IN THE SUPREME COURT OF BRITISH COLUMBIA
Citation: | Danicek v. Alexander Holburn Beaudin & Lang, |
| 2011 BCSC 1375 |
Date: 20111014
Docket: S042714
Registry:
Vancouver
Between:
Michelle Marie
Danicek
Plaintiff
And
Alexander Holburn
Beaudin & Lang
and Jeremy Martin Poole
Defendants
And
Rodneys Oyster
House (Vancouver) Corp.,
Bar None Enterprises Ltd. and
Lombard General Insurance Company of Canada
Third
Parties
Before: The Honourable Mr. Justice
Kelleher
Reasons for Judgment
(in Chambers)
Counsel for Plaintiff: | J.E. Murphy, Q.C. |
Counsel for Defendant | N.P. Kent |
Counsel for Third | R.B. Lindsay, Q.C. |
Place and | Vancouver, B.C. July 22, 2011 and |
Place and | Vancouver, B.C. October 14, 2011 |
[1]
This is a dispute about the costs to be awarded arising from a trial.
It is complicated because it was a long and complex trial; three actions were
consolidated for trial; there were two phases of the trial, the first for
liability and damages and the second for issues of insurance coverage; there
were a number of offers to settle; and a number of aspects of the dispute were
in fact settled.
THE BACKGROUND
[2]
Michelle Danicek was injured in two accidents: a fall in a nightclub on
the evening of April 5, 2001, and a motor vehicle accident on June 29,
2002. This action, S042714, was for damages arising from the 2001
fall. The defendants were her law firm employer, Alexander Holburn Beaudin
& Lang LLP, and an associate of the firm, Jeremy Poole, who knocked her
over. There were third parties: the night club where the accident occurred;
the restaurant where the evening had begun; and the insurer of the law firm.
[3]
The second action was Danicek v. Li (M041927). This was a claim
against the driver and owner of the motor vehicle in the 2002 motor vehicle accident.
Liability in this second action was not in issue.
[4]
The claims against the bar and the restaurant in the first action were
resolved. The issue between the defendant, Mr. Poole, and the third party
insurer, Lombard General Insurance Company, was whether the law firms policy
covered the claim against Mr. Poole: whether there was a duty to defend
and whether there was coverage.
[5]
The third action was Co‑operators General Insurance Company v.
Lombard General Insurance Company of Canada. The issues between them
concerned the interpretation of Lombards policy of insurance and the question
of whether it provided coverage to Mr. Poole, as an employee of Alexander
Holburn. Co‑operators General Insurance Company held Mr. Pooles
homeowner policy.
[6]
The trial of the first and second actions was originally scheduled to be
heard in early February 2009. On January 28, 2009, a settlement was
reached between Mr. Poole and Ms. Danicek. The terms of this
settlement were accurately summarized in the written submission of counsel for Mr. Poole:
(1) Poole
would pay Danicek $1,085,000;
(2) Poole
would admit liability for the accident, and the matter would proceed to trial
for an assessment of damages to determine the amount of the judgment against
Poole;
(3) Poole
would continue to prosecute the insurance coverage third party proceedings
against Lombard with a view to recovering indemnity from Lombard for the amount
of any judgment that might be assessed against Poole. The proceeds recovered
in that action would be divided between Danicek and Poole;
(4) Danicek
would release Poole from any claims against him personally in excess of the $1,085,000
settlement payment;
(5) Danicek
would not seek from Poole personally any execution of and would hold Poole
harmless from any further claims (including costs) in any way arising from the
accident, to the extent that Poole was unable to recover indemnity for any such
claims in the insurance third party proceeding;
(6) Danicek
agreed to release Pooles homeowner insurer (Co‑operators) from any
claims she may have against Co‑operators whether as a judgment creditor
or assignee of Poole or otherwise; and
(7) Poole
agreed to release Co‑operators from any claims he may otherwise have had
against Co‑operators in any way arising from that policy.
[7]
There were settlement offers. On December 28, 2009, Ms. Danicek
offered to Lombard to settle quantum of her claim against Mr. Poole in the
amount of $2,000,000 plus costs. This offer was not conveyed to Mr. Poole
but only to Lombard. The offer was not accepted.
