Neutral Citation: 2003 ONFSCDRS 54
FSCO A01-000215
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
PAMELA SIMPSON
Applicant
and
ALLSTATE INSURANCE COMPANY OF CANADA
Insurer
REASONS FOR DECISION
Before:
David Leitch
Heard:
By telephone conference call on April 1, 2003.
Appearances:
David S. Wilson for Ms. Simpson
John D. Dean for Allstate Insurance Company of Canada
Issues:
The Applicant, Pamela Simpson, was injured in a motor vehicle accident on May 4, 2000. She applied for and received statutory accident benefits from Allstate Insurance Company of Canada ("Allstate" or "the Insurer") payable under the Schedule1 I have now issued three decisions, dated November 16, 2001, February 6, 2002 and March 11, 2003, dealing with disputes between the parties. The issues in this further hearing are:
Is the Applicant entitled to recover hearing expenses in respect of GST on disbursements incurred obtaining medical reports?
How does the fact that the Applicant may have recovered certain disbursements in other proceedings affect my earlier order that the same disbursements were reasonable and recoverable in this proceeding?
Result:
The Applicant is entitled to recover hearing expenses in respect of GST on disbursements incurred obtaining medical reports.
I have no jurisdiction to determine how the fact that the Applicant may have recovered certain disbursements in other proceedings may affect my earlier order that the same disbursements were reasonable and recoverable in this proceeding.
Issue 1: GST on disbursements to obtain medical reports
Allstate's counsel, Mr. Dean, maintained that the Applicant was not entitled to recover GST on fees for medical reports unless the providers of those reports had charged her GST. In support of this submission, Mr. Dean relied upon the September 23, 2002 decision of the Federal Court of Canada, Appeal Division, in the case of Her Majesty the The Queen and Riverfront Medical Evaluations Limited 2002 FCA 341. This decision affirmed a lower court ruling that the supply of medical reports to legal representatives was GST-exempt under section 2 of Part II of Schedule V of the Excise Tax Act.
Ms. Simpson's counsel, Mr. Wilson, acknowledged that GST was not charged by any of the doctors listed in the Applicant's Bill of Costs. He nevertheless stated that in accordance with a Law Society Notice to the Profession in March 1997, he was obliged to, and did, charge the Applicant GST when billing her for doctors' reports. By letter dated March 4, 2003, Mr. Wilson submitted into evidence copies of the Notice to the Profession and Revenue Canada's GST Policy Statement "as provided to the Law Society on March 12, 1997".2 The Notice to the Profession stated: "Members should review the Policy and bring their current practices into conformity with its requirements by April 1, [1997]."
With permission of the parties, I visited the Law Society's Internet Web site on April 1, 2003. I confirmed that, as of August 1, 2002, there had been no material change in what is now the Canada Customs and Revenue Agency's (the CCRA's) policy with respect to GST on fees for medical reports.
According to the CCRA's policy, a disbursement which is not subject to GST when incurred by the lawyer may nevertheless be subject to GST when billed to the client. The policy states that while a disbursement which is "incurred by the lawyer as agent of the client" retains its tax-exempt status when billed to the client, a disbursement which is "not incurred by the lawyer as agent of the client" does not retain its tax-exempt status and is subject to GST when billed to the client. The CCRA policy then lists the most common disbursements incurred by lawyers and indicates which of the two categories each disbursement belongs to. Under the heading "civil litigation", described as including proceedings before tribunals as well as courts, fees for expert reports are categorized as a disbursement "not incurred as agent" and hence subject to GST when billed to the client.
I acknowledge that, based on the evidence before me, the most recent statement of the CCRA policy relied upon by Mr. Wilson pre-dates by approximately two months the Court decision relied upon by Mr. Dean. Nevertheless, the Court decision merely confirmed the assumption already built into the CCRA policy, namely that a disbursement may be GST-exempt when incurred by a lawyer. The Court decision did not provide any basis for questioning the CCRA policy that a disbursement of the type at issue in this case is still subject to GST when billed to the client. Allstate did not provide any other reason to believe that the CCRA policy was no longer in force or that it did not apply to the present case.
