NEWMARKET COURT FILE NO.: DC-09-00031-00

DATE: 2009/06/23

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Tammy Spittal v. Antonito Thomas and Primmum Insurance Company

Krystle Spittal, a minor, by her Litigation Guardian, Tammy Spittal v. Antonito Thomas and Primmum Insurance Company

BEFORE: Justice P. Lauwers

COUNSEL: Frank Feldman, for Antonito Thomas Kay Watson, for Primmum Insurance Company

ENDORSEMENT

[1] This matter was heard on June 17, 2009.

[2] The plaintiffs in these motor vehicle actions were Tammy Spittal and her daughter Krystle Spittal. They sued for damages for injuries arising out of an accident in which the defendant, Antonito Thomas, rear-ended their vehicle. He was not insured at the time. Consequently, under section 265 of the Insurance Act, R.S.O. 1990, c. I.8, Tammy Spittal’s insurer, Primmum Insurance Company, was obliged to defend the actions.

[3] The actions were tried together by a jury and dismissed by the Honourable Mr. Justice Glass on April 20, 2006. Glass J. ordered the plaintiffs to pay the costs of the defendant Primmum and also ordered that the defendant Thomas be jointly and severally liable with the plaintiffs for payment of such costs. The costs were fixed at $129,123.81.

[4] The defendant Thomas, who was not represented at the trial and did not attend, only learned of the order against him in March of 2009 when he sought to renew a mortgage on his family residence and discovered the execution that had been filed with the Sherriff of York Region. He immediately took steps to retain counsel to appeal the cost order of Glass J. The reasons for Mr. Thomas’ delay in seeking leave to appeal are understandable and reasonable.

[5] The plaintiffs’ case before Glass J. foundered largely on surveillance evidence. He noted:

19 In a nutshell, Tammy demonstrated that she had none of the problems that are the subject of her claims. It appears that she recovered from any injury she sustained at this rear end motor vehicle accident.

20 Her only answer to the videotape of her activities is that the taping must have been done on her good days. I find that answer to be preposterous

25 Krystle accepted that she was shown on the video. She did not provide any explanation for what was shown on the video tape

29 …The videos of both plaintiffs demonstrate that if the plaintiffs were reporting to the doctors as they indicated, then they were misleading their doctors.

Glass J. clearly viewed the plaintiffs as dishonest and dismissed the case on the basis of the plaintiffs’ failure to meet the threshold in section 267.5 (5) of the Insurance Act: Spittal v. Thomas, 2006 CarswellOnt 2433.

[6] Glass J.’s costs award noted that “[t]he Plaintiffs took unnecessary steps prior to trial … The Plaintiffs were not prepared to accept insurance medical reports but then changed their position as the trial approached. It was necessary for medical experts to attend the trial.” (Spittal v. Thomas (22 December 2006), Whitby 25777/03 & 28963/04 (Ont. S.C.)

[7] At the conclusion of the trial proceedings on April 20, 2006, Glass J. had the following exchange with counsel for Primmum, as noted in the transcript:

The Court: Costs to the defendant Primmum on a partial indemnity basis until March 23, 2006, and on a substantial indemnity basis thereafter. Quantum of damages to be argued orally, on a date to be arranged by the trial co-ordinator.

Mr. Isaacs: My client also has a cross-claim against the defendant Antonito Thomas. May I please ask that the issue of costs be joint – or Mr. Thomas be joint and several on, on the costs awarded on the cross-claim.

The Court: I have added to the endorsement to that effect, Mr. Isaacs.

[8] Mr. Feldman notes on behalf of the defendant Thomas that there was no argument addressed to Glass J. on the discretionary factors to be considered in an award of costs that are set out in rule 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, nor the propriety of making Mr. Thomas jointly and severally liable for costs, no doubt due to the fact that he was not represented nor present in court. There is affidavit evidence that explains his absence.

[9] A costs award is subject to section 131 (1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, and the factors are set out in rule 57.01 of the Rules of Civil Procedure. An appeal lies to the Divisional Court from a final order of a judge of the Superior Court of Justice, with leave, where the appeal is only as to costs pursuant to section 133 (b) of the Courts of Justice Act.

