Divisional Court Slams Motions Judge’s Failure to Give Reasons

Posted on March 24, 2008 by Stephen Cavanagh

The Divisional Court strongly criticized another judge of the Superior Court, Mr. Justice James H. Clarke, for having dismissed a motion for leave to appeal in the following words: “Leave to appeal denied. Costs reserved to trial judge.”

In MCAP Service Corporation v. McLaren, the plaintiff MCAP had moved for partial summary judgment before Madam Justice Kendra D. Coats. Her Honour dismissed the motion (in reasons which can be found here). MCAP sought leave to appeal and its motion was heard by Justice Clarke on April 16, 2007. His Honour reserved his decision.

Almost six months later, MCAP’s counsel made inquiries of the court office and was advised that the case was still on reserve. The next day, the parties received a fax containing Justice Clarke’s brief endorsement, set out above, dismissing the motion.

The Divisional Court panel, composed of Justices Lee Ferrier, Peter Cumming and Joan Lax, was quite critical of Justice Clarke’s approach, saying:

[T]he failure to give reasons and the circumstances of this case, give rise to a real concern that Clarke J. failed to deal with the motion for leave on its merits. This is unacceptable.

Indeed, the effect is that Clarke J. declined jurisdiction.

Accordingly, the court directed that the motion for leave to appeal be reheard before another judge.

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Court Finds Six-year Limitation Period Applies Where Accident Caused by Truck’s Tailgate Mechanism

Posted on March 24, 2008 by Stephen Cavanagh

The decision in Longley v. General Motors of Canada will only be relevant for a few more years, but it might be important until then.

In this ruling by Mr. Justice Joseph R. Henderson, the issue was whether an action was prescribed by the two-year limitation period formerly set out in s. 206(1) of the Highway Traffic Act. (That provision has since been repealed and has been replaced by the general two-year limitation period found in the Limitations Act, 2002. However, the latter statute only came into force on January 1, 2004. The accident in this case occurred on May 23, 2001.)

The plaintiff had been injured while she was standing on the rear bumper of her GMC pickup truck in order to unpack the trunk. She claims that the tailgate mechanism malfunctioned, causing her to fall to the ground and injure her wrist.

She did not commence her action until February 8, 2006, about four and three-quarters years after the accident.

The defendants argued that the claim should be dismissed because it had not been brought within the two-year period provided for in s. 206(1) of the Highway Traffic Act. When it was in force, that section read as follows:

Subject to subsections (2) and (3), no proceeding shall be brought against a person for the recovery of damages occasioned by a motor vehicle after the expiration of two years from the time when the damages were sustained.

There were issues of discoverability argued in this case, but Justice Henderson found that the limitation period had begun to run no later than April 22, 2002. If s. 206(1) applied, the action was out of time. The key question became, therefore, whether the plaintiff’s claim was one “for damages occasioned by a motor vehicle”. His Honour held that it was not. This meant that the applicable limitation period was the six-year one contained in s. 45(1)(g) of the former Limitations Act.

(Although this was a motion for summary judgment brought on behalf of the defence, Justice Henderson not only dismissed the motion but proceeded to determine that the six-year limitation period applied.)

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Must Insurer Maintain “Firewall” Between Tort and No-Fault Claims?

Posted on March 24, 2008 by Stephen Cavanagh

In Trecartin v. Pilot Insurance Company, Mr. Justice George T. Valin considered the position of an insurer defending both a tort action and an accident benefits claim brought by the same plaintiff.

In the no-fault action, the insurer, Pilot Insurance, was seeking an order permitting it to conduct three independent medical examinations. Counsel for Pilot swore an affidavit in support of that motion. When she was cross-examined by the solicitor for the plaintiff, Pilot’s counsel refused to answer two questions. One of those was this one:

“…has a firewall been maintained from the outset of this case to the present and ongoing between the statutory accident benefits side of Pilot insurance file, including their solicitors, and the tort side of the file and the solicitors on the tort side?”

