Walsh v. Unum Provident, 2012 NSSC 237

SUPREME COURT OF NOVA SCOTIA Citation: Walsh v. Unum Provident, 2012 NSSC 237 Date: 20120625 Docket: Hfx. No. 202244 Registry: Halifax Between: Douglas Walsh Plaintiff v. Unum Provident Defendant Judge: The Honourable Justice Arthur W.D. Pickup Heard: Heard by way of written submissions (Decision on Costs) Counsel: Kevin C. MacDonald, for the plaintiff Michelle C. Awad, Q.C., Jeff Aucoin and Christina Firmini (Articled Clerk), for the defendant By the Court : [ 1 ] This matter arises out of a nine-day trial in November and December 2011.

Some fifteen witnesses gave viva voce evidence, including eight expert witnesses. The plaintiff claimed long term disability benefits from the defendant pursuant to a policy issued in 1993. The plaintiff alleged that bipolar disorder entitled him to benefits for total disability from 2000 onwards. Benefits in the amount of $125,119.20 were paid to the plaintiff between October 2000 and July 2002.

Benefits were discontinued because the defendant determined that the plaintiff did not fall within the definition of “ total disability ” in the policy. [ 2 ] As a result of the discontinuation of benefits, the plaintiff brought action against the defendants. Initially the plaintiff ’ s claim was defended on the basis that the plaintiff did not qualify for benefits because he did not fall within the definition of total disability in the policy.

Later, the defendant amended its defence requesting that the policy be declared void ab initio because the plaintiff had not disclosed material information concerning his medical history at the time he completed the policy application. [ 3 ] In a decision released February 29, 2012 I found that the policy was void ab initio because of the plaintiff ’ s material misrepresentation on the policy application. The defendant ’ s counterclaim for repayment of the benefits received by the plaintiff was allowed.

Finally, I determined that the plaintiff was not totally disabled during the period he had claimed and received disability

benefits. [4] This decision concerns costs. Costs were awarded to the defendant. The parties cannot agree on the amount and request Idetermine the appropriate amount. The parties provided written submissions on costs. The Defendant’s Position: [5] The defendant seeks solicitor and client costs citing the plaintiff’s unsuccessful allegations of breach of contract and badfaith, and the defendant’s success in proving fraud on the part of the plaintiff. The defendant seeks solicitor and client costs of $250,000plus disbursements of $43,056.34. In the alternative, the defendant seeks lump sum costs reflective of: (

i) the new tariffs; (ii) thecomplexity of the matter; and (iii) the nature of the allegations made against the defendant. The Plaintiff’s Position: [6] The plaintiff submits that this is not an appropriate case for solicitor and client costs. He says that the “amount involved”should be substantially less than the amount claimed, and that it should be based on an award of costs no higher than Scale 3 of the 1989tariff. [7] The plaintiff questions the lump sum award sought by the defendant. He questions whether the defendant required twocounsel at trial, along with an articled clerk.

He says the trial was not complex enough to justify two counsel and this should be reflectedin any lump sum. The plaintiff also questions whether the defendant’s formal offer to settle should be considered. He suggests that anyaward of costs should take into consideration his impecuniosity. Finally, the plaintiff questions the quantum of disbursements claimedby the defendant. Discretion to Award Costs: [8] The Civil Procedure Rules provide the court with a broad discretion when determining costs. Rule 77.02 provides: 77.02

(1) A presiding judge may, at any time, make any order about costs as the judge is satisfied will do justice between the parties. Solicitor and client costs: [9] Solicitor and client costs are awarded in exceptional circumstances to compensate a party fully for the expenses of litigation. In Brown v. Metropolitan Authority, 1996 NSCA 91 , [1996] N.S.J.

No. 146 (C.A.), the court stated, at paras. 94 - 98: 94 While it is clear that this Court has the authority to award costs as between solicitor and client, it is also clear that this power isonly exercised in rare and exceptional circumstances, to highlight the court's disapproval of the conduct of one of the parties in thelitigation. 95 This court has refused to award costs as between solicitor and client even though the conduct of the party in question has beenfound to be reprehensible. (Lockhart v. MacDonald (1981), (NS CA), 42 N.S.R. (2d) 29; Warner v.

Arsenault (1982), (NS CA), 53 N.S.R. (2d) 146). 96 The word "reprehensible" is defined in The Concise Oxford Dictionary (1990) as "deserving censure or rebuke".

