Court File and Parties
COURT FILE NO.: CV-03-00000568-0000 DATE: 2020-05-07 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: LESLIE GAIL LLOYD and JASON LLOYD, Plaintiffs AND: DAVID P. BUSH, 818601 ONTARIO INC. c.o.b. as MacDONALD’S PROPANE, THE CORPORATION OF THE COUNTY OF LENNOX AND ADDINGTON, and THE CORPORATION OF THE TOWN OF GREATER NAPANEE, Defendants
BEFORE: Mr. Justice Graeme Mew
COUNSEL: R. Steven Baldwin, for the Plaintiffs David G. Boghosian and Matt Brown, for the Defendants, Town of Greater Napanee and County of Lennox and Addington
HEARD: In writing
Endorsement Regarding Interest and Costs
[1] This the latest chapter in litigation that was commenced on 31 March 2003, following a motor vehicle accident that had occurred on 3 January 2003.
[2] The plaintiffs’ claims arising from that incident have now been the subject of three trials and two appeals.
[3] The defendants David Bush and MacDonald’s Propane settled with the plaintiffs during the course of the first trial. The active defendants since then have been the Corporation of the County of Lennox and Addington and the Corporation of the Town of Greater Napanee (the “Municipal Defendants”). These parties are represented by the same counsel.
[4] The first trial concluded in 2010. The action was dismissed. Costs were awarded to the Municipal Defendants in the total amount of $401,276.43 including disbursements and applicable taxes.
[5] On the first appeal, the Court of Appeal held that the plaintiffs had established a reasonable apprehension of basis on the part of the trial judge. The appeal was allowed, and the matter remitted for a new trial. The Court of Appeal ordered “that each party should be responsible for their own costs at trial”: Lloyds v. Bush, 2012 ONCA 349, at para. 70.
[6] The second trial was heard in 2014, with reasons for decision released on 6 February 2015 (reported at 2015 ONSC 761; supplementary reasons at 2015 ONSC 5340). The Municipal Defendants were held 60% responsible for the plaintiffs’ damages; David Bush and 818601 Ontario Inc., c.o.b. as MacDonald’s Propane were held 30% liable; Leslie Lloyd was found to be 10% contributorily negligent.
[7] The plaintiffs’ damages were assessed by the judge at the second trial in the total amount of $4,149,158.50, comprised as follows:
a. General damages for Leslie Lloyd - $300,000; b. Family Law Act damages for Jason Lloyd - $130,000; c. Future care - $408,866; d. Future attendant care - $2,000,000; e. Future income loss - $1,260,000; and f. Past income loss - $50,292.50.
[8] The second appeal decision, reported at 2017 ONCA 252, upheld the assessment of damages at the second trial, but ordered a new trial on the issue of liability (and the related issues of causation and contributory negligence). Costs of the second trial were remitted for determination at the third trial.
[9] The third trial was heard in April and May 2019, with reasons for decision released on 6 February 2020 and reported at 2020 ONSC 842. Liability was apportioned as follows:
a. Municipal Defendants – 50%; b. David Bush and MacDonald’s Propane – 33%; c. Leslie Lloyd – 17%.
[10] I invited the parties to agree on the costs arising from the second and third trials, failing which they should make written submissions.
[11] The parties were unable agree on costs and, consequently, written submissions have been received. Those submissions have also addressed the issue of interest.
Interest
[12] The plaintiffs seek interest as follows:
a. Prejudgment interest at the rate of 3% per annum from the date the cause of action arose (3 January 2003) to the date of judgment following the third trial (6 February 2020), a total of 6,243 days and cumulative interest of 51.31%; b. Prejudgment interest on past loss of income for the period 3 January 2003 – 6 February 2015 (the date of the court’s judgment on damages following the second trial), a total of 4,417 days. The applicable interest rate claimed is 3%. In accordance with s. 128(3) of the Courts of Justice Act, R.S.O. 1990, c. C.43, interest is calculated on the total past pecuniary loss at the end of each six-month period and at the date of judgment. Following the conventional approach taken in cases where there has been a constant loss of income between the date of loss and judgment at trial, the plaintiffs have calculated prejudgment interest by applying the rate of 3% over 4,417 days and dividing that total by 2; c. Prejudgment interest on past income loss from the date of judgment in the second trial (6 February 2015) to the date of judgment in the third trial (6 February 2020) at a rate of 3% (with no further adjustment); and d. Prejudgment interest on the awards of damages for future care and future loss of income calculated from the date of judgment in the second trial until the date of judgment in the third trial, at a rate of 3%.
[13] The total interest claimed, subject to apportionment for liability, totals $795,492.57, calculated as follows:
a. $220,633 on general damages and FLA damages up to the date of the third trial judgment; b. $9,129.12 on past loss of income up to the date of the second trial judgment; c. $7,548 on past loss of income for the period from the second trial judgment to the third trial judgment; d. $550,634.45 on damages for future care and future loss of income from the date of the second trial judgment to the date of the third trial judgment.
[14] The Municipal Defendants do not challenge the prejudgment interest rate of 3% on general or special damages. Nor do they take issue with the amount of prejudgment interest claimed on non-pecuniary damages (up to 6 February 2020), the past income loss (up to 6 February 2015), or the plaintiffs’ arithmetic generally.
[15] The Municipal Defendants do, however, take issue with the plaintiffs’ entitlement to prejudgment interest on past income loss; future income loss and cost of care from the date of judgment in the second trial until the date of judgment in the third trial; and, if there is any entitlement to interest at all, the applicable rate.
