Walker v. Ritchie, 2005 CanLII 13776 (ON CA)

DATE: 20050428

DOCKET: C40260

COURT OF APPEAL FOR ONTARIO

CATZMAN, GILLESE and LANG JJ.A.

B E T W E E N :

STEPHANIE SUZANNE WALKER, GARY WALKER, ROSEMARY WALKER, LAURA WALKER, ALYSSA WALKER and CHRISTINE WALKER, an infant, by her Litigation Guardian, GARY WALKER

Ronald G. Slaght, Q.C. and Elizabeth Bowker for the respondents

Plaintiffs (Respondents)

• and -

DONALD J. RITCHIE, HAROLD MARCUS LIMITED and THE WAWANESA MUTUAL INSURANCE COMPANY

Earl A. Cherniak, Q.C. and Andra L. Maxwell for the appellants

Defendants (Appellants)

A N D B E T W E E N :

STEPHANIE SUZANNE WALKER, GARY WALKER and ROSEMARY WALKER

Plaintiffs (Respondents)

• and -

THE WAWANESA MUTUAL INSURANCE COMPANY

Defendant (Appellant)

Heard: December 7 and 8, 2004

On appeal from the judgment¹ of Justice John H. Brockenshire of the Superior Court of Justice dated February 27, 2004.

GILLESE and LANG JJ.A.:

A. Introduction

1On a dark April night in 1997, 17 year-old Stephanie Walker (“Stephanie”) was driving a friend home along a country road. Further along the same road, Donald Ritchie was having trouble reversing his tractor-trailer into his driveway. When Stephanie came over the top of a hill, she could not see that the rear of Mr. Ritchie’s tractor-trailer was blocking her side of the road. Stephanie’s van struck the rear of the tractor-trailer. Stephanie suffered catastrophic injuries. With a great deal of support, Stephanie is able to live independently, but she will never be able to resume the life that she would have led but for the accident.

2Stephanie and her family sued Mr. Ritchie, who owned the tractor. As well, they sued Harold Marcus Limited (“Marcus”), the owner of the trailer. Marcus was also Mr. Ritchie’s employer. After a sixteen-day trial, Brockenshire J. found both defendants liable. He awarded Stephanie damages of $4,959,901.00 plus interest and awarded her family members damages under the Family Law Act, R.S.O. 1990, c. F.3. In addition, the trial judge awarded costs of $440,167.90 for legal fees plus a premium of $192,600.00.

3Mr. Ritchie and Marcus appeal on the quantum of the award for damages and on costs.

B. Issues

4This appeal raises issues as to whether the trial judge erred in:

1. holding that Marcus was not a protected defendant entitled to the limitation on its liability provided by s. 267.5 of the Insurance Act, R.S.O. 1990, c. I. 8;

2. assessing the quantum of Stephanie’s damages;

3. holding statutory non-earner benefits to be non-deductible;

4. modifying the discount rate set out in rule 53.09(1) of the Rules of Civil Procedure; and

5. quantifying costs including awarding a premium.

C. Facts

5At trial, Marcus conceded that it employed Mr. Ritchie, the owner and operator of the tractor. Marcus and Mr. Ritchie conceded that they were each an “owner” of the tractor and trailer respectively for the purposes of s. 192 of the Highway Traffic Act, R.S.O. 1990, c. H.8.

6Since 1993, Mr. Ritchie, an experienced truck driver, had worked for Marcus hauling garbage. At the beginning of his employment, Marcus provided Mr. Ritchie with a one-week training course on the operation of tractor-trailers. Marcus supplemented that training with an annual safety briefing, although that briefing did not address specific problems such as those that occurred on the night of the accident.

7The problem that occurred that night arose from Mr. Ritchie’s practice of parking the tractor-trailer on his property. He parked the rig on his property, not only with Marcus’s permission, but also with its encouragement, even though other alternatives were available. In giving its permission, Marcus made no inquiries as to the safety of this practice; it was concerned only that there be no downtime for the rig.

8There were, however, safety issues. When Mr. Ritchie reversed his rig onto his property, it blocked both lanes of the roadway. Indeed, two other drivers who testified at trial reported near accidents when they encountered Mr. Ritchie attempting to park the rig.

9On the night of the accident, the trailer’s elevated front axle caught on the crown of the road with the trailer blocking the roadway. When Mr. Ritchie saw the lights of the approaching Walker vehicle, he drove forward to pull the rig into the other lane. Before he could complete this manoeuvre, however, the Walker vehicle struck the rear of his trailer.

10From Stephanie’s perspective, although there were amber lights along the side of the trailer as she drove over the hill, their height made them indistinguishable from background lights in a nearby subdivision. The evidence at trial confirmed that the trailer could not be seen until after one drove past the headlights of the tractor. Accordingly, the trial judge found that there was nothing that Stephanie could have done to avoid the accident.

11In finding Mr. Ritchie 100% responsible for the accident, the trial judge found that Mr. Ritchie failed to give warning that his rig was disabled by flagging the Walker car down with a flashlight, putting out reflective triangles, engaging his hazard lights, or blowing his horn. The trial judge found Marcus, as employer, directly negligent for permitting Mr. Ritchie to park the rig in his driveway and in failing to train him properly in the safe operation of the rig. In addition, he found Marcus vicariously liable as Mr. Ritchie’s employer.

12At the time of the accident, Stephanie lived with her parents. Although she was in her last semester of a general program at high school, Stephanie had not made any post‑graduation plans. She was a very talented soccer player who, by all accounts, might have pursued a soccer scholarship to universities in the United States. For many years, Stephanie had focused her attention on soccer and athletics, but at the time of the accident she was showing increasing focus on academics. Her marks, which were already “above average,” were improving. The evidence established that both before and after the accident, Stephanie showed strong motivation to succeed at her chosen endeavours.

13While no decisions had been made about her future, Stephanie’s father, a retired high school teacher, had spoken with Stephanie about returning to school to complete sufficient Ontario Academic Credits (“OACs”) so that she would be eligible to attend university. Stephanie’s mother was a professional nurse. Both parents expected that all their daughters would attend post-secondary education. Both Stephanie’s older sisters attended university and both obtained degrees in education. Her younger sister attended community college.

14Different avenues were available to Stephanie to pursue a university education. Although she could not have entered university from a general program, she could have remained in high school for a further year to accumulate sufficient OACs, or she could have attended community college and then transferred to, or subsequently attended, university. The head of Stephanie’s guidance department testified that, increasingly, students attend community college followed by university. In 1997, a transfer from community college to university could be accomplished without OAC courses. Alternatively, Stephanie could have attended university as a mature student, had she waited to apply until she attained the age of twenty-one. It was possible also that Stephanie would have simply pursued a community college education, or would have stopped her education altogether. The accident, however, precluded Stephanie from following any of these options.

15As a result of the accident, Stephanie sustained a head injury, which left her in a coma for several weeks. She suffered irreversible cognitive deficits, including short-term memory impairment, slurred speech, and a general slowing in her ability to reason. She is no longer able to move her eyes smoothly, impairing her ability to read. Perhaps her most significant limitation is her inability to do activities simultaneously. She cannot think and do at the same time. For example, Stephanie cannot have a telephone conversation and simultaneously make a note about the contents of that conversation. Similarly, she must have a note-taker in class because she cannot both listen to a lecture and take notes at the same time. Stephanie is highly distractible. Daily living is hence exhausting; Stephanie requires more sleep than would be usual.

16With one-handed touch-typing, a limitation caused by her partial paralysis, Stephanie is able to use a computer. She uses a Palm Pilot to access schedules, names, and numbers because she has difficulty remembering more than one thing at a time. She is also assisted with daily living by access to the Internet and e-mail.

17As a result of her constellation of deficits, Stephanie is not competitively employable. If she is to maintain a job, it will be only with a benevolent employer. Even with such an employer, after a few months, brain-injured employees tend to lose their jobs. Even so, Stephanie very much wants to work and to contribute to society.

