Court File and Parties
Court File No.: CV-22-3522 CV-23-97 Date: 2023-06-20
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
WAWANESA MUTUAL INSURANCE COMPANY, Applicant
- and-
SHIVA FALAHATPARVAR, Respondent
- and-
SHIVA FALAHATPARVAR, Applicant
- and-
WAWANESA MUTUAL INSURANCE COMPANY, Respondent
Before: J. Speyer J.
Counsel: Daniel M. Himelfarb, for the Applicant/Respondent, Wawanesa Mutual Insurance Company Rory Bamable, for the Respondent / Applicant, Shiva Falahatparvar
Heard: In Writing
JUDGMENT ON COSTS
A. Introduction
[1] This judgment addresses the costs to be awarded in relation to applications brought by each of the parties under s. 128(5)(b) of the Insurance Act, RSO 1990, c I.8. Section 128(5) is part of a legislated process that is designed to provide an easy, expeditious, and cost-effective means for the settlement of claims for indemnity under insurance policies: Desjardins General Insurance Group v. Campbell, 2022 ONCA 128, at para 27. The process is collaborative in nature. If appraisers appointed by the each of the parties cannot reach a compromise resolution, then an umpire selected by them makes a binding determination of the quantification of the loss. If the parties are unable to agree on the selection of an umpire, s. 128(5) allows a judge to appoint an umpire upon the application of either the insured or the insurer.
[2] Wawanesa's application for an order appointing Mr. Gibson to be the umpire in this case was dismissed because, as a result of Wawanesa's approach to the appointment of the umpire, Ms. Falahatparvar reasonably apprehended Mr. Gibson to be biased in favour of Wawanesa. I found that her apprehension was reasonable because of the way in which Wawanesa and its appraiser approached the selection of an umpire. I did not find that Mr. Gibson was, in fact, biased. Rather, Ms. Falahatparvar apprehended Mr. Gibson to be biased because of the manner in which Wawanesa conducted the umpire selection process.
[3] Ms. Falahatparvar's application was successful, and I made an order, in accordance with the relief sought by her, that the umpire be agreed upon between the parties within fifteen days of my decision, failing which an umpire was to be selected by Wawanesa from a list provided by Ms. Falahatparvar. See: Wawanesa Mutual Insurance Company v Falahatparvar, 2023 ONSC 1355.
B. The positions of the parties
[4] Ms. Falahatparvar was entirely successful in responding to Wawanesa's application in CV-22-00003522, and in her own application in CV-23-00000097. Ms. Falahatparvar seeks full indemnity costs for these applications in the amount of $48,106.09.
[5] Ms. Falahatparvar submits that full indemnity costs are warranted in this case because she was forced to litigate her right under her policy that Wawanesa act in good faith and collaboratively during the appraisal process, and to bring her own application to appoint an umpire.
[6] The position of Wawanesa is that Ms. Falahatparvar ought to be awarded costs, but that the costs claimed are excessive and unreasonable, and are not what a party could expect to pay in costs for an application that took less than half a day to argue. Wawanesa submits that Ms. Falahatparvar's cross-application was entirely unnecessary, and that I could have, in dismissing Wawanesa's application, exercised my discretion under section 128(5) of the Insurance Act to order that the parties proceed in the way Ms. Falahatparvar requested. Wawanesa also submits that costs should be awarded on a partial indemnity scale.
C. Generally Applicable Legal Principles
[7] Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, provides: "Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid."
[8] The court is required to consider the matters described in Rule 57.01 of the Rules of Civil Procedure when exercising its discretion to award costs. Those that are engaged in this case are:
(0.a) the principle of indemnity, including where applicable, the experience of the lawyer for the patty entitled to the costs as well as the rates charged, and the hours spent by that lawyer;
(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;
c) the complexity of the proceeding;
d) the importance of the issues;
e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceedings;
f) whether any step in the proceeding was,
(i) improper, vexatious or unnecessary, or
(ii) taken through negligence, mistake or excessive caution;
h) whether it is appropriate to award any costs or more than one set of costs where a patty,
(i) commenced separate proceedings for claims that should have been made in one proceeding; and,
i) any other matter relevant to the question of costs.
