Banihashem-Bakhtiari et al. v. Axes Investments Inc. et al. [Indexed as: Banihashem-Bakhtiari v. Axes Investments Inc.]

69 O.R. (3d) 671

[2004] O.J. No. 302

Docket No. C37466

Court of Appeal for Ontario

Weiler, Moldaver and Armstrong JJ.A.

February 6, 2004

*Application for leave to appeal to the Supreme Court of Canada was dismissed with costs September 16, 2004 (Major, Binnie and Fish JJ.)

Civil procedure -- Costs -- Substantial indemnity -- Trial judge not erring in awarding plaintiffs substantial indemnity costs largely on basis of defendants' failure to admit liability at early stage when it was [page672] obvious that there was no defence to plaintiffs' claim -- Trial judge properly awarding premium of $350,000 to reflect need to encourage counsel to provide access to justice for impecunious plaintiffs by assuming risk of delayed payment or non-payment.

Civil procedure -- Costs -- Premium -- Defendants refusing to admit liability in personal injury action despite fact that it was obvious that there was no defence to plaintiffs' claim -- Trial judge not erring in awarding premium of $350,000 to reflect need to encourage counsel to provide access to justice for impecunious plaintiffs by assuming risk of delayed payment or non-payment.

Damages -- Personal injuries -- Loss of future income -- Plaintiff suffering from mild cognitive impairment and severe anxiety as result of smoke inhalation while trying to escape fire in apartment building -- Real possibility existing that plaintiff's career as engineer could be significantly affected -- Award of $250,000 for future loss of income reasonable.

Damages -- Personal injuries -- Pain and suffering -- Mother and son passing out in stairwell while trying to escape fire in apartment building -- Mother suffering permanent organic brain damage as result of smoke inhalation -- Injuries leaving mother unemployable and dependent -- Son suffering from mild cognitive impairment and severe anxiety -- Trial judge awarding mother general damages near upper end of scale and awarding son general damages of $100,000 -- Awards reasonable.

Torts -- Negligence -- Apportionment of liability -- Tenant starting fire in apartment building through careless smoking and then leaving his suite door open instead of closing it to keep smoke in -- Owner/property manager not having installed self-closing devices on doors in suites and on stairwell doors -- Open doors being major cause of disaster and of plaintiffs' smoke inhalation injuries -- City failing to correctly interpret and enforce by-law in approving plans for building without self-closing devices in 1974 and in granting owner extension of time to retrofit building to install self-closing devices in 1994 -- Tenant, owner and City all negligent -- Trial judge apportioning liability at 10 per cent against tenant, 20 per cent against City and 70 per cent against owner -- Liability reapportioned on appeal -- Tenant 20 per cent liable, owner 45 per cent liable and City 35 per cent liable.

The plaintiff Z and her son P succumbed to smoke inhalation and were injured when they tried to escape a fire in their apartment building by taking the stairs to the roof. The fire started in the defendant D's apartment. After discovering the fire, D left his unit without closing his suite door. The door remained open as the suite was not equipped with a self-closing device ("SCD").

The plaintiffs sued D, the owner and property manager of the apartment building (collectively"A") and the City of Toronto. The trial judge found that all the defendants were negligent. D's careless handling of a cigarette caused the fire. When the building plans were put forward in 1974, the failure of the City to require SCDs on all suites in accordance with its by- law was an act of negligence for which the City was liable. A had a duty to take positive action to make its premises reasonably safe when it first bought them in 1986. Further, it knew or ought to have known of recent developments relating to fires in high rises and to have placed SCDs on all suites. A was negligent in failing to properly maintain [page673] the SCD on the 5th floor stairwell door which would have ensured that the door was closed and latched and would not blow open at flashover by the wave of air pressure generated at that time. The trial judge assessed the degree of fault among the defendants as 10 per cent against D, 20 per cent against the City, and 70 per cent against A.

The trial judge awarded damages in favour of the plaintiffs in the amount of $3,232,009.20. Z suffered severe injuries due to smoke inhalation when she was trapped in the stairwell. She had permanent organic brain damage. The trial judge found that she had been reduced from an independent, respected, confident, self-supporting, employed mother of two sons to an unemployable, unsociable, dependent person, no longer able to be the mother, rather now dependent upon her sons for emotional support. She had reasonable health and a normal life expectancy, but she had severe cognitive deficits. She had a reasonable possibility of coming to dementia earlier than she would have. The trial judge concluded that Z was a candidate for an award of general damages towards the upper end of the scale. P suffered permanent, though mild, cognitive deficits as a result of smoke inhalation. The emotional and psychological consequences of the fire for him were severe, altering his personality, restricting his ability to engage in a full social life and burdening him with chronic anxiety and emotional constriction. P was awarded general damages in the amount of $100,000 and $250,000 for future loss of income.

