Leon Francis Rocheleau v. Allstate Insurance Company of Canada, 2013 ONFSCDRS 125

Financial Services Commission of Ontario

Commission des services financiers de l’Ontario

Neutral Citation: 2013 ONFSCDRS 125

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:

September 12, 2013 by telephone conference call

APPEAL EXPENSE ORDER

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

1. Each party shall bear their own legal expenses of this appeal.

September 20, 2013

Lawrence Blackman Director’s Delegate

Date

REASONS FOR DECISION

I. NATURE OF THE APPEAL

The argument in this appeal expense hearing was, in significant part, which party’s delay in requesting an expense hearing from the Commission was more egregious. My earlier February 23, 2012 appeal decision upheld the May 30, 2011 expense decision of Arbitrator Ashby (the “Arbitrator”) denying the Appellant his entire arbitration expense claim of some $29,000 on the basis of his delay in seeking an expense hearing. This decision, for the reasons that follow, denies the Respondent its entire appeal expense claim of some $4,000, also on the basis of delay.

The background to this decision is the Appellant being injured in a September 8, 2000 motor vehicle accident. Pursuant to the May 23, 2008 judgment of the Arbitrator the Respondent, Allstate Insurance Company of Canada, paid the Appellant $267,826.16, as well as ongoing bi-weekly income replacement benefits under the Schedule¹ of $800. Regarding legal expenses, the Arbitrator stated:

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.

Rule 79.1 of the Dispute Resolution Practice Code (Fourth Edition, Updated August 2011) (the “Code”) provides:

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.

[Emphasis added]

On October 25, 2010, more than two years after the Arbitrator’s decision, the Appellant sent the Respondent his Bill of Expenses. Some months later he contacted the Commission regarding the question of legal expenses. The Appellant’s explanation for his delay was unfamiliarity with the timelines under the Code, that the Rules of Civil Procedure did not place a time limit on seeking legal expenses and his counsel’s busy trial schedule.

The Arbitrator’s May 30, 2011 expense decision held:

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.

But for the Appellant’s delay in seeking an expense hearing, the Arbitrator would have fixed his legal expenses at $29,008.12.

The Appellant argued that the Arbitrator erred in failing to find that the time provisions of Rule 79.1 did not apply to the factual circumstances of this case. Alternatively, the Appellant argued that the Arbitrator erred in not exercising her discretion under Rule 81 of the Code to extend the thirty-day time period in Rule 79.1, on the bases that:

• A just, contextual result balances the interests of the parties and allows parties to get to the real merits of their dispute. The Arbitrator’s overly technical, procedural approach focusing on counsel’s omission led to a grossly unjust result allowing the Respondent to avoid paying $29,000 in legal expenses.
• The delay did not prejudice but rather benefited the Respondent, which was able to earn several thousand dollars in interest on the $29,000 owed for an almost three-year period.
• Conversely the Appellant had incurred more than five years of significant legal expense, stress and financial difficulty waiting for a payment order.
• Neither the Arbitrator’s initial decision nor the Respondent’s correspondence specifically noted Rule 79.1 or the thirty-day time limit. It was, therefore, 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 thirty-day timeline in its expense submissions.

The Respondent agreed that this was not a mere technical breach but a blatant disregard of the Code, disentitling the Appellant to his expenses. The Respondent submitted that 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 was not subject to appellate review.

My February 23, 2012 decision dismissed the appeal. I was first persuaded, for the reasons provided, that Rule 79.1 of the Code and the thirty-day timeline applied in this case.

Regarding the Arbitrator’s exercise of discretion, I noted that the Code was part of an alternative dispute resolution system with its own well-entrenched case management, including an adjudicator’s power under section 23 of the Statutory Powers Procedure Act, R.S.O. 1990, c. S. 22 to give such orders or directions as he or she considered proper to prevent an abuse of process.

Further, the Code existed 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 arbitration process had been established “to facilitate applicants’ access to relatively inexpensive, speedy and informal adjudication of disputes regarding no-fault benefits.”