Pilot’s lawyer refused to answer that question on the ground that it was not relevant. In reliance on the Divisional Court decision in Worthington Trucking v. Klingbeil (1999), 43 O.R. (3d) 69, Pilot argued that it was not obliged to keep confidential information received in the accident benefits claim. In Worthington, the issue was whether the same law firm could represent an insurer in relation to claims for both accident benefits and tort damages. The Divisional Court held that there was nothing inappropriate about this, saying: “Where the plaintiffs rely on the statutory scheme set out in the Insurance Act to claim no-fault benefits from the defendant’s insurer, the insurer ought not, as a matter of course in a subsequent tort action by the plaintiffs, be required to retain separate solicitors for the no-fault claim and the defence of the tort action.” On this basis, counsel for the insurer in the Trecartin case argued that there was no obligation to maintain a “firewall” of confidentiality between the company’s tort and accident benefits files in relation to the plaintiff Trecartin. (Indeed, the evidence gleaned from the cross-examination of Pilot’s counsel made it clear that a fair bit of information had been exchanged between the solicitors acting on the tort and accident benefits files.)

However, counsel for Trecartin argued the 2007 Divisional Court decision in Kitchenham v. AXA Insurance Canada, a case that we discussed in a posting last year. There, the court held that the “deemed undertaking rule” prevented disclosure, in an accident benefits action, of surveillance and an IME obtained in an earlier tort claim that had been settled.

Justice Valin noted that the court in Worthington v. Klingbeil had not considered either the common-law “implied undertaking” rule or the “deemed undertaking” provisions of rule 30.1.01(3). He apparently distinguished the case on that basis. However, it is not clear that the rationale of that decision was applicable here. It does not appear that any “confidential” information received by Pilot had come to it through the discovery process. Rather, the source of the information was more likely to have been either Pilot itself (e.g., surveillance) or the plaintiff (e.g., claims forms required to be completed for accident benefits).

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Divisional Court Orders New Trial After “Offensive” Jury Address of Defence Counsel

Posted on March 4, 2008 by Stephen Cavanagh

Tea.jpg 

In Abdallah v. Snopek, the Divisional Court, by a margin of 2-1, ordered a new trial of a personal injury action arising out of a motor vehicle accident. The decision opened with the often-quoted words, “[a] jury trial is a fight and not an afternoon tea”.

The action had been tried by Justice Alan Whitten and a jury in May, 2006. The plaintiff claimed to have been injured in a rear-end collision in 2001 and to have suffered chronic pain as a result. Liability was admitted but the defendants denied that the plaintiff was entitled to damages.

The jury concluded that the plaintiff had not sustained any injury and assessed his damages at zero. The trial judge, on the other hand, ruled that the plaintiff had met the Insurance Act threshold.

The reasons of the Divisional Court say that Whitten J. “ruled that [the plaintiff] had sustained ‘a permanent and serious impairment of an important bodily function’, thereby meeting the threshold.” However, for a 2001 accident, in non-fatal cases, the wording of the threshold is:

(a) permanent serious disfigurement; or

(b) permanent serious impairment of an important physical, mental or psychological function.

The phrase, “bodily function” does not appear in the Bill 59 threshold. This error seems to have crept into Whitten J.’s reasons as a result of his having referred to pre-Bill 59 cases, decided at a time when “bodily function” was part of the threshold. In fact, Justice Whitten actually stated correctly the current threshold wording in the first part of his reasons.

In any event, following the jury decision, the plaintiff appealed the dismissal of his action. He objected to a portion of the jury address of defence counsel. The full text of the offending portion of the address is set out in the reasons of the Divisional Court, but the court summarized the tenor of the remarks this way:

In his closing address to the jury, defence counsel referred to the fact that Mr. Abdallah is an immigrant to Canada, accused him of taking unfair advantage of Canada’s social welfare system, and suggested that he was seizing on the car accident to collect an award that he would use to start his own business, perhaps not even in this country. Defence counsel then urged the jury to give Mr. Abdallah nothing.

