The ruling of Madam Justice Alison Harvison Young in Bonaiuto v. Pilot Insurance Company show how the disposition of costs can transform a favourable trial outcome into a Pyrrhic victory. The plaintiff sought damages of $22,424.00 from her insurer as a result of theft and damage to her car and its equipment. The insurer, Pilot Insurance Company, denied the claim, contending that it was fraudulent.
At trial, the jury found for the plaintiff but assessed damages at only $5,000. It rejected the plaintiff’s claim for punitive damages against the insurer.
The trial judge then had to deal with the issue of costs. Counsel for Pilot argued that the plaintiff should receive no costs because the award of damages was so low that the action ought to have been brought in Small Claims Court or under the Simplified Procedure. However, Justice Harvison Young rejected these submissions and awarded costs to the plaintiff on a substantial indemnity basis, in the amount of $75,932.23.
Her Honour was critical of Pilot for having made no offer to settle. She also noted that although Pilot had “vigorously” maintained its allegations of fraud on the part of the plaintiff, its evidence on this issue was “thin”.
While Rule 57.05(1) says that “if a plaintiff recovers an amount within the monetary jurisdiction of the Small Claims Court, the court may order that the plaintiff shall not recover any costs”, Justice Harvison Young stressed that this power is discretionary. (Subrule 76.13 contains similar provisions with respect to costs where the amount recovered in an action under ordinary procedure is less than the monetary limit for simplified procedure cases, which is what happened here.)
In the judge’s view, it was important to assess whether or not it was reasonable for the plaintiff to proceed to trial under the ordinary procedure and on this point, relied on a passage from the Court of Appeal’s decision in Garisto v. Wang, 2008 ONCA 389 (CanLII): “The reasonableness of the appellant’s decision to proceed under the ordinary procedure must be assessed on the basis of the facts as they existed before the jury’s verdict.”
Here, Her Honour held that it was reasonable for the plaintiff to proceed under the ordinary procedure (which, at that time, was for cases involving more than $50,000). As a result, she concluded that this was an appropriate case for an award of costs on a substantial indemnity basis. She fixed those costs at that amount claimed by the plaintiff, $75,932.23.
Two things strike us as noteworthy about this decision. First, in evaluating whether or not to apply the costs sanctions provided for in Rules 57 and 76, where the amount recovered falls below a certain level, it seems odd to consider “the facts as they existed before the jury’s verdict”. Taken to its logical conclusion, that approach should make the outcome of the trial irrelevant to this issue.
Secondly, the case of Garisto v. Wang, upon which Justice Harvison Young relied, was a personal injury action in which the plaintiff had marshalled “impressive expert medical evidence”. The Court of Appeal was satisfied that there had been a realistic chance of the damages exceeding the simplified procedure limit at the time.
In cases involving claims for general damages, there is an inherent uncertainty as to what the damages will be. Here though, the claim was a liquidated one for $22,424.00, well below the $50,000 cut-off. The damages for the claim under the policy could not have been higher than the amount claimed. Presumably, it was the claim for punitive damages that had allowed the action to be brought in ordinary procedure. Assuming that to be the case, we would have thought that in determining whether to apply the costs provisions of subrule 76.13 , the court would have had to evaluate the reasonableness of the claim for punitive damages, since the balance of the claim clearly would not have warranted an action under ordinary procedure. However, Justice Harvison Young’s reasons are silent on this point. She said only that “In my view, it was reasonable in these circumstances for the Plaintiff to proceed under the ordinary procedure”, without explaining what led her to that conclusion.