COURT FILE NO.: CV-06-796-00

DATE: 20150811

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: RADOVAN KOVACEVIC and LYNDA KOVACEVIC, Plaintiffs

AND:

ING INSURANCE COMPANY OF CANADA, Defendants

BEFORE: MACKENZIE, J.

COUNSEL: Ava Hillier, for the Plaintiffs (Responding Party)

Jamie R. Pollack, and Jonathan Heeney, for the Defendant (Moving Party)

HEARD: March 25, 2015

ENDORSEMENT RE: COSTS

[1] By Endorsement dated May 27, 2015 I granted the defendant’s motion under Rule 20 for summary judgment, dismissing the action of the plaintiffs.

[2] By paragraph 44 of the Endorsement I directed the parties to make written costs submissions on the motion and the action.

[3] I have since received such costs submissions in accordance with the directions contained in paragraph 44, above, the reply costs submissions of the defendant/moving party having been received on or about July 10, 2015.

The Position of the Defendant/Moving Party

[4] The defendant/moving party, having succeeded on its Rule 20 summary judgment motion dismissing the plaintiffs’ action, seeks costs on a partial indemnity basis in the amount of $42,469.53. In support of this position, the defendant/moving party has filed a bill of costs for the amount claimed, comprising $31,742.50 for fees, $4,126.53 being the HST applicable to such fees, and $6,600.50 for disbursements. In its bill of costs, the defendant/moving party has enumerated the personnel in its counsel’s law firm referring to their respective status and experience in the law firm, their hourly rates and a description of the time spent and the nature of the time spent by each of them in the action and the Rule 20 summary judgment motion. Counsel submits that the total hours docketed by various members of the firm were reasonable having regard to the commencement and progress of the action up to and including the summary judgment motion and with respect to the action proper, most of the work was done by law clerks and junior associates in an attempt to minimize costs.

[5] In its main submissions, the defendant/moving party points out that it was completely successful on the motion, the action was dismissed in its entirety and that in the result, the first part of Rule 57.01(1) comes into play, namely, the court may consider the result in the proceeding together with the other factors enumerated under sub rule (1).

[6] In terms of the description of the work detailed on behalf of the defendant/moving party, counsel submits that as a result of the plaintiffs’ motor vehicle accident in the State of Florida and the commencement of an action there relating to the motor vehicle accident, the defendant/moving party spent considerable time reviewing productions and experts reports relating to the Florida action as well as conducting legal research with respect to the relationship between the law of Florida and the law of Ontario. In particular, legal research by the defendant/moving party related to the applicability of the statutory deductible on prejudgment interest under the Ontario Insurance Act and whether the plaintiffs’ would be entitled to recover legal fees incurred in Florida from the defendant, their Ontario insurer.

[7] The defendant/moving party’s Rule 20 summary judgment motion engaged a complex issue involving the interpretation of the O.P.C.F. 44 R (Family Protection Endorsement) under the plaintiff’s insurance policy with the defendant. (Full particulars of this issue are set out in the May 27, 2015 Endorsement.)

[8] For the purpose of determining costs issues, the focus of the defendant/moving party’s research on the Rule 20 summary judgment motion related to the definition of “inadequately insured motorist” and of “available” policy limits, leading to the central issue of whether the plaintiffs’ settlement of the Florida action with the Florida tortfeasor’s insurer for less than the policy limits in that policy would be a statutory bar to recovery by the plaintiffs under the O.P.C.F. 44 R.

[9] In dealing with the above issue as to the availability of the policy limits of the Florida tortfeasor’s insurer, the defendant/moving party received advice that the plaintiffs settled the Florida action in or about May 2010 for $300,000, a sum considerably below the $1,000,000 face value of the Florida tortfeasor’s insurance policy. The apparent basis for accepting the sum of $300,000 for the plaintiffs’ claims and expenses of the Florida action was that the Florida tortfeasor’s insurer, Lincoln General Insurance Company, (“LGIC”) was in such financial condition that the plaintiffs in the Florida action were faced with the prospect of accepting $300,000 or risking the receipt of nothing against the Florida tortfeasor’s insurer.

