Court File and Parties
COURT FILE NO.: 11-52967 DATE: 2016/05/03 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: SARAH CORBETT, SCOTT CORBETT, SAM CORBETT by his Litigation Guardian, SCOTT CORBETT, and WILLIAM CORBETT by his Litigation Guardian, SCOTT CORBETT, Plaintiffs – and – EVA ODORICO, Defendant
BEFORE: C.T. Hackland J.
COUNSEL: Frank E. McNally and Jaime J. Wilson, for the Plaintiffs Todd J. McCarthy, for the Defendant
HEARD: In writing
Costs Endorsement
[1] The plaintiffs seek their costs of a six week jury trial in which the plaintiff, Sarah Corbett claimed for damages for her personal injuries and financial losses arising from a motor vehicle collision which occurred on December 5, 2009. The plaintiff’s husband and two sons also advanced claims under s. 61 of the Family Law Act, R.S.O. 1990, c. F.3.
[2] The jury returned its verdict on December 16, 2015, awarding the plaintiffs damages in the total sum of $141,500 before deductions for statutory deductibles and collateral benefits. This trial ultimately proceeded as an assessment of damages although the defendant maintained her intention to contest liability right up to the opening of trial and the plaintiffs were required to prepare accordingly.
[3] The plaintiffs submit that they were substantially successful in the action and accordingly, having regard to the Rule 57 factors, are entitled to costs. They claim fees in the sum of $159,249.90 plus HST and disbursements in the sum of $89,347.65 on a partial indemnity basis. However, the plaintiffs ask the Court to increase the fees awarded up to their substantial indemnity amount of $242,521.50, due to the manner by which defendant’s counsel conducted the trial.
Disposition
[4] For the reasons discussed below, I award the plaintiffs their partial indemnity fees of $159,249.90, HST and disbursements in the amount claimed.
Hours and Billing Rates
[5] Dealing first with the number of hours and hourly rates claimed by plaintiffs’ counsel, I would observe that these are demonstrably reasonable, if not very modest for a trial of this length and complexity. The defendant has quite properly not challenged the number of hours or billing rates claimed by plaintiffs’ counsel, nor have they submitted that their (the defendant’s) fees are any less than the plaintiffs have incurred. Further, the disbursements are not specifically challenged and, on my review, appear to be reasonable.
Offers of Settlement
[6] Neither party matched or bettered their respective Rule 49 offers to settle and are therefore not entitled to rely on the compulsory cost consequences in Rule 49.10. However, the Court has the discretion under Rule 49.13 to consider any offer to settle made in writing, including the timing and the terms of such offer. I will consider the three relevant offers as they are of importance to the disposition of costs in this case.
[7] By offer dated September 30, 2015, the defendants offered to settle the plaintiffs’ claim for payment of the amount of $6 dollars plus costs of $1 dollar.
[8] By offer dated October 29, 2015, the plaintiffs sought to settle their claim for damages in the total sum of $370,000 plus PJI, partial indemnity costs and disbursements.
[9] By offer dated November 11, 2015, (at the opening of trial), the plaintiffs offered to settle their claim for $250,000 plus costs and disbursements (identifying their disbursements to that point of time as $48,931.17).
[10] The defendants’ written costs submission and a chart contained therein claims that the defendant’s September 30, 2015 offer was for $107,042. This is inaccurate and misleading. The offer states “The defendant shall pay the plaintiff, Sarah Corbett $30,001.00 less the deductible described in section 267.5(7)(3)(ii)(b) of the Insurance Act for all non-pecuniary damages…” The offer similarly goes on to offer $15,001 less the $15,000 deductible for the Family Law Act claims. The offer goes on to propose $1 for past loss of income, $1 future loss of income and $1 for costs. Had this offer been accepted by the plaintiffs, they would have been entitled to be paid by the defendant a total of $7. ($6 plus $1 for costs)
[11] The amount actually in issue in the trial was the $1 million insurance limits on the defendant’s motor vehicle liability policy as counsel had agreed to limit the plaintiffs’ claim to that sum as a condition of agreeing to a pleadings amendment.
[12] The jury award of $141,500 (or $108,500 after removal of the $33,000 component for general damages due to the statutory deductible, (see s. 267.5(9) of the Insurance Act, as amended), is only half of the amount of the plaintiffs offer to settle at the opening of trial but is, of course, far in excess of the defendant’s $7 offer. The defendant’s $7.00 offer is certainly not a “near miss” as is claimed in the defendant’s costs submission.
Rule 57 Considerations
[13] The plaintiffs succeeded in achieving a significant recovery from the jury and indeed far in excess of what was being offered. On the other hand, the jury declined to award any amount for future income loss or for the plaintiff’s claim for loss of interdependent relationship so it must be recognized that the defendant achieved some success in its defence of this claim. There is no question that this was a complex case to present to a jury – in that it dealt with a medically complex situation from a causation perspective (soft tissue injury, chronic pain with psycho-social aspects). The breakup of the plaintiff’s marriage which she alleged was due to the impact of her chronic pain and the pressures created in regard to parenting her sons, both of whom are autistic, were complicating causation issues. Complex issues arose in respect of the surveillance and social media evidence tendered on by the defendant. In short, the plaintiff faced considerable challenges in establishing her claim for damages and achieved reasonable but not overwhelming success in so doing.
