Martin et al. v. Listowel Memorial Hospital et al. [Indexed as: Martin v. Listowel Memorial Hospital]

51 O.R. (3d) 384

[2000] O.J. No. 4015

Docket No. C31222

Court of Appeal for Ontario

Catzman, Carthy and Feldman JJ.A.

November 1, 2000

Negligence -- Contribution and indemnity -- Damages caused or contributed to by fault or neglect of two or more persons -- Apportionment of liability where defendant vicariously liable -- Where wrongdoing by one party recognized as greater, either in magnitude, or because that party engaged in different kinds of contributing negligence, it is duty of trier of fact to assign larger proportion of fault to that party -- Apportionment of liability may take into account defendant's vicarious liability -- Judge may not attribute portion of fault to non-party -- Negligence Act, R.S.O. 1990, c. N.1, ss. 1, 4.

The plaintiff SM was born at the Listowel Memorial Hospital, where, due to the negligence of two doctors and a nurse, and the want of training of ambulance attendants, he suffered brain damage at birth. He sued for damages and, after a series of amendments to his pleading, made claims against the doctors, the ambulance attendants and the hospital, which was vicariously liable for the attendants and the nurse, who was not a party to the main action but a third party joined by the doctors.

After a settlement was reached with the two doctors, the terms of which were secret, the action proceeded to trial with the hospital and the ambulance attendants as defendants. SM and his family members were awarded substantial damages. For the purpose of apportioning liability, the trial judge found that the doctors, the nurse and the hospital were negligent. The hospital was found to be negligent for its failure to train the nurse and the ambulance attendants, who were not found to be negligent, and the hospital was found to be vicariously liable for the negligence of the nurse. Relying on s. 4 of the Negligence Act, the trial judge stated that he was unable to determine respective degrees of fault and he deemed the defendants equally at fault, each in the amount of one-third of the award. He stated that he did not understand how the nurse and the hospital could be held to be separately negligent for the purposes of the s. 4 apportionment of liability, and he declined to add the nurse as party defendant. In his award, in calculating the infant plaintiff's future wage loss, he used the 2.5 per cent discount factor provided by Rule 53 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and he rejected the plaintiffs' submission that the discount rate be reduced by a 1 per cent productivity factor.

In accordance with the wishes of the parties in light of the plaintiffs' settlement with the doctors, the trial judge ordered that judgment go in favour of the plaintiffs against the hospital for one-third of the amount of the total damages, and no judgment went in favour of the hospital against the doctors. As for costs, he awarded the plaintiffs one-third of their party and party costs to January 22, 1998, the date of their settlement with the doctors, and their entire party and party costs thereafter.

The plaintiffs appealed. Apparently because of the undisclosed terms of the settlement with the doctors, which likely included an agreement by the plaintiffs not to make a claim against any person who could claim relief over against the doctors, it was in the plaintiffs' interest that the hospital's apportionment of damages be maximized to 50 per cent, including its vicarious liability for the fault of the nurse.

The issues on the appeal were: (1) whether the trial judge erred in apportioning an equal share of fault to the hospital, having found that the hospital was negligent in its own right and also vicariously liable for the nurse's negligence; (2) whether s. 1 of the Negligence Act required the trial judge to determine the degree of fault of the nurse; (3) whether the trial judge erred in declining to adjust the discount rate; and (4) whether the trial judge erred in his disposition of costs.

Held, the appeal should be allowed and the trial judgment modified.

The trial judge erred in law by applying s. 4 of the Negligence Act in circumstances where it was not impracticable to determine the degrees of fault of the hospital, including its vicarious liability, and of the two doctors. Section 4 is intended to apply when it is fair to apportion responsibility equally. Where the wrongdoing by one party is recognized as greater, either in magnitude or because that party engaged in different kinds of contributing negligence, it is the duty of the trier of fact to assign a larger proportion of fault to that party. Further, the trial judge's ruling about the apportionment of liability between the hospital and the nurse for the purposes of s. 4 was erroneous. It would be counterproductive to interpret the Negligence Act as requiring the addition of unnecessary parties, purely for form, in order to obtain a fair and proper apportionment of fault. Where the trier of fact is able to assess individually the liability of each person for whom a defendant is v icariously liable, then the degree of fault of the vicariously responsible defendant should be apportioned in order to reflect the contributions of each of the persons for whom the defendant is vicariously liable.

In light of the conclusion that the trial judge had erred in the application of s. 4 of the Act, it was unnecessary to deal with the issue regarding s. 1. However, the issue was important, and some comment was appropriate about the interaction of the sections. Contrary to the plaintiffs' submission, there was no basis in s. 1 or anywhere in the Act for a judge to attribute a portion of fault to a non-party. Although s. 1 refers to "persons", its effect is to impose joint and several liability to the plaintiff only on defendants found at fault or negligent and not on any other person. The effect of s. 1 of the Act is to define the legal effect of a finding of fault by concurrent wrongdoers. The effect is to change the common law and impose on concurrent wrongdoers joint and several liability to the plaintiff. It is the only section of the Act which imposes liability as opposed to apportioning fault. The section is substantive, not procedural. Therefore, when applying the section to any specific action, it is understood that joint and several liability to the plaintiff can and will attach only to a party defendant, although others who may also have been at fault could potentially have been found jointly and severally liable had they been sued by the plaintiff. Because procedurally the section only affects defendants, under this section the court is to apportion degrees of fault only to defendants. The court must also apportion fault to the other parties, the plaintiff and third parties, not under s. 1 of the Act but rather pursuant to ss. 3 and 4 of the Act and in accordance with the requirements of the pleadings.

Based on the evidence, the trial judge did not err by declining to adjust the discount rate to be applied to the claim for future wage loss. The debate between the parties was whether the rate should be 2.5 per cent or 1.5 per cent, and between the two, the trial judge's conclusion of 2.5 per cent was the closest of the contending figures to the real predicted rate of 3 per cent.

The disposition of costs is a matter of judicial discretion, and the circumstances in which an appellate court can interfere are narrow. The exercise of discretion in this case did not fall within those narrowly defined limits, although the award of costs should be adjusted to reflect the revised apportionment of negligence.

APPEAL from a judgment in an action for negligence against doctors and a hospital.

