Court File and Parties
COURT FILE NO.: 6767/12 DATE: 2019-07-16 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Alan John Mahood, Plaintiff AND: Dr. David C. Walsh and Spinal Decompression Centre Inc., Defendants
BEFORE: Heeney J.
COUNSEL: André Michael and Kimberly Knight, for the Plaintiff Brian Foster and Anne Davenport, for the Defendants
HEARD: March 11 to April 12, 2019 at London; written submissions completed June 26, 2019
Endorsement: Costs
[1] I have now received and considered the supplementary submissions on costs that were requested in my endorsement of May 31, 2019.
[2] In his initial submissions, the plaintiff stated that his award of damages of $50,000 and prejudgment interest of $22,500 was less than the sum of $90,000 offered by the defendants in their Rule 49 Offer to Settle. However, he asked that the court exercise its discretion and award no costs to either party. The reasons in support of that submission included the fact that the jury did find a breach of the standard of care by Dr. Walsh, an issue to which a substantial portion of the trial was devoted; that it was reasonable for the plaintiff to have brought this action; and, that the conduct of the trial itself was reasonable.
[3] In the initial submissions of the defendants, they claimed that they were the successful parties in this lawsuit, and asked for partial indemnity costs throughout in the amount of $283,549.77. In the alternative, they sought partial indemnity costs from the date of their Offer to Settle dated October 7, 2018 forward, in the amount of $241,773.11. This alternative position was based on the assertion that recovery at trial did not exceed the amount of the defendants’ Offer to Settle, thereby engaging rule 49.10. That rule provides that where an Offer to Settle is made at least seven days before the commencement of the hearing, is not withdrawn and does not expire before the commencement of the hearing, and is not accepted, and the plaintiff obtains a judgment as favourable or less favourable than the offer, the plaintiff is entitled to partial indemnity costs up to the date of the offer, and the defendant is entitled to partial indemnity costs thereafter, unless the court orders otherwise. Thus, the alternative position put forward by the defendants presumably contemplates that they would pay the plaintiff’s partial indemnity costs up to the date of the offer.
[4] Upon reviewing this material, it became apparent to me that there was an issue that had not been addressed by counsel regarding whether recovery at trial was, indeed, less than the amount offered in the Offer to Settle.
[5] Paragraph 1 of the defendants’ Offer provides as follows: “The Defendants shall pay to the Plaintiff the sum of $90,000 inclusive of any damages, OHIP subrogated claim, and applicable interest”. Paragraph 2 provided that the defendants would pay the plaintiff’s costs on a partial indemnity basis.
[6] The issue that arose for consideration related to the fact that the offer is “inclusive of any … OHIP subrogated claim”. I was advised at the outset of trial that there was an OHIP subrogated claim involved in this case, much of which related to the plaintiff’s surgery in August, 2010. It is now clear (as a result of supplementary submissions filed) that the amount of that subrogated claim was negotiated with the Ministry of Health, with the agreement of counsel for the defendants, to be $22,500.
[7] Counsel had agreed that the success of the OHIP subrogated claim depended upon whether the surgery was causally connected to the breach of the duty of care. One of the questions put to the jury was this: did the defendant’s breach of the standard of care cause or contribute to the need for surgery in August of 2010? Counsel agreed that if the jury answered “yes” to that question, the amount of the subrogated claim would be added to the amount otherwise awarded by the jury. If the jury answered “no” to that question, the subrogated claim would be dismissed. The jury answered that question in the negative.
[8] While that answer ultimately disposed of the subrogated claim, the question remains as to how that claim is to be handled for purposes of dealing with the defendants’ Offer to Settle. From the point in time when the Offer was served until it expired at the commencement of trial, there had been no determination of the causation question by a jury, and if the Offer had been accepted there never would have been such a determination. If it is implicit in the Offer that the plaintiff would pay the subrogated claim out of the settlement monies, then it really amounts to an offer to pay to the plaintiff damages of his own in the net amount of $67,500. This amount is less than the plaintiff’s recovery at trial of $72,500.
[9] I therefore requested supplementary submissions to deal with this issue.
