Neutral Citation: 2007 ONFSCDRS 139 FSCO A03-000041

BETWEEN:

BRENDA LEE Applicant

and

CERTAS DIRECT INSURANCE COMPANY Insurer

DECISION ON EXPENSES

Before: Suesan Alves Heard: Written submissions received by March 12, 2007 Appearances: Gordon Good for Ms. Lee Ryan M. Naimark for Certas Direct Insurance Company

Issues:

The parties agree that Ms. Lee is entitled to her arbitration expenses, but disagree on the amount that Certas should pay. Ms. Lee therefore requested an assessment of expenses.

The issue in this further hearing is:

What is the amount of Ms. Lee’s assessed expenses?

Result:

Ms. Lee’s arbitration expenses are assessed at $40,571.55 for legal fees, GST on fees of $2,434.29 and $12,823.70 for disbursements, and GST $763.41

Amount of Fees:

Background

Ms. Lee was injured in a motor vehicle accident on January 8, 1999. In a decision dated June 15, 2006, I dealt with her claims for statutory accident benefits under the Schedule.¹ I determined that Certas was obliged to pay Ms. Lee $7,200 in relation to her claim for pre 104-week benefits, that she was entitled to post 104-week income replacement benefits; interest on overdue amounts; and a special award. I remained seized of the issues of interest and expenses.

Counsel advised that they were able to agree that Certas should pay Ms. Lee her arbitration expenses, but were unable to agree on the amount. Counsel also advised that there was a dispute concerning the amount of interest, which they subsequently resolved. This decision deals solely with the amount of Ms. Lee’s arbitration expenses.

The Bill of Expenses:

Ms. Lee claimed $44,780.71 for fees, GST of $2,686.84 on those fees, disbursements of $16,993.95 and GST of $1,013.63 on disbursements. These amounts are the combined total of a second revised bill of expenses and the subsequent submission of disbursements incurred in calculating the interest award. I accept the submission made by Mr. Good, counsel for the Applicant, as to the reasons for the revisions.

Following a hearing which took place during nine days over approximately two and a half months, the Applicant claimed fees for 241 hours of hearing and preparation time at the rate of $150 per hour for senior counsel; 94.5 hours for a junior lawyer at $73.87 per hour and fees for a law clerk of 33 hours at $45.00 per hour.

Counsel for the Insurer submitted that the fees were excessive and the services of junior counsel and of a law clerk were unnecessary. He submitted that there were perhaps 50 hours of hearing time and a motion for which preparation time and motion time were billed together.

He submitted that it was appropriate to allow a ratio of 1:2 hours of hearing time to preparation time in this case, and attribute those hours to senior counsel at a rate of $110 per hour.

Certas disputes the hourly rates for fees of senior counsel and of the law clerk, the number of hours of preparation time expended, the need to retain junior counsel and some of the disbursements.

Law:

Section 282(11) of the Insurance Act gives an arbitrator the discretion to award all or part of the expenses a party incurs in respect of an arbitration as may be prescribed in the regulations, to the maximum set out in the regulations.

For the reasons given by the Director of Arbitrations in Pembridge Insurance Company and Howden,² the criteria which govern the issue of expenses in this arbitration are the degree of success, the existence of offers to settle, the novelty of the issues, the conduct of the parties and their representatives, and whether any aspect of the proceeding was improper, vexatious or unnecessary.³

In this case I find the relevant criteria are the Applicant’s degree of success, the Offers to Settle and the Insurer’s non-compliance with a production Order.

The number of hours:

In determining the number of hours of preparation time, arbitrators have historically used the Legal Aid Tariff guidelines as a reference point, or allowed a ratio of between one and four hours of preparation time for every hour of hearing time.⁴

Arbitrators have also concluded that such a yardstick is too crude a device on occasion to determine the reasonableness of fees claimed, particularly when additional time spent in preparation is reflected in decreased time spent in a formal arbitration hearing. For example in Argirovski and Allstate Insurance Company of Canada (FSCO A98-000816, March 14, 2000), Arbitrator Palmer stated: “Efficient use of the Commission's time for hearings should be encouraged, not discouraged by setting inflexible ratios for preparation to hearing time.”

