No “Risk Premiums” Even With Advent of “Full Indemnity” Costs

In Reaume v. Unifund Assurance, Justice Edward R. Browne was asked to consider the issue of “risk premiums” in an award of costs. Regular readers will recall that the Supreme Court of Canada said, in Ritchie v. Walker, that risk premiums could not be awarded under the regime of costs then existing in Ontario. Subsequently, Rule 57.01(4) of the Rules of Civil Procedure was amended to permit a court to order costs on a “full indemnity” basis. Mr. Justice Denis J. Power held, in Ward v. ManuLife, that risk premiums can now be awarded.

(ManuLife’s appeal of Justice Power’s ruling in Ward was argued over two days in the Court of Appeal a couple of weeks ago. Costs was only one small part of the appeal, but presumably, we will hear from the Court of Appeal on this subject in due course.)

Justice Browne came to a different conclusion than had Power J.; he held that risk premiums are still unavailable, even under the “full indemnity” regime.

The action was one arising out of a motor vehicle accident, in which there had been a fatality and some serious injuries. None of the survivors could remember how the accident had occurred and there were no witnesses. A police officer who had undertaken an accident reconstruction concluded that impact had been in the westbound lane; another officer later expressed an opinion, that the collision had taken place in the eastbound lane. Justice Browne acknowledged that the case was a very risky one for plaintiffs’ counsel, as the plaintiffs were impecunious and the case “was close to proving that a ghost unidentified vehicle driven negligently was not a ghost at all”. He said, the “the risk of proving the case was enormous. The importance of the issue was very close to that of a ‘winner take all’.”

At trial, the jury found that the accident had been caused by an unidentified vehicle, with a small amount of contributory negligence on the part of the plaintiff. The judgment was for $765,000 (although in several places in the reasons, Justice Browne refers to the judgment having been for $675,000). Prior to trial, the plaintiffs had offered to settle for $600,000. Because they had beaten their offer, the plaintiffs sought costs on a full indemnity basis, totalling more than $675,000.

Justice Browne rejected this submission. He felt that it would be unreasonable to award costs in an amount exceeding that of the judgment (although, as noted above, there seems to have been some confusion about just what the amount of the judgment was). Instead, he awarded partial indemnity costs, reduced by 15 percent, to the date of the offer and substantial indemnity costs thereafter.

On the issue of risk premium, His Honour considered himself bound by Ritchie v. Walker, notwithstanding the amendments to Rule 57:

In an overview, the result of a claim against an unsuccessful defendant for a risk premium for financial risk is, in effect, a separate head of damages as opposed to costs which an unsuccessful defendant would reasonably be expected to pay. I agree with and regard Walker v. Ritchie, as binding notwithstanding the recent changes to the Ontario scheme as in the Rules of Practice quoted. In the result, there will be no premium allowed or no special award made.

Unfortunately, no reference was made to Justice Power’s reasons in Ward.

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