Leon Francis Rocheleau v. Allstate Insurance Company of Canada, 2012 ONFSCDRS 17

Financial Services Commission of Ontario / Commission des services financiers de l’Ontario

Neutral Citation: 2012 ONFSCDRS 17

Appeal P11-00017

OFFICE OF THE DIRECTOR OF ARBITRATIONS

LEON FRANCIS ROCHELEAU Appellant

and

ALLSTATE INSURANCE COMPANY OF CANADA Respondent

BEFORE: Delegate Lawrence Blackman

REPRESENTATIVES: Mr. Karl Arvai for the Appellant, Mr. Leon Francis Rocheleau Mr. Ian D. Kirby for the Respondent, Allstate Insurance Company of Canada

HEARING DATE: December 14, 2011 and by further submissions received by January 25, 2012

APPEAL ORDER

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

1. The Arbitrator’s decision dated May 30, 2011 is confirmed and this appeal is dismissed.

2. If the parties are unable to agree on the legal expenses of this appeal, an expense hearing shall be requested, as set out below, within sixty days of the date of this decision.

February 23, 2012

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This is an appeal from the May 30, 2011 decision of Arbitrator Ashby (the “Arbitrator”) that the Appellant, Mr. Leon Francis Rocheleau, is not entitled to his legal expenses at arbitration due to his delay in seeking an expense hearing.

The Appellant was injured in a September 8, 2000 motor vehicle accident. As a result, he applied to his first-party automobile insurer, the Respondent, Allstate Insurance Company of Canada, for statutory accident benefits available under the Schedule.¹

The Arbitrator’s May 23, 2008 decision found the Appellant entitled to ongoing income replacement benefits (“IRBs”) from May 7, 2003, interest under subsection 46(2) of the Schedule and, pursuant to subsection 282(10) of the Insurance Act, R.S.O. 1990, c. I.8, a special award of $25,000. Regarding legal expenses, the Arbitrator held that:

The parties made no submissions with respect to expenses. I encourage them to resolve the issue, failing which they may request an expense hearing before me in accordance with the Dispute Resolution Practice Code.

By letter dated June 26, 2008, the Respondent forwarded the Appellant a draft for $267,826.16 covering the arbitration award and advised that ongoing IRBs of $800 would be paid bi-weekly. In the same letter, the Respondent asked for the Appellant’s “bill of arbitration expenses so that hopefully we can resolve this and bring the file to an end.” Receiving no response, the Respondent left a telephone message on November 3, 2008 and followed up in writing on December 23, 2008, asking for the Appellant’s expense proposal.

The Appellant responded on October 25, 2010, sending his Bill of Expenses to the Respondent. Not having received a reply from the Respondent, notwithstanding his follow-up letter of December 29, 2010, the Appellant contacted the Commission in January 2011 regarding the issue of legal expenses.

The Appellant’s explanation for the time it took him to contact the Commission, noted by the Arbitrator in her subsequent May 30, 2011 expense decision, was an unfamiliarity with the time lines under the Dispute Resolution Practice Code (Fourth Edition, Updated September 2010) (the “Code”), the Rules of Civil Procedure did not place time limits on seeking legal expenses and his counsel had a busy trial schedule.

The Arbitrator found that:

Mr. Rocheleau’s explanation for his delay in applying for an Expense Hearing is not compelling. To set aside the 30-day time limit set out in Rule 79 and extend it for a period of 2 years 6 months, for the reasons provided by Mr. Rocheleau would render the provision meaningless. Therefore, I find that Mr. Rocheleau is not entitled to his expenses of the hearing.

The Arbitrator held that but for the Appellant’s delay in seeking an expense hearing she would have fixed his expenses at $29,008.12. The Appellant seeks an order for payment of that amount. The Appellant states that the pertinent facts are not in dispute and that all relevant information was before the Arbitrator.

II. THE PARTIES’ SUBMISSIONS

The Appellant argues that the Arbitrator erred in law in two respects in her expense decision. First, he submits that Rule 79.1 of the Code, or at least the thirty-day time period under that provision, does not apply to the factual situation of this case, for the following reasons:

• Citing Rovella and State Farm Mutual Automobile Insurance Company, (FSCO A01-001012, March 31, 2006), the Appellant argues that Rule 79.1 applies only where the parties cannot agree on entitlement to or the quantum of legal expenses. Here, the Respondent acknowledged the Appellant’s prima facie right to his expenses and the parties ultimately agreed on $29,008.12 as the quantum of those expenses.

