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

Neutral Citation: 2017 ONFSCDRS 275

FSCO A13-009440

BETWEEN:

MK

Applicant

and

WAWANESA MUTUAL INSURANCE COMPANY

Insurer

DECISION ON EXPENSES

Before: Arbitrator Lynda Tanaka

Heard: By written submissions completed on September 1, 2017

Appearances: Ms. MK, the Applicant, participated Mr. Kevin D.H. Mitchell, Lawyer, participated for Wawanesa Mutual Insurance Company

Issues:

MK (the “Applicant”) was injured in a motor vehicle accident on January 3, 2012 and sought accident benefits from Wawanesa Mutual Insurance Company (“Wawanesa”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and the Applicant applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c. I.8, as it read immediately before being amended by Schedule 3 to the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014, and Ontario Regulation 664, as amended (“Act”). In the Arbitration Order dated October 11, 2016 (“Arbitration Order”), Arbitrator Musson found that the Applicant was liable for Wawanesa’s expenses in respect of the arbitration.

The Applicant appealed the Arbitration Order to the Financial Services Commission of Ontario and the Director’s Delegate Jeffrey Rogers dismissed the appeal. This decision deals with the request for expenses by Wawanesa in accordance with Arbitrator Musson’s Arbitration Order. In addition, Wawanesa requested in its filing of August 25, 2017 that the Applicant be liable for its expenses of this Expense Hearing in the amount of $750.00.

The timetable for written submissions was established by email dated August 14, 2017 to the parties. Wawanesa had filed submissions as to expenses dated October 26, 2016 but chose to provide revised submissions including written argument and a case book, together with a revised cost summary on August 25, 2017. The Applicant provided her submissions promptly and requested a decision as quickly as possible. In response, the timetable to provide reply submissions was advanced to September 1, 2017 and Wawanesa filed Reply materials that day.

Because I was not the arbitrator who conducted the Hearing and wrote the Decision, I reviewed some of the exhibits as necessary to understand the arguments raised by the parties in this Expense Hearing. The exhibits included a five volume joint brief of documents which contained over 260 documents and which appeared to cover most, if not all, of the accident benefits claimed, whether or not they were in dispute in the Hearing.

The issues in this Expense Hearing are:

1. What is the quantum of the expenses incurred by Wawanesa respecting the Hearing for which the Applicant is liable?

2. Is the Applicant liable for the expenses incurred by Wawanesa respecting the Expense Hearing and if so, in what amount?

Result:

1. The Applicant is liable for expenses incurred by Wawanesa in a total amount of $14,928.26, inclusive of HST.

2. The Applicant is not liable for the expenses incurred by Wawanesa respecting the Expense Hearing.

EVIDENCE:

The arbitration Hearing in this matter was held over four days in person. The Applicant was claiming medical benefits in the amount of $1,177.86 pursuant to a treatment plan dated August 10, 2012, Income Replacement Benefits (“IRBs”) at a rate of $400.00 per week from January 10, 2012 and ongoing, a Special Award, interest for overdue payment of benefits, and her Expenses. She was unsuccessful on all claims. There were three preliminary motions dealt with on the first day together with the testimony of the Applicant. The Applicant requested that the Hearing proceed with no more than two consecutive days of hearing and this adjustment to the schedule of three consecutive days was made. Wawanesa called three expert witnesses, the limitation of two expert witnesses being waived by agreement of the Applicant.

In its submissions of October 26, 2016, Wawanesa claimed legal fees in the amount of $36,121.27 and disbursements in the amount of $7,825.31 for a total of $44,037.58 (including HST).² In its revised submissions, the claim for fees was revised to $36,212.27 and for disbursements to $7,913.20 for a total of $44,125.47.