I disagreed with the Appellant that little, if any, weight should be put on expeditiousness as a component of justice. Adapting Reference re Securities Act, 2011 SCC 66, I found that the Rule 1.1 criterion of the Code that the Rules be broadly interpreted to achieve the most just resolution of the dispute “may not be used in a manner that effectively eviscerates another” criterion of Rule 1.1, expeditiousness, as expeditiousness is a crucial component of justice.

In Chiarelli v. Wiens, 2000 CanLII 3904 (ON CA), 2000 CarswellOnt 280, 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 found the following considerations relevant in this case:

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

The Appellant’s breach was not only a disregard of a rule or of an administrative dismissal order, but a disregard of an adjudicative order. Marché d’Alimentation Denis Thériault Ltée. v. Giant Tiger Stores Ltd. 2007 ONCA 695 distinguished between (1) inadvertence where indulgence would be generally favoured in the absence of prejudice to the other party, and (2) “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.”

Counsel essentially conceded lack of knowledge of the tribunal process and disregard of the Arbitrator’s May 23, 2008 decision regarding legal expenses. It was difficult to conclude other than, to use the words of Marché, that counsel formed “a deliberate intention not to advance” resolution of the expense claim and put the issue in abeyance.

2. The strength of the claim for legal expenses

The Appellant’s entitlement to his arbitration expenses, subject to delay, was conceded.

3. The respective prejudice to the parties

The Respondent conceded its lack of prejudice. However, Marché held that 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,” that “[f]inality, like the avoidance of unnecessary delay, is a central principle in the administration of justice.”

Machacek v. Ontario Cycling Association, 2011 ONCA 410, held that the delay in that case tipped the balance towards the finality principle over the motion judge’s finding of no evidence of actual prejudice concluding, as found in Marché:

… “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.

The present case, however, was not about the loss of the right to proceed but rather collateral entitlement to partial reimbursement of the Appellant’s liability to his counsel. Marché, held:

…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. Length of the delay in requesting an expense hearing

The Appellant requested an expense hearing 32 months after the Arbitrator’s decision, a 31-month delay. The Appellant took no action regarding legal expenses for 29 months. Repeated communication from the other party was ignored.

5. Explanation for the delay in requesting an expense hearing

To accept as reasonable the explanation given for the delay, unfamiliarity with the thirty-day timeline and a busy trial schedule, would run contrary to the Court of Appeal’s statement in Marché regarding the dominant theme in modern civil procedure, “the discouragement of delay and the enhancement of an active judicial role to ensure timely justice.”

Unlike Shanmugalingam and RBC General Insurance Company, (FSCO A05-002601, April 18, 2008), this is not a situation of an inexperienced, junior lawyer unaware that tribunals may have their own rules of practice. The thirty-day time period to request legal expenses under Rule 79.1 of the Code was not a recent innovation but rather had been in place for more than a decade.

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

The Court of Appeal in Marché held:

… 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.

In this case there was a deliberative decision, contrary to the intent of the Code and an adjudicative order advancing expeditious, cost-effective and just case management, to inordinately and unreasonably delay seeking legal expense reimbursement.

I was not persuaded that the Arbitrator approached her discretion on an improper basis or that her judgment should be second guessed. Taking a contextual approach and balancing, in part, the absence of prejudice to the Respondent with the principle of finality and the length of the delay, I was not persuaded that the explanation for delay and the risk of undermining public confidence in the administration of justice warranted, in these circumstances, interfering with the Arbitrator’s exercise of discretion by extending the thirty-day time limit to 32 months.

Regarding the legal expenses of the appeal hearing, I held:

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.

Sixty days from the February 23, 2012 decision was April 23, 2012. Having received no request for an appeal expense hearing, on April 27, 2012 the appeal file was administratively closed.

A year later, on May 14, 2013, I received the Respondent’s May 10, 2013 request for an expense hearing, advising it had not heard from me regarding its claim for appeal expenses. The letter enclosed the Respondent’s November 23, 2012 letter addressed to me, copied to the Appellant, saying “we should move forward in resolving the appeal expense issue.”

