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Neutral Citation: 2019 ONFSCDRS 39 Appeal P17-00020V

OFFICE OF THE DIRECTOR OF ARBITRATIONS

PARALOGANATHAN NADESU Applicant

and

ZURICH INSURANCE COMPANY LTD. (COMMERCIAL BUSINESS) Respondent

BEFORE: David Evans

REPRESENTATIVES: David S. Wilson for Mr. Paraloganathan Nadesu William M. Sproull for Zurich Insurance Company Ltd.

HEARING DATE: On the record with submissions received by September 20, 2019

VARIATION EXPENSES 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:

Zurich Insurance Company Ltd. shall pay to Mr. Paraloganathan Nadesu his legal variation expenses of $37,582.77, inclusive of HST and disbursements.

October 18, 2019

David Evans Director’s Delegate Date

REASONS FOR DECISION

I. INTRODUCTION

This matter involved a dispute arising from an accident on September 7, 2003, claims for which were governed by the SABS–1996.¹

Mr. Nadesu applied to vary an arbitration order issued by Arbitrator Rogers – later amended on appeal by Delegate Feldman.²

In the order under variation, Arbitrator Rogers had determined the accident caused Mr. Nadesu mental and behavioural disorders that markedly impaired his function within the meaning of section 2(1.1)(g) of the SABS. Therefore, Mr. Nadesu had sustained a catastrophic impairment.

Arbitrator Rogers had also awarded attendant care benefits up to a maximum of around $300 a month of a claimed $5,210.40 (after February 2017), increased on appeal by Delegate Feldman to about $800. The Arbitrator’s finding that round-the-clock care was not needed was affirmed on appeal.

Mr. Nadesu then applied to vary the amended order to increase the benefit to the statutory maximum based mostly on a claim for round-the-clock care.

To determine the variation proceeding, Delegate Lee had to decide whether there had been a “material change in the circumstances of the insured” to justify a variation of the previous order. If “yes,” he then had to decide what order should be issued as result of that change.³ He used January 11, 2016 as the starting point for any variation.

The hearing proceeded over four days in March and April 2019. Mr. Nadesu was not called, on the agreement of the parties. Evidence included testimony of expert and lay witnesses, voluminous medical records, and details of the medical history and current status of Mr. Nadesu including surveillance evidence.

While the Delegate found Mr. Nadesu far less disabled than he manifested, he accepted other testimony that his mental and behavioural disorders had materially worsened.

Delegate Lee calculated that the benefit should be increased from January 11, 2016 onwards by approximately another $650 a month.

However, Delegate Lee found the claim for 24-hour care belied by the surveillance evidence that showed Mr. Nadesu — unaided and without using a walker or losing his balance — walking on sidewalks, entering and exiting cars, opening and shutting doors, standing up and sitting down, and shaking hands and eating.

Delegate Lee also found Zurich was not liable to pay a special award because the record, including the surveillance, showed that Zurich adjusted the claims appropriately.

Finally, he left the matter of expenses to another day.

Mr. Nadesu now seeks his expenses of the variation application. I have been delegated to determine those expenses.

II. FINDINGS

With respect to legal fees, Mr. Nadesu claims 183.3 hours at $150 an hour, totaling $31,069.35 including HST. He claims an additional $14,145.24 for disbursements inclusive of HST. He also claims an additional 2.85 hours in response to Zurich’s submissions on expenses.

Pursuant to R. 75.1 of the Dispute Resolution Practice Code, 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 Regulation⁴ found in Section F of the Code.

Zurich submits that the only relevant criterion under R. 75.2 is (a), “each party's degree of success in the outcome of the proceeding.” It notes that success was divided, but first submits that there should be deductions for both fees and disbursements.

With respect to Zurich’s submissions below, Mr. Nadesu submits that the jurisprudence has established that a line by line analysis is inappropriate, reasonableness being the main criterion, but nevertheless as a practical matter he is required to respond.

Fees

Zurich makes a number of submissions regarding various docket entries that total 86.95 hours. Zurich submits there should be a 50% reduction to 43.47 hours, which at the $150 rate plus HST comes to a total deduction of $7,368.16.

Mar 20, 2017 To attendance with client to review 1.15

Oct 28, 2017 To review of file re issues of attendant care, housekeeping etc. 1.35

Zurich submits that the first entry above is vague and the next entry suggests not all the time is related to the Variation Hearing where Mr. Nadesu had previously given notice of his intent to rescind the June 2010 settlement of the housekeeping claim.

