Roscoe v. Halifax (Regional Municipality), 2013 NSSC 5

SUPREME COURT OF NOVA SCOTIA (FAMILY DIVISION) Citation: Roscoe v. Halifax (Regional Municipality), 2013 NSSC 5 Date:

(20130104) Docket: Hfx 307889 Registry: Halifax Between: Elizabeth Roscoe Plaintiff v. Halifax Regional Municipality Defendant LIBRARY HEADING Judge: The Honourable Justice Pierre L. Muise Final Written Submissions: January 25, 2012 Counsel: Jean McKenna, for Elizabeth Roscoe Karen E. MacDonald, for Halifax Regional Municipality

Summary: The parties agreed on all aspects of costs following trial except whether the Defendant ’ s approach to settlement negotiations and conduct were such as to warrant granting augmented costs.

The approach and conduct complained of included: instructing its lawyer to negotiate subject to after-the-fact approval by Halifax Regional Council (allegedly giving the impression of admission of liability); rejecting the advice of its lawyer in relation to settling liability and damages and instructing her to proceed to trial on both issues; discontinuing negotiations; and, subsequently retaining an expert to bolster its case. Issue: Whether augmented costs should be awarded as a remedial penalty.

Result: It was not shown that the Defendant ’ s conduct amounted to the type of wrongful conduct required to justify the imposition of augmented costs as a remedial penalty. THIS INFORMATION SHEET DOES NOT FORM PART OF THE COURT'S DECISION. QUOTES MUST BE FROM THE DECISION, NOT THIS LIBRARY SHEET . SUPREME COURT OF NOVA SCOTIA Citation: Roscoe v. Halifax (Regional Municipality), 2013 NSSC 5 Date:

(20130104) Docket: Hfx 307889 Registry: Halifax Between: Elizabeth Roscoe Plaintiff v. Halifax Regional Municipality Defendant Judge: The Honourable Justice Pierre L. Muise Final Written Submissions: January 25, 2012

Counsel: Jean McKenna, for Elizabeth Roscoe Karen E. MacDonald, for Halifax Regional Municipality A. INTRODUCTION [ 1 ] In the written decision in this matter, bearing citation number 2011 NSSC 485 , I found Halifax Regional Municipality ( “ HRM ” ) liable and granted judgment in favour of Elizabeth Roscoe in the amount of $30,280.48. In addition, in the event they could not agree on costs, the parties were asked to provide written submissions. [ 2 ] The parties have agreed to costs totaling $15,375.00. This amount was arrived at as follows.

Scale 2 (basic), under the Tariff A “ amount involved ” range of $25,000 to $40,000, was used to provide a base amount of $6,250. $4,000 was added to account for the two days of trial. That subtotal was increased by 50% because Ms. Roscoe made a formal offer to settle for $35,000, which is less than the award granted plus costs. [ 3 ] However, Ms. Roscoe submits that: HRM approached settlement negotiations in an improper manner; and, as a result she is entitled to at least an additional $10,000 as “ enhanced ” or augmented costs. HRM opposes the granting of these augmented costs. B.

ISSUE [ 4 ] The sole issue to be determined is whether HRM ’ s approach to settlement negotiations warrants an augmented costs award. C. LAW AND ANALYSIS [ 5 ] Ms. Roscoe ’ s position is based on the principles in Keam v. Caddey , 2010 ONCA 565 . [ 6 ] In Keam the insurer had refused to participate in mediation on the expressed premise that the claim did not meet the requisite threshold, then, shortly before trial, made an offer to settle, which was taken as an acknowledgment that the requisite threshold was met.

The trial judge refused to award increased costs because it found the position taken by the insurer, in refusing to mediate, to have been a “ genuine available position ” , and awarded $110,000 as partial indemnity costs. The Court of Appeal found the trial judge erred in law and increased the costs award by $40,000. [ 7 ] The case brought into play Sections 258.6(1) and 258.5(1) of the Insurance Act , R.S.O. 1990, c. I.8.

The Court of Appeal outlined the effect of those provisions, at paragraphs 20 to 22, as follows: “ 20 Sections 258.5(1) and 258.6(1) are directed at an insurer that is defending a claim for personal injuries arising out of an automobile accident. The sections impose two obligations on the insurer.

Section 258.6(1) makes participating in mediation mandatory when requested, while s. 258.5(1) requires the insurer to attempt to settle the claim as expeditiously as possible. Sections 258.6(2) and s. 258.5(2) provide the sanction for non-compliance with the statutory duties: the court is required to consider the insurer's failure to comply when awarding costs following trial. 21 The legislature has clearly determined that in every case where one party is willing, mediation is the best way to try to promote the settlement of claims and to avoid the expense of a possibly lengthy and certainly costly trial.

