COURT FILE NO.: CV-18-145
DATE: 28/12/2022
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
KATHERINE FOOTE
Plaintiff
– and –
JULIE LYNN BECK and SUN LIFE ASSURANCE COMPANY OF CANADA
Defendants
Robert J. Reynolds for Plaintiff
Jeffrey F. Pasternak for Defendant Julie Lynn Beck
HEARD: August 16, 2022
JUDGMENT
Justice Sally Gomery
[1] In May 2018, Katherine Foote began this action against Julie Lynn Beck for $1,000,000 in damages she allegedly sustained when Beck’s vehicle rear-ended hers in May 2016. Ms. Foote later added her disability insurer through her employer’s group plan, Sun Life Assurance Company of Canada, as a defendant. Ms. Foote claimed for general damages, income loss, damages for lost housekeeping capacity, interest, and costs.
[2] Ms. Foote has now settled her entire claim against Sun Life and her damages claim against Beck. The remaining issue is her claim for costs against Beck. The parties disagree on costs in the action including Ms. Foote’s entitlement to the costs she incurred in pursuing collateral benefits from her own insurer, Intact; Sun Life; and the Canada Pension Plan. Ms. Foote contends that she is entitled to recover these costs based on the principles set out in Cadieux v. Cloutier, 2018 ONCA 903, 429 D.L.R. (4th) 468, leave to appeal refused [2019] S.C.C.A. No. 63. Ms. Beck denies that Foot can claim Cadieux costs for various reasons, including a change in the statutory regime for appealing denials of claims for income replacement benefits.
[3] For the reasons that follow, I order Ms. Beck to pay Ms. Foote total costs, including Cadieux costs, of $90,000.
Facts
[4] Ms. Foote was 58 years old when Ms. Beck’s vehicle collided with hers in May 2016. Prior to the accident, Ms. Foote had a history of back pain and degenerative disc and joint disease. Ms. Foote received treatment in the emergency room after the accident and, the next day, followed up with her family doctor complaining of body pain. Her pain did not resolve despite investigations, medication, and treatment, and she was eventually diagnosed with chronic pain syndrome. She sued Ms. Beck and Sun Life in 2018.
[5] At the time she began the action, Ms. Foote had applied unsuccessfully for long-term disability (LTD) benefits based on a group insurance plan with Sun Life; disability benefits from the Canada Pension Plan (CPP); and income replacement benefits (IRBs) from her automobile insurer, Intact.
[6] Ms. Foote settled her claims against Sun Life in October 2019. Sun Life initially approved LTD benefits for a few months. In May 2018, it conceded that Ms. Foote was completely disabled from performing the essential duties of her own occupation but took the position that she would be capable of doing other work at the expiry of the “own occupation” period in August 2018. Seventeen months later, on the eve of examinations for discovery, Sun Life offered Ms. Foote $35,000 in settlement of her remaining claim and $10,000 in costs. Ms. Foote accepted the offer. In all, Ms. Foote received approximately $94,000 in benefits from Sun Life.
[7] Ms. Foote’s CPP disability claim was initially denied on October 31, 2017. With her lawyer’s assistance, she submitted a request for consideration attaching a comprehensive report by Dr. Gordon Ko with respect to her injuries and resulting impairments. On May 8, 2018, CPP rejected the request for reconsideration and upheld the denial of disability benefits. Ms. Foote then filed a Notice of Appeal to the Social Security Tribunal. On April 5, 2019, CPP offered to consent to the appeal being allowed. As a result, the Social Security Tribunal issued a decision ordering CPP to pay Ms. Foote $31,328.92 in arrears and an ongoing monthly benefit of $976.40. According to Ms. Foote, the total value of CPP benefits to which she is entitled is $76,000.