[10] Judicial review of a trial judge’s costs disposition is narrowly constrained. It should ordinarily attract “considerable deference” from an appellate court and “can be set aside on appeal only if the trial judge has made an error in principle or if the costs award is plainly wrong”: Herbison v. Lumbermans Mutual Casualty Co. (2004), 2005 19665 (ON CA), 255 D.L.R. (4th) 75 (C.A.) per Borins J.A. at para. 82, citing Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303 at para. 27.

[11] In exercising discretion to extend time for filing a notice of appeal, the court must assess the appeal’s merits, as noted in Kefeli v. Centennial College of Applied Arts and Technology (2002), 23 C.P.C. (5th) 35 (C.A.) per Simmons J.A. at para. 14.

[12] Mr. Feldman raises a number of arguments in support of his position that Glass J. made an error in principle in the costs award.

[13] First, he argues that Thomas was successful in the plaintiffs’ case, so that the trial judge did not have jurisdiction to award costs against him. He relies on London Loan Assets Ltd. et al. v. Morine et al., 1932 117 (ON CA), [1933] O.R. 65 citing Donald Campbell & Co. v. Pollak, [1927] A.C. 732 per Lord Atkinson at p. 776: “It is not a judicial exercise of his discretion (i.e., the discretion of the trial Judge) to order a litigant who has been completely successful in a suit and against whom no misconduct is alleged, to pay the costs of the proceeding”. He also cites Watts v. Benvenuti (2006), 2006 17920 (ON CA), 80 O.R. (3d) 721 at paras. 6-8 (C.A.):

[6] The respondent cross appeals from the application judge’s costs disposition on the ground that the application judge erred by denying the respondent costs because, in the application judge’s view, the respondent was “somewhat the author of his own misfortune”.

[7] Costs awards by application judges attract considerable deference from this court. Appellate intervention is warranted only where the applicant judge errs in principle, or the costs award is plainly wrong.

[8] In this case, in our opinion, the application judge misdirected himself by concluding that the respondent’s conduct leading up to the agreement of purchase and sale was relevant to the disposition of the costs of the application. In the circumstances of this case, this was an irrelevant factor. There is no suggestion that the respondent engaged in any conduct that would disentitle him to costs. Moreover, there are no special circumstances here to warrant a departure from the usual rule that costs should follow the event of both the application and these proceedings.

[14] Mr. Feldman argues that Thomas had nothing to do with the exaggerated claims put forward by the plaintiffs, which had the effect of running up the costs unconscionably. Even though Thomas was the cause of the accident, there was no misconduct on his part that should have resulted in such an award. Mr. Feldman notes, citing Gislason v. Gislason, 1935 284 (MB CA), [1935] 3 D.L.R. 284 (Man. C.A.) that even if Thomas were a “miscreant or odious person” there is no basis in law for ordering a costs award against a successful party.

[15] Mr. Feldman argues that the basis for the costs award must be the cross-claim by Primmum against Thomas, but notes that the cross-claim became moot once the plaintiffs lost the case.

[16] Mr. Feldman’s second argument concerns the legal basis for subrogation, which is found in section 265 of the Insurance Act:

265. (1) Every contract evidenced by a motor vehicle liability policy shall provide for payment of all sums that,

(a) a person insured under the contract is legally entitled to recover from the owner or driver of an uninsured automobile or unidentified automobile as damages for bodily injuries resulting from an accident involving an automobile;

(b) any person is legally entitled to recover from the owner or driver of an uninsured automobile or unidentified automobile as damages for bodily injury to or the death of a person insured under the contract resulting from an accident involving an automobile; and

(c) a person insured under the contract is legally entitled to recover from the identified owner or driver of an uninsured automobile as damages for accidental damage to the insured automobile or its contents, or to both the insured automobile and its contents, resulting from an accident involving an automobile,

subject to the terms, conditions, provisions, exclusions and limits as are prescribed by the regulations.

(6) Where an amount is paid under subsection (1), the insurer is subrogated to the rights of the person to whom such amount is paid and the insurer may maintain an action in its name or in the name of such person against any other person or persons responsible for the use or operation of the uninsured or unidentified automobile.

[17] This case falls under section 265 (1) (b), which refers to “all sums … for bodily injury”. A plain reading of section 265, says Mr. Feldman, provides that the right of subrogation in section 265 (6) only applies where the insurer has paid such damages to the plaintiff. Costs are not mentioned.

