Financial Services Commission des
Commission services financiers
of Ontario de l’Ontario
Neutral Citation: 2008 ONFSCDRS 62
FSCO A05-002601
BETWEEN:
THURKA SHANMUGALINGAM
Applicant
and
RBC GENERAL INSURANCE COMPANY
Insurer
DECISION ON EXPENSES
Before: Susan Sapin
Heard: January 18, 2008, at the offices of the Financial Services Commission of Ontario in Toronto.
Appearances: Adam Ezer for Ms. Shanmugalingam
Aldo Picchetti for RBC General Insurance Company
Issues:
The Applicant, Thurka Shanmugalingam, was injured in a motor vehicle accident on March 9, 2005. In a decision dated June 22, 2007, I dealt with her claims for statutory accident benefits under the Schedule.1 I made the following orders, while reserving on the issue of expenses:
Ms. Shanmugalingam is not entitled to IRBs from June 13, 2005 until February 28, 2006 under section 4 of the Schedule.
Ms. Shanmugalingam is not entitled to expenses for treatment received from Focus Rehabilitation Group through November 2005, under section 15 of the Schedule.
Ms. Shanmugalingam is not entitled to housekeeping expenses.
Ms. Shanmugalingam shall repay $114.30 to RBC under section 47 of the Schedule.
Ms. Shanmugalingam is not entitled to a special award under s. 282(10) of the Insurance Act.
If the parties are unable to agree on the amount of arbitration expenses, either party may refer the matter to me to be determined.
Under ss. 282(11) of the Insurance Act2 and s.12 of Regulation 664, an arbitrator’s power to award expenses is limited by specific criteria, the only one of which applies in the case before me is the first one, “each party’s degree of success in the outcome of the proceeding.” As Ms. Shanmugalingam’s arbitration was entirely unsuccessful, the issue in this further hearing is not whether Ms. Shanmugalingam must pay RBC’s arbitration expenses, but rather what is the amount of expenses she must pay.
The parties were unable to agree on the amount of expenses Ms. Shanmugalingam should pay, and she further argued she should not be required to pay any expenses, because RBC did not request an assessment before me within 30 days of from the date of my arbitration decision, as required by Rule 79.1 of the Dispute Resolution Practice Code (Fourth Edition Updated — October 2003) (the “Code”). In the alternative, Ms. Shanmugalingam disputed the amount of the expenses claimed. I dismissed the first argument and assessed the expenses at $6,000, inclusive of GST.
Result:
- Ms. Shanmugalingam shall pay to RBC its expenses of the arbitration proceeding in the amount of $6,000, inclusive of GST.
ANALYSIS:
Consequences of Delay
There is no question that RBC failed to request an assessment within 30 days from June 22, 2007, the date of the arbitration decision. I find RBC’s formal request for an expense assessment was made to the Commission by letter dated October 24, 2007, which amounts to a delay of approximately 124 days, or about four months.
The question to be determined is, what are the consequences, if any, of the delay. Ms. Shanmugalingam argues that RBC should not be entitled to proceed with this hearing and further, that it should not be entitled to its arbitration expenses, because there is no reasonable explanation for the delay and she has been prejudiced by it. I find this argument to be without merit, unsupported as it is by either fact or law.
The only prejudice identified by Ms. Shanmugalingam is that she is a minimum wage earner and cannot afford to pay the $12,339.87 sought by RBC. As Ms. Shanmugalingam was a minimum wage earner at the time of the arbitration hearing and subsequent decision, she is in no different a position than she would have been regardless of any delay, and I do not find any prejudice attributable to delay.
The consequences of delay depend on the nature of a breach and its effect on the fairness of the proceedings. Rule 1 of the Code is helpful in that regard: the rules are to be broadly interpreted to produce the most just, quickest and least expensive resolution of the dispute; and a defect in form or other technical breach will not make a proceeding invalid.
I find the evidence in this case points to a technical breach, with the delay resulting from a combination of misunderstanding, carelessness and inexperience of the two junior lawyers charged with dealing with the matter of expenses. There was no evidence that RBC intended to waive its right to expenses at all, or to an assessment to determine the amount. RBC served its Bill of Costs promptly in accordance with Rule 79.2 of the Code, and Ms. Shanmugalingam was aware of her liability to pay expenses, if not the precise amount. Under Rule 79.2(b), it is for the party liable to pay expenses, to “promptly provide the other party with a written response to the account, identifying the items in dispute and the reasons for the dispute.” Ms. Shanmugalingam did not provide such a response to RBC. For these reasons I find she cannot rely on RBC’s technical breach of the rules to avoid either an assessment of her expenses, or the obligation to pay expenses.
Correspondence between the parties, copied to the Commission, indicates that RBC provided Ms. Shanmugalingam with its cost submissions by letter dated July 24, 2007, just over 30 days from June 22. The actual Bill of Costs followed on July 30, 2007; both covering letters advise that should the parties not be able to agree on the appropriate level of costs, RBC would be “forced to schedule an Expense Hearing” before me.
