State Farm Mutual Automobile Insurance Company v. Thomas Waldock, 2018 ONFSCDRS 142

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

Neutral Citation: 2018 ONFSCDRS 142

Appeal P15-00068

OFFICE OF THE DIRECTOR OF ARBITRATIONS

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Appellant

and

THOMAS WALDOCK

Respondent

BEFORE:

Edward Lee

REPRESENTATIVES:

Talaal Bond for State Farm

Leonard H. Kunka for Mr. Waldock

HEARING DATE:

July 4, 2018

APPEAL ORDER

Under section 283 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 Regulation 664, R.R.O. 1990, as amended, it is ordered that:

1. The Decision on Expenses of November 15, 2016 is rescinded in its entirety.

2. The Decision on a Motion of May 8, 2017 is also rescinded in its entirety.

3. The issues of the expenses arising from the Decision on a Preliminary Issue of November 10, 2014 is remitted to be heard by a different arbitrator.

Edward Lee

Director’s Delegate

September 10, 2018

REASONS FOR DECISION

I. NATURE OF THE APPEAL

This matter involves the SABS–1996.¹

State Farm Mutual Automobile Insurance Company (“State Farm”), appeals the Decision on Expenses of Arbitrator Henry of ADR Chambers (“the Arbitrator”), dated November 16, 2015, and a Decision on a Motion he issued on May 8, 2017.

Although State Farm listed numerous grounds for the overturning of the Decision on Expenses, most of the appeal is based on violations of natural justice and procedural fairness committed by Arbitrator Henry in the course of his determination of this matter.

State Farm also seeks an order quashing the Decision on a Motion because the Arbitrator did not have the jurisdiction to issue that order, or alternatively, if he did, the order he issued was void because it was not a clarification or correction, but changed, varied, or created a new order altogether.

For reasons that follow, I agree with State Farm’s arguments based on violations of natural justice and procedural fairness. I also accept State Farm’s arguments in regard to the Decision on a Motion.

I am thus rescinding the Decision on Expenses and quashing the Decision on a Motion in their entirety.

II. BACKGROUND

This matter has a long and complex history. At its crux are three orders issued by Arbitrator Henry: a Decision on a Preliminary Issue, a Decision on Expenses, and a Decision on a Motion.

First, I will briefly outline the numerous proceedings that have taken place.

Mr. Thomas Waldock (“the Respondent”), was injured in a motor vehicle accident on March 25, 2008. He applied to his insurer, State Farm Mutual Automobile Insurance Company, for statutory accident benefits available under the SABS-1996. Disputes arose in regard to some of those claims, and Mr. Waldock applied for arbitration before the Financial Services Commission of Ontario.

Mr. Waldock’s initial Application for Arbitration sought a determination of whether he had been catastrophically impaired and whether he was entitled to his expenses of the arbitration. In a decision dated November 10, 2014, Arbitrator Henry, under the heading, “Decision on a Preliminary Issue,” found Mr. Waldock had been catastrophically impaired. In that same decision, the Arbitrator deferred the determination of the parties’ entitlement to “their expenses.”

State Farm then filed an appeal of the Decision on a Preliminary Issue, but that appeal was withdrawn on consent in March 2015.²

Subsequently, after a one-day oral hearing on June 25, 2015, and the receipt of written submissions, Arbitrator Henry issued an order on November 16, 2015 entitled “Decision on Expenses,” in which he ordered the following:

1. Mr. Waldock is entitled to payment of $361,520.30 for Attendant Care and Housekeeping and Home Maintenance Benefits, commencing July 7, 2010.

2. Mr. Waldock is entitled to interest in respect of his overdue benefits, calculated at 2% per month, compounded monthly, commencing July 7, 2010.

3. Mr. Waldock is entitled to payment of his Bill of Costs in the amount of $125,435.00 and his disbursements of $45,824.52.

4. Mr. Waldock is entitled to a Special Award of $108,456.09, plus interest at 2% per month, compounded monthly, commencing July 7, 2010, the date the benefits first became payable under the Schedule.

State Farm filed an appeal of the Decision on Expenses on December 11, 2015.

Other proceedings followed wherein Mr. Waldock sought to strike parts of, or all of the appeal proceedings, or affidavits that had been filed by State Farm. Mr. Waldock also brought a motion to have Arbitrator Henry clarify his Decision on Expenses. On August 16, 2016, Delegate Evans issued an order wherein he enjoined the Arbitrator from issuing a clarification on his Decision on Expenses. Delegates Feldman and Blackman also issued preliminary orders in this file.

Mr. Waldock then commenced a judicial review application in the Divisional Court seeking inter alia:

1. An order reversing the decision of Delegate Feldman, dated July 27, 2016;

2. An order reversing the decision of Delegate Evans, dated August 16, 2016; and

3. An order permitting Arbitrator Henry to provide clarification of his Decision on Expenses prior to the hearing of the appeal from that order.

State Farm then took a motion before the Divisional Court to quash that judicial review proceeding.

The motion to quash was heard by Malloy, J., who rendered her decision on October 21, 2016. In her decision, Malloy, J, quashed the judicial review in regard to Delegate Feldman’s decision. She did not quash the judicial review proceeding against Delegate Evans’ order, but permitted it to proceed before a three-member panel of the Divisional Court. She also refused to issue an order specifically granting Arbitrator Henry the permission to provide a clarification of his Decision on Expenses.

Ultimately, the parties did not proceed with the judicial review application. Arbitrator Henry then heard a motion to provide clarification of his Decision on Expenses, and decided it was “appropriate and within [his] jurisdiction” to do so. He issued his Decision on a Motion on May 8, 2017, wherein he purported to provide “clarifications” to his Decision on Expenses of November 16, 2015.

This is the backdrop against which I must now consider State Farm’s appeal of the Arbitrator’s Decision on Expenses, and his Decision on a Motion.

II. ANALYSIS

I will first address the appeal of the Decision on Expenses. As mentioned, most of the Appellant’s grounds for appeal are based on errors of law (and indeed, layers of errors of law) committed by Arbitrator Henry which amounted to denials of natural justice and procedural fairness that occurred during the conduct of the hearing which led to his Decision on Expenses.

Then I will address the second appeal of State Farm which seeks to quash or overturn the Arbitrator’s Decision on a Motion. This appeal amounts to a challenge of what the Arbitrator purported to be a “clarification” of his previous orders.

Finally, I will turn to the expenses (both legal fees and disbursements) awarded by the Arbitrator in his Decision on Expenses.

For completeness, I have addressed some of the grounds of appeal as alternative arguments when necessary.

Part One: The Decision on Expenses

A. Did the arbitrator err in law by granting an award for and finding entitlement to the Attendant Care benefit and Housekeeping and Home Maintenance when they were not issues in dispute before him?

State Farm argues the Arbitrator erred in law and exceeded his jurisdiction by determining the issues of entitlement to Attendant Care and Housekeeping and Home Maintenance when they were not issues in dispute at the hearing he conducted.

In the alternative, State Farm argues that even if these issues were in dispute at the arbitration, State Farm was denied natural justice because it never received notice that such issues would be determined at that arbitration.

