Financial Services Commission des Commission services financiers of Ontario de l’Ontario

Neutral Citation: 2008 ONFSCDRS 57 FSCO A06-001502

BETWEEN:

AHMED SHAIKH Applicant

and

ALLSTATE INSURANCE COMPANY OF CANADA Insurer

Before: Arbitrator John Wilson

Heard: July 12 and October 12, 2007, at the offices of the Financial Services Commission of Ontario in Toronto.

Appearances: Mohammed Khan and Rizwan Wancho for Mr. Shaikh Gus Triantafillopoulos for Allstate Insurance Company of Canada

Issues:

The Applicant, Ahmed Shaikh, was injured in a motor vehicle accident on February 7, 2005. I dealt with the adjournment request while reserving on the issue of expenses:

The issue in this further hearing is:

Is Allstate entitled to its expenses incurred in respect of the last minute adjournment of the arbitration hearing, and if so, by whom are they payable?

Result:

Pursuant to section 282 (11.2) of the [Insurance Act]¹, Mr. Rizwan Wancho, shall pay $250 to Allstate as its fixed expenses arising from the adjournment of this matter on July 12, 2007. This amount shall be payable forthwith and in any event of the cause.

EVIDENCE AND ANALYSIS:

The facts behind this expense claim are simple. Mr. Shaikh was represented in his claim for accident benefits by Mr. Rizwan Wancho, a SABS representative. On the agreement of all parties, the arbitration hearing was set to commence on Monday, July 16, 2007. Mr. Wancho, as the Applicant’s representative agreed to the date scheduled. He would also have been sent a formal notice of hearing specifying the date, time, and place of the hearing.

On July 4, 2007, the Commission was contacted by Mr. Mohammed Khan who identified himself as a colleague of Mr. Wancho and who requested an adjournment due to the fact that Mr. Wancho was out of the country “on urgent family business.” Given the relatively last minute nature of the request, and Mr. Khan’s inability to specify the nature of the emergency, nor the exact date of Mr. Wancho’s proposed return to Canada, I required that the parties attend to speak to the adjournment request.

While at the first appearance I adjourned the matter, and found that State Farm would be entitled to an expense order arising from the adjournment, I reserved on the amount of and by whom the order should be payable.

At the subsequent hearing on the expense issue, which took place on October 12, 2007, Mr. Wancho advised that, notwithstanding the earlier story put forward, he had travelled to Pakistan on May 1, 2007. While in Pakistan he became ill, a situation that compelled him to cancel his return trip of May 23, 2007. Despite expectations to the contrary he was unable to obtain a reservation to return to Canada before August 2, 2007, which would leave him back in Canada after the scheduled hearing date.

Mr. Wancho has stated that he remained in contact with his office in Canada, which, indeed, was how the adjournment request came about.

There were admittedly some differences in the story provided at the time of the first adjournment request, and that which emerged at the hearing attended by Mr. Wancho. What was common however, was that Mr. Wancho maintained that he had been unavoidably detained in Pakistan and, through no fault of his own was still there when the date for the scheduled hearing approached.

The reason Mr. Wancho’s conduct came into issue in this matter is that he essentially undertook to be present and ready to conduct Mr. Shaikh’s arbitration when he consented to the August 2, 2007 date for the hearing.

As Mr. Wancho stated, having left for Pakistan for a short stay, he was scheduled to return by May 23, 2007. This would have allowed some two months before the scheduled hearing. Once he cancelled and released those return dates, however, and had no confirmed return flights he was immediately at risk of missing the hearing, not to mention being unable to complete the necessary preliminaries, including service of reports and confirming the attendance of witnesses.

Unfortunately, in accordance with the rules that govern arbitration hearings at the Commission, documents and reports that are to be tendered as evidence at a hearing must be served at least 30 days prior to the hearing. I am advised that this was not done. Furthermore, the intended hearing date of July 16 would not have given sufficient time for Mr. Wancho to remedy this oversight, once the first return flight was cancelled.

Even with the best of intentions, Mr. Wancho would not have been able to proceed with this hearing. The significant extra delay in Pakistan only compounded what would have been already a serious problem. This is a situation that Mr. Wancho, as a representative appearing at FSCO hearings, must have been aware of.

Hearing dates for arbitrations are set on the consent of both parties, and are subject to revision only in cases of personal emergencies, the prospect of imminent settlement, or the unforeseen unavailability of critical evidence, or the involvement of counsel in an ongoing proceeding that was scheduled to conclude before the time scheduled for the arbitration. Barring the occurrence of exceptional circumstances, they are expected to be able to proceed within the agreed timeframe.