[14] Rule 57 also permits the Court to consider other factors such as counsel’s conduct that affected the length of the trial. This was an acrimonious trial in which communication and cooperation between counsel seemed to be minimal. Considerable time was wasted arguing about pre-trial issues of alleged lack of production and disclosure. There were intemperate exchanges by defendant’s counsel, groundless mistrial motions and prolix cross-examinations. On the other hand, there was a seeming unwillingness on the part of plaintiffs’ counsel to comply with the Court’s orders concerning the method and scope of questioning and unnecessary interruptions to cross-examination.
[15] The root cause to some of the trial conduct seemed to be that the final round of examinations for discovery were held within 3 months of the trial thus imposing on both sides very tight timeframes to resolve disputed issues, to obtain updated expert reports and to make further production and disclosure. This scenario required close cooperation of counsel, yet the opposite occurred. Each side’s alleged defaults or transgressions are canvassed in detail in the respective costs submissions. In my view, both sides share responsibility for the problems encountered. Therefore, in the exercise of my discretion, I exclude this category of issues in my costs analysis. In any event, most of the conflictual issues were the subject of rulings during the course of trial and success on these rulings was divided.
Proportionality
[16] Mr. McCarthy for the defendant, who was not counsel at trial, raises an important issue pertaining to the principle of proportionality in the award of costs. He submits that the Court of Appeal’s recent judgment in Elbakhiet v. Palmer, 2014 ONCA 544 “ushered in a new era in costs”. His proposition is that an award of trial costs must be proportionate to the amount recovered. This would presumably mean that costs should not exceed some reasonable proportion of the jury award. He points out that in Elbakhiet, a case somewhat similar to the present case, the Court of Appeal awarded trial costs amounting to approximately $11,000 per week of trial on a jury verdict of $144,013. Elbakhiet was a nine week trial and the Court of Appeal awarded costs of $100,000 (inclusive of disbursements and taxes), reducing the trial judges award of $578,742.
[17] In Elbakhiet, the defendant made a Rule 49 offer which was a “near miss”, that is the offer was almost as favourable as the jury verdict. The defendants’ offer was for $145,000 plus prejudgment interest and the jury verdict was $144,013. Whether the defendants’ offer met or exceeded the jury verdict depended on the allocation of prejudgment interest, a matter not specified in the defendants’ offer. This uncertainty prevented the defendant from obtaining the benefit of the cost consequences of Rule 49.10. However, in the Court’s opinion, the defendants’ “near miss” settlement offer should have been considered by the trial judge in fixing the amount of costs. Rosenberg J. A. stated (at paras. 32-33) stated:
For the appellants to succeed they must show that the trial judge erred in principle in respect to other aspects of Rules 49 and 57. In my view, she did. First, the trial judge gave no consideration to rule 49.13 which provides that despite, among other things, rule 49.10, "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." The trial judge gave lengthy reasons in considering the factors set out in Rule 57. She dealt at length with rule 49.10. But she made no mention of rule 49.13. Given that the offer to settle was virtually the same as the Judgment, this was a case where the court had to consider the impact of rule 49.13.
As this court pointed out in Lawson v. Viersen, 2012 ONCA 25, at para. 46, rule 49.13 is not concerned with technical compliance with the requirements of rule 49.10. Rather, it "calls on the judge to take a more holistic approach." The appellants complied with the spirit of Rule 49 even if they failed for technical reasons to provide an offer that exceeded the Judgment. As held in Lawson, at para. 49, this was the type of offer that ought to have been given "considerable weight in arriving at a costs award."
[18] Apart from the trial judge’s failure to consider the defendants’ “near miss” offer, the Court of Appeal was also of the view that “it was not fair and reasonable to award the respondents’ cost of almost $580,000 for a claim the jury valued at just under $145,000.” (para 35).
[19] In the present case, the defendants did not make any offer that could be characterized as a “near miss”. They made an offer, which if accepted, would have paid the plaintiff $7. This presented the plaintiff with the proposition that, on the eve of trial, she should walk away from her case with no compensation, or proceed through trial. In my view, to impose a rule arbitrarily limiting the amount of costs to some proportion of the recovery when there has been no offer of settlement, or only a nominal offer as in this case, would undermine the purpose of Rule 49, which is to encourage settlement by attaching costs consequences for failure to make or accept reasonable offers. It would also encourage the type of “hard ball” approach to settlement employed in this case.
[20] In the present case, the question arises: are partial indemnity fees of $159,249 disproportionate to a jury verdict of $141,500 following a six week trial? With respect, I think not. Moreover, fees in this range, if not higher, are readily foreseeable when a defendant chooses to make no genuine Rule 49 offer, thereby compelling the plaintiffs to take their claim through trial.