[8]
On February 16, 2009, the Li defendants made an offer to
settle the Li action for $500,000. That offer was not accepted.
[9]
Even though Mr. Poole had admitted liability, Lombard exercised its
right to contest liability. Therefore, the trial of the first and second
actions proceeded with liability in issue in the first action and damages in
issue in both actions.
[10]
Phase 1 of the trial commenced on January 4, 2010 and concluded
on April 1, 2010. There were a total of 29 court days. Damages
against Mr. Poole were awarded in the amount of $5,913,783.54; damages
against the Lis were awarded in the amount of $10,595.
[11]
On April 11, 2011, I made an award of costs in favour of the
defendants in the Li Action, 2011 BCSC 444. In that case, as I
stated above, the defendants had offered the plaintiff a settlement of
$500,000. The plaintiff was only awarded $10,595 in that action. I awarded
costs at Scale C to the Li defendants. Their counsel calculates this
cost award to be approximately $180,000.
[12]
The Phase 2 portion of the trial, the third action, proceeded in
November 2010. The issues were whether Lombard was under a duty to defend
Mr. Poole and whether Mr. Poole was covered by the Lombard policy.
[13]
I gave judgment on January 21, 2011. I concluded that Lombard was
under a duty to defend the Danicek action but that the Danicek claim was not
covered by the Lombard policy. I ordered that Lombard reimburse Co‑operators
for one-half of the expenses it incurred in the defence of Mr. Poole up to
January 28, 2009. As success was split, I ordered each party to bear
its own costs. The Lis did not participate in Phase 2.
[14]
The plaintiff Ms. Danicek is seeking the following orders:
(1) costs
on Scale C against Lombard up until December 28, 2009, the date of
Daniceks settlement offer to Lombard. In the alternative, costs against the
defendant Mr. Poole until December 28, 2009;
(2) double
costs on Scale C against Lombard from December 28, 2009 on. In the
alternative, double costs on Scale C against the defendant Mr. Poole;
(3) a
Sanderson order or alternatively a Bullock order requiring
Lombard to pay the costs payable to the Lis in action M041927, or in the
alternative a Sanderson order or a Bullock order requiring the
defendant Mr. Poole to pay the costs payable to the defendants;
(4) costs
for two counsel to prepare for and attend trial double units for trial
preparation and attendance;
(5) a
declaration that Lombard is obliged, pursuant to the terms of the policy, to
pay any costs payable by the defendant Mr. Poole;
(6) costs
of the application.
COSTS FOR THE TRIAL
[15]
The first issue is whether Lombard should be held liable to the
plaintiff Ms. Danicek for the costs of the trial.
[16]
There is no serious dispute that although Lombard was not a defendant
but a third party, it may be liable in costs. It was put this way by Egbert J.
in Sunburst Coaches Ltd v. Romanchuck; Ocean Accident and Guarantee Corporation
Limited (Third Party) (1953) 9 W.W.R. (N.S.) 385 (Alta. S.C.) at 392, para. 19:
The third party, on its own
application became a party to and actively defended the action, and by so doing
made itself subject to the jurisdiction of this court as to costs. I see no
reason why the plaintiff should not have judgment against the third party as
well as against the defendants, for its costs computed in the manner aforesaid.
[17]
Because of the other settlements in this action Lombard found itself the
only party left to defend the claim. Although Mr. Poole had admitted
liability, Lombard contested both the liability of Mr. Poole and damages. It
was entitled to do so but faces the possibility of an award of costs either in
its favour or against it, depending on the outcome of the lawsuit.
[18]
Ms. Danicek argues that she succeeded both on liability and
damages.
[19]
Lombards position is that in fact it was successful; it was not
required to indemnify Mr. Poole for the Danicek judgment; it was not
required to pay Ms. Danicek. Lombard argues that if anything, it should
receive a cost award in its favour.
[20]
Lombard points out that the settlement that Mr. Poole and Ms. Danicek
reached required Ms. Danicek to prove her damages even if they were undefended.
[21]
Lombard did not participate in examinations for discovery. All
examinations of the plaintiff had been completed before Lombard began to
participate.
