Neutral Citation: 2015 ONFSCDRS 194 FSCO A13-005199

BETWEEN:

DANNY BASSON Applicant

and

ROYAL & SUNALLIANCE INSURANCE COMPANY OF CANADA Insurer

DECISION ON EXPENSES

Before: Richard Feldman Heard: By written submissions received by July 16, 2015 Representatives: Martin Zatovkanuk for the Applicant Be-Nazeer Damji for the Insurer

Background:

The Applicant made numerous claims against the Insurer arising from an accident that occurred on April 26, 2011. The disputed issues proceeded to arbitration and were heard by me on October 6, 7, 8, and 9, 2014. Additional written submissions were received by March 27, 2015. On May 7, 2015, I issued my written decision in this arbitration proceeding, dismissing all of the Applicant’s claims (for the reasons attached to my decision) and reserving my decision on the issue of the expenses of the arbitration proceeding.

Issues:

The issue in this hearing is:

Is the Applicant or the Applicant's legal representative liable to pay the Insurer's expenses in respect of the arbitration proceeding under section 282(11) of the Insurance Act?

Result:

The Applicant is liable to pay to the Insurer its expenses in respect of the arbitration proceeding, fixed in the amount of $15,000.00 (inclusive of fees, disbursements and any applicable taxes).

EVIDENCE AND ANALYSIS:

Introduction

The Insurer is seeking expenses in the total amount of about $35,000.00, made up as follows: approximately $18,000.00 in fees (representing about 180 hours of legal services) and approximately $17,000.00 in disbursements.

Mr. Zatovkanuk, the Applicant's counsel, advises that he has been unable to obtain instructions from the Applicant with respect to the outstanding issue of expenses. Mr. Zatovkanuk's written submissions were therefore brief and focused primarily on arguing against any award of expenses as against Mr. Zatovkanuk or his firm (Schwarz Law LLP).

It is not disputed that the Insurer was completely successful and is entitled to an order for its reasonable expenses as against the Applicant. On behalf of the Applicant, however, it is submitted that the amount of expenses should not be out of proportion with the amount of benefits that were in dispute and that reasonable "costs" for this case would "fall in the $5,000.00 range".

Entitlement to Expenses

(a) As against the Applicant's Legal Representatives

Expenses are rarely awarded against a party's legal representative. It is an exceptional remedy. Pursuant to subsection 282(11.2) of the Insurance Act, an arbitrator may make an order requiring a person representing an insured person or an insurer to personally pay all or part of any expenses awarded against a party if the arbitrator is satisfied that,

(a) in respect of a representative of an insured person, the representative commenced or conducted the proceeding without authority from the insured person or did not advise the insured person that he or she could be liable to pay all or part of the expenses of the proceeding;

(b) in respect of a representative of an insured person, the representative caused expenses to be incurred without reasonable cause by advancing a frivolous or vexatious claim on behalf of the insured person; or

(c) the representative caused expenses to be incurred without reasonable cause or to be wasted by unreasonable delay or other default.

There is absolutely no evidence to support a finding under paragraph 282(11.2)(a).

With respect to paragraph (b), I am not satisfied that the claims advanced in the Application for Arbitration were frivolous or vexatious or that there is sufficient evidence upon which I can conclude that the Applicant’s representatives ought to have known that the Applicant’s claims were frivolous or vexatious.

With respect to paragraph (c), it is true that some documents were produced by the Applicant quite late in the arbitration process. It also appears that, despite the agreement of the parties at the pre-hearing discussion, witnesses were not identified by the Applicant at least 60 days prior to the commencement of the hearing. On the evidence before me, however, I am not satisfied that it has been proven that these breaches are necessarily the fault of Applicant's counsel or that these breaches caused additional expenses to be incurred by the Insurer.

In the circumstances of this case and upon the evidence presented, I am not satisfied that it is appropriate to order Mr. Zatovkanuk or his firm to personally pay any of the expenses that I may award to the Insurer.

(b) As against the Applicant

The Insurer relies upon several grounds for seeking its expenses of this proceeding.

Each party's degree of success

All of the Applicant's claims were dismissed. The Insurer was completely successful. On this basis alone, the Insurer is entitled to its expenses. This is not disputed.

Offers to settle

There were three written offers that appear to comply with the requirements of Rule 76 of the Dispute Resolution Practice Code. Two offers came from the Applicant but were for amounts that exceeded what he was ultimately awarded to the Applicant.