I agree with the Appellant and find that entitlement to the Attendant Care benefit and Housekeeping and Home Maintenance were never properly before the Arbitrator as issues in dispute at the hearing he conducted.

Further, I also find that neither Arbitrator Henry, nor any other person at ADR Chambers, ever gave notice to State Farm that these issues would be disputed at the proceeding which led to the Decision on Expenses issued by Arbitrator Henry.

I make these decisions for the reasons that follow.

The Dispute Resolution Practice Code provides a framework for the conduct of hearings at the Financial Services Commission of Ontario. The issues that are to be decided by an arbitrator at a hearing are referenced at Rule 37.6:

37.6 The arbitrator will determine all issues in dispute and such other issues as the parties may agree, where mediation has taken place. [Emphasis mine]

In the present case, the history and supporting documentation in the record of the tribunal clearly demonstrates the issues of Housekeeping and Home Maintenance and Attendant Care were never in dispute at Mr. Waldock’s arbitration.

An Application for Mediation was submitted by Mr. Waldock’s counsel on April 19, 2014. In that Application for Mediation, no benefits whatsoever (neither Attendant Care nor Housekeeping and Home Maintenance) were marked or checked as “Issues in Dispute.” The only box checked was “Other Disputes”, and under “See Issues in Dispute Attached”, the following issue was listed:

Pursuant to s. 2(2) or s.45 of the SABs, a declaration that he sustained a catastrophic impairment which in turn would entitle him to the maximum limits under the SABs (medical benefits, rehabilitation benefits, attendant care benefits, and housekeeping/home maintenance benefits), as well as case management services. [Emphasis mine]

Further, neither this Application for Mediation, nor any document filed by Mr. Waldock before the hearing which led to the Decision on a Preliminary Issue of November 2014, included the determination of a special award as an issue in dispute.

Before me and in written submissions, Mr. Waldock argued that the sentence quoted above in the section “See Issues in Dispute Attached” should be construed not only as a claim for a designation of catastrophic impairment, but also as a claim for each of the specific benefits listed in the parenthesis (medical benefits, rehabilitation benefits, attendant care benefits and housekeeping and home maintenance benefits, as well as case management benefits).

I reject this argument, because it does not accord with the simple everyday reading of this sentence or the application form itself. For instance, if Mr. Waldock’s contention were correct, the entirety of the rest of the Application for Mediation (some four of six pages) would be rendered meaningless as no applicant would need to check off any benefits he wished to have mediated as an “issue in dispute.”

It would also render the Application for Arbitration useless as well, since that form largely mirrors the Application for Mediation, and also requires an applicant to tick off or check each specific benefit he or she seeks to have arbitrated as an “issue in dispute.”

Further, most of the pre-hearing process set out in the Dispute Resolution Practice Code would also be rendered irrelevant and unnecessary, because an applicant would no longer have to seek an agreement and identification of “issues in dispute” at a pre-hearing conference, as required at Rule 33.1:

33.1 One or more pre-hearing discussions may be held before an arbitrator who will attempt to resolve the dispute, and will assist the parties to prepare for the arbitration by:

(a) identifying and obtaining agreement as to the issues for arbitration; [emphasis mine]

A perusal of the record of the tribunal indicates that neither Attendant Care, Housekeeping and Home Maintenance, nor the special award are indicated as “issues in dispute” in any of the following documents: the Report of the Mediator³, the Application for Arbitration filed by Mr. Waldock on February 4, 2013⁴ , and importantly, the pre-hearing discussion letter prepared by Arbitrator Bowles, dated September 26, 2013⁵.

Further, the case law is unanimous in holding that a declaration of catastrophic impairment does not mean that an applicant is automatically entitled to a benefit. Entitlement to a benefit must still be proven before an arbitrator at an arbitration hearing.⁶

The tribunal record proves the only issues in dispute when Arbitrator Henry conducted his hearing based on the one Application for Arbitration in existence at that time were whether Mr. Waldock had sustained a catastrophic impairment and whether the parties were entitled to their expenses for that arbitration.

At the risk of overstating the obvious, the only issue left to be determined when the Arbitrator released his Decision on a Preliminary Issue on November 10, 2014 was the issue of entitlement to expenses of the arbitration.

How then did the Attendant Care benefit and Housekeeping and Home Maintenance (and interest on those benefits) become “issues in dispute” to be decided at the proceeding Arbitrator Henry conducted in June 2015 that resulted in his Decision on Expenses of November 16, 2015?

There is no evidence or suggestion that a second prehearing conference was conducted by any arbitrator which then led to the issuance of another prehearing letter that might have confirmed that Attendant Care benefits and Housekeeping and Home Maintenance had been added as “issues in dispute” to the already existing application for arbitration.

There is no letter wherein both parties confirm that they agreed to have these issues added to the then-existing arbitration, and State Farm asserts in submissions that it has never consented to the addition of any other issues for this arbitration. Correspondence between State Farm’s and Mr. Waldock’s counsel confirms that State Farm did not agree to the addition of any of the issues of Attendant Care, Housekeeping and Home Maintenance or the special award.⁷ Further, any new issue would also have had to have been the subject of a mediation between the parties,⁸ and there is no record of any such mediation.

No other Application or amended Application for Arbitration was filed before Arbitrator Henry issued his Decision on Expenses. In fact, a second Application for Arbitration was filed by Mr. Waldock in January 2016, but this was after the Arbitrator issued his Decision on Expenses in November 16, 2015.⁹ That second Application for Arbitration does indeed list Attendant Care as an “issue in dispute”, but that was not the Application for Arbitration that Arbitrator Henry had before him when he conducted his proceeding in June 2015 and rendered his Decision on Expenses on November 16, 2015.

In his submissions, Mr. Waldock claims that the Appellant’s appeal does not raise any “legitimate errors of law” and that any “alleged unfairness arose out to the Appellant’s failure to follow clear instructions by the Arbitrator, failure to understand instructions given by the Arbitrator, and or failure to respond to submissions made by Mr. Waldock.”

I disagree with this argument. There was no clear instruction whatsoever from the Arbitrator that he was going to address Attendant Care or Housekeeping and Home Maintenance at that hearing, even if had the jurisdiction to do so.

On this point, it is noteworthy to review what occurred at that hearing. It commenced on June 25, 2015, and proceeded for a single day during which the Arbitrator heard “oral submissions.¹⁰” At that point, the hearing was adjourned and the Arbitrator issued an oral direction which he then confirmed in writing on July 3, 2015. That written confirmation order is clear and unequivocal. It reads as follows:

To confirm, I gave the following oral directions during the Expense/Special Award hearing that commenced on June 25, 2015.

State Farm shall:

-provide a hard copy of all its submissions previously provide on a disk, to me (Knox M. Henry, c/o ADR Chambers, 4100 Yonge Street, 6th floor, Toronto ON M2N 1N6), no later than July 10, 2015.

