Seed v. ING Halifax Insurance, 2005 ONSCDC 41991

Seed v. ING Halifax Insurance et al. [Indexed as: Seed v. ING Halifax Insurance]

78 O.R. (3d) 481

[2005] O.J. No. 4870

Court File No. 715/02

Ontario Superior Court of Justice

Divisional Court,

Greer, Chapnik and Lax JJ.

November 10, 2005

Insurance -- Appraisal -- Insurer obtaining order requiring insured to participate in appraisal process under s. 128 of Insurance Act -- Order providing that Umpire was authorized to proceed with appraisal on date determined by him in absence of party -- Insured having history of delaying proceedings -- Insured changing appraisers on eve of hearing and not providing Umpire and insurer with adequate notice -- Umpire not exceeding his jurisdiction and not denying insured natural justice in refusing insured's request for adjournment and in proceeding with appraisal in her absence -- Insurance Act, R.S.O. 1990, c. I.8, s. 128.

The insurer took the position that the insured's property damage claim should be determined by the appraisal provisions under s. 128 of the Insurance Act. After some delay, and a change of counsel, the insured agreed on an Umpire and the appraisal process commenced. The date of the appraisal was changed several times. Shortly before the appraisal was scheduled to commence in November 2001, the insured consulted new counsel and delivered a statement of claim, claiming damages under the insurance policy, damages for personal injuries and aggravated and punitive damages. She brought a motion to stay the appraisal and direct the insurer to deliver a statement of defence. As a result, the November appraisal did not proceed. At the same time, the insurer brought an application for an order compelling the insured to participate in the appraisal process. The application judge dismissed the insured's motion for a stay and ordered the appraisal to proceed on a date to be determined by the Umpire. The Umpire was specifically authorized to proceed in the absence of a party, if necessary. The Umpire had reason to believe that the insured's appraiser might withdraw, and asked the insured's counsel for confirmation that he would continue to act as the insured's appraiser. There was no response. The appraiser did, in fact, withdraw on the eve of the appraisal, which was set to commence in September 2002. Notice of the withdrawal was given to the Umpire and the insurer six weeks after the insured knew that her appraiser would be withdrawing. Her counsel also raised concerns about the suitability of the Umpire. On the day set for the appraisal, the insured appeared with her new appraiser and requested an adjournment. The request was refused. The new appraiser then proposed to call the former appraiser to give evidence in person. The former appraiser was not in attendance and no arrangements had been made for his attendance. The Umpire believed that the November 2001 order required him to proceed in the absence of the i nsurer's consent to an adjournment, which was not forthcoming. The insured and her appraiser left the appraisal proceedings. The Umpire proceeded with the appraisal, heard the insurer's evidence, and determined the value of the insured's property loss. The insured brought an application for judicial review of that decision. She did not challenge the merits of the decision, but sought to have it set aside on the basis that the Umpire exceeded his jurisdiction and denied her natural justice when he refused her request for an adjournment and proceeded in her absence.

Held, the application should be dismissed. [page482]

Per Lax J. (Chapnik J. concurring): The purpose of the appraisal process under s. 128 of the Insurance Act is to provide an expeditious and easy manner for the settlement of claims for indemnity under insurance policies. Courts have afforded substantial deference to an appraisal under the Insurance Act and the appraisal process, which is not subject to the provisions of the Statutory Powers Procedure Act, R.S.O. 1990, c. S.22. Unless there is proof of misconduct or that the appraisers or Umpire exceeded their jurisdiction, courts have been reluctant to interfere. While the decision to grant or refuse an adjournment is normally a discretionary one, it was arguable that the court removed any discretion the Umpire had to grant the adjournment. At the very least, the November 2001 order was a strong judicial signal that no further delay was acceptable. The change of appraisers on the eve of the hearing, the untimely notice to the Umpire and the insurer, the attempt to dis qualify the Umpire at the eleventh hour, the failure to arrange for the attendance of the previous appraiser, the refusal to adduce any evidence or file reports or make any submissions, cried out for a credible explanation, and none was provided. The Umpire gave the insured and her appraiser every opportunity to participate in the appraisal before proceeding in her absence. In the circumstances, there was no procedural unfairness, no loss of jurisdiction, no improper exercise of discretion and no denial of natural justice.

Per Greer J. (dissenting): The Umpire's refusal to grant the adjournment resulted in procedural unfairness to the insured and was a breach of natural justice. The Umpire misconstrued the wording of the November 2001 order. While it was clear that the appraisal had to take place, and it was to be on a date chosen by the Umpire, and while the Umpire was clearly authorized to proceed in the absence of one party, nothing prevented him from granting a further adjournment to allow the insured's new appraiser to properly brief himself and appear on behalf of the insured. The Umpire's decision with respect to valuation is not meant to be a highly discretionary one; it is essentially a mathematical exercise, based on the reports of the appraisers. The Umpire is supposed to be given a decision by each appraiser, when they cannot agree. The Act then says that the decision in writing of any two of the three on the value of the claim is the decision. In this case, the decision was that of the Umpire alone, alt hough he relied on the evidence of the one appraiser present. In reaching that decision, the Umpire did not even meet the minimal procedural fairness requirements of the Act. While the doctrine of legitimate expectations does not create substantive rights, the insured had a legitimate expectation that the adjournment would be granted to allow her new appraiser to complete his task and prepare the appropriate outline in writing for the Umpire to review. This was in spite of the strong wording used in the November 2001 order. The standard of review of the Umpire's decision was that of reasonableness. It was not reasonable for the Umpire to refuse the adjournment and proceed with the appraisal in light of the facts before him. Moreover, the Umpire exceeded his jurisdiction when he conducted the appraisal as if it were a court hearing and delivered what had the appearance of a court decision.

APPLICATION for a judicial review of a decision of the Umpire under the Insurance Act, R.S.O. 1990, c. I.8.

