Wicken, an infant by his Litigation Guardian Wicken v. Harssar et al. [Indexed as: Wicken (Litigation Guardian of) v. Harssar]
73 O.R. (3d) 600
[2004] O.J. No. 1935
Court File No. 452/02
Ontario Superior Court of Justice
Divisional Court,
Cunningham A.C.J., Wilson and Caputo JJ.
May 11, 2004*
*This judgment was recently brought to the attention of the editors.
Civil procedure -- Costs -- Offer to settle -- Purpose of s. 267.5(9) of Insurance Act being to offset potential harsh results of applying statutory deductible to non-pecuniary damages in context of choice of court and threshold of Simplified Procedure -- Section 267.5(9) of Act not having effect of excluding statutory deductible from consideration in determining whether cost consequences of offer to settle under Rule 49 of Rules of Civil Procedure apply -- Insurance Act, R.S.O. 1990, c. I.8, s. 267.5(7), (9) -- Rules of Civil Procedure, R.R.O. 1990, Reg. 194, Rule 49.
The plaintiff in a motor vehicle action was awarded $20,000 by the jury. The actual net recovery, including interest, after deducting the $15,000 statutory deductible set out in s. 267.5(7) of the Insurance Act, was $9,966.67.
Section 267.5(9) of the Act provides that in a motor vehicle action, the determination of a party's entitlement to costs shall be made without regard to the effect of the statutory deductible on the amount of damages for non-pecuniary loss. The trial judge found that the offer to settle served by the defendants was not a "fixed, certain and understandable offer" and was therefore not enforceable in accordance with rule 49.10(2) of the Rules of Civil Procedure. He found that the $15,000 deductible did not apply to the defendants' offer to settle, whether it was an enforceable offer to settle or not. He found that the effect of s. 267.5(9) was that the plaintiff's recovery, for the purposes of rule 49.10(2), was deemed to be $20,000. He concluded that the defendants' offers to settle in the amounts of $10,000 and $5,000 were together less than the recovery. The defendants appealed.
Held, the appeal should be dismissed.
The offer to settle was not clear and hence not enforceable. Rule 49 was therefore not invoked. The costs award made by the trial judge should not be interfered with.
The trial judge's interpretation of s. 267.5(9) of the Act as it relates to a valid Rule 49 offer to settle undermines the principles and philosophy underpinning the offer to settle rule. When interpreting statutes that appear to be in conflict, an interpretation that respects the intended purpose of both the statutes is preferred. While the plain meaning of s. 267.5(7) and (9) is clear and unequivocal, supporting the interpretation of the trial judge, it should not be readily assumed that the legislature intends an unreasonable result or to perpetrate an injustice or absurdity. If a statute is susceptible to two interpretations, the interpretation that avoids absurdity is to be preferred. Even if the words of s. 267.5(7) and (9) appear clear, if they lead to an inconsistency in interpreting their effect upon Rule 49 of the Rules of Civil Procedure, then the words must be modified to avoid that situation. The Insurance Act was amended by Bill 59 in 1996 to increase the statutory deductible from $10,000 to $15,000. At the same time, the cost provision in [page601] s. 267.5(9) was introduced as a trade-off to offset the potential harsh results of applying the enhanced statutory deduction in certain circumstances. The trade-off and protection relates to the choice of court, and the cost consequences of failing to obtain a net recovery that exceeds either the Small Claims Court jurisdiction or the threshold of the Simplified Procedure. Rule 49.10 of the Rules of Civil Procedure was enacted to ensure that plaintiffs are reasonable, with adverse cost consequences if they refuse to accept a defendant's offer and do not achieve a better result at trial. If the reasoning of the trial judge were to apply, the context and purpose of both statutory provisions would be undermined.
Finally, there is a distinction between an "award", tracking the wording of the Act, and a "judgment", tracking the wording of Rule 49. The Rules of Practice define "judgment" as a decision that finally disposes of an application or action on its merits. In this case, the jury awarded $20,000 to the plaintiff. After the statutory deductions the judgment was for $9,966.62. The award by the jury did not finally dispose of the action. The judgment, after the statutory deduction, finally disposed of the action. On the plain wording of the Insurance Act and Rule 49, an offer of more than $10,000 would have been as favourable or more favourable than the judgment and would have met the requirement of rule 49.10(2).
APPEAL from a costs award of Stinson J., [2002] O.J. No. 2843, 24 C.P.C. (5th) 164 (S.C.J.).