The legislature has provided no exceptions to this policy or to the obligation to mediate that it has imposed to implement the policy.

22 Because there are no exceptions to the obligation, the insurer has no option whether or not to participate.

There can be no legitimate reason to refuse to participate because to elect not to participate constitutes a breach of the insurer's statutory obligation.” [ 8 ] At paragraph 27 to 29, the Court noted that it is appropriate for non-compliance with these provisions to attract a “ costs sanction as a ‘ remedial penalty ’ ” to: compensate the plaintiff for having lost the chance to settle early; and, to penalize the defaulting insurer by awarding costs above that provided for in the Civil Procedure Rules to compensate the plaintiff for expenses incurred needlessly.

The legislation does not provide a formula for determining the amount of the “ costs sanction ” .

That is left to the discretion of the judge. [ 9 ] The factors the Court of Appeal considered in arriving at an appropriate amount are outlined, at paragraphs 31 and 32, as follows: “ 31 Approaching the issue afresh, the factors that in my view impact on the magnitude of the costs penalty that ought to have been imposed include: (1) the fact that the insurer twice refused to mediate, the first time two years before trial and the second time over one year before trial; (2) the fact that it decided to "play hardball" by taking the easy position that the claim did not meet the threshold; (3) the fact that shortly before trial it served an offer to settle, which, while low, amounted to acceptance that there was a potential claim to litigate - and therefore to mediate; (4) the size of the recovery; and (5) the 11-day duration of the trial. 32 The appellants' substantial indemnity bill totalled $196,144.90, plus $9,807.25 GST, and its partial bill was $130,352.20, plus GST.

The trial judge awarded the appellants partial indemnity costs, which he fixed at $110,000 plus GST for fees. Although the insurer's conduct may not have risen to the level required for the imposition of substantial indemnity costs, in my view, a significant remedial penalty was required in all the circumstances. I would order an increase of $40,000 in the costs award to reflect the censure of the court and to provide an appropriately significant recovery for the appellants.” [ 10 ] Ms.

Roscoe is of the view that HRM ’ s approach to negotiations in the case at hand should, based on the principles in Keam , attract an augmented costs award which would effectively serve as a “ remedial penalty ” . [ 11 ] She described the negotiations between her and HRM, through their respective lawyers. From February 23, 2010 to April 28, 2010, the parties exchanged multiple offers and counter-offers in a manner which she felt constituted good-faith negotiations. Included with HRM ’ s March 12 counter-offer, was a proviso that it was “ subject to approval by Regional Council ” .

In addition, HRM ’ s acceptance of Ms. Roscoe ’ s $37,000 offer, by voicemail, on April 28, was noted as having to go to Halifax Regional Council despite being recommended by HRM ’ s lawyer. Council rejected settlement on both liability and damages, and was not open to reconsidering its position. [ 12 ] According to Ms. Roscoe ’ s lawyer, Jean McKenna, Council usually follows the advice of HRM ’ s lawyer in relation to resolving claims. [ 13 ] Ms. Roscoe invited continued negotiations.

However, HRM ’ s lawyer, Karen MacDonald, advised that “ Council had concerns with respect to both liability and quantum ” and she was instructed to proceed to trial. Council ’ s discussions on the matter were not provided on grounds that they were in camera and Section 19(4) of the Halifax Regional Municipality Charter , S.N.S. 2008, c. 39, provides that the content of such discussions are not open to the public. It was also not disclosed who voted on the question, despite Ms. Roscoe expressing concerns that one of the Councilors was in a conflict position. [ 14 ] Ms.

Roscoe filed a formal offer to settle for $35,000 on May 26, 2010. Her final attempt to get HRM to resume settlement discussions, contained in a letter dated October 12, 2010, was fruitless. [ 15 ] She submits that:

“[T]he defendant’s conduct was flawed in (

a) instructing its counsel to negotiate (leaving the impression that at least liability was not inissue); (

b) refusing to follow the recommendation of its legal counsel on liability and damages notwithstanding extensive negotiation onthe issues; (

c) failing to consider any possible counter-offer; and, (

d) in subsequently retaining an expert to bolster its position (using atest which this Court described as ‘rudimentary, imprecise, incomplete and flawed’ and ‘of almost no value’).” [16] In her view, it was incumbent upon HRM to provide the information required to determine whether its rejection of its lawyer’srecommendation was “a genuine available position”.