• Similar to Rules 58.03 and 58.04 of the Rules of Civil Procedure, Rule 79.1 of the Code allows either side to request an expense assessment. Under Rule 58.04, a litigant liable to pay costs may obtain a notice to deliver a bill of costs for assessment where the party entitled to costs fails or refuses to file or serve a bill of costs. Where the party required to deliver a bill of costs for assessment then fails to do so within the requisite time and thereby prejudices another party, the assessment officer may fix the costs of the defaulting party at an appropriate sum to prevent the other party further prejudice.

• The time provisions of Rule 79.1 are waived when parties agree to try to resolve expenses on their own beyond the thirty-day period. The Respondent was clearly willing to entertain expense submissions more than six months after the Arbitrator’s order, at no time indicating it would change its position past a certain period.

The Appellant argues, in the alternative, that if the Rule 79.1 thirty-day period does apply, the Arbitrator erred in the exercise of her discretion under Rule 81 of the Code, as follows:

• The purpose of the accident benefits scheme is to provide timely assistance to victims of motor vehicle accidents. The primary purpose of Rules 1.1, 1.3 and 81 of the Code is to promote a fair and just resolution of disputes. The timely resolution of disputes should not conflict with a fair and just resolution. These Rules have similar counterparts in the Rules of Civil Procedure and a similar contextual approach should be taken, balancing the interests of the parties to make an order that is just in the circumstances.

The Arbitrator failed to achieve a just, contextual result that balances the interests of the parties and permits the parties to get to the real merits of their dispute. Rather, the Arbitrator followed an overly technical, procedural approach, focusing on the omission of counsel. It is grossly unjust that the Respondent can avoid its clear obligation to pay $29,008.12 in legal expenses simply because of the Appellant’s technical breach in the late delivery of his Bill of Expenses.

• The Respondent could have equally requested an expense hearing to avoid any delay.

• The delay did not prejudice and actually benefited the Respondent, which had use of the $29,008.12 for almost three years. At an average annual return of 5% return, without compounding, the Respondent has earned approximately $3,626 in interest.

• The Respondent waited only 22 months after its last request for the Appellant’s expense proposal before receiving the Appellant’s Bill of Costs. The Appellant, however, waited more than five years, after IRBs were terminated, for a payment order and only after incurring significant legal expense, stress and financial difficulty.

• Neither the Arbitrator’s initial decision nor the Respondent’s correspondence specifically noted Rule 79.1 or the thirty-day time limit. It is thus unjust to impose the severe penalty of denying legal expenses where counsel was unaware of Rule 79.1 and the Respondent first relied on the time lines in its expense submissions.

The Respondent argues that each provision of the Code is to be read as if it has meaning. To accept the Appellant’s submissions would render Rule 79.1 meaningless. This is not a technical breach but a blatant disregard of the Code, disentitling the Appellant to his expenses. Setting aside time limits under Rule 81 of the Code is a matter of arbitral discretion. As long as the arbitrator acted reasonably, that discretion is not subject to review on appeal.

The Respondent submits that the exercise of discretion in this case was fact-driven, the facts are uncontroverted and the Arbitrator’s reasoning is consistent with prior case law and the principles of legislative interpretation. The cases under the Rules of Civil Procedure upon which the Appellant relies are distinguishable, involving parties who, in the absence of the relief obtained, would have been denied a hearing on the merits of the entire claim, not a collateral expense issue.

III. ANALYSIS

Does Rule 79.1 apply in this case?

I am persuaded that Rule 79.1 of the Code, and the thirty-day time line, applies in this case. Delegate Makepeace states in Haripersaud and State Farm Mutual Automobile Insurance Company, (FSCO P98-00018, December 17, 1999), that “Arbitrators are creatures of statute, with no general or residual jurisdiction.” Arbitrators have no inherent power to award legal expenses. However, subsection 282(11) of the Insurance Act 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.

Under section 21 of the Insurance Act, the Director of Arbitrations may make practice and procedural rules for proceedings before an arbitrator. Pursuant to this authority, Rule 79.1 of the Code provides that:

Where an adjudicator has issued an order determining all issues in dispute except expenses, and the parties cannot agree on the entitlement to or amount of the expenses of the proceeding, either party may request, in writing, an appointment before an adjudicator to determine expenses provided that the request is made within 30 days from the date the decision on all other issues in dispute was issued.