Plaintiffs’ Position
[16] The logic of the plaintiffs’ position is straightforward. Damages were assessed as of 6 February 2015. That assessment was upheld by the Court of Appeal, subject to a retrial on the issue of liability. Accordingly, because the awards for past loss of income and future care and future income loss were fixed on 6 February 2015, subject to apportionment at the third trial, the correct approach to consideration of interest on these amounts is simply to treat them as liquidated amounts that should attract interest at the applicable prejudgment interest rate from the date the amounts were fixed until the conclusion of the third trial. To quote the plaintiffs:
It is implicit in an award of future damages that the trial judge makes the award having regard to the present value of the monies owing as of the date of the award. Pre-judgment interest is to compensate for the value of money deprived from the date it is owed/awarded until the date the obligation to pay is determined. This is no different from the obligation to pay post-judgment interest on an award of future damages until payment received in the usual circumstance of a judgment including both the award of future damages and the obligation to pay being one and the same.
Municipal Defendants’ Position
[17] The Municipal Defendants respond that:
Despite the unique procedural history of this case, like any other trial, the date of the Plaintiff’s entitlement to her future income loss is from the date of This Honourable Court’s judgment, not from the date of an earlier award that was later overturned.
[18] That position is consistent with section 128 of the Courts of Justice Act, which provides:
(1) A person who is entitled to an order for the payment of money is entitled to claim and have included in the order an award of interest thereon at the prejudgment interest rate, calculated from the date the cause of action arose to the date of the order. [emphasis added]
[19] The Municipal Defendants also argue that insofar as future care costs have not actually been incurred by the plaintiffs over the five year period since they were awarded at the second trial, it is not be appropriate to effectively gross up the future care award on account of the passage of five years during which such costs have not been incurred.
[20] If the court is otherwise inclined to consider prejudgment interest on income loss from 6 February 2015 – 6 February 2020, the Municipal Defendants argue that prevailing interest rate should be divided by two to reflect losses that have been incurred gradually from the time of injury to the time of judgment.
Discussion
[21] Section 130 of the Courts of Justice Act provides the court with discretion in the matter of interest. Where it considers it just to do so, the court may, in respect of the whole or any part of an amount on which prejudgment interest would otherwise be payable:
a. disallow interest under either section; b. allow interest at a rate higher or lower than that provided for by statute; c. allow interest for a period other than that provided for by the Act.
[22] Among the factors which the court shall take into account when considering the exercise of its discretion under s. 130(1) are the circumstances of the case and any other relevant consideration.
[23] Neither party cited any case law in support of their respective positions. This is hardly surprising given the unusual circumstances of this case.
[24] In analysing the positions taken, I start from the position that the plaintiffs should not be prejudiced by the passage of time – exactly five years – between the decisions made in the second and third trials.
[25] The unusual feature of this case is that the amount of damages was fixed by the court at the second trial but the plaintiffs were not entitled to recover any portion of those damages until the completion of the third trial.
[26] Had the Court of Appeal upheld both the liability and damages findings of the second trial, the trial judge’s calculation of prejudgment interest would have been preserved, and post-judgment interest on the entire judgment, including prejudgment interest and costs, would have accrued at the rate of 3% provided for in accordance with section 127 of the Courts of Justice Act.
[27] Alternatively, had the award of damages been made at the end of the third trial, the plaintiffs would undoubtedly have been entitled to prejudgment interest on such damages from the date that they were incurred until the date of judgment. Furthermore, an assessment of damages undertaken in 2020 applying the same approach to that taken by the trial judge would, have yielded different values: the award of non-pecuniary general damages would have been higher to take into account the changing value of money; past loss of income and cost of care would have been higher; future loss of income and future cost of care would have been lower.
[28] Why, then, should the plaintiffs not be entitled to recover the value in 2020, of an award made in 2015 dollars which crystallised at that time, but which they have not had the use of, or been able to collect, until after the decision in the third trial?
[29] The Municipal Defendants want it both ways. They want pecuniary damages fixed as of 2015 (which is what the Court of Appeal ordered), but without interest or any adjustment for the changed value of money over the ensuing five-year period.
[30] The inequity of that position is obvious.
[31] I agree with the plaintiffs that he effect of the Court of Appeal’s decision is that the pecuniary damages awarded to the plaintiff became liquidated as of 6 February 2015. That was the amount to which the plaintiffs were held to be entitled, subject to a subsequent determination at the third trial of what portion (if any) of that liquidated sum that the plaintiffs were entitled to.
[32] Accordingly, the plaintiffs should recover prejudgment interest on past loss of income up to the date of judgment in the second trial judgment and, in addition, interest on future pecuniary damages (loss of income and cost of care), from 6 February 2015 to the date of judgment following the third trial.
[33] That does not end the discussion on interest, however. The Municipal Defendants argue that if prejudgment interest is applicable to the past loss of income claim for the period from 6 February 2015 to 6 February 2020, the rate should be halved from 3% to 1.5% to reflect the fact that losses have been incurred gradually from the time of injury to the time of judgment.
[34] That argument is problematic. The claim for past loss of income became liquidated effective 6 February 2015. There was no more gradual accumulation of loss of income beyond that date. Why, then, should there not be full recovery of prejudgment interest on the past loss of income award between the second and third trials?
[35] There was also an award made for future loss of income, which covered the five-year period between the second and third trials (albeit that the annual loss of income claimed would have been adjusted to take into account the then present value of the future loss of income as well as contingencies), and on which interest is also claimed.
