COURT OF APPEAL FOR ONTARIO
DOHERTY, ARMSTRONG and LANG JJ.A.
B E T W E E N:
ORLANDO CORPORATION
Martin Teplitsky and Bradley Teplitsky
for the appellant
Plaintiff (Appellant)
- and -
BOTHWELL-ACCURATE CO. LTD. and DOMTAR INC.
John W. Adams, Q.C., and Kate Broer
for the respondents
Defendants (Respondents)
A N D B E T W E E N:
ORLANDO CORPORATION
Martin Teplitsky and Bradley Teplitsky
for the appellant
Plaintiff (Appellant)
- and -
DUFFERIN ROOFING LIMITED and DOMTAR INC.
John W. Adams, Q.C., and Kate Broer
for the respondents
Defendants (Respondents)
Heard: May 21, 2004
On appeal from the judgments of Justice Lee K. Ferrier of the Superior Court of Justice dated April 4, 2003.
Overview
1Orlando Corporation (“Orlando”) appeals the trial judge’s disposition of costs in two proceedings that were heard together. The underlying litigation, which involved liability for construction negligence on the Coast Paper Building (“Coast”) and the Cooper Lighting Building (“Cooper”), resulted in a finding of negligence against Domtar Inc. (“Domtar”). However, damages were reduced by ninety per cent as a result of the trial judge’s finding on Orlando’s contributory negligence.
2Domtar served Offers to Settle in each of the two proceedings. The trial judge, after considering those offers, granted Orlando partial indemnity costs for both proceedings until September 2000 – the date of Domtar’s Offers – and granted Domtar partial indemnity costs thereafter.
Issues
3Orlando argues that the trial judge erred in law because:
- the two offers should have been treated as separate offers, with the result that Orlando would have obtained partial indemnity costs for both proceedings to September 2000 and partial indemnity costs in the Cooper proceeding thereafter; and
- Domtar’s costs should have been reduced because its witness misled the court on material matters.
The Rules
4A trial judge’s discretion with respect to costs is found in the Courts of Justice Act, R.S.O. 1990, c. C.43:
131.–(1) Subject to the provisions of an Act or rules of court, the costs of and incidental to a proceeding or a step in a proceeding are in the discretion of the court, and the court may determine by whom and to what extent the costs shall be paid.
Generally, and absent offers to settle, a trial judge is guided by the principles set out in rule 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194:
57.01 (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,
(a) the amount claimed and the amount recovered in the proceeding;
(b) the apportionment of liability;
(c) the complexity of the proceeding;
(d) the importance of the issues;
(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;
(f) whether any step in the proceeding was,
(i) improper, vexatious or unnecessary, or
(ii) taken through negligence, mistake or excessive caution;
(g) a party’s denial of or refusal to admit anything that should have been admitted;
(h) whether it is appropriate to award any costs or more than one set of costs where a party,
(i) commenced separate proceedings for claims that should have been made in one proceeding, or
(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different solicitor; and
(i) any other matter relevant to the question of costs.
5Where the defendant files an Offer to Settle, the following specific rule encourages acceptance of reasonable settlements:
49.10 (2) Where an offer to settle [made by a defendant is not accepted by the plaintiff]
and the plaintiff obtains a judgment as favourable as or less favourable than the terms of the offer to settle, the plaintiff is entitled to partial indemnity costs to the date the offer was served and the defendant is entitled to partial indemnity costs from that date, unless the court orders otherwise.
6In other words, unless the court orders otherwise, where the plaintiff subsequently obtains a judgment that is less than or equal to the amount of the defendant’s offer, the plaintiff is only entitled to partial indemnity costs to the date of the defendant’s offer and the defendant is entitled to partial indemnity costs thereafter.
Standard of Review
7As is evident from the above provisions, a trial judge has a broad discretion in awarding costs. Unless that discretion was not exercised judicially, the decision was based on an erroneous principle of law, or the costs award was plainly wrong, an appeal court will not interfere. Appellate courts will be more reluctant to reverse a trial judge on the question of costs where the analysis is highly fact-driven: Hamilton v. Open Window Bakery Ltd., 2004 SCC 9, [2003] S.C.J. No. 72 at para. 27.
