Neutral Citation: 2002 ONFSCDRS 55
FSCO A00-000441
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
GERALD CARR
Applicant
and
LOMBARD GENERAL INSURANCE CO. OF CANADA
Insurer
ASSESSMENT OF EXPENSES
Before:
Susan Sapin
Heard:
March 12, 2002, at the Offices of the Financial Services Commission of Ontario in Toronto.
Written submissions were received on March 12, 2002.
Appearances:
Robert H. Littlejohn for Mr. Carr
Albert M. Conforzi for Lombard General Insurance Co. of Canada
Issues:
The Applicant, Gerald Carr, was injured in a motor vehicle accident on January 5, 1999. In a decision dated September 11, 2001, I denied his claim for statutory income replacement benefits (IRBs) under the Schedule1 and allowed his claim for housekeeping expenses.
I determined that Mr. Carr was entitled to his arbitration expenses. Mr. Carr claimed arbitration expenses of $35,691.16, including legal fees and disbursements. Lombard General Insurance of Canada (Lombard) disputed the amount of expenses claimed by Mr. Carr and requested that they be assessed.
The issue in this further hearing therefore is:
- What is the amount of expenses to which Mr. Carr is entitled in respect of this arbitration proceeding?
Result:
- Mr. Carr is entitled to arbitration expenses of $18,424.74.
ASSESSMENT OF EXPENSES
Criteria for awarding expenses:
Subsection 282(11) of the Insurance Act, R..S.O. 1990, c. I.8, allows expenses to be awarded to either the insured person or the insurer:
282.—(11) The arbitrator may award, according to the criteria prescribed by the regulations, to the insured person or the insurer, all or part of such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations, to the maximum set out in the regulations.
The criteria for awarding expenses are found in subsection 12(2) of Regulation 664, as amended by Ontario Regulation 464/96, under the Insurance Act, which states as follows:2
12.- (2) An arbitrator may award expenses to an insurer or insured person under subsection 282(11) of the Act if the arbitrator is satisfied that the award is justified, having regard 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, including failure to comply with undertakings or orders.
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.
If the insurer or insured person requests, 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.
Arbitrators must consider these legislated criteria and apply them to both parties, having regard to the intent and purpose of the overall statutory scheme. They must balance the applicant's need for access to relatively inexpensive, speedy and informal adjudication of disputes regarding no-fault benefits with a "relatively mild deterrent to undeserving claims or undesirable behaviour."3
The above criteria can also be useful in assessing the amount of expenses.4
As pointed out by Arbitrator Renahan in Dobkina and Commercial Union Assurance Company, (FSCO A98-001232, October 31, 2000), however, "a criterion which may justify an award of expenses in favour of a party, may also justify a reduction in the assessment. For example, although the ultimate success of an applicant might justify an award of expenses in his or her favour, minimal success might justify a reduction in the amount of the assessment."
Legal fees:
Under the Schedule5 legal fees may be awarded for all services performed before an arbitration, including preparation for, attendance at and services subsequent to, an arbitration hearing.
Mr. Carr claims the following legal fees, as outlined in a Bill of Costs prepared by Mr. Littlejohn:
Robert Littlejohn
99.2 hrs @ 175
$17,360.00
Legal assistant
22.2 hrs @ 60
1,332.00
Junior legal assistant
18.1 hrs @ 35
633.50
Total fees:
$19,325.50
GST
1,352.78
Total fees plus GST:
$20,678.28
The hours claimed include both Mr. Littlejohn's preparation for and attendance at the arbitration. Neither legal assistant attended the hearing, which lasted two and half days, or 18.5 hours.
In assessing legal fees, Rule 76 and Section F of the Dispute Resolution Practice Code6 provide that the maximum amount an arbitrator may award is to be calculated using the hourly rates established under the Legal Aid Act f or 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.
Mr. Carr argued that he is entitled to the total amount of his legal fees as claimed, because his case was novel and complicated, and the hours claimed on behalf of his counsel reflect the substantial amount of work involved in obtaining the documents necessary to meet the burden of proof in this case. He further argued that the hourly rate claimed was justified because his counsel was senior and had previously been awarded the $150 maximum hourly rate at FSCO.
Lombard argued that both the hourly rate claimed on behalf of Mr. Littlejohn and his preparation time are excessive, and that the hourly rates for a law clerk and a junior legal assistant should not exceed $20-$25 and $10-$15 per hour, respectively. It maintained that in this particular case Mr. Littlejohn's conduct of the case was unprofessional and inefficient and the maximum rate of $150 for senior counsel was not justified.