The majority of the Divisional Court (Justices Molloy and Lane) left little doubt as to what they thought of this part of the defence address. They characterized it as “offensive”, “irrelevant”, “inflammatory”, “inappropriate”, “not rooted in the evidence”, “prejudicial”, “incorrect in law” and “completely improper”.

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Master MacLeod Proposes Guidelines for Solicitors’ Affidavits

Posted on March 2, 2008 by Stephen Cavanagh

In Mapletoft v. Service, Case Management Master Calum MacLeod decided a motion for summary judgment in a motor vehicle case. The defendant argued that the action had been commenced after the expiry of the limitation period. Our office opposed the motion, acting on behalf of the insurer of the plaintiff’s former solicitor. The principal issue was whether the “discoverability principle” created a genuine issue for trial, such that summary judgment should not be granted. The Master accepted our argument and dismissed the motion.

In the course of his reasons, Master MacLeod made some observations that are of more general application to motion practice and particularly, motions for summary judgment under Rule 20.

The defendant’s motion was supported by an affidavit from a partner of the lawyer who argued the motion. Objection was taken to the admissibility of the affidavit, on two bases: (1) that it was inappropriate for the defendant to rely upon an “information and belief” affidavit, where the source of the information was the solicitor who was arguing the motion; and (2) the defendant could not introduce medical evidence by simply attaching reports to a solicitor’s affidavit.

Solicitors’ affidavits

On the first issue, the Master concluded that the solicitor’s affidavit dealt largely with non-contentious issues, with the exception of one paragraph, which he struck out. However, in his reasons, he discussed this whole area of the law, with a view to developing some guidelines.

Master MacLeod reviewed the law with respect to the general rule against a lawyer being both counsel and witness. He noted that the rule is not absolute, but that when counsel gives evidence at trial without being removed from the record, it is “always with the specific approval of the trial judge in unusual circumstances”.

In this case, although the deponent of the affidavit said that he had been informed by counsel arguing the motion, the Master found that, with the exception of one paragraph, the affidavit could have been drawn solely from a review of the file and that therefore, the breach of the rule against counsel being a witness was really a technical one. As noted above, the Master struck out the offending paragraph of the affidavit.

Guidelines

Master MacLeod proposed three guidelines to assist counsel in the future. These are reproduced in full below, as we anticipate that they will be quite influential in future litigation:

  1. A partner or associate lawyer or a member of the clerical staff may swear an affidavit identifying productions, answers to undertakings or answers given on discovery. These are simple matters of record, part of the discovery and admissible on a motion pursuant to Rule 39.04. Strictly speaking an affidavit may not be necessary but it may be convenient for the purpose of organizing and identifying the key portions of the evidence. Used in this way, the affidavit would be non-contentious.
  2. If it is necessary to rely on the information or belief of counsel with carriage of the file, it is preferable for counsel to swear the affidavit and have other counsel argue the motion. This approach will not be appropriate for highly contentious issues that may form part of the evidence at trial. If the evidence of counsel becomes necessary for trial on a contentious issue, it may be necessary for the client to retain another law firm.
  3. Unless the evidence of a lawyer is being tendered as expert testimony on the motion, it is not appropriate for an affidavit to contain legal opinions or argument. Those should be reserved for the factum.

Introduction of medical reports

The Master rejected our argument, that medical reports cannot properly be introduced into evidence by attaching them as exhibits to a solicitor’s affidavit, at least not without complying with Rule 39.01(4) (“An affidavit for use on a motion may contain statements of the deponent’s information and belief, if the source of the information and the fact of the belief are specified in the affidavit.”) We had relied on the 1996 case of Golding v. Phillip, where it was held that doctors’ reports and medical records may be admitted into evidence by filing an affidavit in compliance with Rule 39.01(4) of the Rules of Civil Procedure or, in accordance with ss. 35 and 52 of the Evidence Act.

