Sienna v. State Farm, 2015 ONSC 786
COURT FILE NO.: 10-20570
DATE: 2015-02-03
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
Susan Sienna
Ms. Poproski, for the Plaintiff
Plaintiff
- and -
State Farm Mutual Automobile Insurance Company
Mr. Sullivan, for the Defendant
Defendant
HEARD: January 26th, 2015
JUDGMENT ON COSTS
ARRELL, J.
Introduction:
[1] This matter was set for trial at the sittings in Hamilton commencing January 26, 2015. The Plaintiff, on January 14, 2015, advised she was abandoning her case and would be calling no evidence.
[2] The only issue remaining was costs which I have been asked to decide.
[3] The Defendant seeks costs on a substantial indemnity basis. The Plaintiff agrees the Defendant should get costs but on a partial indemnity basis and greatly reduced from the draft bill of costs submitted.
Facts:
[4] This matter arises out of a non-earner benefits claim which arose as a result of a motor vehicle accident which occurred on April 17, 2001. The Plaintiff also claimed aggravated and punitive damages. The Defendant denied the claim on May 18, 2001 on the basis that the Plaintiff was working full time at the time of the accident and therefore did not qualify for non-earner benefits. An application for mediation was submitted July 6, 2009 and mediation failed.
[5] The statement of claim was issued on June 9, 2010 ten years post-accident. A defence was filed on March 9, 2011. Discoveries were completed by February 17, 2012 and encompassed two days. The matter was pre-tried on April 30, 2014.
[6] The Defendant paid nothing on this claim. The Defendant advised on November 26, 2014 that it would be bringing a summary judgment motion at the commencement of trial and served all material for that motion on that date.
[7] The Defendant filed a formal offer to settle on January 7, 2015 which lapsed on January 13, 2015. The Defendant’s counsel offered by way of email on January 14, 2015 to recommend resolution of the cost issue by way of payment of $12,500.00 by January 16, 2015. There was no response by the Plaintiff to this proposal.
[8] The statement of claim seeks $900,000.00 for punitive and aggravated damages as a result of bad faith caused by the Defendant. The claim also seeks damages for mental distress as well as the primary claim of non-earner benefits.
[9] In support of the bad faith and mental distress claims the statement of claim, at some length, alleges that the Defendant breached its duty of good faith to the Plaintiff as a result of an “unlawful claims process… designed by a process that was either misfeasant, nonfeasant or malfeasant on the part of the Defendant and in particular the Vice President of claims who was responsible in law for the design and implementation of the claims process…”.
[10] The word “unlawful” is used to describe the conduct of the Defendant a number of times throughout the statement of claim. As well numerous allegations of “unlawful claims practice” are used. The claim also alleges evidence of “conspiracy” in the Defendants operating procedure aimed at the Plaintiff and other policy holders and that this conspiracy was “aided and abetted by persons unknown to the Plaintiff who were agents, employees, officers, directors, lawyers or in-house solicitors executing the insurer’s claims process in Ontario”.
[11] The allegations also state that this conspiracy was unlawful, “pre-meditated and planned and forms part of the claims practices of the insurer.”
[12] The plaintiff further alleges this conspiracy was “a wilful and systemic violation of the Plaintiff’s right to procedural fairness in the administration of the claims process.”
[13] The Plaintiff also alleges the Defendant had a duty to her as a policyholder not to unnecessarily inflict mental distress but indeed acted unreasonably and thereby breached its duty to act in good faith and in fact the Plaintiff alleges the Defendant “acted with a careless or reckless disregard or alternatively unreasonably”.
[14] No objection was taken by the Defendant to strike any portion of these pleadings at any time throughout the law suit. No evidence has been put before me that might form the basis of any type of foundation to substantiate any of these allegations.
Position of the Parties:
[15] The Defendant takes the position that substantial indemnity costs should be awarded given that the claim was without merit; its offer to settle was reasonable; and most importantly because of what it considers outrageous allegations against it which have not be supported by one shred of evidence or foundation. It argues these spurious allegations are akin to allegations of fraud which have not been proven and therefore the court should indicate its disapproval of such abusive allegations and exercise its discretion by awarding substantial indemnity costs. The Defendant specifically made submissions that it was not seeking costs against Plaintiff’s counsel.
