Costs In Simplified Procedure -- Are The Mandatory Consequences History?

Rule 76, the Simplified Procedure, provides for some strong cost consequences if the Rule is not followed but an award within the mandatory scope of the Rule is made. The Court does have the option to not follow the cost provisions of the Rule even when a plaintiff recovers less than $50,000, if it was "reasonable" for the plaintiff to have commenced or continued the action under the ordinary procedure: R 76.13.

Normally the exception under R 76.13 is applied in unusual cases, say where two large competing claims, a claim and counter claim, are set off against each other leading the a small net judgment.

But in Friday's Garisto v. Wang, 2008 ONCA 389 the Court of Appeal seems to have held that the mandatory cost consequences of Rule 76 may be avoided if it was simply plausible that judgment would exceed $50,000.

If this author's analysis is right the cost consequences of Rule 76 are, largely, gutted. Few viable claims, except for liquidated damages, could not plausibly exceed $50,000 in damages.

In any event, the Court's analysis is below and readers can judge for themselves:

ISSUE

[14] This appeal raises the following issue: Did the trial judge err by depriving the appellant of costs pursuant to rule 76.13?

ANALYSIS
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[17] The second hurdle is that the costs consequences of Rule 76 are "the device that drives the whole system": Kincses v. 32262 B.C. Ltd. (1998), 39 C.P.C. (4th) 384 at para. 13 (O.C.J. (Gen. Div.)), quoting Garry D. Watson & Michael McGowan, Ontario Civil Practice, 1999 (Toronto: Carswell, 1998) at 1144. The purpose of the simplified procedure regime is to reduce legal costs and to enhance access to justice by making available a cheaper and more expeditious procedural regime appropriately geared to the litigation of modest claims. That important purpose will be undermined if the costs sanctions built into the simplified procedure regime are not enforced. On the other hand, rule 76.13 has a built-in safety valve, and provides that costs may be awarded even when a plaintiff recovers less than $50,000, if it was "reasonable" for the plaintiff to have commenced or continued the action under the ordinary procedure.

[18] For the following reasons, I conclude that allowing the appellant to recover costs would not undermine the integrity of the Rule 76 simplified procedure regime, and that the appellant has demonstrated an error in principle that justifies appellate intervention. In my view, in the circumstances of this case, the trial judge's conclusion that it was not reasonable for the plaintiff to have commenced and continued the action under the ordinary procedure cannot be reconciled with his pre-verdict assessment of the case, both in his charge to the jury and in his ruling on the defendants' threshold motion.

[19] The trial judge instructed the jury that if it accepted "the plaintiff's view of the case", the appropriate range of damages was between $25,000 and $70,000. In light of that instruction, it could only have been unreasonable for the appellant to have commenced or continued the action outside the simplified procedure regime if the appellant, or his counsel, should have realized that there was no reasonable prospect that the jury would accept the appellant's version.

[20] The trial judge himself had assessed the plaintiff's case, albeit for the limited purpose of the threshold motion. The trial judge was "very impressed" by the appellant's expert witnesses and he found that the appellant's evidence was "sufficiently credible" to support a ruling that the appellant had suffered a permanent and serious impairment of an important physical, mental or psychological function as a result of the accident. Moreover, although the jury plainly did not entirely accept the appellant's version of the case, neither did it accept the respondents' view that the appellant had suffered no significant injury and that his claim was worth nothing.

[21] Accepting at face value the trial judge's jury instruction and threshold ruling, I fail to see how it could not have been reasonable for the appellant to have commenced or continued the action under the ordinary procedure. The reasonableness of the appellant's decision to proceed under the ordinary procedure must be assessed on the basis of the facts as they existed before the jury's verdict. To proceed under the simplified procedure, the appellant would have to abandon any claim for more than $50,000 and forgo the opportunity to approach the case with the level of procedural rigour appropriate for a potentially significant claim. The trial judge found that the appellant had impressive expert medical evidence and although the appellant's credibility was plainly under dispute, the trial judge accepted his evidence as sufficiently credible to defeat the respondents' threshold motion. Jury verdicts in this area are notoriously difficult to predict and, as the trial judge himself recognized, had the jury accepted the appellant's evidence, there was a realistic possibility of an award in excess of $50,000. Moreover, in the end, the jury did accept at least part of the appellant's evidence, as it returned a verdict in his favour.