Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2009 ONFSCDRS 80

Appeals P08-00003 and P08-00004

OFFICE OF THE DIRECTOR OF ARBITRATIONS

PATIENCE SARPONG AND VICTORIA OWUSU Appellants

and

TD HOME AND AUTO INSURANCE COMPANY Respondent

BEFORE: Delegate Lawrence Blackman

REPRESENTATIVES: Mr. Murray Tkatch for Ms. Patience Sarpong and Ms. Victoria Owusu Mr. Andrew Grayson for TD Home and Auto Insurance Company

HEARING DATE: June 11, 2009 by telephone conference call

APPEAL EXPENSES ORDER

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

The Appellants, Patience Sarpong and Victoria Owusu, shall each pay the Respondent, TD Home and Auto Insurance Company, $3,285.15, inclusive of GST, in respect of the Respondent’s legal expenses of these appeal proceedings.

June 19, 2009

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

The Appellants, Ms. Patience Sarpong and Ms. Victoria Owusu, were injured in a June 2, 2004 motor vehicle accident and applied to the Respondent, TD Home and Auto Insurance Company, for statutory accident benefits payable under Schedule.¹ In his January 17, 2008 decisions, Arbitrator Muir (the “Arbitrator”) dismissed the Appellants’ claims. The Arbitrator’s May 22, 2008 expense decision awarded the Respondent its legal expenses of $3,604.01 against Ms. Owusu and $8,409.35 against Ms. Sarpong.

My March 7, 2008 interim decision dismissed the Appellants’ motion for a stay. My September 18, 2008 interim decision dismissed the Appellants’ motion that the Respondent be compelled to order the transcripts of the arbitration hearing. Legal expenses of the motion were deferred to the final resolution of these appeals.

My February 2, 2009 decision confirmed the Arbitrator’s January 17 and May 22, 2008 decisions and dismissed both appeals. By letter dated February 13, 2009, the Respondent requested an expense hearing, seeking its legal expenses of $9,239.72 (its actual solicitor/client bill being roughly $18,000), including 110.1 hours for preparing for and attending at the appeal hearings.

II. ENTITLEMENT TO LEGAL EXPENSES

In opposition to the Respondent’s position, the Appellants submitted that the parties should each bear their own legal costs.

The Appellants pointed to their relative young age or modest economic means, the Respondent’s failure to prove fraud at arbitration, the Arbitrator’s finding that the Appellants were in an accident and did sustain some sort of injury and that they would end up owing tens of thousands of dollars for being forced to seek justice in this dispute resolution system. The Appellants further submitted that they had raised novel issues regarding sections 42 and 48 of the Schedule and that in the circumstances of these cases, discretion should be exercised not to award punitive legal costs, especially considering the inequality between themselves and the Respondent.

The Respondent submitted that its legal expenses represented a reasonable response to appeals the Appellants were not obliged to pursue and that raised almost every imaginable issue.

Rule 75.2 of the Dispute Resolution Practice Code (Fourth Edition, Updated – October 2003) (the “Code”) provides that the adjudicator will consider only the criteria referred to in the Expense Regulation² found in Section F of the Code. The Expense Regulation, while stating that it applies to arbitrators under subsection 282(11) of the Insurance Act, is silent as to whether it applies equally to an appeals adjudicator under subsection 283(7) of the Insurance Act.

In any event, as I stated in Halim v. Security National Insurance Co./Monnex Insurance Mgmt. Inc., (FSCO P07-00035, November 21, 2008):

I find that these expense criteria do not exist in a vacuum, segregated from the overall legislative intent. Rather, the criteria are defined by, and help define the broader, overarching legislative intentions, including consumer protection, as set out by the Supreme Court of Canada in Smith v. Co-operators General Insurance Co., 2002 SCC 30, [2002] 2 S.C.R. 129, which encompasses a fair and reasonable measure of access to justice.

Further, as stated by Delegate Draper in Dominion of Canada General Insurance Company and Guzman, (FSCO P-007209, January 18, 1996):

Reasonable access is also a concern for appeals, but the considerations are somewhat different. An appellant has already had an opportunity to present his or her case to an arbitrator, and has been given a written decision, with reasons. The purpose of the appeal is not to rehear the matter, but rather to determine whether there is some compelling reason to interfere with the decision. Therefore, an appeal is ill-advised unless some error can be demonstrated.

Subsequent to the Guzman appeal being heard, appeals under section 283 of the Insurance Act were restricted to questions of law and Rule 75.2 of the Code was amended to restrict the criteria to be considered in awarding legal expenses. In this context, Delegate Draper’s comments resonate even stronger.

In these present cases, the Arbitrator’s ultimate decisions regarding the Appellants’ respective entitlement to weekly income replacement benefits and a claim for a special award under subsection 282(10) of the Insurance Act, in significant measure, rested on his findings of credibility. Regarding Ms. Sarpong, the Arbitrator stated that:

Ms. Sarpong is clearly capable of dissembling. Her evidence is rife with contradictions, gaps, inaccuracies and latterly admitted untruths.

Regarding Ms. Owusu, the Arbitrator stated that:

… 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 [the putative employer] and whatever its true nature, there is no credible basis for positive finding respecting her actual hours of work or earnings, if any.

Notwithstanding that appeals under subsection 283(1) of the Insurance Act are restricted to questions of law, as stated in my February 2, 2009 decision, the Appellants essentially asked me to review the evidence presented at arbitration and draw different factual conclusions from those drawn by the Arbitrator. As I noted, that is not my role as an appellate adjudicator.

