



COURT OF APPEAL FOR ONTARIO

CITATION: Carroll v. McEwen, 2018 ONCA 902

DATE: 20181204

DOCKET: C62293

Strathy C.J.O., Hoy A.C.J.O., Feldman, Brown and
    Paciocco JJ.A.

BETWEEN

Barbara Lynn Carroll by her Litigation Guardian
    Shannon Luknowsky, Shannon Luknowsky, Jeffrey Carroll and Shannon Luknowsky as
    Executor for the Estate of Lorne Carroll

Plaintiffs (Appellants)

and

Robert McEwen, Caroline McEwen, Aviva Canada Inc.
    and Pilot Insurance Company

Defendants (Respondents)

Geoffrey D.E. Adair, Joseph Y. Obagi and Elizabeth A. Quigley,
    for the appellants

Kevin P. Nearing and Erin H. Durant, for the respondents
    Robert and Caroline McEwen

Stephen G. Ross and Gemma Healy-Murphy, for the
    respondents Aviva Canada Inc. and Pilot Insurance Company

Kristian Bonn, for the intervener Ontario Trial Lawyers
    Association

Heard: May 1-2, 2018

On appeal from the judgment of Justice Hugh R. McLean of
    the Superior Court of Justice, dated October 30, 2015, with reasons reported at
2016 ONSC 2075, 37 C.B.R. (6th) 70
.

By the Court:

A.

INTRODUCTION

[1]

This appeal was heard together with the appeal in
Cadieux v.
    Cloutier
,

2018 ONCA 903,
because both appeals deal with the common
    issue of the treatment of statutory accident benefits (SABs) under s. 267.8
    of the
Insurance Act
, R.S.O. 1990, c. I.8. The
    reasons for judgment are being released concurrently.  This appeal deals with
    the assignment of future SABs to the tort liability insurer, while the
Cadieux
appeal deals with the deduction of SABs received
    before trial from the tort award.

[2]

On March 28, 2009, Barbara Carroll, then approaching her 60
th
birthday, was catastrophically injured when she was hit by a vehicle while
    walking on a road in a township near Ottawa. She was so badly injured that she
    will require care for the rest of her life. She now lives with profound
    physical limitations and a severe traumatic brain injury. It is not contested
    in this proceeding that the damages suffered by Ms. Carroll in the accident are
    in the approximate amount of $4,000,000.

[3]

The vehicle that struck Ms. Carroll was operated by Robert McEwen and was
    owned by his wife, Caroline McEwen. Ms. Carroll and members of her family (the
    appellants) sued the McEwens. The McEwens denied liability, claiming that Ms.
    Carroll caused the accident.

[4]

The McEwens do not have deep pockets. They carried only $1,000,000 in
    liability insurance, through Aviva Canada Inc. (Aviva), and have since been declared
    bankrupt and obtained a discharge.

[5]

Since the damage claims made by the appellants far exceeded the coverage
    under the McEwens Aviva policy, the appellants also claimed benefits under Ms.
    Carrolls $1,000,000 inadequately insured motorist coverage included in the
    OPCF 44R Family Protection Coverage endorsement of her automobile insurance
    policy with Pilot Insurance Company (Pilot). Like the McEwens, Aviva and Pilot
    denied liability. They, too, have been sued by the appellants. Along with the
    McEwens, they are currently respondents in this appeal.

[6]

By coincidence, the two insurance policies  the Aviva policy and the
    Pilot policy  are now funded out of the same pocket, as Aviva has since acquired
    Pilot.

[7]

The litigation did not settle despite multiple offers. After a seven-week
    trial ending in October 2015, the jury determined that Ms. Carroll and the McEwens
    were jointly responsible for the accident. The McEwens were 62 percent liable,
    with Ms. Carroll bearing 38 percent responsibility. The appellants were awarded
    $2,610,774.32 in damages, as well as costs of $375,000. The verdict specified
    that the damages awarded included a lump sum award of $2,232,000 for Ms.
    Carrolls future care costs.


[8]

Aviva and Pilot received a conditional order from the trial judge that
    if they pay the judgment in full, they will receive an assignment of the future
    SABs that Ms. Carroll is entitled to receive from Pilot under the regime in
    Part VI of the
Insurance Act
. In effect, this conditional
    assignment order gave Aviva and Pilot an option that could reduce their net
    liability. If Aviva and Pilot determined that the outstanding SABs would exceed
    the $2,000,000 in combined liability coverage by more than $610,774.32, they
    could reduce their total combined liability to less than $2,000,000 by paying
    the judgment in full and taking the assignment of the future SABs for attendant
    care, and medical and rehabilitation benefits.

[9]

The appellants appeal the conditional assignment
    order on two grounds. They claim that the conditional assignment order violates
    the matching principles required by this courts decision in
Gilbert v.
    South
,
2015 ONCA 712, 127 O.R. (3d) 526,
and that,
    in any event, the conditional assignment order was premature since the judgment
    they won had not been paid when the conditional assignment order was made.

[10]

The appellants
    also seek leave to appeal the costs order they received of $375,000 inclusive
    of all fees, disbursements and HST. This award is less than half of the
    $795,616.09 that they claimed in partial indemnity costs. The trial judge
    offered several reasons for reducing the costs order, including sanctioning the
    appellants counsel for attempting to trick the respondents relating to a
    settlement offer.

