Court of Appeal for Ontario

Date: 2019-03-27

Docket: C63160

Judges: Strathy C.J.O., Hoy A.C.J.O., Feldman, Brown and Paciocco JJ.A.

Between

Chad Cadieux, by his Litigation Guardian Michael Cadieux, Michael Cadieux and Lance Cadieux

Plaintiffs (Respondents/Appellants by way of cross-appeal)

and

Susan Cloutier, Pilot Insurance Company, Eric Saywell and the Wawanesa Mutual Insurance Company

Defendants

(Appellant/Respondent by way of cross-appeal)

Counsel

David A. Zuber and Joshua J.A. Henderson, for the appellant/respondent by way of cross-appeal Eric Saywell

Allan Rouben and Éliane Lachaîne, for the respondents/appellants by way of cross-appeal

Kristian Bonn, for the intervener Ontario Trial Lawyers Association

Heard: May 1-2, 2018

On appeal from: The judgments of Justice Charles T. Hackland of the Superior Court of Justice, sitting with a jury, dated December 12, 2016 and December 23, 2016, with reasons reported at 2016 ONSC 7604, 63 C.C.L.I. (5th) 79.

Supplementary Reasons

[1] In reasons released December 4, 2018, this court allowed the appellant's (defendant's) appeal in part and the respondent's (plaintiff's) appeal in part and requested further written submissions on certain issues. We have now received those submissions and these are our reasons concerning those issues.

[2] The additional issues are as follows:

(a) Whether, having regard to all the circumstances, it is appropriate for the appellant to pay some part of the legal costs incurred by the respondent in recovering Statutory Accident Benefits (SABs) as costs of this proceeding and, if so, how much [para. 135 and para. 150.3];

(b) Whether, having regard to all the circumstances, it is appropriate that the court exercise discretion under s. 130 of the Courts of Justice Act ("CJA") to award prejudgment interest at a rate other than the "default rate" prescribed by s. 128 of the CJA [para. 145, para. 150.6];

(c) The costs in the court below, having regard to the judgment of this court [para. 146]; and

(d) The costs of the appeal.

[3] In his written submissions on these issues, the appellant also submits that: the "management fee" and out-of-pocket expenses awarded by the trial judge should be characterized as an award for "health care."

[4] The resolution of the outstanding issues, particularly as regards costs in the court below and in this court, must have regard to context.

[5] The respondent, a minor, was involved in an altercation with the appellant, also a minor, who pushed him onto a roadway into the path of an oncoming truck. The respondent suffered a fractured skull, brain injuries and orthopaedic injuries. He became incapable of managing his own affairs and will require lifetime financial and medical support.

[6] The respondent settled with the insurer of the truck driver and with his own SABs insurer. He pursued the appellant to trial for his several liability.

[7] The case was vigorously contested by the appellant's insurer. The trial lasted seven (7) weeks. At the end of the day, the jury granted judgment in favour of the respondent in the amount of approximately $2.3 million. However, it found each of the appellant, the truck driver and the respondent one-third responsible for the respondent's injuries. As a result of the contributory negligence finding against the respondent, and the settlement with the truck driver, the respondent was only entitled to recover one-third of his damages.

[8] Following the trial, the trial judge was required to make certain deductions from and adjustments to the damages. This resulted in further deductions from the jury award, largely for: (a) statutory deductions under the Family Law Act; and (b) the impact of the SABs settlement. After the deductions and the addition of a "management fee", the result was a damage award for the plaintiff of $500,827.

[9] The appeal to this court was from the trial judge's post-trial disposition of these issues.

[10] We now turn to the issues identified above.

(a) Respondent's costs in recovering SABs

[11] At para. 130 of this court's reasons, we noted that "the tort defendant should not be required to pay the costs of the plaintiff's pursuit of SABs as a general principle or as a matter of course." We set out, at para 132, a number of factors that a trial judge might consider in determining whether to award such costs and, if so, the amount to be included. We invited the parties to make submissions as to how these factors applied on the facts of this case.

[12] Neither party made a serious effort to address this issue in their written submissions. The appellant took the position that no payment should be made for costs because the SABs settlement was all-inclusive. The respondent has proposed the purely arbitrary amount of $95,325.79. This is based on the court-approved gross fees charged by the respondent's solicitor for the SABs settlement and the settlement with the truck driver ($296,549.36) multiplied by the proportion that the SABs settlement ($900,000) bore to the total settlement ($1.4 million), namely 64.3%, divided by two to account for the appellant's proportionate share of liability.

[13] The only reason advanced by the respondent for the award of such costs is that the appellant has received a substantial benefit from the SABs settlement because it reduces the net amount he is required to pay the respondent – an observation that will apply in any case. The respondent has not addressed most of the factors identified in this court's reasons, particularly whether the SABs settlement was the result of particular risk, effort or expense or whether, to use the vernacular, it was a "slam dunk".

[14] It was within the knowledge and ability of the respondent to address the issues identified by the court. He has failed to do so and we are not persuaded that the circumstances of this case call for an award of costs under this head.

