In Carr v. Modi (2016), the defendants in a tort action appealed the cost judgement following a settlement for damages arising from a car accident in which the plaintiff suffered injuries. A central issue in the defendant’s appeal of costs was whether the amount of costs found against the defendant could include costs the plaintiff had incurred in arbitration against their insurer for statutory accident benefits, in addition to the costs of the tort action against the defendant.
In a previous action, the Court determined that the defendants would pay $42,500 in damages, as well as prejudgment interest plus partial indemnity costs, both to be agreed upon or assessed. However, the parties were unable to agree on the interest rate or the amount of costs, which led to a motion to determine both issues. In a subsequent action, the motion judge held that the applicable rate of interest was 5 percent and awarded total costs of $99,800, inclusive of HST, fees and disbursements.
The question, with respect to the applicable interest rate, was whether an amendment that came into force on January 1, 2015, changing the pre-judgement interest rate from 5 percent to 1.3 percent, was retroactive in nature and would therefore apply to the current case. Judge Molloy agreed with the motion judge and concluded that the new legislation was substantive and not procedural. Accordingly, the legislation does not have retroactive effect and cannot be applied to a case prior to its implementation. On these grounds, the judge dismissed the appellants’ appeal of the 5 percent interest rate and held that the 5 percent rate is valid.
The issue of the recoverability of arbitration costs raises a question of law that has broad implications beyond the current case and could affect the amount of costs awarded in this action. Based on applicable law and prior court decisions, the motion judge ruled that, where a defendant has derived a clear benefit from statutory accident benefits (SABs) arbitration, the costs recoverable in the tort action may also include costs incurred by the plaintiff in recovering SABs benefits.
In the current case, the motion judge found that the defendant did, in fact, derive a benefit because one could logically assume that the plaintiff would have asked for a larger settlement if they had not been able to successfully claim statutory accident benefits in arbitration at the Ontario Financial Services Commission (where the plaintiff was awarded $90,000 in income replacement benefits under SABs). Judge Molloy agreed with the motion judge’s conclusion, noting that there is considerable support in case law for the determination that a plaintiff’s recovery of SABs constitutes a benefit to a defendant in a tort claim (as in Intact Insurance Company v. Marianayagam (2016) and Siddiqui v. Siddiqui (2015)).
Judge Molloy rejected the appellant’s argument that the Court of Appeal decision in Whittle v. Ontario (Ministry of Transportation & Communication) should be applied to the current case. In Whittle, the Court held that there was no reasonable basis for awarding the costs of arbitration between the insurer and respondent, against the appellant. Judge Molloy found that a determination for the current case could not rely on Whittle, as Whittle did not provide an explanation indicating on what basis the decision was reached. Also, in the Whittle case, there were two prior trial decisions in which there were unusual facts underlying the decision to grant costs and there may have been other justifiable reasons, currently unknown, for denying costs to the plaintiff. Therefore, the appeals judge concluded that the Whittle decision could not be taken as conclusively determining the current issue before the Court. Judge Molloy ruled that the motion judge made no error in determining the award to the plaintiff.
At the conclusion of a trial or settlement, the opposing parties are often tasked with resolving outstanding cost issues, which can be a contentious process. At Rastin & Associates, our commitment to our clients begins from our initial meeting and extends beyond the point of ensuring all compensation and costs are settled in our client’s best interests. If you or a family member were injured and are claiming compensation for losses arising from an accident, call our office today to find out how we can help.
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