The Arbitrator’s May 23, 2008 decision determined all issues in dispute except legal expenses. The Arbitrator’s decision specifically states, perhaps redundantly, that in the absence of resolution, an expense hearing may be requested “in accordance with the Dispute Resolution Practice Code.”

If the parties agreed that the Appellant was now entitled to a cheque in the amount of $29,008.12 for legal expenses, we would not be here. Rather, precisely because there is a dispute the Appellant seeks an adjudicative order for payment of that amount. The only provision the Appellant can point to upon which such an order can be made is Rule 79.1 of the Code.

In Rovella, Rule 79.2 of the Code applied, as entitlement to legal expenses was determined in the initial arbitration decision. A thirty-day time period is provided for the successful party to serve its account. Rovella would seem to be a stronger case for the exercise of discretion to extend the set time period, the arbitrator having awarded expenses, leaving only the amount to be determined. Nonetheless, the arbitrator held that the successful party was not entitled to an expense assessment due to its blatant disregard of the Code. I do not read Rovella as saying that delay cannot, by itself, be a basis for denying an expense award.

Further, I see no basis to substitute this tribunal’s process with the court process, essentially on the basis that a representative is more familiar with the latter. The Appellant’s arguments, if accepted, would undermine the Director’s ability to make rules for the effective, expeditious, cost efficient and just case management of this tribunal process.

A fundamental purpose of automobile insurance legislation, as stated by the Supreme Court in Smith v. Co-operators General Insurance Co., 2002 SCC 30, [2002] 2 S.C.R. 129, is consumer protection. It is inconsistent with consumer protection that losing parties at arbitration, specifically insured persons, are obliged to force on an expense hearing or indefinitely have the cloud of legal expenses hang over their head where the successful party puts in abeyance the question of costs.

In addition, to find that efforts by a party to resolve expenses after the thirty-day period amounts to a waiver of time lines, no matter how long the delay by the other side, would simply persuade parties to replace reasonable flexibility and appropriate concessions with rigid denials and intransigence. In any event, I am not persuaded that the Respondent, by seeking to resolve after the thirty-day period, waived indefinitely that time line.

The exercise of discretion

Rule 81 of the Code provides that, subject to the requirements of the Insurance Act and the Statutory Powers Procedure Act, R.S.O. 1990, c. S. 22, 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.

(b) decide that any Rule does not apply in respect of a proceeding.

In Shanmugalingam and RBC General Insurance Company, (FSCO A05-002601, April 18, 2008), Arbitrator Sapin held that the insured could not rely on the insurer’s four-month delay in requesting an expense assessment to avoid an assessment or the obligation to pay expenses.

In her prior, substantive decision in that case, Arbitrator Sapin had stated that if “the parties are unable to agree on the amount of arbitration expenses, either party may refer the matter to me to be determined.” The Code was not referenced. Nonetheless, the insurer provided its cost submissions just past the requisite thirty days and its Bill of Costs less than a month later.

Arbitrator Sapin found the delay to be a technical breach resulting from a combination of misunderstanding, carelessness and inexperience of two junior lawyers dealing with expenses.

There was no resulting prejudice to the insured, nor was there evidence the insurer intended to waive its right to expenses or to an expense assessment. The insured was aware of her liability to pay expenses, if not the precise amount. Holding that settlement of disputes is far preferable to arbitration, Arbitrator Sapin found that allowing the insured ample time to consider her options was a reasonable explanation for the insurer’s delay in seeking an expense assessment.

In State Farm Mutual Automobile Insurance Company and Rovella, (FSCO P05-00009, September 12, 2005), Delegate Evans noted that Rule 81 has been used to forgive a failure to meet the expense hearing deadline where, as in Chafe-Moote and Prudential of America General Insurance Company (Canada), (FSCO A99-000016, June 15, 2000), the party awarded expenses assumed expenses would be dealt with as part of the appeal. The relative degree of success being an expense criterion, waiting for the appeal outcome may reasonably excuse delay.

