Punam Garg v. Motor Vehicle Accident Claims Fund, 2009 ONFSCDRS 50

Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2009 ONFSCDRS 50

FSCO A08-000862

BETWEEN:

PUNAM GARG

Applicant

and

MOTOR VEHICLE ACCIDENT CLAIMS FUND

Insurer

DECISION ON A PRELIMINARY ISSUE

Before: Arbitrator Denise Ashby

Heard: March 13, 2009, at the offices of the Financial Services Commission of Ontario in Toronto. Further written submissions on expenses were received and the hearing concluded on March 27, 2009

Appearances: Gary Mazin for Mrs. Garg

Harold Sterling for the Motor Vehicle Accident Claims Fund

Issues:

The Applicant, Punam Garg, was injured in a motor vehicle accident on October 24, 2006. She applied for statutory accident benefits from the Motor Vehicle Accident Claims Fund (“MVAC Fund”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and Mrs. Garg applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The preliminary issue is:

Does MVAC Fund have standing to participate in the arbitration pursuant to the Dispute Resolution Practice Code?
Is MVAC Fund liable to pay Mrs. Garg’s expenses in respect of this preliminary issue hearing pursuant to subsection 282(11) of the Schedule?
Is Mrs. Garg liable to pay MVAC Fund’s expenses in respect of this preliminary issue hearing pursuant to subsection 282(11) of the Schedule?

Result:

MVAC Fund has standing to participate in the arbitration and the time prescribed for the delivery of the Insurer’s Response is extended to July 7, 2008 nunc pro tunc, pursuant to Rule 81 of the Dispute Resolution Practice Code and the validity of that Response shall be recognized for the purposes of this arbitration.
MVAC Fund shall pay Mrs. Garg’s expenses of $532.44, plus GST, payable in any event of the cause.

Process of The Hearing:

The preliminary issue hearing was to be conducted in writing. However, Mrs. Garg sought to cross-examine MVAC Fund's deponent of the affidavit submitted in support of its response. On consent of the parties and to insure a fair and expeditious hearing of the preliminary issue, I ordered that Mrs. Garg’s submissions in reply would be heard on the same date.

Mrs. Garg made oral submissions in respect of her claim for expenses at the examination. On consent of the parties and in order to insure an expeditious expense hearing, the remaining submissions were conducted in writing.

EVIDENCE AND ANALYSIS:

It is agreed that Mrs. Garg filed her Application for Arbitration on April 24, 2008. On June 3, 2008, the Commission sent the Application to MVAC Fund requesting that its response be served and filed within 20 days. The response was served and filed on July 7, 2008 which is beyond the time prescribed in the Dispute Resolution Practice Code (DRPC).

Mrs. Garg seeks an order that MVAC Fund’s Response by Insurer, be rejected and that the arbitration proceed on an uncontested basis. She submits that because MVAC Fund filed its Response, without justifiable cause, outside the 20 day limitation set out in the DRPC, its Response should be rejected. Mrs. Garg attempted to obtain reasons for the delay in two letters, dated September 9 and October 7, 2008. MVAC Fund responded by providing its opinion that the issue of the late response was irrelevant and it was unlikely it could be raised at any stage of the proceeding. This correspondence was not provided as part of Mrs. Garg’s submissions.

MVAC Fund submits that pursuant to Rule 81 of the DRPC an arbitrator has the authority to set aside any time limit in the Rules subject to the requirements of the Insurance Act and Statutory Powers Procedure Act. MVAC Fund seeks an order extending the time for the filing of its Response and permitting the arbitration to proceed on a contested basis. It submits that it has a reasonable explanation for the unintentional delay; has submitted a meritorious Response and there are genuine issues to be arbitrated which will not be fairly heard if the arbitration proceeds on an uncontested basis. Finally, Mrs. Garg has failed to establish any prejudice which could not be compensated by costs.

In its affidavit, MVAC Fund explained that it had experienced a sudden staffing shortage and the deponent was assigned Mrs. Garg’s file for review. Immediately upon becoming aware that MVAC Fund had not filed its Response she retained counsel. The Response was served and filed on July 7, 2008. During her examination it was revealed that the person who had carriage of the file left suddenly. His portfolio of 100 files had to be reassigned. She received 61 of those files.