Gorieu v. Simonot, [1986] S.J. No. 108 (C.A.); Shinkaruk Enterprises Ltd. v. Commonwealth Insurance Co., 1990 7738 (SK CA), [1990] S.J. No. 317, (1990), 85 Sask. R. 54, 71 D.L.R. (4th) 681, [1990] I.L.R. para. 1-2648 (C.A.), distd Other cases referred to Baker v. Canada (Minister of Citizenship and Immigration), 1999 699 (SCC), [1999] 2 S.C.R. 817, [1999] S.C.J. No. 39, 174 D.L.R. (4th) 193, 243 N.R. 22; B and W (Re) (1985), 1985 2048 (ON SC), 52 O.R. (2d) 738, 23 D.L.R. (4th) 248, 16 Admin. L.R. 99, 33 A.C.W.S. (2d) 246 (H.C.J.); [page483] Canada (Director of Investigation and Research, Competition Act) v. Southam Inc., 1997 385 (SCC), [1997] 1 S.C.R. 748, [1996] S.C.J. No. 116, 144 D.L.R. (4th) 1, 209 N.R. 20, 71 C.P.R. (3d) 417; Canadian Union of Public Employees and Labour Relations Board (Nova Scotia) (Re), 1983 162 (SCC), [1983] 2 S.C.R. 311, 60 N.S.R. (2d) 369, 1 D.L.R. (4th) 1, 49 N.R. 107, 128 A.P.R. 369, 83 C.L.L.C. 12,349 (sub nom. Labour Relations Board (N.S.) v. Digby Mun. School Bd.); Chamberlain v. Surrey School District No. 36, [2002] 4 S.C.R. 710, [2002] S.C.J. No. 87, 221 D.L.R. (4th) 156, 299 N.R. 1, 100 C.R.R. (2d) 288, 2002 SCC 86; Kalin v. Ontario College of Teachers (2005), 2005 18286 (ON SCDC), 75 O.R. (3d) 523, [2005] O.J. No. 2097, 198 O.A.C. 201, 254 D.L.R. (4th) 503, 30 Admin. L.R. (4th) 289 (Div. Ct.) [Leave to appeal to C.A. refused October 25, 2005]; Krofchick and Provincial Insurance Co. Ltd (1978), 1978 1304 (ON SC), 21 O.R. (2d) 805, 91 D.L.R. (3d) 744, [1978] 3 A.C.W.S. 340 (Div. Ct.); Lapedus v. Institute of Chartered Accountants of Ontario, [1997] O.J. No. 409 (Div. Ct.); O'Brien v. Non-Marine Underwriters, Lloyd's, London, 1991 5980 (AB KB), [1991] A.J. No. 1145, 128 A.R. 165, 6 C.C.L.I. (2d) 229, 85 Alta. L.R. (2d) 358 (Q.B.); Ottawa-Carleton Regional Transit Commission and Amalgamated Transit Union, Local 279 (Re) (1983), 1983 1936 (ON CA), 44 O.R. (2d) 560, 4 D.L.R. (4th) 452 (C.A.); R. v. Ontario (Labour Relations Board), 1970 478 (ON CA), [1970] 3 O.R. 461, 13 D.L.R. (3d) 289, 70 C.L.L.C. 14,020 (C.A.) (sub nom. H.R.E.U., Local 197 v. Nick Masney Hotels Ltd.); Seed v. ING Halifax Insurance, 2002 79669 (ON SC), [2002] O.J. No. 1976, [2002] O.T.C. 352, 38 C.C.L.I. (3d) 257, [2002] I.L.R. para. I-4099 (S.C.J.); Stolove v. College of Physicians and Surgeons of Ont ario, [1988] O.J. No. 1426, 30 O.A.C. 236, 11 A.C.W.S. (3d) 353 (Div. Ct.); Toronto (City) v. Canadian Union of Public Employees, Local 79, 2003 SCC 63, [2003] 3 S.C.R. 77, [2003] S.C.J. No. 64, 232 D.L.R. (4th) 385, affg (2001), 2001 24114 (ON CA), 55 O.R. (3d) 541, [2001] O.J. No. 3239, 205 D.L.R. (4th) 280, 2002 C.L.L.C. 220-014, 45 C.R. (5th) 354 (C.A.), affg 2000 30193 (ON SCDC), [2000] O.J. No. 1570, 187 D.L.R. (4th) 323, 2000 C.L.L.C. 220-038 (S.C.J.) (sub nom. Toronto v. C.U.P.E., Local 79); Trentmar Holdings Ltd. (c.o.b. Athena Restaurant) v. Williams, 1984 6003 (ON SC), [1984] O.J. No. 356, 6 C.C.L.I. 180, [1984] I.L.R. para. 1-1791 at 6895 (H.C.J.); Windsor Airline Limousine Services Ltd. and Ontario Taxi Association 1688 (Re) (1980), 1980 1897 (ON SC), 30 O.R. (2d) 732, 117 D.L.R. (3d) 400, 4 A.C.W.S. (2d) 462 (Div. Ct.) Statutes referred to Insurance Act, R.S.O. 1990, c. I.8, s. 128 Statutory Powers Procedure Act, R.S.O. 1990, c. S.22

Elliott A. Zeitz, for applicant. John J. Chapman, for respondent ING Halifax Insurance.

[1] LAX J. (CHAPNIK J. concurring):-- The applicant, Aileen Seed, seeks judicial review of the decision of Mr. Gregory R. Birston, an Umpire appointed by court Order under the Insurance Act, R.S.O. 1990 c. I.8 to conduct an appraisal and determine the value of a loss that occurred at the applicant's home on April 7, 2000. The Umpire refused her request for an adjournment on September 18, 2002 and proceeded with the appraisal in her absence. Ms. Seed does not challenge the substance or merits of the Umpire's decision, but seeks to have it set aside on the [page484] basis that the Umpire exceeded his jurisdiction and she was denied natural justice.

Facts

[2] Ms. Seed's loss occurred when water leaked from underneath her kitchen sink and caused a flood that damaged floors and carpet. In addition to the water damage, she maintained that her home and contents had been contaminated by airborne mould and that her home and most of its contents were a complete loss. She delivered a proof of loss in the amount of $683,634.96 with an insurable loss value of $309,600. ING denied the presence of mould in her home and as a result, the parties were unable to agree on the value of the loss.

[3] Beginning in August 2000, ING took the position that the property damage should be determined by the appraisal provisions under s. 128 of the Insurance Act. This required the insurer and insured to each appoint an appraiser and the two appraisers to appoint an Umpire. The appraisal process was delayed over the fall of 2000 when the parties were unable to agree on an Umpire. Ms. Seed's proposed Umpire was unacceptable to ING as he had previously inspected her home. ING proposed four Umpires. None were acceptable to Ms. Seed. Over this time, Ms. Seed changed lawyers; she was nonetheless able to secure expert reports on mould and related issues.

[4] In March 2001, ING instructed counsel to bring a court application under s. 128(5) of the Act for the appointment of an Umpire. Ms. Seed's new counsel and the respondent were then able to agree on Mr. Birston, a Thunder Bay solicitor, as Umpire and a consent order was made on April 5, 2001. Soon after, Mr. Frank Castaldo, ING's appraiser and Mr. Terry Hall, Ms. Seed's appraiser, commenced the appraisal process.

[5] The parties initially agreed to appraisal dates of May 22-25, 2001, which were consensually changed to June 14-15, 2001. At a pre-hearing meeting with the Umpire on June 12, 2001, Ms. Seed's lawyer advised that he planned to call up to 96 witnesses. Given the volume of material and the number of witnesses, the Umpire established new dates in September, October and November. A site visit was arranged for June 14, at which time Mr. Hall, among others, was present. Over the summer, the appraisers sought to narrow the issues, but they were unable to make much progress due to their differing views on the presence of mould.

[6] Shortly before the appraisal was scheduled to commence in September, Ms. Seed consulted new counsel. Her then counsel of record requested an adjournment which the Umpire reluctantly [page485] granted to dates in November. At the end of October, Ms. Seed retained Toronto counsel (her fourth lawyer) and delivered a Statement of Claim dated November 16, 2001, claiming damages under the insurance policy, damages for personal injuries and aggravated and punitive damages.

