DATE: 20060531

DOCKET: C39680 & C39679

COURT OF APPEAL FOR ONTARIO

CRONK, ARMSTRONG and LANG JJ.A.

B E T W E E N :

TERRY PLESTER and CECILE PLESTER

Hans J.B.A. Dickie Q.C. for the appellant and cross-respondent

(Plaintiffs) Respondents Cross-Appellants

• and -

WAWANESA MUTUAL INSURANCE COMPANY

Alfred M. Kwinter Q.C. for the respondents and cross-appellants, Terry and Cecile Plester and Andrew C. Murray for the respondents, Randy Plester as Estate Trustee of The Estate of Norman Plester and The Oak House Importing Company

(Defendant) Appellant Cross-Respondent

A N D B E T W E E N :

RANDY PLESTER AS ESTATE TRUSTEE OF THE ESTATE OF NORMAN PLESTER and THE OAK HOUSE IMPORTING COMPANY

(Plaintiffs) Respondents

• and -

WAWANESA MUTUAL INSURANCE COMPANY

(Defendant) Appellant

Heard: November 21, 2005

On appeal from the judgment of Justice William A. Jenkins of the Superior Court of Justice, sitting with a jury, dated January 17, 2005.

ARMSTRONG J.A.:

[1] Terry Plester and his wife, Cecile Plester, owned and operated a furniture store, The Oak House Furniture Company, in Ingersoll Ontario. Terry Plester’s father, Norman Plester, operated an antique furniture business under the name of The Oak House Importing Company from the premises of the furniture store. Terry and Cecile Plester insured their building and business with Wawanesa Mutual Insurance Company (“Wawanesa”). Norman Plester also insured his business under a separate insurance policy with Wawanesa.

[2] In the early morning hours of March 14, 1997, the furniture store and much of its contents were damaged by fire. Terry and Cecile Plester submitted a claim for their losses to Wawanesa, as did Norman Plester. Wawanesa denied each of the claims on the basis that Terry, Cecile or Norman Plester, or all of them, set the fire or caused someone to set it on their behalf.

[3] Mr. and Mrs. Plester commenced an action against Wawanesa. Norman Plester also commenced an action against Wawanesa in the name of The Oak House Importing Company. Norman Plester died before the case went to trial. His action was continued by his estate. After a trial of both actions before Justice W.A. Jenkins of the Superior Court of Justice and a jury, judgment was rendered in favour of the Plesters on January 17, 2005. Terry and Cecile Plester were awarded total damages of $1,000,673.83, which included aggravated and punitive damages of $525,000. The estate of Norman Plester was awarded total damages of $131,900 which included punitive damages of $100,000.

[4] Wawanesa appeals to this court in respect of both liability and damages. For the reasons that follow, I would dismiss the appeal except in respect of aggravated damages.

[5] Terry and Cecile Plester seek leave to cross appeal the costs award of the trial judge. For the reasons that follow, I would allow the application for leave to cross-appeal, but I would dismiss the cross-appeal except in respect of one disbursement.

THE FACTS

[6] Terry and Cecile Plester purchased an historical building in Ingersoll, Ontario in 1994. They restored and renovated the building to make it suitable to operate a furniture store. The store opened in May 1994.

[7] Norman Plester, Terry’s father, was engaged in the business of buying and selling antiques. He operated his business from the premises of the furniture store.

[8] On March 13, 1997, Terry Plester left the store at 5:30 p.m. All the doors to the store were locked when he left. Terry and Cecile Plester went to bed at approximately 11:30 p.m. or midnight. There was a bad ice storm that night. At about 2:30 or 3:00 a.m. Terry and Cecile Plester were awakened by a telephone call. They were advised that their store was on fire.

[9] On the evening before the fire, Norman Plester was visiting a friend in London where he stayed the night.

[10] When the Ingersoll Fire Department arrived at the store they found that the doors were locked. The only people with keys to the building were Terry, Cecile and Norman Plester. No other person had access to the building. The Fire Chief was unable to determine the cause of the fire and referred the matter for investigation to the Fire Marshall’s office. The Fire Marshall’s report stated that the fire was incendiary and was not caused by electrical failure.

[11] The Ingersoll Police Force conducted an investigation of the fire and concluded that it was a suspicious fire. No charges were laid by the police in connection with the fire.

[12] Wawanesa retained an electrical and forensic engineer, Cal White, who examined the burnt out premises five days after the fire. He prepared a report in which he concluded that the cause of the fire was arson. His conclusion was primarily based on his opinion that there were at least three points of origin of the fire.

[13] Wawanesa also retained the services of a forensic accountant, David Smith, who reported that the furniture store business was “doomed to failure” and that it would not have survived for more than six months from the date of the fire.

[14] Wawanesa retained an outside adjuster, Robert Pearson, who took written statements from Terry and Cecile Plester on the morning following the fire. Pearson admitted, in his evidence at trial, that he did not find any evidence to link the Plesters to the fire. After the fire, Terry and Cecile Plester also gave independent videotaped statements to the Ingersoll police.

[15] On October 23, 1997, Wawanesa sent a letter to Terry and Cecile Plester that stated:

A review of this matter has been completed. The Wawanesa Mutual Insurance Company wishes to inform you that the claims of The Oak House Furniture Company arising from the fire loss of March 14, 1997 are denied.

Trusting that the Wawanesa’s position is clear, I remain,

Yours truly,

A similar letter was sent to Norman Plester.

[16] After the receipt of these letters, Leonard Croth, a public insurance adjuster retained by Terry and Cecile Plester to assist them with their claim against Wawanesa, called Robert Pearson. Pearson suggested that Croth should phone Alan Reinhardt, Wawanesa’s chief claims examiner and internal adjuster. Croth called Reinhardt who told Croth that Wawanesa was denying liability. During this conversation, Reinhardt asked Croth if he would be interested in settling the claim for fifty percent of the loss. Croth declined the offer and indicated that it was a matter for the lawyer.

THE TRIAL

[17] The two actions proceeded to trial before a Superior Court judge and jury in January and February 2003. The trial lasted 24 days. Wawanesa defended the actions on the basis that the fire, which caused the losses, was incendiary and that the Plesters were responsible.

[18] In order to discharge its burden of establishing arson, Wawanesa called its expert, Cal White, and other witnesses. It also called evidence of financial motive through David Smith, its forensic accountant, who, as indicated above, testified that the furniture store was doomed to failure.

[19] In response to the evidence led by Wawanesa, counsel for the Plesters led expert evidence from Dennis Merkley, who had previously been employed by the Fire Marshall’s office for 23 years. Merkley disagreed with the opinion proffered by White, Wawanesa’s expert, that there were distinct points of origin of the fire. He concluded that the fire was of undetermined origin since all of the accidental sources had not been eliminated. It was his opinion, contrary to the report of the Fire Marshall’s office, that there was evidence that the fire emanated from an area where an electrical light timer was located at the front of the building.