[36] Indeed, and as already alluded to, had the damages award been made in February 2020, rather than effective February 2015, there would have been a higher award for past loss of income, on which there would have been prejudgment interest claimed at an effective rate of 1.5%, but a lower award for loss of future income, which would not have attracted prejudgment interest.
[37] Would there be an element of over-recovery if the plaintiffs were entitled to recover full interest on past lost of income over the five-year period between the second and third trials while at the same time earning interest for that five-year period on the loss of future income claim?
[38] Perhaps. No doubt, some more precise actuarial calculation could be done to determine exactly what the value of over-recovery, if any, would be. No evidence or other information in that regards has been provided.
[39] The circumstances of this case are unusual if not unique. By happy coincidence, the post-judgment interest rate of 3% that would have applied to an order made on 6 February 2015 is the same rate as the plaintiffs claim by way of prejudgment interest on the principal amounts of damages between the second and third trials. I see no principled reason why the plaintiffs should not recover prejudgment interest on their pecuniary losses from 6 February 2015 to 6 February 2020.
[40] In the exercise the discretion that section 130 of the Courts of Justice Act confers, I conclude that the plaintiffs should be entitled to prejudgment interest in accordance with the plaintiffs’ calculations, as set out in paragraph 13 of this endorsement, and subject to the apportionment of liability at the third trial.
Costs
[41] There is now a presumption that costs will be fixed by the court: Rule 57.01(3) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Long-gone are the days where costs between parties were more routinely determined by an assessment officer. This has necessarily resulted in a change of approach. Rather than a line-by-line, item-by-item review of a party’s costs outline or bill of costs, the fixing of costs employs the overriding principle that the costs awarded should be reasonable in the circumstances. In Davies v. Clarington (Municipality) (2009), 2009 ONCA 722, 100 O.R. (3d) 66, Epstein J.A., at para. 52, stated:
Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant. In Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.), this court emphasized the importance of fixing costs in an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding…
[42] By virtue of the direction made on the second appeal, I am tasked with fixing the costs of both the second and third trials.
[43] The plaintiffs seek an award of costs in the amount of $1,150,000 plus H.S.T. and disbursements. This amount is based on a partial indemnity figure of $824,527.69 plus an uplift to reflect the fact that although none of the many offers to settle which were made during the long history of the litigation engaged the application of Rule 49.10(1), a number of the offers that were made by the plaintiffs were favourable to the Municipal Defendants. Disbursements are claimed at $346,191.69 inclusive of applicable taxes and simple interest at a rate of 5% from the date a disbursement was incurred.
[44] The plaintiffs submit that, although the costs of attendance at the first trial and disbursements related to such attendance are clearly not recoverable by reason of the order made on the first appeal that each party should be responsible for their own costs at trial, all other costs and disbursements of the action are recoverable. According to the plaintiffs, this would include costs associated with preparation for the first trial.
[45] The plaintiffs also claim costs associated with advancing their claim for accident benefits.
[46] The Municipal Defendants submit that there is no basis for anything other than a partial indemnity award of costs. The Municipal Defendants further challenge the time expended, the inclusion of time related to recovery of accident benefits, the hourly rates applied, the recoverability of certain disbursements and the inclusion of interest.
[47] The Municipal Defendants agree that time spent on prosecuting the action in general – investigation, pleadings, examinations for discovery, etc. are recoverable even if incurred before the first trial (save and except to the extent that there was duplication of these activities leading up to the first and second trials respectively). But they assert that the Court of Appeal’s direction that each party should be responsible for their own costs “at trial” includes both preparation for and attendance at the trial.
[48] With respect to costs associated with Leslie Lloyd’s accident benefits claim, the Municipal Defendants argue that the court should follow the usual practice of not including such costs in the determination of costs of a tort action.
[49] In addition to the foregoing, there are the more usual disagreements between the parties over the amount of time expended, the applicable hourly rates of the fee earners involved and the disbursements that are reimbursable.
[50] I will address first the issued relating to the first trial and the inclusion of time spent recovering accident benefits, and then turn to the application of general principles.
Costs Related to Preparation for the First Trial
[51] The plaintiffs favour a literal interpretation of the words used by the Court of Appeal, namely, that each party would be responsible for their costs at trial. According to the plaintiffs,
This is an unambiguous statement meaning that costs accruing prior to trial would be recoverable by the successful party.
The plaintiffs submit that the Court of Appeal recognised that the value of trial preparations for the first trial would stand to the benefit, without duplication, to the continuing litigation.
[52] The Municipal Defendants argue that in awarding no costs of the first trial to either side, the Court of Appeal’s intent was not to visit the result of that trial on either side.
[53] In my view, “costs at trial” needs to be interpreted in a manner that takes into account the practicalities of litigation. As the plaintiffs would have it, “at trial” would be confined to time actually spent in the courtroom, during the trial. It would presumably not include meeting with a witness an hour before court started or preparing an argument overnight, let alone preparation undertaken in the days and weeks leading up to the trial.
[54] In R. v. Morin, [1972] 1 S.C.R. 771, Sopinka J. observed, at para. 36:
Just as the fire truck must get to the fire, so must a case be prepared. … All other factors being equal, the more complicated the case, the longer it will take counsel to prepare for trial and for the trial to be conducted once it begins.
[55] I believe the Court of Appeal intended that the costs consequences of the result of the first trial should be borne by the parties and not visited upon the other side. I would therefore not include as recoverable time or disbursements incurred either in respect of the hearing of the first trial or preparation for that trial.