Cases referred to Andani Estate v. Peel (Regional Municipality) (1993), 66 O.A.C. 137 (C.A.), varg (April 26, 1989), Doc. Brampton 10176/ 81, 6457/85 (Ont. H.C.J.), supp. reasons at (June 20, 1989), Doc. Brampton 10176/81, 5240/81, 6457/85 (Ont. H.C.J.), supp. reasons amended (July 20, 1989), Doc. Brampton 10176/81, 5240/ 81, 6457/85 (Ont. H.C.J.) [Leave to appeal to S.C.C. refused (1994), 71 O.A.C. 78n, 170 N.R. 320n] (sub nom. Andani v. Peel (Regional Municipality)); Batchelor v. Brown (1980), 1980 1616 (ON SC), 28 O.R. (2d) 590, 13 C.C.L.T. 237, 111 D.L.R. (3d) 642 (H.C.J.) (sub nom. Paquette v. Batchelor); Bennetto v. Leslie, 1950 71 (ON SC), [1950] O.R. 303 (H.C.J.); Clyke v. Blenkhorn (1958), 1958 347 (NS CA), 13 D.L.R. (2d) 293 (N.S.C.A.), affg (1957), 1957 908 (NS SC), 12 D.L.R. (2d) 242 (N.S.T.D.); Colonial Coach Lines Ltd. v. Bennett, 1967 171 (ON CA), [1968] 1 O.R. 333, 66 D.L.R. (2d) 396 (C.A.); Consumers' Gas Co. v. Peterborough (City), 1981 66 (SCC), [1981] 2 S.C.R. 613, 18 C.C.L.T. 258, 129 D.L.R. (3d) 507, 40 N.R. 425, affg (1979), 1979 77 (ON CA), 25 O.R. (2d) 399, 9 C.C.L.T. 1, 104 D.L.R. (3d) 174 (C.A.), affg in part (1976), 1976 778 (ON SC), 14 O.R. (2d) 137, 1 C.C.L.T. 90, 73 D.L.R. (3d) 177 (S.C.) (sub nom. Fenn v. Peterborough (City), Consumers' Gas Co. v. Fenn); Dube v. Penlon (1992), 1992 7449 (ON CA), 10 O.R. (3d) 190 (Gen. Div.); Foulis v. Robinson (1978), 1978 1307 (ON CA), 21 O.R. (2d) 769, 8 C.P.C. 198, 92 D.L.R. (3d) 134 (C.A.), revg (1977), 3 C.P.C. 16 (Ont. H.C.J.); Gerula v. Flores (1995), 1995 1096 (ON CA), 126 D.L.R. (4th) 506 (Ont. C.A.), revg in part (1993), 16 C.P.C. (3d) 362 (Ont. Gen. Div.); Giannone v. Weinberg (1989), 1989 4046 (ON CA), 68 O.R. (2d) 767, 33 O.A.C. 11 (C.A.), varg (1986), 37 C.C.L.T. 52 (Ont. H.C.J.); Ingles v. Tutkaluk Construction Ltd., 2000 SCC 12, [2000] 1 S.C.R. 298, 49 C.C.L.T. (2d) 1, 183 D.L.R. (4th) 193, 251 N.R. 63, 46 O.R. (3d) 736n, 8 M.P.L.R. (3d) 1, 1 C.L.R. (3d) 1, revg (1998), 1998 1036 (ON CA), 38 O.R. (3d) 384, 158 D.L.R. (4th) 147, 46 M.P.L.R. (2d) 1, 37 C.L.R. (2d) 192 (C.A.), revg (1994), 24 M.P.L.R. (2d) 293 (Ont. Gen. Div.); Ligate v. Abick (1996), 1996 4006 (ON CA), 28 O.R. (3d) 1, 134 D.L.R. (4th) 538, 20 M.V.R. (3d) 75 (C.A.), affg (1991), 1991 7346 (ON SC), 5 O.R. (3d) 332, 2 C.P.C. (3d) 209 (Gen. Div.), supp. reasons (1992), 1992 7677 (ON SC), 8 O.R. (3d) 49 (Gen. Div.); Maxfield v. Llewellyn, [1961] 3 All E.R. 95, 1 W.L.R. 1119, 105 Sol. Jo. 550 (C.A.); Mortimer v. Cameron (1994), 1994 10998 (ON CA), 17 O.R. (3d) 1, 111 D.L.R. (4th) 428, 19 M.P.L.R. (2d) 286, 1 L.W.R. 57 (C.A.), revg in part (1992), 9 M.P.L.R. (2d) 185 (Ont. Gen. Div.) [Leave to appeal to S.C.C. refused (1994), 19 O.R. (3d) xvi, 23 M.P.L.R. (2d) 314, 178 N.R. 146n]; Roustauskas v. Wilson, [1952] O.W.N. 441 (H.C.J.); Seaway Trust Co. v. Markle (1990), 40 C.P.C. (2d) 4 (Ont. H.C.J.), affg (1988), 25 C.P.C. (2d) 64 (Ont. Master); St. Catharines Flying Club v. St. Catharines (City), 1953 136 (ON CA), [1953] O.R. 393, 2 D.L.R. 685 (C.A.); Vanek v. Great Atlantic & Pacific Co. of Canada (1999), 1999 2863 (ON CA), 48 O.R. (3d) 228, 180 D.L.R. (4th) 748 (C.A.); Walker Estate v. York-Finch Gener al Hospital (1999), 1999 2158 (ON CA), 43 O.R. (3d) 461, 44 C.C.L.T. (2d) 205, 169 D.L.R. (4th) 689, 31 C.P.C. (4th) 24 (C.A.), affg (1997), 39 C.C.L.T. (2d) 1 (Ont. Gen. Div.) [Leave to appeal to S.C.C. allowed (1999), 249 N.R. 192n, 249 N.R. 194n]; Wells v. McBrine (1988), 1988 3087 (BC CA), 33 B.C.L.R. (2d) 86, 47 C.C.L.T. 94, 54 D.L.R. (4th) 708, [1989] 2 W.W.R. 695 (C.A.) Statutes referred to Family Law Act, R.S.O. 1990, c. F.3 Law and Equity Act, R.S.B.C. 1979, c. 224, s. 51 [am. S.B.C. 1981, c. 10, s. 30] Negligence Act, R.S.B.C. 1979, c. 298 [now R.S.B.C. 1996, c. 333] Negligence Act, R.S.O. 1990, c. N.1, ss. 1, 3-5 Rules and regulations referred to B.C. Reg. 352/81 Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 5.03(4), 7.08, 49.10(1), 53.09(1) Authorities referred to Bates and Cameron, "Settlement of Complex Liability Lawsuits: Opportunities and Perspectives", (2000) 22 Advocates' Q. 265 Carr, Segal, Walker, Report to the Committee of the Supreme Court of Ontario on Fixing Capitalization Rates in Damage Actions, February 1980 Halsbury's Laws of England, 4th ed. (London: Butterworths, 1998), Vol. 12(1): Damages, para. 844, fn. 6 Ontario, Civil Rules Committee, Subcommittee of the Civil Rules Committee on the Discount Rate and Other Matters, Report (Toronto: February 1998) Ontario Law Reform Commission, Report on Contribution Among Wrongdoers and Contributory Negligence (Toronto: Ministry of the Attorney General, 1988), c. 3, pp. 186-88

T.J. Billo and S. Harper, for appellants. J. Liswood and K. Frelick, for respondent.

[1] BY THE COURT: -- The plaintiff, Steven Andrew Martin, was born at the Listowel Memorial Hospital on July 30, 1981. Due to the negligence of two attending doctors, Dr. Neable and Dr. Clunas, and of the attending Nurse James, as well as the lack of training of the ambulance personnel by the hospital (the hospital being vicariously liable for the nurse and directly responsible for the failure to train the ambulance personnel), the infant suffered brain damage at birth which has left him with very serious physical and cognitive disabilities. The trial judge assessed his damages at $3,501,802. His family members were awarded significant further amounts in respect of their care of the plaintiff as well as for their claims under the Family Law Act, R.S.O. 1990, c. F.3.

[2] The history of these proceedings is indeed a lengthy one. Although the action was commenced in 1982, the plaintiffs initially failed to join three attending physicians and the two ambulance drivers as parties. They were joined in the action by order in March 1989. That order was appealed by the physicians to the Divisional Court and to this court, with leave of the Supreme Court of Canada being denied in October 1993. In July 1994, the action was dismissed against one of the doctors; the other two delivered their statements of defence and cross- claims, as did the hospital. A fresh amended statement of claim was delivered by the plaintiffs in December 1996, now including allegations of negligence of the hospital and its employed staff, including Nurse James, but no claim was made against Nurse James as a separate party. The hospital delivered a fresh defence and cross-claim against the physicians in January 1997, and the physicians also delivered a fresh defence and cross-claim at that time, as well as a third party claim against Nurse James.

[3] The action proceeded to trial on January 26, 1998, against the hospital and the two ambulance attendants, the plaintiffs having reached a settlement with the two attending physicians on January 22, 1998. That settlement was approved by the court. However, it was apparently agreed between the settling parties that the terms of the settlement would not be disclosed, and the court record for the approval proceedings was sealed. As a result, none of the trial judge, the other parties, or this court was apprised of the terms of that settlement. The fact of the secret settlement has caused or at least contributed to some of the problems which led to the appeal, including the issues of apportionment, the form of the judgment and costs.

The Findings of the Trial Judge

[4] The plaintiffs' action only proceeded against the hospital and the two ambulance drivers, the trial judge having been made aware of the settlement with the doctors. The trial judge heard all of the evidence surrounding the birth of Steven in order to apportion the degree of fault or negligence among the defendants who caused or contributed to the damage, apparently treating the doctors still as party defendants for that purpose. [See Note 1 at end of document] The trial judge made the following findings in respect of liability:

(1) Dr. Clunas was negligent in his failure to treat Sandra Martin's premature labour appropriately. That negligence materially contributed to Steven's birth injuries.

(2) Dr. Neable was negligent in failing to provide appropriate medical care to Sandra Martin during the delivery of the infant and in failing to provide appropriate medical care to Steven immediately following his birth. That negligence also materially contributed to the birth injuries which Steven suffered.

(3) Nurse James was negligent in her medical care and management of both Sandra Martin before and during the delivery, and of Steven Martin during and after the delivery. Her negligence materially contributed to Steven's birth injuries.

(4) The two ambulance attendants, John Gilham and Fred Scott, were found not to be negligent. Their inadequacies were as a result of lack of proper training.

(5) Listowel Hospital was found to be vicariously liable for the negligence of Nurse James both in respect of her own actions and failure to act, as well as in failing to provide her with training on how to operate the incubator equipment in the ambulance. Nurse James's actions and failures had already been found to have materially contributed to Steven's birth injuries.

(6) Listowel Hospital was also found to be negligent in failing to train ambulance attendants and drivers who transported newborn infants from one hospital to another to provide safe and managed transportation. It also failed to have protocols in place regarding oxygen availability for the ambulances and for obstetrical nurses when admitting to hospital women at risk of giving birth prematurely. The hospital's negligence in failing to provide adequate personnel, equipment, training, protocols and procedure materially contributed to Steven's birth injuries.

