COURT OF APPEAL FOR ONTARIO DATE : 20210428 DOCKET: C68447 Tulloch, Zarnett and Sossin JJ.A.

BETWEEN

Anna Przyk Plaintiff (Respondent)

and

Hamilton Retirement Group Ltd., carrying on business under the name and style The Court at Rushdale Defendant (Appellant)

Counsel: Todd J. McCarthy and Dennis Ong, for the appellant Jeffrey Crannie, for the respondent

Heard: January 28, 2021 by video conference

On appeal from the costs ruling of Justice Alan C.R. Whitten of the Superior Court of Justice, dated December 24, 2019, with reasons reported at 2019 ONSC 7498.

Zarnett J.A.:

A. OVERVIEW

[1] The respondent, Anna Przyk, slipped and fell on a sidewalk located between the entrance and exit of the retirement home where she resided. She sued the owner of the retirement home — the appellant (“Rushdale”) — for negligence and breach of the Occupiers’ Liability Act, R.S.O. 1990, c. O.2. The quantum of damages was agreed to and a trial proceeded before a judge and jury on liability alone. The jury found no liability on the part of Rushdale, and the action was dismissed.

[2] Rushdale, as the successful party to the action, asked for an award of partial indemnity costs against Ms. Przyk. The trial judge denied the request for three reasons.

[3] First, he observed that the action, which required expert evidence, illustrated the need that the law of negligence adapt to the growing area of elder care.

[4] Second, he held that since Rushdale was insured and had been defended by an insurer — Aviva — which holds a large share of the Ontario insurance market, the case was a “David and Goliath situation”.

[5] Third, he was critical of the fact that Aviva had never offered a settlement to Ms. Przyk, other than a no costs dismissal of her claim. The trial judge considered this to be an example of Aviva’s arrogant, “hardball” approach on display generally when it defends claims — an approach that is unfair to litigants of modest means and inconsistent with Aviva’s “social responsibility”.

[6] Rushdale obtained leave from a panel of this court to appeal the costs ruling.

[7] In my view, the trial judge’s costs ruling reflects certain errors in principle. The fact that Rushdale was insured and defended by Aviva, a large insurer, was not a reason to deny an award of costs. Neither the existence of insurance in favour of a successful party at trial, nor the fact that the successful party was better resourced than their opponent, is a justification for denying costs where the resource advantage has not been used to engage in abusive tactics or other misconduct during the litigation. The refusal of a party to offer a financial settlement before trial is also not a reason to deny that party costs where the refusal is proven reasonable by the verdict. Nor ought the trial judge to have sought to correct a general attitude of Aviva toward settlement in other cases by his costs award in this case.

[8] Nevertheless, I would not interfere with the costs award. The trial judge viewed Ms. Przyk’s case as addressing an underdeveloped area of the law and thus to have raised important and novel issues, which is a proper consideration in deciding whether costs should be awarded. This finding was not tainted by any errors in the costs decision and is entitled to deference from this court. It is sufficient on its own to justify the result reached by the trial judge.

B. ANALYSIS

(1) The Standard of Review

[9] An appellate court takes a deferential approach when reviewing a discretionary award of costs by a trial court (including a discretionary decision to deny costs). A costs award will only be set aside on appeal “if the trial judge has made an error in principle or if the costs award is plainly wrong”: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27.

[10] This deferential approach requires that attention be paid not only to the nature of any error affecting a costs decision, but also to its extent. It is insufficient to identify an error in principle in the course of the trial judge’s reasons without considering whether there is an independent basis to uphold the order. An appellate court should be reluctant to interfere with “the exercise of discretion by a trial judge who had a much better opportunity to acquaint himself with, and have a feeling for, all of the factors that formed the basis for the award of costs”: Bell Canada v. Olympia & York Developments Ltd., 1994 ONCA 239, 111 D.L.R. (4th) 589 at para. 41. Even where a trial judge has relied on a factor that is unsupported by proper legal principles or considerations to deny costs to a successful party, an appellate court should not intervene unless it can “find nothing in the factual circumstances or argument to support the order”: Bell Canada at para. 42.

(2) Depriving a Successful Party of Costs

[11] A successful party to civil litigation in Ontario is entitled to a reasonable expectation that it will receive an order for payment of its costs unless there are special circumstances [^1]: Bell Canada, at para. 23; Lundy's Regency Arms Corp. v. Potato Factory Bar & Grill Corp, 2020 ONSC 238 (Div. Ct.) at para. 11.

[12] Although sometimes referred to as the “loser pays” costs rule, this approach is not, properly understood, a rule at all. Costs are in the discretion of the court, which may determine by and to whom costs are payable and in what amount: Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131(1). A court in the exercise of that discretion may consider, among other things, the result of the proceeding: Rules of Civil Procedure, R.R.O. 1990, Reg. 194, r. 57.01(1). But the result is not the exclusive consideration, and thus a successful party does not have an entitlement to costs, but merely a reasonable expectation that they will be awarded, absent special circumstances.