She assumes that, since the recommendation came from experienced counsel,following extensive negotiations which were progressing well, “extraneous irrelevant consideration played a role in Council’s decision”. [17] She further submits the following: “If in fact Halifax Regional Municipality affirms that only reasonable and relevant factors were considered by Council, the approach inany event (negotiation followed by instruction) should attract additional costs.

If in fact extraneous matters played a role, then costsshould particularly be increased, and should be awarded on a solicitor and client basis.” [18] She estimates that post-settlement stage legal expenses represent 64% of the total legal expenses. She is of the view that theextra time expenditure is not reflected in the offer-to-settle increase of $5,125. 64% of the $15,375 agreed upon for total costs amounts to$9,840. She suggests a rounded amount of $10,000 should be added to the costs award as a remedial punitive measure. [19] HRM is of the view that: Ms.

Roscoe is essentially seeking solicitor-client costs which “should only be awarded inrare and exceptional circumstances”; and, “HRM’s conduct in this case was not reprehensible, scandalous or outrageous so as to justifythe additional $10,000.00 in costs sought”. It cites Lockerby v.

Lockerby, 2011 NSSC 103, in support of its position. [20] In Lockerby, at paragraphs 24, 25, and 33, the Court stated: “24 In Young, (SCC), [1993] 4 S.C.R. 3, Justice McLachlin, as she then was, commented on an award of solicitor andclient costs at paragraph 66, saying that costs on this basis are generally awarded ‘only where there has been reprehensible, scandalous oroutrageous conduct on the part of one of the parties.’ The reprehensible conduct may be in the circumstances giving rise to the cause ofaction, or in the proceedings themselves. 25 Solicitor and client costs are limited to rare and exceptional circumstances. …. 33 Ms.

Lockerby's conduct has been vindictive and ill-considered. I have considered it and made my decisions accordingly. It has notbeen reprehensible, scandalous or outrageous as would be required to support an award of solicitor and client costs.” [21] HRM notes that it was clearly indicated, during settlement discussions, that “any final settlement was subject to the approval ofHalifax Regional Council”. In addition, HRM submits it does not have to follow the advice of its lawyer. Council had concerns inrelation to liability and damages.

HRM was entitled to instruct its lawyer to proceed to trial, without agreeing to participate in asettlement conference. It argues that, unlike the situation in Keam, it “was not obligated to participate in a settlement conference or anyfurther settlement negotiations”.

[ 22 ] In my view the case at hand is easily distinguishable from the Keam decision. There was no statutory requirement for HRM to continue or resume settlement negotiations, nor for HRM to participate in a settlement conference. Cases considering Keam have limited its application to situations where such statutory obligations exist and a costs sanction is provided for. [ 23 ] In Williston v.

Gabriele , 2011 ONSC 5400 , at paragraph 3 , the Court stated: “ 3 The plaintiff asks for an augmented award of costs in view of the defendant's refusal to mediate, and cites s. 258.6 of the Insurance Act and the decision of the Court of Appeal in Keam v. Caddey , 2010 ONCA 565 . The City could have saved the plaintiff and itself some money if it had agreed to mediation. I do not think, however, that I can award the augmented damages provided for in the Insurance Act because the defendant is not an insurer either as named defendant or, as far as I know, by way of subrogation. ” [ 24 ] In Nicolas v.

Bowers , 2012 ONSC 522 , at paragraph 22 , the Court stated: “ 22 … I have not been provided with any evidence that defendant's counsel refused or neglected to attend any requested mediation and therefore s. 258.5(1) of the Insurance Act and the decision of the Court of Appeal in Kearn v Caddey , 2010 ONCA 565 , are not brought into play. ” [ 25 ] Both Williston and Nicolas indicate that, in the absence of such statutorily mandated settlement steps, accompanied by costs sanctions for failing to take them, the failure to make all reasonable attempts to resolve a claim does not, by itself, warrant augmented costs.

Conduct attracting such costs is that of the type which can be described as: “ malicious ” ; “ reprehensible ” ; “ harassment by the pursuit of fruitless litigation ” ; “ abusing the process of the Court ” ; and, other descriptions conveying exceptional and wrongful conduct related to the litigation or the circumstances giving rise to the cause of action. [ 26 ] In that regard, the Court in Nicolas , at paragraphs 21, and 23 to 25 , stated: “ 21 That said, I now turn to the conduct of the defendant throughout the course of these proceedings to determine if such conduct warrants sanctioning by this court.