MVAC Fund further submits that, as the police report identifies an insurer², Mrs. Garg had an obligation to consider it as a source of recovery prior to applying to MVAC Fund pursuant to the rule in Valauskas and Wawanesa and Motor Vehicle Accident Claims Fund, upheld on appeal.³ Therefore, it has a viable defence. MVAC Fund submits that it would be greatly prejudiced if it was denied the opportunity to put its defence before an arbitrator and an unfair adjudication of the issues would result.

Rule 26.1 provides:

Within 20 days receipt by the insurer of the Application for Arbitration, the insurer must respond in one of the following ways:

(a) serve and file a Response by Insurer in FORM E, completed in accordance with Rule 27, together with a Statement of Service in FORM F; or

Rule 81.1 provides:

Subject to the requirements of the Insurance Act and the Statutory Powers Procedure Act, the adjudicator may on such terms as he or she considers just:

(a) set aside any time limit set out in these Rules for doing any act, serving any notice, filing any document or holding any hearing.

There is no dispute that MVAC Fund was late in filing its Response. I find that, pursuant to Rules 7 and 8 of the DRPC, MVAC Fund should have served and filed its Response on or before June 25, 2008. It filed its Response on July 7, 2008 which is 12 days beyond the time prescribed by the Rules. The DRPC does not provide a penalty for the late filing of a Response by an Insurer.

Applications and Responses are analogous to pleadings in civil cases. However, the DRPC does not have a procedure for noting pleadings closed or obtaining default judgement as provided for in the Rules of Civil Procedure. Arbitrators have taken various approaches to the late filing of Responses: standing has been denied because of the egregious conduct of the insurer; standing has been confirmed because the applicant failed to raise an early objection and insurers have been found to have no standing until a Rule 81 extension has been obtained.

In Natana and Zurich Insurance Company and Allstate Insurance Company of Canada, Zurich failed to file its response and pay the assessment fee levied by the Commission until the eve of hearing, notwithstanding the Commission had communicated with Zurich about the deficiency on numerous occasions.

The Senior Arbitrator concluded that an insurer who fails to pay the assessment and fails to file a response is not a party for the purpose of receiving notices of proceedings. She went on to rule that the hearing would not be re-opened and would proceed on an uncontested basis. In making this determination she found that the prejudice to the other parties could not be dealt with by an order of costs. Her decision was influenced by Zurich’s failure to provide either a meaningful explanation for its failure to respond to the Application or an assessment of the merits of its case.⁴

In Pires and Zurich Insurance Company, the Arbitrator declined to deny Zurich standing, notwithstanding it had filed its response late. She ruled that Mr. Pires waived his right to object to Zurich’s late filing by failing to request a ruling or remedy from the Commission prior to the first day of the hearing notwithstanding there had been two pre-hearings. In reaching her conclusion she noted that the Commission had treated Zurich as a party throughout the proceedings.⁵

The Arbitrator in Lebana and Zurich Insurance Company (Commercial Business) considered Hunt v. Brantford (City)⁶ as well as Natana and Pires. He noted that the Commission’s standard letter enclosed with the Application warns: “Insurers who are late filing their responses may not have standing to participate in the arbitration process nor to receive further notice regarding the proceedings.” The Arbitrator went on to find that an insurer who files a late Response has no status until it obtains an order of an adjudicator extending the time for the filing of the response pursuant to Rule 81. He ordered that Zurich should have standing and issued an order extending the time prescribed for filing its Response nunc pro tunc.

Mrs. Garg raised an early objection to the delay. This is consistent with the Pires decision. As a consequence, it must now be determined whether the circumstances warrant an extension of the time prescribed for the delivery of MVAC Fund’s Response pursuant to Rule 81. The preceding three cases provide the following criteria for consideration:

did the Applicant raise a procedural objection in a timely manner?
was the delay unintentional?
did the insurer provide a valid reason for the delay and make full disclosure of the material facts?
does a valid defence on the merits exist? and
will the applicant(s) suffer prejudice that cannot be addressed by either a costs order, an adjournment, or other relief within the jurisdiction of an arbitrator?

Mrs. Garg has not claimed to have been prejudiced by the delay. MVAC Fund provided evidence that the delay was unintentional and a potential defence on the merits. I am satisfied that a fair hearing of the issues requires MVAC Fund’s participation in the arbitration process. Therefore, I exercise my discretion pursuant to Rule 81 and extend the time for MVAC Fund to file its Response to July 7, 2008, nunc pro tunc.

EXPENSES:

Entitlement:

The parties have each claimed their expenses in respect of this preliminary issue hearing. An arbitrator’s discretion in awarding expenses is confined to the criteria set out in the Expense Regulation set out in section F of the DRPC. The criteria relevant to this proceeding are:

Each party’s degree of success in the outcome of the proceeding.
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.

