Neutral Citation: 2003 ONFSCDRS 5

FSCO A01-000333

FINANCIAL SERVICES COMMISSION OF ONTARIO

BETWEEN:

LORNA HOWDEN

Applicant

and

PEMBRIDGE INSURANCE COMPANY (PAFCO INS. CO.)

Insurer

DECISION ON EXPENSES

Before:

John Wilson

Heard:

December 18, 2002, at the Offices of the Financial Services Commission of Ontario in Toronto.

Appearances:

David S. Wilson for Ms. Howden

Grant R. Dow for Pembridge Insurance Company (Pafco Ins. Co.)

Issues:

The Applicant, Lorna Howden, was injured in a motor vehicle accident on October 5, 1998. In a decision dated October 16, 2002, I dealt with her claims for statutory accident benefits under the Schedule.¹ I made the following orders, while reserving on the issue of expenses:

Pembridge shall pay to Ms. Howden the income replacement benefits due to her post-104 weeks, plus accrued interest on all outstanding amounts.
Pembridge shall pay to Ms. Howden a special award of 50 per cent of the outstanding benefits, including accrued interest.
Pembridge shall pay to Ms. Howden $363 as fulfilment of its outstanding production agreement made prior to the hearing.

The issue in this further hearing is:

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

Result:

Ms. Howden is entitled to her expenses in this matter.

EVIDENCE AND ANALYSIS:

This proceeding has been a multi-stage process, with several hearings, and pre-hearings. It was a complex case that involved many days of hearings scattered over months and years. Ultimately, Ms. Howden was successful in her claim, and, indeed, the evidence given at the hearing vindicated the position she took on preliminary matters such as her application for interim benefits. The only matter in which she was not ultimately successful was in her request to re-open the hearing to introduce a new issue.

The criteria for an order of expenses are set out in section 73 of the Dispute Resolution Practice Code (the Code). Subsection 73.1 establishes the jurisdiction of an arbitrator to award expenses, while subsection 73.2 reflects the principles for an award, as set out in the Expenses Regulation. ( Regulation 664 R.R.O. 1990 as amended)

Subsection 73.2 reads as follows:

The adjudicator will consider the criteria referred to in the Expense Regulation found in Section F of the Code. These criteria are:

a) each party's degree of success in the outcome of the proceeding;

b) conduct of the insurer or the insured person that tended to prolong, obstruct or hinder the proceeding, including failure to comply with undertakings or orders;

c) whether the proceeding or any position taken by the insurer or the insured person was manifestly unfounded, frivolous, vexatious, fraudulent, or an abuse of process.

d) the degree of complexity, novelty or significance of the factual or legal issues raised in the proceeding;

e) at the request of either party, any written offer to settle made in accordance with Rules 74 and 75, having regard to the outcome of the proceeding;

f) any other matter related to the proceeding that the adjudicator considers relevant to the issue of whether an award of expenses is justified.

There have been no settlement offers tendered pursuant to Rules 74 and 75. Ms. Howden enjoyed complete success on all substantive issues. As well, I found, in making a special award, that the position taken by the Insurer with regard to Ms. Howden's educational qualifications and transferable skills was manifestly unfounded.

By all normal criteria, it is clear that Ms. Howden should receive her expenses from all levels of this action. There is also no issue that Mr. Wilson should not receive the maximum rate of $150 per hour.

The Insurer, however takes issue with both Ms. Howden's entitlement to expenses and with the amount that she is claiming.

Although some arbitrators have used a simple multiplier of the hearing time, as a yardstick to set expenses in some cases, it would be inappropriate to use such an approach in this matter given the unique twists and turns of the case. Nor is it appropriate to do a line-by-line assessment of Mr. Wilson's expenses as billed. I prefer, however to deal generally, with some of the Insurer's objections to Mr. Wilson's claimed expenses, while acknowledging my initial finding of the Insurer's obligation to pay Ms. Howden's expenses in this matter.

The Insurer has claimed, inter alia, that Ms. Howden unnecessarily prolonged the proceeding, pointing specifically to the time taken by Mr. Wilson in his cross-examination of the Insurer's witnesses, including Dr. Siegel. It also points to the number of objections made by Mr. Wilson to the Insurer's question during both examination-in-chief and cross-examination, as an example of time-wasting.

While Mr. Wilson was exceptionally thorough in his cross-examination, and took up a significant part of the tribunal's time in hearing this matter, it is hard to argue with the success of his strategy.

As a result of both his diligent research and questioning, Mr. Wilson obtained very significant concessions from Dr. Siegel that went to the root of the Insurer's case. Likewise, his cross-examination of Mr. Addams-Webber was, on the whole, beneficial to his case and was effective in bringing the credibility of his expert opinions into question.

The same would appear to apply to his cross-examination of Ms. Robinson, which triggered the revelation of previously undisclosed notes of her assessment of the Applicant.

While arbitration is designed to be "quicker, less expensive, and less formal" (Introduction to the Code), it is also designed to be fair and to allow each party to bring out all the relevant evidence supporting his or her case.

It is clear that without a tenacious cross-examination on behalf of Ms. Howden, important evidence would not have been before this tribunal. Unless evidence is clearly inadmissible or repetitive, or the questioning or conduct improper, an adjudicator in an adversarial process should not attempt to second-guess or interfere with the conduct of a party to an arbitration. I find that there is no convincing reason for me to do so at this time either.