[20] In response to the evidence of motive, the Plesters called Ron Smith, a forensic accountant. Smith testified that the Plesters had been meeting all their financial obligations for a period of two years before the fire and for a period of time after the fire.

[21] The Plesters also called Michael Lavigne, a sales representative of a supplier to the furniture store. Lavigne testified that Terry Plester was paying his bills within terms and that he never had to press him for payment. Three months after the fire, Terry Plester spoke to Lavigne about buying more stock to continue doing business. Lavigne was not able to meet his request.

[22] The Plesters called witnesses from their community who gave evidence of the good character of the Plesters.

[23] Terry and Cecile Plester testified on their own behalf. They denied the allegation of arson. Terry Plester testified that, prior to the fire, he was a board member of the Chamber of Commerce. He received the Chamber of Commerce “Business Man of the Year” award in 1996. He was also the treasurer of the local Kinsmen Club. After the fire he was relieved of both positions.

[24] Mr. Plester testified that for the financial year ending July 31, 1996 the store had a net profit of $5600.00. However, he projected that sales and profits for the 1997 financial year ending July 31 would be much improved. In order to meet his obligations, he cashed in some of his RRSP’s. He admitted that his financial statements were not accurate in that he was pocketing about $200 in cash each week and not recording it. The Plesters had very little equity in the building as they had placed three mortgages on it.

[25] The Plesters also called Craig Jones of Key Facts Canada, who had been retained by Pearson to prepare a financial motive report. Jones testified that, based on all the sources he contacted, he would classify the Plesters’ credit rating as A-1. He found no motivation to start a fire.

[26] Pearson testified in cross-examination that he was unaware of any information that suggested financial desperation on the part of the Plesters – all the creditors were being paid.

[27] Finally, the Plesters called Norman Southwood, the regional vice-president of Wawanesa. Southwood testified that Wawanesa had a net income before taxes in 1997 of $242,000,000 and that the company had assets of over $2,000,000,000.

THE JURY’S VERDICT

[28] The jury was asked to answer the following questions:

1. Has the Wawanesa Mutual Insurance Company satisfied you that the fire which occurred at 11-23 King Street East, Ingersoll on March 14, 1997 was intentionally set by Terry or Cecile Plester, either acting alone or in concert with each other, or in concert with persons unknown?

2. Has the Wawanesa Mutual Insurance Company satisfied you that the fire which occurred at 11-23 King Street East, Ingersoll on March 14, 1997 was intentionally set by Norman Plester, either acting alone or in concert with persons unknown?

The jury responded “No” to each question.

[29] The jury assessed the damages of Terry and Cecile Plester in the following amounts:

a. Damages to the building $ 319,000.00

b. Damages to the contents of the building $ 106,673.83

c. Damages for business interruption losses $ 50,000.00

d. Aggravated damages $ 175,000.00

e. Punitive damages $ 350,000.00

TOTAL $1,000,673.83

[30] The jury assessed the damages of the Estate of Norman Plester in the following amounts:

a. Property damage and business interruption losses $ 31,900.00

b. Punitive damages $ 100,000.00

TOTAL $ 131,900.00

[31] The jury was requested to answer the following question:

9. If your answer to Question No. 1 is NO, have the Plaintiffs, Terry and Cecile Plester, satisfied you that the Wawanesa Mutual Insurance Company breached its duty of good faith and that its misconduct in doing so [has] been so high-handed or malicious or arbitrary or highly reprehensible that it departs to a marked degree from ordinary standards of decent behaviour?

The jury was asked a similar question in respect of Norman Plester. The jury answered both of these questions in the affirmative.

[32] The jury provided the following particulars of the misconduct of Wawanesa in respect of Terry and Cecile Plester:

• 7 months to deny claim after fire was determined incendiary (April 10/1997).
• No written reason for claim denied in the denial letter October 23, 1997.
• Wawanesa’s follow up and investigation was not conclusive or complete. Wawanesa ignored recommend-ations to help resolve claim.
• Wawanesa denied claim October 23, 1997 then tried to settle with Mr. Croth shortly after the denial.
• Wawanesa did not produce strong credible evidence that could prove Terry and Cecile Plester [started] the fire, instead tried to prove otherwise.
• Wawanesa immediately took an offensive position [and] without notification to the Plesters retained Mr. LeDroit under the direction of the adjuster Mr. Reinhardt.
• Wawanesa retained Mr. David Smith one day before the denial was sent out to the Plesters, before any conclusions could have been made on motive for Terry and Cecile Plester.
• Wawanesa did not perform due diligence on behalf of the insured customers, Terry and Cecile Plester.

[33] The jury provided the following particulars of the misconduct of Wawanesa in respect of Norman Plester:

• Norm’s claim was handled arbitrarily and classed the same as Terry and Cecile’s. Norm had a separate policy.
• Mr. Pearson’s recommendation was ignored. Mr. Pearson could see no motive on Norm’s behalf and recommended the claim be paid.
• Wawanesa paid only 1 month’s rent on a temporary location of business. Mr. Reinhardt’s testimony was inconsistent with actual facts. Mr. Reinhardt’s actions were not professional, in handling Norm’s claim.
• Mr. Norm Plester died, labelled an arsonist, or so suspected.
• Norm’s claim was straightforward, Wawanesa had no reason to deny claim.

THE GROUNDS OF APPEAL

[34] The appellant raises the following grounds of appeal:

(i) the trial judge erred in ruling that evidence of a pre-trial settlement offer by the appellant was admissible;

(ii) the trial judge erred in permitting the Plesters to call evidence of good character;

(iii) the trial judge erred in ruling that evidence of the financial status of Wawanesa was admissible;

(iv) the trial judge erred in refusing to bifurcate the trial in respect of liability and punitive damages;

(v) the jury’s verdict in respect of liability was unreasonable;

(vi) the trial judge erred in leaving the issue of aggravated damages to the jury in respect of Terry and Cecile Plester when there was no evidence to substantiate such an award;

(vii) the trial judge erred in leaving the issue of punitive damages to the jury in relation to the Estate of Norman Plester and, in any event, the award was wholly unreasonable;

(viii) the trial judge’s charge to the jury was unbalanced and unfair; and

(ix) the punitive damages awarded to Terry and Cecile Plester are wholly unreasonable.

ANALYSIS

(i) Did the trial judge err in ruling that evidence of a pre-trial settlement offer was admissible?

