Court File and Parties

COURT FILE NO.: CV-10-408146 DATE: 20190429 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: ANUPAM DHAR, Plaintiff AND: KENNETH MCGUINNESS, MCGUINNESS INTERNATIONAL INC. AND STATE FARM AUTOMOBILE INSURANCE COMPANY, Defendants

BEFORE: Stinson J.

COUNSEL: David F. MacDonald, for the Plaintiffs D. Keith Smockum, for the defendants Kenneth McGuinness Robert A. Betts, for the defendant State Farm Automobile Insurance Company

HEARD at Toronto: By written submissions

Reasons for Decision as to Costs

[1] The plaintiff Anupam Dhar was injured in a motor vehicle accident on August 29, 2008. In 2010, he started this action seeking damages from the defendants Kenneth McGuinness (driver of the other car) and McGuinness International Inc. (its owner) (collectively “McGuinness”). When McGuinness alleged that an unidentified driver cause the accident, Dhar was forced to add his own insurer, State Farm, as a co-defendant, advancing a claim on his unidentified motorist coverage. The case culminated in a jury trial that starting on January 14, 2019.

[2] Over the course of the litigation, Dhar made numerous offers to settle, the most recent being a Rule 49 offer made January 3, 2019 for the sum of $350,000 plus costs and disbursements. The only offer to settle from the defendants was a non-Rule 49 compliant offer from McGuinness, the Friday afternoon before the Monday start of trial, for the sum of $75,000 plus costs and disbursements.

[3] One week into the anticipated five week long jury trial, the parties participated in a mid-trial judicial settlement conference. They agreed to settle the issue of Dhar’s damages at $365,000. They further agreed to continue the trial on liability, as between McGuinness and State Farm, with the issue of Dhar’s costs to be addressed following the jury decision on liability.

[4] At the conclusion of the trial on liability, the jury found McGuinness 10% at fault for the accident and the unidentified motorist 90% responsible. Because McGuinness was insured, by reason of the operation of s. 2(1)(c) of O. Reg. 676 made under the Insurance Act, R.S.O. 1990, c. I.8, State Farm is absolved of liability to pay any of Dhar’s damages. The net result is that McGuinness is 100% liable for Dhar’s damages.

[5] Against the foregoing factual backdrop, Dhar has submitted a bill of costs seeking an order that his costs be paid by McGuinness on a partial indemnity basis up to the date of his offer of January 3, 2019 and on a substantial indemnity basis thereafter.

Liability for Costs

[6] As Firestone J. observed in Lakew v. Munro, 2014 ONSC 7316, at para. 57: "Costs are in the absolute discretion of the court. A successful litigant has no right to costs, but only a reasonable expectation of costs.”

[7] In the ordinary course, and absent some proper basis for not doing so, the court will order an unsuccessful litigant to pay costs to a successful litigant.

[8] In the present case, Dhar asserts that, since he was successful at trial as against McGuinness, he should be awarded costs payable by McGuinness. For his part, McGuinness contends that this is a case in which each party should bear their own costs. For the reasons that follow, I disagree with McGuinness.

[9] To begin with, it was entirely reasonable and appropriate for Dhar to sue McGuinness. The accident was caused when the McGuinness vehicle crossed the centreline of the roadway and collided with Dhar’s oncoming car. There was no suggestion of any fault on the part of Dhar. In the absence of some explanation that would wholly absolve McGuinness from responsibility, those facts indicated that McGuinness was liable.

[10] For his part, however, McGuinness asserted that sole responsibility for the collision lay with an unidentified motorist who caused him to take evasive action that resulted in him losing control of his own vehicle, and colliding with Dhar. As such, the burden of proving that theory of causation and liability rested on McGuinness. Ultimately, McGuinness was unable to discharge his onus of shifting 100% of liability to the unidentified motorist; instead, he was found partially responsible. As noted, the result of that finding is that McGuinness (or his insurer) is 100% liable to pay Dhar’s damages.

[11] As Arrell J. stated in Yelda v. Vu, 2013 ONSC 5903, at para.11 (citing 1318706 Ontario Ltd. v. Niagara (Municipality) (2005), 75 O.R. (3d) 405 (C.A.) at paras. 48-52): "[t]he principle that costs follow the event should only be departed from for very good reasons such as misconduct of the party, miscarriage in procedure, or oppressive or vexatious conduct of proceedings."