All this is set out clearly in Practice Note 9 which forms part of the Dispute Resolution Practice Code (the “Code”).

The Introduction to the Code, which governs arbitrations at the Commission, notes that our procedural rules aim to promote “timely, cost-effective and fair dispute resolution services.”

While the obvious comparator for arbitration is the courts, in light of recent reforms to court procedures, including case management of most matters, every effort must be made to maintain the strict time requirements of the arbitration system.

The preamble to Practice Note 9 provides:

The Commission has an obligation to conduct arbitrations efficiently and speedily. Parties are contacted and agree to pre-hearing and hearing dates well in advance of the dates set. Therefore, adjournments are granted only sparingly once dates have been set.

Rule 72.4 of the Code specifically provides for adjournments being “on such terms as he or she [the adjudicator] considers just.”

Rule 75 of the Code sets out the criteria for an award of expenses. Among the considerations contained in Rule 75.2 is the conduct of a party that tended to prolong, obstruct or hinder the proceeding.

Section 282 (11.2) of the Insurance Act also sets out the requirements for an award against a representative in an arbitration.

Liability of representative for costs

An arbitrator may make an order requiring a person representing an insured person or an insurer for compensation in an arbitration proceeding to personally pay all or part of any expenses awarded against a party if the arbitrator is satisfied that,

(a) in respect of a representative of an insured person, the representative commenced or conducted the proceeding without authority from the insured person or did not advise the insured person that he or she could be liable to pay all or part of the expenses of the proceeding;

(b) in respect of a representative of an insured person, the representative caused expenses to be incurred without reasonable cause by advancing a frivolous or vexatious claim on behalf of the insured person; or

(c) the representative caused expenses to be incurred without reasonable cause or to be wasted by unreasonable delay or other default. 2002, c. 22, s. 127.

In the context of an accident benefit claim and the situation of a particular arbitration, any condition imposed on an adjournment must be “just.” “Just” has been defined as: “Legally right; lawful; equitable.”² Likewise, it can be “acting or done in accordance with what is morally right or fair, deserved, well grounded,” or “right in amount.”

The ordering of conditions is within the discretion of an arbitrator, a discretion that must be exercised lawfully, fairly or equitably, provided only that the order is not based on “irrelevant factors”, a failure to consider “relevant factors” or if the condition itself was an “unreasonable conclusion.”³

Given the wide-ranging nature of judicial discretion and the necessary vagueness of the concept of “just” in the context of conditions on judicial orders, the best summary of the power would be that it must be applied on a principled basis, and its application will “depend upon the circumstances of each case.”⁴

The House of Lords has said that a successful litigant has by law no right to costs. Although he or she may have a reasonable expectation of receiving them, this is subject to what some cases have referred to as the court's absolute and unfettered discretion to award or withhold costs⁵.

The discretion, however, is a judicial one and its exercise must be based on material before the court.⁶

This approach fits uncomfortably with the view expressed by the Saskatchewan Court of Appeal that where a plaintiff is wholly successful in an action and there is no misconduct on his or her part, the plaintiff is entitled to costs on the reasoning that there is no material on which a court can exercise a discretion to disallow costs.⁷

Some of this confusion can be traced to the history of costs awards. The author of The Law of Costs⁸, Mark M. Orkin, has commented:

At common law, costs followed the event, whereas the Court of Chancery had a discretion as to costs. Nowadays, although in practice these two principles have merged, the latter is paramount, sometimes with statutory sanction. Thus, in Ontario the Courts of Justice Act while not granting any new power to award costs makes all costs in the discretion of the court.⁹

At FSCO, costs or “expenses” are covered by Regulation 664 of the Insurance Act. Although Section 12(2) of the Regulation mandates the consideration of certain factors, whether or not to order expenses in any particular matter is at the discretion of the arbitrator, albeit bearing in mind the specified criteria.

Rule 57.01 of the Rules of Civil Procedure (which constitutes that part of the regulations under the Courts of Justice Act regarding costs referred to above) is strikingly similar to the criteria in Regulation 664, with only modest differences.

The Insurance Act provision framing expenses reads as follows:

Expenses

The arbitrator may award, according to criteria prescribed by the regulations, to the insured person or the insurer, all or part of such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations, to the maximum set out in the regulations.

That portion of Regulation 664 relating to arbitration expenses reads as follows:

12(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.
Whether the insured person refused or failed to submit to an examination as required under section 42 of Ontario Regulation 403/96 (Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996) made under the Act or refused or failed to provide any material required to be provided by subsection 42 (10) of that regulation.

The complicating factor in this matter is that the proposed cost order will arise as a condition to an adjournment and not as the result of a completed arbitration, with a winner or loser, and the possibility of offers to settle to be considered.

