Mona Halim v. Security National Insurance Co./Monnex Insurance Mgmt. Inc., 2008 ONFSCDRS 186

Financial Services Commission of Ontario

Neutral Citation: 2008 ONFSCDRS 186 Appeal: P07-00035 Office of the Director of Arbitrations

Mona Halim Appellant

and

Security National Insurance Co./Monnex Insurance Mgmt. Inc. Respondent

Before: Delegate Lawrence Blackman

Representatives: Mr. Arvin Gupta for Ms. Halim Mr. David Smagata for Security National Insurance Co./Monnex Insurance Mgmt. Inc.

Hearing Date: November 12, 2008

APPEAL EXPENSES ORDER

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

1. Security National Insurance Co./Monnex Insurance Mgmt. Inc. shall pay Ms. Halim her legal expenses of this appeal, fixed in the amount of $2,550.99, inclusive of GST.

November 21, 2008

Lawrence Blackman Director's Delegate

REASONS FOR DECISION

I. BACKGROUND

Ms. Halim (the "Appellant") was injured in a November 24, 2004 motor vehicle accident. In her October 30, 2007 decision, Arbitrator Miller (the "Arbitrator") dismissed the Appellant's claims against Security National Insurance Co./Monnex Insurance Mgmt. Inc. (the "Respondent") for specific statutory accident benefits claimed pursuant to the Schedule¹ and awarded the Respondent a $722.25 cancellation fee for the Appellant's failure to attend a designated assessment centre ("DAC") appointment.

The Appellant appealed the Arbitrator's rulings regarding three assessments claimed pursuant to section 24 of the Schedule and the $722.25 cancellation fee. The Appellant also claimed, on appeal, a special award pursuant to subsection 282(10) of the Insurance Act, R.S.O. 1990, c. I. 8 and her legal expenses of both the arbitration and the appeal proceedings.

My August 8, 2008 decision rescinded part of the Arbitrator's October 30, 2007 order, the Respondent being ordered to pay $869.50 for one of the assessments claimed, plus interest thereon pursuant to section 46 of the Schedule. If the parties were unable to agree on the legal expenses of the appeal, an expense hearing was to be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003) (the "Code").

My decision held that, in the circumstances of this case, the Arbitrator had erred in determining the Appellant's entitlement to the section 24 expenses claimed based on paragraph 24(1)(3) of the Schedule. Rather, subsection 38.2(9) applied, which required the Respondent to pay for specific assessments if it failed to provide the requisite notice under that section. The Respondent provided no basis for ignoring these mandatory provisions, which it conceded it had not followed.

The parties were unable to agree on entitlement to or the quantum of the legal expenses of this appeal and, hence, this expense hearing was held.

My August 8, 2008 decision held that I would not determine the legal expenses of the arbitration proceeding as the parties had never contacted the Arbitrator to address this issue as the Arbitrator had requested, a stay of the Arbitrator's decision had not been sought by either party on appeal and no submission was provided why the thirty-day period under Rule 79.1 of the Code to request an appointment to assess expenses should be waived.

By letter dated September 8, 2008, the Appellant requested that the issues of entitlement to and the quantum of arbitration expenses be added to this expense hearing, citing in support Royal and SunAlliance Insurance Company of Canada and Jiwa, (FSCO P04-00024, May 18, 2005). On September 10, 2008, I wrote the parties that I had already determined this question, after having heard submissions from both parties. In any event, in Jiwa, both parties agreed that Director's Delegate Makepeace should determine the legal expenses of that arbitration proceeding. In the case before me, the Respondent submitted that I had no jurisdiction to determine such expenses.

The Appellant submits a September 23, 2008 account for her appeal legal expenses in the amount of $2,756.78. The Respondent's September 26, 2008 Bill of Costs is $3,835.21.

The Appellant's account includes 31 hours for a student-at-law at $50 an hour, 5 hours for one counsel at $150 an hour and an additional half-an-hour for a second lawyer at $73.87 an hour.

The Respondent submits that the hourly legal aid rate for a student-at-law is $46, which cannot be adjusted by the experience allowance provided by the Legal Aid Services Act, 1998, S.O. 1998, c. 26. The Respondent also submits that the hourly rate for the first counsel should be $87.26, there being no justification for the $150 hourly rate sought. The Respondent also disputes the $50 disbursement for photocopies and postage, requesting details of same.