The trial judge awarded counsel fees to the plaintiffs on a substantial indemnity scale at $1,120,000 plus a premium of $350,000. There were two offers to settle made by the plaintiffs which the trial judge found did not meet the requirements of rule 49.10(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The second offer was extremely close to the amount awarded by the trial judge. Counsel for the plaintiffs submitted at trial that, given that the second offer was a "near miss" in respect of engaging rule 49.10(1), the trial judge should exercise his discretion to award substantial indemnity costs under rule 49.13. However, the trial judge found that his discretionary power under rule 49.13 did not extend to a case where the plaintiff's offer was greater than the recovery. The trial judge then considered whether the conduct of the defendants provided a basis upon which he could order substantial indemnity costs apart from Rule 49. He reviewed a number of factors, including: the failure of the defendants to respond to the plaintiffs attempts to settle; the failure to admit any liability at all; the failure to respond in a timely way to requests for advance payments to assist in Z's rehabilitation; and the failure to admit in a timely fashion that Z would never return to work. The defendants' failure to admit liability at an early stage, when it was obvious that there was no defence to the plaintiff's claims, was a dominant factor in the trial judge's consideration. The premium was awarded to reflect the need to encourage counsel to provide access to justice for the impecunious plaintiff by assuming the risk of delayed payment as well as possible non- payment. The delay in payment for eight years in this case, with possibly two or more years to come as the appeal process continued, was a risk that was assumed by counsel for the plaintiffs in fulfillment of the duty to provide access to justice for the legitimate claims of impecunious parties. The trial judge held that this, combined with the uncertainty so long as liability was not admitted, was a basis for a premium to recognize the very real cost of carrying the plaintiffs for that time.

Counsel for the City made a settlement offer to the other defendants based on the assumption that all defendants would be found liable and that they would end up paying D's share as he was impecunious. The proposal assumed a 3:1 ratio between the defendants and the City after D's share was rateably apportioned, so that the defendants would pay 75 per cent and the City 25 per cent of the damages. This offer was made pursuant to rule 49.12(1) of the Rules of Civil Procedure. The [page674] trial judge concluded that when the judgment was compared with the City's offer, the City had bettered its offer to absorb 25 per cent of the damages. He awarded the City its costs payable by the defendants from seven days after the offer was made, and fixed the costs on a partial indemnity basis in the amount of $85,000. The defendants appealed.

Held, the appeal should be allowed in part.

D's liability should have been higher. He was not only the instigator of the fire, but had he shut his door in accordance with signs posted throughout the building, the smoke would have been confined to his unit. The trial judge apparently did not take this into account in apportioning liability.

The trial judge properly found that the City failed to correctly interpret and enforce its own by-law in approving the plans without SCDs on all suite floors, but he erred in restricting the City's negligence to that one event. The City had the opportunity to rectify the lack of SCDs on suite doors in 1994 when A applied for an extension of time to retrofit the building in accordance with the provincial Fire Code. The City's representative was aware that SCDs were an important part of fire safety, but approved A's application for an extension of time to install SCDs on suite doors solely on grounds of financial hardship. In view of the by-law and the public knowledge of the serious risk created by the lack of SCDs in high-rise apartments, he ought not to have done so. The trial judge found that A's negligence went on for years and that its failure to install SCDs was the single greatest contributor to the disaster. It was appropriate that A assume a greater portion of the liability. Liability should be reapportioned as follows: 20 per cent to D; 35 per cent to the City; and 45 per cent to A.

An appellate court is not justified in interfering with the trial judge's assessment of damages unless the amount awarded is either so inordinately low or so inordinately high that it must be a wholly erroneous estimate of the damage. While the award of general damages to Z may have been at the high end of the appropriate range, there was no basis for interfering with it. That was also true of the award of general damages to P. In awarding P $250,000 for future loss of income, the trial judge took into account medical evidence that P suffered from cognitive impairment and that there was a realistic possibility that he would suffer from early dementia. He also found that there was a real possibility that P's career as an engineer would be significantly affected. The award was not unreasonable. The trial judge did not err in awarding costs on a substantial indemnity basis or in awarding a $350,000 premium.

As a result of the re-apportionment of liability, the City no longer could be considered to have bettered its offer to the other defendants. It was not entitled to an award of costs payable by the other defendants.

APPEAL from a judgment of Lane J. (2001), 24 M.P.L.R. (3d) 248, [2001] O.J. No. 4720 (Q.L.) (S.C.J.) for the plaintiffs in an action for damages for personal injuries.

Andrews v. Grand & Toy Alberta Ltd., 1978 1 (SCC), [1978] 2 S.C.R. 229, 83 D.L.R. (3d) 452, consd Other cases referred to Bakhtiari v. Axes Investments Inc., [2001] O.J. No. 4720 (QL), (2001), 24 M.P.L.R. (3d) 248 (S.C.J.), supp. reasons (2003), 42 M.P.L.R. (3d) 228 (Ont. S.C.J.); MacMillan v. Ontario (Minister of Transportation and Communications) (2001), 24 M.V.R. (4th) 15, [2001] O.J. No. 1891 (QL) (C.A.), revg [1998] O.J. No. 2763 (QL), 64 O.T.C. 285 (Gen. Div.); Padfield v. Martin (2003), 2003 36239 (ON CA), 227 D.L.R. (4th) 670, 64 O.R. (3d) 577, 34 C.P.C. (5th) 59 (C.A.), supp. reasons [2003] O.J. No. 2794 (C.A.) [page675] Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 49.10(1), 49.12(1), 49.13

Barry A. Percival, Q.C., for appellants. Stuart Forbes, Q.C., for City of Toronto. Ian W. Outerbridge, Q.C., and Cynthia R.C. Sefton, for respondents.