[5] After considering the law of causation, the trial judge concluded on the issue of liability:

In my view, the only inference that can be drawn from all of the evidence is that Steven's injuries were caused or materially contributed to jointly by the negligence of Dr. Clunas, Dr. Neable, Nurse James and the Listowel Memorial Hospital. Each therefore is responsible in law for that injury.

[6] The trial judge then referred to ss. 1 and 4 of the Negligence Act, R.S.O. 1990, c. N.1, which provide:

1. Where damages have been caused or contributed to by the fault or neglect of two or more persons, the court shall determine the degree in which each of such persons is at fault or negligent, and, where two or more persons are found at fault or negligent, they are jointly and severally liable to the person suffering loss or damage for such fault or negligence, but as between themselves, in the absence of any contract express or implied, each is liable to make contribution and indemnify each other in the degree in which they are respectively found to be at fault or negligent.

2. If it is not practicable to determine the respective degree of fault or negligence as between any parties to an action, such parties shall be deemed to be equally at fault or negligent.

Counsel for the hospital submitted that the trial judge should apportion fault on the basis of 50 per cent to Dr. Neable, 30 per cent to Dr. Clunas, and 20 per cent to the third party, Susan James, for whom the hospital is vicariously liable.

[7] However, the trial judge rejected that submission and instead made the following finding, apparently applying s. 4 of the Act:

On the evidence before me, I am unable to determine the respective degrees of fault and I deem all of the defendants whom I have found negligent to be equally at fault or negligent.

(Emphasis added)

It appears from this passage that the trial judge continued to treat the doctors who had settled with the plaintiffs as defendants.

[8] The trial judge next made his findings with respect to damages. He rejected the plaintiffs' submission that in calculating the infant plaintiff's future wage loss, he reduce the 2.5 per cent discount factor provided by rule 53.09(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, by a 1 per cent productivity factor. Although the plaintiffs' expert substantiated the factor based on future projections, it was not borne out by historical data. Furthermore, because the expert evidence was that at the time, the difference between estimated investment and price inflation rates was 4 per cent, then to accurately reflect the 1 per cent productivity factor, the 1 per cent should be deducted from 4 per cent and not from 2.5 per cent as set out in the rule, which of course would not benefit the plaintiff. The trial judge was not convinced, on all of the evidence, that he should depart from the rate set out in the rule.

[9] Following release of the reasons for judgment, the plaintiffs sought clarification from the trial judge on the issue of whether Nurse James was a "party" within the meaning of s. 4 of the Negligence Act.

[10] The plaintiffs submitted that Nurse James was a "party", as she was a third party at the suit of the doctors. Therefore, applying s. 4, fault should have been apportioned 25 per cent to each doctor, 25 per cent to Nurse James and 25 per cent to the hospital. The hospital would then be responsible for 50 per cent of the damages awarded, as it is vicariously liable for Nurse James.

[11] The trial judge held that Nurse James was not a "party" for the purposes of section 4. In further written reasons [reported at 31 C.P.C. (4th) 242] he stated [at pp. 245-46] that because the amended statement of claim attributes Nurse James's negligence to the hospital because of its vicarious liability for employees, ". . . I have difficulty understanding how Nurse James and the Hospital can be held to be separately negligent for the purposes of s. 4 of the Negligence Act or in law: Fenn v. Peterborough (City) (1979), 1979 77 (ON CA), 25 O.R. (2d) 399 (C.A.); Seaway Trust Co. v. Markle (February 19, 1988 - Master Sandler)."

[12] The plaintiff then sought to add Nurse James as a party defendant, relying on Rule 5.03(4) of the Rules of Civil Procedure. The trial judge declined to do so, concluding [at pp. 246-47]:

I do not find that it is "necessary" to add Nurse James as a party defendant to enable me to adjudicate effectively and completely on the issues in this action. As I have indicated earlier, the main action, as revealed by the statement of claim, proceeded on the basis that the Hospital should be vicariously liable for its servants and agents for what they did or might have failed to do. Nowhere in the pleadings was it suggested that James, Scott or Gilham were acting outside the scope of their employment. This is not a case where the plaintiffs were taken by surprise. They framed their case and argued it on the basis of the vicarious liability of the Hospital for its servants or agents. My finding of negligence against James was in her capacity as a nurse of the Hospital. In my view, this is not a case where she should be added as a party defendant and the motion will be dismissed.

[13] Finally, the trial judge ordered that judgment go in favour of the plaintiffs against the hospital for one-third and not 100 per cent of the amount of the total damages, and no judgment went in favour of the hospital against the doctors. We understand that this was in accordance with the wishes of the parties in light of the plaintiffs' settlement with the doctors. [See Note 2 at end of document]

Issues

1. Did the trial judge err in apportioning an equal share of fault to the hospital, when he had found that the hospital was negligent in its own right and was also vicariously liable for Nurse James's negligence, both of which materially contributed to the infant plaintiff's damage?

2. Did s. 1 of the Negligence Act require the trial judge to determine the degree of fault or negligence of Nurse James as a person who contributed to the plaintiffs' damages, whether or not she was a party to the action?

3. Did the trial judge err by declining to adjust the discount rate provided by rule 53.09(1) to be applied to the claim for future wage loss?

4. Did the trial judge err in his disposition of costs?

Analysis

[14] Essentially, what the plaintiffs wish to achieve on the appeal (and what they wanted to achieve at trial as well), is a finding that the hospital's total apportionment of the damages suffered by the plaintiffs is 50 per cent, including its vicarious liability for the fault of Nurse James.

[15] Normally, a plaintiff is not concerned about issues of apportionment of fault and liability among defendants or potential defendants. Because s. 1 of the Negligence Act makes all persons found at fault or negligent jointly and severally liable to the plaintiff for the plaintiff's damages, the plaintiff may recover the full amount of the damages from any defendant found at fault, even if that person is only held to be less than 1 per cent responsible for the damage suffered. It is then the concern of the defendants to ensure that the trial judge correctly apportions responsibility among the parties at fault so that they can collect from each other in accordance with that apportionment.

[16] In this case, the problem appears to have arisen for the plaintiffs as a result of their settlement with the doctors. As counsel for the plaintiffs felt constrained by their agreement not to disclose the terms of the settlement, they were unable to explain to the court why the issue of the apportionment concerned them at all, and why a judgment against the hospital for 100 per cent of the amount of the damages would not provide full recovery for them.

[17] Counsel for the hospital was able to assist by advising the court as to what likely was the plaintiffs' concern. He suggested that whatever settlement was made by the plaintiffs with the doctors would likely have included a release wherein the plaintiffs agreed not to make any claim against any person who could claim relief over as against the doctors. In that event, to the extent that the plaintiffs were to collect more from the hospital than its share of the fault, and the hospital then sought to be reimbursed by the doctors, that would be a breach of the release, or would require the plaintiffs to indemnify the doctors. It is therefore in the plaintiffs' interest for the court to maximize the apportionment attributable to the hospital, because the hospital cannot make any claim over against the doctors for the amounts for which it is responsible.

[18] Therefore, as a result of the settlement, at trial the plaintiffs' position was that the negligence for which the hospital is answerable was the largest cause of the infant's damage, while the hospital's position was that the doctors' negligence was the largest contributor. Of course, the doctors took no part in the trial. Had there been no settlement, presumably the plaintiffs would have been content with any apportionment of liability as between the hospital and the doctors, and it would have been the doctors who would have been seeking to minimize their responsibility and maximize that of the hospital.

[19] With this backdrop in mind, we turn to the issues raised by the plaintiffs on appeal.

1. Did the trial judge err in apportioning an equal share of fault to the hospital, when he had found that the hospital was negligent in its own right and was also vicariously liable for Nurse James's negligence, both of which materially contributed to the infant plaintiff's damage?

[20] It is clear that the issue of apportionment is one on which substantial deference is to be accorded to the trial judge. In Ingles v. Tutkaluk Construction Ltd., 2000 SCC 12, [2000] 1 S.C.R. 298 at p. 338, 49 C.C.L.T. (2d) 1, Bastarache J. stated:

The apportionment of liability is primarily a matter within the province of the trial judge. Appellate courts should not interfere with the trial judge's apportionment unless there is demonstrable error in the trial judge's appreciation of the facts or applicable legal principles . . .

[21] In our view, this is a case where the trial judge erred in law by applying s. 4 of the Act in circumstances where it was not impracticable to determine the degrees of fault of the hospital and of the two doctors.

