Financial Services Commission des
Commission services financiers
of Ontario de l’Ontario
Neutral Citation: 2008 ONFSCDRS 125
FSCO A04-001909
BETWEEN:
FARID SHEMOU
Applicant
and
ING INSURANCE COMPANY OF CANADA
Insurer
REASONS FOR DECISION
Before: Arbitrator John Wilson
Heard: By written submissions and oral hearing February 29, 2008, at the offices of the Financial Services Commission of Ontario in Toronto.
Appearances: Mr. Shemou was self-represented. Mr. Shemou’s cousin, Mr. Billy Stephan assisted Mr. Shemou in presenting his case.
Mr. Egidio Stagnitta and Ms. Lorraine Takacs for ING Insurance Company of Canada
Issues:
The Applicant, Farid Shemou, was injured in a motor vehicle accident on January 30, 2003. He applied for and received statutory accident benefits from ING Insurance Company of Canada (“ING”), payable under the Schedule.1 ING refused to pay weekly income replacement benefits. The parties were unable to resolve their disputes through mediation, and Mr. Shemou applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.
In two previous decisions I found that Mr. Shemou had received a valid offer of employment and that he was entitled to certain income replacement benefits (IRBs) based on that offer of employment. The further issues dealt with in this decision are the calculation of the exact quantum of the payments to Mr. Shemou, under my order, and the issue of the amount and by whom and to whom any expense orders shall be payable.
The issues in this hearing are then:
What is the calculation of the IRB found payable to Mr. Shemou?
Is Mr. Shemou responsible for the expenses of the adjournment of March 2006?
Is either of Mr. Shemou or ING responsible for the expenses (costs) in this matter, and, if so, how much should be payable?
Result:
The amount of the IRB owed to Mr. Shemou is $3,082.60.
Mr. Shemou is not responsible for ING’s expenses relating to the adjournment.
Each party shall be responsible for its own expenses in this matter.
EVIDENCE AND ANALYSIS:
In my first decision relating to Mr. Shemou’s claim for accident benefits, I dealt with the issue of whether Mr. Shemou had received a valid offer of employment prior to his motor vehicle accident that could form a basis for his claim for income replacement benefits.
Subsequently, I issued a further decision relating to Mr. Shemou’s entitlement to accident benefits, including the income replacement benefit that arose from his offer of employment.
This further hearing dealt with the issue of the expense order arising from the adjournment and the balance of the issues relating to Mr. Shemou’s substantive claim, including the final calculation of IRBs payable and any final cost order.
Calculation of Benefits owing:
Dealing first with the quantum of the income replacement benefit payable, I received submissions from ING that the appropriate calculation of the benefit would be in the amount of $3,082.60 being an IRB of $187.62 over a duration of 16.2 weeks. The accrued interest as would have been $207.80 as of September 7, 2007.
The method of calculation for income replacement benefits is set out in sections 6 and 61 of the Schedule, which read as follows:
- (1) The amount of the income replacement benefit shall be,
(a) for each of the first 104 weeks of disability, 80 per cent of the insured person’s net weekly income from employment determined in accordance with section 61; …
Section 61 reads:
- (1) For the purpose of this Regulation, a person’s net weekly income from employment shall be determined in accordance with the following formula:
where,
A = the person’s net weekly income from employment,
B = the person’s gross annual income from employment,
C = the annual premium payable by the person under the Employment Insurance Act (Canada) on the gross annual income from employment,
D = the annual contribution payable by the person under the Canada Pension Plan on the gross annual income from employment,
E = the income tax payable by the person under the Income Tax Act (Canada) and the Income Tax Act (Ontario) on the gross annual income from employment.
I asked both parties for submissions as to the correct calculation of the income replacement benefits owing. Ms. Takacs and her successor on the file made both written and oral submissions as to the quantum of this benefit. Mr. Shemou made no specific submissions as to the correct calculations, but suggested that my finding as to the duration of his income replacement benefit be revisited, since he still felt entitled to an ongoing income replacement benefit.
I explained to Mr. Shemou that we were dealing only with the calculation of the benefit as previously awarded and were not going to revisit any findings made in previous decisions. I accept that the calculations as submitted by ING appear to be correct, calculated in accordance with the Schedule, and should be accepted as representative of the benefit owing to Mr. Shemou.
