What makes for a fair civil justice system?
Established rules of procedure? Impartial court officials? A regulated and accountable legal profession? Yes, yes, and yes.
But a fair justice system must inherently be an accessible civil justice system. If only the independently wealthy could afford to pursue or defend a claim, many other people would consider it unjust.
There are several ways to facilitate this access. Legal Aid, pro bono work, and contingency fee structures all provide ways for people, who may not otherwise have the means, to access legal representation and participate in the justice system. However, the court also has another tool at its disposal: awarding costs to successful parties particularly when the other party took unreasonable positions.
What Are Court Action Costs and Who Pays Them?
When prosecuting or defending any step of a proceeding, a party incurs legal fees, disbursements (expenses), taxes, or various other charges. Collectively, these are the “costs” of participating in a court action.
Ontario is a jurisdiction which awards certain costs to the winning party. By adopting a “loser pays” policy, the courts encourage both parties to minimize their own costs (and court time) by agreeing to reasonable offers to settle prior to the conclusion of a trial. This policy also deters frivolous lawsuits or defences, and partially compensates a successful litigant for having to incur costs when attempting to recover damages.
For example, if the plaintiff in a personal injury case successfully litigates their claim, in addition to any monetary damages awarded, the defendant would also be ordered to pay a portion of the plaintiff’s costs for having to bring the action to court in the first place, and for unreasonably prolonging the action by failing to make a fair settlement offer in advance of trial.
Generally, costs are fixed at every step in the proceeding that requires court intervention. The court has great latitude when assessing costs according to section 131 of the Courts of Justice Act, but judges must be fair and reasonable when exercising this discretion. Moreover, a successful party is not guaranteed costs. Courts will also take into account the conduct of the party during proceedings, and the circumstances which precipitated the need for a legal action.
Moustakis v. Agbuya: A Costly Lesson in Trial Strategy
On January 9, 2016, Kyriaki “Cindy” Moustakis (the Plaintiff) was involved in a motor vehicle accident. She sought damages for injuries including soft tissue injuries, chronic pain, and psychological injuries. We’ve discussed some notable aspects of this important case here, here, and here.
Following a trial in October 2023, the jury awarded damages for pain and suffering in the amount of $100,000, damages for past lost income in the amount of $105,000, and damages for loss of future
income/loss of earning capacity in the amount of $125,000. After taking into account the statutory deductible for pain and suffering awards and collateral benefits (amounts received for the same heads of damage through a separate Statutory Accident Benefits Schedule (SABS) claim), the Plaintiff recovered general damages of $55,252.61.
The Defendant had offered to settle on June 23, 2023 for a dismissal of the action against him without costs. The Plaintiff offered to settle on August 22, 2023 for $35,000 for damages, plus
interest, costs, and disbursements all to be agreed or assessed. By rejecting this offer to settle, the action proceeded to trial. Ultimately, since the Plaintiff was awarded more than her settlement offer, she was entitled to partial indemnity costs to the date of her offer and substantial indemnity costs thereafter as decided by the judge in the case.
These costs were broken down as follows:
- $20,775 to August 22, 2023;
- $76,167.50 from August 22, 2023 to the start of trial;
- $150,817.50 for trial preparation and attendance;
- $32,208.80 in HST; and,
- $148,073.76 in disbursements
Challenging Court Costs: Proportionality and Legal Fee Disputes
The Defendant raised numerous objections to the costs sought by the Plaintiff, including:
- Costs not being proportionate to the damages recovery; and
- The composition of the plaintiff’s legal team, their rates of pay, and their docketed work.
Proportionality vs. Access to Justice: What Should Prevail?
Proportionality must be an important consideration in fixing costs, but it should not result in a successful party being under compensated for its costs. The judge noted that when a Defendant makes no offer of a monetary payment, thus forcing a trial, and the plaintiff beats her own offer to settle, “proportionality must give way to… important access to justice principles.”
Given the modest amount of the damages award, the Defendant also contended that the action should have been commenced under the simplified procedure, Rule 76 in Ontario’s Rules of Civil Procedure. At the time, this procedure was limited to claims under $100,000, and when the Plaintiff’s action commenced and did not provide many of the procedural differences from the ordinary procedure. (Simplified procedure has since been modified).
The value of the Plaintiff’s case was not clear at the time the action commenced because the companion Statutory Accident Benefits Schedule (SABS) claim had not yet been determined. If a seriously injured Plaintiff does not receive a “catastrophic injury” designation under SABS and access to the most generous tier of benefits to provide for future costs of care, anticipated losses are litigated in the tort claim.
By the time the Plaintiff had accepted a SABS settlement in December 2020, examinations for discovery and mediation had already taken place, thereby limiting the potential for savings under the simplified procedure. The judge also noted that since the main thrust of the defence was to attack the Plaintiff’s credibility and that her claims were for chronic pain and psychiatric injuries (invisible injuries/disabilities) that required expert evidence to prove, the choice of ordinary procedure was justified.