[12] The facts of this case do not meet that high test. I therefore conclude that Dhar is entitled to an award of costs payable by McGuinness.

Scale of Costs

[13] Dhar seeks partial indemnity costs to the point of his offer to settle on January 3, 2019 and substantial indemnity costs thereafter. His latter request is based on the fact that he obtained a result that was more favourable than his Rule 49 offer to settle: $365,000 versus $350,000.

[14] McGuinness submits, however, that the court should not apply the costs consequences that flow from Rule 49. McGuinness argues that the factual circumstances leading to the accident and the statutory and regulatory framework governing motor vehicle accidents involving unidentified drivers, precluded the possibility of a pretrial settlement. McGuinness contends that the ultimate allocation of liability of 90% to the unidentified driver and only 10% to McGuinness suggest that acceptance of the Rule 49 offer by the defendants was an impossibility, such that a trial on liability was required. McGuinness therefore submits that the court should depart from the usual cost consequences of Rule 49.

[15] I do not accept these submissions. As D. Rutherford J said in Carleton Condominium Corp. No. 97 v. Coscan Development Corp., [1996] O.J. No. 4091 (Gen. Div.) at paras 12 and 13:

I think Rule 49 permits a plaintiff to make a global offer to multiple defendants putting the onus on them to come up with a method of sharing the burden of accepting the offer or risking the burden of solicitor-client costs. If the offer is not accepted, and, overall, the trial result is more favourable to the plaintiff.

This approach creates a considerable incentive for multiple defendants to try to find a formula for acceptance of an offer to settle. Such global offer does not prejudice individual defendants, all of whom can deal with such a global offered in concert with the other defendants, or as individuals by offering an amount to settle just as against it.

[16] In the present case, there was nothing to prevent the defendants from settling Dhar’s claim at any time prior to trial and committing to pay Dhar the agreed upon amount of his damages, and thereafter litigating as between themselves the issue of their respective liability for the accident. Indeed, that is precisely what occurred, albeit one week after the trial involving all participants began. I therefore see no proper basis for absolving McGuinness from the consequences of the non-acceptance of Dhar’s Rule 49 offer.

[17] Rule 49.10 provides that, where an offer to settle is made by a plaintiff at least seven days before the commencement of the hearing and it is not withdrawn and does not expire before the commencement of the hearing and is not accepted by the defendant, where the plaintiff obtains a judgment more favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date of the offer and substantial indemnity costs thereafter, unless the court orders otherwise. On these facts, I see no proper basis to exercise my discretion to relieve McGuinness from his decision to force Dhar on to trial. He could have settled with Dhar and pursued a cross-claim against State Farm, but opted not to do so.

[18] I therefore conclude that McGuinness should pay Dhar his partial indemnity costs up to the date of the offer and substantial indemnity costs thereafter.

Quantum of Costs

[19] Dhar seeks costs of $449,399.90 for fees, plus HST of $58,421.99 and disbursements (inclusive of tax) of $131,444.60, for a total costs claim of $639,266.49. It is apparent at the outset that his costs claim of $639,000 is 1.75 times the amount of his damages recovery, $365,000. Based on the principle of proportionality and other grounds, McGuinness argues that the amount claimed is unreasonable and excessive. McGuinness also points out that Dhar’s Bill of Costs does not include all steps in the litigation, but merely those that were carried out by Dhar’s trial counsel, who assumed carriage of the matter after the examinations for discovery and the initial mandatory mediation. For comparison purposes, McGuinness has submitted his own Bill of Costs for the entire proceeding showing substantial indemnity costs (including tax) of $158,184.75 and partial indemnity costs of $113,078.34.

[20] The principles applicable to fixing costs are well known. The general principles and leading authorities are helpfully summarized in Agius v. Home Depot Holdings Inc., 2011 ONSC 5272 at paras. 10 through 12. The overriding principle is that the amount of costs awarded be reasonable in the circumstances: see Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66 (C.A.).

[21] Against that backdrop, I turn to a consideration of the applicable principles set out in rule 57.01(1)(0.a) through (i).