Snider v. Salerno, [2002] O.T.C. 284, [2002] O.J. No. 1004 (S.C.J.), apld Other cases referred to Brantford (City) Public Utilities Commission v. Brantford (City) (1998), 1998 1912 (ON CA), 36 O.R. (3d) 419, 44 M.P.L.R. (2d) 151 (C.A.); Datacalc Research Corp. v. Canada, [2002] T.C.J. No. 99, 2002 D.T.C. 1479 (Tax Ct.); Friends of Oldman River Society v. Canada (Minister of Transport), 1992 110 (SCC), [1992] 1 S.C.R. 3, 84 Alta. L.R. (2d) 129, 88 D.L.R. (4th) 1, 132 N.R. 321, 48 F.T.R. 160n, [1992] 2 W.W.R. 193; Guelph (City) v. Wyndham Street Investments Inc. (2003), 2003 15725 (ON CA), 63 O.R. (3d) 481, 223 D.L.R. (4th) 678, 36 M.P.L.R. (3d) 1, 37 M.V.R. (4th) 15, [2003] O.J. No. 674 (C.A.), affg (2001), 2001 28018 (ON SC), 56 O.R. (3d) 490, 27 M.P.L.R. (3d) 35, 23 M.V.R. (4th) 225 (S.C.J.); Hedley Byrne & Co. v. Heller and Partners Ltd., [1963] 2 All E.R. 575, [1964] A.C. 465, [1963] 3 W.L.R. 101, 107 Sol. Jo. 454, [1963] Lloyd's Rep. 485 (H.L.); Municipal Enterprises Ltd. v. Nova Scotia (Attorney General) (2003), 212 N.S.R. (2d) 36, 665 A.P.R. 36, 2003 NSCA 10, [2003] N.S.J. No. 26 (C.A.); New Bruns wick v. Estabrooks Pontiac Buick Ltd. (1982), 1982 3042 (NB CA), 44 N.B.R. (2d) 201, 144 D.L.R. (3d) 21, 116 A.P.R. 201, 7 C.R.R. 46 (C.A.) (sub nom. Melvin v. New Brunswick, Fisherman's Wharf Ltd. (Re)); R. v. McIntosh, 1995 121 (SCC), [1995] 1 S.C.R. 686, 21 O.R. (3d) 797n, 1995 124 (SCC), 178 N.R. 161, 95 C.C.C. (3d) 481, 36 C.R. (4th) 171; Shannon Realties Ltd. v. St. Michel (Town), 1923 425 (UK JCPC), [1924] A.C. 185, [1924] 1 D.L.R. 119, 130 L.T. 518, 47 B.R. 416 (P.C.); Walmer Developments v. Wolch (2003), 2003 42163 (ON SCDC), 67 O.R. (3d) 246, 230 D.L.R. (4th) 372, [2003] O.J. No. 3435 (Div. Ct.); Will-Kare Paving & Contracting Ltd. v. Canada, [2000] 1 S.C.R. 915, 2000 SCC 36, 188 D.L.R. (4th) 242, 255 N.R. 208, 2000 D.T.C. 6467; Yepremian v. Weisz (1993), 1993 5483 (ON SC), 16 O.R. (3d) 121, 20 C.P.C. (3d) 357 (Gen. Div.) Statutes referred to An Act to Amend the Insurance Act and Certain other Acts in respect of Automobile Insurance and other Insurance Matters (Bill 164), 3rd Sess., 35th Leg. Automobile Insurance Rate Stability Act, 1996, S.O. 1996, c. 21 (Bill 59) Insurance Act, R.S.O. 1990, c. I.8, s. 267.5 Rules and regulations referred to Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 49, 49.10, 58.06(1) Rules of Practice, Rule 103 [page602] Authorities referred to Bennion, F., Statutory Interpretation, 4th ed. (London: Butterworths, 2002)
Wayne P. Cipollone, for respondent (plaintiff). Donald G. Cormack, for appellants (defendants).
BY THE COURT: --
The Issue
The Issue
1This is an appeal from the cost award of Stinson J. dated July 15, 2002. The appellants (defendants) assert that the learned trial judge misinterpreted the cost provisions of s. 267.5(7) and 267.5(9) of the Insurance Act, R.S.O. 1990, c. I.8 (the "IA") when considering an Offer to Settle served pursuant to rule 49.10(2) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.
