Patience Sarpong and Victoria Owusu v. TD Home and Auto Insurance Company, 2008 ONFSCDRS 81

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2008 ONFSCDRS 81

FSCO A05-001817

and A06-001294

BETWEEN:

PATIENCE SARPONG

VICTORIA OWUSU

Applicants

and

TD HOME AND AUTO INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before: David Muir

Heard: By telephone conference call on March 26, 2008.

Appearances: Murray Tkatch for Ms. Owusu and Ms. Sarpong

Andrew Grayson for TD Home and Auto Insurance COMPANY

Issues:

The Applicants, Victoria Owusu and Patience Sarpong were involved in a motor vehicle accident on June 2, 2004. They each sought income replacement benefits and a special award. In a decision dated January 17, 2008, I dismissed both Applicants’ claims for statutory accident benefits under the Schedule¹ in their entirety, while reserving on the issue of expenses. The parties have been unable to resolve that issue and accordingly an appointment was requested pursuant to Rules 75 to 79 of the Dispute Resolution Practice Code (Fourth Edition — Updated October 2003) (the “Code”).

These matters were heard together pursuant to an Order made earlier pursuant to Rule 30(d) of the Code. Separate decisions were released, however as regards the expense issue, although the results differ, the decisions in the arbitrations have been combined.

TD Home is seeking expenses in the amount of $33,500 consisting of $26,000 in legal fees and a further $7,500 in disbursements and other expenses. Neither Ms. Owusu nor Ms. Sarpong are seeking any amount of their expenses.

At the heart of the expenses dispute is the consequence, if any, of the failure of TD Home to prove its allegation that Ms. Owusu and Ms. Sarpong were participants in a conspiracy or ring to defraud the Insurer. The Applicants submit that this failure ought to have consequences and the only consequence remaining at this stage is expenses. TD Home counters this argument with the assertion that although it did not prove its fraud allegation, it was compelled to call all of that evidence to defend these claims particularly in the face of the special award claim advanced by the Applicants.

The Applicants had sought to adjourn the expense hearing in order to obtain detailed dockets of counsel for TD Home in order that those hours related to the conspiracy theory could be stripped out in the event that I accepted their submission that TD Home should bear the consequence of their failure to prove it. I indicated at the expense hearing that while I understood the point, I was not inclined to engage in a line-by-line analysis and upon reflection I am even more persuaded that such an exercise would be fruitless given my conclusions below respecting the amount of time that this case ought to have taken to prepare and present

In the result, I have accepted the Applicants’ central point that TD Home failed to prove its conspiracy theory and there ought to be some expense consequences for that failure. I have also concluded that the amount of time claimed by TD to prepare and present the case is unreasonable and not solely because of the failed attempt to prove a conspiracy to make fraudulent claims. Accordingly, I have made findings regarding the amount of expenses TD Home is entitled to, considering its complete success in defending these claims discounted to a considerable degree as a consequence of my determination about the length of time that the hearing ought to reasonably have taken. I will also make findings respecting the appropriate disbursements that are payable given those conclusions.

As originally framed by TD Home, the demand for expenses was that each of the Applicants was jointly and severally liable for the entire amount sought. As I indicated at the hearing it does not follow from my Rule 30 Order, that liability for expenses would be joint and several. The arbitrations although heard together were not combined, but remained separate and no special Order was made as regard expenses at the time of the hearing. TD Home did not take exception to my view of this aspect of the expense issue, but submitted in response that if there was to be an apportionment of expenses between the Applicants it ought to be on a 50/50 basis.

The issue in this further hearing is formally stated as follows:

Is TD Home entitled to all or part of their expenses incurred in respect of these arbitration hearings from either Applicant?

Result:

The Applicants shall pay to TD Home a part of its reasonable expenses as follows:

Ms. Owusu shall pay to TD Home its expenses in the amount of $3,604.01; and
Ms. Sarpong shall pay to TD Home its expenses in the amount of $8,409.35.

EVIDENCE AND ANALYSIS:

The arbitration hearing lasted almost 7 days. Ms. Owusu’s evidence-in-chief was not much more than an hour in length. Her cross-examination took somewhat longer but her evidence in total was completed in less than a full day.² Ms. Sarpong’s evidence-in-chief was not much longer than Ms. Owusu’s evidence. However, TD Home’s cross-examination took considerably longer as Ms. Sarpong was apparently much closer to the apparent centre of the alleged conspiracy, Worthys Unisex Hair Salon (“Worthys”). However all in, the evidence of both Applicants took no more than two-and-a-half days. If the cross-examinations had focussed on the Applicants’ entitlement to benefits as opposed to the various collateral attacks on their credibility, their evidence could have been concluded in little more than one, or two days at most.