[56] I am reinforced in my view that “costs at trial” would include preparation for the trial by the decision of Taxing Officer Burt in Schmidt v. Robb (1983) 21 A.C.W.S. (2d) 444 (Ont. H.C.J.). In that case, there had been an appeal to Divisional Court in respect of which “costs of this hearing” had been awarded to the successful appellant. An issue arose as to whether the appellant was entitled to costs of preparation for the appeal. The Taxing Officer held, at para. 12:
It is my opinion that the words “this hearing” would include the preparation for the hearing. I agree with counsel for the appellant that if the words were to mean just the actual hearing alone without any preparation then I believe that the order would have to show some clear indication of such a limitation and that limitation would have to be clear and unambiguous.
[57] I acknowledge that the conclusion I have reached is different from that of Tausendfreund J. in his determination of costs of the second trial: 2015 ONSC 5340, at paras. 14-19. However, while I accord his views the greatest of respect, in light of the Court of Appeal’s subsequent decision and the remitting of the issue of costs of the second trial to be considered afresh, I am not bound by them.
[58] If I am wrong in my interpretation of what “costs at trial” was supposed to mean, I would nevertheless exercise my discretion, given the unique circumstances, to exclude such costs.
Costs of Advancing Claim for Accident Benefits
[59] The Municipal Defendants calculate that 106.8 hours of fee earners’ time dealing with accident benefit claims on behalf of Leslie Lloyd has been included in the plaintiffs’ claim for costs.
[60] Citing no authority, the plaintiffs argue:
Part VI of the Insurance Act provides that a tort defendant receives credit for accident benefits paid and assignment of future benefits in consideration of the tort defendant being liable for all past and future damages of the plaintiff. It is the obligation of the plaintiff to take all reasonable steps to claim and pursue available accident benefits. A plaintiff that does not claim and pursue available benefits is liable to the denial or reduction of the tort claim to the extent that a defendant shows the plaintiff as being less than reasonably diligent in pursing available accident benefits. The assessment of damages in this action required reduction of the past income loss by reason of the receipt of income replacement benefits. Absent the apportionment of liability there would be arguments regarding assignment of future benefits. There is no statutorily recognized recovery of costs from an accident benefits insurer. The legal expense incurred by a plaintiff for protecting entitlement to accident benefits is a direct benefit to the tort defendant for which the tort defendant ought to compensate in costs.
[61] By contrast, the Municipal Defendants initially submitted, again without citing any authority:
It is trite that tort defendants cannot be asked to pay for the costs of advancing AB claims.
[62] It is only when the Municipal Defendants delivered further submissions replying to the plaintiffs’ reply submissions, that any reference to authority was made.
[63] The leading case is Cadieux v. Cloutier, 2018 ONCA 903, supplementary reasons 2019 ONCA 241. The Court of Appeal refers, in turn, and at some length, to the decisions of D. Wilson J. in Ryan v. Rayner, 2015 ONSC 3310 and Hoang v. Vicentini, 2014 ONSC 5893, 40 C.C.L.I. (5th) 231. In Hoang, D. Wilson J. wrote, at para. 66:
There may be times when a tort defendant derives a clear benefit from the accident benefits matters by way of a deduction of the amounts from damages, and in those circumstances a judge fixing costs in a tort action may consider it appropriate that the tort defendant pay the costs incurred by the Plaintiff in securing the benefits. At other times, however, there may be “compelling circumstances,” as described in Moodie v. Greenaway Estate, [1997] O.J. No. 6525 (Ont. Ct. J., Gen. Div.), at para. 4, where it would be inappropriate to visit the costs of dealing with other insurers on a Defendant in a tort claim. There is no hard and fast rule.
[64] Commenting on this passage, the Court of Appeal in Cadieux, at para. 130 agreed: “that the tort defendant should not be required to pay the costs of the plaintiff’s pursuit of SABs as a general principle or as a matter of course”.
[65] There is not, however, an absolute rule or practice against the recovery of costs incurred in relation to accident benefit claims. The Court of Appeal in Cadieux went on to articulate some principles to guide courts in determining whether the particular circumstances of a given case warrant ordering a tort defendant to pay costs related to the pursuit of accident benefits, stating, at para. 132:
A trial judge considering whether to award such costs, and if so, the amount of the award, will have regard to all the circumstances, including: (a) the fees and disbursements actually billed to the plaintiff in pursuit of the SABs; (b) relevant factors in Rule 57.01, including whether the litigation of the SABs claim involved particular risk or effort; (c) the proportionality of the legal costs and expenses incurred by the plaintiff to the benefit of the SABs reduction to the defendant; (d) whether the SABs were resolved by way of settlement or by arbitration; (e) any costs paid as a result of the settlement or arbitration; (f) whether all or any portion of the costs were incurred as a result of unusual or labour-intensive steps that should not reasonably be visited upon the tort defendant; (g) whether or not plaintiff’s counsel was acting on a contingent fee basis and, if so, the terms of the arrangement; and (h) the overall fairness of the allocation of the costs of pursuing SABs as between the plaintiff and the SABs insurer and as between the plaintiff and the tort insurer.