[22] Although it may be difficult, and often is, for the trier of fact to determine what role the negligence of each wrongdoer played in causing or contributing to the ultimate damage suffered when a number of mistakes together created the problem for the plaintiff, s. 4 is intended to apply only when it is fair to apportion responsibility equally. The concept was discussed by the Nova Scotia Court of Appeal in Clyke v. Blenkhorn (1958), 1958 347 (NS CA), 13 D.L.R. (2d) 293 (N.S.C.A.). That court stated at p. 304:

The prevailing Canadian practice is to look at such causative conduct in terms of relative or comparative blameworthiness or culpability, i.e., to see in what degrees the parties departed from the norm of reasonable conduct . . .

(Emphasis in original)

[23] The Nova Scotia statute used the phrase "not possible" rather than the similar phrase used in the Ontario Act, "not practicable". The court explained the phrase in this way (at p. 305):

In this context, "not possible" simply means that the tribunal of fact cannot find any substantial basis for discriminating between the respective kinds of negligent conduct in terms of relative blame.

[24] Consequently, where the wrongdoing by one party is recognized as greater, either in magnitude, or because that party engaged in different kinds of contributing negligence, it is the duty of the trier of fact to assign a larger proportion of fault to that party. When the section speaks of impracticability, it refers to the difficulty in making a quantifiable distinction between the degrees of fault because they appear to be very close, not because it is always difficult to assign a number to something which is not precise or calculable.

[25] In this case the trial judge ignored his own conclusion, implicit in the reasons, that Nurse James's contribution, for which the hospital was vicariously liable, was significant and would have been equal to that of each of the other wrongdoers, by assigning only 33 per cent responsibility to the hospital. He appears to have believed, erroneously, that he was obliged to apply s. 4, whereunder the apportionment of responsibility is equal, when he stated: ". . . I have difficulty understanding how Nurse James and the hospital can be held to be separately negligent for the purposes of s. 4 of the Negligence Act or in law. . . ." His reasons suggest that he understood that the plaintiffs were obliged to join Nurse James as a defendant in the action and not rely on the hospital's vicarious liability if they wished to have her contribution to the damages accounted for.

[26] As discussed above, normally a plaintiff is not concerned about the apportionment, but the defendants and third parties are. The logic of the trial judge suggests that where the liability of one of the defendants may include vicarious liability, the other defendants must add as a third party the impugned employee or other person for whom a defendant would be vicariously liable, in order to ensure that the appropriate degree of responsibility is assigned to the vicariously responsible defendant.

[27] In our view, this logic and conclusion are also in error. The result would be to encourage the unnecessary multiplication of parties and costs. The rule of vicarious liability allows a party who has been injured by, for example, an employee in the course of employment, to sue the employer for the loss, without having to sue the employee who may or may not be as financially able to compensate the plaintiff. With litigation becoming more and more expensive and numerous initiatives being taken to reduce the cost of litigation, it would be counterproductive to interpret the Negligence Act as requiring the addition of unnecessary parties, purely for form, in order to obtain a fair and proper apportionment of fault.

[28] Where the trier of fact is able to assess individually, as this trial judge was able to do, the actions of each employee or other person for whom a defendant is vicariously liable, and to make specific findings of fault and negligence, then the degree of fault of the vicariously responsible defendant should be apportioned in order to reflect the contributions of each of the persons for whom the defendant is vicariously liable.

[29] Therefore, the trial judge erred in his apportionment by failing to assign to the hospital a degree of fault which would accurately have reflected his finding of the contribution of the negligence of Nurse James to the damages suffered by the infant plaintiff, and by applying s. 4 and an equal apportionment of fault among the hospital and the two doctors. As the reasons disclose that the trial judge would have assigned equal fault to each of Dr. Clunas, Dr. Neable, Nurse James and the hospital at 25 per cent each, had Nurse James been a defendant, the correct apportionment of fault to the hospital is 50 per cent, reflecting its direct negligence and its vicarious liability for Nurse James.

2. Did s. 1 of the Negligence Act require the trial judge to determine the degree of fault or negligence of Nurse James as a "person" who contributed to the plaintiffs' damages, whether or not she was a party to the action?

[30] As we have found that the trial judge erred by applying s. 4 of the Act and not apportioning 50 per cent of the fault to the hospital, it is unnecessary to deal with the plaintiffs' alternative submission that s. 1, which uses the word "persons" and not "parties", required the court to determine the degree of fault of non-parties. However, the issue of the interaction of the sections is an important one on which some comment is appropriate. Section 1 of the Negligence Act is set out again for ease of reference:

1. Where damages have been caused or contributed to by the fault or neglect of two or more persons, the court shall determine the degree in which each of such persons is at fault or negligent, and, where two or more persons are found at fault or negligent, they are jointly and severally liable to the person suffering loss or damage for such fault or negligence, but as between themselves, in the absence of any contract express or implied, each is liable to make contribution and indemnify each other in the degree in which they are respectively found to be at fault or negligent.

[31] The trial judge fully considered Nurse James's involvement in the birth of the plaintiff Steven Martin, and made several findings of negligence against her, concluding that her negligence materially contributed to the damage he suffered. However, he did not go on to determine her degree of fault because he did not consider her to be a party to the action. The plaintiffs submit that because s. 1 refers to persons and not parties, he should have done so, even if she was not a party.

[32] We would not give effect to that submission. There is no basis in s. 1 or anywhere in the Act for a judge to attribute a portion of fault to a non-party. Furthermore, although s. 1 refers to "persons", in any particular action its effect is to impose joint and several liability to the plaintiff only on defendants found at fault or negligent, and not on any other person.

[33] The use of the word "persons" in the section, where "parties" is used elsewhere in the Act, has led to the suggestion that the section is intended to apply to anyone at fault. However, the authorities which have considered the issue have consistently held that the section does not allow the court to apportion any degree of fault to a non-party. Furthermore, this interpretation is consistent with the proper operation of the Act.

[34] The effect of s. 1 of the Negligence Act is to make all persons sued who caused or contributed to the damage suffered by the plaintiff jointly and severally liable to the plaintiff for the damage. This is referred to by the Ontario Law Reform Commission in its Report on Contribution Among Wrongdoers and Contributory Negligence (Toronto: Ministry of the Attorney General, 1988) as "in solidum liability" (chapter 3). The purpose of the legislation is to facilitate full recovery of the loss for the plaintiff, while at the same time providing a mechanism for each of those who contributed to the loss to share the financial responsibility in the proportions of their respective degrees of fault.

[35] It is therefore axiomatic that the plaintiffs' judgment against each defendant found at fault to any degree, be in the amount of 100 per cent of the damages suffered. Of course, the plaintiff cannot collect more than 100 per cent in total from all defendants, so that satisfaction of any amount against one is satisfaction against all. However, as between themselves, the defendants are each entitled to contribution and indemnity to the extent of any overpayment to the plaintiff of their own proportionate share. Any defendant who successfully claimed over against a third party is also entitled to contribution from that third party to the extent of that party's fault.

[36] The effect of a finding of a degree of fault on a non- party could have significant consequences for the other defendants under this section. If the fault is apportioned only among the parties, then if there is a non-party who may also have been at fault and contributed to the damage, a larger percentage of the whole loss may be attributed to each party, so that the entire loss is divided for indemnity purposes, and no gap is left. But if a portion of the fault were attributed to a non-party, or to a party at fault but with a legal defence such as a limitation defence, the defendants who are liable to the plaintiff would be left with no one from whom they could recover that portion of the claim.

[37] Because it is in the interests of the parties to ensure that everyone potentially liable is joined in the action, in practice, it is therefore most unlikely that any solvent, known person with the potential to be found at fault, would not be joined in the action as a party in some capacity. Section 5 of the Act makes special provision for adding parties, again to ensure that all parties who should be contributing to compensate the plaintiff for the loss are joined in the action which fixes everyone's responsibility.

[38] Therefore, the circumstances where a non-party might be found at fault will be unusual and rare. That possibility arose in the case of Batchelor v. Brown (1980), 1980 1616 (ON SC), 28 O.R. (2d) 590, 13 C.C.L.T. 237, 111 D.L.R. (3d) 642, [1980] O.J. No. 93 (H.C.J.). In that case a car and motorcycle were in an accident. Actions were commenced by the motorcycle passenger and driver, by the owner of the car, and by the owner of another car damaged during the collision. A police officer who was directing traffic at the time was joined as a third party in all the actions but was not named as a defendant in any of them. The police officer raised a limitation defence to the third party claims. At the conclusion of the trial, the trial judge found the degree of fault of the driver of the motorcycle to be one- third, and of the driver of the automobile to be two-thirds. Although the trial judge found that the police officer was also negligent, he did not assign a percentage of responsibility to him until after he determi ned whether any judgment would go against him or whether the limitation defence would succeed. In the third party action, the trial judge ultimately held that the claim against the police officer was not statute-barred. He therefore reallocated the degrees of fault as between the three liable parties to 50 per cent to the car driver, 25 per cent to the motorcycle driver and 25 per cent to the police officer.