The Appellants raised various other grounds of appeal, many without any merit. The latter included that the Arbitrator was required to accept disability certificates on their face, that there was a reasonable apprehension of bias by the Arbitrator (retracted in oral submissions), that the Arbitrator accepted hearsay evidence notwithstanding the Appellants’ own reliance on such evidence and that the Arbitrator unfairly heard these cases together notwithstanding the Appellants withdrew their motions to have these arbitration proceedings heard separately.

Regarding the alleged novelty of the Appellants’ argument under section 42 of the Schedule (pertaining to insurer medical examinations), my February 2009 decision stated that:

The Appellants themselves state that section 42 of the Schedule … does not specifically provide that an insurer’s failure to arrange an IME [insurer medical examination] automatically obligates an insurer to pay the benefit claimed. The Appellants failed to refer me to any other provision upon which they relied that either provides for such a specific result from an insurer’s non-action or in which there was genuine ambiguity in the meaning of the language, as set out in Chilton v. Co-operators General Insurance Co. (1997), 1997 CanLII 765 (ON CA), 32 O.R. (3d) 161 (C.A.), that allowed for such a result.

As to section 48 of the Schedule (termination of benefits for material misrepresentation), the Appellants were successful in this aspect of the arbitration. The Arbitrator’s decision in this regard was not appealed. I am not persuaded that section 48 represents a novel ground of appeal.

Legal costs are an important regulator of litigation within the context of fair and reasonable access to justice. I do not see that the legislation views legal costs as red lights impeding meritorious claims or defenses raised in good faith. Nor do I see the legislation viewing legal costs as a green light to claims or defenses of dubious merit, bad faith or poor choice.

Legal costs, in this first party dispute resolution system, are an aid to the advancement of justice and a caution against abuse or excesses.

In significant measure, these appeals resembled a deluge of submissions flung in the general direction of an error of law in the hope that something might hit its mark. As an example, in her appeal submissions Ms. Sarpong argued, simultaneously, that she was taken by surprise at the arbitration hearing by (1) the Respondent’s allegations of fraud and conspiracy and (2) that the Respondent was defending the claim on a basis other than fraud.

In such circumstances, in addition to the Respondent being entirely successful on these appeals, it is not reasonable that the parties simply each bear their own legal expenses. I am, rather, persuaded that the Respondent is entitled to its reasonable legal costs of these appeals.

III. QUANTUM OF LEGAL EXPENSES

In the event that legal costs were awarded to the Respondent, the Appellants’ February 25, 2009 letter proposed the sum of $6,017.13. The Appellants noted the following concerns:

Preparing for the appeals did not require legal counsel. Rather a law clerk or, at most, an articling student would have sufficed.
The involvement of three lawyers by the Respondent was not necessary to respond to the Appellants’ interim motion.
Two hours, rather than four, was sufficient for preparing the Respondent’s Bill of Costs.

The Respondent argued that these appeals were not simple, raising twelve issues in lengthy materials. The Respondent submitted that it endeavoured to use its most junior lawyers to do the bulk of the preparation for the interim motion. The involvement of substitute counsel for the main appeal was necessitated by unforeseen circumstances and the wish to avoid an adjournment.

I find the use of counsel rather than a law clerk or student-at-law in these appeals eminently reasonable and make no deduction in this regard. I find the expeditious and efficient substitution of counsel to avoid an adjournment laudable and make no deduction in this regard. I find the care in accurately listing and totaling various billable hours and hourly rates in preparing the Bill of Costs reasonable and make no deduction in this regard.

Ms. Sarpong’s Schedule “A” in her Notice of Appeal consisted of 43 paragraphs in 4 pages, single-spaced. The Response to Appeal was 129 paragraphs, in 14 pages single-spaced. Ms. Sarpong’s Factum was 27 pages, single-spaced, consisting of 133 paragraphs. The Respondent’s factum was 37 pages, single-spaced, consisting of 309 paragraphs. Ms. Sarpong’s Motion Factum consisted of 5 pages, single spaced. The Respondent’s motion Factum was 17 pages, double spaced, together with a responding affidavit. The Appellants further filed 5 pages of submissions, single-spaced, regarding this motion.

The correlation between Ms. Owusu and the Respondent was similar.

The Respondent submits that the Appellants’ written submissions were excessive. Even considering the Respondent’s larger font and the conversion, where applicable, to single-spaced, the Respondent’s written submissions were more excessive and, especially regarding the lengthy recitation of evidence at arbitration, unhelpful.

The amount of $7,626.89 is claimed by the Respondent for preparation for the interim motion and for the appeal. I am not persuaded as to the reasonableness of these costs. I reduce this amount by 35%, or $2,669.41, to $4,957.48. I allow the remainder of the Bill of Costs, as claimed, including attendance at the oral hearings, and photocopy and courier disbursements of $310.90. The allowable Bill of Costs is, therefore, $6,570.31.

The Respondent did not request its expenses for further preparation for or participation in the oral expense hearing.

Accordingly, I allow the Respondent its legal costs of these appeals fixed in the amount of $6,570.31. The Respondent requested that these costs be split equally between the Appellants, rather than each being held jointly and severally liable. The Appellants did not argue otherwise. Accordingly, each Appellant is responsible for $3,285.15 in legal expenses.