[66] In written submissions that were made by the parties to Cloutier subsequent to the Court of Appeal’s initial decision, neither party made a serious effort to address the factors that a trial judge might consider in determining whether to award the costs of recovering accident benefits and, if so, the amount to be included. The accident benefits claim had been settled for an all-inclusive amount that did not make reference to any costs element. The plaintiffs sought an amount for costs of the accident benefits claim based on court approved gross fees, the proportion that the accident benefits settlement bore to the total settlement, and the proportionate share of liability of the appellant. The Court of Appeal was evidently not satisfied with that approach, stating, at paras. 13-14:
[13] The only reason advanced by the respondent for the award of such costs is that the appellant has received a substantial benefit from the SABs settlement because it reduces the net amount he is required to pay the respondent – an observation that will apply in any case. The respondent has not addressed most of the factors identified in this court’s reasons, particularly whether the SABs settlement was the result of particular risk, effort or expense or whether, to use the vernacular, it was a “slam dunk”.
[14] It was within the knowledge and ability of the respondent to address the issues identified by the court. He has failed to do so and we are not persuaded that the circumstances of this case call for an award of costs under this head.
[67] In the present case, the plaintiffs have provided me with very little information considering costs incurred with respect to the accident benefits claim. There is no breakdown and no real attempt to address the Cadieux factors.
[68] The Municipal Defendants have undertaken a line-by-line review of the dockets prepared by the plaintiffs’ solicitors. However, the reader is left to try and extrapolate from those docket entries what was done and why.
[69] While there does not appear to have been litigation or arbitration concerning statutory accident benefits, from which I infer that the accident benefits claim was settled, it is simply not practical for me to try and distill from the information contained in the dockets “whether”, to quote the Court of Appeal, the “settlement was the result of particular risk, effort or expense” or “whether all or any portion of the costs were incurred as a result of unusual or labour-intensive steps that should not reasonably be visited upon the tort defendant”.
[70] In the absence of sufficient information for me to evaluate “all the circumstances”, I have excluded from my award of costs any time or disbursements incurred in relation to Leslie Lloyd’s accident benefits claim.
Application of Principles
[71] In applying the overarching principle of reasonableness, proportionality will always be an important consideration. Judicial discretion will also be guided by the criteria set out in Rule 57.01.
[72] In terms of Rule 57.01 considerations, it is, I would observe at the outset that this was a substantial claim which resulted in an assessment of damages of in excess of $4,000,000. The issue of the extent to which, if at all, the Municipal Defendants were liable for a portion of those damages was robustly contested by both sides through three trials.
[73] The first trial went the Municipal Defendants’ way. They were awarded costs of $401,276.43.
[74] At the second trial, it will be recalled that liability was apportioned 60% against the Municipal Defendants, 30% against David Bush and his propane company and 10% on account of the contributory negligence of Leslie Lloyd. Costs were awarded in the amount of $750,000 inclusive of H.S.T. plus disbursements of $167,937. Those costs included costs of preparation for the first trial, but not costs of the actual trial itself.
[75] It can be assumed that the lack of any reference in the review that follows to certain express factors set out in Rule 57.01 means that I regard them as neutral, for the purposes of this case.
(i) Reasonable Expectations
[76] From the standpoint of proportionality, the Municipal Defendants did not submit a bill of costs or a summary of the costs that they would have claimed, if successful. However, the costs award of $401,267.43 made in favour of the Municipal Defendants following the first trial provides some indication of what the defendants might reasonably have expected to pay for one trial.
(ii) Complexity
[77] The case did involve some complexity, particularly with respect to accident reconstruction and winter road maintenance standards. Overall, I would regard it as a moderately complex case.
(iii) Hours Claimed
[78] The Municipal Defendants wisely do not attempt to drill down into the hours claimed on a task-by-task basis. Rather, they have analysed the costs outline and identified those items which they regard as pertaining to accident benefits, time spent on the first trial, including preparation, and time spent on preparing and attending on the two appeals. They have argued for the exclusion of all such costs. As I have already stated, I agree with the Municipal Defendants that time spent preparing for the first trial and in relation to accident benefits should be excluded.
[79] In the plaintiffs’ reply submissions, no issue is taken with the Municipal Defendants’ determination of items that relate to accident benefits, the first trial or the second appeal.
[80] According to a table prepared by the Municipal Defendants, which breaks down the time spent by the various fee earners, the total number of hours spent by all fee earners is claimed to be 4,108.75 hours.
[81] After eliminating the hours attributable to preparation for the first trial, trial attendance in 2009, the first appeal, the second appeal and accident benefits work, the net hours of all fee earners, as calculated by the Municipal Defendants, are 2,281.31 hours.
[82] In the absence of any challenge to the Municipal Defendants’ arithmetic, I accept as accurate the breakdown of the plaintiffs’ dockets prepared by the Municipal Defendants.
(iv) Hourly Rates Claimed
[83] The hourly rates claim for the two principal fee earners who worked on the case are $750/hr for Steven Baldwin (called to the Bar in 1993) and $235/hr for Lorraine Thomson (licensed paralegal/senior law clerk).
[84] The plaintiffs acknowledge that these hourly rates do not reflect what was actually paid by the plaintiffs. The plaintiffs’ lawyers took the case on a contingency fee basis. Nevertheless, the hourly rates are claimed to be “consistent with the notional hourly rates of personal injury counsel throughout Ontario having regard for the inherent risks counsel undertake in providing services and incurring disbursements for which there is no certainty of recovery”.
[85] It is well established that, despite the indemnity principle which is inherent in our system of costs, the risk of non-payment to a plaintiff’s lawyer is not a relevant factor under the costs regime set out in Rule 57.01(1): Walker v. Ritchie, 2006 SCC 45, [2006] 2 S.C.R. 428; Manufacturers Life Insurance Company v. Ward, 2007 ONCA 881.