[35] Counsel for Wawanesa at trial moved for a mistrial after the Plesters’ adjuster, Croth, testified that Reinhardt had offered to settle the Plesters’ claim for 50 percent. Counsel submitted that the offer was a without prejudice settlement offer and was inadmissible. The trial judge dismissed the application and said:

I agree with the defendant that at the time the conversation took place litigation was at least within the contemplation of the parties. I am not however satisfied that the offer was made by Mr. Reinhardt with the implied intention that it would not be disclosed in court, since Mr. Reinhardt has not as yet given evidence.

In any event, the statement made by Mr. Reinhardt, and the circumstances in which it was made, are relevant to the issue of punitive damages; see Whiten v. Pilot Insurance Company.

Indeed there may be other evidence of discussions between the parties that relate to the issue of whether the insurance company was taking unfair advantage of its superior financial resources to try and force an improvident settlement on the plaintiffs. We will have to see as the evidence unfolds.

In any event, it would in my opinion be unfair to both parties to declare a mistrial after 11 days of evidence. This is particularly so since, in my view, any harm done to the defendant can be rectified at the end of the trial by a limiting instruction to the jury advising them of the use that can be made of Mr. Croth’s evidence concerning the Reinhardt offer.

[36] Reinhardt testified several days later in the trial that he had been an adjuster for 24 years and that he regularly negotiated settlements of claims with other insurance adjusters and lawyers. Such negotiations were always understood to be without prejudice. If this were not the case, he would never attempt to settle cases. This was a common practice in the insurance industry. Reinhardt was not cross examined on this evidence and no evidence was called to the contrary.

[37] The evidence of the 50 percent offer was ultimately put to the jury as relevant to the Plesters’ claim for punitive damages. The jury listed it as one of the particulars of misconduct on the part of Wawanesa in respect of Terry and Cecile Plester.

[38] In John Sopinka, Sidney N. Lederman and Allan W. Bryant, The Law of Evidence in Canada, 2^nd ed. (Toronto: Butterworths, 1999) at 810, the authors set out the three conditions which protect settlement offers from disclosure before the court:

(a) a litigious dispute must be in existence or within contemplation;

(b) the communication must be made with the express or implied intention that it would not be disclosed to the court in the event negotiations failed; and,

(c) the purpose of the communication must be to attempt to effect a settlement.

[39] In this case, the trial judge found that the first condition was established. However, he was not satisfied that the offer was made by Reinhardt with the implied intention that it would not be disclosed to the court since Reinhardt had not yet testified. However, the trial judge eventually received unchallenged evidence to that effect before the case went to the jury.

[40] While I do not believe that the trial judge erred in failing to declare a mistrial at the time that Croth testified, I do believe he was obligated to consider the evidence of Reinhardt before his charge to the jury. Once the unchallenged evidence of Reinhardt was received, the three conditions stated in The Law of Evidence in Canada were satisfied. In my view, the jury should have been instructed that the offer of settlement was a without prejudice communication, and should be disregarded by it as a factor in considering whether to make an award of punitive damages. An instruction of this kind was not given by the trial judge.

(ii) Did the trial judge err in permitting the Plesters to call evidence of good character?

[41] In ruling that character evidence was admissible, the trial judge recognized that such evidence in civil cases is generally excluded on grounds of irrelevance: see Deep v. Wood (1983), 143 D.L.R. (3d) 246 (Ont. C.A.) at 250. However, he noted that there are some exceptions, such as defamation cases where the good character of a plaintiff may be put in issue by the defendant.

[42] The trial judge concluded his ruling on the admissibility of this evidence as follows:

Evidence of good character is routinely admitted in criminal cases and since the defendant is alleging that the plaintiffs in these actions committed criminal acts I see no reason why they should not be permitted to call evidence of their general reputation in the community. I therefore order that the plaintiffs be permitted to call such evidence at the trial of these actions.

[43] In my view, the trial judge did not err in admitting character evidence in this case. Once the appellant alleged arson against the Plesters, it was permissible for them to respond with the kind of evidence that would be available to them in a criminal court.

[44] The appellant also takes issue with the trial judge’s charge to the jury on the use that it could make of the character evidence. The trial judge told the jury:

Evidence of good character, such as honesty and reliability in their business or personal dealings, may be of assistance to you in deciding this case. Good character by itself is not evidence that the Plesters did not set this fire, but it may make it less likely that they were involved in the fire. So you should consider the character evidence in the same way that you consider the rest of the evidence in deciding whether Wawanesa has proved on a balance of probabilities that the Plesters set this fire.

I do not find fault in the trial judge’s charge on the use that could be made of the character evidence.

(iii) Did the trial judge err in ruling that the evidence of the financial status of Wawanesa was admissible?

[45] During his opening address to the jury, counsel for Wawanesa provided the following description of his client:

Wawanesa is a Canadian company that started in Manitoba 100 years ago. It is made up of people you would encounter in your everyday life. It is a mutual company that is owned by the policyholders. There are no big corporate directors taking big rates of pay out of the company. It competes in Canada with insurance companies from around the world, American insurance companies like State Farm or Allstate and international companies like Axa.

[46] To counter the above statement, counsel for the Plesters sought to call the regional vice-president of Wawanesa to testify as to Wawanesa’s financial status in 1997. The trial judge ruled that the description of Wawanesa by its counsel in his opening address made the evidence of financial status “very relevant”.

[47] The appellant relies upon the following observation by Binnie J. in Whiten v. Pilot Insurance Co., 2002 SCC 18, [2002] 1 S.C.R. 595 at para. 121:

The fact the respondent's assets of $231 million were mentioned to the jury in this case was unhelpful. Pilot was obviously a substantial corporation. Disclosure of detailed financial information before liability is established may wrongly influence the jury to find liability where none exists (i.e., the subliminal message may be "What's a $345,000 insurance claim to a $231 million company?"). Moreover, pre-trial discovery of financial capacity would unnecessarily prolong the pre-trial proceedings and prematurely switch the focus from the plaintiff's claim for compensation to the defendant's capacity to absorb punishment. In any event, the court should hesitate to attribute anthropomorphic qualities to large corporations (i.e., the punishment should "sting").

[48] Whiten is distinguishable from this case in that the insurer’s counsel in Whiten did not appear to have “opened the door” to the issue of financial capacity or to have otherwise put the insurer’s financial status directly in issue. However, the cautionary warning by Binnie J. regarding the potential use by the jury of this kind of evidence is still apt. In my view, the evidence should not have been admitted. The better way to have dealt with counsel’s opening was simply to tell the jury to ignore it.

(iv) Did the trial judge err in refusing to bifurcate the trial in respect of liability and punitive damages?

[49] In Whiten, Binnie J. made the following comments about bifurcation at para. 122 of his reasons:

Where a trial judge is concerned that the claim for punitive damages may affect the fairness of the liability trial, bifurcated proceedings may be appropriate. On the facts of this case, no harm was done by the procedure followed, including the mention of the $231 million figure.

