Carroll (Litigation Guardian of) v. McEwen
[Indexed as: Carroll (Litigation Guardian of) v. McEwen]
Ontario Reports
Court of Appeal for Ontario
Strathy C.J.O., Hoy A.C.J.O., K.N. Feldman, D.M. Brown and Paciocco JJ.A.
December 4, 2018
143 O.R. (3d) 641 | 2018 ONCA 902
Case Summary
Civil procedure — Costs — Trial judge substantially reducing successful plaintiffs' costs on grounds that plaintiffs attempted to enforce settlement that they understood defendants had not agreed to, needlessly forced trial and unnecessarily lengthened trial — Leave to appeal costs award denied.
Insurance — Automobile insurance — Statutory accident benefits ("SABs") — Assignment — Jury awarding plaintiff damages for future care costs without particularizing those costs — Trial judge not erring in making conditional assignment of plaintiff's future statutory accident benefits to insurers under s. 267.8(12)(a)(ii) of Insurance Act despite fact that insurers were unable to demonstrate that future SABs payments would qualitatively and temporally match tort damages — "Strict matching" approach to assignment of SABs rejected and "silo" approach affirmed — Trial judge not erring in granting conditional assignment order before judgment had been paid in full — Insurance Act, R.S.O. 1990, c. I.8, s. 267.8(12)(a)(ii).
Facts
The plaintiff was catastrophically injured when hit by a car driven by the defendant RM and owned by CM. She sued the defendants for damages. Since the damages claimed far exceeded the coverage of $1 million under the M's policy with Aviva, she also claimed benefits under the $1 million "inadequately insured motorist" coverage included in the OPCF 44R Family Protection Coverage endorsement of her own automobile insurance policy with Pilot. Aviva and Pilot denied liability, and the plaintiff also sued them. The jury determined that the Ms were 62 per cent liable and that the plaintiff bore 38 per cent responsibility for the accident. The damages awarded included a lump sum award of $2,232,000 for the plaintiff's "future care costs". The jury did not particularize those costs. The trial judge made a conditional order under s. 267.8(12)(a)(ii) of the Insurance Act assigning to Aviva and Pilot the future statutory accident benefits that the plaintiff was entitled to receive from Pilot. The plaintiff appealed, arguing that the assignment order did not accord with the "strict matching" approach, under which a trial judge should not order an assignment of SABs unless the insurer can demonstrate beyond dispute that the future SABs payments would qualitatively and temporally match the tort damages awarded by the jury. They also argued that the order was granted prematurely, before the judgment had been paid in full. At trial, the plaintiff had claimed partial indemnity costs in the amount of $795,616.09. The trial judge awarded costs of $375,000. He offered several reasons for reducing the costs, including sanctioning the plaintiff's counsel for attempting to trick the defendants in relation to a settlement order. The plaintiff applied for leave to appeal the costs order.
Held
The appeal should be dismissed; leave to appeal the costs order should be denied.
The trial judge did not err in granting the conditional assignment where the jury's lump sum assessment did not allow the court to match the award of future care costs to the particular accident benefits that might be received in the future. The "silo" approach to the assignment of SABs, which requires the tort award only to match generally with the broad, corresponding SABs categories or silos, should be followed.
The assignment order was not premature. Requiring a damages award to be paid before an assignment order can be made is impractical. A damages award obviously cannot be paid before the trial has ended and the damages to be recovered have been identified. The plaintiff's interpretation of s. 267.8(12)(a) would require post-trial motions to obtain the assignment of future SABs, an expensive and inefficient use of judicial resources. More importantly, s. 267.8(12) avoids the need for subsequent assignment motions by expressly empowering trial judges to make orders to assign "subject to any conditions the court considers just". That empowers judges to make the assignment order itself conditional. Under the conditional assignment order made in this case, the assignment would not occur until the plaintiff had recovered the damages in the action.
The trial judge substantially reduced the plaintiff's costs for the following reasons: (1) the plaintiff tried to enforce a settlement knowing that the defendants had not agreed to it; (2) there was little material benefit to the plaintiff in pursuing the trial; and (3) the plaintiff had engaged in behaviour that unnecessarily extended the trial. There were no strong grounds for finding that the trial judge erred in exercising his discretion.
Counsel
Geoffrey D.E. Adair, Joseph Y. Obagi and Elizabeth A. Quigley, for appellants.
Kevin P. Nearing and Erin H. Durant, for respondents Robert and Caroline McEwen.
Stephen G. Ross and Gemma Healy-Murphy, for respondents Aviva Canada Inc. and Pilot Insurance Company.
Kristian Bonn, for intervenor Ontario Trial Lawyers Association.
Decision
A. Introduction
1This appeal was heard together with the appeal in Cadieux (Litigation Guardian of) v. Cloutier, 2018 ONCA 903, because both appeals deal with the common issue of the treatment of statutory accident benefits ("SABs") under s. 267.8 of the Insurance Act, R.S.O. 1990, c. I.8. The reasons for judgment are being released concurrently. This appeal deals with the assignment of future SABs to the tort liability insurer, while the Cadieux appeal deals with the deduction of SABs received before trial from the tort award.