(0.a) – The principle of indemnity, including rates charged and hours spent by the party’s lawyer

[22] In relation to this factor, I am particularly struck by the amount of time that was devoted by Dhar’s counsel to take the case from the post-discovery stage through trial, as contrasted to the total amount of time spent on the full proceeding by counsel for McGuinness. The former spent over 1,300 hours, while the latter spent less than 500 hours. I acknowledge, of course, that plaintiff’s counsel has the more challenging task of framing and prosecuting the case, assembling evidence and directing the client through the litigation process. It is thus understandable that more time would be spent by one side than the other. In this case, however, the total of 1,300 professional hours - a factor of more than 2.5 times the hours spent by the defence (leaving aside the time spent by previous plaintiff’s counsel on the pleadings and discovery stages) – leads me to conclude that the hours are excessive.

[23] One aspect of excessive time that was apparent to me was the fact that multiple lawyers for the plaintiff were present in the courtroom for much of the trial, for reasons that were not readily apparent. It is open to any party to staff a case as they may choose, but unless the complexities and issues demand it, the expense of so doing should not be visited on the opponent. In my view, this was not a case that warranted or required the attendance of experienced senior counsel plus two additional lawyers on behalf of plaintiff. My review of the time spent on various pre-trial steps also suggests that more time was spent than was required. That said, I acknowledge that plaintiff’s counsel had to (and did) prepare for an anticipated five week trial in which much of the evidence would have involved expert testimony regarding complex medical issues, given the nature of Dhar’s injuries.

[24] I now turn to the matter of hourly rates. McGuinness objects to the rates claimed as being significantly higher than those charged by defence counsel. In my experience, however, they are not materially out of line when compared to the rates charged by other main stream lawyers and law firms who act for plaintiff clients in these kind of cases. The rates charged by defence counsel to insurance company clients who are repeat customers are not a good comparator from which to measure the reasonability of the claimed rates.

[25] Taken together, however, these factors militate in favour of reducing the amount of costs recoverable by the plaintiff.

(o.b) – The reasonable expectations of the paying party

[26] At the conclusion of the trial, I expressly invited McGuinness to submit the bill of costs he would have presented had he been successful. As noted above, McGuinness accepted that invitation, and submitted a bill that showed substantial indemnity costs (including tax) of $158,184.75 and partial indemnity costs of $113,078.34. For the reasons mentioned above (i.e. the greater scope of the work of plaintiff’s counsel and the likelihood that defence counsel’s hourly rates are lower than those charged by plaintiffs’ lawyers), I would not expect it would be similar in strict dollars terms to plaintiff’s costs. It is, however, some indication of the expectations of the paying party, in terms of the magnitude of the costs liability he was facing.

[27] This was hard fought litigation in which each side incurred significant costs to carry the case through trial, each being conscious of the value of plaintiff's underlying claim. Dhar in particular (to the knowledge of McGuinness) needed to be ready to prove his case on damages, which was hotly contested. Thus McGuinness had to be aware that Dhar was incurring significant costs and he was prepared to do likewise.

[28] A very important additional factor is the Rule 49 offer made by Dhar in advance of the trial. Despite that offer, McGuinness proceeded to trial and assumed the risk that the trial outcome would not be as favourable for Dhar. McGuinness must now accept the consequences of that risk. Indeed, McGuinness ultimately agreed to enter into a settlement agreement that exceeded Dhar’s offer, and thus knowingly opened himself to an award of substantial indemnity costs from the date of the offer forward, which covered the critical – and intensive from a trial preparation perspective – 10 day window immediately prior to the trial, as well as the trial itself. Thus, certainly as regards that element of Dhar’s costs claim, McGuinness cannot contend that his reasonable expectations did not include the spectre of paying substantial indemnity costs for that time-intensive portion of the litigation.

[29] I conclude that this factor favours the plaintiff.

(a) – The amount claimed and the amount recovered in the proceeding

[30] Dhar’s damage recovery was $365,000. His costs claim is $639,266.49 (although, in fairness, almost $200,000 of that sum includes HST of $58,421.99 and disbursements of $131,444.60, while the fees claimed are $449,399.90). The quantum of actual recovery as compared to the amount sought for costs raises the issue of proportionality. McGuinness argues that Dhar’s costs claim is “grossly disproportionate” to the amount recovered. Other judges have commented, however, that proportionality should not be the overriding or even the predominant factor: see for example Sanderson J. in Persampieri v. Hobbs, 2018 ONSC 368; and Gray J. in Cimmaster Inc. v. Piccione, 2010 ONSC 846, for example.

