Financial Services Commission des

Commission services financiers

of Ontario de l’Ontario

Neutral Citation: 2009 ONFSCDRS 58

FSCO A08-000090

BETWEEN:

KULENDRARAJAH ARUMUGAM

Applicant

and

GUARANTEE COMPANY OF NORTH AMERICA

Insurer

Before: Arbitrator Elizabeth Nastasi

Heard: By telephone conference call on May 1, 2009.

Appearances: David S. Wilson for Mr. Arumugam

Alexander Neaves for Guarantee Company of North America

Issues:

The Applicant, Kulendrarajah Arumugam, was injured in a motor vehicle accident on December 30, 2006. He applied and received statutory accident benefits from Guarantee Company of North America (“Guarantee”), payable under the Schedule.¹ Disputes arose between the parties concerning Mr. Arumugam’s entitlement to certain benefits. The parties were unable to resolve their disputes through mediation and in January 2008, Mr. Arumugam applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c.I.8, as amended.

The hearing had been scheduled for 4 days from December 8 to December 11, 2008. The parties settled Mr. Arumugam’s claims for statutory accident benefits prior to the hearing on December 4, 2008.

Mr. Arumugam presented an account for legal fees of $6,127.50 plus $306.38 for GST and disbursements of $9,276.93 including GST, for total arbitration expenses of $15,710.81.² The Insurer agrees that Mr. Arumugam is entitled to his expenses, but disputes the amount.

The issue in this further hearing is:

What is the amount of expenses to which Mr. Arumugam is entitled in respect of this arbitration proceeding?

Result:

Mr. Arumugam is entitled to fees and disbursements in the amount of $12,000 (inclusive of G.S.T.).

EVIDENCE AND ANALYSIS:

The issues in dispute at the arbitration hearing, as noted in the pre-hearing letter dated May 6, 2008, were as follows:

Is Mr. Arumugam entitled to receive a medical benefit for the following:

$901.72 for physiotherapy by Sasha Kabossi set out in a treatment plan dated November 5, 2007;
$1,115.68 for physiotherapy by Ratna Adepu set out in a treatment plan dated August 11, 2007,

both claimed pursuant to section 14 of the Schedule?

Is Mr. Arumugam entitled to payments for housekeeping and home maintenance services, for services provided by Anushiyathevi Ariharakumaran from March 28, 2007 to date and ongoing, at the rate of $100 per week, less payment made by Guarantee in the amount of $880, pursuant to section 22 of the Schedule?
Is Mr. Arumugam entitled to interest for the overdue payment of benefits pusuant to section 46(2) of the Schedule?

The parties agreed that if the Applicant had been successful at an arbitration hearing he would have been awarded approximately $10,500 for the issues in dispute including interest. The parties settled the issues for approximately $8,000.

Entitlement to Legal Expenses

The Insurer does not dispute the Applicant’s entitlement to his legal expenses. Although the matter did not proceed to a hearing, I find that the Applicant was substantially successful in respect of the issues in dispute.

Quantum of Legal Expenses

(a) Legal Fees – Hourly Rate

Mr. Wilson, counsel for the Applicant, argued that since he was substantially successful on the issues in dispute, he should be awarded his time at the rate of $150 per hour. The Insurer did not object to the hourly rate charged.

(b) Legal Fees – Number of Hours

The total hours expended and being claimed by the Applicant is 41 hours. In respect of legal fees, the Insurer did take issue with the overall time spent and number of hours being claimed. The Insurer argued that because the overall claim was for a relatively small amount, the legal fees being claimed were excessive and disproportionate.

Although Mr. Neaves, counsel for Guarantee, suggested that the time spent by Mr. Wilson in preparing for the hearing of this matter was excessive, he did not present any evidence in respect of the number of hours that he and his colleagues spent representing the Insurer in respect of this matter. Arbitrator Feldman was presented with a similar concern on behalf of the Insurer in Hutchinson and Security National Insurance Company.³ In that case, Arbitrator Feldman found that it was inappropriate of the Insurer’s counsel to attack the reasonableness of the Applicant counsel’s dockets, without being prepared to make a similar disclosure himself. Arbitrator Feldman refers to the Ontario Divisional Court case of United States of America et al. v. Yemec et al.⁴ which held that in civil proceedings, an attack on the quantum of costs based on excess in circumstances where the court does not have before it the bills of all counsel “is no more than an attack in the air.” Further, the court found that a reasonable inference can be drawn from the failure of counsel for one party to disclose his or her Bill of Costs that he or she likely spent at least as much time on the matter as that being claimed by the other party.

I agree with the position taken by Mr. Wilson that counsel are required to adequately prepare for a hearing regardless of the amount in dispute. The evidence must be prepared in an appropriate manner regardless of the potential quantum of award.