18In addition to her cognitive challenges, Stephanie has accident-caused physical challenges. She suffers from residual left side paralysis and walks with a cane. She has no voluntary movement in her left wrist or hand. By the time of trial, although she no longer received physiotherapy or any medical treatment, she needed periodic assistance from family and friends in stretching her left arm.

19In addition to her cognitive and physical limitations, Stephanie suffered a loss of her active social life and her close relationship with siblings and friends. Although Stephanie has somewhat improved in her ability to control her temper, the accident has left her with significant emotional and personality problems. Stephanie continues to engage in inappropriate behaviours with rigid thinking patterns common to those suffering brain damage. Stephanie is unable to appreciate other people’s perspectives. She is moody and easily agitated or frustrated. Stephanie has no social life.

20Stephanie will require lifelong support from specialists and psychologists. She will become increasingly dependent. Her disabilities will interfere with her ability to find a partner or to sustain an enduring relationship. As well, her problems will impair her ability to care for any children she may have.

21By the time of trial, Stephanie was completing a library technician program at Seneca College on a part-time basis and living independently in a student residence. She is able to use public transportation, cook light meals, and buy groceries. She manages her own banking. With the aid of various devices, Stephanie is able to provide for her own personal care. She regularly swims and exercises. Stephanie is very proud of her achievements, both at Seneca and with her independent living. She has been able to do volunteer jobs and, with an understanding employer, to hold down summer employment. All these accomplishments are important to ensure Stephanie does not again fall into the depression that she suffered post-accident.

22Given Stephanie’s injuries, the trial judge awarded her non-pecuniary damages of $250,000.00. With respect to her employability, the trial judge concluded – a conclusion that is not challenged – that Stephanie will be unable to maintain competitive employment, but she will likely earn some money during her lifetime earning the minimum wage.

D. Protected Defendant Issue

23The court’s decision in Vollick v. Sheard is being released contemporaneously with the release of the decision in the present case. The factual basis in Vollick is indistinguishable in principle from that in the present case. For the reasons given in Vollick, Marcus is not a “protected defendant” within the meaning of the Insurance Act.

E. Damages Issues

24Of the total damages award of approximately $4.9 million, the appellants challenge $1,140,679.00. That challenge relates only to certain components of the award for pecuniary damages. In particular, the appellants argue that the trial judge erred in:

1. assuming that Stephanie would have attended university;

2. applying earning statistics for all university graduates;

3. quantifying the loss of an interdependent relationship;

4. awarding expenses for a nanny;

5. awarding expenses for vocational rehabilitation and job coaching; and

6. awarding expenses for technology and a fitness membership.

25In addition, on damages-related matters, the appellants challenge the trial judge’s failure to deduct non-earner benefits from the pecuniary damages awarded to Stephanie and challenge his adjustment of the discount rate applied to the pecuniary award.

26Before considering the specific items challenged, it is appropriate to be mindful of the standard to be applied by an appellate court reviewing a trial decision on damages.

27In Banihashem-Bakhtiari v. Axes Investments Inc. (2004), 69 O.R. (3d) 671 (C.A.), leave to appeal to S.C.C. dismissed, [2004] S.C.C.A. No. 145, this court said at para. 21:

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.

28In Delrina Corp. v. Triolet Systems Inc. (2002), 58 O.R. (3d) 339 (C.A.), leave to appeal to S.C.C. refused, [2002] S.C.C.A. No. 189, the question of the standard of review was canvassed at para. 106:

The standard of appellate review relating to an appeal from a damage award is set forth in Woelk v. Halvorson, [1980] 2 S.C.R. 430 at p. 435, 114 D.L.R. (3d) 385 as follows:

It is well settled that a Court of Appeal should not alter a damage award made at trial merely because, on its view of the evidence, it would have come to a different conclusion. It is only where a Court of Appeal comes to the conclusion that there was no evidence upon which a trial judge could have reached this conclusion, or where he proceeded upon a mistaken or wrong principle, or where the result reached at the trial was wholly erroneous, that a Court of Appeal is entitled to intervene.

See also Robert McAlpine Ltd. v. Byrne Glass Enterprises Ltd., [2001] O.J. No. 403 (C.A.) at para. 8.

29In Naylor Group Inc. v. Ellis-Don Construction Ltd., 2001 SCC 58, [2001] 2 S.C.R. 943, the court wrote at para. 80:

It is common ground that the Court of Appeal was not entitled to substitute its own view of a proper award unless it could be shown that the trial judge had made an error of principle of law, or misapprehended the evidence, or it could be shown there was no evidence on which the trial judge could have reached his or her conclusion, or the trial judge failed to consider relevant factors in the assessment of damages, or considered irrelevant factors, or otherwise, in the result, made “a palpably incorrect” or “wholly erroneous” assessment of the damages. Where one or more of these conditions are met, however, the appellate court is obliged to interfere [citations omitted].

With those principles in mind, we turn to the specific areas of damage challenged by the appellants.

1. The University Assumption

30The trial judge was alert to the principles of law applicable to the assessment of non-pecuniary losses, including loss of future income. He recognized that the assessment of future income loss is, by its nature, somewhat speculative, particularly in predicting a future career for an adolescent who has not yet set her long-term education goals or embarked on a specific career path. In acknowledging these difficulties, the trial judge cited Graham v. Rourke (1990), 75 O.R. (2d) 622 (C.A.) at 634, which establishes that a plaintiff is not required to prove her future income loss on a balance of probabilities but rather to prove “a real and substantial risk of future pecuniary loss”. Stephanie was accordingly not required to show that, but for the accident, she would have achieved a university education and therefore lost the earning capacity of a university graduate. Rather, the onus was on her to establish a real and substantial risk that she lost the earning capacity available to a person with that education.

31As found by the trial judge, Stephanie was injured at a time when her post-secondary course was undecided. In those circumstances, the trial judge was required to ask himself if Stephanie had established a real and substantial risk that she lost the benefits of a university education.

32To set a basis for Stephanie’s loss of income, the trial judge considered Stephanie in the context of her familial and educational background. He dismissed the possibility that Stephanie would have stopped her education after grade twelve. Such a discontinuance of her education would have been inconsistent with her accomplishments to the date of the accident, inconsistent with her motivation to achieve, and inconsistent with the expectations of her parents and the accomplishments of her siblings.

33If Stephanie had continued her education, the evidence established that she could have chosen from among a number of options: returning to high school to obtain OAC credits; entering community college to pursue a career such as that of her younger sister; entering community college and then transferring to university; pursuing a soccer scholarship at a U.S. university; or entering university, when she was able to do so, as a mature student. All these options were open to Stephanie.

34In choosing among these options, there were many unknowns, but the known factors were Stephanie’s tenacity, significant academic potential, established athletic accomplishments, and a supportive family who expected her to continue her education. In deciding among the possible options, the trial judge had the benefit of evidence from Stephanie’s family and her experienced high school guidance counsellor. He decided that Stephanie’s most reasonable and substantial possible option was the attainment of a university education.

35He also decided that, before she could pursue such a step, Stephanie would have undertaken one year of further education before entering university. Accordingly, he adjusted Stephanie’s loss of income to reflect a one-year delay beyond the estimate provided by the respondent’s expert. The choice of this option was entirely within the purview of the trial judge and was supported by the evidence. It is precisely the type of adjustment necessary to ensure that the defendant did not overcompensate Stephanie for income that she had no real and substantial possibility of losing.

36Had Stephanie pursued a university education, as an average university graduate she would have expected, as a starting point, a salary of $57,190.00 annually, with an average annual salary over her lifetime of $65,769.00.

37After setting a base annual earnings loss, a trial judge must refine the award by properly considering the potential negative and positive contingencies. Examples of negative contingencies that impede the production of income are job loss, forced retirement, disability prior to normal retirement age, and the possibility that a plaintiff may, after all, have pursued a different path. At least to some extent, however, these negative contingencies are offset by employer- or government-provided benefits programs. Factors that might improve the plaintiff’s potential income (i.e. positive contingencies), include promotion, labour productivity increases, and continuing employment after normal retirement age. To some greater or lesser extent, negative contingencies and positive contingencies may be found to offset each other.