[11]

For the
    reasons below, we would dismiss the appeal from the conditional assignment
    order and deny leave to appeal the costs order. The trial judge properly
    exercised his discretion in granting the conditional assignment order, and there
    are no strong grounds for concluding that the trial judge erred in ordering the
    costs that he did.

B.

THE ISSUES

[12]

The appeal
    before this court is narrow. Neither the allocation of liability nor the
    quantum of damages is contested. There are two general issues.

[13]

The first
    or main issue is whether the trial judge erred in assigning to Aviva and Pilot
    Ms. Carrolls right to SABs in respect of medical and rehabilitation benefits
    and attendant care benefits, provided the judgment is paid in full. Two
    sub-issues arise:

(1)

Did the trial judge err in law in
    granting the conditional assignment where the jurys lump sum assessment did
    not allow the court to match the award of future care costs to the particular
    accident benefits that might be received in the future?
[1]

(2)

Did the trial judge err in law in
    granting the conditional assignment order prematurely, before the judgment had
    been paid in full?

[14]

The second
    general issue relates to the costs order. The trial judge reduced the costs order
    for three reasons, namely: (1) the behaviour of the appellants counsel
    relating to a September 11, 2015 settlement offer made by the respondents; (2)
    the lack of benefit to the appellants in pursuing the trial; and (3) behaviour
    by the appellants that extended the trial. The appellants claim that each of
    these bases for doing so was in error, so each must be considered in turn. The threshold
    question is whether leave to appeal the costs order should be granted on any or
    all of these bases. If leave is granted, it must then be determined whether the
    trial judge erred in the costs order he made.

C.

ISSUE 1: THE ASSIGNMENT OF
    STATUTORY ACCIDENT BENEFITS

(1)

The Statutory Assignment Scheme

[15]

As
    described in detail in
Cadieux
,
s. 267.8
    of the
Insurance Act
addresses the intersection
    of tort damages and SABs to prevent double recovery by eligible claimants. It
    does this in three ways.

[16]

First, ss.
    267.8(1), (4) and (6) require the tort award to be reduced by corresponding categories
    of designated SABs that have been received by the injured party before trial.
    Deductibility of SABs is at issue in
Cadieux
,
    but is not directly before us in this case.

[17]

Second, where
    damages have been recovered for income loss, loss of earning capacity, expenses
    that have been or will be incurred for health care, or other pecuniary loss,
    SABs subsequently received that correspond to those general categories of
    damages are subject to a statutory trust to facilitate repayment in favour of
    the persons who paid the damages: ss. 267.8(9) and (10).

[18]

Third, s. 267.8(12)
    empowers courts to exercise discretion to assign broad categories of future SABs
    payments to the tortfeasor or the tort liability insurer.

[19]

The trust
    and assignment provisions of  s. 267.8 are set out below:

(9) A plaintiff who recovers damages for income loss,
    loss of earning capacity, expenses that have been or will be incurred for
    health care, or other pecuniary loss in an action for loss or damage from
    bodily injury or death arising directly or indirectly from the use or operation
    of an automobile shall hold the following amounts in trust:

1. All payments in respect of the incident that
    the plaintiff receives after the trial of the action for statutory accident
    benefits in respect of income loss or loss of earning capacity.

2. All payments in respect of the incident that
    the plaintiff receives after the trial of the action for income loss or loss of
    earning capacity under the laws of any jurisdiction or under an income
    continuation benefit plan.

3. All payments in respect of the incident that the
    plaintiff receives after the trial of the action under a sick leave plan
    arising by reason of the plaintiffs occupation or employment.

4. All payments in respect of the incident that
    the plaintiff receives after the trial of the action for statutory accident
    benefits in respect of expenses for health care.

5. All payments in respect of the incident that
    the plaintiff receives after the trial of the action under any medical,
    surgical, dental, hospitalization, rehabilitation or long-term care plan or
    law.

6. All payments in respect of the incident that
    the plaintiff receives after the trial of the action for statutory accident
    benefits in respect of pecuniary loss, other than income loss, loss of earning
    capacity and expenses for health care.

(10) A plaintiff who holds money in trust under
    subsection (9) shall pay the money to the persons from whom damages were
    recovered in the action, in the proportions that those persons paid the
    damages.

...

(12) The court that heard and determined the action
    for loss or damage from bodily injury or death arising directly or indirectly
    from the use or operation of the automobile, on motion, may order that, subject
    to any conditions the court considers just,

(a) the plaintiff who recovered damages in the
    action assign to the defendants or the defendants insurers all rights in
    respect of all payments to which the plaintiff who recovered damages is
    entitled in respect of the incident after the trial of the action,

(i) for statutory
    accident benefits in respect of income loss or loss of earning capacity,

(ii) for income loss
    or loss of earning capacity under the laws of any jurisdiction or under an
    income continuation benefit plan,

(iii) under a sick
    leave plan arising by reason of the plaintiffs occupation or employment,

(iv) for statutory
    accident benefits in respect of expenses for health care,

(v) under any medical,
    surgical, dental, hospitalization, rehabilitation or long-term care plan or
    law, and

(vi) for statutory
    accident benefits in respect of pecuniary loss, other than income loss, loss of
    earning capacity and expenses for health care; and

(b) the plaintiff who recovered damages in the
    action co-operate with the defendants or the defendants insurers in any claim
    or proceeding brought by the defendants or the defendants insurers in respect
    of a payment assigned pursuant to clause (a).