[18] The concept, Mr. Feldman argues, is that the insurer Primmum’s rights are no higher than those of its insureds the plaintiffs, and the insureds had no right to go after Thomas, as the dismissal of the action shows.

[19] Mr. Feldman argues that Primmum has no independent right to claim costs against Thomas at common law in light of s. 265 of the Insurance Act, an argument that depends implicitly on the rule of statutory construction, expressio unius est exclusio alterius. He distinguishes the cases proffered by Primmum on the basis that in them the insurer was seeking to recover on account of amounts paid as damages to the injured party by the insurer. In other words, the cases are distinguishable because the injured party was successful on the main claim, which is not the case here.

[20] Ms. Watson argues, on Primmum’s behalf, that the ruling precedent is McFee v. Joss, 1925 386 (ON CA), [1925] 2 D.L.R. 1059 at p. 1064 (Ont. C.A.), per Ferguson J.A.:

With deference, I am of opinion that the plaintiff is entitled to be indemnified in respect of what he had to pay and lost by reasons of the defendant’s neglect to drive the plaintiff’s car in a manner required by law; for, as I read the cases, an implied contract of indemnity arises in favour of a person who, without fault on his part, is exposed to liability and compelled to pay damages on account of the negligence or tortious act of another, provided the parties were not joint tort-feasors in such a sense as to prevent recovery; that is, where the act done is not clearly illegal in itself. This right of indemnity is based upon the principle that every one is responsible for his own negligence, and if another is, by a judgment of a court, compelled to pay damages which ought to have been paid by the wrongdoer, such damages may be recovered from the wrongdoer. I am also of opinion that such right of indemnity exists independently of the statue, and whether or not contractual relations exist between the parties, and whether or not the negligent person owed the other a special or particular legal duty not to be negligent.

[21] Ms. Watson argues that the legal arrangement in place in Joss, where the car owner was made responsible for the negligent driver’s actions, is a predecessor of the statutory scheme found in the Insurance Act; there is nothing in the Insurance Act that displaces the common law.

[22] The second case relied on by Ms. Watson is Mayberry v. Scottish & York Insurance Co. (1987), 24 C.P.C. (2d) 54 (Ont. Dist. Ct.) per Morrissey D.C.J. In that case the court applied Joss and accepted the submission of counsel for Scottish & York that “indemnity would not be complete unless legal costs were paid by the party ultimately responsible”.

[23] A similar result was reached in Husnik v. McArthur, [1993] O.J. No. 3230 (Ont. Ct. J. (Gen. Div.) per F.G. Carter J. who held at paragraph 4:

I believe this issue should be resolved in favour of the defendant, the Dominion of Canada Group. It was the failure of its co-defendants to have insurance which brought it into the action, and it would appear just that it recover its costs against them in the main action and the cross-claim in the manner I have indicated. This result would also appear to be supported by the judgment of Morrissey, D.C.J. (as he then was) in Mayberry….

Justice Carter awarded Dominion of Canada Group costs of the main action on a solicitor and client scale from the uninsured co-defendants.

[24] I am grateful for the extensive arguments by counsel on the legal principles at issue in this case and regret that Glass J. did not have the benefit of these submissions. Had he heard the submissions about the inherent unfairness of visiting the consequences of the plaintiffs’ misconduct upon Thomas, he might have exercised his discretion differently by, for example, limiting Thomas’ contribution to a lower percentage of the award of costs. While I am not prepared to conclude that he erred in principle or is plainly wrong, I find there to be sufficient uncertainty to warrant leave to appeal.

[25] As to the underlying legal issues raised by Mr. Feldman, counsel for both parties candidly admitted that they had not found any cases that have related section 265 of the Insurance Act and the subrogation rights contained therein to the continued existence of the insurer’s common law rights. There is a serious question as to whether section 265 of the Insurance Act is a complete code in the relations between uninsured motorists and insurance companies forced to take on their defence. These are matters of principle on which the law is uncertain, and the guidance of an appellate court would be useful.

[26] In these unique circumstances, I therefore grant an extension of time to the defendant Thomas to appeal the costs award of Glass J., and grant leave to appeal.

[27] I have considered the costs outlines provided by counsel. The costs of this motion are fixed at $7500 plus GST plus disbursements payable in the cause of the appeal.

Justice P. Lauwers

DATE: June 23, 2009