97 The conduct of the Authority, in my opinion, deserves that description. 98 There is, however, a difference between reprehensible conduct as demonstrated here, and those rare and exceptional circumstances which attract the sanction of costs as between solicitor and client.

In my opinion, the Authority's actions do not cross that line, and accordingly, I would not award costs as between solicitor and client. [ 10 ] Is this such a rare and exceptional circumstance that, to highlight the court ’ s disapproval of the conduct of the plaintiff, the court should award solicitor and client costs? [ 11 ] Counsel for the defendant says the nature of the allegations made by the plaintiff and the defendant ’ s success in proving fraud on the part of the plaintiff invites solicitor and client costs. [ 12 ] The burden of proving fraud is set out in

Part IV of the Nova Scotia Insurance Act , R.S.N.S. 1989, c. 231, at ss. 82 and 83 . This requirement to prove fraud is legislatively set and cannot be attributable to any conduct of the plaintiff such that it would attract an award of costs as between solicitor and client.

As to the plaintiff ’ s allegations of bad faith and other serious wrongdoing by the defendant, I am not satisfied that this is such a rare and exceptional circumstance that this court should highlight its disapproval of the conduct of the plaintiff by awarding solicitor and client costs. [ 13 ] The evidence led by the plaintiff at trial as to these allegations was understandable, at least from the plaintiff ’ s prospective. Moreover, the focus of the trial was on the fraud allegations and the plaintiff ’ s misrepresentations.

These allegations of wrongdoing formed a small part of the plaintiff ’ s claim. [ 14 ] In

summary, I am not satisfied that this is one of those exceptional circumstances where solicitor and client costs are called for to compensate the defendant fully for the expenses of litigation. I decline to award solicitor and clients costs. The number of counsel appearing at trial on behalf of the defendant: [ 15 ] Plaintiff ’ s counsel says that legal fees of $250,000 are excessive and the trial was not of the complexity to justify two counsel. Plaintiff ’ s counsel ask that the court consider whether two counsel were necessary. If not, a number less than $250,000 should be considered. [ 16 ] Ms.

Awad filed an affidavit dated June 13, 2012. At trial Ms. Awad had Geoff Aucoin assisting her, along with an articled clerk. In her affidavit she indicates that the defendant did not pay any fees for their articled clerk ’ s attendance at trial, and the fees associated with Mr. Aucoin ’ s attendance at trial would amount to $10,000. [ 17 ] I am satisfied that it was reasonable that the defendant had two counsel at trial. Prior to trial, the plaintiff had listed nine witnesses including six experts.

The medical files were voluminous and there were extensive discovery transcripts. [ 18 ] In fact, in my experience in a nine-day trial of this complexity, having co-counsel is the norm rather than the exception, and there is nothing before me to suggest that having the second counsel at trial was unjustified, nor was the allocation of the fees to him unreasonable. Party and party costs: [ 19 ] Rule 77.06 provides:

77.06

(1) Party and party costs of a proceeding must, unless a judge orders otherwise, be fixed by the judge in accordance with tariffs of costs and fees determined under the Costs and Fees Act , a copy of which is reproduced at the end of this Rule 77. [ 20 ] Rule 77.08 provides: 77.08 A judge may award lump sum costs instead of tariff costs. [ 21 ] This action was started on June 11, 2003, some fifteen months before the September 29, 2004 effective date of the “ new ” costs tariff in Nova Scotia. It does not appear to be in dispute that the new tariff is not retroactive and, therefore, does not apply to this case.

However, the defendants submits this is an appropriate case to exercise the court ’ s discretion to award lump sum costs. The defendants say that the old tariff would result in a costs award which is much less than the substantial contribution which is intended. The tariffs set costs based on the “ amount involved ” and have more than one scale depending on the complexity (or lack thereof) of the case.

The plaintiff suggests that the amount awarded against him on the counterclaim ($125,119.20) should be the “ amount involved ” for purposes of any calculation of costs using the tariffs. [ 22 ] The claim before me at trial was a claim by the plaintiff for disability benefits payable from August 1, 2002 to the date of judgment, plus a request for a declaration which was intended to result in the payment of monthly disability benefits into the future. [ 23 ] In this instance, defendant ’ s counsel submits that the amount involved would be the total of the plaintiff ’ s claim plus the defendant ’ s counterclaim as being the amount at risk.