[7] On November 22, 2001, Mr. Justice John de P. Wright heard a motion brought by Ms. Seed to stay the appraisal and direct ING to deliver a Statement of Defence. As a result, the November appraisal did not proceed. By way of Application heard at the same time, ING sought an Order compelling Ms. Seed to participate in the appraisal process and to pay her equal share of the expense of the appraisal and the Umpire as required under s. 128(4) of the Act.

[8] In its Application, ING sought an Order requiring the parties to direct their respective appraisers to meet with the Umpire on a date to be determined by him and to proceed with the appraisal, failing which the Umpire was authorized to proceed in the absence of a party. In reasons for judgment released March 13, 2002, the motion for stay was dismissed and the court ordered the appraisal to proceed on the terms requested by ING: See, Seed v. ING Halifax Insurance, 2002 79669 (ON SC), [2002] O.J. No. 1976, 38 C.C.L.I. (3d) 257 (S.C.J.).

[9] On April 15, 2002, the Umpire wrote to the parties to suggest dates in May and July for the appraisal to proceed. The Umpire had some reason to believe that Mr. Hall might withdraw from the appraisal process and in his letter, he asked Ms. Seed's counsel for confirmation that he would continue to act as Ms. Seed's appraiser. There was no response and as we will come to, the Umpire did not learn that Mr. Hall was withdrawing until the eve of the appraisal.

[10] Ms. Seed brought a motion for leave to appeal the decision of de P. Wright J. and took the position that the appraisal was stayed pending the hearing of the motion. The motion for leave to appeal was heard on June 27, 2002 and reserved.

[11] On July 3, July 13 and July 17, ING's counsel wrote to counsel for Ms. Seed seeking to arrange a tentative date for a meeting between the Umpire and the appraisers in order to avoid further delay. He also sought confirmation of Mr. Hall as Ms. Seed's appraiser. On July 4, Ms. Seed's counsel replied to the first of these letters, but would not agree to dates and did not confirm Mr. Hall's participation. On August 7, 2002, the motion for leave to appeal the decision of de P. Wright J. was dismissed.

[12] On August 15, 2002, the Umpire wrote to the parties and established dates for the appraisal on September 18 and 19, October 31 and November 1, 2002. [page486]

[13] By letter dated August 27, counsel for Ms. Seed advised ING's counsel that Ms. Seed had appointed a new appraiser, Mr. Robert Watson, and would be seeking a postponement of the appraisal. He also expressed concern for the first time about the suitability of Mr. Birston acting as Umpire and suggested alternative umpires. ING did not agree to change umpires or to postpone the appraisal, pointing out that any difficulties with dates were solely caused by Ms. Seed's refusal to co-operate with the appraisal process, that the appraisal had already commenced in April 2001 and that it would be counter-productive to start over again with a new Umpire and different appraisers.

[14] Ms. Seed knew by at least July 15 that Mr. Hall was withdrawing as her appraiser. This was not communicated to ING or the Umpire until August 27, 2002, approximately six weeks later. No explanation was given, although the Umpire had specifically inquired about this as early as April and ING had asked in July.

Decision of the Umpire on Request for Adjournment

[15] In his decision, the Umpire reviewed the history of the proceedings that led to the Order of de P. Wright J., which provides in para. 2:

2. AND THIS COURT ORDERS that the parties direct their respective appraisers to meet with the Umpire on a date to be determined by him and to proceed with the appraisal failing which the Umpire is authorized to proceed in the absence of one party.

[16] The Umpire noted that after Ms. Seed's motion for leave to appeal was dismissed on August 7, he told the parties that the appraisal would begin in his office on September 18 at 9:00 a.m. and continue on the other dates mentioned. The appraisal dates of September 18 and 19 were again confirmed in writing to the parties on August 29 and September 16, 2002.

[17] On September 18, Ms. Seed attended with her new appraiser, Mr. Robert Watson. A request for adjournment was made and refused. Mr. Watson then commenced the appraisal process by outlining the issues. Procedures were discussed and agreed upon with respect to the calling of evidence by the appraisers, as well as the presence of expert witnesses. The Umpire then called on Mr. Watson to present Ms. Seed's position and call any evidence to support it.

[18] Mr. Watson advised that he proposed to call Mr. Terry Hall (the applicant's former appraiser) as his first witness. Mr. Hall was not in attendance and no arrangements had been made for his attendance. Mr. Watson acknowledged that he was in possession [page487] of expert reports from Mr. Hall and others, but it was his preference to call Mr. Hall as a witness. An adjournment was granted to permit Mr. Watson to contact Mr. Hall.

[19] When the appraisal resumed, Mr. Watson advised the Umpire that he had spoken with Mr. Hall, but he was not available as he was involved in union negotiations. The Umpire adjourned the appraisal a second time to canvass the possibility of Mr. Castaldo and ING's expert witness rearranging their schedules to allow the appraisal process to extend into the evening. An offer was extended to Mr. Watson to adjourn until 5:00 p.m., but Mr. Watson requested an adjournment to another date. It was the Umpire's view that the Order of de P. Wright J. required him to proceed unless ING consented to the adjournment, which was not forthcoming.

[20] Although the Umpire urged and encouraged Mr. Watson to offer evidence either viva voce or by filing written reports or providing submissions, Mr. Watson declined and left the appraisal proceedings with Ms. Seed at 1:15 p.m. The Umpire proceeded with the appraisal and heard evidence presented by ING. He determined that the value of the loss for the building and its contents to be $18,155.20.

Analysis

[21] The procedure for the determination of the value of a loss is found in s. 128 of the Act, which provides:

128(1) This section applies to a contract containing a condition, statutory or otherwise, providing for an appraisal to determine specified matters in the event of a disagreement between the insured and insurer.

(2) The insured and the insurer shall each appoint an appraiser, and the two appraisers so appointed shall appoint an umpire.

(3) The appraisers shall determine the matters in disagreement and, if they fail to agree, they shall submit their differences to the umpire, and the finding of any two determines the matters.

[22] Ms. Seed submits the Umpire committed a procedural error by refusing to adjourn absent the consent of the insured and continuing with the appraisal in her absence and that this is to be reviewed on a standard of correctness. ING submits that the appropriate standard is reasonableness and the appropriate question is whether the Umpire acted unreasonably in refusing the adjournment.

[23] The purpose of the appraisal process under s. 128 of the Insurance Act is to provide an expeditious and easy manner for the settlement of claims for indemnity under insurance policies. It is intended to be a final and binding determination of the loss: [page488] Krofchick and Provincial Insurance Co. Ltd. (Re) (1978), 1978 1304 (ON SC), 21 O.R. (2d) 805, 91 D.L.R. (3d) 744 (Div. Ct.); Trentmar Holdings Ltd. (c.o.b. Athena Restaurant) v. Williams, 1984 6003 (ON SC), [1984] O.J. No. 356, 6 C.C.L.I. 180 (H.C.J.), at para. 10. Courts have afforded substantial deference to an appraisal under the Insurance Act and the appraisal process, which is not subject to the provisions of the Statutory Powers Procedure Act, R.S.O. 1990, c. 22. Unless there is proof of misconduct or that the appraisers or Umpire exceeded their jurisdiction, courts have been reluctant to interfere.