2This motor vehicle action proceeded to a trial with a jury. The defendants owned or drove the car that injured the infant plaintiff, who was riding his bicycle at the time of the accident.
3Stinson J. ordered costs of the action in favour of the plaintiff on a partial indemnity basis.
4Lane J. granted leave to appeal the order of costs [[2003] O.J. No. 210 (Div. Ct.)] with respect only to the conclusions reached by Stinson J. as to the effect of s. 267.5 of the IA as it applies to Offers to Settle.
The Statutory Provisions
5The IA provides for a statutory amount to be deducted from an award, but also provides that when costs are to be considered, the statutory deductible is not to be taken into account.
6Section 267.5(7) with for the statutory deductible, as well as the cost rule in s. 267.5(9) provide:
267.5(7) Amount of damages for non-pecuniary loss -- Subject to subsections (5), (12), (13) and (15), in an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile, the court shall determine the amount of damages for non-pecuniary loss to be awarded against a protected defendant in accordance with the following rules:
3.[T]he amount of damages for non-pecuniary loss to be awarded against the protected defendant shall be determined by reducing the amount determined under paragraph 1 by, [page603]
i. in the case of damages for non-pecuniary loss other than damages for non-pecuniary loss under clause 61(2)(e) of the Family Law Act, the greater of,
A.$15,000, and
(9) Costs -- In an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile, the determination of a party's entitlement to costs shall be made without regard to the effect of paragraph 3 of subsection (7) on the amount of damages, if any, awarded for non-pecuniary loss.
(Emphasis added)
7Rule 49.10(2) of the Rules of Civil Procedure provides:
49.10(2) Defendant's Offer -- Where an offer to settle,
(a) is made by a defendant at least seven days before the commencement of the hearing;
(b) is not withdrawn and does not expire before the commencement of the hearing; and
(c) is not accepted by the plaintiff,
and the plaintiff obtains a judgment as favourable as or less favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer was served and the defendant is entitled to partial indemnity costs from that date, unless the court orders otherwise. O. Reg. 284/01, s. 11(2).
The Cost Order Made
The Cost Order Made
8The jury awarded the plaintiff $20,000. The actual net recovery including interest after deducting the statutory deductible was $9,966.67.
9Stinson J. did not consider the $15,000 statutory deductible when considering the issue of costs applying s. 267.5(9) of the IA.
10Stinson J. concluded that the recovery was not within the jurisdiction of the Small Claims Court, and therefore adverse costs consequences of failing to attain a judgment of $10,000 in this court did not apply.
11As well, he concluded that although prima facie the gross recovery of the plaintiff was $20,000, and therefore within the monetary jurisdiction of the Simplified Procedure, he concluded that in the facts of this case it was reasonable to commence the matter under the ordinary procedures. Although the jury preferred the evidence of the defence medical experts, the plaintiff's case requesting amounts significantly higher than the amounts recovered was premised upon "reputable and respectable medical opinions".
12Stinson J. concluded that the offer to settle served by the appellants was not a "fixed, certain and understandable offer" [page604] that would allow the recipient to "contemplate and accept" a proposed offer (see Yepremian v. Weisz (1993), 1993 5483 (ON SC), 16 O.R. (3d) 121, 20 C.P.C. (3d) 357 (Gen. Div.), at p. 123 O.R.). The offer was, therefore, not an enforceable offer in accordance with rule 49.10(2).
13Stinson J. concluded that the $15,000 deductible does not apply to the defendant's offer to settle, whether it be an enforceable offer to settle pursuant to rule 49.10(2) or not. He found that the effect of the statutory deductible and the provisions of s. 267.5(9) provided a $15,000 "cushion" when considering the cost consequences of an offer to settle.
14Paragraphs 23 and 24 of the decision of Stinson J.:
In my view, s. 267.5(9) of the Insurance Act was not intended to apply to the interpretation of an offer to settle in the fashion argued by defence counsel. Rather, in my view, in order to trigger the operation of rule 49.10(2) in circumstances to which s. 267.5(9) applies, a defendant's offer must exceed the plaintiff's post-reduction trial recovery by at least $15,000. Unless a defendant's offer meets that test, a successful plaintiff ought not be deprived of the costs that would ordinarily follow the event.