BY THE COURT: --

Nature of Appeal

1This action arises out of a fire that occurred January 6, 1995, at the appellant's premises, known as 2 Forest Laneway in the former City of North York. None of those who stayed in their apartment were injured. Six people died and several others were injured when they were overcome by smoke in the stairwells of the apartment building. Nine actions were brought and were ordered tried together. Lane J. heard the action that forms the subject matter of this appeal. The damages in the other actions are somewhat in dispute and counsel have agreed to abide by the result as to liability in this action.

2The trial judge gave thorough and detailed reasons. His diligence greatly simplifies our task. The reasons are reported at [2001] O.J. No. 4720 (QL) and (2001), 24 M.P.L.R. (3d) 248 (Ont. S.C.J.). They include a detailed summary of the facts, which we need not repeat. We will refer to the respondents (Zari Banihashem-Bakhtiari and Pedrum Sodouri) as Zari and Pedrum respectively as this is how they are referred to in the trial judgment.

3The Fire Marshall, William Hiscott, determined the cause of the fire to be consistent with a cigarette burning on a couch in apartment 509, a unit rented by the defendant, Merv Doctorow. After discovering the fire, it appears that Mr. Doctorow opened the balcony door, then exited his suite leaving the suite door open. As the suite door was not equipped with a self-closing device (SCD), the suite door remained open.

4The fire spread into the hallway and then into the stairwell. The plaintiffs Zari and her son Pedrum were tenants on the 17th floor who fled their apartment into the stairwell and eventually began climbing towards the roof. Several floors above theirs they succumbed to smoke inhalation and were injured.

5Following a 39-day trial without a jury, the trial judge awarded damages in favour of the plaintiffs in the amount of [page676] $3,232,009.20. The defendants Axes Investments Inc., the registered owner of 2 Forest Laneway, Tandem Group Management Inc., the property managers (collectively"Axes"), the City of Toronto, successor to the former City of North York, and Mr. Doctorow were all found to be negligent. The trial judge found as proven acts of negligence:

(i) Doctorow's careless handling of a cigarette caused the fire and contributed to the injuries that ensued by leaving his suite and balcony doors open.

(ii) When the building plans were put forward in 1974, the failure of the City to require SCDs on all suites in accordance with its by-law was an act of negligence for which it was liable.

(iii) Axes had a duty to take positive action to make its premises reasonably safe when it first bought the premises in 1986. Further, it knew or ought to have known of recent developments relating to fires in high rises and to have placed SCDs on all suites.

(iv) Axes was negligent in failing to properly maintain the SCD on the 5th floor stairwell door which would have ensured the door was closed and latched and would not blow open at flashover by the wave of air pressure generated at that time.

6He assessed the degree of fault among the respective defendants as follows: Mr. Doctorow 10 per cent; the City 20 per cent; Axes 70 per cent. In addition, the trial judge awarded counsel fees to the plaintiffs on a substantial indemnity scale at $1,120,000 plus a premium of $350,000 and disbursements of $193,402. The trial judge also awarded costs to the co-defendant, City of Toronto, payable by Axes, Paul Reid and Van Forbell, fixed at $85,000.

Issues on Appeal

7Only Axes appealed the issue of liability to Zari and Pedrum but, at the outset of this appeal, Axes abandoned that issue. This appeal therefore relates to the apportionment of liability, the quantum of general damages for the respondents, future loss of income and the costs of the appeal. There is also a cross-appeal with respect to two aspects of future care costs. In relation to the future care costs of Zari, it was conceded that there was a mathematical error of $79,000 because the incorrect life expectancy factor had been used. Accordingly, subject to what we say later, that amount shall be added to the judgment. [page677]

Apportionment of Liability

8We begin by acknowledging the narrow scope of appellate review in this area. A re-apportionment of liability sought on appeal will only be granted in strong and exceptional cases.

9The trial judge's reasons for apportioning the damages as he did are summarized at para. 172 of his judgment and are reproduced below:

The defendant Merv Doctorow negligently allowed the fire to start. The Axes/Tandem defendants were the occupiers and failed in their duty in the manner described above. The City failed to properly interpret and enforce its own by-law. Each of these acts or omissions contributed to the plaintiffs' injuries. In considering the issue of the comparative negligence of each, I am struck by the central role played by the absence of SCDs on the suite doors, and the failure of the 5th floor fire stair door closer, aspects in which Mr. Doctorow played no part; and by the open fire stair door in which neither Doctorow nor North York played a role. The City's operative negligence occurred once, in the process of approval of the plans over 20 years before the fire. The negligence of Axes/Tandem went on for years as they failed to remove the risk which they knew or ought to have known was created by the absence of these essential safety devices, and failed to maintain the fire stair doors. They must bear the greater part of the loss.

10With respect to Doctorow, as indicated, the trial judge held him 10 per cent liable. In coming to that conclusion, he found at para. 15:

His careless handling of a cigarette caused the fire and so contributed to the injuries and deaths which ensued. The plaintiffs are entitled to judgment against him.