The Respondent claims 36 hours for its main counsel at the applicable legal aid hourly rate of $87.26, and for a second counsel, the legal aid rate of $96.95 per hour for 42 minutes. Both parties claim an additional 1.5 hours for preparation for and participation at the appeal expense hearing, the Appellant at $77.56 an hour, the Respondent at $87.26.

The Respondent submits that the Appellant was successful on only one of the five issues it raised on appeal, losing on the special award, the DAC cancellation fee and two of the three section 24 assessments. It estimates a 5% recovery by the Appellant of the monies in dispute. Although not all of its own arguments were accepted, the Respondent submits "[i]t was time well spent, and it facilitated the ultimate outcome that the [Appellant] was not entitled" to most of the claims sought. The Respondent argues that this case should not be seen as one of mixed success.

The Appellant submits that it obtained a higher degree of monetary success, but argues that more important is the nature of the legal issues raised and whether it was reasonable to bring this appeal. The Appellant cites McLellan and Aviva Canada Inc., (FSCO A06-001263, February 12, 2007) that:

The purpose of the expense criteria is to encourage parties to endeavour to resolve their disputes on a fair and reasonable basis, and if the matter does proceed to a hearing, to conduct themselves in a fair and reasonable manner.

The Appellant submits that this appeal brought clarity to this area of the law, and to that extent, the appeal addressed novel issues.

The Respondent notes the "more results-based" approach to expenses articulated by Director Draper in Pembridge Insurance Company (Pafco Ins. Co.) and Howden, (FSCO P02-00031, May 17, 2004). In that case it was held that the outcome was mixed and that although the insurer raised legitimate challenges, it was appropriate that the parties bear their own appeal expenses.

The Respondent argues that the only relevant criterion in this case is the degree of success, as in Kingsway General Insurance Company and Pereira, (FSCO P05-00031, September 17, 2007). However, the Respondent notes that Urgiles and Allstate Insurance Company of Canada, (FSCO A04-001424, November 16, 2006) and Msuya and Belair Insurance Company Inc., (FSCO A04-000115, August 29, 2005) suggest that "where there has been a mixed degree of success, and where no other criteria is applicable to the advantage of one party over the other, the parties should bear their own expenses."

II. ENTITLEMENT TO LEGAL EXPENSES

Rule 75 of the Code references the Expense Regulation found in Regulation 664, R.R.O. 1990, made under the Insurance Act, which sets out the following criteria for awarding legal expenses:

(a) Each party's degree of success in the outcome of the proceeding

The Appellant was not successful on all of her claims raised on appeal. However, the Appellant was successful in establishing that there had been an error of law by the Arbitrator, and further, as a result, that certain monies were owing to her by the Respondent.

(b) Any written offers to settle made in accordance with the Schedule

The parties agree that no written offers to settle were exchanged by either side.

(c) Whether novel issues were raised in the proceeding

The Respondent submits that the issues in this case were "the typical variety of whether proper procedure under Section 24 of the Schedule was complied with." However, the Respondent noted only one other case, Tan and Royal & SunAlliance Insurance Company of Canada, (FSCO A04-000656, November 29, 2004), as being on point. However, Tan did not address subsection 38.2(9) of the Schedule and held that in the circumstances of that case, the mandatory payment provisions of subsection 43(12) did not come into play.

I find that the interplay between section 24 expenses and the procedure under section 38.2 of the Schedule was a novel issue on which the Appellant was successful on a question of law.

(d) 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

The parties agree, and I concur, that both parties conducted themselves in a proper manner throughout the process.

(e) Whether any aspect of the proceeding was improper, vexatious or unnecessary

The parties agree that no aspect of this appeal was improper, vexatious or unnecessary.

(f) Whether the insured person refused or failed to submit to an examination required under section 42 of the Schedule or refused or failed to provide any material required to be provided by subsection 42(10) of the Schedule

The parties agree that this criterion is not relevant.

Having reviewed the above criteria, I find that the degree of success is not the only applicable criterion in determining legal expenses in this case. However, as stated by Arbitrator Rogers in Mulhall and Wawanesa Mutual Insurance Company, (FSCO A04-000384, June 16, 2006), no guidance is given in the legislation as to what "what factors are to be considered in assigning weight."