2On March 28, 2009, Barbara Carroll, then approaching her 60th birthday, was catastrophically injured when she was hit by a vehicle while walking on a road in a township near Ottawa. She was so badly injured that she will require care for the rest of her life. She now lives with profound physical limitations and a severe traumatic brain injury. It is not contested in this proceeding that the damages suffered by Ms. Carroll in the accident are in the approximate amount of $4 million.
3The vehicle that struck Ms. Carroll was operated by Robert McEwen and was owned by his wife, Caroline McEwen. Ms. Carroll and members of her family (the "appellants") sued the McEwens. The McEwens denied liability, claiming that Ms. Carroll caused the accident.
4The McEwens do not have deep pockets. They carried only $1 million in liability insurance, through Aviva Canada Inc. ("Aviva"), and have since been declared bankrupt and obtained a discharge.
5Since the damage claims made by the appellants far exceeded the coverage under the McEwens' Aviva policy, the appellants also claimed benefits under Ms. Carroll's $1 million "inadequately insured motorist" coverage included in the OPCF 44R Family Protection Coverage endorsement of her automobile insurance policy with Pilot Insurance Company ("Pilot"). Like the McEwens, Aviva and Pilot denied liability. They, too, have been sued by the appellants. Along with the McEwens, they are currently respondents in this appeal.
6By coincidence, the two insurance policies -- the Aviva policy and the Pilot policy -- are now funded out of the same pocket, as Aviva has since acquired Pilot.
7The litigation did not settle despite multiple offers. After a seven-week trial ending in October 2015, the jury determined that Ms. Carroll and the McEwens were jointly responsible for the accident. The McEwens were 62 per cent liable, with Ms. Carroll bearing 38 per cent responsibility. The appellants were awarded $2,610,774.32 in damages, as well as costs of $375,000. The verdict specified that the damages awarded included a lump sum award of $2,232,000 for Ms. Carroll's "future care costs".
8Aviva and Pilot received a conditional order from the trial judge that if they pay the judgment in full, they will receive an assignment of the future SABs that Ms. Carroll is entitled to receive from Pilot under the regime in Part VI of the Insurance Act. In effect, this conditional assignment order gave Aviva and Pilot an option that could reduce their net liability. If Aviva and Pilot determined that the outstanding SABs would exceed the $2 million in combined liability coverage by more than $610,774.32, they could reduce their total combined liability to less than $2 million by paying the judgment in full and taking the assignment of the future SABs for attendant care, and medical and rehabilitation benefits.
9The appellants appeal the conditional assignment order on two grounds. They claim that the conditional assignment order violates the matching principles required by this court's decision in Gilbert v. South, 2015 ONCA 712, and that, in any event, the conditional assignment order was premature since the judgment they won had not been paid when the conditional assignment order was made.
10The appellants also seek leave to appeal the costs order they received of $375,000, inclusive of all fees, disbursements and HST. This award is less than half of the $795,616.09 that they claimed in partial indemnity costs. The trial judge offered several reasons for reducing the costs order, including sanctioning the appellants' counsel for attempting to "trick" the respondents relating to a settlement offer.
11For the reasons below, we would dismiss the appeal from the conditional assignment order and deny leave to appeal the costs order. The trial judge properly exercised his discretion in granting the conditional assignment order, and there are no strong grounds for concluding that the trial judge erred in ordering the costs that he did.
B. The Issues
12The appeal before this court is narrow. Neither the allocation of liability nor the quantum of damages is contested. There are two general issues.
13The first or main issue is whether the trial judge erred in assigning to Aviva and Pilot Ms. Carroll's right to SABs "in respect of medical and rehabilitation benefits and attendant care benefits", provided the judgment is paid in full. Two sub-issues arise:
(1) Did the trial judge err in law in granting the conditional assignment where the "jury's lump sum assessment did not allow the court to match the award of future care costs to the particular accident benefits that might be received in the future"?
(2) Did the trial judge err in law in granting the conditional assignment order prematurely, before the judgment had been paid in full?
14The second general issue relates to the costs order. The trial judge reduced the costs order for three reasons, namely, (1) the behaviour of the appellants' counsel relating to a September 11, 2015 settlement offer made by the respondents; (2) the lack of benefit to the appellants in pursuing the trial; and (3) behaviour by the appellants that extended the trial. The appellants claim that each of these bases for doing so was in error, so each must be considered in turn. The threshold question is whether leave to appeal the costs order should be granted on any or all of these bases. If leave is granted, it must then be determined whether the trial judge erred in the costs order he made.
C. Issue 1: The Assignment of Statutory Accident Benefits
(1) The statutory assignment scheme
15As described in detail in Cadieux, s. 267.8 of the Insurance Act addresses the intersection of tort damages and SABs to prevent double recovery by eligible claimants. It does this in three ways.
16First, s. 267.8(1), (4) and (6) require the tort award to be reduced by corresponding categories of designated SABs that have been received by the injured party before trial. Deductibility of SABs is at issue in Cadieux but is not directly before us in this case.
