David A. Gresty v. Howard Mutual Fire Insurance Company, 2002 ONFSCDRS 48

Neutral Citation: 2002 ONFSCDRS 48

FSCO A99-001152

BETWEEN:

DAVID A. GRESTY

Applicant

and

HOWARD MUTUAL FIRE INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before:

Susan Sapin

Heard:

By telephone conference call on January 11, 2002.

Appearances:

James E. S. Allin for Mr. Gresty

Barry J. Sullivan for Howard Mutual Fire Insurance Company

The Applicant, David A. Gresty, was injured in a motor vehicle accident on November 3, 1997. Three days prior to the arbitration hearing scheduled to begin February 26, 2001, the parties settled Mr. Gresty's disputed claims for statutory accident benefits under the Schedule,¹ except for his legal expenses. Mr. Gresty presented an account for legal fees of $12,082.50 plus $845.77 for GST, and disbursements of $6,877.63 including GST, for total arbitration expenses of $19,805.90. The Insurer agrees Mr. Gresty is entitled to his expenses, but disputes the amount.

The issue in this further hearing therefore is:

What is the amount of expenses to which Mr. Gresty is entitled in respect of this arbitration proceeding?

Mr. Gresty is entitled to fees and disbursements in the amount of $19,449.35, including GST.

Under the Expense Regulation,² an arbitrator may award either party its expenses of the arbitration proceeding according to the following criteria:

Each party's degree of success in the outcome of the proceeding.
Conduct of the insurer or the insured person that tended to shorten or facilitate the proceeding or that tended to prolong, obstruct or hinder the proceeding....
Whether the proceeding or any position taken by the insurer or the insured person during the proceeding was manifestly unfounded, frivolous, vexatious, fraudulent or an abuse of process.
The degree of complexity, novelty or significance of the factual or legal issues raised in the proceeding.
Any written offers to settle...
Any other matter related to the proceeding that the arbitrator considers relevant to the issue of whether an award of expenses is justified.

These criteria can also be useful in assessing the amount of expenses.³

Under the Schedule, legal fees may be awarded for all services performed before an arbitration, including preparation for, attendance at and services subsequent to, an arbitration hearing.

Legal Fees

Mr. Gresty broke down his claim for legal fees as follows: Time Summary up to conclusion of the settlement:

James Allin, solicitor

52.9 hours @ $150.00 =

$ 7935.00

Law Clerk

39.5 hours @ $45.00 =

1777.50

Letters Out

114 letters x .1hr @ $150 =

1710.00

Letters In

44 letters x .1hr @ $150 =

660.00

Total Fees

$12,082.50

7% GST

$845.77

Grand Total fees plus GST

$12,928.27

Mr. Gresty also claimed legal fees for 3 hours preparation time and 1 hour of hearing time on behalf of his counsel for the expense hearing, at $150 per hour, for a total of $600.

The Insurer does not dispute the 52.9 hours Mr. Allin spent in the matter, but argues that the $150 per hour fee is not justified because the Insurer agreed to resolve the case rather than litigate it. It also disputes the $45 per hour claimed on behalf of a law clerk, and the amounts claimed under the headings "Letters Out" and "Letters In."

Mr. Allin submitted that the terms of settlement represented a complete success for Mr. Gresty, as the issues in dispute at the arbitration, including arrears, quantum and ongoing entitlement to income replacement benefits (IRBs), overpayment, collateral benefits and entitlement to vocational rehabilitation, were all resolved in Mr. Gresty's favour. These issues were complex, and a four-day hearing involving ten witnesses which was ready to proceed was averted, resulting in a significant cost saving to both parties. Mr. Allin further submitted that the $150 hourly rate is justified in this case because he is an experienced counsel, called to the Bar in 1979, the skills brought to bear by experienced counsel in SABS cases contribute to efficient and cost-effective dispute resolution at FSCO, and because the $150 hourly rate would ensure that applicants have access to senior and qualified counsel.

In assessing legal fees, Rule 76 and Section F of the Dispute Resolution Practice Code⁴ provide that the maximum amount an arbitrator may award is to be calculated using the hourly rates established under the Legal Aid Act for professional services in civil matters before the Ontario Court (General Division) (now Superior Court of Ontario), with an extra allowance for experienced counsel up to a maximum of $150 per hour, if the arbitrator feels such a higher amount is justified.

Having considered the criteria set out in the Expense Schedule and the arguments of the parties, I conclude that the $150 hourly rate is justified in this case, and that Mr. Gresty is entitled to be paid for the legal fees for Mr. Allin as claimed, or $7,935.00.

I further find that Mr. Gresty is entitled to the amounts claimed for "Letters Out" and "Letters In," at .1 hr per letter. I note that Mr. Allin did not docket time for each letter sent or for reviewing letters received. I find .1 hr per letter to be a conservative estimate. I heard no evidence that the number of letters was not accurate. I heard no argument that Mr. Allin's "averaged" method of accounting for the cost of drafting or reviewing letters resulted in an unreasonable expense. I therefore allow this expense as claimed at $2,370.

