Court File and Parties

COURT FILE NO.: CV-15-00304-00 DATE: July 15, 2019 SUPERIOR COURT OF JUSTICE – ONTARIO

RE: PETER ST. MARTHE, Plaintiff -and- LESLIE J. O’CONNOR, Defendant

BEFORE: Justice Patrick Hurley

COUNSEL: Edward V. Bergeron and Warren WhiteKnight, for the Plaintiff Vanessa Turner, Vanessa De Sousa and Jeremy Shaw, for the Defendant

HEARD: In Writing

Endorsement

[1] Following an 11 day trial, I granted judgment in favour of the plaintiff (2019 ONSC 1585). This endorsement deals with three issues arising from that judgment: the statutory deductible for the non-pecuniary damages; the prejudgment interest rate; and the costs of the action.

The statutory deductible

[2] The evidence was completed on November 30, 2018 and final submissions were made December 3. I released my decision on March 11, 2019. I assessed the plaintiff’s non-pecuniary damages at $70,000. The statutory deductible under the Insurance Act for 2018 was $37,983.33. I applied that deductible which resulted in a net award of $32,016.67. I indicated in a footnote that the deductible had increased to $38,819.97 for 2019 and stated that, if the defendant’s position is that the 2019 deductible is the proper one, I would decide this issue by written submissions.

[3] The defendant argues that the 2019 deductible is applicable because of section 267.1(8) of the Insurance Act which states, in part, that the damages are to be reduced by “the non-pecuniary loss deductible published under clause 267.2 (1) (a) for the year in which the court makes the award of damages, if the award of damages is made in a year after 1994”.

[4] However, that particular provision applies only to motor vehicle accidents that occurred between January 1, 1994 and October 31, 1996. For accidents after November 1, 1996, it is section 267.5(7) and the provision simply states “the amount prescribed by the regulations”. Relying on the subheading “Determination at trial; non-pecuniary loss”, the plaintiff submits that the 2018 statutory deductible applies if the trial is deemed to end at the conclusion of final argument but the 2019 one applies if it is deemed to continue until the trial judge is functus.

[5] Ontario Regulation 461/96 entitled “Court Proceedings for Automobile Accidents that Occur on or After November 1, 1996” sets out the formula for the calculation of the deductible for each year but does not otherwise address when it applies. There is no case on point.

[6] Although the statutory language has changed, I agree with the defendant’s position. The statutory deductible will change every year and it makes sense that the one which applies is for the year in which the award of damages is made. As a result, I conclude that the statutory deductible is $38,819.97 which reduces the net award for non-pecuniary damages to $31,180.03.

Prejudgment interest

[7] It is not disputed that, because of the Court of Appeal’s decision in Cobb v. Long Estate, 2017 ONCA 717, s. 128 of the Courts of Justice Act applies to the calculation of the prejudgment interest rate subject to the discretion a court has under s. 130 to vary the amount that would otherwise be payable.

[8] The plaintiff contends that due to the “entrenched intransigence” of the defendant, I should exercise that discretion and increase the rate from 1% to 3% commencing July 14, 2015. The defendant submits that, although he vigorously defended the litigation, he did nothing to lengthen the duration of the proceeding or cause any unnecessary delay.

[9] The factors which I should consider in exercising my discretion are set out in s. 130 (2). In my view, there was no conduct on the part of the defendant nor any circumstances in this case that should cause me to depart from the prescribed rate. Therefore, I fix the prejudgment interest rate at 1%.

The costs of the litigation

[10] The general principles were recently summarized by Mew, J. in Canfield v. Brockville Ontario Speedway, 2018 ONSC 3288, at paras. 9 – 12:

The usual rule in Ontario is that costs follow the event. This is subject to the overarching discretion of the court to determine by whom and to what extent costs should be paid: Courts of Justice Act, R.S.O. 1990, c. C.43, s. 131(1).

Rule 57.01 of the Rules of Civil Procedure provides specific guidance on the exercise of the court’s discretion to award costs. Costs are usually payable on a partial indemnity scale unless the Rules of Civil Procedure provide for, or the circumstances of the case warrant, costs on an enhanced (substantial indemnity or full indemnity) scale.