[9] The assessment of costs is governed by the principle of reasonableness. In Davies v. Clarington (Municipality), 2009 ONCA 722, Epstein J.A. stated at paras. 51-52:
As can be seen, the overriding principle is reasonableness. If the judge fails to consider the reasonableness of the costs award, then the result can be contrary to the fundamental objective of access to justice. 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, this court emphasized the importance of fixing costs in an amount that is fair and reasonable for the unsuccessful patty to pay in the particular proceeding at para. 37, where Armstrong J.A. said "[t]he failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objective of access to justice."
See also: Apotex Inc. et al v. Eli Lily Canada Inc. et al, 2022 ONCA 587, at paras. 58-66.
[10] The assessment of costs is not an exercise in counting the number of hours expended on a file, and then multiplying that number by an acceptable hourly rate. Rather, the court must approach its task from the perspective of determining what is reasonable, and what the losing party might reasonably have expected to pay in costs. In Davies, the Court of Appeal endorsed the following principles:
The discretion of the court must be exercised in light of the specific facts and circumstances of the case in relation to the factors set out in rule 57.01(1);
A consideration of experience, rates charged, and hours spent is appropriate, but is subject to the overriding principle of reasonableness as applied to the factual matrix of the particular case: see Boucher et al. v. Public Accountants Council for the Province of Ontario et al., 71 O.R. (3d) 291 (C.A.). The quantum should reflect an amount the court considers to be fair and reasonable rather than any exact measure of the actual costs to the successful litigant;
The reasonable expectation of the unsuccessful party is one of the factors to be considered in determining an amount that is fair and reasonable;
The court should seek to avoid inconsistency with comparable awards in other cases;
The court should seek to balance the indemnity principle with the fundamental objective of access to justice.
[11] In Apotex, the Court of Appeal held, at para. 60:
A proper costs assessment requires a court to undertake a critical examination of the relevant factors as applied to the costs claimed and then "step back and consider the result produced and question whether, in all the circumstances, the result is fair and reasonable".
[12] The patty seeking costs bears the burden of proving them to be reasonable, fair, and proportionate: Apotex, at para. 66.
C. Analysis
(a) Full or Partial Indemnity?
[13] It is the position of Ms. Falahatparvar that full indemnity costs are appropriate because:
When insurers contest policy rights against their own insureds, full indemnity costs are appropriate. Ms. Falahatparvar submits that she is entitled under her policy to have her insurer conduct the appraisal in good faith and in a collaborative manner. Because she had to litigate to establish her policy rights, she should be fully compensated for the legal costs she has incurred.
Wawanesa's improper conduct, and that of its appraiser, warrants a full indemnity award.
[14] Elevated costs are warranted in only two circumstances. The first, which involves the operation of an offer to settle under Rule 49.10, is not engaged in this case. The second is where the losing party has engaged in behaviour worthy of sanction.
[15] An award of elevated costs is exceptional. Generally, substantial indemnity costs should only be awarded after trial where the court deems that a party's conduct was reprehensible, scandalous, or outrageous: Pinder Estate v. Farmers Mutual Insurance Company (Lindsay), 2020 ONCA 413, at para. 146; Clarington (Municipality) v. Blue Circle Canada Inc., 2009 ONCA 722, 100 O.R. (3d) 66, at para. 29. As noted in Net Connect Installation Inc. v. Mobile Zone Inc., 2017 ONCA 766, 140 O.R. (3d) 77, at para. 8, the circumstances that would warrant an award of full indemnity costs are even more egregious:
"[s]ubstantial indemnity costs is the elevated scale of costs normally resorted to when the court wishes to express its disapproval of the conduct of a party to the litigation. It follows that conduct worthy of sanction would have to be especially egregious to justify the highest scale of full indemnity costs."
[16] The fact that proceedings have little merit is no basis for awarding costs on an elevated scale: Young v. Young, [1993] 4 S.C.R. 3, at p. 134. There is an important distinction between "hard-fought litigation that turns out to have been misguided, on the one hand, and malicious counter-productive conduct, on the other. The former, the thrust and party of the adversary system, does not warrant sanction: the latter well may.": Davies v. Clarington (Municipality), at para. 45.