Hourly rate:
I accept Lombard's arguments and find that neither the hourly rate nor the preparation time claimed are reasonable in this case. Much of the evidence presented in this case was irrelevant and unhelpful, and confused rather than clarified the issues.
Counsel's continued interruptions despite repeated admonitions were disruptive. I find an hourly rate of $110 to be reasonable.
Preparation time:
Section 3 of the Schedule states that legal fees may be awarded for all services performed before an arbitration and for the preparation of an arbitration. As this does not include services performed up to and including mediation, I disallow Mr. Carr's claim for legal fees for the 17.9 hours spent by Mr. Littlejohn up to March 15, 2000, the date of mediation.
I deducted a further six hours identified as time spent, among other things, reviewing transcripts and in discussions with tort counsel, which are not relevant to the arbitration. That leaves 65 hours spent on the file, including hearing time of 18.5 hours.
With respect to the amount of time spent by counsel on a file, arbitrators do not conduct a line-by-line analysis of dockets in order to determine what is reasonable in any given case. Rather, in addition to the criteria noted above, 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. Arbitrators have found ratios of preparation time to hearing time ranging from 1:1 to 4:1 to be reasonable, with the lower ranges reserved for less complex cases.7
In Mr. Carr's case, the ratio of allowable preparation time to hearing time works out to 46.5:18.5 hours, or 2.5:1. I find this to be excessive in the circumstances. Although Mr. Carr's employment status was not straightforward, it was not particularly complex. It became "complicated" only because Mr. Carr made contradictory statements and was secretive about his business arrangements. Having arranged his financial affairs so as to avoid tax liability in Canada, Mr. Carr was faced with the consequence that he was unable to provide any independent, reliable or objectively verifiable documentary or other evidence to substantiate his claim that he earned income as an employee, and, as a result, that he was entitled to an IRB.
I find a ratio of preparation time to hearing time of 2:1 to be reasonable in this case, and allow 55.5 hours combined preparation and hearing time for counsel. At $110 per hour, this amounts to total counsel fees of $6,105. Mr. Carr is entitled to legal fees for the preparation and attendance at the expense assessment in the amount of 3 hours at $110, for $330. Total legal fees allowed for counsel therefore are $6,435.
Fees for legal assistants
The Legal Aid rate for law clerks as referenced in Rule 76 and Section F of the Code is $23 per hour. Where the amounts claimed are disputed, I find I have no authority to award more than the amount provided for in the regulation. I did not understand Lombard to dispute the amount of time spent on the file by Mr. Littlejohn's two assistants, which together amounts to 40.3 hours. In this case, I have not included this amount in the ratio of preparation time to hearing time, above. I allow this time spent at $23 per hour, which amounts to a total of $926.90.
The total amount allowed for legal fees therefore is $7361.90. GST of seven per cent is $515.33, which brings the grand total to $7877.23.
Disbursements:
Mr. Carr claimed the following disbursements:
Legal disbursements:
$11,374.88, including GST
Mr. Carr's trip to the Bahamas:
2,782.00
Travel expenses:
856.00
Total disbursements
$15,012.88
I allowed disbursements as follows:
Legal disbursements:
$ 7,609.51, including GST
Mr. Carr's trip to Bahamas:
2,182.00
Travel expenses:
756.00
Total disbursements:
$10,547.51
Legal disbursements:
These refer to the disbursements included in the disbursement summary prepared by Mr. Littlejohn. Lombard disputes $3,000 claimed for the cost of a forensic accountant's report prepared by Colangelo Cookson Walker Inc., as well as the $1,440 for the neurological report of Dr. Warren Goldstein and the cost of various clinical notes and records and discovery transcripts, which it maintains were obtained for the purpose of Mr. Carr's tort action.
i) Experts' reports:
As the medical evidence presented at the arbitration hearing was essential to my finding that Mr. Carr was substantially disabled from the essential tasks of his pre-accident employment, I allow these expenses. Dr. Goldstein’s report was particularly helpful. The amount claimed is within the maximum of $1500 allowable for the preparation of an expert's report under subsection 5(5) of the Dispute Resolution Expenses Schedule, and I find it to be reasonable for this report.