A plaintiff who is injured in a car accident automatically encounters a reduction of $15,000 from whatever sum a jury or judge may award as damages for non-pecuniary loss. The Legislature has seen fit, in enacting s. 267.5(9), to direct that the reduction should be disregarded when determining a plaintiff's (or, for that matter, a defendant's) entitlement to costs. Rule 49.10(2) has existed since 1985 and the Legislature must be presumed to have been aware of the rule when it enacted s. 267.5(9). In my view, the intention of the Legislature, in relation to situations to which s. 267.5(9) applies, was to require that, for rule 49.10(2) to be triggered, a defendant's offer to settle must provide for a settlement payment to a plaintiff that is at least $15,000 greater than the plaintiff's post-reduction recovery. In other words, a plaintiff has a $15,000 "cushion" when considering the potential rule 49.10 costs consequences of any offer to settle. That "cushion" provides an incentive to defendants to be slightly more generous with their offers to settle, with a view to increasing the likelihood that plaintiffs will choose to settle instead of going to trial. To permit a defendant to draft an offer to settle having the effect for which counsel for Harssar and Hurowitz contends would, in my view, defeat the Legislature's intent and should not be permitted.
15Lane J. granted leave to appeal the decision only with respect to the interpretation of s. 267.5(9) of the IA as it applies to offers to settle as follows [at para. 6]:
He [Stinson J.] continued his analysis of the costs effect of the offer by considering whether the result was better for the defendants than the offer which they made. Section 267.5(7) of the Insurance Act requires that a deduction of $15,000 be made from any award for non-pecuniary damages in an automobile case. However, subsection (9) provides that "the determination of a party's entitlement to costs shall be made without regard" to that deduction. Accordingly, he held that the plaintiff's recovery, for costs purposes, must be deemed to be $20,000. This would be before interest and costs. The moving defendants' offer of $10,000, before interests and costs, and Imperial's offer of $5,000 inclusive are together plainly less than the [page605] recovery. This is so even when the $2,000 contributory negligence is factored in. Therefore, the plaintiff had "beaten the offer".
16Lane J. continued [at para. 7]:
The moving parties submit that this reasoning is flawed because the judge did not give full effect to subsection (9) supra. It refers to "a party's entitlement to costs" and thus the deduction must be ignored in calculating the value of the defendants' offers as well as in calculating the plaintiff's recovery. . . .
17Lane J. thought the matter was of sufficient merit to deserve review by the Divisional Court, given the almost universal use of Rule 49 offers in automobile personal injury cases.
Discussion and Conclusion
Discussion and Conclusion
18In this case, the offer to settle was not clear and hence not enforceable. Rule 49 is therefore not invoked. We therefore do not interfere with the costs award made by the trial judge.
19While the decision of Stinson J. in respect of this narrow issue may be considered obiter, we are of the view given the importance, the issue requires clarification in order to provide certainty to the personal injury bar.
20After careful consideration of the relevant statutory provisions, principles of statutory interpretation, and the intended purpose of offers to settle as provided for in Rule 49 of the Rules of Civil Procedure, we conclude that Stinson J.'s interpretation with respect to s. 267.5(9) of the IA as it relates to a valid Rule 49 offer to settle undermines the principles and philosophy underpinning the offer to settle rule.
21We reach this conclusion for two reasons. First, when interpreting statutes that appear to be in conflict, an interpretation that respects the intended purpose of both the statutes is preferred. Second, a close reading of the provisions of the IA refers to "an award", whereas the offer to settle rule refers to the "judgment" achieved.
Application of Principles of Statutory Interpretation
Application of Principles of Statutory Interpretation
22In this case, there are competing principles of statutory interpretation.
23When considering the meaning and effect of s. 267.5(7) and (9) there are two applicable principles of statutory interpretation. The first is the plain meaning rule. The second is that statutory provisions are to be read in their grammatical and ordinary sense harmoniously with the objective of the legislation (for further discussion see Walmer Developments v. Wolch (2003), 2003 42163 (ON SCDC), 67 O.R. (3d) 246, [2003] O.J. No. 3435, (Div. Ct.), at para. 27). [page606]
24The court must give effect to the words used when the meaning of the words used is plain and no ambiguity arises from the context. The words offer the best indicator of Parliament's intent (Will-Kare Paving & Contracting Ltd. v. Canada, 2000 SCC 36, [2000] 1 S.C.R. 915, 188 D.L.R. (4th) 242, per Binnie J., at para. 54 and R. v. McIntosh, 1995 124 (SCC), [1995] 1 S.C.R. 686, 95 C.C.C. (3d) 481 per Lamer J., at p. 697 S.C.R.).