[16] The Plaintiff argues that the allegations in its statement of claim are not outrageous or abusive and in fact commonly pleaded in A.B. cases. It further argues that if the Defendant was as offended as it now claims to be it should have brought a motion to strike the offending allegations years ago rather than wait to the day of trial. Further, the Plaintiff argues, this is the first time she has heard that these allegations were an issue to the Defendant. The Plaintiff urges the court to award only partial indemnity costs and reduced trial preparation, especially after November 26, 2014 when the summary judgment material was served. Indeed the Plaintiff argues preparation costs from the date the Ontario Court of Appeal in Seitzema v. Economical Mutual Insurance Company, 2014 ONCA 111 ruled favourably for the Defendant in an identical case should have put an end to the preparation. That case was released on February 11, 2014. Counsel for the Plaintiff in the case at bar and Seitzema were the same and she sought leave to appeal to the Supreme Court of Canada which was dismissed in December 2014.
Analysis:
[17] Section 131 of the Courts of Justice Act provides that “costs of and incidental to a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.” Rule 57.01 of the Rules of Civil Procedure enunciates the general factors to be considered by the court in exercising its discretion in relation to costs. I have considered those factors.
[18] The Court of Appeal has stated that costs should be on a partial indemnity basis except for rare exceptions;
“…This court, following the principle established by the Supreme Court, has repeatedly said that elevated costs are warranted in only two circumstances. The first involves the operation of an offer to settle under Rule 49.10, where substantial indemnity costs are explicitly authorized. The second is where the losing party has engaged in behavior worthy of sanction.”
Davies v. Clarington (Municipality) 2009 ONCA 722, [2009] O.J.No. 4236 (O.C.A.); Prinzo v. Baycrest, (2002) 2002 45005 (ON CA), 60 O.R. (3rd) 474 (O.C.A.)
[19] R. 20.06 encompasses the second exception which, as there is no offer here that would attract cost consequences, is the Defendants only ground available for it to seek substantial indemnity costs.
The rule codifies what the case law has been for some time. The party paying costs must have either acted in bad faith or unreasonably.
[20] The power to award costs on a solicitor-and-client scale is within the discretion of the court. It is a discretion which is to be exercised in only special and rare cases. Proceedings where allegations of fraud and dishonesty are made and not established are recognized as falling into that category of special and rare cases.
Bargman v. Rooney, [1998] No. 5528 at para. 15
[21] In Hamilton v. Open Window Bakery Ltd., [2004] SCC 9 () Arbour J., held that an unsuccessful attempt to prove fraud or dishonesty does not lead inexorably to an award of substantial indemnity costs against the unsuccessful party. Arbour J. stated at para. 26:
In Young v. Young, 1993 34 (SCC), [1993] 4 S.C.R. 3, at p. 134, McLachlin J. (as she then was) for a majority of this Court held that solicitor-and-client costs “are generally awarded only where there has been reprehensible, scandalous or outrageous conduct on the part of one of the parties”. An unsuccessful attempt to prove fraud or dishonesty on a balance of probabilities does not lead inexorably to the conclusion that the unsuccessful party should be held liable for solicitor-and-client costs, since not all such attempts will be correctly considered to amount to “reprehensible, scandalous or outrageous conduct”. However, allegations of fraud and dishonesty are serious and potentially very damaging to those accused of deception. When, as here, a party makes such allegations unsuccessfully at trial and with access to information sufficient to conclude that the other party was merely negligent and neither dishonest nor fraudulent (as Wilkins J. found), costs on a solicitor-and-client scale are appropriate: see, generally, M. M. Orkin, The Law of Costs (2nd ed. (loose-leaf)), at para. 219.
[22] As noted by Armstrong J.A. in Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3rd) 291 the fixing of costs involves more than merely a calculation using the hours docketed and the cost grid. He further stated in para. 24, “In our view, the costs award should reflect more what the court views as a fair and reasonable amount that should be paid by the unsuccessful parties rather than any exact measure of the actual costs to the successful litigant.”