One offer (dated September 5, 2014) came from the Insurer but it was on a “full and final” basis (i.e., a settlement of the current issues in dispute as well as any other potential claims that could arise from the April 2011 accident). Since it was a "full and final" settlement proposal, it is difficult to compare the offer to the result of the arbitration proceeding (which only resolves the issues in dispute in this arbitration proceeding and not potential future claims).

By way of contrast, on September 26, 2014, the Applicant submitted a formal offer to settle "the issues in dispute in this Arbitration" for the amount of $2,000.00 plus fees and disbursements. Since the claims of the Applicant were ultimately dismissed, he was obviously awarded less than $2,000.00 on his substantive claims. In that sense, the Insurer was right to have rejected this offer. As a practical matter, however, had the Insurer accepted this offer, for a very nominal amount it could have saved itself tens of thousands of dollars in legal expenses related to the hearing (some of which are not recoverable under the Expense Regulation).

On the facts of this case, I find that the various offers to settle have little, if any, impact on my determination of the issue of expenses.

Conduct that tended to prolong, obstruct or hinder the proceeding and whether any aspect of the proceeding was improper, vexatious or unnecessary

The Insurer contends that many documents were produced by the Applicant quite late in the arbitration process and that the Applicant failed to provide a list of his witnesses at least 60 days prior to the commencement of the hearing (as agreed at the pre-hearing conference). The Insurer argues that this late disclosure meant that the Insurer was taken by surprise by new information that was disclosed shortly before or during the hearing and that this tended to prolong the proceeding. It is also submitted that this meant that the Insurer's expert witnesses had to spend additional time preparing to testify and did not have sufficient time to prepare new reports. I shall deal with these matters when determining the appropriate amount of expenses to award to the Insurer.

(c) Conclusion (re entitlement)

Because the Insurer was completely successful, it is entitled to its reasonable expenses of this arbitration proceeding, in an amount (quantum) to be determined in accordance with the provisions of the Expense Regulation.

Quantum

Fees

The oral hearing was scheduled for four days and it lasted four days. As a result of new information disclosed by the Applicant at the hearing, there was contemplated the possibility of returning for a fifth day of hearing in December 2014 but, ultimately, the parties agreed that was unnecessary and they made their closing arguments in writing.

This was not a particularly complex case. It turned largely upon my assessment of the credibility of the Applicant.

The Insurer is seeking fees of about $18,000.00, based upon a total of about 180 hours of legal services. The vast majority of that time is related to the services provided by Ms. Damji. The Applicant's representative has criticized the total amount claimed by the Insurer as being unreasonable and excessive in the circumstances of this case. I tend to agree.

Ms. Damji has indicated in her written material that she actually billed 26 hours related to attending at the hearing in October 2014. Allowing preparation time to hearing time at a ratio of 1.5:1, at the appropriate Legal Aid rates, this would be equivalent to fees of approximately $7,500.00 for preparing for and attending at the hearing. If I were then to permit $1,000.00 for reviewing the Application, preparing a Response and attending the pre-hearing conference and $1,500.00 for preparing closing written submissions (instead of the approximately $5,500.00 being sought by Insurer's counsel, which I find to be excessive), this would total $10,000.00 (not including HST), which I find to be a much more reasonable amount of fees to grant in this case.

Disbursements

A party to an arbitration proceeding at FSCO is only permitted to seek compensation for expenses of a type and in an amount permitted under the Expense Regulation. The Insurer is seeking reimbursement for the following disbursements:

	Description	Amount ($)
1.	Photocopies	391.22
2.	Parking (during hearing)	60.00
3.	Mileage (for travel by counsel from office to hearing)	60.48
4.	Dr. Lexier -- preparation and attendance	1,300.00
5.	Dr. Mascarenhas -- preparation and attendance	1,300.00
6.	Dr. Lexier -- additional time (in lieu of a new report)	1,500.00
7.	Dr. Mascarenhas -- additional time (in lieu of a new report)	1,500.00
8.	Victory Verbatim -- attendance of reporter at hearing	2,058.88
9.	Victory Verbatim -- transcripts	8,879.55
	Total	$ 17,050.13

Counsel for the Applicant has not specifically taken issue with any of the disbursements claimed by the Insurer. As previously noted, however, Mr. Zatovkanuk has been unable to obtain instructions with respect to this expense hearing. In any event, I must be satisfied that the disbursements claimed are both reasonable and permissible under the Expense Regulation.

I am prepared to permit the amounts claimed for transportation and for photocopies.

With respect to the court reporter, it is well established at the Financial Services Commission of Ontario that expenses related to having a verbatim reporter attend the hearing and to obtaining transcripts are usually not recoverable as a disbursement.¹ There is no provision under the Expense Regulation for claiming such expenses. I did not require the presence of a reporter. There was no dispute over the testimony that I heard. I did not request that transcripts be prepared.