In this case, I find the ratio of between one to four hours of preparation time in relation to hearing time would be inappropriate because counsel co-operated to reduce the amount of hearing time, because of the complexity of the case, the Applicant’s success, the Applicant’s Offers to Settle, and the Insurer’s non-compliance with a production order as detailed below.

In this case, there were also instances where counsel were able to co-operate, and during the course of the hearing, agree on the evidence of two witnesses and save hearing time. This was commendable. One of these witnesses was the family physician, often a key witness in cases where the Applicant alleges that he or she is disabled. However, in shortening the hearing time, the number of hours available to be used as a yardstick was shortened. Removing the doctor from the witness list also meant that his witness fee and preparation time were technically no longer payable under the Dispute Resolution Expenses Schedule, as is detailed below.

Complexity

Counsel for the Insurer submitted that this was a simple case, however, I did not view it in this manner. Counsel for the Insurer relied on Schihl and Canada Life Casualty Insurance Company (FSCO A97-000566, July 13, 2000). In that case, Arbitrator Evans, as he then was, described a hearing involving a claim for post-104 week benefits which lasted 1.5 days, as “not one which involved multiple, complex issues.”

Claims, including claims for post 104-week benefits, may well present with different degrees of complexity. I found Ms. Lee’s case factually complex. She had been injured in two motor vehicle accidents. She had a complex pre-accident and post-accident medical history. The Insurer raised multiple causation issues concerning pre-existing, co-existing and post-accident events and conditions, as well as credibility issues. The hearing was conducted over nine days which spanned a period of about two and a half months.

In this case, the Insurer required extensive productions of the Applicant and mounted a vigorous defence. It was entitled to do so. However, the Applicant was required to spend more time to obtain those documents and review them. It should come as no surprise that the Applicant’s preparation time would therefore be more extensive.

Success

The Applicant was completely successful at the arbitration.

Offers to settle

The Applicant made two Offers to Settle, and the Insurer made one Response to an Offer to Settle, within the meaning of section 76 of the Dispute Resolution Practice Code—Fourth edition, Updated October 2003. I find that the Applicant enjoyed greater success at the arbitration than she would have obtained under either of her Offers to Settle or under the Insurer’s Response to her first Offer to Settle.

The Applicant’s first Offer to Settle was made on January 14, 2004 and was open until the commencement of the hearing, unless earlier withdrawn in writing. The Offer was made about two months after a pre-hearing, and shortly before the hearing which was scheduled to commence on January 26, 2004. At that time, the Applicant offered to settle the arbitration for $90,000 inclusive of interest, together with arbitration expenses to be agreed upon or assessed. The hearing was adjourned during the settlement discussion to July 2004.

The Insurer responded to the Applicant’s first Offer by way of a letter dated January 16, 2004. In that letter, counsel noted that Certas had now paid Ms. Lee income replacement benefits up to the 104-week mark, plus interest, and that in addition the Insurer offered to pay $20,000 plus costs as agreed or assessed in exchange for a dismissal of the arbitration and a full and final release for income replacement benefits in relation to the January 9, 1999 and June 16, 2002 motor vehicle accidents.

The Applicant made a second Offer to Settle on July 12, 2004, in which she offered to settle the arbitration in exchange for reinstatement of her income replacement benefits. This Offer was made four days before the hearing commenced and expired five minutes after the hearing commenced.

The Applicant was completely successful in the arbitration. Certas was ordered to pay Ms. Lee $7,200 which Certas had incorrectly deducted as collateral benefits from her pre 104-week income replacement benefits. In addition, Certas was ordered to pay Ms. Lee post 104-week benefits, interest and a special award.