This case is significant, because it adds to growing case law where insurers have taken matters involving serious but moderate claims to trial rather than engaging in good faith negotiations to reach a settlement that would spare the costs and time required to prepare and participate in a trial. Aviva Insurance Canada, the Defendant’s insurer in this case, has also been the Defendant insurer in a number of other cases where costs fixed have been many times the ultimate damages award, including:
- Brophy v. Harrison, et al., 2019 ONSC 4377 (under appeal at the time of writing), in which the plaintiff was awarded $17,688.64 in damages with $275,456.60 in costs
- St. Marthe v. O’Connor, 2019 ONSC 4279, in which the Plaintiff recovered $32,016.67 in damages and was provided $378,864.56 in costs.
- Barry v. Anantharajah, 2024 ONSC 1267, in which the plaintiff was awarded $16,160.50 in damages and $300,000.00 in costs – a costs to award ratio of almost 19 to 1
To illustrate, in Persampieri v. Hobbs, et al., 2018 ONSC 368, Maria Persampieri (the Plaintiff) was awarded $20,414.83 in damages and costs of $197,185.00. In that case, the judge noted: “The original counsel of the Defendants advised Plaintiff’s counsel as soon as she had served and filed the Statement of Defence, that her client (the insurer for the Defendant Aviva Canada) had an internal system of assessing motor vehicle accident claims and that its assessment concluded that it would not be willing to offer even $1.00…She further advised that once this internal decision had been made, nothing could be done to alter it. Throughout…the action, the defendants were represented by a number of…solicitors. Every one…conveyed the message…that only two options were available… to accept $0.00 for a dismissal of the action on a no costs basis or to proceed to trial…”
Pursuing this strategy is high-risk for the Defendant, but as a well-financed insurer, it is one that may be considered worth the risk if it can intimidate plaintiffs with valid claims into dropping their cases or persuade a court to limit costs. The judge came to a similar conclusion, suggesting “If pursuing such an approach or strategy were to have the effect of generally discouraging Plaintiffs from bringing and pursuing modest sized claims, [even in cases such as here where liability has been admitted] the benefits to insurers could be significant and wide ranging. If insurers were incentivized to pursue such a strategy and to generally resist settlement of such cases, in order to generally discourage such Plaintiffs from pursuing such actions, that could seriously jeopardize overall access to justice.” By playing “hardball,” in the Persampieri case, the Moustakis case, and others, judges have agreed that the Defendant should have foreseen the obvious risks and been prepared to pay reasonable costs if the Plaintiffs beat their own offers to settle.
In cases where claims are completely without merit, Defendants may be confident that they need not make any offer and that the Plaintiffs will either abandon their claims or be forced to pay costs to the defence if a judge and/or jury declines to award damages. But when modest claims do have merit, being unreasonable by choosing to proceed to an expensive and time-consuming trial should come with significant and costly consequences.
Assessing Legal Fees
First published in 2005 and adjusted for inflation in the years since, the Civil Rules Committee developed a cost grid (including maximum rates) as a guide for courts to consider when fixing partial indemnity costs. This guide is not mandatory and does not bind courts to specific ceilings for rates if a judge determines them to be reasonable.
The Defendants objected to the Clerk’s hourly rate, questioned the need for the Plaintiff to have two lawyers attending trial, and produced a “Revised Bill of Costs,” which reduced hours spent by lawyers preparing for trial (without any explanation) and re-categorized the time spent on various duties by the Law Clerk.
The judge first noted that the Law Clerk assigned to the Plaintiff’s case had 26 years of experience and had won awards for her work in the past. Given the nature of the work she does, the judge determined the Law Clerk’s hourly rate, despite being higher than the recommended rate on the Costs Grid, was reasonable. Moreover, although the Defendant’s “Revised Bill of Costs” suggested that certain hours spent by this senior Law Clerk should be deemed non-compensable administrative work, the judge suggested that the fact that this Law Clerk had her own administrative assistant made it more likely than not that the Law Clerk’s docketed work was not administrative in nature.
Turning to the need for two lawyers’ attendance at trial, the judge noted that one of the Plaintiff’s lawyers, who was called to the bar in 2017 and attended every day of the trial in person, provided significant contributions to the case. The judge wrote: “[Victoria Yang] led the evidence of Dr. Tashima who was one of the Plaintiff’s most important witnesses and otherwise assisted at trial including arguing the threshold motion. I find that it was reasonable to have Ms. Yang attend the trial as co-counsel. I do not find that her time should be reduced as learning time.”
Although the Moustakis case was not overly complex, given the nature of the Plaintiff’s injuries, the need for certain expert witnesses, and the Defence plan to attack the credibility of the Plaintiff, the judge agreed that the Plaintiff’s legal expenses, after some adjustments for trial attendance, were reasonable and justified.
Playing Hardball And Striking Out: How Courts Are Pushing Back
Judging by the results of recent cases where insurance companies have pursued this” scorched earth” strategy, courts are not prepared to unduly burden successful plaintiffs who made reasonable offers to settle when fixing costs. Defence attempts to object to reasonable plaintiff expenses have also been rejected by judges who know, as umpires, that when you play hardball, you should accept the consequences of striking out.
Most personal injury cases settle before judgement at trial, because personal injury lawyers working on contingency and fronting client expenses are loath to risk bringing meritless and frivolous cases forward. Most defendants also understand that if they have some liability exposure, negotiating a reasonable, mutually agreeable settlement will spare them additional legal costs and save time. Perhaps, with costs adding up, insurers playing high-risk hardball will rethink their strategy.
