Court File and Parties
Court File No.: 16-67119 Date: 2024-08-14 Superior Court of Justice - Ontario
Re: Behzad Afkham Rezai and Fatemeh Sheikhbaghermohajer, Plaintiffs And: Aarohi Kumar and Dishant Langayan, Defendants
Before: A. Kaufman J.
Counsel: Tara L. Lemke and Kelly P. Hart, Counsel, for the Plaintiffs Daniel Reisler and Isabelle Amyot, Counsel, for the Defendants
Heard: In writing
Costs Endorsement
[1] Ms. Sheikhbaghermohajer was involved in a motor vehicle collision on October 6, 2014. She was rear-ended by the defendant, Aarohi Kumar. The defendants formally admitted liability and the contest was confined to the assessment of damages.
[2] At the conclusion of the trial, the jury awarded the following damages to the plaintiff:
• General damages: $35,000 • Past Loss of Income: $90,000 • Future Loss of Income: $390,000 • Medical Rehabilitation: $346,000 • Attendant Care: $179,000
Total: $1,040,000
[3] After applying the appropriate deductions and adding pre-judgment interest, the plaintiff was awarded a total of $469,774.85.
[4] The plaintiff claims her legal fees on a partial indemnity basis, amounting to $402,560.23 + HST, along with disbursements of $139,334.26 + HST, for a total of $607,091.77.
[5] The defendants submit that the court should award the plaintiff costs ranging from $100,000 to $150,000 for the period from June 12, 2016, to March 7, 2024 (inclusive of disbursements), while they seek their partial indemnity costs in the amount of $94,672.30.
[6] These reasons will address the following issues:
a. Should the defendants be ordered to pay the plaintiff’s costs of advancing her claim for accident benefits? b. Should the defendant be ordered to pay interest on the plaintiff’s litigation loan? c. Are the defendants entitled to partial indemnity costs from March 7, 2024? d. What constitutes a fair and reasonable quantum of costs?
Procedural History
[7] This action was commenced on January 12, 2016. The original claim sought damages in the amount of 1.2 million.
[8] The parties attended examinations for discovery in January 2018 and participated in two mediations. They attended a pre-trial conference on October 20, 2021.
[9] The plaintiff settled her accident benefits file on December 15, 2022, for $1,075,000.
[10] The parties exchanged settlement offers between February and May 2024. The plaintiff offered to settle her claims for $1,442,500, while the defendants offered $367,500. Both offers provided for pre-judgment interest and stipulated that costs would be agreed upon or assessed.
[11] The trial was initially scheduled for six weeks, given there were two defendants. Mr. Rezai, the plaintiff’s husband, accepted the defendants’ Rule 49 offer, leaving only Ms. Sheikhbaghermohajer’s claims to proceed. The plaintiff called 14 witnesses, and the defendants called two. The trial concluded in under four weeks.
Costs of Advancing Claim for Accident Benefits
[12] The plaintiff claims partial indemnity costs of $31,124.87 + HST for pursuing her SABS settlement.
[13] The plaintiff’s SABS insurer denied her claim for housekeeping and attendant care benefits, prompting her to initiate a LAT dispute on December 2, 2021. The plaintiff brought a motion to add past attendant care to the issues in dispute. The LAT hearing was scheduled between October 31 and November 3, 2022, but the dispute was settled on October 30, 2022, on the eve of the hearing.
[14] After the settlement, the parties negotiated whether the funds were required to be put into a structure, which was ultimately resolved. As mentioned above, the plaintiff settled her SABS claim for $1,075,000.
[15] The defendants benefited from this settlement by receiving a $525,000 deduction from the jury award.
[16] In Cadieux v. Cloutier,[^1] the Court of Appeal for Ontario held that legal fees incurred in the SAB setting “may, in some cases” be recoverable upon the resolution of a Tort claim. The Court provided 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.
[17] The defendants argue that the court should not award any costs related to the LAT proceedings. They assert that the SAB settlement was accounted for in the parties’ Rule 49 offers and did not alter the defendants’ position on damages. They further argue that the SAB settlement should have informed the plaintiff that her damages would not exceed the defendants’ policy limits and that she should not have proceeded to trial.
[18] The plaintiff was charged a 25% contingency fee in relation to the SAB settlement, resulting in fees of $268,750 plus $34,937.50 in HST. The fees claimed from the defendant ($31,124) are relatively modest.