As I noted in my decisions on the merits of these claims, the evidence supporting entitlement to the benefits in dispute was extremely limited. At the conclusion of the Applicants’ cases, I expressed my concerns about TD Home’s ability to prove its theory given the nature of the evidence that was proposed to be called. In particular, I queried why we needed several more days of largely indirect and hearsay evidence, entirely collateral to the benefit issues in dispute, in order to respond to the very limited and frankly problematic evidence that had been called by the Applicants.³

A brief review of my conclusions in each case is set out below.

As regards Ms. Owusu’s claims at the end of the day, other than being in a car with Ms. Sarpong and her stepfather⁴, there was very little that connected Ms. Owusu to the alleged ring:

TD Home led no evidence that directly linked Ms. Owusu to the alleged ring or conspiracy. Its theory as it relates to Ms. Owusu rests almost entirely on her connection with various other accident benefit claimants, including her putative employer, as well as her connection to Ms. Sarpong and Mr. Asamane, who are in turn linked through their putative employer with another number of accident benefit claimants. Having considered the voluminous evidence in support of the conspiracy theory, almost all of which was indirect and/or hearsay, I am unable to find that Ms. Owusu was a knowing participant in the alleged ring. However, while the conspiracy theory of the Insurer was not established, the substantial questions surrounding Ms. Owusu's claims were not answered in her evidence and accordingly I have concluded that she is not entitled to an income replacement benefit.

and then later after summarizing her evidence:

I find that Ms. Owusu is not a credible or reliable historian. In her evidence before me she almost entirely disavowed her August 2004 statement, without actually doing so. Given the passage of time, it is not inconceivable that her memory might fade about some of the details of her life in the weeks surrounding the accident. But when given the opportunity to explain the contradictions, she neither reverted to the August 2004 statement or explained why she might have misspoken so completely then.

As regards her explanation for denying knowing Mr. Asamane, her stepfather, while at first blush plausible, in the end it was vague and unconvincing. Once her mother knew about her transgression in being with her stepfather, it makes little sense to have maintained that she did not know him two months later when providing a statement to TD Home.

Her inability to be consistent about when the accident occurred - before or after the visitation - is further indication of the made up nature of much of Ms. Owusu’s evidence. When linked with her testimony at the hearing that afterwards she went home in a cab with her stepfather, this later version of events amounts to a complete repudiation of the one related in the August statement.

The stark contradiction in the evidence respecting her hours of work is also troubling. Ms. Owusu’s statement of August 2004 supported by the limited information provided by her putative employer is crystal clear - she worked 6 days a week. It seems to me unlikely, if she worked at Kleopatra's seven days a week, that she would have forgotten that when she gave her statement in August 2004 but then recall her actual hours of work correctly three years later.

Although the evidence does support the conclusion that Ms. Owusu had some connection with Kleopatra’s, and possibly more than merely a customer, I am unable to find based on the evidence as a whole that she worked there seven days a week, in excess of 45 hours per week every day from March 8 to June 2, 2004, as she has claimed. The credibility issues arising from the many contradictions in her evidence and almost complete lack of any documentary evidence of employment compel the conclusion that her relationship with the putative employer was not as she has claimed.

I find that she has, at a minimum, grossly exaggerated the nature of her relationship with Kleopatra’s and whatever its true nature, there is no credible basis for positive finding respecting her actual hours of work or earnings, if any.

I also find that there is no real evidence of any inability to perform the essential tasks of her pre-accident employment. It is not enough to state, as Ms. Owusu did, that she did not feel well for 8 months and then returned to work because she felt better. In the absence of any real evidence of an impairment arising from the accident, I would dismiss the claim to income replacement benefits for this reason as well.

As can be seen from my conclusions in Ms. Owusu’s arbitration, none of them required any significant evidence from TD Home. Much of Ms. Owusu’s problem followed from the contradictions between her statement given shortly after the accident and her evidence at the hearing. In the result, because of the profound credibility issues raised by her evidence, I simply did not accept that she worked the number of hours she claimed she had at Kleopatra’s Natural Mystique (“Kleopatra’s”) and found that her evidence of disability was too limited to establish that she was substantially unable to perform the essential tasks of her pre-accident employment.

Ms. Sarpong was more connected to the alleged conspiracy because she was employed at Worthys, at the centre of the alleged conspiracy with the result that more of the evidence lead by TD Home did relate to her part in TD Home’s theory. However in the end, I concluded that her claim to an income replacement benefit failed because of her failure to lead any credible evidence in support of it.

