COURT FILE NO.: CV-13-5572-00 DATE: 20170508
Superior Court of Justice - Ontario
RE: YOJNA GUPTA, Plaintiff THAKAR SINGH and FORTIGO FREIGHT SERVICES INC., Defendants
BEFORE: EMERY J.
COUNSEL: Gary Mazin, for the Plaintiff Fatima M. Vieira, for the Defendants
HEARD: April 3, 2017
Costs Endorsement
[1] The plaintiff, Yojna Gupta, brought this action claiming damages she allegedly suffered from a motor vehicle accident in which her car was struck from behind by a truck on October 22, 2012. The driver of the truck, Thakar Singh, and the owner of the truck he was driving, Fortigo Freight Services Inc. were named as defendants in the action.
[2] The trial of this action was scheduled to commence on January 3, 2017. On December 22, 2016, the defendants served an Offer to Settle on the plaintiff dated December 21, 2016 (the “defendants’ Offer”), to pay $34,000 plus pre-judgment interest at the rate of 0.65% calculated from December 13, 2013.
[3] It was also a term of the defendants’ Offer that:
- The Defendants will pay to the Plaintiff her partial indemnity costs of this action to the date of this Offer in an amount to be agreed upon or accessed pursuant to the Rules of Civil Procedure.
[4] The plaintiff accepted the defendants’ Offer on January 4, 2017, after picking a jury.
[5] Mr. Mazin, counsel for the plaintiff now asks this court to assess costs pursuant to the terms of the accepted Offer to Settle of the defendants.
Background
[6] The plaintiff claimed $2,000,000 in general damages and special damages in her statement of claim issued on December 12, 2013.
[7] The defendants contested both liability and damages in the statement of defence.
[8] On August 21, 2014, the plaintiff made an Offer to Settle in the amount of $370,000, plus interest, costs and disbursements. The defendants did not respond to this Offer.
[9] The defendants had initially offered to settle the action for a dismissal of the action without costs. At a mediation, the defendants made a final offer of $5,000. At the time, the plaintiff had incurred approximately $31,000 in disbursements. This fact was made known to counsel for the defendants at the time they made that Offer.
[10] At or after the mediation on December 22, 2015, the plaintiff made another Offer to Settle for $320,000, plus interest, costs and disbursements.
[11] On December 21, 2016, the plaintiff made another Offer to Settle in the amount of $250,000, plus costs.
[12] It was with this history that the defendants Offer in the amount of $34,000, plus pre-judgment interest and costs dated December 21, 2016 was made.
Position of the Plaintiff
[13] Mr. Mazin seeks costs on a partial indemnity basis for a total of $180,274.10 for his client. This total includes $101,935.00 for fees, plus HST to bring the total claims for fees to $115,187.00. In addition, he claims disbursements not subject to HST in the amount of $3,748.87, and disbursements that are subject to HST in the amount of $54,281.56 plus HST of $7,056.60 that adds up to a total claim for disbursements of $65,087.03.
[14] Ms. Gupta claimed that she had suffered injuries to her neck and back that were caused by this accident.
[15] Ms. Gupta had previously been diagnosed with multiple scleroses (“MS”). The most significant injury Ms. Gupta reported as a result of this accident was the amplification of her MS symptoms.
[16] In support of the plaintiff’s contention that she was entitled to an income loss claim, Mr. Mazin submits that Ms. Gupta had begun a position as an Avon representative. She had signed on with Avon Canada three days before the accident. For 20 years prior to that time, she had been a homemaker and mother with no outside employment history.
[17] Mr. Mazin described how shortly before the accident, Ms. Gupta had hired a housekeeper to temporarily assist with housekeeping following her gallbladder surgery. Despite recovering from surgery, Ms. Gupta was forced to continue employing the housekeeper on a more frequent basis following the accident.
[18] Counsel for the plaintiff had engaged various individuals, medical experts and treating professionals to testify at the trial of this action. Those experts were expected to give evidence on the many ways Ms. Gupta’s life had been permanently impacted by the accident. In addition to family members, the treating psychologist and treating family doctor, an orthopedic surgeon, podiatrist, chiropractor, kinesiologist and occupational therapist would have been called to testify. Mr. Mazin also intended to call a chartered accountant and other accounting professionals to testify about Ms. Gupta’s loss of income and competitive advantage.
[19] Mr. Mazin describes in the Costs brief that the plaintiff’s Offer to Settle dated August 21, 2014 in the amount of $370,000 was apportioned as follows:
a. $115,000 for general damages; b. $90,000 for loss of income, loss of competitive advantage and diminished earning capacity; c. $110,000 for loss of housekeeping capacity and childcare; and d. $55,000 for “medicals” and treatment.
