Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2003 ONFSCDRS 65

Appeal P02-00024

OFFICE OF THE DIRECTOR OF ARBITRATIONS

ROBERT L. WELSH

Appellant

and

ECONOMICAL MUTUAL INSURANCE COMPANY

Respondent

Before:

Stewart M. McMahon

Representatives:

David Morin for Mr. Welsh

Gordon L. Robson for Economical

Hearing Date:

April 14, 2003 by telephone conference call

APPEAL ORDER ON A PRELIMINARY ISSUE*

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

Mr. Welsh’s request to amend his Notice of Appeal is allowed on the terms set out in the accompanying decision.

April 23, 2003

Stewart M. McMahon Director’s Delegate

Date

REASONS FOR DECISION

1. NATURE OF THE ISSUE

Following an arbitration decision dated August 16, 2002, each of the parties filed a Notice of Appeal in a timely fashion. Approximately four months later, Mr. Welsh asked for leave to amend his Notice of Appeal to challenge a portion of the order he had not initially appealed. Economical Mutual Insurance Company (“Economical”) opposes the request.

II. BACKGROUND

Mr. Welsh was injured in a motor vehicle accident on February 8, 1998. He submitted claims for various benefits pursuant to the SABS-1996.¹ Ultimately, a number of these disputes were submitted to arbitration. The issues included a medical benefit, a rehabilitation benefit, and the calculation of income replacement benefits (“IRBs”). Mr. Welsh’s entitlement to an IRB was not contested.

The Arbitrator dismissed the claim for the medical benefit. Mr. Welsh appealed this portion of the order. The Arbitrator allowed the claim for the rehabilitation benefit. Economical appealed this aspect of the order. The Arbitrator’s ruling on the IRB issue is the subject of this decision, and deserves a little more in the way of background.

Mr. Welsh was self-employed as a contractor. Following the accident he continued to operate the business, but incurred additional labour costs to replace the tasks he could no longer manage. In addition, he claimed that he had to scale back his operation, and thereby suffered a loss of opportunity.

The combined effect of s. 6(1) and s. 7(1)2i of the SABS-1996, fixes the amount of the insured’s IRB at 80 per cent of his pre-accident weekly income, subject to a maximum of $400. Based on these sections Mr. Welsh’s weekly benefit is approximately $350. However, s. 6(5) provides that “the insurer shall add to the amount of the income replacement benefit payable to the person 80 per cent of the losses from self-employment incurred as a result of the accident.”

Mr. Welsh claimed that all of the additional labour costs he incurred should be treated as a post-accident losses. He also argued that his lost opportunities should be characterized as post-accident losses. Finally, he argued that all of his losses should be added to his basic IRB, and these additional amounts are not limited by the $400 cap imposed by s. 7(1)2i. Economical disputed these claims. It conceded that the additional labour costs should be included as post-accident expenses, but argued they were not losses, in and of themselves. It also argued that the SABS-1996 did not compensate for lost opportunity. Finally, it argued that s. 7(1)2i limited an insurer’s potential exposure for IRBs, irrespective of the size of post-accident losses. The Arbitrator preferred Economical’s arguments on each of these points.

Initially, Mr. Welsh did not appeal this aspect of the Arbitrator’s decision. However, approximately four months later he asked for leave to amend his Notice of Appeal. Mr. Welsh is not seeking to challenge the Arbitrator’s rejection of his argument concerning the characterization of his additional labour costs, or the rejection of his lost opportunity theory. However, he submits that the Arbitrator erred in concluding that the provision for an increase in the level of IRBs, to account for post-accident losses, is subject to the $400 cap.

The timing of subsequent events plays some part in my reasoning and, accordingly, I will briefly review the major steps taken in the interim between the release of the decision, and the request to amend the Notice of Appeal.

Each party’s Notice of Appeal was served and filed by mid-September 2002, within a few days of the 30-day time limit set out in Rule 52.1 of the Dispute Resolution Practice Code (the “Code”). The Responses were filed by the end of September. Mr. Welsh’s written submissions in relation to his appeal were filed in early November. Economical filed its submissions on both appeals on January 16th. On January 17th Mr. Welsh sought leave to amend his Notice of Appeal.

III. ARGUMENTS and ANALYSIS

Both parties argued the matter on the basis that leave to amend a Notice of Appeal was governed by Rule 52.2 which stipulates that the Director of Arbitrations may extend the time for requesting an appeal if he is satisfied there are reasonable grounds for granting the extension.