[10] To determine the financial status of LGIC, the defendant/moving party through counsel was required to conduct research into LGIC’s financial status beyond information supplied by the plaintiffs and their Florida counsel. This research entailed communications with LGIC’s representatives in the states of Florida, Pennsylvania and Illinois, as well as with regulators in Florida and Pennsylvania. In the event, it turned out that LGIC because of its financial condition was suspended from writing new auto liability insurance policies and was in a form of “runoff” in which existing claims would be processed.

[11] In its costs submissions, counsel for the defendant/moving party points to the foregoing facts as being grounding for the factors under Rule 57.01(1), specifically (c), the complexity of the proceeding and (d), the importance of the issues.

[12] Counsel further refers to the conduct of the parties, factor (e), namely, the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding.

[13] Counsel contends the defendant/moving party saved this court the time and expense of a three week trial that was scheduled to begin on May 11, 2015.

[14] Counsel also contends the court should have regard to Rule 49.13 of the Rules of Civil Procedure in fixing the costs in this matter. Counsel points out that on or about October 30, 2012, the defendant/moving party made an offer to settle the action for $25,000 plus partial indemnity costs, disbursements and HST. Counsel points out that the plaintiffs never responded to this settlement offer nor did they make any settlement proposal or counteroffer of their own. In the event, the defendant/moving party’s offer to settle was withdrawn on the 14th of March. Finally, in this regard, the defendant/moving party submits that after the plaintiffs had settled their Florida action in May of 2010, they ought to have acknowledged or admitted that they no longer had a claim against the defendant in pursuance of the O.P.C.F. 44 R Endorsement. Counsel points out that they chose to continue with this action against the defendant/moving party notwithstanding there was no evidence regarding the availability or non-availability of the LGIC policy limit of $1,000,000 in May of 2010 when they settled the Florida action. (See paras. 8, 9, 12 and 13 in Endorsement dated May 27, 2015.)

The Position of the Plaintiffs

[15] The primary thrust of the written submissions of counsel for the plaintiffs on costs issues is that “the facts and context of the case constitute special and exceptional circumstances which permit the court to exercise its jurisdiction to deny costs of the action to the defendant/moving party in the interest of doing procedural and substantive justice between the parties.” (para. 1, Costs Submissions of the Plaintiffs)

[16] Counsel argues that at no time prior to the defendant/moving party’s summary judgment motion did it question or raise the bona fides of settlement based upon LGIC’s financial position as the plaintiff understood it to exist at the time of settlement (May 2010), namely, that LGIC had committed an act of bankruptcy and could not pay more. Counsel for the plaintiffs contends that had there been no coverage available on behalf of the Florida tortfeasor, the defendant/moving party would have been fully liable for payment to the plaintiff of its claims without the benefit of any setoff in Ontario. Counsel for the plaintiffs asserts that the interests of the defendant/moving party and the plaintiffs were identical in that both sought appropriate compensation for the plaintiffs’ injuries in the Florida action.

[17] Counsel refers at length to the defendant/moving party during the course of the lengthy litigation not raising any issue as to the improvidence of the May 2010 settlement arising from the financial status of LGIC at the date of loss and that the financial status of LGIC was not questioned or raised in any pleading by the defendant or otherwise. Counsel says that no further settlement discussions took place after May 2013 and in 2014, counsel for the defendant/moving party informed the plaintiffs that it would be bringing a summary judgment motion for hearing in March of 2015 to dismiss the claim.

[18] In essence, counsel for the plaintiffs founds its opposition to the costs sought by the defendant/moving party on the basis of fairness to the losing party. (Although no specific reference was made, this argument would appear to engage sub rule (0.b) of Rule 57.01(1).) Counsel contends that the court in considering costs should take into account the defendant’s success on an issue that was not only never pleaded until a week before the scheduled trial date by way of motion to amend the statement of defence but that had never been in issue throughout ten years of correspondence, and further that at no time did the defendant/moving party suggest that the plaintiffs had no right to resolve the Florida action on the best terms available at the time and with the advice of counsel or that they had not been acting in good faith in accepting their counsel’s advice. (See para. 9, plaintiffs’ costs submissions.)