17Second, where damages have been recovered for income loss, loss of earning capacity, expenses that have been or will be incurred for health care, or other pecuniary loss, SABs subsequently received that correspond to those general categories of damages are subject to a statutory trust to facilitate repayment in favour of the persons who paid the damages: s. 267.8(9) and (10).
18Third, s. 267.8(12) empowers courts to exercise discretion to assign broad categories of future SABs payments to the tortfeasor or the tort liability insurer.
19The trust and assignment provisions of s. 267.8 are set out below:
267.8(9) A plaintiff who recovers damages for income loss, loss of earning capacity, expenses that have been or will be incurred for health care, or other pecuniary loss in an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile shall hold the following amounts in trust:
All payments in respect of the incident that the plaintiff receives after the trial of the action for statutory accident benefits in respect of income loss or loss of earning capacity.
All payments in respect of the incident that the plaintiff receives after the trial of the action for income loss or loss of earning capacity under the laws of any jurisdiction or under an income continuation benefit plan.
All payments in respect of the incident that the plaintiff receives after the trial of the action under a sick leave plan arising by reason of the plaintiff's occupation or employment.
All payments in respect of the incident that the plaintiff receives after the trial of the action for statutory accident benefits in respect of expenses for health care.
All payments in respect of the incident that the plaintiff receives after the trial of the action under any medical, surgical, dental, hospitalization, rehabilitation or long-term care plan or law.
All payments in respect of the incident that the plaintiff receives after the trial of the action for statutory accident benefits in respect of pecuniary loss, other than income loss, loss of earning capacity and expenses for health care.
267.8(10) A plaintiff who holds money in trust under subsection (9) shall pay the money to the persons from whom damages were recovered in the action, in the proportions that those persons paid the damages.
267.8(12) The court that heard and determined the action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of the automobile, on motion, may order that, subject to any conditions the court considers just,
(a) the plaintiff who recovered damages in the action assign to the defendants or the defendants' insurers all rights in respect of all payments to which the plaintiff who recovered damages is entitled in respect of the incident after the trial of the action,
(i) for statutory accident benefits in respect of income loss or loss of earning capacity,
(ii) for income loss or loss of earning capacity under the laws of any jurisdiction or under an income continuation benefit plan,
(iii) under a sick leave plan arising by reason of the plaintiff's occupation or employment,
(iv) for statutory accident benefits in respect of expenses for health care,
(v) under any medical, surgical, dental, hospitalization, rehabilitation or long-term care plan or law, and
(vi) for statutory accident benefits in respect of pecuniary loss, other than income loss, loss of earning capacity and expenses for health care; and
(b) the plaintiff who recovered damages in the action co-operate with the defendants or the defendants' insurers in any claim or proceeding brought by the defendants or the defendants' insurers in respect of a payment assigned pursuant to clause (a).
267.8(13) Subsection (9) no longer applies if an order is made under subsection (12).
20As can be seen, s. 267.8(12)(a) provides for the assignment of three broad categories of SABs, namely, those "in respect of income loss or loss of earning capacity" (s. 267.8(12)(a)(i)); those "in respect of expenses for health care" (s. 267.8(12)(a)(iv)); and those "in respect of pecuniary loss, other than income loss, loss of earning capacity and expenses for health care" (s. 267.8(12)(a)(vi)). Insurance Act, s. 224(1) defines "health care" as including all goods and services paid for by "medical, rehabilitation and attendant care benefits".
21This case raises questions about when an assignment order can be made of SABs paid "in respect of expenses for health care" under the current legislation.
(2) The trial judge's determination
22After a trial in which the majority of evidence was about Ms. Carroll's future care requirements, including medical and rehabilitation benefits, and attendant care benefits, the jury awarded the appellants $4,083,000. The answers provided to the jury questions identified Ms. Carroll's damages. They consisted of general damages in the amount of $300,000 for pain and suffering, and $3,600,000 for "future care costs". The jury questions did not seek further particularization of the "future care costs".
23Adjusted to account for her contributory negligence, Ms. Carroll's net jury award was $186,000 for general damages, and $2,232,000 for future care costs.
24Aviva and Pilot sought an assignment of the future SABs Ms. Carroll would receive for health care costs, if they paid the tort award in full. Although the tort award of $2,610,744.32 exceeded the $2,000,000 in insurance coverage provided by Aviva and Pilot, payment of that award in full coupled with an assignment of future SABs could reduce Aviva and Pilot's net liability. If Aviva and Pilot determined that the outstanding health care SABs would not exceed the $2 million in combined liability coverage by more than $610,774.32, they would be better off paying only the $2 million and foregoing the benefits of any assignment order they obtained. But if they determined that the future health care SABs payments would exceed $610,744.32, they could pay the entire award, and then rely on their assignment rights under the order to reduce their total net obligation by the amount the SABs exceeded $610,744.32.