[39] These allocations, of course, only affect the contribution inter se of the defendants and third party for the damages suffered by the plaintiffs for which the defendants were found liable. Although the trial judge did not discuss the rationale for proceeding as he did, it appears that he concluded that if the third party claim could not succeed, then it would be wrong to allocate 25 per cent responsibility to the police officer. The police officer would then be a person responsible, but not able to be made liable to any of the defendants in a judgment. Such an allocation would have served no practical purpose, and could have had the effect of leaving one defendant or the other exposed to overpaying the plaintiffs without being able to be proportionally reimbursed by the other defendant.

[40] The result in the Paquette case is consistent with other Ontario cases and with the English approach. See for example, Bennetto v. Leslie, 1950 71 (ON SC), [1950] O.R. 303 (H.C.J.); Roustauskas v. Wilson, [1952] O.W.N. 441 (H.C.J.); St. Catharines Flying Club v. St. Catharines (City), 1953 136 (ON CA), [1953] O.R. 393 at p. 396, [1953] 2 D.L.R. 685 (C.A.). In the latter case, Aylesworth J.A. stated:

The student pilot is not a party to the action and I do not think that even if his negligence, if any, did cause or contribute to the accident it is proper that any finding be here made against him; it is the respective responsibilities, if any, of the parties to the action which alone must be considered: Bennetto et al. v. Leslie and Werby; Sykes v. Leslie and Werby, 1950 71 (ON SC), [1950] O.R. 303.

[41] In Maxfield v. Llewellyn, [1961] 3 All E.R. 95, 1 W.L.R. 1119 (C.A.), the English Court of Appeal explained the rationale for not attributing any fault to a non-party in this way at p. 1123 W.L.R.:

On the argument under s. 6 of the Law Reform (Married Women and Tortfeasors) Act, 1935, it seems to me that, if the argument of counsel for those defendants responsible for the van is correct, the section would be unworkable. If each pair of defendants was to be found one-third responsible, it would mean that in the absence of the motorcyclist or his representatives, the defendants could only recover from each other one-third and then it would be left to chance which of the defendants the plaintiff chose to proceed against who would be responsible for the remaining third attributable to the motorcycle. That makes the section virtually unworkable. Furthermore, it would involve this, that the court would have to make an assessment of the liability of the driver of the motorcycle, he or his representatives not being present or parties to the action and having no opportunity through his representatives to give any explanation of the accident. It seems fundamentally contrary to the ideas of justice as administered in these courts that this court should have to assess liability for an alleged negligence which has never been alleged against the party responsible. Furthermore, on looking at the whole section I think it is clear that what the court has to do is to assess the damage between those who have been found liable for it, and if somebody has not been found liable, surely then he must be excluded from the computation.

[42] Although the 1935 English legislation has been replaced by the Civil Liability (Contribution) Act, 1978, the interpretation set out in the Maxfield case continues to apply. See Halsbury's Laws of England, 4th ed. (London: Butterworths, 1998) Vol. 12(1): Damages, para. 844, fn. 6.

[43] A useful comparison with the Ontario Act can be made with the operation of the comparable legislation in British Columbia. The Negligence Act, R.S.B.C. 1979, c. 298, now R.S.B.C. 1996, c. 333, has been interpreted to provide for joint and several liability of defendants where the plaintiff is blameless, but for only several liability where the plaintiff is contributorily negligent. The issue of apportioning a degree of fault to a non-party has arisen where the plaintiff was contributorily negligent and the defendants therefore only severally liable. In Wells v. McBrine (1988), 1988 3087 (BC CA), 33 B.C.L.R. (2d) 86, 47 C.C.L.T. 94 (C.A.), the British Columbia Court of Appeal held that it was not an error for the jury to have assessed a degree of fault for the accident and damage to an unknown and unnamed group of "troublemakers" at the scene. There was no issue of contribution among defendants where liability was several only. The defendants therefore benefited, because their individual degrees of liability were not increased to cover what was actually the contribution of people not brought into the litigation. There was no consequence to the "troublemakers" because they were not parties to the litigation and therefore the finding against them did not bind them. The only effect was on the recovery of the plaintiff, which was limited to the amount representing each defendant's actual degree of responsibility for the damage and not an inflated proportion to cover the part attributable to the "troublemakers". As long as the plaintiff had notice and a fair opportunity to meet the issue, there was no unfairness to the plaintiff.

[44] As the analysis of the court in the Wells case, that under the British Columbia Act an amount of fault can be attributed to a non-party in certain circumstances, turned on the fact that there is only several liability for multiple tortfeasors in a contributory negligence situation, the analysis is not applicable to s. 1 of the Ontario Act. [See Note 3 at end of document] That was recently made clear by the Supreme Court of Canada in Ingles v. Tutkaluk Construction Ltd., supra, where the court first stated how s. 3 of the Ontario Act operates where there is contributory negligence [at p. 338 S.C.R.]:

When there are two or more tortfeasors, and a plaintiff has also been found negligent, the proper approach to apportionment is to first reduce the extent of the recoverable damages in proportion with the plaintiff's negligence, and then to apportion the remaining damages between the defendants, in accordance with their fault; see, for example, Fitzgerald v. Lane, [1988] 2 All E.R. 961 (H.L.); Bow Valley v. Saint John Shipbuilding, [1997 307 (SCC), [1997] 3 S.C.R. 1210]; Colonial Coach Lines Ltd. v. Bennett, 1967 171 (ON CA), [1968] 1 O.R. 333.

and later referred to the British Columbia interpretation and commented at p. 339 S.C.R.:

The Ontario legislation has been interpreted differently, and joint and several judgments have been awarded to contributorily negligent plaintiffs; see Menow v. Honsberger Ltd., 1969 459 (ON SC), [1970] 1 O.R. 54 (H.C.J.), affd 1970 47 (ON CA), [1971] 1 O.R. 129 (C.A.), affd on other grounds 1973 16 (SCC), [1974] S.C.R. 239 (sub nom. Jordan House Ltd. v. Menow). Similarly, in Bow Valley v. Saint John Shipbuilding, supra, this Court ruled that defendants would be jointly and severally liable for a negligent plaintiff's damages in the context of the Canada Shipping Act, R.S.C. 1985, c. S-9. The purpose of a regime which imposes joint and several liability on multiple defendants is to ensure that plaintiffs receive actual compensation for their loss. Given the wording of the Ontario Negligence Act, I can see no reason to deny this benefit to a plaintiff who contributes to his or her loss. His or her responsibility for the loss is accounted for in the apportionment of fault. There is no reason to account for it again by denying him or her the benefit of a scheme of joint and several liability when the wording of the legislation does not intend it to be so.

[45] In its 1988 Report on Contribution Among Wrongdoers and Contributory Negligence, supra, the Ontario Law Reform Commission suggested that the current law in Ontario on whether a court is to apportion a degree of fault to a non-party under s. 1 of the Negligence Act, is not altogether clear (pp. 186-88). The Commission acknowledged the cases already referred to as supporting no apportionment to non-parties [See Note 4 at end of document], but also referred to a dictum of Laskin J.A., as he then was, in Colonial Coach Lines Ltd. v. Bennett, 1967 171 (ON CA), [1968] 1 O.R. 333 at p. 341, 66 D.L.R. (2d) 396 (C.A.), where he stated:

. . . There would seem, however, to be much merit in the contention that, in the practical administration of a system of apportionment of fault where multiple parties defendant are involved, an assessment of the degree of contributory negligence of a plaintiff should be taken as referable to all or the one only of the defendants found to be at fault with respect to the cause of action sued upon; that is to say a defendant found to be at fault and disappointed in his expectation of having a co-defendant share, as between themselves, a portion of the liability to an injured plaintiff may well be disentitled to shift additional blame to a plaintiff who has been already fixed with a percentage of fault.

[46] That case was a jury trial where the jury had apportioned a percentage of fault to the C.P.R., but the trial judge then dismissed the action against the C.P.R. on the basis that it owed no duty to the plaintiff. The latter finding was reversed on appeal, and it was in that context that Laskin J.A. made the above observation. We do not read his comment as inconsistent with the other authorities and with the Supreme Court in Ingles, supra, that no amount be apportioned to a non- party or to a named party found not liable, and that the remaining defendant(s) will be responsible to the plaintiff for all but the plaintiff's share of fault.