Jan 7, 2018 To review of various outstanding issues .75

Feb 28, 2018 To attendance with client during conference call; memos to file and correspondence to insurer 1.25

Mar 21, 2018 To telephone conversation with client (with Dr. Kanagaratnam as interpreter) .60

Jul 9, 2018 To attendance of client and wife (with interpreter); memos to file 1.35

Similarly, Zurich submits these entries above do not specify that they relate to the Variation proceeding.

Mr. Nadesu responds that the only one ongoing proceeding between the parties was the variation proceeding, so a specific reference was unnecessary. As to the intention to rescind the June 2010 settlement, Mr. Nadesu submits no services were rendered regarding that issue, nor was any related proceeding commenced.

Nov 21, 2018 To preparation for Variation hearing; review of file; lengthy correspondence to Dr. Kanagaratnam respecting opinion re causation 1.35

Zurich submits that any issue about catastrophic impairment and resultant entitlement to attendant care benefits had already been determined by Arbitrator Rogers in his May 2015 arbitral decision.

Mr. Nadesu submits that the issue was not whether the accident caused a catastrophic impairment but rather whether it caused an increased need for attendant care, as was later set out in Dr. Kanagaratnam’s December 3, 2018 report.

Feb 21, 2019 To preparation for variation hearing with Michael Lewis 1.80

Feb 22, 2019 To review of Elements notes (applicable to Michael Lewis) .95

Zurich submits that as Michael Lewis was not called to testify at the Variation Hearing, this portion of the account is not payable. Mr. Nadesu submits that the fact Mr. Lewis was not called is arguably irrelevant, as he would have been called but for the time constraints imposed by the Delegate, he provided necessary information about Mr. Nadesu’s impairments, and on the second attendance he helped counsel review the applicable notes of Elements that were put into evidence.

Additional correspondence 382 letters received and sent @ .2 hours per letter (not including letters respecting earlier motion) 76.40

Zurich submits that this claim is grossly excessive where there is no documentation supporting that all those claimed correspondences relate to the Variation proceeding only. There is also authority that a claim for fees does not allow for a separate award for hours claimed for sending and receiving letters: Elaiathamby and State Farm Mutual Automobile Insurance Company, (FSCO P08-00035, April 7, 2011).

Mr. Nadesu submits that, as noted above, the variation proceeding was the only ongoing proceeding, so the correspondence related to this proceeding. Further, while there is no separate award for hours claimed for sending and receiving letters, the correspondence is considered as part of counsel’s preparation. Mr. Nadesu submits that the total claim for preparation including the correspondence is proportionate, in that the total 183.3 hours claimed break down as follows:

Time at hearing: 34.5 hours
Preparation time: 127 hours
Time related to preparation of post-hearing submissions: 21.8 hours

Mr. Nadesu submits that the ratio of hearing time to preparation time was 1:3.7, within the mandated ratios of up to 1:4. He also submits that the time taken for preparing the post-hearing submissions should not be included in the ratio, as those submissions saved at least a day of hearing and the time spent was reasonable considering the complexity of the issues and the length of the submissions.

Mr. Nadesu also submits that a charge of .2 hours per letter has been accepted as appropriate: Hutchinson and Security National Mutual Insurance Company/Monnex Insurance Management Inc., (FSCO A03-001712 and A05-000327, November 26, 2007).

Conclusion on fees:

I agree with Mr. Nadesu that, as there was only one ongoing matter between the parties, it was not necessary to list every item as specifically relating to this file, such as for the correspondence. Further, I find his submissions satisfactory with respect to the other disputed entries.

Regarding the correspondence, I find Zurich’s submission too simplistic that Elaiathamby stands for the proposition that a claim for fees does not allow for a separate award for hours claimed for sending and receiving letters. Indeed, as Mr. Nadesu notes, adjudicators have awarded .2 hours per letter in some cases, although I note that other times they have awarded .1 hours or reduced the number of letters for which the claim could be made. Accordingly, I am not prepared to simply halve the amounts of the disputed dockets.

As I discussed in Elaiathamby, you cannot both award expenses based on an appropriate ratio and then add on an award for correspondence: as Mr. Nadesu notes, the correspondence is considered as part of counsel’s preparation. However, Mr. Nadesu calculates counsel’s preparation only with respect to preparation up to the hearing itself and excludes time for the written submissions and, indeed, the additional 2.85 hours he claims for the preparation of the expense submissions. That is not what I said in Elaiathamby:

In the leading case of Henri and Allstate Insurance Company of Canada, (OIC A‑007954, August 8, 1997), the ratio of 4 to 1 was applied for the entire period from the completion of mediation through to the completion of the hearing including oral submissions and the time for the expense hearing; additional expenses for items such as the pre-hearing or correspondence were not also allowed…

