Court File and Parties
COURT FILE NO.: CV-04-CT005744 DATE: 20170720 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: YOLANDA GIRAO, Plaintiff AND: LYNN CUNNINGHAM and VICTOR MESTA, Defendants
BEFORE: Mr. Justice P.J. Cavanagh
COUNSEL: Yolanda Girao, In Person Michael Best, for the Defendant, Lynn Cunningham Stuart Aird, for the Defendant, Allstate Insurance Company of Canada
HEARD: Submissions in Writing
COSTS ENDORSEMENT
Background
[1] This action arises from a motor vehicle accident which occurred on June 19, 2002. On June 15, 2004, the plaintiff commenced an action against the defendants Lynn Cunningham (“Cunningham”) and Victor Mesta. The plaintiff alleged that she suffered from permanent and serious impairment as a result of the injuries sustained in the accident. The claim against the defendant Victor Mesta was dismissed on November 3, 2006.
[2] At the time of the accident, Cunningham had a valid policy of motor vehicle insurance with Coachman Insurance Company of Canada.
[3] On March 31, 2006, the plaintiff commenced a separate action against Allstate Insurance Company of Canada (“Allstate”).
[4] The trial of the action against Cunningham commenced on February 6, 2017 and concluded on March 3, 2017. The trial against Allstate was heard at the same time pursuant to the order of Master Peterson dated January 23, 2007. The plaintiff conducted the 20 day jury trial as a self-represented litigant.
[5] At trial, evidence was adduced to show that the plaintiff received $91,246.24 for income replacement benefits from her statutory accident benefits carrier, Allstate.
[6] Immediately following my charge to the jury, and once the jury had been dismissed for deliberations, Cunningham brought a motion for a determination of whether the plaintiff had proven that she met the statutory threshold set out in subsection 267.5(5) of the Insurance Act. I allowed the plaintiff additional time to respond to this motion.
[7] On March 3, 2017, the jury rendered a decision with respect to the claims brought by the plaintiff. The jury found that Cunningham was negligent and was fully at fault for the accident. As a result of this verdict, the action against Allstate was dismissed.
[8] The jury awarded $45,000 for general damages, $30,000 for past loss of income and no amounts for future loss of income, future housekeeping and homemaking and future cost of care.
[9] On March 10, 2017, the threshold motion was heard. I released my decision on April 20, 2017 and found that the plaintiff did not meet the threshold of having sustained a serious and permanent impairment of important physical, mental or psychological function. Therefore, I dismissed the plaintiff’s claim for non-pecuniary loss as against Cunningham.
[10] Pursuant to section 267.8(1) of the Insurance Act, the jury’s award of $30,000 for past loss of income is reduced by the amount paid to the plaintiff in the form of income replacement benefits through her accident benefits carrier. The deduction reduces the amount awarded for past loss of income to $0.00.
Costs Sought by Cunningham against the Plaintiff
[11] Cunningham submits that, as a successful defendant, costs should be awarded in her favour on a partial indemnity scale. Cunningham submits that there is no compelling reason to depart from this usual approach to costs.
[12] Cunningham refers to three settlement offers made to the plaintiff during the course of the litigation in compensation for general damages in the amounts of $100,000, $73,800 and $85,000, plus costs. These offers were not accepted. On September 29, 2011, the plaintiff served a written offer to settle for $800,000 plus costs, interest and disbursements which expired on October 4, 2011. On June 28, 2012, the plaintiff served a written offer to settle for $800,000 plus costs in the amount of $132,681.60.
[13] Cunningham submits that in light of (a) the prolonged nature of the action; (b) the settlement offers that were made during the course of the litigation; (c) the length of the trial; and (d) the issues raised during the trial, the request for costs on a partial indemnity scale is fair and reasonable in the circumstances.
[14] According to the bill of costs of Cunningham, legal fees in the amount of $342,532.94 and disbursements in the amount of $106,302.96 were charged in respect of the defence of the action brought by the plaintiff. Cunningham seeks an award of costs on a partial indemnity scale based upon 60 percent of the fees charged, or $205,542.38, together with disbursements of $106,302.96, inclusive of HST.