25The appellants, not wanting to take the chance that their net recovery would be diminished by an assignment, opposed the request. They relied upon the decisions of this court -- primarily Bannon v. McNeely and Gilbert -- to argue that a trial judge should not order an assignment of SABs unless the insurers can demonstrate beyond dispute that the future SABs payments would qualitatively and temporally match the tort damages awarded by the jury. In other words, it must be shown with certainty that the SABs and the jury award cover the same kind of health care costs relating to the same period of loss. They argued that the jury question did not provide sufficient specificity to meet this strict matching standard.
26The appellants also argued that no assignment should take place as it is unlikely that the judgment will be paid, given the insurance limits and the McEwens' bankruptcy.
27The trial judge disagreed. He held that the Gilbert principles were satisfied because "it was clear at the trial that the only major damage issue was the cost of future care", and that all of the evidence demonstrated that the nature and need for future care was "akin to health benefits". (This latter reference is from Bannon"a head of damage or type of loss akin to that for which the no-fault benefits were intended to compensate".) The trial judge was not troubled by the prospect that payment of the judgment may be unlikely, because the appellants were aware of this risk before commencing the litigation.
28The trial judge therefore made a conditional s. 267.8(12)(a)(iv) assignment order in favour of Aviva and Pilot. Specifically, he ordered that "[u]pon payment" of the said sum of "$2,610,774.32 plus costs and post-judgment interest" the two insurers would be assigned Ms. Carroll's entitlement to SABs "in respect of medical and rehabilitation benefits and attendant care benefits" available to her "from her own insurer, Pilot . . .".
(3) Analysis
(a) The trial judge did not err in his assessment of the matching requirement
29The appellants contend that a strict matching approach is justified because language in certain subsections of s. 267.8 links the benefit payment to the particular damages award. They point to s. 267.8(1)1 which refers to "the income loss and loss of earning capacity", and s. 267.8(4)1, which refers to "the expenses for health care" (emphasis added). The appellants claim these are references to benefits in respect of "the tort award", which direct strict identification and matching between particular SABs and damages for the identical head of damages awarded by the jury within the same silo. They suggest that although the trust and assignment provisions do not similarly include the word "the", those provisions should be interpreted in the same way to achieve consistency in interpretation and application.
30The appellants assert that because the assignment provisions are a codification of common law "Cox and Carter" orders, the general principles articulated in Bannon remain applicable.
31They argue that, in this case, the strict matching requirement cannot be satisfied because the jury award for "future care costs" was not particularized. They also argue that the future SABs for medical and rehabilitation benefits and attendant care benefits did not match the jury award for future care costs because the SABs would be exhausted shortly after trial, but the jury award was for lifetime damages. In effect, in making this latter argument the appellants' position is that it does not matter whether the jury award necessarily covered the same damages; since the SABs payments can be linked temporally to specific damage periods while the jury award cannot be, the temporal matching required by strict matching standards is defeated.
32The respondents maintain that no strict matching principle should be imported into the current statutory scheme, as the significant amendments that were subsequently made to the legislation after Bannon address the policy rationale underlying that decision, namely, ensuring fair compensation and preventing double recovery. They contend that Gilbert should be overruled because it erroneously applied the Bannon approach and cannot be reconciled with the decision of the Supreme Court of Canada in Gurniak v. Nordquist, 2003 SCC 59.
33The McEwens alternately suggest that if the strict matching approach applies, it can be satisfied: as in El-Khodr v. Lackie, 2017 ONCA 716, Ms. Carroll is catastrophically impaired, no temporal matching problem arises and there are no benefits for which assignment is requested that would not be permitted under the legislation.
34For the reasons that follow, we do not agree with the appellants' submissions. In our view, the silo approach adopted in Cadieux should similarly apply to the assignment of SABs.
35In Cadieux, we outlined the historical development of two inconsistent approaches to matching SABs to tort damages, as well as the state of the authorities. We noted that while the broad silo approach has more recently been applied to the deduction of SABs received or available before trial, the strict approach has continued to apply to those assignment cases that cannot be factually distinguished from Gilbert. This state of the law is unsatisfactory.
36In Cadieux, in the face of this conflicting authority, we affirmed that the silo approach applies to the deduction provisions. We did so because the silo approach is consistent with the current statutory language, is fair to plaintiffs, defendants and their insurers, and promotes efficiency in motor vehicle accident litigation. It is also consistent with the reasoning in Gurniak.
37In our view, these considerations apply equally in assignment cases. Section 267.8 is integrated in the sense that, together, its provisions are meant to ensure fair compensation and prevent double recovery. There is no principled or technical reason why a different matching regime should apply to SABs received after trial. While Bannon can be distinguished as being based on a prior statutory regime, and the result in Gilbert was based on its unique facts, to the extent that both cases support a strict matching approach under the current statutory scheme, they should be overruled in light of Gurniak. The silo approach is to be applied to s. 267.8 as a whole.
38As we noted in Cadieux, the strict approach was driven by the statutory regime in force at the time Bannon was decided. That statutory regime directed that the present value of the future no fault benefits the plaintiff was entitled to would be deducted from the damages award against the defendant. Plaintiffs who ultimately proved to be ineligible to receive anticipated benefits would therefore be under-compensated, hence the need for strict proof and strict matching. The current statutory trust and assignment provisions make it unnecessary to require strict proof of entitlement to future benefits. They pass no risk of under-compensation to a plaintiff. The benefits are assigned or held in trust as and when they are received until such time as the defendant or its insurer has been reimbursed for payments made under the judgment in respect of the particular "silo".
