Marcoccia v. Ford Credit Canada Limited, 2009 ONCA 317
CITATION: Marcoccia v. Ford Credit Canada Limited, 2009 ONCA 317
DATE: 20090420
DOCKET: C47528
COURT OF APPEAL FOR ONTARIO
Rosenberg, MacPherson and Rouleau JJ.A.
BETWEEN
Robert Marcoccia, by his Litigation Guardian, Angela Marcoccia
Respondent
and
Bhupinder Singh Gill, Purba Furniture Ltd., and Ford Credit Canada Limited
Appellant
Alan J. Lenczner, Nina Bombier, and Myron W. Shulgan, for the appellant
Earl A. Cherniak, Kirk F. Stevens, and Nancy Ralph, for the respondent
Heard: February 4, 2009
On appeal from the judgment of Mr. Justice J. Patrick Moore of the Superior Court of Justice, Toronto, sitting with a jury, dated September 8, 2008.
MacPherson and Rouleau JJ.A.:
I. OVERVIEW
[1] The appellant, Ford Credit Canada Limited, appeals from the judgment of Moore J. of the Superior Court of Justice, sitting with a jury, dated September 8, 2008, concerning a motor vehicle accident which occurred on June 8, 2000, involving the respondent, Robert Marcoccia, and Bhupinder Singh Gill, the driver of the truck owned by the appellant.[^1]
[2] Following a six-week trial, the jury concluded that the respondent was 39% at fault and Gill was 61% at fault for the accident. The jury assessed the respondent’s damages at $312,000 for pain and suffering, $5,322.73 for past income loss, $1,384,918 for future income loss, and $13,952,064 for future cost of care.
[3] The appellant contests the findings made by the jury in respect of the apportionment of liability and damages for future cost of care. The appellant also seeks leave to appeal the trial judge’s costs award of $720,000 and, if leave is granted, seeks a reduction of that award.
II. FACTS
A. The accident and the respondent’s injuries
[4] The basic facts in this case are relatively simple. The accident took place in the City of Toronto on the evening of June 8, 2000, at the right-angled intersection of Rexdale Blvd. and Humberwood Blvd. Rexdale runs east and west and Humberwood runs north and south. Rexdale is a through street. Humberwood ends at Rexdale at a “T” intersection.
[5] The respondent was travelling west along Rexdale, intending to continue on through the intersection. He was in the left-most lane as he neared the intersection at Humberwood. As he approached the intersection, the traffic light turned amber. He initially slowed down, but then sped up over the speed limit.
[6] At this time, Gill had entered the intersection on the amber light and was stopped in the left turn lane waiting to turn left from Rexdale onto Humberwood. As the light turned red, Gill started to turn slowly into the intersection. He did not notice the respondent approach the intersection or run the red light. An instant later, the respondent’s car collided with Gill’s van, seriously injuring the respondent.
[7] At the time of the accident, the respondent was 20 years old and had just finished grade 12. He suffered serious injuries to the frontal and temporal lobes of his brain in the accident. As a result, he suffers from diminished executive functioning, has enduring physical, psychological, behavioural, and emotional impairments that impede his ability to lead a normal life, and cannot be competitively employed in the future.
[8] The respondent brought an action for damages against Gill and Gill’s employer, Purba Furniture Ltd., as well as against the appellant. Gill and Purba Furniture Ltd. settled with the respondent before trial. The appellant defended the action.
B. The parties’ positions at trial regarding liability and damages
[9] At trial, the appellant asserted that the respondent was far from the intersection when the traffic light turned amber and that it was amber for a full five seconds before the respondent reached the intersection. The respondent could easily have slowed down to stop at the light. Instead of slowing down, however, the respondent sped up in an attempt to beat the light. When the light turned red, the respondent ran the red and collided with Gill, who had just begun his left turn.
[10] The respondent, on the other hand, asserted that he was very close to the intersection when the light turned amber. Gill therefore could and should have seen him coming. The respondent misjudged his ability to clear the intersection on the amber light and entered the intersection on the red light. Because Gill’s van moved out in front of him in the intersection, the vehicles collided.
C. The jury’s findings and disposition regarding liability and damages
[11] The jury found that the respondent entered the intersection “on the red light”. It concluded that the respondent was 39% at fault for doing so, contributing to the accident, and that Gill was 61% at fault for failing to ensure that his left turn could be negotiated safely, causing the accident. The jury assessed the respondent’s damages at $312,000 for pain and suffering, $5,322.73 for past income loss, and $1,384,918 for future income loss.