[47] To resolve any perceived uncertainty, the Law Reform Commission stated that it was its view and that it recommended that under s. 1, no degree of fault be apportioned to an "absent concurrent wrongdoer" (p. 187). We agree with the conclusion of the Law Reform Commission.

[48] In our view, the effect of s. 1 of the Act is to define the legal effect of a finding of fault by concurrent wrongdoers. The effect is to change the common law, and impose on concurrent wrongdoers joint and several liability to the plaintiff. It is the only section of the Act which imposes liability, as opposed to apportioning fault. The section is substantive, not procedural. Therefore, when applying the section to any specific action, it is understood that joint and several liability to the plaintiff can and will attach only to a party defendant, although others who may also have been at fault could potentially have been found jointly and severally liable had they been sued by the plaintiff. Because procedurally the section only affects defendants, under this section the court is to apportion degrees of fault only to defendants. The court must also apportion fault to the other parties, the plaintiff and third parties, not under s. 1 of the Act but rather pursuant to ss. 3 and 4 of the Act, and in accordance with the requirements of the pleadings.

The Secret Settlement

[49] No issue was raised on appeal challenging the settlement or its secret nature. However, the fact of the pre-trial settlement with the defendant doctors has formed the backdrop to the issues before the court. The settlement was an infant settlement and was therefore required to be approved by the court (rule 7.08 of the Rules of Civil Procedure).

[50] The effect of a settlement with one of multiple tortfeasors with a full release and indemnity by the plaintiff is to limit the plaintiff's ability to collect a judgment from the remaining defendants where the judgment is higher in amount than the plaintiff may have anticipated, or where the settling defendant's apportionment of the fault is higher than anticipated.

[51] Because of joint and several liability and the consequent ability of a plaintiff to collect the entire loss from any one defendant found liable, no matter how limited is that defendant's fault or negligence, these two risks are very significant when there are concurrent tortfeasors and the Negligence Act applies.

[52] When an infant is involved, the risks take on more significance because the full implications of any potential settlement must be comprehensively set out for the approving judge, to ensure that he or she is satisfied that in the context of the Negligence Act consequences, the settlement is in the best interests of the infant.

[53] In a recent article entitled "Settlement of Complex Liability Lawsuits: Opportunities and Perspectives" (2000) 22 Advocates Q. 265, the authors [P. Bates & J. Cameron] suggest that the courts should be involved in reviewing the fairness of all partial settlements and their consequences for all parties. This would be done at a hearing where all parties, including the non-settling defendants, are present. It therefore would eliminate "secret settlements" in multi-party negligence actions. The issue of who is released and who remains a party to the action can be resolved with a full understanding of the consequences for the settling and non-settling parties.

[54] In our view, this proposal is one which ought to be implemented, particularly in cases involving infants. It ensures that all parties who are potentially liable either to the plaintiff or to indemnify others found at fault, participate in the partial resolution, and that the interests of all involved are fully explored so that a party who elects to accept the risks of the settlement, including a court on behalf of an infant, does so with full understanding by everyone of the consequences under the Act.

3. Did the trial judge err by declining to adjust the discount rate provided by rule 53.09(1) to be applied to the claim for future wage loss?

[55] At the relevant time rule 53.09(1) of the Rules of Civil Procedure read:

53.09(1) The discount rate to be used in determining the amount of an award in respect of future pecuniary damages, to the extent that it reflects the difference between estimated investment and price inflation rates, is 2.5 per cent per year.

[56] The rule does not refer to wage inflation rates. It is true that wages are included in "future pecuniary damages", but the discount rate referred to reflects estimated price inflation rates rather than wage inflation rates. However, the customary approach of economists giving expert evidence appears to be to express future wage loss estimates as a derivative of future price increases. For instance, experts might say, wages are expected to increase at a greater rate than prices and thus the appropriate discount rate for wages should be 1 per cent lower than for prices. Given that the jurisprudence makes it clear that in some circumstances, where justified by the evidence, the 2.5 per cent rate may be adjusted, what should the court do when the evidence discloses that the 2.5 per cent figure does not reflect contemporary estimates of price inflation, being measurably low, and it is asked to adjust for wage increases to an even lower level? That is the issue on this point of appeal.

[57] The experts on both sides agreed that in 1998 the prospective difference between investment rates and price inflation was 4 per cent rather than the 2.5 per cent stipulated by rule 53.09(1). They also agreed that wage increases in the future will exceed price increases (explaining the overall elevation of our standard of living) and that, expressed relative to price inflation, wage inflation justifies a 1 per cent lower discount rate. Thus, an assessment unaffected by rule 53.09(1), on a dollar-for-dollar basis, would give a higher judgment recovery for future wage loss than for future expenses, the first being discounted at 3 per cent and the second at 4 per cent.

[58] The plaintiffs argued at trial that the appropriate discount rate for future wage loss should be 1.5 per cent on the basis of the undisputed evidence of the differential from price inflation prospects and the provision of 2.5 per cent set by rule 53.09(1). The defendants' position was that, if 1 per cent was to be deducted, it should be from the actual prospect of a 4 per cent price inflation factor.

[59] The trial judge held:

Although the court has a discretion to depart from this discount rate if justified by the evidence and circumstances, I am not convinced that it should be done in this case. Between 1980 and 1990, productivity returns were negative and I would prefer to rely on this historical data rather than on predictions. Moreover, as both Professors Welland and Pesando noted, at present the difference between estimated investment and price inflation rates is four percent. The deduction of a productivity factor from this four percent would result in an approximate discount rate of three percent. If a three percent discount rate was applied to the present value of Steven's future loss of income, then the amount calculated would be lower than that produced using the 2.5 percent discount rate prescribed by Rule 53.09. Accordingly, I am not convinced that in calculating Steven's future loss of income, I should depart from the 2.5 percent per year discount rate prescribed by Rule 53.09(1).

[60] Thus, on 1998 calculations, the plaintiff has been overcompensated for future wage loss by the difference between a discount rate of 2.5 per cent and 3 per cent and would be even more generously endowed if a 1.5 per cent factor was applied. Nonetheless, there was evidence to justify departing from the 2.5 per cent stipulated by rule 53.09(1). The problem this creates is that while we know, on the evidence, that the appropriate discount is 3 per cent, we are asked to take the arbitrary 2.5 per cent and reduce it to a totally unreal 1.5 per cent.

[61] This conundrum justifies a short historical analysis to enable the current application of the rule to be analyzed.

[62] Rule 53.09(1) was drafted following the Carr, Segal, Walker report of February 1980 (Report to the Committee of the Supreme Court of Ontario on Fixing Capitalization Rates in Damage Actions). It advised that, where a stream of payments can be expected to increase at the same rate as price inflation, a discount rate of 2.5 per cent is a fair estimate. It also pointed out that, over time, average wages and salaries increase at a faster pace than prices for goods and that, where a future stream is to compensate for wages, a lesser rate of 1 per cent would be appropriate.

[63] In passing rule 53.09(1), the Rules Committee did not adopt the second suggestion and, as is made clear by Morden A.C.J.O. in Ligate v. Abick (1996), 1996 4006 (ON CA), 134 D.L.R. (4th) 538, 28 O.R. (3d) 1 at p. 11 (C.A.), "When the predecessor of rule 53.09(1) was enacted in 1980 it was not intended that it give any effect to future wage inflation rates." If the rule does not pertain to wage inflation, and its wording clearly supports that interpretation, in that future wage losses are future pecuniary damages but do not depend on future price increases, why is it even referred to when future wage losses are assessed? Why not simply rely upon independent evidence of the appropriate factor for future wage losses? The answer probably lies in the fact that the authorities that touch upon the issue of future wage loss, prior to the present appeal, did not have evidence adduced that the 2.5 per cent rate was markedly outdated and thus did not serve as an appropriate starting point for an independent analysis of a d iscount rate for wage loss. It became convenient for economists to testify in terms of, say, 1 per cent less than price inflation and for the courts to use 2.5 per cent as a starting point for lack of any alternative. Thus, the award for future pecuniary damages for wages was considered as reflecting the difference between investment and price inflation rates because the difference was expressed as 1 per cent less than price inflation.

[64] British Columbia made its position clear by passing a regulation differentiating between wage and price inflation and acknowledging the productivity factor by assigning 2.5 per cent to wages and 3.5 per cent to prices: Law and Equity Act, R.S.B.C. 1979, c. 224, s. 51 [am. S.B.C. 1981, c. 10, s. 30], B.C. Reg. 352/81 (3.5 per cent and 2.5 per cent).