39The trust and assignment provisions do not contain language that requires a departure from the silo approach we endorsed in Cadieux. SABs to be assigned or held in trust are similarly grouped into three broad categories or silos. Like the deduction provisions, the statutory language of the trust and assignment provisions does not support an interpretation that permits further subdivision of the SABs enumerated within those silos.
40In Cadieux, we noted that the language of the deduction provisions which directs that "all payments" within each of the described silos will reduce a tort award, is inconsistent with offsetting some SABs payments within the designated silos against damages, but not others. Like those provisions, s. 267.8(12) requires the assignment of all rights in respect of all payments with respect to the enumerated categories of SABs. Subsection 267.8(9), which requires the payment of SABs to be held in trust, also specifically includes this "all payments" language.
41We reject the appellants' submissions with respect to the impact of the word "the" in s. 267.8(1)1 and (4)1. In our view, the word "the" does not bear the significance the appellants sought to ascribe to it. The word "the" in these provisions describes the SABs that will reduce a tort award, not the tort award itself. Moreover, the legislation does not use the word "the" in s. 267.8(6) to modify other pecuniary loss SABs that will reduce a tort award, or in describing the SABs that are caught by the trust or assignment provisions. The use of the word "the" is simply part of the grammatical structure chosen in some of the provisions to identify the kind of SABs that can reduce a tort award.
42Nor can the fact that the assignment of SABs is discretionary, while the deduction provisions and the trust provisions are mandatory, have any rational bearing on the type of matching that is required. The appellants do not argue otherwise.
43Moreover, as we noted in Cadieux, strict matching encourages formalistic legal strategies and arguments that remove the focus from whether double recovery is occurring, whether in the assignment context or otherwise.
44In this case, for example, it is obvious that there is overlap between the tort award and SABs payments. Yet, by using strict matching authorities the appellants sought to benefit from the fact that the jury question did not specify the precise kinds of "future care costs" the jury was awarding, or their amounts. The argument descended into a debate about who is responsible for the form of jury questions.
45We therefore do not accept the appellants' arguments that the silo method is unfair. Nor has anything the appellants said dissuaded us from our conclusion expressed in Cadieux that the silo method promotes efficiency in motor vehicle accident litigation.
46It is not contested that, here, the damages award for future care costs falls exclusively within the health care silo and that so, too, do the SABs assigned by the trial judge. The trial judge was therefore entitled to conditionally assign to Aviva and Pilot, SABs "in respect of medical and rehabilitation benefits and attendant care benefits" available to Ms. Carroll "from her own insurer, Pilot . . ."
(b) The trial judge did not err by making a premature assignment order
47The trial judge described the appellants as arguing at trial that no assignment should take place as it is unlikely that the judgment will be paid, given the insurance limits and the McEwens' bankruptcy. That argument was fleshed out before us. The appellants urge that the trial judge erred in law by making a conditional assignment order before the judgment had been paid in full. In effect, the complaint is that the conditional assignment order was premature.
48The appellants base this argument on the language in s. 267.8(12)(a) that authorizes the trial judge to assign SABs to the defendants or the defendants' insurers from the "plaintiff who recovered damages in the action". Since Aviva and Pilot had not paid the $2,610,774.32 at the time of trial, the appellants had not "recovered damages in the action". The appellants therefore contend that the conditional assignment order was not authorized by s. 267.8(12)(a), and the trial judge erred in making it.
49In our view, the trial judge did not err in this regard. Requiring a damages award to be paid before an assignment order can be made is impractical. Obviously, a damages award cannot be paid before the trial has ended and the damages to be recovered have been identified. The appellants' interpretation of s. 267.8(12)(a) would require post-trial motions to obtain the assignment of future SABs, an expensive and inefficient use of judicial resources.
50More importantly, s. 267.8(12) avoids the need for subsequent assignment motions by expressly empowering trial judges to make orders to assign "subject to any conditions the court considers just". This empowers trial judges to make the assignment itself conditional. Under the conditional assignment order made by the trial judge in this case, the assignment would not occur until the appellants recovered the damages in the action, in full. This outcome is consistent with the language of s. 267.8(12)(a), since, at the time any such assignment would be triggered, the appellants would be plaintiffs "who recovered damages in the action". We would therefore reject this ground of appeal.
51There is more, however. The conditional assignment order Aviva and Pilot properly secured from the trial judge has been frustrated and devalued as a result of the appellants' appeal and the positions they have taken. Pending the appeal, Ms. Carroll has continued to receive and benefit from SABs payments from her insurer, Pilot. The appellants' position is that they are not required to hold these payments in trust because their statutory obligation to do so under s. 267.8(9) is contingent on their having recovered damages, and the judgment has not yet been paid. In the meantime, they have been refusing to tell Aviva how much Ms. Carroll has been receiving in SABs payments from Pilot because they are under no statutory obligation to do so. Even though Aviva has acquired Pilot, Aviva is not permitted to obtain this information directly from Pilot because Pilot owes confidentiality obligations to Ms. Carroll.