The essence of my conclusions respecting Ms. Sarpong’s claims is set out in the following paragraph:

Despite the voluminous evidence lead by TD Home in support of its allegation of a ring, I have concluded that Ms. Sarpong is not entitled to an income replacement benefit not because I have found that she was a participant in the conspiracy, but primarily because of the profound credibility problems arising from her own evidence. To put it plainly, it is difficult because of the inconsistencies, gaps and admitted untruths in her evidence to give it much credit. It is against this backdrop that I have considered the extremely limited evidence in support of her claim to being disabled from work for 16 months as a result of impairments sustained in a motor vehicle accident. Despite the fact that TD Home did not vigorously challenge her assertion that she was unable to work for that period, at the end of the day there is little or no credible evidence of an inability to perform her pre-accident employment duties as a result of injuries sustained in the accident nor any credible evidence respecting the duration of any such impairments.

As regards the evidence of a conspiracy involving Ms. Sarpong, my general conclusions in that regard were as follows:

TD Home led no direct evidence that Patience Sarpong was a knowing participant in a conspiracy or ring to make fraudulent claims. TD Home did not call her putative employer or anyone else associated with the business. I heard no direct evidence from any of the other alleged members of the ring. Instead TD Home lead considerable circumstantial evidence through various investigators, largely in the form of other claims made by individuals associated in one way or the other with Worthys or Ms. Sarpong. TD Home relies on a limited number of facts related to these claims, their timing and the interconnections between the individuals involved to support its theory. The sheer volume of circumstantial evidence and the common sense unlikeliness that all of these claims could have been legitimate strongly suggests something untoward. However it does not necessarily follow from these collateral facts that Ms. Sarpong was not involved in a car accident on June 2, 2004 and suffered injuries which prevented her from working at the hair salon, which we know was a functioning business.

The factors that I am required to consider in assessing entitlement to expenses are narrowly prescribed in O. Reg. 664 and are set out here for convenience:

12(1) The expenses set out in the Schedule are prescribed for the purpose of subsection 282(11) of the Act. R.R.O. 1990, Reg. 664, s. 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 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 relevant factors are 1, 2 and 4, above although the settlement proposal - that the Applicants’ consent to a dismissal of their claims without expenses – serves only to confirm what would normally be the result, that the Applicants are not entitled to their expenses and TD Home is entitled to all or part of its reasonable expenses.

In the normal course, I would likely have concluded that the Applicants were liable to pay all of TD Home’s reasonable expenses on the basis that they were completely unsuccessful in advancing their claims, indeed neither brought any case at all. But for the fact that TD Home did not seriously challenge their claims to being disabled from their pre-accident occupations, focussing on the conspiracy instead, it might have been argued that the neither Applicant had presented sufficient evidence to establish a prima facie case for entitlement.

However it is TD Home’s ultimately vain attempt to prove the conspiracy theory that complicates the expenses issue.

As discussed in my earlier reasons, it is widely accepted that in order to prove what amounts to criminal conduct in a civil proceeding the quality of evidence required may be greater than what would be required to prove other, less freighted, kinds of facts. TD Home did not meet that burden. Most importantly, TD Home was warned of the difficulties I foresaw before it began leading its case.

TD Home makes the fair point that it was required to lead some evidence to counter the special award claim. But given the manifest weakness of the Applicants’ evidence, TD Home’s response could have been quite limited, and lead entirely through Ms. Rochon, an official of TD Home with knowledge of both of the Applicants’ files. The other witnesses added little that was ultimately useful.

To my mind the fact that the hearing became about a conspiracy that was not proven and given the evidence that was called could not have been proven, must be considered under either or both of the factors 1 and 4 above, that is either, and most clearly, the parties’ degree of success, or perhaps, a position taken that tended to prolong the hearing.

Ultimately this was a simple case, the simplest in some respects. Little or no medical evidence was led by the Applicants. Because of the positions taken by TD Home from the outset no assessments were conducted. In any case neither party called any medical witnesses and other than a tangential reference to a Med/Rehab DAC and two OCF-3’s by Ms. Owusu, no other reference was made to any of the limited medical documentation in the briefs.

As I indicated earlier but for the conspiracy theory of TD Home and the extensive collateral attacks on the credibility of the Applicants arising from the theory, these matters could have both been concluded in two days. Ms. Owusu’s case would have taken up something less than a full day. Generously allowing 1 day of preparation time for each day of hearing required to deal with the merits, TD Home would normally have been entitled to 16 hours of preparation time in addition to roughly 16 hours for attending a hearing.

I appreciate that TD Home, having chosen to deny these claims on bases other than that the Applicants were not disabled, left itself with limited defences. I also appreciate that it could not necessarily have anticipated how little evidence would be proffered in support of their claims until the Applicants got into the witness box and gave their evidence. Accordingly I find that something more than would normally be allowed to prepare for arbitrations of this weight is appropriate.