[13] A judge may deprive a successful party of costs, or even order the successful party to pay costs, as long as the exercise of discretion to do so is not tainted by errors of law or principle, or does not result in a decision that is plainly wrong because it is based on irrelevant factors and overlooks relevant ones: rr. 57.01(4), 57.01(2); Bell Canada, at paras. 20, 41-42; Birtzu v. McCron, 2019 ONCA 777, 438 D.L.R. (4th) 141 at paras. 10-17, 20-21.

[14] The trial judge cited what he termed the “normative or default approach” that costs should follow the event. He recognized that his discretion to make a different order had to be exercised “fairly and reasonably”. He quoted the factors set out in r. 57.01, which may be considered in the exercise of discretion over costs, although he did not identify, as applicable, any specific factor listed in that rule other than the importance of the issues. [^2] He then went on to identify three reasons why Rushdale, although successful in the action, should not receive an award of costs. For analytical purposes, I address them in a different order than the trial judge.

(a) A David and Goliath Situation

[15] The trial judge said that:

Modest complainants are always at the mercy of the economics of litigation. This is not a lucrative area for a personal litigator. It is not unexpected that a plaintiff such as Anna Przyk could end up against an insurer such as Aviva, an insurer of retirement homes with a head office in Kentucky. This could be characterized as a “David and Goliath" situation. Access to justice could be threatened by the resources of the opposing side.

[16] The trial judge cited no authority for the proposition that the existence of insurance could be relied on in the way that he did. [^3] In my view, the trial judge erred in principle in his reliance on the fact that Rushdale was insured by Aviva, and the implications he derived from that fact.

[17] There is no doubt that a party who is being defended by an insurer has resources to conduct the defence. But what is relevant to the question of costs is not the existence of defence-facilitating resources, but how the resources were used in the litigation. I draw this conclusion for three reasons.

[18] First, although the factors listed in r. 57.01 are non-exhaustive, they all relate to the nature of the issues in the litigation, the result, and to the way a party behaved in the litigation. None point to the identity or resources of the party. Nor do the provisions of r. 49.10, which set out cost consequences for failure to accept an offer to settle, support the view that the resources of the party making or refusing the offer is relevant.

[19] Second, it would be wrong to punish a successful party, or their insurer, by using the existence of insurance as a reason to deny an award of costs on the theory that insurance, by resourcing the defence, could threaten access to justice, without considering whether there was improper litigation conduct by the successful party that in fact did interfere with access to justice for the unsuccessful claimant.

[20] Third, it is wrong to leap to the conclusion that a plaintiff with a modest claim against an insured defendant is necessarily in a David and Goliath situation without examining the circumstances. Proceedings should not be stereotyped: Kerr v. Danier Leather Inc., 2007 SCC 44, [2007] 2 S.C.R. 331 at para. 69. An apparently tilted playing field might be levelled in a number of ways, such as through contingency fee arrangements, third party litigation funding, or adverse costs insurance.

[21] Ms. Pryzk was not denied access to justice. She took her case to trial, and although the arrangements through which this occurred were not explored, there is no doubt that Ms. Przyk was represented by experienced counsel at trial. The trial judge noted that “(t)he case for the plaintiff was well-presented”. Both sides called experts. Nothing in the trial judge’s reasons supports the view that Ms. Przyk’s case was prejudiced by a mis-match of resources.

[22] Moreover, the trial judge overlooked the fact that Ms. Przyk had obtained adverse costs insurance, and that Rushdale’s request was for costs only to the extent covered by the insurance available to Ms. Pryzk under that policy. Rushdale did not seek any amount from Ms. Przyk personally.

[23] The trial judge made no finding of conduct in the litigation that would justify depriving Rushdale of costs. He did not, for example, cite any conduct that unnecessarily lengthened the proceedings, any improper, vexatious or unnecessary steps taken on its behalf, or any refusal to admit something that it should have. On the contrary, he noted that “(b)oth sides treated this particular case seriously”, and that the parties had agreed before trial to the quantum of damages, allowing the trial to be confined to the issue of liability. In other words, neither any resource advantage due to the fact that Rushdale was insured by Aviva, nor Aviva’s conduct of the defence, resulted in anything other than responsibly conducted litigation.

[24] Accordingly, the trial judge erred in principle in relying on the fact of insurance as a reason to deny costs to Rushdale as the successful party.

