Kingsway General Insurance Company v. Jose Pereira, 2007 ONFSCDRS 174

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2007 ONFSCDRS 174

Appeal P05-00031

OFFICE OF THE DIRECTOR OF ARBITRATIONS

KINGSWAY GENERAL INSURANCE COMPANY Appellant

and

JOSE PEREIRA Respondent

BEFORE: David Evans

REPRESENTATIVES: Tricia McAvoy for Kingsway General Insurance Company Jose Pereira, acting for himself

HEARING DATE: August 8, 2007

APPEAL EXPENSES ORDER

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

1. Mr. Pereira shall pay Kingsway General Insurance Company’s appeal expenses of $1,000.

September 17, 2007

David Evans Director’s Delegate

Date

REASONS FOR DECISION

BACKGROUND AND ANALYSIS

Mr. Pereira claimed a number of accident benefits under the SABS–1996¹ for injuries arising out of an accident on September 11, 2001.

In his decision of October 14, 2005, the arbitrator awarded Mr. Pereira income replacement benefits for approximately a year, while noting that Mr. Pereira had withdrawn claims for attendant care and housekeeping benefits after cross-examination.

Kingsway appealed that decision. I heard the appeal on August 4, 2006. However, between the filing of the appeal and the appeal hearing, the arbitrator issued an expense decision on April 11, 2006. He held that both parties should bear their own expenses. He found that, although Mr. Pereira was successful to some extent, the cross-examination showed that his claims for attendant care and housekeeping benefits were fabricated, so those claims were frivolous.

My appeal decision was issued on December 20, 2006, and I dealt with the expenses decision as follows: “On a preliminary note, Mr. Pereira stated at the beginning of the appeal hearing that he was not aware of the arbitrator’s subsequent decision on expenses of April 11, 2006. I advised him that he could appeal it; to date, he has not.” I then concluded that the arbitrator had been in error when he awarded Mr. Pereira income replacement benefits, in light of his findings about Mr. Pereira’s credibility. The last sentence of my decision reads as follows: “If the parties are unable to agree about expenses of this appeal, a hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.”

On February 1, 2007, Ms. McAvoy wrote to the Commission on behalf of Kingsway as follows: “Further to the Appeal Order dated December 20, 2006, I am writing to request an expense hearing in accordance with Rule 79 of the Dispute Resolution Practice Code.”

A Notice of the expenses hearing was sent on April 23, 2007, stating that “submissions to determine the entitlement to and the amount of appeal expenses in the above matter” would be made before me on June 7, 2007.

However, days before the expenses hearing date, the insurer filed its Bill of Costs for the appeal and also the original Bill of Costs filed at the arbitration expenses hearing. Mr. Pereira did not appear at the appeal expense hearing, but I was able to reach him by telephone, and we set a new hearing date of August 8, 2007. I also wrote to him:

Mr. Pereira, I will go over what has happened so far. The arbitrator initially awarded you some benefits (what I will call the benefits decision). However, he then held that each party should bear their own expenses (that is the expenses decision). That means that you have to pay your lawyer and Kingsway has to pay its lawyer. Kingsway appealed the arbitrator’s initial decision giving you some benefits. At the appeal hearing, you said that you did not have a copy of the arbitrator’s expenses decision, so Ms. McAvoy gave you a copy.

I then held that the arbitrator made an error in awarding you those benefits (that is the appeal decision).

Now, Kingsway is seeking its expenses for the appeal decision. However, it is also seeking its expenses for the benefits decision. That is, Kingsway wants you to pay its lawyer’s expenses for both the benefits and the appeal decision.

…. I am including in this letter the Bill of Costs Ms. McAvoy prepared. It shows that she is claiming $5,515.00 in legal fees, disbursements and conduct monies for the initial hearing (the benefits hearing that Arbitrator Renahan conducted). As I said before, in his expenses decision, Arbitrator Renahan held that Kingsway should not be able to recover these funds from you.

Kingsway is also seeking $1,875.70 for the legal expenses of the appeal hearing, the hearing that I conducted.

Included with that letter was a revised Notice, stating that “submissions to determine the entitlement to and the amount of arbitration and appeal expenses” would be held.

The appeal expenses hearing proceeded with Mr. Pereira present. Mr. Pereira was only interested in finding out who would be paying his bill for his counsel (who was allowed to withdraw on the first day of the arbitration hearing).