The same cannot be said for the accountant's report, produced only on the first day of the hearing, contrary to the minimum ten days prior to the hearing required by the Code. Although I admitted the report into evidence due to the sparsity of reliable supporting evidence in this case, I did warn Mr. Carr that I would take the late filing of this report into account when considering expenses. Unfortunately, this report was based entirely on the same unverifiable source information found to be unreliable at the hearing, and directly contradicted Mr. Carr’s evidence about his employment situation. I agree with Lombard that the report did not meet the standard of an "expert" report required for the purposes of an arbitration hearing. I allow $750 for this report.
ii) Miscellaneous expenses unrelated to the arbitration proceeding
The amounts claimed as "Legal Reporting Services" ($359.60 and $198.69), "Transaction Levy: Statement of Claim" ($50), "Issue Statement of Claim" ($289) and "Filing Documents - Trial Record" ($293) are unrelated to the arbitration hearing and cannot be awarded. The total amount of disbursements allowed therefore is $7236.30, before GST. As the Application for Arbitration fee of $100 and the $19 for issuing the Summons to Witness are not subject to GST, the amount subject to GST is $7111.30. GST of seven per cent is $498.31, for a total of $7,609.51.
Mr. Carr's trip to the Bahamas:
Shortly before the hearing, Mr. Carr travelled to the Bahamas to obtain documentary evidence to support his case, including anything that would substantiate his claim that he had actually received a salary payment, a key issue at the hearing. As there is evidence that he had previously written for some of this documentation but was unable to obtain it, I find it reasonable that Mr. Carr felt he had no alternative but to attend in person. Subsection 4(4) of the Schedule permits me to award out-of-pocket expenses incurred in furtherance of the arbitration, and so I allow his airfare, transportation, meals and document expenses as out-of -pocket expenses under this section, as claimed. However, subsection 6(3) of the Schedule limits the amount that may be awarded for overnight expenses and meals related to attendance at a hearing to $150 per night. On that basis, I allow $600 for the four nights accommodation. The total amount allowed for Mr. Carr's trip is therefore $2,182.00.
Mr. Carr’s mileage expenses related to the arbitration proceeding:
Mr. Carr claimed mileage expenses of $856 at 34 cents per kilometre for travel to meet with his counsel, to attend two medical assessments and to attend the hearing.
Subsection 6(2) of the Schedule provides for a maximum of the lesser of 30 cents per kilometre or the amount incurred by a person, for attendance at a hearing. I allow this amount. I allow the amounts claimed for attendance at the two assessments and for meetings with counsel, as out-of-pocket expenses under subsection 4(4), at the rate of 30 cents per kilometre. The total amount allowed is $756.
Medical expenses:
At the expense assessment hearing, Mr. Carr asked that I consider a claim for expenses for medications and travel to his family doctor in the amount of $1458.15 presented to Lombard on October 12, 2001.
These are not arbitration expenses and I have no authority to consider them. However, in light of my finding that Mr. Carr was substantially disabled due to pain, stiffness and restricted range of motion due to his accident injuries, I would urge the parties to resolve the issue of these medical expenses, if they have not already done so.
The total amount of disbursements allowed as above is $10,547.51.
Summary:
Total fees allowed:
$7,877.23
Total disbursements allowed:
$10,547.51
Total expenses allowed:
$18,424.74
These amounts include GST.
April 12, 2002
Susan Sapin Arbitrator
Date
Neutral Citation: 2002 ONFSCDRS 55
FSCO A00-000441
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
GERALD CARR
Applicant
and
LOMBARD GENERAL INSURANCE CO. OF CANADA
Insurer
ARBITRATION ORDER
Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
- Lombard shall pay to Mr. Carr his arbitration expenses of $18,424.74.
April 12, 2002
Susan Sapin Arbitrator
Date
Footnotes
- The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended by Ontario Regulations 462/96, 505/96, 551/96, 303/98 and 114/00.
- These criteria are incorporated into the Dispute Resolution Practice Code - Third Edition (Rule 73.2 and Section F)
- Gray and Zurich Insurance Company (and upheld on appeal)
- Lacroix and Elma Mutual Insurance Company (FSCO A99-000158), February 12, 2002.
- Dispute Resolution Expenses Schedule to Ontario Regulation 464/96, under the Insurance Act.
- (Third Edition, April 15, 1997) (the "Code"); the Third Edition of the Code applies to applications for arbitration filed prior to May 31, 2001. Section F of the Code is the Schedule to the Expense Regulation.
- See Henri and Allstate Insurance Company of Canada (OIC A-007954, August 8, 1997)