St. Elizabeth Home Society v. Hamilton (City), 2010 ONCA 280

CITATION: St. Elizabeth Home Society v. Hamilton (City), 2010 ONCA 280

DATE: 20100416

DOCKET: C44716

COURT OF APPEAL FOR ONTARIO

Laskin, Rouleau and Epstein JJ.A.

BETWEEN

St. Elizabeth Home Society (Hamilton, Ontario)

Plaintiff (Appellant)

and

City of Hamilton, in its capacity as successor of the Corporation of the City of Hamilton, City of Hamilton, in its capacity as successor of the Regional Municipality of Hamilton-Wentworth, Ruth Schofield and Marilyn James

Defendants (Respondents)

Chris G. Paliare, Margaret L. Waddell and George A. Babits, for the appellant

John F. Evans, Q.C., Paul R. Sweeny and Shane van Engen, for the respondents, the City of Hamilton, in its capacity as successor of the Regional Municipality of Hamilton-Wentworth, Ruth Schofield and Marilyn James

Peter M. Jacobsen, Carlos Martins and Adrienne Lee, for the respondent, the City of Hamilton, in its capacity as successor of the Corporation of the City of Hamilton

Heard: September 14, 15, 16, 17 and 18, 2009

On appeal from the judgment dated December 13, 2005, and the costs order dated December 31, 2007, of Justice David S. Crane of the Superior Court of Justice.

Laskin and Rouleau JJ.A.:

A. OVERVIEW

[1] There are two principal issues on this appeal: first, whether the trial judge erred in dismissing a claim of misfeasance in public office against the respondents, the City of Hamilton and the Regional Municipality of Hamilton-Wentworth; and second, whether he erred in making a very large costs award – in excess of $4 million – in favour of the respondents.

[2] The appellant, St. Elizabeth Home Society (Hamilton, Ontario), operates a retirement home in Hamilton called the St. Elizabeth Villa. The Villa is licensed under a City of Hamilton by-law as a “second level lodging house” – that is, a home for “persons requiring guidance with the activities of daily living”. Over the period relevant to this litigation, the Villa was run by two Sisters – Sister Maria Szucs and Sister Elisabeth Manhertz.

[3] In early 1994, the former Director of Nursing at the Villa, Helen Demchuk, and several healthcare aides sent letters (collectively, the Demchuk letters) to the Region’s Public Health Department, the City’s Licensing Department and the Villa’s Board of Directors alleging wide-spread substandard care of residents at the Villa. These letters prompted a review of the Villa’s practices by an independent consultant, Martha McGuire, retained by the Villa’s Board. In early December 2004, after a two-week review, Ms. McGuire delivered a draft report. The report was damning. It amplified the concerns in the Demchuk letters, strongly criticized many health care practices at the Villa and commented adversely on the autocratic management style of Sister Maria.

[4] At a meeting on December 12, 1994, Ms. McGuire reviewed her draft report with the Sisters. They were upset with its content and objected to many of its criticisms. Overall, they did not accept the report.

[5] On December 20, 1994, eight days after the meeting, the City and the Region issued an order to comply against the Villa. The order to comply lies at the heart of this appeal. It alleged that the Villa had violated the “second level lodging house” by-law in four areas: admission of residents, nursing care, reports and records, and food. Over the next several months, the Villa took steps to rectify the violations.

[6] In April 1995, a Hamilton City councillor, Mr. Merling, leaked the order to comply and other documents to a reporter at the local paper, the Hamilton Spectator. Over the next six months, the Spectator published many articles on the Villa. Three of the articles referred to the order to comply. At the time, St. Elizabeth took no action.

[7] In late 1996 and early 1997, the coroner held an inquest into the deaths of five Villa residents. The Spectator reported the inquest’s evidence daily for six weeks with flashy headlines and dramatic stories. In late December 1996, in the middle of the inquest, St. Elizabeth began this litigation. Still, it made no claim that the order to comply was defamatory. In 2001, however, St. Elizabeth amended its statement of claim to allege defamation, abuse of public office, abuse of power, negligence, interference with economic relations and conspiracy, all in connection with the order to comply.

[8] The action was tried before Crane J. over 142 days between April 2004 and July 2005. In a lengthy judgment delivered in December 2005, the trial judge dismissed the action in its entirety. He assessed St. Elizabeth’s damages at $102,185. And he awarded costs of $2,317,000 to the City and $1,945,000 to the Region – a total of $4,262,000 – even though, by legislation effective January 1, 2001, the City and the Region had been amalgamated.

[9] On appeal, St. Elizabeth makes a wide-ranging attack on the trial judgment, contending that the trial judge made palpable and overriding errors in his findings of fact, and that he erred in law, particularly in his application of the tests for misfeasance in public office and negligence by a public authority.

[10] St. Elizabeth also contends that the trial judge erred in finding that the Region was entitled to rely on the six-month limitation period in the Public Authorities Protection Act R.S.O. 1990, c. P.38, even though a municipality is expressly excluded from the Act. In addition, St. Elizabeth argues that the trial judge erred both in failing to find a causal relationship between the respondents’ misconduct and St. Elizabeth’s losses and in his calculation of damages for lost profits. Finally, St. Elizabeth seeks leave to appeal, and if granted appeals the costs award on the grounds that it is too high and that separate awards to the City and the Region were unwarranted after they were amalgamated in 2001.

[11] St. Elizabeth seeks an order allowing the appeal, and a judgment in the amount of $715,295 for lost profits and $200,000 in general damages, plus prejudgment interest and costs.

B. THE LITIGATION

[12] We begin by observing that St. Elizabeth’s claim lacks an air reality. Its claim now centres on the order to comply issued in December 1994. Yet, although the Sisters forcefully disagreed with the order, the Villa did not initially seek to appeal or review it, or challenge it in any way. Instead, the Villa sought to address the violations in the order and, from the record, seemed to have done so quite successfully.

[13] Similarly, after the order to comply was leaked to the press and referred to in several Hamilton Spectator articles in 1995, St. Elizabeth initially made no claim in respect of it. Indeed, even in late 1996 when St. Elizabeth began this lawsuit, the order to comply figured only marginally in its pleadings. Not until 2001 – seven years after the order to comply was issued and five years after the lawsuit against the City and the Region was started – did St. Elizabeth amend its statement of claim and shift its focus to challenging the order to comply.

[14] That the challenge to the order to comply was belated is not fatal to its success. But it does give context to the question whether the issuance of the order to comply seriously affected the operation of the Villa. That context would have been apparent to the trial judge as the evidence unfolded before him.

C. THE APPEAL

[15] St. Elizabeth argued six issues before us: misfeasance in public office, the applicability of the Public Authorities Protection Act, negligence, causation, damages and costs.