I find that these expense criteria do not exist in a vacuum, segregated from the overall legislative intent. Rather, the criteria are defined by, and help define the broader, overarching legislative intentions, including consumer protection, as set out by the Supreme Court of Canada in Smith v. Co-operators General Insurance Co., 2002 SCC 30, [2002] 2 S.C.R. 129, which encompasses a fair and reasonable measure of access to justice.

In this case, I find that the nature of the main issue raised on appeal to be the most important criterion. The Appellant limited the scope of her appeal and was successful on an issue of law. It was reasonable, and also important, that an appeal regarding the interplay of sections 24 and 38.2 of the Schedule be advanced. To quote the Respondent, "[i]t was time well spent."

I am not persuaded that the Appellant, in bringing this appeal, should be penalized either by having to pay a portion of the Respondent's legal expenses or in having to bear all of her own legal expenses because she did not have a higher percentage of monetary success. Accordingly, I am persuaded that the Appellant is entitled to her legal expenses of this appeal, as allowed by the Schedule.

III. QUANTUM OF LEGAL EXPENSES

Especially given that the Respondent seeks compensation for a total of 37.95 hours of professional services rendered in this appeal, including preparation for and attendance at this expense hearing, I am persuaded that the 38.0 hours sought by the Appellant is reasonable.

Rule 78.2 of the Code provides that the maximum amount that may be awarded for agent's fees is the amount calculated using the hourly rates established under the Legal Aid Services Act, 1998, for law clerks, articling students and investigators. This provision provides no discretion for increasing the hourly rate, unlike Rule 78.1 which addresses legal fees in the context of professional services in civil matters and allows an hourly rate of up to $150 where an adjudicator is satisfied that a higher amount for legal fees to an insured person is justified.

The question is whether a student-at-law is an agent under Rule 78.2 of the Code or is charging legal fees under Rule 78.1. The Respondent was of the view that Rule 78.1 applied. I agree.

As noted by the Appellant, in Panchenko and RBC General Insurance Company, (FSCO A05-002645, February 27, 2008), a student-at-law was allowed $50 an hour. However, as noted by the Respondent, a discussion of the authority to award a higher amount than that established under the Legal Aid Services Act, 1998, S.O. 1998, c. 26 is absent in that decision.

Subsection 14(4) of the Legal Aid Services Act, 1998 provides that "[l]egal services shall only be provided by a lawyer or a person working under the direct supervision of a lawyer." I find that as articling students work under the direct supervision of a lawyer, they are providing legal services for which "a higher amount for legal fees" may be awarded under Rule 78.1 of the Schedule. The notation of "articling students" in Rule 78.2 serves, in my view, as a guidepost for agents, rather than setting a maximum hourly rate for students-at-law themselves.

I find that there was professional representation in this case on behalf of both parties. I find that the slightly higher hourly rate of $50 being sought in this case is certainly justified. Mr. Gupta has now been called to the bar, and the additional 1.5 hours sought regarding this expense hearing is allowed at the agreed hourly rate of $77.56.

As to the $150 an hour sought for the Appellant's senior counsel, no basis was laid or any argument put forward to justify a higher hourly rate under Rule 78.1 of the Code. Accordingly, the hourly rate for that counsel is $87.26. The hourly rate for the more junior counsel is agreed to be $77.56. I am persuaded that the Appellant's disbursements, the $250 filing fee and the rather modest $50, plus GST, for miscellaneous photocopies and postage expenses, are reasonable.

Accordingly, I allow the following legal expenses for this appeal proceeding:

For Mr. Gupta: 31 hours @ $50 an hour $1,550.00 For Mr. Gupta: 1.5 hours @ $77.56 an hour $ 116.34 For senior counsel 5 hours @ $87.26 $ 436.30 For junior counsel .5 hours @ $77.56 an hour $ 38.78 5% GST on counsel fee $ 107.07 Filing Fee $ 250.00 Other Disbursements, including GST $ 52.50

Total $2,550.99

IV. RESULT

Security National Insurance Co./Monnex Insurance Mgmt. Inc. shall pay Ms. Halim her legal expenses of this appeal, fixed in the amount of $2,550.99, inclusive of GST.

November 21, 2008

Lawrence Blackman Director's Delegate

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.