Neutral Citation: 2007 ONFSCDRS 88

FSCO A03-001063

BETWEEN:

SIVAHARAN KULASEKARAMPILLAI
Applicant

and

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
Insurer

DECISION ON EXPENSES

Before: Jeffrey Rogers

Heard: By a telephone conference call on March 30, 2007 and written submissions completed on April 23, 2007.

Appearances:
Mr. David S. Wilson, solicitor for Mr. Kulasekarampillai;
Ms. Angela S. James, solicitor for State Farm Mutual Automobile Insurance Company

Issues:

The Applicant, Sivaharan Kulasekarampillai, was injured in a motor vehicle accident on December 18, 2002. He applied for and received statutory accident benefits from State Farm Mutual Automobile Insurance Company ("State Farm"), payable under the Schedule.¹ State Farm terminated income replacement and housekeeping benefits. Mr. Kulasekarampillai disagreed with the decision. The parties were unable to resolve their dispute through mediation, and Mr. Kulasekarampillai applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended. The arbitration hearing was held on July 19, 2004. Arbitrator Sapin issued an order on December 24, 2004. State Farm applied for variation or revocation of the order pursuant to section 284 of the Insurance Act and Rule 61 of the Dispute Resolution Practice Code (the "Code"). Mr. Kulasekarampillai objected to the application, submitting that it does not fall within the grounds of section 284 and Rule 61.

The Director of Arbitrations allowed the application to proceed and I was appointed to hear it. When they appeared before me, the parties indicated that they had agreed that State Farm's application for variation or revocation of the order as it pertains to entitlement to post-104 IRBs would be withdrawn. State Farm also conceded entitlement to expenses on that issue but reserved the right to dispute quantum. The only issue remaining before me was variation or revocation of the order as it pertains to quantum of IRBs. In a decision dated August 23, 2006, I dismissed the application for variation or revocation, while reserving on the issue of expenses.

The issues in this further hearing are:

Is Mr. Kulasekarampillai entitled to his expenses incurred in respect of the hearing of State Farm's application for variation or revocation of the arbitration order made on December 24, 2004?
If Mr. Kulasekarampillai is entitled to his expenses, what is the quantum of those expenses?

Result:

Mr. Kulasekarampillai is entitled to his expenses in the amount of $24,314.82.

EVIDENCE AND ANALYSIS:

Background

As noted above, State Farm withdrew its application for variation or revocation of the order as it pertains to entitlement to post-104 IRBs and conceded that Mr. Kulasekarampillai was entitled to expenses on that issue. The only issue left to be heard was whether the arbitration order as to quantum of IRBs should be varied or revoked. Mr. Kulasekarampillai was entirely successful on that issue.

Mr. Kulasekarampillai submitted details of his claimed expenses on November 14, 2006. State Farm did not respond as provided in Rule 79.2(b) of the Code. At the expense hearing, Mr. Kulasekarampillai argued that, because State Farm had breached Rule 79.2(b), it should not be allowed to dispute his claim for expenses. I pointed out to counsel that he had made that submission in an earlier case and the arbitrator had rejected it.² I ruled that the remedy for the breach would depend on the resulting prejudice to Mr. Kulasekarampillai.

Entitlement

The submitted bill claims a counsel fee for 79.7 hours at a rate of $150 per hour, plus sundry disbursements and GST, for a total of $27,260.42. State Farm did not dispute entitlement to expenses. It also did not challenge the rate of $150 per hour for counsel fees. Its only submissions were that the number of hours claimed, although not outlandish, was slightly excessive and that Mr. Kulasekarampillai was not entitled to recover the cost of three reports, incurred before March 21, 2005 when State Farm filed the application to vary or revoke the arbitration order.