[16] We did not call on the City and the Region to respond to St. Elizabeth’s submission on negligence. St. Elizabeth submitted that the respondents were negligent in their investigation of the Villa and in issuing the order to comply. In our view, that submission must fail because neither respondent owed a duty of care to the Villa. In their investigation and in issuing the order to comply, the respondents owed a public law duty to the residents of the Villa; they owed no duty to the Villa’s operator: see, for example, River Valley Poultry Farm Ltd. v. Canada (Attorney General) (2009), 2009 ONCA 326, 95 O.R. (3d) 1 (C.A.).

[17] Because of our conclusion on the absence of a duty of care, we need not address the two related questions of merger and the Public Authorities Protection Act. St. Elizabeth argued before the trial judge, as it argued before us, that it could maintain a claim in negligence separate from its claim of defamation. The trial judge held, however, that St. Elizabeth’s negligence claim merged with its claim for defamation arising out of the Hamilton Spectator articles in 1995 and a later Globe and Mail article in mid-1996. As the defamation action failed because St. Elizabeth did not meet the notice and limitation provisions in the Libel and Slander Act, R.S.O. 1990, c. L.12, so too did the negligence action. We express no opinion on whether the trial judge correctly applied the doctrine of merger.

[18] Similarly, we express no opinion on whether the trial judge was correct in concluding that any negligence claims against the Region and its Public Health Department were statute-barred because St. Elizabeth did not sue within the six-month limitation period in the Public Authorities Protection Act.

[19] We called on the respondents to address misfeasance in public office, causation, damages and costs. The balance of these reasons, however, deals only with the issues of misfeasance in public office and costs. We are not persuaded that the trial judge erred in dismissing the claim for misfeasance in public office, thus rendering a discussion of causation and damages unnecessary. However, we are persuaded that the trial judge erred in his costs award. We would grant leave to appeal from that part of his judgment, allow the appeal on costs and substantially reduce those costs in accordance with these reasons.

D. THE CLAIM OF MISFEASANCE IN PUBLIC OFFICE

(a) Introduction

[20] Misfeasance in public office is an intentional tort. The tort is meant to provide a measure of accountability for public officials who do not exercise their duties of office in good faith. To make out this tort, a plaintiff must prove four elements:

• The public official deliberately engaged in unlawful conduct in the exercise of public functions;

• The public official was aware that the conduct was unlawful and was likely to injure the plaintiff;

• The public official’s tortious conduct was the legal cause of the plaintiff’s injuries; and

• The injuries suffered are compensable in tort law.

See Odhavji Estate v. Woodhouse, 2003 SCC 69, [2003] 3 S.C.R. 263 at para. 32.

[21] At its core, the tort targets officials who act dishonestly or in bad faith. As Iacobucci J. said in Odhavji, public officials who deliberately engage in conduct that they know to be inconsistent with the obligations of their office risk liability for the tort. Conversely, public officials who honestly believe their acts are lawful, and do not intend to cause harm or know that harm would likely result from their actions, fall outside the ambit of misfeasance in public office. In this way, the required mental element achieves a balance between curbing unlawful, dishonest behavior and enabling public officials to do their jobs free from claims by those adversely affected by their decisions.

[22] St. Elizabeth submits that the trial judge erred in his findings on the first two elements of the tort of misfeasance in public office. It contends that, however well intentioned, the City and the Region’s Public Health officials knew that when they issued the order to comply the Villa had not violated the licensing by-law. St. Elizabeth contends that, by issuing the order to comply, City and Region officials acted with reckless disregard to the damage the order would cause to St. Elizabeth’s business. These submissions run up against the trial judge’s factual findings to which we will refer. And, as we shall endeavour to show, in our view, those findings are grounded in the evidence and in the trial judge’s credibility findings.

[23] Before discussing in detail the licensing by-law and the order to comply, we will set out the trial judge’s findings on misfeasance in public office. We address only the first two elements of the tort, which are the elements that make it an intentional tort. The trial judge found that St. Elizabeth had failed to establish either of these elements. On the first element – deliberate unlawful conduct in the exercise of public functions – the trial judge concluded at para. 408:

I conclude that the representatives Hunter, Barrow, Nelson and Schofield, did have the authority to issue the Order to Comply. I find secondly, that their belief in their authority was reasonably held by each of them on the basis that the interpretation given to the By-law by them was one that the By-law could bear. I find that there was no intention by these parties to act beyond their powers and thereby abuse their authority.

[24] On the second element – awareness that the conduct is unlawful and likely to harm St. Elizabeth – the trial judge concluded at para. 392:

The second essential element of the defendants being aware that their conduct of issuing the Order to Comply was likely to cause harm to the Villa, has no factual foundation. There is no credible evidence that any of the defendants were “aware both that his or her conduct was unlawful and that it was likely to harm the plaintiff”.

And at 408:

Nor was there any knowledge by any of them that the issuance of the Order to Comply would do anything other than benefit the plaintiff in improving health care to the Villa residents.

[25] In a separate section of his reasons, the trial judge addressed the issue of good faith. He found that the several public officials from the Region’s Department of Public Health who dealt with the Villa acted in good faith. They believed that they were acting lawfully when they issued the order to comply. Their intent in doing so was not to harm the Villa but to assist it in its operation. The trial judge found that the City’s licence inspector, Dean Barrow, was a “consummate civil servant” who did not have “either a torch to bear or a sword to wield”.

(b) City of Hamilton licensing by-law 80-259

[26] This by-law prescribes standards for licensing and regulating second level lodging houses. The Villa was licensed under this by-law in 1988.

[27] Section 1(25) of the by-law defines a second level lodging house:

1(25) “Second Level Lodging House” means a House:

(i) which accommodates four or more Residents;

(ii) where, for a fee, the Operator offers to Residents guidance in the activities of daily living; and advice and information;

(iii) where, 24 hours a day, at least the Operator or one adult employee of the Operator, in on duty in the House and able to furnish such guidance.

[28] Section 1(1) defines “activities of daily living” as including “those activities of the individual that maintain his sufficient nutrition, hygiene, warmth and rest.”

[29] The regulatory provisions of the by-law that the Villa allegedly violated are found in ss. 26, 32, 35 and 44(2). Section 26 deals with the admission of residents to a second level lodging house:

ADMISSION OF RESIDENTS

26. Where the physical or mental condition of a person is such that, in the opinion of a physician, the person cannot be properly cared for in a House, the person shall not be admitted or remain as a Resident.