[19] Developing further the argument of unfairness to the plaintiffs of a costs award against them, counsel contends that where the plaintiffs became aware during the mediation process in Florida that LGIC was in “runoff”, itself an act of bankruptcy, acting under supervision and not allowed to write new policies, there was a reasonable expectation in the mind of the plaintiffs that no funds would likely be available later. Further, counsel alleges that the release document signed by the plaintiffs in the Florida action (particulars in para. 8, Endorsement of May 27, 2015) establishes that while the plaintiffs in settling their claim did not intend to act to the detriment of the defendant/moving party, neither were they giving up their rights against it. (reference, para. 12 plaintiffs’ costs submissions.)

[20] In closing, counsel contends that to burden the plaintiffs with the costs of the entire action “in circumstances where they have already expended $175,000 in pursuance of an action which was for the benefit of the very defendant (the defendant/moving party) would be greatly oppressive and not do procedural or substantive justice between the parties.” (reference, para 17, plaintiffs’ costs submissions.) Counsel closes its submissions by stating recovery by the defendant/moving party should be limited to the costs of the summary judgment motion, less the amount owed to the plaintiffs for the production of documents undertaken at their request throughout the action of $3,871.07.

The Defendant/Moving Party in Reply

[21] The defendant/moving party disputes the claim by the plaintiffs that the Florida action was brought for the joint benefit of the plaintiffs and the defendant/moving party. Counsel counters that the Florida action was brought entirely for the benefit of the plaintiffs and that they were obliged to bring the Florida action or prove the at-fault party was inadequately insured as a precondition to recovery against the defendant/moving party under the O.P.C.F. 44 R Endorsement. The argument of the defendant/moving party is that once the at-fault party had been identified in Florida and coverage was confirmed, the plaintiffs no longer had a reason to pursue a claim against the defendant/moving party for coverage under O.P.C.F. 44 R but having done so, the defendant/moving party was required to incur legal expenses in defence. Further, counsel submits that once the plaintiffs did settle their Florida action in May of 2010 for less than the at-fault tortfeasor’s policy limits, the plaintiffs should have discontinued this action. By continuing with the claim against the defendant/moving party after settling the Florida action, the plaintiffs were seeking additional recourse.

[22] Counsel rejects the submission of the plaintiffs that the legal costs incurred by the plaintiffs in their Florida action has any relevancy with respect to the costs sought by the defendant/moving party on either the summary judgment motion or the action underlying the same.

[23] Counsel for the defendant/moving party addresses the submission by the plaintiffs that the defendant/moving party was unreasonable in delaying its bringing of this summary judgment motion. Counsel points out that the reason the summary judgment motion had not been mounted earlier is because the plaintiffs failed to provide the defendant/moving party with particulars of their Florida settlement. In this regard, counsel indicates that upon learning of the settlement of the Florida action in May 2010, counsel for the defendant/moving party wrote to counsel for the plaintiffs requesting particulars of the settlement and thereby to determine why the plaintiffs had settled for less than the policy limits of the at-fault party. Counsel submits that if the plaintiffs had provided the defendant/moving party with sufficient particulars of the settlement, the defendant/moving party could have brought its Rule 20 summary judgment motion earlier than it did.

[24] In terms of subsequent events, counsel points out that when the plaintiff Lynda Kovacevic was discovered on February 23, 2011 approximately 10 months after the settlement, counsel for the defendant/moving party sought particulars from her about the Florida settlement but at that time the plaintiffs did not have any documentation pertaining to the settlement and indicated they had never seen any such documents; accordingly, the plaintiffs provided an undertaking to provide particulars of settlement at a later date.

