Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2009 ONFSCDRS 59

Appeal P08-00033

ALNOOR JADAVJI Appellant

and

SECURITY NATIONAL INSURANCE CO./MONNEX INSURANCE MGMT. INC. Respondent

BEFORE: Delegate Lawrence Blackman

REPRESENTATIVES: Mr. Arvin Gupta for Mr. Alnoor Jadavji Mr. Christopher A. Caston and Mr. Gaspare Di Salvo for Security National Insurance Co./Monnex Insurance Mgmt. Inc.

HEARING DATE: April 29, 2009

APPEAL ORDER

Minor error on page 4, third paragraph corrected on June 11, 2009 in accordance with the Dispute Resolution Practice Code and section 21.1 of the Statutory Powers Procedure Act.

Under section 283 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

The Arbitrator’s decision dated July 15, 2008 is confirmed and the Notice of Appeal dated September 26, 2008 is dismissed.
If the parties are unable to agree on entitlement to and/or the quantum of the legal expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003).

May 22, 2009

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

The Appellant, Mr. Alnoor Jadavji, was injured in a September 7, 2005 motor vehicle accident. A three-day arbitration hearing was scheduled for January 2008 to determine the Appellant’s entitlement to caregiver, housekeeping, replacement eyewear and cost of examination claims under the Schedule,¹ as well as interest, a special award pursuant to subsection 282(10) of the Insurance Act, R.S.O. 1990, c. I.8 and legal expenses. The week before the arbitration, the parties reached a full and final settlement of $10,000, plus legal expenses of the arbitration proceeding, to be agreed or assessed.

The parties were unable to agree on legal expenses. An expense hearing was, therefore, held on May 9, 2008 before Arbitrator Ashby (“the Arbitrator”). The Arbitrator’s July 15, 2008 decision ordered the Respondent, Security National Insurance Co./Monnex Insurance Mgmt. Inc., to pay the Appellant, directly, his legal expenses of $6,628.75.

The Appellant’s September 26, 2008 Notice of Appeal, expanded by subsequent written submissions, argued that the May 9, 2008 expense hearing only addressed his March 26, 2008 Bill of Costs of $8,544.13, and that he was still entitled to claim his subsequent legal expenses. The Appellant submitted that the Arbitrator erred in not further determining entitlement to and the quantum of his legal expenses incurred between March 27 and May 9, 2008.

The Appellant further argued a reasonable apprehension of bias by the Arbitrator, in that her July 15, 2008 decision failed to note her allegedly contentious ruling on the admissibility of the Respondent’s affidavit evidence and that she closed her mind to the Appellant’s submissions on subsequent legal expenses.

The Appellant, in oral argument, stated that it was not his initial intention to divide the determination of legal expenses. Rather, this developed only as expenses began to mount in preparing for the expense hearing when he decided, at some uncertain point, to rely on his prior offer of $3,500, confirmed in writing on February 21, 2008. The Respondent had made a counter, written offer of $1,252.06 to settle the issue of legal expenses.

The Appellant thus seeks an order that the Respondent pay his legal expenses preparing for and attending at the May 9, 2008 arbitration expense hearing or, in the alternative, referring this issue back to an arbitrator for determination. The Appellant further requested that the affidavit of Mr. Alon Rooz, counsel for the Appellant, sworn November 24, 2008 and the attached exhibits be admitted as fresh evidence in this appeal and that he be awarded his legal expenses of same.

The October 22, 2008 Response to Appeal, expanded by subsequent written submissions, argued, in part, that the Notice of Appeal was filed out of time and objected to the Appellant’s request to introduce the evidence.

The Respondent further argued that the May 9, 2008 expense hearing was intended to address the legal expenses of the entire arbitration proceeding and that the Arbitrator’s July 15, 2008 decision clearly considered all matters relating to legal expenses, which the Arbitrator confirmed in her subsequent August 29, 2008 letter.

The Respondent submitted that the award of legal expenses is discretionary. As the Appellant did not provide his counsel’s dockets in support of his legal expense claim, the Respondent was required to obtain affidavits from former students-at-law and/or lawyers with the Appellant’s law firm to demonstrate that legal work was not performed as claimed.

The Respondent further argued that an arbitrator does not have jurisdiction to award legal expenses for an expense hearing. In any event, the Arbitrator’s award, which assessed expenses globally, was exceptionally fair to the Appellant in light of the latter’s failure to provide dockets and that the entire accident benefits claim was settled for $10,000.

The Respondent, submitting that the Appellant’s bias allegation was “absurd,” sought its legal costs of the appeal against the Appellant’s counsel, Mr. Rooz, personally or in the alternative, against the Appellant.

My February 6, 2009 preliminary decision determined, for reasons set out therein, that:

Pursuant to subsection 283(3) of the Insurance Act, the time was extended to September 26, 2008 for requesting an appeal of the Arbitrator’s July 15, 2008 decision.
The Affidavit of Alon Rooz, sworn November 24, 2008, was not allowed as fresh evidence. Exhibits “B” to “T” of the Affidavit would, however, form part of the Appeal Record.
The Respondent had ten days to serve and file, with supporting submissions, any further documentation created up to and including August 29, 2008 that it requested form part of the appeal record. The Appellant then had ten days to respond.