[8] Intact initially accepted Ms. Foote's IRB application but ceased making payments in August 2017. In April 2019, Ms. Foote applied to the Licence Appeal Tribunal (LAT). After receiving a brief prepared by Ms. Foote’s counsel for a case conference, Intact conceded that she was entitled to IRBs to the end of the 2 year "own occupation" period in July 2018. Further negotiations led to a settlement of her claim for IRBs through to her anticipated retirement date. Ultimately, Ms. Foote received roughly $72,500 from Intact.
[9] According to Ms. Foote, her recovery of benefits from Sun Life, Intact, and the CPP reduced her income loss claim against Ms. Beck from $236,000 to zero. Her lawyer tracked the time spent working to obtain this recovery separately from the costs in this action and charged her fees of $38,515.50 for work to recover these collateral benefits.
[10] Ms. Foote’s action against Ms. Beck was set to be tried by a judge and jury in March 2022. Prior to trial, Ms. Foote served an amended statement of claim, reducing the damages in the tort action to $200,000, the maximum that can be claimed under r. 76 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The jury notice was subsequently struck.
[11] At a settlement conference on February 14, 2022, the parties settled the issues of damages and pre-judgment interest, with the defendant paying the plaintiff $100,000. They were not, however, able to agree on costs. In her endorsement, Williams J. wrote:
The issue of costs remains outstanding. There are two components to the plaintiff's claim for costs: (1) Her costs of this action; and (2) Her costs in respect of the plaintiff's recovery of collateral benefits, which she seeks in accordance with Cadieux v. Cloutier, 2018 ONCA 903 at para 121 -135. I urge the parties to continue their efforts to resolve the issue of costs. However, under Rules 76.10(1) and 50.07(1)(c), I order that, if the parties are unable to reach an agreement with respect to costs, either party may bring a motion to a judge to request an order fixing her costs.
[12] The parties have since been unable to agree on Cadieux costs and costs of the action. This led to the hearing before me on these issues.
(i) Legal principles
[13] Pursuant to s. 276.8(1) of the Insurance Act, R.S.O. 1990, c. I.8, where a plaintiff recovers damages from a tortfeasor in a motor vehicle accident action, those damages are reduced by amounts that the plaintiff has received, or that was available to them, by way of statutory accident benefits (SABs); by IRBs received or available; and by benefits paid under group insurance plans through the plaintiff’s occupation or employment:
267.8 (1) In an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile, the damages to which a plaintiff is entitled for income loss and loss of earning capacity shall be reduced by the following amounts:
All payments in respect of the incident that the plaintiff has received or that were available before the trial of the action for statutory accident benefits in respect of the income loss and loss of earning capacity.
All payments in respect of the incident that the plaintiff has received or that were available before the trial of the action for income loss or loss of earning capacity under the laws of any jurisdiction or under an income continuation benefit plan.
All payments in respect of the incident that the plaintiff has received before the trial of the action under a sick leave plan arising by reason of the plaintiff’s occupation or employment.
[14] If a plaintiff has applied for SABs and IRBs but their application has been denied, the SABs and IRBs are deemed not to have been available (s. 267.8(21)).
[15] Under s. 276.8(9), a plaintiff who recovers “damages for income loss, loss of earning capacity, expenses that have been or will be incurred for health care, or other pecuniary loss in an action for loss or damage from bodily injury or death arising directly or indirectly from the use or operation of an automobile” shall hold any SABs and other benefits they receive after trial in trust for the tortfeasor who paid damages for income loss and other pecuniary damages. Alternatively, a court may assign such benefits to the tortfeasor under s. 276.8(12).
[16] Cadieux affirmed two important principles regarding the application of s. 276.8. In that case, a plaintiff who was hit by a truck claimed statutory benefits from his insurer and sued the person who had pushed him into the truck’s path as well as its driver. Prior to trial, the plaintiff settled his claim against his insurer and against the driver. At trial, a jury found that the plaintiff, the driver, and the other, non-settling, defendant were each one-third liable for the plaintiff’s injuries. The questions on appeal included the impact of SABs on the amount that the non-settling defendant would have to pay in damages, and whether and how the plaintiff could recover costs of SABs recovery from that defendant.