Section 26 must be considered in conjunction with the undertaking signed by the two Sisters when the Villa was licensed in 1988:

Let this serve to certify and confirm that, effective the 25th day of August, 1988, no person(s) will be admitted to the St. Elizabeth Villa in the absence of a certificate from a legally qualified medical practitioner certifying that such person(s) does not require Nursing Home Care, at the time of admission, in the opinion of such medical practitioner.

[30] Section 32 of the by-law deals with nursing care:

NURSING CARE

32. Wherever the physician mentioned in sections 30 or 31 determines that a Resident requires emergency nursing care of “Home Care Services”, the Operator shall allow such nursing care or “Home Care Services” to be given to that Resident.

[31] Section 35 deals with food:

NUTRITIONAL CARE

35. The Operator shall ensure that the Residents are served daily sufficient food of good quality and adequate nutritional and caloric value.

[32] And s. 44(2) deals with the reporting of assaults or injuries:

RECORDS AND REPORTS

44(2) Every occurrence of fire, assault and injury shall be recorded forthwith and kept available for inspection by the Medical Officer of Health.

[33] During argument, the parties put forward two different theories about what prompted Public Health Officials to issue the order to comply. According to St. Elizabeth, in targeting the Villa, the Public Health Department of the Region was advancing its hidden agenda to implement a set of recommendations for interpreting and indeed changing the by-law, even though the City had refused to amend it. The Public Health Department and the task force that made these recommendations wanted a more comprehensive regulation of second level lodging houses, and specifically wanted to exclude those persons eligible for admission at provincially regulated nursing homes. St. Elizabeth claimed that the Public Health Department sought to make an example of the Villa in order to press its case for amending the by-law. The trial judge rejected St. Elizabeth’s claim at para. 514 of his reasons:

I reject the plaintiff’s submission as unfounded that Ms. Schofield and Public Health were on a mission or had a well-meaning intention to enforce a higher level of health care on operators of Second Level Lodging Houses than was provided in By-law 80-259 and 81-93. I find that Ms. Schofield had accepted that the Provincial Government did not accept the Christopherson Task Force recommendations and that it was for her to move on and do her job. I expect that a conscientious Medical Officer of Health and her Public Health staff would interpret their legislative authority broadly, consistent with obtaining for the vulnerable elderly population in Second Level Lodging Homes, a good level of care.

[34] We see no basis to overturn that finding. Moreover, we do not see it as terribly relevant to the issue we must decide: whether the trial judge’s finding that the respondents did not knowingly abuse their authority when they issued the order to comply ought to be overturned.

[35] The other theory, pressed by the respondents, was that in reality St. Elizabeth was not operating a second level lodging house, but instead an unlicensed nursing home. According to the City and the Region, far too many residents were admitted to the Villa who should have been in a nursing home. The trial judge agreed with the respondents’ contention at para. 466 of his reasons:

I conclude from all the evidence that the Sisters did not profess any intention of operating the Villa according to the Second Level Lodging House By-law of guidance in daily living. They had operated a nursing home on John Street and I find that they had set up the Villa to care for essentially the same care level of persons.

[36] The trial judge’s conclusion becomes relevant when we examine whether St. Elizabeth violated s. 26 of the by-law and the Sisters’ undertaking concerning the admission of residents to the Villa.

(c) The order to comply

[37] As we have said, the order to comply was issued on December 20, 1994, eight days after the Sisters had reviewed McGuire’s draft report. St. Elizabeth submits that in issuing the order and issuing it when they did, the City and the Region acted in bad faith. St. Elizabeth argues that instead of issuing a formal order, the representatives of the respondents should have met informally with the Sisters and the Villa’s Board of Directors to discuss their concerns. St. Elizabeth also argues that the respondents acted precipitously in issuing the order before receiving McGuire’s final report and before giving the Villa’s Board an opportunity to discuss the report at its January meeting. We do not agree with St. Elizabeth’s submissions.

[38] The Demchuk letters and the McGuire draft report presented an alarming yet credible portrayal of substandard care at the Villa. Demchuk was the former Director of Nursing. She was in a position to know. McGuire was an independent consultant who spent two weeks examining resident care at the Villa. Demchuk wrote of feeding several residents from the same food, placing residents in restraints for night sleep, and physical and verbal abuse of residents by staff. McGuire’s draft report wrote about food being recycled, inappropriate emergency procedures, lack of ready access to food and drink, rough and disrespectful treatment of residents, poor hygienic practices, overuse of restraints and the Sisters’ highly controlling management style.

[39] Faced with the serious concerns raised by Demchuk and McGuire, the respondents had a duty to protect the health and safety of the residents at the Villa. They had to take some action. They were not obliged to wait until McGuire’s final report or the January Board meeting. Indeed, they would have been open to criticism had they done so as the Sisters had already rejected, in strong terms, the content of the Demchuk letters and the McGuire draft report as “biased” and “unfounded” .

[40] Moreover, the seriousness of the concerns about resident care at the Villa, coupled with the Sisters’ categorical refusal to acknowledge these concerns, demanded formal action, not a mere informal discussion. The respondents could have taken more serious action – for example, a charge under the by-law or a show cause hearing to revoke or suspend St. Elizabeth’s license – but instead chose the least drastic formal option available: the issuance of an order to comply. Viewed in this light, their exercise of discretion to take formal action instead of holding an informal meeting can hardly be characterized as evidence of bad faith. Indeed, the trial judge found that in issuing the order to comply, they were motivated by good faith and a desire to assist the Villa and its residents. The record fully supports his finding.

[41] The order to comply is directed to Sister Maria and the Villa. It begins with a recital “that in accordance with the City of Hamilton by-law 80-259 as amended an inspection was conducted and the following violations were noted”. The order to comply goes on to state that a by-law charge may be laid if the Villa fails to comply with the order’s terms within 42 days.

[42] The substantive part of the order deatils the alleged violations along with recommendations for compliance and implementation dates. We set these out in full:

Section 26, Admission of Residents

Violation: Residents beyond the level of care of a Second Level Lodging House are admitted

Recommendation: That the operator notify the Lodging Home Nurse of all new residents

Implementation: Immediately

Section 32,[^1] Nursing Care

Violation 1: Delayed response to medical emergencies

Recommendation 1a: That the operator allow all staff to access emergency medical care such as calling 911 in a medical emergency

Implementation: Immediately

Recommendation 1b: That policy and procedures for emergency care practices for all staff be established

Implementation: January 31, 1995

Violation 2: Failure to provide additional care or Home Care Services to forty five residents who are beyond the care that is normally provided in a Second Level Lodging House

Recommendation: That the operator review in collaboration with families, Home Care, PCS and Second Level Lodging House nurses the 45 residents classified form Level C to Level F to ensure additional care services are provided up to and including transfer to another facility*

Implementation: To begin as soon as possible

*Please note: Lodging Home Nurse will assist if needed in the completion of the recommendation

Section 44(2),[^2] Records and Reports

Violation: Form 1 records are not being completed on every occurrence of assault and injury

Recommendation: That Form 1 records be completed on every occurrence of assault and injury and be placed in the resident’s file and kept available for inspection by the Medical Officer of Health

Implementation: Immediately

Section 35, Kitchen

Violation: Recycling of food

Recommendation: That all left over foodstuff be promptly disposed of by depositing the same in a suitable garbage container upon conclusion of all meals, as required in Section 26, Ontario Regulations 592/93

Implementation: Immediately

[43] St. Elizabeth makes two main submissions regarding the order to comply: first, that no inspection under the by-law was conducted; and second, that the Villa did not commit the infractions alleged. St. Elizabeth says that the respondents knew that no inspection had been carried out and knew that no violation had been committed, and yet, with reckless disregard, went ahead and issued the order to comply. We do not accept St. Elizabeth’s submissions.