25On one hand, the plain meaning of s. 267.5(7) and (9) is clear and unequivocal, supporting the interpretation of the learned trial judge.
26However, on the other hand, competing statutes are to be interpreted in a way that avoids any absurd or inconsistent result. It should not be readily assumed that the legislature intends an unreasonable result or to perpetrate an injustice or absurdity. (See: New Brunswick v. Estabrooks Pontiac Buick Ltd. (1982), 1982 3042 (NB CA), 44 N.B.R. (2d) 201, 144 D.L.R. (3d) 21 (C.A.), at para. 21.)
27If a statute is susceptible of two interpretations, the interpretation that avoids absurdity is to be preferred (Datacalc Research Corp. v. Canada, [2002] T.C.J. No. 99, 2002 D.T.C. 1479 (Tax Ct.), at para. 54).
28According to F. Bennion, Statutory Interpretation, 4th ed, (London: Butterworths, 2002), the concept of "absurdity" actually encompasses several components. The presumption against an "absurd" interpretation means the avoidance of (1) an unworkable or impractical result, (2) an inconvenient result, (3) an anomalous or illogical result, (4) a futile or pointless result, (5) an artificial result, or (6) disproportionate counter-mischief.
29Regarding inconvenience, the author, at p. 839, quotes Lord Shaw in Shannon Realties Ltd. v. St. Michel (Town), 1923 425 (UK JCPC), [1924] A.C. 185, [1924] 1 D.L.R. 119, at p. 192 A.C., who said:
Where the words of a statute are clear, they must, of course be followed, but in their Lordships' opinion where alternative constructions are equally open, that alternative is to be chosen which will be consistent with the smooth working of the system which the statute purports to be regulating and that alternative to be rejected which will introduce uncertainty, friction or confusion into the working of the system.
30In considering the avoidance of anomalies, the author states at p. 846 that "every legal system [must] seek to avoid unjustified differences and inconsistencies in the way it deals with similar matters. As Lord Devlin said, 'no system of law can be workable if it has not got logic at the root of it' (Hedley Byrne & Co. Ltd. v. Heller and Partners Ltd. (1963), [1964] A.C. 465, [1963] 2 All E.R. 575 at p. 516 A.C.).["]
31This court and the Court of Appeal have also considered these concepts. In Brantford (City) Public Utilities Commission v. Brantford (City) (1998), 1998 1912 (ON CA), [page607] the Court of Appeal quoted Justice La Forest in Friends of Oldman River Society v. Canada (Minister of Transport), 1992 110 (SCC), [1992] 1 S.C.R. 3, 88 D.L.R. (4th) 1, who stated [at p. 38 S.C.R.]:
The basic principles of law are not in doubt. Just as subordinate legislation cannot conflict with its parent legislation . . . so too it cannot conflict with other Acts of Parliament . . . unless a statute so authorizes . . . . Ordinarily, then, an Act of Parliament must prevail over inconsistent or conflicting subordinate legislation. However, as a matter of construction a court will, where possible, prefer an interpretation that permits reconciliation of the two. "Inconsistency" in this context refers to a situation where two legislative enactments cannot stand together . . . there is a presumption that the legislature did not intend to make or empower the making of contradictory enactments.
32In Guelph (City) v. Wyndham Street Investments Inc. (2001), 2001 28018 (ON SC), 56 O.R. (3d) 490, 27 M.P.L.R. (3d) 35 (S.C.J.), at paras. 11-12, Justice Caswell stated the following:
There are other principles of statutory interpretation that are also applicable in this case. Here the court is dealing with two statutes among the many that govern land use in Ontario. When the court is considering the legislative context, it is also important to apply the principles for the harmonization of different statutes.
R. Sullivan, in Driedger on the Construction of Statutes (3rd ed., 1994), expressed these principles as follows, at p. 288:
The meaning of words in legislation depends not only on their immediate context but also on a larger context which includes the Act as a whole and the statute book as a whole. The presumptions of coherence and consistency apply not only to Acts dealing with the same subject but also, albeit with lesser force, to the entire body of statute law produced by a legislature.
Therefore, other things being equal, interpretations that minimize the possibility of conflict or incoherence among different enactments are preferred.