[24] Re Krofchick illustrates this approach. In that case, the parties each appointed an appraiser who in turn appointed an Umpire. The insured's appraiser informed the insured's solicitors that the "preliminary view" of the appraisers was that the loss was in the range of $50,000. The insured's solicitor asked the insured's appraiser not to make any decision until an engineering report was provided. The request was ignored. The appraisers met with the Umpire and agreed on a determination of loss that was embodied in a unanimous appraisal award. The court was asked to interfere with the decision on the basis that there was a denial of natural justice. In refusing to do so, the court stated at pp. 811-12 O.R.:

The function of the appraisers and umpire was not to hear evidence, but rather to arrive at a decision on the basis of their own knowledge and expertise. If they were not required to hold a hearing, as we have found, then they could not have been under any obligation or duty to postpone a decision in order to consider a piece of evidence that one party wanted to put before them.

To find that the appraisers were obliged to consider the report from the insured's engineer would be quite inconsistent with our finding that they were not obliged to hold a hearing.

There is no evidence before us as to whether the insured's appointee informed the other appointee and the umpire of his conversation with the insured's solicitors, and, if so, the reason why the three men proceeded to make their decision without waiting. Perhaps they thought they already had sufficient engineering advice. We are not prepared to assume that any of the appraising group acted unfairly or unreasonably. We are of the opinion that the appraisers and umpire properly acted within their authority and, no misconduct having been shown, the application is dismissed with costs.

[25] Ms. Seed relies on Shinkaruk Enterprises Ltd. v. Commonwealth Insurance Co., 1990 7738 (SK CA), [1990] S.J. No. 317, 71 D.L.R. (4th) 681 (C.A.), but this is simply an example of an Umpire misconceiving his function and purporting to act as an arbitrator by taking into account the wording of the insurance policy, construing its clauses and making findings of fact. The only decision brought to our attention where a defect in the process led to the setting aside of [page489] an appraisal award is Gorieu v. Simonot, [1986] S.J. No. 108 (C.A.). In that case, the Umpire's failure to notify one of the appraisers of the time of the appraisal rendered the award non-binding.

[26] Gorieu is clearly distinguishable on its facts. Here, both appraisers had the opportunity to participate in the process, but Ms. Seed's appraiser voluntarily chose to withdraw from the process. This was the situation in Windsor Airline Limousine Services Ltd. and Ontario Taxi Association 1688 (Re) (1980), 1980 1897 (ON SC), 30 O.R. (2d) 732, 117 D.L.R. (3d) 400 (Div. Ct.), revd on other grounds Ottawa-Carleton Regional Transit Commission and Amalgamated Transit Union, Local 279 (Re) (1983), 1983 1936 (ON CA), 44 O.R. (2d) 560, 4 D.L.R. (4th) 452 (C.A.), where the company left a certification hearing after an adjournment request was refused and the Ontario Labour Relations Board proceeded in its absence. The court refused to interfere on the basis of a denial of natural justice and stated at p. 739 O.R.:

It has for some time been made plain in a number of decisions that one who chooses to leave on the ground that a tribunal is incompetent runs the risk of being foreclosed from any later complaint . . .

A similar situation prevails, and is becoming more apparent all the time, where an application for an adjournment is made unsuccessfully. The risk that a person who "walks out" will deprive himself of the right to complain later is a real one.

(Citations omitted)

[27] In our view, the case at bar is stronger. While the decision to grant or refuse an adjournment is normally a discretionary one, it is arguable that the court removed any discretion the Umpire had to grant the adjournment. At the very least, the Order was a strong judicial signal that no further delay was acceptable. The Umpire did not have unrestrained control of the process. The court had ordered the parties and their appraisers to attend on a date fixed by the Umpire and to proceed with the appraisal failing which the Umpire is authorized to proceed in the absence of one party. It is difficult to imagine any stronger language or clearer direction from the court. As we read this language, it was the court and not the Umpire that compelled Ms. Seed and her appraiser to attend and to proceed. The Umpire's sole function under the first part of the Order was to determine the date of the appraisal.

[28] We accept that the result of the Umpire's refusal to grant the adjournment has serious consequences for Ms. Seed, but did he exceed his jurisdiction or unfairly exercise his discretion? On the authority of Re Krofchick, an appraisal under the Insurance Act [page490] requires neither a hearing, nor a consideration of evidence. The Umpire had chosen to hold a hearing and had established dates for this purpose from the time of the pre-hearing meeting in June 2001. Mr. Hall had told the Umpire that he planned to call a large number of witnesses. This may explain why Mr. Birston decided to proceed in this manner.

[29] It was anticipated that Ms. Seed's evidence alone would take the better part of two days. It is difficult to understand why she refused to proceed with her own evidence on September 18 and 19. The next scheduled hearing date was six weeks later on October 31. This would have given Mr. Watson time to prepare and to arrange for Mr. Hall's attendance, but as of September 18, no attempt had been made to arrange for the attendance of any witness.

[30] The change of appraisers on the eve of the hearing, the untimely notice to the Umpire and ING, the attempt to disqualify Mr. Birston at the eleventh hour, the failure to arrange for the attendance of Mr. Hall, the refusal to adduce any evidence or file reports or make any submissions, cries out for a credible explanation, but none has been provided. Ms. Seed had almost one and a half years from the time of the consent order in April 2001 to prepare for the appraisal. In one way or another, she appears to have attempted from the outset to disrupt the appraisal process for strategic or other reasons that one can only surmise.

[31] The Umpire gave Ms. Seed and Mr. Watson every opportunity to participate in the appraisal before proceeding in her absence. The Order of de P. Wright J. unequivocally authorized him to do this. In seeking the consent of the insurer to the adjournment, the Umpire was only attempting to find a way to accommodate Ms. Seed in the face of the Order. It seems to us that she was offered every reasonable accommodation that the Umpire was in a position to offer, given the strong language of the Order. We find no error in the manner in which he proceeded even if the standard of review is correctness. In declining to offer evidence and in choosing to withdraw from the appraisal, Ms. Seed ran the risk of being foreclosed from further complaint.

[32] The Umpire's decision was made against a lengthy background of delay, in the context of a legislative scheme that is intended to provide an expeditious and easy manner of settling indemnity claims and in the face of an Order compelling the parties to attend and proceed. In all of the circumstances, we can find no procedural unfairness, no loss of jurisdiction, no improper exercise of discretion and no denial of natural justice: Lapedus v. Institute of Chartered Accountants of Ontario, [1997] O.J. No. 409 (Div. Ct.); R. v. Ontario (Labour Relations Board), 1970 478 (ON CA), [1970] 3 O.R. 461, 13 D.L.R. (3d) 289 (C.A.); Stolove v. College of Physicians and Surgeons of Ontario, [1988] O.J. No. 1426, 30 O.A.C. 236 (Div. Ct.). [page491]

[33] The application for judicial review is therefore dismissed with costs to ING, fixed in the total amount of $5,000, as agreed by the parties.