Regarding the expenses being claimed by the Applicant (Waldock), both parties shall provide me written submissions, via email to me, (khenry@adr.ca) as follows:

1. Counsel for Waldock must provide its written submissions, no later than 4:00 p.m., Thursday, July 9, 2015.

2. Counsel for State farm must provide its response, in writing, no later than 4:00 p.m., Thursday, July 23, 2015.

3. Counsel for Waldock must provide any reply, in writing, no later than 4:00 p.m., Thursday July 30, 2015.

Regarding the issue of catastrophic impairment. Both parties shall:

4. Provide written submissions, quoting case law, where the Insurance Act requires that an application for a Special Award must be filed as a part of the application for arbitration.

5. Counsel for Waldock must provide its written submissions no later than 4:00 p.m. Thursday, July 9, 2015.

6. Counsel for State Farm must provide its written response no later than 4:00 p.m., Thursday, July 23, 2015.

7. Counsel for Waldock must provide any reply, in written, no later than 4:00 p.m., July 30, 2015.

All written submissions must be limited to a maximum of three (3) pages (excluding any case law quotations), 12 point type.

Should the parties wish that this hearing be reconvened vive voce or via teleconference call, they must advise me in their submissions.

Knox M. Henry

Arbitrator

P.S. –I apologize that this email is delayed. I had originally prepared it on my iPad. I have just learned that apparently, transmission from the iPad was unsuccessful.¹¹

This written confirming order of July 3, 2015 does not even mention the Attendance Care benefit or Housekeeping and Home Maintenance. There is simply no way to construe it as notice that the Arbitrator would deal with those issues or that he considered they were “issues in dispute” (I will have more to say about this written order and the Decision on a Motion which purports to modify it in a later part of my decision).

Finally, if nothing else, even the written submissions Mr. Waldock made to Arbitrator Henry on June 24, 2015 suggest that Mr. Waldock himself understood that Attendant Care and Housekeeping and Home Maintenance were not to be decided at that proceeding.¹² Paragraph 23 of Mr. Waldock’s submission reads as follows:

In these circumstances, where there were no monetary benefits at issue in the Arbitration, and where the arbitration was merely for a declaration that Mr. Waldock’s injuries should be deemed to be a “catastrophic impairment”…” [emphasis mine]

Therefore, I find that when Arbitrator Henry conducted his hearing on June 25, 2015 and when he received written submissions afterward, the Attendant Care benefit and Housekeeping and Home Maintenance were not “issues in dispute” before him. Thus, the Arbitrator did not have the jurisdiction to consider these benefits, and that part of his decision entitling Mr. Waldock to $361,520.30 for Attendant Care benefits and Housekeeping and Home Maintenance, and any interest he awarded for those amounts, is void.

Further, I find alternatively, that even if Attendant Care and Housekeeping and Home Maintenance had been issues in dispute before Arbitrator Henry, neither Arbitrator Henry, nor anyone else at ADR Chambers ever gave notice to State Farm that these issues in dispute would be determined by Arbitrator Henry at that proceeding.

Accordingly, I find the Arbitrator violated the principles of natural justice and procedural fairness by not informing State Farm of the case it had to meet and the proceeding that would take place. Again, I find that any part of the order dealing with entitlement to Attendant Care, Housekeeping and Home Maintenance, and any interest award thereupon, is void.

B. Did the Arbitrator err in law by failing to provide adequate reasons for his decision when he granted an award for Housekeeping and Home Maintenance and Attendant Care?

Having rendered my decision in regard to the issues in dispute that were before Arbitrator Henry, I have already voided his Decision on Expenses, but I will consider State Farm’s arguments in the alternative.

In his Decision on Expenses of November 16, 2015, Arbitrator Henry listed the following issues (inter alia) for his hearing:

“Is Mr. Waldock entitled to payment of $361,520.30 for Attendant Care and Housekeeping and Home Maintenance Benefits?”

In his “Result:” he listed the following:

“Mr. Waldock is entitled to payment of $361,520.30 for Attendant care and Housekeeping and Home Maintenance Benefits, commencing July 7, 2010.”

State Farm submits the Arbitrator erred in law because his Decision on Expenses does not provide adequate reasons for the determination of the entitlement and quantum of these benefits.

In dealing with this argument, I note first the Arbitrator’s own comments in his Decision on Expenses of November 2015, which describe what occurred at the proceeding which led to his Decision on a Preliminary Issue of November 2014 (where he determined Mr. Waldock was catastrophically impaired):

“… my notes indicate that I advised the parties that I expected the issue of expenses and any Special Award would be determined by another arbitrator as I had not heard any evidence on the issue of the claimed benefits and Special Award.”¹³ [Emphasis mine]

An examination of the Decision on a Preliminary Issue demonstrates that the Arbitrator correctly confirmed he heard no evidence on Special Award or on any claimed benefits during the hearing where he determined Mr. Waldock was catastrophically impaired. There was no suggestion the Arbitrator had jurisdiction to deal with entitlement to Attendant Care or Housekeeping and Home Maintenance, and no indication whatsoever that he heard evidence on those benefits or the special award. They were simply not at issue when he conducted that hearing, and nothing was presented to him in regard to those issues.

Arbitrator Henry also described what transpired at the hearing which led to his Decision on Expenses of November 16, 2015. There was one day of in-person hearing during which he heard oral submissions, followed by written submissions:

At the end of the first day of oral submissions, it was apparent that the balance of the hearing could be conducted by written submissions from the parties, who consented to this arrangement. I made an oral order on June 25, 2015, setting out timelines for the submissions, I confirmed those directions in an email to both counsel on July 3, 2015.¹⁴

Both parties then provided submissions on the issues that the Arbitrator set out in his written direction of July 3, 2015. Although the Arbitrator’s order only required submissions form the parties, Mr. Waldock’s submissions included a Schedule of Submitted Claims Post-Cat,”¹⁵ as well as a table of claims paid by the Insurer.¹⁶

These documents appear to have been submitted in contravention of Rule 39 of the DRPC:

EVIDENCE

39.1 Subject to Rule 39.2, all documents, reports (including experts' reports) and assessments to be introduced at a hearing by either party must be served on the other party at least 30 days before the first day of the hearing.

In any case, the Arbitrator did not discuss any of the documents that were included in the submission. The only discussion of evidence takes place at page 9 of the Arbitrator’s Decision on Expenses wherein he considers Dr. Cashman’s and Dr. Waisman’s testimony and reports:

In my decision on the preliminary issue, issued on November 10, 2014, I referred to the oral evidence of Dr. Waisman wherein he was critical of the report prepared and submitted by Dr. Cashman to State Farm.

This was evidence from the previous hearing adduced for the Arbitrator’s determination as to whether Mr. Waldock had sustained a catastrophic impairment, but it is clear (and the Arbitrator confirmed it himself on page 5 of his decision), that it was not evidence in regard to the claimed benefits of Attendant Care and Housekeeping and Home Maintenance and special award.