The Insurance Act is consumer protection legislation.⁷ Arbitral precedent establishes that the Insurance Act, its Schedules and the Code must be interpreted in a purposive fashion which gives meaning to the remedial nature of the legislation.⁸ Therefore, the Expense Regulation must be interpreted in such a way as to uphold both the protective and remedial nature of the legislation from which it flows.

Pursuant to Pires, Mrs. Garg had an obligation to raise an objection to the delay if she was to rely on the procedural defect. MVAC Fund failed to provide an explanation for its delay in filing its Response. It did not provide an explanation at the pre-hearing causing Mrs. Garg to bring her motion. MVAC Fund’s explanation set out in its affidavit failed to provide all the material facts which compelled Mrs.Garg to cross-examine the deponent.

The rule in Lebana requires the insurer to obtain a Rule 81 extension in order to perfect its late filing of its response failing which it has no standing to participate in the proceeding.

A motion was required in order to correct the defect occasioned by MVAC Fund’s failure to file its Response within the time prescribed by the DRPC. MVAC Fund’s failure to provide a fulsome explanation for its delay within the affidavit made the cross-examination necessary and fruitful. Notwithstanding that Mrs. Garg was unsuccessful I find that she is entitled to her expenses.

Quantum of Expenses:

Mrs. Garg submitted a Bill of Costs in the amount of $5,490.00 inclusive of $50.00 in disbursements and GST. Counsel, who appeared at the pre-hearing, claimed to have spent 1.5 hours on the correspondence seeking an explanation for the delay for which he billed $450.00.

This correspondence was not provided as part of Mrs. Garg’s submissions. A further 3 hours at $900.00 was billed for reviewing the file in preparation for the examination on March 13, 2009. He was called to the bar in 2003.

Counsel, who appeared at the proceedings on March 13, 2009, claimed 10 hours of preparation and estimated 4.5 hours for his attendance for a total of $3,525.00. He was called in 2008.

On March 27, 2009, Mrs. Garg submitted an Amended Bill of Costs. Her amended expenses totalled $3,749.75 including $75.00 claimed for disbursements with no amount attributed to GST. Both counsel billed their time at $175.00 per hour.

MVAC Fund submits that the expenses submitted by Mrs. Garg are excessive and unreasonable. It notes that the letters requesting an explanation for the late filing were brief and this expense is not recoverable in these proceedings. It recommended that Mrs. Garg’s 1½ page, written submissions be fixed at $150.00 because they were extremely brief, there was no reference to legal authority and there was no affidavit evidence submitted in support of her motion.

I agree with MVAC Fund that Mrs. Garg’s claim for expenses is excessive. The Commission’s schedule of fees relies on the Legal Aid Ontario (LAO) hourly rates. However, an arbitrator has discretion to award an hourly rate of up to $150.00 for senior counsel. The advocacy on Mrs. Garg’s behalf was not such that I would exercise my discretion.

I award an hourly rate of $93.48 for counsel called to the bar in 2003, being the rate prescribed by LAO at Tier 2 and adjusted for experience between 4 and 10 years.

Arbitrators have awarded Articling students an hourly rate of $50.00. I find the junior counsel rate, of $55.40, prescribed by LAO, to be unreasonably low when compared to the rates awarded to Articling students. Therefore, I award counsel called in 2008 an hourly rate of $73.87 being the Tier 1 Rate prescribed by LAO unadjusted for experience.

I find that the correspondence, between Mrs. Garg and MVAC Fund in respect of obtaining an explanation for the delay, is a recoverable expense. In the absence of the letters being produced, I accept MVAC Fund’s description of the correspondence and allow 1 hour at $93.48. Mrs. Garg’s initial submissions were extremely brief and devoid of any reference to legal precedent for which I award her 1 hour at $93.48. The total awarded at this rate is $186.96.

The examination and submissions on March 13, 2009 took less than 1 hour. I award 4 hours at the hourly rate of $73.87 for a total of $295.48 for both preparation and attendance.

I decline to make any award in respect of the time spent preparing and making submissions in respect of Mrs. Garg’s Bill of Costs.

I will allow $50.00 for disbursements as set out in her original Bill of Costs.

On the basis of the foregoing, I award Mrs. Garg her expenses in the amount of $532.44, plus GST, payable in any event of the cause.

April 24, 2009

Denise Ashby Arbitrator

Date