(13) Subsection (9) no longer applies if an order is
    made under subsection (12).

[20]

As can be
    seen, s. 267.8(12)(a) provides for the assignment of three broad categories of
    SABs, namely: those in respect of income loss or loss of earning capacity (s.
    267.8(12)(a)(i)); those in respect of expenses for health care (s.
    267.8(12)(a)(iv)); and those in respect of pecuniary loss, other than income
    loss, loss of earning capacity and expenses for health care (s.
    267.8(12)(a)(vi)).
Insurance Act
, s. 224(1)
    defines health care as including all goods and services paid for by medical,
    rehabilitation and attendant care benefits.

[21]

This case
    raises questions about when an assignment order can be made of SABs paid in
    respect of expenses for health care under the current legislation.

(2)

The Trial Judges Determination

[22]

After a
    trial in which the majority of evidence was about Ms. Carrolls future care
    requirements, including
medical and
    rehabilitation benefits, and attendant care benefits
, the jury awarded
    the appellants $4,083,000. The answers provided to the jury questions
    identified Ms. Carrolls damages. They consisted of general damages in the amount
    of $300,000 for pain and suffering, and $3,600,000 for future care costs. The
    jury questions did not seek further particularization of the future care
    costs.

[23]

Adjusted
    to account for her contributory negligence, Ms. Carrolls net jury award was
    $186,000 for general damages, and $2,232,000 for future care costs.

[24]

Aviva and
    Pilot sought an assignment of the future SABs Ms. Carroll would receive for
    health care costs, if they paid the tort award in full. Although the tort award
    of $2,610,744.32 exceeded the $2,000,000 in insurance coverage provided by
    Aviva and Pilot, payment of that award in full coupled with an assignment of
    future SABs could reduce Aviva and Pilots net liability. If Aviva and Pilot
    determined that the outstanding health care SABs would not exceed the
    $2,000,000 in combined liability coverage by more than $610,774.32 they would
    be better off paying only the $2,000,000 and foregoing the benefits of any
    assignment order they obtained. But if they determined that the future health
    care SABs payments would exceed $610,744.32, they could pay the entire award,
    and then rely on their assignment rights under the order to reduce their total
    net obligation by the amount the SABs exceeded $610,744.32.

[25]

The appellants,
    not wanting to take the chance that their net recovery would be diminished by
    an assignment, opposed the request. They relied upon the decisions of this
    court  primarily
Bannon v. McNeely

(1998), 38 O.R. (3d) 659 (C.A.), and
Gilbert
 to argue that a trial judge should not order
    an assignment of SABs unless the insurers can demonstrate beyond dispute that the
    future SABs payments would qualitatively and temporally match the tort damages
    awarded by the jury. In other words, it must be shown with certainty that the
    SABs and the jury award cover the same kind of health care costs relating to
    the same period of loss. They argued that the jury question did not provide
    sufficient specificity to meet this strict matching standard.

[26]

The appellants
    also argued that no assignment should take place as it is unlikely that the
    judgment will be paid, given the insurance limits and the McEwens bankruptcy.

[27]

The trial
    judge disagreed. He held that the
Gilbert
principles were satisfied
    because it was clear at the trial that the only major damage issue was the
    cost of future care, and that all of the evidence demonstrated that the nature
    and need for future care was akin to health benefits. (This latter reference
    is from
Bannon
, at p. 679, a head of damage
    or type of loss akin to that for which the no-fault benefits were intended to
    compensate.) The trial judge was not troubled by the prospect that payment of
    the judgment may be unlikely, because the appellants were aware of this risk
    before commencing the litigation.

[28]

The trial
    judge therefore made a conditional s. 267.8(12)(a)(iv) assignment order in
    favour of Aviva and Pilot. Specifically, he ordered that [u]pon payment of
    the said sum of $2,610,774.32 plus costs and post-judgment interest the two
    insurers would be assigned Ms. Carrolls entitlement to SABs in respect of
    medical and rehabilitation benefits and attendant care benefits available to
    her from her own insurer, Pilot.

(3)

Analysis

(a)

The trial judge did not err in his assessment of the matching requirement

[29]

The
    appellants contend that a strict matching approach is justified because
    language in certain subsections of s. 267.8 links the benefit payment to the
    particular damages award. They point to s. 267.8(1)1 which refers to 
the
income loss and loss of earning
    capacity, and s. 267.8(4)1 which refers to 
the
expenses for health care (emphases added). The
    appellants claim these are references to benefits in respect of the tort
    award, which direct strict identification and matching between particular SABs
    and damages for the identical head of damages awarded by the jury within the
    same silo. They suggest that although the trust and assignment provisions do
    not similarly include the word the, those provisions should be interpreted in
    the same way to achieve consistency in interpretation and application.

[30]

The appellants
    assert that because the assignment provisions are a codification of common law
    Cox and Carter orders, the general principles articulated in
Bannon

remain applicable.