The only paragraph in the Decision on Expenses discussing entitlement to and the quantum of Attendant Care and Housekeeping and Home Maintenance is as follows:

In this matter, of the total of $532,779.82 in benefits, expenses, etc., claimed by Mr. Waldock, he is presently claiming a total amount of $361,520.30 representing claims for Attendant Care and Housekeeping and Home Maintenance. As result of my earlier finding that Mr. Waldock suffered a catastrophic impairment, it is my understanding that State Farm has since paid $171,259.52 to Mr. Waldock as reimbursement for past benefits, plus some expenses and interest leaving approximately $361,520.30 outstanding and due Mr. Waldock.¹⁷ [Italics mine]

I agree with State Farm’s contention that the Arbitrator provided inadequate reasons as to how he concluded $361,520.30 was outstanding and owing. The Arbitrator only mentioned that $361,520.30 represented claims for Attendant Care and Housekeeping and Home Maintenance. It is trite to note that an amount claimed by an applicant is not the same as an amount determined to be outstanding and owing to an applicant after an arbitration of that issue. The arbitrator must make that determination of entitlement, after an examination of the evidence, the legal tests, and findings of facts.

Those legal tests for the Attendant Care benefit and Housekeeping and Home Maintenance are set out in the SABs as follows:

Attendant Care Benefit

16. (1) The insurer shall pay an insured person who sustains an impairment as a result of an accident an attendant care benefit. O. Reg. 403/96, s. 16 (1).

(2) The attendant care benefit shall pay for all reasonable and necessary expenses incurred by or on behalf of the insured person as a result of the accident for,

(a) services provided by an aide or attendant; or

(b) services provided by a long-term care facility, including a nursing home, home for the aged or chronic care hospital. O. Reg. 403/96, s. 16 (2).

Housekeeping and Home Maintenance

22. (1) The insurer shall pay for reasonable and necessary additional expenses incurred by or on behalf of an insured person as a result of an accident for housekeeping and home maintenance services if, as a result of the accident, the insured person sustains an impairment that results in a substantial inability to perform the housekeeping and home maintenance services that he or she normally performed before the accident. O. Reg. 403/96, s. 22 (1). [Emphasis mine]

Nowhere does the Arbitrator detail or mention any evidence or analysis he applied to come to the conclusion that any amount of Attendant Care or Housekeeping and Home Maintenance was reasonable and necessary (as required under sections 16 and 22 of the SABS), and outstanding and owing to the applicant at the time of his decision.

Instead, the Arbitrator only states his “understanding” is that State Farm paid $171,259.52 to Mr. Waldock “as reimbursement for past benefits, plus some expenses and interest,” but again, he does not reveal how he came to this “understanding.”

There was no agreed statement of facts between the parties. The Arbitrator does not refer to any exhibits of invoices or primary documents specifying what amounts were incurred (whether for Attendant Care or Housekeeping and Home Maintenance) relating to service providers, payments made, or the time periods for which they had been paid or claimed. Arbitrator Henry does not explain how he arrived at the number $171,259.52.

In fact, the Respondent’s own supplementary factum, submitted in response to the Arbitrator’s written direction of July 3, 2015, provided a table of values concerning amounts Mr. Waldock claimed were owing, but these numbers differ significantly from the numbers cited by the Arbitrator.¹⁸ For instance, that table suggests $298,353.52 had been paid by State Farm in Attendant Care alone, but Arbitrator Henry determined only $171,259.52 had been paid by State Farm as a “total for past benefits, expenses, and interest.”¹⁹

Based upon the calculations the Arbitrator performed in the afore-cited paragraph, it appears he commenced with the applicant’s total claim of “$532,779.82 in benefits, expenses, etc.,” (without clarifying what part referred to an Attendant Care benefit, or to Housekeeping and Home Maintenance, or an expense, or something else which he only referred to as “etc.”). He then subtracted the amount of $171,259.52 which he understood had been paid (ignoring the values in Mr. Waldock’s own submissions) from $532,779.82, and arrived at a difference of $361,520.30. The Arbitrator determined the amount of $361,520.30 was “outstanding and due”, but failed to apply the tests for entitlement for Attendant Care or Housekeeping and Home Maintenance or failed to provide adequate reasons as to how he came to his conclusions in regard to entitlement.

State Farm cited the decision of Clifford v. Attorney General of Ontario, 2009 ONCA 670, in regard to the adequacy of reasons required from an administrative tribunal.

29R.E.M. emphasizes that where reasons are legally required, their sufficiency must be assessed functionally. In the context of administrative law, reasons must be sufficient to fulfill the purposes required of them, particularly to let the individual whose rights, privileges or interests are affected know why the decision was made and to permit effective judicial review. As R.E.M. held, at para. 17, this is accomplished if the reasons, read in context, show why the tribunal decided as it did. The basis of the decision must be explained and this explanation must be logically linked to the decision made. This does not require that the tribunal refer to every piece of evidence or set out every finding or conclusion in the process of arriving at the decision. To paraphrase for the administrative law context what the court says in R.E.M., at para. 24, the "path" taken by the tribunal to reach its decision must be clear from the reasons read in the context of the proceeding, but it is not necessary that the tribunal describe every landmark along the way.

30R.E.M. also emphasizes that the assessment of whether reasons are sufficient to meet the legal obligation must pay careful attention to the circumstances of the particular case. That is, read in the context of the record and the live issues in the proceeding, the fundamental question is whether the reasons show that the tribunal grappled with the substance of the matter: see R.E.M., at para. 43.

31In addition, in my view, it is important to differentiate the task of assessing the adequacy of reasons given by an administrative tribunal from the task of assessing the substantive decision made. A challenge on judicial review to the sufficiency of reasons is a challenge to an aspect of the procedure used by the tribunal. The court must assess the reasons from a functional perspective to see if the basis for the decision is intelligible. [Emphasis mine]

These same requirements have been adopted in many appeal decisions of the Financial Services Commission of Ontario.

I find that the reasons provided by Arbitrator Henry in regard to how he determined Mr. Waldock was entitled to Attendant Care and Housekeeping and Home Maintenance were inadequate because they do not demonstrate how the decision was made, do not permit effective judicial review, and do not demonstrate the basis of the decision. This insufficiency of reasons also amounts to an error of law, and again, I find the entirety of the Arbitrator’s decision in regard to the Attendant Care and Housekeeping and Home Maintenance claims (and any interest he awarded on those amounts) is a nullity.

C. Did the arbitrator err in law when he granted a special award when it was not an issue in dispute, or when he did not give notice that he would determine that issue, or when he determined the quantum of the special award without hearing evidence?

State Farm argues the Arbitrator committed numerous errors of law when he determined the special award in his Decision on Expenses of November 16, 2015. Those errors included conducting a hearing on special award when it was not in dispute, determining the special award when he had no jurisdiction to do so, or without providing notice, and determining the issue and the quantum of the special award without hearing any evidence.

To begin this examination, I revert to my previous analysis related to whether Attendant Care and Housekeeping and Home Maintenance were ever issues in dispute in the Application for Arbitration that was the basis of the arbitration hearing that led to the Decision on a Preliminary Issue of November 2014.

Without repeating the entire analysis, I find that special award was not included as an issue in the Application for Mediation, the Report of the Mediator, the Application for Arbitration, or in the prehearing letter completed by Arbitrator Bowles, that all led to the hearing which resulted in the Arbitrator’s Decision on a Preliminary Issue.

