McLean v. Knox et al.; Pembridge Insurance Company, Statutory Third Party

[Indexed as: McLean v. Knox]

109 O.R. (3d) 690
2012 ONSC 1069

Ontario Superior Court of Justice

R. Smith J.
February 14, 2012

Civil procedure -- Costs -- Fixing costs -- Plaintiff's recovery in complex personal injury action much less than amount he had sought from [page691] jury and closer to amount of defendant's offer to settle -- Defendant's offer to settle not complying with rule 49.10 of Rules of Civil Procedure but factor in awarding costs -- Defendant not submitting that costs claimed by plaintiff were beyond what unsuccessful party would reasonably have expected to pay -- Defendant ordered to pay costs in amount of $150,000 plus disbursements and HST -- Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rule 49.10.

Civil procedure -- Costs -- Offer to settle -- Statutory deduction under s. 267.5(9) of Insurance Act not to be subtracted from damages when considering whether offer to settle was exceeded -- Insurance Act, R.S.O. 1990, c. I.8, s. 267.5(9).

The plaintiff in a personal injury action sought his costs on a partial indemnity basis fixed in the amount of $302,559.64 (including $185,986.95 for fees). He submitted that he recovered damages of $174,553, after deducting 15 per cent from the damages award for his share of contributory negligence and before allowing for the deductible under s. 267.5(9) of the Insurance Act. The defendant submitted that it should be awarded partial indemnity costs from the date a collective all- inclusive offer to settle for $260,000 was made or, alternatively, it should be awarded partial indemnity costs from the date it offered to settle for $150,000 plus costs. The defendant also submitted that the plaintiff only recovered damages of $141,478 for purposes of determining whether offers to settle had been exceeded, after deducting the $30,000 statutory deduction under the Insurance Act.

Held, the plaintiff should be awarded costs on a partial indemnity basis in the amount of $150,000 plus disbursements and HST.

The statutory deduction was not to be considered when determining the plaintiff's entitlement to costs.

The collective offer to settle did not trigger any costs consequences under rule 49.10 of the Rules of Civil Procedure as it was withdrawn several months before trial and the plaintiff's recovery would exceed the amount of the offer. That offer was a very small factor under rule 49.13. The defendant's own offer to settle for $150,000 did not comply with rule 49.10 as it was made only four days before the commencement of trial and the plaintiff recovered damages greater than the amount to settle. However, that offer was a factor in awarding costs as the amount of the offer was very close to the amount recovered after trial. The amount recovered was much less than the amount the plaintiff had sought from the jury. This was a complex action involving multiple expert witnesses. While some of defence counsel's tactics and statements made before the jury required correcting instructions to be given to the jury, defence counsel's conduct was not so extreme as to be a major factor in awarding costs. Defence counsel did not file a cost outline outlining the costs incurred as required by rule 57.01(6) and had not submitted that the costs claimed were beyond what the unsuccessful party would reasonably have expected to pay.

RULING on costs.

Cases referred to
Rider v. Dydyk (2007), 87 O.R. (3d) 507, [2007] O.J. No. 3837, 2007 ONCA 687, 286 D.L.R. (4th) 517, 231 O.A.C. 169, 53 C.C.L.I. (4th) 188, [2007] I.L.R. I-4649, 160 A.C.W.S. (2d) 968

Statutes referred to
Insurance Act, R.S.O. 1990, c. I.8, ss. 267 [as am.], 267.5(9) [page692]

Rules and regulations referred to
Rules of Civil Procedure, R.R.O. 1990, Reg. 194, rules 49.03, 49.10, 49.11, 49.13, 57, 57.01(6)

William J. Sammon, for plaintiff.
Daniel Reisler and Chester Wydrzynski, for defendant Finnigan's Roadhouse.

R. SMITH J.: -- Positions of Parties

[1] The plaintiff seeks costs on an partial indemnity basis fixed in the amount of $302,559.64. He claims $185,986.95 for fees plus HST of $24,178.30, for a total of $210,165.25. The sum of $92,394.39 ($82,745.77 plus HST of $9,648.62) is claimed for disbursements.

