Pauli v. ACE INA Ins., (2004) 354 A.R. 348 (CA)

• Judge: Fruman,Rawlins,Wittmann
• Neutral Citation: 2004 ABCA 253
• Court: Court of Appeal (Alberta)
• Date: 30 July 2004
• Citation: (2004), 354 A.R. 348 (CA),2004 ABCA 253,242 DLR (4th) 420,[2005] 1 WWR 12,32 Alta LR (4th) 205,354 AR 348,12 CCLI (4th) 215,[2004] AJ No 883 (QL),329 WAC 348,49 CPC (5th) 47,354 A.R. 348,(2004), 354 AR 348 (CA),242 D.L.R. (4th) 420,329 W.A.C. 348,[2004] A.J. No 883 (QL)

Pauli v. ACE INA Ins. (2004), 354 A.R. 348 (CA);

    329 W.A.C. 348

MLB headnote and full text

Temp. Cite: [2004] A.R. TBEd. AU.051

Ken Pauli et al. (appellants/plaintiffs) v. ACE INA Insurance Co. et al. (respondents/defendants)

Susan Regier on behalf of herself and all other members of a class having a claim against the defendant ING Western Union Insurance Company (appellant/plaintiff) v. ING Western Union Insurance Company (respondent/defendant)

(0301-0125-AC; 0301-0284-AC; 2004 ABCA 253)

Indexed As: Pauli et al. v. ACE INA Insurance Co. et al.

Alberta Court of Appeal

Fruman and Wittmann, JJ.A., and Rawlins, J.(ad hoc)

July 30, 2004.

Summary:

The appellants were individuals whose motor vehicles were damaged beyond economic repair. They made insurance claims and were paid the actual cash value of the vehicle less the policy deductible. In each case, the insurer took title to the salvage. The appellants launched a representative action against Alberta insurers, challenging the practice of subtracting the policy deductible from the cash value. A trial of the following preliminary issue (the "merits issue") was ordered: "Does Statutory Condition 4(7) of Section 614 of the Alberta Insurance Act permit an insurance company to charge a deductible against the actual cash value in a total loss situation and keep the salvage".

The Alberta Court of Queen's Bench, in a decision reported at 334 A.R. 104, answered the question in the affirmative and dismissed the appellants' action. In a decision reported at 336 A.R. 85, the court awarded costs against the appellants, both for appearances and steps necessary for the disposition of the merits issue as well as for other case management matters. The appellants appealed from both the decision on the merits issue and the decision on costs.

The Alberta Court of Appeal, in a decision reported at 346 A.R. 263; 320 W.A.C. 263, dismissed the appeal on the merits issue, but reserved the issue of costs, including costs on the appeal.

The Alberta Court of Appeal allowed the costs appeal in part and directed that there would be no order for costs relating to the merits motion. However, the court affirmed that the respondents would have their costs for all other steps taken to pursue certification or case management issues that were independent of the merits issue. There would be no costs with respect to the merits appeal. As success was divided on the costs appeal, all parties would bear their own costs of the costs appeal.

Practice - Topic 210.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - Costs - The appellants launched a representative action against Alberta insurers - A trial of the following preliminary issue (the "merits issue") was ordered: "Does Statutory Condition 4(7) of Section 614 of the Alberta Insurance Act permit an insurance company to charge a deductible against the actual cash value in a total loss situation and keep the salvage" - A chambers judge answered the question in the affirmative and dismissed the appellants' action - The chambers judge awarded costs against the appellants with respect to the merits issue as well as other case management matters - The appellants appealed from the costs decision - The Alberta Court of Appeal allowed the appeal in part and directed that there would be no order for costs relating to the merits motion - The criteria for a no costs order were met (public interest, novel point of law, test case and access to justice) - However, the court affirmed that the certification process and case management issues other than the merits issue properly attracted costs - The court considered, inter alia, that the appellants' insistence in pursuing certification and other case management issues had resulted in dual tracking - See paragraphs 35 to 38.