[17] On the first issue, the Court of Appeal upheld the trial judge’s finding that SABs should be deducted from the damages that the tortfeasor was required to pay by using the “silo approach”. This requires that the tort award only generally match with the broad, corresponding SABs categories.
[18] On the second issue, the Court held that “it may, in some cases, be appropriate to award the plaintiff, as part of the costs of the tort action, some or all of the costs actually incurred by the plaintiff in recovering SABs which have reduced the amount of the tort award”: see Cadieux, at para. 123. It cited with approval this passage by Wilson J. in Hoang (Litgation guardian of) v. Vicentini, 2014 ONSC 5893, 40 C.C.L.I. (5th) 231, 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.
[19] The Court of Appeal held that costs to recover SABs could reasonably be considered incidental to a proceeding against a tortfeasor because the recovered benefits reduced the damages payable by the defendant. As a result, a court has jurisdiction, under s. 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, to award such costs to the plaintiff (Cadieux, paras. 129-30). The Court agreed with Wilson J., however, that a 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” (Cadieux, para. 130). It gave the following guidance, 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.
[20] More recently, in Nemchin v. Green, 2021 ONCA 238, a plaintiff’s tort action for damages sustained in a motor vehicle accident was granted at trial. The LTD benefits she had already received from her employer’s group benefits insurer were deducted from the award, and future benefits paid under the group policy were assigned to the tortfeasor’s insurer. In the assignment order, the judge also required the plaintiff to top up the assigned benefits because her disability insurer deducted applicable income taxes from its payments to her.
[21] The Court of Appeal held that the top-up order was inappropriate. First, the plain meaning of s. 267.8(9) is that a plaintiff is required to hold payments actually received in trust for the tortfeasor (or its insurer). Second, the trial judge’s interpretation would imply that, if the payments were assigned under s. 267.8(12) rather than kept in trust, the amounts that flowed to the tortfeasor would be greater, even though ss. (9) and (12) are complementary provisions. Third, the top up would result in the plaintiff being worse off than she would have been had she not had LTD insurance. Although she could seek a refund of the money held back by the group insurer, she would have to incur expenses to do so.
[22] In both Cadieux and Nemchin, the Court of Appeal emphasized the legislative purpose of s. 267.8. It is to “promote fair compensation to injured plaintiffs and prevent double recovery” given the overlap between damages recoverable in tort and collateral benefits (Nemchin, at para. 22). As the Court held in Cadieux, at para. 17, motor vehicle accident victims “should be fairly compensated, but not over-compensated”.
(ii) Can any Cadieux costs theoretically be ordered in this case?
[23] The defendant Ms. Beck argues that, as a matter of jurisdiction and principle, she should not have to pay Cadieux costs. First, this court’s jurisdiction to order Cadieux costs has been limited by legislative amendments giving the Licence Appeal Tribunal exclusive jurisdiction over disputes in respect of an insured person’s entitlement to statutory accident benefits, including costs of such disputes. Second, CPP disability benefits are not SABs subject to the regime set out in s. 267.8 (1) of the Insurance Act. Third, the principles in Cadieux presuppose that a plaintiff has proved its entitlement to pecuniary damages. In a case, such as this one, where a tort action has settled before trial, no Cadieux costs can be ordered.
Does s. 280 of the Insurance Act preclude an order for Cadieux costs?
[24] As noted by the Court of Appeal in Cadieux, at paras. 133-134, the jurisdiction over SABs claims changed effective April 1, 2016:
Under the regime in effect at the time of the accident in this case (2006), s. 282 of the Insurance Act provided for arbitration of disputed SABs claim and s. 282(1) provided that the arbitrator could award a party the expenses of the arbitration. Arbitrations took place under the auspices of the Financial Services Commission ("FSCO"). A party was not required to arbitrate and could pursue a claim in the courts.