[12] The jury also assessed the respondent’s damages for future cost of care at $13,952,064, which amounted to roughly 96% of the highest schedule of future care costs claimed by the respondent. This award envisioned the respondent living independently with provision for extensive support and services.
[13] Two other situations were considered but ultimately rejected by the jury: the respondent advanced the option of residence and treatment at CHIRS (Community Head Injury Resources Services of Ontario), a residential rehabilitation facility, which would have cost $9,589,302 but had an 11-year waiting list; and, the appellant advanced the option of a semi-independent living arrangement preceded by a two year period of intensive rehabilitation in a rehabilitation facility and a one year transition period in a semi-independent living environment, which would have cost $2,173,000.
[14] The appellant appeals from the jury’s findings regarding both liability and damages in respect of the respondent’s future care costs. The appellant also seeks leave to appeal, and a reduction of, the trial judge’s costs award of $720,000.
III. ISSUES
A. Liability
[15] The appellant raises the following issues in relation to the jury’s apportionment of liability:
Was the jury’s conclusion finding Gill 61% liable for the accident perverse and illogical?
Was the trial judge’s charge to the jury in respect of the apportionment of liability deficient?
B. Damages
[16] The appellant raises the following issues in relation to the quantum of damages awarded by the jury for the respondent’s future care costs?
Was the quantum of damages awarded by the jury for future care costs excessively high?
Was the trial judge’s charge to the jury in relation to damages for future care costs inadequate and erroneous?
C. Costs
[17] The appellant also raises the following issues in relation to the trial judge’s costs award of $720,000 in favour of the respondent:
Should the trial judge have reduced the total costs award by $159,000, being the amount previously ordered to be held in trust and applied against future fees?
Did the trial judge err in awarding costs against the appellant for the respondent’s unsuccessful appeal of a master’s order, and in awarding substantial indemnity costs against the appellant for the guardianship motion?
Did the trial judge’s substantial indemnity costs award essentially amount to an award on a full indemnity basis?
IV. ANALYSIS
A. Liability
[18] The essence of the appellant’s submission on the liability issue is two-fold: first, the 61%:39% (appellant: Gill) apportionment of fault between the two drivers was perverse and illogical; and, second, this conclusion was the direct result of serious deficiencies in the trial judge’s charge to the jury in relation to the apportionment of liability. For the reasons that follow, we do not accept either component of the appellant’s submission.
1. The jury’s allocation of fault was not “plainly unreasonable and unjust”
[19] The appellant asserts that it is a well-recognized principle that drivers are entitled to reasonably expect that other drivers will respect the prohibition against entering an intersection on a red light. The appellant submits that, accordingly, in light of the jury’s finding that the respondent had run the red light in breach of his traffic obligations and the duty of care owed to Gill and other drivers, its conclusion that Gill was 61% liable is illogical and perverse. According to the appellant, the jury’s conclusion is also perverse given the supporting evidence that the light had been amber for a full five seconds before the respondent reached the intersection, that he could have stopped safely, and that he was driving over the speed limit when he struck Gill’s van.
[20] We do not accept this submission. The standard of review of a jury verdict in a civil case is well-established. An appellate court may interfere with a jury’s verdict only where “it is so plainly unreasonable and unjust as to satisfy the court that no jury reviewing the evidence as a whole and acting judicially could have reached it” (emphasis added): see Snushall v. Fulsang (2005), 2005 CanLII 34561 (ON CA), 78 O.R. (3d) 142 (C.A.), at para. 19, citing Vancouver-Fraser Park District v. Olmstead, 1974 CanLII 196 (SCC), [1975] 2 S.C.R. 831, at p. 838. As explained by this court in McIntyre v. Grigg (2006), 2006 CanLII 37326 (ON CA), 83 O.R. (3d) 161, at para. 38, “in the absence of a material misdirection or non-direction” by the trial judge in his or her charge to the jury, an appellate court will not disturb a jury’s apportionment decision unless “no jury reviewing the evidence as a whole and acting judicially could have arrived at that conclusion.”