At para. 19 of his reasons, the trial judge quoted from the report of Mr. Hiscott as follows:

Due to the actions of the occupant opening the patio door and leaving the suite door open, the fire burned freely consuming most of the combustibles contained in the couch.

Further, at para. 22:

Mr. Robert Harpur P. Eng., also from the OFM, holds a degree in engineering and has been in fire protection work since 1978. He has studied smoke movement and smoke control design and has investigated many fires. He was qualified as an expert. His evidence was also essentially uncontradicted and I accept it. He performed fire resistance tests on a typical suite door from 2 Forest Laneway and found that, although it burned through to the extent of a 60 mm. hole in 13 minutes, less time than permitted under 1995 standards to be rated for fire resistance, it nevertheless: "... remained essentially intact and in place and would have presented a useful barrier against the spread of fire and smoke in an actual fire." (Report, Ex. 13, vol. 1, p. 212). Of course, it would have had to have been closed to perform such a function. [page678]

In a later portion of his reasons, at para. 117, the trial judge stated:

If the suite door to 509 had been closed it would have at least been a useful barrier against the spread of the fire and smoke; indeed, Mr. Hiscott and Mr. Silvestri felt that they would have been confined to 509 itself. Had that been the case, there would likely have been no injuries or fatalities from smoke.

11It is apparent that this finding applies equally to Mr. Doctorow. He was not only the instigator of the fire but had he also shut the door in accordance with signs posted throughout the apartment building directing tenants to do so, the smoke would have been confined to his unit. It does not appear that the trial judge took this into account in apportioning liability. Accordingly, we are of the opinion that Mr. Doctorow's liability should have been higher.

12We turn now to the issue of whether the trial judge erred in his apportionment of liability with respect to the City. In assessing the City's apportionment, the trial judge found at para. 172 that the City's operative negligence occurred once "in the process of approval of the plans over 20 years before the fire". The trial judge specifically held at para. 116 that "Bylaw 22000 required that 2 Forest Laneway be equipped with SCDs on all suite doors." The trial judge properly found that the City failed to correctly interpret and enforce its own by-law in approving the plans without SCDs on all suite doors. With respect, however, we think that the trial judge erred in restricting the City's negligence to that one event.

13Leaving aside the fact that the City apparently failed to enforce its by-law, the City certainly had an opportunity to rectify the lack of SCDs on suite doors in 1994 when Axes applied for an extension of time to retrofit the building in accordance with the provincial Fire Code. Mr. Cleary, the City's representative in charge of deciding on applications for an extension:

acknowledged that he knew that heat and smoke are two products of combustion; that in high-rise fires, smoke is the primary cause of injuries and death; that he was aware that a feature of fires in high-rise buildings is the stack effect, and the consequent migration of smoke; that in 1994 he knew what a self closing device was, that its purpose was to return the door to the closed position and that keeping a door to a suite in the closed position was "... an important part of fire safety."

(At para. 146)

Despite this, Mr. Cleary approved Axes' application for an extension of time to retrofit the building including time to install SCDs on suite doors. He did this solely on grounds of financial hardship. The trial judge found at para. 149:

Mr. Cleary reached a decision which is supportable upon the financial criteria recommended by the Fire Marshall's October, 1992, circular. It was [page679] entirely reasonable for Mr. Cleary to have relied upon the criteria recommended by the OFM in that circular.

14In our opinion, while this may have applied to the rest of the retrofit, in view of By-Law 22000 and the public knowledge of the serious risk created by the lack of SCDs in high-rise apartments, he ought not to have done so. The trial judge alluded to this public knowledge and great danger at paras. 67-69 and 82 of his judgment in discussing the liability of Axes as owner of the building. However, he made no reference to the City and in our view his conclusion is also applicable to the City. The City missed the opportunity to rectify the situation and, in light of the trial judge's findings concerning the closure of the suite door, this had to be a significant factor in the tragic outcome. Accordingly we are of the view that the trial judge underestimated the City's liability.

15Axes further submits that the trial judge also underestimated the City's liability when he found that although Chief Hudson was negligent in failing to use the Emergency Voice Communication System (EVAC), that negligence did not cause or contribute to the plaintiffs' injuries. Axes submits that had Chief Hudson looked at the annunciator panel upon his arrival, he would have seen that the smoke detectors were going off in the stairwells and, using the EVAC system, advised tenants to stay in their apartments or to return to their apartments.

16We would not give effect to this submission. We note that there was no evidence that Chief Hudson was negligent because he may not have gone immediately to the annunciator panel. He was concerned with deploying his forces to fight the fire and putting in a second alarm. The trial judge found that Chief Hudson's duty to communicate with the tenants by using the EVAC system did not arise until 5:24 a.m., at which time in all probability the EVAC system had shorted out and was not operational. He also found that it was "very probable" that the plaintiffs had left their apartment before the Fire Department arrived. Moreover, he found (at para. 166) that smoke probably overcame the plaintiffs between 5:20 and 5:25 a.m. and it was "most improbable" that even "perfect communication" would have assisted them since they were trapped on the 30th floor "13 smoke-filled floors away from their apartment".