Neither the Code nor the Expense Regulation spell out how the discretion to order costs should be exercised in the case of an adjournment, when outcome, relative success, and novelty of issues, are for the most part irrelevant.

There are at least three matters that govern the exercise of discretion in this adjournment. The first is the need to address any prejudice suffered by the Insurer due to the adjournment. The second is to discourage conduct that abuses the arbitration process, while a third, and not necessarily the lesser, is to not discourage access to justice by persons having valid claims.

Consideration of this latter factor arises from the well known statement by Gonthier J. in Smith v. Co-operators General Insurance Company¹⁰ that: “There is no dispute that one of the main objectives of insurance law is consumer protection, particularly in the field of automobile and home insurance”. It is reinforced by the fact that Mr. Shaikh, personally, was present and ready to participate at all stages of this procedure, and eager to move his claim along.¹¹

Having decided that the appropriate means of addressing prejudice was through a monetary award for expenses thrown away, the criteria outlined in the Expense Regulation also come into play, but only to the extent that they are relevant to an adjournment.

Rule 15 of The Law Society of Upper Canada’s Code of Conduct for Paralegals provides:

Claims under Statutory Accident Benefits Schedule

In addition to complying with these Rules, a paralegal when acting as an adviser, consultant or representative to a person making a claim under the Statutory Accident Benefits Schedule to the Insurance Act shall comply with that Act, the regulations under that Act and the Code of Conduct for Statutory Accident Benefit Representatives.

Rule 2.11 of the Code of Conduct for SABS Representatives also provides:

A representative must appear promptly for, and participate in good faith in all dispute resolution proceedings for which he or she has received notice.

In deciding whether the conduct of a representative “representative caused expenses to be incurred without reasonable cause or to be wasted by unreasonable delay or other default”¹², then reference should be made first to the above codes of conduct to determine the reasonableness or otherwise of the conduct in question.

Yet another situation that may be potentially relevant to an award of costs in this adjournment is the tribunal’s power to prevent an abuse of its processes. Section 23(1) of the Statutory Powers and Procedures Act (SPPA) reads as follows:

A tribunal may make such orders or give such directions in proceedings before it as it considers proper to prevent abuse of its processes.

Under an “abuse of process” approach, if the conduct of a party in effectively forcing an adjournment, that otherwise might not be granted could be considered an abuse, then a separate foundation for an award of expenses, outside of the Expense Regulation could be found. A jurisprudential foundation for such an approach can be found in the comments by Jennings J. in Royal & Sun Alliance Insurance Company of Canada v. Volfson¹³, where he stated that an order:

…to pay the expenses of the innocent parties must be seen as a logical and necessary extension of the tribunal's control of its own process and its power to prevent them from being abused. therefore conclude that the Arbitrator did have the jurisdiction to prevent abuse of the tribunal's process by requiring the abuser to compensate those who had been caused expense as a result of the abuse of process.

A tribunal has jurisdiction under s. 23(1) of the SPPA to prevent an abuse of its process. Jennings J. observed in Volfson: “It must surely be part of a tribunal’s power to prevent abuse to ensure that those who perpetrate such abuse not be permitted to do so with impunity.”¹⁴

Had it been proven that Mr. Wancho intentionally forced an adjournment by absenting himself, and concocted a story about being detained in Pakistan, I would have no trouble in finding an abuse of process. However, on the evidence before me, the best explanation of Mr. Wancho’s unavailability was that it was inadvertence, or carelessness, tinged perhaps with negligence, rather than any specific intention to flout the rules.

In this context, I note my finding that there was at least an initial misrepresentation about the nature of Mr. Wancho’s absence in Pakistan, with the inference to be drawn that he had departed only recently due to a family emergency. Mr. Wancho has since advised of the actual duration of his stay, and has corrected the scenario to include a delay due to illness while in Pakistan. He has also stated that he was in contact with his Toronto office, and had instructed his colleague to bring the adjournment application.

An inference could also be drawn that Mr. Wancho was well aware of the representation made on his behalf by Mr. Khan, and that he only withdrew it on being “caught out” by opposing counsel who opposed the adjournment.

Given Mr. Wancho’s contrition and the circumstantial nature of the evidence directly implicating him, I am not prepared to make a specific finding of abuse in this matter. I am prepared, however to make a finding that Mr. Wancho should be liable for an expense order arising from the adjournment. Rather than an abuse of process, I make that finding on the grounds that Mr. Wancho “caused expenses to be incurred without reasonable cause or to be wasted by unreasonable delay or other default” as provided for by section 282 (11.2)(c) of the Insurance Act.