This amount is calculated by adding $854,786 for the plaintiff ’ s claim and $125,119.20, for the defendant ’ s counterclaim, for a total “ amount involved ” of $979,905.20. The costs recoverable by the defendant under Scale 3 of the old tariff would be $33,772.16 and Scale 5 would be $52,320.26. Under the new tariff, the amount claimed under Scale 2 would be $82,750 and Scale 3 would be $98,938. [ 24 ] The defendant says that given the $250,000 in fees it incurred, the old tariff would represent a recovery between 13.5% and 22%, and the new tariff amounts would represent a recovery between 33% and 40% .

It submits that neither amount can be considered a substantial contribution to its legal fees. [ 25 ] To support its position, the defendant refers to Day v. Day, 2009 NSSC 237 , wherein the court used the new tariffs to guide the costs awarded after noting the insufficient award which resulted from application of the old tariffs, The court stated as follows at paras. 6 - 8: 6 The defendant points out, rightly, that the old tariffs of costs apply in this case. The action was started in July of 2004 and the new tariffs came into effect in the following September.

The new tariffs expressly provide that they are not retroactive. 7 The old tariffs would provide only a $4,125 indemnity. That would not begin to serve the purpose of the tariffs, to provide a partial but substantial indemnity. I would, therefore, depart from the tariffs and order lump sum costs. 8 The action was started so close to the effective date that I would look to the new tariffs as one source of guidance for a lump sum. It would lead to an award of $11,250, if it applied. [ 26 ] The defendant submits that an appropriate lump sum costs award in this case is $125,000.

It says this amounts to approximately 50% of it ’ s solicitor and client costs. I am satisfied that $125,000 is an appropriate lump sum amount. Should the November 25 th , 2009 formal offer be considered? [ 27 ] The defendant seeks to increase the lump sum amount by 50% pursuant to Rule 10.09(2)(c):

(2) A judge may award costs to a party who starts or who successfully defends a proceeding and obtains a favourable judgment, inan amount based on the tariffs increased by one of the following percentages: ... (

c) fifty percent, if the offer is made after setting down and before the finish date; [28] This

section is discretionary. The offer made in 2009 was for $25,000. The offer, with respect, is low in relation to theamounts in contention at trial. While the defendant has obtained a favourable judgment, within the meaning of this section, I decline toaward a 50% increase in costs. It is, therefore, not necessary to determine the question of whether or not the formal offer should beconsidered. Plaintiff’s Impecuniosity: [29] At trial the plaintiff testified his only source of income is a small CPP disability pension.

In an affidavit filed on June 1, 2012,he stated: My only source of income is a CPP disability benefit. For 2011, my total income from CPP was $9,661.00. Attached as Exhibit “5" tomy affidavit, is a copy of Notice of Reassessment. [30] The plaintiff seeks to have his financial situation considered in the cost calculation. He cites Windsor v.

Adu Poku, 2003 NSSC95, where Justice MacLellan considered the impecuniosity of the plaintiff: 13 The plaintiff's counsel in her submission to me suggests that I should consider the fact that the plaintiff is a retired senior citizen ona fixed income of Canada Pension and Old Age Security and has no major assets.

She has provided an affidavit from the plaintiff inwhich she indicates this and also indicates that her husband's income is comprised of Old Age Pension, Canada Pension, Workman'sCompensation and some income from an R.R.S.P. ... 19 I conclude that here it is appropriate for me to consider the financial circumstances of the plaintiff in deciding an appropriateamount of costs. [31] Also in Gillan v. Mount St. University, 2007 NSSC 249, Justice LeBlanc commented as follows at para. 8: 8 Mr.

Richey argues that the Court should exercise its discretion to refuse to grant costs on the basis that awarding costs "would createan undue financial hardship": Kaye v. Campbell (1984), (NS CA), 65 N.S.R. (2d) 173 (C.A.).He refers to Windsor v.Adu Poku (2003), 2003 NSSC 95 , 214 N.S.R. (2d) 88 (S.C.), where MacLellan J. concluded that it was appropriate to considerthe financial circumstances of an unsuccessful plaintiff in determining costs. He also refers to Lockhart v. New Minas (Village), 2005NSSC 93 , [2005] N.S.J. No. 164 (S.C.), where Warner J. made similar comments. Counsel refers to the evidence of Ms.