[1] GREER J. (dissenting):-- On April 7, 2000, Aileen Seed (the "applicant") suffered a flood in her home in Thunder Bay, Ontario, which she says resulted in substantial damage to her home and its contents. The applicant homeowner's insurer is ING Halifax Insurance ("ING"). The flood, which emanated from under the applicant's kitchen sink, created the damage. The flood was quickly reported by the applicant to ING. The parties before us took various steps, as set out in the materials before the court, to deal with the damage caused by the flood. Despite these steps, the applicant says that mould appeared in the home, which has damaged both her home and the contents thereof.

[2] The applicant then filed a Proof of Loss Statement with ING, in which she quantifies her loss at $683,634.96, with an insurable loss value of $309,600. ING denied the presence of any mould in the applicant's home. By October 17, 2000, ING informed the applicant that it would not agree to any further mould contamination testing of her home and demanded that an appraisal be held pursuant to the provisions of the Insurance Act, R.S.O. 1990 c. I.8, as amended (the "Act"), and that an Umpire be appointed pursuant to s. 128 of the Act. An Umpire, Gregory R. Birston (the "Umpire") was appointed in March 2001, on consent of the parties, to act as set out in the Act. Birston, although a respondent in this Application, did not respond and has taken no position on the Application before us.

[3] Such appraisal took place on September 18, 2002, by the Umpire, with no evidence having been led by the applicant, whose new appraiser had requested an adjournment of the September 18 date, under the circumstances set out later in these reasons. Such adjournment was refused and the applicant now seeks judicial review of the Umpire's decision dated September 24, 2002, fixing the applicant's damages at $18,161.20. She further asks for an Order that the Decision of the Umpire and his accounts for services rendered in connection therewith be set aside; and asks for an Order directing that a new appraisal be arranged at the first date convenient to the parties before a different Umpire to be selected by the parties. [page492]

[4] It is the applicant's position that the Umpire deprived her of natural justice by denying her the adjournment to allow her new appraiser adequate time to review the claim, conduct a thorough site inspection and put together the necessary evidence to try to properly establish her actual loss.

[5] I have read the reasons of my colleague, Madam Justice Lax, and her finding that the Umpire in no way erred in proceeding with the appraisal with no input by the applicant or her appraiser. With respect, I disagree with her position. I find that the Umpire's refusal to grant the adjournment requested resulted in procedural unfairness to the applicant and was a breach of natural justice.

Some Background Facts

[6] There is no dispute that the applicant's current counsel is not her first counsel in this matter. In my view, the fact that the applicant had new counsel and a new appraiser, was not properly taken into account by either ING or the Umpire. The history of the applicant's claim and the steps taken by the parties, while they tried to come to some agreement on the amount ING should pay the applicant, are carefully set out in each party's Factum and in the reasons of Madam Justice Lax, herein. I see no need to repeat them.

[7] As I see it, the applicant's claim that mould was affecting both her health and her ability to continue to live in her home was the key issue that she wanted the Umpire to look at. Since this never took place, given what happened when the adjournment was not granted, it was therefore in ING's interest to get the issue of the Umpire's Decision dealt with as quickly as possible. They refused to consent to an adjournment when the Umpire asked them if they would consent to it.

[8] Each party had obtained expert advice on the issue of mould growth and air contamination in the home. Each had copies of the other's evidence before the appraisal by the Umpire took place. The Umpire also had copies of all the reports.

[9] The Resource Centre for Occupational Health and Safety at Lakehead University prepared a report dated May 10, 2000, for ING, at the urging of the applicant, which stated that they could find no air contaminants which presented a cause for concern. It also says that there was no evidence of mould growth observed in the home. On the other hand, the applicant's appraiser, Terry Hall ("Hall"), of Mystic Ventures Development Ltd., prepared a Report for her dated August 16, 2000, which set out in photographs and in a lengthy report that there was [page493] both "water damage and subsequent fungal contamination" in the applicant's home. Hall states on p. 7 of his Report that Mike Hannusch, of Asbestrol Services Inc., did tests on June 8, 2000 to determine the extent of fungal contamination of the applicant's home. The Report says many fungal contaminants were found in areas that coincided with the true water damage done to the home.

[10] The Hall Report contains many diagrams, which show not only the areas of the home which the applicant says were affected by water damage, but also shows those areas on the floor plans where he says he found various forms of mould growth in the areas affected, as well as "Mould Damage". I have set out what evidence is in these Reports, given that the experts do not agree on what damage has occurred in the home as a result of the flood. Neither could the parties' appraisers agree on the damage.

The Legislation

[11] The role of the Umpire is found in s. 128 of the Act. It reads as follows:

128(1) This section applies to a contract containing a condition, statutory or otherwise, providing for an appraisal to determine specified matters in the event of a disagreement between the insured and the insurer.

(2) The insured and the insurer shall each appoint an appraiser, and the two appraisers so appointed shall appoint an umpire.

(3) The appraisers shall determine the matters in disagreement and, if they fail to agree, they shall submit their differences to the umpire, and the finding in writing of any two determines the matters.

The Umpire selected by the appraisers pursuant to s. 128(2) was Birston, a local solicitor in Thunder Bay. I understand that Birston had previously never acted as an Umpire.

[12] There is nothing in the Act which sets out the duties or powers of the Umpire. Subsection 128(3) simply says that the appraisers shall determine the matters in disagreement, and if they fail to agree, "... they shall submit their differences to the umpire ...". The Act then says that "... the finding in writing of any two determines the matters". One could infer, from the wording of this subsection, that there must be three persons present when the determination is made, since the "finding" (meaning the Decision) must be made by any two of them. If I am wrong in this regard, at the very least, the two appraisers "... shall submit their differences to the umpire". This did not take place in the case before us.

[13] There is no case law in Ontario that is on point, regarding the role of the Umpire under the Act, nor is there any Regulation [page494] regarding how the Umpire is to conduct his or her hearing, other than what is set out in the above legislation.

[14] The applicant's initial appraiser, Hall, was not familiar with the process, says counsel for the applicant. He had never acted in that position before. The appraiser for ING, Frank Castaldo ("Castaldo"), seems to have been the most familiar with the process. It is the applicant's position that when Hall and Castaldo met on May 7, 2001, as contemplated by the Act, it was Hall's intention to canvass the areas of agreement and disagreement between him and Castaldo. He says such discussion never took place because Castaldo refused to go through the applicant's proof of loss and instead took the position that all of the damages listed by the applicant were in dispute. Castaldo is said to deny that this happened. No matter which version is correct, it is still a fact that there is no evidence before us that any "finding in writing" was made by either appraiser before the Umpire made his findings, and that no finding in writing was determined by any two of them to determine the matters.