[65] In Giannone v. Weinberg (1989), 1989 4046 (ON CA), 33 O.A.C. 11, 68 O.R. (2d) 767 (C.A.), this court dealt with a submission that the 2.5 per cent should be adjusted, in reliance on Dr. Pesando's evidence (the respondent's expert in the present appeal) and that the appropriate rate for price inflation was then 3 per cent to 3.5 per cent. The court found that where price inflation rates and future investments are the only factors, the 2.5 per cent must be adhered to in order to avoid costs and assure uniformity. In respect of other factors, the court stated at pp. 777-78 O.R.:

We think that the short answer to the appellant's contention is that, in so far as future investment and price inflation rates are concerned as factors, the discount rate must be 21/ 2%. When these are the only factors which are being taken into account rule 53.09 does not allow the use of a different discount rate.

Rule 53.09 has two basic purposes. One of them is to avoid the expense incurred by parties in calling economic and actuarial evidence relating to future investment and price inflation rates in every case where future pecuniary damages are in question in order to establish the discount rate to be used. The other purpose is to avoid the general injustice of similar cases decided at the same time having different results because of the use of different discount rates in the calculation of the award.

In so far as other factors may bear on the calculation (such as future wage increases over general price inflation, or the relevant individual's income from employment increasing at a faster rate than the general increase) and it is felt that they may reasonably be given effect to in the discount rate, then the 21/2% starting point may be adjusted. In Dziver v. Smith (1983), 1983 1920 (ON CA), 41 O.R. (2d) 385 at p. 389, 146 D.L.R. (3d) 314 (C.A.), Weatherston J.A. said for this court:

If no evidence is adduced by either side as to these additional factors [additional to future investment and price inflation rates], the court may safely apply Rule 267a [the predecessor of rule 53.09], but it should not deviate from the rule without evidence one way or the other.

(Emphasis added)

We interpret this statement as saying that the rule should not be departed from unless there is evidence one way or the other on the factors other than future investment and price inflation rates.

[66] We see here the emphasis on the starting point being adjusted, rather than a search for a real number standing on its own. It should be noted that this excerpt is obiter; the issue in the appeal did not concern wage loss assessment.

[67] In Andani Estate v. Peel (Regional Municipality) (1993), 66 O.A.C. 137 (C.A.), this court supported the trial judge in reducing the 2.5 per cent by .5 per cent "to take into account productivity". There is no detail in the reasons as to the evidence supporting the adjustment, nor is there any indication that the 2.5 per cent was considered inappropriate for price inflation.

[68] The issue was revisited in Ligate, supra. The evidence at trial came entirely from the evidence of the plaintiff's expert, Mr. Segal (one of the authors of the 1980 report). His testimony was that, over a period of 50 years, wages and salaries rose at a faster pace than prices to the extent of approximately 2 per cent. There is no indication that any evidence was given as to the contemporaneous prediction for price increases, nor would it have been in the plaintiff's interest to raise that issue. The trial judge accepted the evidence and used a .5 per cent factor for discounting future wage losses. This court upheld that finding and in the course of doing so, noting the discrepancy identified by Mr. Segal, suggested reconsideration by the Civil Rules Committee.

[69] This led to the appointment of a subcommittee headed by Justice Sydney L. Robins, whose findings and recommendations concerning wage loss projections included the following (Ontario, Civil Rules Committee, Subcommittee of the Civil Rules Committee on the Discount Rate and Other Matters, Report (Toronto: February 1998)):

Based on the submissions received on the issue of productivity, the Subcommittee has concluded that the empirical evidence confirms that average wages and salaries have consistently increased at a faster pace than general price inflation when measured over extended periods of time in the past. Mr. Murray Segal, in his submissions, expressed the opinion that the average remuneration of the average worker will continue to outpace general price inflation by the long-term historical average rate of about 1 per cent to 2% per year in the long-run future. He referred to the fact that the Canada Pension Plan, in its most recent evaluation report, has assumed ultimate excess by the year 2000 of wage and salary increases over price inflation of 1% per year.

Dr. Douglas Welland, who has researched this issue, expressed the opinion that it was appropriate to recognize productivity growth as a component of wage growth in a case involving a long period of future loss affecting both the income of the plaintiff and the human services component of other damage awards (future care and household services). Dr. Welland indicates the recent forecast of long-run real rates of increase in wages which ran between 0.5% and 1.5%, such that a 1% annual productivity increase in the income loss calculations and in the human services components of future care plans is reasonable.

Dr. Jack Carr, in his submissions, emphasized the importance of distinguishing between specific productivity increases for individual plaintiffs based on individual circumstances, including such things as the nature of the plaintiff's occupation and experience, as opposed to general productivity increases. Dr. Carr did not believe that it was possible to formulate a rule for general productivity increases because these, in themselves, vary from occupation to occupation and there are substantial differences in the general productivity increase for different groups in the economy.

Dr. James Pesando, in his submissions, concluded that it was reasonable to assume that, over the long-term, wages and salaries would increase at a rate in excess of the overall rate of inflation. It would therefore be reasonable to set the rate of growth of real wages equal to 1% per year and thereby reduce the discount rate by 1% to reflect general wage productivity.

While at first blush it seems desirable to mandate a specific productivity factor to take into account general wage productivity, the Subcommittee has concluded that it is not reasonably practical to do so for the reasons set out by Dr. Carr. First of all, even if a general wage productivity factor to be applied in all cases were agreed to, it would remain open to the plaintiff or the defendant in a particular case to argue that there are specific factors relative to that plaintiff that would justify either a further increase and/or reduction in the discount rate to take into account those specific productivity factors. The second difficulty relates to how one would deal with future losses that are for shorter periods of time. Would it be appropriate to reduce the discount rate by 1% for a future loss that spans a period of less than 10 years? The economic data does not appear to support this.

[70] Accordingly, the Committee made no changes in respect of wage increases, but, in response to other recommendations, amended rule 53.09(1) to read:

53.09(1) The discount rate to be used in determining the amount of an award in respect of future pecuniary damages, to the extent that it reflects the difference between estimated investment and price inflation rates, is,

(a) for the 15-year period that follows the start of the trial, the average of the value for the last Wednesday in each month of the real rate of interest on long-term Government of Canada real return bonds (Series B113911), as published in the Bank of Canada Weekly Financial Statistics for the 12 months ending on August 31 in the year before the year in which the trial begins, less 1 per cent and rounded to the nearest 1/4 per cent; and

(b) for any later period covered by the award, 2.5 per cent per year.

[71] The problem that we are now addressing will disappear for the first 15-year period because real return bonds can be accepted as a true current reflection of anticipated price inflation and a reduction from that factor, as justified by the evidence, will reflect a true estimate of wage inflation. In the second tier, the period beyond 15 years, there may or may not be controversy between economists as to the accuracy of 2.5 per cent as a predictor of price increases and it may be necessary to introduce evidence independent of price increases to support wage increases.

[72] Returning to the problem at hand, we see nothing in the authorities cited to compel this court to reduce the 2.5 per cent factor for prices by 1 per cent for wages in the face of evidence agreed to by the experts for both parties that the appropriate discount rate for wages in 1998 was 3 per cent. Rule 53.09(1), as it stood for 20 years, was arbitrary and justifiably so to provide uniformity and save expenses. The Civil Rules Committee has twice decided not to impose a fixed discount rate on wage loss calculations and thus independent evidence was required to justify a wage loss factor.

[73] The resolution can be expressed in these terms. Evidence that the wage factor should be 1 per cent less than the price factor is acceptable so long as the rule-imposed price factor is currently accurate in the opinion of economists. If the rule-imposed factor is not currently accepted, it should not be used as a basis for deriving a wage factor. The wage factor should be presented independently, as indeed it was in this case as being 3 per cent.

[74] On the evidence of the experts in this case, the defendants could have argued for a 3 per cent discount rate for future wage loss. They did not because their expert, Dr. Pesando, felt he was legally stuck with 2.5 per cent as a starting point. Nor did the defendants cross-appeal. The contention throughout has been about whether the rate should be 2.5 per cent or 1.5 per cent and, between the two, we agree with the conclusion of the trial judge that it should be 2.5 per cent, simply because that is the closest of the contending figures to the real predicted rate of 3 per cent.

4. Did the trial judge err in his disposition of costs?

[75] Salhany J. addressed the question of costs in supplementary reasons for judgment. He noted that no offers to settle had been made in compliance with rule 49.10(1). He rejected the appellants' submission that they should receive complete indemnification for their costs through an award of solicitor-and-client costs, and accepted the respondents' submission that there was no reason to depart from the usual rule that costs be paid by the unsuccessful party on a party- and-party basis. He awarded the appellants one-third of their party-and-party costs up to January 22, 1998 (the date of court approval of their settlement with the defendant physicians), and their entire party-and-party costs thereafter.