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Power J. Rejects Insurer’s Constitutional Challenge to Court’s Power to Dismiss Civil Juries

Posted on March 2, 2008 by Stephen Cavanagh

In Legroulx v. Pitre, Mr. Justice Denis Power had to consider whether Rule 47.07 of the Rules of Civil Procedure, which permits a court to strike a jury notice on the ground that the action ought to be tried without a jury, contravenes the Canadian Charter of Rights and Freedoms. He held that it does not. In reaching his conclusion, he held that “judges are people who are skilled and experienced in deciding cases” and that “deciding cases is their business”.

This was a personal injury action action arising out of a 2000 car accident. The trial began before Justice Power and a jury. Counsel for the plaintiffs moved, at the opening of trial, for the jury to be discharged because of the complexity of the case. In particular, causation was a major and difficult issue in the case. Justice Power dismissed the motion, but without prejudice to the right of the plaintiffs to renew it later in the trial.

After some medical experts had testified, counsel for the plaintiffs did renew his motion. This time, Justice Power granted it and discharged the jury. He had been observing the jurors and had concluded that some of them were “having difficulty with the evidence”.

The trial continued. Eventually though, Power J. was advised that a “conditional settlement” had been reached between the parties. The condition was that His Honour make an order under Rule 22.01(2) of the Rules of Civil Procedure, for the determination of a constitutional question about the validity of Rules 47.02(2) and (3), which empower a judge to dismiss a jury. Justice Power agreed to make such an order.

Accordingly, the trial itself came to an end, but the constitutional question was argued last September. (This was a peculiar situtation; trial counsel for the plaintiffs did not appear on the motion. Instead, a new firm was engaged to argue the constitutional question. Although the Attorney-General was invited to participate in the motion, the invitation was not taken up. Counsel for the Ontario Trial Lawyers’ Association and the Advocates’ Society did make submissions though.)

Justice Power rejected the submission of counsel for the Advocates’ Society, that the motion should be dismissed on the ground that the issue was moot. He pointed out that the settlement had been expressly predicated on the Rule 22 motion proceeding. He accepted that the settlement would not have occurred had he refused to order that the constitutional question be argued.

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C.A. Rejects Insurer’s Interpretation of “Anti-concurrent causation” clause

Posted on March 2, 2008 by Stephen Cavanagh

Addendum: On July 31, 2008, the Supreme Court of Canada refused leave to appeal from the decision of the Court of Appeal that was discussed in this post.

In Appin Realty Corporation Limited v. Economical Mutual Insurance Company, the Court of Appeal upheld the decision of Mr. Justice Stanley Kershman, which was the subject of an earlier post on this site. Our firm acted for the successful respondent, Appin Realty. The case dealt with an “anti-concurrent causation” clause in a CGL policy and with the appointment of the insured’s counsel to defend the underlying lawsuit, notwithstanding the coverage dispute.

In an action against Appin, a former caretaker of a building owned by it alleged that he had been made ill by mould or bacteria in his unit. Appin’s liability insurance policy with Economical Mutual contained an exclusion for “fungi and fungal derivatives”. That exclusion specifically referred to mould but did not mention bacteria. Justice Kershman had found that because it was possible that at trial, the plaintiff’s injuries might be found to have been caused solely by the non-excluded cause of bacteria, Economical owed Appin a duty to defend the action.

Economical relied heavily on an “anti-concurrent causation” clause in its policy. It argued that that wording meant that the “fungi and fungal derivatives” exclusion applies “whenever mould is alleged to or in fact does contribute to a loss”.

The anti-concurrent causation clause read as follows:

This exclusion applies regardless of the cause of the loss or damage, other causes of the injury, damage, expense or costs or whether other causes acted concurrently or in any sequence to produce the injury, damage, expenses or costs.

