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

Neutral Citation: 2017 ONFSCDRS 6

FSCO A12-001626

BETWEEN:

COMERT TOPRAK

Applicant

and

ECONOMICAL MUTUAL INSURANCE COMPANY

Insurer

Before: Arbitrator Lynda Tanaka

Heard: By written submissions completed on October 21, 2016

Appearances: Mr. Brian Cintosun for Mr. Comert Toprak Ms. Sonia Fabiani for Economical Mutual Insurance Company

Issues:

The Applicant, Mr. Comert Toprak, was injured in a motor vehicle accident on August 24, 2008 and sought accident benefits from Economical Mutual Insurance Company (“Economical”), payable under the Schedule.¹ The parties were unable to resolve their disputes through mediation, and the Applicant, through his representative, applied for arbitration at the Financial Services Commission of Ontario under the Insurance Act, R.S.O. 1990, c. I.8, as amended.

In my decision issued August 2, 2016, I made the following Order as to expenses:

If the parties are unable to agree on the entitlement to, or quantum of, the expenses of this matter, any party requesting expenses shall file with me and with the opposing party a written submission setting out the request for expenses and any supporting material within 30 days of the issuance of this decision. The opposing party shall file with me and with the party requesting expenses its responding submissions within 20 days of receipt of the request for expenses. The party requesting expenses shall file with me and the opposing party its reply material within 10 days of receipt of the responding material. I will determine the entitlement and quantum of expenses in accordance with Rules 75 to 79 of the Dispute Resolution Practice Code.

Economical has requested an Order that the Applicant is liable for its expenses in the amount of $75,343.92, inclusive of HST. The Applicant has also filed a Costs Submission containing some information on his legal expenses and the cost of one expert witness.

The issues in this Expense Hearing are:

Is the Applicant liable for the expenses of Economical and, if so, in what amount?
Is Economical liable for the expenses of the Applicant for the report and attendance of the psychiatrist witness, Dr. Lionel Gerber, in the amount of $5,000.00, and for the legal fees for his counsel, plus HST?

Result:

The Applicant is liable for the expenses of Economical in the amount of $40,357.10.
Economical is not liable for any of the expenses of the Applicant.

EVIDENCE AND ANALYSIS:

The Hearing in this matter was held over six days, two of which were half days. The issues related to a claim of catastrophic impairment and entitlement to ongoing income replacement benefits, medical benefits, attendant care benefits, housekeeping and home maintenance benefits, costs of examinations, interest and expenses. I held that the Applicant did not sustain a catastrophic impairment as a result of the accident within the meaning of the Schedule and was not entitled to weekly income replacement benefits, the claimed medical benefits, or housekeeping and home maintenance benefits. However, I found that the Applicant was entitled to attendant care benefits in the amount of $716.20 per month for the period August 24, 2008 to August 24, 2010, and was entitled to payments for the cost of examinations by Psychology Associates for $2,238.00 pursuant to an OCF-18, dated December 27, 2011. I also found that the Applicant was entitled to interest on any overdue payments. Therefore, success was divided, but was predominantly in favour of the Insurer—particularly on the most valuable claims for catastrophic impairment and income replacement benefits.

In the course of the Hearing, evidence was given by the Applicant, his wife, one of his sons, a friend, and four experts (including two psychiatrists, a psychologist and an orthopaedic surgeon). The voluminous Exhibits included reports by treating psychiatrists, cardiologists and gastroenterologists, as well as by independent assessors. The evidence covered an extensive medical history and work experience. There were also surveillance videos during the course of the evidence, and reports on those videos.²

The Insurer’s Costs Submissions included references to its efforts to resolve the matter prior to the Hearing. In November 2014, Economical offered $20,000.00 “all in” to settle the case. At a Pre-Hearing in November 2015, the Applicant offered to settle the matter for $400,000.00. At a Pre-Hearing on in March 2016, Economical offered to resolve the matter for $100,000.00. A written offer open until one minute after the commencement of the Hearing was sent by Economical on April 25, 2016, approximately a week prior to the Hearing. The offer remained $100,000.00 to settle all past, present and future statutory accident benefits, including benefits that had been approved and not yet incurred, as well as all issues in dispute at the Hearing, inclusive of interest, expenses and taxes. The Applicant did not accept the written offer.

