A trial judge has discretion to award costs of the litigation process. Usually, that award would be to the successful party, but not always. May a trial judge refuse to award costs to a successful defendant because that defendant was insured, refused to accept any settlement before trial, or was “known” to generally play hardball in its defences? This question was answered in Przyk v. Hamilton Retirement Group Ltd. 2021 ONCA 267.
The plaintiff had slipped and fallen on a sidewalk on the grounds of a retirement home where she resided. She sued the owner of the retirement home for negligence and breach of the Occupiers’ Liability Act. The parties agreed on damages and the trial proceeded before a judge and jury on liability alone. The jury found no liability on the part of the defendant and the action was dismissed against it. The defendant requested an award of costs against the plaintiff. Actually, to be more specific, it requested its costs only to the extent of an insurance policy that the plaintiff had taken out for the very purpose of indemnifying her against an award of costs if she were unsuccessful in the action. The defendant was not seeking any award of costs against the plaintiff personally.
The trial judge refused to order any costs against the plaintiff. He gave three reasons for doing so:
- The individual plaintiff, who was a senior and who had been injured, was up against a very large insurer and the case was a “David and Goliath situation.”
- The defendant’s insurer had never engaged in settlement discussions – other than to allow a no costs dismissal of the plaintiff’s claim. This, the judge felt, was an example of the insurer’s arrogant “hardball” approach, used generally when defending claims, an approach that is unfair to litigants of modest means and inconsistent with the insurer’s “social responsibility”.
- It was a novel case, which required expert evidence and illustrated the need for the law of negligence to adapt to the growing area of elder care.
Consider how any large defendant, particularly an insurer, and its counsel would react to those reasons for decision. Apoplexy might be an appropriate description. The defendant, through its insurer, appealed to the Ontario Court of Appeal.
Costs are in the discretion of the court, who may determine by and to whom costs are payable and in what amount. In the exercise of that discretion, the court will consider the result and other factors set out in Rule 57.01(1). Of course, the norm is to award costs to a successful party, costs that will be affected significantly by offers to settle that fall within certain parameters.
An appeal court will set aside a costs award only if “the trial judge has made an error in principle or the costs award is plainly wrong.” The Court of Appeal reviewed each of the judge’s reasons with that standard of review in mind.
David & Goliath
You’re big with ample resources; I’m small. Even though I lost, I should not pay costs because to do so could threaten access to justice. The Court held that the trial judge erred in this proposition:
- Yes, an insurer has resources, but that is irrelevant. What is relevant for costs is not resource availability, but how those resources are used. Nothing in Rule 57.01 points to the identity or resources of the party as a factor, nor do the provisions of Rule 49.10 (dealing with cost consequences of offers to settle) support the view that the resources of a party making or refusing an offer are relevant.
- The real consideration is whether the successful party engaged in improper litigation conduct that actually interfered with the unsuccessful party’s access to justice. In this case, the defendant’s litigation conduct was not improper; no examples were cited of (i) conduct that unnecessarily lengthened the proceedings or (ii) any improper, vexatious, or unnecessary steps, or (iii) a refusal to admit something that should have been admitted.
- It is improper to conclude that a plaintiff with a modest claim against an insured defendant results in a David and Goliath situation without looking at the circumstances. An apparently tilted playing field might be levelled in a number of ways such as contingency fee arrangements, third party litigation funding, and adverse costs insurance. In this case, the plaintiff was not denied access to justice. She took her case to trial, presented by experienced counsel, with expert evidence to bolster the case. Nothing in the reasons for decision supported the view that the plaintiff was prejudiced by a mismatch of resources.
The trial judge noted that the plaintiff had always been open to settle, but that the insurer had not. He thought that these were hardball tactics and stated:
“From reading the employment advertising for Aviva concerning the sending a message to judges, mediators, and counsel, one detects a certain arrogance. Size of the insurance market is not inconsequential. Insurers are answerable to their shareholders. Playing hardball with the modest litigant may indeed be profitable, but that does not mean that the modest litigant should have a field day or that the insurer be vulnerable to frivolous claims. Being a large market shareholder is not without social responsibility, size should not be wielded to oppress deserving litigants as that would encroach upon the broader social interest of access to justice. Aviva with its approach is at risk of allegations of playing hardball. In some circumstances that approach may result in no costs. In a way, that is a cost of doing business in such a fashion.”
Although the trial judge referred to the insurer generally using its size to oppress deserving litigants, he did not refer to any conduct in this case that actually did so – other than its failure to offer a financial settlement. The Court stated that this was an error in principle. “A litigant, or its insurer, even if wealthy, is not obliged to pay a settlement just because it has been sued; it is entitled to have the claim determined by the court.” It hardly lies in the mouth of the trial judge to say that the defendant was unreasonable when its position is borne out by a successful result at trial.
The Court noted that even when error taints the grounds on which a trial judge relies to deny a successful party costs, the award may still stand if another independent ground justifies the decision.
The trial judge felt that the case arose in an important and developing societal and legal context. Elder care, he stated, is an emerging area in our society and coincidental with its growth is a need for the law of negligence to apply in new situations involving our elderly.
The Court was not fully enamoured with this reasoning, but noted that: “The question is not, however, whether I would have arrived at the same conclusion, but whether the trial judge relied on an erroneous principle, or applied it to reach a decision that was plainly wrong. I am unable to say that either occurred.”
Because a novel issue that involves the public interest can justify a no costs order as an exception to the norm that a successful litigant is entitled to its costs, the Court dismissed the appeal as to costs. It did not, however, award any costs of the appeal itself.
The insurer did not get its trial costs, but that is not why it appealed. It could not allow the trial judge’s reasons to set a precedent. We suspect that the insurer and its counsel were well satisfied with the Court’s decision.
Image courtesy of cindydangerjones.
Written by Jonathan Speigel, the founding partner of Speigel Nichols Fox LLP, leads the litigation and construction practices.