[17] I consider it unnecessary to decide whether substantial indemnity costs are warranted in this case by analogy to other circumstances in which full indemnity costs have been awarded against insurers, because Wawanesa's conduct in attempting to compel Ms. Falahatparvar to accept its choice of umpire must be sanctioned. It is necessary to express the court’s disapproval of Wawanesa's egregious conduct in the strongest possible way.
[18] Wawanesa's conduct was high-handed and oppressive. Wawanesa's insistence that its single chosen nominee umpire its dispute with its insured flew in the face of its own nominee's opinion as to the proper process for choosing an umpire, demonstrated blatant disregard for the governing legislation, was unprecedented, and ignored binding appellate direction that an appraiser must attempt, in good faith, to reach a compromise with their fellow appraiser. In failing to consider the nominees for umpire proposed by Ms. Falahatparvar's appraiser, Wawanesa acted in bad faith. In threatening Ms. Falahatparvar with court action and costs consequences if her appraiser did not accept Wawanesa's single nominee, Wawanesa acted like a bully.
[19] Costs will be awarded to Ms. Falahatparvar on a full indemnity scale.
(b) Quantum of Costs
[20] Ms. Falahatparvar submits that it was necessary for her to bring her own application because Rule 38.03(4) of the Rules of Civil Procedure mandates that a respondent seeking its own relief must make a separate application. I disagree. The Rules of Civil Procedure have no application to the procedure mandated by the provisions of the Insurance Act: 56 King Inc. v. Aviva Canada Inc., 2016 ONSC 7139, at para. 20, appeal dismissed, 2017 ONCA 408, leave to appeal to the S.C.C. refd. [2017] S.C.C.A. No. 298.
[21] I agree with Wawanesa that it was not necessary for Ms. Falahatparvar to initiate her own application in order to obtain the relief she sought. That relief could have been granted, pursuant to s. 128(5) of the Insurance Act, in the context of Wawanesa's application. Ms. Falahatparvar's application added unnecessary complexity to the application and required the parties to file duplicative materials that tended to lengthen the time required to prepare for and to hear the proceedings.
[22] Ms. Falahatparvar has filed a separate bill of costs in relation to her application. That amount, $6,350.53, is much less than the amount claimed in the bill of costs submitted in relation to her response to Wawanesa's application. This is undoubtedly because the work done in relation to her application duplicated work done to respond to Wawanesa's application. There will be no order of costs in relation to Ms. Falahatparvar's application.
[23] Wawanesa submits that the amount claimed by counsel for Ms. Falahatparvar is excessive. Wawanesa points to its costs outline filed in anticipation of the hearing of the application as evidence of the amount it could reasonably have expected to pay if it was unsuccessful. That amount, on a partial indemnity basis, inclusive of HST and disbursements was $10,605.87. That is based on a total of 58 hours of time expended by one senior and one junior lawyer.
[24] Counsel for Ms. Falahatparvar, one senior and one junior lawyer, expended 81.8 hours. Those lawyers billed at higher hourly rates than counsel for Wawanesa. The hourly rates charged by counsel for Ms. Falahatparvar are entirely reasonable.
[25] However, I find that the quantum of costs sought by Ms. Falahatparvar, $48,106.09, inclusive of HST and disbursements, is greater than what is reasonable and more than what Wawanesa might reasonably have expected to pay in costs for the application on a full indemnity scale. The application was somewhat complex and involved consideration of the law relating to a novel issue related to the appointment of umpires, and the issue was of importance to the parties. It was necessary for Ms. Falahatparvar to provide the court with a clear and complete understanding of the events leading up to the litigation. It was necessary for Ms. Falahatparvar's counsel to prepare a thorough factum to respond to Wawanesa's application. A helpful compendium was also presented to the court. Two witnesses were examined in advance of the hearing. Responding to the application required a significant amount of work. On the other hand, the application was argued in a few hours, and the issue was focused and not complicated.
[26] I find that a reasonable amount that Wawanesa would reasonably have expected to pay in costs to Ms. Falahatparvar on a full indemnity scale is the amount of $35,000.00, inclusive of HST and disbursements. Wawanesa is ordered to pay that amount within 30 days.
Released: June 21, 2023 J. Speyer J.