Neutral Citation: 1998 ONFSCDRS 98

FSCO A96-000174

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

MOHADAI HARIPERSAUD

Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Insurer

DECISION on EXPENSES ENTITLEMENT

Issue:

On March 16, 1998, I issued a decision in which I dismissed Ms. Haripersaud's claim for payment of a physiotherapy expense that she incurred with Metro Orthopaedic Rehab Clinics Ltd. (Metro). I reserved on the issue of expenses pending further submissions from the parties, which I have since received, both orally and in writing.

In my decision I concluded that the parties had settled Metro's account in April 1995, and therefore they were precluded from arbitrating that issue. I also declined Ms. Haripersaud's request for an Order compelling State Farm to pay damages for breach of the settlement agreement, on the basis that the Commission had no such jurisdiction.

I further decided, in the alternative, that although Ms. Haripersaud was the "true" applicant, and she herself "incurred" the physiotherapy expense, Metro's expenses were "reasonably available" from OHIP and were therefore excluded under subsection 75(13) of the Schedule.

The issue is this further hearing, is, therefore:

1. Is Ms. Haripersaud entitled to her expenses incurred in respect of this arbitration hearing?

Result:

1. Ms. Haripersaud is not entitled to her expenses of the arbitration hearing, with the exception of expenses incurred as a result of the Insurer's failure to produce documents, which I fix at $1,000.

The Legislation:

The discretion to award an insured her expenses is found in subsection 282(11) of the Insurance Act, which states:

The arbitrator may award to the insured person such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations to the maximum set out in the regulations. (my emphasis)

In exercising their discretion, arbitrators have generally taken the approach set out in McCormick and Economical Mutual Insurance Company,¹ namely that it is appropriate to award an applicant her expenses, win or lose, unless the application was "manifestly frivolous or vexatious, or ...the applicant's conduct unreasonably prolonged the proceedings." This approach was endorsed "in the main" by the Director of Arbitrations in the appeal decision, Calogero and The Co-operators General Insurance Company.² However, in Allison and Markel Insurance Company of Canada,³ Director's Delegate Naylor noted that "while arbitrators have uniformly accepted this general principle, they have built on the criteria set out in McCormick." She stated that the principles set out in McCormick should not be treated as fixed rules, but that other factors could be considered: "Expenses have been denied, for example, where the claim is found to have been without any merit..." The Director's Delegate also noted that expenses have been denied where applicants unduly prolonged the proceeding or misconducted themselves.

Submissions and Findings

State Farm argued that I should depart from the general rule of allowing expenses to the applicant, on three bases - jurisdiction, merits and conduct. I will deal with each argument in turn.

1. Lack of jurisdiction

State Farm submitted that I only have jurisdiction to award expenses which were "incurred" by Ms. Haripersaud personally. It suggests that although I found that Ms. Haripersaud was liable for the physiotherapy expenses that were the subject of the arbitration, the same is not true of the arbitration expenses: those, it argues, were borne exclusively by Metro, a non-party to this proceeding. It notes that Mr. Puritt described his services as "pro bono." Consequently, it submits, no expenses are payable.

I do not agree with State Farm's argument. Even if Metro agreed to fund the expenses of the arbitration, Ms. Haripersaud remains the applicant. The expenses were incurred on her behalf, and consequently she is liable for them. Any decision by Metro to waive collection of those expenses is voluntary, and does not, in my view, enure to State Farm's benefit.

2. The Merits

State Farm recognizes that it cannot recover its own expenses of the hearing because this arbitration proceeding was commenced before November 1, 1996, when the Schedule was amended to allow arbitrators to award expenses to either the insured person or the insurer. However, it strenuously opposes an award of expenses to Ms. Haripersaud, on the basis that her claim was unmeritorious. For the following reasons, I agree with State Farm.

A central difficulty in awarding Ms. Haripersaud any expenses is that not only was her claim unsuccessful, it was misguided. Ms. Haripersaud alleged that the Insurer had agreed unconditionally, in the Release signed by the parties, to pay Metro's account. But instead of seeking specific performance of the agreement in the courts, Ms. Haripersaud came to the Commission with the argument that she had set aside the agreement and was entitled to an order for damages for breach of contract, a remedy clearly outside of the Commission's jurisidiction. Her claim was, therefore, doomed even before she arrived here.