In considering a request for an award of expenses, an arbitrator must consider the criteria set out in Rule 75.2 of the Dispute Resolution Practice Code (“Code”) and the provisions of the Expense Regulation 664.³

The quantum of expenses that may be ordered must be reasonable. It is generally accepted that a line-by-line assessment of the expenses is not appropriate; rather, the arbitrator should make a global assessment of reasonable expenses.⁴

Wawanesa referred me to the decision on expenses in Shah and Personal Insurance.⁵ As in the present case, the outcome turned largely on the credibility of the Applicant and the presence or absence of corroborating evidence. The Applicant in Shah and Personal Insurance was represented by experienced counsel. In that case, Arbitrator Feldman found that the conduct of the representative of the Applicant tended to hinder or obstruct the proceeding and that, in view of this, a ratio of about 2:1 (the ratio of preparation time to hearing time) was appropriate. The conduct which Arbitrator Feldman found hindered the hearing was the failure of the Applicant to reveal the names of the witnesses he in fact intended to call at least 30 days prior to the hearing and the failure to disclose relevant and important documentation concerning his employment and income until shortly before the commencement of the hearing.⁶ In addition, Arbitrator Feldman refused to permit any amount for the alleged cost of expert witnesses when there was no supporting documentation because it was not possible to determine the exact nature of the expenses being claimed, whether the expenses were within the maximum limits permitted and whether the expenses related to experts whose evidence formed part of the record.⁷ He did accept without supporting documentation the disbursements related to courier fees, facsimiles, online research, outside printing, photocopying, conduct money and process serving.⁸

I have considered the various relevant criteria from the Code as set out below. The remaining two criteria related to attendances for examinations under either section 42 or section 44 of the Schedule were not relied on by Wawanesa and are not relevant.

Criteria 1: Each party’s degree of success in the outcome of the proceeding

Wawanesa was successful in that the Applicant did not recover any of the benefits she claimed in the arbitration.

Criteria 2: Any written offers to settle that were made in accordance with the rules of practice and procedure applicable to the proceeding after the conclusion of Mediation and before the conclusion of the Arbitration

Wawanesa advised that one written offer dated June 7, 2016 was made for a total of $15,000.00, which remained open until one minute after the first witness was called to testify at the arbitration. The offer was made one month prior to the commencement of the Hearing (July 7, 2016).

Wawanesa has provided other information concerning offers in its Expense Hearing Record of the Insurer (“Wawanesa’s Expense Record”). On August 12, 2015, the Applicant’s representative conveyed instructions for an all-in settlement for $70,000 and Wawanesa’s response was $37,000. Applicant’s representative responded with a $50,000.00 offer, all by email.⁹ On August 18, 2015 the Applicant offered to settle for substantially more than her representative had conveyed to Wawanesa¹⁰. The Applicant has advised in her submissions that she had made an offer to Wawanesa, to settle on an all-in basis for less than the August 18, 2015 amount, thereby reducing her settlement figure.

The Applicant’s position is that Wawanesa chose to spend over $44,000 on the two items in dispute in this arbitration when it could have had a settlement of all claims arising from the accident for amounts not significantly over that. Her position is that, having paid Wawanesa $250,000 over a period of years (presumably in her premiums), she is justified in asking for return of part of that money when she has been injured and is coping with long term pain.

Criteria 3: Whether any novel issues are raised in the proceeding

There were no novel issues raised.

Criteria 4: The conduct of a party or a party’s representative that tended to prolong, obstruct or hinder the proceeding, including the failure to comply with undertakings and orders.

The Applicant claimed a Special Award. Wawanesa moved at the outset of the Hearing to have that claim removed from the arbitration on the basis that the Applicant had not provided any particulars of the claim. Arbitrator Musson allowed the Applicant time to search for any emails in which Wawanesa had been advised of the particulars of the claim but she could not locate any support for her complying with her production obligations in this regard. Arbitrator Musson ordered that the Applicant had not complied with a production order under Rule 32 of the Code and therefore she could not proceed with the Special Award claim.

There were two other motions brought at the outset of the Hearing. Wawanesa brought a motion to have three expert witnesses testify and that was not contested by the Applicant. The Applicant brought a motion to add additional medical benefit claims even though they had not been mediated. Wawanesa objected to the Applicant’s motion and Arbitrator Musson agreed that, since the claims had not been mediated, the claims could not be added to this arbitration.