[31]

They argue
    that, in this case, the strict matching requirement cannot be satisfied because
    the jury award for future care costs was not particularized. They also argue
    that the future SABs for
medical and
    rehabilitation benefits and attendant care benefits
did not match the
    jury award for future care costs because the SABs would be exhausted shortly
    after trial, but the jury award was for life time damages. In effect, in making
    this latter argument the appellants position is that it does not matter
    whether the jury award necessarily covered the same damages; since the SABs payments
    can be linked temporally to specific damage periods while the jury award cannot
    be, the temporal matching required by strict matching standards is defeated.

[32]

The respondents maintain that no strict matching
    principle should be imported into the current statutory scheme, as the
    significant amendments that were subsequently made to the legislation after
Bannon
address the policy rationale underlying that decision, namely, ensuring fair
    compensation and preventing double recovery. They contend that
Gilbert
should be overruled because it erroneously applied the
Bannon
approach
    and cannot be reconciled with the decision of the Supreme Court of Canada in
Gurniak
    v. Nordquist
, 2003 SCC 59, [2003] 2 S.C.R. 652.

[33]

The McEwens alternately suggest that if the
    strict matching approach applies, it can be satisfied: as in
El-Khodr
    v. Lackie
, 2017 ONCA 716,
139 O.R. (3d) 659
, leave to appeal to S.C.C. refused, [2017] S.C.C.A. No. 461, Ms.
    Carroll is catastrophically impaired, no temporal matching problem arises and
    there are no benefits for which assignment is requested that would not be
    permitted under the legislation.

[34]

For the
    reasons that follow, we do not agree with the appellants submissions. In our
    view, the silo approach adopted in
Cadieux
should similarly apply to the assignment of SABs.

[35]

In
Cadieux
, we outlined the historical development of two inconsistent
    approaches to matching SABs to tort damages, as well as the state of the
    authorities. We noted that while the broad silo approach has more recently been
    applied to the deduction of SABs received or available before trial, the strict
    approach has continued to apply to those assignment cases that cannot be
    factually distinguished from
Gilbert
. This
    state of the law is unsatisfactory.

[36]

In
Cadieux
, in the face of this conflicting authority, we affirmed
    that the silo approach applies to the deduction provisions. We did so because
    the silo approach is consistent with the current statutory language, is fair to
    plaintiffs, defendants, and their insurers, and promotes efficiency in motor
    vehicle accident litigation. It is also consistent with the reasoning in
Gurniak
.

[37]

In our
    view, these considerations apply equally in assignment cases. Section 267.8 is
    integrated in the sense that, together, its provisions are meant to ensure fair
    compensation and prevent double recovery. There is no principled or technical reason
    why a different matching regime should apply to SABs received after trial. While
Bannon
can be distinguished as being based on a prior statutory
    regime, and the result in
Gilbert
was based on its unique facts, to
    the extent that both cases support a strict matching approach under the current
    statutory scheme, they should be overruled in light of
Gurniak
. The
    silo approach is to be applied to s. 267.8 as a whole.

[38]

As we
    noted in
Cadieux
, the strict approach was
    driven by the statutory regime in force at the time
Bannon
was decided. That statutory regime directed that the present value of the future
    no fault benefits the plaintiff was entitled to would be deducted from the
    damages award against the defendant. Plaintiffs who ultimately proved to be
    ineligible to receive anticipated benefits would therefore be under-compensated,
    hence the need for strict proof and strict matching. The current statutory
    trust and assignment provisions make it unnecessary to require strict proof of
    entitlement to future benefits. They pass no risk of under-compensation to a
    plaintiff. The benefits are assigned or held in trust as and when they are
    received until such time as the defendant or its insurer has been reimbursed
    for payments made under the judgment in respect of the particular silo.

[39]

The trust
    and assignment provisions do not contain language that requires a departure
    from the silo approach we endorsed in
Cadieux
.
    SABs to be assigned or held in trust are similarly grouped into three broad
    categories or silos. Like the deduction provisions, the statutory language of
    the trust and assignment provisions does not support an interpretation that
    permits further subdivision of the SABs enumerated within those silos.

[40]

In
Cadieux
, we noted that the language of the deduction
    provisions which directs that all payments within each of the described silos
    will reduce a tort award, is inconsistent with offsetting some SABs payments
    within the designated silos against damages, but not others. Like those
    provisions, s. 267.8(12) requires the assignment of all rights in respect of
all payments
with respect to the
    enumerated categories of SABs. Subsection 267.8(9), which requires the payment
    of SABs to be held in trust, also specifically includes this all payments
    language.

[41]

We reject
    the appellants submissions with respect to the impact of the word the in ss.
    267.8(1)1 and (4)1. In our view, the word the does not bear the significance
    the appellants sought to ascribe to it. The word the in these provisions
    describes the SABs that will reduce a tort award, not the tort award itself.
    Moreover, the legislation does not use the word the in s. 267.8(6) to modify
    other pecuniary loss SABs that will reduce a tort award, or in describing the
    SABs that are caught by the trust or assignment provisions. The use of the word
    the is simply part of the grammatical structure chosen in some of the
    provisions to identify the kind of SABs that can reduce a tort award.

[42]

Nor can
    the fact that the assignment of SABs is discretionary, while the deduction
    provisions and the trust provisions are mandatory, have any rational bearing on
    the type of matching that is required. The appellants do not argue otherwise.