[44] Under the by-law, “inspector” is defined to mean, among other things, “an Inspector of the Hamilton-Wentworth Regional Board of Health”. We accept that McGuire was not an inspector under the by-law and that her report largely prompted the issuing of the order to comply. In a narrow, literal sense, St. Elizabeth is correct that there was no “inspection” under the by-law.

[45] However, the Region’s Department of Public Health officials inspected the Villa regularly and did so as late as mid-November 1994. They had access to both the Demchuk letters and the McGuire draft report. These public health officials took a broad view of what constituted an “inspection” and were satisfied that this pre-condition to the issuance of an order to comply had been met. We think that they acted reasonably in doing so. In performing their public functions, they were entitled to act on reliable information and reports obtained in the course of their duties.

(d) The alleged violations

(i) Section 26: Admission of Residents

[46] The most serious alleged violation is that residents beyond the level of care of a second level lodging house were admitted to the Villa, contrary to s. 26 of the by-law. McGuire’s draft report provided compelling evidence that the Sisters were admitting many residents who should have been in a nursing home. She noted that nearly half the residents of the Villa (47 of 98) had care requirements that exceeded the care to be provided in a second level lodging house. Some approached a state of total dependency.

[47] Section 26 itself prescribes that where, in the opinion of a physician, a person cannot be properly cared for in a second level lodging house, the person shall not be admitted or remain a resident. As we have said, s. 26 has to be considered in conjunction with the undertaking given by the Sisters that no person would be admitted to the Villa without a certificate from a legally qualified medical practitioner certifying that at the time of admission the person did not require nursing home care.

[48] St. Elizabeth points out that every admission to the Villa was accompanied by a doctor’s certificate signed either by Dr. Szabo or Dr. Magda, in accordance with the undertaking and s. 26. However, these certificates are not conclusive proof of compliance with the undertaking and the by-law. For the certificates to be valid and compliant, the doctors’ opinions must be informed opinions. The opinions would be informed only if the doctors understood their obligations under the by-law and the undertaking, and understood the difference between a second level lodging house and a nursing home. The trial judge found that they did not. At para. 427 of his reasons, he said:

I have found from the evidence that these physicians were involved in miscommunication and non-communication, perhaps, most importantly, with regard to the requirements of the City’s Second Level Lodging House By-law as it related to the care provided at the Villa.

And at para. 430:

The certificates that the doctors signed following admission of their new patients to the Villa, were in a standard printed form prepared by the Villa. I find these forms did not correctly reflect the opinions of the doctors. Indeed, neither Doctor Magda nor Doctor Szabo, considered the distinctions between nursing homes and second level lodging houses. As indicated, their only concern was whether there was adequate care for their patients at the Villa.

And finally at paras. 464-465:

Ms. Nelson’s evidence is that she found the residents’ doctors were not aware of the level of services regulated under a Second Level Lodging house By-Law as compared to the Provincial standards of nursing homes.

This impression of Ms. Nelson proved to be largely true. Each of Drs. Magda and Szabo, in my understanding of their evidence, assessed their patients as to whether they believed the Villa could properly care for them. Neither thought it relevant to his practice to understand the licensing distinction.

[49] The evidence of the two doctors who signed the certificates supports these findings. For example, Dr. Szabo acknowledged that he did not really understand the by-law:

A: That is not true. I believe I may have had some discussion with the visiting nurses who came for inspections and job reviews and what have you on a regular basis. And I may have told them that I didn’t completely understand the by-law, that I didn’t understand what it was all about. They may have interpreted that to mean that I didn’t know about the by-law. There’s a difference

Q: Well, sure. I mean, if you’ve said to the public health officials …

A: Because …

Q: ‘I know there’s a by-law but I don’t understand the by-law.’ Do you think you might have said something like that, is that …

A: I would have said it’s vague, it’s very difficult to interpret and so therefore – but again, I’m not sure it was Ms. Schofield, I did see some of the nurses that visited on a regular basis. I didn’t see them, I saw them in the building.

[50] Dr. Magda admitted that he did not review the by-law until the inquest was called in 1996:

Q: Do you recall ever having reviewed this by-law which governs second-level lodging homes?

A: I did review it, but not at that time.

Q: Yes. And you reviewed it prior to the inquest?

A: Yes.

Q: Did you review it before that time?

A: I don’t think I remember doing it.

[51] It is also apparent that, in certifying admissions to the Villa, Dr. Magda did not take account of the Sisters’ undertaking that the person admitted did not require nursing home care. His only concern was that the Villa be able to provide the residents with the necessary care, even if it was the type of care provided by a nursing home.

Q. Can you tell me what kind of considerations you looked to in 1994 in making the assessment as to whether or not one of your patients was suitable for admission to the villa?

A: My criteria was in the building, the staff, the facilities and the equipment is there to look after my patient needs. Is there staff who dispense medication, is there staff who execute orders, is there staff who calling in outside help if I order it, like physiotherapy or VON for difficult to treat wounds, whatever. If that is in place, I think I feel the patients are safe in there. That was my criteria.

[52] But perhaps the most concrete evidence that the Sisters were operating a nursing home at the Villa came from the City’s official, Dean Barrow. After a visit to the Villa, he testified about what he saw and about what he expected to see:

Every floor that I attended [he attended on all floors] there was no one … all the lights were out in the bedrooms, the doors were open, it was dark. There was no one in the halls. On each floor that we went to, with the exception of the 6th floor, we did not see – other than employees, we did not see any clients until we arrived at the 6th floor when I observed there were six elderly clients or lodgers sitting in wheelchairs. ... I was a bit uneasy. I thought I was disturbing the clients here. I thought I was in – I thought I was in a nursing home.