[50] At the outset of this trial, the trial judge referred counsel to the above excerpt from Whiten and suggested that they might wish to consider the issue of bifurcation. The next day the trial judge reminded counsel that the issue of bifurcation remained outstanding. On the ninth day of trial, counsel for Wawanesa reminded the trial judge that the bifurcation issue had not been argued. The trial judge responded, “that’s long since gone by the boards”. Counsel for the appellant asserts in this court that the trial judge erred in refusing to hear his submissions on this issue.

[51] On the twelfth day of trial, counsel for Wawanesa moved for a mistrial on a number of grounds, including the failure of the trial judge to make an order bifurcating the trial. The trial judge ruled as follows:

Finally, I know of no authority that requires bifurcation of a trial in which punitive damages are claimed, and none have been brought to my attention. Mr. Kwinter objects to bifurcation, and failure to proceed in that manner is not grounds for a mistrial.

[52] Counsel for the appellant referred us to four cases from the Supreme Court of British Columbia to show that the court in British Columbia, at least on interlocutory motions made before trial, routinely severs bad faith and punitive damages claims from the issue of liability under an insurance policy where one of the parties would suffer prejudice if the claims were heard together: see Sanders v. Clarica Life Insurance Company, (2003), 2003 BCSC 403, 30 C.P.C. (5th) 364 (B.C.S.C.) at para. 10; Lawrence v. Insurance Corp. of British Columbia (2001), 2001 BCSC 1530, 96 B.C.L.R. (3d) 375, (B.C.S.C.) at para. 52; Read v. Insurance Corp. of British Columbia, 2002 BCSC 1607, [2002] B.C.J. No. 2617 (B.C.S.C.), at para. 36; Wonderful Ventures Ltd. v. Maylam (2001), 2001 BCSC 775, 91 B.C.L.R. (3d) 319 (B.C.S.C.) at para. 34.

[53] I am not persuaded that the failure to hear the application and order bifurcation constitutes a reversible error in the circumstances. I agree with the trial judge that there is no obligation to order bifurcation. He was alive to the issue and the comments of Binnie J. in Whiten. He made the discretionary decision not to bifurcate and I am not persuaded that this court should interfere.

(v) Was the jury’s verdict in respect of liability unreasonable?

[54] Counsel for the appellant submits that the jury’s verdict in respect of liability was unreasonable for the following reasons:

(i) the report of the Fire Marshall’s office concluded that the fire was incendiary;

(ii) the appellant’s expert concluded that the fire was caused by arson;

(iii) the Plesters possessed a financial motive to set the fire; the Plesters’ income from the furniture store declined in the years before the fire. In the fiscal year prior to the fire, the business income had gone from $46,000 to $5,600; and,

(iv) the Plesters had the opportunity to set the fire. On the night of the fire, the Plesters were the only individuals with keys to the premises and there was no evidence of forced entry.

[55] Counsel for the appellant further submits that the jury was influenced by the following evidence which was inadmissible:

(i) the pre-trial settlement offer;

(ii) the evidence of good character; and,

(iii) the evidence of the financial status of Wawanesa.

[56] This court reviewed the principles for setting aside a jury verdict in Deshane et al. v. Deere & Co. (1993), 15 O.R (3d) 225 at 231:

The principles governing appellate review of the verdict of a jury have been laid down by the Supreme Court of Canada in McLean v. McCannell, [1937] S.C.R. 341 at p. 343, [1937] 2 D.L.R. 639, so that “the verdict of a jury will not be set aside as against the weight of evidence unless it is so plainly unreasonable and unjust as to satisfy the Court that no jury reviewing the evidence as a whole and acting judicially could have reached it”. The principle has been re-affirmed in Vancouver-Fraser Park District v. Olmstead, [1975] 2 S.C.R. 831 at p. 839, 51 D.L.R. (3d) 416, where de Grandpré J., delivering the judgment of the court, stated:

All of the relevant cases make it abundantly clear that jury verdicts must be treated with considerable respect and must be accorded great weight. This does not mean however that they should be regarded with awe.

See also Barker (c.o.b. Mike Barber Auto Sales) v. Zurich Insurance Co. (2001), 140 O.A.C. 358 (C.A.) at para. 26.

[57] In Cameron v. Excelsior Life Insurance Co., [1981] 1 S.C.R. 138 at 142 Laskin C.J.C. said that a jury’s finding of fact is “entitled to rational appreciation and to be regarded in as favorable a light as the evidence supporting it”.

[58] In my view, it cannot be said of the verdict in this case “that no jury reviewing the evidence as a whole and acting judicially could have reached it”. While there was evidence from the Fire Marshall’s office and the appellant’s expert that the fire was incendiary, there was also evidence from the Plesters’ experts to the contrary. Two of the appellant’s own advisors (Pearson and Jones) testified that there was no evidence of financial motive to set the fire. There was also much evidence led by counsel for the Plesters that contradicted the evidence of financial motive. Against the appellant’s position that the Plesters had the opportunity to set the fire, there was the sworn evidence of Terry and Cecile Plester from the witness box that they had not started the fire.

[59] In my view, there was an abundance of evidence to support the jury’s verdict on the issue of liability.

[60] In respect of the evidence of the pre-trial settlement offer and the evidence of the financial status of Wawanesa, there is little connection between that evidence and the liability issue. In terms of the pre-trial settlement offer, the jury was told that the evidence went to the issue of punitive damages. In terms of the financial status of the company, the evidence was admitted in response to the statement made by counsel for Wawanesa. In respect of the character evidence, I have already concluded that, on these facts, such evidence was admissible and that the trial judge gave a proper jury instruction in respect of it.

[61] I should add that the attack by the appellant on the jury’s verdict is directed largely at Terry and Cecile Plester. Little is said about the case for arson against Norman Plester. This is not surprising, in that the appellant’s case against Norman Plester was virtually nonexistent.

(vi) Did the trial judge err in leaving the issue of aggravated damages to the jury in respect of Terry and Cecile Plester?

[62] Aggravated damages are compensatory. The basis on which such damages are awarded was considered by the Supreme Court of Canada in Hill v. Church of Scientology of Toronto, [1995] 2 S.C.R. 1130 at para. 190:

If aggravated damages are to be awarded, there must be a finding that the defendant was motivated by actual malice, which increased the injury to the plaintiff, either by spreading further afield the damage to the reputation of the plaintiff, or by increasing the mental distress and humiliation of the plaintiff.

[63] While Hill must be read in the context of a defamation action, it is my view that the general principles articulated in that case concerning aggravated damages are applicable to such damages in a bad faith claim against an insurance company.