In Truong and Lumbermens Mutual Casualty Company / Kemper Canada, (FSCO P03-00007, March 31, 2005), the arbitrator’s main decision deferred expenses, inviting the parties to contact him within 45 days if they could not agree on costs. Within that period the insurer contacted the Commission requesting an expense hearing. The insured asked that the matter be deferred pending the outcome of the appeal. Delegate Makepeace held that an arbitration expense hearing requested again, after the release of the appeal decision, should not be denied because of the Commission’s lack of a response to the initial request.

In Amato and Wawanesa Mutual Insurance Company, (FSCO A02-000161, August 17, 2006), the arbitrator stated in her main arbitration decision that “[i]f needed, the parties may now speak to the issue of expenses.” The insured delayed requesting an expense hearing for more than two years. Applying Rule 81, Arbitrator Miller followed Chafe-Moote to set aside the thirty-day time period, finding on the facts of the case it was reasonable for the insured person to wait until the appeal was over before dealing with the issue of arbitration expenses.

In Rovella, however, Arbitrator Miller found that the insurer failed to provide any reasonable explanation upon which she should exercise her discretion to set aside the time limit. The main arbitration decision, determining expense entitlement but not the amount, did not note the thirty-day time line. Arbitrator Miller found that the insurer waited some 19 months, without any reasonable or logical explanation or cogent, credible reasons, to enforce her expense order and then commenced procedures other than under Rule 79 before finally providing the insured with an itemized Bill of Costs 29 months after her decision.

The Appellant was unable to provide any cases under Rule 58.04 of the Rules of Civil Procedure as to the consequences of a party failing to deliver a bill of costs within the time period set out in the assessment officer’s notice. However, the Appellant relied on cases such as Chiarelli v. Wiens, 2000 CanLII 3904 (ON CA), 2000 CarswellOnt 280, where the Ontario Court of Appeal upheld the motion judge’s extension of the time for service of the Statement of Claim.

In Chiarelli, the motion to extend was commenced more than six years after the time for service had expired. The plaintiff’s lawyer testified he had succumbed to the pressure of work, became embarrassed and depressed by his negligence and instead of bringing a motion, he “froze.” The Court held that “on a motion to extend the time for service, the court should be concerned mainly with the rights of litigants, not with the conduct of counsel,” the fundamental consideration being whether extending the time for service would advance the just resolution of the dispute without prejudice or unfairness to the parties.

Finlay v. Van Paassen, 2010 ONCA 204, 2010 CarswellOnt 1543, allowed an appeal of a motion judge’s refusal to set aside the Registrar’s order dismissing an action for delay, where there had been a two-year delay seeking relief from the dismissal. The Court of Appeal held that notwithstanding that a discretionary order attracted significant deference, the motion judge failed to weigh all the material considerations, specifically prejudice, invariably a key consideration on such a motion and, therefore, reached an unjust result. Following Chiarelli, the court held that:

… on a motion to set aside a dismissal order, the court should be concerned primarily with the rights of the litigants, not with the conduct of their counsel. As Sharpe J.A. noted in Marché, at para. 28, “The law will not ordinarily allow an innocent client to suffer the irrevocable loss of the right to proceed by reason of the inadvertence of his or her solicitor.” Sharpe J.A. went on to recognize that the situation may be different where the lawyer’s conduct is not inadvertent but deliberate. In the case before us, however, the conduct of Finlay’s law firm was not deliberate, which affords a further basis to call into question whether the motion judge’s decision was just …

In Cook v. AXA Insurance (Canada), 2006 CarswellOnt 573 (Ont. C.A.), finding there was little, if any, prejudice to the defendant, the Court extended the time for service where the motion to extend was brought seven years after the prescribed six-month period.

In Scaini v. Prochinicki, 2007 ONCA 63, 2007 CarswellOnt 408, (no prejudice to the defendant, inadvertence of counsel), Soldatova v. Bruno, 2011 CarswellOnt 2111, (two and a half year delay setting aside a Registrar’s dismissal order due to chaos in the office of the plaintiff’s lawyer) and Viola v. Tortorelli, 2010 CarswellOnt 9219, (almost a year delay in moving to set aside a Registrar’s dismissal order), the Court adopted a contextual approach, balancing the interests of the parties by weighing all relevant factors to achieve a just order in the circumstances that, in general, a party should not lose his or her right to proceed due to the inadvertence of counsel.