I find, therefore, that the time taken by Mr. Wilson in cross-examination, and in the conduct of his case, was, in the context of this arbitration, reasonable.

The Insurer also challenges some small charges which pre-date the filing for arbitration. While it is highly questionable whether all mediation expenses are recoverable, it is reasonable to anticipate that some compensable activity will take place prior to the filing for arbitration. In this case, in retrospect, it must have been apparent that, given the positions taken by the Insurer, the mediation would not resolve the matter.

Since mediation is a necessary pre-condition to arbitration, I see no reason why reasonable ancillary expenses and preparation for the failed mediation should not also be applicable to the arbitration and thus subject to an expense order.

More obviously, of course , there is the preparation for the filing and the creation of the application for arbitration document itself. Indeed, since there is a significant penalty for the filing of an arbitration that is frivolous or vexatious, it is anticipated that counsel will thoroughly review a file prior to filing to avoid such consequences, a review which must take place prior to the filing for arbitration.

Consequently I find that the specific expenses claimed which were incurred prior to the filing of the application for arbitration were reasonable and necessary to the arbitration and should be paid. The only time which could not be compensable is that directly occupied by the mediation proceeding itself. I would therefore deduct two hours from the bill of expenses as a disallowance of the time spent in mediation.

The Insurer also challenged the use of outside counsel by the Applicant, and the charges associated with the retainer. Given the need to keep arbitrations on a timely basis, it is anticipated that counsel will, if unable to appear due to time restrictions, transfer the file to others in their firm, or if no alternate person is available in-house, retain outside counsel.

While the process may involve a learning curve for the outside counsel, some additional expense to allow for timely proceedings may be permissible. Having examined the dockets for outside counsel, I do not find them extraordinary, nor do they appear to duplicate work already done by Mr. Wilson.

While I note that Mr. Isaacs of Laxton Glass & Swartz, the outside counsel engaged by Ms. Howden was called to the bar in 1996, and has less experience than Mr. Wilson, I am prepared to concede him the rate of $150 per hour that he has claimed. Rule 78 of the Code gives a discretion to an arbitrator "(W)here an adjudicator is satisfied that a higher amount for legal fees to an insured person is justified."

The Expense Regulation uses the term "expenses" instead of the more usual word "costs" in the context of a reimbursement of legal expenses incurred by a party to an arbitration. While "costs" generally refers to the practice of providing an allowance to a successful party, based on known scales or tariffs, to indemnify him or her for some of the expenses incurred, "expense" seems to have a more simple meaning. The Canadian Oxford Dictionary describes "expense" as:

Cost incurred; payment of money . 2. A: costs incurred in doing a particular job etc. (will pay your expenses) b. an amount paid to reimburse this.

Clearly, the legislature in using the word "expense" meant to indemnify a party for its actual incurred expenses up to any statutory limit.

I am satisfied that this is an appropriate case for the higher rate, since Ms. Howden has incurred the cost of engaging outside counsel. The actions of the Insurer in unreasonably withholding payment of her benefits necessitated the retainer of counsel. From the date of his call to the bar, Mr. Isaacs does not appear to be a neophyte in legal matters. It is, therefore, appropriate that the Insurer pay his expenses at the rate claimed.

I find, as well, that it was reasonable for the counsel to attempt to bring the application for interim benefits on at the time scheduled for a pre-hearing. Subrule 33.1(d) of the Code specifically provides that pre-hearings are an appropriate forum for:

dealing with procedural and preliminary issues and requests for interim relief or interim expenses.

Consequently, the Insurer's suggestion that time was wasted by bringing the interim application in the context of the pre-hearing does not hold water.

The Insurer also expressed an unwillingness to pay the GST amounts paid by the Applicant for reports. In support of this, Mr. Dow produced a Tax Court case, (Riverfront Medical Evaluations Ltd. v. Canada [2001] T.C.J. No. 381) which he claimed stood for the proposition that GST was not payable on medical-legal assessments.

While the case related to Riverfront's own liability for GST on the medical elements of its assessment work, I find that it does not bear on the obligation of an insurer to reimburse an applicant for appropriate costs of reports, including GST, where it has been assessed. It certainly does not stand for the proposition that reports by non-medical practitioners, such as Mr. Katz, are not subject to GST.

Having regard to expert reports, it is apparent that the FSCO limit of $1,500 per report has been exceeded in some of the expenses claimed. With the exception of those exceeding the statutory limit, however, all such reports should be paid in full. Consequently, the disbursements listed for Mr. Katz will be reduced by $1,178.85 including GST.

Mr. Katz also billed $230 for a treatment plan. Although I find that the Insurer's response virtually invited the creation of such a document, Mr. Katz is not a health practitioner, nor is he entitled to file a treatment plan. It is therefore neither necessary nor compensable.

In total, I find that the Bill of Expenses ($40, 483.93) should be reduced by $1,745.95, including GST. In addition, I would allow Mr. Wilson a further two hours time for the hearing of the expense matter ($300 plus GST). Consequently, Pembridge shall pay the amount of $39,058.98 to Ms. Howden as her assessed expenses in this matter.

January 23, 2003

John Wilson Arbitrator

Date