Commission des services financiers de l’Ontario

Neutral Citation: 2006 ONFSCDRS 59

FSCO A05-000493

BETWEEN:

JASMIN THEVASAGAYAM

Applicant

and

SECURITY NATIONAL INSURANCE CO./ MONNEX INSURANCE MGMT. INC.

Insurer

DECISION ON EXPENSES

Before: William J. Renahan

Heard: Written submissions received at the Offices of the Financial Services Commission of Ontario in Toronto on February 24, 2006.

Appearances: David S. Wilson for Mrs. Thevasagayam at the hearing and Robert Zeigler at the expense hearing Lorraine Takacs for Security National Insurance Co./Monnex Insurance Mgmt. Inc.

Issues:

The Applicant, Jasmin Thevasagayam, was injured in a motor vehicle accident on April 24, 2004. The parties settled all issues in dispute except entitlement to and amount of expenses in the arbitration proceeding and the disposition of the arbitration proceeding. Mrs. Thevasagayam asks for an order that she is entitled to expenses of the arbitration proceeding.

Jurisdiction:

Ms. Takacs argued that I do not have jurisdiction because an arbitrator has not exercised and cannot exercise a statutory power of decision where the parties have resolved the issues in dispute and therefore there is no proceeding and no jurisdiction to award expenses.

Section 282(11) of the Insurance Act provides:

(11) The arbitrator may award to the insured person such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations to the maximum set out in the regulations. R.S.O. 1990, c. I.8, s. 282 (11).

A "proceeding" is defined in section 4 of the Dispute Resolution Practice Code (Fourth Edition) as:

"proceeding" means a matter requiring the exercise of a statutory power of decision.

I agree with Arbitrator Leitch's comment in Khoury and Zurich¹ that a statutory power of decision arises and a matter becomes a "proceeding" when a person files an Application for Arbitration with the Financial Services Commission of Ontario.

Under section 20(2) of the Insurance Act, an arbitrator has exclusive jurisdiction to determine all questions of fact and law that arise in any proceeding before him or her and under section 279(4) every arbitrator shall determine issues before him or her by order.

Where a statute gives a decision maker the exclusive jurisdiction to determine all questions of fact and law that arise in a "proceeding", I do not see how a party can end the "proceeding" unilaterally. In my view, the Application for Arbitration continues to be a "proceeding" until it is ended by an order of an arbitrator. Such an order is normally an order that an insurer pay certain benefits to the applicant, or an order dismissing the application for arbitration or an order granting permission to the applicant to withdraw his application for arbitration. Until an arbitrator makes an order, the matter is a "proceeding" and the arbitrator has exclusive jurisdiction under section 20(2) of the Insurance Act to determine all questions of fact and law that arise in the proceeding, including the authority under section 282(11) to determine entitlement to expenses of the arbitration proceeding.

The criteria I should consider in determining entitlement to expenses of the arbitration proceeding are set out in section 12 of Ontario Regulation 664, R.R.O. 1990, as amended. I consider each of the five criteria in order.

1. Each party's degree of success in the outcome of the proceeding.

It is difficult to assess each party's degree of success where they have resolved all other issues for a number of reasons. Parties enter settlements voluntarily because each party assesses that it is in their best interests to enter the settlement. In some cases it appears contrary to the definition of settlement to say that one party won and the other lost. In Anishinaabe Child and Family Services, Inc. v. Canadian Broadcasting Corporation² the Court stated that where parties reach a settlement as between themselves, the court should be very slow to make an award of costs against one of the parties unless there are compelling reasons.

One reason parties resolve claims is to avoid a hearing on the merits. To then ask an arbitrator to consider the merits in order to determine who achieved the best result is again contrary to the notion of a settlement. By settling, it should be unnecessary to determine the parties' rights on the merits. In McClellan v. Powassan Lumber Company³, the Court was asked to award costs in a property dispute between neighbours concerning water rights after both neighbours had sold their properties to a common purchaser. Middleton J. wrote:

The parties by their action in selling the property have made it entirely unnecessary that the rights in the litigation should ever be determined. Costs are in truth incident to a determination of the rights of the parties, and ought not to be made themselves the subject matter of the litigation. When the merits for any reason cannot be determined, there ought not to be a pretended investigation of the merits for the purpose of awarding costs.