Haines J. in interpreting the similar rule in the courts (Rule 57.07(1)) observed:

The language of the rule is straightforward and I can see no reason why the words should not be given their ordinary meaning. The jurisdiction conferred by the rule is discretionary. The court must determine whether the particular conduct complained of falls within the purview of the rule and, if so, whether the circumstances are such that the provisions of the rule should be invoked. If the rule is reasonably construed and applied no injustice should result. In my view rule 57.07 simply permits the court to make an order for costs against a solicitor where it is fairly determined that the proper responsibility for the payment of such costs rests with the solicitor.¹⁵

Having reference to the potential reasons for an order of expenses in this matter, I find that Mr. Wancho’s ill-fated trip to Pakistan gave rise to this adjournment. His client, Mr. Shaikh, was available and anxious to get this matter done. Mr. Triantafillopoulos, counsel for Allstate was ready, but Mr. Wancho was not.

Had Mr. Wancho made appropriate travel plans, or advised Allstate of his problems in obtaining confirmation of a return date in May rather than July, it is unlikely that Allstate would have incurred extra costs in preparing for this hearing. Therefore, I find that Mr. Wancho holds the “proper responsibility for costs in this matter, since his actions and his delay “caused expenses to be incurred without reasonable cause”.

Mr. Triantafillopoulos, on behalf of Allstate has provided an estimate of what he believed should be considered “the costs thrown away” due to the adjournment. The amount claimed is $1000. In absolute terms, it is not a great amount. In the context of a claim that has yet to be adjudicated, it may well be significant.

While costs or expenses are generally compensatory, there are circumstances when an award has a clearly punitive aspect as well such as when directed at an abuse of process, contempt or other serious default in conduct.

Quantifying the appropriate amount is not so easy. The idea of “costs thrown away resulting from the adjournment”, is a concept that can be troubling for its imprecision. As Molloy J. observed:

With that said, determining what costs are actually thrown away is not an easy task. To some extent I have to gaze into a crystal ball and predict, without actually knowing myself, exactly what work was done and how much of that work has been wasted. Even counsel can't say at this point how much of the work is truly wasted and how much will have to be redone. A lot depends on the vagaries of the human memory; some witnesses will remember their preparation interviews better than others; some will require all of that work to be done over again; some will require only part of it to be done over again.¹⁶

I am not convinced that all the amounts claimed by Allstate are necessarily payable as “costs thrown away” due to the adjournment. Some preparation would patently be usable in the arbitration, whenever it takes place. I have no clear evidence just which efforts must necessarily be duplicated.

I am also cognisant that Mr. Wancho sincerely regrets any delay and expense he may have caused to Allstate by his absence, and that I have found that his absence was more likely due to carelessness compounded by bad luck, or just plain negligence rather than any malice or intent to delay or frustrate the proceedings. Negligence alone that causes a party to incur further costs will support an award of expenses.

As noted earlier, Mr. Shaikh was in no way implicated in the delays in this matter, other than indirectly by retaining Mr. Wancho. I find that Mr. Wancho personally, should be responsible for any costs order arising from the adjournment, since he alone would have been in a position to avoid any costs either through more carefully managing his travel plans or in the alternative providing notice to Allstate once he was without a confirmed return date, and could not guarantee his presence for the hearing.

Mr. Wancho was put on notice as to his potential liability for costs, and he was given an opportunity to bring evidence and make submissions as to his responsibility. Although I have found some mitigating circumstances, I have also found that there are cogent reasons for making an award of some nature against Mr. Wancho.

While I have no doubt that Allstate has spent the amount claimed or more on this matter, it is not clear what would justify the award claimed, nor what part of Allstate’s expenses would have to be duplicated for a new hearing date. As well, at best Mr. Triantafilloupoulos is entitled to bill at legal aid rates which would suggest that he has claimed for over ten hours work lost due to the adjournment.

It would be more appropriate in this case to find that a nominal expense award should be fixed and payable by Mr. Wancho as a condition of the adjournment, and to leave the issue of incurred expenses, including those related to the period covered by Mr. Wancho’s absence to the arbitrator hearing the substantive issues in this matter.

Consequently, while I find that Allstate should receive some of their costs for the adjournment, consideration of the entire amount claimed should be deferred. Therefore without prejudice to any claim that Allstate may have to its costs in this proceeding as a whole from the Applicant, I award nominal costs on the adjournment which I fix at $250.

This amount is payable by Mr. Wancho forthwith and in any event of the cause. As noted earlier, the balance of the $750 claimed by Allstate shall be payable only in the context of any claim against Mr. Shaikh for the overall expenses of the hearing, which I leave to the discretion of the hearing arbitrator.

April 4, 2008

John Wilson Arbitrator

Date