[15] Section 131(1) of the Courts of Justice Act provides that the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid. The discretion to award costs must be exercised in accordance with the facts and circumstances of the case and in accordance with the factors set out in r. 57.01(1) of the Rules of Civil Procedure. The court may consider 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. Overall, the court is required to consider what is fair and reasonable, with a view to balancing compensation to the successful party with the goal of fostering access to justice: Boucher v Public Accountants Council (Ontario), (2004), 71 O.R. (3d) 291 (Ont. C.A.).
[16] A successful party does not have a right to costs but it does have a reasonable expectation that a costs award will be made in its favour. Normally, costs follow the event and are awarded on a partial indemnity scale. Discretion can be exercised in exceptional circumstances to depart from any of these norms: Dawood v. Jasey, 2016 ONSC 7427, at para. 40.
[17] I have considered the factors set out in rule 57.01(1). The amount of the claim was substantial and the plaintiff was not successful. The action progressed over many years, and the jury trial was a long one, taking four weeks. The issues were important to the parties.
[18] The plaintiff provided a bill of costs which included the number of hours spent on the action and a calculation of costs based upon an hourly rate of $60. The plaintiff seeks costs on the basis of fees including HST of $404,993.81 and disbursements including HST of $22,119.73. Because the plaintiff was unsuccessful, there is no proper basis upon which to award costs in her favour.
[19] With respect to the claim for costs by Cunningham, I regard the amount claimed based upon 60 percent of the fees charged to be reasonable and proportionate. In my view, the disbursements claimed were necessary. In the plaintiff’s responding submissions, there was no challenge to the amounts claimed by Cunningham for fees and disbursements.
Costs Sought by Allstate against Cunningham or, alternatively, against the Plaintiff
[20] Allstate seeks costs for the litigation against Cunningham on the basis of a “Sanderson” order. Allstate seeks costs on a partial indemnity scale up to the date of its last offer to settle and, from that point forward, on a substantial indemnity scale. Alternatively, Allstate seeks costs from the plaintiff.
[21] Allstate submits that on June 15, 2004, the plaintiff issued a statement of claim against Cunningham and Victor Mesta for damages arising out of her involvement in the June 9, 2002 motor vehicle accident. Both Cunningham and Victor Mesta delivered statements of defence and cross-claims, respectively, in response to the plaintiff’s claim. The examination for discovery of Cunningham and the partial examination for discovery of the plaintiff were conducted on January 27, 2006.
[22] Following these examinations for discovery, on March 31, 2006, the plaintiff issued a statement of claim against Allstate in a separate action. In the statement of claim against Allstate, the plaintiff pleads that Cunningham alleges that her vehicle was struck in the rear by an unidentified vehicle, causing her vehicle to come into contact with the vehicle driven by Victor Mesta. The plaintiff claimed against Allstate pursuant to the provisions of the uninsured and underinsured motorist coverage and unidentified motorist coverage under the Allstate policy.
[23] Allstate submits that it has always taken the position that Cunningham would be at least 1% responsible for causing the June 19, 2002 motor vehicle accident and, therefore, Allstate would not have any responsibility to respond to the plaintiff’s claim. Allstate made this position known to the plaintiff and to Cunningham prior to issuance of the statement of claim against Allstate. Cunningham has always maintained that the accident was caused solely as a result of the negligence or want of care on the part of an unidentified motorist. This position was maintained through to the conclusion of trial.
[24] Allstate submits that, because Cunningham refused to acknowledge at least 1% fault for the accident, the plaintiff was forced to maintain the claim against Allstate so that she could recover damages for her losses, if proven, in the event that there was no apportionment of fault as against Cunningham.
[25] During the trial of the two actions, the plaintiff did not present any evidence relating to the involvement of an unidentified motorist as a cause for the motor vehicle accident in question. The only evidence that was tendered addressing the issue of the unidentified motorist was introduced by Cunningham.
[26] In its verdict, the jury answered that there was no negligence on the part of an unidentified driver that caused or contributed to the accident and that the accident was caused entirely as a result of the negligence of Cunningham. The jury found that Cunningham was solely at fault for the accident giving rise to the plaintiff’s claim.