Counsel for Mr. Kulasekarampillai indicated that he was prepared to address the issue of the number of hours, but not the reports. To remedy the prejudice to Mr. Kulasekarampillai resulting from State Farm's failure to raise the issue earlier, I permitted written submissions on that issue and indicated that I would consider a request for any additional expense incurred. I rejected counsel's submission that this remedy was inadequate, because he bills Mr. Kulasekarampillai at a rate higher than he can recover in expenses. I pointed out that such an approach would likely mean that no indulgence could ever be granted when a party breaches the Rules.

I find that, of the five criteria I am required by section 12(2) of O. Reg. 664 to consider in awarding expenses, degree of success in the outcome of the proceeding is the only one relevant to this decision. I find that, based on his complete success, Mr. Kulasekarampillai is entitled to his expenses.

Quantum

I find that, based on the experience of counsel and the complexity of the issues, an hourly rate of $150 for counsel is justified pursuant to Rule 78.1(b) of the Code. I accept Mr. Kulasekarampillai's submission that, although the hearing only took about two hours, the total time of 79.7 hours claimed for counsel fees is justified for two reasons. First, preparation time was duplicated because the hearing, which was originally scheduled to start on February 13, 2006, was adjourned at State Farm's request, made on January 31, 2006. Second, the hearing was expected to take four days but the parties agreed to narrow the issues on the eve of the hearing, after preparation for the full hearing had been completed. I do not accept State Farm's submission that the issues could have been narrowed earlier. State Farm framed the issues when it made the application and it was its concession that narrowed them. Mr. Kulasekarampillai could not have narrowed them on his own. I have therefore allowed a counsel fee of $11,955.00, plus GST of $717.30, as claimed.

The three reports at issue are dated November 22, 2004, December 3, 2004 and January 12, 2005. They address the issue of whether Mr. Kulasekarampillai meets the post-104 test for IRBs. That test applied as of December 2, 2004. At that time, State Farm was paying IRBs, having conceded ongoing entitlement at the hearing before Arbitrator Sapin on July 19, 2004. Arbitrator Sapin's decision was released on December 24, 2004. The issue before her was not entitlement, but whether she should make an order for ongoing IRBs. She ordered State Farm to pay ongoing IRBs.

State Farm submitted that the provisions in the Code specifically limit expenses to the period after the application or the dispute process has been commenced, and that entitlement to disbursements should be construed consistent with that limitation. State Farm did not identify the specific limitation, and I have found none. I find that entitlement to the disputed disbursements is determined by reference to section 4.4 of the Expense Regulation which provides for recovery of "...out-of-pocket expenses incurred in furtherance of the arbitration, appeal, variation or revocation application". Although expenses will normally be incurred after the proceeding has been commenced, section 4.4 is broad enough to encompass expenses incurred earlier, provided that they can be shown to be "in furtherance" of the proceeding.

Mr. Kulasekarampillai submitted that he is entitled to recover the disbursements because they were incurred with the reasonable anticipation that State Farm would be of the view that he would not be entitled to post-104 benefits. Mr. Kulasekarampillai pointed to nothing in State Farm's conduct to support his assumption. I therefore have no evidence that his assumption was a reasonable one. Having conceded entitlement before Arbitrator Sapin, it would have been unreasonable for State Farm to cease paying benefits, while awaiting her order.

In any event, the issue is not whether the expenses were incurred in furtherance of a potential dispute, but whether they were incurred in furtherance of the application for variation or revocation that State Farm filed in March 2005. I am not satisfied that the disputed disbursements were incurred in anticipation of that application, or in furtherance of Mr. Kulasekarampillai's position on that application. I have therefore disallowed the cost of these disbursements in the amount of $3,466.80. I find that Mr. Kulasekarampillai is entitled to recover the other claimed disbursements, totalling $11,121.32.

I find that, in addition to the above expenses, Mr. Kulasekarampillai is entitled to his counsel fees at the expense hearing in the amount of $238.50.

Mr. Kulasekarampillai is therefore entitled to expenses as follows:

Counsel fees.
$13,193.50

Disbursements
11,121.32

Total
$24,314.82

This amount includes GST.

May 7, 2007

Jeffrey Rogers
Arbitrator

Financial Services Commission of Ontario