[21] The appellant has not persuaded us that the jury’s allocation of fault in this case clears the high hurdle described above. In our view, the jury’s apportionment of fault as between Gill (61%) and the respondent (39%) does not meet this “exacting standard for appellate intervention”: see Kerr v. Loblaws (2007), 2007 ONCA 371, 224 O.A.C. 56, at para. 46. It is clear from the record that both drivers committed major blunders that led directly to the disastrous accident and the respondent’s injuries – the respondent ran a red light, and Gill did not keep a proper lookout. They collided as a result of both their errors. Both were indisputably at fault. The jury’s attribution of negligence to both drivers was therefore entirely reasonable.
[22] This determination then required the jury to apportion the fault between them. A 61%:39% apportionment recognizes that both drivers were at fault to a substantial degree. The jury heard and saw all the evidence in a lengthy trial and did precisely what it was entitled to do – exercise its collective common sense and judgment and attempt to reach a fair result. In our view, the jury’s apportionment of liability in this case simply does not attract the perverse and unreasonable labels promoted by the appellant; the jury’s apportionment was not “so plainly unreasonable and unjust as to satisfy the court that no jury reviewing the evidence as a whole and acting judicially could have reached it”: Snushall at para. 19.
2. The trial judge’s charge to the jury regarding liability was not deficient
[23] The appellant asserts that the jury’s perverse apportionment of liability resulted from a deficient charge to the jury by the trial judge in relation to liability. According to the appellant, the trial judge’s charge was general, vague, confusing, and unhelpful. The appellant submits that the trial judge not only failed to relate the legal obligations of the drivers and the law of negligence to the theories of liability that were advanced by each party, but also misdirected the jury as to the relevant obligations and permissible expectations of these drivers under the Highway Traffic Act, R.S.O. 1990, c. H.8.
[24] In particular, the appellant submits that the trial judge erred in failing to instruct the jury that Gill was entitled to assume that the respondent would abide by the rules of the road and obey the red light: see Zurevinski v. P & G Construction Co. (1987), 15 M.V.R. (2d) 281 (Ont. Dist. Ct.), at paras. 17 – 19, citing Chatten v. Armstrong, 1968 CanLII 429 (ON CA), [1968] 1 O.R. 497 (C.A.), at p. 499. The appellant further submits that although its trial counsel did not object to the impugned portions of the charge, this does not preclude the appellant from relying on the misdirection, especially where the errors bore directly on the jury’s central task – the apportionment of liability. In other words, the absence of an objection at trial is not fatal to this ground of appeal. The appellant submits that these errors render it uncertain that the jury would have returned with the same verdict had the errors not occurred.
[25] We see nothing in the trial judge’s jury charge in relation to liability that introduces any element of fragility into the jury’s conclusion, nor into our assessment thereof. The trial judge expressly instructed the jury that they could use the Highway Traffic Act and the associated rules of the road “as indicators of a reasonable standard of conduct that drivers could and should govern themselves by at intersections controlled by traffic signals.” He cautioned the jury, however, not to use the provisions of the Highway Traffic Act “to establish liability for offences under the Act” but instead simply for assistance in determining the standard of care applicable to the drivers in the circumstances of this case. He also carefully reiterated and explained the sections of the Highway Traffic Act pertinent to the issue of liability. He concluded this component of the charge by reminding the jury “to apportion [liability] according to [their] best sense of fairness and justice upon the evidence as [they] find it.”
[26] In our view, the trial judge’s charge in relation to liability was comprehensive, clear, fair, and balanced. There was no “material misdirection or non-direction” by the trial judge that warrants appellate intervention. Further, although not determinative, the absence of any objections to the charge by an experienced trial counsel supports this assessment. In our view, the trial judge’s instructions to the jury in relation to liability provided genuine assistance, not confusion, in a difficult case. We therefore would not give effect to the appellant’s submissions to the contrary.
B. Damages
[27] The appellant also contests the jury’s assessment of damages in the amount of almost $14 million for the respondent’s future care costs. This amount represented approximately 96% of the maximum amount claimed by the respondent. The appellant submits that this amount is “perverse and wholly unreasonable” and greatly exceeds any known award for future care costs in a brain damage or personal injury case in Canada, including cases that involve full paraplegic plaintiffs. Further, the appellant submits that this perverse award resulted directly from the trial judge’s inadequate and erroneous jury charge in relation to future care costs. In particular, the appellant asserts that the trial judge erred in his charge to the jury in the following ways:
• First, that he failed to instruct the jury that damages for future care costs should be based only on what is “reasonably necessary” on the medical evidence to promote the mental and physical health of the plaintiff and that he failed to properly “unpack” what reasonableness means; and
• Second, that his charge to the jury was erroneous in the sense that he did not instruct the jury that they were permitted to combine elements of the different scenarios put to them by the respondent, contrary to the decision of this court in Sandhu v. Wellington Place Apartments (2008), 2008 ONCA 215, 234 O.A.C. 200, at paras. 17 and 19.
