COURT FILE AND PARTIES

COURT FILE NO.: 04-CV-266354CM1
DATE: 20120216
SUPERIOR COURT OF JUSTICE – ONTARIO

RE: GEETA ANAND, DHARAM DEV ANAND and SANDEEP ANAND , Plaintiffs

AND:

VALERIE BELANGER, and TRACY TOLLAND AND STATE FARM MUTAL AUTOMOBILE INSURANCE COMPANY , Defendants

BEFORE: Stinson J.

COUNSEL:
Jeffrey William Strype , for the plaintiffs

Sandi J. Smith , for the defendant State Farm

HEARD: by written submissions

ENDORSEMENT REGARDING COSTS

[ 1 ] This endorsement addresses the written submissions of the parties regarding liability for the costs of this action.

Background

[ 2 ] The plaintiff Geeta Anand was injured in a motor vehicle accident that occurred on April 26, 2003. She commenced a tort action against the driver of the car, Tracy Tolland, and its owner, Valerie Belanger. Belanger alleged that the car had been stolen and not driven with her consent and thus she disputed liability. Tolland was uninsured, so Anand added her own insurer, State Farm, as a co-defendant, pursuant to the uninsured motorist coverage of her State Farm policy. In view of uncertainty whether the Belanger car was or was not driven with the consent of the owner, Belanger’s insurer, Western Assurance, was added as a statutory third party pursuant to s. 258(14) of the Insurance Act , R.S.O. 1990, chapter 1.8.

[ 3 ] The defendant Tolland was never located to be served with the statement of claim, so the action was discontinued as against him. In November 2008, the claims against Western Assurance and Belanger were resolved after Western served a rule 49.12 Offer to Contribute. The action was subsequently discontinued as against Belanger and the third party claim against Western Assurance was dismissed.

[ 4 ] The tort action proceeded to a jury trial against State Farm only in April 2010. Liability was not in issue, but damages were. At the conclusion of the trial the jury assessed the plaintiff's damages as follows:

General damages $85,000
Past income loss $161,679
Future income loss $25,000
Total $271,679

[ 5 ] The parties subsequently addressed the issues of the credit due to the defendant pursuant to s. 267.8(1) of the Insurance Act on account of collateral benefits from her accident benefits insurer (also State Farm) and her short term and long term disability policies at work. In my reasons released September 28, 2010 I resolved the issues surrounding the credit due to the defendant pursuant to s. 267.8(1) as follows:

Agreed credit due to insurer for pre-termination IRBs: $ 35,374.32
Ruling on net credit due to insurer for post-termination IRBs: 80,040.00
Ruling on net credit due to insurer for pre-termination STDs: 37,361.00
Ruling on credit due to insurer for post-termination LTDs: ____ nil __
Total s. 267.8(1) credit due: $ 152,775.32

[ 6 ] The parties remained at odds concerning the application of these and several other credits and debits for purposes of calculating the correct amount of the monetary judgment in favour of the plaintiff arising from the jury verdict. The additional issues include the application of the $15,000 deductible against the plaintiff's jury award, an advance payment of $50,000 made by State Farm pursuant to s. 256 of the Insurance Act and s. 120 of the Courts of Justice Act , R.S.O. 1990, chapter C.43, the $85,000 payment made by Western Assurance, and calculation of pre-judgment interest.

[ 7 ] In my endorsement released August 5, 2011, I addressed all of the foregoing issues and determined that the monetary judgment in favour of the plaintiff should be calculated as follows:

General damages award $85,000.00
Deductible (15,000.00)
Net general damages 70,000.00
Prejudgment interest on general damages $16,041.67
Interest payment by Western Assurance (15,000.00)
Balance due for PJI on general damages $1,041.67 _ 1,041.67
Subtotal for general damage claim $71,041.67

Advance payments

by Western Assurance ($50,000.00)
by State Farm ( 50,000.00)

Subtotal for advance payments ($100,000.00) (100,000.00)

Subtotal (overpayment) before income loss awards ($28,958.33)

Income loss awards

Past 161,679.00
Future _ 25,000.00
186,679.00

Less credits for IRB, etc. (152,775.32)

Net income loss award $33,903.68

PJI on past income loss __ 1,616.79

Subtotal for income loss $35,520.47 35,520.47

Total/Net sum due to plaintiff/Amount of Judgment $ 6,562.14

[ 8 ] Following my conclusion that the plaintiff was entitled to recover judgment for the net sum of $6,562.14, I invited the parties to attempt to resolve the question of costs. They were unable to do so and I therefore directed them to make written submissions, dealing firstly with the issue of liability for costs. They have now done so and this ruling deals with that issue.

