Popalzai v. Co-operators General Insurance Company, 2004 ONFSCDRS 131

Neutral Citation: 2004 ONFSCDRS 131

FSCO A03-001231

BETWEEN:

ARIS POPALZAI Applicant

and

CO-OPERATORS GENERAL INSURANCE COMPANY Insurer

DECISION ON INTERIM EXPENSES

Before: John Wilson

Heard: By written submissions

Appearances: Jeffrey D. Gray for Mr. Popalzai Karen Earl for Co-operators General Insurance Company

Issues:

The Applicant, Aris Popalzai, was injured in a motor vehicle accident on November 21, 2002 and subsequently applied for arbitration. In the context of an adjournment request, I ordered that Mr. Popalzai be subject to an expense award. The only issues were as to the quantum, and whether Mr. Popalzai, or his representative should be primarily responsible for the order.

Result:

The expense order shall be payable by Mr. Popalzai.

EVIDENCE AND ANALYSIS:

Rule 72 of the Dispute Resolution Practice Code provides that arbitrators may grant adjournments "on such terms or conditions he or she considers just."

Counsel for Mr. Popalzai had requested a late adjournment based on his own schedule conflict, a conflict that apparently had to do more with an apparent lack of communication between Mr. Baradaran, the Applicant's former agent, and his current solicitor, rather than any action by Mr. Popalzai himself.

In a previous letter decision I ordered that the adjournment be granted subject to an order for costs thrown away. The only question remaining to be determined was whether Mr. Popalzai personally, or some other person should be responsible for the payment of the expense order pursuant to section 282(11) of the Insurance Act.

Traditionally in arbitrations at FSCO, it has been either of the named parties, the insured or the insurer, who can be found liable for the other's expenses. In this matter, however, there is some issue raised about the conduct of the representative, Mr. Baradaran, the former counsel, specifically a potential delay in completing the transfer of the file to Mr. Gray in time to permit him to carry on with the arbitration on the agreed dates.

Although the Commission, as an administrative tribunal and a creature of statute, has no inherent jurisdiction, subsection 23(1) of the Statutory Powers Procedure Act (SPPA), R.S.O. 1990, c. S.22, grants a mandate to control abuse. In addition, the revised section 282(11.2) of the Insurance Act, now specifically gives an arbitrator the right to hold a representative liable for costs arising from such abuses. It is in this context that an award pursuant to section 282(11.2) must be considered. That section reads as follows:

An arbitrator may make an order requiring a person representing an insured person or an insurer for compensation in an arbitration proceeding to personally pay all or part of any expenses awarded against a party if the arbitrator is satisfied that;

(a) in respect of a representative of an insured person, the representative commenced or conducted the proceeding without authority from the insured person or did not advise the insured person that he or she could be liable to pay all or part of the expenses of the proceeding;

(b) in respect of a representative of an insured person, the representative caused expenses to be incurred without reasonable cause by advancing a frivolous or vexatious claim on behalf of the insured person; or

(c) the representative caused expenses to be incurred without reasonable cause or to be wasted by unreasonable delay or other default.

Although the new provisions do not specify the type of conduct that constitutes "reasonable cause", the courts have long considered the issues raised by cost orders against lawyers or agents.

McLachlin J. stated in Young v. Young 1993 CanLII 34 (SCC), [1993] 4 S.C.R. 3 (S.C.C.):

The basic principle on which costs are awarded is as compensation for the successful party, not in order to punish a barrister. Any member of the legal profession might be subject to a compensatory order for costs if it is shown that repetitive and irrelevant material, and excessive motions and applications, characterized the proceedings in which they were involved, and that the lawyer acted in bad faith in encouraging this abuse and delay. It is clear that the courts possess jurisdiction to make such an award, often under statute and, in any event, as part of their inherent jurisdiction to control abuse of process and contempt of court. But the fault that might give rise to a costs award against Mr. How does not characterize these proceedings, despite their great length and acrimonious progress. Moreover, courts must be extremely cautious in awarding costs personally against a lawyer, given the duties upon a lawyer to guard confidentiality of instructions and to bring forward with courage even unpopular causes. A lawyer should not be placed in a situation where his or her fear of an adverse order of costs may conflict with these fundamental duties of his or her calling.

In Marchand (Litigation Guardian of) v. Public General Hospital Society of Chatham [1998] O.J. No. 527, Granger J. further clarified the type of conduct that would attract cost sanctions:

Although "bad faith" is not a requirement to invoking the costs sanctions of Rule 57.07 against a solicitor, such an order should only be made in rare circumstances and such orders should not discourage lawyers from pursuing unpopular or difficult cases. It is only when a lawyer pursues a goal which is clearly unattainable or is clearly derelict in his or her duties as an officer of the court that resort should be had to Rule 57.07.

Returning to section 282(11.2) of the Insurance Act, it is apparent that the application of this provision, as well, is contingent upon some serious default by the representative of an insurer or an insured. It is not meant to be a routine sanction for counsel or representatives whose practices offend an adjudicator. It is meant to apply to egregious cases where the conduct of a representative, if unchecked, would tend to bring the arbitration system and the administration of justice into disrepute, as enunciated in both the Young and Marchand cases.

While it is inexcusable and potentially negligent that communication of the dates set for the arbitration hearing between Mr. Baradaran and Mr. Gray apparently did not take place in an efficient and timely matter, I am not convinced that either Mr. Gray or Mr. Baradaran acted necessarily in bad faith or with the intention of causing delay or undue expense. Whatever their individual responsibility to their client may ultimately be, I do not accept that either representative should be ordered to pay the expense order pursuant to section 282(11.2) of the Insurance Act.

September 9, 2004

John Wilson Arbitrator

Date