[2] The plaintiff submits that he recovered damages of $174,553.00, inclusive of prejudgment interest, and after deducting 15 per cent from the award of damages for his share of contributory negligence and before allowing for the deductable under s. 267.5(9) of the Insurance Act, R.S.O. 1990, c. I.8.

[3] Finnigan's submits that it should be awarded partial indemnity costs from the date the collective all inclusive offer to settle for $260,000 was made or, alternatively, it should be awarded partial indemnity costs from the date it offered to settle for $150,000 plus partial indemnity costs, which was made four days before trial. In the further alternative, Finnigan's submits that the amount claimed for costs by the plaintiff is excessive.

[4] Counsel for Finnigan's also denies the plaintiff's allegations that his conduct was unreasonable or unduly lengthened the trial and submits that even if the offers to settle do not comply with rule 49.10 [of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194] they must be considered under rule 49.13 when fixing the costs.

Factors

[5] The factors to be considered when fixing costs are set out in Rule 57 and include in addition to success, the amount claimed and recovered, the complexity and importance of the matter, unreasonable conduct of any party which unduly lengthened the proceeding, scale of costs and any offer to settle, hourly rate claimed, the time spent and the principles of indemnity and [page693] proportionality, and the amount that a losing party would reasonably expect to pay.

Issue #1 Should the Insurance Act deduction be made from the award of damages before considering the cost consequences of offers to settle

[6] Counsel for Finnigan's submits that the plaintiff only recovered damages of $141,478 for purposes of determining whether offers to settle have been exceeded and not $174,533 as claimed. Finnigan's has calculated the damages recovered by the plaintiff after deducting the $30,000 statutory deduction under the Insurance Act. I do not agree with the defendant's approach as it is contrary to the Court of Appeal decision of Rider v. Dydyk (2007), 2007 ONCA 687, 87 O.R. (3d) 507, [2007] O.J. No. 3837 (C.A.).

[7] In Ryder v. Dydyk, the Ontario Court of Appeal considered the correct interpretation of s. 267 of the Insurance Act and held that the statutory deduction from the plaintiff's assessed damages are not to be considered when determining a party's entitlement to costs.

[8] As a result, I accept the plaintiff's calculation that he recovered the amount of $174,533 in damages for purposes of awarding costs and for the purpose of determining if the defendant obtained a better result after trial than its offer to settle. I find that Finnigan's calculation of damages of $141,419 is not correct for these purposes.

Offers to Settle

[9] The plaintiff offered to settle for the sum of $400,000 plus costs of the action on a partial indemnity basis. The offer was not exceeded after trial and therefore there are no costs consequences arising from the plaintiff's offer to settle.

[10] The defendants made two offers to settle. The first offer to settle was made collectively by all defendants for $260,000, all inclusive. The offer to settle was made on January 26, 2011 and was withdrawn on May 30, 2011. The collective offer to settle does not trigger any costs consequences under rule 49.10 because this offer to settle was withdrawn several months before the trial commenced and the plaintiff's recovery after trial will exceed the amount of the collective offer once the costs are added to his recovery of $174,553 in damages. As a result, the defendant's collective offer to settle is a very small factor under rule 49.13.

[11] On September 14, 2011, Finnigan's also made an offer to settle for $150,000, inclusive of prejudgment interest plus partial indemnity costs to be agreed or assessed. This offer did not [page694] comply with rule 49.10 as it was made only four days before the commencement of trial and the plaintiff recovered damages after trial greater than the amount of the offer to settle.

Rule 49.13

[12] Rule 49.13 states that despite rules 49.03, 49.10 and 49.11, the court, in exercising its discretion with respect to costs, must take into account any offer to settle made in writing, the date the offer was made and the terms of the offer. In this case, Finnigan's offered to settle for $150,000 plus partial indemnity costs and after trial and the plaintiff recovered $174,553. While the defendant's offer to settle did not trigger the costs consequences under rule 40.10, it is a factor in awarding costs as the amount of the defendant's offer was very close to the amount recovered after trial. Finnigan's offered to settle for $24,553 less than the amount the plaintiff recovered after trial, which is 14 per cent less than the plaintiff's recovery.