33Even if the words in s. 267.5(7) and (9) of the IA appear clear, if they lead to an inconsistency in interpreting their effect upon Rule 49 of the Rules of Civil Procedure, then the words may be modified to avoid that situation (Municipal Enterprises Ltd. v. Nova Scotia (Attorney General), 2003 NSCA 10, [2003] N.S.J. No. 26, 212 N.S.R. (2d) 36 (C.A.), at para. 76).
Interpreting Section 267.5(9) of the Insurance Act
Interpreting Section 267.5(9) of the Insurance Act
34We conclude that applying the principles of statutory interpretation, outlined above, when considered in the context, as well as the plain meaning of the words, s. 267.5(9) of the IA cannot apply to offers to settle. The following context is helpful in reaching this conclusion. [page608]
35The statutory deductible was first introduced in 1993 in Bill 164, An Act to Amend the Insurance Act and Certain other Acts in Respect of Automobile Insurance and other Insurance Matters, 3rd Sess., 35th Leg. Ontario, 1993. The deductible was initially $10,000. A review of the Hansard debates on January 26, 1993 indicates questions and concerns with respect to the concept.
36On that date, Mr. D. Blair Tully, Deputy Minister in the Automobile Insurance Review, states: "The reason for the deductible is twofold: to eliminate the smallest claims, which are seen to burden the system, and as part of the overall balancing of cost in the system."
37The amendments to the Insurance Act in Bill 59 -- the Automobile Insurance Rate Stability Act, 1996, S.O. 1996, c. 21 (Bill 59), came into effect on November 1, 1996.
38Bill 59 increased the statutory deductible from $10,000 to $15,000. At the same time the cost provision in s. 267.5(9) was introduced.
39Subsection 267.5(9) has the effect of protecting plaintiffs from what may be punitive cost consequences as a result of applying the enhanced statutory deduction. Counsel for the plaintiff characterized the increased statutory deduction coupled with s. 267.5(9) as a "give and take". The addition of s. 267.5(9) is a trade-off to offset potential harsh results of applying the enhanced statutory deduction in certain circumstances.
40There are very few cases considering the meaning of s. 267.5(9) of the IA.
41The trade-off and protection [have] been interpreted to relate to the choice of court, and the cost consequences of failing to obtain a net recovery that exceeds either the Small Claims Court jurisdiction, or the threshold of the Simplified Procedure. We agree with this interpretation.
42Killeen J. in Snider v. Salerno, [2002] O.J. No. 1004, [2002] O.T.C. 284 (S.C.J.), at paras. 6 and 7 interprets the section. He concluded that s. 267.5(9) allows for what amounts to an exemption from the strict loss-of-costs order provided for in the Simplified Procedure rule 76.10(2). In Snider, the plaintiff, after deducting the statutory deductible, achieved a judgment less than $25,000. The application of the cost consequences called for in the rule would have deprived the plaintiff of costs, unless the trial judge concluded that it was reasonable to begin, and to continue the case under the ordinary procedures. Killeen J. concluded [at para. 7]:
There is, from my perspective, a complete answer to Ms. Beckett's argument in s. 267.5(9) of the Insurance Act reading as follows:
(9) Costs -- In an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile, the determination of a party's entitlement to costs shall be made [page609] without regard to the effect of paragraph 3 of subsection (7) on the amount of damages, if any, awarded for non-pecuniary loss.
To me, the plain and unambiguous language of this saving proviso is that the statutory deductible of $15,000 cannot be taken into account in assessing costs and, since Mrs. Snider's gross recovery falls well over the $25,000 limit of Rule 76 which was in effect at the time of trial in December, 2001, the costs provisos of Rule 76 can have no application to this case.
(Emphasis added)
43We agree with Killeen J.'s interpretation as to the meaning of s. 267.5(7) and s. 267.5(9) of the IA.
44In this case the net recovery after the deductible was less than the $10,000 limit for the Small Claims Court. So too, we agree with Stinson J.'s interpretation that the application of s. 267.5(9) in this case means that the adverse cost consequences of failing to recover a judgment in this court exceeding $10,000 do not apply.
45However, we are of the opinion that different, and important, competing principles are applicable when considering s. 267.5(9) in the context of an enforceable Rule 49 offer to settle.
46It is the appellant's position that had there been an enforceable offer to settle, Stinson J. failed to properly apply s. 267.5(9) of the IA. Stinson J. found that the legislative intent underlying s. 267.5(9) of the IA required the defendants to augment rule 49.10 offers by an additional $15,000 "cushion" in excess of a plaintiff's post-deductible recovery at trial in order to trigger the costs consequences under rule 49.10.
