Court File and Parties

Citation: Koon v. Lawyers Professional Indemnity Company, 2016 ONSC 932 Court File No.: CV-11-0005113100OT Date: 2016-05-18 Superior Court of Justice - Ontario

Re: Anthea Koon, Applicant And: Lawyers Professional Indemnity Company, Respondent

Before: Justice Matheson

Counsel: Blair W. M. Bowen and Martine S. W. Garland, for the Applicant Mark J. Freiman and Jameel Madhany, for the Respondent

Heard: February 4, 2016

Endorsement

[1] The applicant lawyer seeks to set aside the arbitral award of the Hon. Dennis Lane dated March 18, 2011. The backdrop to the arbitration involved LawPRO’s exercise of a contractual right to settle a claim without the consent of the insured – in this case, without the consent of the applicant.

[2] In and around 2008, the applicant was representing a client in estate litigation. In early 2009, she was given notice that a costs order would be sought against her personally in those estate proceedings, under Rule 57.07 of the Rules of Civil Procedure.

[3] The applicant reported the costs claim to LawPRO in February 2009 and LawPRO appointed counsel. Appointed counsel evaluated the costs claim, opined that the applicant would be liable for costs thrown away and recommended that the claim be settled.

[4] The applicant raised issues regarding the adequacy of appointed counsel’s opinion, requested additional disclosure and pressed forward on a number of matters of concern to her about how her LawPRO claim was being handled.

[5] LawPRO concluded that the claim should be settled. It confirmed this recommendation in writing in May 2009 and requested the applicant’s consent to settle the matter. The applicant believed that she had done nothing wrong and that the issues she had raised with LawPRO about her claim had not been addressed to her satisfaction. She did not provide her consent.

[6] The applicant continued to make disclosure requests. The dialogue between the applicant and LawPRO continued, but consent was not given. LawPRO proceeded to settle with the two parties who were seeking costs against the applicant. One settlement was reached in December 2009 and the other in February 2010.

[7] The applicable LawPRO policy provided for LawPRO’s right to settle without consent, in its discretion, as follows:

O. Compromise or Settlement

The INSURER may, it its sole and absolute discretion, upon notice to the INSURED, compromise any CLAIM or settle any CIVIL SUIT without the consent of the INSURED who shall nevertheless remain liable to contribute to the INSURED’S DEDUCTIBLE(S) as required by the relevant POLICY terms.

... [Emphasis added.]

[8] On December 23, 2009, after learning that one of the two claims had been settled, the applicant wrote to LawPRO complaining about the decision to proceed without her consent. She raised a number of specific issues. Internal LawPRO counsel responded to the applicant about her right to pursue arbitration. The LawPRO policy provided for a right of arbitration, as follows:

P. Arbitration

Subject to Part 1 Coverage B, subparagraph no. 2, in the event of a dispute between (among) the INSURED(S) and INSURER or between two or more INSUREDS, such dispute shall be decided by binding arbitration before a single arbitrator as mutually agreed upon by the parties in dispute. The INSURED(S) and INSURER each agree that the procedure to be followed in every arbitration under this condition shall be set and determined by the arbitrator appointed by the parties in dispute, and that each party shall bear its own costs. [Emphasis added.]

[9] The applicant requested arbitration. Under the policy, as a result of settlements, the applicant would be required to pay a $5,000 deductible and an annual surcharge of $2,500 for five years, totaling $17,500.

[10] By letter dated February 12, 2010, LawPRO wrote to the applicant suggesting three names of arbitrators who had previously conducted LawPRO policy arbitrations. It also outlined the usual process it followed, with hearings that were informal in nature and involved exchanging and filing arbitration briefs ten days prior to the hearing and oral submissions on the briefs at the hearing without additional viva voce evidence.

[11] What had become a difficult relationship between the parties continued to deteriorate. Correspondence between the parties continued, including requests by the applicant for further disclosure. In March 2010, the applicant had several email exchanges with the internal LawPRO counsel who was dealing with the arbitration. By email dated March 24, internal LawPRO counsel indicated once again that a particular requested document was not relevant and indicated that if the applicant did not want the arbitration, the deductible and surcharge would be applied. He referenced s. 47.1 of the Law Society Act, R.S.O. 1990, c. L.8, and By-law 6, s.11, permitting summary suspension for failure to pay the outstanding deductible under the policy. As for the claim history surcharge, counsel indicated that it would apply automatically to the next policy renewal unless the arbitration has been disposed of prior to that time.

[12] On a number of additional occasions, internal LawPRO counsel wrote to the applicant indicating an intention to move toward summary suspension if she did not promptly pursue her arbitration.