Payee of the Benefit:
ING had previously raised an issue as to whether any benefit should be payable to either the Ontario Disability Support Plan or Social Services, as the case may be, since it understood that Mr. Shemou had been receiving benefits and that an organization held an assignment of any no-fault benefits payable to Mr. Shemou. I note that no assignment to ODSP, Ontario Works or any other agency has been filed as part of this proceeding.
Prima facie any benefits owed are payable to Mr. Shemou personally. Indeed, the Schedule specifically provides for a complete ban on the assignment of accident benefits, with the exception of assignments in the context of certain government support programmes such as ODSP. Section 65(1) of the Schedule reads as follows:
Assignment of Benefits
- (1) The assignment of a benefit under this Regulation, or the assignment of the right to pursue a mediation, arbitration, appeal or variation proceeding under sections 280 to 284 of the Act, is void. O. Reg. 281/03, s. 32 (1).
(2) Subsection (1) does not apply to,
(a) an assignment under section 267.8 of the Insurance Act;
(b) an assignment of a benefit to,
(i) the Ministry of Community, Family and Children’s Services,
(ii) a delivery agent under the Ontario Disability Support Program Act, 1997 or the Ontario Works Act, 1997, or
(iii) The Minister of Finance under subsection 6.1 (4) of the Motor Vehicle Accident Claims Act; or
(c) the assignment of a benefit to the Ministry of Health in respect of a service, benefit or entitlement provided under an Act the administration of which was transferred by order in council from the Ministry of Community and Social Services to the Ministry of Health.
In the event that another person or organization has put forward a claim for any monies payable by way of assignment or otherwise, and required that an order for payment of those benefits be made payable to that organization, it would be incumbent upon them to make submissions and to provide evidentiary support for any variation of the final order in this matter.
No submissions, or representations of any kind were received from any such third party as to this issue, nor has ING provided the name or the identity of any organization that claims to stand in Mr. Shemou’s shoes for the payment of these benefits or a copy of any notice of assignment it might have received. Consequently, any benefits outstanding shall be paid to Mr. Farid Shemou, personally.
Expenses of the March 27, 2006 Adjournment:
More troubling is the issue of expenses, both in the arbitration as a whole, and arising from the adjournment of the arbitration when Mr. Shemou was still represented by Mazin & Rooz.
Mr. Shemou’s claim first proceeded to hearing on March 27, 2006, when it was adjourned due to the unavailability of a key witness, who had not been summonsed by either his counsel of record, Alon Rooz of the law firm of Mazin & Rooz, or Ms. Dimple Verma, the lawyer who actually appeared for Mr. Shemou at the hearing.2 At that time, I scheduled a resumption of the hearing for August 2006, since counsel for Mr. Shemou was not ready to proceed. I reserved at that time on an order of costs thrown away resulting from the last-minute adjournment.
I adjourned the original arbitration hearing due to the unavailability of a key witness for the Applicant, Mr. Alex (Aklas) Zaro, the former owner of the sports bar where Mr. Shemou claimed he was offered work.
The most obvious reason for the adjournment was simply that neither Mr. Rooz, counsel for the applicant, nor his junior, Ms. Dimple Verma, had served this witness, (who had been identified at the pre-hearing as a key witness to the issue of an offer of employment) with a summons to compel attendance at the arbitration hearing.
It is a basic rule of practice that parties issue a summons to witness to ensure that that the witness is available and will attend at the prescribed time for a hearing. Indeed, Practice Note 8 of the Dispute Resolution Practice Code (Fourth Edition, Updated October 2003) (Practice Code) states:
Practice Note 8:
Attendance of a Witness to an Arbitration Hearing by Summons
If you need a witness to attend an arbitration hearing you must arrange four things: advanced notification to the potential witness, the summons, an affidavit attesting to the summons, and the correct attendance fees.
There was no question that the adjournment was entirely due to the default of counsel for Mr. Shemou in failing to take the necessary steps to secure the attendance of Mr. Zaro, and I so found.
At the time of the adjournment I reserved my decision on a request for an order compensating the Insurer for costs thrown away by reason of the adjournment.