In Finlay, the Court of Appeal referenced, at some length, its earlier decision in Marché d’Alimentation Denis Thériault Ltée. v. Giant Tiger Stores Ltd. 2007 ONCA 695. Marché confirmed the four-part test for setting aside an order dismissing an action under Rule 48.14: the explanation for the litigation delay, inadvertence in missing the deadline, the motion is brought promptly and no prejudice to the defendant.

Addressing the criterion of the explanation for the litigation delay, the Court of Appeal stated that Rule 48.14 was “one of many rules of civil procedure designed to promote the timely resolution of disputes, to discourage delay in civil litigation, and to give the courts a significant role in reducing delays. Before the promulgation of Rule 48.14, parties had total control over when cases were placed on the trial list.” The Court continued:

These rules and cases rest upon an important principle: there is a strong public interest in promoting the timely resolution of disputes. “The notion that justice delayed is justice denied reaches back to the mists of time ... For centuries, those working with our legal system have recognized that unnecessary delay strikes against its core values and have done everything within their powers to combat it”: Blencoe v. British Columbia (Human Rights Commission), 2000 SCC 44, [2000] 2 S.C.R. 307 at para. 146. The interest of litigants involved in the civil justice system in timely justice is obvious. Litigants are entitled to have their disputes resolved quickly so that they can get on with their lives. Delay multiplies costs and breeds frustration and unfairness.

Regarding the criterion of prejudice, the Court of Appeal still noted, citing Rule 1.04 of the Rules of Civil Procedure, that the Rules “must be interpreted in a manner that recognizes that expeditious justice is only one value to be weighed against others and that delay may be excused where necessary to ensure complete justice … Expeditious justice must be balanced with the public interest in having disputes determined on their merits.”

The Court of Appeal stated that “[w]here, despite the delay, the defendant would not be unfairly prejudiced should the matter proceed for resolution on the merits, according the plaintiff an indulgence is generally favoured.” The Court held that:

One important consideration is that the plaintiff will not be left without a remedy. I recognize here the need to ensure that adequate remedies are afforded where a right has been infringed. The law will not ordinarily allow an innocent client to suffer the irrevocable loss of the right to proceed by reason of the inadvertence of his or her solicitor: see e.g. Chiarelli v. Wiens (2000), 46 O.R. (3d) at para. 9 (C.A.).

However, the Court stated that it is not left with:

… a stark choice between defeating the client’s rights and forcing the opposite party to defend the case on its merits. That assumption is faulty where, as in this case, the solicitor’s conduct is not mere inadvertence, but amounts to conduct very likely to expose the solicitor to liability to the client. When the solicitor is exposed in this way, the choice is different; refusing the client an indulgence for delay will not necessarily deny the client a legal remedy.

In the case before it, the Court concluded that:

Overall, reinstating this action would excuse a five-year delay after the dismissal of an action, explained only by the fact that a lawyer formed “a deliberate intention not to advance the litigation toward trial” and “put the file in abeyance”. That would risk undermining the integrity and repute of the administration of justice.

These court decisions applied Rule 1.04(1) of the Rules of Civil Procedure that the Rules “shall be liberally construed to secure the just, most expeditious and least expensive determination of every civil proceeding on its merits.” This mirrors Rule 1.1 of the Code, that the Rules will be broadly interpreted to produce the most just, quickest and least expensive resolution of the dispute. Consistent with that intent, Rule 1.2 of the Code provides that a “defect in form or other technical breach will not make a proceeding invalid.” Thus, Arbitrator Sapin stated in Shanmugalingam that:

The consequences of delay depend on the nature of a breach and its effect on the fairness of the proceedings. Rule 1 of the Code is helpful in that regard …

Adopting the Court of Appeal’s comments in Finlay, I find that the Code, similar to the Rules of Civil Procedure, is:

… intended to do away with overly “technical” arguments about the effect of the Rules and orders made under them. Instead, these provisions aim to ensure that the Rules and procedural orders are construed in a way that advances the interests of justice and ordinarily permits the parties to get to the real merits of their dispute.