This was a licensed second level lodging home that had in excess, at the time, of 100 clients. I expected, because it was such a large facility and had been in similar facilities, not in Hamilton, that it’d be quite busy, that they had a recreational room there with TV and lounges. I expected people would be, you know, sitting there watching TV, maybe playing cards, talking, having family visit – having family visiting them at that time of night. This was 7:30. We saw no one. The only person we saw when we entered was Sister Maria.

[53] Cumulatively, this evidence shows that, at least in substance, the Villa had violated s. 26 of the by-law and the undertaking.

(ii) Section 32: Nursing Care

[54] The order to comply alleged two violations connected to nursing care: responses to medical emergencies were delayed and additional care was not provided to 45 residents who needed more care than ordinarily provided in a second level lodging house. Section 32 of the by-law stipulates that when an on-call physician determines that a resident requires emergency nursing care or additional care, the Villa has to allow that care to be given. Admittedly, the two alleged violations do not fit easily into s. 32, which conditions emergency and additional care on a doctor’s opinion. Nonetheless, the record substantiates that City officials had good reason to be concerned about these problems at the Villa.

[55] Health care workers at the Villa testified that Sister Maria prohibited them from calling 9-1-1 in case of a medical emergency. Sister Maria’s protocol required first reporting the incident to her or to another designated staff person. This protocol is entirely consistent with the McGuire draft report’s observations regarding Sister Maria’s controlling management style. Of course, for residents in crisis, this protocol could have tragic consequences.

[56] According to the Region’s Public Health Department, 45 residents in need of additional care at the Villa were not receiving it. In the face of this evidence, Public Health officials can hardly be criticized for requiring that these nursing care problems be rectified. Their actions were consistent with the obligations of their office: protecting the health and safety of the residents of the Villa.

(iii) Section 44(2): Records and Reports

[57] Section 44(2) requires that every occurrence of a fire, assault or injury be recorded and that the report be available for inspection by the medical officer of health. The order to comply alleged that records were not being kept for every occurrence. The evidence of Rachelle Harber, whom the trial judge found “to be a knowledgeable and dedicated Public Health nurse with very positive motives”, supported this allegation. She testified that occurrence reports for serious injuries at the Villa were not completed. She was not shaken in her evidence on cross-examination.

(iv) Section 35: Recycling of Food

[58] The order to comply alleged that food was being recycled at the Villa contrary to s. 35 of the by-law, which requires that the operator serve food “of good quality”. This allegation was especially concerning in an elderly and vulnerable population, many of whom could not protect themselves from disease.

[59] Although no one from the City or the Region saw food being recycled, Mr. Hunter – the Director of the Environmental Health Branch at the Region’s Department of Public Health and the person who drafted s. 35 – testified that inspectors seldom, if ever, directly observe poor health care practices. They have to rely on evidence from others.

[60] In including s. 35 in the order to comply, Mr. Hunter relied on evidence in the Demchuk letters. In our view, he was entitled to do so. Those letters were written by health care workers at the Villa who saw food being recycled and reused – from one meal to the next and from one resident to the next – mainly by, and under the direction of, Sister Elizabeth. The trial judge referred to some of this evidence at para. 525 of his reasons:

In the Teles letter, concerns were expressed of food being recycled and mould being scraped off food and the remaining food fed to residents; that Sister Elisabeth used her hands to serve food (resulting in a concern for cross-contamination and disease); that cereal was recirculated. The concern regarding the cereal was that the first resident using her spoon would, if carrying a contagious disease, contaminate the cereal with that disease for the second resident to ingest. Food being recycled, such as toast served to residents with bites taken from it, again, could spread bacteria between residents. The use of food containing mould may cause illness.

[61] Mr. Hunter also had available to him the inspection report of Rachelle Harber, a public health nurse for the Region. In her inspection of the Villa in mid-November 1994, she noted that one resident told her “she watched Sister Elizabeth use leftover food from one resident and give it to another resident”, apparently because “the resident ate too slow.” Overall, substantial, credible evidence supported the allegation of food recycling.

(e) Conclusion on misfeasance in public office

[62] The tort of misfeasance in public office requires unlawful activity that is carried out deliberately with knowledge that it is likely to harm the plaintiff. In our view, the respondents acted lawfully in issuing the order to comply. They put forward substantial and credible evidence to support their claim that the Villa had violated three provisions of the by-law – ss. 26, 35 and 44(2). And, although the evidence did not establish that the Villa had violated the express terms of s. 32 of the by-law, the evidence did support the two allegations concerning nursing care at the Villa identified in the order to comply. Overall, we are not persuaded that St. Elizabeth has demonstrated illegality.

[63] However, even if we were to conclude that the respondents acted unlawfully in issuing the order, St. Elizabeth has failed to make out the critically important mental element of the tort. In our view, the trial judge’s finding that the respondents acted honestly, believing their actions to be lawful, and without any intent to harm the Villa is borne out by the evidence and by his credibility findings.

[64] In asserting that the respondents knew that they had no authority to issue the order to comply and acted with reckless disregard to the harm the order might cause to the Villa, St. Elizabeth points to the evidence of some of the Region’s Public Health officials and to the pre-trial evidence of David Beck, the Region’s solicitor who advised the Public Health Department to issue the order to comply. We do not think that their evidence undermines the trial judge’s finding that the respondents honestly believed they had the authority to issue the order to comply and that they acted in good faith in doing so.

[65] Ruth Schofield, an experienced nurse responsible for administrating the second level lodging house program, and Vicky Woodcox, a Director of Nursing for the Region’s Public Health Department, were cross-examined extensively on whether the Villa had violated s. 32 of the by-law. Both conceded that the Villa had not violated s. 32 as it was written because of the absence of an on-call doctor’s opinion. But both maintained that the Villa had violated the intent of s. 32: to provide immediate emergency care or additional care when needed. We do not find that their concession, which was limited to the express wording of s. 32, evidences bad faith. Indeed, the evidence seems to support the view of Ms. Schofield and Ms. Woodcox that the Villa frustrated the purpose of s. 32 because no one at the Villa – and especially not the Sisters – informed the on-call doctors of the need for emergency care or additional care.

[66] David Beck was examined exhaustively before trial but was not called as a witness at the trial. St. Elizabeth submits that in his pre-trial evidence, Beck acknowledged that at the December 14, 1994 meeting when the decision was made to issue the order to comply, he told City and Region officials that “there was no legal violation of the by-law”. Moreover, St. Elizabeth says that we should draw an adverse inference against the respondents because the Region failed to call Beck as a witness at trial.

[67] To take the last point first, we see no basis to draw an adverse inference. It was open to St. Elizabeth to call Beck as a witness, and it had available Beck’s extensive pre-trial evidence.