[22]
Lombard did not file a statement of defence to the plaintiffs action
until February 9, 2009.
[23]
The purpose of an award of costs is to indemnify successful litigants;
deter frivolous proceedings and defences; encourage parties to deliver
reasonable offers to settle; and discourage improper or unnecessary steps in
litigation: see Skidmore v. Blackmore (1995), 122 D.L.R (4th) 330, at para. 37.
[24]
My conclusion is that the plaintiff is entitled to her costs in respect
to Phase 1 of the trial against Lombard. It was Lombard that decided to
contest liability and quantum. Ms. Daniceks position was upheld on each
of these issues. Quantum far exceeded the settlements she had reached with Mr. Poole,
Alexander Holburn and the other third parties.
[25]
Lombard was not, ultimately, liable for the judgment against
Mr. Poole. This was because of the conclusion reached in the second phase
of the trial that the Lombard policy did not provide coverage. But that was
not the issue in Phase 1 of the trial. (There was evidence relevant to
the coverage issue adduced at trial. That is because witnesses were called at
the first phase who had evidence to give in respect to the second phase.) The
issues decided in Phase 1 were liability of Mr. Poole and quantum of
damages.
[26]
In my view having in mind the principle of an award of costs, costs
should be awarded against Lombard in respect of Phase 1 from the time that
it filed a statement of defence. The plaintiff was substantially successful on
the issues involving Lombard in that part of the trial.
BULLOCK OR SANDERSON ORDER
[27]
Ms. Danicek seeks a Sanderson order (or alternatively a Bullock
order) directing Lombard, or alternatively Mr. Poole/his insurers, to pay the
costs Ms. Danicek has been ordered to pay the Lis.
[28]
A Sanderson order is one in which the unsuccessful defendant is
ordered to pay costs directly to the successful defendant. A Bullock
order permits the plaintiff to claim the amount of costs which the plaintiff
pays to the successful defendant as a disbursement in the assessment of costs
against an unsuccessful defendant.
[29]
The plaintiff, then, is seeking a discretionary order provided for in
Rule 14‑1(18):
14‑1 (18) If the costs of
one defendant against a plaintiff ought to be paid by another defendant, the
court may order payment to be made by one defendant to the other directly, or
may order the plaintiff to pay the costs of the successful defendant and allow
the plaintiff to include those costs as a disbursement in the costs payable to
the plaintiff by the unsuccessful defendant.
[30]
The rule was described in Robertson v. Wing (1980), 26 B.C.L.R.
225 (C.A.). Mr. Justice Lambert held in that case that in order for
either a Sanderson or a Bullock order to be considered, there
must be this threshold test to be met: it must have been reasonable for the
plaintiff to have joined the successful defendant in the action. If that is
the case, it is left to the judge to exercise her or his discretion in deciding
what would be just: see Times Square Holdings Ltd. v. Shimizu, 2001
BCCA 667, at para. 9.
[31]
Ms. Danicek argues that in the exercise of this discretion,
something must have been done on the part of the unsuccessful defendant, such
as asserting the other defendant was the culprit, to warrant his being ordered
to pay the costs of the successful defendant: Grassi v. WIC Radio Ltd.,
2001 BCCA 376.
[32]
Here the plaintiff argues that, while the lead defendants (the Lis) were
parties to a different action, the Ontario Court of Appeals judgment in Moore
(Litigation guardian of) v. Wienecke), 2008 ONCA 162, holds that Sanderson
orders can be made requiring defendants in one action to pay the costs of the
defendants in another action.
[33]
Ms. Danicek argues that the foremost consideration is whether the
defendants at trial tried to shift responsibility onto each other.
[34]
Counsel for Ms. Danicek argues that Mr. Poole collected
medical opinions prior to settlement and later Lombard amassed medical opinions
before and during the trial, alleging that the plaintiffs ongoing disability
arose from the motor vehicle accident with the Lis.