[27] Allstate submits that in multi-defendant proceedings, where one defendant attempts to shift blame onto another defendant and is not successful, the unsuccessful defendant ought to be responsible to pay the costs of the successful defendant. Allstate submits that this principle should be applied in this case where the plaintiff did not call evidence against Allstate, however, Cunningham presented evidence against Allstate that was not accepted. In addition, Allstate submits that the plaintiff will likely be unable to pay its costs and that this is also a factor that favours a Sanderson order.
[28] The usual test for determining whether a Sanderson order is appropriate has two steps. First, courts ask a threshold question: whether it was reasonable to join the several defendants together in one action. If the answer is yes, courts must use their discretion to determine whether a Sanderson Order would be just and fair in the circumstances: Moore v. Wienecke, 2008 ONCA 162, at para. 41.
[29] With respect to the threshold question, Allstate submits that the sole reason that the plaintiff was, essentially, compelled to commence an action against Allstate was because of the position taken by Cunningham that an unidentified motor vehicle was the sole cause of the accident giving rise to the plaintiff’s claim. Allstate submits that need to have the two actions tried together is obvious and that the evidence regarding both the circumstances of the accident and the quantum of damages, as claimed, are the same in each action. Cunningham also agrees that the threshold question of whether it was reasonable to join the defendants together has been met.
[30] I also agree. The two actions were properly tried together as provided for by the order of Master Peterson dated January 23, 2007 which ordered that the two actions are to be heard at the same time or one immediately after the other.
[31] In Moore v. Wienecke, the Court of Appeal identified several factors to be considered by the court in determining whether a Sanderson order is appropriate. These factors were summarized in Gardner v. Hann, 2012 ONSC 2006, at para. 17 and include:
a. Did the unsuccessful defendant try to shift responsibility onto the successful defendant? b. Did the unsuccessful defendant cause the successful defendant to be added as a party? c. Are the causes of action independent of each other? d. Who has the ability to pay costs?
[32] With respect to factor “a”, the plaintiff presented no evidence concerning an unidentified motorist. Cunningham presented evidence that attempt to shift the fault for the accident onto the operator of an unidentified motor vehicle which, if accepted, would shift responsibility for the plaintiff’s claims to Allstate.
[33] Cunningham submits that she concentrated her efforts on meeting the plaintiff’s case, as opposed to shifting the responsibility onto Allstate. She submits that the only witness that she called in relation to the liability issue was herself to provide evidence of the events that led to the accident in question. Cunningham argues that this factor has not been met.
[34] With respect to the second factor “b”, it is clear that the plaintiff’s action against Allstate was commenced because of the position taken by Cunningham that the accident was caused solely as a result of the negligence of the operator of an unidentified motor vehicle. The position taken by Cunningham caused the plaintiff to sue Allstate.
[35] Cunningham submits that the plaintiff made the decision to bring a separate action against Allstate and that she did not cause Allstate to be added as a party. Cunningham submits that she was never in a position to let Allstate out of the action, as she was not a party to the action involving Allstate.
[36] Further, Cunningham’s counsel submits that this defendant was never in the position to admit any portion of liability because the plaintiff’s claims exceeded the policy limit of Cunningham’s insurer and, as a result, Cunningham’s counsel was required to protect her interest by taking all possible steps to limit the claim to the policy limits. Cunningham’s counsel submits that admitting any portion of liability without the claim being limited would have put Cunningham at risk of being uninsured for any portion of damages awarded over and above $1 million. Because the plaintiff refused to limit her claim to the defendant’s policy limits, Cunningham could not admit liability and, as a result, Allstate was not let out of the action.
[37] Cunningham therefore submits that the second factor has not been met because she did not cause Allstate to be added, nor did she cause Allstate to be kept in the action.
[38] With respect to the third factor “c”, the causes of action in each action are not independent of each other. A central issue in each action concerned who was negligent and at fault for the accident. Cunningham agrees.
[39] With respect to the fourth factor “d”, Allstate submits that there is a significant risk that the plaintiff will be unable to pay Allstate’s costs, and that this factor should be taken into account in determining whether a Sanderson order should be made. Cunningham acknowledges that she is more likely to be able to pay Allstate’s costs than the plaintiff, however, she submits that this should not be a determining factor. Cunningham submits that she should not be penalized for the plaintiff’s decision to bring Allstate into the action and keep it in the action simply because Cunningham has bigger pockets than the plaintiff.
