Sep 25, 2017

ONTARIO COURT OF APPEAL SUMMARIES (SEPTEMBER 18 – SEPTEMBER 22, 2017)

Cobb v. Long Estate, 2017 ONCA 717 (CanLII)

[Doherty, MacFarland and Rouleau JJ. A.]

Counsel:

G. Paliare and T. H. Lie, for The Estate of Martin T. Long (Defendant)

Rouben and K. Bonn, for Wade Brett Cobb, Erica Mae Cobb and James Wade Cobb, a minor by his Litigation Guardian, Erica Mae Cobb (Plaintiff)

Keywords: Insurance Law, Motor Vehicle Accidents, Damages, Collateral Benefits, Statutory Accident Benefits, Deductibility, Double Recovery, Statutory Interpretation, Costs, Offers to Settle, Rule 49

Facts:

This is the companion decision to El-Khodr v Lackie.

On July 8, 2008, the vehicles driven by Martin T. Long and the plaintiff, Wade Cobb, collided. Long was charged with operating a motor vehicle while impaired or “over 80” (Criminal Code, R.S.C., 1985, c. C-46, s. 253(1)), to which charge he pleaded guilty in August 2009. Mr. Long died before the trial of the civil action, so his estate became the defendant in this litigation.

In December 2009, the plaintiffs brought this action in negligence and gross negligence, claiming $2.35 million in compensatory damages and $3 million in punitive damages. The trial took place over the course of 19 days in the fall of 2015. The jury awarded $220,000 in compensatory damages. After deducting amounts pursuant to the Insurance Act for collateral benefits that Wade Cobb had received from his insurer and for the statutory deductible for general damages (i.e., damages for “non-pecuniary” losses, such as “pain and suffering” and “loss of amenity”), the trial judge calculated a final judgment amount of $34,000.

At trial, the real issue dividing the parties was the quantum of damages to which the plaintiff, Wade Cobb, was entitled. By the time of trial, Mr. Cobb’s injuries would be described as soft tissue in nature, resulting in chronic pain, such that he claimed to be permanently disabled and unable to resume either his pre-accident employment in the contracting field or any other meaningful employment.

The trial judge rejected the plaintiff’s request to put the question of punitive damages to the jury. The plaintiff alleged this was a proper case for that question to go to the jury because of Mr. Long’s drinking and driving conviction arising from the accident and the fact that Mr. Long had an earlier conviction for a similar offence.

From the jury’s award for past and future income losses, which totalled $150,000, the trial judge deducted the sum of $159,300 that the plaintiffs had received before trial in SABs for income replacement benefits. This sum was comprised of $29,300 received before the settlement of June 29, 2010, and the $130,000 portion of that settlement apportioned to “all past and future income replacement benefits”. This deduction resulted in a net award of zero for the loss of past and future income.

The plaintiff had received $9,150 in housekeeping and home maintenance benefits (“HKHM benefits”) before trial from his SABs insurer. Accordingly, the trial judge reduced the jury’s award of $5,000 for past HKHM expenses to zero. However, the trial judge refused to apply the remaining $4,150 in HKHM benefits that the plaintiff had received before the trial to the amount that the jury had awarded for future housekeeping loss, maintaining that award at $10,000.

The trial judge did not determine whether the amendment in s. 258.3(8.1) of the Insurance Act, which came into force on January 1, 2015, and which reduced the default rate of prejudgment interest for non-pecuniary losses for bodily injury or death from five percent to the bank rate at the time the proceeding was commenced (here, .5 percent), applied retrospectively. Instead, the trial judge exercised his discretion pursuant to s. 130 of the Courts of Justice Act and set the prejudgment interest rate at three percent.

Effective August 1, 2015, the statutory deductible applicable to an award for non-pecuniary damages increased from $30,000 to $36,540 through an amendment to s. 5.1(1) of the regulation entitled Court Proceedings for Automobile Accidents that Occur on or After November 1, 1996, O. Reg. 461/96.

The trial judge concluded that the change to the regulation was “substantive”, as opposed to “procedural”, and, accordingly, should not be applied retrospectively to this action. He applied a deductible of $30,000, leaving a net general damage award of $20,000.