38The trial judge recognized the need to adjust for both positive and negative contingencies. He cited Andrews v. Grand & Toy Alberta Ltd., [1978] 2 S.C.R. 229, for the principle that such deductions depend upon the circumstances of the particular plaintiff but, generally, will be small.

39Looking at those contingencies, the trial judge recognized that Stephanie might not have gone to university, but instead pursued a community college education, an education that statistically would have resulted in lower average earnings. To reflect that contingency, he deducted 10% from Stephanie’s award for loss of future income. As well, the trial judge made a further deduction from the award to reflect that, with her post-accident limitations, Stephanie might earn income in the future. He found such employment would likely be part-time clerical work in a supportive environment at or near the minimum wage. He quantified the appropriate deduction at $100,000 on evidence that Stephanie’s future employment would be limited to about one-third of normal working hours and would not likely extend beyond age 60.

40There was ample evidence to support the trial judge’s conclusion that Stephanie might well, after some delay, have proceeded through university. There was also evidence to support the adjustments made by the trial judge by way of deductions for contingencies. Accordingly, this ground of appeal cannot succeed.

2. Earnings Statistics

41The appellants argue that the trial judge erred in assessing Stephanie’s income loss on the basis of gender-neutral earnings statistics. Their objection is twofold. First, they submit that the trial judge erred in basing his award on statistics for all university graduates, as opposed to statistics for all female university graduates. Second, they submit that such statistics do not reflect the most likely of Stephanie’s possible career paths, teaching.

42On the first ground, the trial judge discussed the legal principles. He considered Tucker v. Asleson, [1991] B.C.J. No. 954 (S.C.), where Finch J. applied the average university earnings of male graduates to an eight year-old girl who suffered serious brain injury. In doing so, he found that “no educational or vocational opportunities were excluded to her”, although he subsequently applied a significant deduction for negative contingencies. In Terracciano (Guardian ad litem of) v. Etheridge, [1997] B.C.J. No. 1051 (S.C.) at para. 80, Saunders J. queried the applica­bility of average female earnings statistics, which he noted, “have hidden in them serious discounts for lower and sporadic participation in the labour market which are duplicated by many of the negative contingencies used by economists to massage the numbers downward”. Finally, the trial judge considered Gray v. Macklin, [2000] O.J. No. 4603 (S.C.J.), where evidence was called about the diminishing differential in men’s and women’s earnings. In Gray, the trial judge commented at para. 197 on historical wage inequities and the need for the court to “ensure as much as possible that the appropriate weight is given to societal trends in the labour market in order that the future loss of income properly reflects future circumstances.” In that case, the trial judge also discounted the award by a total of 30% for negative contingencies.

43In Audet (Guardian ad litem of) v. Bates, [1998] B.C.J. No. 678 (S.C.), in assessing the damages for a female plaintiff asphyxiated during birth, the trial judge used gender-neutral earnings tables, saying at para. 76 that there was “no logical or compelling reason to differentiate between male and female earning capacity when making an assessment in relation to an infant whose work and education prospects cannot be identified or characterized with any precision.” However, the trial judge then discounted the award by 30% for negative contingencies.

44In MacCabe v. Westlock Roman Catholic Separate School District No. 110 (2001), 2001 ABCA 257, 293 A.R. 41 (C.A.), the Alberta Court of Appeal held that, in the circumstances of the case, it was not reasonable to calculate the plaintiff’s damages based on male earnings. In that case, the plaintiff had given specific evidence that she wished to have four children and would have preferred to remain at home with them for some period of time. Accordingly, on that evidence, the plaintiff would not have achieved earnings equivalent to a male in similar circumstances. The Court of Appeal also noted at para. 125 that: “In general, tort law and in particular, the quantification of damages necessitates an individual approach.”

45As in the other authorities that have considered this issue, the trial judge decided damages on the evidence before him. On the first objection, while damages awards are compensatory in nature and cannot be calculated in a manner that overcompensates a particular individual, a court must be equally cognizant of the fact that gender-based earnings statistics are grounded in retrospective historical data that may no longer accurately project the income a person would achieve in the future.

46In this case, the trial judge cannot be said to have erred in applying gender-neutral earnings tables to Stephanie’s income loss. He did so on the basis of the evidence before him, which he accepted. In doing so, he noted that at least two of Stephanie’s potential options – teaching and kinetics – were areas where pay equity had been achieved. Further, he noted at para. 135 that female earnings tables were based on historical data and might be inappropriate “where the court is attempting to make a forecast stretching many years into the future”.

47Further, the loss of income figure which the trial judge accepted included consideration of negative contingencies for layoff, unemployment, forced early retirement, and disability. These contingencies, according to the evidence, were offset by employee benefits as well as by positive contingencies such as promotion, productivity increases, and the possibility of post-age-65 income. The trial judge’s decision not to deduct a global amount for negative contingencies was firmly grounded in the evidence he accepted. It is worth noting that, in any event, the gender-neutral statistics, which are a composite of male and female statistics, inherently include absenteeism from the workforce, whether caused by reason of illness, childcare or other circumstance.

48In this case, as in most, an individual approach is required to the assessment of future loss of income. The trial judge applied an individual approach to his assessment of Stephanie’s loss of income. He chose to apply gender-neutral statistics. We see no error in his decision to do so or in his application of those statistics.

49On the second ground, the appellants challenged the trial judge’s application of earnings statistics for all university graduates, as opposed to those for teaching and kinetics, the most likely of Stephanie’s options as determined by the trial judge.

50There was, however, a paucity of evidence on teachers’ salaries. The guidance counsellor was asked about ranges of teachers’ salaries, but she did not have information with her. She thought that for the local school board, they started at $30,000 or $35,000 a year. She also thought they reached a maximum of $70,000 a year but that a teacher who took on additional responsibilities would earn more. That was the extent of the evidence led on teachers’ salaries. No evidence was led at trial on the potential earnings of a kinesiologist. Indeed, neither expert on future loss was asked to give evidence about the specific earnings of either of these two particular career paths.

51Further, the trial judge did not confine Stephanie’s potential career to those two options. Rather he referred to them simply as “a couple of the suggested future professions” for Stephanie. Clearly, the trial judge recognized the speculative nature of determining a career path for this young woman, particularly when she was not precluded from any potential career. This challenge to the trial judge’s factual findings cannot succeed.

3. Loss of Interdependent Relationship

52The trial judge explained this award succinctly at para. 188 of his reasons:

This is a heading of future pecuniary loss, based on the proven and well known fact that two people can live together less expensively than they can live apart. This is a relatively new head of damages, but at the same time has been discussed frequently enough to acquire the acronym L.O.I.R. I was given the case of Reekie v. Messervey, [1989] B.C.J. No. 797 and the case of Osborne (Litigation Guardian of) v. Bruce (County), [1999] O.J. No. 50 by Mr. Fleck, and the case of Bartosek (Litigation Guardian of) v. Turret Realties Inc., [2001] O.J. No. 4735, by Mr. Woodward for the defence.

53Over time, the authorities cited by the trial judge, and other authorities, have come to accept loss of interdependent relationship as one component of a compensatory damages award. Such an award compensates a plaintiff for a future financial loss. Before the accident, the sociable and socially-active Stephanie would very likely have formed an interdependent relationship with another person. After the accident, it became highly unlikely that Stephanie would form or could sustain such a relationship.

54Stephanie therefore lost the opportunity to share a household with a partner. Accordingly, she lost the opportunity to share household expenses. In the result, Stephanie will pay one hundred percent of her household expenses, instead of the lesser share of expenses had a partner assisted her with those expenses. Her loss, accordingly, is measured by the loss of the contribution that she would have received but for the accident.