[68] On St. Elizabeth’s first point, we do not read Beck’s pre-trial evidence to say that he gave the opinion no legal violation of the by-law had occurred. Indeed, the order to comply was issued on his advice. Mr. Barrow testified that Mr. Beck directed him to draft the order because the Region’s Public Health officials concluded that the Villa had violated the by-law. Ms. Schofield testified that what Beck cautioned against was laying a charge under the by-law, but that Beck said an order to comply was appropriate if the by-law had been violated:

I can’t remember exactly the wording that he said but I do remember, overall, what he said. I do recall that that was, overall, what he was saying, that it was a violation of the By-law and – but we were not laying a charge. This was a violation of the areas that have been identified with these different standards.

As I said, my understanding was that’s correct. We were not going to lay a charge. With the information we couldn’t lay a charge because we hadn’t gone through the enforcement process but that doesn’t mean we couldn’t give a violation and that was my understanding, that there was a violation and that they could have an Order to Comply. That was my understanding.

[69] We, therefore, are not persuaded that the evidence of Ms. Schofield, Ms. Woodcox or Mr. Beck supports St. Elizabeth’s submission that the respondents knowingly acted unlawfully in issuing the order to comply. On the contrary, the record amply demonstrates that the City and Region officials dealing with the Villa acted honestly and in good faith in issuing the order to comply. The trial judge made that finding and he made no error in doing so.

[70] Accordingly, in our view, St. Elizabeth has failed to show that the respondents acted unlawfully in issuing the order to comply. It has also failed to show that the respondents acted dishonestly or that they knew their actions would likely harm the Villa. St. Elizabeth’s challenge to the trial judge’s dismissal of the claim for misfeasance in public office must fail.

E. COSTS

(a) The challenge to the costs award

[71] It is well recognized that cost awards are within the discretion of the trial judge. A cost award should not be set aside on appeal unless the trial judge made an error in principle or the award is plainly wrong: see Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2004] 1 S.C.R. 303 at para. 27.

[72] The trial judge awarded the respondents costs on a partial indemnity basis up to February 21, 2003, the date of the respondents’ offer to settle, and on a substantial indemnity basis thereafter. In setting the amount of costs, the trial judge found the time spent by counsel for the respondents to be reasonable and allowed them in full at a rate of 60 per cent for the partial indemnity portion of the costs and 90 per cent for the substantial indemnity portion. The amount of the award was $2,317,000 for the costs of the City and $1,945,000 for the costs of the Region, together with post-judgment interest at the rate of 4 per cent from the date of the judgment, December 13, 2005.

[73] St. Elizabeth submits that the costs award was excessive and unreasonable and that the trial judge committed several significant errors in reaching his conclusion. Specifically, St. Elizabeth submits that the trial judge erred in:

(1) awarding two sets of costs to the respondent, the amalgamated City of Hamilton, for the period after the City and Region were amalgamated on January 1, 2001;

(2) awarding substantial indemnity costs following the respondents’ offer to settle;

(3) awarding the respondents costs of two specific motions, a contempt motion involving Ken Peters and a motion seeking particulars of the respondents’ bill of costs; and

(4) not carefully scrutinizing the bill of costs on the basis that the award was so high as to make litigation inaccessible and out of proportion to the issues raised.

We will address each of these in turn.

(1) Should the respondents have received two sets of costs for the period following the January 1, 2001 amalgamation?

[74] The respondents maintain that St. Elizabeth is precluded from challenging the trial judge’s decision to award two completely separate sets of costs. The respondents argue that, in the course of its costs submissions at trial, St. Elizabeth had conceded that both the Region and the City were entitled to costs as if the amalgamation had not occurred.

[75] In our view, the respondents have misinterpreted the concession made by St. Elizabeth. Clearly, both the Region and the City were entitled to separate awards of costs up until the date of amalgamation. Nothing in the record suggests that St. Elizabeth’s concession was intended to apply beyond this to the post-amalgamation period. Indeed, the portion of St. Elizabeth’s submissions at trial dealing with the appropriate quantum of costs clearly said that, after the amalgamation, the respondents were no longer entitled to an award that ignored the fact the City and the Region had amalgamated.

[76] After the amalgamation, the Region and the City became one legal entity – the City of Hamilton. As a result, there was only one interest to be defended and the cross-claim between them became a nullity. The trial judge therefore erred when he stated that “there was distinct and separate interest and exposure to liability as between [the City] and [the Region].” It is true that different strategies, relying on the various actions of the Region or the City, were available to St. Elizabeth in seeking to establish the liability of the amalgamated City of Hamilton. However, whichever strategy was adopted, and regardless of who is said to have been responsible for the negligence or misfeasance, the same entity – the amalgamated City of Hamilton – would be liable.

[77] The respondents further submit that because the City and the Region had different insurers, continued separate representation after amalgamation was warranted. We would not give effect to this submission. The involvement of more than one insurer in the defence of a party is not an unusual occurrence. There is frequently more than one insurer, or an insurer and a re-insurer, involved in defending a claim against an insured, each of whom may have its own set of lawyers advising it. However, this does not normally result in the plaintiff being burdened with more than one set of costs.

[78] In the alternative, the respondents submit that the two individual defendants, Ruth Schofield and Marilyn James, were entitled to separate representation. We would not give effect to this submission. These two individuals did not have separate representation before amalgamation. They were represented by counsel for the Region, their employer at the time. The Region’s by-laws provided that it would indemnify them from claims such as the one advanced in this litigation. After amalgamation, they continued to be indemnified by their employer and continued to share the same solicitor as their employer. On the facts of this case, we see no basis to justify separate representation for these two individuals after amalgamation. Although they may have developed a good working relationship with counsel for the Region, and may have preferred to continue working with them, this does not justify imposing costs for two sets of lawyers to represent interests that were only notionally different after amalgamation.

[79] In the further alternative, the respondents submit that the trial judge made a finding that both sets of lawyers were required, that they properly divided the workload and that there was no duplication. The respondents base this submission on the statement by the trial judge that “defence counsel made an appropriate division of time and participation in this litigation commensurate with their division of the defence based upon the plaintiff’s case …”

[80] We do not agree. The trial judge’s observation was made in the context of his earlier reference to the pre-amalgamation period when each of the former entities was entitled to separate representation and a separate defence. The trial judge never addressed the issue in the post-amalgamation context of only one defendant and one defence.

