Court Rejects Discretionary Costs Premium and Reimbursement for “Carrying Costs” of Unpaid Fees and Disbursements

In Marcoccia v. Ford Credit Canada Limited, Mr. Justice Patrick Moore has written the latest chapter in one of Canada’s largest personal injury cases. In the course of doing so, he has made some instructive points about determining costs as between litigants.

This decision dealt with the costs payable by the defendant Ford Credit Canada Limited to the plaintiff, Robert Marcoccia. His Honour awarded costs totalling $892,464.44, inclusive of fees (partial and substantial indemnity), disbursements and GST. The plaintiff had sought $1,459,489.00 while the defendant had proposed a figure of $438,178.93. Thus, the award was about 61% of what the plaintiff had requested.

Justice Moore disallowed entirely a “discretionary costs premium” and an amount to compensate for the carrying costs of unpaid fees and disbursements over the life of the case. The plaintiff had sought a total of $556,458 for these two items. 

He also made it clear that a defendant arguing that the plaintiff’s costs exceed what the defendant could reasonably expect should be prepared to lead evidence of its expectations, including evidence as to its own legal fees and disbursements.

The Accident and Previous Proceedings

The action arose out of a motor vehicle accident that took place on June 8, 2000. The plaintiff, Robert Marcoccia was turning left at an intersection and his car was struck by a vehicle that was driving straight through. Robert, who had just turned 20, suffered a catastrophic brain injury. At trial before a jury and Justice Moore, liability was apportioned 61% to the defendant driver and 39% to the other driver.

The driver had had liability insurance with limits of $1 million. A partial settlement of the case was reached on October 11, 2003, which saw the liability limits of the defendant’s primary insurance policy being paid to the plaintiff and a settlement reached with respect to the plaintiff’s costs to that date. The partial settlement required court approval and was the subject of an earlier posting on our blawg. That decision was the first of a series of recent cases in which judges have criticized the sufficiency of the material placed before the court to enable it to approve the settlement (see also our posts about Rivera v. Leblond and Lau v. Bloomfield.

After the partial settlement, the insurer of the lessor of the vehicle (Ford Credit Canada Ltd.) assumed the defence of the action.

Result of Trial

The jury and Justice Moore assessed the plaintiff’s damages at $16,915,998. When reduced for contributory negligence, the net damages were $10,366.529.98.

Prior to the trial, the plaintiff had made an offer to settle which appears to have been for $4 million. The offer remained open during the trial but was ultimately withdrawn.

The defendant made an offer of $1.25 million all-inclusive during the trial. 

It was conceded on the costs hearing that the plaintiff was entitled to partial indemnity costs from October 12, 2006 to January 5, 2007 and substantial indemnity costs thereafter. 

Previous Ruling on Contingency Fee

At an earlier hearing, Ford Credit sought a ruling granting it status to participate in the hearing to approve the contingency fee that the plaintiff’s solicitor proposed to charge. Justice Moore refused to grant status to Ford Credit. He said: “Ford seeks to entwine the two obligations together but the fact that some of the latter may ultimately be funded by money paid by Ford to satisfy the judgment is not sufficient to persuade this court that Ford should be considered a necessary or proper party entitled to make submissions at any hearing into fee and disbursements issues between the plaintiff and his counsel.”

It appears that Justice Moore finally approved the contingency fee proposed by the plaintiff’s solicitor, but we do not know the particulars of that ruling. 

Costs Ruling

In the most decision, Justice Moore was fixing the partial indemnity and substantial indemnity costs payable by Ford Credit. He allowed them in full. He fixed the partial and substantial indemnity costs at close to the same amounts sought by the plaintiff. (In fact, his figure for substantial indemnity costs—$600,000—was slightly higher than the amount that the plaintiff had claimed.) The total partial and substantial indemnity award was only about $3,000 less than the amount requested by the plaintiff.

Defendant’s Expectations

One basis on which the defendant had challenged the plaintiff’s costs figures was that those figures surpassed what the defendant could reasonably expect to pay. Justice Moore said:

In addressing the extent to which the plaintiff’s claims exceed the reasonable expectations of the defendant, I am struck by the fact that the defendant has not tendered any evidence of what expectations it held from time to time as the trial date approached and/or as the trial unfolded.

He noted that the defence had had three lawyers gowned at the trial and that counsel for the defence had elected not to introduce evidence of the defendant’s own legal fees: “I must conclude that the defendant invested heavily in the trial of this action and will not be taken aback by the fact that the plaintiff did likewise.”


An interesting aspect of this decision is the court’s treatment of the plaintiff’s request for a “premium”. In the wake of Walker v. Ritchie, the case in which the Supreme Court of Canada held that risk premiums cannot be charged, counsel for the plaintiff Marcoccia did not seek a “risk premium”. Instead, she asked the court to award a “discretionary costs” premium. Counsel for the plaintiff argued that the Supreme Court “had not specifically ruled out a premium of any kind being added to costs payable by a defendant, only a risk premium”. This was characterized as a premium to recognize, by way of increased costs, various factors enumerated in Rule 57.01.

In this case, the “discretionary costs” premium requested was $350,000.

However, Justice Moore held that the Walker decision applied equally to premiums based on factors other than risk:

[62] Having considered the factors listed in Rule 57.01 and having set aside factors not listed in that rule, the exercise is complete. It is not appropriate, in my view, to then add on a costs premium driven by a re-consideration of factors enumerated within Rule 57.01. In the words of Rothstein J. in Walker, supra (at para. 36):

Compensating for these factors again through the addition of a risk premium arguably constitutes a double count in the costs award against the unsuccessful defendant.

[63] In my view, the logic applies equally where, as is here the case, the plaintiff seeks any premium, not only a risk premium, in addition to the costs fixed and awarded against the unsuccessful defendant.

He considered Justice Denis Power’s decision in Ward v. Manulife, where a premium was awarded after the Walker case.
(The Ward case was appealed and the premium was one of the grounds argued by the defendant. The appeal was argued in the fall and a decision is pending.) Justice Moore distinguished the ruling in Ward on the basis that Power J. had found misconduct on the part of the defendant Manulife and that there was no evidence in the present case “suggesting, let alone establishing, that the defendant acted inappropriately at any time during the many years that this case was ongoing.”

Carrying Costs

Finally, counsel for the plaintiff also sought an (upwards) adjustment of the costs to take into account the fact that she had carried unbilled fees and disbursements on her books for a number of years. The adjustment requested was $206,458.

Justice Moore said that “this is an interesting and novel claim, especially as it is one made in submissions that assert that the business arrangements between the plaintiff and his own lawyer are not relevant to the entitlement of the plaintiff to, or the amount of, costs payable by a defendant.”

His Honour held that compensation for “carrying costs” was merely another way of asking for a risk premium and he refused to make any award on this account.

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