55Although the appellants willingly concede that an award for the loss of an interdependent relationship is generally appropriate, they argue that such an award should preferably be assessed globally under the heading of loss of future earning capacity. As well, they argue that the quantification of such an award must take into account the child-rearing and child-care expenses that Stephanie would have incurred had the accident not occurred.

56The trial judge accepted the ample evidence that Stephanie’s ability to form a shared living relationship was detrimentally impacted by the accident and he accepted the uncontradicted expert evidence as to the quantification of that impact.

57Specifically, the trial judge accepted the calculations of the plaintiff’s expert, who used average ages for the date of marriage, assumed a shared income until age 63, assumed marriage to someone of similar socio-economic background, and specifically incorporated contingencies for withdrawal from the workplace. In addition, the expert applied two contingencies that the trial judge regarded as generous. First, he allowed for a 25% possibility that Stephanie would not have married even if there had been no accident. Second, he allowed for a 50% possibility that Stephanie would marry despite the accident.

58Further, in answer to the defence concern about double accounting for childcare costs, the trial judge deducted a further contingency from the expert’s estimate of $150,384.00. In the result, based on the unchallenged expert evidence, the trial judge awarded $125,000.00 for Stephanie’s future loss of interdependent relationship. We see no error in the trial judge’s determination under this head of damage, which is firmly grounded in the evidence.

4. Nanny Expenses

59The trial judge awarded Stephanie a lump sum for the costs she would incur in employing a live-in full-time nanny for seven years for childcare purposes.

60The appellant challenges this award on the basis that it overcompensated Stephanie for the following reasons:

1. The quantum of childcare costs assumes a 72% chance that Stephanie will have children in contradiction to the assumption that she only had a 50% chance of forming an interdependent relationship;

2. Stephanie would have incurred childcare costs even if the accident had not occurred;

3. If Stephanie formed an interdependent relationship that partner would assist with the care of the child; and

4. Stephanie’s loss of future income should have been reduced to take into account her withdrawal from the work force for childcare purposes.

61On the first issue, there is no inconsistency between the two assumptions. At para. 195, the trial judge specifically recognized that Stephanie could be both a single mother and have an interdependent relationship during her lifetime.

62On the second issue, the live-in nanny costs were an additional cost attributable solely to Stephanie’s injuries. The evidence was clear that Stephanie would be unable to care for a child on her own at any time. Moreover, the defence agreed to the concept of this award at trial and cannot raise the issue on appeal.

63On the third issue, the trial judge specifically discounted the award for the loss of an interdependent relationship to take into account the contributions of a partner to the care of the child.

64On the fourth issue, the loss of future income award was based on tables and on evidence that took into account voluntary absences from employment. We see no reason to interfere with the trial judge’s award on that issue.

65Accordingly, this ground of appeal does not succeed.

5. Vocational Rehabilitation and Job Coaching

66The appellant argued that it was inconsistent for the trial judge to find both that Stephanie was not employable and, at the same time, to award $135,000.00 for her vocational rehabilitation and job coaching.

67This argument fails on two grounds. First, the trial judge found that Stephanie would likely work, at least on a part-time basis, and attributed to her a lifetime income of $100,000.00. Second, the evidence established that Stephanie would also undertake volunteer positions, particularly if supportive employment could not be maintained.

68The evidence was uncontradicted that Stephanie will need significant assistance to achieve either paid or unpaid work and the evidence was also overwhelming that work is essential for Stephanie’s mental and emotional stability. Further, she has a strong motivation to contribute to society.

69While the costs of obtaining meaningful work for Stephanie exceed the likely income from that work, the issue is not solely a financial one. The evidence was uncontradicted that Stephanie needs work, volunteer or otherwise, to maintain emotional stability.

70In quantifying this claim, the trial judge analyzed the opinions of both the expert for the plaintiff and the expert for the defence. On the particularly significant item of job coaching and work trials, he preferred the plaintiff’s estimate of $32,266.92 to the defence estimate of $9,100.60.

71There is no basis to interfere with the trial judge’s award.

6. Award for Technology and Fitness Membership

72On the basis that Stephanie would have purchased these items from her own income had the accident not occurred, the appellants argue that there was no basis for the trial judge’s awards for the costs of a laptop computer, Internet access, and gym membership.

73The trial judge’s awards for these items are founded on the expert evidence that he considered. The trial judge accepted that, post-accident, Stephanie had a childlike scrawl. On the basis of that disability, the trial judge awarded Stephanie compensation for a laptop computer “as a partial substitute for Stephanie’s ability to communicate in longhand”. In addition, the trial judge recognized a laptop would facilitate cognitive remediation.

74Further, the trial judge saw Internet access as an important tool for Stephanie given her difficulties with mobility and its use as a learning tool.

75In addition, the trial judge accepted as reasonable Stephanie’s enrolment in the North York YMCA (the “Y”) where she has access to equipment specific to her rehabilitation. As a result of awarding the cost of fitness club membership, the trial judge decided not to award damages for the use of specific training equipment, which would be available at the Y. In addition, the trial judge pointed out that the fitness club membership would provide Stephanie with a needed opportunity for social interaction.

76There was no evidence called at trial that, but for the accident, Stephanie would have purchased a personal laptop, high-speed Internet access, or a gym membership. Rather, the awards for the cost of these items are sustainable as they are all firmly founded on the evidence called at trial.

F. Non-Earner Benefits

77The trial judge held that Ms. Walker was entitled to receive “non-earner” benefits (NEBs) from the no-fault insurer, Wawanesa, in the amount of $101,553.16, including interest calculated from September 7, 1999, when they were terminated, to the date of trial. He also held that NEBs are not deductible from tort damages.

78The appellants challenge only the holding of non-deductibility. They argue that NEBs are pecuniary in nature and properly deductible from damage awards for income loss or loss of earning capacity pursuant to s. 267.8(1) of the Insurance Act. They say that the pecuniary nature of NEBs is evident from s. 12(4) of the Statutory Accident Benefits Schedule – Accidents on or after November 1, 1996, O. Reg. 403/96 (the “Regulation”), that provides that no-fault insurers required to pay NEBs are entitled to deduct from the NEBs any net weekly payments for loss of income that the insured receives as a result of the accident. Further, they point out, the amount of the NEB is reduced when the insured attains the retirement age of 65, just as statutory income replacements are reduced. Thus, they say, the rationale for awarding NEBs is to compensate those not yet in the workforce for their loss of earning capacity and it was an error for the trial judge to fail to deduct them from the damages awarded for income loss.

79In holding that NEBs are non-deductible, the trial judge reasoned as follows. The reduction of damage awards on account of collateral benefits is covered by s. 267.8 of the Insurance Act. Section 267.8(7) specifically provides that damages in respect of non-pecuniary loss “shall not be reduced because of any payments or benefits” received. While NEBs are payments or benefits, the trial judge did not accept that they were payments for income loss or loss of earning capacity and therefore deductible in accordance with s. 267.8(1). In paras. 41 and 42 of the supplementary decision, he explains why.

The non-earner benefit is clearly not an income replacement benefit. That is handled by an entirely separate provision in the regulations calling for proof of loss of employment or at least proof of previous employment. The only qualifications required by Stephanie were that she was enrolled on a full-time basis in secondary education at the time of her accident and suffered a complete inability to carry on a normal life. As I indicated in my reasons as quoted above, the criteria I referred to dealt with her involvements in sports, in social activities, and in schooling. They had nothing to do with earning income. Neither did they have anything to do with loss of earning capacity. Further, they had nothing to do with her health care, or the expenses of it. The amount paid under this benefit is a flat rate, which has no relation to past or future income loss, past or future earning capacity, past or future health care expenses, or for that matter any type of pecuniary loss. The rationale for the non-earner benefit is not spelled out in the legislation but I assume it is in part to relieve the perceived injustice of someone who would not qualify for an income replacement benefit receiving nothing, and an attempt to provide what Dickson J. in Andrews v. Grand & Toy, [1978], 2 S.C.R. 229 at 261 referred to as, “reasonable solace for his misfortune”. As such, this would be akin to general damages, but as above noted, non-pecuniary losses are not to be reduced because of payments of benefits, the plaintiff has received or is entitled to receive.