Practice - Topic 210.3

Persons who can sue and be sued - Individuals and corporations - Status or standing - Class or representative actions - Costs - The appellants launched a representative action against Alberta insurers - A trial of the following preliminary issue (the "merits issue") was ordered: "Does Statutory Condition 4(7) of Section 614 of the Alberta Insurance Act permit an insurance company to charge a deductible against the actual cash value in a total loss situation and keep the salvage" - A chambers judge answered the question in the affirmative and dismissed the appellants' action - The chambers judge awarded costs of the entire proceedings to the respondents - On appeal, the Alberta Court of Appeal directed that there would be no order for costs relating to the merits motion - The chambers judge had considered the access to justice issue only in respect of the financial circumstances of the appellants and had concluded that because funding was available their access to justice was not compromised - However, access to justice had to be viewed in the broader context of the effect of a costs award against citizens who sought to resolve matters affecting society generally - A costs award such as was made by the chambers judge curtailed access to justice because it had a chilling effect on future potential litigants and others who might be willing to underwrite the costs of a potentially meritorious representative action - See paragraphs 31 to 34.

Practice - Topic 7029

Costs - Party and party costs - Entitlement to party and party costs - Successful party - Exceptions - Novel or important point - The appellants launched a representative action against Alberta insurers - A trial of the following preliminary issue (the "merits issue") was ordered: "Does Statutory Condition 4(7) of Section 614 of the Alberta Insurance Act permit an insurance company to charge a deductible against the actual cash value in a total loss situation and keep the salvage" - A chambers judge answered the question in the affirmative and dismissed the appellants' action - The chambers judge awarded costs of the entire proceedings to the respondents - On appeal, the Alberta Court of Appeal directed that there would be no order for costs relating to the merits motion - The court held, inter alia, that the action raised a novel point of law - The court stated that "To deny costs where a novel point of law is determinative of the issue solely because one party is innocent of any wrongdoing, as the chambers judge did in this case, may effectively deny a 'no costs' order in most cases" - See paragraphs 27 to 28.

Practice - Topic 7029.5

Costs - Party and party costs - Entitlement to party and party costs - Successful party - Exceptions - Public interest or test case - The appellants launched a representative action against Alberta insurers - A trial of the following preliminary issue (the "merits issue") was ordered: "Does Statutory Condition 4(7) of Section 614 of the Alberta Insurance Act permit an insurance company to charge a deductible against the actual cash value in a total loss situation and keep the salvage" - A chambers judge answered the question in the affirmative and dismissed the appellants' action - The chambers judge awarded costs of the entire proceedings to the respondents - On appeal, the Alberta Court of Appeal directed that there would be no order for costs relating to the merits motion - The court held, inter alia, that a declaratory judgment that interpreted provincial insurance legislation and the standard automobile insurance policy clearly had implications reaching beyond the interest of the appellants and the issue constituted a matter of broad public interest - See paragraphs 21 to 26.

Practice - Topic 7029.5

Costs - Party and party costs - Entitlement to party and party costs - Successful party - Exceptions - Public interest or test case - The appellants launched a representative action against Alberta insurers - A trial of the following preliminary issue (the "merits issue") was ordered: "Does Statutory Condition 4(7) of Section 614 of the Alberta Insurance Act permit an insurance company to charge a deductible against the actual cash value in a total loss situation and keep the salvage" - A chambers judge answered the question in the affirmative and dismissed the appellants' action - The chambers judge awarded costs of the entire proceedings to the respondents - The chambers judge determined that this was not a test case because the appellants were intent on capturing all possible Alberta parties and on having all potential similar claims in Alberta settled by the action - On appeal, the Alberta Court of Appeal directed that there would be no order for costs relating to the merits motion - The court held that the interpretation of the Insurance Act and the standard automobile insurance policy would establish a legal principle that would determine other actions in Alberta and be persuasive in other provinces where similar statutory language existed - Given the conflicting cases in that regard, the issue met the requirements for a test case - See paragraphs 29 to 30.

Practice - Topic 7053.1

Costs - Party and party costs - Entitlement to party and party costs - Class or representative actions - [See both Practice - Topic 210.3 ].