[64] The trial judge charged the jury as follows:

Aggravated damages are compensatory damages to compensate the plaintiffs for loss. They are meant to compensate the plaintiffs for damages that they have suffered as a result of the actions of the defendant. Typically they are awarded in cases involving reckless conduct or intentional wrongdoing on the part of the defendant. They are meant to compensate the plaintiffs for the humiliation, indignity, shame and degradation they have suffered as a result of the defendant’s improper conduct. So in order to recover aggravated damages the plaintiffs must prove, on a straight balance of probabilities, that they suffered some damages as a result of reckless or intentional wrongdoing on the part of Wawanesa.

In that regard there is no doubt that the allegation of arson would spread quickly through the small community of Ingersoll, and raise at least suspicions that the Plesters had something to do with the fire that burned their store. As a result it is clear that their reputation has probably been damaged to some extent by the action of Wawanesa. There is however no other evidence before you on which you can base an award of aggravated damages. For instance, there is no evidence of illness or emotional distress caused by these allegations, or of an inability to obtain employment, or of any other form of discrimination. There simply is no evidence of that.

Indeed, while there was obviously damage caused to the Plesters’ reputation, there is simply no evidence of the effects of that loss of reputation. I therefore suggest that while it is open to you to award Terry and Cecile Plester aggravated damages if Wawanesa has not satisfied you that they were involved in setting this fire, it would be unwise for you to award anything more than a modest amount. I say that because there is simply no evidence on which you can base a sizable award.

[65] In the above excerpt, the trial judge neglected to mention that Terry Plester had been relieved of his positions with the Chamber of Commerce and the Kinsmen Club. He also did not mention Terry Plester’s inability to continue doing business with one of his suppliers after the fire. However, apart from the aforementioned evidence, the case for aggravated damages was very thin. In the course of the argument before us we were not directed to any specific evidence which would support a claim for aggravated damages on behalf of Cecile Plester, other than her presumable shame and humiliation as a result of the allegation of arson made by Wawanesa.

[66] While, in my view, there was a case to go to the jury on aggravated damages based upon the allegation of arson and the ultimate finding of bad faith by the jury, the award of $175,000 is grossly excessive. This is particularly so, given the trial judge’s caution that “it would be unwise… to award anything more than a modest amount … because there is simply no evidence on which you can base a sizable award.” I agree. I would therefore reduce the award of aggravated damages to $50,000.

(vii) Did the trial judge err in leaving the issue of punitive damages to the jury in respect of the Estate of Norman Plester? In any event, was the award unreasonable?

[67] The appellant submits that punitive damages are non-compensatory in nature and are not recoverable by the Norman Plester Estate under s. 38 of the Trustee Act, R.S.O. 1990, c. T.23. Section 38(1) of the Trustee Act provides:

Except in cases of libel and slander, the executor or administrator of any deceased person may maintain an action for all torts or injuries to the person or to the property of the deceased in the same manner and with the same rights and remedies as the deceased would, if living, have been entitled to do, and the damages when recovered shall form part of the personal estate of the deceased; but, if death results from such injuries, no damages shall be allowed for the death or for the loss of the expectation of life, but this proviso is not in derogation of any rights conferred by Part V of the Family Law Act.

[68] Section 38 of the Trustee Act carves out an exception to the common law maxim, actio personalis moritur, cum persona.

[69] The legislative approach to the issue of whether an estate may recover punitive damages varies widely across Canada. Five jurisdictions (Alberta, Newfoundland, Nova Scotia, Prince Edward Island and the Yukon) completely exclude estates from recovering punitive damages. One jurisdiction (Manitoba) excludes estates from such damages if the tort causes the death of a person. Two jurisdictions (Saskatchewan and New Brunswick) explicitly allow punitive damages. Four jurisdictions (Ontario, British Columbia, Nunavut and the Northwest Territories) are silent as to the availability of punitive damages.

[70] There do not appear to be any cases directly on point. The closest case is a judgment of the British Columbia Court of Appeal in Allan Estate v. Co-Operators Life Insurance Co. (1999), 1999 BCCA 35, 62 B.C.L.R. (3d) 329. I will have more to say about this case in due course.

[71] It seems to me that s. 38 of the Trustee Act raises at least three questions:

(i) Is the language of s. 38 sufficiently broad to embrace a claim for punitive damages?

(ii) Does the silence of the Trustee Act in respect of punitive damages suggest that they are available to an estate?

(iii) Is there a principled policy basis to support an award of punitive damages?

In my view, the answer to each of the above questions is yes.

[72] In respect of the first question, I start with the proposition that s. 38 of the Trustee Act is remedial legislation and should be given a large and liberal interpretation in order to achieve its purpose. The language of s. 38(1), in effect, says that the estate of a deceased is entitled to recover for all torts or injuries to the person or to property as if the deceased were still alive. This language raises the further question of whether the Norman Plester Estate action can be said to be an action in tort or a claim for injury to the person or to property. While the action against the insurance company is originally founded in a contract of insurance, there is an independent claim of bad faith. In my view, bad faith claims fall into a category of claims for “injuries to the person or to the property of the deceased”. If Norman Plester were still alive, he would be entitled to seek an award of punitive damages.

[73] In Allan Estate, the British Columbia Court of Appeal took a more restrictive view of similar, although not identical, legislation. In Allan Estate, the deceased was receiving disability benefits from her insurance company. The deceased committed suicide when the insurance company terminated her benefits. The deceased’s estate commenced an action for breach of the contract of insurance and claimed punitive damages. The claim for punitive damages was dismissed in a motion for the determination of a question of law.

[74] The question before the British Columbia Court of Appeal was whether the plaintiff’s claim for punitive damages was barred by ss. 59(2), (3), and (4) of the Estate Administration Act, R.S.B.C. 1996, c. 122. These subsections provide:

59(2) Subject to subsection (3), the executor or administrator of a deceased person may continue or bring and maintain an action for all loss or damage to the person or property of the deceased in the same manner and with the same rights and remedies as the deceased would, if living, be entitled to, including an action in the circumstances referred to in subsection (4).

(3) Recovery in an action under subsection (2) must not extend to the following:

(a) damages in respect of physical disfigurement or pain or suffering caused to the deceased;

(b) if death results from the injuries, damages for the death, or for the loss of expectation of life, unless the death occurred before February 12, 1942;

(c) damages in respect of expectancy of earnings after the death of the deceased that might have been sustained if the deceased had not died.

(4) The damages recovered in an action under subsection (2) form part of the personal estate of the deceased, but nothing in this section, section 60 or 61 derogates from any rights conferred by the Family Compensation Act.

[75] In Allan Estate, the motion judge held that the claim for punitive damages was not available to the estate. In the Court of Appeal, Lambert J.A. provided a thorough historical review of the English common law related to the “actio personalis” maxim and the subsequent legislative reforms, including Lord Campbell’s Act of 1846.