The principle of proportionality is one of general application to the interpretation of the Rules of Civil Procedure (rule 1.04(1.1)) and therefore applies to the application of the rules governing costs. As a general proposition: (i) proportionality does not override other considerations when determining costs; and (ii) proportionality should not be used as a sword to undercompensate a litigant for costs legitimately incurred: Aacurate General Contracting Ltd. v. Tarasco, 2015 ONSC 5980, at paras. 13-17; Dang v. Anderson, 2017 ONSC 2150, paras. 12-15.

Fixing of costs is not merely a mechanical exercise in reviewing the receiving party’s costs outline: Agius v. Home Depot Holdings Inc., 2011 ONSC 5272 at para. 11. The amount of costs should reflect an amount that the court considers to be fair and reasonable and within the expectations of the parties, rather than an exact measure of the actual costs of the successful litigant: Zesta Engineering Ltd. v. Cloutier (2002), 19 A.C.W.S. (3d) 341 (Ont. C.A.) at para. 4; Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.).

Indemnity, proportionality and the reasonable expectations of the parties

[11] I awarded damages of $205,662.23. The plaintiff made a rule 49 offer on August 30, 2018 for $40,000 inclusive of damages and interest plus costs to be agreed upon or fixed by the court. Therefore, he is entitled to his costs on a partial indemnity basis up to that date and on a substantial indemnity basis after it.

[12] The defendant’s sole written offer was made on August 20, 2018. He offered to consent to a dismissal of the action on a without costs basis if the offer was accepted by October 1, 2018. If not accepted by that date, the defendant would consent to a dismissal of the action upon payment of his disbursements up to October 22 at 5 p.m. at which time the offer was revoked. The trial commenced November 19.

[13] In his written submissions, the plaintiff outlined his efforts to settle the litigation and the defendant’s response. The plaintiff did not identify the amounts proposed by him with the exception of a written offer made during the trial on November 26, 2018 which was open for acceptance until November 28. It was $60,000 for damages and interest plus $153,000 for costs inclusive of HST and disbursements. There was no response to this offer.

[14] According to the plaintiff, the defendant attended at a mediation and judicial pretrial but declined to make any settlement proposals at them. He refused to participate in a mid-trial judicial settlement conference. The defendant did not explain in his written submissions why he was unwilling to make any settlement proposal other than the offer of August 20, 2018. In the absence of an explanation, I can only conclude that the defendant decided, at an early stage of this litigation, that he would not pay any amount, however modest, to settle the case.

[15] This position is baffling in view of the admission of liability and the defence expert opinion. As I set out in my reasons, the defendant’s expert, Dr. Bednar, concluded that the plaintiff suffered from a chronic pain condition which was supported by objective findings and it was reasonable for him to retrain for a more sedentary occupation. The limitation period defence did not require a lengthy trial and, in any event, was an issue that could have been factored into a settlement that reflected a reasonable compromise on both sides.

[16] The defendant’s approach to this litigation is an important consideration on costs because of the emphasis made in his submissions about proportionality. There is no doubt that this is a principle that I must take into account but I agree with the comments of Sanderson, J. in Persampieri v. Hobbs, 2018 ONSC 368, at paras. 93 – 103:

In my view, it is important to recognize that the legislature [or its delegate], by imposing stiffer costs consequences on Defendants where Plaintiffs have beat their own Offers to Settle than it has imposed on Plaintiffs where Defendants have beat their own Offers to Settle has signaled an intention to give greater costs protections to Plaintiffs than to Defendants.

A strict application of the proportionality principle in awarding costs to a Plaintiff who has obtained an order under Rule 49.01(1) for costs on a substantial indemnity basis, would be to deprive that plaintiff of that greater protection.

Like Firestone J, in Valentine, and the other Courts to which I have earlier alluded in this endorsement, I am of the view that to unduly shave Plaintiff’s costs, especially substantial indemnity costs ordered under Rule 49.01(1), based solely or primarily on an undue emphasis on the application of the proportionality factor (reasonableness of costs ordered relative to the amount awarded) would be unfair, especially in all of the circumstances here.

The proportionality principle is generally invoked to foster access to justice.