17Returning to the question of apportionment, Axes' overall submission is that its liability should not be greater than that of the City. The trial judge found the negligence of Axes went on for years. It included not only its failure as owner and occupier of the Building to install SCDs on all suite doors but also its failure to maintain SCDs that had been installed on the fire exit doors [page680] leading to the stairwells. In respect of the latter finding, the trial judge found that it was "the single greatest contributor to the whole disaster" (at para. 62). While that finding may be questionable in light of the trial judge's findings regarding the importance of SCDs in each unit, we nonetheless consider it appropriate that Axes assume a greater portion of the liability.

18Based on the foregoing analysis, we are of the view that the trial judge erred in his apportionment of liability for negligence. Taking into account the full extent of the responsibility of Mr. Doctorow and the City, we are of the view that liability should be apportioned as follows:

Doctorow: 20 per cent

North York: 35 per cent

Axes: 45 per cent

General Damages

19The only issue with respect to Zari is the award for non-pecuniary general damages. In oral argument, Axes abandoned its appeal respecting future care costs.

20Zari suffered severe injuries due to smoke inhalation when she was trapped in the stairwell. She has permanent organic brain damage. The trial judge summarized the nature and extent of her injuries at para. 247 of his reasons as follows:

In my view, the quality of Zari's life has been destroyed. She has been reduced from an independent, respected, confident, self-supporting, employed mother of two sons who looked to her for guidance, to an unemployable, unsociable, dependent person, no longer able to be the mother, rather now dependent upon her sons for her emotional support. Once she has done her banking and her shopping, she has no activities to stimulate her socially or cognitively. She does not travel for pleasure. Her course is a correspondence course, lacking in the give and take of a classroom. Her short-term memory is so bad she often has to re-play movies to pick up the plot. She has a similar problem when reading. She has reasonable health, except for her shoulder and neck pain (for which she goes to the gym occasionally) and a normal life expectancy, but she has severe cognitive deficits. It is true that she is in a better situation as to health than any of the trilogy plaintiffs. Nevertheless, the result of her injuries has devastated her former life. She has a reasonable possibility of coming to dementia earlier than she would have. Such a plaintiff is a candidate for an award towards the upper end of the scale: MacMillan v. Ontario, [1998] O.J. No. 2763 (O.C.J.).

21In MacMillan v. Ontario (Minister of Transportation and Communication), [1998] O.J. No. 2763 (QL), 64 O.T.C. 285 (Gen. Div.), Jenkins J. assessed the plaintiff's damages at $210,000 in respect of injuries that were similar to the injuries sustained by [page681] Zari in this case. An appellate court is not justified in interfering with the trial judge's assessment of damages unless the amount awarded is either so inordinately low or so inordinately high that it must be a wholly erroneous estimate of the damage. While the award here may have been at the high end of the appropriate range, we are not prepared to interfere. The trial judge's findings of fact are reasonably capable of supporting the amount awarded. See: Padfield v. Martin (2003), 2003 36239 (ON CA), 64 O.R. (3d) 577, 227 D.L.R. (4th) 670 (C.A.) at p. 592 O.R. In coming to this conclusion, we note that in oral argument Axes abandoned its position that the trial judge had erred in finding that Zari had a reasonable possibility of suffering early dementia. That factor, which played a role in the assessment of future care costs, is also significant with respect to the assessment of general damages.

22Pedrum was awarded $100,000 in non-pecuniary general damages. In arriving at that award the trial judge found at para. 276 of his reasons:

In my opinion the weight of the medical evidence -- Drs. Butler, Cancelliere, Upton and Weber and to some extent Dr. Travis and also Dr. Stewart in cross-examination -- supports the view that Pedrum has suffered permanent, although mild, cognitive deficits as a result of the fire in which he experienced 10 [per cent] CO poisoning, a significant period of hypoxia and smoke inhalation, all of which contributed to his impairment. There is a possibility, which I regard as a real possibility, in the order of 10 per cent, that at some future time he may experience some degree of dementia perhaps five years earlier than would have been the case absent the fire. He almost certainly retains sufficient intellectual capacity to achieve an engineering degree, but his career may suffer. He will actually never know. I deal elsewhere with the economic consequences of that, but this is the place to consider the frustrations engendered by it. Apart from intellectual function, the emotional/psychological consequences of the fire for him have been severe, altering his personality, restricting his ability to engage in a full social life and burdening him with chronic anxiety and emotional constriction. In considering the quantum of general damages, I also must recall the experiences of the day itself, apart from the sequelae: the terror, the pain and suffering of the hospital stay and the immediate as well as long term disruption of his life. I assess his general damages at $100,000.

23Not unlike the situation with Zari, the findings of the trial judge were reasonable, and, while the award may be at the high end of the range, we are not prepared to interfere.

Future Loss of income

24The trial judge awarded Pedrum $250,000 for future loss of income. In doing so, he took into account the medical evidence that showed that Pedrum suffered from cognitive impairment and that there was a realistic possibility that he too would suffer from early dementia. He also found that there was a real possibility [page682] that his career as an engineer could be significantly affected. Over a lifetime of work, and given the nature of his occupation, this amount is not unreasonable. We are unable to find any error in the trial judge's assessment of this head of damages.