Relevant events

[ 9 ] To understand the dynamic of the present dispute, it is necessary to set out some history. On September 29, 2008 State Farm made a formal Offer to Settle to the plaintiff for the all-inclusive sum of $50,000. The plaintiff did not accept this offer, so on October 27, 2008, State Farm made an advance payment to the plaintiff of $50,000 instead.

[ 10 ] On October 8, 2008 State Farm accepted an Offer to Contribute by Western Assurance. It contemplated a contribution by Western in the total sum of $85,000, allocated as follows: $50,000 for claim, $15,000 for prejudgment interest, and $20,000 for costs. Following negotiations between counsel for the plaintiff and counsel for Western Assurance, the offered sums were paid to Mrs. Anand, in exchange for a release from the plaintiff and State Farm in favour of Western Assurance.

[ 11 ] By letter dated October 28, 2008, counsel for the plaintiff wrote to counsel for State Farm as follows: "[counsel for Western] confirms that your acceptance of the Offer to Contribute on behalf of State Farm constitutes an admission by State Farm that the motor vehicle owned by Belanger was being operated without her consent and was as a result uninsured." Following further correspondence and discussions, counsel for the plaintiff confirmed that State Farm's position was that the defendants’ vehicle was being operated without consent. The significance of this point, of course, is that it meant that the parties agreed there was no longer any basis for a claim as against Belanger or her insurer, Western Assurance.

[ 12 ] On March 31, 2009 counsel for Western Assurance circulated a form of consent for the dismissal of the third party claim. As it emerged, that dismissal order could not be taken out because no notice of discontinuance had been filed as against Belanger. On April 28, 2009 counsel for Western Assurance wrote to counsel for the plaintiff asking him to see to the filing of the notice of discontinuance. Eventually, the order of dismissal was obtained in September 2009.

[ 13 ] On May 1, 2009 State Farm served a further Offer to Settle, in which it offered to pay the plaintiff "the sum of $188,750, gross of the statutory deductible, including prejudgment interest … . This amount to be reduced by the amount paid by Western Assurance ($61,250 for damages including prejudgment interest) and State Farm Insurance Company ($50,000 for damages), and subject to the Insurance Act … sections 256, 258(4) and 267.5(7)." The Offer also included costs and disbursements to be agreed upon or assessed less any amounts paid by Western Assurance for costs and disbursements.

[ 14 ] For her part, on May 1, 2009 the plaintiff served an offer to settle for the sum of $300,000 “inclusive of interest and net of all applicable deductibles, advance payments and contributing payments" plus costs and disbursements to be assessed or agreed-upon and GST. Both offers were open for acceptance until one minute after the commencement of trial.

[ 15 ] The case did not resolve and proceeded to trial in April 2010, with the result described above, namely, a judgment in favor of the plaintiff for $6,562.14, inclusive of prejudgment interest.

Positions of the parties

[ 16 ] The position of State Farm is that the amount recovered by the plaintiff is less than the amount offered in its May 1, 2009 Offer to Settle. As a result, and in view of the modest amount of the plaintiff's recovery, the plaintiff should be required to pay the defendant's costs on a partial indemnity scale from May 1, 2009 onwards.

[ 17 ] The position of the plaintiff is that State Farm's May 1, 2009 settlement proposal did not qualify as a Rule 49 Offer to Settle, for two reasons. First, it made no provision for the costs of the other defendant, Belanger, who had not yet been released from the action. Thus, it failed to comply with rule 49.11. Second, the offer was ambiguous and thus was incapable of triggering Rule 49 consequences. The plaintiff further submits that case law dictates that she should be entitled to the costs of the trial.

Analysis

[ 18 ] In my view, the first submission made by the plaintiff is entirely without merit. It is plain that, as a result of the events of October and November 2009, as reflected in the correspondence generated at that time, the claim against Belanger had been resolved. In view of the acknowledgment by all concerned that Belanger’s car was being driven without her consent, she was not liable. It was therefore understood from that point forward that the case was proceeding only as against State Farm and that there was no ongoing involvement or exposure by either Belanger or Western Assurance. This is further confirmed by the steps taken by counsel for Western Assurance to secure the formal termination of proceedings as against Western Assurance and Belanger in March and April 2009. The difficulties encountered by counsel for Western Assurance in obtaining the formal order of dismissal as against his client arose directly due to the failure of counsel for the plaintiff to file the Notice of Discontinuance as against Belanger that was contemplated as part of the October/November 2008 resolution: no evidence before me suggests otherwise.

