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Are Costs Not Justified for a Successful Party – One With Insurance?

COSTS word from wooden blocks on white desk

A trial judge has the discretion to award or not to award costs. However, the decision regarding costs can be set aside on appeal, if there has been an error in principle or if the costs award is wrong.

In Przyk v. Hamilton Retirement Group Ltd., leave was obtained from the Court of Appeal and an appeal launched to set aside the trial decision on costs.

The respondent, Przyk, slipped and fell on a sidewalk at the retirement home where she resided.

She sued the appellant, Rushdale, the owner of the retirement home, for negligence and breach of the Occupiers’ Liability Act. Damages were agreed to in advance of the trial.

At trial, the jury found no liability on Rushdale and the action was dismissed. Rushdale, as the successful party, sought an award of partial indemnity costs and was denied for 3 reasons by the trial judge:

  1. Since Rushdale was insured by a major insurer, the case was a “David and Goliath situation”;
  2. There was concern that the insurer for Rushdale never offered a settlement to Przyk, other than a dismissal of the action on a without costs basis. The trial judge found this approach unfair and inconsistent with the insurer’s “social responsibility’; and
  3. The action required expert evidence, which demonstrated that the law of negligence needed to adapt to the growing area of elder care;

Zarnett J.A. writing for the Court of Appeal panel, agreed that the costs decision reflected “certain errors in principle”. Nevertheless, the Court of Appeal upheld the decision on costs finding that the case demonstrated a novel law approach.

David and Goliath

The Court of Appeal concluded that costs should not have been denied because Rushdale was insured and defended by its insurer. The insurer did not use this “resource advantage” to engage in any practices or misconduct, during the litigation or at trial to the Plaintiff’s disadvantage. Zarnett J.A. found that there is no case law to support the position that was taken by the trial judge.

Quite justifiably, the Court of Appeal references contingency fee arrangements, third party litigation funding and adverse costs insurance, all of which benefit and protect a Plaintiff, when pursuing an action such as this one. Ultimately, it was found that there was no “mis-match” of resources. There was no conduct justifying the denial of costs.

In fact, Przyk did have adverse cost insurance and the request for costs was only for that covered under the adverse cost insurance policy. No monies were being sought as against Przyk personally. 

There was no conduct by Rushdale, that lengthened the trial, such as extensive delays, or taking unreasonable positions regarding litigation strategy, that would justify not awarding costs. Accordingly, the Court of Appeal found that the trial judge erred in principle in citing insurance as a basis for denying costs to a successful party.

Settlement Offers

Rushdale argued that it should not be sanctioned by a denial of costs because it decided not to make a financial offer to settle, based on the evidence and  given that it’s position was reinforced by the jury.

This discussion of the “hardball approach” is discussed in the paper, “The Cost Consequences of Playing Hardball” by my colleague Dan Waldman. That paper deals with the trial judge’s decision in finding split costs in Teglas v. City of Brantford, where mention again was made of the defendants having insurance and how that may have impacted the strategy adopted by the defendants and in their offer to settle approach.

In Przyk, Zarnett J.A. references the 1994 Court of Appeal decision of Bell Canada v. Olympia & York Developments Ltd. and states “in Bell Canada, this court held that it is an error in principle to rely on the failure of a successful defendant to have offered a payment to an unsuccessful plaintiff as a ground to deny costs.” He references Bell:

There are many reasons not to offer settlement, and they should remain the private preserve of the litigants. In a libel suit, for example, vindication may be a legitimate consideration for either party, standing above recovery or payment of money… A defendant may not be in a position to pay a settlement and, even if wealthy, may have a better business use for the money pending trial. None of these litigants should fall from grace in the eyes of the trial judge if they succeed on the merits.

Although Przyk made mention of the insurer’s general approach to all of its litigation, it was found that conduct outside of this case should be not considered.

Novel Issue

However, curiously, the Court of Appeal did decide to uphold the trial judge’s cost decision on the basis that it addressed an underdeveloped area of law and raised important and novel issues. On this basis, the Court of Appeal upheld the costs decision.

The trial judge stated

…demographically, eldercare is a burgeoning area in our society. Coincidental with such growth is a need for the law of negligence to apply in new situations involving our elderly. Both sides treated this particular case seriously. Engineers and a biomechanical engineer were witnesses. This was not a case solely dependent on upon [sic] the evidence of the parties.

As was held by the Court of Appeal in Childs v. Desormeaux, “A novel issue that involves the public interest can support a no costs order as an exception to the general approach that a successful party will receive their costs”.

The Court of Appeal refused to analyze whether a slip and fall case, involving an elderly person, in front of a retirement home, was justified as being deemed as “novel” and stated that the only analysis required was whether the trial judge relied on an erroneous principle or was plainly wrong. The Court of Appeal stated it was “unable to say that either occurred”. The trial judge’s decision, was therefore entitled to deference and the no costs award was upheld.

With Canada’s aging population, we have seen and will continue to see cases involving the elderly. But whether a slip and fall case involving someone elderly should be considered novel is a concerning rationale for the denial of costs, especially given success at trial. In this writer’s opinion, the decision on costs, seems unfair and inequitable. I am concerned that it sets a dangerous precedent and I am certain that the rationale will be relied upon, in upcoming cases, which is concerning, to say the least. I sincerely hope that there is greater definition on what constitutes “novel”, going forward.

Pallett Valo LLP has earned my trust and loyalty based on their extensive legal knowledge and expertise, further enhanced by their prompt service and attention to detail.
Mark Hallink