ONTARIO

SUPERIOR COURT OF JUSTICE

COURT FILE NO.: 61554/09
DATE: 20120327

BETWEEN:

REBECCA MACINTOSH Plaintiff – and – MANULIFE FINANCIAL, THE MANUFACTURERS LIFE INSURANCE COMPANY Defendant

Todd J. McCarthy, for the Plaintiff

Gordon Jermane and Veronica Mohan, for the Defendant

HEARD: December 14-15, 2011, with cost submissions by February 17, 2012

RULING ON COSTS

Boswell J.

Overview:

[1] On January 20, 2012 I released a Judgment in this proceeding, dismissing the Plaintiff’s claim for payment of an accidental death benefit provided for in a group policy of insurance underwritten by the Defendant. The parties were invited to make written submissions on costs, which they have done. This ruling addresses the issue of costs.

[2] The facts of the case are fully set out in the Judgment, reported at 2012 ONSC 504. Briefly stated, the Plaintiff’s brother was tragically killed on November 15, 2007 in a single vehicle accident on a ramp exiting Highway 404 onto Highway 401. He was a member of a group policy of life insurance underwritten by the Defendant. The Plaintiff was his named beneficiary. The policy provided for a payment of $100,000 in basic life insurance and a further $100,000 if death was the result of an accident, as was the case here. The Defendant paid the basic life insurance, but refused to pay the accidental death benefit. The Defendant relied on an exclusion in the policy that applied to accidents occurring while an insured individual was operating a motor vehicle with a blood alcohol content (“BAC”) of more than 80 milligrams of alcohol in 100 millilitres of blood (“.08”).

[3] A post-mortem examination was conducted on the body of the insured a month following the accident. A toxicology report was ordered by the pathologist. Samples of the blood and urine of the insured were sent to the Centre of Forensic Sciences (“CFS”) for testing. The toxicology report was significantly delayed. Ultimately, it was not until May 26, 2009, over a year and a half after the accident, that the Defendant denied coverage.

[4] This was really a one issue trial – whether the insured’s BAC was greater than .08 at the time of the accident. The Defendant bore the onus at trial of proving that the exclusion clause applied. In other words, it was the Defendant’s onus to establish, on a balance of probabilities, that the BAC of the insured was over .08 at the time of the accident. To make its case, the Defendant chose to rely solely on the report of the CFS.

[5] The CFS report contained an indication that there was putrefaction in the urine sample sent to the CFS by the pathologist. Putrefaction is evidence that the sample is decomposing. Putrefaction can result in an elevated alcohol content in a sample. The Plaintiff, quite properly in my view, had concerns about the toxicology results given: (1) the delay between the date of death and the post-mortem examination; (2) the delay between the post-mortem examination and the toxicology tests; and (3) the evidence of putrefaction in the urine sample.

[6] The Plaintiff retained her own forensic toxicologist to critique the findings of the CFS and to conduct his own tests on the blood and urine samples of the insured. The Plaintiff’s toxicologist asked the CFS to repeat its tests, given concerns about putrefaction. Unfortunately, the CFS would not do so. To compound the problem, the Plaintiff was refused access to the urine and blood samples, so her toxicologist was unable to conduct his own tests.

[7] The reliability of the toxicology results was squarely in issue. This was, in essence, a Simplified Rules proceeding. There were no discoveries. Regrettably, it was not until trial that the Plaintiff learned, as we all did, from Teri Martin of the CFS, about the internal quality assurance procedures employed by the CFS. I was satisfied, for reasons set out in the Judgment, that the CFS test results were reliable. Part of the evidence I relied on, however, came from the Plaintiff’s toxicologist, who conceded that there were no signs of putrefaction in the insured’s blood sample and that second tests would not normally be conducted as a matter of routine.

[8] All of this is to say that, in my view, the Plaintiff’s position was, in all the circumstances a reasonable one. In no way do I mean to suggest that the Defendant acted in bad faith at any time. But the circumstances of this case being what they were, including the absence of a fulsome toxicology report from the Defendant, the inability of the Plaintiff’s toxicologist to independently test the blood and urine samples of the insured, the absence of discoveries, and the delays involved in testing and reporting, the Plaintiff was entirely justified in pursuing the action and putting the Defendant to the proof of the exclusion.