Position of the Defendants
[20] The defendants oppose the amount of costs claimed by the plaintiff on three essential grounds:
- Since the action settled for an amount within the monetary range of simplified procedure, the cost consequences of Rule 76.13(3) should apply;
- Many items for which time is claimed and many of the disbursements do not relate to an issue in the action that had any prospect of success; and
- The amount claimed is disproportionate to the settlement of $34,000, plus interest.
[21] In this respect, Ms. Vieira has attached a Bill of Costs in which partial indemnity fees of $51,983.40 are claimed, plus HST of $6,757.84, totalling $58,741.24. This provides the court with a check on what would seem reasonable to the defendants, and what could be considered proportionate having regard to the claim for costs of the plaintiff.
Analysis
[22] The plaintiff is clearly entitled to costs up to the date of the defendant’s Offer that she accepted on January 4, 2017. There is no dispute between the parties that the plaintiff is entitled to those costs on a partial indemnity basis. The only issue on this hearing is the amount of those costs.
[23] Ms. Vieira made submissions in her written materials and in argument that certain costs for interim motions must be deducted off the top from the amount claimed for fees where costs on those interim motions had already been awarded. These deductions are not seriously challenged by Mr. Mazin.
[24] From the fee total of $101,935, I therefore deduct $3,812.14 for those motions from the time recorded by plaintiff’s counsel, and additional amounts for interim motions between January 14 and November 22, 2016 in the amount of $1,409.58. This leaves a net balance of $96,713.28 for the total fees claimed on a partial indemnity basis as the starting point to assess costs.
[25] It is an overarching principle in the law of costs that any amount the court awards for costs must be fair and reasonable. In Boucher v. Public Accountants Council for the Province of Ontario, [2004] 71 O.R. (3rd) 291, the Court of Appeal stated that a measure of what is fair and reasonable is generally considered to be what amount the unsuccessful party could reasonably expect to pay for costs. This is the governing principle on which all else must follow.
[26] Mr. Mazin has made his position known on what amount he seeks in the submissions he has made on behalf of the plaintiff. I shall therefore consider in turn the three essential grounds on which Ms. Vieira opposes the amount of costs requested.
What Rule Applies?
[27] The defendants have asked this court to apply Rule 76.13(3) to preclude the plaintiff from any entitlement to costs. They make this submission because Ms. Gupta recovered less than $100,000 without bringing her action under simplified procedure.
[28] I do not consider Rule 76.13(3) to be applicable here. First, the plaintiff did not obtain a judgment for less than $100,000. Subrule 76.13(2) applies where a judgment is obtained, and subrule 76.13(3) applies where 76.13(2) applies. It follows that the prohibitive effect of subrule 76.13(3) did not apply if the plaintiff accepted the defendant’s Offer of less than $100,000 before trial. In any event, I would also exempt the plaintiff’s claim for costs under Rule 76.13(3)(b) as I am satisfied it was reasonable for the plaintiff to commence and to continue the action under ordinary procedure.
[29] Second, this assessment of costs is conducted under the terms of paragraph 2 of the defendant’s Offer to Settle. The parties formed a settlement contract on the terms of that Offer when it was accepted by the plaintiff. The accepted Offer dictates the terms for the assessment of costs. If the defendants intended to have Rule 76.13(3) apply, the defendant’s Offer should have expressly stated that the costs were subject to that rule.
[30] The defendants Offer provided that the plaintiff would have her costs on a partial indemnity basis upon acceptance. This term determines the matters of entitlement and scale for the costs award I am to make.
[31] Mr. Mazin relies on the decision of this court in Campbell v. Norbury, 2014 ONSC 5168, in which Justice Mitchell held that Rule 58.06 is the applicable Rule to apply when assessing costs where an offer is accepted, rather than Rule 57.01. Ms. Vieira submits that Rule 57.01(1) provides the factors for the court to follow on this assessment.
[32] I agree with the reasoning and conclusion of Justice Mitchell in Campbell that Rule 58.06 applies when fixing the amount of those costs. I add one further reason. Rule 57.01(1) contains factors for the court to apply when deciding issues of entitlement and scale in addition to the amount of costs. Its scope is greater. This is borne out by the opening words of Rule 57.01(1) “In exercising its discretion under section 131 of the Courts of Justice Act to award costs…”
[33] In contrast, Rule 58.06 provides a less rigorous set of factors. Those factors are directed to the sole purpose of assessing the amount of the costs for the court to award. As Justice Mitchell noted, the judge on an assessment of costs in effect stands in the shoes of an assessment officer under Rule 58.06(1).