The total hours claimed for preparation aside from the hearing itself comes to 151.65 hours (127 pre-hearing + 21.8 post-hearing + 2. 85 expenses). That is a ratio of 4.4 to 1, preparation to hearing time of 34.5 hours. I find that an appropriate ratio should be less than that. The fact that the post-hearing submissions saved time, or that lengthy expense submissions had to be created, can go towards awarding a higher ratio. In the same vein, this was a lengthy and somewhat complicated hearing, considering the matters that had come before. Accordingly, I find an appropriate ratio to be 3.5:1. Multiplying the 34.5 hours by 3.5 comes to 120.75 hours for preparation, the two figures thus totalling 155.25 hours. Zurich does not disagree with the claimed hourly counsel fee of $150, so that fee times the 155.25 hours plus HST comes to $26,314.88:

Hearing 34.50

Prep at 3.5:1 120.75

Total hours 155.25

Rate at $150 $23,287.50

HST $3,027.38

Total allowed $26,314.88

Disbursements

Interpreting services: $1,216.81 is claimed, plus HST, but HST was already included in the invoices. $20.56 reduction claimed.

Mr. Nadesu correctly submits that the claimed reduction of $20.56 is in error, as, he submits, to determine the precise amount of HST one divides the entire account by 1.13 and then multiplies the result by .13. He takes as an example the $200 account for March 26, 2017: Dividing it by 1.13 results in a figure of $177, and multiplying that same figure results in an HST of $23, totaling the $200 of the account.

Applying the same math to the total claim of $1,216.81, the reduction should be $140 for HST already charged and I so order.

Report and Form 1 from 365 Rehab October 27, 2018: $1,810.92 plus HST claimed.

Subsection 5(5) of the Schedule to Section F of the Code provides that “The amount of the expenses paid by or on behalf of the insured person or the insurer to an expert for the preparation of a report may be awarded, to a maximum of $1,500.” Zurich claims a reduction of $351.33 ($310.92 plus HST of $40.41).

Mr. Nadesu agrees the appropriate reduction is $351.33, and I so order.

Conduct money for Dr. Hershberg ($53) and for Angela Fleming ($82.89) and related process serving charges by Canadian Paralegal ($276.20), totaling $412.09 plus HST.

Zurich submits these amounts should be disallowed because Zurich undertook to produce both as witnesses for the insurer’s case, and did produce Ms. Fleming as its witness. The costs were unnecessary, so the total plus HST should be deducted: $465.66.

However, Mr. Nadesu has provided correspondence showing that, while Zurich reserved the right to call those witnesses, it in fact made no undertaking to do so. Accordingly, Mr. Nadesu took steps to assure their attendance and so advised Zurich. I allow no deduction on this account.

Parking and mileage charges including HST: $110.92.

Zurich submits that no invoices were produced, and there is no separate charge for parking. The expenses must be disallowed as the hearing took place in the jurisdiction where counsel maintains his office: Anthonypillai and TD Home and Auto Insurance Company, (FSCO A09‑002810, November 19, 2013), and Arulappu and TD Home and Auto Insurance Company, (FSCO A09-002809, November 19, 2013).

Mr. Nadesu submits that, with respect to the invoices, Zurich is well aware that the parking cost $16 a day at FSCO including HST, or $64 for four days, so he only concedes that Zurich is entitled to a modest reduction of $46.92.

As to the right to claim parking fees, there has been some inconsistency on the point at FSCO. It seems to me that the cost of parking could fit in the “other out-of-pocket expenses incurred in furtherance” of the proceeding basket clause allowed under s. 4.4 of the Schedule to the Expense Regulation. In any event, since I have awarded such expenses in the past, I will award them here: see Brady and Personal Insurance Company of Canada, (FSCO A97–000307, December 16, 1998) and R. and T. Bharat and State Farm Mutual Automobile Insurance Company, (FSCO P17‑00047 and P17-00048, March 7, 2019). Accordingly, I allow the claim but with a reduction of $46.92.

Preparation ($450) and hearing attendance costs ($1,125) for Dr. Cullen, plus HST.

Dr. Cullen invoiced 2.5 hours for attendance at $1,125, but s. 5(3) of the Schedule to Section F provides that “The maximum amount that may be awarded for the attendance of an expert witness is $200 per hour of attendance, up to a maximum of $1,600 per day.” The maximum award was $500, so Zurich submits there should be a reduction of $625 plus HST of $81.25 totaling $706.25.

Mr. Nadesu concedes Zurich is entitled to the reduction claimed of $706.25, and I so order.

Preparation ($150) and attendance ($1,050) for Dr. Kanagaratnam, plus HST.

Dr. Kanagaratnam invoiced 2.5 hours for attendance on April 3, 2019 ($750) plus one hour of travel time ($300). The maximum, again, was $500 for this expert’s attendance, so Zurich claims a reduction of $550 plus HST totalling $621.50.