However, a strict application of the proportionality principle here could work against the achievement of that goal and could have the opposite effect.

Here, the party invoking the proportionality principle and thereby seeking to minimize the effects of a usual order for costs under Rule 49.01(1) is a sophisticated insurer that made a tactical decision to reject a Plaintiff’s formal Rule 49 Offer to Settle understanding the risk in costs that it was taking by so doing.

Because it had framed its defence in the manner that it had, it knew that the resolution of the issues at a trial would involve the hearing of lengthy and costly evidence, including extensive medical evidence.

Sanctioning insurers’ litigation strategies involving:

(1) discouraging Plaintiffs from pursuing legitimate but modest claims by refusing to make any meaningful offer to pay damages and forcing those Plaintiffs to trial in circumstances where, because of defences the insurers have asserted, they cannot possibly be successful unless they call expensive medical and other evidence;

(2) then, raising the spectre of very serious adverse cost consequences of such trials;

(3) then, even after Plaintiffs have chosen to take the serious adverse costs risks of such trials, and even after they have been successful at trial and have received costs awards under Rule 49.01(1) on a substantial indemnity scale; (4) attempting to unduly minimize the quantum of otherwise usual amounts of costs including substantial indemnity costs on the basis of proportionality, would be, in my view, to sanction under compensation of Plaintiffs for costs legitimately incurred to make many lawsuits uneconomic and could generally discourage Plaintiffs with modest claims, even if valid from pursuing them.

If pursuing such an approach or strategy were to have the effect of generally discouraging Plaintiffs from bringing and pursuing modest sized claims, [even in cases such as here where liability has been admitted] the benefits to insurers could be significant and wide ranging.

If insurers were incentivized to pursue such a strategy and to generally resist settlement of such cases, in order to generally discourage such Plaintiffs from pursuing such actions, that could seriously jeopardize overall access to justice.

Insurers can, of course, pursue whatever strategy options they deem fit, but especially where such strategies may have wide ranging and adverse implications involving widespread denial of access to justice, the use of such strategies should not be encouraged by the giving of cost breaks on foreseeable costs consequences.

[17] The plaintiff is seeking costs of $450,241.64 inclusive of fees, disbursements and HST. The fees are $400,594.41 and the disbursements $49,647.20. There were two counsel at trial, Edward V. Bergeron and Warren WhiteKnight. The former was called in 1993 and the latter in 2014. Another lawyer, Casey Dorey (a 2016 call) and a law student and two clerks also worked on the file. The collective number of hours spent by all of them, from commencement of the lawsuit to the end of trial, was 977.8.

[18] The defendant had three lawyers at trial, all of whom are employees of Aviva Canada Inc. Lead counsel was Vanessa Tanner who was called in 2002. She was assisted for the most part by Vanessa De Sousa, a 2017 call. The third lawyer, Jeremy Shaw, was present during the trial but did not gown until final submissions. He was called in 2007. A law clerk also worked on the case. According to the defendant’s cost outline, their fees and disbursements inclusive of HST were $152,883.41 on a partial indemnity basis and $214,810.80 on a substantial indemnity basis. The disbursements were $30,185.75. The collective number of hours was 743.3.

[19] The difference in the amount of hours and disbursements is not surprising. In a personal injury lawsuit, the plaintiff’s lawyers will usually spend substantially more time in preparing and presenting their case at trial than the defendant and the disbursements commonly exceed those incurred by the defendant by a considerable margin. The most significant distinction in this case is between the hourly rates of the lawyers. Mr. Bergeron’s proposed substantial indemnity rate is $750 and his partial indemnity is $500. For Mr. WhiteKnight the rates are, respectively, $300 and $200. Mr. Dorey’s are $250 and $166.66. The law student and clerks are $150 and $100.

[20] According to the defendant’s written submissions and bill of costs, the actual hourly rates for Ms. Tanner, Ms. De Sousa and Mr. Shaw are $300, $225 and $250. [1] While Ms. De Sousa’s rate is in keeping with a recent call, the amounts for Ms. Tanner and Mr. Shaw seem quite modest for Toronto counsel with their level of experience.