Analysis
1. Should the trial judge have treated the two offers separately?
8Domtar’s September 2000 settlement offers and the trial judge’s 2001 damages awards were in the following amounts:
Cooper Proceeding Coast Proceeding Total
Offer $ 65,000.00 $105,000.00 $170,000.00
Judgment $106,615.50 $ 53,551.60 $160,167.10
9Globally, Orlando obtained a judgment of a lesser amount than offered by Domtar. Viewed separately, however, Orlando obtained a higher judgment than Domtar’s offer in the Cooper proceeding and a lower judgment than Domtar’s offer in the Coast proceeding.
10Accordingly, had the trial judge applied rule 49.10 separately to each offer, Orlando would have been entitled to partial indemnity costs in both proceedings to the date of Domtar’s offers. Costs after the date of the offers would have been divided: Orlando would have been entitled to partial indemnity costs in the Cooper proceeding, and Domtar would have been entitled to post-offer costs in the Coast proceeding. In the result, the post-offer costs would have cancelled each other out, and Orlando would have received the only costs award.
11Instead, because the trial judge treated the two offers as a combined offer, he awarded Orlando partial indemnity costs of both proceedings to the date of the offers and Domtar partial indemnity costs of both proceedings thereafter. In effect, the trial judge refused to give Orlando its post-offer costs of the Cooper proceeding to which Orlando would have been entitled on a strict reading of rule 49.10, and which would likely have relieved Orlando from the obligation to pay any of Domtar’s costs.
12The question is whether the trial judge exercised his discretion judicially in deciding that this was a case to depart from the strict application of rule 49.10. Courts may only depart from a strict application of the Rules in exceptional circumstances. As this court said in Niagara Structural Steel (St. Catherine’s) Ltd. v. W. D. Laflamme Ltd. (1987), 1987 4149 (ON CA), 58 O.R. (2d) 773 (C.A.), at p. 777:
[R]esort should only be had to the exception where, after giving proper weight to the policy of the general rule, and the importance of reasonable predictability and the even application of the rule, the interests of justice require a departure.
13The trial judge considered the strict application of rule 49.10 and said at paras. 16-18 of his reasons on costs:
As has often been said, one of the underlying purposes of the costs provisions in the rules is to encourage settlement thereby avoiding unnecessary proceedings. As noted above, the result of the application of rule 49.10 to each of the offers in this case would be to award Domtar its cost from September 15, 2000 forward, and award Orlando its costs from September 15, 2000 forward, likely producing a wash. This in turn would leave Orlando with its costs up to September 15, 2000. Without more in my judgment, this would be an unfair result in the circumstances of this case.
Although the strict application of rule 49.10 would produce the result above noted, in my view the spirit of rule 49.10 ought to be applied in the circumstances and Domtar should have the advantage of having made two offers which, if both had been accepted, would have ended the matter. I note that nowhere in its submissions does Orlando give any reason why it could not have accepted both offers.
Accordingly, exercising the discretionary power of this court, it would be my view that Orlando should have its costs of both proceedings to September 15, 2000, on a partial indemnity scale, and thereafter, Domtar should have its costs of both actions on the same scale.
14In my view, this was a proper exercise of the trial judge’s discretion. He was entitled, under rule 49.10, to decide that this was an appropriate circumstance “to order otherwise”. He was in the best position to weigh the offers and the circumstances surrounding the offers, to determine whether this was the exceptional case where the court should depart from a strict application of rule 49.10. Indeed, the trial judge’s reasons demonstrate his appreciation for the objectives of rule 49.10 to “encourage settlement thereby avoiding unnecessary proceedings.”
15There is no error in the trial judge’s reasoning on this issue.
16Having decided not to apply rule 49.10 strictly, the trial judge was entitled to turn to the general principles set out in rule 57.01 which, as he noted in para. 14 of his reasons on costs, specifically allowed him to consider “the result in the proceeding and any offer to settle ... made in writing…”. The trial judge decided, in all the circumstances of this lengthy and costly trial, that it would be in error to award all costs to Orlando.
2. Should Domtar’s Costs Have Been Reduced Because its Witness Misled the Court?
17Costs may be reduced or disallowed for misconduct of the parties either before or during litigation: rule 57.01(1)(e).
18Dr. Booth, a scientist with Domtar and one of its chief witnesses, conducted testing in his in-house capacity and, as an “expert”, gave evidence of those earlier tests at trial. Dr. Booth was not an expert witness in the traditional sense of being an outside consultant retained after the events to provide an opinion as to their cause. Orlando submits that Domtar should be entirely deprived of costs because Dr. Booth “allegedly attempt[ed] to mislead the court on material matters and [failed] to disclose relevant evidence” (para. 19, reasons on costs).