My May 14, 2013 reply stated that the November 23, 2012 letter was not in the appeal file, it had not been entered in the appeals computer chronology by the Case Administrator nor had I any recollection of having seen the letter. I stated:

If the Respondent wishes to pursue the legal expense issue, it should forthwith serve and (with a Statement of Service in Form F) file, as set out in my decision, its “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.” If the Respondent is simply relying on the above documentation, it should so advise, with a copy of its Bill of Costs.

The Respondent’s May 21, 2013 letter included its March 5, 2012 letter to the Appellant, not copied to the Commission, saying a Bill of Expenses was enclosed and if there was any dispute with expense entitlement or quantum, the Appellant was to advise within the week, “failing which I shall write to the Commission and arrange a further teleconference.” Also enclosed were a $4,118.53 Bill of Expenses and a March 7, 2012 e-mail to the Appellant that if the latter was disputing expenses, the Respondent would contact FSCO and arrange an expense hearing.

The Respondent’s appeal expense submissions were succinct:

Insofar as the issue of entitlement to appeal expenses, I would simply say that insofar as the appeal issue was concerned, the [Respondent] was entirely successful and there seems no basis on which to deny the insurer its expenses of the appeal. As for the quantum of expenses, same is detailed in the attached bill of expenses and I believe same is both self-evident and reasonable, given the issues in dispute on appeal.

The Appellant states that he never received the Respondent’s November 23, 2012 letter. The Appellant’s June 5, 2013 letter states he had not seen a Bill of Expenses to date. The Appellant submits regarding appeal legal expenses that:

1. The very subject matter of this appeal was the Appellant’s delay in requesting an arbitration expense hearing. On appeal, both parties “were keenly aware of the importance of complying with the prescribed time limits as a result of the arbitrator and the extensive reasons upholding the decision on appeal.” The Delegate exercised his discretion under Rule 81 of the Code to extend the Rule 79.1 thirty-day timeline to sixty days for the parties to request an expense hearing.
2. The Appellant responded on March 7, 2012 to the Respondent’s March 5, 2012 letter, offering to settle expenses without acknowledging entitlement. The Appellant did not receive the Respondent’s March 7, 2012 e-mail as it was sent to an old e-mail address.
3. The Respondent did not comply with the April 23, 2012 deadline regarding appeal expenses and has given no explanation for its delay in requesting an expense hearing.
4. The Appellant’s Notice of Application for Judicial Review did not seek nor did it have the effect of staying the February 23, 2012 sixty-day timeline.
5. The reasons for upholding the Arbitrator’s expense decision, specifically the finality principle, apply equally to the present case. The Respondent’s breach was a disregard of an adjudicative order where the need for compliance with prescribed time limits was detailed, emphasized and ordered. As stated in the February 23, 2012 appeal decision, it can be said here also that counsel formed a “‘deliberate intention not to advance’ resolution of the expense claim, putting that issue in abeyance.” Further, the Respondent insurer is not necessarily left without a legal remedy.
6. The Respondent reaped a significant gain in not having to pay $29,000 in arbitration expenses, a quantum that was not disputed by the Respondent and which the Arbitrator found to be reasonable. The Appellant has been prejudiced in that the judicial review of the February 23, 2012 appeal decision has been completed. Should the Appellant wish to seek judicial review of the appeal expense decision, he will be put to significant and probably prohibitive expense in commencing an entirely new application.

The Respondent’s reply written submissions and subsequent oral submissions, sought an amended $4,286.83 in legal expenses. The Respondent argues:

1. There was no legitimate basis upon which to deny the Respondent its appeal expenses. The Respondent was entirely successful on appeal. There were no written offers to settle. The issues on appeal were not novel. There was nothing in the Respondent’s conduct that prolonged, obstructed or hindered the proceeding. Any failure to comply with the order that an expense hearing be requested within sixty days of the appeal decision was explained. The dispute was simply with regard to quantum.