Middleton J. noted that this was not a refusal to adjudicate upon the issue of entitlement to costs, but an exercise of "judicial discretion."

Another reason it is difficult to assess the merits of a settlement is that the parties may settle for economic reasons unrelated to the merits of the case. An insurer may offer a settlement because it is less expensive than successfully defending an application after its legal expenses are taken into account. Similarly, an insured may accept a settlement, which is less than the full value of his claim, because it is more cost effective to accept the settlement than pay his lawyer the costs of successfully prosecuting his claim at a hearing.

On the other hand, parties incur expenses in the prosecution and defence of an application for arbitration and expenses are an issue which requires determination. In Frankel v. Manitou Corp.⁴ Ground J. analysed the details of the settlement and of the claims made and the various offers of settlement to determine that the applicant had achieved a substantial degree of success and was entitled to costs.

In this case, the parties made submissions concerning the strengths of their respective cases and the reasons it settled. The submissions were sometimes contradictory and not supported by evidence. I only considered the facts which the parties agreed to and the evidence of the claims made. The parties did not file any settlement documents.

In this proceeding, Mrs. Thevasagayam claimed entitlement to income replacement benefits after May 16, 2005. Security claimed a repayment of income replacement benefits from March 5, 2005 to May 16, 2005. At the opening of the hearing on October 31, 2005, Security agreed to reinstate income replacement benefits. However, Mr. Wilson asked for an order that Security pay the income replacement benefits. Ms. Takacs resisted the request. I delivered an oral ruling that Mrs. Thevasagayam was entitled to a decision on whether she was entitled to income replacement benefits and that I would hear evidence, including the settlement agreement, on the issue. I provided written reasons for the decision on February 14, 2006. By letter dated February 21, 2006, Mr. Wilson advised the Commission that Mrs. Thevasagayam would not proceed with her request for an order for income replacement benefits.

On the claim for income replacement benefits, Mrs. Thevasagayam was successful in obtaining the reinstatement of income replacement benefits. Security was successful in resisting Mrs. Thevasagayam's application for an order that it pay income replacement benefits.

Mrs. Thevasagayam's other claims were for housekeeping expenses after March 4, 2005 at $100 per week, interest on lump sum payments of income replacement benefits that Security made to Mrs. Thevasagayam in arrears and a special award. These claims were settled by Security paying Mrs. Thevasagayam $6,750. The parties advised me this amount included housekeeping at $48.01 per week for housekeeping and nothing for a special award.

The last substantive issue was resolved at the resumption of the hearing on March 13, 2006. Ms. Thevasagayam claimed $138.64 for interest on overdue income replacement benefits. The issue was resolved by Security paying Mrs. Thevasagayam $105.

2. Any written offers to settle made in accordance with subsection (3).

The parties did not advise me of any offers to settle.

3. Whether novel issues are raised in the proceeding.

Other arbitrators have decided that an applicant is entitled to ask for an order for weekly benefits where the insurer has reinstated benefits and that the issue is determined on the evidence. I came to the same conclusion. In Khoury, the arbitrator discussed the jurisdiction of an arbitrator to award expenses of the proceeding where the parties had resolved all other issues.

4. The conduct of a party or a party's representative that tended to prolong, obstruct or hinder the proceeding, including a failure to comply with undertakings and orders.

Mr. Wilson did not comply with Rule 70 of the Dispute Resolution Practice Code (4th Edition) when he purported to withdraw the issue of Mrs. Thevasagayam's entitlement to an order for income replacement benefits. Otherwise, the parties made allegations of misconduct, but did not adduce evidence to support those allegations.

5. Whether any aspect of the proceeding was improper, vexatious or unnecessary.

The motion for a ruling on whether Mrs. Thevasagayam was entitled to ask for an order that she was entitled to income replacement benefits was unnecessary given the fact that she did not proceed with that claim when I ruled that she was entitled to a decision on entitlement.

Having regard to the five criteria, I exercise my discretion in ordering that each party bear their own expenses of the arbitration proceeding.

Lastly, since all the issues are resolved, I order that the Application for Arbitration is dismissed.

April 18, 2006

William J. Renahan Arbitrator

Date

Financial Services Commission of Ontario