19The trial judge considered Dr. Booth’s conduct in his reasons for judgment. To say the least, the trial judge was unimpressed with Dr. Booth’s evidence. He referred to it as “most unsatisfactory” and found that Dr. Booth failed to disclose certain information, even withholding important information from Domtar’s lawyers. The trial judge found him to be a partisan witness, one who “was on the scene in a major way as a Domtar employee” (para. 297, trial reasons). While the trial judge found that “for the most part, Dr. Booth put aside his partisanship when giving his evidence”, he also found that he did “make serious mistakes … in not being forthright” (para. 298, trial reasons). Further, at paras. 299-301 and 309, the trial judge found,
I note that much of Dr. Booth’s evidence is corroborated by physical evidence including photographs and documents. Further, the critical aspect of the chemistry of corrosion was soundly addressed by Dr. Rudin. The expert opinion of David Scott concerning air leakage, which I have accepted, is based in part on Dr. Booth’s evidence as to his observations – but they, in turn, are supported by photographs – and Mr. Scott made his own inspections.
In short, I do not accede to the plaintiff’s submission that I should reject Dr. Booth’s evidence in its entirety to the extent that it supports the defendant’s position.
I am satisfied that all the … experts with whom Dr. Booth communicated were completely independent and the findings in their report were not, taking into account all the evidence, falsified or inappropriately altered.
Much of Dr. Booth’s evidence is corroborated by documents, physical evidence and other witnesses. I am therefore unable to accede to the plaintiff’s submissions that I should reject any part of his evidence which tends to assist Domtar.
20In those circumstances, the trial judge did not see Dr. Booth’s conduct as the type of partisanship on the part of an expert which, in another case, might require the court’s sanction exercised by depriving the relevant party of their costs. Instead, while noting he had made negative findings concerning Dr. Booth’s credibility, the trial judge preferred to characterize the conduct not as misconduct per se, but as conduct that “lengthened somewhat the duration of the trial” (para. 24, reasons on costs). Again, this finding regarding the effect of Dr. Booth’s conduct on the trial is entitled to deference by this court.
21The trial judge considered whether to reduce Domtar’s costs in light of Dr. Booth’s prolongation of the trial. In doing so, he looked at other factors at paras. 25-26:
A further consideration must be taken into account. It is the fact that in pursuing its claims at trial, Orlando sought approximately $1,850,000 in damages. It was awarded approximately $160,000. This is a factor that may be taken into account under rule 57.01 (1)(a).
In addition, the apportionment of liability is relevant under sub-para. (b) of rule 57.01 (1). In my view, both these considerations would result in a substantial reduction in the costs awarded to Orlando.
After considering all these factors, he found at para. 27:
[I]t is my view that the fairest and most appropriate result is to not reduce Orlando’s recovery and not reduce Domtar’s recovery.
22In deciding this question, the trial judge was entitled to balance Domtar’s conduct under rule 57.01 (1)(e) against Orlando’s conduct under 57.01 (1)(a) and (b) and come to his conclusion with respect to the allocation of costs. In doing so, the trial judge did not, as argued by Orlando, improperly “double count” for Orlando’s obvious lack of success having regard to the finding that it was ninety per cent responsible for the resulting damages. First, the trial judge did not, as in the cases referenced by Orlando, make the error of reducing Orlando’s costs by ninety per cent because it was ninety per cent contributorily negligent. See Hogan v. Italian Mosaic and Tile Co., [1927] O.J. No. 5 (S.C. (H.C.Div.)); J.W. Faux Ltd. v. Ontario Hydro, [1996] O.J. No. 2816 (Ct.J. (Gen.Div.)); Capital Community Credit Union Ltd. v. BDO Dunwoody, [2001] O.J. No. 61 (S.C.J.). Second, the trial judge was entitled to take into account Orlando’s minimal success both in his determination of the disposition of costs and in his determination of the quantum of those costs.
23The trial judge was in the best position to assess the effect of Dr. Booth’s conduct and whether it warranted a response by the court. He was entitled to consider Dr. Booth and Domtar’s conduct in light of all the other circumstances and to decide that the most equitable solution would be not to reduce costs for either party.
Result
24The trial judge judicially exercised his discretion to award costs and made no error in principle. The appeals are dismissed.
Costs
25With respect to the costs of this appeal, brief written submissions may be made in that regard within thirty days of the release of this decision.
Released: JUN 30 2004 Signed: “Susan Lang J.A.”
DD “I agree Doherty J.A.”
“I agree Robert P. Armstrong J.A.”