The Appellant conceded in oral submissions that he was not disputing the quantum. Likewise, at first instance, the Respondent did not dispute the Appellant’s entitlement to or the quantum of the legal expenses sought, other than on the basis of delay.

2. The Respondent further argues that on July 25, 2012 it received the Appellant’s Notice of Application for Judicial Review that specifically sought the costs of this appeal. The Respondent assumed that the Appellant was going to bring a motion or request a stay of the appeal expense order until the judicial review had been heard. Only in November 2012 did the Respondent realize that the Appellant was not going to seek a stay of the February 23, 2012 appeal decision and, accordingly, wrote the Commission.

This does not explain why the Respondent did not request an expense hearing within the set timeline ending April 23, 2012. The Respondent says it first had notice of the judicial review on July 25, 2012. That is more than three months after the sixty-day timeline had ended. The parties agree that an application for judicial review does not, by itself, stay the decision of a Director’s Delegate. The Respondent advises that the Divisional Court, without calling on the Respondent, dismissed the Appellant’s judicial review application for oral reasons provided that the standard of review was reasonableness and that the decision under judicial review was reasonable.

3. The Respondent submits that the Commission has a heavy case load. It is overburdened with work. It takes a year to get a consent order. The Respondent was simply respecting the Commission’s valuable time and trying to save the Commission work. Denying the Respondent its legal expenses will send a message that the Commission punishes consideration of its time.

The Respondent’s actions have not saved the Commission’s time. The Respondent’s actions have not saved the parties’ time. A brief letter to the Commission, copied to the other party, requesting a reasonable extension could have avoided the issue of delay. A timely expense hearing request accompanied by the requisite documentation could have resolved legal expenses, just as judicial review expenses were resolved in the sum of $7,500, payable to the Respondent.

In any event, I am unable to see how concerns regarding delay elsewhere excuse ignoring an adjudicative order, especially an order obtained on consent with the specific intent of expediting dispute resolution. In any case, the Notice of Appeal in this proceeding was received by the Commission on June 30, 2011. Written submissions, with an extension being granted, were received by November 23, 2011. The appeal was heard December 14, 2011. Further written submissions were received by January 25, 2012. The decision was released February 23, 2012. The appeal file was closed April 27, 2012, ten months after receipt of the Notice of Appeal.

4. The Respondent further submits that factually, this case is fundamentally different from the expense dispute before the Arbitrator. In this appeal, the Appellant knew within ten days of the February 23, 2012 decision that the Respondent was seeking its legal expenses, and the amount. If the Appellant had not received the Respondent’s Bill of Costs on March 5, 2012, how could he have responded with an expense counter-offer two days later? Contrary to the Appellant’s assertion he never received the Respondent’s May 7, 2012 e-mail, the e-mail did not “bounce back.” The Respondent phoned the Appellant on May 14, 2012, but did not have the courtesy of a reply to its phone message.

Denying the Respondent its legal expenses, it is argued, will send a message that the Commission punishes courtesy. Although there may not have been perfect compliance with the February 23, 2012 appeal order, factually, there was still compliance. Non-compliance would be to have done nothing.

I find that there was not compliance with the February 23, 2012 appeal order. Rather, as argued by the Appellant, the Respondent failed, as ordered, within the agreed sixty-day period to:

(a) Request an expense hearing. The Respondent specifically conceded in oral submissions that at the very best, its request was seven months late.

(b) File with the Commission a Bill of Costs describing the expenses claimed, the services received and the costs.

(c) File with the Commission its written submissions regarding entitlement to and/or the quantum of the legal expenses in dispute.

The Respondent did not, within the sixty-day period, seek an extension of time for requesting an expense hearing The Respondent did not provide any communication with the Commission within the sixty-day period, or within seven months thereafter. Although the Respondent does not explicitly ask that I exercise my discretion to extend the timelines as it submits there has been compliance, I would decline to do so, for the following reasons:

1. As stated in the February 23, 2012 appeal decision, this is not solely a disregard of a procedural rule or an administrative order. It is disregard of an adjudicative order where submissions were specifically sought and both parties agreed that I should exercise my discretion to extend the thirty-day timeline under Rule 79.1 of the Code to sixty days, as confirmed in the decision.