(b) Aviva’s Settlement Posture

[25] Although the trial judge did not advert to any litigation misconduct, he was critical of Aviva’s settlement conduct. He referred to the fact that counsel for Ms. Przyk “was throughout the course of the litigation open to resolve the matter”, but that the “adjusters and counsel for [Rushdale], members of the in-house legal department of Aviva, resolutely put forth a negative proposal of no damages nor costs”. He referred to the position advanced by Ms. Przyk that the refusal of the defence to offer anything other than a no costs “walk away” constituted playing “hardball”, that this is a “well-known tactic by Aviva”, and that Aviva advertises for employees who will work with counsel to ensure a consistent message “with judges, mediators, and counsel surrounding our litigation files”.

[26] The trial judge then stated:

From reading the employment advertising for Aviva concerning the sending a message to judges, mediators, and counsel, one detects a certain arrogance. Size of the insurance market is not inconsequential. Insurers are answerable to their shareholders. Playing hardball with the modest litigant may indeed be profitable, but that does not mean that the modest litigant should have a field day or that the insurer be vulnerable to frivolous claims.

Being a large market shareholder is not without social responsibility, size should not be wielded to oppress deserving litigants as that would encroach upon the broader social interest of access to justice.

Aviva with its approach is at risk of allegations of playing hardball. In some circumstances that approach may result in no costs. In a way, that is a cost of doing business in such a fashion.

[27] Although the trial judge referred to an insurer using its size to “oppress deserving litigants”, he did not refer to any conduct of Aviva in this case which could be so characterized, other than its failure to offer a financial settlement to Ms. Pryzk. In Bell Canada, this court held that it is an error in principle to rely on the failure of a successful defendant to have offered a payment to an unsuccessful plaintiff as a ground to deny costs. Carthy J.A. stated:

I do not back away from my comment in Armak Chemicals Ltd. v. Canadian National Railway Co.:

At the same time, every litigant should be encouraged to be single-minded in attention to the need to make and consider reasonable offers which may dispose of the litigation.

The question is, what is reasonable when the claim is dismissed? The defendant's position has been vindicated, and to deprive that party of the normal fruits of success is to say to all defendants that an offer to settle must be made simply because the lawsuit was launched. To put it another way, the trial judge cannot dispute the reasonableness of his own decision and, thus, cannot be critical of a party who anticipated it.

The courts must also be careful not to become too paternalistic with litigants or to unnecessarily discourage recourse to the trial as a forum for the resolution of disputes. Concern is properly directed to unreasonable conduct in the course of litigation which leads to unnecessary or prolonged trials. However, the judicial system is here to serve the public and no barriers to access should be imposed by warnings as to cost consequences arising from the court's assessment of how litigants should conduct their business.

There are many reasons not to offer settlement, and they should remain the private preserve of the litigants. In a libel suit, for example, vindication may be a legitimate consideration for either party, standing above recovery or payment of money…A defendant may not be in a position to pay a settlement and, even if wealthy, may have a better business use for the money pending trial. None of these litigants should fall from grace in the eyes of the trial judge if they succeed on the merits: at paras. 13-16.

[28] The trial judge’s reasoning is contrary to that in Bell Canada. Aviva’s decision not to offer Ms. Przyk a payment was confirmed as reasonable by the result of the trial. The analysis does not change by characterizing Aviva’s settlement posture in this case as a hardball approach. As the court in Bell Canada pointed out, a litigant, or its insurer, even if wealthy, is not obliged to pay a settlement just because it has been sued; it is entitled to have the claim determined by the court. Although the absence of a reasonable settlement posture may influence the disposition of costs, when the result of the trial is known what is reasonable is necessarily judged by that result. This is consistent with the philosophy underlying r. 49.10, which expressly requires comparing an unaccepted offer to the result at trial in order to determine whether the cost consequences stipulated by that rule apply.

[29] Ms. Przyk cites various cases where an insurer’s failure to make a satisfactory settlement offer was the subject of comment by a trial court or a pre-trial judge. [^4] But those were cases where the plaintiff was successful at trial, and thus entitled to a reasonable expectation of costs, or where a step in the proceeding was a waste of time due to unreasonable defence conduct. They were not cases where a successful defendant was punished by denying it costs simply because its pre-trial settlement position did not go beyond what was reasonable as judged against the result achieved at trial.

[30] Counsel for Ms. Przyk also points to a motor vehicle case where Aviva, as the insurer, failed to offer a settlement of more than zero dollars. No costs were awarded even though the plaintiff’s award at trial was effectively zero dollars: Peterson v. Phillips at para. 26.

[31] Peterson is readily distinguishable. In that case, liability was admitted, and the jury found that the plaintiff had suffered damages. However, it assessed the damages at an amount that netted out to zero after subtracting the deductible under the relevant provisions of the Insurance Act and its regulations. Since under the Insurance Act, the plaintiff’s entitlement to costs was to be determined before giving effect to the deductible provisions, the plaintiff argued that it was entitled to costs. However, the court declined to give the plaintiff any costs, as the plaintiff had refused an offer of zero dollars – ultimately the judgment in the action. The defendant was neither criticized for making that offer, nor deprived of costs for having done so. Rather, the defendant benefitted in avoiding a costs award against it by virtue of having made the offer: paras. 24-26.