The law on deductibility of benefits under s. 267(1), the predecessor section to s. 267.8 of the Insurance Act, was laid down in Bannon v. McNeeley, (1998), 38 O.R. (3d) 659 (C.A.) by Finlayson J.A. He said at pg. 679:

I believe that, where possible, any no fault benefit deducted from a tort award under s. 267(1)(a) must be deducted from the head of damage or type of loss akin to that for which the no fault benefits were intended to compensate ... if at all possible, apples should be deducted from apples, and oranges from oranges ... if the no fault deduction exceeds the amount awarded under the specific heads of damages to which the no-fault benefits can be attributed, then there cannot be resort to another portion of the tort judgment for the balance.

It appears to me that the new s. 267.8 simply adopts that principal [sic]. As I indicated above, the non-earner benefit, if it is akin to any head of damages in a court action, is akin to non-pecuniary or general damages, and the new statutory provisions specifically prohibit a deduction of statutory benefits amounts from non-pecuniary damages.

80We agree with the trial judge’s conclusion and his reasoning.

81The appellants’ submission that NEBs are a form of income replacement and therefore pecuniary in nature is based on the assumption that NEBs compensate people who do not qualify for income replacement for their loss of earning capacity. In our view, such an assumption is not warranted.

82As a full-time student at the time of the accident, Stephanie was found to be entitled to NEBs pursuant to s. 12(1)3.i of the Regulation, which reads as follows:

s. 12(1) The insurer shall pay an insured person who sustains an impairment as a result of an accident a non-earner benefit if the insured person meets any of the following qualifications…

3. The insured person suffers a complete inability to carry on a normal life as a result of … the accident and,

i. was enrolled on a full-time basis in elementary, secondary or post-secondary education at the time of the accident[.]

83Section 2(4) of the Regulation provides that a person suffers a complete inability to carry on a normal life as a result of an accident if:

the person sustains an impairment that continuously prevents the person from engaging in substantially all of the activities in which the person ordinarily engaged before the accident.

84On a plain reading of these provisions, it appears that NEBs are awarded to compensate for loss of daily life functions and therefore are more akin to general non-pecuniary damages. While s. 12(4) entitles an insurer to deduct payments for loss of income from NEBs, there is nothing in s. 12 to suggest that benefits are in any way related to loss of income. Section 12 provides a flat rate of benefits that is not tied in any way to past or future income loss or earning capacity. Rather than serving as a proxy for income replacement, NEBs provide a benefit for those persons unable to engage in the activities in which they would ordinarily have engaged but for the accident. That is, NEBs are designed to compensate for loss of enjoyment of life. In the case at bar, the activities that Stephanie was prevented from engaging in were competitive athletics, her social life and her activities as a student. None of these activities involved earning an income.

85The appellants argue that such reasoning is inconsistent with this court’s decision in Brownell v. Tannahill (2000), 52 O.R. (3d) 227 (C.A.), a case in which s. 13(1) of the Statutory Accident Benefits Schedule – Accidents Before January 1, 1994, R.R.O. 1990, Reg. 672 was considered. In Brownell, Charron J.A., writing on behalf of the court, held that weekly no-fault benefits were not deductible from any award of general damages because they were akin to damages for loss of income.

86The statutory provisions that apply in the case at bar are quite different from those considered in Brownell. The full text of both is appended to this judgment. The key provisions in Brownell were ss. 12 and 13. They were both contained in Part IV, entitled “Weekly Benefits”. Sections 12 and 13 referred to one another and were clearly complementary – s. 13(7) states that a person could not receive benefits under ss. 12 and 13 at the same time. Payments under s. 13 were to be reduced by any payments for loss of income. As this court found, when read in context, it was clear that s. 13 was intended to compensate an injured person who was not in receipt of income for losses akin to damages for loss of income.

87While the rationale for providing NEBs is not spelled out in the legislation, as noted above, the activities compensated for pursuant to s. 12 of the Regulation bear no relationship to income or earnings. Section 12 is a stand-alone provision in Part III of the Regulation, the heading of which is “Non-earner Benefit”. Apart from s. 12(4), which prevents a person from receiving both NEBs and payments for loss of income, payment of NEBs is not linked to income loss payments. NEBs are not predicated upon, or complementary to, the provisions made for those in receipt of benefits for loss of income. If NEBs are akin to any head of damages, it is non-pecuniary or general damages and s. 267.8(7) specifically prohibits reducing damages for non-pecuniary loss because of benefits received. Had the legislature wished to provide for the deductibility of NEBs, it could have done so within the scope of deductions for “other pecuniary loss” in s. 267.8(6) but it chose not to. Accordingly, in our view, the trial judge correctly refused to treat NEBs as a benefit in respect of which a deduction must be made from an award of damages under s. 267.8.

G. Discount Rate

88For the period following the fifteen years after judgment, the trial judge applied the rule 53.09(1) discount rate of 2.5%, except with respect to professional services, where he applied a discount rate of 1.5%. The appellants now object to that deviation from the rule 53.09(1) rate, although they did not do so at trial.

89In their objection, the appellants concede that in Ligate v. Abick (1996), 28 O.R. (3d) 1 (C.A.), the Court of Appeal held that the 2.5% rule 53.09(1) discount rate would only be varied in the face of evidence that factors other than future investment and price inflation, such as wage inflation, supported a different discount rate. However, subsequent to that decision, rule 53.09(1) was replaced with a new rule that, while structured to provide flexibility in the discount rate for the first fifteen years, continued to use a 2.5% discount rate for the period beyond fifteen years.

90In Martin v. Listowell Memorial Hospital (2000), 51 O.R. (3d) 381 (C.A.), a case decided by this court after the amendment, the court contemplated the introduction of evidence regarding wage increases as evidence that might affect the appropriate discount rate.

91In this case, evidence called before the trial judge established that the costs of professional services are increasing faster than the rate of inflation, thus justifying the variation to a 1.5% discount rate. Accordingly, the trial judge did not err in accepting evidence supportive of an adjusted discount rate for professional fees.

H. The Costs Award

92The plaintiffs were awarded substantial indemnity costs of $470,979.65 plus GST and disbursements as against Ritchie and Marcus. They were awarded partial indemnity costs of $63,222.23, plus GST and disbursements, as against Wawanesa. In addition, the trial judge awarded the plaintiffs a premium of $200,000, plus GST, apportioned 90% against Ritchie and Marcus and 10% against Wawanesa.

93The appellants challenge two aspects of the costs award – the quantum and the addition of a premium.

94In considering this ground of appeal, it is appropriate to bear in mind that an appeal court is to set aside a costs award only if the trial judge has made an error in principle or the award is plainly wrong: see Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303.

1) Quantum of Costs

95In determining costs, the trial judge awarded the maximum rates under the grid for lead counsel. The trial judge also awarded a second counsel fee for Ms. Wilde, albeit at a lower rate, which took the amount above the maximum permitted by the grid. And, he awarded costs for trial preparation work performed by a third lawyer, Ms. Daigneault, who never appeared as counsel at trial.

96The appellants challenge the quantum on two grounds. First, they say that the legal fees reflect duplicated efforts by the plaintiffs’ solicitors. Second, they argue that while multiple counsel fees may be awarded they must not, in aggregate, exceed the maximum counsel fee provided for in the costs grid.

97The trial judge was aware of the allegation that plaintiffs’ counsel claimed for duplicated effort. After taking into consideration the reductions based on concessions by plaintiffs’ counsel, he made a reduction for the time that he found was duplicated effort between Ms. Daigneault and Ms. Wilde. He also specifically found that some of Ms. Daigneault’s time was acceptable trial preparation that had been performed at home and that he saw no further duplication in the account. We see no basis upon which to interfere with the trial judge’s award in respect of possible duplication of effort.