[28] We would not give effect to the appellant’s submissions in relation to the jury’s assessment of damages for future care costs.
1. The jury’s damages award for future care costs was not unreasonable
[29] Section 119 of the Courts of Justice Act, R.S.O. 1990, c. C.43, provides that “[o]n an appeal from an award for damages for personal injury, the court may, if it considers it just, substitute its own assessment of the damages.” As noted above with respect to a jury’s apportionment of liability, appellate intervention regarding a jury’s damages assessment is justified only where the damages award “is so plainly unreasonable and unjust as to satisfy the court that no jury reviewing the evidence as a whole and acting judicially could have reached it” (emphasis added): see Snushall at para. 19. In the same vein, a jury’s decision on the apportionment of damages can be disturbed only in “exceptional circumstances”: see Jones v. Niklaus (2008), 2008 ONCA 504, 240 O.A.C. 43, at para. 43, citing Deshane v. Deere & Co. (1993), 1993 CanLII 8678 (ON CA), 15 O.R. (3d) 225 (C.A.), at para. 43, and Jack v. Kirkrude (2002), 2002 CanLII 9922 (ON CA), 155 O.A.C. 28, at para. 3. This court must thus accord considerable deference to a jury’s damages assessment.
[30] Counsel for the appellant stated in oral submissions that the appellant was not advancing on appeal its trial position regarding damages, which amounted to just over $2M. The appellant confirmed that the appropriate damages award in this case would therefore lie somewhere above $9.5M and below $14M, the two options advanced by the respondent at trial. The appellant submitted that the jury’s almost $14M damages award was “way out of the park” and characterized it as “perverse and wholly unreasonable”. Before us, the appellant further argued that the $14M option left with the jury was based on much duplication and unrealistic assumptions. It conceded, however, that a lower award in the range of $11M would have been reasonable, albeit at the upper end of the range of reasonableness.
[31] In our view, the jury’s assessment of damages in this case was not “plainly unjust and unreasonable”. Rather, it was based on expert evidence properly adduced at trial. No evidence was led at trial with respect to the alleged overlap in the calculations advanced by the respondent’s expert. Although the parties’ experts disagreed as to assumptions relating to the appropriate level and length of care required, it was open to the jury to prefer the respondent’s expert on these points. Further, the jury did not simply adopt the figures advanced by the respondent’s expert. Substantial reductions were effected to many of the claims, including a reduction in the claim for future care costs. Accordingly, this court has no basis upon which to interfere with the jury’s assessment of damages.
2. The trial judge’s jury charge in relation to future care costs was sufficient
[32] In any event, the trial judge’s instructions to the jury in relation to future care costs were neither inadequate nor erroneous, as the appellant suggests they were. While the trial judge did not expressly delineate the meaning of reasonableness, he instructed the jury on multiple occasions that their findings needed to be grounded in “evidence [they] accept as being reasonable.” Based on this instruction, it is implicit that if the jury determined that an item or scenario was justified on the evidence, by definition, it must be reasonable. Moreover, the trial judge emphasized that “[t]he award must be fair to all parties” and that “[f]airness to the parties is achieved by assuring that the claims are legitimate and justifiable” on the evidence. Accordingly, it cannot be said that the trial judge’s charge was inadequate for failing to more comprehensively “unpack” what reasonableness entailed.
[33] The appellant also submits that the trial judge erroneously failed to instruct the jury that they were not obligated simply to accept the scenarios advanced by the respondent; instead, the trial judge should have expressly instructed the jury that they were permitted to combine scenarios. The appellant relies on the following statement from Sandhu at para. 17:
Juries are told they may accept some, none or all of the witnesses’ evidence. This jury was not obliged to accept only one of the scenarios presented by counsel by way of example. They were free to make their own calculation, provided that the calculation was based on the evidence.