Ms. Haripersaud submits that it would be unfair to deny expenses on this basis, because she was not aware of the Release, which formed the basis of her claim for damages, until a few weeks before the hearing. Even so, there was nothing to prevent her from moving to withdraw from the Commission at that stage, thereby avoiding several unneccessary hearing days. At the very least, her counsel should have given the Insurer notice that he intended to argue this issue at the hearing, instead of introducing it for the first time in his opening submissions and thus both completely altering and significantly lengthening the course of the hearing. I strongly disagree with counsel's contention that the Release issue should have taken "no more than a day" of hearing time. Aside from the fact that the Insurer opposed its inclusion at all, the issue was hotly contested and required evidence from several witnesses⁴ whose evidence, collectively, spanned several days.⁵

Ms. Haripersaud also argues that even if the Commission does not have jurisdiction to award her damages, it still made sense for her to seek a declaration from the Commission that the Release was binding because she could later enforce that in the courts. This approach has two problems: first, I was not asked to and did not make any "declaration" of the Release's validity, except to the extent that it was necessary to determine whether the parties had made a binding agreement that resolved Metro's account and thereby precluded the issue from arbitration. The "Order Requested"⁶ by Ms. Haripersaud at the hearing went far beyond a mere declaration; she demanded that State Farm pay her $1,260 (the amount of Metro's account) plus interest, a special award, and "costs" of no less than $66,181.80. Second, any "declaration" would be nothing more than a finding that State Farm agreed to pay Metro's account, rather than an "order" for payment, and as such is not enforceable in the courts. All of which means that Ms. Haripersaud would have to relitigate the entire matter in the courts, resulting not only in further delay but in a significant duplication of time and money.

Finally, even if the issue of the Release had never come up, Ms. Haripersaud's claim arouses little sympathy. Although she got around the technical issues regarding standing raised in Adeussi and other decisions, she failed to persuade me that Metro's operation was anything other than a profit driven scheme designed to take advantage of the provisions of the Schedule. Her injury was minor and required modest treatment equally available from an OHIP facility. Nor was this a minor issue; State Farm raised it at the pre-hearing and both parties submitted considerable evidence and arguments on it at the arbitration. My decision on this issue was obiter only because the question of the Release arose shortly before the hearing as a preliminary issue.

Ms. Haripersaud emphasized that although I dismissed her application to recover Metro's account, she succeeded on other (obiter) issues, whereas State Farm failed to prove its main contention, namely that Metro's operation was a "billing scheme" operated by "rogue treatment providers." While I may not have adopted that precise terminology, I found that the arrangements between Metro and the St. Clair Dufferin Medical Centre suggest that "treatment decision are motivated more by financial profit than patient care"⁷ - hardly a flattering description of Metro's operation. I also found the physiotherapist employed by Metro (Ms. Joanne Lui, the key witness on this issue) highly unreliable because of several inconsistent statements which she made.⁸

Given the arbitrary, revenue-driven decisions made at Metro, it is little wonder that State Farm reacted poorly when it finally learned precisely how this facility operates. All the more so where, as here, the applicant sustained a minor injury that could easily have been properly treated within the OHIP regime.

3. Conduct

State Farm also argued that Ms. Haripersaud's conduct at the hearing disentitled her to any expenses. It referred, amongst other things, to her application alleging bias, and specifically that it was brought without notice⁹ and found to be completely without merit.

Ms. Haripersaud responded that although the bias application proved unsuccessful, it took less than two hours of hearing time and occupied "only" 30 pages of transcript. In addition to being factually incorrect,¹⁰ her submission entirely misses the point. An allegation of bias is a very serious matter. As the Director of Arbitrations noted in Kahkesh and Lloyd's Non Marine Underwriters,¹¹ "it should not be made lightly, nor as a catch-all ground for appeals."

In this case, Ms. Haripersaud alleged bias on the basis of my conduct of the hearing. Specifically, she complained that I allowed the Insurer to add new issues, reserved on a preliminary issue, made comments suggestive of bias, allowed the Insurer's counsel to speak to production problems and repeat questions in cross-examination, and inadequately censured the Insurer's conduct. I ultimately found that the allegations were completely without merit. Moreover, the trivial nature of the complaints¹² leads me to conclude that Ms. Haripersaud's application was prompted not by a well-founded belief of bias, but because her counsel was dissatisfied with various rulings¹³ - matters which are more properly addressed through the appeal mechanisms in the legislation. But no matter how spurious counsel's submissions may have been, the gravity of this allegation required considerable deliberation and detailed reasons by me,¹⁴ thus drawing time and resources away from meritorious claims before the Commission.

This is not to say that a bias application is never warranted. Counsel are expected to vigorously pursue their clients' cause and safeguard their rights. Where appropriate, this may include raising concerns about bias. But allegations such as the ones made here, brought without notice and utterly lacking in merit, are wasteful of resources and disrespectful of the tribunal. In an appeal from an order dismissing an application for judicial review on the grounds of bias, the British Columbia Court of Appeal¹⁵ made these comments on the seriousness of the issue:

This case is an exemplification of what appears to have become general and common practice, that of accusing persons vested with the authority to decide rights of parties of bias or reasonable apprehension of it without any extrinsic evidence to support the allegation. It is a practice which, in my opinion, is to be discouraged. An accusation of that nature is an adverse imputation on the integrity of the person against whom it is made...It ought not to be made unless supported by sufficient evidence to demonstrate that, to a reasonable person, there is a sound basis for apprehending that the person against whom it is made will not bring an impartial mind to bear upon the cause. As I have said earlier, and on other occasions, suspicion is not enough...