[19] The plaintiff was highly successful in the LAT proceedings. The settlement was very favorable, considering the particular facts of this case.
[20] The settlement significantly benefited the defendants, resulting in a $525,000 deduction from the jury award. The payment of $31,124 + HST is a small fraction of the benefit the defendants received.
[21] The plaintiff is seeking partial indemnity fees based on the hourly rates spent on the proceedings before the LAT. These fees do not relate to unusual or labor-intensive steps taken by the plaintiff. On the contrary, the LAT proceedings appear to have followed a straightforward path. The modest cost claim suggests that the plaintiff’s counsel pursued the SABs claims efficiently.
[22] In my view, the LAT proceedings involved some risk and effort. The plaintiff faced a complete denial of benefits. Her claim, while supported by medical experts, primarily involved soft tissue injuries without objective corroboration.
[23] Considering all these factors, the Court concludes that the plaintiff is entitled to recover the costs incurred in securing the benefits. The defendants derived a substantial benefit from the settlement through a $525,000 deduction from the jury award, which would otherwise have been sought from them in this tort action. The fees claimed are proportional to the benefit received by the defendants. The plaintiff faced some risk in pursuing the LAT proceedings, as costs are typically not awarded, and she obtained a highly favorable result.
[24] The Court awards the plaintiff $30,000, inclusive of HST, in relation to the costs of advancing her AB benefit claim.
Litigation Loan Interest
[25] The plaintiff seeks $37,001.66 for interest on her litigation loan during these proceedings. She first requested a $25,000 advance from the defendants on December 18, 2019. She made a further request for a $40,000 advance on September 11, 2020. On January 27, 2022, the plaintiff requested a $50,000 advance. The defendants declined to make any advance payments.
[26] On March 19, 2024, the plaintiff disclosed her loan statements to the defendants. The plaintiff obtained a litigation loan from BridgePoint Financial in the amount of $50,000 on January 25, 2022, with an interest rate of 21.9%, compounded semi-annually.
[27] In Davies v. The Corporation of the Municipality of Clarington et al., the Court outlined that to successfully claim interest on a litigation loan as a disbursement, the plaintiff must (a) disclose the loan details; (b) consider other funding methods; (c) demonstrate the need for the loan; and (d) disclose the loan documents in Schedule “B” of their Affidavit of Documents.[^2]
[28] The defendants argue that the plaintiff did not exhaust all other funding methods, or prove that she did so, and failed to demonstrate a need for the loan. They highlight that the loan terms specified the funds were for living expenses and a portable elevator costing $31,500 plus the cost of an electrician. The defendants note that a portable elevator was never procured, and the plaintiff provided no evidence of purchases made with the litigation loan.
[29] The Court agrees with the defendants that the plaintiff has not provided sufficient evidence to substantiate the use she made of the “litigation loan” or that she exhausted other funding alternatives. The plaintiff provided emails between her counsel and the defendants' counsel requesting advances for medications, but no evidence was provided that the funds were used for medications or anything else. The plaintiff argues that no other lending options were available due to the time since the accident, but it is unclear why this would affect her ability to borrow from a traditional lender. No evidence was presented that attempts were made to borrow from other sources.
[30] The claim for litigation loan interest is accordingly denied.
Should the defendants be entitled to their partial indemnity costs
[31] The defendants argue that they should be entitled to partial indemnity costs as of March 7, 2024. In effect, the defendants seek the cost consequences outlined in Rule 49.10(2).[^3]
[32] The consequences set out in Rule 49.10(2) apply when the plaintiff's judgment is as favorable as or less favorable than the defendant's offer. The defendants offered to settle the plaintiff’s claim for $367,500 plus prejudgment interest and costs. The jury award, after appropriate deductions and PJI, amounts to $469,774.85. In this case, the plaintiff obtained a judgment $102,224.85 more favorable than the defendants’ offer.
[33] In Elbakhiet v. Palmer, the Court of Appeal confirmed that Rule 49.10(2) cost consequences apply only when the plaintiff’s judgment is as favorable as or less favorable than the defendant’s offer. There is no "near-miss" policy. The power to order otherwise has been narrowly construed to promote settlement and predictability.[^4]
[34] While the plaintiff recovered significantly less than her offer of $1,442,500 or the amount claimed in this action, the defendant is entitled to costs only if the plaintiff’s judgment is as favorable as or less favorable than the defendant’s offer. The plaintiff’s offer does not factor into this equation, and in any event, the defendants’ offer was not a “near-miss” as the plaintiff’s judgment was 27% more favorable.