[34] We do not accept the appellant’s submission in this regard. While the trial judge did not come up with a specific combined scenario to put to the jury, the following excerpts illustrate that he did expressly instruct the jury that they were permitted to deviate from the scenarios advanced by the respondent at trial:
Remember that the onus is on the plaintiff to establish that a future pecuniary loss is a real possibility. Each party bears an onus of establishing that the model or models they present to value a given future pecuniary loss, is realistic and reasonable. Yours must be a reasoned analysis grounded in evidence before you. If the models given to you by Mr. Seigel or Dr. Charette do not assist you or persuade you, you must develop a different, yet fair and reasoned analysis of your own.
It is not necessary that you accept one side’s entire proposal, although you may well decide to do so. I want you to understand this, that you need not accept the entire menu of damages proposed by the defendants, or the entirety of what is proposed by the plaintiff. For example, there may be a part of the future care cost claim that you conclude is not fair and reasonable. This does not mean that you must reject the plan in its entirety. However, there must be a base of evidence that you have accepted to support whatever amounts you do decide to assess these future claims at. [Emphasis added.]
[35] More importantly, the appellant did not devise a specific combined scenario at trial, nor did it ask the jury to consider combining the scenarios advanced by the parties. Counsel for the appellant presumably made a strategic decision not to do so in order to convey to the jury the appellant’s position that the scenarios advanced by the respondent were inappropriate – scenario one ($14M) because it was excessive, and scenario two ($9.5M) because it was impractical due to the 11 year waitlist – and, accordingly, that the appellant’s position ($2M) was the only reasonable and appropriate one in the circumstances. The appellant’s submission on appeal is, in effect, that the trial judge had a duty to put to the jury a position that he was not only required to devise on his own, but which was also not advanced or put to the jury by either party. This argument is untenable, particularly in light of the above excerpts. Further, although not determinative, the absence of any objection to the jury charge by counsel for the appellant at trial supports the conclusion that the charge was not erroneous in this regard.
C. Costs
[36] On the issue of costs, the appellant has raised three grounds of appeal to support its submission that the trial judge’s costs award should be reduced. For the reasons that follow, we reject the appellant’s first two grounds of appeal, but accept the third.
1. The trial judge gave the appellant credit for the $159,000 to be applied against future fees
[37] First, the appellant argues that the trial judge should have reduced the total costs award by $159,000. This sum represents a portion of the payment made by the defendants Gill and Purba Furniture Ltd. pursuant to a partial settlement of the claim, and which was ordered by Wilkins J. to be held in trust and applied against future fees: see Marcoccia v. Gill, 2007 CanLII 33 (ON S.C.), at para. 69. In the appellant’s view, the failure to reduce the costs award by this amount constitutes a breach of the terms of the partial settlement, which provides that the appellant is not to be subject to any duplication in respect of costs and disbursements payable to the respondent pursuant to the partial settlement.
[38] We disagree. The terms of the partial settlement provided for the payment of $1 million in damages, as well as an additional $395,000 payable to the respondent’s solicitors for fees and disbursements. The full $395,000 was applied in payment of the respondent’s partial indemnity costs incurred to the date of the partial settlement. The additional $159,000, designated by Wilkins J. to be held in trust and applied against future fees, was subtracted from the $1 million damages award recovered by the respondent. In other words, the $159,000 was taken from the respondent’s damages award in the partial settlement and was directed to be held in trust so that the respondent’s solicitors would have access to funds to pay for the work necessary to bring the matter to trial.
[39] In the costs endorsement released following the trial, the trial judge indicated that the appellant was required “to pay the net damages recovery less the $1,000,000 already recovered through the partial settlement of damages claims”: see Marcoccia v. Gill, 2007 CanLII 51528 (ON S.C.), at para. 10. Therefore, contrary to the appellant’s assertion, the appellant was given credit for the $159,000. These monies are included in the $1 million that the trial judge subtracted from the net damages award against the appellant, to account for the damages already recovered by the respondent in the partial settlement.
2. The trial judge credited the appellant for costs of the respondent’s unsuccessful appeal of a master’s order and awarded costs of the guardianship motion on a partial indemnity scale
[40] Second, the appellant seeks further reductions of $8,775 and $11,175 in the costs award. With respect to the $11,175, the appellant submits that the trial judge’s costs award included $7,057.50 for an unsuccessful appeal by the respondent of a master’s order when, in fact, the appellant was awarded the costs of the appeal in the amount of $4,118.10.
