A costs decision recently handed down by The Honourable Madam Justice Hooper in a recent case involving the Ministry of Transportation contains an important reminder for those who choose to commence third party claims against other tortfeasors.
The case in question is Mitton v. MTO (2025) ONSC 2645 (CanLii). In this action, the Plaintiff, Ron Busch, was injured in a head-on motor vehicle accident on February 12, 2015, as a result of the Defendant, Christy Mitton, losing control of her vehicle, crossing the centre line of a provincial highway near Belleville, and striking his vehicle head on. Mr. Busch, at the time of the accident, was a 20-year veteran of the Canadian Armed Forces, where he served as a helicopter pilot, and was involved in a number of overseas deployments. As a result of this accident, he sustained a significant foot injury, which prevented him from continuing to fly helicopters. By all accounts, he presented as a sympathetic and credible witness, and Hooper J. commented as such several times in her decision.
Ms. Mitton commenced third party proceedings against the Ministry of Transportation and its Area Maintenance Contractor, Carillon Construction. Her only defence in the main action was that the icy road conditions caused her to lose control of her vehicle, precipitating this accident, which was also the basis of the third party claim. The matter was scheduled to proceed to trial in June 2024.
About ten (10) days before trial, Mr. Busch made an offer to settle to Ms. Mitton for $210,000 plus costs and interest; however, the Defendant initially took the position that it would only pay 50% of this offer, contingent on the MTO, as third party, paying the remaining 50% – a position which was consistently rejected by the MTO, which presumably felt it had a very strong liability defence. The Defendant was not prepared to settle the main action with the Plaintiff in its entirety then continue the third party claim to seek contribution from the MTO. As will be seen, the Defendant's position was one with which Hooper J had a great deal of difficulty.
While the costs decision does not contain a lot of information on the Plaintiff's injuries and damages, Hooper J. commented that this was an extremely reasonable offer given the nature of Mr. Busch's injuries, and the effect they had on his life and his career with the military. Eventually, the Defendant relented and agreed to settle the main action with the Plaintiff, thus paying Mr. Busch out.
The Negligence Act requires, in situations such as this one, that the third party accept the settlement figure as reasonable, failing which the onus falls on the Defendant to establish this as part of the trial of the third party claim. Counsel for MTO initially refused to approve the quantum of the settlement and insisted essentially that the Plaintiff's damages be proven at trial. Properly or improperly, Hooper J. put an end to this by sending a very pointed message to counsel, through her judicial assistant, immediately prior to the trial starting asking what would happen if she assessed damages for more than the settlement amount. Upon receiving this message, counsel for MTO took the hint, cut its losses on the damages issue and agreed to the reasonableness of the settlement of the main action.
The trial of the third party claim continued and MTO was ultimately successful in avoiding liability completely.
This left costs to be dealt with, which resulted in Hooper J. proceeding to fix costs in the sum of $281,251.79, inclusive of HST and disbursements in the Plaintiff's favour against the Defendant. It is quite evident from her costs reasons that she fixed costs in excess of what would otherwise have been the case in order to express her displeasure at the Defendant for keeping the Plaintiff in this action up to the courthouse steps due to its "unreasonable" position in insisting upon a 50% contribution from the third party as a condition of settlement. She stated specifically in this regard:
When there is a third-party proceeding, the potential liability of the third party is irrelevant to the main action. The plaintiff must prove liability on the defendant. Once that occurs, the defendant can assert its claim for contribution and indemnity against the third party. Although the court usually tries the cases together for consistency and efficiency, the lis between the plaintiff is only with the defendant. If the defendant decides to dig in its heels and refuses to entertain settlement discussions without the participation of the third party, which I find happened in this case, it is trying to meld the two actions together. The defendant was insured. The insurer is a sophisticated litigant who was instructing its counsel. The insurer knew it was ultimately responsible to the plaintiff for all damages. It had the funds to pay the claim in full yet it decided to make a tactical decision to drag out this litigation, putting undue pressure on an innocent plaintiff, even after the plaintiff had reduced his claim to an amount well within the range of what could have been awarded at trial. In my view, once the plaintiff made his offer in April 2024, the matter should have resolved. Instead, the defendant insisted on contribution from the third party. This forced the plaintiff to prepare for a lengthy trial. While it was open to the defendant to make these tactical decisions, it does so at the risk of exposing itself to additional costs.
The judge was also quite critical of MTO for initially forcing the plaintiff to prove the damages in the settlement. Had it persisted with this position throughout the trial of the third party claim, it seems extremely likely that she would have disallowed MTO's costs in defending the third party claim in their entirety. Instead, she awarded MTO costs against Ms. Mitton, on a partial indemnity scale, in the sum of $125,000, inclusive of HST (compared to the ~$175,000 it had sought) in partial indemnity costs, but to sanction the MTO for not approving the settlement as reasonable, deducted from this sum the Plaintiff's costs of preparing for trial following the offer of $210,000 being made, in the sum of $18,103.74.
Takeaways:
1. If you act for a defendant which has brought a third party claim, it is far better to fund a settlement in the main action, and then pursue contribution and indemnity in the trial of the third party claim, rather than, as Hooper J. put it "trying to meld the main action and third party claim together" by making the settlement of the main action contingent upon contribution from the third party, particularly if the third party has not defended the main action;
2. Conversely, if you act for a third party, it is important to think long and hard before not agreeing that the settlement of the main action was reasonable, particularly when dealing with a sympathetic Plaintiff with an objective injury;
As evidenced by this decision, failure to do either of these things might well result in the trial judge exercising her/his discretion to make an adverse costs award to your client's detriment. Counsel would be well-served to keep in mind that a third party claim and a crossclaim, although both are forms of claims for indemnity, are entirely different beasts.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
