In Dennie v. Hamilton, the defendants’ solicitor probably thought that the trial had gone pretty well (see our previous post about this case). In this MVA action, the plaintiff had claimed damages of about $1 million. At the end of an 11-day jury trial, in closing argument, counsel for the plaintiff asked the jury to award damages totalling about $405,000. The jury came back with an award of only $40,000; after applying the Insurance Act deductible, that sum was reduced to $25,000.
And it got even better! The trial judge then allowed a threshold motion brought by the defence. That eliminated the general damages award, leaving only $20,000 for loss of housekeeping capacity.
But the victory became somewhat Pyrrhic when the trial judge, Mr. Justice William L. Whalen, had to fix costs. He awarded the plaintiff costs of (gulp!) $106,255.12. How did this happen?
Prior to trial, both sides had made offers to settle. The plaintiff had offered to accept $95,000 (net of the Insurance Act deductible), plus costs. The defendants had offered $15,000 (net) plus interest and “costs at 15%, plus taxable disbursements and G.S.T. or costs as otherwise agreed”.
The defence argued that its offer had been within dollars of the plaintiff’s eventual recovery. By comparison, the plaintff’s offer had been so high that, far from promoting settlement, it merely ensured that the case would have to be tried. The defendant’s solicitor asked that the trial judge award costs to the plaintiff up to the date of her offer, on a partial indemnity basis, and thereafter to the defendants on the same basis. To do so, it was argued, was in keeping with the philosophy of Rule 49.
Justice Whalen did not agree. He began by citing the Court of Appeal’s ruling in Rider v. Dydyk, where the Court held that, in deciding the issue of costs, courts are not to take into account the Insurance Act deductibles.
But then, he went further and applied the same principle to the threshold defence:
I conclude that the principle of comparing offers and trial results without applying Insurance Act deductions applies equally to the consideration of threshold questions. It would be inconsistent to take some aspects of the operation of the Insurance Act on damage assessments into account while ignoring others. In my view, the same policy considerations apply, so that the result should be considered for the purpose of determining entitlement to costs without the effect of deductions or threshold findings. To do so would not undermine the objectives of the Insurance Act or Rule 49.
(Readers of this blawg will have seen another recent post about the decision of Justice Raymond Harris in Ksiazek v. Newport Leasing Limited. There, it was held that statutory accident benefits received by a plaintiff prior to trial are also not to be taken into account for purposes of costs. The next thing that we can expect to see is that courts will ignore the fact that under the Insurance Act, pre-trial income loss is limited to 80% of income, net of income tax, CPP, EI, etc. It will soon be argued that damages awarded for pre-trial income loss should be grossed back up to 100% for purposes of fixing costs. While we’re at it, although there was no claim for health care expenses in this case, that was probably because, at the time, the Insurance Act required that a plaintiff’s impairment be “catastrophic” before being eligible for such damages. When fixing costs, why not add back in the damages that notionally would have been awarded if the plaintiff had not had to meet the “catastrophic” requirement?)
To return to the present case, even though Justice Whalen had allowed the defendants’ threshold motion, disentitling the plaintiff to any non-pecuniary general damages, he added the general damages back in for purposes of fixing costs. Comparing the notional recovery of $40,000 with the defence offer of $15,000, he concluded that the plaintiff’s recovery exceeded the offer.
His Honour then held that the defence offer was, in any event, too uncertain to qualify as a Rule 49 offer. As noted above, the offer had been for “costs at 15%, plus taxable disbursements and G.S.T. or costs as otherwise agreed”. But, said Whalen J., “15% of what–of $15,000, or of the plaintiff’s assessed costs? In my view, this part of the defendants’ offer is uncertain, and is therefore ineffective as an offer under Rule 49.”
As well as the trial itself had gone for the defence, the costs issue just kept going from bad to worse. The defence argued that if the plaintiff were to receive any costs at all, she should be penalized because her recovery fell within the jurisdiction of either Small Claims Court or simplied procedure. His Honour ruled (rightly) that the recovery for the plaintiff had been greater than the $10,000 Small Claims Court limit. Turning to simplified procedure, even though the award (no matter how it was looked at) was less than the $50,000 limit under Rule 76, he was not prepared to apply Rule 76.13 and deprive the plaintiff of costs. He said that it had been reasonable for her to commence and continue the action under ordinary procedure. (In fact, Justice Whalen went so far as to say that if the plaintiff’s solicitor had brought the claim under Rule 76, “he probably would have been professionally negligent”!)
Having decided that the plaintiff would recover costs, the only remaining question was, how much? Justice Whalen noted that “the defendants are really a large insurance company with enormously greater means and experience in these types of matters than the very modestly employed plaintiff.”
Overall, he felt that the time spent by the plaintiffs’ solicitors was reasonable. The only factor that seems to have weighed somewhat against the plaintiff was that “settlement did not seem to be of great concern to [her] until she delivered her offer of September 21, 2006. Soft tissue and psychological injuries are high risk questions at any time in a court room, particularly where a jury is involved. The plaintiff should have recognized this risk at an early stage and placed greater emphasis on settlement short of trial as a solution. This bears negative impact on costs.” This evidently prompted Justice Whalen to reduce somewhat the hourly rates claimed on behalf of the plaintiff.
In the end, His Honour reduced the costs claimed on behalf of the plaintiff from $135,337.85 to $106,255.12.
In light of this decision, along with Rider and Ksiazek supra, it is difficult to see how defendants in motor vehicle actions can possibly use Rule 49 to encourage settlement of claims. To make an offer to settle that creates any risk at all for a plaintiff, a defendant would have to offer an amount tens of thousands (possibly even hundreds of thousands, if Ksiazek was correctly decided) dollars more than the plaintiff would receive at trial, assuming that the defendant has assessed the claim with perfect accuracy.