[76] In respect of the British Columbia Estate Administration Act, Lambert J.A. concluded at paras. 72-74:

The focus of this Act is on the estate of the deceased and the damages in an action under the Act are directed to form part of the personal estate. The action is “for all loss or damage to the person or property of the deceased.” Loss or damage to the personal or real property of the deceased caused by a tort or similar wrong must necessarily have diminished the deceased’s estate and damages for that loss or damage would be recoverable. Loss or damage to the person of the deceased is also recoverable where the tort or similar wrong has the effect of diminishing the deceased’s estate through, for example, loss of wages to the date of death, or costs incurred in medical or other necessary care. But loss or damage which does not damage the deceased’s estate such as physical disfigurement, pain or suffering, death itself, or loss of expectation of life, is excluded. In addition, loss or damage which does not diminish the present value of the deceased’s estate, though it may diminish the future value, in the nature of expectancy of future earnings, is also excluded. From those exclusions the scope of the Act can be determined, as it was determined in Campbell v. Read. The damages which may be recovered under the Estate Administration Act are the damages that reflect a diminution of the personal estate of the deceased, whether they are for damage or loss to the person or damage or loss to property, and nothing more.

Punitive damages do not fall within the category of damages for diminution of the personal estate of the deceased. So punitive damages cannot be assessed or recovered in an action under the Estate Administration Act of British Columbia.

In some Provinces punitive damages are specifically excluded by the survival of actions legislation, in others they are specifically permitted, and in others they are not mentioned. The fact that they are not specifically excluded by the British Columbia legislation does not alter my view that they are implicitly excluded by a consideration of the common law before the legislation was enacted and by a consideration of the terms of the legislation itself.

[77] While I find the judgment of the British Columbia court an extremely useful review of the historical development of this area of the law, I am not persuaded to apply the British Columbia court’s reasoning to s. 38 of the Trustee Act. I prefer a more expansive construction of s. 38 which I believe achieves the purpose of putting the estate of a deceased person on the same footing as the deceased would have been if he or she were alive.

[78] As to the silence of the Trustee Act in respect of punitive damages, I come to a different conclusion than Lambert J.A. In my opinion, the fact that some provincial legislatures have seen fit to exclude claims for punitive damages by an estate invites the suggestion that if the Ontario legislature had intended to exclude such claims, it would have expressly done so.

[79] Finally, from a policy point of view, I find the arguments in favour of permitting estates to recover punitive damages very persuasive. In 1991, the Ontario Law Reform Commission decided that there were three major rationales militating in favour of permitting a claim for punitive damages to survive for the benefit of an estate:

(i) A wrongdoer can be punished just as easily, whether his or her victim lives or dies.

(ii) Deterrence is furthered when other potential tort-feasors learn that the death of their potential victims will not stop the imposition of punitive damages.

(iii) It would be manifestly unjust to allow a wrongdoer to escape civil punishment by the fortuity of his or her victim’s death, if the punishment would have been meted out should the victim have survived the tort.[^1]

[80] In S.M. Waddams, The Law of Damages, looseleaf (Toronto: Canada Law Book, 2005) at para. 11.440, the author states:

[T]here seems no reason why the death of the plaintiff should affect an award, for it is not for the plaintiff’s benefit that the power to award exemplary damages is supposed to exist … The thinking behind the provision that the claim does not survive to the claimant’s estate appears to be that the estate should succeed to what represents the deceased person’s property and that the deceased can only be said to have a property interest in a claim to compensatory damages that replaces something of value that has been lost, that is, remedies a depletion of the estate for which the defendant is responsible. But this line of thinking is really incompatible with the existence of exemplary damages at all, for it must be conceded, wherever exemplary damages are awarded to a living plaintiff, that they cannot be justified on a compensatory basis. So if enrichment of a living plaintiff is tolerable, presumably in the public interest, so also should be enrichment of an estate. On the other hand, if enrichment of an estate seems anomalous, that must lead the observer to question the whole basis of exemplary damages.

[81] The above analysis leads me to conclude that s. 38 of the Trustee Act permits an award of punitive damages to the Norman Plester Estate.

[82] The appellant also argues that the jury’s award of $100,000 in punitive damages to the Norman Plester Estate was wholly unreasonable. I will have something to say about the test for setting aside an award of punitive damages in respect of Terry and Cecile Plester. Suffice it to say that in respect of the quantum of punitive damages awarded to the Norman Plester Estate, I do not find these damages to be exorbitant. The jury found that the appellant breached its duty of good faith to Norman Plester. In arriving at that conclusion, it found that the insurer acted arbitrarily, ignored a recommendation of the adjuster to settle a straightforward claim and labeled Norman Plester an arsonist. I see no basis to interfere with this award of punitive damages.

(viii) Was the trial judge’s charge to the jury unbalanced and unfair?

[83] Counsel for the appellant submits that the trial judge set out, in an unbalanced way, the theories of the parties and made inflammatory references to the conduct of the appellant. In particular, counsel for the appellant takes issue with the following:

(a) the trial judge stated that he “really [did] not see why this building should be restored on the cheap”;

(b) the trial judge stated that “the policy limit of $319,000 … is not an unreasonable figure for repairs to this building”;

(c) the trial judge characterized the cross-examination by the defence counsel of Terry and Cecile Plester as “vigorous”;

(d) the trial judge was critical of the testimony of the appellant’s fire expert. The trial judge said, “ Cal White simply did not appear to have done his homework. He was only at the scene for a few hours and he did not appear to have a grasp of how the fire progressed.”

(e) the trial judge used the word “unfortunately ” in relation to the fact that neither Mr. Hutton nor Mr. Marinoff, of the Fire Marshall’s office, went back to the scene of the fire after they learned that there was an issue about the light timer. The appellant points out that they testified that there was no need to return.

[84] It is accepted that a trial judge is entitled to express his or her opinion on the evidence. If he or she does express an opinion on the evidence it must be done with great care so as not to influence the jury unfairly or to appear to influence the jury unfairly. See McFarlane v. Safadi (2004), 70 O.R. (3d) 599 (C.A.) at para. 38.

[85] In his charge the trial judge told the jury:

You are not obligated to accept comments that counsel or I might make concerning the evidence. I plan to comment on some of the evidence, and if your recollection or interpretation of the evidence is different than mine, then I want you to be guided by your own collective recollections and interpretations of the evidence.

In my view, the trial judge did not cross the line in his comments on the evidence to the jury, particularly when those comments are read in the context of the entire charge. It is also telling that defence counsel at trial really did not object to the fairness or balance of the charge.

(ix) Are the punitive damages awarded to Terry and Cecile Plester wholly unreasonable?

[86] Counsel for the appellant submits that the award of punitive damages was wholly unreasonable and unsupported by the evidence. Counsel attacks the particulars articulated by the jury in support of its finding of bad faith. The appellant’s position is set out in the following paragraphs:

(a) Seven months to deny claim after fire was determined incendiary, April 10, 1997.