Wawanesa’s position is that the conduct of the Applicant tended to prolong, obstruct or hinder the proceeding. The Applicant was self-represented and not knowledgeable about the process. Wawanesa says that its counsel spent time attempting to educate her about the process and that her lack of knowledge of the process meant that the Hearing took longer than it should have. Wawanesa complains that the Applicant’s testimony plus the three preliminary motions took the entire first day. Wawanesa said that Arbitrator Musson had to insist during her testimony that the Applicant stick to relevant issues, answer questions directly and not engage in inappropriate conduct. Wawanesa says the Applicant’s convoluted emails and inappropriate conduct also tended to prolong the proceedings. Wawanesa also points to the Applicant’s stated intention to appeal further.

Wawanesa also seeks expenses related to the time spent on the Capacity Hearing held before Arbitrator Schnapp. The Hearing was scheduled for three days in August 2015. The Applicant’s then counsel indicated to Wawanesa and ADR Chambers that he had concerns as to the Applicant’s capacity and a Hearing was scheduled for that determination. Prior to the Hearing which was set for September 28, 2015, the Applicant’s counsel ceased to represent her¹¹ and she appeared on her own behalf at the Capacity Hearing. Arbitrator Schnapp ruled that she had capacity to participate in the Hearing. The motion was argued based on a record prepared by Wawanesa in which it filed an affidavit outlining what it regarded as inappropriate conduct on the part of the Applicant.

Wawanesa also points to the appeal brought by the Applicant which was unsuccessful as another step which prolonged the process.

The Applicant argues that the evidence of Dr. Murray, a psychologist, as well as the reports dealing with the issue of her psychological impairments, were unnecessary and improper as there was no treatment plan for psychological counselling or treatment before the Arbitrator. There had been no mediation of a treatment plan for psychological treatment and the record indicates that Wawanesa’s independent assessors recommended approval of treatment plans for psychological counselling and treatment.

The Applicant also complains of the delay in getting to the Hearing as she did not want the August 2015 Hearing date adjourned and she complained about the unavailability of counsel for Wawanesa in setting earlier Hearing dates.

Criteria 5: Whether any aspect of the proceeding was improper, vexatious or unnecessary

Wawanesa argues that the whole proceeding was vexatious and unnecessary because the Applicant had an unmeritorious claim and pursued it in a vexatious manner.

The Applicant says the process was illegal (by which I assume she means outside the jurisdiction of the Arbitrator or failing to provide procedural fairness) and that the whole matter could have settled if Wawanesa had only been reasonable and if she had not been the victim of discrimination.

ISSUE ONE: What is the quantum of the expenses incurred by the Insurer respecting the Hearing for which the Applicant is liable?

I have considered the arguments of the parties as outlined above. The case raises important issues related to the balance that must be sought where the Applicant is self-represented. The balance must be established between, on the one hand, fulfilling the consumer protection policy framework and ensuring an accessible legal process while, on the other hand, compensating the party who has been successful in defending its position and where it has attempted to settle the matter on a reasonable basis so as to deter a party who prolongs, hinders or delays the arbitration process or who acts inappropriately and in doing so undermines the civility that is expected from the parties. Inherent in this balance is the recognition that self-represented parties will seldom have the fluency in legal jargon and the statutory requirements of accident benefits to participate as efficiently as a legal representative may do. Nor will the hearing format or location be as familiar to them, as to the legally trained. Applicants have a right to have an independent third party determine their claims if they follow the correct process. In addition, the process must accommodate disabilities of those who participate. Finally, the criteria I am to consider do not include whether or not the Applicant has or will appeal the arbitration order. These are rights of every unsuccessful party.