The starting point for this analysis, in addition to the cases cited by counsel for the defendant, is the decision of the Court of Appeal in Davies v. Clarington (Municipalit y), 2009 ONCA 722 ( ‘ Davies ’ ), at paragraphs 40 and 46, which provide as follows: 40 In

summary, while fixing costs is a discretionary exercise, attracting a high level of deference, it must be on a principled basis. The judicial discretion under rules 49.13 and 57.01 is not so broad as to permit a fundamental change to the law that governs the award of an elevated level of costs.

Apart from the operation of rule 49.10, elevated costs should only be awarded on a clear finding of reprehensible conduct on the part of the party against which the cost award is being made. [Emphasis added.] ... 46 Here, there is no finding or evidence in the record of ‘harassment...by the pursuit of fruitless litigation’. The settling defendants were entitled to advance their position; they were not required to settle. In the end, the trial judge did not agree with their position but the settling defendants did nothing to abuse the process of the court.

In short, there was no wrongdoing on the part of the settling defendants that warranted a rebuke from the court. …. 23 The fact that the defendant chose to put the plaintiffs to the strict proof of their claim, including whether or not Victoria Nicolas's claim for non-pecuniary damages passed the threshold is of no moment in the circumstances of this case.

While I hold the personal view that all cases have an economic settlement threshold, as it were, beyond which it might be prudent to settle, and I urge party litigants to consider settling even during the trial process, failure to yield to the suggestion of a judicial officer does not necessarily lead to an adverse costs consequence.

24 This notion is best expressed by Epstein J.A. in Davies at paragraph 45 where she made the following observation: Of course, a distinction must be made between hard-fought litigation that turns out to have been misguided, on the one hand, andmalicious counter-productive conduct, on the other. The former, the thrust and parry of the adversary system, does not warrant sanction:the latter well may. In Apotex v. Egis Pharmaceuticals (1991), (ON SC), 4 O.R. (3d) 321 (Ont.

C.J.), substantialindemnity costs were justified as a means ‘to discourage harassment of another party by the pursuit of fruitless litigation ... particularlywhere a party has conducted itself improperly in the view of this court.’ 25 … I am not persuaded that there is any principled reason for me to accede to the plaintiff's request for an increase in the award ofcosts from that agreed upon.

Again, the conduct of the defendant does not warrant such an exercise of discretion. … .” [27] In Williston, the plaintiff requested $40,000 in augmented costs because the defendants, including the City of Hamilton,refused to take

part in mediation. The Court increased partial indemnity costs by $2,000 based on the result obtained at trial. However, itdid not award any augmented costs based on the City’s conduct in the litigation, despite condemning its approach to settlement. TheCourt described the City’s conduct, at paragraph 4, as follows: “4 I would say that the City has not seriously tried to settle the litigation.

Instead, four days before the commencement of the trial itagreed to damages that were more than double its offer to settle of July 2011 and then, having settled the difficult issue after tying upplaintiff's counsel all summer with damages, it dug in its heels on the issue on which it had no hope of success beyond contributorynegligence, and little hope of that. Unlike the plaintiff, the City has the resources to afford this sort of approach.

I do not understand theutility of it, but that is not my business, beyond fixing the appropriate indemnity for the successful plaintiff.” [28] In the case at hand, HRM decided, contrary to the advice of its lawyer, to discontinue settlement negotiations and proceed totrial. Council had its own concerns regarding liability and damages. It was entitled to decide, based on those concerns, to put Ms. Roscoeto the strict proof of her claim.

It was not required to heed the advice of HRM’s lawyer. [29] In my view, the onus is on the party seeking augmented costs as a result of the other party’s conduct to establish thatthe conduct was such as to warrant imposing augmented costs as a remedial penalty. It has not been shown that HRM: actedmaliciously or reprehensibly; refused to settle to harass or annoy Ms. Roscoe; abused the court process; or engaged in exceptional andwrongful conduct related to the litigation or the circumstances giving rise to the cause of action. [30] Ms.

Roscoe has shown that HRM, having engaged in good-faith settlement negotiations: terminated settlement negotiations andrefused to resume them; and, provided no explanation beyond having concerns regarding liability and damages. She has also shown thatHRM made offers, and accepted an offer, conditional upon approval by Halifax Regional Council. In my view that is not conductjustifying the imposition of augmented costs as a remedial penalty. [31] Terminating settlement discussions, by itself, is not wrongful, nor prohibited. [32] HRM had informed Ms.