By letter dated March 2, 2009, I included as part of the Appeal Record, the July 21, 2008 letter from the Appellant’s counsel to the Respondent’s counsel.

II. ANALYSIS

I do not accept the Respondent’s submission that an arbitrator does not have jurisdiction to award legal expenses for preparation for or attendance at an expense hearing.

Subsection 282(11) of the Insurance Act statutorily allows an arbitrator to award all or part of such expenses incurred in respect of an arbitration proceeding as may be prescribed in the regulations, to the maximum set out in the regulations.

Paragraph 3(1)4 of the Dispute Resolution Expenses Schedule to R.R.O. 1990, Reg. 664, made under the Insurance Act, as amended to O. Reg. 275/03, specifically states that the legal fees payable by the insured person or the insurer may include “services subsequent to an arbitration, appeal, variation or revocation hearing.” The most common event that may follow a hearing is the determination of legal expenses. There is no explicit or implicit restriction regarding the powers of adjudicators in this regard and I see no basis to impose such a restriction.

Further, although it may not be the usual practice, I am not persuaded that there is a blanket prohibition against applying the bifurcation of legal expenses under section 77 of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003) (the “Code”) to expense hearings themselves, as is appropriate and with necessary modifications.² It is, however, still to be remembered that the prime consideration of the Code, as enunciated by Rule 1.1, is that the Rules will be broadly interpreted to produce the most just, quickest and least expensive resolution of the dispute.

It is not disputed and I accept that the Appellant incurred legal expenses subsequent to March 26, 2008, specifically, a full day expense hearing on May 9, 2008. The question in this case is not whether, at some point prior to the release of the Arbitrator’s July 15, 2008 decision, the Appellant decided it was preferable to have the issue of the legal expenses of the arbitration separated from the legal expenses incurred preparing for and attending at the arbitration expense hearing. Rather, the issue is whether the Arbitrator erred in law in failing to consider such a request at the May 9, 2008 expense hearing.

The Appellant contends that there was a clear demonstration of a live outstanding issue regarding the legal expenses incurred after March 26, 2008. I disagree, for the following reasons:

There was certainly no initial request for bifurcation of the expense hearings. Mr. Rooz’ March 27, 2008 letter to the Respondent (that followed, by more than a month, the Appellant’s offer to settle), included in Exhibit 4 before the Arbitrator, states that:

The amount I will be seeking at the expense hearing will include work done between settlement and the expense hearing (in fact, it already does), which is already higher than usual due to the research I have done into the matter of providing dockets, sworn affidavits, detailed invoices, all of which were onerous demands by you which are not supported by numerous FSCO expense decisions I had researched following your demands. [emphasis added]

The letter does not refer to multiple expense hearings, but rather a single “expense hearing.”

Consistent with his March 27, 2008 letter, the Appellant’s Bill of Costs in Exhibit 1, noted as “Updated on 3/26/2008,” sets out some ten hours of legal time regarding post-settlement issues, including “research expense issues raised by counsel.”
At the oral appeal hearing, the Appellant conceded that there was nothing in the Appeal Record indicating the Appellant was going to request a bifurcation of the arbitration expense hearing.
References to offers to settle in the correspondence included in Exhibit 4, tendered by the Appellant at arbitration, were blacked out. As implied by the Appellant in his letter of August 7, 2008, this was consistent with not wishing to compromise a claim for more than $8,000 for legal expenses with a prior offer to settle of $3,500.

Rule 77.2 of the Code provides that where any party seeks to have an Offer to Settle or a Response to an Offer to Settle considered by the adjudicator in connection with an award of expenses, the parties will jointly advise the adjudicator of that fact at the conclusion of the hearing. Rule 77.3 provides that upon such advice, the adjudicator will determine all issues in dispute, except expenses (or, in this case presumably, the expenses other than those for preparing for and attending at the expense hearing) and issue his or her order.

Mr. Rooz’ letters of July 21 and August 7, 2008 requesting a further expense hearing do not refer to a joint request having been made. The former states that Mr. Rooz “advised the Arbitrator that submissions were to be made regarding expenses for the Expense Hearing upon receipt of her order,” the latter that he indicated in closing submissions that he still had submissions to make regarding costs with respect to the Expense Hearing. The Appellant did not advance any subsequent argument that a joint submission had been made in accordance with Rule 77.2 of the Code.

Contrary to the Appellant’s post-expense hearing assertions, the August 27, 2008 letter from the Respondent’s counsel, Mr. Di Salvo, states that:

[Neither] Mr. Caston, nor myself recall Mr. Rooz indicating that costs were being sought for the expense hearing and that they would be addressed after receipt of [the Arbitrator’s] Order. In fact, we were under the impression that the time and place for all expenses was at the expense hearing itself. After all, we did spend the entire day of May 9, 2008 and beyond 5:30 pm discussing the issue of costs. [emphasis in the original]

Rule 77.1 of the Code does refer to the parties jointly informing the adjudicator that there is no offer to settle to be considered in connection with an award of expenses, in which case, the adjudicator shall make an award of expenses as part of his or her order on the substantive issues in dispute. There is no indication in this case that such joint advice was given the Arbitrator.