Gillanthat she has been disabled since her injury as sufficient basis upon which to conclude that an award of costs would constitute hardship. [32] Associate Chief Justice Smith in Farrell v. Casavant,, 2010 NSSC 46, held that it is the exception, rather a the rule, for courtsin Nova Scotia to consider the financial circumstances of unsuccessful parties when awarding costs. The following is stated at paras. 24- 26:

24 The Plaintiff submits that he is a man of modest means and asks the court to deny costs on this basis. It is important to note that thePlaintiff has not applied pursuant to Civil Procedure Rule 77.04 (former Rule 5.17) to be relieved from liability for costs because ofpoverty.

In addition, no evidence has been filed with the court setting out the Plaintiff's financial circumstances (while I had evidence attrial concerning his annual income, I have not been provided with a statement of assets and liabilities.) 25 While there have been occasions in this province (predominantly in the family law context) in which the court has considered aparty's financial circumstances when dealing with the issue of costs, this factor is not usually taken into account by the court. Asindicated by Goodfellow, J. in Gilfoy et al. v.

Kelloway et al. (2000), (NS SC), 184 N.S.R. (2d) 226 (N.S.S.C.) atpara. 25: More importantly, the determination of costs with the rare exception of some exceptional family law situations has never been influencedby wealth, lack of wealth or impecuniosity of a party. The Registry of Deeds contains many judgments for and including costs and thecollectability of costs is not a factor to be considered in the proper exercise of judicial discretion as to entitlement to costs or indeed thequantum of costs ... [Emphasis in the original] 6 While there have been a few non-family law cases since Gilfoy et al. v.

Kelloway, et al., supra, where the court has taken intoaccount the financial circumstances of the unsuccessful party when awarding costs (see for example: Windsor v. Poku, 2003 NSSC 95)that practice is certainly the exception in this province rather than the rule. I am not satisfied that the Plaintiff's financial circumstancesshould affect my costs award in this proceeding. [33] Defendant’s counsel submits, and I agree, that similar principles exist in this case. The plaintiff has not applied pursuant toCivil Procedure Rule 77.04 (former Rule 5.17) to be relieved from liability for costs because of poverty.

While there is some evidence ofthe plaintiff’s financial circumstances, no statement of assets and liabilities has been provided. Significantly, as defendant’s counselpoints out, there is no where in the affidavit that the plaintiff states that he has no other assets, nor does he say is not able to respond to acosts award. [34] The defendant asks the court to consider that there is some evidence that the plaintiff is able to raise funds to pay costs anddisbursements when required.

He has been represented by counsel for most of the nine years of litigation and there is no suggestion thathis current counsel has not been paid. The plaintiff paid throw away costs pursuant to an order of Chief Justice Kennedy in May 2010 inthe amount of $7,500. He also called six experts as witnesses at trial and it is a fair assumption that those experts would have been paidfees for their preparation and attendance at trial by the plaintiff. [35] I am not satisfied on the evidence before me that the plaintiff has met his burden of showing that he has limited means tosatisfy a costs award.

Therefore, I decline to depart from the normal approach. The plaintiff’s financial situation is not a consideration indetermining costs in this case. Disbursements: [36] The defendant claims disbursements in the amount of $43,056.34. The original amount claimed was $43,070.72, but the claimfor disbursements has been reduced by $14.38, the amount for a glass of wine claimed by one of the experts, Mr. Tufford. [37] The plaintiff challenges a number of the claimed disbursements. He challenges Dr. Juan Negrette’s airfare, meals and courtattendance fees. He questions Mr. Tufford’s expenses, including his airfare.

He also questions Donna Taylor’s hotel and meal bill. [38] The question before the court is whether all of the disbursements claimed are reasonable. [39] The defendant’s counsel submitted affidavit evidence concerning the reasonableness of the disbursements. The specifically

challenged disbursements were discussed in the June 13, 2012 response brief submitted by Ms. Awad. I accept the explanation set out therein, and find that the listed disbursements are reasonable in the circumstances. [ 40 ] I allow the claimed disbursements in the amount of $43,056.34. [ 41 ] Costs are awarded to the defendant in the amount of $125,000, plus disbursements of $43,056.34 for a total of $168,056.34. Pickup, J.