[13] Plaintiff's counsel also offered to accept that the plaintiff would be contributorily negligent to the extent of 13.1 per cent. The jury ultimately found that the plaintiff was 15 per cent contributorily negligent. Defence counsel took the position that the plaintiff was 50 per cent contributorily negligent. The plaintiff's offer was much closer to the percentage of contributorily negligence than the position of the defendant before trial.

Amount Claimed and Recovered

[14] In his submissions to the jury, the plaintiff sought damages in the amount of approximately $800,000. The plaintiff recovered $174,553 from which there is a $30,000 statutory deductable, as the general damages awarded did not exceed $100,000. The plaintiff's recovery was much less than the amount he sought from the jury. The damages ultimately recovered by the plaintiff were closer to the amount of the defendant's offer to settle than to the amount sought by the plaintiff.

Complexity and Importance

[15] The issues were important to the parties and the trial was a complex personal injury action involving multiple expert witnesses retained by both plaintiff and defendants. There were expert witnesses on the effect of a second concussion and a pre-existing learning disability as well as a loss of future income and future care claims.

Unreasonable Conduct of Any Party

[16] The plaintiff submits that the trial conduct of counsel for Finnigan's was unreasonable in a number of instances, and this conduct should be a factor in the awarding of costs.
(a) The defendant refused to admit a number of uncontested facts before trial. I find that this is a minor factor that showed the defendant was not co-operative but isn't a large factor in fixing costs.
(b) The plaintiff alleges that counsel for Finnigan's made a number of improper and inflammatory remarks before the jury, including that the plaintiff had fathered a child out of wedlock, stating that the owner at Finnigan's was sorry and regretful for what happened and that he had accepted some responsibility while suggesting in trial that the plaintiff had not accepted any responsibility. The plaintiff submits that defence counsel had the owner of Finnigan's attend court every day implying that Finnigan's would be personally liable to pay for the plaintiff's damages when the defendant had a commercial liability policy with Lloyds of London. Whether the defendant was insured or not is not a factor to which I give any weight. The defendant did have his client attend throughout the court to create the impression that he was personally responsible for the damages; however, he was a party and he was entitled to attend court.
(c) The plaintiff also complains about defence counsel's statements before the jury that the video surveillance showed that the plaintiff was doing things that he said he could not do like extending his arm fully. Defence also stated that based on the video surveillance, the plaintiff was back to his pre-accident physical condition, which was contrary to the evidence of the defendant's own medical expert Dr. Axlerod. The plaintiff consented to the admissibility of the surveillance tapes on the condition that they only be used to show the activities that the plaintiff was engaged in but not to impeach his credibility. The jury was instructed that they could not use the video surveillance evidence to impeach the plaintiff's credibility because when the plaintiff testified he acknowledged that he had been working as a mover and that he was able to extend his arm fully and was able to lift items and worked as a mover after the accident. As a result, the video surveillance evidence was consistent with the plaintiff's evidence.
(d) The plaintiff further objects to the way the defendant's counsel asked the jury to turn their minds to why the plaintiff had not accepted some responsibility for his own actions which was an issue that the parties were unable to agree on notwithstanding the plaintiff's offer to accept a contributory negligence of 13 per cent. I do not find this submission to be inappropriate where contributory negligence is an issue.
(e) The plaintiff further objected to defence counsel implying that plaintiff's counsel had obtained a report from the pharmacologist Dr. Kalant dealing with the plaintiff's sobriety which he had not disclosed to defence. When the plaintiff corrected his answers on discovery with regards to the amount of alcohol he had consumed at Finnigan's pub, defence counsel took out his Blackberry in front of the jury and in a sarcastic tone commented that he had just received the corrections by e-mail. The defendant's conduct suggested that the plaintiff had tailored his evidence to fit the experts' evidence. Both counsel agreed that this situation could not be corrected by a further instruction to the jury as it would have only served to reinforce this inaccurate perception to the jury. This conduct was not appropriate.
(f) When cross-examining the orthopedic surgeon, Dr. Kadish, called by the plaintiff, defence counsel suggested that the plaintiff's counsel may wish to put the video surveillance evidence to him. This suggestion was made without warning or consultation in front of the jury and was designed to leave the impression that there was something in the video surveillance evidence that Dr. Kadish should comment on.
(g) A further issue arose with the opinion of Dr. Hoffenberg, an orthopedic surgeon who prepared a report for the accident benefit insurer. Dr. Hoffenberg had given an opinion that the plaintiff had recovered from his injuries and could return to work. In cross-examining Dr. Scherer, the occupational psychologist called by the plaintiff, defence counsel sought to put the opinion of Dr. Hoffenberg, who was not being called as a witness, to get his opinion before the jury. Defence was permitted to cross-examine Dr. Scherer by asking him whether or not he had read the report or had relied upon it in preparing his opinion. A correcting instruction was given to the jury.
(h) The plaintiff further objects to defence counsel's conduct of when cross-examining the plaintiff's future loss in income expert. Defence counsel suggested to her that she was [page697] biased because she was relying on assumptions provided to her by plaintiff's counsel. A correcting instruction was given once again to the jury.