[35]
For example, on December 24, 2008, counsel for Mr. Poole
served a number of reports on the plaintiff, including a report of a Dr. Zasler,
a neurologist. Dr. Zasler stated at p. 62 of that report:
It is my opinion, stated with a
degree of medical probability, that Ms. Danicek would likely still be
working if not for the 2002 [motor vehicle] accident. Additionally, it is my
opinion, also stated with a degree of medical probability, that if she receives
appropriate, coordinated, specialty care for her chronic pain disorder …
which clearly well pre-dated her 2001 accident, and was aggravated by the 2001
and subsequently 2002 injuries, that it is more likely or not that she would be
able to return to work as an attorney.
[36]
Ms. Danicek argues that Lombard relied on this report and that it
was not until late in the trial, after the plaintiff had closed her case, that
counsel for Lombard indicated that he did not intend to file this report.
[37]
The plaintiff also points to Lombards closing submissions where it is submitted
that … but for the motor vehicle accident, the plaintiff would have fully
recovered in time. Therefore, there can be no future loss of capacity
attributable to the dance floor incident.
[38]
Mr. Poole argues that a Bullock or Sanderson order
would be completely inappropriate. He argues that the whole purpose of the
settlement agreement was to eliminate his exposure to liability. He points to
the fact that Ms. Danicek agreed to hold Mr. Poole harmless for any
further claims, including costs. In that sense, Mr. Poole argues, her
pursuit of the Sanderson order is a breach of the settlement agreement.
[39]
Even apart from the settlement agreement, Mr. Poole argues that the
two law suits were separate causes of action with separate liabilities. This is
particularly so in light of an amendment Ms. Danicek made to her statement
of claim in the Li action on September 23, 2009. In that
claim, she expressly limited her claim against the Lis to that portion of her
damages corresponding to the allegation of fault to the Lis. This meant that
the Lis liability to Ms. Danicek would be limited to any discrete loss or
damage caused by the Li MVA and only the portion of so-called indivisible
injuries that corresponded to the degree of fault of the Lis.
[40]
Mr. Poole argues that Ms. Daniceks action against him does
not include any entitlement for legal costs payable in a completely separate
law suit on a different matter.
[41]
The language of Rule 14‑1(18) which provides for Bullock
and Sanderson orders only contemplates parties to the same action.
Although that has been extended in Ontario, the British Columbia Court of
Appeal has referred to this as an issue to be left for another case: see Gill
v. Lindstrom, 2004 BCCA 632, para. 14.
[42]
Finally, Mr. Poole argues, the requirements for a Bullock/Sanderson
order are not met in this case in any event. Counsel referred to Gill, supra,
where there were two separate actions for personal injuries arising out of two
motor vehicle accidents. Both defendants were represented by the same counsel.
[43]
In the middle of the trial, the trial judge consolidated the two
actions, converting two law suits into one. The trial judge made a Bullock
order because the respondent had to delve into the circumstances of both
accidents and the medical evidence was intertwined. The Court of Appeal took a
different view. According to the Court, it could not be said that there was
anything done by the appellant to shift blame to the other defendant.
[44]
Lombard adopts the arguments made by Mr. Poole, and in addition
makes these points:
·
the plaintiff entered into a settlement agreement with Mr. Poole
in which she agreed to save him harmless from any further claims including
costs;
·
the plaintiff is in breach of the settlement agreement by seeking
an order that Mr. Poole be required to pay extra costs by way of a Sanderson
order;
·
the two actions were separate law suits arising from separate
causes of action and separate liabilities;
·
there is no British Columbia authority which permits Bullock
or Sanderson orders where there are separate causes of action; and
·
the requirements for a Bullock or Sanderson order
have not been met in this case.
[45]
Lombard recognizes that the Ontario Court of Appeal in Moore, supra,
extended the use of a Sanderson order in similar circumstances, but
argues that that is not governing authority in British Columbia.
[46]
Lombard relies as well on Grassi, supra, where Southin J.A.
stated:
There must be something which the
unsuccessful defendant did, such as asserting the other defendant was the
culprit in the case, to warrant his being made to reimburse the plaintiff for
the successful defendants costs. That was what happened in Bullock v.