[ 19 ] With all due respect, therefore, I consider it is disingenuous at best for counsel for the plaintiff now to assert that the State Farm Rule 49 offer served May 1, 2009 fails to qualify as such because it did not address the position of Belanger. Had plaintiff’s counsel proceeded on a timely basis to file the Notice of Discontinuance, Belanger would have been formally removed from the proceedings well before May 1, 2009. In my view it does not lie in his mouth now to assert non-compliance with Rule 49 by State Farm on this ground, when it was known all along that Belanger had no further involvement, and he was the cause of the delay in filing the formal discontinuance.

[ 20 ] I do, however, find merit with the plaintiff's alternative argument. A fixed, certain and understandable offer must be outstanding down to the trial in order for there to be cost consequences under rule 49.10: Cass v. Muir , 1996 11791 (ON SC) , [1996] O.J. No. 5389 (Div. Ct.). This requirement is essential to promote certainty in the resolution of disputes. Parties must be able to evaluate offers reliably and decide with confidence whether to accept them, without doubt or ambiguity as to the result. Confusion as to the consequences of accepting or rejecting an offer serves neither side.

[ 21 ] In the present case, State Farm offered to pay the plaintiff "the sum of $188,750, gross of the statutory deductible, including prejudgment interest calculated in accordance with the Insurance Act… and the Courts of Justice Act .… This amount to be reduced by the amount paid by Western Assurance ($61,250 for damages including prejudgment interest) and State Farm Insurance Company ($50,000 for damages), and subject to the Insurance Act … sections 256, 258(4) and 267.5(7)." An accompanying letter purported to break down the calculation as follows:

(a) $188,750 - $15,000 the statutory deductible = $173,750.00
(b) $173,750 - $61,250 paid by Western including PJI = $112,500.00
(c) $112,500 - $50,000 paid by State Farm = $62,500.00
(d) $62,500 remains as new money but includes any amount owing to PJI on the advance payment made by State Farm on October 28, 2008.

It may thus be seen that the letter carried out the various arithmetical subtractions recited in the Offer to Settle, but was silent as to the significant of the remaining qualifications contained in the Offer: "and subject to the Insurance Act sections 256, 258(4) and 267.5(7)." One must therefore examine the Offer to determine precisely what was being proposed by way of resolution.

[ 22 ] Section 256 of the Insurance Act deals with the impact of advance payments by an insurer; s. 258(4) provides that an insurer remains liable to a claimant despite an assignment or cancellation of the insurance contract or any act of default or breach of the Criminal Code ; s. 267.5(7) specifies the method for calculating an award of damages for non-pecuniary loss, and contains cross-references to the "threshold" set out in s. 267.5(5) and the process for determining whether it has been met (s. 267.5(12) and (15)).

[ 23 ] The purpose and intent of the references to these sections of the Insurance Act in defendant's Offer to Settle is unclear. For example, is the Offer somehow conditional to the plaintiff moving under s. 267.5(12) prior to trial to establish that her claim meets the threshold? Why is there any mention of s. 258? The only provision that appears to bear on the Offer is s. 256, although that mention would seem to be superfluous.

[ 24 ] In my view, faced with the contents of the Offer and notwithstanding the contents of the letter (which failed to explain the statutory references) the plaintiff could not reliably and with certainty predict the consequences of acceptance. In the absence of such certainty, in my view the defendant's Offer to Settle cannot operate to trigger the cost consequences of Rule 49.

[ 25 ] As a result, there were no operative offers to settle that require consideration in relation to determining my costs disposition.

conclusion and disposition

[ 26 ] This, then, is a case where the amount of the judgment recovered by the plaintiff ($6,562.14) is within the monetary jurisdiction of the Small Claims Court. Rule 57.05(1) provides as follows:

If a plaintiff recovers an amount within the monetary jurisdiction of the Small Claims Court, the court may order that the plaintiff shall not recover any costs.

In my view, this is an appropriate case for the application of that rule. The plaintiff was compensated for almost the full amount of her loss prior to the trial. She chose not to accept as sufficient what she had already received and instead elected to proceed with a lengthy jury trial. The defendant incurred substantial expenses to defend a claim where it had a very modest exposure beyond what it had already paid. It should not be required to pay anything more than the modest judgment recovered by the plaintiff.

[ 27 ] For the foregoing reasons, I conclude that the most just result would be for each side to bear its own costs. I therefore order that there should be no costs award in favour of any party.

__________________________ Stinson J.

Released: February 16, 2012