However, the context of the Code is distinct, being part of an alternative dispute resolution system with its own well-entrenched case management governed by the Statutory Powers Procedure Act (including the power under section 23 to give such orders or directions as the tribunal considers proper to prevent abuse of its processes). The Code also exists in the context of consumer protection and the timely assistance to victims of motor vehicle accidents. Arbitrator Naylor, in McCormick and Economical Mutual Insurance Company, (OIC A-000139, November 10, 1991, held that:

The discretion to award expenses should be exercised, having regard to the intent and purpose of the legislative scheme. The arbitration process has been established under the Insurance Act as amended, in order to facilitate applicants’ access to relatively inexpensive, speedy and informal adjudication of disputes regarding no-fault benefits. The discretion to award expenses should be exercised in accordance with this objective, having regard to the individual circumstances of each case.

The Appellant argues that the Court of Appeal puts little, if any weight, on expeditiousness in advancing the interests of justice. As prejudice, he submits, is the deciding factor, Rule 79 of the Code, similar to Rule 58.04 of the Rules, should allow counsel to obtain their client’s expenses when counsel is able. The longer the delay, the stronger the case for exercising adjudicative discretion to extend the time limit as the other party has had more time to use the successful party’s money. In any event, a liable party objecting to the delay can always force on an expense hearing.

I do not agree. To adapt the language of Reference re Securities Act, 2011 SCC 66, in deciding whether to exercise discretion under Rule 81 of the Code to extend the time to request an expense hearing, one criterion “may not be used in a manner that effectively eviscerates another” criterion, expeditiousness, especially where expeditiousness, as set out above, is a crucial component of justice.

Marché was recently followed in Machacek v. Ontario Cycling Association, 2011 ONCA 410, where the action had been dismissed by the registrar. Thirty-one months later, LawPRO served a motion record to set aside the registrar’s order. In the interim, the client had met his prior lawyer six times to urge him to deal with the dismissal of the action, in addition to sending registered mail necessitated by his counsel’s failure to respond to his interim inquiries.

The Court of Appeal held that delay tipped the balance towards the finality principle over the motion judge’s finding of no evidence of actual prejudice, concluding, as found in Marché, that:

… “reinstating the action at this point would undermine the finality principle while refusing to reinstate the action does not interfere with the need to ensure adequate remedies.” In respect to the latter comment, we note that the appellants are not left without a remedy as they still have recourse through an action in solicitor’s negligence.

In Chiarelli, the Court of Appeal stated that the “court should not fix in advance rules or guidelines when an extension should be refused,” but that each case should be decided on its facts. I find the following factors relevant in this case.

1. The nature of the breach of Rule 79.1 and whether the breach was inadvertent

The Appellant’s breach is not solely disregard of a procedural rule or of an administrative dismissal order. It is also disregard of an adjudicative order. The Appellant argues that the breach was not deliberate, but rather an inadvertent mistake. He provides a definition of inadvertent as “not resulting from or achieved through deliberate planning.” The Concise Oxford Dictionary, Eighth Edition (Oxford: Clarendon Press, 1990), provides alternative definitions of inadvertent as “unintentional,” “not properly attentive” and “negligent.”

Marché, however, distinguishes between inadvertence where indulgence will be generally favoured in the absence of prejudice to the other party and “conduct very likely to expose the solicitor to liability to the client,” where such indulgence would “risk undermining the integrity and repute of the administration of justice.”

While the result of delay in this case may have been unintended, the delay itself was not. Rather, counsel concedes or essentially concedes a lack of informed knowledge of the tribunal process, disregarding the Arbitrator’s instructions in her substantive decision regarding legal expenses, including notation of the Code, and ignoring the Respondent’s subsequent endeavours to resolve that issue.

With a misplaced reliance on the Rules of Civil Procedure and an asserted heavy trial schedule, it is difficult to conclude other than, to use the words in Marché, that counsel formed “a deliberate intention not to advance” resolution of the expense claim, putting that issue in abeyance. It is difficult to characterize a considered decision not to request an expense hearing for 32 months as a simple technical breach.

Unlike the court cases cited by the Appellant, an entire proceeding is not being dismissed in this case. Rather, in issue are solely legal expenses. In Byers (Litigation Guardian of) v. Pentex Print Masters Industries Inc., (2003), 2003 CanLII 42272 (ON CA), 62 O.R. (3d) 647, the Court of Appeal held that:

… a request for costs, including the scale and the amount of costs, raises legal issues collateral to the main cause of action. … costs cannot fairly be characterized as an element of the relief sought in the main proceeding. Unlike other judicial relief, costs are not compensation for the injury (in the broad sense of that word) giving rise to a proceeding in which damages or other monetary relief, is claimed.