[86] While, particularly absent a contingency fee arrangement, a notional hourly rate of the magnitude claimed by the plaintiffs might be relevant to the assessment of costs as between a lawyer and his or her client, to factor a “risk” element into the hourly rate used for the purposes of determining costs between parties to litigation is an attempt to do indirectly what the Supreme Court in Walker says cannot be done directly, i.e., include in the hourly rate a premium or allowance for the risk assumed by the plaintiff’s lawyers.
[87] The determination of reasonable rates, should, accordingly, be undertaken without regard to the risk assumed by the lawyers.
[88] Experience is undoubtedly a relevant consideration. As the Municipal Defendants point out, at the commencement of this litigation, Mr. Baldwin was a lawyer with ten years’ experience. Now he is senior counsel. Ms. Thomson, although not a qualified lawyer, has been a law clerk since 1982 and is also a licensed paralegal.
[89] The Municipal Defendants argue that hourly rate should be determined by reference to the so called “Costs Grid” promulgated by the costs sub-committee of the Civil Rules Committee, which was in effect from 1 January 2002 until 1 July 2005. Although the costs grid is no longer in effect, the Municipal Defendants argue that the hourly rates of the fee earners acting for the plaintiffs should be determined by the grid rates, adjusted for inflation.
[90] I disagree. There is no requirement to apply the “grid rates”, which have been described as “out of date”, rather than a partial indemnity rate referable to a reasonable actual rate: Bain v. UBS Securities Canada Inc., 2018 ONCA 190, at para. 32.
[91] An hourly rate of $750 per hour for senior trial counsel, while, perhaps, high for a lawyer practising outside one of the larger (and more expensive) metropolitan areas, is not, in my view, excessive. However, while such a rate might be appropriate for determining the costs of the third trial, it would be an excessively high rate to apply to services which, with respect to some of the early stages of the litigation, go back seventeen years, when the lawyer concerned had less experience and seniority.
[92] Although I have not attempted to engage in a precise mathematical calculation, I have used a partial indemnity rate of $475/hr for time spent by Mr. Baldwin in relation to the third trial, a rate of $440/hr in relation to work done at the second trial and a rate of $400/hr in relation to work done prior to the first trial. As for Ms. Thomson, it would, in my view, be unwise to undervalue the contribution which an experienced law clerk/paralegal provides in sophisticated personal injury litigation such as this. I have used partial indemnity rates of $120 - $140 with respect to Ms. Thomson’s contribution. Other fee-earners’ rates reflect the amounts set out in the plaintiffs’ costs outline.
(v) Importance of the Issues
[93] The issues were sufficiently important to the parties for this case to have twice gone to the Court of Appeal.
[94] Any case involving serious personal injury will be of great importance to the affected plaintiffs. And cases involving potential liability for winter road maintenance are of great importance to municipalities and their insurers and, ultimately, the public who pay the taxes that finance municipal operations.
(vi) Disbursements
[95] The Municipal Defendants argue that the plaintiffs’ proper entitlement should eliminate disbursements that relate to the first trial, witness fees, unparticularised disbursements representing charges for telephone, in-house photocopying, binding, facsimile charges, online research and other overhead expenses.
[96] They point, in particular, to “large, unexplained and unusual disbursements such as a February 2, 2015 disbursement in the amount of $9,000.00 for a “Westlaw search,” unparticularised disbursements for photocopying in the amounts of $7,500.00 and $25,000 and a $10,000 “surcharge” (with no further explanation). They also claim that witness summons fees have been claimed for despite the witnesses not being called.
[97] The plaintiffs respond that witness fees and disbursements for expert attendances at the first trial have not been claimed; that the “unparticularized disbursements” represent charges for telephone, in-house photocopying, binding, facsimile charges, online research, postage and other expenses for which no individual receipt is available. The charges are estimated as a function of the duration of size of the file and the duration of the file opening over a period of seventeen years at a “reasonable” $340/month.
[98] Unfortunately, the plaintiffs do not quantify the amounts which they say the Municipal Defendants are unreasonably seeking to have deducted, leaving it to the court to go through the Municipal Defendants’ annotations of the plaintiffs’ disbursement list to decide which ones should not, in fact, be adjusted.
[99] The plaintiffs explain the “estimated” charges on the basis that the plaintiffs’ lawyer does not have electronic recording of miscellaneous expenses. Be that as it may, many of the elements referred to by the plaintiffs amount to part of the overhead costs of operating a law firm, which are not properly recoverable.
[100] In Moon v. Sher (2004), 246 D.L.R. (4th) 440, 192 O.A.C. 222, it was held that amounts disbursed for computerised legal research services, courier services, stationery and postage may be recoverable if the service or expense was “reasonably necessary for the conduct of the proceeding”, the amount was reasonable, and had been charged to the client, and the disbursement “does not fall within standard office overhead”: Moon, at para. 39. The Court of Appeal added that it is for the party seeking recovery of the disbursements to satisfy these criteria.
[101] In my view, it has become increasingly harder as time as gone by, to satisfy a court that computerised legal research is not part and parcel of the ordinary overhead expense of a law practice. The law reports, looseleaf services and texts that traditionally lined the shelves of law firm and courthouse law libraries have been increasingly replaced by online resources.
[102] The point has been reached where disbursements for computerised legal research are generally no longer recoverable in the absence of special circumstances: see Mark Orkin, The Law of Costs, 2nd ed. (Toronto: Thomson Reuters, 2018) (loose-leaf) at §219.6(9).