[81] Having concluded that only one set of costs ought to have been awarded after amalgamation, the exercise of setting the appropriate cost award is not as simple as allowing only one set of lawyers from the date of the amalgamation forward. The present case is unusual because when the claim was issued there were two separate defendants – the City and the Region – defending. Therefore, up to the point of amalgamation, each was entitled to its own set of lawyers as each faced different issues, provided separate instructions, had different priorities and faced separate liability. After the amalgamation, the need for separate representation was lost. However, it would be unrealistic to expect the amalgamated City of Hamilton to have chosen one of the two previous law firms and immediately dismissed the other without further contact. At a minimum, there needed to be a significant transition period during which both firms would continue to be involved in the case, transferring information and coordinating the amalgamated City of Hamilton’s position going forward.

[82] In fixing costs, therefore, the trial judge ought to have treated the City and the Region as one entity after amalgamation and, in this context, assessed the need for and extent of the continued involvement of counsel from both firms working on the case.

(2) Did the trial judge err in awarding substantial indemnity costs from the date of the respondents’ offer?

[83] Both St. Elizabeth and the respondents made offers to settle before trial. In February 2003, the respondents offered to settle the claim for $153,200 plus interest and costs. In March 2004, St. Elizabeth offered to settle for $1.299 million plus interest and costs. The trial judge awarded the respondents costs on a partial indemnity scale up to the date of their offer and on a substantial indemnity scale thereafter.

[84] St. Elizabeth submits that the award of substantial indemnity costs should be set aside. Specifically, it argues that the trial judge’s reliance on the respondents’ offer to settle for making the award was contrary to the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 and established jurisprudence.

[85] The respondents make three submissions on this issue. First, they say that the trial judge took many factors into account in exercising his discretion and that, although he considered the offers to settle as one factor among many, they were not determinative. Second, in any event, the respondents say that the offers to settle did provide an appropriate basis for the award. Finally, the respondents say that the award was justified by St. Elizabeth’s conduct of the action.

(i) Were the offers to settle determinative?

[86] With respect to the respondents’ first submission, in making his costs award, the trial judge indicated that “[h]ad there been no offer of the defendants, I would have granted to the defendants partial indemnity costs throughout.” It is apparent, therefore, that the trial judge relied on the offers to settle for his award of substantial indemnity costs. The issue squarely before the court is whether the judge could rely on the offers.

(ii) Were the offers to settle an appropriate basis for the award?

[87] As to the respondents’ second submission, the respondents argue that the trial judge was correct to rely on the offers to settle to award substantial indemnity costs. The trial judge explained that the offers to settle justified the award because the plaintiff’s offer was “unjustifiable and unacceptable to the defendants”, “exceeded its expert evidence on assessment of damages at trial” and “put the defendants in the situation of either paying an outrageously large sum as settlement or incurring an outrageously large sum to successfully defend themselves.” By contrast, the trial judge found that the respondents “made an offer that represented a generous resolution of the litigation in favour of the plaintiff … they acted responsibly to avoid a huge trial cost.” He then concluded that “the defendants’ offer to settle must be positively recognized both to do justice here and as a precedent to the parties and their counsel in other litigation by ‘deep pocketed’ plaintiffs.”

[88] The respondents submit that authority for the trial judge’s reliance on the offers to settle in setting costs can be found in this court’s decision in S & A Strasser v. Richmond Hill (Town) (1990), 1 O.R. (3d) 243 (C.A.). In that case, the Court of Appeal determined that awarding substantial indemnity costs from the date of a defendant’s offer to settle was justified.

[89] We disagree. The trial judge’s award of substantial indemnity costs is inconsistent with the Rules and is not supported by the case law.

[90] Rule 49 sets out the costs consequences of offers to settle. Pursuant to r. 49.10(1), where a plaintiff offers to settle, obtains a judgment at least as favourable as the offer to settle, and meets other procedural requirements, it is entitled to substantial indemnity costs from the date of the offer unless a court orders otherwise. However, there is no corresponding provision entitling a defendant to substantial indemnity costs where it makes an offer to settle that is greater than the amount ultimately awarded. Nor is there any provision providing that substantial indemnity costs can be awarded against a plaintiff where its offer to settle is inordinately high. In our view, therefore, the trial judge erred in relying on the offers to settle for his award of substantial indemnity costs.

[91] Moreover, we reject the respondent’s submission that the trial judge’s consideration of the defendants’ offer was justified on the basis of this court’s decision in Strasser to award substantial indemnity costs against a plaintiff where the defendant had made a reasonable offer to settle. In that case, the trial judge had observed that the situation “screams for solicitor and client costs.”

[92] However, later decisions of our court have stressed that Strasser should be applied narrowly. In Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 312 D.L.R. (4th) 278 (Ont. C.A.), this court carefully reviewed the jurisprudence since Strasser and concluded, at para. 40, that Strasser should be interpreted as “a case where the trial judge implicitly found such egregious behavior” on the part of the plaintiff that an award of substantial indemnity costs was warranted. It does not, as the respondents suggest, represent a change in the law that solicitor and client costs are only awarded in rare and exceptional cases. (See also Scapillati v. A. Potvin Construction Limited (1999), 1999 1473 (ON CA), 44 O.R. (3d) 737 (C.A.) and McBride Metal Fabricating Corp. v. H. & W. Sales Co. (2002), 2002 41899 (ON CA), 59 O.R. (3d) 97.)

[93] Turning to the plaintiff’s offer, the trial judge’s comments suggest that a plaintiff making a settlement offer prior to trial will be penalized in costs if the offer proves to be high as compared to the evidence led at trial. As noted, rule 49 does not provide for this. Furthermore, such an approach would operate to discourage plaintiffs from making offers to settle unless they were reasonably confident that the amount offered was less than what they would ultimately be seeking to prove at trial.

[94] The trial judge’s finding that St. Elizabeth’s offer to settle put the respondents in the position of either settling for an inordinately high amount or incurring the costs of litigation is not a relevant consideration in awarding substantial indemnity costs. The existence of a large gap between a plaintiff’s and a defendant’s offer provides only a limited indication whether a figure between the two might resolve the matter prior to trial. The widely divergent offers in this case put the respondents in no worse a position than defendants in the many cases where the plaintiff makes a large claim, neither party makes a settlement offer and the plaintiff’s claim ultimately fails at trial.

[95] Finally, we note that St. Elizabeth’s claim advanced at trial was more than the amount it offered to settle for. Although St. Elizabeth’s settlement offer exceeded its own expert’s assessment of damages, the expert only addressed the lost revenue claim. St. Elizabeth was also advancing a claim for general, punitive and exemplary damages. When these claims are added to the expert’s assessment of damages, it brings the total claim well beyond the amount of the settlement proposal.

(iii) Could the award be justified by St. Elizabeth’s conduct of the action?