[13] Ultimately, the applicant indicated that she had no preference amongst the three names of potential arbitrators proposed by LawPRO, and requested a date in November or December 2010. LawPRO then obtained a November date for the arbitration before the Hon. Patrick Galligan.

[14] On September 29, 2010, Mr. Galligan confirmed that the arbitration hearing would take place on November 17, 2010, and set out his proposed process, which was consistent with the process set out in LawPRO’s earlier correspondence with the applicant. Mr. Galligan invited the parties to voice any objection to the process and indicated that he would hold a pre-arbitration hearing, if needed.

[15] On October 18, 2010, the applicant requested either an adjournment or a pre-arbitration hearing before Mr. Galligan to address issues between the parties. LawPRO did not agree, but, shortly thereafter, LawPRO advised that it agreed to adjourn the hearing to accommodate Mr. Galligan. The hearing was rescheduled for January 2011.

[16] Mr. Galligan held a pre-arbitration hearing by conference call on October 29, 2010. He made a pre-hearing order about a number of matters, including disclosure. He concluded that the applicant had had ample time to prepare and set a schedule for the delivery of arbitration briefs. He denied the applicant’s request for an adjournment.

[17] On November 29, 2010, Mr. Galligan sent the parties a draft arbitration agreement. The applicant did not agree with the scope of the arbitration. On December 9, 2010, Mr. Galligan withdrew from the arbitration indicating that he was in doubt as to whether a binding arbitration agreement had ever been reached between the parties. He also indicated that he did not intend to render an account for his services.

[18] In December 2010, the applicant contacted a number of potential arbitrators, one of whom was the Hon. Dennis Lane. LawPRO agreed to Mr. Lane. The hearing was re-scheduled for March 14, 2011.

[19] Up until December 2010, the applicant had been representing herself. However, in late December 2010, she sought to retain counsel. In January 2011, she retained counsel, to at least attempt to settle the dispute. What is less clear is whether it was ever intended that this counsel also act on the arbitration if the matter did not settle.

[20] The applicant’s counsel was unable to settle the dispute. An email was sent to Mr. Lane’s office on March 4, 2011, ten days before the hearing, indicating that her counsel could not represent her at the hearing and it was therefore unlikely that she would be able to proceed on the scheduled date. The applicant’s counsel also wrote to LawPRO indicating that the applicant was not to be faulted for counsel’s inability to act for her.

[21] Mr. Lane replied that he would expect a reason for the adjournment, but that the main problem was usually getting a new date. However, internal LawPRO counsel opposed the adjournment, taking the position that the applicant had already had ample time to prepare for the hearing and retain counsel, and noting the prior adjournments.

[22] On the Friday before the hearing, the applicant indicated that she was ill and Mr. Lane responded that if she was requesting an adjournment on that basis she ought to bring a doctor’s note to the hearing. A doctor’s note forms part of the record before me. However, on the evidence before me, it does not appear that it was provided to Mr. Lane or raised as an issue when the adjournment was argued the following week.

[23] In the week before the hearing, the applicant contacted many lawyers seeking to retain new counsel, including James Morton. Mr. Morton was out of the country but his assistant informed the applicant that he could meet with her before the hearing. After his return, he reviewed documents and met with the applicant.

[24] Mr. Morton attended at the hearing on Monday, March 14, 2011, and requested a short adjournment in order to properly prepare. Mr. Morton has sworn an affidavit in this application indicating that despite his best efforts, given the short period of time he had to review the matter, he was not fully briefed and prepared for the hearing.

[25] LawPRO objected to the requested adjournment. LawPRO submitted that there had been significant delays already, and submitted that it was not prepared to pay Mr. Lane’s fee for the adjournment, having already paid for Mr. Galligan. Counsel to LawPRO submitted that another adjournment would be prejudicial to LawPRO.

[26] Mr. Lane denied the adjournment. He found that the matter had dragged on for a prolonged period of time and that the applicant had ample time to retain counsel if she had acted with diligence. Further, on discussion with Mr. Morton, Mr. Lane concluded that Mr. Morton had sufficient acquaintance with the issues and that it would not be unfair to proceed. This assessment was confirmed over the course of the hearing.

[27] The hearing then proceeded. Mr. Lane permitted Mr. Morton time to meet privately with his client to prepare her to testify, and she then testified at the hearing. This was permitted despite the LawPRO’s prior communication to the effect that these hearings ordinarily proceed with no viva voce evidence.

[28] By decision dated March 18, 2011, Mr. Lane found against the applicant. In reaching his decision, he addressed the continuing issue of disclosure requests made by the applicant, finding that her disclosure requests revealed a “level of distrust that went beyond the reasonable.” He considered the question of why LawPRO decided to settle without the applicant’s consent, concluding that LawPRO acted reasonably in doing so. He further found that the amount of the settlements were not unreasonable.