[21] The defendant relies on the costs grid set out in the preamble to Rule 57.01 “Information for the Profession” which identifies maximum hourly rates for lawyers and law clerks and he points out that the top rates are reserved for only exceptional or complicated cases and this one did not fall under either category. If it is applied, the maximum rate for Mr. Bergeron would be $350, for Messrs. WhiteKnight and Dorey $225 and for the law clerks $80.

[22] While the costs grid can supply some guidance, I agree with the view of Mew, J. in Canfield that the rates should be based on what clients typically pay and will vary with the type of work, geographic location and the type of client among other factors. See also Donleavy v. Ultramar Ltd., 2019 ONSC 2985, at para. 42.

[23] Mr. Bergeron is a senior member of the personal injury bar in Eastern Ontario. Mr. WhiteKnight ably assisted him at the trial. I accept that both of them could bill at the substantial indemnity rates proposed by them. However, I need to take into account the decisions in Canfield and Donleavy where the hourly rates of local counsel were considered. It is important, in my view, that there be some consistency on this issue. I find that the appropriate partial and substantial indemnity rates for them to be as follows: Mr. Bergeron – $400 and $600; Mr. WhiteKnight – $200 and $300; Mr. Dorey – $150 and $250; the law student and clerks – $100 and $150.

[24] The defendant described the case as a “straightforward personal injury matter”. On the face of it, that is true; there was nothing exceptional in respect of liability or damages. But that tells only half the story. This was hard-fought litigation on both sides and that almost invariably results in the expenditure of time and effort that the parties deem necessary at the time but, after the case is completed, the unsuccessful party characterizes as excessive or unwarranted.

[25] A compelling illustration of the defendant’s approach were the written submissions filed at the end of the trial. These consisted of several volumes which consisted of detailed statements of law, copious footnotes and a lot of caselaw. Every issue that could be contested was. I do not say this in criticism of counsel because written submissions are often helpful and were in this case, but it exemplifies the toil which the defendant thought this case deserved. The total amount of hours spent by the defendant’s lawyers also belies his claim that this was uncomplicated, routine case. Clearly, it would be within the reasonable expectation of the defendant that the plaintiff would spend more hours and incur greater disbursements as he, in fact, did. The ratios of hours and disbursements (about 25% and 40% more respectively) are within a range that would be anticipated by the defendant.

[26] The defendant cites the decisions in Lee v. Rezai, 2015 ONSC 3140 and Poonwasee v. Plaza, 2015 ONSC 4968 and asserts that, because they were trials of a similar duration, they constitute a “benchmark” for determining the reasonable expectations of the parties. In the former, the defendant was awarded $110,638.18 for fees and disbursements and in the latter, the plaintiff received $120,000 all inclusive. However, in both cases, the costs were fixed on a partial indemnity basis. Moreover, this approach is contrary to the Court of Appeal’s adjuration that the guiding principle is the reasonableness of the costs claimed in the particular case.

[27] The other general objection to the fees was that more of the legal work should have been done by the law clerks or secretarial staff. While I agree with this submission as a general proposition, I also recognize that the suggested division of labour is not as easily achieved in a small personal injury firm as it is in an insurance company. The defendant did not identify the work which he thought should have been delegated.

[28] The defendant has made three specific objections to the disbursements. He argues that the expense for photocopies is excessive because there was a relatively small number of productions, the bill for process servers was too much in the circumstances and the costs associated with the expert Ross Skirda are not recoverable because he was not called as a witness. These amounts are $6,005.25, $2,892.90 and $10,989.50.

[29] There is no explanation for the photocopy expense (either the number of copies or the specific charge for a copy) and this was not a document driven case. I reduce the amount by 20% meaning it is decreased to $4800. Given the number of witnesses subpoenaed by the plaintiff and the fact that some of them were not local, I would not reduce the process server expense. Because of the defendant’s position on the loss of income claim, it was reasonable to retain Mr. Skirda and obtain a report from him. However, the plaintiff did not in the end call him as a witness at trial and so I would deduct $3,528 (the fee related to the trial attendance) which decreases the amount to $7,461.50. This reduces the total claim for disbursements from $44,647.20 to $39,864.56. As the defendant did not have any other objections, I do not make any further reductions.