[96] We turn now to the respondents’ submission that the award of substantial indemnity costs was, or could be, justified by St. Elizabeth’s conduct of the action. Although the trial judge expressed concern with the way St. Elizabeth conducted the trial,[^3] the nature of the allegations and the strength of its case, we do not, as the respondents suggest, view these concerns as providing the basis for substantial indemnity costs. First, the trial judge did not rely on St. Elizabeth’s conduct for making the award; he relied instead on the offers to settle. Furthermore, other than broad statements showing his disapproval for the length of the trial and the breadth and weakness of the claims advanced, the trial judge provided little detail and carried out little analysis of these concerns. Nothing suggests they rose to a level where, according to the existing jurisprudence, substantial indemnity costs would have been warranted.

(3) Did the trial judge err in awarding the respondents costs for the contempt motion and the motion seeking particulars of the respondents’ bill of costs?

[97] St. Elizabeth submits that it should not have been required to pay the costs incurred by the respondents for the contempt motion or for the motion requesting particulars of the respondents’ bill of costs.

[98] The contempt motion related to the refusal by Ken Peters, a reporter for the Hamilton Spectator, to reveal his source for the information contained in an allegedly defamatory article he authored. St. Elizabeth argues that the trial judge had ordered Peters to pay the costs and it would be a duplication to now order St. Elizabeth to do so.

[99] In our view, it was within the trial judge’s discretion to order St. Elizabeth to pay these costs. Peters was called by St. Elizabeth as a witness at trial and so the costs incurred for the motion were properly considered to be trial costs. The trial judge ordered Peters to pay a portion of the costs of the contempt motion as a penalty. That penalty was overturned by this court. As a result, there was no outstanding order that Peters pay the costs of the contempt motion and it was open to the trial judge to require St. Elizabeth to pay these costs. We would not interfere with his exercise of discretion.

[100] With respect to the motion for particulars, St. Elizabeth argues that because further particulars of the respondents’ bill of costs were ordered, the motion was successful and costs should follow the result.

[101] The respondents, however, point out that the motion was settled while it was being argued. In their view, the settlement was nothing more than the respondents’ agreeing to present the information already provided to St. Elizabeth, albeit in a different format.

[102] In our view, it was within the trial judge’s discretion to rule as he did on this issue.

(4) Did the trial judge err in failing to ensure that overall the costs award was fair and just?

[103] St. Elizabeth submits that the trial judge carried out a purely mechanical review of the costs being claimed. He did not, as he is required to do, review the award to determine whether, overall, it was fair and just in the result. In St. Elizabeth’s view, the trial judge simply rubberstamped the respondents’ bill of costs.

[104] Because we have concluded that the trial judge erred in awarding two separate sets of costs after amalgamation and in awarding substantial indemnity costs, there will be a significant reduction in the overall costs award. This reduction, in and of itself, addresses the essence of St. Elizabeth’s complaint on the overall size of the costs award.

[105] However, even absent a reduction in the award, we would not have given effect to this ground of appeal. In his reasons following the penultimate phase of the costs submissions, the trial judge specifically turned his mind to the issue of the overall amount of costs. He referred to this court’s decision in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291 (C.A.) and indicated that he was reserving his discretion “to actually fix the costs without a slavish adherence to arithmetic and with one last long look at what is overall a fair and just result.” About a month later, the trial judge issued his final ruling on the costs issue and stated that he had exercised his discretion in fixing the amount of costs. Read in the context of his earlier statement, it is apparent that the trial judge did turn his mind to the overall fairness of the costs award before making his decision.

(b) Disposition

[106] The substantial indemnity portion of the costs awarded was, for the City, $1,882,629 (90 per cent of the actual fees of $2,091,810) and, for the Region, $1,470,966 (90 per cent of the actual fees of $1,634,407). From our review of the record, it appears that all other aspects of the costs award were made on a partial indemnity scale. To reflect our decision that costs ought to have been awarded on a partial indemnity scale throughout, we would reduce the fees awarded to the City by $627,543 (30 per cent of $2,091,810) and reduce the fees awarded to the Region by $490,322 (30 per cent of $1,634,407). If, upon review, counsel determine that other portions of the costs were awarded on a substantial indemnity basis, they can make the appropriate adjustments or make further submissions to the court.

[107] Determining what adjustments should be made to reflect the duplication due to the Region and the City not undertaking a single defence after the January 1, 2001 amalgamation is not as straightforward. As we have noted, the peculiar circumstances of this case made a period of significant continuing overlap by both sets of solicitors necessary.

[108] As well, the trial judge’s view that, at trial, counsel for the two former entities “made an appropriate division of labour and participation” should be reflected in any adjustment we make. As noted by the respondents, this was a long and complex trial and the issue is not whether there were two separate sets of lawyers representing them, but rather whether there was a duplication of costs. In their view, the court should find no duplication because despite having two sets of lawyers, the respondents only had four gowned counsel at trial on most days. Similarly, St. Elizabeth had four gowned counsel at trial on many days. The similarity suggests that the respondents had effectively combined their defences.

[109] In our view, however, the fact that St. Elizabeth had four gowned counsel present at trial on many days does not mean that St. Elizabeth would necessarily have recovered fees for all four counsel in an assessment to determine reasonable trial costs. Further, this submission only applies to the portion of the bill of costs relating to the trial costs. The respondents had two sets of counsel attending the lengthy discoveries in this matter, most of which were held after the amalgamation. In addition, both sets of lawyers for the respondents were supported by several lawyers at their respective firms and we expect that each firm would be preparing separate reports to their client, as well as engaging in meetings and exchanges to coordinate what were, in effect, separate defences.

[110] On the record before us, any adjustment we make will be no more than a rough estimate of the duplication that could reasonably have been avoided. We do not, however, believe that the interests of the parties would be served by sending this matter for an assessment. The matter is best disposed of by this court. We would alter the award by adjusting the fee portion of both bills of costs by applying a further 25 per cent reduction to the post-amalgamation costs of both the City and the Region, after making the adjustment to reflect partial indemnity costs throughout. We expect that there would be very little duplication in the disbursements and would make no adjustment to that figure.

F. CONCLUSION

[111] We would dismiss St. Elizabeth’s appeal from the judgment at trial dismissing the action. However, we would grant St. Elizabeth leave to appeal costs, allow the appeal on costs, and reduce the trial costs in accordance with these reasons.

[112] If the parties cannot agree on the costs of the appeal, St. Elizabeth may make brief written submissions within thirty days of the release of these reasons, and the respondents may do so twenty days thereafter.

RELEASED: April 16, 2010 “John Laskin J.A.”

“JL” “Paul Rouleau J.A.”

“I agree Gloria Epstein J.A.”

[^1]: The order to comply says section 31, but both sides agree that the relevant provision is section 32. [^2]: The order to comply says section 42(1), but both sides agree that the relevant provision is section 44(2). [^3]: We note that counsel on appeal were not counsel at trial.