[40] Cunningham submits that, if I find that this is an appropriate case in which to make a Sanderson order, the court should order Cunningham, the unsuccessful defendant, to pay only a portion of Allstate’s costs. Cunningham relies on Sousa v. Jahagirdhar, 2012 ONSC 5153, at paras. 12-13 in support of this submission.
[41] I have considered these factors and I exercise my discretion to make a Sanderson order in this case. I do so for the following reasons:
a. Cunningham, the unsuccessful defendant on the liability issue, tried to shift responsibility for the accident to an unidentified motorist. b. Had it not been for Cunningham’s allegations concerning the involvement of an unidentified motorist, Allstate would not have been involved in this litigation. Through her position that the accident was caused entirely by fault of an unidentified motorist, Cunningham placed the plaintiff in a position where, in order to avoid the risk that Cunningham could be found to be not at fault for the accident, she had to sue Allstate. As a result, Allstate had to participate in the litigation including through a four-week jury trial. c. Having failed to successfully shift responsibility for the accident to an unidentified motorist, in my view, it is fair and just for Cunningham to be responsible for payment of Allstate’s costs. The fact that the plaintiff refused to limit her claim to Cunningham’s insurer’s policy limits and that the defendant could not admit liability does not, in my view, change the fact that Allstate was only involved in the litigation because of the position taken by Cunningham.
[42] Allstate seeks costs on a substantial indemnity scale from September 6, 2016, the date of its last offer to settle. In that offer, Allstate offered to pay to the plaintiff $10,000 in exchange for a full and final release and the plaintiff forgoing any future potential claims pursuant to the unidentified motorist coverage under the Allstate policy. The offer was not accepted and Cunningham never agreed to accept 1% liability for the accident.
[43] Cunningham submits that Allstate’s rule 49 offers to settle should have no role in determining what level of costs the defendant should pay. Cunningham submits that the offers to settle were not directed at the defendant and that the defendant could not have accepted any of the offers as she was not a party to the action between the plaintiff and Allstate. I agree with these submissions.
[44] In my view, the proper scale of costs is the partial indemnity scale. Cunningham was entitled to take the position that she did concerning the involvement of an unidentified motorist, and there was no conduct on the part of Cunningham that would justify an award of costs on a substantial indemnity scale.
[45] Allstate submits that it incurred costs over the past 11 years in defending the claim brought by the plaintiff totaling $132,151.50 in fees, HST/GST of $16,504.20 on fees, disbursements of $8,154.41, and HST/GST of $1,028.42 on disbursements, totaling $157,559.14. Allstate requests an award of costs on a partial indemnity scale in the amount of 60 percent of its fees calculated at $79,290.78 plus HST and disbursements plus HST.
[46] Cunningham submits that she should not be required to pay costs for attendance of a second counsel at the trial when her role could have been performed by a legal clerk. Cunningham submits that the fees for the participation of second counsel at the trial should be allowed only at the maximum rate of a law clerk - $80 per hour. Cunningham also submits that the costs associated with second counsel’s trial preparation, amounting to 76.6 hours at $150 per hour, should be reduced by half.
[47] In my view, it was appropriate for Allstate to have a second counsel assist its lead counsel in case, including the four week jury trial. Cunningham also had two counsel on this case, which I agree was reasonable. The rates claimed by Allstate’s counsel are reasonable. In my view, the fees claimed on a partial indemnity scale are reasonable and proportionate, based upon 60 percent of the fees charged to Allstate. I regard the disbursements claimed to be proper and necessarily incurred.
Disposition
[48] I award costs in favour of Cunningham in action no. 04-CT-005744 to be paid by the plaintiff on a partial indemnity scale fixed in the amount of $205,542.38 inclusive of HST for fees and in the amount of $106,302.96 inclusive of HST for disbursements, a total of $311,845.34.
[49] I award costs in favour of Allstate in action no. 06-CV-308826 to be paid by Cunningham on a partial indemnity scale fixed in the amount of $89,598.58 inclusive of HST for fees and in the amount of $9,214.48 inclusive of HST for disbursements, a total of $98,813.06.
