUSTER, YURI SHUSTER AND THE FINANCIAL SERVICES COMMISSION OF ONTARIO
REASONS FOR JUDGMENT
Jennings J.
Released: October 24, 2005