I have carefully reviewed the allegations including the length and conduct of the Hearing, the offers, the motions and the Capacity Hearing, having in mind the criteria above. The outcome for the Applicant was clearly less than she could have obtained if she had accepted the offer by Wawanesa but I must recognize that she was self-represented and would not be as familiar with the risks that she faced as a legally trained representative would have been.

I do not agree that this Hearing was unusual in length because of the requirement to take time with a self-represented party whose first language is not English and who is not familiar with the Schedule, the Act and the Code. If the appeal prolonged the process, as Wawanesa alleges, Wawanesa has been compensated in the award of expenses in that process.

As a result of the balancing of interests identified above, I find that it would be unfair to impose expenses on the Applicant based on the Hearing being prolonged because she participated as a self-represented person. I also note that if applicants choose not to have legal representation, they have an obligation to inform themselves from the information which is broadly available of the requirements of the system. However, in this case, I note that the Applicant is accessing the system in a language other than her first language, and that she is coping apparently with disability recognized under the Ontario Disability Support Program.

I reject entirely that Wawanesa should be paid its expenses for the Capacity Hearing. The Applicant did not want this Hearing and it was held because of her representative’s and ultimately Wawanesa’s view of her conduct. Wawanesa characterizes the issue as being raised so that the representative could get off the record. That was accomplished before the motion was heard, according to the file, and it was Wawanesa who provided the record outlining conduct it felt was inappropriate. Also on the record are documents that indicate that Wawanesa has approved treatment for the Applicant for psychological counselling as sequelae to her injuries from the accident. In those circumstances, to impose the expense of that Hearing on the Applicant is not appropriate.

Based on my experience in these hearings, I reject Wawanesa’s submission that it is a sign of a prolonged hearing to have the Applicant’s evidence and any preliminary motions occupy the first day.

With respect to the allegation that the Applicant’s conduct was vexatious, I recognize the time commitment on the part of the Insurer and its representatives in dealing with self-represented parties, but in the policy framework of consumer protection, applicants should not be penalized for not hiring legal representation. Nor should the need to accommodate her by not sitting more than two days in a row be at her expense. Arbitrators regularly accommodate requests for variations in sitting dates to accommodate the schedules of legal representatives and their expert witnesses or to accommodate physical or other disabilities of applicants.

Legal Fees

I note that the expense claim for Wawanesa is equivalent to about two years of IRBs at $400.00 per week.

The Applicant complains that Wawanesa used too many lawyers on the case, a senior lawyer and two less experienced lawyers, as well as a clerk. I agree that, with only two substantive issues, one of which was worth less than $1,200.00, the expenses for which she should be liable should be limited to only one lawyer. I use the ratio of 2:1 for preparation time to hearing time. I note that I am using the same ratio as in the Shah and Personal Insurance case where there was a finding that the hearing had been hindered by the Applicant. I have rejected that argument here but believe the ratio is still appropriate and the difference in the two cases should be reflected in a reduction in the hearing time. The days in this case apparently were extended by the need to not sit two days in a row. Also, the Applicant has raised the issue of the necessity of the evidence of the psychologist. Therefore, I have determined that the legal fees should be based on three seven-hour days (10:00 a.m. to 5:00 p.m.), at the hourly rate requested by the senior counsel, $136.41. This adjustment is a fair balancing of the competing interests, and takes into account the criteria as required.

The legal fees for preparation including all motions and attendances prior to the Hearing are $5,729.22 and the legal fees for the balance of the arbitration are $2,864.61.

Total fees for which the Applicant is liable are $8,593.83 with HST of $1,117.20, for total of $9,711.03.

Disbursements

On review of the findings of both Hearing and Appeal arbitrators on the issues in dispute, I find that the Applicant’s liability for expert witness testimony should be limited to two expert witnesses and I reduce the disbursements by $1,300.00 representing the $500.00 in preparation and $800.00 in attendance for one witness. I recognize that three witnesses were agreed to by the Applicant but, I have reviewed the submissions of the Applicant and the findings that led the Arbitrator to conclude that he should dismiss the claims for IRBs and for the medical treatment. I note that he relied on only the accountant and the medical doctor (as well as the evidence of the Applicant and documents).