52Aviva is therefore in a "Catch-22" position. It cannot discover the value of the conditional assignment without paying the judgment in full. However, if it pays the judgment in full it may learn that it has paid more damages than it was required to pay pursuant to the trial judgment. All it knows with certainty is that the value of the conditional assignment order has been declining since that order was made on October 30, 2015.
53In our view, this is an unsatisfactory outcome. The mere exercise of a right to appeal an order should not frustrate the efficacy of an order that proves, on appeal, to have been properly made. Nor should counsel be exploiting technicalities to frustrate the efficacy of judicial orders.
54Subsection 267.8(12) empowers this court to impose conditions on assignment orders. We would do so in this case to prevent the unsuccessful appeal of the conditional assignment order from defeating the benefit of that order. We would impose an additional condition on the assignment order requiring Ms. Carroll to disclose to Aviva the amount that she has received by way of SABs payments in respect of medical and rehabilitation benefits and attendant care benefits since October 30, 2015.
55It is also necessary, in our view, to restore the integrity of the order, as it was at the time of the trial. If, after Aviva has received that disclosure, Aviva and Pilot elect to pay the sum of $2,610,744.32 plus costs and post-judgment interest, minus the amount of SABs payments in respect of medical and rehabilitation benefits and attendant care benefits Ms. Carroll has received since October 30, 2015, Ms. Carroll will assign to Aviva and Pilot all future payments Ms. Carroll is entitled to receive for SABs in respect of medical and rehabilitation benefits and attendant care benefits from her insurer, Pilot.
D. Issue 2: The Costs Appeal
56After succeeding in the action, the appellants sought $795,616.09 in costs on a partial indemnity basis. The trial judge awarded the appellants costs but reduced the amount substantially, to $375,000. As noted above, he gave three general reasons for doing so: (1) the behaviour of the appellants' counsel relating to a September 11, 2015 settlement offer made by the respondents; (2) the lack of benefit to the appellants in pursuing the trial; and (3) behaviour by the appellants that extended the trial.
57The appellants seek leave to appeal the costs order, arguing that the trial judge erred in arriving at each of the conclusions that led him to reduce the costs order. They ask for their costs in the amount of $795,616.09, or for a reassessment of their partial indemnity costs free of the errors they claim the trial judge made.
58The legal principles that apply in a costs appeal are not in dispute. Considerable deference should be given to the trial judge's discretion in determining the entitlement, scale and quantum of a costs order: McNaughton Automotive Ltd. v. Co-Operators General Insurance Co., 2008 ONCA 597, at para. 27. As a result, leave to appeal costs orders should be granted sparingly, only in obvious cases where there are strong grounds upon which the appellate court could find that the judge erred in exercising his discretion: Inter-trust Mortgage Investment Corp. v. 1071005 Ontario Ltd., at para. 12; Brad-Jay Investments Ltd. v. Szijjarto, at para. 21, leave to appeal to S.C.C. refused [2007] S.C.C.A. No. 92; and Feinstein v. Freedman, 2014 ONCA 205, 119 O.R. (3d) 385, [2014] O.J. No. 1496, at para. 52. Even where leave has been granted, a costs order should not be set aside unless the trial judge made an error in principle or the order is plainly wrong: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, at para. 27.
59We would not grant leave to appeal the costs order in this case. In our view, this is not an obvious case where there are strong grounds for finding that the trial judge erred in exercising his discretion. Had leave been granted, we would have denied the costs appeal.
(1) The purported settlement
60As the scheduled trial approached, the parties exchanged settlement offers. Discussions included threats, made by the appellants, to sue Aviva for acting in bad faith relating to its insurance obligations.
61On September 10, 2015, in an e-mail in which Aviva adamantly denied that it was acting in bad faith, the respondents notified the appellants that they were augmenting a previous offer to settle that they had made. A formal "offer to settle" document, dated September 11, 2015, was then delivered in which the respondents "offer[ed] to settle th[e] proceeding" upon payment by the respondents of $2,150,000 inclusive of all damages, prejudgment interest and costs. The offer did not require the assignment of SABs by the appellants. A subsequent letter from counsel for Aviva and Pilot held out that the offer was being made pursuant to the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 and warned of the costs consequences if the offer was not accepted.
62At 4:24 p.m. on September 11, 2015, counsel for the appellants notified the respondents that they had accepted the joint offer. At 4:25 p.m., counsel for the appellants sent a second e-mail. This second e-mail included service of a statement of claim for $2 million in damages against Aviva and Pilot alleging that Aviva and Pilot had acted towards the appellants mala fide or in bad faith. In quick succession, the appellants purported to settle one action against the respondents, and then commence another related action against Aviva and Pilot.
63Upon realizing that the appellants were taking the position that only the accident damages action had been settled, the respondents refused to recognize the appellants' purported acceptance of their settlement offer. Although a jury had already been selected to adjudicate the accident damages action, that action was put on hold so that the appellants could bring a motion before Hackland J. to enforce the purported settlement of the accident damages action. That motion did not go well for the appellants. It was withdrawn by them before Hackland J. was required to rule. He left costs relating to the motion to be determined by the trial judge.