Therefore, when the Arbitrator commenced the hearing which led to his Decision on a Preliminary Issue in November 2014, the special award was not an issue. Further, special award is not mentioned in the Decision on a Preliminary Issue. The last part of the Arbitrator’s November 2014 Decision on a Preliminary Issue reads as follows: “The parties’ entitlement to their expenses is deferred for consideration by the arbitrator at the arbitration hearing in this matter.”

At that point, Arbitrator Henry had decided all the issues that were before him as part of that Application for Arbitration, apart from the issue of expenses. At the risk of oversimplification, I note that expenses of arbitration proceedings are specifically dealt with in Rule 75 of the DRPC and Section F of the Expense Regulation which reads as follows:

Award of expenses

75.1 An adjudicator may award expenses to a party if the adjudicator is satisfied that the award is justified having regard to the criteria set out in Rule 75.2. The items and amounts which may be awarded are found in Rule 78 and the Schedule to the Expense Regulation found in Section F of the Code.

75.2 The adjudicator will consider only the criteria referred to in the Expense Regulation found in Section F of the Code. These criteria are:

(a) each party's degree of success in the outcome of the proceeding;

(b) any written offers to settle made in accordance with Rule 76;

(c) whether novel issues are raised in the proceeding;

(d) the conduct of a party or a party's representative that tended to prolong, obstruct or hinder the proceeding, including a failure to comply with undertakings and orders;

(e) whether any aspect of the proceeding was improper, vexatious or unnecessary.

(f) whether the insured person refused or failed to submit to an examination as required under section 42 of Ontario Regulation 403/96 (Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996) made under the Act or refused or failed to provide any material required to be provided by subsection 42 (10) of that regulation; and

(g) whether the insured person refused or failed to submit to an examination as required under section 44 of Ontario Regulation 34/10 (Statutory Accident Benefits Schedule — Effective September 1, 2010), made under the Act, or refused or failed to provide any material required to be provided under subsection 44 (9) of that regulation.

Further, the special award is neither a benefit nor an expense. Special awards are defined at section 282(10) of the Insurance Act:

282(10) If the arbitrator finds that an insurer has unreasonably withheld or delayed payments, the arbitrator, in addition to awarding the benefits and interest to which an insured person is entitled under the Statutory Accident Benefits Schedule, shall award a sum of up to 50% of the amount to which the person was entitled at the time of the award together with interest on all amounts then owing to the insured (including unpaid interest) at the rate of 2 per cent per month, compounded monthly, from the time the benefits first became payable under the Schedule.

In argument, the Respondent asserts that it first raised the issue of the special award in its written submissions filed on July 10, 2014.

The relevant part of the submission is found at paragraph 43.²⁰

In these circumstances, where there are no monetary benefits at issue in the Arbitration, and where the arbitration is merely for the declaration that Mr. Waldock’s injuries should be deemed to be a “catastrophic impairment”, these are fit and proper circumstances for the learned Arbitrator in this case, to exercise his discretion to award the applicant a special award of his solicitor/client costs for all costs incurred after the date of State Farm’s denial of catastrophic impairment. These costs should include the proceeding with the FSCO mediation, responding to the insurer’s motions and appeals, and filing for and proceeding with this Arbitration. [italics mine]

Although this argument is somewhat of a red herring, I do not find that this paragraph constitutes notice to State Farm that Mr. Waldock was seeking a special award at this time, simply because the amount claimed by Mr. Waldock in paragraph 43 has no relation to the special award.

In fact, as set out in the legislation cited above, the special award derives from an arbitrator’s determination that the insurer has unreasonably withheld or delayed payments, whereupon in addition to awarding benefits and interests, the arbitrator may then award a further sum.

The solicitor/client costs to which Mr. Waldock refers in paragraph 43 of his written submission are the costs assessed as “Expenses of Representatives” under the Dispute Regulation Practice Code (Rule 78) and section F of the Schedule to the Expense Regulation. They are completely distinct from the special award sought in section 282(10) of the Insurance Act. Those solicitor/client costs are determined in the following manner:

Expenses of Representatives (Also see schedule to expense regulation found in section F of the Code)

78.1 The maximum amount that may be awarded to an insured person or an insurer for legal fees, is an amount calculated using:

(a) the hourly rates established under the Legal Aid Services Act, 1998 for professional services in civil matters before the Ontario Superior Court of Justice; or

(b) the hourly rate referred to in Rule 78.1(a) adjusted to include, where appropriate, the experience allowance established under the Legal Aid Services Act, 1998

Where an adjudicator is satisfied that a higher amount for legal fees to an insured person is justified, an hourly rate of up to $150 may be awarded.

78.2 The maximum amount that may be awarded to an insured person or an insurer for agent’s fees is an amount calculated using the hourly rates established under the Legal Aid Services Act, 1998 for law clerks, articling students and investigators.

Nor is Mr. Waldock correct when he argues an arbitrator may grant a special award based on an applicant’s solicitor/client costs of the arbitration hearing.²¹ Again, there is no basis in law for an arbitrator to base a special award on solicitor/client costs.

I also find there is no basis in law for Mr. Waldock’s argument that a claim for expenses (the one remaining issue after the Arbitrator completed his Decision on a Preliminary Issue of November 2014) could encompass a claim for benefits, interest, and a special award.

As already mentioned, Attendant Care or Housekeeping and Home Maintenance are determined by their own specific tests found at sections 16 and 22 and of the SABs. They are not listed as or considered expenses under rule 75 of the Dispute Resolution Practice Code and Section F of the Expenses Regulation. Nor are they special awards, which, as already noted, are determined under section 282(10) of the Insurance Act.

Therefore I find that the reference to a special award for solicitor/client costs in paragraph 43 of the Respondent’s written submissions sent in June 10, 2014, did not constitute notice of a claim for a special award.

But this finding alone does not resolve this issue. The Arbitrator clearly decided he had the authority to raise the issue of a special award, and in fact, he proceeded to determine the merits of the special award and its quantum in his Decision on Expenses of November 2016.

In this regard, I accept the arguments of State Farm, and I find that even if the Arbitrator had the jurisdiction to unilaterally raise the issue of the special award, he erred in law by not giving notice to State Farm that he would determine that issue, and by determining the issue without hearing any evidence on that point.

In response, Mr. Waldock argues that the Arbitrator’s written confirmation order of July 3, 2015 constituted notice that he would determine the issue of special award, but I reject that argument because that order, reproduced below and previously in this decision, simply orders the parties to “… provide written submissions, quoting case law, where the Insurance Act requires that an application for a Special Award must be filed as part of the application for arbitration.” [Emphasis mine]

To confirm, I gave the following oral directions during the Expense/Special Award hearing that commenced on June 25, 2015.

State Farm shall:

-provide a hard copy of all its submissions previously provide on a disk, to me (Knox M. Henry, c/o ADR Chambers, 4100 Yonge Street, 6th floor, Toronto ON M2N 1N6), no later than July 10, 2015.

Regarding the expenses being claimed by the Applicant (Waldock), both parties shall provide me written submissions, via email to me, (khenry@adr.ca) as follows:

1. Counsel for Waldock must provide its written submissions, no later than 4:00 p.m., Thursday, July 9, 2015.

2. 2. Counsel for State farm must provide its response, in writing, no later than 4:00 p.m., Thursday, July 23, 2015.

