Douglas Keffer v. Wawanesa Mutual Insurance Company, 2011 ONFSCDRS 35

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2011 ONFSCDRS 35

FSCO A07-000940

BETWEEN:

DOUGLAS KEFFER

Applicant

and

WAWANESA MUTUAL INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before: Anne Sone

Heard: Written submissions received by January 12, 2011

Appearances: Douglas O’Toole for Mr. Keffer

Katherine E. Kolnhofer for Wawanesa Mutual Insurance Company

Issues:

The Applicant, Douglas Keffer, was injured in a motor vehicle accident on April 1, 1999. In a decision dated April 3, 2009, I dealt with his claims for statutory accident benefits under the Schedule.¹ I made the following order, while reserving on the issue of expenses:

This arbitration proceeding is stayed.

The issue in this further hearing is:

Is Mr. Keffer or Wawanesa entitled to expenses incurred in respect of this arbitration hearing?
If so, what is the amount?

Result:

Wawanesa is entitled to its expense of this arbitration fixed at $9,626.70.

ANALYSIS:

Background:

Wawanesa had sought to have Mr. Keffer’s arbitration stayed, as he had also commenced an action in Ontario Superior Court with regard to the same accident. Mr. Keffer vigorously opposed the stay. This case was complicated by Mr. Keffer being involved in three accidents with two different insurers. In addition to an April 1, 1999 accident where he was insured by Wawanesa, (“the Wawanesa accident”), Mr. Keffer was in two further accidents where he was insured by Belair Insurance Company Inc. (“Belair”). The first was on August 24, 2001 (“the first Belair Accident”) and the second was on December 14, 2001 (“the second Belair Accident”). Although the action in Superior Court is against both Wawanesa and Belair², Mr. Keffer had only applied for arbitration against Wawanesa. In addition, Mr. Keffer alleges that he was catastrophically impaired.

After I granted the stay of Mr. Keffer’s arbitration, Wawanesa requested that the question of expenses be dealt with in accordance with Rule 79 of the Dispute Resolution Practice Code (Fourth Edition, Updated September 2010) (the “Code”).

The Relevant Legislation

Subsection 282(11) of the Insurance Act, R.S.O. 1990, c. I.8 provides that:

The arbitrator may award, according to criteria prescribed by the regulations, to the insured person or the insurer, 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.

Subsection 12(2) of R.R.O. 1990, Reg. 664 (the “Expense Regulation”) provides that only the following criteria shall be considered for the purposes of awarding all or part of incurred legal expenses:

Each party’s degree of success in the outcome of the proceeding.
Any written offers to settle made in accordance with subsection (3).
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.
Whether the insured person refused or failed to submit to an examination as required under section 42 of Ontario Regulation 403/96 (Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996) made under the Act or refused or failed to provide any material required to be provided by subsection 42 (10) of that regulation.
Whether the insured person refused or failed to submit to an examination as required under section 44 of Ontario Regulation 34/10 (Statutory Accident Benefits Schedule — Effective September 1, 2010), made under the Act, or refused or failed to provide any material required to be provided under subsection 44 (9) of that regulation.

Subsection 12(3) of the Expense Regulation provides that:

Upon the request of the insurer or the insured person, the arbitrator shall, for the purposes of awarding expenses, take into account all written offers to settle, if any,

(a) that were made after the conclusion of mediation and before the conclusion of the arbitration; and

(b) that were made in accordance with the rules of practice and procedure applicable to the proceeding.

According to subparagraph 12(4) of the Expense Regulation, if an arbitrator is requested to take into account a written offer under subsection (3), the arbitrator shall have regard to the terms of the offer, the timing of the offer, the response to the offer and the result of the proceeding.

Under Rule 76.1 of the Code, an adjudicator is to consider an Offer to Settle in connection with an award of expenses provided that:

(a) it was made in writing, was served on the other parties and contains:

(i) the full terms of the Offer to Settle;

(ii) the date when the Offer was served and the time period during which it remained open for acceptance.

Is Wawanesa or Mr. Keffer entitled to expenses in this arbitration?

Each Party’s Degree of Success in Outcome of Proceedings:

Mr. Keffer submitted that since success in this arbitration was split, both parties should bear their own expenses. He based this submission on the following statements in the decision:

Although I concur with Wawanesa that this arbitration should be barred while the civil action involving Mr. Keffer’s three accidents is still outstanding, I am not prepared to do so unconditionally.