Roscoe that its acceptance of the $37,000 settlement offer was subject to approval by Council. She wasnot misled into believing that the acceptance was unconditional. She knew it was contingent on approval by Council. [33] This approach had been communicated with at least one of HRM’s prior counter-offers. Thus, Ms. Roscoe knew under whatterms she was negotiating when the conditional acceptance was communicated to her. HRM cannot make payments exceeding $5,000without the approval of Council.

It would significantly slow settlement negotiations if each offer or counter-offer, and the ultimateacceptance, had to be pre-approved by Council. It makes sense to use that approach. In my view, there is nothing wrongful in it.Therefore, this approach does not justify augmented costs as a remedial penalty. I might have taken a different view if HRM had backedout of an unconditional acceptance. However, that is not the situation in the case at hand.

[ 34 ] It has not been established, and I am unable to infer, that HRM considered extraneous and irrelevant factors in arriving at its litigation decision. Even if I could make such an inference, the existence of extraneous and irrelevant considerations does not mean that the litigation conduct chosen merits an augmented costs award. It becomes clear in many cases that a settlement was not reached because one or more of the parties was, or were, unable to put aside extraneous and irrelevant considerations and take a reasonable approach to resolving the matter.

It is common for parties to allow animosity, resentment or other extraneous factors to cloud their judgment, resulting in an insistence that the outcome of the dispute be determined by a judge. However, as long as their conduct is not of the wrongful type justifying a remedial costs penalty, it is not appropriate to grant one. [ 35 ] Ms. Roscoe submits that “ the advice may well have been rejected for an improper purpose ” . That possibility is insufficient to justify augmented costs. [ 36 ] HRM ’ s position on liability was not so clearly devoid of merit as to lead to an inference that its refusal to accept Ms.

Roscoe ’ s offer and to resume negotiations was done in bad faith, or for a “ reprehensible, scandalous or outrageous ” purpose, rather than in pursuance of a “ genuine available position ” . This case revolved around a small piece of greyish-coloured duct tape that was difficult to see amongst the multiple boundary lines marked on the gym floor. Use of tape on the floor was prohibited.

It was not a foregone conclusion that the Court would find: a sweeper would have detected the tape; the tape was present before the gym was turned over to HRM from the Halifax Regional School Board; and, the tape caused the sudden stop and injury. Litigants are never certain how the evidence will come out at trial, nor whether the Court will find witnesses credible and reliable.

One cannot simply look back from the result to determine whether the unsuccessful litigant ’ s case was devoid of merit. [ 37 ] Further, in Williston , the Court refused to award augmented costs as a remedial penalty even though it concluded that the defendant “ had no hope of success beyond contributory negligence, and little hope of that ” .

Therefore, even if HRM ’ s position had been devoid of merit, it still may not justify an inference of sufficiently wrongful conduct. [ 38 ] In addition, the damages awarded were less than the formal officer to settle, and, the costs prior to trial, combined with the actual damage award, could easily have resulted in an amount lower than the offer to settle. [ 39 ] In my view it is common for a party to engage in settlement negotiations even though it is of the view that liability is in issue. Engaging in settlement negotiations is not an implied admission of liability.

It has not been shown that HRM expressly admitted liability. I see nothing in contesting liability following failed settlement negotiations in such circumstances that is wrongful and warrants augmented costs. [ 40 ] Having decided it was going to take its chances at trial, HRM hired an expert to bolster its case. In my respectful view there was nothing improper in that action. Parties are expected to present the best case they can. There is no indication HRM made improper use of information obtained in without prejudice discussions in the preparation of the expert ’ s report.

The poor quality and limited value of the expert ’ s report is not something which, in my view, justifies an augmented costs award against HRM. It hired Dr. Stuart Smith because it required an expert and relied on his expertise in testing the site of the incident and preparing a report. The frailties of the testing and report became clearer at trial, partly due to the effective cross-examination conducted by Ms. McKenna. HRM would not have fully appreciated the weakness of its expert evidence until he finished testifying. [ 41 ] In essence, it turned out that HRM merely failed to accept a reasonable offer.

In my view, that shortfall on its part has been appropriately addressed through the agreement to a 50% costs increase to account for the failure to accept Ms. Roscoe ’ s formal offer to settle. [ 42 ] I do not find that HRM ’ s conduct, looked at individually, or as a constellation, was the type of wrongful conduct required to attract augmented costs. D. CONCLUSION

[ 43 ] Based on the foregoing, I conclude that it has not been shown that HRM ’ s conduct was such as to justify awarding augmented costs as a remedial penalty. Therefore, the request for such costs is denied. Costs shall be awarded as otherwise agreed upon between the parties. _____________________________ PIERRE L. MUISE, J