Alon Rooz was removed as solicitor of record in this matter by my order dated August 14, 2006. The order however was made specifically “subject to any rights ING might have to pursue counsel for expenses pursuant to section 282 (11.2) of the Insurance Act during the period when Mr. Rooz (and/or his firm) was solicitor of record.”
Mr. Rooz was advised that he would have the opportunity to call evidence and make submissions as to whether the expense order arising from the March 2006 adjournment should be payable by Mr. Shemou or his former counsel of record.
When, on February 29, 2008, the issue of the costs thrown away by the unnecessary adjournment was to be addressed, I was surprised to find Mr. Rooz not present for the hearing. I was informed by Mr. Stagnitta, counsel for ING, that he had taken it upon himself, without notice to either the Commission or Mr. Shemou, to advise Mr. Rooz not to attend, since ING now intended only to claim its costs on the adjournment from Mr. Shemou himself.
While Mr. Shemou, as a named party is presumptively liable for any expense award, the circumstances in this case suggest that Mr. Shemou would have a reasonable expectation that his former counsel would at the very least be available to share in any adverse cost award arising from the adjourned hearing. Indeed, throughout the hearing process, the operating assumption was that when the issue of adjournment expenses was dealt with, recourse would be had to section 282(11.2) and that Mr. Rooz as counsel of record would be required to speak to his potential liability. Mr. Rooz was consequently put on notice as to his exposure to an expense award.
Mr. Rooz’s potential exposure to costs was not entirely speculative. At the time of the adjournment I found that it was necessary due to a serious default by counsel – namely, the failure to secure and summons a key witness. I do not accept that such a failure should necessarily be attributed to Mr. Shemou when it falls clearly within the expertise that a reasonably competent counsel is expected to bring to the hearing process. That expertise would include the knowledge of how to obtain the attendance of key witnesses.
If it was not a foregone conclusion that Mr. Rooz would be ordered to pay any expense order, it was however open to Mr. Shemou to, in effect, claim indemnity for any cost order against him from his former counsel if that order arose from the actions of counsel while counsel of record in this matter and could be brought under the terms of section 282(11.2) of the Insurance Act.
By advising Mr. Rooz not to attend the expense hearing, and advising at the hearing that it would only claim expenses against Mr. Shemou, ING effectively precluded any hope that Mr. Shemou might be indemnified for any expense order by Mr. Rooz.
By so doing without notice counsel for ING verged on sharp practice. While ING had carriage of the claim for expenses against Mr. Rooz and was dominus litis of that part of the arbitration, it cannot abuse that position to the detriment of its insured. The role of a first party insurer such as ING entails certain responsibilities.
Le contrat d'assurance en est un "uberimma fides", de bonne foi la plus évidente. L'assureur doit agir de bonne foi et prendre consideration les interêts de son assuré aussi bien que les siens. Il doit lui divulger, dans un délai raisonnable, tous les renseignements pouvant affecter les décisions de l'assuré dans ces negotiations de réglement ou dans son litige.3
ING was aware of the acrimony of the relationship between Mr. Shemou and his former solicitor. It was also aware of Mr. Shemou’s interest in having Mr. Rooz bear any award of costs, as well as its own obligations arising from the uberimma fides nature of the insurance contract.
While ING is not necessarily in a fiduciary relationship with its insured, Mr. Shemou, it has a duty to exercise its discretion in relation to its client fairly and without preferring its own interests over those of its client.
As Bullock J. noted:
The duty is not a fiduciary duty but includes certain elements akin thereto. A fiduciary who owes a duty of individual loyalty to his/her principal and in exercising powers of discretion arising from the fiduciary relationship must treat the principal's interest as paramount. In contrast, an insurer in fulfilling its contractual obligations may give consideration to its own interests. However, the insurer must give as much consideration to the welfare of the insured as it gives to its own interests.