[32] The trial judge also erred in accepting the submission of Ms. Pryzk that Aviva generally plays hardball, a reference to its behaviour in other cases. [^5] In my view, the trial judge was not in a position to assess whether the circumstances in other cases were the same as those applicable here, or even whether settlement positions taken in other cases were reasonable. Moreover, even if Aviva had not been reasonable in other cases, it is not clear why the remedy would be to deny its insured costs in this case where it was found to have acted reasonably.

(c) A Novel Issue

[33] As the decision in Bell Canada mandates, even where grounds relied upon by a trial judge to deny a successful party costs are tainted by error, the award may still stand if an independent ground exists to justify it.

[34] One of Ms. Przyk’s submissions to the trial judge was that no costs should be awarded because the case raised an important and novel issue. She argues that even though the trial judge did not use the term “novel”, he accepted this submission. I agree that the trial judge accepted this approach as a basis for his decision. He noted not only that the case involved expert evidence but that it arose in an important and developing societal and legal context. He said:

As mentioned above, demographically, eldercare is a burgeoning area in our society. Coincidental with such growth is a need for the law of negligence to apply in new situations involving our elderly.

Both sides treated this particular case seriously. Engineers and a biomechanical engineer were witnesses. This was not a case solely dependent on upon [ sic ] the evidence of the parties.

[35] Rule 57.01 contemplates the court considering the nature, importance, and complexity of issues in exercising its costs discretion. Novel issues arise where there is uncertainty in the law or where the facts make the guidance provided by prior cases inadequate: Fischer v. IG Investment Management Ltd., 2014 ONSC 6260, at paras. 9, 35. A novel issue that involves the public interest can support a no costs order as an exception to the general approach that a successful party will receive their costs: Childs v. Desormeaux (2004), 239 D.L.R. (4th) 61 (Ont. C.A.) at para. 100.

[36] Rushdale argues that the trial judge erred by identifying the issues in this case as novel. The question is not, however, whether I would have arrived at the same conclusion, but whether the trial judge relied on an erroneous principle, or applied it to reach a decision that was plainly wrong. I am unable to say that either occurred.

[37] The trial judge was well-positioned to determine whether the case raised an important and novel issue. His decision to accept that it did, and to rely on that factor to make a no costs award, is entitled to deference. It is not tainted by any error in principle. Nor does it result in a costs award that is plainly wrong.

C. CONCLUSION

[38] Notwithstanding certain errors in principle, the trial judge’s costs award has an independent basis to support it that is free of error.

[39] I would therefore dismiss the appeal.

[40] Rushdale succeeded on certain issues that it argued had precedential importance. Ms. Pryzk succeeded in upholding the trial judge’s no costs award. I would accordingly not award any costs of the appeal.

Released: April 28, 2021 “M.T.” “B. Zarnett J.A.” “I agree. M. Tulloch J.A.” “I agree. Sossin J.A.”

Footnotes

[^1]: Subject to certain statutory exceptions which are inapplicable here. [^2]: Rule 57.01 provides as follows: (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing, (0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer; (0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed; (a) the amount claimed and the amount recovered in the proceeding; (b) the apportionment of liability; (c) the complexity of the proceeding; (d) the importance of the issues; (e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding; (f) whether any step in the proceeding was, (i) improper, vexatious or unnecessary, or (ii) taken through negligence, mistake or excessive caution; (g) a party’s denial of or refusal to admit anything that should have been admitted; (h) whether it is appropriate to award any costs or more than one set of costs where a party, (i) commenced separate proceedings for claims that should have been made in one proceeding, or (ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; (h.1) whether a party unreasonably objected to proceeding by telephone conference or video conference under rule 1.08; and (i) any other matter relevant to the question of costs. [^3]: The Insurance Act, R.S.O 1990, c. I.8, imposes obligations on insurers defending actions to attempt to settle expeditiously, to make advance payments where liability has been admitted, and to participate in mediation, and authorizes a court to take into account any failure to comply in an award of costs: ss. 258.5, 258.6. These provisions are inapplicable here. [^4]: See for example Persampieri v. Hobbs, 2018 ONSC 368 at paras. 100-8; Valentine v. Rodriguez-Elizade, 2016 ONSC 6395, at para. 64; Rososhansky v. Williams, 2018 ONSC 1964 at paras. 5, 14, and 22. [^5]: I need not deal with Rushdale’s argument that it was procedurally unfair for the trial judge to have done so as Rushdale had not been given an opportunity to address the point.