98In relation to the award of counsel fees in excess of the maximum provided for in the costs grid, the trial judge declined to follow Banihashem-Bakhtiari v. Axes Investment Inc. (2003), 66 O.R. (3d) 284 (S.C.J.), var’d (2004), 69 O.R. (3d) 671 (C.A.) leave to appeal to S.C.C. refused, [2004] S.C.C.A. No. 145, saying that it was “a perfectly sensible and allowable thing” to have both a senior experienced counsel and a junior counsel working on the case.

99In Banihashem-Bakhtiari at paras. 47-48, Lane J. gave the following explanation for permitting more than one counsel fee but limiting such fees to the maximum provided for in the costs grid:

In my opinion, there is but one amount available for all counsel representing the same party… Under the former tariff there was a discretion to permit an additional fee for junior counsel where warranted, but the present tariff is silent on the point. I do not think that means that no fee for a second counsel is allowed; rather, the tariff limits the total amount. In considering what "up to" means in the counsel fee grid, the court can allow a fee to second counsel where that expense is warranted by the nature of the case, as it is here, subject to the maximum total counsel fee set out in the grid.

This conclusion is supported by certain characteristics of the counsel fee. First, it is per day and a day in trial court is normally about five to six hours maximum; indeed the tariff for motions and appeals both declare a half day to be two hours, although the trial tariff does not. If the top hourly rate were $450, then a normal court day of, say, 5.5 hours, would be $2,475. Second, preparation for trial is not included in the counsel fee; it is specifically included among the matters to which the hourly rates are applicable… Third, even assuming that the intention was to be more generous for time actually spent at trial, there is clearly room for a fee for more than one counsel. Fourth, the length and complexity of trials have increased significantly in recent years and second counsel are now more frequently seen than in the past. It makes sense to provide for this development, and it appears that the tariff does so. Finally, the weekly rate represents a significant discount on the rate for five days, reflecting either the notion that there is some economy involved in spending an entire week at the same trial, as opposed to appearing in five one-day trials, or, perhaps more likely, an effort to keep the cost of litigation within a more manageable range. This reinforces the point that the sum is a maximum.

100A number of decisions have followed the approach laid out by Lane J. in Banihashem-Bakhtiari. See, for example, Manielly v. Moran, [2004] O.J. No. 2128 (S.C.J.); Basdeo v. University Health Network, [2002] O.J. No. 597 (S.C.J.); Young v. Toronto Star Newspapers Ltd., [2003] O.J. No. 5092 (S.C.J.); Genest Murray Desbrisay Lamek v. Furbacher, [2004] O.J. No. 1568 (S.C.J.); and Upper Canada District School Board v. Conseil de District des Écoles Publiques de Langue Française No. 59, [2002] O.J. No. 1525 (S.C.J.).

101However, there are cases in which multiple counsel fees have been awarded that exceed the grid limit. See Andersen v. St. Jude Medical Inc., [2004] O.J. No. 3102 (S.C.J.) and Dybongco-Rimando Estate v. Lee, [2003] O.J. No. 534 (S.C.J.).

102Since the hearing of this appeal, this court released its decision in Celanese Canada Inc. v. Canadian National Railway Company, [2005] O.J. No. 1122 (C.A.). At paras. 45-51, Borins J.A., writing for himself, analyses the conflicting jurisprudence and follows Lane J.’s analysis in Banihashem-Baktiari. He concludes that fees for a second counsel are permissible under the cost grid but that the aggregate of counsel fees cannot exceed the maximum permitted under the costs grid. We adopt that view.

103Thus, the trial judge erred in principle in awarding counsel fees in excess of the maximum provided for in the grid and that part of the award that reflects counsel fees in excess of the maximum is set aside.

2) Costs – the premium

104The appellants submit that the trial judge was in error in awarding a premium for five reasons. First, they contend that a premium was not available on the facts because there was no, or minimal, risk to the plaintiffs’ counsel, as it was always likely that Ritchie would be found liable. Second, the appellants say that the trial judge assumed that the plaintiffs did not have the means to pay their legal fees or disbursements despite there being no evidence to that effect. Third, they contend that there was no evidence that the plaintiffs were being charged a premium by their solicitors for which they ought to be indemnified. Fourth, the appellants submit that in awarding the premium, the trial judge improperly considered the fact that his decision had been appealed to this court. Fifth, the appellants argue that there is no reason in principle why defendants should be required to compensate plaintiffs for the premiums their lawyers charge to assume the risk of non-payment if a claim fails. The appellants say that they were entitled to defend the action without being penalized by an award of a premium.

105We will deal first with the appellants’ contention that it is an error in principle to award a premium when a defendant has a meritorious defence. Substantial indemnity costs are awarded in two different types of circumstances. The first is where the losing party has engaged in reprehensible, scandalous or outrageous behaviour: Young v. Young, [1993] 4 S.C.R. 3. The second is triggered by operation of rule 49.10. In the second situation, it is not misconduct that leads to a substantial indemnity costs award but, rather, the operation of an offer to settle under rule 49.10.

106The jurisprudence of this court makes it clear that a premium is available in the first situation. See, for example, Roberts v. Morana (1997), 37 O.R. (3d) 342 (Gen. Div.), aff’d (2000), 49 O.R. (3d) 157 (C.A.). However, until recently, it was unclear whether a premium could be awarded in the second situation. In Lurtz v. Duchesne, [2005] O.J. No. 354 (released after the hearing of this appeal), Rosenberg J.A., writing for the court, held that a premium can be awarded in addition to substantial indemnity costs where the basis of the costs award is the operation of rule 49.10. He explains the availability of a premium in such circumstances on the basis that premiums are awarded not to punish a losing party but to recognise the result achieved and the financial risk undertaken by counsel for litigants of limited financial means. At paras. 33-35, Rosenberg J.A. writes:

As indicated, the appellants make the broad submission that no premium should be awarded where, as here, solicitor and client costs have been awarded because the judgment exceeds an offer to settle. They rely upon this court’s decision in Finlayson v. Roberts (2000), 136 O.A.C. 271 (C.A.).

In my view, this states the principle in Finlayson too broadly. Both before and after Finlayson this court has approved the award of substantial premiums on top of solicitor and client costs. See for example Roberts v. Morana (2000), 49 O.R. (3d) 157 (C.A.) and Jack (Litigation Guardian of) v. Kirkrude, [2002] O.J. No. 192 (C.A.). I agree with the analysis of Finlayson by the trial judge (Kurisko J.) in Jack [2000 CarswellOnt. 4969 (S.C.J.)] at paragraphs 74 to 78. As Kurisko J. points out, there is no mention in Finlayson of the degree of risk assumed. To the contrary, in Finlayson, liability was admitted and the only issue was the amount of damages. Further, the only basis for the claim for a premium in Finlayson would seem to have been the private arrangement between the plaintiff and her solicitor. There was no such arrangement in Jack or in this case. This court upheld the decision of Kurisko J.

In my view, it is open to a trial judge to award a premium on solicitor and client costs in a proper case because of the risk assumed and the result achieved. This is such a case. It is the kind of case that counsel undertake at some financial risk to provide impecunious plaintiffs access to the courts. This respondent was impecunious. Her counsel received no fees whatsoever through trial. They carried significant disburse­ments from the outset of the litigation. The case was complex and counsel achieved an outstanding result. This was, therefore, a proper case to award some premium.

107Thus, we reject the argument in respect of Ritchie and Marcus, against whom costs were awarded on a substantial indemnity basis, that a premium was not available in principle. In our view, Lurtz also disposes of the appellants’ argument that a premium cannot be awarded absent evidence that the plaintiffs were charged a premium by their solicitor. There is nothing in Lurtz to suggest such a requirement either as a matter of law or evidence.