In his reasons on costs, the trial judge addressed whether the amendment to s. 267.5(9) of the Insurance Act that came into force on August 1, 2015 should apply to this action. Until July 31, 2015, under s. 267.5(9) and this court’s decision in Rider v. Dydyk, 2007 ONCA 687, 87 O.R (3d) 507, the court was not to consider the statutory deductible in determining entitlement to costs. Effective August 1, 2015, however, s. 267.5(9) was amended so that entitlement to costs was to be determined “with regard” to the statutory deductible. The difference here was significant, because of a defence settlement offer made March 13, 2014.

In reasons for judgment dated December 23, 2015 and reported at 2015 ONSC 7373, the trial judge determined that he “would not give the Insurance Act amendments retroactive application”. He added, however, that if he was wrong in that determination, he would exercise his discretion and order that each side bear its own costs.

Issues:

The plaintiffs raise three grounds of appeal:

  1. Did the trial judge err by deducting, pursuant to s. 267.8(1) of the Insurance Act, the amounts allocated to income replacement benefits in the SABs settlement from the jury awards for past and future income loss?
  2. Did the trial judge err in refusing to put the question of punitive damages to the jury?
  3. Did the trial judge err in his determination of prejudgment interest?

The defendant also raises three grounds of appeal:

  1. Did the trial judge err by failing to deduct the full amount of the HKHM benefits received by the plaintiff before the trial from the damages awarded for the housekeeping loss?
  2. Did the trial judge err in applying the statutory deductible in force prior to August 1, 2015 ($30,000) rather than the statutory deductible in force at the time of judgment ($36,540)?
  3. Did the trial judge err in his assessment of costs?

Held: Plaintiff’s appeal dismissed. Defendants’ appeal allowed.

Reasoning:

1. No. The attribution of the settlement funds to particular claims is a question of fact on which the court owes deference to the trial judge. The record fully supports the trial judge’s determination on this issue. In the settlement negotiations, the SABs insurer left it up to plaintiff’s counsel to determine the allocation of the settlement amounts. The Settlement Disclosure Notice divided the settlement compensation of $152,000 into $130,000 for income replacement benefits, $20,000 for medical benefits and $2,000 for “other items”. Correspondence from the settlement negotiations indicates that, before executing the Release, the plaintiff had agreed to allocate $130,000 of the $152,000 settlement to income replacement benefits, $20,000 to medical benefits and $2,000 to the plaintiff’s legal costs. There was no evidence in the record that the plaintiff had negotiated for compensation arising from any allegation of bad faith.

Claims advanced in a tort action for both past and future income loss are required to be separately advanced. Pre-judgment interest is owed on past income claims but not on future loss claims. The onus on a plaintiff is different – a plaintiff who claims for pre-trial pecuniary loss must prove the amount of that loss on the balance of probabilities. In contrast, a claim for future (i.e., post-trial) pecuniary loss needs only be proved on the basis of a “real and substantial possibility” of impairment of future earnings and a jury instructed accordingly.

Both types of claims are still claims for income loss. The Insurance Act does not differentiate between past and future losses.

Section 267.8(1) speaks only to amounts received prior to the trial for income loss. Whether those amounts relate to past or future claims is irrelevant for the purpose of deductibility.

2. No. The key point is that punitive damages are awarded “if, but only if” all other penalties have been taken into account and found to be inadequate to accomplish the objectives of retribution, deterrence, and denunciation.” Where tortious acts have already been sanctioned by the imposition of a criminal sentence, it is inappropriate to award punitive damages in a civil lawsuit. To do so is to punish twice for the same offence. Where, however, the civil proceedings establish that…the sentence does not fully sanction the tortfeasor’s behaviour… punitive damages may be awarded. Here, the court found that there was no evidence to suggest that the defendant’s criminal sentence, consisting of a fine of $1,300 and a one-year driving prohibition, was insufficient to meet the objectives of retribution, deterrence and denunciation; and that the trial judge’s decision not to put the question of punitive damages to the jury was reasonable in the circumstances. His decision in this regard is therefore entitled to deference.