[10] In his supplementary submissions, the plaintiff argued that the Offer to Settle implied that the plaintiff would have to satisfy the Ministry of Health’s claim and provide a final release to the defendants of all claims relating to the action. This would require negotiation between the plaintiff and the Ministry.
[11] Although the plaintiff acknowledged that a finding that the defendants’ Offer to Settle lacked sufficient certainty to engage rule 49.10 could lead to an award of partial indemnity costs to the plaintiff throughout, he nevertheless took a very modest position that was not far from his initial position that there should be no costs awarded either way. He submitted that if the court exercised its discretion to award some partial indemnity costs to the plaintiff, only a modest amount of $10,000 was requested, plus disbursements, but specifically excluding the post-October 7, 2018 disbursement relating to Dr. Peerless, whose opinion on causation was clearly rejected by the jury.
[12] In their supplementary submissions, the defendants argued that even though the amount of the OHIP subrogated claim had been agreed to be $22,500, it should be limited to $2,442.02, which is the amount that they say relates to the worsening of the plaintiff’s condition following the negligent treatment by Dr. Walsh, but excludes amounts relating to the subsequent surgery and treatment thereafter. On this basis, the defendants argue that their Offer to Settle still exceeds the plaintiff’s recovery at trial, and reiterated their claim for costs as outlined above.
[13] Before dealing with rule 49.10, however, I will deal first with the question as to who is entitled to costs in general. I will then consider whether that outcome is impacted by the defendants’ Offer to Settle.
[14] Costs are, of course, in the discretion of the court: s. 131(1) Courts of Justice Act, R.S.O. 1990, c. C.42. Rule 57.01 provides a list of considerations that the court may consider in exercising that discretion. The first two subrules (0.a) and (0.b) relate to the principle of indemnity and what an unsuccessful party could reasonably expect to pay, and these go to quantum as opposed to entitlement.
[15] Subrule (a) refers to the amount claimed and the amount recovered. In that regard, the plaintiff claimed general damages of $500,000 and special damages of $250,000. As already noted, he recovered $50,000 plus prejudgment interest of $22,500.
[16] Subrule (b) speaks to the apportionment of liability, and in that regard the defendants were found to be 100% liable.
[17] Subrule (c) refers to the complexity of the proceeding. It was clearly complex, involving competing expert evidence on standard of care and causation, as well as the need to refer to many volumes of medical records regarding the plaintiff’s pre-existing condition. It required that both sides have the assistance of junior counsel.
[18] Subrule (d) refers to the importance of the issues. They were clearly important to both sides. For the plaintiff, his position was that he had been rendered permanently injured and unable to work as a result of the defendants’ negligence, so this case involved a life-changing event from his perspective. For the defendant Dr. Walsh, this case involved an allegation that he was professionally negligent, which has obvious importance to him in his professional life.
[19] Subrule (e) asks the court to consider the conduct of any party that tended to shorten or lengthen unnecessarily the duration of the proceeding. This trial was initially estimated to be a 7 week trial. Through the efficient cooperation of counsel, it was ultimately concluded in 21 sitting days.
[20] The defendants make much of the fact that the plaintiff did not advance his loss of income claim until November, 2018, which was after the originally scheduled trial date. However, I reject their argument that this greatly increased the complexity and length of the trial. The loss of income claim was based on the simple assertion that the owner of a local body shop, Kevin Rupple, was willing to hire the plaintiff to work in his body shop, at annual earnings of about $50,000, had he not been injured and rendered incapable of performing the job. The lost income claim was based on multiplying that figure by the number of years the plaintiff could be expected to have worked. The evidence in support of this claim consisted of Mr. Rupple’s testimony, which lasted a couple of hours at most, plus a few questions posed to the plaintiff on this topic. There was no expert testimony nor any other lost income quantification evidence proffered by either side at trial. I conclude that the impact of this additional claim on the length and complexity of the trial was insignificant.
[21] The defendants also argue that the plaintiff unduly lengthened the trial by calling multiple experts. However, while the plaintiff initially wished to call four experts, I ruled, in a pretrial motion, that he was restricted to calling only the three experts allowed by s. 12 of the Evidence Act, R.S.O. 1990 c. E. 23. The plaintiff can hardly be faulted for calling the number of experts he is permitted to call by statute. In my view, each of the three experts called by the plaintiff had a unique perspective to offer that was not unnecessarily duplicative of the other experts.