The Court of Appeal described the insurer’s argument this way:

According to the insurer, the effect of that language was to absolve the insurer of a duty to defend in any case where bodily injury from mould is alleged, even if combined with other causes of bodily injury, such as bacteria. The insurer further submitted that the effect of the clause is that the duty to defend is narrower than the duty to indemnify. In this regard, the insurer submitted that if, after a trial, it were found that the injury was caused solely by bacteria, the insurer would have a duty to indemnify the insured, even though it had not been obliged to defend the action on the insured’s behalf.

The court held that the meaning of the clause was ambiguous. In the course of the argument of the appeal, the panel (Justices John Laskin, Michael Moldaver and Kathryn Feldman) took Economical’s counsel to task about the language that the insurer had used (although making it clear that they were not being critical at all of the counsel arguing on behalf of the insurer). Justice Laskin in particular observed that, “if the three of us can’t understand what this provision is supposed to mean, how does your client expect an insured to understand it?”

The court rejected the insurer’s argument, that by virtue of the anti-concurrent causation clause, the duty to defend had been made narrower than the duty to indemnify. This position “stands on its head the general proposition that the duty to defend is broader than the duty to indemnify”.

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Plaintiff Severely Injured in Two Accidents Can’t Recover Aggregate Non-pecuniary Damages in Excess of S.C.C. “Cap”

Posted on March 2, 2008 by Stephen Cavanagh

Broadbent v. Greater Toronto Transit Authority is another case involving a plaintiff injured in multiple accidents. Mr. Justice Moore had to deal with several interesting issues. He discussed the appropriate way to approach the assessment of damages in cases involving multiple accidents. He also concluded that a plaintiff cannot recover non-pecuniary general damages in excess of the Supreme Court of Canada’s “cap” (about $312,000), no matter how many times the plaintiff is injured.

(This January 15, 2008 decision was formerly posted on CanLII’s website as 2008 CanLII 1418 (ON S.C.), but for some reason, it has since been removed from the site. As a result, we are unable to link to the reasons of Justice Moore.)

The plaintiff had been involved in motor vehicle accidents in 1998 and 2001. It was conceded that the plaintiff had suffered significant brain injuries in both accidents. She also had various orthopædic injuries.

In both accidents, the plaintiff had been a passenger in a car.

The plaintiff had brought two separate actions. According to Moore J., the damages allegations in the two statements of claim were quite similar. The action relating to the second accident had proceeded to trial before Justice Moore and a jury. The earlier action (referred to in the reasons as, “the companion action”) had been settled but the settlement had not yet received court approval.

At the trial of the second action, Justice Moore learned, for the first time, that there had been a case management order made, requiring that the two actions be tried together. Because of the tentative settlement, no trial record had been passed in relation to the first action.

On the fifth day of the trial of the second action, Justice Moore directed that there be a voir dire “to receive and consider evidence touching upon the question of whether the injured plaintiff’s damages must be globally assessed and apportioned between two outstanding actions”.

It was made clear to His Honour, that the defendant in the second action intended to argue that to a considerable extent, the plaintiff’s current problems were attributable to the 1998 accident and were not the responsibility of the defendants in the second action.

The plaintiff, on the other hand, contended that if the jury were satisfied that the plaintiff’s present condition had resulted from the cumulative effect of the two accidents, she would be entitled to receive full compensation from the defendants in the second action, provided that it could be shown that that accident had “materially contributed” to the plaintiff’s condition.

Justice Moore reviewed in some detail the contents of counsels’ opening statements, as well as some of the evidence that had been led at the trial, in order to determine the direction that the trial of the second action would likely take when tried to its conclusion. He was satisfied that the evidence would show that the injuries suffered by the plaintiff in the two accidents had been “strikingly similar”. It appears that there was no real dispute about this. The question was, what to do about it?

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Thunder Bay Judges Don’t Want to See Pyramids

Posted on January 21, 2008 by Stephen Cavanagh

Pyramids.jpg There’s something afoot among the judges in Thunder Bay. Madam Justice Helen Pierce and Mr. Justice George Smith, colleagues on the Superior Court in that city, have both released rulings in which they have complained about what they call “pyramid billing”. This apparently refers to the practice of “hiving off” (to use Justice Pierce’s expression) overhead expenses and charging them separately as fee items in order to “enhance” the hourly rate of the lawyer.