London General Omnibus Co. The omnibus company asserted the cart driver
was the cause of the accident. (at para. 33)
[47]
Lombard argues that the plaintiff should not have kept any of the
defendants in the action until judgment given that: (1) the Lis made a
settlement offer which turned out to be more than reasonable; (2) Ms. Danicek
settled with Mr. Poole and only went to trial on the chance there would be
further insurance coverage for her claims against him; and (3) Ms. Danicek,
as much as Mr. Poole, lost on the coverage issue. That is to say, because
Mr. Pooles actions were not covered by the Lombard policy, Lombard was
not required to pay any part of the judgment awarded to Ms. Danicek
against Mr. Poole.
[48]
Finally, Lombard argues that it was Ms. Danicek herself who
testified in chief that she had been hopeful of a full recovery from the
accident until she was involved in the motor vehicle accident. She then
regressed and never got back to the same level of improvement. As well, in
closing submissions, her counsel advanced as a matter of law that almost all of
the damages flowed from the motor vehicle accident. Those submissions were
made prior to the closing submissions of Lombard.
[49]
This is not a case for a Bullock or Sanderson order. It
was the plaintiff more than Lombard who argued that the claim was properly made
against the motor vehicle accident defendants. Lombards case was that Mr. Poole
was not liable, and that, if he was, the damages were not as severe as the
plaintiff argued. Lombard did not succeed on these points, but it did not
point the finger at the Lis; the focus of its case was not that it was the Li
defendants who were responsible for the damages.
[50]
The reasoning in Bratanich v. Daisley, 2006 BCSC 843, is
applicable here with respect to whether Lombard should bear the costs that
Ms. Danicek must pay to the Lis:
39. The plaintiff was not required to bring the second
action. He did so to recover damages caused by a tort different from the tort
for which he claimed damages against Mr. Daisley. He was advancing a claim
for damages for which Mr. Daisley, the first defendant, was not liable. That
action was dismissed. The plaintiff is not liable in costs to Mr. Lang
because of anything Mr. Daisley did. He is liable in costs to Mr. Lang
because his claim against Mr. Lang was unsuccessful.
40. Rule 57(18) [now Rule 14‑1(18)] is of
application only where the costs of one defendant against a plaintiff ought to
be paid by another defendant. There is no reason why Mr. Daisley ought
to pay the costs of Mr. Lang.
41. I am of the opinion that the
plaintiff is not entitled to recover from Mr. Daisley the costs that are
recoverable against the plaintiff by Mr. Lang.
[51]
In any event, Rule 14‑1(18) has not been interpreted as
referring to separate actions. The costs of one defendant being paid by another
defendant implies that this is all in the same action.
SHOULD THE COSTS AWARD BE BASED ON PREPARATION AND ATTENDANCE BY COUNSEL?
[52]
I have already ruled that the defendants in the Li action were entitled
to costs based on to counsel preparing and attending. The same order is appropriate
here.
SHOULD THERE BE AN AWARD OF DOUBLE COSTS AGAINST LOMBARD?
[53]
On December 8, 2009, counsel for Ms. Danicek emailed counsel for
Lombard a proposal to settle quantum of the claim against Mr. Poole in the
amount of $2,000,000 plus costs. However the offer did not include the precise
language prescribed by Rule 37B in the former Rules of Court.
(1) In this rule, offer to settle means
(a) an offer to settle made and
delivered before July 2, 2008 under Rule 37, as that rule read on the date of
the offer to settle, and in relation to which no order was made under that
rule,
(b) an offer of settlement made
and delivered before July 2, 2008 under Rule 37A, as that rule read on the date
of the offer of settlement, and in relation to which no order was made under
that rule, or
(c) an offer to settle, made after
July 1, 2008, that
(i) is made in writing by a party
to a proceeding,
(ii) has been delivered to all
parties of record, and
(iii) contains the following sentence: The
.[name of
party making the offer]
. reserves the right to bring this offer to the
attention of the court for consideration in relation to costs after the court
has rendered judgment on all other issues in this proceeding.
[54]
The wording of Rule 37B is clear. This was not an offer to settle within
the meaning of the rules. It did not state the plaintiff reserved the right to
bring the offer to the attention of the court. I decline to order double
costs.
COSTS OF THIS APPLICATION
[55]
The plaintiff has been largely successful in this application and is
entitled to costs.
Kelleher J.