The Insurer’s expense claim of $75,343.92 is constituted as follows:

Fees: 240 hours at $150.00/hour ($36,000.00) plus HST ($4,680.00) Disbursements : $34,663.92 (inclusive of HST) Total: $75,343.92

On a per diem basis, the bill is $6,000.00 per Hearing day (excluding HST) for the two lawyers who appeared for Economical. The disbursements are almost as much. Therefore, Economical is seeking over $12,000.00 per Hearing day from the Applicant.

The quantum of expenses that may be ordered must be reasonable. An Arbitrator must consider the criteria set out in the Dispute Resolution Practice Code (“the Code”), Rule 75.2 and the provisions of the “Expense Regulation”, Regulation 664.³ 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.

I have considered the various relevant criteria from that Rule as set out below.

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

Economical was not entirely successful in this proceeding. As noted above, the Applicant succeeded on two of the six substantive issues in the matter, though not on the issues that formed the largest dollar amount. There was, however, evidence given on those issues, and it would not be appropriate to award legal fees for time taken in the evidence that led to those successful findings for the Applicant.

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

There was a written offer by Economical for more than the success the Applicant achieved at the Hearing.

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

The issues were not novel.

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

Economical alleges that the Applicant’s conduct has prolonged, obstructed and hindered this proceeding. The Applicant has been represented by three counsel over the course of the Arbitration proceedings. Six Pre-Hearings were held in the matter. Two Pre-Hearings were rescheduled to accommodate new counsel being briefed, or illness of the Applicant’s counsel. The initial Application for Arbitration, filed in 2012, did not include a claim for catastrophic impairment. The Hearing, originally scheduled for November 2014, was adjourned to commence September 21, 2015, because of the Applicant’s failure to proceed promptly with the catastrophic impairment claim, and because of the Applicant’s failure to make proper document production, the Hearing was further adjourned to May 2016. The claim for catastrophic impairment was not in fact added until April 10, 2016. As late as February 2016, the Applicant had not complied with his obligations for productions. Clearly the process was drawn-out and longer than it should have been.

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

Economical seeks $6,135.00, inclusive of HST, for the expenses of Pre-Hearings and multiple Motions for productions, in addition to the costs of the Arbitration Hearing, caused, it says, by the Applicant’s failure to comply with production Orders made by the Pre-Hearing Arbitrator.

Economical is correct that it was improper of the Applicant not to obey the Orders of the Pre-Hearing Arbitrator on production issues, and that much of the Pre-Hearing process was unnecessary. Adjournments to accommodate illness on the part of counsel or to accommodate new counsel do not fall well within that category, though, so I will take those factors into account in my conclusion.

Issue 1 – Is the Applicant liable for the expenses of Economical and, if so, in what amount?

Legal Fees

Economical relies on Kidder and Economical Mutual Insurance Company⁴ for the proposition that multiple interim Pre-Hearings due to lack of productions prolong and hinder proceedings. Arbitrator Schnapp held that while an Applicant is entitled to instruct his counsel to do whatever he feels is necessary to advance his position; he has to be prepared to deal with the cost consequences of those instructions. Economical also relies on Kidder for the proposition that the objective in setting the quantum of expenses is to fix an amount that is fair and reasonable given the number of issues, their complexity and the amounts in dispute. Arbitrator Schnapp also referred to the generally accepted ratio in the range of 1:1 to 4:1 for Pre-Hearing preparation to Hearing time.

Economical seeks a ratio of 4:1. In my view, such a large ratio is not warranted when the Applicant had some success. However, I accept that the additional Pre-Hearings and Motions necessitated by the Applicant’s conduct warrant considerable weight, and the document briefs prepared by Economical’s counsel were very well organized in a thoughtful manner and were of great assistance to me. In my view, the 4:1 ratio should be reserved for those cases where the Applicant has had no success at all, where there are novel legal issues or matters of great complexity. Here there were no novel issues, and whatever complexities there were, related to factual issues and the extensive medical history of the Applicant.