Justice Pierce’s remarks appeared in Beerthuizen et al v. West Arthur Place  while those of Justice Smith can be found in Paulin v. P.C.M. Collections Limited (Professional Collection Management).

Both decisions concerned awards of costs. In Beerthuizen, a personal injury action, a jury had dismissed the plaintiffs’ action in the fourth week of trial. Pierce J. agreed that the defendant was entitled to costs, but one component of the costs sought by the defendant was for the services of a law clerk. Justice Pierce observed:

There is no indication of her education, training or function in relation to the conduct of the litigation. A review of the dockets suggests that she performed secretarial functions such as making and receiving telephone calls, collating material and the like. Claims for her services at $85 per hour are disallowed.

Her Honour also disallowed some other expenses that the defence had claimed, including the cost of a “legal assistant” and a “litigation analyst”. She also disallowed disbursements for long distance charges, courier, facsimile, laser printing, postage and computerized legal research, on the basis that the tariff did not provide for them.

Speaking more generally, Pierce J. explained her concerns about “pyramid billing”: 

Except as authorized by the Rules of Civil Procedure or the jurisprudence, claims for a lawyer’s staff fall under his hourly rate which contemplates overhead. Overhead includes staff. Counsel ought not to enhance his true hourly rate by hiving off overhead costs and charging staff time separately This “pyramid technique” of claiming costs is not contemplated either by the rules or by the jurisprudence and can only serve to inflate a bill of costs beyond what is reasonable to recover from the opposing party.

The decision in Beerthuizen was dated January 8. Three days later, on January 11, Justice Smith released his reasons in Paulin. It was a much shorter trial (three days), this time won by the plaintiff. But Smith J.’s criticisms of “pyramid billing” bore a strong resemblance to his colleague’s comments in Beerthuizen. He said:

20]      Pyramid or cumulative billing of this nature is not uncommon. Prior to the inception of this practice Bills of Cost included only the time of the solicitor having carriage of the file. Secretarial costs and office overhead was subsumed in the solicitor’s hourly rate. Now it is frequently added to the Bill as either the work of a law clerk or as a disbursement.

[21]      This practice has increased the size of Bills of Cost to such a degree that I am often left wondering how any client of average means could possibly afford to litigate.

[22]      The effect of this practice has been to restrict access to justice to those possessing above average financial resources.

[23]      Before the cost regime was modified by the introduction of the costs grid, costs were dealt with quickly and modestly. Now, it is not uncommon to see large cost briefs involving hours of work that inevitably get charged to the client.

[24]      Costs have spiraled out of control. It is time for the courts to send a message to the Bar that no matter how much time is spent on a file, reasonable limits will be imposed by the courts. If law firms engage in cumulative or pyramid billing this is something that ultimately they will have to resolve and justify with their clients. The cost regime should not be viewed as a way to pass on to an unsuccessful litigant excessive charges.

[25]      Mr. Justice Killeen in Pagnotta v. Brown has this to say about escalating costs and proportionality:

                        From my perspective, if lawyers wish to expend such grossly inordinate amounts of billable hours on relatively routine cases, they may feel free to do so subject to their client’s approval, but they cannot expect judges to encourage such inefficient expenditures of time when their costs are to be fixed following trial. Judges and assessment officers have a duty to fix or assess costs at reasonable amounts and in this process they have a duty to make sure that the hours spent can be reasonably justified. The losing party is not to be treated as a money tree to be plucked willy nilly by the winner of the contest.                        

[26]      The Bill of Costs in the case at bar includes time for 9 individuals described as ‘Law Clerks’. The credentials of these individuals are unknown as is the nature of the work that each performed. The hourly rates for these individuals ranges from $20 to $90 per hour.