[76] On the appeal, the appellants submitted that Salhany J. erred in three respects in his disposition of costs. In their submission, Salhany J. erred:

(1) in failing to award costs on a solicitor-and-client basis, having regard to the principle of full indemnification of the minor Steven Andrew Martin;

(2) in apportioning costs on the basis of one-third of party- and-party costs payable by the hospital for the period from the commencement of the action in August 1982 to March 1989, when the physicians were added as defendants; and

(3) in apportioning costs on the basis of one-third rather than one-half against the hospital for the period from March 1989 to January 1998, when the claims against the defendant physicians were settled.

[77] The first submission was stated in the following terms in the appellants' factum:

The primary objective in cases involving catastrophically injured plaintiffs who are totally disabled for life is to make the plaintiff economically whole. That objective is substantially diminished if full compensation for costs is not awarded. The principle of full indemnification for costs in this case requires that the court have regard to the difficult, complex and costly nature of the litigation, the absence of any efforts to settle by the defendant hospital and the extraordinary length of time the plaintiffs were deprived of full compensation with corresponding benefit to the defendant hospital and the written offers to settle made by the plaintiffs.

[78] The authority on which counsel relied in support of this submission was Dube v. Penlon Ltd. (1992), 1992 7449 (ON CA), 10 O.R. (3d) 190 (Gen. Div.), a decision of Zuber J. That case involved a plaintiff who suffered brain damage and was rendered a quadriplegic as a result of an overdose of anaesthetic during surgery. He sued, among others, the hospital, the manufacturer of the anaesthetic equipment and the anaesthetist. The case was settled on the third day of trial. The three defendants jointly accepted liability to the plaintiff, although the proportion of liability agreed upon between them was not disclosed to the court. The settlement provided that the plaintiff was entitled to costs, but left the scale of costs to be determined by the trial judge.

[79] Zuber J. awarded costs on a solicitor-and-client scale.

[80] In his reasons for that award, he noted at the outset that "the determination of the scale of costs attracts the operation of no particular rule or procedure or any special rule of law, but is founded simply on the discretionary power of this court" (p. 191). He then expressed his view that this was "one of those cases in which justice can only be done by complete indemnification for costs" (p. 191), and listed the factors that led him to that conclusion at pp. 191-92:

(1) It was or should have been obvious within a short time after the occurrence at the hospital that the plaintiff was blameless and that liability rested with one or more of the defendants. Despite that position the plaintiff has had to embark on an extremely difficult, complex, and costly course of litigation. The adversarial position of the defendants varied. Some were prepared to admit matters. Others were not.

The real struggle in this case, as I perceive it, was between the defendants. Nevertheless it was left to the plaintiff to prosecute and prepare the case against each of the defendants. One need only look at the mass of exhibits assembled in this courtroom to appreciate the extent of the plaintiff's preparation. Thus the plaintiff has been caught up in a contest that far exceeded the ordinary, the cost of which can seriously erode the plaintiff's recovery.

(2) This is a total disaster case. Jordan Dube, a young boy, has been tragically totally disabled for life. This is the kind of case that attracted the attention of the Supreme Court of Canada in the cases popularly known as the trilogy, that is, Teno, Andrews and Thornton. In those cases it was emphasized that the primary objective in cases of that type was not the assessment of general damages, but rather making the plaintiff economically whole.

In the exceptional circumstances of this case that objective would be substantially diminished if full compensation costs were not awarded.

[81] In Dube, the cause of the seriously injured plaintiff's injuries -- an overdose of anaesthetic -- was known from the outset. In the present case, there was a live question as to which of the various persons who came into contact with the seriously injured plaintiff could be found to have contributed to his condition and the degree of responsibility to be assigned to each of them.

[82] As Zuber J. himself noted in Dube, no particular rule of procedure or special rule of law governs the disposition of costs in such actions as these. Indeed, this court has noted that Dube reflects an exercise of judicial discretion, not a binding proposition of law: Walker Estate v. York-Finch General Hospital (1999), 1999 2158 (ON CA), 43 O.R. (3d) 461 at p. 482, 169 D.L.R. (4th) 689 (C.A.).

[83] Like Zuber J. in Dube, Salhany J. in the present case knew that he was being called on to exercise a discretion in determining the appropriate scale of costs, and he addressed the factors that moved him in the exercise of that discretion. He specifically adverted to Dube and to decisions of this court (Foulis v. Robinson (1978), 1978 1307 (ON CA), 21 O.R. (2d) 769, 92 D.L.R. (3d) 134 (C.A.); Mortimer v. Cameron (1994), 1994 10998 (ON CA), 17 O.R. (3d) 1, 19 M.P.L.R. (2d) 286, (C.A.); and Gerula v. Flores (1995), 1995 1096 (ON CA), 126 D.L.R. (4th) 506 (Ont. C.A.)) dealing with the subject of costs. He noted the absence of any suggestion that the respondent was using the judicial process to frustrate the proceedings or that it engaged in unreasonable conduct to compound the complexity of the proceedings. He observed that, without knowing the nature of the settlement reached with the defendant physicians, he could not assess the impact of his award of costs on the principle of full compensation for which the app ellants contended. In the end, he concluded that the appropriate award of costs was on a party-and-party scale.

[84] The disposition of costs is a matter of judicial discretion, and the circumstances in which an appellate court can interfere with the exercise of such a discretion are narrowly defined. We are unable to conclude that the manner in which Salhany J. exercised his discretion in the present case falls within these narrowly defined limits.

[85] In an alternative submission, counsel for the appellants suggested that, if this court was not prepared to substitute an award of solicitor-and-client costs, it should give directions to the assessment officer to be generous and to award a premium on the appellants' party-and-party costs.

[86] We reject this alternative submission for two reasons. The first is the same reason for which we did not accede to the appellants' primary submission: namely, that we find no basis on which to interfere with the exercise of Salhany J.'s discretion. The second is the proposition, recently recorded by this court, that there are in this province only two types of costs -- party-and-party and solicitor-and-client -- and that there is no hybrid scale of "enhanced" party-and-party costs: Vanek v. Great Atlantic & Pacific Co. of Canada (1999), 1999 2863 (ON CA), 48 O.R. (3d) 228 at p. 246, 180 D.L.R. (4th) 748 (C.A.).

[87] The first and second submissions can be dealt with together. In awarding the plaintiffs one-third of their party- and-party costs against the hospital up to January 22, 1998, Salhany J. was reflecting his apportionment of negligence (one- third) against the hospital. We have varied that apportionment of negligence to one-half and, consistent with that variation, the costs awarded against the hospital for the period when the action was proceeding against both the hospital and the doctors should be one-half, rather than one-third, of party-and-party costs.

[88] The action was commenced in August 1982. The doctors were not joined as defendants until March 1989. They remained as defendants until January 1998, when the claims against them were settled.

[89] Accordingly, the appellants should have been awarded 100 per cent of their costs against the hospital from August 1982 until March 1989; 50 per cent of their costs against the hospital from March 1989 until January 1998; and 100 per cent of their costs against the hospital after January 1998, all on a party-and-party scale.

Disposition

[90] In the result, the appeal is allowed and the judgment at trial modified to provide an award against the hospital in the amount of 50 per cent of the damages found by the trial judge with costs in accordance with para. 89. The appellants are entitled to their costs of the appeal payable forthwith after their assessment.

Order accordingly.

Notes

Note 1: As the hospital and the doctors had not settled, the cross-claim against the doctors could have been tried and fault apportioned on that basis. But the trial judge referred to the doctors as defendants.

Note 2: This form of judgment is not in compliance with the Negligence Act, which requires that the judgment against the defendant hospital in favour of the plaintiff be in the amount of 100 per cent of the damages and judgment in the cross-claim by the hospital against each doctor be in the amount of 33 per cent of the damages.

Note 3: Section 3 of the Ontario Act deals with contributory negligence and provides:

3. In any action for damages that is founded upon the fault or negligence of the defendant if fault or negligence is found on the part of the plaintiff that contributed to the damages, the court shall apportion the damages in proportion to the degree of fault or negligence found against the parties respectively.

Note 4: Bennetto v. Leslie, 1950 71 (ON SC), [1950] O.R. 303 (H.C.J.); Roustauskas v. Wilson, [1952] O.W.N. 441 (H.C.J.); St. Catharines Flying Club v. St. Catharines (City), 1953 136 (ON CA), [1953] O.R. 393, 2 D.L.R. 685 (C.A.); Paquette v. Batchelor (1980), 1980 1616 (ON SC), 28 O.R. (2d) 590, 111 D.L.R. (3d) 642 (H.C.J.).