3. No. For the purposes of s. 128, s. 127(1) defines “prejudgment interest rate” as “the bank rate at the end of the first day of the last month of the quarter preceding the quarter in which the proceeding was commenced”. However, s. 128(2) creates an exception from this default rate of prejudgment interest for damages for non-pecuniary loss arising from personal injuries:

The relevant “rule of court” to which s. 128(2) refers is r. 53.10 of the Rules of Civil Procedure, which provides:

53.10 The prejudgment interest rate on damages for non-pecuniary loss in an action for personal injury is 5 per cent per year.

Therefore, s. 128 of the Courts of Justice Act contemplates two default rates of prejudgment interest: one for damages for non-pecuniary loss in personal injury actions, and one, called “the prejudgment interest rate”, for all other money awards for which s. 128 makes prejudgment interest available. The plaintiffs commenced their action on December 8, 2009, so the applicable prejudgment interest rate in s. 128(1) is .5%.

The effect of s. 258.3(8.1) of the Insurance Act is that, in an action for damages arising out of a motor vehicle accident, the prejudgment interest rate on non-pecuniary damages will now be the rate provided for in ss. 127 and 128(1) of the Courts of Justice Act, subject to the overriding discretion of the court in s. 130 of the same statute to increase or reduce the rate, to change the interest period, or to disallow interest altogether.

In this case, the trial judge did not make a determination one way or the other as to whether the amendment applied retrospectively. Instead, he chose what he described as “a third choice” and exercised the discretion available to him under s. 130(1)(b) of the Courts of Justice Act. Having “taken into account the factors set out in s. 130(2)” and having “considered the overall circumstances of the case”, he fixed the interest rate for non-pecuniary damages at three percent.

This was not erroneous. The amendment in the Insurance Act to the prejudgment interest rate was intended to have retrospective effect and it applies to all actions that are tried after its commencement.

First, as a matter of statutory interpretation, there is a presumption that the legislature does not intend to interfere with “vested rights”: Dikranian, at paras. 32-33. Dikranian, at paras. 37-40, endorsed Prof. Côté’s test for establishing a “vested right”: (1) the individual’s legal situation must be “tangible and concrete rather than general and abstract” (i.e.: the individual must point to a specific right); and (2) the legal situation must have been sufficiently constituted at the time of the new legislation’s commencement. In other words, by the time of the legislation’s commencement, the right must have crystallized and become “inevitable” and “certain”: 1392290 Ontario Ltd. v. Ajax (Town), 2010 ONCA 37, 257 O.A.C. 311, at paras. 37-38.The characterization of the “right” at issue is important to the success of the argument that the right had “vested” by commencement: 1392290 Ontario Ltd., at para. 39.

Second, new legislation that affects substantive rights is presumed to have a purely prospective effect unless a clear legislative intent that it is to apply retrospectively is evident. However, “procedural legislation designed to govern only the manner in which rights are asserted or enforced” applies immediately to both pending and future cases because such legislation does not affect the “substance” of the relevant rights: R. v. Dineley, 2012 SCC 58, [2012] 3 S.C.R. 272, at para 10. In Dineley, the Supreme Court emphasized that this presumption of immediate application does not apply to “procedural legislation” if that legislation “affects substantive rights”. Therefore, “the key task” lies “not in labelling the provisions “procedural” or “substantive”, but in discerning whether they affect substantive rights”: Dineley, at para. 11.

The plaintiff has not demonstrated that he has a crystallized or certain right to a particular rate of prejudgment interest. This the court was of the view that it was not necessary to consider the application of the presumptions or to decide whether s. 258.3(8.1) of the Insurance Act, which only deals with the rate of prejudgment interest and not with the entitlement to prejudgment interest, is substantive in nature. Even if the rate of prejudgment interest constitutes a substantive right, the fact that a particular presumption could apply does not necessitate a conclusion that the amendment does not apply in this case. Common-law presumptions on temporal application of legislation are simply aids in the identification of legislative intent. A contextual analysis of the legislation demonstrates that the legislature intended s. 258.3(8.1) to apply to causes of action that had already arisen but not yet been tried.