64In his costs order after trial, the trial judge was strongly critical of the appellants' conduct relating to the September 11, 2015 offer. He held that the appellants "did or should have understood that that offer was made on the basis that it would deal with everything outstanding, including a mala fide claim". Indeed, he expressed the "view that the [appellants] were clearly aware of what they were doing and that they were in fact taking the [respondents] by surprise". He found they were "well aware that the offer which they attempted to enforce was made on the clear basis that it was to settle all outstanding claims between the parties". He concluded that the attempt by the appellants to enforce a settlement that the appellants understood the respondents had not agreed to was "essentially a trick" and "[t]his is not something that this Court can countenance without sanction". The trial judge expressed concern that failing to do so would undermine the confidence required to be placed in settlement agreements.
65Where a trial judge has reduced the amount of costs awarded to a party by reason of her counsel's conduct, an appeal court can intervene where the amount of the reduction is not warranted by, or is disproportionate to, the specific conduct of counsel: Jarbeau v. McLean, 2017 ONCA 115, at paras. 80-81. The appellants claim the trial judge made an unwarranted and disproportionate reduction of the costs award in this case, committing a serious error in sanctioning them when they were entitled to treat the respondents' joint September 11, 2015 offer as an offer to settle only the accident damages action.
66In support, the appellants rely on the fact that the offer was drafted using the style of cause of the accident damages action and used the language from Rules of Civil Procedure, Rule 49, referring to an "offer to settle this proceeding". Moreover, by clear implication counsel for Aviva and Pilot represented in its September 11, 2015 letter that this was a Rule 49 offer, which would necessarily require that the offer not extend beyond claims brought in the proceeding.
67In our view, the trial judge's findings that underpin his characterization of the appellants' conduct as a trick deserve deference. The prior offers and the trial record, including the e-mail of September 10, 2015, provide ample basis for the trial judge's conclusion that "without doubt . . . all these offers were made on the basis that everything would be settled between these parties and this would end all litigation", and that the appellants knew this. The trial judge clearly understood the technical foundation that the appellants' counsel was relying on to support its claim that it was accepting an offer to settle only the accident damages action, and he was entitled, on the evidence before him, to reject the bona fides of that claim. Based on those findings of fact, the attempt by the appellants to enforce the settlement could be characterized as a trick. A settlement is based on a meeting of the minds, yet the appellants, knowing that no meeting of the minds had occurred, attempted to enforce the purported settlement. The trial judge was entitled to find that the relative timing of the acceptance of the offer and of the service of the bad faith statement of claim smacked of a calculated design to entrap the respondents into a settlement the appellants knew had not been achieved. No error of principle occurred in this case. The reduction of the costs award by the trial judge was warranted by the conduct he found.
68The appellants are also critical of the trial judge for stating that the reasons of Hackland J. on the enforcement motion were before the court, when no such reasons had ever been issued. Nothing comes of this. The trial judge simply misspoke. It is obvious he was referring to the colloquy between Hackland J. and the appellants' counsel during the motion where Hackland J. was critical of the conduct of the appellants' counsel.
69Nor does it matter that Hackland J.'s position on the impropriety of the appellants' counsel's conduct softened by the end of the settlement enforcement motion. What matters is the trial judge's characterization of the appellants' conduct, and that his characterization was amply supported by the record.
(2) The lack of material benefit
70The trial judge also found that costs should be reduced because, given the offer of September 11, 2015 in particular, the benefits to the appellants in proceeding to trial "were slight". In essence, the trial judge was critical of the appellants for needlessly forcing a trial.
71The appellants claim that this conclusion by the trial judge represents a palpable and overriding error. They urge that, on the evidence, they beat the offers to settle that were made. They also argue that the trial judge erred by failing to consider the offers the appellants made, and by requiring the appellants to beat the offers to settle by a substantial margin in order to secure partial indemnity costs. This last submission arises from the trial judge's observation that "it seems that the verdict's benefit to the [appellants] is not substantially over the offers themselves as these offers really comprised the funds available". We do not accept any of these arguments.
72The trial judge considered the settlement offers that had been made, and the appellants' position. He was simply persuaded by the respondents' position that, while it may appear factually that the settlement offers had been beaten, when substance is considered there was little if anything to be gained by going to trial. When the trial judge said that the appellants had not substantially beaten the offers made, he was not purporting to describe and apply a legal principle. He was commenting on the state of facts.
73The trial judge was entitled, in the circumstances, to conclude that there was little if any benefit in bringing the action. Regardless of the jury award, the most the appellants could realize in damages after trial was $2 million, the gross amount of available insurance coverage. The McEwens were discharged bankrupts and the permission the appellants secured to sue them was limited to their $1 million insurance policy.