Economical’s ratio of 4:1 producing 240 hours was based on 60 hours of Hearing time, and reflects two counsel. But the Hearing did not last 60 hours over the six days. Two of the Hearing days were half days and at least three of the other days ended before 4:00 p.m. On one day, one witness testified for less than an hour in the morning and the Hearing then broke until 1:00 p.m. when another witness testified for less than 2.5 hours. In my view, the Hearing lasted less than 30 hours and part of this time needs to be allocated to the Applicant’s success on the psychological treatment plan and the attendant care benefit. The Applicant called Dr. Pillai, a treating psychologist, to testify for just under one hour, as well as his wife and son who confirmed their role in the Applicant’s attendant care. I therefore reduce the Hearing time for the purpose of determining Economical’s legal fees by one half day (3.5 hours), for a net of 26.5 hours.

In addition, Economical requests expenses for both counsel at $150.00 per hour. There were no novel issues involved. The two counsel were required by Economical apparently because of the volume of documents and witnesses both parties indicated they would call. The Applicant was represented by one counsel with the exception of one day when he had assistance. Under Rule 78 of the Code, I am limited in the hourly rate I can award for Insurer’s counsel to the Legal Aid Rate of $109.13 per hour⁵ unless I have further information to justify an increased rate. The expenses claim did not include such information. Therefore, I reduce the expenses for legal fees to reflect $109.13 per hour for one counsel and $100.00 per hour, a reduced hourly rate, for the other counsel attending. I therefore award $5,541.95 for the legal fees for the Hearing itself, being 26.5 hours at $100.00 per hour and 26.5 hours at $109.13.

In view of the documented prolonging of the Pre-Hearing process, I determine the legal fees for the Pre-Hearing process as follows:

3 hours of preparation for each hour of Hearing = 79.5 hours

Much of the work done in preparation for any Hearing does not warrant the highest hourly rate. Because the Insurer was represented by two lawyers, I award 50 of those hours at $109.13 per hour and the remainder at $100.00 per hour for a total of $8,406.50. I am using the higher hourly rate for the majority of the Pre-Hearing hours because there was an excessive number of Pre-Hearings that Economical had to attend and because of the production Motions that Economical was forced to bring due to the Applicant’s failure to fulfill his production obligations.

Total legal fees: $13.947.65 HST: $ 1,813.20 Total: $15,760.85

Disbursements

The Applicant’s submissions do not provide any analysis with respect to the disbursements requested in Economical’s Cost Submissions, even though those Cost Submissions were served prior to the Applicant’s submissions being received.

Under the Expense Regulation, the Insurer’s lawyer is entitled to be awarded travelling expenses and overnight accommodation and meals. The rate is the lesser of $0.30 per kilometre or the amount incurred. The maximum that can be awarded for overnight expenses and meals is $150.00 per night. Parking charges of $30.39 were incurred for two in-person Pre-Hearings, one in June 2014 and one in March 2016. In addition, mileage charges for two trips for the in-person Pre-Hearings were incurred, totalling $121.92 per trip (406 kilometres per trip). These are appropriate disbursements, especially as the March 2016 Pre-Hearing was necessitated by the Applicant’s conduct during the Pre-Hearing period. I also award the claims for accommodation, meals, mileage and parking expenses during the Hearing in the amount of $1,756.41 as claimed.

Other disbursements listed in section 4 of the Expense Regulation include long distance telephone, facsimile and other telecommunication charges, typing, printing and reproducing copies of documents, delivery by mail or courier, and “other out of pocket expenses incurred in furtherance of the arbitration” and applicable taxes. The amount chargeable for expert witnesses and their reports is limited by the Expense Regulation to $1,500.00 for reports and $200.00 per hour for attendance of experts.

In terms of the experts’ reports, the Applicant should not have to reimburse Economical for its reports assessing his attendant care needs, which were reports by the experts Gilchrist, Chow, Lexier, Sidney and Syed, or for the psychological report of Dr. Derry that addressed the OCF-18 for psychological treatment on which he was successful. For the experts Gilchrist, Chow, Lexier, Sidney and Syed, there were multiple reports claimed. But none of those experts were called to testify, and the focus in the evidence was not on their opinions but rather on inconsistent statements the Applicant gave to them and other assessors.