47With respect, there is no factual or legal basis for this conclusion. This interpretation fails to recognize the context of the statutory deductible. It was introduced, and enhanced to eliminate the small costly cases in the system, in an attempt to reduce escalating insurance costs. Rule 49.10 of the Rules of Civil Procedure was enacted to ensure that plaintiffs are reasonable, with adverse cost consequences if they refuse to accept a defendant's offer, and do not achieve a better result at trial.
48If the reasoning of Stinson J. were to apply, the context and purpose of both statutory provisions would be undermined. In our view, a most unfair situation would be created that does not accord with practical reality.
49Defendants would be required to augment all offers to settle by the amount of the statutory deductible in order to trigger costs consequences under rule 49.10. This arbitrary benefit to plaintiffs would not be offset by any corresponding duty on plaintiffs to modify their offer to settle. This may encourage plaintiffs to litigate, rather than curtailing litigation for the smaller cases.
50This interpretation would send very mixed messages to those with modest claims. The objective of culling the modest [page610] cases less than $15,000 from the system would be compromised. Given the importance of offers to settle in the litigation process, much uncertainty would be created which in the final analysis would be counter-productive.
Interpreting Section 267.5(9) in Light of Rule 49 of the Rules of Civil Procedure
Interpreting Section 267.5(9) in Light of Rule 49 of the Rules of Civil Procedure
51Finally, there exists an argument that there is a distinction between an "award", tracking the wording of the IA, and a "judgment", tracking the wording of the Offer to Settle rule. On the basis of this distinction, s. 267.5(9) of the IA does not apply to a situation with an enforceable offer to settle.
52Section 267.5(9) provides that:
In an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile, the determination of a party's entitlement to costs shall be made without regard to the effect of paragraph 3 of subsection (7) on the amount of damages, if any awarded for non-pecuniary loss.
[Emphasis added]
53Rule 49.10(2) provides"Where an offer to settle,
(a) is made by a defendant at least seven days before the commencement of the hearing;
(b) is not withdrawn and does not expire before the commencement of the hearing; and
(c) is not accepted by the plaintiff,
and the plaintiff obtains a judgment as favourable as or less favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer was served and the defendant is entitled to partial indemnity costs from that date, unless the court orders otherwise.
[Emphasis added]
54The Rules of Practice define "judgment" in Rule 103 as a decision that finally disposes of an application or action on its merits and includes a judgment entered in consequence of the default of a party. The Rules do not define "award".
55In this case, the jury awarded $20,000 to the plaintiff. After the statutory deductions, the judgment was for the sum of $9,966.62. The award by the jury did not finally dispose of the action. The judgment, after the statutory deduction, finally disposed of the action.
56On the plain wording of the Insurance Act and Rule 49, an offer of more [than] $10,000 would have been as favourable or more favourable than the judgment and would have met the requirement of rule 49.10(2). [page611]
Costs are Discretionary
Costs are Discretionary
57Finally, it must not be forgotten that a cost award is a discretionary one, with or without an offer to settle. The result is not made mandatory by the provisions of the offer to settle rule. The rule applies "unless the court orders otherwise". Generally trial judges enforce the offer to settle rule, to ensure that the rule has teeth. However, judicial discretion with respect to a cost award shall also be informed by the application of the balancing principles outlined in rule 58.06(1) of the Rules of Civil Procedure to do justice between the parties.
58In this case the defence submitted to the members of the jury that the appropriate range for damages was $25,000 to $30,000 before considering contributory negligence. Members of the jury are unaware of the applicable statutory deduction. The plaintiff suggested the damages were in the range of $100,000. As Stinson J. points out, reputable medical experts expressed differing opinions with respect to the injuries sustained, and consequential damages. The jury accepted the position of the defence and found that the plaintiff's damages were $25,000 less 20 per cent for contributory negligence.
59A frivolous claim must be distinguished from a claim where there is an honest disagreement about the value of a claim, the parties are unable to agree on a fair resolution and chose to proceed to trial.
60The trial judge is in the best position to make this important distinction between a frivolous case and an unsuccessful case. The trial judge can control the court process through an award of costs, taking into account a valid offer to settle.
61For these reasons, we conclude that the appeal should be dismissed. Costs fixed payable to the plaintiff in the amount of $2,500 for the motion for leave to appeal, and for this appeal.
Appeal dismissed.