74Nor is it clear that the appellants beat the offers by any measure. The $2,150,000 September 11, 2015 offer made by the respondents did not include an assignment of future SABs, and therefore, in substance, was an offer worth well in excess of $2,150,000 to the appellants. On the evidence before the trial judge, the value of the future SABs was between $599,000 and $830,000. After the multi-week trial, the appellants secured an award of $2,610,774.32 in damages, as well as costs of $375,000. There was little if any utility in having a trial. In our view, the trial judge was entitled to rely on this to reduce the costs order.
(3) Conduct delaying the trial
75Rules of Civil Procedure, rule 57.01(1)(e) authorizes a trial judge, in awarding costs, to consider the conduct of any party that tended to shorten or lengthen unnecessarily the duration of the proceeding. The trial judge found that the appellants unnecessarily lengthened the trial. In our view, on the evidence before him the trial judge was entitled to make and rely on that finding.
76We have already recounted the delay that was caused by the appellants' attempt to enforce a clearly unenforceable settlement. This was a significant event, on its own sufficient to warrant the reduction in the costs order that occurred.
77The trial judge, having had the benefit of the representations and submissions of counsel and the trial record, was also entitled to find that the trial was delayed because of the last-minute decision of the appellants to have Ms. Carroll testify. We do not accept the appellants' submission that no representation had been made that Ms. Carroll would not testify. The appellants conducted themselves as if she would not be called, until the last minute. She was not on the witness list and was proposed as a witness for the first time only on the eve of trial. The trial judge's decision to permit her to be examined for discovery before trial was a reasonable one, as was his decision to hold the appellants responsible for the delay that this examination caused.
78Finally, the trial judge was entitled to note that the appellants had paid only lip service to the case management master's order. Most notably, the record supports the trial judge's conclusion that the future care report that was served by the appellants months late on August 18, 2015 was a new plan contemplating more vigorous therapy for Ms. Carroll.
79We would not, on this record, give any currency to the appellants' submission that since the respondents also failed to comply strictly with the case management master's order, it is unfair to reduce the appellants' costs because of delay. The trial judge had more than sufficient reason for reducing the appellants' costs, as he did.
(4) Conclusions on the costs appeal
80The appellants have not met the test for obtaining leave to appeal costs. This is not an obvious case where there are strong grounds for finding that the trial judge erred in exercising his discretion. We therefore deny leave to appeal the costs order. The question of who should bear the reduction in the costs award ordered by the trial judge, counsel or client was not raised before us.
E. Order
81We dismiss the appeal from the conditional assignment order and vary the conditional assignment order in the judgment as follows. The amendments we make are underscored for ease of identification:
(1) Within 30 days of the receipt of this judgment, the plaintiff Barbara Lynn Carroll is to disclose to the defendant the Aviva Insurance Company of Canada the amount that she has received by way of statutory accident benefits payments in respect of medical and rehabilitation benefits and attendant care benefits since October 30, 2015.
(2) Upon payment by the Aviva Insurance Company of Canada in its capacity as the insurer of the defendants Robert McEwen and Caroline McEwen and by Pilot Insurance Company, in its capacity as the OPCF 44R insurer of Barbara Lynn Carroll, of the sum of $2,610,744.32 plus costs and post-judgment interest, minus the amount of statutory accident benefits payments in respect of medical and rehabilitation benefits and attendant care benefits that Barbara Lynn Carroll has received since October 30, 2015, Barbara Lynn Carroll will assign to the Aviva Insurance Company of Canada and Pilot Insurance Company, all payments in respect of the motor vehicle accident of March 28, 2009 that Barbara Lynn Carroll is entitled to receive, after the judgment has been paid, for statutory accident benefits in respect of medical and rehabilitation benefits and attendant care benefits from her own insurer, Pilot Insurance Company. Such payments shall be made to the Aviva Insurance Company of Canada and Pilot Insurance Company and/or such payments shall be assigned to the Aviva Insurance Company of Canada and Pilot Insurance Company. This right of assignment is conditional on payment by the Aviva Insurance Company of Canada and/or Pilot Insurance Company, within 30 days of the receipt by the Aviva Insurance Company of Canada of the disclosure of the amount Barbara Lynn Carroll has received by way of statutory accident benefits payments in respect of medical and rehabilitation benefits and attendant care benefits since October 30, 2015. Moreover, to the extent that Barbara Lynn Carroll assigns her rights in respect of all payments to which Barbara Lynn Carroll is entitled in respect of the accident of March 28, 2009, from the Aviva Insurance Company of Canada and Pilot Insurance Company for medical and rehabilitation benefits and attendant care benefits, Barbara Lynn Carroll will co-operate with the Aviva Insurance Company of Canada and Pilot Insurance Company in any claim or proceeding brought by the Aviva Insurance Company of Canada and Pilot Insurance Company in respect of such assigned payments including participating in any mediation, litigation or arbitration proceeding commenced by the Aviva Insurance Company of Canada and Pilot Insurance Company to recover such payments.
82We also deny leave to appeal the costs order.
83As agreed between the parties, we award costs in the appeal to the respondents, together, in the amount of $35,000, inclusive of HST and all disbursements.
Appeal dismissed.
Notes
1 Revised plaintiffs' factum, at para. 8.
End of Document