Counsel for the Applicant submitted that the Insurer had an opportunity to avoid the additional costs of a hearing by accepting either of her offers. Instead, it put her to the cost of a hearing. Counsel for the Applicant submitted that under these circumstances, the Insurer should pay for the costs she has incurred in obtaining the result she did at a hearing, to the extent that I can do so under the Regulations. I agree with counsel for the Applicant that this is an important consideration in this case.

The Financial Services Commission of Ontario provides an alternate dispute resolution forum in which parties are encouraged to settle their disputes. While all of the relevant criteria in determining the amount of Ms. Lee’s expenses favour the Applicant, I find that Ms. Lee’s Offers to Settle in particular justify an increase in the ratio of preparation time to hearing time.

Conduct

I am required to consider 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.

In this case, the pre-hearing arbitrator ordered Certas to determine whether it intended to rely on any surveillance at the latest by October 28, 2003 and to produce forthwith any surveillance upon which it intended to rely by that date. Certas produced an edited surveillance videotape on December 24, 2003, and a complete copy of the videotapes in January 2004, approximately three months late. Certas did not provide an explanation for its delay in complying with the order.

I accept the submission of counsel for the Applicant that Certas’ delay in complying with the Order of the pre-hearing arbitrator caused him to expend further time in preparation, and caused the Applicant’s experts to expend further time in reviewing the surveillance videos before the hearing. In the decision, I concluded that “For the most part, the surveillance shows Ms. Lee doing things she has stated she was able to do, such as lifting 10 pounds, even before the surveillance was conducted.”

Conclusion on the number of hours

I accept that the amounts of time docketed by senior counsel, Mr. Simpson, and by the senior law clerk were in fact expended. I find it was reasonable for the Applicant to use their services. I accept that the hearing would have taken longer without the assistance of junior counsel. I also accept that it was more economical to use Mr. Simpson’s services and those of a senior law clerk than to have these services rendered by senior counsel. Having regard to the above criteria and all of the circumstances of this case, I find the number of hours claimed reasonable and allow them. I have allowed those hours at the rates claimed in relation to the services provided by senior counsel and by the senior law clerk. In the case of Mr. Simpson, I have varied the rates for the reasons set out below.

Hourly rates

Senior counsel

Counsel for the Applicant claims an hourly rate for his services in the amount of $150 based on his experience. Counsel for the Insurer submitted that a reasonable hourly rate in this case was $110.

Rule 76.1 permits an arbitrator to allow an hourly rate of up to $150 for the Applicant’s legal fees “where an adjudicator is satisfied that a higher amount for legal fees to an insured person is justified.”

For the following reasons I am satisfied that the higher rate claimed by counsel for the Applicant is justified and exercise my discretion to increase the fees of senior counsel to $150 per hour.

Counsel for the Insurer relied on the Schihl and Canada Life Casualty Insurance Company (FSCO A97-000566, July 13, 2000). In that case, Arbitrator Evans, as he then was, noted that the range in fees which arbitrators have allowed to applicants’ counsel has been “fairly wide: $100,⁵ $110,⁶ $125⁷ and $150.⁸” He concluded that an hourly rate of $110 was appropriate for experienced counsel in relation to a claim for post-104 week benefits which lasted 1.5 days, noting that the case was not one which involved multiple, complex issues.”

In Tustin, Arbitrator Palmer reasoned as follows:

In order to award the $150 hourly rate an adjudicator need only be “satisfied” that a higher amount for legal fees is “justified.” In my view, the $150 hourly rate can be awarded equally in circumstances where the claim is complex and requires superior skills of representation or in circumstances where an experienced advocate has attended on a hearing, leaving a sizeable gap between his or her fees per hour and the hourly rates accorded under the Legal Aid Act. This provision facilitates access to justice for all applicants and their access to experienced counsel.

I agree with Arbitrator Palmer that a higher rate is appropriate in either of these circumstances.