Effective April 1, 2016, disputed SABs claims must be pursued in proceedings before the Licence Appeal Tribunal ("LAT") and not in the courts. The LAT has no jurisdiction to award costs, except in cases where a party has acted unreasonably or the appeal is frivolous, vexatious or commenced in bad faith, in which case the party may make a request for costs: Common Rules of the License Appeal Tribunal, Animal Care Review Board, and Fire Safety Commission (effective October 2, 2017), s. 19.1; see, also, License Appeal Tribunal Act, 1999, S.O. 1999, c. 12, Sch. G, s. 8. The import is that in most cases, the party will bear its own costs of asserting a contested SABs claim against the insurer.
[25] The Court declined to consider how this change might impact the plaintiff’s ability to recover such costs from a tortfeasor, noting that the issue was not before it (Cadieux, para. 134).
[26] Section 280 of the Insurance Act, which now governs SAB recovery, reads as follow:
280 (1) This section applies with respect to the resolution of disputes in respect of an insured person’s entitlement to statutory accident benefits or in respect of the amount of statutory accident benefits to which an insured person is entitled.
Application to Tribunal
(2) The insured person or the insurer may apply to the Licence Appeal Tribunal to resolve a dispute described in subsection (1).
Limit on court proceedings
(3) No person may bring a proceeding in any court with respect to a dispute described in subsection (1), other than an appeal from a decision of the Licence Appeal Tribunal or an application for judicial review.
Resolution in accordance with Schedule
(4) The dispute shall be resolved in accordance with the Statutory Accident Benefits Schedule.
Orders, powers and duties
(5) The regulations may provide for and govern the orders and interim orders that the Licence Appeal Tribunal may make and may provide for and govern the powers and duties that the Licence Appeal Tribunal shall have for the purposes of conducting the proceeding.
Orders for costs, other amounts
(6) Without limiting what else the regulations may provide for and govern, the regulations may provide for and govern the following:
Orders, including interim orders, to pay costs, including orders requiring a person representing a party to pay costs personally.
Orders, including interim orders, to pay amounts even if those amounts are not costs or amounts to which a party is entitled under the Statutory Accident Benefits Schedule.
[27] Ms. Beck contends that the exclusive jurisdiction conferred to the LAT in s. 280 precludes this court from determining and awarding costs related to such proceedings in a tort action like this one.
[28] I do not accept this argument. The issue before me is Ms. Foote’s recovery against a tortfeasor, not her recovery against her no-fault insurer. As the Court of Appeal held in Dorman v. Economical Mutual Insurance Company, 2021 ONCA 314, 155 O.R. (3d) 338, at para. 10: “Nothing in s. 280 deprives the court of jurisdiction, over the tort claims alleged, in preference to the LAT. The LAT is concerned only with claims between insured persons and insurers.”
[29] Legislation must always be read in a way that advances its purposes. The purpose of s. 280 is, self-evidently, to streamline and simplify insured’s claims for SABs. It accomplishes this purpose by eliminating the possibility of arbitrations or court actions by insureds against their own insurers in favour of LAT proceedings. An interpretation of s. 280 that would remove the court’s jurisdiction to order a tortfeasor to pay the plaintiff’s costs incurred in recovering SABs would not do anything to advance this purpose because the Superior Court retains jurisdiction over tort claims arising from motor vehicle accidents.
[30] Finally, if Ms, Beck’s argument on this point were correct, the plaintiff who recovered collateral benefits, but was foreclosed from any meaningful compensation for this effort from the tortfeasor, would inevitably be worse off than the plaintiff who did not have access to collateral benefits. That additional financial burden was held to be contrary to s. 267.8 by the Court of Appeal in Nemchin because it undermined the principle of full compensation for the injured party.
Can CPP disability benefits be treated as SABs for the purpose of s. 267.8 (1)?