I find therefore that the Applicants together are responsible for the three days of hearing that it took to get their cases in, because the Insurer would not necessarily be able to assess its need to respond until they had each been heard from. I also find that one further day of evidence was reasonably required in order for TD Home to mount a full defence to the limited evidence offered by the Applicants, for a total of four days of hearing to reasonably deal with these claims.

What then of the three to four days taken up with the conspiracy theory of TD Home? I agree with the Applicants that the failure of TD Home to prove these allegations must have consequences and all that is left at this point is its claim to expenses. Moreover it is unfair for the Applicants’ to bear the full burden of TD Home’s insistence in pursuing that line of defence when there was little or no reason to believe that it could be successful given the nature of the evidence that was called. As the Applicants noted, more direct evidence was potentially available but was not called.⁵

For these reasons, I find that TD Home is not entitled to its expenses for the three to four days of hearing devoted entirely to the attempt to prove the conspiracy theory.

Quite aside from these considerations, the hours of legal work devoted to these files are also excessive. Even if I were to find that TD Home is entitled to be compensated for the full 7 days of hearing, 314 hours of legal work were billed. Based on the Bill of Costs it appears that it took almost 100 hours of largely lawyer time to get these matters to a pre-hearing.

Although not exceedingly complex even considering the voluminous evidence going to the conspiracy, I will allow two days of preparation time for each day that the hearing ought to have taken to complete. I am giving some credit for the preparation of the conspiracy evidence because some of it was useful in resolving these claims, but more importantly, this work would have been done prior to it being evident that it was not necessary to defend the claims and before I warned TD Home of my concerns about its ultimate usefulness.

Based on an 8-hour day, I would allow 96 hours for attending at and preparing for the arbitration hearing. I would also allow a further 10 hours for attending at, as well as preparing and responding to pre-hearing issues. There were several pre-hearings and motions. One in particular dealt with TD Home’s request to have the three arbitrations combined. That motion was vigorously resisted by the Applicants, without success.

Accordingly I allow TD Home 106 hours for lawyers’ fees.

TD Home also claims 4.4 hours of senior counsel’s time in assisting in preparation. This is a reasonable claim and is allowed.

The Bill of Costs includes approximately 26 hours of law clerk time. This is a reasonable claim.

Turning to its disbursements, TD Home claims the cost of the court reporter. As has been found many times the expenses of a court reporter are a discretionary expense not related to the conduct of the hearing and are not recoverable under the Regulation.

The Applicants took issue with the expense of the report of the statistician, Mr. Pelly, claiming that his report and testimony proved nothing. Although this witnesses’ evidence and report did not figure prominently in my reasons, I did rely upon his conclusions that the chances of the number of claimants working in the same small workplace as Ms. Sarpong over the relevant period of time were astronomically high.

That said the evidence only went to whether or not Ms. Sarpong could have been a claimant, along with all the others associated with Worthy’s. It said even less about Ms. Owusu’s claims. In the end the evidence did prove nothing because as I pointed out in my earlier reasons, while all of the claims could not likely have been legitimate, that fact does not lead to the conclusion that Ms. Sarpong was not an employee of Worthy’s and involved in the accident. To be clear this evidence could only have value as an element of a case which included some direct evidence supporting the conspiracy theory. There was no such evidence, and accordingly, this evidence was little more than further circumstantial evidence that something was going on, but without directly implicating Ms. Sarpong. Accordingly nothing can be allowed for this expense.

The remaining disbursements are allowed including the photocopying, courier charges and conduct money listed. Although I have concluded that the evidence that TD Home called proved very little, I accept that TD Home did need to be prepared to counter the special award claim. Precisely how little evidence was ultimately needed to counter those claims would not necessarily have been apparent until the eve of the hearing or later. Prudence would require that TD Home have its witnesses under summons even if it became apparent that they would not be necessary.

ALLOWED EXPENSES

Legal Fees:

106 hours @ $83.10

$8,808.60

4.4 hours @ $92.34

406.30

26 hours @ $23.00

598.00

Disbursements:

Photocopies, Courier Expenses

$1,916.46

Conduct Money

284.00

TOTAL REASONABLE EXPENSES

$12,013.36

As regards the apportionment of expenses as between the two Applicants, it follows from my estimate that the cases would have taken four days to conclude but for TD Home’s vain attempt to prove a conspiracy and the fact that Ms. Owusu’s case would have taken up at most one of those four days, that Ms. Owusu should be responsible for at most one third of these expenses. I would reduce that further to 30 per cent for the reason that the evidence connecting Ms. Owusu to the conspiracy was sparser than that tendered in relation to Ms. Sarpong.

May 22, 2008

David Muir Arbitrator

Date