[35] Although the defendants are not entitled to costs under Rule 49.10(2), their offer must still be considered in assessing costs pursuant to Rule 49.13, which allows the court to consider any written offer to settle in exercising its discretion.
[36] I now turn to assess the quantum of the plaintiff’s costs.
General Principles
[37] Under section 131 of the Courts of Justice Act,[^5] and subject to provisions of an Act or court rules, "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”.
[38] This section is supplemented by Rule 57.01, subsection (1), which lists factors the court may consider when exercising discretion to award cost.
[39] Courts have emphasized that cost awards must not be a simple mechanical or mathematical calculation based merely on time spent multiplied by hourly rates or a tabulation of disbursements incurred.
[40] Instead, all cost claims are subject to the "overriding principle of reasonableness," applied to the case's factual matrix.[^6]
[41] The overall goal is to award costs that are "fair and reasonable for the unsuccessful party to pay in a particular proceeding" rather than a sum tailored to exactly match the successful litigant's actual costs.[^7]
[42] The Court will now examine the Rule 57.01 factors that apply in this case.
The principle of indemnity, the experience of the lawyer for the party entitled to the costs, the rates charged and the hours spent by that lawyer.
[43] The plaintiff had six timekeepers on this file: Paul Muirhead (Call 1998), Tara Lemke (Call 2005), Kelly Hart (Call 2007), Ashley Barber (Call 2011), Alexander Herele (Call 2020), and Gabrielle Parsons (Call 2023), as well as articling students and law clerks. Ms. Lemke and Mr. Hart conducted the trial.
[44] The plaintiff’s counsel was prepared and provided succinct legal briefs when anticipated legal issues arose, which the Court appreciated. The hourly rates claimed are reasonable, and the defendants do not argue otherwise.
[45] The time spent on each task appears reasonable. The determination of costs is not a mechanical exercise, and the court ought not to second guess the hours and amounts claimed unless they are clearly excessive and overreaching.[^8]
[46] In arriving at a global amount, the court considers that multiple timekeepers were involved in the file, which inevitably involved a degree of duplication and inefficiency.
The amount claimed and the amount recovered in the proceeding
[47] The plaintiff’s recovery fell short of her expectations. She amended her claim before the trial to over $9 million, but the jury awarded her $1,040,000.
[48] The defendants emphasize that the plaintiff consistently offered to settle for amounts exceeding their policy limits, yet ultimately obtained an award within these limits.
The apportionment of liability and admission of liability
[49] The defendants admitted liability. The plaintiff argues that the defendants did not admit liability until March 24, 2024 which was conduct that increased the costs of the action. I am not persuaded by this submission. In an email dated August 26, 2022, counsel for the plaintiff noted that liability was not an issue. The defendants also note that liability was not contested in their mediation and pre-trial briefs.
[50] I agree that this factor does not have any impact on the assessment of costs.
The complexity of the proceeding
[51] This case was of medium complexity. It was a civil jury trial that was completed in under four weeks. While there were multiple experts involved, the factual and legal issues were not overly complicated.
The importance of the issues
[52] The Court recognizes that the issue at trial, namely the assessment of the plaintiff’s damages, was of significant importance to both parties.
[53] For the plaintiff, this was her only opportunity to recover damages resulting from the accident. The jury awarded her damages for loss of income, which was not otherwise compensated by the SABs settlement.
[54] The issues were equally important for the defendants. The plaintiff did not agree to limit her claim to the defendants’ policy limits, exposing them to a significant claim that, if successful, could have resulted in their financial ruin.
[55] Both parties were justified in investing considerable time and effort in pursuing their claims and defences.
Conduct of the Parties That Affected the Duration of the Proceeding
[56] The plaintiff contends that the defendants’ failure to provide a clear list of witnesses required her counsel to prepare for cross-examinations of witnesses who were not ultimately called. While this may have increased the plaintiff’s costs, it did not lengthen the duration of the trial. It is also normal for the defence to assess which witnesses to call based on the plaintiff’s evidence.