25For these reasons, the appeal by Axes respecting damages is dismissed.

The Cross-Appeal on Damages

26In his initial set of reasons, the trial judge found that Zari would "clearly benefit today from the services available in a setting which left her free to come and go, but assisted her with activation programs and had therapeutic modalities as well" (at para. 231). He also found that Zari's "quality of life would be greatly enhanced by the social activation and rehabilitative opportunities available in the proper setting. Indeed, this is the only way to compensate her for the loss of her former life. The debate in the trial over the specific sites . . . surely did not cover all possibilities" (at para. 231).

27Although he had tables of costs in the future care consultant's report relating to Zari overcoming various disabilities, a revision was put in during the evidence and it was agreed that these figures would need to be redone after the trial judge's findings were available. In this context the trial judge also recognized the possibility that Zari might resist the semi-institutional setting that was being suggested and that this was a contingency to be taken into account in fixing the final award. After the release of his November 30 reasons, the trial judge met with the parties and asked counsel for Zari to advise him whether Zari wished to enter a semi- institutional setting or to live independently with assistance. Counsel for the plaintiffs objected on the basis that the question was not relevant having regard to the trial judge's earlier finding. The trial judge declined to give effect to this objection. They then complied with the trial judge's request and reported that she wanted to live on her own.

28Zari submits that the trial judge erred in asking for this information. The trial judge was alive to this submission. At para. 4 of his supplementary reasons (reported at [2003] O.J. No. 158, 42 M.P.L.R. (3d) 228 (S.C.J.)), he stated:

Counsel for Zari submits that there is no "contingency" to be applied to the future care costs on the basis that Zari will resist an institutional setting; rather it is an issue of causation. The Court has already found that the negligence of the defendants caused the injuries to Zari and that "her present condition derived from the fire sufficed to make this kind of care reasonable now" (para. 231, November 30, 2001 Reasons). Further the Court has found that this is the only way to compensate her for the loss of her former life. The [page683] plaintiffs submit that whether and how Zari may use the amounts awarded to her for the value of future care costs is irrelevant to the award and cannot be relied on by the defendants to attempt to reduce the award in a fault based system. Reference is made to Andrews v. Grand & Toy Alberta Ltd. (1978), 1978 1 (SCC), 83 D.L.R. (3d) 452 at 466 (S.C.C.) where the Supreme Court observed that it was not for the court to conjecture how a plaintiff will actually spend the sums awarded to him after they have been awarded.

29As the trial judge observed, the choice in Andrews v. Grand & Toy Alberta Ltd., 1978 1 (SCC), [1978] 2 S.C.R. 229, 83 D.L.R. (3d) 452 was between home care and the less expensive institutional care. The Supreme Court held that the setting that was the more advantageous to the plaintiff should be awarded. The trial judge then went on at para. 8 of his supplementary reasons to distinguish the present case as follows:

In my opinion, it is not reasonable to base an award to Zari on the cost of a type of care which would help her, but which she will not use. While Ms. Whitham and the court thought it reasonable that she would be helped by living in such an environment even now, the choice must be hers, and she has made it. It is the mirror image of Andrews. Here, the plaintiff claims to live independently which may or may not be the less expensive choice. Ms. Whitham's letter of January 9, 2002, (Ex. 98, tab 8) suggests that it will in fact be more costly, but other evidence is to the contrary. For my purposes, it does not matter. The point is not that Zari must mitigate her loss by accepting a lesser standard of care, there is no such requirement on an injured plaintiff. The point is rather that, faced with two reasonable possibilities for her immediate living arrangements, she has chosen to remain in her own home independently. Therefore, the cost of her future care while she remains in her own home should be the basis upon which the award for the next several years to perhaps age 57 is based. Thereafter, the impact of Dr. Upton's estimate of a 10-20 [per cent] chance of premature need for assisted housing must be considered and then a reasonable schedule for moving towards the full costs of such housing as Zari ages.

30The trial judge did not misinterpret Andrews. The issue of where Zari would live was left open in his November 30 reasons and the trial judge made it clear that before deciding the matter he needed to have further evidence. Having received that evidence, he was entitled to take Zari's express wishes into account in awarding the future care costs he did. In so doing he was not departing from the principle of full compensation enunciated in Andrews.

31Accordingly, the cross-appeal is dismissed.

Costs at Trial

The plaintiffs' costs

32The trial judge awarded the respondents their costs on a substantial indemnity basis fixed at $1,470,000 plus disbursements. This figure of nearly $1.5 million included a premium of [page684] $350,000 (the trial judge's endorsement as to costs is reported at (2003), 2003 32527 (ON SC), 66 O.R. (3d) 284, [2003] O.J. No. 3071 (S.C.J.)).

33There were two offers to settle made by the respondents which the trial judge found did not meet the requirements of rule 49.10(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The second offer made by the respondents was extremely close to the amount awarded by the trial judge. Counsel for the respondents submitted at trial that, given that the second offer was a "near miss" in respect to engaging rule 49.10(1), the trial judge should exercise his discretion to award substantial indemnity costs under rule 49.13. However, the trial judge found that his discretionary power under rule 49.13 did not extend to a case where the respondent's offer was greater than the recovery.