[23] I do not accept the submission of Plaintiff’s counsel that the allegations I have cited from her statement of claim are common with the plaintiff’s bar in AB actions, when there is no foundation or evidence to support them. Certainly no evidence, or case law, was presented to this court to support such a proposition. I do indeed find the allegations made by the Plaintiff in her statement of claim are akin to a pleading alleging fraud. The allegations go to the very honesty and reputation of the Defendant and in my view, unless there is evidence to support such allegations, the Plaintiff does so with the same risk in costs as pleading fraud which she is unable to prove.
[24] This case is similar to Hamilton, supra., where the plaintiff alleged fraud, but had access to information sufficient to conclude the Defendant was neither dishonest or fraudulent and substantial indemnity costs were payable. Clearly the Plaintiff in the case at bar had such information as it elected to present no evidence at the trial. This is not a case similar to Young, supra., which involved a bitterly fought family law matter.
[25] The Plaintiff’s argument that there was some obligation on the Defendant to move to strike the scandalous parts of the statement of claim at an earlier stage is, in my view, without merit. The Defendant should not be put to the expense of bringing motions to see if the Plaintiff has sufficient evidence to support its pleadings. The Plaintiff obviously knew for some time that it had no evidence to support the allegations. I suggest it was incumbent on her at that stage to withdraw the offensive portion of her pleadings or face the risk of an adverse costs award. She had the knowledge of what she could prove not the Defendant.
[26] Likewise, I see no merit in the argument of the Plaintiff that the Defendant should not be awarded costs for much of its preparation for trial since the Court of Appeal decided Seitzema in February 2014. The flaw in that argument is that it was the same counsel who sought leave to appeal Seitzema to the Supreme Court. Obviously counsel thought there must have been some merit in her argument that leave might be granted. It is difficult to understand why the Plaintiff felt it was unreasonable for the Defendant to await the results of the leave application before deciding to bring its summary judgment motion. It would have certainly been met with the argument by Plaintiffs’ counsel that any decision on that motion, had it been brought earlier, should await the results of the leave application.
[27] I also find the argument that the Defendant should have ceased preparation for trial once the Court of Appeal released Seitzema to be flawed. There was a leave application outstanding and a fixed trial date approaching. Obviously the Plaintiff felt she might have some success at the Supreme Court, given her leave application, and she had certainly not advised the Defendant, at that time, that she was abandoning her case. Under those circumstances I think it was incumbent on the Defendant to prepare and be ready for the potential trial. It would have been criticized had it not been ready for the potential trial.
[28] I conclude that the allegations in the Plaintiff’s statement of claim are of fraud and dishonesty and as stated by the Supreme Court in Hamilton, supra.,
However, allegations of fraud and dishonesty are serious and potentially very damaging to those accused of deception. When, as here, a party makes such allegations unsuccessfully at trial and with access to information sufficient to conclude that the other party was merely negligent and neither dishonest nor fraudulent (as Wilkins J. found), costs on a solicitor-and-client scale are appropriate: see, generally, M. M. Orkin, The Law of Costs (2nd ed. (loose-leaf)), at para. 219.
[29] The allegations go to the very honesty of a large international insurer. They were made with no evidence to substantiate them. Indeed the entire claim appears to be made without merit, however, the Defendant was not advised of this until the last moment just before trial. Under such circumstances it is incumbent upon the court to show it’s disapproval of such conduct which in my view is clearly worthy of sanction. Costs on a substantial indemnity basis will therefore be awarded to the Defendant payable by the Plaintiff forthwith.
[30] The bill of costs submitted by Defence Counsel totals $33,692.97 inclusive of disbursements and G.S.T. This is the actual bill sent to the Defendant by its counsel for all work done up to the date of this motion. The bill is very fair and reasonable, both for the amount of work done from the inception of this case and the hourly rates charged. I conclude this is an amount that the Plaintiff would have expected to pay having lost this case. I award additional costs of this motion to the Defendant in the amount of $2000.00 inclusive of disbursements and taxes for a total amount in costs of $35,692.97 payable forthwith by the Plaintiff to the Defendant.
Arrell, J.
DATE: February 3rd, 2015
COURT FILE NO.: Sienna v. State Farm, 2015 ONSC 786
DATE: 2015-02-03
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Susan Sienna
Plaintiff
- and -
State Farm Mutual Automobile Insurance Company
Defendant
JUDGMENT ON COSTS
HSA (vt)
DATE: February 3rd, 2015