[27]      I am not prepared to accept any Bill of Costs that includes the time of a ‘law clerk’ unless precise details of the qualifications and work performed by that individual are provided. A ‘law clerk’ is not a person performing secretarial work. It is someone possessing the necessary training and qualifications and someone who has performed non-secretarial work on a file.

The comments of Pierce and Smith JJ. strongly suggest that counsel seeking to recover costs for time expended by law clerks should spend some time spelling out the qualifications of the clerk, as well as the nature of the work that he or she performed on the file.

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Court Declines to Award Substantial Indemnity Costs Where Successful Defendant Had Offered Dismissal Without Costs

Posted on January 21, 2008 by Stephen Cavanagh

In Crete v. Carleton Condominium Corporation #47, Madam Justice Giovanna Toscano Roccamo delivered very comprehensive costs reasons following a trial by jury in which the plaintiff’s action had been dismissed. The decision is instructive with respect to several aspects of the law of costs. In particular, Her Honour declined to award substantial indemnity costs to the defence, even though an offer to consent to a dismissal without costs had been made. Her reasons articulate her view as to the circumstances in which such an award can properly be made.

(Our post perhaps wanders a bit off-topic towards the end. Those determined enough to make it that far will find, under the heading, “Access to Justice”, some musings about the relationship between contingency fee agreements and risk.)

This was an occupier’s liability case. The 85 year old plaintiff fell and injured herself in the lobby of the condominium building in which she resided. At trial, the jury found that the defendants were not liable. It also assessed damages at $2,533.83.

It appears that both parties filed the costs outline contemplated by Rule 57.01(6) and Form 57B and the successful defendant filed a bill of costs (Form 57A). Both parties’ costs outlines evidently calculated costs on a partial indemnity and substantial indemnity basis.

Partial and Substantial Indemnity Rates

Her Honour was critical of the failure, on both sides, to detail in the outlines the “actual fees charged to the client as required by Form 57A”. She requested more information from both parties.

(Form 57B, the costs outline, is supposed to be given to every other party and brought to the hearing. So, it is prospective. It sets out what the party intends to ask for in costs, if successful. The form does contemplate that the party preparing the form set out the partial indemnity rate being sought and the “actual rate”, which is described as “the rate being charged to the client” for each person for whose time expenditure a claim is being made. Thus, while the form does not, in so many words, require that a party set out “the actual fees charged to the client”, parties are supposed to identify who provided services, how many hours are being claimed in relation to each timekeeper from the opposing party and at what rate. Presumably, the resulting product would indeed equal the actual fees charged.)

When provided with the additional information that she had requested from the parties, Justice Toscano Roccamo discovered that the rates charged by counsel for the defendant were less than the amount claimed by the defence for substantial indemnity costs and more closely approximated the partial indemnity rates claimed.

When counsel for the defendant provided a recalculated (and reduced) version of the various scales of costs, the amount claimed for partial indemnity costs still exceeded the actual fees when multiplied by 1.5. (Rule 1.03 defines “substantial indemnity costs” as “costs awarded in an amount that is 1.5 times what would otherwise be awarded in accordance with Part 1 of Tariff A”.)

Justice Toscano Roccamo said:

I accept the latest figures for the defendants’ actual fees at $127,195 and substantial indemnity fees at $114,485.70 as the benchmarks against which to determine a partial indemnity fees. Substantial indemnity costs may be set at 1.5 times the partial indemnity costs claimed, but must have regard to the factors set out in Rule 57.01(1), including appropriate indemnity under Rule 57.01(1)(o.a.) in circumstances where counsel is subject to a fee arrangement with a client. In the circumstances of this case, I adopt the reasoning in Mantella v. Mantella, [2006] O.J. No. 2085 noting the actual amount charged to a client limits what may be claimed for partial indemnity fees, not the substantial indemnity costs. Therefore, I fix an appropriate gross partial indemnity fee to the defence in this matter at $82,400.48.