[103] To similar effect, binding charges are considered as office overhead: Orkin at §219.6(7).3 and while photocopying expenses are often allowed, particularly when backed up by some evidence justifying both the number of copies and the charge per page, there is also a view that photocopying is “just part of the cost of doing business” and, thus, part of office overhead: Orkin at §219.6(7), citing Tiago v. Tinimint Housing Non-Profit Inc., 2008 ONSC 53845, at para. 5.
[104] For these reasons, I am generally sympathetic to the submissions made by the Municipal Defendants concerning disbursements and agree that the disbursements they have identified as unrecoverable should be excluded.
(vii) Interest on Disbursements
[105] The plaintiffs rely on the decision of this court in Herbert v. Brantford (City), 2010 ONSC 6528 as authority for the proposition that there is an entitlement to interest on disbursements. The plaintiffs also point to the fact that the trial judge in the second trial allowed interest on disbursements. The plaintiffs argue that to not allow interest on disbursements would ignore the value of money and be a disincentive to incurring the necessary charges to properly advance litigation.
[106] An obvious distinguishing feature in Herbert is that certain experts in that case had added interest charges to their outstanding accounts. The plaintiff had suffered a catastrophic personal injury while riding his bicycle on a public trail. At trial, he recovered damages of $1,116,220.70 against the defendant municipality.
[107] In his initial costs decision, the trial judge held that although interest on outstanding expert reports and reviews is not specifically provided for in the Rules of Civil Procedure or in Tariff A to the Rules, interest should be allowed “in litigation of this magnitude”: costs judgment, Herbert v. Brantford (City), reported at 2010 ONSC 6528. When the parties were unable to agree on the quantum of interest, in a further endorsement, the trial judge concluded that the interest charged by the experts, which was compounded monthly, was neither exceptional nor unreasonable, adding “[o]ne cannot fault the experts for addressing the realities of having expended the effort and becoming indirectly financers of the litigation”: see 2011 ONSC 4066, at para. 10.
[108] On appeal, the Court of Appeal found that in the circumstances of the case, the evidence relied upon by the trial judge did not support his “exceptional order” for interest on some of the expert’s fees to be awarded at between 1% and 2%, compounded monthly. Accordingly, the appeal against the order of the trial judge respecting the compounding of interest was allowed. The issue of whether such interest should be recoverable at all was not an issue on the appeal and, accordingly, not discussed.
[109] The question of whether an out-of-pocket payment of interest incurred by a successful litigant as an expense in funding disbursements in litigation is recoverable as a disbursement was comprehensively considered by the British Columbia Court of Appeal in MacKenzie v. Rogalasky, (2014) 378 D.L.R. (4th) 419, 2014 BCCA 446. The court made reference to Herbert, noting that although the trial decision was appealed, the Ontario Court of Appeal had not cast doubt on the proposition that interest was a recoverable disbursement.
[110] The applicable British Columbia rule provides for the recovery as costs of “a reasonable amount” for disbursements that “have been necessarily or properly incurred in the conduct of the proceeding”. The corresponding provision in Ontario permits the recovery (in addition to specified disbursements) of “any other disbursement reasonably necessary for the conduct of the proceeding”: Tariff A – Lawyers’ Fees and Disbursements Allowable Under Rules 57.01 and 58.05, Rules of Civil Procedure, item 35.
[111] The British Columbia requirement that disbursements “have been necessarily or properly incurred in the conduct of the proceeding” is sufficiently close to the Ontario requirement that other disbursements be “reasonably necessary for the conduct of the proceeding” for the British Columbia Court of Appeal’s decision in MacKenzie to be highly persuasive authority. In that case, Harris J.A. found, at para. 80, that:
To be recoverable a disbursement must arise directly from the exigencies of the proceeding and relate directly to the management and proof of allegations, facts and issues in litigation, not from other sources. In my view, that is what is captured by the phrase “the conduct of the proceeding”.
[112] Harris J.A. felt that this interpretation flows naturally from the purpose of a costs regime and the guidance provided on that subject by the Supreme Court of Canada in Walker. He continued, at para. 81:
Several points emerge which assist in interpreting the rule. The first is that a costs regime serves multiple functions, only one of which is indemnification. Even in respect of that function, the costs regime provides only partial, and not full, indemnity to a successful party. Accordingly, one is not compelled to conclude that interest expenses must be recoverable because the purpose of the rule is to make a successful party whole. To the contrary, partial indemnification underlies both the recovery of costs on a tariff and disbursements (because the reasonable amount awarded may not fully indemnify the cost of necessary or proper disbursements).
[113] The court in MacKenzie went on to make the point that recognising interest as an expense would lead to a transfer of resources between classes of parties in which unsuccessful defendants were exposed to the risks of paying interest rates designed to pay for the cost of lending money. This was considered in the context of the principle enunciated by Walker, where, as already discussed, the Supreme Court considered whether a risk premium added to a legal fee should be recoverable as part of a costs award. In that regard, Harris J.A. observed that the court in Walker had regarded the enumerated factors under Rule 57.01 as providing a basis for parties predicting probable costs awards against them and assessing whether or not to settle or to proceed. Rothstein J. expressed the opinion, at para. 28 of Walker:
Unsuccessful defendants should expect to pay similar amounts by way of costs across similar pieces of litigation involving similar conduct and counsel, regardless of what arrangements the particular plaintiff may have concluded with counsel.
[114] Although that comment of Rothstein J. was made in relation to a “premium” or “uplift” on rates to reflect the litigation risk assumed by the plaintiff’s lawyer, the observation is, in my view, equally applicable to the issue of whether a successful plaintiff should be able to recover interest on disbursements accrued in the litigation during the course of litigation running from the date that the disbursement was incurred.