3. Counsel for Waldock must provide any reply, in writing, no later than 4:00 p.m., Thursday July 30, 2015.

Regarding the issue of catastrophic impairment. Both parties shall:

4. Provide written submissions, quoting case law, where the Insurance Act requires that an application for a Special Award must be filed as a part of the application for arbitration.

5. Counsel for Waldock must provide its written submissions no later than 4:00 p.m.

Thursday, July 9, 2015.

6. Counsel for State Farm must provide its written response no later than 4:00 p.m., Thursday, July 23, 2015.

7. Counsel for Waldock must provide any reply, in written, no later than 4:00 p.m., July 30, 2015.

All written submissions must be limited to a maximum of three (3) pages (excluding any case law quotations), 12 point type.

Should the parties wish that this hearing be reconvened vive voce or via teleconference call, they must advise me in their submissions.

Knox M. Henry

Arbitrator

P.S. I apologize that this e-mail is delayed. I had originally prepared it on my IPad. I have just learn that apparently, transmission fork the IPad was unsuccessful.

KMH. [emphasis mine]

The written confirmation is clear and unequivocal. The Arbitrator does not state that he will conduct a hearing or hear evidence on the merits of that special award. He does not say he will hear evidence to determine the quantum of that special award. He simply asks for submissions and case law as to whether a special award must be filed as part of an application for arbitration.

Nor do I accept Mr. Waldock’s argument that the last paragraph in the Arbitrator’s written confirmation order somehow placed an onus on State Farm to demand or request an opportunity to present vive voce evidence or a reconvening on these issues. There was no requirement on State Farm to do anything other than what the Arbitrator explicitly required in his written confirmation order.

Accordingly, regardless as to whether the Arbitrator had jurisdiction to even consider the special award (which was the actual question the parties were required to address in his written order), I find that the issue of the special award (meaning whether Mr. Waldock was entitled to the special award and its quantum) was never an issue in dispute at the hearing which led to the Decision on Expenses of November 16, 2015.

Further, I find neither the Arbitrator nor any person at ADR Chambers ever gave notice to State Farm that he would determine this issue. Therefore, I find the Arbitrator erred in law by determining the issue of the special ward and quantifying that award without providing notice to State Farm.

Alternatively, I find that even if the Arbitrator had jurisdiction to deal with these issues, he still erred in law by failing to give State Farm the opportunity to present its evidence about the special award (on entitlement and quantum), to question the opposing party’s evidence, and to make representations on those issues.

This was the approach followed by Delegate Draper in the decision of Clark v. Royal Insurance Company of Canada (FSCO 97-00008, September 26, 1997):

The arbitrator had the authority to raise the issue of a special award on her own initiative, but had to give Royal a reasonable chance to respond. Parties to arbitration hearings are asked to present their cases concisely and rely on documentary evidence where possible. It cannot be assumed, therefore, that evidence relevant to a special award will be led. For example, an adjuster’s testimony may be unnecessary unless a special award is in issue.

In the particular situation here, I accept Royal’s contention that it would have presented its case differently if it had known a special award was being considered. It did not call the adjuster or any of its medical experts as witnesses. I am not persuaded, therefore, that allowing written submissions was sufficient. However, I do not agree with Royal’s contention that even re-opening the hearing for further evidence would be unfair. In my opinion, that was the appropriate course. While Royal might have asked for a chance to submit evidence, Decision No. 1 specifically asks for written submissions, not further evidence.

As a result, I conclude that the requirements of natural justice and fairness were not met and, therefore, the special award cannot stand. [Emphasis mine]

I find the Arbitrator failed to observe these mandatory requirements of procedural fairness and natural justice, and denied State Farm an opportunity to present evidence, question Mr. Waldock’s evidence, and to make submissions on the merits of the special award and its quantum. These violations of natural justice and procedural fairness constituted errors of law on the Arbitrator’s part, and accordingly, I am voiding the entirety of the Arbitrator’s determinations in regard to the merits and quantum of the special award.

In the alternative, I also find the Arbitrator determined the issue of entitlement to the special award and its quantum on evidence which he himself had declared did not pertain to the special award, another error of law.

I make this determination because the Arbitrator had not heard any evidence on special award during the proceeding which led to the Decision on a Preliminary Issue. The Arbitrator confirmed this himself in his Decision on Expenses.

My notes indicate that I advised the parties I expected the issues of expenses and any Special Award would be determined by another Arbitrator, as I had not heard any evidence on the issue of claimed benefits and any Special Award.²² [Emphasis mine]

The Arbitrator’s analysis of whether Mr. Waldock was entitled to a special award begins at page 9 of his Decision on Expenses, but the only evidence the Arbitrator cites is that which he heard at the preliminary issue hearing of November 2014, the very same evidence which he already confirmed was not relevant to the special award (as set out above in his citation).

That evidence (as he correctly noted) did not concern the special award, and it was an error of law for him to then apply it to make a determination of entitlement to and quantum of special award.

I thus find the Arbitrator erred in law by determining the special award and its quantum in the absence of any evidence in regard to the special award, or he misconstrued evidence he had heard to determine whether a person was catastrophically impaired and then erroneously applied it to a determination of entitlement and quantum of special award.

Because of these errors of law based on lack of jurisdiction and violations of natural justice and procedural fairness, I am rescinding all of the Decision on Expenses which deals with the special award and interest thereupon, including the merits of that award, and its quantum.

Part two: The Decision on a Motion (The “Clarification Order”):

I turn now to the second appeal brought by State Farm. This appeal seeks to overturn and void the Decision on a Motion issued by Arbitrator Henry on May 8, 2017. This decision purported to be a “clarification” of his Decision on Expenses issued in November 2016, as well as a “clarification” of an “Oral Order” of June 2015 and the “Directions to Counsel” of July 3, 2015 he made during the hearing that led to that Decision on Expenses.

This part of the litigation also has a complex history, which I will briefly resume here.

When it became known Mr. Waldock was seeking a clarification from the Arbitrator, State Farm brought a motion before Delegate Evans to enjoin the Arbitrator from doing so. The Delegate enjoined the Arbitrator from issuing a clarification. The Delegate’s order was dated August 16, 2016.

Soon after, Mr. Waldock brought a judicial review of the Delegate’s order. That judicial review was heard on a preliminary basis by Justice Malloy, who issued an order on October 21, 2016. She ruled (inter alia) that the order of Delegate Evans was premature, but did not finally determine all the matters before her, and left them to be decided by a three-panel member of the Divisional Court.

Ultimately, the parties did not proceed with the judicial review. Arbitrator Henry then heard a motion in February 2017 as to whether he could clarify his order. He decided it was “appropriate and within his jurisdiction” to provide a clarification, and issued his Decision on a Motion on May 8, 2017.

State Farm now appeals the Decision on a Motion, seeking to void that order. The grounds of the appeal are (inter alia) as follows:

(1) The Arbitrator did not have authority from the Divisional Court to issue the clarification he did;

(2) The Arbitrator did not have legal authority to issue the clarification;

(3) The clarification provided by the Arbitrator exceeded the parameters of what is permissible under the Dispute Resolution Practice Code.