The passage from Mantella to which Toscano Roccamo J. was referring is (we think) this one:

In this case, because of the rates at which counsel undertook Ms. Murray’s defence, there is little difference between partial indemnity and full recovery costs. The actual fees charged by counsel are not the starting point of a costs analysis. Costs are an indemnity, and thus may not exceed the client’s total liability to her solicitor; the client may not gain a windfall as a result of a costs award. However, in fixing partial indemnity costs, the court does not look at the actual fee arrangement between solicitor and client and discount that arrangement to ensure that recovery is “partial”. Rather, the court considers the pertinent factors laid down in the rules in fixing the amount of recovery appropriate on a partial indemnity basis.  So long as the amount is equal to or less than the actual fees and disbursements charged, then the amount arrived at by reference to the factors listed in the rules will be the amount of the award – whether that represents 50% of actual fees, 75% of actual fees, or even 100% of actual fees. If counsel is prepared to work at rates approximating partial recovery costs, that is counsel’s choice. There is no reason why the client’s fee recovery ought to be reduced because she has negotiated a favourable rate with counsel, so long as the total of the indemnity does not exceed the fees actually charged.

In other words, actual rates are a “ceiling” on partial indemnity costs. The court is to fix the partial indemnity rate, having regard to the factors set out in Rule 57.01, and then multiply by 1.5 to derive a substantial indemnity rate. The partial indemnity rate cannot exceed the actual rate, but can equal it. (However, presumably the indemnity principle referred to at the beginning of the passage quoted from Mantella would also prevent an award of substantial indemnity costs of 1.5 times a partial indemnity rate that matches the actual rate.)

In this case, the partial indemnity figure arrived at by Justice Toscano Roccamo, multiplied by 1.5, would have resulted in an amount less than the defendants’ actual legal fees but more than the amount claimed by the defence on a substantial indemnity basis.

Defendant’s Offer to Consent to Dismissal Without Costs

Regular readers will have seen earlier posts about some recent decisions in which defendants have been awarded substantial indemnity costs after successfully defending at trial, as a result of having previously offered to consent to dismissal without costs: see, for example, our post on the Flying J case.

In this case, the defendants had offered, in the fall of 2007, to consent to a dismissal without costs. They made no other offer. On the basis of their offer (and the jury’s assessment of damages at an amount less than the monetary jurisdiction of Small Claims Court), the defendants sought costs on a full indemnity or a substantial indemnity basis. However, Justice Toscano Roccamo J. rejected that request.

Her Honour noted that the plaintiff had made several offers to settle and that the defendant had, in fact, solicited an offer from the plaintiff but made no offer itself (other than one for dismissal of the claim). She was critical of the defendants’ approach, saying that it “arguably amounted to an invitation to the plaintiff to negotiate against herself, as it contained no element of compromise and sought nothing short of capitulation on the part of the plaintiff”.

She reviewed the caselaw dealing with awards of substantial indemnity costs and concluded that “[i]n most cases, an offer of payment by the defendant to a plaintiff of some amount would appear to be an important consideration”. Her Honour made the further observation, that to warrant an award of substantial indemnity costs, one or more of the factors in  Rule 57.01(1) should be present (e.g., where a party’s conduct has tended to lengthen unnecessarily the duration of the proceedings).

Justice Toscano Roccamo summed up her views in a departure from the Flying J series of decisions:

I prefer the view that, unless the circumstances of a case trigger consideration of a number of the factors in Rule 57, including conduct of the kind described in Rule 57.01(1) (e) or (f), a defendant will not be awarded enriched costs over and above partial indemnity fees in the absence of any reasonable offer to settle a plaintiff’s claim by payment of some amount. Even then where the plaintiff’s conduct has not been found to be on balance egregious, a court may decline to award costs sanctions throughout the proceedings or prior to the defendant’s offer to settle; see St. Louis-Lalonde v. Carleton Condominium Corporation No. 12, [2005] O.J. No. 4164 (S.C.J.).

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