Although the Applicant there relied on different grounds in support of her application for bias, the principle that bias applications should not be made carelessly or on frivolous, unsubstantiated grounds applies equally here. In these circumstances, I agree with State Farm that this should have some bearing on the issue of expenses.

A further example of discourteous conduct arose during submissions on the issue of expenses. These submissions were carefully arranged by me in advance. I first obtained the parties agreement to hear submissions by teleconference on Wednesday, May 13th. By letter dated March 26, 1998, approximately six weeks in advance, I confirmed the appointed date, and advised:

Any party who wishes to provide written submissions must deliver them to the Commission and the other party by no later than Wednesday, April 29th. If either party wishes to respond to submissions it has received, it must deliver its response to the Commission and the other party by no later than Wednesday, May 6th.

I will not consider any written submissions received outside of the time frames set out above. (emphasis in original)

Despite these very clear instructions, Mr. Puritt failed to respond to State Farm's submissions in writing, but instead, at the teleconference on May 13th, spent a great deal of time reading from and discussing several lengthy cases which he had not disclosed in advance. His submissions took State Farm by surprise and prolonged the teleconference significantly. When confronted with my letter requiring this material in advance, Mr. Puritt neither acknowledged his error nor apologized for his misuse of time. I found this attitude highly disrespectful, especially because during the hearing Mr. Puritt frequently expressed moral outrage over alleged misconduct by State Farm.

As I noted earlier, because this application was begun after the amendments to the Schedule regarding expenses, I have no authority to grant the Insurer its expenses. I do, however, have discretion under section 282(11.2) of the Insurance Act to order an assessment against Ms. Haripersaud if I find that she commenced an arbitration that was frivolous, vexatious, or an abuse of process. For the reasons set out above, I might have made such an order. However, in my decision, I also noted concerns regarding the Insurer’s conduct; it attempted to resile from its agreement with the Applicant and then failed to produce documents which it undertook to provide at the pre-hearing. That these documents were ultimately of little relevance to the merits of this case does not excuse State Farm from its obligation to honour such undertakings; otherwise, insurers would regularly ignore their obligations in the hope that the documents might ultimately be found to be of minimal relevance.

Under these circumstances, I find that each party should bear its own costs of the proceeding, with one exception. During the hearing I ordered that the Insurer pay any expenses incurred as a direct result of its failure to produce Ms. Haripersaud’s tape-recorded statements in a timely fashion, regardless of the outcome of the case. That order stands. On the basis of the limited information I received regarding the associated expenses, I fix this amount at $1,000. If it has not already done so, State Farm should also pay for the cost of any transcripts made of these statements.

Order:

1. State Farm shall pay Ms. Haripersaud $1,000 in expenses, plus the cost of any transcripts of her statements.

Deena Baltman

Arbitrator

Date

Present at the Hearing:

Ms. Haripersaud's Representative: Jeffrey D. Puritt, Barrister and Solicitor

State Farm’s Representative: Harry J. Brown, Barrister and Solicitor

Footnotes

1. 1October 2, 1991), OIC A-000139
2. 2(February 13, 1992), OIC P-000251
3. 3(August 21, 1996), OIC P-002131
4. 4Including the Applicant, Ms. Singh (State Farm's adjuster) and Ms. Handy (the manager of Metro)
5. 5See my comments at pp.16-17 of the Decision.
6. 6In her factum filed at the hearing, para.134.
7. 7Decision, p.30
8. 8As I noted in my decision, I attach no significance to the fact that the Insurer called Ms. Lui; it had little choice, given her conflicting statements and Ms. Haripersaud's failure - or reluctance - to call her.
9. 9In my decision (p.14) I noted that Ms. Haripersaud failed to give reasonable notice, causing delay and inconvenience to the Insurer, several witnesses, and this tribunal.
10. 10The bias application was raised at 10:00 a.m. and was not disposed of until 2:30 p.m., thus consuming most of the day. This does not include the time needed to formulate and write my reasons, which I released later. The application also occupied 68 pages of transcript. (Transcript, March 4, 1997, pp. 1-68)
11. 11(August 19, 1992), OIC P-000378
12. 12For example, counsel maintained that I should have ruled immediately in his client's favour on a preliminary issue, instead of reserving, as I did, in order to hear relevant evidence on the matter.
13. 13In its submissions on the bias application, State Farm described it as "almost intimidation." (Transcript, March 4, 1997, p.67)
14. 14Decision, pages 13-23.
15. 15Adams v. Workers' Compensation Board 42 B.C.L.R. (2d) 228 (C.A.). These comments were recently quoted with approval by Madame Justice Chapnik in Muscillo Transport Ltd. V. Ontario (Licence Suspension Appeal Board) 1997 CanLII 12317 (ON CTGD), [1997] O.J. No. 3062.