34The trial judge then considered whether the conduct of the defendants in this action provided a basis upon which he could order substantial indemnity costs apart from Rule 49. He reviewed a number of factors which included:

(i) the failure of the appellants to respond to the respondents' attempts to settle;

(ii) the failure to admit any liability at all;

(iii) the failure to respond in a timely way to requests for advance payments to assist in Zari's rehabilitation; and

(iv) the failure to admit in a timely fashion that Zari would never return to work.

35It is clear that the failure of the appellant to admit liability at an early stage was a dominant factor in the trial judge's consideration. He stated at paras. 18 and 19 of his costs endorsement:

Taking the three defendants, Axes, the tenant and the City, as a group, it is obvious that there was no defence to the plaintiffs' claims. The plaintiffs were entirely innocent; at the very worst they might have conceivably been open to a modest percentage of contributory negligence for leaving the apartment, but that is stretching matters. The tenant did not defend and he was thought to be uninsured. Nothing could realistically be expected from him if he was solely liable. But, at least after the inquest, it was, or ought to have been, clear that the owners would be liable for something because the rapid spread of the smoke was only possible due to the open fire door at the 5th floor stairwell. These doors are required to close automatically and this one clearly did not. That the owner could escape without any contribution at all was a known impossibility on that fact alone. The view of the Axes defendants may be judged by the fact that they called no evidence in their own defence. The obvious inference is that they knew they could not defend their maintenance practices. The City's liability was somewhat more problematic, although, despite its protestations of being 'ambushed', it ought to have [page685] known from early days that it was seriously exposed on the issuance of the permit. The strange saga of Mr. Mori and the memo gives credence to the view that the City did indeed know it was exposed.

The conduct of defendants who have no arguable case against the plaintiff but nevertheless insist on a protracted trial has been criticized, and substantial indemnity costs awarded on several occasions. The plaintiffs referred to [Dube v. Penlon Ltd. (1992), 1992 7449 (ON CA), 10 O.R. (3d) 190 (Gen. Div.)] where Zuber J. fixed solicitor and client costs because it should have been obvious that the plaintiff, catastrophically injured by an overdose of anaesthetic, was blameless and liability rested with one or more of the defendants. That decision has been referred to at least twice in subsequent cases in the Court of Appeal as an exercise of discretion, and not a rule of law, but without criticism of it as the former. The present action is on all fours with the footnoted cases under review: the plaintiff Zari was catastrophically injured in circumstances where she could not be liable, and those who were potentially liable were all sued. The real fight was among them as to their shares of the liability to the plaintiff. The Axes defendants in particular, by refusing to admit any liability, put the plaintiffs to the prolonged and unnecessary task of proving their liability, which the plaintiffs duly did on the precise basis foreshadowed by the testimony at the Inquest and known to the defendants from the outset. This conduct strongly supports the request of the plaintiffs for substantial indemnity costs.

36The appellants submit that this is not a case for an award of costs on a substantial indemnity basis. They assert that the trial judge complimented all counsel, including counsel for the appellants, at the end of the trial on their professional and courteous conduct throughout the trial. This is also reflected in the trial judge's conclusion to his costs endorsement, at para. 99:

This trial began over two and one-half years ago, on January 8, 2001. From that day to this, I have been the beneficiary of the assistance of some of the finest counsel in the Province. I am grateful to them all.

37It should be noted that the trial judge, when referring to the conduct of the appellants, was not referring to their solicitors. His comments were confined to their clients and those who instructed them.

38The appellants further attack the costs award on the basis that it is inconsistent in the sense that if the liability portion of the case was clear from the outset this is not a case for a substantial indemnity costs award and a premium. However, the trial judge pointed out that the preparation involved complex evidence as to the spread of the fire and especially the smoke movement within the building; the relationship of the Building Code violations to the events; the study and understanding of Fire Department procedures; all of which required many days of investigation. (Because the appellants did not admit liability, it was necessary for the plaintiffs to lead this evidence which would otherwise have related to the apportionment of liability as between Axes and the City). The trial judge also concluded that [page686] this was a catastrophic injury case which was complex medically and in relation to damages -- particularly in relation to the cost of future care. Further, there was a significant issue on the question of the early onset of dementia and whether it could be triggered by an incident of hypoxia, or whether it was essentially assigned to patients with repeated blows to the head, such as boxers.

39Counsel for the respondents sought a premium on the award of costs on more or less the same basis upon which they had sought costs to be fixed on a substantial indemnity scale: success, the indifference of the appellants to the plight of Zari; failure to accept the realities of the case and their lack of a defence. In addition, they premised their claim for a premium upon the following written submission at trial:

It is submitted that this is one of those cases where the Plaintiffs lack the resources to fund a lengthy complex trial, but it is a case which, in the interest of justice, ought to have proceeded and competent and skilled counsel must continue to take on the challenge and continue to step forward and accept such cases.