According to Ms. Damji's submissions, she ordered the transcripts to assist her in preparing closing arguments. Ms. Damji submits that Applicant's counsel requested a copy of the transcript but, once Ms. Damji ordered the transcripts, pursuant to Rule 74 of the Dispute Resolution Practice Code, the Insurer was obliged to provide a copy to me and to counsel for the Applicant. Retaining a court reporter and ordering transcripts were tactical decisions made by the Insurer and the Applicant is under no legal obligation to reimburse the Insurer for this expense.

I shall now deal with the expenses related to the Insurer's two expert witnesses.

Under the Expense Regulation, the most that the Insurer can claim for such experts is $200.00 per hour (to a maximum of $1,600.00 per day) for each hour of attendance at the hearing plus up to a maximum of $500.00 to prepare for a hearing at which the expert actually testifies. Up to $1,500.00 can also be awarded for preparation of a report.

Dr. Mascarenhas testified on October 8, 2014. He billed $1,600.00 as his "half-day" fee. He billed an additional $1,600.00 for reviewing the medical file and preparing to testify. Thus, he charged the Insurer a total of $3,200.00.

The Insurer is seeking $1,300.00 for Dr. Mascarenhas preparing for and attending the hearing. I shall assume that this represents $500.00 for preparation and $800.00 for a half-day's attendance. These amounts comply with the Expense Regulation.

The Insurer, however, is also requesting an additional $1,500.00 for Dr. Mascarenhas reviewing documents and preparing for the hearing. This claim is made despite the fact that the maximum amount that is permitted under the Expense Regulation for preparation of an expert witness is $500.00.

The Insurer’s argument is that, had the Applicant made earlier disclosure of some documents, the Insurer might have had Dr. Mascarenhas prepare a report and if such a report had been prepared and if that report had been accepted into evidence, the Insurer could have asked to be reimbursed up to $1,500.00 for such a report. According to the Insurer, since there was insufficient time to have such a report prepared prior to the hearing, the Insurer should nevertheless be awarded $1,500.00 for the time spent by Dr. Mascarenhas in reviewing the records in preparation to testify at the hearing.

This is simply an attempt by the Insurer to get around the maximum of $500.00 established in the Expense Regulation for any time required by experts to prepare to testify. I am not convinced that it is appropriate to subvert the intention of the Expense Regulation in this way and counsel for the Insurer has provided me with no case law to suggest that this has ever been allowed in any other cases.

In any event, judging by the medical documentation put before me at the hearing (Exhibit 5), it appears to me that the medical documentation produced by the Applicant was quite sparse. It is difficult to see how it would have taken more than an hour or two (at most) for any medical expert to have reviewed all of the relevant medical documents. Thus, even if I had the discretionary power to permit more than $500.00 for preparation by Dr. Mascarenhas, I would not grant more than $500.00 on the facts of this case.

Dr. Lexier billed $3,672.50 for his preparation for and attendance at the hearing on October 8, 2014. The Insurer is seeking $1,300.00 for Dr. Lexier preparing for and attending the hearing. Again, I assume that this represents $500.00 for preparation and $800.00 for a half-day's attendance and, again, I find that these amounts comply with the Expense Regulation.

The Insurer is also requesting a further $1,500.00 for Dr. Lexier on the same basis that it sought additional compensation for Dr. Mascarenhas. For the reasons already provided, I find that the claim for $1,300.00 is reasonable and in accordance with the Expense Regulation but the claim for an additional $1,500.00 for preparation by Dr. Lexier is neither reasonable nor permissible under the Expense Regulation.

Thus, of the disbursements claimed on behalf of the Insurer, based on the written submissions of the parties and the supporting documents filed, I find that a total of about $3,100.00² is reasonably permitted under the Expense Regulation.

CONCLUSION:

Having considered the relative complexity of this matter, the time spent, the applicable Legal Aid rates, the written submissions of the parties, the supporting documentation filed and the maximum amounts permitted under the Expense Regulation, for the reasons set out above, I find it appropriate to fix the Insurer's expenses at $15,000.00³ (inclusive of all fees, disbursements and any applicable taxes) and to order that the Applicant pay this amount to the Insurer.

September 22, 2015

Richard Feldman Arbitrator

Date

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c.I.8, as amended, it is ordered that:

The Applicant shall pay to the Insurer its expenses in respect of this arbitration proceeding, fixed in the amount of $15,000.00 (inclusive of fees, disbursements and any applicable taxes).