[41] With respect to the $8,775, the appellant argues that the trial judge awarded the respondent substantial indemnity costs of $21,937.50 for the guardianship motion. He ought not to have done so as the offer to settle (on which the order of substantial indemnity costs is based) excluded the guardianship issue. As a result, the costs related to this issue ought to have been awarded on a partial indemnity basis. The difference between the two scales is $8,775.
[42] The respondent does not dispute that the costs awarded on the guardianship issue should have been on a partial indemnity basis, nor does he dispute that the appellant was awarded costs of the unsuccessful appeal of the master’s order. Rather, the respondent argues that the trial judge made a global costs award in relation to the fees, consisting of $120,000 in partial indemnity costs and $600,000 in substantial indemnity costs. There is no reason to believe that the award did not take into account the two points now being raised by the appellant. Further, the last sentence in the trial judge’s reasons suggests that a portion of the costs award for work carried out after the date of the offer to settle was calculated on a partial indemnity scale. This, the respondent submits, shows that the trial judge was conscious that the work relating to the guardianship motion, which took place after the offer to settle, did not attract substantial indemnity costs.
[43] We would not give effect to this ground of appeal. In the portion of his reasons outlining the appellant’s submissions, the trial judge referred to both of these issues. The fact that the trial judge did not again refer to them at the point in his reasons where he set the figure for the global costs award does not, in our view, indicate that the two points were not taken into account. In fact, the partial indemnity component of the costs award was substantially less than the amount sought by the respondent, suggesting that the costs awarded to the appellant for the respondent’s unsuccessful appeal of the master’s order were taken into account by the trial judge. Further, as noted by the respondent, the last sentence of the trial judge’s reasons provides some confirmation that he awarded the costs on the guardianship issue on a partial indemnity basis.
3. The substantial indemnity portion of the costs award is excessive
[44] Third, the appellant submits that the trial judge’s award of $600,000 in substantial indemnity costs amounts to an award of costs on a full indemnity basis.
[45] From the reasons, it is not entirely clear how the trial judge came to the $600,000 figure. It appears that, pursuant to the definition of “substantial indemnity costs” in rule 1.03 of the Rules of Civil Procedure[^2], the trial judge applied a multiplier of 1.5 to the sum of $400,000, being the amount of fees that he would have considered reasonable on a partial indemnity scale. However, the $600,000 he awarded is more than the $559,489 in substantial indemnity costs sought by the respondent’s solicitors. Although rule 57.01(4)(d) of the Rules of Civil Procedure allows the court “to award costs in an amount that represents full indemnity”, there is nothing in the trial judge’s reasons to suggest that his $600,000 costs award was intended to be a full indemnity award.
[46] It is unclear from the record how the respondent calculated the sum of $559,489. However, it is reasonable to assume that the respondent’s solicitors applied a modest reduction to their regular hourly rates to achieve a substantial indemnity rate, which they then used as a basis for calculating their substantial indemnity costs in the amount of $559,489. The substantial indemnity rates are set out in the contingency fee agreement made between the respondent and his solicitors.
[47] The respondent submits that the solicitors’ hourly rates were irrelevant because of the contingency fee agreement. Although the agreement set out hourly rates, the fees actually charged to the respondent pursuant to the agreement were not hourly based. In light of the favourable outcome for the respondent at trial, the fees charged were a percentage of his recovery and far exceeded the $600,000 costs award. The respondent argues that the significant difference between the costs awarded against the appellant and the fees actually paid by the respondent to his solicitors is clear evidence that the respondent has not been fully indemnified.
[48] The respondent further submits that, to the extent that hourly rates are a factor relevant in fixing the fees and/or costs, the trial judge noted that the substantial indemnity rates approved by him in the contingency fee agreement (which we have taken to be the rates that would ordinarily be recovered on a substantial indemnity basis) were “at a minimum, reasonable”: para. 65. Thus, the respondent argues that these are the minimum rates recoverable by his solicitors. Should the trial judge have chosen not to apply one of the two percentage-of-recovery formulae set out in the contingency fee agreement, he could have based the fees on rates higher than these.