The onus is on the Appellant to establish that the absence of joint submissions denotes that the Arbitrator was to bifurcate the issue of expenses. Given the relative novelty of bifurcated expense hearings as argued in this case, the absence of any assertion that the Respondent requested that its offer to settle be considered, the parties’ dispute as to what was stated at the expense hearing, the comments of the Arbitrator noted below and the absence of a transcript, I am persuaded that the Appellant has not met his onus.

The Arbitrator’s decision of July 15, 2008 states specifically, at page three, that:

Therefore, I set Mr. Rooz’ rate at $95.99. He has claimed 15.5 hours for all services rendered in the arbitration proceeding including preparation for the expense hearing. [emphasis added]

The Appellant claimed privilege regarding any dockets his firm may have kept. Such an assertion is inconsistent with Rule 79.2(c) of the Code that requires a party awarded expenses to promptly produce, amongst other things, “computerized dockets” in respect of disputed items.

The Arbitrator cited Frumusa and General Accident Assurance Co. of Canada, (OIC A96-000192, February 12, 1998) for the proposition "that a party who does not provide dockets risks not being adequately compensated for incurred expenses." The Appellant took no issue with this statement. The Arbitrator also noted the Appellant's reliance on decisions adopting a global rather than a "line by line" assessment of legal expenses. The Appellant now objects to the Arbitrator’s global assessment of all of his legal expenses.

The purpose of an offer to settle, in addition to encouraging dispute resolution, would be to seek a higher level of recovery on expenses incurred subsequent to the offer. Inconsistent with this is the Appellant specifically submitting some ten hours of post-offer legal work in his Bill of Costs for the Arbitrator’s May 9, 2008 determination.
In response to the correspondence from counsel following the release of her decision, the Arbitrator, by letter dated August 29, 2008, stated that her “[d]ecision dealt with all matters relating to expenses.”

Rule 74 of the Code states that the Commission does not provide reporting services for a hearing. A party wishing a record of the proceedings must make their own arrangements for the attendance of a reporting service and must pay for this service. Subsection 22(3) of the Insurance Act provides that the evidence and proceedings in any matter before, among others, an arbitrator, may be reported by a stenographer who has taken an oath before the person to report the evidence and proceedings faithfully.

The Appellant exercised his option not to arrange for a stenographer to be sworn at the arbitration expense hearing. To adopt the words of Delegate Makepeace in Ms. Z and Dominion of Canada General Insurance Company, (FSCO P00-00023, February 14, 2003), in the absence of a transcript of the hearing, “I have no basis for second-guessing” the Arbitrator, in this case, as to what, if any, submissions, were made to her regarding a further expense hearing.

Respecting the Appellant’s allegations concerning bias, Director Sachs held in Kahkesh and Lloyd's Non-Marine Underwriters, (OIC P-000378, August 19, 1992), that “[b]ias on the part of an adjudicator against a party is a serious allegation. It should not be made lightly, nor as a catch-all ground for appeals.” Citing the Supreme Court of Canada in Newfoundland Telephone Company Limited v. Newfoundland (Board of Commissioners of Public Utilities), 1992 CanLII 84 (SCC), [1992] 1 S.C.R. 623, Director Sachs stated that:

… The test for bias, and the reasonable apprehension of bias … is whether, taking all considerations into account, the arbitrator closed her mind to being persuaded, or prejudged the issues so as to preclude the acceptance of representations to the contrary and denied a party a fair hearing.

The Arbitrator’s decision did not reference the Respondent’s entire sworn, and evidently contentious, affidavit evidence as to the conduct of the Appellant’s law firm in this matter. I am not persuaded that such silence by the Arbitrator denotes that the she closed her mind or prejudged the issues so as to deny the Respondent a fair hearing any more than I am persuaded that the Arbitrator not noting in her decision an oral procedural order made during the course of the expense hearing establishes her bias against the Appellant.

Rule 65.6 of the Code provides that an adjudicator may at any time clarify a decision or order “that contains a misstatement, ambiguity or other similar error.” I am not persuaded that the Arbitrator’s letter August 29, 2008 confirming that her decision “dealt with all matters relating to expenses” establishes that she closed her mind or had prejudged the issues at the May 9, 2008 arbitration expense hearing.

Accordingly, I dismiss the Notice of Appeal herein dated September 26, 2008. In accordance with subsection 283(5) of the Insurance Act, I confirm the Arbitrator’s July 15, 2008 decision.

III. EXPENSES

If the parties are unable to agree on entitlement to and/or the quantum of the legal expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Code.

If either party has served a Bill of Costs, then the other party shall forthwith provide a written response to the account, identifying the items in dispute and the reasons for the dispute, including whether entitlement to expenses is in dispute. If a party seeking its legal expenses has not yet served a Bill of Costs describing the expenses claimed, services received and costs, it shall do so forthwith. I confirm that there was no request, by either party, to bifurcate the hearing of appeal expenses.