[29] This application was commenced in April 2011. It was commenced in Ottawa for no apparent reason.

[30] The applicant asked that enforcement of payment of the deductible and surcharge be held in abeyance pending the court’s determination of her application. LawPRO agreed to this request.

[31] Almost four years later, in January 2015, LawPRO brought a motion to dismiss this application for delay. On that motion, despite her request in 2011 that enforcement be held in abeyance, the applicant attested that LawPRO had not taken timely steps to seek payments from her. The applicant submitted that LawPRO was therefore barred by the limitation period. That position was obviously untenable. However, there had been some communications between the parties regarding the brief of documents used at the arbitration, including in 2015, explaining at least some of the delay. The application was transferred to Toronto but not dismissed for delay.

Analysis

[32] The applicant frames the issue on her application as follows: whether she was treated fairly and equally in the arbitration process in the sense that she was afforded an opportunity to present her case or to respond to LawPRO’s case. If not, the second issue is whether this Court should exercise its discretion to set aside the Award.

[33] In oral argument, the applicant’s counsel focused on Mr. Lane’s denial of the applicant’s request for an adjournment, and Mr. Lane’s alleged acceptance of LawPRO’s preferred procedural approach for the conduct of the hearing.

[34] The applicant relies upon section 19 of the Arbitration Act, 1991, S.O. 1991, c. 17, which provides as follows:

19(1) In an arbitration, the parties shall be treated equally and fairly.

(2) Each party shall be given an opportunity to present a case and to respond to the other parties’ cases.

[35] Section 19 confers a right to a fair process, not to a particular substantive outcome. The parties agree that the following passage from Hercus v. Hercus, [2001] O.T.C. 108 (Ont. S.C.J.), at para. 75, correctly describes the duty of procedural fairness:

It is settled law that the right to a fair hearing is an independent and unqualified right. Arbitrators must listen fairly to both sides, give parties a fair opportunity to contradict or correct prejudicial statements, not receive evidence from one party behind the back of the other and ensure that the parties know the case they have to meet. An unbiased appearance is, in itself, an essential component of procedural fairness. [Citations omitted]

[36] The applicant must lead clear evidence of unequal or unfair treatment: Cawthorpe v. Cawthorpe, 2010 ONSC 1389, 319 D.L.R. (4th) 746, at para. 62. Courts will only interfere with an arbitral award in limited circumstances, as enumerated in section 46 of the Arbitration Act.

Adjournment request

[37] An arbitrator’s decision regarding whether to grant or refuse an adjournment is a discretionary decision, and as such is entitled to considerable deference. It is “only in the rarest of cases that the court would intervene because of such a decision and only if it reaches the conclusion that the [decision maker] proceeded on a wrong principle.”: Senjule v. LSUC, 2013 ONSC 2817 (Div. Ct.), at para. 21, citing Re Amourgis and Law Society of Upper Canada (1984) 1984 1872 (ON SC), 12 D.L.R. (4th) 759 (Ont. Div. Ct.), at p. 761.

[38] The arbitrator was obliged to consider the request in light of the circumstances, having regard to the right of the applicant to a fair hearing weighed against the obvious desirability of a speedy and expeditious hearing. When balancing these two factors, the right to a fair hearing must be the paramount consideration: Morgan v. Land Surveyors Assn. (Ontario) (1980), 1980 1661 (ON SC), 28 O.R. (2d) 19 (Ont. Div. Ct.), at p. 22.

[39] I find that Mr. Lane did consider the adjournment request on this basis. He considered relevant factors and specifically considered fairness to the applicant, concluding that it would not be unfair to the applicant to proceed.

[40] The applicant relies heavily on the decision in Webster v. Wendt, [2001] O.J. No. 622 S.C.J.), however, that case arose in markedly different circumstances. In Webster, through some oversight, applicant’s counsel did not advise his clients of the date of the hearing when it was scheduled. As a result, one client learned of the date only six days before the hearing and another learned of the date after it commenced, when he was out of the country. The arbitrator refused an adjournment and the hearing commenced without that party present. There were a series of adjournment requests as the hearing moved forward, all of which were refused. The Court found that the applicants were not even given proper notice of the hearing date itself, let alone a fair hearing.

[41] The applicant raised a number of issues regarding Mr. Lane’s decision not to adjourn.