[17] I agree with the plaintiff's submissions that a number of the tactics used and statements made by defence counsel before the jury required correcting instructions to be given to the jury. Defence counsel is very experienced and knowledgeable in the area of motor vehicle accidents and would have been aware that he was pushing the boundaries in the manner in which he conducted the defence. While the conduct complained [of] was on the edge and required a number of correcting instructions to be given to the jury, it was not so extreme to be a major factor in awarding costs.

Hourly Rates, Time Spent, Proportionality and Indemnity

[18] While the defendant submits that the amount claimed by the plaintiff in costs is excessive, he does not object to the hourly rates claimed or the time spent by plaintiff's counsel. The claim was complex, involving contributory negligence by a passenger and involved a licensed establishment that served a large amount of alcohol to the driver within a short period of time. The plaintiff also suffered a second concussion and had a pre-existing learning disability, and the case involved assessment of future loss of income and future care costs and general damages.

[19] The plaintiff relies on the principle of indemnity and submits that the injured plaintiff has reasonably incurred the costs claimed in successfully pursuing his claim for damages, and should be indemnified on a partial indemnity scale. The plaintiff has ultimately been successful, however; he recovered less then he sought from the jury but he still exceeded the amount of the defendant's offer to settle. I agree with the plaintiff's submission that he should be entitled to receive a reasonable amount for costs.

[20] Plaintiff's counsel was called to the bar in 1976 (35 years), and the maximum hourly rate on a partial indemnity scale as set out in the notice for the profession is $350 per hour. This amount was established in 2005, and I take judicial notice that there has been inflation over the past six years which would have increased this maximum amount somewhat. Plaintiff's counsel's regular hourly rate is $500. He claims $320 per hour, which I find is a reasonable rate in the circumstances.

[21] The principle of proportionality must also be considered. The time spent by counsel was reasonable in terms of the complexity of the claim that had to be advanced, namely, a three-week [page698] jury trial involving a serious motor vehicle accident, personal injuries resulting in both future and past loss of income and future care costs and general damages. The defendant's failure to admit a number of uncontested facts did not unduly extend the amount of time required to conduct the trial.

Amount the Unsuccessful Party Would Reasonably Expect to Pay

[22] The unsuccessful party was represented by experienced counsel who has not filed a cost outline outlining the costs incurred as required by rule 57.01(6) and has not submitted that the costs claimed were beyond what the unsuccessful party would reasonably have expected to pay. In addition, he did not object to the hourly rate claimed. He simply took the position that the costs were excessive given the amount recovered. As a result, I find that the costs claimed do not exceed the amount the unsuccessful party would reasonably expect to pay.

Disposition

[23] Having considered all of the above factors, the defendant is ordered to pay costs to the plaintiff in the amount of $150,000 plus HST plus disbursements as claimed in the amount of $80,000 plus HST. The amount of costs claimed has been reduced based on the amount claimed versus the amount recovered, removing the time spent on the plaintiff's unsuccessful motion to strike the jury and considering the defendant's offer to settle under rule 49.13.

Order accordingly.