Financial Services Commission of Ontario
Commission des services financiers de l’Ontario
Neutral Citation: 2009 ONFSCDRS 170
Appeals P09-00030A and P09-00030C
OFFICE OF THE DIRECTOR OF ARBITRATIONS
MUHAMMAD QURESHI
Appellant
and
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
Respondent
AND
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY
Cross-Appellant
and
MUHAMMAD QURESHI
Cross-Respondent
BEFORE:
Delegate Lawrence Blackman
REPRESENTATIVES:
Mr. Gary Mazin for Mr. Muhammad Qureshi
Ms. Carla S. Falkeisen for State Farm Mutual Automobile Insurance Company
HEARING DATE:
Written submissions were due December 7, 2009
APPEAL EXPENSES
ORDER
Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:
- Each party shall bear their own legal expenses of these appeal proceedings.
December 10, 2009
Lawrence Blackman
Director’s Delegate
Date
REASONS FOR DECISION
I. BACKGROUND
Mr. Muhammad Qureshi was injured in a December 13, 2005 motor vehicle accident and applied to State Farm Mutual Automobile Insurance Company (“State Farm”) for statutory accident benefits payable under the Schedule.1 Arbitrator Lee (the “Arbitrator”), in his July 9, 2009 decision, found Mr. Qureshi entitled to payment of some of the benefits claimed. The Arbitrator further held, without reasons, that each party should bear their own arbitration legal expenses.
Mr. Qureshi appealed the Arbitrator’s decision regarding income replacement (“IRB”) and housekeeping entitlement. Both parties appealed the Arbitrator’s expense order.
For the written reasons provided:
My October 14, 2009 decision rescinded the Arbitrator’s July 9, 2009 expense order. The issues of entitlement to and the quantum of arbitration legal expenses were referred back to the Arbitrator for the parties’ submissions and the Arbitrator’s decision, with written reasons.
I otherwise confirmed the Arbitrator’s July 9, 2009 decision. Accordingly, State Farm’s Notice of Appeal was allowed and Mr. Qureshi’s Notice of Appeal, other than on the issue of arbitration legal expenses, was dismissed.
I held that if the parties were unable to agree on the legal expenses of these appeals, an appeal expense hearing could be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003) (the “Code”).
The parties were unable to agree on appeal legal expenses. My letter of October 29, 2009 set the following time lines for the document exchange required under the Code:
(a) any party seeking their legal expenses of these appeals was, by November 16, 2009, at 4:30 p.m., to serve and file their (1) account describing each of the legal expenses of the appeals claimed, services received and the costs and (2) their submissions regarding entitlement to the legal expenses of these appeals;
(b) the responding party was, by November 30, 2009, at 4:30 p.m., to serve on the originating party and file with the Commission (1) a written response to the account, identifying the items in dispute and the reasons for the dispute, and (2) any responding submissions on entitlement to the appeal legal expenses; and,
(c) the originating party was, by December 7, 2009, at 4:30 p.m., to serve and file copies of supporting documentation, such as invoices, receipts, computerized dockets or cancelled cheques in respect of the disputed items.
I asked that the parties address in their respective submissions whether the issues of entitlement to and the quantum of appeal legal expenses should be determined on the basis of the above-noted documents, or if an oral hearing was also warranted.
The parties have not requested an oral expense hearing. Exercising my discretion under Rule 56.5 of the Code and the guidance of Rule 1.1, I am persuaded that it would be most expeditious, least expensive and equally just and fair (notice having been given to the parties with an opportunity to respond) to determine appeal expense entitlement and quantum on the basis of the filed written submissions.
II. ENTITLEMENT TO LEGAL EXPENSES
By letter dated November 6, 2009, State Farm served and filed its Bill of Costs. State Farm seeks its legal expenses of these appeals for the following reasons, as set out in its initial October 27, 2009 correspondence and in its December 1, 2009 reply submissions:
State Farm was successful on all issues in these appeals and specifically the Arbitrator’s IRB and housekeeping decisions. It did request that I award the insurer its arbitration costs and “simply fix those costs rather than remit it back for a costs hearing.” As this issue has now been sent back to arbitration, State Farm may possibly still obtain its arbitration expenses. Hence, this issue on appeal was not lost. In any event, State Farm should not be penalized for its attempt to expedite the resolution of this issue.
State Farm’s August 12, 2009 offer to settle these appeals was sent more than three weeks before written submissions were due. Mr. Qureshi did not serve an offer to settle, nor did he respond to State Farm’s offer. State Farm’s offer proposed to settle the appeal and the cross-appeal as follows:
(a) Mr. Qureshi would consent to an Order dismissing his appeal without costs.
(b) In consideration, State Farm would consent to an order dismissing its appeal/cross-appeal without costs.
(c) The Offer to Settle expired one minute after the commencement of the appeal hearing, or sooner if revoked in writing.
State Farm submits that its offer was as favourable to Mr. Qureshi if not more favourable than the appeal decision. State Farm further offers various possible scenarios as to what may happen at the arbitration expense hearing that will show that its August 12, 2009 Offer to Settle, ultimately, would have left Mr. Qureshi better off.