With respect to the 39.5 hours preparation time claimed on behalf of the law clerk at $45 per hour, the Insurer argued that the services of a law clerk should be considered to be part of a lawyer's overhead, and so is included in the solicitor's hourly rate. It further argued that an hourly rate of $20 (the Legal Aid rate is $23) was appropriate in this case.

I do not accept that the fee for a law clerk is part of a lawyer's overhead. This may be true of secretarial or clerical staff, but a law clerk brings specialized legal training and expertise to a case, and does work a lawyer would otherwise be required to do at a higher hourly rate. The Legal Aid Tariff recognises separate hourly rates for law clerks. Furthermore, as Rule 76 of the Code does not distinguish between law clerks and lawyers when allowing for legal fees in accordance with the Legal Aid Tariff, and allows a maximum hourly rate of $150 if justified, I find I am not limited to the hourly rate of $23 for a law clerk as set out in the Tariff. The hourly rate for a law clerk must simply be reasonable and justified.

The 39.5 hours spent by the law clerk on the file is identified only as "arbitration preparation" by the law clerk in the account, and is not broken down further into actual tasks. The account defines the preparation as "medical brief, documents brief chronology, brief of authorities, summonses, witness scheduling, etc." Mr. Allin pointed out that, with 22 years of experience, his law clerk was very competent and contributed to the efficient administration of Mr. Gresty's case, a factor recognised as important by arbitrators in awarding expenses for a law clerk. Mr. Allin submitted that an hourly rate of $45 for a law clerk has been accepted by FSCO.⁵

Mr. Allin further argued that the expense for his law clerk was reasonable in light of the fact that his own ratio of preparation time to hearing time (assuming the hearing took up the four days scheduled and assuming eight-hour hearing days) was 52.9:32 or 1.6 : 1, well within the range of 1:1 to 4:1 that arbitrators have found to be reasonable.⁶ The inference, presumably, is that the assistance of a law clerk enabled Mr. Allin to use his own time more effectively. Adding the law clerk's hours to Mr. Allin's results in a ratio of 2.9 :1, arguably also a reasonable ratio.

It is true that, rather than a line-by-line analysis of dockets, arbitrators have preferred a "global" approach to assessing expenses, expressed through the somewhat approximate method of assigning a ratio of preparation time to hearing time, expressed either in terms of hours or days, in order to arrive at a reasonable assessment of expenses. The low end of the range refers to less complex cases; the high end to more complex ones, among other factors. I find this to be a consideration when determining whether the expenses claimed for a law clerk were reasonable in this case. Although the hearing did not proceed, it is reasonable to predict, based on the issues in dispute and the number and type of witnesses scheduled, that the four days assigned was accurate. In light of Mr. Allin's own low ratio of preparation time to hearing time, the relative complexity of Mr. Gresty's case, and the successful outcome to him, I find that the 39.5 hours spent by the law clerk is reasonable.

I further find that the hourly rate of $45 is reasonable. Although I heard no evidence about what Mr. Allin paid his law clerk, or at what rate he charged her services to Mr. Gresty, I find that Rule 76 of the Code affords me the discretion to consider an hourly rate greater than the $23 set out in the Legal Aid Tariff given the law clerk's 22 years of experience. I find that $45 per hour is reasonable in this case, and allow the fees claimed of $1,777.50 on her behalf.

Disbursements

Of the $6,453.20, net of GST, claimed for disbursements, the Insurer disputed only the expenses claimed for conduct money for witnesses, on the basis that, as the witnesses were not required to attend a hearing, they are responsible for re-paying the conduct money and their failure to do so should not be an expense assessed against an Insurer. The Insurer also disputed the cost of the initial and final reports of the Applicant's accountants.

Conduct money is an allowable expense under the Code, regardless of whether the hearing took place or not, and on that basis I find the Applicant entitled to this expense. The Insurer is entitled to a credit for any conduct money returned.

Accountant's report

From the invoices submitted by the Applicant's accountant, Rich Rotstein Limited, filed, it appears that the accountant billed for his work as follows: (amounts include GST)

Initial report

$1,647.80

Update schedules

454.75

Review and analyse Insurer's report; additional calculations

$1,417.75

Total accountant's fees

$3,520.30

Subsection 5(5) of the Schedule provides that the maximum that may be awarded to an expert for the preparation of a report is $1500. Experts may be paid for more than one report, including an "update."⁷

Given that quantum of IRB was very much in dispute in this matter, and that even after several attempts to calculate the amount by the Applicant's accountant, the matter was only resolved when the parties agreed to split the difference, the accountant's reports in this matter were clearly crucial to the settlement negotiations and the Applicant's ultimate success. I was presented with no compelling reason for why the accountant should not be paid for his work. I find $1500 for the first report, $454.75 for the first update and $750 for the second update to be reasonable. These amounts include GST. The total amount to which Mr. Gresty is entitled for this expense is $2,704.75. The total amount of disbursements allowed therefore is $6,062.08.

I allow legal fees for two hours preparation time for this straightforward one-hour expense hearing, at $150 per hour, for a total of $450.

The total amount of fees and disbursements assessed and allowed is $19,449.35, including GST.

March 18, 2002

Susan Sapin Arbitrator

Date