Positions of the Parties:

[9] The Defendant submits that it was the successful party and that costs ought to, in the usual course, follow the event. In addition to the dismissal of the Plaintiff’s claim, the Defendant points to an Offer to Settle it made on the basis of an all-inclusive payment to the Plaintiff of $20,000. Clearly it bettered its offer. It seeks partial indemnity costs fixed at just over $28,500, which it asserts is a fair, reasonable and proportionate amount in all the circumstances.

[10] The Plaintiff submits that this is not an appropriate case for costs. The Plaintiff argues that she was justified in her position, in light of the failure of the Defendant to provide fulsome toxicology evidence. The Plaintiff’s counsel incurred over $16,000 in expert’s fees in an effort to overcome the shortcomings of the Defendant’s evidence. The Plaintiff is otherwise an impecunious university student. She argues that fairness, justice and the need to foster access to justice dictate that she ought not to be burdened with costs above and beyond the expense of her toxicologist.

General Principles of Costs Awards:

[11] The award of costs is governed by section 131 of the Courts of Justice Act, R.S.O. 1990 c. C.43 and by Rule 57.01 of the Rules of Civil Procedure. Section 131 clothes the court with its general discretion to fix costs. Rule 57.01 provides a measure of guidance in the exercise of that discretion by enumerating certain factors that the court may consider when assessing costs.

[12] In particular, the court may consider, in addition to the result achieved and any offers to settle, any of the following factors:

(0.a) the principle of indemnity;

(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;

(a) the amount claimed and the amount recovered in the proceeding;

(b) the apportionment of liability;

(c) the complexity of the proceeding;

(d) the importance of the issues;

(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;

(f) whether any step in the proceeding was,

(i) improper, vexatious or unnecessary, or

(ii) taken through negligence, mistake or excessive caution;

(g) a party’s denial of or refusal to admit anything that should have been admitted;

(h) whether it is appropriate to award any costs or more than one set of costs where a party,

(i) commenced separate proceedings for claims that should have been made in one proceeding, or

(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and

(i) any other matter relevant to the question of costs.

[13] The Court must also remain mindful of the purposes that costs orders serve. As Perrell J. summarized in 394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238, [2010] O.J. No. 5692 (S.C.J.), at para. 10 :

Modern costs rules are designed to advance five purposes in the administration of justice: (1) to indemnify successful litigants for the costs of litigation, although not necessarily completely; (2) to facilitate access to justice, including access for impecunious litigants; (3) to discourage frivolous claims and defences; (4) to discourage the sanctioning of inappropriate behaviour by litigants in their conduct of the proceedings; and (5) to encourage settlements (internal citations omitted).

[14] The general rule is that costs follow the event and will be awarded on a partial indemnity basis: Bell Canada v. Olympia & York Developments Limited et. al. (1994), 17 O.R. (3d) 135 (C.A.). In special circumstances, costs may be awarded on a higher scale, but those cases are exceptional and generally involve circumstances where one party to the litigation has behaved in an abusive manner, brought proceedings wholly devoid of merit, and/or unnecessarily run up the costs of the litigation: Standard Life Assurance Company v. Elliott (2007), 86 O.R. (3d) 221 (S.C.J.).

[15] Ultimately, in fixing an amount for costs, the overriding principles are fairness and reasonableness: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.); and Moon v. Sher (2004), 246 D.L.R. (4 th ) 440 (C.A.). In assessing what is fair and reasonable in the circumstances, the Court is not to engage in a mechanical exercise, but rather must take a contextual approach, applying the principles and factors discussed above, to settle on a figure that is fair and reasonable in all the circumstances: Gratton-Masuy Environmental Technologies Inc. (c.o.b. Ecoflow Ontario) v. Building Materials Evaluation Commission, [2003] O.J. No. 1658, at para. 17.

Discussion:

[16] This was not a complex case, in large part thanks to experienced counsel’s ability to co-operatively and efficiently focus on the real issue in dispute. Although it stretched over a two day hearing, or more accurately, two half-days, it was really akin to a long motion. There were four witnesses in total, but only two of any significance: Teri Martin from the CFS and the Plaintiff’s toxicologist, Dr. Michael Corbett. Arguments were concise and on point. As I indicated, it really came down to an issue of whether the Court found the CFS toxicology results to be reliable.