In its role as dominus litis of the expense claim against Mr. Rooz, ING cannot unilaterally compromise the claim without at least considering Mr. Shemou’s interests. As Power J. observed in the context of a WSIB matter:
As I understand it, the issue before me is whether there are any fetters on the Board's control with respect to compromising the claim. I believe that there are. In my opinion, the Board is under a duty to be fair to those who will be affected by its decisions in the exercise of its control of the litigation. That duty encompasses an obligation on the Board to exercise its authority reasonably, notwithstanding that it is dominus litis and notwithstanding the precedents heretofore highlighted in these Reasons for Decision. The Board does not have carte blanche to proceed to settle a matter over which it has jurisdiction and control without, at least, hearing and considering the position of the worker and/or his legal counsel. 4
In this matter, ING compromised the claim for expenses payable against the solicitor, while maintaining the claim against its client Mr. Shemou, an action which clearly prejudiced Mr. Shemou, since the possibility of indemnification for a costs order was taken away unilaterally and without notice by ING’s action.
While an expense or cost order is payable to a party, issues of costs are not entirely within the discretion of the claiming party, and are not always just a further compensatory dispute between two private parties. Costs may also have a dual aspect – on one hand compensatory; on the other hand punitive – a tool that a judge or arbitrator may use to control the process and to punish those who abuse the process or engage in frivolous or vexatious conduct. As Mark Orkin commented in The Law of Costs:
Even before the enactment of this rule courts had exercised a jurisdiction to award costs against solicitors personally, sometimes on a solicitor-and-client basis, because of their conduct in the proceedings. The court’s jurisdiction to order payment of costs by solicitors personally was historically part of its jurisdiction to control and discipline its officers. It has been said that the jurisdiction was both punitive and compensatory, although the latter retains a disciplinary element.5
ING not only effectively curtailed Mr. Shemou’s right to have his claim for indemnity from the solicitor heard, but also precluded the jurisdiction of the tribunal to control, and discipline counsel appearing before it by means of an order of expenses.
While it is not a foregone conclusion that Mr. Rooz would have been responsible for the adjournment expenses, it is clear that ING’s unilateral action, without notice, made any recourse against Mr. Rooz impractical if not impossible. Given the potential prejudice to Mr. Shemou, ING, by its unilateral actions, has forfeited any claim it may have had against Mr. Shemou for the expenses arising from the adjournment.
Expenses of the arbitration proceeding:
ING also claimed its overall expenses in this arbitration. The criteria for an award of expenses are set out in the Expense Regulation:
- (1) The expenses set out in the Schedule are prescribed for the purpose of subsection 282(11) of the Act.
(2) An arbitrator shall, under subsection 282 (11) of the Act, consider only the following criteria for the purposes of awarding all or part of the expenses incurred in respect of an arbitration proceeding:
Each party's degree of success in the outcome of the proceeding.
Any written offers to settle made in accordance with subsection (3).
Whether novel issues are raised in the proceeding.
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.
Whether any aspect of the proceeding was improper, vexatious or unnecessary. …
(3) Upon the request of the insurer or the insured person, the arbitrator shall, for the purposes of awarding expenses, take into account all written offers to settle, if any,
(a) that were made after the conclusion of mediation and before the conclusion of the arbitration; and
(b) that were made in accordance with the rules of practice and procedure applicable to the proceeding.
(4) If the arbitrator is requested to take into account a written offer under subsection (3), the arbitrator shall have regard to the terms of the offer, the timing of the offer, the response to the offer and the result of the proceeding.
With regard to the first criterion, Mr. Shemou was successful on the issue of whether or not he had a valid offer of employment, and also as to his entitlement to an income replacement benefit.
The Insurer did serve and file a settlement offer, which was superior to the amount of benefits I found actually owing to Mr. Shemou. The offer was addressed to Ms. Dimple Verma, to whom Mr. Rooz had apparently delegated carriage of the file, and was open for acceptance until March 24, 2006.
The “offer to settle” was greater than the amount that Mr. Shemou obtained by order in this arbitration.
The “offer to settle” concludes with the sentence “(S)hould your client accept the offer, we can discuss and negotiate costs.” There is no doubt that the pre-hearing letter indicated that costs (expenses) were an issue in this arbitration. The original hearing was set to commence on Monday, March 27, 2006.
Rule 76 of the Practice Code provides that an offer to settle contain “(i) the full terms of the Offer to Settle.” On the face of it the offer to settle from ING did not contain the full terms, since it left the issue of expenses to “discuss and negotiate.”