[49] A further basis for the respondent’s suggestion that the $600,000 in substantial indemnity costs was warranted, even if it amounted to or exceeded full indemnity, is the trial judge’s view that the work being billed for was, in large measure, the work that required the greatest skill – work for trial preparation and the trial itself. The costs award against the appellant was principally for trial and trial related work, because the costs incurred from the inception of the action to the period just preceding the trial had been assessed and paid as part of the partial settlement reached with the other defendants. The respondent seems to suggest that for this reason, even though the award may have amounted to or exceeded full indemnity if the solicitors’ regular hourly rates were applied, it was fully justified.
[50] In our view, the $600,000 substantial indemnity costs award cannot stand. The trial judge properly concluded that, following Walker v. Ritchie, 2006 SCC 45, [2006] 2 S.C.R. 428, at para. 42, it was inappropriate to include in a costs award the risk premium being charged by the respondent’s solicitors. By awarding the respondent more than what his solicitors had calculated to be the appropriate substantial indemnity amount, the trial judge was doing indirectly what he had concluded should not be done.
[51] The $559,489 originally sought by the respondent represented a reasonable substantial indemnity award based on rates derived from the hourly rates normally charged by the solicitors who worked on the file. These rates generally reflect what the defendant reasonably expects to be the basis for the award of costs. The fact that the contingency agreement provides for significantly higher fees in the event that the plaintiff is successful is of little relevance as the higher fee is, in effect, a form of risk premium.
[52] Further, by suggesting that rates in excess of the solicitors’ regular hourly rates are justified for the hours devoted to the trial proper, the respondent is submitting that, in effect, the solicitors’ regular hourly rates should be considered to be “blended rates”. The rates would be viewed as a blend of higher rates for trial work and lower rates for work done in the pre-trial phases. This overlooks the fact that the respondent’s costs for the pre-trial phases have already been assessed and recovered in the partial settlement using this “blended rate”. In fairness, therefore, if we were to disregard the “blended rate” and use a higher rate in the assessment of the work done at trial, the assessment of the pre-trial costs made as part of the partial settlement would have to be revisited. These costs were based on the “blended rate”, being a rate that, on the respondent’s premise, exceeded the value of the work done.
[53] Therefore, the substantial indemnity component of the costs award is excessive and ought to be reduced. In so concluding, we do not wish to be taken as challenging the definition of substantial indemnity costs in rule 1.03 of the Rules of Civil Procedure, or the trial judge’s decision to apply it. However, we note that where the application of rule 1.03 leads to substantial indemnity costs that are equal to or greater than a full indemnity award, it necessarily follows that the partial indemnity costs have been assessed too generously. Therefore, the effect of rule 1.03 is to limit the trial judge’s discretion in assessing partial indemnity costs to something less than two-thirds of the solicitor’s full indemnity costs.
[54] The appropriate starting point for the substantial indemnity costs award should have been the $559,489 originally sought by the respondent. As noted above, the respondent had included in this amount the $21,937.50 in costs flowing from the guardianship motion. For reasons explained earlier, we have concluded that the trial judge included the costs for the guardianship motion within the $120,000 he awarded in partial indemnity costs. The costs for the guardianship motion cannot be included in both the partial indemnity and substantial indemnity cost awards. Therefore, the $559,489 claimed by the respondent in substantial indemnity costs must be reduced by $21,937.50 to reflect the fact that the costs of the guardianship motion are included in the trial judge’s partial indemnity component of the costs award.
[55] In conclusion, we would allow the appeal on costs to the extent that the substantial indemnity costs should be reduced from $600,000 to $537,551.50. This reduces the fee portion of the costs award from $720,000 to $657,551.50.
V. DISPOSITION
[56] For the foregoing reasons, we would dismiss the appeal with respect to liability and damages. We would allow the appeal on costs to the extent that the costs award should be reduced from $720,000 to $657,551.50. The respondent is entitled to its costs of the appeal fixed at $25,000, inclusive of disbursements and GST.
RELEASED:
“MR” “J.C. MacPherson J.A.”
“APR 20 2009” “Paul Rouleau J.A.”
“I agree M. Rosenberg J.A.”
[^1]: Gill was the driver of the delivery van, which was leased by his employer, Purba Furniture Ltd., from the appellant that collided with the respondent’s car. Gill and his employer settled with the respondent.
[^2]: Rule 1.03 of the Rules of Civil Procedure provides as follows: “substantial indemnity costs” mean costs awarded in an amount that is 1.5 times what would otherwise be awarded in accordance with Part I of Tariff A, and “on a substantial indemnity basis” has a corresponding meaning. (“dépens d’indemnisation substantielle”)