[57] The plaintiff also argues that the defendants threatened various motions that were never brought, requiring her counsel to prepare needlessly. The defendants respond that the plaintiff should have waited until the motions were actually brought before preparing submissions. Again, this conduct did not lengthen the trial, and preparing for potential motions is part of standard trial preparation.
[58] The defendants argue that the plaintiff took an unreasonable view of her damages, insisting that they personally pay for damages beyond their policy limits. They claim this bad faith behavior should not be rewarded.
[59] I cannot conclude that the plaintiff acted in bad faith. The amounts claimed were consistent with the expert reports she obtained. The fact that the jury did not accept portions of the evidence presented on her behalf does not indicate bad faith.
[60] The defendants also highlight various incidents during the trial, such as improperly mentioning certain matters to the jury that resulted in jury instructions. In my view, these issues are best characterized as mistakes that can occur during the heat of trial and do not constitute evidence of bad faith or misconduct warranting a costs sanction.
Offers to Settle Not Meeting the Requirements of Rule 49.
[61] Rule 49.13 calls for a holistic approach to determining costs, considering any offers to settle, even if they do not meet the formal requirements of Rule 49, where appropriate to do justice between the parties.[^9]
[62] The defendants made an offer closer to the jury award than the amount claimed by the plaintiff at trial. However, I also note that the jury award exceeded the defendants’ offer by $102,224.85. Given this discrepancy, the plaintiff was justified in taking the matter to trial.
[63] In Macini Associates LLP v. Perpetual Income Producing Enterprises Inc.[^10], Justice Diamond, discussing the principles of fairness, reasonableness, and proportionality, quoted Justice Emery, who stated, “Proportionality should not automatically serve to reduce the costs to which a plaintiff is entitled simply because the amount claimed is excessive in relation to the damages awarded”.
[64] The plaintiff's claims were determined to be valid, and the jury award exceeded the defendants’ offer. I decline to reduce the costs based on principles of proportionality.
The amount that an unsuccessful party could reasonably expect to pay
[65] Considering all the factors above, I conclude that an award of $275,000 for fees and $100,000 for disbursements is fair and reasonable in the circumstances.
[66] In reaching this figure, the court considered the following:
a. the action was ongoing for 9.5 years; b. the parties participated in two mediations and a pre-trial; c. there were multiple timekeepers on this file; d. the plaintiff incurred legal fees to obtain a SABS settlement that was highly advantageous to the defendant; e. the trial lasted under four weeks; f. the plaintiff was represented by competent and diligent counsel, whose submissions greatly assisted the Court; and g. the plaintiff obtained an award that exceeded the defendants' offer by $102,224.85.
Disposition
[67] I order the defendants to pay the plaintiff (a) $275,000 in costs of this action on a partial indemnity basis, inclusive of HST; (b) $30,000 as a contribution to the plaintiff’s costs of the LAT proceedings, inclusive of HST; and (c) $100,000 for disbursements, inclusive of HST.
A. Kaufman J.
Date: August 14, 2024
[^1]: 2018 ONCA 903 [^2]: Davies v. The Corporation of the Municipality of Clarington et al., 2019 ONSC 2292. [^3]: Rules of Civil Procedure, R.R.O. 1990 Reg. 194. [^4]: Elbakhiet v. Palmer, 2014 CarswellOnt 9411, 2014 ONCA 544, at para 30. [^5]: R.S.O. 1990, c.C.43. [^6]: Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC (2005), 2005 1042 (ON CA), 75 O.R. (3d) 638 (Ont. C.A.), and Andersen v. St. Jude Medical Inc. (2006), 2006 85158 (ON SCDC), 264 D.L.R. (4th) 557 (Ont. Div. Ct.). [^7]: Boucher v. Public Accountants Council (Ontario), 2004 14579 (ON CA), [2004] O.J. No. 2634 (Ont. C.A.), at paragraph 26, and Zesta Engineering Ltd. v. Cloutier, 2002 25577 (ON CA), [2002] O.J. No. 4495 (Ont. C.A.), at paragraph 4. [^8]: D’Antonio v. Monaco, 2013 ONSC 6157, at para 15. [^9]: König v. Hobza, 2015 ONCA 88, at para 35. [^10]: Macini Associates LLP v. Perpetual Income Producing Enterprises Inc. (2016), 2016 ONSC 2959 at para 6.