The Motion before Mr. Justice de Pencier Wright

[15] The applicant had previously sought new counsel, who began a civil law suit against ING in October 2001. Her new counsel wanted to move before the court to have the proceedings before the Umpire stayed until the civil law suit was over. The Motion was brought on before Mr. Justice de Pencier Wright (the "motion judge") on November 22, 2001. He delivered reasons for his decision on March 13, 2002, dismissing the stay requested. He then went on to specifically set out in his decision, how he saw the process taking place. He ordered the parties to [at para. 6]:

... direct their respective appraisers to meet with the Umpire on a date to be determined by him and to proceed with those proceedings failing which the umpire is authorized to proceed in the absence of one party.

[16] One of the difficulties before us, as I see it, is how the Umpire interpreted this direction. The two appraisers are directed to meet with the Umpire. He is given the discretion to determine the date. In the meantime, the applicant's Motion for Leave to Appeal the decision of the motion judge was dismissed on August 7, 2002, by Mr. Justice G.P. Smith. This meant that the appraisal, which had been originally set down before the Umpire to be heard in July 2002, had to be rescheduled.

[17] The Umpire, then unilaterally, rescheduled the appraisal to be held to commence on September 18, 2002, without input of [page495] either counsel. The applicant's counsel was made aware of this new date by mid-August 2002, yet, even though the applicant and her counsel wanted input or consultation respecting the new date, they were given no opportunity to do so.

[18] By July 2002, the applicant's new counsel had contacted Hall, and it was then that counsel learned of Hall's reluctance to continue to act as the applicant's appraiser, given his lack of familiarity with the process. A search was immediately begun to find a new appraiser who was experienced and willing to go to Thunder Bay for a fee the applicant could afford. Mr. Robert Watson ("Watson") of National Fire Adjustment Co., Inc. was contacted on August 7, 2002, with a view to retaining him. He met, in Toronto, with the applicant's counsel on August 21, 2002. He was retained to act for the applicant around the first week of September 2002.

[19] Watson says he was given about 500 pages from Hall to review. He says he did not have sufficient time to review all of the materials or to conduct a thorough site inspection of the home in Thunder Bay. Watson says he first discussed the case with Castaldo 12 days before the scheduled appraisal date and Castaldo was aware that Watson had not yet received his formal retainer and had not yet done a thorough appraisal.

[20] Watson says he did not believe that his request for an adjournment of the appraisal would be turned down by ING, given that in his 14 years as a professional appraiser, he had never seen such a request opposed or denied.

[21] Watson tried to contact the Umpire to request an adjournment but the Umpire was on vacation until September 16, 2002, two days before the scheduled date of the appraisal. Further, on August 27, 2002, ING's counsel was informed by the applicant's counsel that Watson had been formally retained and would likely need an adjournment.

[22] When the Umpire returned from vacation, he told the parties two days before the appraisal that he refused to consider any adjournment, given what he interpreted as the motion judge's "unequivocal and explicit endorsement".

[23] ING says that there had been too many delays in the process and wanted the appraisal to go ahead, whether the applicant had an appraiser or not. ING says it tried to clarify what Hall's involvement was going to be in the appraisal process over several months but was unsuccessful. They were aware, however, by early September that the applicant required an adjournment to allow Watson time to prepare an appraisal based on the voluminous evidence before him. [page496]

The Flaws in the Process Leading Up to the Decision of the Umpire

[24] The appraisal meeting took place on September 18, 2002, despite Watson's request for an adjournment. The Umpire was made aware that Watson and Castaldo had not met, pursuant to s. 128(3) of the Act, to discuss what they could agree on and what they could not. This was, in my view, the first flaw in the process before the Umpire. Since ING would not agree to an adjournment, the Umpire thought he had no discretion to adjourn the process without its consent, as he felt the court's decision compelled him to proceed that day, despite the fact that he knew that the respective appraisers had not met pursuant to the terms of the Act.

[25] The Umpire allowed Watson approximately 15 minutes, says Watson, to try to contact Hall who was now acting only as the applicant's main mould expert. Hall was unavailable, as he was in a closed-door union negotiation. The Umpire adjourned the matter to 5:00 p.m. to allow them to proceed with both experts but this did not take place. Watson says that under all these circumstances, he could not adequately represent the applicant at the appraisal. He then withdrew from the process.

[26] The Umpire proceeded, in the absence of the applicant, in the absence of her appraiser and in the absence of her expert. The Umpire heard only the evidence of ING and its appraiser and other ING witnesses. The Record shows that the Umpire had much, if not all, of Hall's Report before him. Despite the applicant's claim for damages caused by the mould, the Umpire's Decision did not take any of this into account. Of the $487,334.96 the applicant claimed on account of personal property damage, the Umpire allowed only $103.49, representing the cost of repairing a damaged vacuum cleaner. He also allowed $18,051.71 as the damages for losses to the building.

[27] The Umpire's written Decision, released September 24, 2002, is lengthy. He is the only one who signed it. The second flaw in the process is that the Umpire had no written appraisal of Castaldo before him, pursuant to s. 128(3) of the Act, in reaching the conclusions he did.

The Refusal to Adjourn as a Question of Procedural Fairness

[28] It is the position of the applicant that she was denied natural justice when the Umpire refused to adjourn the appraisal. The duty of fairness has been recognized in our courts as a flexible duty that may vary, based on all of the circumstances of the case. In Baker v. Canada (Minister of Citizenship and Immigration), 1999 699 (SCC), [1999] 2 S.C.R. 817, [1999] S.C.J. No. 39, [page497] Madam Justice L'Heureux-Dubé states at para. 22:

I emphasize that underlying all these factors is the notion that the purpose of the participatory rights contained within the duty of procedural fairness is to ensure that the administrative decisions are made using a fair and open procedure, appropriate to the decision being made and its statutory, institutional, and social context, with an opportunity for those affected by the decision to put forward their views and evidence fully and have them considered by the decision-maker.

The five factors referred to therein include: (1) the nature of the decision; (2) the nature of the legislative scheme; (3) the importance of the decision to the individual affected; (4) the legitimate expectations of the person challenging the statute; and (5) the decision-maker's choice of procedure.

The Supreme Court of Canada, in a later decision, Chamberlain v. Surrey School District No. 36, 2002 SCC 86, [2002] 4 S.C.R. 710, [2002] S.C.J. No. 87, at para. 15 states:

If the reviewing court determines that the Board's process of decision making took it outside the constraints intended by the legislature, then it must find the resulting decision unreasonable. Where an error of this type occurs, the fact that the effects of a decision are relatively innocuous cannot save it.

[29] In the case before us, the effects of the Decision of the Umpire can hardly be said to be "relatively innocuous". The impact of the Umpire's Decision was devastating to the applicant's position. Was it therefore reasonable, on the part of the Umpire, to refuse the adjournment because he thought ING had to consent, or because he thought the motion judge's decision was mandatory that he proceed with only one party, after he knew that the applicant's new appraiser, Watson, had not had time to prepare his appraisal?

[30] On p. 5 of his Decision, the Umpire states "... absent the consent of the insurer, I was bound by the Order of Justice John deP. Wright ...". The Umpire seems to think that he had no choice but to proceed on the date fixed by him, despite the request for an adjournment. Further, his Decision makes no mention of any of the applicant's expert evidence at all, but goes into great detail about evidence given by ING's witnesses. How could this constitute procedural fairness?