108We hasten to add that awarding a premium ought to occur only rarely and only when both factors – risk and result – cry out for an award in excess of substantial indemnity costs. The risk must be based on evidence that the plaintiff lacked the financial resources to fund lengthy and complex litigation, plaintiff’s counsel financed the litigation, the defendant contested liability and plaintiff’s counsel assumed the risk not only of delayed but possible non-payment of fees. In our view, it is not necessary that the plaintiff be proved to be impecunious but it must be shown that the litigation was beyond the plaintiff’s financial means. While risk must be present, it alone does not justify a premium – counsel for the plaintiff must also achieve an outstanding result.

109In our view, however, the argument against the availability of a premium in relation to Wawanesa must succeed. It will be recalled that the trial judge awarded costs against Wawanesa on a partial indemnity basis. In Ontex Resources Ltd. v. Metalore Resources Ltd., [1996] O.J. No. 3336, Master Clark said this at paras. 32 and 34:

This is a party and party assessment on a party and party scale. There is no solicitor-client aspect to this assessment. Therefore the Tariff governs, and there is no provision in the Tariff for a premium.

However, I go further and say that the concept of a premium is not compatible with the party and party scale of costs. A premium is an award that counsel is occasionally granted, vis‑a-vis his or her own client, for exceptional legal work. It would be a penalty to impose it on the client’s opponent.

110We share Master Clark’s view while noting that “party and party costs”, to which reference is made in this extract, are now referred to as “partial indemnity costs”.

111This court considered the matter of a premium between solicitor and client in Desmoulin (Committee of) v. Blair (1994), 21 O.R. (3d) 217 (C.A.). In Desmoulin, the plaintiff was awarded costs of a party and party basis. Austin J.A., writing for the court, held that counsel had the right to charge his client a premium because it was litigation that should be prosecuted, the plaintiffs could not fund the litigation, the solicitors carried the risk of the litigation and there was an excellent result. As Austin J.A. explained, a premium based on risk in such circumstances was acceptable as it provided access to the courts for legitimate claims.

112It is significant that Austin J.A. explicitly recognised that payment of a premium by the plaintiff could impair the future care fund and that such a consideration was relevant when determining whether to reduce the solicitor’s fees. That is, the court expressly recognised that the cost of the premium would be borne by the plaintiffs and implicitly recognised that such a cost would not be shifted to the defendants.

113The matter in issue is not the availability of a premium as between solicitor and client. It is a question of whether a defendant can be required to pay a premium in addition to partial indemnity costs. In our view, it would be unfair to require a defendant to pay a premium in such circumstances. A defendant has no knowledge of the private arrangements between the plaintiff and his or her counsel and thus has no means of measuring the risk of engaging in litigation. Defendants would be unable to gauge their exposure to costs when deciding whether and how to defend as exposure would be dependent, at least in part, on the financial means of the plaintiff. This difficulty would be compounded by the fact that many plaintiffs would happily agree to any amount of premium if the premium were to be paid by the losing party. In situations where a party realistically understands that his or her exposure for costs is limited to an award on a partial indemnity basis, counsel ought not to be concerned that the normal elements of costs will be inflated by a private arrangement made between the other side and his or her counsel.

114Furthermore, to award a premium in addition to partial indemnity costs would offend the principles that govern costs awards. Those principles, as enunciated in Mortimer v. Cameron (1994), 17 O.R. (3d) 1 (C.A.), leave to appeal to S.C.C. refused, [1994] S.C.C.A. No. 150, are twofold. First, substantial indemnity costs are awarded only if special grounds exist to justify a departure from a partial indemnity scale and, second, costs are not to be awarded to supplement damages or to ensure that damages reach the plaintiff intact.

115As this court noted in Vanek v. The Great Atlantic & Pacific Co. of Canada Ltd. (1999), 48 O.R. (3d) 228 (C.A.), leave to appeal to S.C.C. refused, [2000] S.C.C.A. No. 50, in Ontario there are only two types of costs – partial indemnity and substantial indemnity. At para. 74 of Vanek, this court observed, “The factors set out in Rule 57 provide sufficient flexibility under either of these two categories of costs. There is not a need, therefore, to create a hybrid scale of “enhanced” party-and-party costs.”

116To award a premium in addition to partial indemnity costs would infringe upon the principles enunciated in both Mortimer and Vanek. The premium would amount to a supplement to a damage award in situations that did not attract costs on a substantial indemnity basis and its award would amount to the creation of a third type of cost award.

117Accordingly, it was an error in principle for the trial judge to award a premium in respect of Wawanesa and the award of such a premium is set aside.

118We turn next to the factual grounds on which the appellants contest the premium award. The trial judge found that the plaintiffs’ counsel had carried the steadily increasing value of their work-in-progress for four years. They had received no remuneration from the plaintiffs. Counsel had expended over $130,000 in disbursements to take the matter to trial. At para. 13 of the costs decision, the trial judge rejected the appellants’ contention that the issues were not complex and stated: “The liability part of the action was complex because it involved not only a finding of liability of the truck driver, but also findings of negligence by the trucking company outside of the actual operation of the vehicle.” He also held that the assessment of damages was complex, citing five areas of complexity. He found at para. 36 that the defendants had “vigorously defended the issues of liability and also the many issues of quantum of damages”. It is clear that the case involved multiple issues that involved much investigation and preparation and that the plaintiffs made a significant request to admit to which no substantive response was ever made. On this record, we cannot say that there was no evidence of risk to plaintiffs’ counsel of non-payment or that the plaintiffs did not have the means to finance the litigation.

119We also reject the argument that the trial judge improperly considered the fact that the decision had been appealed. In our view, when the trial judge referred to the appeal of his decision, he was simply reflecting the continued need of plaintiffs’ counsel to carry their work-in-progress to the end of the appeal and the continued risk that posed to their ultimately being paid.

120In light of these findings and subject to our determination that a premium was not available as against Wawanesa, the trial judge was entitled to award the premium, as he did, because of the financial risk that plaintiffs’ counsel assumed, the complexity of the case and the results achieved.

I. DISPOSITION AND COSTS

121The appeal is allowed only to the extent of varying the costs disposition to accord with para. 103 of these reasons and is otherwise dismissed. Having regard to the disposition of the appeal, the respondents are entitled to their costs. If counsel are unable to agree on the quantum of costs, they may file brief submissions on that subject with the office of the Registrar of the court in the usual manner. All such submissions shall be filed on or before May 31, 2005.

Released: APR 28 2005 Signed: “E.E. Gillese J.A.”

MAC “S.E. Lang J.A.”

“I agree: M.A. Catzman J.A.”

Schedule

Statutory Accidents Benefits Schedule –

Accidents Before January 1, 1994,

R.R.O. 1990, Reg. 672

PART IV

WEEKLY BENEFITS

Income Benefit

12.(1) The insurer will pay with respect to each insured person who sustains physical, psychological or mental injury as a result of an accident a weekly income benefit during the period in which the insured person suffers substantial inability to perform the essential tasks of his or her occupation or employment if the insured person meets the qualifications set out in subsection (2) or (3). R.R.O. 1990, Reg. 672, s. 12 (1).

(2) The following qualifications apply to an insured person who claims a weekly benefit under subsection (1):

1. He or she must have been at the time of the accident,

i. employed or self-employed,

ii. on a temporary lay-off, or

iii. entitled to start work within one year under a legitimate offer of employment made before the accident and evidenced in writing.

2. He or she as a result of and within two years of the accident must have suffered a substantial inability to perform the essential tasks of his or her occupation or employment. R.R.O. 1990, Reg. 672, s. 12 (2).

(3) A person who was unemployed and who was not self-employed at the time of the accident is qualified to receive a weekly benefit under subsection (1) if he or she was employed or self-employed for any 180 days in the twelve-month period before the accident, and if he or she as a result of and within two years of the accident has suffered a substantial inability to perform the essential tasks of the occupation or employment in which he or she spent the most time during the twelve-month period before the accident. R.R.O. 1990, Reg. 672, s. 12 (3).