I accept Mr. Wilson's statement that, as a member of the Law Society, he conducted himself in accordance with the CCRA policy. I, therefore, find that his client paid and is entitled to recover GST in respect of the disbursements incurred to obtain the medical reports referred to in my earlier decision.
Issue 2: recovery of disbursements found to be reasonable and recoverable in this proceeding but perhaps recovered in other proceedings
In a letter to me dated March 3, 2003,3 Mr. Dean stated that all of the disbursements itemized in the Applicant's Bill of Costs were recovered, in part, through the settlement of a related tort action. He maintained that the disbursements claimed in this proceeding must, as a result, be reduced by the amounts the Applicant has already recovered through the tort proceedings.
Mr. Wilson disagreed with Mr. Dean's description of the settlement as it related to his client's recovery of disbursements. He also alleged that it would be "entirely inappropriate" for me to embark upon an inquiry into confidential discussions in relation to the settlement of the tort action.
Notwithstanding these divergent positions, counsel agreed that the settlement discussions in relation to the tort action took place after the expense hearing on September 27, 2002. They further agreed that my decision that certain disbursements incurred by the Applicant were reasonable and recoverable was based on the evidence presented and arguments heard at the expense hearing on September 27, 2002. I further observe that, during the course of the hearing on that date, Mr. Dean did not ask me to issue an order requiring the Applicant to repay these disbursements to Allstate in the event she subsequently recovered all or some portion of them through other proceedings. Nor, during the course of the hearing on September 27, 2002, did Mr. Wilson make any attempt to persuade me that the disbursements in question were incurred only, or primarily, to obtain evidence in support of the Applicant's claims for statutory accident benefits and not to obtain evidence in support of her tort claims.
I acknowledge that in my decision of March 11, 2003, I retained jurisdiction over the issue of expenses. However, I retained jurisdiction primarily so that I could deal with the GST issue which had been specifically raised at the hearing on September 27, 2002 but which had, as of March 11, 2003, still not been fully argued due to intervening and ultimately unsuccessful settlement discussions between the parties. In my decision of March 11, 2003, I also noted that my finding that the disbursements in question were reasonable and recoverable was subject to Mr. Dean's argument that these disbursements were recovered, in part, in a related tort action. However, this did not mean that I would necessarily rule on Mr. Dean's argument. I note that the first time I heard about this argument was when I received Mr. Dean's letter of March 3, 2003. Had it not been for the settlement discussions between the parties, my decision on expenses would have been issued soon after the hearing on September 27, 2002, well before I received Mr. Dean's letter of March 3, 2003 and perhaps well before the settlement of the tort action.
In these rather unusual circumstances, and, of course, subject to Allstate's applying to the Director for a variation of my order, I find that I have no jurisdiction to determine how the fact that the Applicant may have recovered certain disbursements in other proceedings may affect my earlier order that the same disbursements were reasonable and recoverable in this proceeding.
April 4, 2003
David Leitch
Arbitrator
Date
Neutral Citation: 2003 ONFSCDRS 54
FSCO A01-000215
FINANCIAL SERVICES COMMISSION OF ONTARIO
BETWEEN:
PAMELA SIMPSON
Applicant
and
ALLSTATE INSURANCE COMPANY 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:
The Applicant is entitled to recover hearing expenses in respect of GST on disbursements incurred obtaining medical reports.
I have no jurisdiction to determine how the fact that the Applicant may have recovered certain disbursements in other proceedings may affect my earlier order that the same disbursements were reasonable and recoverable in this proceeding.
April 4, 2003
David Leitch
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, 114/00 and 482/01.
- Exhibit 18.
- Exhibit 19.