[31] In my view, the Umpire misconstrued the wording used by the motion judge in his decision. While it is clear that the appraisal had to take place, and it was to be on a date chosen by the Umpire, nothing prevented him, under the circumstances presented to him, to grant a further adjournment to allow Watson, the new and very experienced appraiser, to properly brief [page498] himself and appear on behalf of the applicant. Clearly, the Umpire was authorized to proceed in the absence of one party, but nothing prevented him from adjourning the appraisal to a new date to be fixed by him.

[32] If the Decision of the Umpire is examined by using the principles set out in Baker, supra, it cannot be said that the procedure used by the Umpire was fair and open in these circumstances. The decision by the Umpire with respect to valuation is not meant to be a highly discretionary decision. The decision, as I see it, is essentially a mathematical exercise, based on the reports of the appraisers. The Umpire is supposed to be given, under the Act, a decision by each appraiser, when they cannot agree. The Act then says that the decision in writing of any two of the three, of the appraisers and the Umpire, on the value of the claim, is the Decision.

[33] In the case before us, however, the Decision is that of the Umpire alone, although he relies on the evidence of the one appraiser present. There were never two sets of competing facts, put in writing by the two appraisers, before the Umpire to assist him in his Decision. To reach the Decision, the Umpire did not even meet the minimal procedural fairness requirements of the Act.

[34] In Baker, supra, the court held that it is also necessary to look at the statutory scheme in question, when determining whether natural justice has been denied. Thus, a decision of an Umpire must be looked at in the broader scheme of how the Act, itself, operates. If the appraisal process has not been flawed or if the Umpire acted within his or her jurisdiction, the appraisal is meant to be a final and binding valuation. As was said in Shinkaruk, infra, the statutory provision authorizing appraisals is intended to encourage a quick settlement of the insured's loss and to facilitate the use of the expertise of an appraiser (or an umpire) in the sphere of property values. Since there is no appeal procedure in the Act from a decision of an Umpire, and given that the Umpire's decision is meant to conclusively determine the issue of the value of the claim, these factors suggest greater fairness is owed.

[35] The court has also said that one must look to the importance of the decision to the litigant. The greater the importance, the more procedural protections are necessary to ensure that the procedure used to reach the decision is both open and fair. It is clear from the facts before us that the difference between how the applicant sees her claim and loss, and how ING sees it and characterizes it, is about as far apart as two parties can get. The applicant alleges total mould contamination of her home and its [page499] contents, whereas ING sees it as a simple claim for some water damage, with no mould contamination, giving rise to about $18,200 in damages.

[36] The doctrine of legitimate expectations does not create substantive rights. I am of the view that the applicant, however, had a legitimate expectation that the adjournment would be granted by the Umpire to allow her new appraiser (who was only her second appraiser) to complete his task and prepare the appropriate outline in writing for the Umpire to review. This is in spite of the strong wording used by the motion judge on the Motion to stay the proceedings. The applicant and her counsel knew that the stay of the process was not granted, but did she expect that, what seemed to her and her counsel was a straight-forward request for an adjournment, in light of the fact that her new appraiser had only been retained two weeks before, would not be allowed and she would be forced to proceed in any event?

[37] The Act provides the Umpire with no clear outline as to how he or she should proceed, other than the "finding in writing of any two determines the matters". While this factor suggests deference should be paid to the decision-maker's choice of procedures, even under the most minimal procedural fairness requirements, the Umpire's choice to proceed unilaterally with the appraisal, without any input from the applicant could not meet such requirements. The procedure used by the Umpire had the air of a trial to it, as various witnesses presented oral evidence before him. The procedure, however, with only ING present, gave the applicant's counsel no ability to cross-examine ING's appraiser and other witnesses. How could the Umpire make a fair decision with this format?

[38] In Gorieu v. Simonot, supra, the court set aside an appraisal because one appraiser was not even notified of the time and place of the appraisal, thereby depriving the Umpire of jurisdiction to render a binding valuation. In the case before us, the date of the appraisal was known to all parties. The intervening factor, however, was the date upon which the applicant's new appraiser came on the scene. Hall told the applicant's counsel in mid-July that he was not going to be the applicant's appraiser but would be her witness. ING claims it was not told this until six weeks later. One would have hoped that ING would agree to an adjournment of a few short months to allow the process to proceed in a fair manner. When ING refused to give its consent to an adjournment, the Umpire felt he had no discretion to otherwise grant the adjournment.

[39] In the case before us, the magnitude of the difference between the applicant's claim and what the Umpire determined, [page500] without input from the applicant or her appraiser and expert, is huge, even if one only looks at the actual insured value. Was it correct for the Umpire to operate the appraisal process as a one-person tribunal, rather than a tripartite system contemplated under the Act? I think not. Impartiality on the part of the Umpire must be seen in the result delivered. In this case, while I make no finding one way or the other on whether the Umpire was biased in the manner in which he conducted the appraisal and reached his decision, the process must have the appearance of impartiality, and here it did not.

[40] ING relies on the case law stating that it is appropriate to refuse an adjournment where there have been previous delays of the applicant's making and when the applicant has had an opportunity to secure representation. See: B and W (Re) (1985), 1985 2048 (ON SC), 52 O.R. (2d) 738, 23 D.L.R. (4th) 248 (H.C.J.). I cannot see where all the delay was the applicant's fault. She had a right to instruct counsel to bring on a civil action against ING. The results of the Motion for the Stay were not delivered by the court for approximately five months and the Leave Motion decision was not delivered until August 2001. There was some wavering by Hall, the applicant's expert, in giving a final decision about not appearing as her appraiser. The applicant, however, cannot be said to have caused that delay.

[41] In Kalin v. Ontario College of Teachers (2005), 2005 18286 (ON SCDC), 75 O.R. (3d) 523, [2005] O.J. No. 2097 (Div. Ct.), leave to appeal to C.A. refused October 25, 2005, Madam Justice Molloy at para. 31 states:

A Tribunal is entitled to correct its own processes and is not obliged to grant an adjournment merely to accommodate the "convenience" of a party: Re Flamboro Downs Holdings Ltd. and Teamsters Local 879 (1979), 1979 1669 (ON SC), 24 O.R. (2d) 400, 99 D.L.R (3d) 165 (Div. Ct.). However, in exercising its discretion as to whether to grant an adjournment, a tribunal is not permitted to act arbitrarily. ... It must take into account all of the relevant factors, including the reasons for the request and the implications of not granting the request ...

In my view, as in Kalin, supra, the Umpire acted arbitrarily in setting the new date. I adopt Madam Justice Molloy's reasoning in para. 32, thereof, and I find that the Umpire failed to take in the relevant factors and breached its duty to act fairly and in accordance with natural justice.