For reasons that follow, I agree with State Farm’s arguments and find that the Decision on a Motion is a nullity.

A. Did the Arbitrator err in law by issuing his “clarification” order (the Decision on a Motion) when he did not have the jurisdiction to do so?

This was essentially the question brought before Delegate Evans which led to his decision of August 16, 2016, wherein he enjoined the Arbitrator from issuing a clarification of his Decision on Expenses.

In his decision, Delegate Evans referred to section 286 of the Insurance Act which reads as follows:

286. When arbitrator cannot act—an arbitrator appointed by the Director cannot vary or revoke and order made by him or her and cannot make a new order or replace an order made by him or her if the order is under appeal.

He noted that the subject of the proposed “clarification” was the Arbitrator’s Decision on Expenses, which was, at that time (and still is), an order under appeal.

The Delegate then added:

As was held by the Director of Arbitrations in Shadd and Liberty Mutual Insurance Company, (FSCO P02-00001, December 24, 2004), [section 286 of the Insurance Act] applies to corrections despite the broad wording of the Code. I find the same applies to any clarifications as well.²³

I agree with Delegate Evans’ analysis of section 286 of the Insurance Act, and its impact on clarifications under the Dispute Resolution Practice Code.

Therefore, I find Arbitrator Henry had no jurisdiction to issue his Decision on a Motion of May 8, 2017. Accordingly, the Decision on Motion is a nullity.

For completeness, I will now consider the Appellant’s arguments in the alternative.

B. Did the Arbitrator err in law by stating that the Divisional Court had granted him the authority to make his decision on a motion order?

In the Arbitrator’s Decision on a Motion, he acknowledged the paramount authority of section 286 of the Insurance Act and the decision of the Director of Arbitrations in Shadd²⁴, which applied section 286 to corrections. He then made this statement:

While section 286 of the Insurance Act states otherwise, I agree with Mr. Waldock’s submissions and adopt the Endorsement by Justice Malloy allowing me permission to provide the clarification required. I find it appropriate and within my jurisdiction to do so.²⁵

I find the Arbitrator misread the Endorsement of Malloy, J. in her ruling of October 21, 2016. In fact, the judge specifically declined to authorize the Arbitrator to provide the clarification sought:

25Apart from this issue, it would be inappropriate for this Court to issue a declaration in advance authorizing the Arbitrator to issue a clarification. That decision should be made in the first instance by the Arbitrator, and then subject to appeal to the tribunal. The Divisional court ought not step in prematurely to render a decision as to the Arbitrator’s jurisdiction or potential jurisdiction. [Emphasis mine]

Thus, the Court did not authorize the Arbitrator to issue a clarification or other order, and the Arbitrator erred in law by adopting her endorsement as an allowance of permission.

C. Did the Arbitrator err in law by issuing a “clarification” which exceeded the parameters of Rules 65.5 and 65.6 of the DRPC and introduced new elements into the decision of November 15, 2016, beyond the scope of what is permitted in Rules 65.5 and 65.6?

Even if the Arbitrator somehow had the jurisdiction to issue his Decision on a Motion, did he err in law for the reasons set out above?

Rules 65.5 and 65.6 of the Dispute Resolution Practice Code read as follows:

65.5 An adjudicator may, at any time, correct a typographical error, error of calculation, technical error, or similar error made in his decision or order.

65.6 An adjudicator mat at any time, clarify a decision or order that contains a misstatement, ambiguity, or other similar error.

These provisions are promulgated under the Insurance Act which includes section 286 of that Act, (already cited above), and in the light of the general common law principle of functus offcio, defined in Black’s Law Dictionary as follows:

A task performed. Having fulfilled the function, discharged the office, or accomplished the purpose, and therefore of no further force or authority.

Rules 65.5 and 65.6 do not confer any authority upon an adjudicator to issue a new order or a different order, once he or she has issued a final order. The rules only allow an adjudicator to “correct” certain types of errors, or to “clarify” a “misstatement, ambiguity or other similar error.”

In the present case, the Arbitrator’s Decision on a Motion addressed two distinct issues, as set out in his “Result:” at page 2 of his decision. I will address each clarification in turn.

The first of the “clarifications” is as follows:

1. I confirm that the sum of the $361,520.30 awarded to the Applicant for Attendant Care and Housekeeping and Home Maintenance Benefits is NOT in addition to the amounts already paid by State Farm for those benefits following receipt of my November 10, 2014 decision.

I find this is not a clarification as permitted by Rule 65.5 of the DRPC. The change in the decision does not correct any typographical, technical, calculation, or other similar error.

The Arbitrator does not perform a calculation to arrive at a new number to provide clarification. Although the Arbitrator says the sum awarded “… is NOT in addition to amounts already paid for those benefits ...,” he never specified in his decision what amount State Farm had “already paid for those benefits.” As previously noted, his Decision on Expenses only quantified the amount of $171,259.52, paid to Mr. Waldock “… for past benefits, plus some expenses and interest.”

Thus, the Arbitrator failed to calculate a value for whatever amount he wished to award for these benefits, and provided no corrected number to replace another. Therefore, it does not correct any error of calculation, typography or similar type error. Nor does it clarify an ambiguity or misstatement or other similar error.

Therefore, even if the Arbitrator had jurisdiction to issue a clarification, I find he committed an error of law by failing to perform what he could do under Rules 65.5 and 65.6. As a result, I find this part of the Arbitrator’s clarification is a nullity.

The second part of the “Result:” in the Decision on a Motion purported to clarify both the Arbitrator’s oral order of June 25, 2015 and his written directions of July 3, 2015.

But as previously noted, the written directions of July 3, 2015 were issued to “confirm” the oral order of June 25, 2015.

The Arbitrator’s jurisdiction to issue a written order following an oral order flows from section 65.2 of the DRPC:

Rule 65.2: An adjudicator may make an oral order with oral reasons where he or she considers it appropriate. The adjudicator will confirm the provisions of an oral order in writing if requested by the parties at the conclusion of the oral order. [Emphasis mine]

Having already confirmed the oral order in his written order of July 3, 2015, I find it is this written order which must be the subject of any ‘clarification” by the Arbitrator.

Further, I repeat my finding that this written order of July 3, 2015 (which confirmed the oral order of June 25, 2015 and is reproduced in an earlier part of my decision) is clear and unambiguous.

The “clarification” of the written order in the Arbitrator’s Decision on a Motion is as follows:

2. In the oral directions I issued on June 25, 2015 and the confirming written directions to counsel of July 3, 2015, I advised the parties they could make further submissions pertaining to:

(a)The granting of the special award;

(b)The Attendant Care and Housekeeping and Home maintenance;

(c) The legal expenses of the Preliminary issue hearing and the hearing on the Expenses.

I considered the submissions received before issuing my Decision on Expenses, dated November 16, 2015.²⁶ [Emphasis mine]

I find that nothing in this part of what purports to be a “clarification” in the Arbitrator’s Decision on a Motion amounts to a correction of a typographical, calculation, technical or “similar such error.”