[87] Counsel for the appellant submits that it was not unreasonable for Wawanesa to take time to consider whether the claim should be denied. He points out that the criminal investigation remained open after April 10, 1997, and the final report of the Fire Marshall’s office was not prepared until November 14, 1997.

(b) No written reasons for claim denied in the denial letter, October 23, 1997.

[88] Counsel submits that it was obvious why the claim was being denied.

(c) Wawanesa’s follow-up investigation was not conclusive or complete.

[89] Counsel for the appellant argues that whether the investigation was conclusive or complete is not a relevant consideration.

(d) Wawanesa ignored recommendations to help resolve the claim.

[90] Counsel agrees that Pearson, the company’s outside insurance adjuster, discussed the possibility of resolving Norman Plester’s claim with Reinhardt. However, because of the findings of the investigation it was deemed inappropriate to resolve the claim.

(e) Wawanesa denied the claim on October 23, 1997 and then tried to settle with Mr. Croth shortly after the denial.

[91] Counsel for the appellant argues that Cecile and Terry Plester retained Croth, a public adjuster, to represent their interest in relation to the resolution of their insurance claim with Wawanesa within about two weeks of the fire. It was therefore appropriate for the representative of Wawanesa to discuss the settlement of the claim even after the denial.

(f) Wawanesa did not produce strong, credible evidence that could prove Terry and Cecile Plester started the fire, instead tried to prove otherwise.

[92] In respect of this particular of bad faith, counsel for the appellant points to the report received from Wawanesa’s fire expert, which concluded that “the fire or fires had to have been initiated by someone who had a key to gain access to the building, more likely less than an hour before the fire was discovered”. Counsel for the appellant asserts that based on the report, it was reasonable to defend the Plesters’ claim on the basis of arson. Counsel further asserts that, in these circumstances, an insurance company is not required to be correct in making a decision to dispute its obligations to pay a claim. A mere denial of a claim that ultimately succeeds is not, in itself, an act of bad faith: see 702535 Ontario Inc. v. Non-Marine Underwriters, Lloyd’s of London (2000), 130 O.A.C. 373 (C.A.) at para. 30.

(g) Wawanesa immediately took an offensive position without notification to the Plesters.

[93] Counsel for the appellant points out that Wawanesa paid the first month’s rent for storage space for the salvageable stock removed from the premises for Norman Plester’s business. Counsel also notes that the Plesters were aware that the matter was under investigation when they signed a non-waiver agreement on March 17, 1997. Although there was no duty to inform the Plesters that Wawanesa had commenced an investigation regarding the fire, they would have concluded that to be the case because the Ingersoll police had commenced a criminal investigation on the day of the fire because the fire was deemed suspicious.

(h) Wawanesa retained Mr. Ledroit under the direction of the adjuster Mr. Reinhardt.

[94] Counsel for Wawanesa submits that his client was entitled to retain a lawyer in the circumstances.

(i) Wawanesa retained David Smith one day before the denial letter was sent out to the Plesters, before any conclusions could have been made on motive for Terry and Cecile Plester.

[95] Counsel for the appellant points out that David Smith was retained on July 30, 1997. He made a preliminary verbal report regarding the financial status of the business to Reinhardt of Wawanesa on August 6, 1997.

(j) Wawanesa did not perform due diligence on behalf of the insured customers, Terry and Cecile Plester.

[96] Counsel for the appellant responds to this particular by referring to the steps Wawanesa took in retaining White, Smith and Pearson to carry out an investigation. Counsel also refers to the examinations under oath of Cecile and Terry Plester, which were conducted in August 1997 on behalf of the insurance company.

[97] In my view, the appellant’s submissions have merit in respect of some of the particulars. The delay of seven months in advising the Plesters that their claims were denied is not in itself evidence of bad faith. The insurance company was entitled in the circumstances to conduct an investigation, given the information received from both the police and the Fire Marshall’s office. Moreover, I do not regard the proposal to settle the claim at fifty percent as evidence of bad faith on the part of the appellant. As Reinhardt’s unchallenged testimony indicated, he was simply doing what he regularly does in his position as a claims adjuster. Finally, I see no basis for asserting that the retainer of counsel in this case could be regarded as evidence of bad faith.

[98] Although I have concluded that some of the particulars relied upon by the jury do not constitute evidence of bad faith, there is, in my view, a sufficient basis on this record to support the jury’s finding. There is evidence to support the jury’s conclusion that Wawanesa’s follow-up investigation was not conclusive or complete. The investigation in respect of both the fire and financial motive was certainly not conclusive. As a result, I agree with the jury that Wawanesa did not produce strong, credible evidence that could prove that Terry and Cecile Plester started the fire.

[99] There was certainly no evidence to establish a case for arson against Norman Plester. The case for arson against Terry and Cecile Plester did not pass much beyond suspicion. Based on all the information available to the appellant, it had to know that it could not succeed in an arson defence against Norman Plester, and that the case against Terry and Cecile Plester was a very long shot.

[100] Although the appellant apparently received a verbal report from its accounting expert, David Smith, a week or so after he was retained on July 30, 1997, it is significant that the company sent out its letter of denial in October 1997, the day after it requested an opinion in writing from Mr. Smith. In my view, it was open to the jury to take this evidence into account in arriving at its finding of bad faith.

[101] I now turn to the quantum of the punitive damages award in respect of Terry and Cecile Plester. In Hill, supra, at para. 159, Cory J. cited the test for setting aside a punitive damages award enunciated by Robins J.A. in Walker v. CFTO Ltd. (1987), 59 O.R. (2d) 104 (C.A.) at 110:

[A court should consider] whether the verdict is so inordinately large as obviously to exceed the maximum limit of a reasonable range within which a jury may properly operate or, put another way, whether the verdict is so exorbitant or so grossly out of proportion to the libel as to shock the court’s conscience and sense of justice.

[102] In Whiten, supra, at para. 111, Binnie J. stated that proportionality is the key to the permissible quantum of punitive damages. A disproportionate award overshoots its purpose and becomes irrational. A punitive damages award must consider proportionality in several dimensions. Binnie J. provided a list of a number of factors that I need not repeat here. Suffice it to say, the trial judge’s charge to the jury included some, but not all, of the factors listed by Binnie J. The trial judge also told the jury that the award should be no more than was necessary to punish, deter and denounce the conduct of Wawanesa. As well, the trial judge told the jury that judges and juries in this province have generally found that moderate awards of punitive damages are sufficient.

[103] The award of punitive damages in this case is fairly high. While I would not have awarded punitive damages in the amount awarded by the jury, I cannot conclude that it fails to pass the test articulated by Robins J.A. in Walker.