[31] In my view, costs incidental to recovering CPP disability benefits could be recoverable as costs in a tort action, whether or not such benefits fall within the language of s. 267.8(1)(a) or (b). I see no reason why CPP disability benefits would be treated differently than other statutory IRBs. The reasoning underlying Wilson J.’s decision in Hoang, adopted by the Court of Appeal in Cadieux, applies insofar as a plaintiff’s entitlement to CPP disability benefits may clearly benefit a tort defendant by reducing the plaintiff’s claim for lost income. In appropriate cases, a judge has the discretion to consider the costs of recovery of such benefits in fixing costs in the action, under s. 131(1) of the Courts of Justice Act.
Can Cadieux costs be ordered in the context of a settlement of a tort action?
[32] Ms. Beck argues that, since Ms. Foote’s claim against her did not go to trial, I cannot assume that she would have been able to prove that Ms. Beck was liable for damages for income loss. As a result, I should not order Ms. Beck to pay any costs incidental to Ms. Foote’s claim for this category of damages.
[33] Cadieux costs are a component of costs of the action. Ms. Beck’s argument would imply that a settling defendant should never be required to contribute to a plaintiff’s costs because it is impossible to predict with any certainty the outcome of a trial that does not take place. But defendants routinely contribute to a plaintiff’s costs in the context of settlement, whether as the result of negotiation or an assessment. Their agreement to pay some damages is generally taken as a concession that it was appropriate for the plaintiff to sue and that the defendant would have had to pay some costs had the case gone to trial.
[34] In this case, the evidence of disability was sufficient to persuade two insurers and the CPP to pay IRBs and disability benefits past the “own occupation” period. This suggests that Ms. Foote would have succeeded at trial on this issue. This recovery moreover worked to Ms. Beck’s benefit, not only because she no longer had to face an income loss claim in the tort action, but she was not required to participate in a multi-week jury trial or pay her lawyer for the associated costs of such a trial.
[35] Beyond this, in this particular case, I am uncomfortable with the idea that a defendant could agree to a settlement at a pre-trial conference premised on having benefitted from the plaintiff’s recovery of collateral benefits, but then take the position that the settlement precludes any cost recovery in connection with those benefits.
[36] For these reasons, I reject the defendant’s argument that no Cadieux costs are recoverable when parties to an MVA action settle a case prior to trial.
What costs, including Cadieux costs, should Ms. Foote recover?
[37] I find it appropriate to consider Ms. Foote’s entitlement (if any) to Cadieux costs within the broader context of her entitlement to costs in the action.
[38] Ms. Foote seeks about $126,000 in total, consisting of $49,131.78 in Cadieux costs and $76,851.44 in costs of the action (fees of roughly $57,600 plus about $19,200 in disbursements) on a partial indemnity basis. She has not discounted the fees and disbursements used to calculate the Cadieux costs, arguing that they should be treated as a wholly recoverable disbursement, based on the reference to “costs actually incurred” in this passage in Cadieux, at para. 123:
For the reasons that follow, it may, in some cases, be appropriate to award the plaintiff, as part of the costs of the tort action, some or all of the costs actually incurred by the plaintiff in recovering SABs which have reduced the amount of the tort award under s. 267.8.
[39] Ms. Beck proposes partial indemnity costs in the action of $22,600 plus disbursements of $27,267.41. She argues that the costs in the action claimed by Ms. Foote are excessive given the settlement amount. She also contends that Ms. Foote’s legal team spent an unreasonable amount of time on the file. In her submission, if any Cadieux costs are awarded, they should be nominal.
[40] Of the factors identified by the Court of Appeal in determining Ms. Foote’s entitlement to recover Cadieux costs against a tortfeasor, I consider the following relevant:
• $49,131.78 in fees and disbursements were actually billed to Ms. Foote by her lawyer for work in pursuit of LTD benefits, IRBs, and CPP disability benefits;
• Ms. Foote’s claim against Sun Life was settled after she sued, just prior to discoveries being held. The CPP benefits claim was settled only after an unsuccessful request for reconsideration and service of a notice of appeal. The IRB claim did not settle until Ms. Foote applied to the LAT and her lawyer prepared a case conference brief.