Further, I do not find that this “clarification” addresses any misstatement, ambiguity, or other similar error. The written order of July 3, 2015 makes no mention whatsoever of Attendant Care Benefits or Housekeeping and Home Maintenance. It does not speak of the “granting” of a special award, but only asks for submissions as to whether “an application for a Special Award must be filed as a part of an application.”

In addition, the Arbitrator’s words concerning his consideration of the “submissions received” are completely superfluous, and have no connection whatsoever to what might be permitted under rules 65.5 and 65.6 of the DRPC.

Thus I find this ‘clarification” is an error of law because it exceeds that which is permitted under Rules 65.5 or 65.6 of the DRPC. Instead, the purported clarification amounts to a new and different order which varies the ones he issued previously. It even adds issues not previously mentioned.

Accordingly, I also find this part of the Decision on a Motion to be void.

I turn now to the final part of this appeal which addresses the legal expenses awarded by the Arbitrator in his Decision on Expenses.

Part Three: The Expenses Awarded in the Decision on Expenses:

A. Did the Arbitrator err in law in granting an award for expenses of the hearing in excess of the amounts permitted by the Expense Regulation?

The Arbitrator awarded $125,435.00 for legal fees to Mr. Waldock’s counsel and $45,824.52 for disbursements, in accordance with the Bill of Costs submitted after the hearing of June 25, 2015.²⁷

The hourly rates awarded to legal counsel by the Arbitrator varied from $225.00 per hour to $750.00 per hour. I agree with State Farm and find that the Arbitrator erred in law by exceeding the limits of what he could validly grant for legal fees in an arbitration. These fees must be awarded in accordance with the provisions of the Insurance Act which state as follows:

Section 282(11) The arbitrator may award, according to criteria prescribed by the regulations to the insured person or insurer, all or part of such expenses incurred in respect to an arbitration proceeding as may be prescribed in the regulations, to the maximum set out in the regulations. [Emphasis mine]

The Schedule to Regulation 664 (Dispute Resolution Expenses), provides a comprehensive code for the consideration and awarding of expenses for an arbitration. It sets out the maximum hourly rates for the award of legal fees by reference to the Dispute Resolution Practice Code and the amounts payable as disbursements for the preparation of reports and the preparation of, and attendance of witnesses.

Expenses of representatives (Also see Schedule to Expense Regulation found in section F of the Code)

78.1 The maximum amount that may be awarded to an insured person or an insurer for legal fees, is an amount calculated using:

(a) the hourly rates established under the Legal Aid Services Act, 1998 for professional services in civil matters before the Ontario Superior Court of Justice; or

(b) the hourly rate referred to in Rule 78.1(a) adjusted to include, where appropriate, the experience allowance established under the Legal Aid Services Act, 1998

Where an adjudicator is satisfied that a higher amount for legal fees to an insured person is justified, an hourly rate of up to $150 may be awarded. [Emphasis mine]

78.2 The maximum amount that may be awarded to an insured person or an insurer for agent’s fees is an amount calculated using the hourly rates established under the Legal Aid Services Act, 1998 for law clerks, articling students and investigators.

I find the Arbitrator erred in law when he awarded amounts for legal fees which were in excess of the maximum hourly rates set out in the Dispute Resolution Practice Code and the Expense Regulation. Therefore, I find that the award of $125,435.00 for legal expenses is void.

Further, I also note that many of the disbursements awarded by the Arbitrator exceeded the monetary maximums permitted under the same Expense Regulation.²⁸ For instance, the Arbitrator awarded $8,000.00 to Mr. Waldock for a single witness’s (Dr. Syed) preparation and attendance, when the maximum allowable for a single witness is $1,600.00 per day and a maximum of $500.00 for preparation. The hearing took place over three days. Dr. Seyd’s testimony is resumed in three short paragraphs that hardly span a half a page in the Arbitrator’s decision. Even if he testified on each day of the hearing, the Arbitrator would still have erred in law by awarding him $8000.00 in attendance and preparation fees.

Similarly, section 5(5) of the Regulation allows a maximum of $1,500.00 to be awarded for the preparation of an expert’s report. In his decision, the Arbitrator exceeded this maximum for Dr. Kliman, Dr. Ameis, and Omega Medical Associates. Further, the Expense Regulation makes no mention that costs of transcripts may be awarded as disbursements.

I find the Arbitrator erred in law when he made his award of disbursements because he ignored provisions of the Insurance Act and the Expenses Regulation.

Finally, it appears the Arbitrator based his determination of entitlement to expenses on all the issues he addressed in his Decision on Expenses, including those over which he had no jurisdiction to decide, such as Attendant Care, Housekeeping, and the Special Award:

I find that as Mr. Waldock has been entirely successful in this matter, he is entitled to reimbursement of his Bill of Costs and his disbursements.²⁹ [Emphasis mine]

Accordingly, I am voiding all of the Arbitrator’s Decision on Expenses, and remitting the issue of expenses arising from the Decision on a Preliminary Issue to be determined by a different arbitrator.

IV. EXPENSES

If the parties are unable to agree about expenses of this appeal, an expense hearing may be arranged in accordance with Rule 79 of the Dispute Resolution Practice Code.

Edward Lee

Director’s Delegate

September 10, 2018

Footnotes

1. 1The Statutory Accident Benefits Schedule — Accidents on or after November 1, 1996, Ontario Regulation 403/96, as amended.
2. 2Letter of Delegate Evans, Tab H, Appellant’s Appeal Record Vol. 1
3. 3Tab 2 of Appellant’s Appeal Record Vol. I
4. 4Ibid at Tab 2C
5. 5Ibid at Tab 2E
6. 6Liu v. 1226071 Inc. (Canadian Zhorong Trading Ltd.), 2009 ONCA 571 (Can LII)
7. 7Tab K of Appellant’s Appeal Record Vol. 1
8. 8R. 37.6 of DRPC
9. 9Tab P of Appellant’s Appeal Record Vol. 1
10. 10Page 3 of Decision on Expenses
11. 11Tab 9 of Respondent’s Appeal Record
12. 12Tab 7 of Respondent’s Appeal Record
13. 13Page 5 of Decision on Expenses
14. 14Page 13 of Decision on Expenses
15. 15Tab 6 of Respondent’s Appeal Record
16. 16Ibid at Tab 10
17. 17Page 14 of Decision on Expenses
18. 18Ibid
19. 19Page 6 of Decision on Expenses
20. 20Tab 1 of Respondent’s Appeal Record
21. 21Para 5 of Respondent’s Factum, Tab 7 of Respondent’s Appeal Record
22. 22Page 5 of Decision on Expenses
23. 23Decision of Delegate Evans, August 16, 2016, Tab B of Appeal Record of State Farm in relation to order of May 8, 2017
24. 24Cited in Delegate Evans’ order of August 16, 2016
25. 25Page 6 of Decision on a Motion of May 8, 2017
26. 26Page 2 of Decision on a Motion
27. 27Tab 7 of respondent Appeal record
28. 28Schedule to R.R.O. 1990, Reg. 664, Dispute Regulation Expenses
29. 29Page 11 of Decision on Expenses