[43]

Moreover, as
    we noted in
Cadieux
, strict matching
    encourages formalistic legal strategies and arguments that remove the focus
    from whether double recovery is occurring, whether in the assignment context or
    otherwise.

[44]

In this
    case, for example, it is obvious that there is overlap between the tort award
    and SABs payments. Yet, by using strict matching authorities the appellants
    sought to benefit from the fact that the jury question did not specify the
    precise kinds of 
future care costs
the jury was awarding, or their amounts. The argument descended into a debate
    about who is responsible for the form of jury questions.

[45]

We
    therefore do not accept the appellants arguments that the silo method is
    unfair. Nor has anything the appellants said dissuaded us from our conclusion expressed
    in
Cadieux

that
    the silo method promotes efficiency in motor vehicle accident litigation.

[46]

It is not
    contested that here, the damages award for future care costs falls exclusively
    within the health care silo and that so, too, do the SABs assigned by the trial
    judge. The trial judge was therefore entitled to conditionally assign to Aviva
    and Pilot, SABs in respect of medical and rehabilitation benefits and
    attendant care benefits available to Ms. Carroll from her own insurer,
    Pilot.

(b)

The trial judge did not err by making a premature assignment order

[47]

The trial
    judge described the appellants as arguing at trial that no assignment should
    take place as it is unlikely that the judgment will be paid, given the
    insurance limits and the McEwens bankruptcy. That argument was fleshed out
    before us. The appellants urge that the trial judge erred in law by making a
    conditional assignment order before the judgment had been paid in full. In
    effect, the complaint is that the conditional assignment order was premature.

[48]

The appellants
    base this argument on the language in s. 267.8(12)(a) that authorizes the trial
    judge to assign SABs to the defendants or the defendants insurers from the
    plaintiff who recovered damages in the action. Since Aviva and Pilot had not
    paid the $2,610,774.32 at the time of trial, the appellants had not recovered
    damages in the action. The appellants therefore contend that the conditional assignment
    order was not authorized by s. 267.8(12)(a), and the trial judge erred in
    making it.

[49]

In our
    view, the trial judge did not err in this regard. Requiring a damages award to
    be paid before an assignment order can be made is impractical. Obviously, a
    damages award cannot be paid before the trial has ended and the damages to be
    recovered have been identified. The appellants interpretation of s. 267.8(12)(a)
    would require post-trial motions to obtain the assignment of future SABs, an
    expensive and inefficient use of judicial resources.

[50]

More
    importantly, s. 267.8(12) avoids the need for subsequent assignment motions by
    expressly empowering trial judges to make orders to assign subject to any
    conditions the court considers just. This empowers trial judges to make the
    assignment itself conditional. Under the conditional assignment order made by
    the trial judge in this case, the assignment would not occur until the appellants
    recovered the damages in the action, in full. This outcome is consistent with
    the language of s. 267.8(12)(a), since, at the time any such assignment would
    be triggered, the appellants would be plaintiffs who recovered damages in the
    action. We would therefore reject this ground of appeal.

[51]

There is
    more, however. The conditional assignment order Aviva and Pilot properly
    secured from the trial judge has been frustrated and devalued as a result of
    the appellants appeal and the positions they have taken. Pending the appeal,
    Ms. Carroll has continued to receive and benefit from SABs payments from her
    insurer, Pilot. The appellants position is that they are not required to hold
    these payments in trust because their statutory obligation to do so under s.
    267.8(9) is contingent on their having recovered damages, and the judgment has
    not yet been paid. In the meantime, they have been refusing to tell Aviva how
    much Ms. Carroll has been receiving in SABs payments from Pilot because they
    are under no statutory obligation to do so. Even though Aviva has acquired
    Pilot, Aviva is not permitted to obtain this information directly from Pilot
    because Pilot owes confidentiality obligations to Ms. Carroll.

[52]

Aviva is
    therefore in a Catch-22 position. It cannot discover the value of the
    conditional assignment without paying the judgment in full. However, if it pays
    the judgment in full it may learn that it has paid more damages than it was
    required to pay pursuant to the trial judgment. All it knows with certainty is
    that the value of the conditional assignment order has been declining since
    that order was made on October 30, 2015.

[53]

In our
    view, this is an unsatisfactory outcome. The mere exercise of a right to appeal
    an order should not frustrate the efficacy of an order that proves, on appeal,
    to have been properly made. Nor should counsel be exploiting technicalities to
    frustrate the efficacy of judicial orders.

[54]

Subsection
    267.8(12) empowers this court to impose conditions on assignment orders. We
    would do so in this case to prevent the unsuccessful appeal of the conditional
    assignment order from defeating the benefit of that order. We would impose an
    additional condition on the assignment order requiring Ms. Carroll to disclose to
    Aviva the amount that she has received by way of SABs payments
in respect of medical and rehabilitation
    benefits and attendant care benefits

since
    October 30, 2015.