[25] In the result, the plaintiffs did not provide the defendant/moving party with any documentation pertaining to the Florida settlement until September 17, 2012. In or about October 5, 2012 counsel for the defendant/moving party informed counsel for the plaintiffs that the materials provided in September 2012 were insufficient because there was no explanation about the amount of the settlement nor any details of the availability of the LGIC policy limits. In sum, the plaintiffs never provided further documentation or particulars relating to the settlement of the Florida action. Accordingly, counsel for the defendant/moving party informed the plaintiffs’ counsel of its intention to bring the summary judgment motion on August 2014 and asked for counsel’s availability for motion dates in 2014. Counsel for the defendant/moving party points out the earliest date that both parties were available was March 25, 2015 and that such date was booked for hearing on a consent basis on September 5, 2014.

[26] In essence, the position of the defendant/moving party is that it did not delay bringing the motion and that the plaintiffs were given notice of the proposed motion for summary judgment approximately seven months before it was scheduled for hearing, on a consent basis. Counsel adds that such seven month period should have been sufficient time for the plaintiffs to obtain any evidence that it required in order to make proper answer and put its best foot forward on the defendant/moving party’s Rule 20 motion.

Analysis

[27] It is noteworthy that the plaintiffs in their submissions re: costs have not challenged the validity of the time expended and the rates charged by members of the defendant/moving party’s firm, both in the action and in the summary judgment motion. Although it is not necessary to do a line-by-line analysis for the value of time dockets where the court is fixing costs under Rule 57.01, it is not uncommon for counsel challenging a party’s entitlement on quantum of costs to do so. This step is frequently engaged in support of R. 57.01(1), factor (0.b).

[28] I agree with the substance of the submissions made on behalf of the defendant/moving party. In particular, I am unable to find any unreasonable conduct on the part of the defendant/moving party in seeking to obtain further and better particulars of the settlement of the plaintiffs’ Florida action nor in its timing with respect to mounting its Rule 20 summary judgment motion.

[29] I accordingly reject the submissions made on behalf of the plaintiffs that to make an award of costs both with respect to the summary judgment motion and the action dismissed as a result of the summary judgment motion’s disposition constitute “special and exceptional circumstances” which would justify the court denying costs to the defendant/moving party.

[30] The real question is to fix the amount of costs being awarded to the defendant/moving party.

[31] My review of the docketed time and the services reflected in that time is unremarkable having regards to the nature of the issues involved in the action and in the summary judgment motion, save in one aspect. A substantial amount of time and accordingly fees have been devoted to research into issues of O.P.C.F. 44 R coverage as well as into the solvency of LGIC and communications with LGIC representatives. The summary judgment motion materials also indicate a substantial amount of time expended and having regard to the centrality of the O.P.C.F. 44 R issues, not only in the action but also on the summary judgment motion. In my view, there is some duplication of time and work therein. Accordingly, an adjustment must be made with respect to the time claimed for such items.

[32] In the result, I reduce the fees of $31,742.50 to $29,000, with an appropriate adjustment on those fees of the HST. The disbursements are awarded as claimed in the amount of $6,650.

[33] There remains one outstanding question in this award.

[34] As noted above, counsel for the plaintiffs has suggested there is a form of setoff or credit against any costs award against the plaintiffs for an amount of $3,871.07 “owed to the plaintiffs for the production of documents undertaken at their request throughout the action”. The alleged setoff or credit is not referred to by counsel for the defendant/moving party in its reply to the submissions on behalf of the plaintiffs. Although it can be argued that such claim is inferentially denied by virtue of the silence or non-response by counsel for the defendant/moving party, I am not prepared to draw such an inference.

[35] Accordingly, I require by correspondence some indication as to whether or not this alleged setoff claimed by the plaintiffs is a valid factor in the equation in order to arrive at the appropriate costs award. I request counsel to respond to this issue at their earliest convenience and in no event later than August 31, 2015.

MacKenzie, J.

Date: August 11, 2015