As noted in my appeal decision, Mr. Pereira took no steps to appeal the arbitrator’s expenses decision, nor has he taken any to date. I have no jurisdiction to reverse the arbitrator’s expenses decision in Mr. Pereira’s favour. However, I find the same applies to Kingsway’s request to review the arbitrator’s expenses decision. Kingsway submits that an appeal of the expenses decision follows from the appeal, and that since it was entirely successful on the appeal, the only basis on which the arbitrator ruled that each side should bear its expenses (partial success of the applicant) falls.

While there is some logic to this position, Kingsway did not take any steps to appeal the arbitrator’s expenses decision, and there was no indication of a dispute with respect to the expenses order until June 2007. The sequence of events in this case parallels those in Crossey.² In that case, the arbitrator issued a substantive decision that was appealed by both parties. After the appeal was filed, the arbitrator then issued an expenses decision. Mrs. Crossey filed an appeal of that decision, and as noted by the Director’s Delegate, Mrs. Crossey’s appeal was expanded to include the expenses issue.³ That did not happen here. Furthermore, my appeal order referred only to appeal expenses, the request by Kingsway for an expenses hearing was made further to that order, and the initial Notice – to which Kingsway did not object – only referred to a hearing of appeal expenses.

Accordingly, in these circumstances I am not prepared to disturb the arbitrator’s expenses order.

Turning to the appeal expenses, Kingsway was entirely successful, and so meets the first criterion of the Expenses Regulation, s. 12(2) of O. Reg. 664, as amended. None of the other criteria are relevant. I find that Kingsway is entitled to its expenses of the appeal.

The legal fees claimed for the appeal are modest and are allowed. However, Kingsway also seeks to recover the cost of the transcript. Rule 74.2 of the Dispute Resolution Practice Code specifically provides that a party hiring a recording service must directly pay the person or agency providing the reporting service, and Rule 74.3 provides that, where a party orders all or a portion of the transcript of a proceeding, the party must directly pay the person or agency providing the transcript. There is no provision in the Schedule to the Expense Regulation allowing for the recovery of the cost of transcripts similar to that allowing for the recovery of the filing fees paid by an insured when applying for arbitration (Schedule, s. 1) or the filing fees paid by an insured or an insurer when appealing an order (s. 2). There is also no provision similar to the Schedule’s specific allowance for witness expenses and for the cost of expert reports (s. 5). The closest to a “basket clause” where the transcript expense might fit is in s. 4.4, which provides for the payment of “other out-of-pocket expenses incurred in furtherance of the arbitration, appeal, variation or revocation hearing.” However, the other items listed in s. 4 are telecommunication charges (4.1), typing, printing and reproducing copies of documents (4.2), mail or courier delivery (4.3), and taxes on these expenses (4.5). I find the costs of transcripts (or the cost of a court reporter, for that matter) do not fit into that context and that the phrase “other out-of-pocket expenses” more likely refers to the relatively small expenses referred to in the rest of that section. In that regard, I have sympathy for the conclusion of the arbitrator in Singh and Wawanesa Mutual Insurance Company, (FSCO A02-001401, May 18, 2004), who found that the cost of a reporting service was not recoverable as an expense after accepting this submission:

Mr. Gillen argued that since court reporter’s fees can be significant, it could not have been the legislature’s intention to include them as “other out-of-pocket expenses” when it specifically placed a cap on less costly disbursements such as preparation of an expert witness for a hearing.

It is the option of a party to request the attendance of a court reporter at a hearing, as is the option to obtain and file the transcript, and it is only in very limited circumstances that parties have ever been required to order and produce a transcript.⁴ Other expenses that might be described as optional – in that parties have a great deal of discretion in preparing their cases – are subject to caps, such as the amounts allowed for preparing a witness (s. 5(4)), calling a witness (s. 5(3)), or for preparing a report (s. 5(5)). However, no caps are placed on expenses for court reporters or transcripts, although they may add up to thousands of dollars. This suggests that transcripts are not meant to be recoverable as expenses.

In any event, I am only prepared to allow the insurer its expenses on appeal in the amount of $1,000, which is the amount remaining after deducting the cost of the transcript.

September 17, 2007

David Evans Director’s Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Farmers’ Mutual Insurance Company and Crossey, (FSCO P05-00028, June 8, 2007).
3. 3As is the usual procedure, Mrs. Crossey’s additional appeal was accepted without her being required to pay a second filing fee.
4. 4See, for instance, Ms. Z and Dominion of Canada General Insurance Company, (FSCO P00-00023, September 11, 2001), where the Director’s Delegate denied Ms. Z's motion for an order for a complete transcript, but did order Dominion to provide the examination of chief of a witness when it had only provided the cross-examination.