For these reasons, I reduce Economical’s claim for those reports by $1,500.00 for each expert (except for Mr. Gilchrist, whose report is at $1,327.75). The total of these is $8,827.75. I note that I have been given insufficient detail to match the report disbursements to the reports in Exhibit 4. The balance of the fees for experts’ reports being $13,412.50 is approved. HST is not eligible on these disbursements.

Much of the evidence dealt with the Applicant’s work situation, and there are charges of $64.00 in total related to obtaining corporate reports that are proper out-of-pocket expenses. I allow the photocopying, courier and facsimile charges totalling $3,047.38. I also allow the postage charges of $70.12 and the Freedom of Information Application fee of $5.00 for the ODSP file, especially given the Applicant’s history of failure to produce documents in this matter. However, since there were no novel issues, I will not allow the legal charges of $121.25.

Economical seeks to recover the entire cost of the surveillance report in the amount of $3,130.97. The surveillance evidence was viewed in the Hearing and the four reports were filed as Exhibit 20. Since this evidence was helpful in assessing the catastrophic impairment issue, I award this amount in full.

I refuse Economical’s request to recover $2,622.00 in examination fees for the court reporter. Court reporter fees for Hearings are not normally recoverable, and I have no specifics as to what the phrase “examination fees” refers to.

I award Economical the fees for the two expert witnesses who attended, being Dr. L. Reznick, the psychiatrist whose evidence I accepted, and Dr. B. Paitich, whose evidence on the catastrophic impairment I accepted. These fees total $2,200.00.

Therefore the total disbursements awarded to Economical are:

Photocopying, courier and facsimile charges: $3,047.38
Parking charges of $30.39 for two in-person Pre-Hearings (one in June 2014 and one in March 2016), and mileage charges for the two trips ($121.92 per trip): $274.23
Accommodation, meals, mileage and parking expenses during the Hearing: $1,756.41
Corporate reports: $64.00
Surveillance Report: $3,130.97
Postage charges: $70.12
Freedom of Information Application fee: $5.00
Expert witness fees for Hearing: $2,200.00
Expert reports: $13,412.50

HST is not yet included on items 1, 2, 4 and 6 and $1,200.00 of the accommodation and meals expenses. HST on these amounts totals:

$4,655.73 x 13% = $605.25

Therefore the total of the disbursements that the Applicant is liable to pay Economical is $24,596.25 (inclusive of HST).

Issue 2 – Is Economical liable for the expenses of the Applicant for the report and attendance of the psychiatrist witness, Dr. Lionel Gerber, in the amount of $5,000.00 and for the legal fees for his counsel plus HST?

With respect to the Costs Outline submitted by Mr. Cintosun on behalf of the Applicant, there is no clear request in that document for an Order that Economical pay the Applicant’s expenses, but I have interpreted it as such. Mr. Cintosun has billed 60 hours of his time at the rate of $250.00 per hour. He has billed $15,000.00, plus HST, since November 2015, when he took over the file. His submissions also refer to costs Orders and legal fees with respect to the tort case, and he has not broken down what of those fees are related to the Arbitration and what are related to the tort case. I have no dockets or details with respect to what the other lawyers did on the file, nor do I have the hourly rates. The only disbursement referenced is $5,000.00 paid to Dr. Lionel Gerber for his medical report.

There has been no effort made to conform to the requirements of Expense Regulation in these submissions. The vast majority of the Hearing was consumed with evidence on the claims on which the Applicant was not successful, including the catastrophic impairment claim and the income replacement benefit claim. Given that the Applicant did not accept a written offer in the amount of $100,000.00, and applying the criteria listed above, I find that the Applicant is not entitled to recover any part of his expenses, despite the fact that he was successful on two of the claims. I have reflected his success on the two claims by reducing Economical’s expense claim.

EXPENSES:

The Applicant is liable for the expenses of Economical in the amount of $40,357.10.

January 9, 2017

Lynda Tanaka Arbitrator

Date