Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2008 ONFSCDRS 154
Appeal P06-00024
OFFICE OF THE DIRECTOR OF ARBITRATIONS
RAY MCCORMACK Insured/Respondent
and
AVIVA CANADA INC. Insurer/Respondent
and
ISABELLA & ASSOCIATES INC. Representative/Appellant
BEFORE: David Evans
REPRESENTATIVES: J. Dannial E.S. Baker for Mr. Isabella Grant R. Dow for Aviva Canada Inc. Mr. McCormack did not participate
HEARING DATE: August 26, 2008
APPEAL ORDER – EXPENSES
Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
- Mr. Isabella shall pay Aviva’s fixed expenses of $3,300, inclusive of GST.
September 23, 2008
David Evans Director’s Delegate
Date
REASONS FOR DECISION
I. NATURE OF THE APPEAL
In a decision dated March 3, 2008, I upheld the arbitration orders dated September 16, 2005 and June 13, 2006. These required Mr. Isabella, who had represented Mr. McCormack, to personally pay Aviva’s fixed expenses of $1,566, inclusive of GST, pursuant to s. 282(11.2)(c) of the Insurance Act. These expenses were for costs thrown away prior to the withdrawal of Mr. McCormack’s application for arbitration. At the end of my decision, I wrote that I too was prepared to consider applying s. 282(11.2)(c) to Mr. Isabella for the appeal expenses. Aviva now seeks its expenses of the appeal in the amount of $3,918.771 against Mr. Isabella personally.
II. ANALYSIS
Mr. Isabella accepts Aviva’s Bill of Costs, agreeing that counsel for Aviva did the work claimed of nearly 40 hours and incurred the expenses set out in it. He also does not dispute that he should be liable to pay the appeal expenses. Indeed, considering that the appeal was brought by him, that Mr. McCormack had nothing to do with the appeal, and that he lost, it would be difficult for Mr. Isabella to argue otherwise. However, he submits that the Bill of Costs should be about $500.
Mr. Isabella relies on Boucher v. Public Accountants Council for the Province of Ontario, 2004 CanLII 14579, 71 O.R. (3d) 291, 188 O.A.C. 201. The case related to an abandoned application. The lower court judge assessed costs at nearly $188,000. Armstrong, J.A., stated that the “failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice…. [T]he chilling effect of a costs award of the magnitude of the award in this case generally exceeds any fair and reasonable expectation of the parties.”
The court in Boucher was applying the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and in particular rule 57.01(1), which, as the court noted, “lists a broad range of factors that the court may consider in exercising its discretion to award costs….” The court in considering rule 57.01(3) (the “grid”) also noted that since it refers back to the list in rule 57.01(1), “rule 57.01(3) makes it clear that the fixing of costs is not simply a mechanical exercise” of calculating hours times rates and that the overriding principle is reasonableness. Although it is not clear to me that Boucher has direct application to expenses at arbitration and appeals, its principles have echoes in the case law at the Commission. Thus, while s. 12(2) of the expense regulation has a smaller list of factors and requires an arbitrator to consider only them in awarding expenses, arbitrators still have discretion, as s. 282(11) specifically provides that the expenses prescribed in the regulation are a maximum. Therefore, as stated in Henri and Allstate Insurance Company of Canada, (OIC A‑007954, August 8, 1997), the overriding consideration in fixing arbitration expenses is reasonableness.
However, Mr. Isabella submits that since the total claim in this case was about $5,000, the “fair and reasonable expectation of the parties” regarding costs should be limited to what would be expected in the Small Claims Court. That court is limited to awarding costs up to 15 per cent of the amount claimed.2
It was Mr. Isabella’s choice acting as agent for Mr. McCormack to proceed with arbitration. As the Court of Appeal stated in Liberty Mutual Insurance Company v. Fernandes, 2006 CanLII 30212, “By leaving the choice of forum always with the insured, the legislature has guaranteed that the insured maintains control of the process including its timing and cost.” If Mr. Isabella wanted to limit the potential exposure to costs – which would have also limited his client’s potential recovery of costs – he should have proceeded in the Small Claims Court. Instead, he proceeded through arbitration, where the expenses that may be recovered are set out in the Dispute Resolution Practice Code and the expense regulation.3 There is no 15 per cent rule in arbitration, and I reject the proposition that expenses in arbitration are governed by the rules for costs in the Small Claims Court.
In conclusion, I find the account generally reasonable. Although the appeal expenses hearing was very short, I agree with the Director’s statement in Stephenson and Economical Mutual Insurance Company, (FSCO P07–00001, April 22, 2008) that the “ratio approach” often used to determine arbitration expenses has “no application to appeals – the nature of the work is simply too different.” I also see no parallel with the excessive costs initially assessed in Boucher, where the Court of Appeal ultimately imposed costs of $63,000.00.
I do note that close to six hours of the Bill of Costs relates to time spent preparing for and attending at the second day before the arbitrator. These would be arbitration expenses. Aside from any other considerations, I see nothing in the file to indicate that Aviva was going to seek those expenses until it filed its most recent bill of costs. I do not believe it appropriate for me to consider those expenses.
Accordingly, I find that Aviva is entitled to its appeal expenses in the amount of $3,300, awarded personally against Mr. Isabella pursuant to s. 282(11.2)(c) of the Insurance Act.
September 23, 2008
David Evans Director’s Delegate
Date
Footnotes
- This claim includes an estimate for preparation and attendance at the appeal expense hearing.
- Section 29 of the Courts of Justice Act, R.S.O. 1990, c. C.43, provides “An award of costs in the Small Claims Court, other than disbursements, shall not exceed 15 per cent of the amount claimed or the value of the property sought to be recovered unless the court considers it necessary in the interests of justice to penalize a party or a party’s representative for unreasonable behaviour in the proceeding.”
- Schedule to Regulation 664, R.R.O. 1990, made under s. 282(11) of the Insurance Act and repeated in Section F of the Dispute Resolution Practice Code.