Cases Noticed:

Westersund v. Westersund (1993), 157 A.R. 276; 77 W.A.C. 276 (C.A.), refd to. [para. 15].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1, refd to. [para. 16].

N.M. v. F.W. (2004), 348 A.R. 143; 321 W.A.C. 143; 2004 ABCA 151, refd to. [para. 18].

Hamilton v. Open Window Bakery Ltd. et al. (2003), 316 N.R. 265; 184 O.A.C. 209; 2004 SCC 9, refd to. [para. 18].

Vriend et al. v. Alberta (1996), 184 A.R. 351; 122 W.A.C. 351; 141 D.L.R.(4th) 44; 40 Alta. L.R.(3d) 352 (C.A.), refd to. [para. 21].

Sierra Club of Western Canada v. Chief Forester (B.C.) et al. (1994), 94 B.C.L.R.(2d) 331 (S.C.), affd. (1995), 60 B.C.A.C. 230; 99 W.A.C. 230; 7 B.C.L.R.(3d) 375 (C.A.), refd to. [para. 22].

Odhavji Estate et al. v. Woodhouse et al., [2003] 3 S.C.R. 263; 312 N.R. 305; 180 O.A.C. 201; 2003 SCC 69 (S.C.C.), refd to. [para. 23].

Harris v. Minister of National Revenue, [2002] 2 F.C. 484; 214 F.T.R. 1 (T.D.), refd to. [para. 24].

Smith v. Co-operators General Insurance Co., [2002] 2 S.C.R. 129; 286 N.R. 178; 158 O.A.C. 1, refd to. [para. 25].

McNaughton Automotive Ltd. v. Co-operators General Insurance Co., [2000] O.T.C. 727; 50 O.R.(3d) 300 (Sup. Ct.), revd. (2001), 151 O.A.C. 252; 54 O.R.(3d) 704 (C.A.), leave to appeal denied (2002), 289 N.R. 400; 163 O.A.C. 398 (S.C.C.), refd to. [para. 27].

Mueller v. Western Union Insurance Co., [1974] 5 W.W.R. 530 (Alta. Dist. Ct.), refd to. [para. 27].

Brown v. Black Top Cabs Ltd. et al. (1997), 97 B.C.A.C. 59; 157 W.A.C. 59; 43 B.C.L.R.(3d) 76 (C.A.), refd to. [para.32].

Authors and Works Noticed:

Alberta, Institute of Law Research and Reform, Final Report on Class Actions, Report No. 85 (2000), pp. 147 to 154 [para. 31].

Jones, Craig, Theory of Class Actions (2003), p. 150 [para. 31].

Orkin, Mark M., The Law of Costs (2nd Ed.) (1995 Looseleaf), pp. 2-37, 2-38 [para. 21].

Counsel:

W.E. McNally, C.D. O'Brien, Q.C., and J.D. Cuming, for the appellants;

J.W. Rose, Q.C., and T.P. O'Leary, for the respondents, ACE INA Insurance Co. et al. and ING Novex Insurance Co. of Canada;

A.L. Kirker, for the respondents, Allianz Insurance Company of Canada et al.;

D.K. Yasui, for the respondents, American Home Insurance Co., Commerce and Industry Insurance Co., New Hampshire Insurance Co. and St. Paul Fire and Marine Insurance Co.;

J.A. Campion, for the respondent, The Dominion of Canada General Insurance Co.;

A.L.W. D'Silva, for the respondents, Liberty Mutual Insurance Company, Liberty Insurance Company of Canada, Liberty Mutual Fire Insurance Company and the Employers Insurance Company of Wausau;

M.A. Gelowitz, for the respondent, State Farm Mutual Automobile Insurance Co.;

R.J. Potts, for the respondent, Zenith Insurance Co. et al.

This appeal was heard on February 2 and 3, 2004, before Fruman and Wittmann, JJ.A., and Rawlins, J.(ad hoc), of the Alberta Court of Appeal. The following memorandum of judgment on costs was delivered by the Court of Appeal on July 30, 2004.