In this case I find both of these circumstances are present. Counsel for the Applicant is an experienced counsel who presented his case ably and efficiently. Counsel for the Applicant was called to the Bar in 1982. He is a member and director of the Ontario Trial Lawyers’ Association, and practices exclusively in the area of personal injury litigation, including claims for statutory accident benefits. I also accept that there is a sizeable gap between the fees for senior counsel and those payable under the Legal Aid Act. I find the maximum hourly rate of $150 the Applicant claimed for senior counsel is justified and appropriate in this case

Junior counsel

Counsel for the Applicant retained Mr. Simpson to assist him with research, review of documents, drafting of facta and other documents and to assist him at the arbitration hearing. At the hearing, I was informed that Mr. Simpson had been called to the Bar immediately before the hearing commenced in 2004. Accordingly, I allow his services prior to the hearing at the rate of $23 per hour, the rate payable for an articling student under the Legal Aid Act. Given the complexity of the case, the extensive productions Certas required and the duration of the hearing, I find it was reasonable and cost effective to employ the services of an articling student to provide that assistance.

During the course of the hearing Mr. Simpson also performed research and provided assistance to senior counsel. I allow his services during those periods, to a total of 15 hours, at the rate of $73.87 per hour. However, much of his time at the hearing appeared to be spent taking notes. While it was reasonable to have someone available to do so, given the anticipated two week duration of the hearing, I find those services should be paid at the rate of an articling student. In the result, the Applicant is entitled to payment of 79.5 hours of Mr. Simpson’s time at $23 per our, and 15 hours at the rate of $73.87 per hour.

Senior Law clerk

Counsel for the Applicant claimed an hourly rate for his senior law clerk with 21 years of experience of $45 per hour. Counsel for the Insurer submitted that $23 was appropriate.

In Gresty and Howard Mutual, (FSCO A99-001152, March 18, 2002), Arbitrator Sapin concluded that an arbitrator has a discretion to increase the hourly rate of a law clerk upwards from the $23.00 set out in the Legal Aid Tariff. She held that $45 per hour was reasonable for a law clerk with 22 years of experience. For similar reasons, I exercise my discretion to increase the fee as requested and allow the services of Mr. Good’s senior law clerk at the rate of $45 per hour.

Disbursements:

The Applicant claimed disbursements of $16,993.95 and GST of $1,013.64 on those disbursements, a total of $18,007.59. The Insurer disputed several of the disbursements claimed by the Applicant. My findings in relation to the disputed items are as follows:

I allow the photocopies as claimed, based on the extensive productions which the Insurer required, the number and size of the briefs which were prepared by the Applicant for the arbitration, and that these were docketed.

I allow Dr. MacDonald’s preparation time at $500, the maximum permitted, and $600 for his attendance at the hearing. The disallowed amounts are $655 and the GST is reduced by $39.30.

As noted earlier, counsel were able to co-operate during the course of the hearing and avoid calling Dr. Maddeford, the Applicant’s family physician, thereby shortening the hearing. Dr. Maddeford had cleared his schedule, made himself available and prepared for the hearing. The Applicant incurred the expense in respect of his attendance. However, section 5(4) of the Dispute Resolution Expenses Schedule only permits me to award payment for preparation and a witness fee where the witness testifies at the hearing.

Ironically, the parties’ efforts to shorten this proceeding, place the Applicant in the position of incurring a financial loss with respect to a disbursement I accept that she has incurred. I nevertheless encourage Certas to pay Dr. Maddeford’s account. The disallowed amount is $853 and the GST is reduced by $51.18.

I allow Dr. Delaney’s preparation time at $500 and the sum of $880 for her attendance at the arbitration hearing. The number of hours billed for Dr. Delaney’s attendance is greater than the amount of time she spent testifying. I accept that the remaining hours were waiting time.

I agree with Arbitrators Evans and Killoran that the term “attendance” is “not necessarily strictly limited to the time an expert spends testifying.” In the case of Warwick and Liberty Mutual, (FSCO A99-000153, July 18, 2001), Arbitrator Evans awarded waiting time as part of an expert witness’ attendance. He relied on the definition of attendance in The Canadian Oxford Dictionary, “attendance” is “the act of attending or being present”, adopted the approach of Arbitrator Killoran in Chafe-Moote and Prudential of America General Insurance Company (Canada), (FSCO A99-000016, June 15, 2000) and awarded waiting time as part of an expert’s attendance. As the Expense Schedule does not contemplate the payment of travel time for experts, I have disallowed the claim for travel time. The disallowed amounts for preparation and travel total $2,036.75, with associated GST of $122.21.