[42] The applicant submitted that LawPRO wrongly told Mr. Lane that it had paid Mr. Galligan. The evidence in this regard is unclear. Mr. Galligan said, when he withdrew, that he did not intend to charge. What happened thereafter does not form part of the record. LawPRO may have concluded that it was appropriate to pay him. Internal LawPRO counsel swore an affidavit in this proceeding and could have been cross-examined on this point. Ultimately, it was for the applicant to establish the requisite facts. On the record before me, I am not prepared to conclude that counsel made a false statement in this regard.

[43] The applicant also argues that LawPRO wrongly told Mr. Lane that the applicant had obtained two prior adjournments. This submission is based on a pre-hearing email that was copied to Mr. Lane. However, Mr. Lane’s reasons for decision on the adjournment do not proceed on the basis that the applicant had been granted prior adjournments. He refers to the overall length of time, and there is no doubt that it had “dragged on.”

[44] The applicant further submitted that her counsel’s recent withdrawal was a factor in favour of an adjournment. Yet it was not determinative, and Mr. Lane was aware of it. He satisfied himself that new counsel was able to fairly proceed. In that regard, the applicant points to one question that her new counsel was unable to answer. However, it was not material and the applicant was present if an answer was needed.

[45] The applicant also submitted that she wanted to call a witness and asked LawPRO to have the witness there, but the witness was not present. However, it does not appear that this was put forward to Mr. Lane as a reason for an adjournment.

[46] Taking all of the applicant’s submissions into account, I conclude that Mr. Lane made no legal error and exercised his discretion considering relevant factors in keeping with the applicant’s right to be treated fairly and equitably. His decision is entitled to considerable deference. I conclude that s. 19 was not breached in this regard.

Procedural approach

[47] The applicant submits that the terms of the arbitration were forced on her by LawPRO, creating a procedural unfairness contrary to her right to be treated equally and fairly. However, after a detailed review of the extensive record before me, I do not come to that conclusion. At an early stage, LawPRO indicated what the usual approach was to these arbitrations and the applicant did not dispute that general approach.

[48] Further, under the arbitration clause in the policy, the procedure to be followed in the arbitration was to be determined by the arbitrator. The conduct of the hearing itself shows that Mr. Lane did not consider himself constrained by LawPRO’s preferred process. That process did not include viva voce evidence, yet the applicant was permitted to testify viva voce.

[49] There were certain focused issues of dispute that permeated the pre-hearing dialogue between the parties. Those issues were disclosure, a related alleged conflict of interest and a related dispute about the scope of the arbitration. LawPRO disputes the relevance of the pre-hearing conduct, yet it did not lead to an unfair hearing.

[50] On the subject of disclosure, in the course of the pre-arbitration steps, the requests made by the applicant quickly moved from reasonable to unreasonable. Mr. Lane specifically dealt with disclosure in his Award. In that regard, Mr. Lane observed that the applicant’s disclosure requests revealed a “level of distrust that went beyond the reasonable”.

[51] The alleged conflict of interest formed part of the disclosure requests and, similarly, had moved to the stage of being unreasonable before the arbitration commenced, given the responses that had already been made in this regard.

[52] On the scope of the arbitration, the applicant submitted that she sought to arbitrate not only the decision to settle without her consent, but also the grounds upon which LawPRO appeared to base its decision to settle. However, it is apparent from the Award that Mr. Lane addressed the basis for the decision to settle.

[53] A number of the process issues now raised by the applicant were not even the subject of a request to Mr. Lane, let alone a denial by him.

[54] One aspect of the pre-hearing conduct deserves special mention. Once the relationship between these parties became difficult, LawPRO did begin to refer to the prospect of an interim suspension in an effort to get the applicant to move her arbitration forward in a timely way. Toward the end of the pre-hearing dealings between the parties, when internal counsel to LawPRO was clearly exasperated by the applicant, his references to the interim suspension power became more aggressive. While the applicant submitted on this application that she was intimidated by this course of conduct, the record suggests the opposite. During the lengthy period of time that she chose to be self-represented, she was tenacious in pursuing what she saw to be her legal rights. I am unimpressed by this course of conduct by LawPRO. However, I do not conclude that it led to a breach of section 19 of the Arbitration Act in the particular circumstances of this case.

[55] I have considered all of the concerns raised by the applicant regarding the hearing process and conclude that there was no breach of s. 19 of the Arbitration Act. It is therefore not necessary to consider whether or not this is an appropriate case to set aside the Award.

Decision on application

[56] Despite the able argument of the applicant’s counsel, this application is dismissed.

[57] If the parties are unable to agree on costs, the respondent shall make its submissions by delivering brief written submissions together with a costs outline by June 6, 2016. The applicant may respond by delivering brief written submissions by June 27, 2016.

Justice W. Matheson

Date: May 18, 2016