• Ms. Foote’s total legal costs of roughly $49,000 were incurred to obtain $236,000 in collateral benefits.
[41] Taking a step back to consider general Rule 57 factors with respect to costs in the action, in my view the most relevant considerations are reasonability and proportionality.
[42] The costs awarded on any matter must be fair and reasonable: see Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 CanLII 14579 (ON CA), 71 O.R. (3d) 291 (C.A.), at para. 26. Given the initial quantum of damages claimed, the amount of time that passed between the filing of the action and settlement, and the complexity of the issues as reflected by the estimated length of trial, I do not find roughly $77,000 in costs of the action to be excessive. The time recorded by Ms. Foote’s legal team is somewhat high but not completely unreasonable. Her lawyer appropriately delegated work to a law clerk. Ms. Beck argues that her own legal costs were lower. It is not, however, surprising that a plaintiff in a motor vehicle action would incur higher pre-trial costs than a defendant, given the burden of proof and the preferential hourly rate that an insurer may be able to negotiate from its lawyers.
[43] The argument against awarding the total costs claimed, as well as Cadieux costs, is disproportionality. Ms. Beck argues that in a $100,000 settlement a defendant would ordinarily compensate a plaintiff for more than $20,000 for legal fees plus disbursements. At r. 57.01(1)(a), one of the factors identified as potentially relevant to costs is “the amount claimed and the amount recovered in a proceeding”. A cost award should not be wholly disproportionate to the amounts recovered: Elbakhiet v. Palmer, 2014 ONCA 544, 121 O.R. (3d) 616, at para. 36. A shortfall between these two amounts may indicate that the plaintiff overestimated the value of their claim or pursued clearly meritless claims.
[44] Ms. Beck proposes costs of the action of just under $50,000, including Ms. Foote’s disbursements. In my view, $60,000 is a reasonable, proportionate amount in the circumstances of this case.
[45] To this I would add $30,000 in Cadieux costs. In the circumstances of this case, I conclude that it is appropriate for Ms. Beck to compensate Ms. Foote for some, but not all, of the cost of recovering collateral benefits. This recovery not only reduced Ms. Foote’s income loss damages in the tort action against Ms. Beck to zero but prompted her to renounce any damages claim above the limit allowed under the Simplified Procedure. This minimized the prospective costs and risks of a long jury trial for both parties and set the stage for settlement.
[46] I am limiting that recovery based on the principle of overall proportionality and the circumstances of this case. Ms. Foote’s successful appeals of the initial denial of CPP disability benefits and IRBs worked very much to Ms. Beck’s benefit. I find, however, that Ms. Foote is not entitled to claim the costs of her recovery against Sun Life because she negotiated $10,000 in costs as part of her settlement with that insurer. It is true that in Cadieux, at para. 131, the Court of Appeal held that “the amount, if any, allocated to costs by plaintiff's counsel and the SABs insurer in a settlement disclosure notice should not necessarily determine the costs to be paid by the tort insurer”. In this case, however, I have not been presented with any compelling argument that Ms. Beck should pay for any part of the costs that Sun Life refused to pay as part of its settlement with Ms. Foote.
Disposition
[47] I order Ms. Beck to pay Ms. Foote a total of $90,000 all-inclusive in costs, consisting of $30,000 in Cadieux costs and $60,000 in other costs in the action.
Justice Sally Gomery
Released: December 28, 2022
COURT FILE NO.: CV-18-145
DATE: 28/12/2022
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
KATHERINE FOOTE
Plaintiff
– and –
JULIE LYNN BECK and SUN LIFE ASSURANCE COMPANY OF CANADA
Defendants
JUDGMENT
Justice Sally Gomery
Released: December 28, 2022