[55]

It is also
    necessary, in our view, to restore the integrity of the order, as it was at the
    time of the trial. If, after Aviva has received that disclosure, Aviva and
    Pilot elect to pay the sum of $2,610,744.32 plus costs and post-judgment
    interest,
minus the amount of SABs payments in respect of
    medical and rehabilitation benefits and attendant care benefits Ms. Carroll has
    received since October 30, 2015
, Ms. Carroll will assign to Aviva
    and Pilot, all future payments Ms. Carroll is entitled to receive for SABs in
    respect of medical and rehabilitation benefits and attendant care benefits from
    her insurer, Pilot.

D.

ISSUE 2: THE COSTS APPEAL

[56]

After
    succeeding in the action, the appellants sought $795,616.09 in costs on a
    partial indemnity basis. The trial judge awarded the appellants costs but reduced
    the amount substantially, to $375,000. As noted above, he gave three general
    reasons for doing so: (1) the behaviour of the appellants counsel relating to
    a September 11, 2015 settlement offer made by the respondents; (2) the lack of
    benefit to the appellants in pursuing the trial; and (3) behaviour by the
    appellants that extended the trial.

[57]

The
    appellants seek leave to appeal the costs order, arguing that the trial judge
    erred in arriving at each of the conclusions that led him to reduce the costs order.
    They ask for their costs in the amount of $795,616.09, or for a reassessment of
    their partial indemnity costs free of the errors they claim the trial judge
    made.

[58]

The legal principles that apply in a costs
    appeal are not in dispute. Considerable deference should be given to the trial
    judges discretion in determining the entitlement, scale and quantum of a costs
    order:
McNaughton Automotive Ltd. v. Co-operators General Insurance Company
,
    2008 ONCA 597,
95 O.R. (3d) 365,
at para. 27. As a
    result, leave to appeal costs orders should be granted sparingly, only in
    obvious cases where there are strong grounds upon which the appellate court
    could find that the judge erred in exercising his discretion:
Inter-Trust
    Mortgage Investment Corp. v. 1071005 Ontario Ltd.
, 1999 CanLII 2724 (Ont.
    C.A.), at para. 12;
Brad-Jay Investments Limited v. Village Developments
    Limited
, 2006 CanLII 42636 (Ont. C.A.), at para. 21, leave to appeal to
    S.C.C. refused, [2007] S.C.C.A. No. 92; and
Feinstein v. Freedman
,
    2014 ONCA 205, 119 O.R. (3d) 385, at para. 52. Even where leave has been
    granted, a costs order should not be set aside unless the trial judge made an
    error in principle or the order is plainly wrong:
Hamilton v. Open Window
    Bakery Ltd.
,
2004 SCC 9, [2004] 1 S.C.R. 303,
at para. 27.

[59]

We would
    not grant leave to appeal the costs order in this case. In our view, this is
    not an obvious case where there are strong grounds for finding that the trial
    judge erred in exercising his discretion. Had leave been granted, we would have
    denied the costs appeal.

(1)

The Purported Settlement

[60]

As the
    scheduled trial approached, the parties exchanged settlement offers. Discussions
    included threats, made by the appellants, to sue Aviva for acting in bad faith
    relating to its insurance obligations.

[61]

On
    September 10, 2015, in an email in which Aviva adamantly denied that it was
    acting in bad faith, the respondents notified the appellants that they were
    augmenting a previous offer to settle that they had made. A formal Offer to
    Settle document, dated September 11, 2015, was then delivered in which the respondents
    offer[ed] to settle th[e] proceeding upon payment by the respondents of
    $2,150,000 inclusive of all damages, prejudgment interest and costs. The offer
    did not require the assignment of SABs by the appellants. A subsequent letter
    from counsel for Aviva and Pilot held out that the offer was being made
    pursuant to the
Rules of Civil Procedure
, R.R.O.
    1990, Reg. 194 and warned of the costs consequences if the offer was not
    accepted.

[62]

At 4:24
    p.m. on September 11, 2015, counsel for the appellants notified the respondents
    that they had accepted the joint offer. At 4:25 p.m., counsel for the
    appellants sent a second email. This second email included service of a
    statement of claim for $2,000,000 in damages against Aviva and Pilot alleging
    that Aviva and Pilot had acted towards the appellants
mala
    fide

or in bad faith. In quick
    succession, the appellants purported to settle one action against the respondents,
    and then commence another related action against Aviva and Pilot.

[63]

Upon
    realizing that the appellants were taking the position that only the accident
    damages action had been settled, the respondents refused to recognize the
    appellants purported acceptance of their settlement offer. Although a jury had
    already been selected to adjudicate the accident damages action, that action
    was put on hold so that the appellants could bring a motion before Hackland J.
    to enforce the purported settlement of the accident damages action. That motion
    did not go well for the appellants. It was withdrawn by them before Hackland J.
    was required to rule. He left costs relating to the motion to be determined by
    the trial judge.

[64]

In his
    costs order after trial, the trial judge was strongly critical of the
    appellants conduct relating to the September 11, 2015 offer. He held that the
    appellants did or should have understood that that offer was made on the basis
    that it would deal with everything outstanding, including a
mala fide

claim. Indeed,
    he expressed the view that the [appellants] were clearly aware of what they
    were doing and that they were in fact taking the [respondents] by surprise. He
    found they were well aware that the offer which they attempted to enforce was
    made on the clear basis that it was to settle all outstanding claims between
    the parties. He concluded that the attempt by the appellants to enforce a settlement
    that the appellants understood the respondents had not agreed to was
    essentially a trick and [t]hat is not something that this Court can
    countenance without sanction. The trial judge expressed concern that failing
    to do so would undermine the confidence required to be placed in settlement
    agreements.