CONCLUSION IN RESPECT OF THE WAWANESA APPEAL

[104] Wawanesa requests an order setting aside the judgment and an order directing a new trial. I have indicated that in my view the trial judge erred in admitting the evidence of the pre-trial settlement offer and the evidence of the financial status of Wawanesa. However, I am not satisfied that any substantial wrong or miscarriage of justice has occurred as a result of the admission of that evidence. Put somewhat differently, on the facts here, the interests of justice do not plainly require a new trial: see Landolfi v. Fargione, [2006] O.J. No. 1226 (C.A.). Accordingly, I would decline to order a new trial in accordance with s. 134(6) of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[105] As indicated above, I would allow the appeal in respect of aggravated damages. Otherwise I would dismiss the appeal.

CROSS-APPEAL ON COSTS

[106] The trial judge awarded Terry and Cecile Plester partial indemnity costs up to the date of service of a Rule 49 offer, and full indemnity costs thereafter. The trial judge also awarded a premium of approximately ten percent of their costs, in the amount of $30,000. Terry and Cecile Plester seek leave to appeal on the ground that the trial judge failed to order substantial indemnity costs throughout. They also seek leave to appeal the amount of the premium and the failure of the trial judge to include in the costs award the fee of Leonard Croth and his associate, David Hanson.

[107] In declining to award substantial indemnity costs, the trial judge said:

Although the actions of Wawanesa were unjustified, it should not be penalized a second time with respect to the costs of the action. As a result, I find that the plaintiffs Terry and Cecile Plester should be allowed their costs of the action on a partial indemnity basis to December 2, 2002 when they served an offer to settle in accordance with Rule 49. Thereafter their costs should be assessed on a substantial indemnity basis.

[108] In Mark Orkin, The Law of Costs, looseleaf (Aurora: Canada Law Book, 2005) at s. 219.1.2, the author says:

Some Canadian courts have declined to award both punitive damages and solicitor-and-client costs on the reasoning that a party who has been punished for misconduct by an award of punitive damages should not be further punished by having to pay costs on the higher scale.

The better view appears to be that the two issues are legally distinct or, putting it another way, the issue of indemnifying a plaintiff for legal costs is sufficiently distinct from punishing a defendant for misconduct that an award of punitive damages should not automatically preclude the awarding of solicitor-and-client costs. As has been said in this context, the awarding of costs is a discretionary matter which by definition is not governed by a set of rigid rules.

[109] Although Orkin suggests that the better view is that the two issues of punitive damages and solicitor-and-client costs (now substantial indemnity costs) are legally distinct, I would not interfere in this case. With respect, it seems to me that there are cases where the fact of an award of punitive damages will militate against an award of substantial indemnity costs. This appears to be such a case.

[110] The Plesters also argue that substantial indemnity costs are warranted because of the defence allegation of arson. The trial judge was alive to this issue. An award of substantial indemnity costs is not automatic even where there are allegations of serious wrongdoing. I am not persuaded that in the circumstances of this case the trial judge erred in principle or exercised his discretion on an improper basis.

[111] In respect of the premium, the trial judge was clearly in the best position (having presided over a five-week trial) to decide the quantum of the premium. I would not interfere with his discretionary decision regarding the appropriate amount of the premium.

[112] The Plesters also seek leave to appeal the refusal of the trial judge to allow, as a disbursement, the fee of $60,040 for the National Fire Adjustment Company, who provided the services of Croth and Hanson to the Plesters. The trial judge held that Croth and Hanson were not expert witnesses and they were therefore not entitled to expert witness fees. The trial judge held that the $60,040 should have been included as an item of special damages.

[113] The Plesters made a subsequent application to have the National Fire Adjustment fee added to the special damages and included in the final judgment. The trial judge dismissed the application, given that this fee had not been placed before the jury and the amount of the fee was challenged by counsel for Wawanesa.

[114] Croth was not qualified as an expert witness at trial. However, the trial judge apparently overlooked the fact that Hanson was qualified at trial as an expert in building contracting and estimating. In my view, the Plesters are entitled to claim an expert witness fee for the services rendered by Hanson.

[115] Unfortunately, the quantum of the fee for Hanson presents a problem. The National Fire Adjustment Company did not produce a detailed invoice breaking down the services rendered. Its bill of $60,040 (which includes the services of both Croth and Hanson) is based on a percentage (six percent) of the Plesters’ total recovery.

[116] One approach would be to send the matter back to the trial judge for his reconsideration. However, this would add increased cost to what is already very expensive litigation. In my view, it would be preferable for this court to deal with the issue. I propose to follow this course.

[117] Hanson is an estimator. He offered an opinion in respect of the cost of repairs to the building. His estimate of the cost of repairs was $330,550.47. As previously stated, judgment in respect of this item of damages was given in the amount of $319,000.

[118] Hanson testified that, with traveling time, he spent two days at the site of the fire. He then spent another day or day and a half preparing his estimate. In my view, a reasonable fee for these services would be $3,000 a day or $10,500. I would allow an additional $3,000 for preparation of his evidence at trial and his attendance at trial, for a total of $13,500.

[119] In respect of the balance of the fee claimed for the services of National Fire Adjustment, I see no error in the refusal of the trial judge to include the disbursement in the award of costs.

[120] In the result, I would allow the application for leave to cross-appeal the costs award and allow the cross-appeal in respect of the disbursement to the extent of $13,500. In respect of the claim for substantial indemnity costs throughout and the premium, I would dismiss the cross-appeal.

THE COSTS OF THE APPEAL AND CROSS-APPEAL

[121] Counsel on behalf of Terry and Cecile Plester seek costs in respect of the appeal and cross-appeal in the total amount of $67,866.46, including disbursements and G.S.T.

[122] The Plesters were successful on the appeal except for the appeal on aggravated damages. They were successful in a relatively minor way on their cross-appeal. Some reduction is therefore appropriate in respect of their total bill. I would order costs in favour of Terry and Cecile Plester on a partial indemnity scale in the amount of $50,000, including disbursements and G.S.T.

[123] Since the above award takes into account the appellant’s success on aggravated damages and the cross-appeal, it is unnecessary to make a separate costs award in favour of Wawanesa.

[124] Counsel on behalf of the Estate of Norman Plester and The Oak House Importing Company seek costs in the amount of $18,328.34, including disbursements and G.S.T. These respondents were entirely successful. I would award them costs on a partial indemnity scale in the amount of $15,000, including disbursements and G.S.T.

RELEASED: “EAC” May 31, 2006

“R.P. Armstrong J.A.”

“I agree. E.A. Cronk J.A.”

“I agree. S.E. Lang J.A.”

[^1]: Ontario Law Reform Commission, Report on Exemplary Damages (Toronto: The Commission, 1991), at pp. 59-60.