[21] The defendant relies on the decision of Cornell J. in Mullin v. Legace, 2015 ONCA 757 on the proportionality issue. In this motor vehicle case, the plaintiff accepted a pre-trial settlement offer of $190,000 plus costs. The parties failed to agree on costs and the plaintiff submitted a costs claim for $528,522 plus disbursements of $20,000 to an assessment officer who allowed $231,137. On appeal to the Superior Court, Cornell J. set aside the assessment officer’s decision and allowed $77,000 for costs and $15,000 in agreed upon disbursements. He held that the assessment officer erred in failing to address the requirements of Rule 57 and in failing to refer to Rule 1.04(2.2) which required the principle of proportionality to be applied in costs awards as well as other matters governed by the Rules. The Court stated at para. 24 that, “Among all of the factors that the court may consider in awarding costs, Patene Building Supplies Ltd v. Niagara Home Builders Inc., 2013 ONSC 468 and Elbakhiet reference the fact that such award must be proportionate to the amount recovered.”
[22] The plaintiffs rely on a recent judgment of this Court in Interborough Electric Inc. v. 724352 Ontario Ltd., 2016 ONSC 1115. In this case, a construction lien action tried over the course of 11 weeks, the defendant had failed to make any meaningful settlement offer in advance of trial. At trial, the plaintiff’s net recovery after set offs was $254,000, but their costs claim exceeded $1.2 million. The defendants advanced a proportionality argument based on Elbakhiet in response to which Justice Vallee stated:
56 In Elbakhiet v. Palmer, 2014 ONCA 544, a recent decision, the court stated that, "It was not fair and reasonable to award the respondents costs of almost $580,000 for a claim the jury valued at just under $145,000." A significant difference between Elbakhiet and this matter is that in Elbakhiet, the appellant (defendant) made two offers to settle, one in the amount of $120,000 and the other in the amount of $145,000. The second offer was very close to the result. Here, Maple made no offer to pay Interborough anything.
57 In this case, it seems completely unfair and unreasonable to deny Interborough a large share of its costs on the basis that the amount is not proportionate to the result. Maple's refusal to pay anything resulted in a lengthy trial. If a results-based view of proportionality were to be applied here, a serious injustice would occur. The principle of indemnity is important in this matter. If Interborough were to be awarded significantly less than the costs to which it is entitled pursuant to Rule 49, then the entire exercise would be for nothing. Interborough had two choices prior to trial. It could have thrown in the towel and walked away from money to which it was entitled. If this had happened, Maple certainly would have requested costs and might have still proceeded with its counterclaim. The other choice was to proceed to trial to present a legitimate claim.
[23] Another recent decision of this Court cautioning against giving too much weight to the need for proportionality in fixing costs is the decision of McCarthy J. in Aacurate v. Tarasco, 2015 ONSC 5980:
An over-emphasis on proportionality may serve to under-compensate a litigant for costs legitimately incurred. Assuming, as is often the case, that a successful Plaintiff's lawyer is working on an actual fees basis (as opposed to a contingency agreement), this will inevitably result in the Plaintiff having to fund her successful litigation out of the proceeds of judgment that a court found she was entitled to. This is patently unfair to litigants who have been wronged and who choose to invest their hard-earned resources into pursuing a legitimate claim. One does not say to one's lawyer, "I have only a modest claim. I am instructing you to do a mediocre job in advancing it." Few litigation lawyers would be attracted to a litigation landscape where they could not recommend giving a matter the time and effort it requires to be properly advanced because the principle of proportionality predestines a costs award that promises to turn a successful result in court into a net financial loss for their client. A pattern of such outcomes would result in an unintended but nonetheless real denial of access to justice; it will send a message to litigants that it is not worth one's while to pursue legitimate claims in court because one cannot possibly make it cost effective to do so. This is a denial of justice in the most fundamental sense. It tends to encourage those resisting legitimate but modest claims to take unreasonable positions, the logic being that any exposure to costs will be limited because of the size of the claim, regardless of the time and expense necessary to extract a judgment.
[24] In another recent case, Gardiner v. MacDonald, 2016 ONSC 2770, Justice Toscano Roccamo observed (at para. 65):
…I echo the sentiments of McCarthy J. in Aacurate, to the effect that a court should refrain from allowing “proportionality” to override the unique features of the case before it. An undue focus on proportionality ignores the principles of indemnity and access to justice.
[25] I respectfully agree with the observations of the judges in these three cases. In the circumstances of the present case, it would be an injustice to the plaintiffs to deprive them of an otherwise appropriate and reasonable award of costs due to a modest recovery at trial, in the face of a $7.00 settlement offer from the defendant.
Disposition
[26] In summary, in considering the defendant’s position on settlement, the relevant factors under Rules 49.13 and 57, including the offers made, the results of the trial and considerations of proportionality, I award the plaintiffs their costs of the action on a partial indemnity basis as follows: fees in the sum of $159,249, HST in the sum of $20,702.48 and disbursements in the sum of $89,347, payable by the defendant within 30 days hereof.