[31] From Dhar’s perspective, placing too much emphasis on the element of proportionality would have an adverse impact on access to justice. Dhar’s claim was well founded. To recover the compensation to which he was entitled, he was compelled to retain skilled counsel who had to devote considerable resources to present a case against two well-resourced defendants. Placing too much emphasis on the factor of proportionality could well result in the plaintiff netting nothing, despite his success at trial. While I acknowledge the relevance of this factor, for the reasons indicated I would discount its significance in this case.

(b) – Apportionment of liability

[32] McGuinness argues that he was found only 10% responsible for the accident, and that Rule 49 and its costs consequences should not apply since pre-trial settlement was impossible. For the reasons previously stated, I do not accept that argument. It was open to the defendants to conclude a settlement prior to trial, just as they did mid-way through the plaintiff’s case.

[33] In any event, the plaintiff was 100% successful. The fact that, as between the defendants, one of them must pay 100% of the plaintiff’s damages – despite being found just 10% responsible for the accident – cannot and should not alter Dhar’s entitlement to costs.

[34] I therefore do not consider this factor to be relevant.

(c) – Complexity of the proceeding

[35] This was a matter of more than moderate complexity. While the mechanics of the accident – and the evidence surrounding it – were fairly straight forward, the damages questions were far more challenging. Plaintiff’s counsel had to retain and instruct multiple experts, dealing with such diverse topics as neurology, psychiatry, psychology, chronic pain, orthopaedics and income loss.

[36] This factor therefore favours a more generous costs allowance.

(d) – Importance of the issues

[37] From the perspective Dhar, the injuries and losses that he suffered were life-altering. The issues were therefore extremely important to him. This factor therefore favours plaintiff.

(e) – Any conduct that tended to shorten or lengthen the proceedings

[38] This case was initially scheduled for trial in February 2017, when it was adjourned at the request of McGuinness. In the following two years, an additional mediation and two further settlement conferences took place, in which McGuinness made no settlement offers. Costs inevitably increased as the case was delayed, including the necessity of updating medical and financial information, among other requirements. This factor therefore favours a more generous costs award.

(f) – Whether any step in the proceeding was improper, etc.

[39] I do not consider this a relevant factor.

(g) – Improper denial of or refusal to admit

[40] I do not consider this a relevant factor.

(h) – More than one set of costs

[41] Counsel advises that the matter of State Farm’s costs has been resolved. This factor is therefore inapplicable.

(i) – Other relevant matters, if any

[42] McGuinness takes issue with Dhar’s disbursements for experts, arguing that a number of them are duplicative. I disagree. This was a complex chronic pain case involving both physical and psychological injury. The involvement of multiple experts was reasonable. In particular, the income loss expert was required to prepare multiple reports because the plaintiff’s circumstances changed, and thus the information had to be revisited and the reports revised. No specific issue was taken with the remainder of the claimed disbursements; while they were significant, there is no suggestion that they were improperly incurred.

Summary and Disposition

[43] McGuinness argues (citing Edwards J. in Hamfler v. Mink) that “[r]easonableness and proportionality dictate that the court take a long hard look at the claim for costs and disbursements in its overall determination as to the reasonableness and fairness of the amount claimed.” I agree, and I have attempted to do so while reviewing the factors enumerated above. Having done so, I conclude that the fees sought by Dhar are greater than is reasonable for the effort required, due to excessive time spent. Most of the other factors are either neutral or favourable to the plaintiff. In the circumstances, and for the reasons I have indicated, I discount the significance of the proportionality factor.

[44] Taking into account the foregoing factors as weighed by me, I fix plaintiff’s recoverable fees at $375,000, a reduction of almost $75,000 from the claimed fees of $449,399.90. To that sum must be added HST of $48,750, and disbursements of $131,444.60. The result is a total costs award payable by McGuinness to Dhar of $555,194.60.

Stinson J. Date: April 29, 2019