[65]

Where a trial judge has reduced the amount of
    costs awarded to a party by reason of her counsels conduct, an appeal court
    can intervene where the amount of the reduction is not warranted by, or is
    disproportionate to, the specific conduct of counsel:
Jarbeau v. McLean
,
    2017 ONCA 115,
410 D.L.R. (4th) 246,
at paras. 80-81.
    The appellants claim the trial judge made an unwarranted and disproportionate
    reduction of the costs award in this case, committing a serious error in
    sanctioning them when they were entitled to treat the respondents joint
    September 11, 2015 offer as an offer to settle only the accident damages
    action.

[66]

In support, the appellants rely on the fact that
    the offer was drafted using the style of cause of the accident damages action
    and used the language from
Rules of Civil Procedure
,
r. 49, referring to an offer to settle this proceeding. Moreover,
    by clear implication counsel for Aviva and Pilot represented in its September
    11, 2015 letter that this was a r. 49 offer, which would necessarily require
    that the offer not extend beyond claims brought in the proceeding.

[67]

In our
    view, the trial judges findings that underpin his characterization of the
    appellants conduct as a trick deserve deference. The prior offers and the
    trial record, including the email of September 10, 2015, provide ample basis
    for the trial judges conclusion that without doubt  all these offers were
    made on the basis that everything would be settled between these parties and
    this would end all litigation, and that the appellants knew this. The trial judge
    clearly understood the technical foundation that the appellants counsel was
    relying on to support its claim that it was accepting an offer to settle only
    the accident damages action, and he was entitled, on the evidence before him,
    to reject the
bona fides

of
    that claim. Based on those findings of fact, the attempt by the appellants to
    enforce the settlement could be characterized as a trick. A settlement is based
    on a meeting of the minds, yet the appellants, knowing that no meeting of the
    minds had occurred, attempted to enforce the purported settlement. The trial
    judge was entitled to find that the relative timing of the acceptance of the
    offer and of the service of the bad faith statement of claim smacked of a
    calculated design to entrap the respondents into a settlement the appellants
    knew had not been achieved. No error of principle occurred in this case. The reduction
    of the costs award by the trial judge was warranted by the conduct he found.

[68]

The
    appellants are also critical of the trial judge for stating that the reasons of
    Hackland J. on the enforcement motion were before the court, when no such
    reasons had ever been issued. Nothing comes of this. The trial judge simply misspoke.
    It is obvious he was referring to the colloquy between Hackland J. and the appellants
    counsel during the motion where Hackland J. was critical of the conduct of the appellants
    counsel.

[69]

Nor does it
    matter that Hackland J.s position on the impropriety of the appellants
    counsels conduct softened by the end of the settlement enforcement motion.
    What matters is the trial judges characterization of the appellants conduct, and
    that his characterization was amply supported by the record.

(2)

The Lack of Material Benefit

[70]

The trial
    judge also found that costs should be reduced because, given the offer of
    September 11, 2015 in particular, the benefits to the appellants in proceeding
    to trial were slight. In essence the trial judge was critical of the
    appellants for needlessly forcing a trial.

[71]

The
    appellants claim that this conclusion by the trial judge represents a palpable
    and overriding error. They urge that, on the evidence, they beat the offers to
    settle that were made. They also argue that the trial judge erred by failing to
    consider the offers the appellants made, and by requiring the appellants to
    beat the offers to settle by a substantial margin in order to secure partial
    indemnity costs. This last submission arises from the trial judges observation
    that it seems that the verdicts benefit to the [appellants] is not
    substantially over the offers themselves as these offers really comprised the
    funds available. We do not accept any of these arguments.

[72]

The trial
    judge considered the settlement offers that had been made, and the appellants
    position. He was simply persuaded by the respondents position that, while it may
    appear factually that the settlement offers had been beaten, when substance is
    considered there was little if anything to be gained by going to trial. When
    the trial judge said that the appellants had not substantially beaten the
    offers made he was not purporting to describe and apply a legal principle. He
    was commenting on the state of facts.

[73]

The trial
    judge was entitled, in the circumstances, to conclude that there was little if
    any benefit in bringing the action. Regardless of the jury award, the most the
    appellants could realize in damages after trial was $2,000,000, the gross
    amount of available insurance coverage. The McEwens were discharged bankrupts
    and the permission the appellants secured to sue them was limited to their
    $1,000,000 insurance policy.

[74]

Nor is it
    clear that the appellants beat the offers by any measure. The $2,150,000 September
    11, 2015 offer made by the respondents did not include an assignment of future
    SABs, and therefore, in substance, was an offer worth well in excess of
    $2,150,000 to the appellants. On the evidence before the trial judge, the value
    of the future SABs was between $599,000 and $830,000. After the multi-week
    trial, the appellants secured an award of $2,610,774.32 in damages, as well as
    costs of $375,000. There was little if any utility in having a trial. In our
    view the trial judge was entitled to rely on this to reduce the costs order.