[115] The Municipal Defendants would not have been privy to the arrangements between the plaintiffs and their lawyers. While it will be no surprise that litigation such as this was undertaken on a contingency fee basis, there is no indication in the record as to what the arrangements were for payment of disbursements. Sometimes disbursements are carried by plaintiff’s lawyers (sometimes with the assistance of litigation funding companies or commercial lenders). In other situations, the client may be responsible for carrying disbursements. Or, as was the case in Herbert, experts providing reports and services effectively carried the expense, subject to charging interest.
[116] In the present case, there is no evidence that interest has actually been paid on any of the disbursements incurred by the plaintiffs. The implication is that these disbursements have been carried by the plaintiffs’ lawyers and that the rate of 5% simple interest claimed on disbursements reflects a rate equivalent to counsel’s line of credit (ignoring the fact that a line of credit carries a compound interest rate).
[117] In Walker, Mr. Justice Rothstein made reference to disbursements incurred by plaintiffs’ lawyers in the conduct of contingency fee personal injury litigation at paras. 39-40:
39 Personal injury cases involve the prospect of receiving a favourable judgment out of which an impecunious plaintiff can pay a lawyer’s fee. Thus, if successful, counsel will receive payment for the disbursements made and services rendered, i.e. what counsel would have received on an ongoing basis had the client been financially capable of paying. In addition to the delay in payment, however, such counsel bears the risk of non‑payment if success is not achieved. This requires a further incentive for counsel to be willing to take on such cases. In other words, counsel will look to be compensated for providing the additional service of financing the litigation at his/her own risk.
40 This is the concern that the Ontario courts first responded to by permitting counsel to charge plaintiffs a risk premium. In addition, it is now met through legislation permitting counsel to charge contingency fees: see the Solicitors Act… The opportunity for counsel to charge his or her own client a risk premium, or now a contingency fee, encourages competent counsel to take on the cases of impecunious plaintiffs. Such a charge is not dependent upon the amount the plaintiff recovers from the opposing party in a costs award. The appropriate source of encouragement lies with the client not with his or her opponent. Requiring unsuccessful defendants to pay a premium to the plaintiffs in personal injury cases is not compelled on the theory of promoting access to justice.
[118] Once again, I find that the comments of Rothstein J. regarding premiums to be equally applicable to the principle of to interest, whether actually incurred, or notional, applied to disbursements. Neither should be visited upon the party paying costs.
[119] I note that MacKenzie, and a decision of the Newfoundland and Labrador Court of Appeal, Cabana v. Newfoundland and Labrador, 2016 NLCA 75, which also dealt with the question of whether interest incurred on a litigation loan was a proper disbursement, were cited by this court, with apparent approval, in Davies v. Clarington (Municipality), 2019 ONSC 2292.
[120] For the foregoing reasons, I reject the plaintiffs’ claim to interest on disbursements incurred.
Offers to Settle
[121] Rule 49.10(1) provides for enhanced award of costs if, subject to certain requirements set out in the rule, a plaintiff makes an offer to settle and then goes on to achieve a judgment as favourable or more favourable than the terms of the offer.
[122] There were no offers to settle complying with the requirements of Rule 49.10 that remained open for acceptance at the commencement of the third trial. Nevertheless, Rule 49.13 provides that the court, in exercising its discretion with respect to costs, may nevertheless take into account any offer to settle made in writing, the date the offer was made and the terms of the offer.
[123] This rule has been described as giving a trial judge a residual discretion in making an order with respect to costs to take into account even a revoked written offer to settle: Thomas v. Bell Helmets Inc. (1999) 126 O.A.C. 353, 40 C.P.C. (4th) 31 (C.A.) at para. 50.
[124] The plaintiffs made a number of offers that were favourable to the Municipal Defendants. On 4 May 2009, prior to the first trial, the plaintiffs offered to settle for the all-inclusive amount of $600,000. On 26 September 2014, prior to the second trial, the plaintiffs offered to settle with the Municipal Defendants for $1,000,000 plus costs. On 22 October 2014, the Municipal Defendants offered to settle for $1,000,000 plus costs; the plaintiffs responded by offering to settle for $2,100,000 plus costs.
[125] On 25 April 2019, four days before the commencement of the third trial, the plaintiffs offered to settle for $2,420,800, all inclusive. The plaintiffs submit that this offer was more favourable to the defendants than the outcome at trial, once prejudgment interest, costs and disbursements are factored in.
[126] It is easy to say, with the benefit of hindsight, that the defendants should have accepted one of these offers. However, as the defendants note, one of the major issues in contention, namely whether Rankins Corners was in a state of non-repair, was said by the Court of Appeal on the second appeal to be “far from clear”.
[127] Having regard to the circumstances as a whole, including the importance of the issues of liability pertaining to the Municipal Defendants, the failure to settle was neither surprising or unreasonable. I am therefore not inclined to take advantage of the latitude that Rule 49.13 gives me to depart from viewing costs on a partial indemnity scale.
Conclusion on Costs
[128] Applying the rates and principles discussed above and rounding figures to the nearest $10,000, I fix the costs payable by the Municipal Defendants to the plaintiffs as follows:
a. Fees $ 530,000 b. H.S.T. on Fees 68,900 c. Disbursements (inclusive of applicable taxes) 180,000
TOTAL: $ 778,900
[129] If there are any issues arising from the incorporation of my determination of interest and costs into the formal judgment in this matter, I may be spoken to.
Graeme Mew J. Released: 7 May 2020