It is now up to Mr. Keffer to amend his Statement of Claim. On the other hand, he may wish to pursue his remedies in a different fashion. For example, he may decide to withdraw from the civil proceeding against both insurers and only pursue arbitration.

I disagree with Mr. Keffer’s submission that the success on this proceeding was split. Wawanesa asked for a stay of proceedings in the arbitration, and I ordered that stay. Simply because that stay was subject to being lifted, if Mr. Keffer chose to withdraw his proceedings in civil court, did not change the outcome of the case.

Any Written Offers to Settle in accordance with Rule 76:

Wawanesa delivered a written Rule 76 Offer to Settle on December 14, 2007, (after the pre-hearing of October 11, 2007). This was an offer for Mr. Keffer to dismiss the arbitration proceeding without costs being payable to Wawanesa. The offer was open until December 21, 2007 at noon, after which time Wawanesa would withdraw it. Mr. Keffer did not respond, and so Wawanesa withdrew it.

In considering this offer, I must look at its terms, timing, the response to it and the result of the proceeding. Mr. Keffer suggests that since it does not contain any element of compromise, I should not give this criterion much weight. However, in my view, allowing a party to withdraw without paying expenses to the other side has an element of compromise. In terms of timing, the offer fits within the parameters outlined in subparagraph 12(3)(a) of the Expense Regulation, (which is after the mediation concludes, but before the arbitration finishes). The Applicant did not respond. The Insurer succeeded in obtaining a stay of the arbitration.

Whether Novel Issues were raised in the Proceeding:

The parties agreed that novel issues were raised in the proceeding. The arguments raised many legal principles applied to complex facts, including the intertwined nature of credibility, causation and catastrophic impairment, with two insurers and three accidents. Mr. Keffer submits that this suggests the parties should bear their own expenses, so as not to penalize an applicant who unsuccessfully pursued a novel claim. While I agree that Mr. Keffer raised many novel arguments at the hearing, I am not persuaded that the case raised novel issues,³ since there have been many cases at the Commission regarding duplicity of proceedings.

Conduct of a Party or Representative that tended to Prolong, Obstruct or Hinder the Proceeding:

Wawanesa stated that Mr. Keffer’s failure to comply with a deadline for hearing submissions resulted in a six-week delay. Mr. Keffer did not respond to this allegation, and I find that this caused delay. Wawanesa also stated that Mr. Keffer should be penalized for immediately rejecting Wawanesa’s proposed list of Expenses. However, I see no reason to penalize Mr. Keffer for responding promptly.

I also note that Mr. Keffer did not respond to correspondence sent regarding some questions that I had following the hearing. In addition, Mr. Keffer did not provide a copy to me of relevant correspondence he sent to Wawanesa, and did not copy Wawanesa on a piece of correspondence he sent to me. This definitely prolonged these proceedings. However, Wawanesa, perhaps inadvertently, did not provide me with their list of Expenses initially, either, but remedied the oversight promptly. So neither party is entirely blameless under this heading.

Remainder of Criteria under subsection 12(2) of the Expense Regulation:

Neither party seriously argued that any of the remaining criteria under subsection 12(2) of the Expense Regulation applies in this case. I concur.

Conclusion regarding entitlement to expenses:

Wawanesa was successful in this proceeding. Mr. Keffer ignored Wawanesa’s Offer to Settle. Mr. Keffer and his counsel certainly engaged in more conduct that tended to prolong the proceedings than Wawanesa. Based on the criteria in the Expense Regulation, I find that Wawanesa is entitled to its expenses of the preliminary issue hearing.

Amount of Expenses:

Fees:

Although the oral submissions pertaining to the hearing took place on one extended day, the written submissions were extremely voluminous,⁴ raised numerous issues and cited many cases.