The Standard of Review of the Discretionary Decision

[42] Even if the refusal by the Umpire to adjourn the appraisal scheduled for September 18, 2002 was not a denial of natural justice, one could say that either the Umpire had no jurisdiction to [page501] do what he did, or as a discretionary decision within the Umpire's decision-making authority, the Umpire failed to exercise that discretion appropriately, thereby losing jurisdiction.

[43] Decisions must be made within the bounds of the jurisdiction conferred on the decision-maker by the statute. In the Act, the parameters of how the Umpire is to reach a decision are clearly set out in s. 128 of the Act. There is nothing in the provisions of the Act that gives the Umpire the power to deal with disputed legal questions. The Umpire's statutory power is severely restricted to coming up with the "value" in a disputed insurance claim.

[44] In Shinkaruk Enterprises Ltd. v. Commonwealth Insurance Co., 1990 7738 (SK CA), [1990] S.J. No. 317, 71 D.L.R. (4th) 681 (C.A.), a decision involving the role of an Umpire under the Saskatchewan legislation that is similar to the Act, the court held that an Umpire cannot do something that he or she is not empowered to do under the statute. There, at p. 688 D.L.R., the court describes the function of the Umpire and the appraisers in insurance matters:

They are not empowered to make a disposition of the entire controversy between the parties, as would a court in an ordinary case, or sometimes a board of arbitration. All issues other than the value of the property insured and property saved, and amount of loss, are reserved for settlement by negotiation or for determination by litigation in an ordinary action under the policy.

Therefore, in the case before us, did the Umpire misconceive his function and his powers?

[45] It is clear from the disagreement between Hall and Castaldo, where they could "not agree on anything", that they did not understand the obligation to put something in writing for the Umpire on their respective positions. The Act makes it obligatory that, "... they shall submit their differences to the umpire". This seems to infer that these positions should be put in writing and given to the Umpire to review ahead of the actual appraisal taking place. As far as I can see in the materials, this was never done prior to September 18, 2002. Defects in the appraisal process can amount to an excess of jurisdiction.

[46] Shinkaruk, supra, was considered in O'Brien v. Non-Marine Underwriters, Lloyd's, London, 1991 5980 (AB KB), [1991] A.J. No. 1145, 128 A.R. 165, 6 C.C.L.I. (2d) 229 (Q.B.). There the insurer was applying for an Order striking out all or part of the claim and for a declaration that the appraisal was binding on the plaintiffs and that the internal loss was paid by way of full and final settlement. It was also a case where the parties' appraisers disagreed and an umpire had to be appointed. The court found that the appraisal was binding but allowed the other issue to go to trial. The wording of the Alberta Act is similar to that of Ontario regarding the [page502] finding in writing of any two determines the matters. The court, at p. 235 C.C.L.I., refers to both Shinkaruk, supra, and Gorieu, supra, noting that the validity of an appraisal is subject to challenge on the ground that the Umpire had no power or jurisdiction to do what he or she did.

[47] Our courts have held that the pragmatic and functional approach must be applied in determining the standard of review. The four factors as set out in Baker, supra, are the presence of a privative clause, the expertise of the decision-maker, the purpose of the legislation and the nature of the problem. There are three standards of review: the standard of correctness, the standard of patent unreasonableness and the standard of reasonableness. See: Chamberlain, supra, at para. 5.

[48] The standard of "correctness" involves minimal deference, and can apply where there is only one right answer and the administrative body must reflect it. The standard of "patent unreasonableness" is the most deferential of the three standards. The decision, in that instance, will only be overturned if it suffers from a defect so apparent that it demands the court's intervention. The intermediate standard of "reasonableness" allows for some deference but the decision will not be set aside unless it is based on an error or is not supported by any reasons that can stand up to a somewhat probing examination.

[49] If the defect is apparent on the face of the tribunal's reasons, then it is patently unreasonable. To be simply "unreasonable", there has to be a greater searching or testing of the decision to find the error. See: Canada (Director of Investigation and Research, Competition Act) v. Southam Inc., 1997 385 (SCC), [1997] 1 S.C.R. 748, [1996] S.C.J. No. 116, 144 D.L.R. (4th) 1, at pp. 776-77 S.C.R., 19-20 D.L.R.

[50] There is no governing privative clause in the statute, but neither is there a right of appeal. The Umpire has no particular expertise in the process. The purpose of the legislation is to encourage settlement and have a value of the claim determined in an efficient and fair manner. The decision of whether to grant an adjournment is not a pure question of law since it should involve an analysis of the facts surrounding the request. The nature of the problem is more a question of mixed law and fact under these circumstances. See: Toronto (City) v. Canadian Union of Public Employees, Local 79 (2001), 2001 24114 (ON CA), 55 O.R. (3d) 541, [2001] O.J. No. 3239 (C.A.), at pp. 552-53 O.R. ("Toronto"), affd 2003 SCC 63, [2003] 3 S.C.R. 77, [2003] S.C.J. No. 64.

[51] While a high level of deference may be owed to the substantive valuation result reached by an Umpire, such deference is not necessarily owed on questions of process. It is clear that [page503] different standards of review may apply to different decisions made by a tribunal in the course of a proceeding. See: Toronto, supra, at p. 551 O.R. After weighing these factors, I am of the view that the standard of review would then be one of reasonableness.

[52] In my view, for the reasons discussed, it was not reasonable for the Umpire to refuse the adjournment and proceed with the appraisal in light of the facts before him. If I am wrong, and if the standard of reasonableness should not apply in the circumstances of this case, I am satisfied that the applicant was denied her right to natural justice, when the adjournment was refused.

[53] Although Watson and the applicant walked out of the hearing after they could not get Hall to appear to give evidence, in my view, they had no choice. Watson simply had not had enough time to complete a thorough appraisal of his own. ING relies on the statement in Windsor Airline Limousine and Ontario Taxi Assn. 1688 (Re) (1980), 1980 1897 (ON SC), 30 O.R. (2d) 732, 117 D.L.R. (3d) 400 (Div. Ct.) for the proposition that the risk a person who "walks out" takes is that he or she will deprive himself or herself of the right to complain later. In that case, involving the issue of union certification and issues of unfair labour practices, the issues were quite different from the one before us.

[54] Even in Krofchick and Provincial Insurance Co. Ltd. (Re) (1978), 1978 1304 (ON SC), 21 O.R. (2d) 805, 91 D.L.R. (3d) 744 (Div. Ct.), the court noted at p. 811 O.R. that the function of the appraisers and umpire "... was not to hear evidence, but rather to arrive at a decision on the basis of their own knowledge and expertise". The Umpire, in the case before us, conducted the appraisal, as if it were a court hearing and listened to two part-days of evidence. He exceeded his jurisdiction in this regard when he delivered what had the appearance of a court decision.

[55] For the reasons noted above, the application is granted and I hereby quash the decision of the Umpire, Gregory R. Birston, dated September 24, 2002. I order that the Umpire's accounts for services rendered in connection therewith be set aside. I further order that a new appraisal be arranged at the first date convenient to the parties before a different Umpire, selected on the consent of the respondent, ING, and the applicant, failing which, that a new Umpire be appointed by Application of the parties to the court.

Application dismissed.

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