(b) The rate of prejudgment interest

[15] The appellant submits that the default rate of 3.3% per annum should apply. The respondent does not dispute this. In the circumstances, there is no basis to award anything other than the default rate.

(c) The costs of trial

[16] Prior to trial, the respondent offered to settle for the sum of $900,000, plus costs, disbursements and HST. The appellant made a Rule 49 offer to settle for $500,000, plus partial indemnity costs.

[17] The respondent advanced a claim for partial indemnity costs of the entire proceeding in an amount of nearly $600,000. The trial judge considered this amount reasonable for a complex seven-week jury trial. The appellant argued that his "near miss" offer should be taken into account in the award of the costs of trial and claimed partial indemnity costs from the date of his offer of approximately $420,000. The trial judge considered this amount reasonable as well.

[18] The trial judge considered r. 49.10(2) with respect to the costs consequences of a plaintiff not accepting a defendant's offer to settle, which is more favourable than the judgment: unless the court otherwise orders, 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. He also considered the "near miss" line of cases dealing with settlement offers that were close to, but less than, the judgment. In particular, he mentioned this court's decision Elbakhiet v. Palmer, 2014 ONCA 544, referring to r. 49.13, which provides that "the court, in exercising its discretion with respect to costs, may take into account any offer to settle made in writing, the date the offer was made and the terms of the offer."

[19] With these principles in mind, the trial judge awarded the respondent costs of $100,000 plus HST and disbursements of $98,798, a very significant reduction of the costs claimed and clearly giving significant effect to the appellant's "near miss" offer.

[20] The outcome of the appeal is that when statutory deductions and deductions for SABs are taken into account, the respondent's net recovery is somewhere between $340,000 and $378,000, depending on which party's calculations are accepted. The result is that the appellant's offer was not a "near miss". It was more favourable than the respondent's recovery. The costs consequences of r. 49.10(2) apply, "unless the court otherwise orders."

[21] In determining costs, we must also have regard to the general principles set out in r. 57.01, including the amount claimed and recovered, the importance of the issues and the overriding principle of proportionality. We also have regard to the principles expressed by the trial judge, at para. 64 of his reasons:

It must be remembered that costs are discretionary with the Court and in addition to the goal of promoting settlement (Rule 49), there are the goals of fairness to the parties, promoting access to justice and, in the context of personal injury cases, ensuring that an injured plaintiff is not undercompensated (nor over-compensated).

[22] We begin with proportionality. The parties engaged in a lengthy legal dispute, and a seven-week jury trial, and each incurred, at least on paper, costs of about half a million dollars to claim, and defend, a net judgment of around $400,000. On the face of it, the costs claimed by both parties are disproportionate to the result.

[23] Second, access to justice, fairness and fair compensation. The respondent suffered serious, permanent and disabling injuries. While the jury found that he bore some of the responsibility, and while he received no-fault SABs and a settlement from one of the parties, his total net compensation did not, in our view, result in overcompensation. The outcome of the proceeding was clearly not what he and his lawyer expected when he offered to settle for $900,000, plus costs, disbursements and taxes.

[24] Third, the real issue. This appeal, which resulted in the reduction of the net judgment, was not about the jury award or the conduct of the trial. The appellant did not challenge the award. He challenged the method of deducting SABs from the jury's award. As we pointed out in our reasons, this was a complicated and uncertain area of the law. For the appellant's insurer, as we were reminded at the hearing, the issue was an important one. Indeed, it was important to the insurance industry and for lawyers representing plaintiffs and defendants and, of course, for their clients. So while the "swing" in the judgment as a result of the appeal meant a great deal to the respondent in terms of dollars and cents, the outcome was significant for the appellant in more than its immediate financial consequences. The appeal established principles and practices that have important effects beyond this particular case.

[25] Having regard to these factors, we would follow the approach originally taken by the trial judge in his post-trial ruling (before additional adjustments were made), namely, "notionally setting off the costs incurred by the plaintiff [respondent] prior to the date of the defendant's [appellant's] offer to settle and the costs incurred by the defendant from the date of his offer to settle forward, including preparation for trial and trial costs." The result is that neither party is entitled to costs.

(d) The costs of appeal

[26] Having regard to the fact that the appellant was substantially the successful party on the appeal, and to the other factors identified in these reasons, the appellant is entitled to costs of the appeal fixed at $25,000, inclusive of disbursements and all applicable taxes.

(e) Deductibility of management fee and out-of-pocket expenses

[27] These issues were apparently not raised with the trial judge and they were not directly addressed by the parties on the appeal.

[28] In the interests of efficiency, we will address the management fee. In our view, the management fee was as awarded by the trial judge properly applied to the plaintiff's net recovery and does not itself give rise to a further deduction.

[29] The respondent's submissions do not refer to the out-of-pocket expenses. We hope the matter has been resolved. If it has not been, we expect the parties to make reasonable and good faith efforts to do so. The amounts are not large and no issue of principle is involved.

"G.R. Strathy C.J.O."

"Alexandra Hoy A.C.J.O."

"K. Feldman J.A."

"David Brown J.A."

"David M. Paciocco J.A."