The Appellant cited the Respondent’s arbitration submission that “one of those widely accepted standards of justice and reasonableness is the process exemplified by the [Code] … this process is a feature of an ordered society under the rule of law. Principles of the rule of law are compromised if the process is defied for months or years.” At the main appeal, the Respondent itself argued that the Appellant’s delay in seeking arbitration expenses was not a mere technical breach but a blatant disregard of an adjudicative order.

2. As also stated in the February 23, 2012 decision, while the result of the delay in seeking legal expenses may have been unintended, the delay itself was not. The Respondent’s delay in requesting an appeal expense hearing was not inadvertent but rather deliberate, as it says it was (1) trying to resolve the expense issue on its own, (2) did not want to trouble the Commission, and (3) expected the Appellant would bring a stay motion.

I am not persuaded in the specific circumstances of this case that it was reasonable for the Respondent to wait until November 2012, at the earliest, before bringing the issue of appeal expenses to the Commission.

3. The Court of Appeal held in Finlay v. Van Paassen, 2010 ONCA 204, 2010 CarswellOnt 1543, that “[e]xpeditious justice must be balanced with the public interest in having disputes determined on their merits.” Where the solicitor’s conduct was not mere inadvertence but amounted to conduct very likely to expose the solicitor to liability to the client, refusing the client an indulgence for delay would not necessarily deny the client a legal remedy. In that case, the Court concluded that reinstating the action would risk undermining the integrity and repute of the administration of justice.

Similar to the legal expenses at arbitration in this case, entitlement to appeal expenses was essentially conceded, subject to the issue of delay. Unlike the delay in arbitration, prejudice was asserted. In addition to prejudice, which is not a prerequisite and was not claimed by the Respondent in the arbitration expense hearing, the same principles of finality, discouraging delay and enhancing an active judicial role in ensuring timely justice apply.

4. It is true that that Appellant’s delay was 31 months, whereas the Respondent’s delay was perhaps no more than seven months. It is also true that the Appellant did nothing for 29 months, whereas the Appellant sought to resolve the issue of legal expenses with the Respondent shortly after the February 23, 2012 appeal decision.

However, unlike the main arbitration hearing, on appeal the question of delay in seeking an expense hearing was front and centre, appeal expenses were specifically addressed at the main appeal hearing and a consent order specifically extended the Rule 79.1 timeline. There is also a significant difference between $4,000 in lost appeal expenses and $29,000 in lost arbitration expenses followed by payment of $7,500 for a failed judicial review.

5. This is not the case of an inexperienced, junior lawyer unaware of the rules of this tribunal. The Respondent’s counsel noted his 22 years of experience in attending before this Commission and its predecessor, the Ontario Insurance Commission.

6. The parties advise that the Arbitrator was given the choice solely between allowing the arbitration legal expenses in full and denying them entirely. A third option, such as allowing an extension on terms of a partial reduction, was not proposed. Given that a third option is also not proposed regarding appeal expenses and the Arbitrator’s all or nothing determination, I would not be disposed to allow a time extension on terms.

In any event, as noted by the Appellant, the Respondent has never requested a time extension, asserting that it has complied with the February 23, 2012 appeal order.

Taking a contextual approach, considering, in part:

• the specificity of my earlier expense order,
• the centrality of the issue of delay in this appeal proceeding,
• the less than persuasive reasons given for the delay,
• the experience of counsel,
• the finality principle,
• the principles of fairness and consistency, and
• the risk of undermining public confidence in the administration of justice,

I am not persuaded in these circumstances to exercise my discretion to grant the Respondent a remedy it does not explicitly seek, namely to extend by a minimum of seven months the sixty-day timeline to request legal appeal expenses accompanied by the requisite material set out in my February 23, 2012 decision.

Accordingly, I find that each party shall bear their own legal expenses of this appeal.

September 20, 2013

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.