In my view, because Mr. Welsh met the initial requirement of filing his Notice of Appeal within 30 days, he does not have to rely on Rule 52.2. This case involves an amendment to an existing appeal, not the filing of a new appeal. However, Rule 52 is a useful starting point because, if the Director has a broad discretion to grant an extension of the time to file an initial Notice of Appeal, it follows that he has at least as broad a discretion to allow a party to amend an existing appeal, even if it involves a fresh challenge. The real question is – what factors should be considered in exercising this discretion?

There are no reported cases on point in the Commission’s jurisprudence. This is not surprising, given that many of these issues are dealt with in the form of “letter decisions” that are sent only to the parties.

Some guidance can be gained by referring to the way our civil courts have addressed the issue. Rule 61.04 of the Rules of Civil Procedure stipulates that an appeal must be commenced within 30 days of the date of the order. However, Rule 61.08 provides that a notice of appeal may be amended “without leave” before the appeal is perfected, and thereafter with leave. Given the time to perfect an appeal, a party may amend its notice of appeal “without leave” even after the expiry of the 30-day time limit for initiating an appeal, and in some cases months after the release of the order. On the question of “leave,” the Court of Appeal allowed an amendment in DaCosta v. DaCosta (1992), 1992 CanLII 7749 (ON CA), 89 D.L.R.(4th) 268, on the grounds that the responding party was not prejudiced. The Court did not refer to any other factors.

I take from these Rules and the DaCosta decision, that the expiry of the time for initiating an appeal is not determinative, and that the major factor to be considered is the existence or absence of prejudice. I would add that by prejudice I mean prejudice that cannot be addressed by expenses or other relief.

Beyond the question of potential prejudice, the substance of the proposed amendment should be examined to ensure that it raises a question of law. The length of the delay may also be a factor, together with any excuse for the delay, although I would not weigh these as heavily as the existence or absence of prejudice. Frequently these factors will overlap. For example, the longer the delay, the more likely the prejudice. In my view, all the factors should be weighed together. Finally, the overriding principle set out in Rule 1.1 of the Code should be kept in mind – “These Rules will be broadly interpreted to produce the most just, quickest and least expensive resolution of the dispute.”

In this case, Mr. Welsh’s excuses for not appealing the IRB issue at the outset are weak. However, the fact that he did not immediately realize the practical implications of the order, at least explains why the issue was not included in the original Notice of Appeal. The proposed amendment raises legitimate questions about a point of law. The delay of four months is not long, particularly if it is considered in light of the fact that the request to amend the Notice of Appeal was made the day after Economical delivered its written submissions. Given that a date for oral submissions has not yet been scheduled, the proposed amendment should not significantly delay the ultimate disposition of the appeals.

The question of prejudice deserves more discussion. Despite Mr. Welsh’s limitations he has continued to operate his business. It would appear that it has generated a profit over short periods of time, but has often operated at a loss. To monitor this situation Economical has retained an accountant who meets with Mr. Welsh periodically and reviews his books. In light of the Arbitrator’s ruling that Economical’s exposure is limited to $400, the accountant had no real interest in verifying post-accident expenses once the losses justified an increase in the benefit to $400. Economical’s materials include a letter from the accountant stating that following the release of the arbitration decision he did not analyze all the expenses as carefully as he would have if he had known the $400 cap was still a live issue.

This prejudice is real and cannot be ignored. However, it can be addressed by concessions and undertakings given on behalf of Mr. Welsh by his counsel. First, Mr. Welsh has agreed that if the amendment is allowed he will limit his claim to the date of the amendment to a maximum of $400 per week. Second, Mr. Welsh has agreed that if Economical demands higher levels of proof regarding his expenses, he will not refuse to proffer such proof on the grounds that it is more than Economical’s accountant had asked for in their meetings following the release of the arbitration decision. In addition, Mr. Welsh undertakes that if the amount of his IRBs is litigated or arbitrated, he will not seek to discredit the accountant on the basis that the level of proof he has demanded has shifted from what he sought in the meetings following the release of the Arbitrator’s decision.

Weighing all of these factors, I am satisfied that the balance favours allowing the amendment.

IV. EXPENSES

Mr. Welsh agreed that if the amendment was allowed, it should be on the condition he pays Economical’s expenses thrown away. Mr. Welsh has proposed a figure of $600. Economical has proposed a figure of $1,000. In my opinion, Mr. Welsh’s proposal is a better reflection of the expenses that could have been avoided if the issue addressed in the amendment had been included at first instance. Mr. Welsh shall file proof of payment of the sum of $600 together with the amended Notice of Appeal, by May 8, 2003, failing which the amendment shall be disallowed.

Economical shall file an amended Response within 20 days. Mr. Welsh shall file supplementary written submissions by no later than June 11, 2003, and Economical shall file supplementary submissions within 14 days of receipt of Mr. Welsh’s submissions.