Evidence in the form of further correspondence and affidavits filed on behalf of the parties indicates a misunderstanding arose when Adam Ezer, the articling student representing Ms. Shanmugalingam, called Alexander Curry, a junior lawyer handling the expense issue for RBC, on July 27, 2007. Mr. Curry swore an affidavit and testified at the expense hearing; Mr. Ezer, on the other hand, chose to take the somewhat circuitous route of presenting his side of the story through the sworn affidavit of Oana Floricel, the office manager of the firm where he works. Given her lack of firsthand information, Ms. Floricel’s affidavit and testimony were of little assistance.
It appears from the evidence that Mr. Ezer called Mr. Curry to say that he would “recommend that the Applicant sign a Full and Final Release in relation to the motor vehicle accident at issue in return for no costs being payable by the Applicant to the Respondent . . .” Mr. Ezer’s position is that this recommendation was a “proposal,” and not an offer to settle expenses. Despite this assertion, I can well understand why Mr. Curry would have thought his discussions with Mr. Ezer were in fact in response to his (Mr. Curry’s) written invitations to Mr. Ezer to discuss resolution: “Should we not be able to agree on the appropriate level of costs we will be forced to schedule an Expense Hearing in front of Arbitratror Sapin.”3 I can also appreciate why such a “proposal” from Mr. Ezer would be of little interest to RBC, given that Ms. Shanmugalingam was not successful in any respect at arbitration.
Settlement of disputes between the parties is by far the preferable alternative to arbitration, and that includes disputes about expenses. RBC’s offer to attempt to reach agreement on the appropriate level of costs, after serving its Bill of Costs on the Applicant, was the correct thing to do and it was reasonable for it to allow the Applicant ample time to consider her options. Unfortunately, Mr. Ezer’s proposal that his client pay nothing in the way of arbitration expenses, in exchange for a full and final release, was neither realistic nor reasonable. Also, he did not provide Mr. Curry with the Applicant’s Bill of Costs, as requested, which might have assisted RBC in determining if it would accept a lesser amount in costs than it was claiming from Ms. Shanmugalingam. Although it would have been prudent, in the face of Mr. Ezer’s inaction, for Mr. Curry to simply go ahead and request an assessment hearing, it is difficult to find fault with him allowing Mr. Ezer and his client time to consider reasonable options.
In conclusion, I find that Ms. Shanmugalingam cannot avoid this assessment hearing nor her liability for costs, as there is no prejudice to her as a result of RBC’s technical breach of Rule 79 of the Code, and RBC had a reasonable explanation for its delay in seeking an assessment.
Amount of Expenses:
The Expense Regulationunder the Insurance Act provides that:
12(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 the Schedule or refused or failed to provide any material required to be provided under subsection 42(10) of the Schedule.
RBC claims legal fees of $8,021.11 at the legal aid rate, as it is entitled to do, and $2,524.93 for disbursements, for a total of $12,339.87 (which includes GST on fees and disbursements of $1,793.83).
I do not find the legal fees unreasonable for a four-day hearing. However, I am mindful of the view of the courts when it comes to expenses that “one must remember that the overall objective in fixing costs is to fix an amount that is fair and reasonable to the unsuccessful party rather than an amount fixed by the actual costs incurred by the successful litigant.”4 I have no doubt that the actual legal fees incurred by RBC are considerably higher than the legal aid rate; however, the legislature has stipulated the rules that govern my discretion. What I am allowed to consider, and do, is the third criteria, above: “whether novel issues are raised in the proceeding.” Ms. Shanmugalingam’s case was one of the first where it was necessary to determine whether an injury fell within the Pre-approved Framework Guideline for Whiplash Associated Disorder Grade II injuries With or Without Complaint of Back Symptoms (“the WAD II Guideline”).5 There is inherently more risk to an applicant in proceeding with a novel issue, a factor which should not be an inordinate deterrent irrespective of the potential merits of a claim. For this reason, I find it would be fair to take this factor into account from the Applicant’s point of view in this case, and reduce the amount of legal fees payable to $5,000 inclusive of GST.
Regarding disbursements, Rule 79 requires the party awarded expenses to provide the other party with copies of supporting documentation for disputed expenses. Apparently no such documents were provided. On the other hand, there was no indication that Ms. Shanmugalingam disputed the disbursements. Accordingly, I find $1,000 inclusive of GST is a reasonable amount for disbursements.
Each party shall bear its own expenses of the assessment hearing.
April 18, 2008
Susan Sapin
Arbitrator
Date
Financial Services Commission des
Commission services financiers
of Ontario de l’Ontario
Neutral Citation: 2008 ONFSCDRS 62
FSCO A05-002601
BETWEEN:
THURKA SHANMUGALINGAM
Applicant
and
RBC GENERAL INSURANCE COMPANY
Insurer
ARBITRATION ORDER
Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
- Ms. Shanmugalingam shall pay to RBC General Insurance Company arbitration expenses of $6,000 inclusive of GST.
April 18, 2008
Susan Sapin
Arbitrator
Date
Footnotes
- The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
- R.S.O. 1990, c.I.8, as amended.
- Mr. Curry’s letters of July 24, and 30, 2007, to Mr. Ezer.
- Boucher v. Public Accountants Council for the Province of Ontario, 2004 CanLII 14579 (ON CA), [2004] 71 O.R. 3d 291, at para. 26 (Emphasis in the original)
- Note 2: Guideline issued by the Superintendent of Insurance, pursuant to Section 268.3 of the Insurance Act, or the purposes of the Schedule.