[17] There is no question that the Defendant was ultimately successful. Their position was that the exclusion clause applied and I found that it did. In the ordinary course, costs would follow the event with the main issue being whether the costs sought are proportionate to the complexity and importance of the issues and fair and reasonable in all the circumstances. But indemnifying a successful party is only one of the purposes that costs orders serve in the administration of justice. In certain cases, other purposes have a more prominent role to play.

[18] In this case, the goals of facilitating access to justice and encouraging settlements take on added significance. I say this for the following reasons:

(i) The Plaintiff is an impecunious university student. While her financial circumstances were not, for obvious reasons, directly addressed in evidence at the trial, a reasonable inference can be drawn about her financial affairs, from the evidence the Court does have. First, she is just 20 years old. She is in her third year of studies at McMaster University. Her counsel has had to absorb the cost of Dr. Corbett’s report – in excess of $16,000. Her university studies are undoubtedly being funded by the $100,000 she received in life insurance proceeds from the Defendant, as a result of the death of her brother. The costs sought by the Defendant would effectively claw back almost a third of those funds;

(ii) The Plaintiff acted reasonably, as I have found above, in pursuing the action in light of all the circumstances, including, amongst other things, the delays experienced in the post-mortem examination and toxicology testing, the delays involved in the receipt of the toxicology report and the Defendant’s denial of coverage letter, the presence of putrefaction in the urine sample, the refusal of the CFS to make the samples available for independent testing, and the lack of a fulsome Defendant’s expert’s report on the BAC of the insured at the time of the accident;

(iii) The central issue at trial was the reliability of the CFS report. Before this matter could reasonably settle, it was critical that the Plaintiff be able to test the reliability of the findings of the CFS. The Plaintiff’s ability to test the report was handicapped by a number of factors. First, as mentioned, the CFS refused to repeat their tests and refused the request of the Plaintiff’s expert for access to the samples tested. The Plaintiff’s toxicologist spent considerable time and effort, at great expense, attempting to find a way to enhance the reliability of the test results of the CFS. Second, the CFS report contained little detail apart from their results. The CFS report was ultimately supplemented at trial by the evidence of Dr. Corbett. In other words, the Defendant benefitted in a very real and direct way from the Plaintiff’s expert, at significant cost, of course, to the Plaintiff. Third, there were no discoveries. Fourth, the content of the report was finally amplified at trial and, for the first time, the Plaintiff learned of the internal quality control procedures utilized by the CFS.

[19] The Court does not make its rulings based on sympathy or prejudice. While it is certainly easy to be sympathetic to the Plaintiff’s circumstances, all parties are equally entitled to be treated justly and fairly. Having said that, there are very valid reasons to limit the award of costs in this case. Again, I want to emphasize that I do not attribute any bad faith to the Defendant. But their reliance on the CFS report alone made a trial almost inevitable because of its lack of detail and the position taken by the CFS in terms of the release of samples for private testing. The Plaintiff was naturally concerned about the reliability of the CFS findings in view of the delays described above and the presence of putrefaction in at least one of the samples tested. Ultimately, the Defendant was able to meet its onus at trial in part by reliance on the evidence of the Plaintiff’s expert.

[20] This was a matter that, unfortunately, needed to be tried because of the circumstances I have described. The fear of significant costs awards can have a deterrent effect on impecunious claimants who might otherwise have meritorious claims, as was the case here. Although unsuccessful, there was certainly merit in the Plaintiff’s pursuit of this claim. Indeed, the reliance by the Defendant on the limited report of the CFS in denying coverage, made resolution difficult, for the reasons set out above. For these reasons, my view is that any costs awarded should be modest. I am supported in that view by the fact that the case was uncomplicated and was akin, as I said, to an argued long motion.

[21] In my view, a fair and reasonable costs award, in all the circumstances, is $5,000.00 all inclusive, payable by the Plaintiff to the Defendant within 30 days.

Boswell J.

Released: March 27, 2012