The Appellant has received a $267,826.16 judgment, plus ongoing payment of benefits. The order includes a $25,000 special award for the Respondent’s unreasonable withholding of IRBs.

In other words, a penalty imposed by the Arbitrator for the Respondent’s unreasonable delay.

The majority of the balance of the award represents prejudgment interest under section 46 of the Schedule on overdue payments at two per cent per month, compounded monthly, compensating the Appellant for his five-year wait for IRBs. It is hardly accurate to say that the delay the Appellant encountered in obtaining judgment has been ignored in this case.

2. The strength of the Appellant’s claim for legal expenses

Unlike Rovella, there was no initial order awarding a party its legal expenses. However, given the Appellant’s complete success at arbitration, his entitlement to his expenses, subject to delay, was conceded.

3. The respective prejudice to the parties

The Respondent concedes its lack of prejudice. However, as held by the Court of Appeal in Marché, the motion judge’s finding of no evidence of actual prejudice was an important factor, but had “to be balanced by a consideration of the finality principle.”

This is not a case of an irrevocable loss of the right to proceed. Rather, it is the Appellant’s collateral entitlement to partial reimbursement of his liability to his counsel, either already satisfied from the arbitration award (but with no right to interest from the third party) or pending, that is in question.

The Court of Appeal in Marché held, regarding the criterion of prejudice, that “[f]inality, like the avoidance of unnecessary delay, is a central principle in the administration of justice.” The Court quoted Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, that the “law rightly seeks a finality to litigation” and finality is “a compelling consideration.”

In Finlay, the Court of Appeal held that “[s]peculation about whether a party has a lawsuit against its own lawyer, or the potential success of that lawsuit, should not inform the court’s analysis of whether the registrar’s dismissal order ought to be set aside.” However, the same court, in Marché, held that:

…excusing a delay of this magnitude and gravity risks undermining public confidence in the administration of justice. Lawyers who fail to serve their clients threaten public confidence in the administration of justice … There is a risk that the public would perceive disregarding the solicitor’s conduct in the circumstances of this case as the legal system protecting its own. Excusing a delay of this kind would [throw] into question the willingness of the courts to live up to the stated goal of timely justice.

4. The length of the delay in requesting an expense hearing

In Shanmugalingam, where discretion was exercised to extend the time period, there was a four- month delay in requesting an expense hearing; in Amato, two years. The Divisional Court, in Viola, called the 27-month delay between the date of dismissal and serving motion materials in Wellwood v. Ontario Provinicial Police, 2009 CanLII 1476 (ON SCDC), [2009] O.J. No. 235 (Ont. Div. Ct.), egregious.

In this case, the expense hearing was requested 32 months after the Arbitrator’s decision, a 31- month delay. In Shanmugalingam, steps were taken within a few weeks to try to resolve expenses. In Rovella, where the time period was not extended, steps, albeit unorthodox, were taken to enforce the expense order 19 months following the initial decision. In this case, the Appellant took no action whatsoever regarding legal expenses for 29 months. No Bill of Costs was submitted. No effort at resolution was made. No expense hearing was requested. Repeated communication from the other party was ignored.

5. The explanation for the delay in requesting an expense hearing

In this case, the Arbitrator found the explanation for delay, counsel being unfamiliar with the thirty-day time line combined with a busy trial schedule, not compelling. To accept this explanation as reasonable would run contrary to the Court of Appeal’s statement in Marché that the explanation for litigation delay “ties into a dominant theme in modern civil procedure: the discouragement of delay and the enhancement of an active judicial role to ensure timely justice.”

Unlike Shanmugalingam, this is not a situation of a junior lawyer who may be inexperienced that tribunals, similar to courts, have their own rules of practice. Further, unlike Rule 48 of the Rules of Civil Procedure, Rule 79.1 of the Code, setting a thirty-day time period to request legal expenses is not a recent innovation changing a long-standing practice. Rather, the thirty-day time line was introduced in the April 15, 1997, Third Edition of the Code, more than a decade before the Arbitrator’s initial decision and within seven years of the Commission’s creation.