[30] I now turn to the specific factors outlined in rule 57.01(a-i).

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

With the exception of the claim for future housekeeping and home maintenance expenses, the plaintiff received an amount that approximated what he claimed. I know that some judges look at the prayer for relief in relation to this factor but I prefer to compare the plaintiff’s submission at trial with the amount eventually awarded. I find that the plaintiff took a reasonable approach to the damages and was successful on this issue.

b) The apportionment of liability

The defendant sought a reduction in the basis of contributory negligence. I found him wholly at fault for the accident.

c) The complexity of the proceeding

As I earlier stated, there were no exceptional factual or legal issues. There were two motions to discharge the jury, the last one being successful. There were contested evidentiary issues over the admission of social media posts and surveillance recordings. The parties were eventually able to agree on the surveillance evidence. I would describe the trial as moderately complex.

d) The importance of the issues

The case was obviously important to the plaintiff. In view of the defendant’s settlement position, he had no choice but to go to trial if he wanted any monetary compensation for his injuries. Although I am not privy to his current financial circumstances, he will have gainful employment upon graduation and will own assets in the future, if he does not now. A costs award against him would have been a significant financial burden, potentially for years to come. Success at trial was crucial.

e) Conduct of any party that tended to lengthen or shorten unnecessarily the duration of the proceeding

The plaintiff complains that the defendant did not properly respond to requests to admit, requiring him to call evidence to prove facts that should have been admitted. The defendant denies this and submits that, given his agreement to a joint book of documents that contained all the relevant records, the plaintiff did not have to call all the healthcare professionals. I find that neither party acted unreasonably in respect of the trial. The defendant put the plaintiff to the proof of his case, which he was entitled to do. The plaintiff’s decision to call the healthcare professionals arguably enured to the defendant’s benefit because he used their cross-examination to support his challenge to the credibility and reliability of the plaintiff’s testimony.

f) Whether any step in the proceeding was improper, vexatious or unnecessary, or taken through negligence, mistake or excessive caution

Neither party alleged any such conduct.

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

I addressed the requests to admit above. Counsel agreed to trial management conferences and some issues were resolved at them. They also agreed to a joint book of documents. Where the parties could not agree, the issues were argued in a cooperative and efficient manner.

h) Any other matter relevant to the question of costs

I have already adverted to the defendant’s approach to settlement and the impact that will have on the proportionality issue.

Conclusion

[31] The plaintiff is asking for an amount in costs that is more than double the damages that were awarded. As other judges have done when faced with this issue, I cite the decision of Lane, J. in 163972 Canada Inc. v. Isacco:

That the costs significantly exceed the amounts at stake in the litigation is regrettable, but it is a common experience and is well known to counsel as one of the risks involved in pursuing or defending a case such as this to a bitter end rather than finding a compromised solution. To reduce the plaintiff’s otherwise reasonable costs on this basis would simply encourage the kind of intransigence displayed by the defendants in this case.

[32] In Persampieri, Sanderson, J. interpreted the Court of Appeal’s decision in Cobb to impose a notional upper limit for partial and substantial indemnity costs; the former should not exceed 9.035 times the net award and the latter should be fixed at 13.5525. Her decision does not apply in this case because the plaintiff is not seeking an award of costs that is anywhere near that notional upper limit. However, it is important for the confirmation, if such was needed, that a sophisticated litigant like the insurer in this case could reasonably expect to pay costs substantially in excess of the damages awarded, particularly when it takes an inflexible approach to settlement.

[33] This does not mean that proportionality is ignored but reasonableness remains the primary consideration: Boucher v. Public Accountants Council for the Province of Ontario and Davies v. Clarington (Municipality), 2009 ONCA 722. Applying this principle and taking into account the factors set out in rule 57.01, I fix the fees at $300,000 plus HST of $39,000 and the disbursements at $39,864.56 plus HST, payable by the defendant to the plaintiff within 30 days of the date of this order. I will leave it to the parties to agree on the amount of the applicable taxes on the disbursements. If they cannot do so I will decide the issue by written submissions.

Hurley, J. Released: July 15, 2019

Footnotes

[1] The defendant uses the term “solicitor- client” rate which I interpret to be the same as the actual rate.