(4) Subject to subsection (5), the weekly benefit under subsection (1) will be the lesser of,

(a) $600 plus, if Optional Benefit 2 has been purchased, the amount of the benefit chosen; and

(b) 80 per cent of the insured person’s gross weekly income from his or her occupation or employment, less any payments for loss of income, except Unemployment Insurance benefits,

(i) received by or available to the insured person under the laws of any jurisdiction or under any income continuation benefit plan, or

(ii) received under any sick leave plan. R.R.O. 1990, Reg. 672, s. 12 (4).

(5) The insurer is not required to pay a weekly benefit under subsection (1),

(a) for the first week of the disability;

(b) for any period in excess of 156 weeks unless it has been established that the injury continuously prevents the insured from engaging in any occupation or employment for which he or she is reasonably suited by education, training or experience. R.R.O. 1990, Reg. 672, s. 12 (5).

(6) The insurer is not required to pay a weekly benefit under subsection (1) to a person described in subparagraph iii of paragraph 1 of subsection (2) until the day the person would have been entitled under the contract to begin employment unless before that day the person is qualified for a benefit under another paragraph of that subsection. R.R.O. 1990, Reg. 672, s. 12 (6).

(7) The following rules apply to the calculation of gross weekly income:

1. A person’s gross weekly income shall be deemed to be the greatest of,

i. his or her average gross weekly income from his or her occupation or employment for the four weeks preceding the accident,

ii. his or her average gross weekly income from his or her occupationon or employment for the fifty-two weeks preceding the accident,

iii. $232.

2. When a person becomes qualified to receive an income benefit under subparagraph iii of paragraph 1 of subsection (2), the person’s gross weekly income shall be deemed to be the greatest of,

i. if the person was qualified under either subparagraph i or ii of paragraph 1 of subsection (2), his or her gross weekly income as determined under paragraph 1,

ii. the gross weekly income payable under the contract of employment,

iii. $232.

3. Business expenses which cease as a result of the accident shall be deducted from a person’s income from self-employment before calculating his or her gross weekly income. R.R.O. 1990, Reg. 672, s. 12 (7).

Benefit if no Income

13.(1) The insurer will pay with respect to each insured person who sustains physical, psychological or mental injury as a result of an accident, a weekly benefit during the period in which the insured person suffers substantial inability to perform the essential tasks in which he or she would normally engage if he or she meets the qualifications set out in subsection (2). R.R.O. 1990, Reg. 672, s. 13 (1).

(2) The following qualifications apply to an insured person who claims weekly benefits under subsection (1):

1. He or she as a result of and within two years of the accident must have suffered a substantial inability to perform the essential tasks in which he or she would normally engage.

2. He or she must not be entitled to receive a benefit under section 12 at the time of the payment of a benefit under this section or, if entitled to a benefit under that section, he or she must be a primary caregiver as described in subsection (4) and have only income from self-employment from work in his or her home.

3. He or she must attain the age of sixteen years before being eligible to receive the weekly benefit. R.R.O. 1990, Reg. 672, s. 13 (2).

(3) The weekly benefit under subsection (1) will be $185 less any payments for loss of income, except Unemployment Insurance benefits,

(a) received by or available to the insured person under the laws of any jurisdiction or under any income continuation benefit plan; or

(b) received under any sick leave plan. R.R.O. 1990, Reg. 672, s. 13 (3).

(4) The insurer will pay to an insured person who is receiving a weekly benefit under subsection (1), or who but for section 17 would be entitled to the weekly benefit, a benefit of $50 per week if Optional Benefit 3 has not been purchased, or $100 per week if it has been purchased, for each person who at the time of the accident was residing with the insured person and in respect of whom the insured person was the primary caregiver if the person receiving the care was less than sixteen years of age or if the person required the care because of physical or mental incapacity. R.R.O. 1990, Reg. 672, s. 13 (4).

(5) The maximum amount payable under subsection (4) is $200 per week, if Optional Benefit 3 has not been purchased, and $400 per week if it has been purchased. R.R.O. 1990, Reg. 672, s. 13 (5).

(6) A weekly benefit under subsection (4) ceases,

(a) when the person cared for attains age sixteen, unless he or she is incapacitated;

(b) when the incapacity of the person cared for ceases; or

(c) when the insured person ceases to be eligible for a benefit under subsection (1) or when the insured person would cease to be eligible had he or she not been disqualified under section 17. R.R.O. 1990, Reg. 672, s. 13 (6).

(7) A person cannot receive benefits under this section and section 12 at the same time. R.R.O. 1990, Reg. 672, s. 13 (7).

(8) The insurer is not required to pay a weekly benefit under this section,

(a) for the first week of the disability;

(b) for any period in excess of 156 weeks unless it has been established that the injury continuously prevents the insured person from engaging in substantially all of the activities in which the person would normally engage. R.R.O. 1990, Reg. 672, s. 13 (8).

Statutory Accidents Benefits Schedule –

Accidents on or after November 1, 1996,

O. Reg. 403/96

PART III

NON-EARNER BENEFIT

12.(1) The insurer shall pay an insured person who sustains an impairment as a result of an accident a non-earner benefit if the insured person meets any of the following qualifications:

1. The insured person suffers a complete inability to carry on a normal life as a result of and within 104 weeks after the accident and does not qualify for an income replacement benefit.

2. The insured person suffers a complete inability to carry on a normal life as a result of and within 104 weeks after the accident, received a caregiver benefit as a result of the accident and there is no longer a person in need of care.

3. The insured person suffers a complete inability to carry on a normal life as a result of and within 104 weeks after the accident and,

i. was enrolled on a full-time basis in elementary, secondary or post-secondary education at the time of the accident, or

ii. completed his or her education less than one year before the accident and was not employed, after completing his or her education and before the accident, in an employment that reflected his or her education and training.

(2) Subject to subsection (3), the amount of the non-earner benefit shall be $185 for each week that the insured person is eligible to receive the benefit.

(3) If a person qualifies for a non-earner benefit under paragraph 3 of subsection (1) and more than 104 weeks have elapsed since the onset of the disability, the amount of the non-earner benefit shall be $320 for each week that the insured person continues to be eligible to receive the benefit. O. Reg. 403/96, s. 12 (1-3).

(4) The insurer may deduct the following amounts from the amount payable to an insured person as a non-earner benefit:

1. Net weekly payments for loss of income that are being received by the insured person as a result of the accident under the laws of any jurisdiction or under any income continuation benefit plan.

2. Net weekly payments for loss of income that are not being received by the insured person but are available to the insured person as a result of the accident under the laws of any jurisdiction or under any income continuation benefit plan, unless the insured person has applied to receive the payments for loss of income. O. Reg. 403/96, s. 12 (4); O. Reg. 462/96, s. 6.

(5) For the purpose of subsection (4), subsections 7 (2) and (3) apply with necessary modifications.

(6) Subject to subsection (7), the non-earner benefit is payable during the period that the insured person suffers a complete inability to carry on a normal life.

(7) The insurer,

(a) is not required to pay a non-earner benefit for the first 26 weeks after the onset of the complete inability to carry on a normal life; and

(b) is not required to pay a non-earner benefit for any period before the insured person attains 16 years of age.

(8) Sections 9 and 10 apply, with necessary modifications, to a non-earner benefit and, for that purpose, the reference in subsection 10 (1) to “the amount determined under section 7” shall be deemed to be a reference to the amount referred to in subsection (2) of this section. O. Reg. 403/96, s. 12 (5-8).

Footnotes

1. 1Brockenshire J. issued three decisions in this matter, Walker v. Ritchie, [2003] O.J. No. 18 (the “Main Decision”), Walker v. Ritchie, [2003] O.J. No. 5596 (the “Supplementary Decision”), and Walker v. Ritchie, [2004] O.J. No 787 (the “Costs Decision”).