Canada: The Cost Consequences Of Playing Hardball

In our justice system, it is generally accepted that the unsuccessful party to a lawsuit is liable to pay the winner's costs. However, a recent decision of the Ontario Superior Court has held that a party's costs award can be severely affected if they do not make efforts to settle a case or concede a position before trial.

In Teglas v. City of Brantford et al., it was held that, even when a party succeeds at trial, taking hardball positions when it comes to settling and simplifying matters can significantly impact the ultimate costs award. This is especially true when a plaintiff's claim has merit, even though they don't ultimately prevail.

In that case, the plaintiff was assaulted while walking through a parking garage after work and he had to undergo surgery as a result. The assault lasted only seconds and the perpetrators were not apprehended.

The plaintiff sued the City of Brantford and the security company contracted by the city to protect the parking garage. The defendants were represented by counsel appointed by an insurance company. They did not dispute that the plaintiff was injured and the quantum of damages were settled before trial. However, the defendants alleged that they were not responsible for the assault due to neglect or improper security; and, if there was neglect, it did not cause the injury.

At trial, it was held that the defendants owed the plaintiff a duty of care. It was also held that the duty was breached and it was reasonably foreseeable that the breach could have caused injury or loss. Specifically, the defendants assumed responsibility for people trafficking the parking garage and keeping them reasonably safe on the premises. It was also noted that there were definite safety concerns with the garage and the defendants failed to prevent the risk of harm. The possibility of a harmful incident was therefore foreseeable.

However, it was found that the defendants' breach of their duty of care did not cause the plaintiff's injury. Given that the assault happened so quickly, the defendants taking steps to fulfill their duty of care could not have prevented it. As such, the defendants were not held to be liable for the plaintiff's injury.

The defendants sought a costs award of $60,000 for their success at trial.

In determining the appropriate costs award, Justice Turnbull held that the defendants should be penalized due to their conduct and failure to cooperate with the plaintiff. In particular, the defendants did not make any offers to settle the case, even for a nominal sum and they refused the plaintiff's request to go to mediation on two occasions.

It was acknowledged that insurers often force matters to trial where they feel that there is no liability on the part of their clients and that they have a "perfect right" to do so. Such "hardball" positions are therefore "fairball", Turbull stated. However, that does not necessary mean that an insurer should be given a large costs award, even when they are completely successful on their position.  In this regard, Turnbull stated that this strategy often "forces a plaintiff of modest means to not proceed due to the potential risk of an adverse costs award". Consequently, when a plaintiff opts to go to trial with a meritorious claim and is ultimately unsuccessful, it should not be subject to a full costs award in every case.

In this case, even though the plaintiff was not successful at trial, his claim was by no means frivolous and the bulk of it had significant merit. It was also noted that the defendants could have saved the court time if they had conceded that they owed a duty of care and that the harm caused by the breach was foreseeable. If the defendants had conceded those points, the issue of causation would have been the only matter to be determined at trial, which would have shortened the hearing significantly.

Turnbull therefore reviewed the costs claimed by the defendants and took the above-noted factors into consideration. On top of that, he noted that the defendants requested two adjournments of the trial, which resulted in costs thrown away for the plaintiff in the amount of $25,000. The plaintiff had also incurred significant expenses in retaining a medical expert.

In the end, the costs claimed by the defendants were set-off by the amounts incurred by the plaintiff. They were also reduced by a further 50 percent because there was divided success at trial. This reduced the costs payable by the plaintiff to a modest $13,743.92.

This decision is good news for plaintiffs who are apprehensive about bringing meritorious claims to trial, even when success is not a certainty. But it will likely cause its fair share of controversy insofar as it sanctions insurers and similar parties for taking hardball positions when they feel that they bear no liability and are ultimately successful at trial.

This decision also leaves some important questions about the consequences of refusing to make offers to settle and conceding positions before trial. In this case, Turnbull felt that the defendants' liability regarding the duty of care and foreseeability of harm were clear and therefore the defendants should have been penalized for not conceding those points. However, it is unclear how this would play out in situations where liability is not as clear-cut. This may result in parties feeling the need to concede positions which may not be in their clients' interests out of fear of cost consequences.

Additionally, it leaves open the question about the cost consequences of not offering to settle a matter before trial. In this case, the defendants assumed that they bore no liability and this assumption proved to be correct. Nonetheless, Turnbull still held that it would have benefitted them if they had offered to settle for a nominal sum or at least agreed to participate in mediation, given that the plaintiff's claim was meritorious at least in part. In other cases, however, the circumstances may not be as clear, especially when a party feels that a claim has no merit whatsoever. In such cases, they may still feel the need to make an offer to settle out of fear of cost consequences.

The issues raised in this case will undoubtedly give litigants a lot to think about next time a matter is bound for trial, especially when insurers are involved. Given the potential cost consequences of taking a hardball position, it may be the case that playing hardball is not necessarily "fairball" after all.