Wawanesa’s counsel prepared a list of Expenses which claimed $23,540.05 for fees, to which it added GST. This was broken down as follows:

Description

Hours

Rate per Hour

Total

Pleadings: Katherine Kolnhofer (called 1998) Michelle Mainprize (called 2002)

2.4 2.3

$150 $150

$ 360.00 $ 345.00

Preparation and attendance at Pre-Hearing: Katherine Kolnhofer

7.0

$150

$ 1,050.00

Preparation and attendance at Hearing, including fees for subsequent written submissions: Katherine Kolnhofer Tricia Hannigan (called 2002) Anna Maria Cartaginese (called 2008) Donald Cormack (called 1975) Michelle Mainprize Law Clerks

30.4 92.8 16.8 0.7 4.0 3.5

$150 $150 $150 $150 $150 $ 23

$ 4,560.00 $13,920.00 $ 2,520.20 $ 105.00 $ 600.00 $ 80.50

Mr. Keffer disputes Wawanesa’s claim for 156.4 hours of lawyers’ time. He submits that this amount of time is “a quantum of hours that is most charitably described as absurd.” He suggests that 6 hours of hearing time, and 18 hours of preparation time, (for a total of 24 hours) would be reasonable.

The general approach with respect to fees is to take a “pragmatic, broad-strokes approach, with a view to fixing an amount that is reasonable.”⁵ This means taking into account the length of the proceeding and the complexity of the issues, and frequently involves applying a ratio of pre-hearing preparation time to hearing time in the range of 1:1 to 4:1.⁶

This was a complex case. In addition to the oral hearing, Wawanesa and Mr. Keffer provided very lengthy and detailed submissions in writing. I am prepared to consider these written submissions as an additional two days of hearing. Added to the six-hour oral hearing day, this comes to 18 hearing hours. I find that a ratio of 4:1 (72 hours of preparation to 18 hours at the hearing) for preparation time to hearing time is reasonable in this case, given the complex issues and lengthy submissions.

Mr. Keffer also questioned whether Wawanesa was entitled to the maximum hourly rate of $150 per hour claimed by Wawanesa for the various counsel who worked on the case.

Rule 78 of the Code deals with the maximum expenses that may be awarded to representatives and states as follows:

The maximum amount that may be awarded to an insured person or an insurer for legal fees is an amount calculated using:

(a) the hourly rates established under the Legal Aid Services Act, 1998 for professional services in civil matters before the Ontario Superior Court of Justice; or

(b) the hourly rate referred to in Rule 78.1(a) adjusted to include, where appropriate, the experience allowance established under the Legal Aid Services Act, 1998;

Where an adjudicator is satisfied that a higher amount for legal fees to an insured person is justified, an hourly rate of up to $150 may be awarded.

[My underlining]

As a result, Rule 78 only allows counsel for insureds to obtain the Legal Aid rate (subject to the experience allowance).⁷The current maximum Legal Aid rate is $96.95 per hour.

According to Wawanesa’s list of Expenses, its various counsel claimed a total of 156.4 hours of time spent times $150 per hour. As outlined above, I am only prepared to order 90 hours of preparation and hearing time. Ms. Kolhofer was the lead counsel on this case. She spent a total of 39.8 hours on it. Multiplied by the legal aid rate of $96.95,⁸ this comes to $3,858.61. I am allowing the remainder of the 50.2 hours at the lower legal aid rate of $77.56.⁹ This comes to $3,893.51. The sum of these two amounts is $7,752.12. Once GST is included, the total I am allowing for fees is $8,139.72.

Disbursements:

In its list of Expenses, Wawanesa sought $548.50 plus GST for disbursements for telephone, photocopies and facsimile transmission charges. Mr. Keffer sought a breakdown of these disbursements, which was later provided.

These charges fall under subsections 1 to 3 of section 3(1) of the Schedule to the Expense Regulation. Although these charges are on the high side, as mentioned previously, there was voluminous material in this case. As these sorts of expenses are specifically referred to under this Schedule, I find that they are reasonable.

Wawanesa has also claimed, as a disbursement, legal research (Quiklaw Research) charges of $911.06. Under subsection 4(1) of this Schedule, disbursements may be awarded that pertain to other out-of-pocket expenses incurred in furtherance of the arbitration hearing. In my view, legal research charges fall under that category. As this was a complex case, legal research was justified. I find that the amount of $911.06 was reasonable under the circumstances.

Conclusion regarding amount of expenses:

Wawanesa is entitled to fees, including GST, of $8,139.72 ($7,752.12 for legal fees, plus GST of 5% at $387.60), as well as taxable disbursements, including GST, of $575.92 (disbursements of $548.50, plus GST at 5% of $27.42) and non-taxable disbursements (for Quiklaw Research) of $911.06. Therefore, Wawanesa is entitled to $9,626.70 for its expenses of the preliminary issue hearing.

April 5, 2011

Anne Sone Arbitrator

Date