[22] In my view, neither side was guilty of any misconduct that unduly lengthened the trial, subject to my comments to follow regarding the liability issue.
[23] Subrule (f) addresses whether any steps were taken improperly, unnecessarily or though negligence or excessive caution. No such conduct was alleged by either side.
[24] Subrule (g) addresses a party’s denial of, or refusal to admit, anything that should have been admitted. Again, I will discuss this below regarding the liability issue.
[25] Subrules (h) and (i) have no application.
[26] The defendants argue that they are the successful parties at this trial, and seek partial indemnity costs throughout in accordance with the normal principle that costs follow the event. In support of this argument, counsel for the defendants repeat several times in their written submissions that their various offers of settlement “reflect an acknowledgment by the Defendants that Dr. Walsh breached the standard of care and that the treatment caused a worsening of the Plaintiff’s condition”, thereby leaving the causation issue relating to the subsequent surgery as the only real issue at trial. At paras. 62 and 63 of their submissions, the defendants dispute the plaintiff’s argument that he is entitled to costs based on the jury’s finding that there was a breach of the standard of care that caused a worsening of his condition. The defendants argue “that they clearly acknowledged long before the trial that such a finding would be made, as is evidenced by their multiple Offers to Settle dating back to the first Pretrial in 2017.”
[27] In my view, the defendants cannot claim to have acknowledged a breach of the standard of care, causative of damages, while proceeding to vigorously deny liability at trial, and then suggest to the jury in closing argument that the plaintiff’s damages were worth the paltry sum of $5,000. If the defendants wanted to acknowledge that Dr. Walsh breached the standard of care, they should have made that formal admission at trial, and confined the issues to causation and damages.
[28] Indeed, if it was clearly a foregone conclusion, long before trial, that the jury would make a finding of a breach of the standard of care, causative of damages, then it follows that the defendants acted unreasonably in failing to admit something that should have been admitted, which would have reduced the duration of this trial by more than half.
[29] The fact is that liability was hotly contested at trial, and the majority of the evidence was devoted to this issue. In this, as in any negligence case, the first key issue is whether the defendant has been negligent. If the plaintiff fails to prove a breach of the standard of care, the case is over and the plaintiff loses. Here, the plaintiff succeeded in proving negligence.
[30] The next key issue is whether the defendant’s negligence caused the plaintiff to suffer damages. Once again, the plaintiff succeeded in proving that the defendant Dr. Walsh’s negligence was causative of damages, which the jury quantified at $50,000. This is not an insignificant sum of money.
[31] Clearly, therefore, the plaintiff was the successful party in this lawsuit, and did what every plaintiff in a negligence case has to do: prove a breach of the standard of care, causative of damages. Where the plaintiff was unsuccessful was in proving that the defendant’s negligence caused the need for spinal surgery in August, 2010 which, although it was successful in alleviating his acute pain, ultimately led to “failed back syndrome” and a permanent inability to earn an income. The jury obviously concluded that the plaintiff would have required that surgery anyway, even had he not undergone mechanical traction therapy at the hands of Dr. Walsh. This explains the lack of any award for loss of past or future income.
[32] Thus, while it can be said that the defendants were successful in limiting their exposure to damages, it cannot be said that they won this lawsuit. The plaintiff clearly won and, since costs normally follow the event, he is presumptively entitled to his costs. As counsel for the defendants pointed out in their written submissions, to deprive a successful party of costs is “exceptional”. The principle that costs follow the event should only be departed from for very good reasons such as misconduct of the party, miscarriage in the procedure, or oppressive or vexatious conduct of the proceedings: DUCA Financial Services Credit Union Ltd. v. Bozzo, 2010 ONSC 4601, [2010] O.J. No. 3758 (S.C.J.) at para. 5; Yelda v. Vu, 2013 ONSC 5903 at para. 11, as considered by Firestone J. in Lakew v. Munro, 2014 ONSC 7316 at para. 58.