What amount would be fair and reasonable?
[34] I am of the view that I will have reached a fair and reasonable amount to award for costs in this case if I arrive at that place by following either one of two routes. The first route is to assess the costs claimed by Ms. Gupta globally under Rule 58.06 in conjunction with the principles in Boucher. The second route is through proportionality.
[35] The damages claimed by the plaintiff in the statement of claim were not insignificant. However, there are many reasons a plaintiff may decide to accept an offer that is lower than the initial amount claimed, or to make an offer to accept lower damages along the way.
[36] In this action, the end result suggests that the amount for damages claimed by the plaintiff was excessive. There is no doubt that the issues were important to her, but they were likely important to the defendants as well.
[37] The more relevant factors under Rule 58.06 to make a fair and reasonable assessment are either the conduct of any party that tended to shorten or to unnecessarily lengthen the proceeding under (e), or if any step was unnecessary or the result of excess caution under (f)(i) or (ii), or both. I can only make that determination on two of the most pronounced issues: the claim for income loss made by Ms. Gupta, and her claim for housekeeping expenses.
[38] Ms. Vieira points out that Ms. Singh had no employment history in the workforce outside the home for 20 years prior to the accident. She had just signed a sales commission contract with Avon Canada three days before. She had no employment history on which to base a claim for economic loss or her loss of competitive advantage in the market place.
[39] Ms. Vieira further submits that Ms. Gupta had causation issues with respect to her claim for housekeeping expenses. She had hired a housekeeper before the accident occurred. Causation was definitely an issue on her claim that she required a housekeeper as a result of the injuries she suffered on October 22, 2012.
[40] The plaintiff’s settlement did not include elements of either her claim for loss of income, or for housekeeping expenses. I therefore conclude that the plaintiff’s costs must be reduced for the time her legal team incurred for those issues, leaving the question of by how much to be decided. For that answer, I refer to the amount of the defendants’ costs on a partial indemnity basis shown in their bill of costs up to the date the Offer was made on December 21, 2016. Those fees total $37,354.
[41] Although that amount is not comparative, I consider it fair and just to add 50% to recognize the statement made by Justice Ground that one would normally expect the plaintiff’s counsel to spend more time in the process of assembling and organizing evidence and in preparation for trial compared with the fees associated with the defence: Canadian National Railway Corporation v. Royal and Sun Alliance Insurance Co. of Canada, (2015), 77 O.R. (3d) 2012 (SCJ) at para. 10. I would not think it unfair to agree with this observation for two reasons, first that the plaintiff bears the burden of proof, and second, that counsel for the plaintiff often has the challenge of dealing with first time litigants who have diverse expectations of their counsel and the justice system when making a claim.
[42] I consider the plaintiff would be entitled to costs based on partial indemnity fees assessed at $56,000 as the baseline for the costs she is seeking. This is an amount that should be viewed by both parties as fair and reasonable as it is supported in part by what the defendant could expect to pay for costs, and in part by the value of additional work the plaintiff realistically expended to prepare for trial up to December 21, 2016.
Proportionality
[43] Since the discretion of the court under section 131 of the Courts of Justice Act is subject to the Rules, that discretion must also be governed by the requirements of Rule 1.04(1.1) of the Rules of Civil Procedure.
[44] Mr. Mazin argues that the primary purpose behind the principle of proportionality is to encourage defendants to make offers. In this case, he states that only at mediation did the defendants offer $5,000.00 all inclusive to settle the case. He submits that the defendants made this offer knowing that the plaintiff had incurred disbursements alone in excess of $31,000.00 at the time.
[45] Mr. Mazin makes reference to section 258.5(1) that requires an insurer defending an action for loss or damage from bodily injury directly or indirectly from the use or operation of a motor vehicle to attempt to settle the case as expeditiously as possible. He refers the court to section 258.5(5) of the Insurance Act which states that the failure of an insurer to comply with that section should be considered by the court in awarding costs.
[46] Ms. Vieira submits that the primary purpose behind the principle of proportionality is to provide access to justice. She argues that proportionality must govern the conduct of all parties during a proceeding to control the cost of litigation. Ms. Vieira argues that proportionality considerations ensure that counsel and the parties on each side of a case take a hard look at the case at all material times. This continued focus works to keep costs both reasonable and realistic, having regard to the issues and the amounts involved.
[47] Ms. Vieira argues that there was serious doubt that Ms. Gupta had suffered a permanent serious impairment of an important physical, mental or psychological function. Ms. Gupta faced a challenge under section 267.5(15) whether her claim for non-pecuniary damages met the threshold for recovery under subsections 267.1(3) and (5) of the Insurance Act. Ms. Vieira further submits that Ms. Gupta faced serious obstacles to proving a loss of income, or that her claim for housekeeping expenses was cause by this accident.