Further:

The Plaintiff's counsel fees remain unpaid to date from 1995 to the present. The work in process has therefore been carried for over eight years with substantial amounts expended for disbursements by counsel. The Plaintiffs' law firm in effect has been the direct lender to the defendants. The work in process has a value in excess of $1,000,000. The actual cost to the Plaintiff's law firm is its cost of carrying that value is in excess of $350,000. It is submitted the defendants should pay a premium of $350,000 for this burden of the Plaintiffs and their counsel and for the privilege of conducting the litigation in the manner they did. The defendant Axes/Tandem has filed a Notice of Appeal on both liability and damages. The defendant City shelters under the damages appeal. Not only are the Plaintiffs' lawyers' fees unpaid to date, but there is a real prospect that the plaintiffs will not collect any of their costs until after all appeals available to the defendants are exhausted.

40When considering the premium issue, the trial judge made the following observations at paras. 32 and 34:

The defendants submitted that the plaintiffs could not have it both ways. Having complained of the failure of the defendants to admit liability when it was a non-issue, they cannot now claim a premium for their great risk of non- recovery. The plaintiffs respond that the defendants insisted in keeping the issue alive and so must bear the cost of that decision. In my view, the risk kept alive by the defendants' failure to admit liability was not so great that it alone justifies a premium, but there is another factor: the need to encourage counsel to provide access to justice for the impecunious plaintiff by assuming the risk of delayed as well as possible non-payment.

. . . . . [page687]

In my view, the delay in payment for eight years with possibly two or more years to come as the appeal process continues, is a risk that was assumed by counsel for the plaintiffs in fulfillment of the duty to provide access to justice for the legitimate claims of impecunious parties. Combined with the uncertainty so long as liability was not admitted, it is a basis for a premium to recognize the very real cost of carrying the plaintiffs for that time. I am therefore of the view that a premium is called for. The plaintiffs seek $350,000 as an estimate of the real value of the service of carrying the plaintiffs for so long.

41There is no question that the costs award in this case is generous. However, with two exceptions, we see no basis for interfering with the trial judge's award of costs.

42Our first point of disagreement with the trial judge is in his award of costs in respect to a separate action against certain doctors and the hospital in which Zari was treated. The appellants were not parties to that action. The trial judge's reasoning in awarding these costs is to be found at para. 43 of his endorsement:

The plaintiffs brought an action against certain doctors and the hospital in which Zari was treated. It was held in abeyance and was dismissed when this action was completed. In my view, such an action was a necessary precaution to be taken by counsel for the plaintiffs to protect the clients' interests. That it was not dismissed until 2002 may well be related to the failure of the Axes defendants to admit liability. I think it was both reasonable and necessary and I will allow these charges.

43In our view, there is no proper basis for awarding costs against the appellants when they were not parties to the medical malpractice action. The trial judge suggests that perhaps the reason for not dismissing the action until 2002 may be related to the failure of the respondents to admit liability. He does not elaborate. While no doubt the medical malpractice action may have been a necessary precaution taken by counsel for the respondents, it is not a precaution that should be financed by the appellants.

44The second point of disagreement with the trial judge involves the award of substantial indemnity costs in respect to respondents' counsel appearing at the inquest related to the fire. Although we accept the rationale for an award of substantial indemnity costs insofar as it relates to the action itself, we do not agree that the factors considered by the trial judge in arriving at his conclusion in regard to the scale of costs in this action have anything to do with the inquest. There is no suggestion that the conduct of the appellants at the inquest in any way prejudiced the respondents. The costs of counsel appearing at the inquest should be on a partial indemnity basis. [page688]

45We would therefore grant leave to appeal the trial judge's costs order, but dismiss the appeal except with respect to the medical malpractice action and the costs of the inquest.

Costs as between the defendants

46Counsel for the City made a settlement offer to the appellants based on the assumption that all defendants would be found liable and that they would end up paying Mr. Doctorow's share as he was impecunious. The proposal assumed a 3:1 ratio between the appellants and the City after Mr. Doctorow's share was rateably apportioned so that the appellants would pay 75 per cent and the City 25 per cent of the damages. Costs, interest and any assignment of the judgment against Mr. Doctorow would be similarly treated. This offer was made pursuant to rule 49.12(1) of the Rules of Civil Procedure.

47The trial judge concluded that when the judgment was compared with the City's offer, the City had bettered its offer to absorb 25 per cent of the damages.

48The trial judge awarded the City its costs payable by the appellants from seven days after the offer was made for those costs associated with the continuation of the liability portion of the trial. He fixed the costs on a partial indemnity basis in the amount of $85,000.

49As a result of the re-apportionment of the liability share on this appeal, the City no longer can be considered to have bettered its offer. We therefore give leave to appeal this costs order and allow the appeal by vacating the said order.

Costs of the appeal

50If the parties cannot agree on the costs of the appeal, they shall have ten days from the release date of these reasons to deliver written submission, not to exceed five pages in length double-spaced, along with their bills of costs and any other relevant documentation.

51With respect to the differential between the costs for the inquest (varied from substantial to partial indemnity), if the parties cannot agree on the amount of the differential, they may deliver further written submissions within ten days of the release date of these reasons. Said submission shall not exceed two pages double-spaced.