[33] I find no misconduct on the part of the plaintiff, no miscarriage in the procedure and no oppressive or vexatious conduct on the part of the plaintiff that would justify a departure from the normal principle. I find that, as the successful party, the plaintiff is presumptively entitled to his costs. The next question to be considered is whether he was successful enough to beat the defendant’s Offer to Settle, which engages a consideration of rule 49.10.
[34] As already noted, the defendants, in October, 2018, offered to settle for the sum of $90,000 inclusive of any damages, OHIP subrogated claim, and applicable interest, plus costs. Since this settlement figure was inclusive of OHIP’s claim, it would therefore fall to the plaintiff to satisfy that claim out of the monies payable to him.
[35] The amount of OHIP’s claim was agreed among counsel and OHIP to be $22,500. The defendants argue that if one excludes the costs relating to the surgery and thereafter, the amount of the subrogated claim is only $2,442.02. However, that analysis can only be made with the benefit of the ruling of the jury that the defendants’ negligence did not cause or contribute to the need for surgery in August of 2010. From the time the Offer to Settle was served in October, 2018 until it expired at the commencement of trial, that factual determination had not been made, and if the plaintiff had accepted the defendants’ offer, it would have fallen to the plaintiff to negotiate a reduction with OHIP. It is uncertain what would happen if they were unable to negotiate a resolution.
[36] In my view, for an Offer to Settle to attract the draconian costs consequences outlined in rule 49.10, its terms should be certain, such that the plaintiff knows what he will receive if he accepts the offer, at the time the offer is made and while it continues to be open for acceptance. The defendants’ Offer is uncertain, because the plaintiff might receive any net amount between $67,500 and $90,000, depending upon how the negotiations went with OHIP. If the net amount payable to the plaintiff ended up between $67,500 and $72,499, the defendants could not claim that the plaintiff failed to beat their offer.
[37] Rule 49.10(3) puts the onus upon the defendants of proving that the Offer is more favourable than the result at trial. Since the amount that OHIP would settle for is uncertain, they are unable to discharge that onus of proof.
[38] The defendants could have made an offer that provided certainty to the plaintiff by providing in the Offer to Settle that the defendants would assume liability for the OHIP claim. That would leave it to the defendants to negotiate with OHIP, and leave them with the burden of convincing OHIP to accept a number lower than had been agreed to.
[39] I am not persuaded that the defendants have proven that the plaintiff has failed to beat their Offer to Settle of October 7, 2018. Accordingly, in the exercise of my discretion, I am not disposed to ordering the costs consequences provided for in rule 49.10.
[40] There were other settlement offers upon which the defendants rely in their submissions, although they do not claim that they qualify as rule 49.10 offers. Their first was a formal Offer to Settle dated December 5, 2017 for $50,000 inclusive of damages, the OHIP subrogated claim, interest and costs. This offer need not be considered, both because the plaintiff clearly beat it, but also because it expired on December 15, 2017.
[41] The written submissions of the defendants recount all of the settlement negotiations between the parties. The plaintiff objects to this, on the basis that these discussions were privileged. I will deal with that objection later. For now, I will review the defendants’ summary of the history of those negotiations, without making any predetermination as to the use that information might be put to.
[42] At the pretrial of November 16, 2017, the defendants offered the all-inclusive sum of $50,000. The plaintiff was not in a position to respond with a counter offer. On December 5, 2017, the defendants formalized that position in the Offer to Settle referred to above.
[43] The parties engaged in a private mediation on February 27, 2018. After a long day of negotiations, the defendants made a time-limited offer to settle for the all-inclusive sum of $165,000. The plaintiff responded with an all-inclusive offer of $180,000. The case, astoundingly, did not settle, but both sides agreed to leave their offers open until March 1, 2018 so that they might reconsider their positions. The next day, the plaintiff withdrew his offer.
[44] The defendants fault the plaintiff for not accepting their offer. However, in my view, both sides are at fault for the case not having settled at mediation, given that they were only $15,000 apart. Splitting the difference would have cost each side $7,500, which is less than the cost of one day of trial.
[45] The next offer was the formal Offer to Settle dated October 9, 2018, which has already been discussed.