I note that the Applicant complained about the experts’ preparation fees, since the experts all had to refer to their notes to answer questions and so she questions how much preparation they could have done. While I have some sympathy with this argument, I will not reduce the preparation time for the two expert witnesses since I have no way to measure how much time they should have spent to be able to testify without referring to their notes and I accept the submission of Wawanesa that having the experts refer to their notes assists in having correct evidence.

The only invoices that have been provided are those for the process server and for the printing. I have been shown no documentary support for postage ($17.85), facsimile charges ($52.75) or photocopying ($579.25)¹² and I decline to approve them. I decline to approve the disbursement for travel, mileage and parking expenses ($393.87) as there is no documentary support or explanation. Further, Wawanesa’s counsel has his office in the city where the Hearing was held. There are two charges related to a cheque for Dr. Marchie’s attendance which apparently were incurred because of a stale dated cheque ($10.96 and $31.13). I find these are not appropriate expenses for the Applicant to bear.

Therefore, the amount of the disbursements is reduced by $2,385.81. Applying HST ($600.21) only on those expenses for which it is chargeable, the total amount of the disbursements is $4,617.02 plus HST of $600.21 for a total of $5,217.23.

The Applicant is therefore liable for the expenses incurred by Wawanesa, for both legal fees and disbursements, in a total amount of $14,928.26, inclusive of HST.

ISSUE 2: Expenses of the Expense Hearing

The awarding of expenses for an Expense Hearing is not unheard of but such an award is far from routine.¹³

Wawanesa knew it had to provide support for its disbursements and it failed to do so. It has attempted to recover, albeit at the lower rate, for every hour spent by its legal team, without regard to proportionality to the amounts at issue. Also, it attempted to recover travel expenses without any information as to who was travelling, how far, how the disbursement was calculated, etc. Its first submission contained errors which it chose to correct in an amended submission, thereby requiring additional work by the Applicant. In these circumstances, I reject Wawanesa’s claim for expenses for this written Hearing.

October 26, 2017

Lynda Tanaka Arbitrator

Date

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

Neutral Citation: 2017 ONFSCDRS 275

FSCO A13-009940

BETWEEN:

MK

Applicant

and

WAWANESA MUTUAL INSURANCE COMPANY

Insurer

ARBITRATION ORDER

Under section 282 of the Insurance Act, R.S.O. 1990, c. I.8, as it read immediately before being amended by Schedule 3 to the Fighting Fraud and Reducing Automobile Insurance Rates Act, 2014, and Ontario Regulation 664, as amended, it is ordered that:

1. The Applicant is liable for expenses incurred by Wawanesa Mutual Insurance Company in a total amount of $14,928.26, inclusive of HST.

2. The Applicant is not liable for the expenses incurred by Wawanesa Mutual Insurance Company respecting the Expense Hearing.

October 26, 2017

Lynda Tanaka Arbitrator

Date

Footnotes

1. 1The Statutory Accident Benefits Schedule - Effective September 1, 2010, Ontario Regulation 34/10, as amended.
2. 2The figure given is taken from the submissions though the total is in fact $43,946.58.
3. 3R.R.O. 1990, Reg. 664: Automobile Insurance.
4. 4Chernet and RBC (FSCO A13-000932), May 17, 2016.
5. 5Shaw and Personal Insurance (FSCO A11-002437) and (A11-002549), Arbitrator Richard Feldman, May 26, 2014.
6. 6Ibid. at pp. 7 and 8.
7. 7Ibid. at p. 9.
8. 8Ibid. at p. 10.
9. 9Wawanesa’s Expense Record, Tabs 6 and 7.
10. 10Ibid., Tab 10.
11. 11Wawanesa’s Expense Brief, Tab 10 email dated August 19, 2015.
12. 12There is an additional charge of $692.13 for outside printing fees for the joint document brief previously described.
13. 13Shah and Personal Insurance, at p. 11.