The “offer to settle” was also withdrawn on March 24, 2006, several days prior to the commencement of the hearing. While the Practice Code does not deal directly with the time that an offer of settlement should be left open in order to engender costs consequences from non‑acceptance, Rule 76 of the Practice Code is clearly inspired by Rule 49 of the Rules of Civil Procedure, which deals with the mechanism of the use of settlement offers in litigation in greater detail. While not binding on me as an arbitrator, I accept that the Rules of Civil Procedure can illuminate the discretion of an adjudicator or arbitrator to “take in account” a written settlement offer.
Rule 49.1 (Court Rules) sets as a pre-condition for consequences of a failure to accept that the offer be made at least seven days before the commencement of the hearing and that it not be withdrawn before the commencement of the hearing.
In this matter, as noted previously, the offer was withdrawn prior to the hearing. In fact it was withdrawn some eight months before the first part of the substantive hearing dealing with the offer of employment actually commenced.
During that time any relationship between Ms. Verma and Mr. Shemou was clearly severed and Mr. Rooz was removed as counsel of record after much acrimony. I have no evidence that any further written offer was made to Mr. Shemou, nor as to whether Mr. Shemou himself was aware that that any offer to settle had been made to him, and that he proceeded to the November 7, 2006 hearing in spite of the availability of a settlement offer.
In the light of the serious shortcomings in content and timing of the Insurer’s offer to settle, while I “take into account” the Insurer’s written offer to settle, I find that it should be given little or no weight in the determination of expenses in this matter.
Mr. Shemou was successful to a certain degree in both parts of this bifurcated hearing. In his application for arbitration, he claimed for expenses in this arbitration. I note that the fact that he was self-represented for most of the hearing process is not a bar to an expense award in his favour.
Mr. Shemou, however, did not file any detailed claim for expenses, nor any supporting documentation following the completion of the substantive hearing. I have no idea if he spent money or money’s worth in prosecuting his claim. Nor had the Insurer any idea of a case to meet with regard to Mr. Shemou’s expenses.
Both parties were asked to provide submissions and documentation with regard to expenses in this arbitration. In fact, only ING complied with this request.
Although, the relative success of Mr. Shemou might have supported a finding of entitlement to expenses, his failure to bring forward details of an expense claim effectively precludes an order of expenses in his favour. In spite of Mr. Shemou’s lack of legal representation, it would be going too far to fix expenses based on conjecture or assumptions that may or may not be correct. In the circumstances of this case, I order that each side be responsible for its own expenses.
July 23, 2008
John Wilson Arbitrator
Date
Financial Services Commission des
Commission services financiers
of Ontario de l’Ontario
Neutral Citation: 2008 ONFSCDRS 125
FSCO A04-001909
BETWEEN:
FARID SHEMOU
Applicant
and
ING INSURANCE COMPANY OF CANADA
Insurer
ARBITRATION ORDER
Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
ING shall forthwith pay to Mr. Farid Shemou the amount of $3,082.60.
ING shall pay to Mr. Shemou the further amount of $207.80 as accrued interest to September 7, 2007.
The above amounts shall be subject to the statutory interest rate of 2 per cent per month compounded monthly from September 7, 2007 until such time as the payment is satisfied.
July 23, 2008
John Wilson Arbitrator
Date
Footnotes
- The Statutory Accident Benefits Schedule - Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
- Indeed, this was a bone of contention between Mr. Shemou and the Mazin & Rooz firm, since Mr. Shemou contended that he had retained Mr. Rooz, not Ms. Verma, and was taken by surprise by her attendance at the hearing.
- La juge BorensteinKusalic c. Zurich Cie d'assurances [1995] A.Q. No. 1425, “The contract of insurance is one of 'uberrima fides' of utmost good faith. The Insurer must act in good faith and take into consideration the interests of its insured as well as its own. It must divulge (to its insured) in a reasonable timeframe all the information capable of affecting the decisions of the insured in his (or her) settlement negotiations or in litigation.”
- Bard v. Longevity Acrylics Inc. 2002 CanLII 49622 (ON SC), [2002] O.J. No. 1373, Ontario Superior Court of Justice
- Mark M. Orkin. The Law of Costs. 2nd ed. Aurora: Canada Law Book, 1990