4. Yes. There is no reason to distinguish between the past and future awards. The head of damage is to compensate for loss of the ability to carry out HKHM both in the past and the future. The language of the legislation requires a reduction from the damages awarded. That is, all payments received before the trial for SABs in respect of pecuniary loss.

5. Yes. The legislature intended for the 2015 amendment to s. 5.1.(1) to have retrospective application. Accordingly, the amendment applied at the time of the judgment and the trial judge erred in holding otherwise.

The 2015 amendment to s. 5.1 of the Court Proceedings Regulation contains no transition provision that clearly indicates its temporal application. In contrast, the version of s. 5.1 in force before August 1, 2015 specifically stated that it was applicable to accidents that occurred on or after October 1, 2003. The court also noted that s. 267.5(8.1.1) of the Insurance Act specifically provides that the statutory deductible does not apply to “damages awarded for non-pecuniary loss awarded in respect of a person who dies as a direct or indirect result of an incident that occurs after August 31, 2010” (emphasis added). It is noteworthy that within that part of the statute that deals with the statutory deductible, the language distinguishes between those sections that are specifically intended to have only a prospective application and those that are not. The fact that there is no similar temporal language in the current version of s. 5.1 of the regulation provides some support for the argument that the change should apply to accidents occurring before its promulgation.

Absent persuasive evidence of a legislative intention to apply the version of a regulation in force at a specific date, section 59 of the Legislation Act, 2006 ensures application of the current version of a regulation to which a statutory provision refers. Thus, the interpretation of the regulation at issue must start from the premise that the regulation that is intended to apply to any given case is the regulation that is in force from time to time and not the version of the regulation that was in force at the date of the accident.

A regulation applies retrospectively where authorized by the regulation’s enabling statute, either by express words or by necessary implication: British Columbia (Attorney General) v. Parklane Private Hospital Ltd., [1975] 2 S.C.R. 47, at p. 60; Keyes, at p. 498-9. The Insurance Act authorizes the immediate application of the amended regulation to accidents that occurred before its promulgation. The fact that the dates for calculating the prescribed damage quantum in s. 267.5(8.3) of the Insurance Act, above which the deductible does not apply, match the dates in s. 5.1(1) of the Court Proceedings Regulation proves that the legislature must have authorized the executive to amend s. 5.1(1) with retrospective application to pending and future proceedings.

6. Yes. The Court of Appeal concluded that the amendment to s. 267.5(9) which changed the words “without regard” to “with regard”, applies to the fixing of costs in this case for two reasons: (1) there is no vested right to costs, and (2) costs legislation is “procedural”. Thus the trial judge erred in holding otherwise.

The defendant’s offer to settle on March 13, 2014 of $40,000 inclusive of all damages was a valid Rule 49 offer and, based on the amount of the trial judgment as revised, was more favourable than the judgment that the plaintiffs achieved at trial. In the ordinary course, it should follow that the plaintiffs would be entitled only to their partial indemnity costs to the date of the offer and the defendant to its partial indemnity costs thereafter. However, in his reasons on costs, the trial judge said that, if he was incorrect in his calculation of the judgment amount, and it was determined that the deductible was to be taken into account so as to reduce the judgment figure for costs purposes, he would have ordered that each side bear its own costs. The defendant advised the court that it was prepared to live with that order and will not require the plaintiffs to pay the defendant’s partial indemnity costs from the date of the offer.

In response to the plaintiff’s assertion of entitlement to substantial indemnity on the basis of s. 4(6) of the Victims’ Bill of Rights, 1995, the court noted that the record does not disclose that any effort was made by way of motion before the trial judge to have the reasons corrected in this or any other relevant respect. In the circumstances the court must accept the reasons of the trial judge as they were written. In any event, the trial judge’s assessment of costs at approximately $409,000 on a judgment of $22,136.60, (or $34,000, as the trial judge found) is out of all proportion and cannot stand. On any proportional basis, the plaintiff’s costs, even taking the defence offer out of the equation for the moment, could not have been expected to exceed approximately $200,000, given the results achieved.

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