Mr. Nadesu concedes that while Zurich is entitled to a reduction, it should be a lesser amount. He notes that the account does not neatly allocate between preparation and attendance time, but then submits that there should be an award for the total 4 hours claimed for preparation, attendance and travel time. I do not find this reasonable, as not all the time was spent in attendance. Accordingly, I find Zurich is entitled to the reduction it claims of $550 plus HST totalling $621.50.

Attendance of the lay witness Jose Bernardes: $945 plus HST.

Subsection 5(2) of the Schedule provides that “The maximum amount that may be awarded for the attendance of a witness is the amount of the attendance allowance for the witness that may be allowed under Rule 58.05 of the rules of court as a disbursement.” Tariff item 21.1 of the Rules of Civil Procedure specifies “Attendance allowance for each day of necessary attendance: $50.” Zurich claims a reduction of $895 plus HST of $116.35 for a total of $1,011.35.

Mr. Nadesu submits that as the witness was an employee of Elements Support Services, the provider charged for his attendance, presumably related to its obligation to pay Mr. Bernardes for his time. He submits that this fits with the “basket clause” I referred to above, s. 4.4. However, the other items listed in s. 4 are telecommunication charges (4.1), typing, printing and reproducing copies of documents (4.2), mail or courier delivery (4.3), and taxes on these expenses (4.5). I find the cost claimed does not fit into that context and that the phrase “other out-of-pocket expenses” refers to relatively small expenses similar to those listed in the rest of that section. Accordingly, I allow Zurich’s claimed reduction of $1,011.35.

Zurich claims a deduction of $3,287.57 for disbursements. For the reasons set out above, I allow a total of $2,877.35 in deductions:

HST, translator $140.00

365 Rehab $351.33

Parking $46.92

Dr. Cullen $706.25

Dr. Kanagaratnam $621.50

Witness Bernardes $1,011.35

Total Deductions $2,877.35

Deducting that figure from the $14,145.24 claimed leaves net disbursements of $11,267.89.

Divided Success

Zurich submits that the overriding consideration in fixing expenses is reasonableness: Subramaniam and Wawanesa Mutual Insurance Company, (FSCO A09-002594, April 8, 2013). It also submits that the outcome in that case resembles the result here: in both cases, the Applicants were successful on some of their claims (increase in monthly attendant care benefit payable), but unsuccessful on others (the need for 24/7 supervisory care and the entitlement to a special award). Zurich submits that Mr. Nadesu’s partial success should be taken into account just as it was in Subramaniam, where counsel fees were reduced 30% and disbursements 10%.

Regarding the counsel fees, Zurich does not seek a further reduction beyond that it claims as set out above, namely about $7,400. As can be seen above, I did reduce the total counsel fees claimed, although not as much as claimed by Zurich. The deduction including HST I applied is approximately $5,240. However, Zurich seeks a further reduction of the remaining disbursements by 10%, in particular in relation to the costs of the experts whose opinions were rejected.

Zurich submits that the only relevant criterion is success. In that regard, while Mr. Nadesu claimed an increase of the monthly benefits of about $5,000, he was only awarded about $650. It notes that Delegate Lee largely accepted its experts and not those of Mr. Nadesu. It also submits that Mr. Nadesu could have chosen not to pursue the claim for a special award, which would have had no impact on his partial success on the issue of attendant care, thereby shortening the hearing.

Mr. Nadesu submits that the outcome in this case does not resemble Subramaniam. In that case, the applicant had some success with respect to his IRB claim, but no success with respect to the ACB claim and other issues. The Arbitrator reduced the recoverable expenses with respect to the unsuccessful issues. In this case, the only issue was an increase in the ACBs. Mr. Nadesu also submits that the special award claim played virtually no part in the proceedings, as no submissions were made in that regard except briefly in reply. Mr. Nadesu relies on the following statement by Arbitrator Rogers in the earlier arbitration expense proceeding.⁵

Mr. Nadesu was not awarded all that he claimed for attendant care, but there is no suggestion that Zurich was prepared to pay anything for attendant care, without being ordered to do so. Thus a hearing was required, regardless of Mr. Nadesu’s degree of success. In these circumstances, I find that no deduction relating to this issue is warranted.

I agree with that conclusion and find that it is equally applicable here. I find that Subramaniam is distinguishable and that no reduction should be made regarding the special award claim. Accordingly, I am ordering no further reduction based on partial success.

In the result, I find that Zurich shall pay to Mr. Nadesu a counsel fee of $26,314.88 and disbursements of $11,267.89, for a total of $37,582.77, inclusive of HST. The fees for this expense hearing are included therein, as set out above.