[46] There was a second pretrial conference on November 16, 2018, where counsel for the defendants confirmed that their settlement position was $90,000 plus costs in accordance with their formal Offer to Settle. Plaintiff’s counsel advised that their offer was now $220,000 plus costs, or an all-inclusive amount of $275,000.
[47] On February 19, 2019, the plaintiff served an Offer to Settle for $245,000 inclusive all claims for damages, interest and OHIP’s subrogated claim, plus costs, which was open until the commencement of evidence.
[48] Two mid-trial settlement conferences were held. At the first, the plaintiff offered to settle for $510,000 plus costs. At the second, the defendants offered to settle for the all-inclusive sum of $125,000, while the plaintiff offered to settle for the all-inclusive sum of $295,000.
[49] As noted above, the plaintiff objects to defence counsel referring to these various verbal offers, on the basis that these were part of settlement discussions and were made on a without prejudice basis and are therefore privileged. The defendants respond to this argument by citing two cases from Alberta and one from the Northwest Territories, standing for the proposition that any offer to settle may be taken into account in determining costs. Conspicuous by its absence is any authority from Ontario.
[50] In my view, the answer to the objection is found in the Rules. Rule 49.13 provides as follows:
Despite rules 49.03, 49.10 and 49.11, the court, in exercising its discretion with respect to costs, may take into account any offer to settle made in writing, the date the offer was made and the terms of the offer. [emphasis added]
[51] I therefore disregard all verbal offers made at the various pretrial and settlement conferences and during mediation. On the material before me, it appears that the defendants’ most generous offer made in writing is the Offer to Settle dated October 9, 2018. The plaintiff’s only written Offer to Settle appears to be the one made February 19, 2019, for $245,000 plus costs.
[52] Based on the foregoing, and given my ruling that the defendants’ Offer to Settle dated October 9, 2018 does not attract the costs consequences in rule 49.10, it would be open to me to simply award the plaintiff partial indemnity costs throughout, given that he was the successful party, and given that costs normally follow the event. However, in exercising its discretion as to costs, a court must produce a result that is fair and reasonable in all the circumstances: Boucher v. Public Accounts Council (Ontario) (2004), 71 O.R. (3d) 291 (C.A.).
[53] In support of an award of partial indemnity costs to the plaintiff, I have found that he was the successful party at trial, and proved a breach of the standard of care, causative of damages. Although he was unsuccessful in proving that the defendants’ negligence caused the need for surgery, it was entirely reasonable for him to have litigated that issue. He had an eminently qualified neurosurgeon, Dr. Peerless, with impeccable credentials as an expert dating back many decades, telling him that the surgery was causally connected to the mechanical traction applied by the defendant Dr. Walsh. The neurosurgeon who performed the surgery, Dr. Lownie, was of the same opinion, although the jury did not hear that evidence because he testified as a participating expert, not a litigation expert.
[54] The plaintiff was not guilty of any misconduct in the prosecution of his case, and it was presented in an efficient and cost-effective manner. By contrast, I have already noted that, based on the defendants’ own written submissions, the liability issue probably should have been admitted, which would have reduced the duration of the trial by more than half.
[55] On the other hand, there are reasons why an award of partial indemnity costs to the plaintiff would be unreasonable and unfair to the defendants. To begin with, the plaintiff is not seeking such an award, beyond the modest amount of $10,000 plus some of his disbursements. Secondly, there has been divided success, in that defendants were successful on the important causation issue regarding the need for surgery. Third, there is a great disparity between the amount claimed and the amount recovered. Fourth, the defendants’ Offer to Settle of October, 2018, while not attracting the costs consequences of rule 49.10, nevertheless demonstrates that the defendants were being reasonable in their efforts to settle the case, in light of the amount ultimately awarded to the plaintiff by the jury. The plaintiff’s Offer to Settle of February 19, 2019, for $245,000 plus costs demonstrates that the plaintiff’s expectations were unreasonable.
[56] In my view, a fair and reasonable order is the one proposed by the plaintiff in his initial submissions, which is that each party bear their own costs. An order will go in that regard.
“Mr. Justice T. A. Heeney” Mr. Justice T. A. Heeney Date: July 16, 2019