Alleged Impecuniosity Insufficient to Bar Costs Award
In a recent Costs Endorsement decision in Kesete v. Gaspar[i], the Ontario Superior Court addressed an argument that a plaintiff’s alleged impecuniosity should bar any – or anything more than nominal – costs being awarded to a successful defendant.
The decision followed a 14-day jury trial, in which judgment was granted in favour of the defendant and the action was dismissed. The action arose from a motor vehicle accident that occurred in 2014, with the plaintiff claiming $1 million in resulting damages.
On the matter of costs, the defendant argued that she should be awarded partial indemnity costs to the date of an offer to settle in September 2022, and substantial indemnity costs thereafter.
The plaintiff, however, claimed to be impecunious, and argued that the defendant should be awarded no costs or $2,000 in costs, at most. The only evidence as to the issue of impecuniosity and the plaintiff’s ability (or inability) to satisfy a costs award was trial evidence of his current source of income being the Ontario Disability Support Program, and his income in 2021 being some $21,000. However, there was also some evidence of after-the-event insurance that might have been available to the plaintiff to pay some or all of any costs award against him.
The plaintiff relied on the Superior Court decision in Baines v. Hehar[ii], in which it was held that there was no utility in awarding costs against an unsuccessful impecunious plaintiff who would be unlikely to attain an ability to pay a costs award in the future. The defendant, on the other hand, relied on the Divisional Court decision in Nassab (Litigation Guardian of) v. Erinoakkids[iii], in which the Divisional Court stated that cases such as Baines, (in which a party’s inability to pay costs may be a factor in determining whether to make an adverse costs award) would be few and far between, and would generally require evidence both of a current lack of financial wherewithal to satisfy a costs award, and of unlikelihood “that they will ever acquire the ability to meet a costs burden arising from the case”.
Justice Taylor in Kesete distinguished Baines, which involved a self-represented plaintiff and a suggestion of mental health issues affecting the plaintiff, and relied instead on the decision in Nassab. With no evidence about the plaintiff’s future prospects and ability to pay a costs award, and with the potential of after-the-event insurance being available, His Honour declined to deviate from the general rule that costs follow the event and to deprive the successful defendant of costs.
In addressing the defendant’s contention for partial indemnity costs up to the date of an offer to settle and substantial indemnity costs thereafter, Justice Taylor examined the language of Rule 49, noting that it provides that a defendant who makes an offer to settle and obtains a more favourable result at trial is entitled to partial indemnity costs from the date the offer was served. However, as judgement was granted in favour of the defendant and the action dismissed, she was also entitled to partial indemnity costs up to the date of the offer. That said, as per the Court of Appeal in Davies v. Clarington (Municipality)[iv], “substantial indemnity costs cannot be awarded to ‘reward’ a defendant for making a legitimate attempt to curtail litigation by making an offer to settle which turns out to be more favourable to the plaintiff than the result at trial”.
There being no reprehensible conduct found on the part of the plaintiff to justify an award of substantial indemnity costs, Justice Taylor found the defendant to be entitled to partial indemnity costs of the action, ultimately awarding the defendant $158,000 in total for costs, HST and disbursements.
[i] 2022 ONSC 6860.
[ii] 2013 ONSC 849.
[iii] 2017 ONSC2740.
[iv] 2009 ONCA 722.