Ms. Kobayashi, the Applicant’s vocational expert, generated a report and testified at the hearing. She provided a detailed critique of a number of reports and her evidence was helpful. I accept that the services described in her invoice number 1431 relate to the generation of her report. That account is allowed at $1,500, the maximum permitted under the Dispute Resolution Expenses Schedule. The disallowed amount is $144.50 and the associated GST of $8.67.

I accept that Ms. Kobayashi’s invoice number 1434 relates to preparation and attendance at the arbitration hearing. I allow the further sum of $500 for her preparation and $840 for her attendance at the arbitration hearing. The disallowed amount in relation to this invoice is $375, and GST of $22.50. I disallow the sum of $106.00 paid as witness fees for two individuals who did not testify at the hearing, and the associated GST of $6.36.

The Applicant claimed payment of three accounting reports, one in the amount of $1,417.50, a second in the amount of $750 and the third in the amount of $210. The first two were stated to be “in relation to the arbitration decision and in relation to outstanding income replacement benefits.” The fee for the third was stated to be “paid for the calculation of the interest award.”

Counsel for the Insurer objected to the payment of the first two reports on the basis that neither was introduced into evidence at the hearing and therefore should not be paid. The Applicant did not respond to this submission. Counsel for the Insurer made no submissions with respect to the third report; however, I have assumed that there is a similar objection by Certas with respect to that report.

I have not seen the reports. Although these documents were not filed at the arbitration, I find they are nevertheless “expenses incurred in respect of an arbitration proceeding” within the meaning of section 282(11) of the Insurance Act. Further, I find that these are “out-of-pocket expenses incurred in furtherance of the arbitration… application.” within the meaning of section 4.4 of the Expenses Schedule.

A primary goal of an insured person who applies for arbitration is the payment of benefits, interest and any other monetary relief he or she seeks. It is important that those amounts be accurately calculated. I am persuaded that the interest calculation under the Schedule is a complicated one, and I find it reasonable to obtain an accounting report to perform such calculations, and to obtain updated reports due to the passage of time. Counsel for the Applicant advised that each party obtained its own accounting reports and that the Insurer agreed to pay the further amounts of interest. Based on the limited information available to me, I infer that the Applicant was able to use these reports to persuade Certas to revise and increase the amount of interest it was prepared to pay, pursuant to the arbitration award.

Although the accounting reports were not filed at the arbitration hearing, I find that they advanced a primary goal and purpose of the arbitration and were therefore incurred “in furtherance of” the arbitration. I allow these disbursements as claimed.

With respect to the undisputed disbursements which form part of the Bill, I find them all to be reasonable as claimed.

In the result, I have reduced the disbursements claimed by $4,160.25, and GST by $250.22 for a total of $4,410.47 The Applicant is therefore entitled to $13,597.12 for disbursements inclusive of the GST

Summary of fees and disbursements

Senior counsel 241 hours x $150 per hour $36,150.00

Junior counsel 15 hours x $ 73.87 per hour 1,108.05

Articling student 79.5 hours x $ 23 per hour 1,828.50

Law clerk 33.0 hours x $ 45 per hour 1,485.00

Total Fees $40,571.55

6% GST on fees 2,434.29

Total fees and GST $43,005.84

Disbursements billed, including GST $18,007.58

Less disbursements and GST disallowed 4,420.47

Total disbursements allowed including GST 13,587.11

Total fees, disbursements and GST as assessed $56,592.95

Conclusion:

I have assessed the Applicant’s fees, disbursements and GST in the total amount of $56,592.95.

July 20, 2007

Suesan Alves Arbitrator

Financial Services Commission of Ontario