Arbitrators have found ratios of preparation time to hearing time ranging from 1:1 to 4:1 to be reasonable, with the lower ranges reserved for less complex cases.⁵ There were 4 days scheduled for this hearing which would have amounted to approximately 22-28 hours of hearing time. In this case, the 41 hours claimed by the Applicant, amounts to about 2 hours for each hour of hearing. Given the relatively straightforward nature of the claims, I find that a more appropriate ratio of costs to preparation to be 1:1 – 1 hour of preparation time for every 1 hour of hearing time.

The Insurer took the position that the 4 days of hearing time that was allotted was too long to deal with the relatively straightforward issues in dispute.

On the face of it, I would agree that 4 days does seem potentially excessive to deal with the issues in dispute in this case. However, the Applicant did require an interpreter which would have added some extra time. Further, presumably the pre-hearing arbitrator was convinced that 4 days was required and there is no evidence of any objection made by the Insurer at that time. Taking the above factors into consideration as well as the fact that there were relatively few issues in dispute, I find it is reasonable that this hearing would have taken between 2 to 4 days.

(c) Legal Fees – Correspondence Fee

Of the total 41 hours being claimed by Mr. Wilson, 16.4 hours is for correspondence. This amounts to 82 letters sent and received at .2 (or 12 minutes) per letter. These hours are listed in a bulk docket format. Mr. Wilson submitted that the time expended to prepare and review correspondence is not normally individually docketed for administration purposes.

The Insurer submits that 16.4 hours for correspondence is excessive. Mr. Neaves indicated that the number of letters produced in the Insurer’s file amounted to only 50.

I accept the submission of Mr. Wilson that there are generally more letters generated by the Applicant than the Insurer due to more undertakings and production issues that the Applicant is required to comply with. Taking this into consideration, I find that an additional 30 letters above the number generated by the Insurer should not be regarded as “excessive.”

The principle that the Commission does not engage in a line-by-line analysis of a party's expenses has been adopted in several FSCO decisions. Further, allowing counsel to submit a bulk docket for correspondence using an average of 0.2 hours per letter has also been found to be reasonable.⁶

(d) Disbursements

The amount being claimed in Mr. Wilson’s Bill of Costs for disbursements is $9,276.93 including GST. The Insurer is specifically disputing $5725.65 of the total amount claimed leaving $3551.28 not in dispute. The disputed disbursements were the following items:

Dr. Pierre Kirwin report (September 4/08)

$2,500.00 125.00 (GST) $2,625.00 (limited to $1,500.00 + GST)

$1,575.00

Dr. Kirwin report (December 2007)

$2,300.00 115.00 (GST) $2,415.00 (limited to 1,500.00 + GST)

$1,575.00

Atila Balaban report (December 3, 2007)

$1,200.00 60.00 (GST)

$1,260.00

Atila Balaban report (September 30, 2008)

$1,200.00 60.00 (GST)

$1,260.00

Conduct Money

$53.00 2.65 (GST)

$55.65

⁷

In a letter sent to both FSCO and Mr. Wilson dated February 10, 2009, the Insurer took issue with only the second report conducted by each of Mr. Balaban, functional assessor, and Dr. Kirwin, physiatrist. The Insurer argued that the Applicant had an adequate amount of evidence in support of his claim and thus the follow-up reports were not “reasonably required.” In their oral submissions, the Insurer modified their position and counsel objected to all of the above noted reports as not being reasonably required. The Insurer pointed to the fact that there were clinical notes and records and other expert reports that were available to the Applicant and therefore the reports of Mr. Balaban and Dr. Kirwin were not reasonable and necessary.

I find this to be a curious position on behalf of the Insurer. It seems to amount, in part, to arguing that the Applicant had a strong case and did not need any additional evidence in support of his claim. If that was in fact the case, then it begs the question why the Insurer did not settle the matter sooner. The Applicant submitted that the existence of the additional reports of Dr. Kirwin and Mr. Balaban may have in fact assisted the parties in reaching a settlement.

Neither party submitted any of the referenced reports to me for review. Given that I did not hear the case or have the opportunity to consider the disputed reports within the context of all of the evidence relevant to the issues in dispute, it is difficult to determine the specific role that these reports would have played if a hearing had taken place and whether or not they were reasonable and necessary.

I accept the Applicant’s evidence that the disputed reports were conducted by assessors of different specialities who assessed different aspects of the Applicant’s abilities and function. There was a significant time gap in between the first and follow up report for each. I accept that it was reasonable for the Applicant to have obtained a follow up report in each case given that the claim for housekeeping benefits was an ongoing claim as of the date of the hearing.

CONCLUSION

After considering all of the submissions, the relative success of the Applicant and the “reasonableness” ⁸ of the expenses being claimed, I fix costs and disbursements at $12,000 (inclusive of GST).⁹

May 21, 2009

Elizabeth Nastasi Arbitrator

Date