Having been found liable, in part, for a $25,000 special award for unreasonably withholding or delaying IRB payments, the Respondent made several efforts to resolve legal expenses. When the Bill of Costs was ultimately forthcoming, the Respondent agreed, with minor reductions, to the amount, subject to the issue of delay. This is not a situation of a party “hiding in the weeds,” waiting for the thirty-day time period to elapse. It is difficult to see the Respondent’s delay in replying to the Appellant’s October 25, 2010 letter, close to two years after the Respondent’s last letter, as significant in these circumstances.

6. The justice of the case and the exercise of discretion

In Allison and Markel Insurance Company of Canada, (OIC P-001231, August 21, 1996), Delegate Naylor stated that an award of legal expenses:

… is a matter within the discretion of the arbitrator, although the discretion must be exercised reasonably. Because the discretion is given to the arbitrator, it should not be interfered with lightly on appeal … Generally, his or her determination should not be disturbed unless the party appealing the order can point to a serious error in the exercise of the discretion: for example, the arbitrator adopted a wrong approach, based the decision on irrelevant considerations or inadequate evidence, or failed to look at the merits of the individual case by inappropriately fettering his or her discretion … Provided that the arbitrator has approached the discretion on a proper basis, his or her judgement should not be second-guessed merely on the basis that another arbitrator might have reached a different conclusion.

The Arbitrator did not have the benefit of the extensive court case law now provided. However, the essence of her reasons mirrored the comments of the Court of Appeal in Marché that:

… the nature of the delay and the solicitors’ conduct in this case amount to more than that kind of lapse or inadvertent mistake that the legal system can countenance. We should opt for a resolution that discourages this type of conduct which undermines the important value of having disputes resolved in a timely fashion. The decision of the Master sends the right message and provides appropriate incentives to those involved in the civil justice system.

What message does the Arbitrator’s expense decision send?

The resolution of expenses cannot be left hanging indefinitely over the heads of parties. Losing parties are not obliged to expend additional resources to obtain an expense judgment for the other party. Parties that concede the other side’s expense entitlement, extend the time for resolution and are reasonable regarding the quantum of legal expenses are not deemed to have waived indefinitely any time lines. A prolonged, entrenched belief that familiarity with a tribunal’s rules is not necessary is not a reasonable basis for setting aside a time line, nor is protracted inattention to an adjudicative order. An inordinate delay seeking an expense hearing without a reasonable explanation does not advance the interests of justice, nor is it the “kind of lapse or inadvertent mistake that the legal system can countenance.”

In Rovella, Arbitrator Miller held that the insurer’s nineteen-month delay was not a technical breach but rather a blatant disregard of the Code. She stated that to allow the extension “would set a precedent wherein parties seeking their costs can look to this decision as a basis that no penalty will ensue if the rules are completely ignored for no valid reason whatsoever.” In this case, the Arbitrator held that to extend the Rule 79 thirty-day time limit for two and a half years “would render the provision meaningless.”

Looking at the justice of this present case, on the one hand there is conceded entitlement to legal expenses, subject to delay, as well as a lack of prejudice to the Respondent and the loss to the Appellant of obtaining third-party, partial, collateral legal expense recovery.

One must balance, on the other hand, that the present breach of the procedural rule and the adjudicative order is not simply inadvertent or technical, there was an inordinate delay of 31 months requesting an expense hearing and the Arbitrator found the explanation for the delay “not compelling.” There is further the significant undermining of the principle of finality and the risk of undermining public confidence in the administration of justice. As well, in the absence of third-party recovery, the Respondent is not necessarily left without a legal remedy.

Adopting a contextual approach, balancing the relevant factors, I am not persuaded that the Arbitrator exercised her discretion improperly or that her judgment should be second guessed.

Accordingly, the Arbitrator’s May 30, 2011 decision is confirmed and this appeal is dismissed.

IV. EXPENSES

Upon requesting and hearing submissions specifically in this regard, if the parties are unable to agree on the legal expenses of this appeal, exercising my discretion under Rule 81 of the Code, the time lines of Rule 79.1 are modified such that an expense hearing shall be requested within sixty days of the date of this decision. The request, however, shall be accompanied by a Bill of Costs describing the expenses claimed, the services received and the costs, as well as written submissions regarding entitlement to and/or the quantum of legal expenses as may be in dispute.

February 23, 2012

Lawrence Blackman Director’s Delegate

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.