(3)

Conduct Delaying the Trial

[75]

Rules of Civil Procedure
, r. 57.01(1)(e) authorizes a
    trial judge, in awarding costs, to consider the conduct of any party that tended
    to shorten or lengthen unnecessarily the duration of the proceeding. The trial
    judge found that the appellants unnecessarily lengthened the trial. In our
    view, on the evidence before him the trial judge was entitled to make and rely
    on that finding.

[76]

We have
    already recounted the delay that was caused by the appellants attempt to
    enforce a clearly unenforceable settlement. This was a significant event, on
    its own sufficient to warrant the reduction in the costs order that occurred.

[77]

The trial
    judge, having had the benefit of the representations and submissions of counsel
    and the trial record, was also entitled to find that the trial was delayed
    because of the last-minute decision of the appellants to have Ms. Carroll
    testify. We do not accept the appellants submission that no representation had
    been made that Ms. Carroll would not testify. The appellants conducted
    themselves as if she would not be called, until the last minute. She was not on
    the witness list and was proposed as a witness for the first time only on the
    eve of trial. The trial judges decision to permit her to be examined for
    discovery before trial was a reasonable one, as was his decision to hold the
    appellants responsible for the delay that this examination caused.

[78]

Finally,
    the trial judge was entitled to note that the appellants had paid only lip
    service to the case management masters order. Most notably, the record
    supports the trial judges conclusion that the future care report that was
    served by the appellants months late on August 18, 2015 was a new plan contemplating
    more vigorous therapy for Ms. Carroll.

[79]

We would
    not, on this record, give any currency to the appellants submission that since
    the respondents also failed to comply strictly with the case management masters
    order, it is unfair to reduce the appellants costs because of delay. The trial
    judge had more than sufficient reason for reducing the appellants costs, as he
    did.

(4)

Conclusions on the Costs Appeal

[80]

The
    appellants have not met the test for obtaining leave to appeal costs. This is
    not an obvious case where there are strong grounds for finding that the trial judge
    erred in exercising his discretion. We therefore deny leave to appeal the costs
    order. The question of who should bear the reduction in the costs award ordered
    by the trial judge, counsel or client, was not raised before us.

E.

ORDER

[81]

We dismiss
    the appeal from the conditional assignment order, and vary the conditional
    assignment order in the judgment as follows. The amendments we make are
    underscored for ease of identification:

(1)

Within 30 days of the receipt of this judgment, the Plaintiff Barbara
    Lynn Carroll is to disclose to the Defendant the Aviva Insurance Company of
    Canada the amount that she has received by way of statutory accident benefits payments
    in respect of medical and rehabilitation benefits and attendant care benefits since
    October 30, 2015
.

(2)

Upon payment by the
    Aviva Insurance Company of Canada in its capacity as the insurer of the
    Defendants Robert McEwen and Caroline McEwen and by Pilot Insurance Company, in
    its capacity as the OPCF 44R insurer of Barbara Lynn Carroll, of the sum of
    $2,610,744.32 plus costs and post-judgment interest,
minus the amount of statutory accident benefits payments in respect
    of medical and rehabilitation benefits and attendant care benefits that Barbara
    Lynn Carroll has received since October 30, 2015
, Barbara Lynn
    Carroll will assign to the Aviva Insurance Company of Canada
and Pilot Insurance Company, all payments in respect
    of the motor vehicle accident of March 28, 2009 that Barbara Lynn Carroll is
    entitled to receive, after the judgment has been paid, for statutory accident
    benefits in respect of medical and rehabilitation benefits and attendant care
    benefits from her own insurer, Pilot Insurance Company. Such payments shall be
    made to the Aviva Insurance Company of Canada and Pilot Insurance Company
    and/or such payments shall be assigned to the Aviva Insurance Company of Canada
    and Pilot Insurance Company.

This right of assignment is conditional on
    payment by the Aviva Insurance Company of Canada and/or Pilot Insurance
    Company, within 30 days of the receipt by the Aviva Insurance Company of Canada
    of the disclosure of the amount Barbara Lynn Carroll has received by way of statutory
    accident benefits payments in respect of medical and rehabilitation benefits
    and attendant care benefits since October 30, 2015
.
Moreover, to the extent that Barbara Lynn
    Carroll assigns her rights in respect of all payments to which Barbara Lynn
    Carroll is entitled in respect of the accident of March 28, 2009, from the
    Aviva Insurance Company of Canada and Pilot Insurance Company for medical and
    rehabilitation benefits and attendant care benefits, Barbara Lynn Carroll will
    co-operate with the Aviva Insurance Company of Canada and Pilot Insurance
    Company in any claim or proceeding brought by the Aviva Insurance Company of
    Canada and Pilot Insurance Company in respect of such assigned payments
    including participating in any mediation, litigation or arbitration proceeding
    commenced by the Aviva Insurance Company of Canada and Pilot Insurance Company
    to recover such payments.

[82]

We also
    deny leave to appeal the costs order.

[83]

As agreed
    between the parties, we award costs in the appeal to the respondents, together,
    in the amount of $35,000, inclusive of HST and all disbursements.

Released: December 4, 2018 (G.R.S.)

G.R. Strathy C.J.O.

Alexandra Hoy A.C.J.O.

K. Feldman J.A.

David Brown J.A.

David M. Paciocco J.A.





[1]
Revised Plaintiffs
Factum, at para. 8.