[48] I consider the submissions of both counsel to have merit. Mr. Mazin makes a reasonable argument that the defendants should have made greater attempts to settle this action earlier in the case. However, I take the point made by Ms. Vieira that Mr. Mazin and his client had a responsibility to control costs having regard to the issues and evidence available to prove the underlying facts for each part of her claim. In the course of collecting the evidence to prove the plaintiff’s case, her counsel had a responsibility to take a hard look at the prospects of each component of the plaintiff’s claim from time to time.
[49] The plaintiff initially claimed $2,000,000 for damages in the statement of claim. Ms. Gupta subsequently reduced her claim for those damages to $370,000, and later to $320,000 for settlement purposes. When I consider the fact that she ultimately settled for $34,000, I am left with the impression that Ms. Gupta knew her reach exceeded her grasp in terms of having the evidence necessary to prove those parts of her case. Unfortunately, Ms. Gupta incurred costs to her lawyers for those claims that were not reflected by the settlement reached. She cannot reasonably expect to recover costs from the defendants for making those claims.
[50] Ms. Vieira argues that the plaintiff’s claim for costs is disproportionate to the principle amount of $34,000 she finally accepted. However, paragraph 2 of the defendants’ Offer did not specify to what part of the plaintiffs claim the Offer was directed.
[51] If the defendants are genuine in their submission that there was no real prospect of success for either the claim for loss of income or the housekeeping component, it is reasonable to conclude that the Offer was directed to the plaintiff’s claim for non-pecuniary loss. If that is a reasonable conclusion, then it is reasonable to take into consideration the deductible of approximately $30,000 that would have applied to the claim for general damages. On this basis, the net Offer could be taken to mean that the defendants assessed the plaintiff’s claim for general damages at $64,000.
[52] I cannot countenance fees that overwhelm common sense, or that rewards a plaintiff for risking far more in costs than the damages she might reasonably expect to recover for a legitimate claim. It is only in rare circumstances where the justice of the case requires the risk and expenditure of greater resources than the actual amount at issue on a claim.
[53] I do not consider it unreasonable or disproportionate for Ms. Gupta as the plaintiff to recover fees from the defendants on a dollar for dollar basis. It is my view that the costs she is seeking must be reduced by at least one third to bring the fees claimed down to $64,000 as a matter of proportionality. This is the amount I consider to be the high water mark to what costs would be proportionate to the value of the settlement.
[54] I am therefore awarding the plaintiff $60,000 for fees, plus HST. This amount is the average of the conclusions I have reached using the fair and reasonable approach, and through proportionality.
Disbursements
[55] The question of whether proportionality is applicable to disbursements is also raised. In determining whether a particular disbursement is recoverable, including expert fees, the court must look at the relevance of the disbursement in relation to the purpose it was incurred, as well as the amount of that disbursement on a proportionate basis.
[56] Hamfler v. 1682787 Ontario Inc., [2011] O.J. No. 6190 (SCJ) and Kirby v. Andany, 2017 ONSC 301 are two decisions of Justice M. L. Edwards that express the view that disbursements in a civil action are subject to proportionality considerations. Those considerations must be factored in with the standard scrutiny of the court to question whether those disbursements are fair and properly claimed against another party as part of the costs of the action.
[57] I have reviewed the disbursements claimed by Ms. Gupta, having regard to the submissions of Ms. Vieira and the principle of proportionality as follows:
a. There was no reasonable income loss claim for which recovery was obtained. The fees for the two economic loss reports prepared by Principle Nafekh Ltd. for $5,162 and $1,750 respectively are therefore excluded; b. The cost of the medical illustrations totalling $9,215, are excluded. From all accounts, the plaintiff suffers a soft tissue injury with a neurological component that exacerbated her MS condition, and caused related chronic pain. The medical illustrations were of little consequence to proving the plaintiff’s injury in the final analysis; and c. The plaintiff obtained future care assessments from three different assessors, costing $3,300, $3,500, and $7,100. I have subtracted a third of these amounts ($4,587) for proportionality.
[58] I therefore award disbursements that are subject to HST in the amount of $33,567, plus applicable HST of $4,363, and $3,748 for disbursements that are HST exempt, for a total of $41,678.
Costs Ordered
[59] The plaintiff is therefore awarded $60,000 for fees plus HST on a partial indemnity basis, and $41,678 for disbursements in this action, payable by the defendants forthwith.