By letter dated November 20, 2009, State Farm wrote that Mr. Qureshi had not filed a Bill of Costs. As the time for doing so had expired, Mr. Qureshi was now precluded from seeking his appeal legal costs. By letter dated November 26, 2009, State Farm reminded Mr. Qureshi, as a courtesy, that his deadline for his responding submissions was November 30, 2009.
Counsel for Mr. Qureshi wrote State Farm November 26, 2009, copied to the Commission, that:
My client’s position is that if [State Farm is] seeking costs to this appeal, then we are as well. Our submissions will be served and filed, as per Director’s Delegate Blackman’s request by November 30, 2009.
By letter faxed November 26, 2009, I confirmed that the November 16, 2009 deadline was for any party seeking their legal expenses of these appeals. The November 30, 2009 deadline was for the responding party to serve and file their responding submissions. Accordingly, any initiating request for legal expenses was now late.
By letter dated November 30, 2009, Mr. Qureshi provided his responding submissions regarding State Farm’s legal expense request. Mr. Qureshi submitted that State Farm was not successful on all issues in appeal. Rather, it unsuccessfully sought an appellate order determining entitlement to and the quantum of arbitration legal expenses, whereas Mr. Qureshi asked that the Arbitrator’s expense order be overturned so that an arbitration expense hearing could be held.
Regarding State Farm’s Offer to Settle, Mr. Qureshi submitted that the appeal decision now provides him the opportunity to have an arbitration expense hearing. He queries how State Farm’s Offer to Settle can be seen as better than the appeal decision.
I find that:
(1) Both parties sought and were successful in obtaining an order that the Arbitrator erred in law in determining legal expenses without providing reasons.
(2) Both parties sought additional or alternative relief in these appeals.
(3) Mr. Qureshi also appealed the Arbitrator’s findings regarding IRB and housekeeping entitlement. In this regard, I held that:
I am not persuaded that the Arbitrator erred in law regarding his determinations regarding the Appellant’s entitlement to IRB and housekeeping and home maintenance benefits. Rather, the Arbitrator, who had the advantage of hearing and observing the witnesses in person, determined these entitlement issues upon assessing credibility and evaluating the evidence as a whole. I see no basis upon which to overturn these findings.
(4) State Farm submitted that determination of entitlement to and the quantum of arbitration expenses “by an appeals officer would be no different than any determination on any issue.” Mr. Qureshi in his written submissions sought, in the alternative, an appellate order that he was entitled to his arbitration legal expenses. My October 14, 2009 decision stated that:
Appeals to the Director or his Delegate are from the order of an arbitrator. An appeal from my decision regarding arbitration legal expenses would be by application for judicial review. I am not persuaded that this would be a more expeditious or cost-efficient process than returning these issues to arbitration, with the right to an internal appeal at the Commission on these issues.
Further, I am mindful of the Supreme Court of Canada’s observation in Housen and Nikolaisen, 2002 SCC 33, [2002] S.C.J. No. 31, of the trial judge’s “advantageous position to make factual findings, owing to their extensive exposure to the evidence and the benefit of hearing the testimony viva voce.” I am persuaded that the same reasoning applies herein and that it is appropriate that I exercise any discretion that I may have to remit these issues to the Arbitrator, especially as there is no submission that these issues should be remitted to a different arbitrator.
(5) State Farm’s submissions regarding its Offer to Settle are based on speculation as to what the Arbitrator may determine regarding arbitration legal expenses. In the interim, the issue of arbitration legal expenses has been returned to arbitration, as requested in the alternative by Mr. Qureshi. I am not persuaded that State Farm’s August 12, 2009 Offer to Settle is as favourable or more favourable than the October 14, 2009 appeal decision.
(6) Considering that both parties sought to overturn an identical aspect of the arbitration decision and that criterion 75.2(e) of the Code (whether any aspect of these specific appeal proceedings was unnecessary) applies in some measure to both parties who sought a considerably broadened interpretation of my jurisdiction and powers under subsections 283(1) and (5) of the Insurance Act, I am persuaded that both parties should bear their respective costs of these appeal proceedings.
III. QUANTUM OF LEGAL EXPENSES
For completeness, I will briefly address the quantum of appeal legal expenses.
State Farm submits a Bill of Costs (revised by an additional hour for its reply submissions) of $2,448.50, inclusive of GST. The Bill of Costs consists of 15.8 hours at $150 an hour. The Bill of Costs notes that its counsel was called to the Bar in 1986. State Farm’s initial Bill of Costs anticipated additional time in replying to Mr. Qureshi’s submissions. I would allow the amendment of its Bill of Costs.
Mr. Qureshi submits that State Farm’s Bill of Costs is grossly excessive. I find the hours claimed for the work done to be reasonable.
Rule 78 of the Code provides that only legal fees for “an insured person” (not an applicant or appellant) may be increased to $150. State Farm is not “an insured person.” Accordingly, the maximum hourly rate for State Farm is, in accordance with Rule 78.1 of the Code, the hourly rate established under the Legal Aid Services Act, 1998 for professional services in civil matters before the Ontario Superior Court of Justice, adjusted to include the experience allowance. State Farm’s maximum hourly rate would be $96.95.
December 10, 2009
Lawrence Blackman
Director’s Delegate
Date
Footnotes
- The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.