Jazz Air LP v. Toronto Port Authority et al.

[Indexed as: Jazz Air LP v. Toronto Port Authority]

84 O.R. (3d) 641

Ontario Superior Court of Justice, Divisional Court,

Lane, Matlow and Pardu JJ.

March 5, 2007

Civil procedure -- Costs -- Substantial indemnity -- Plaintiff moving unsuccessfully for interlocutory injunction -- Motion judge not erring in awarding defendant costs of motion on substantial indemnity basis because of unsubstantiated allegations of conspiracy and improper conduct and because of plaintiff's tactical approach to timing of motion.

The plaintiff's motion for an interlocutory injunction was dismissed. The motion judge found the motion to be without merit and awarded costs of the one-day motion on a substantial indemnity basis in the amount of $160,000. The plaintiff appealed.

Held, the appeal should be dismissed.

Per Pardu J. (Lane J. concurring): It was open to the motion judge to award costs on a substantial indemnity basis because of the unsubstantiated allegations of conspiracy and improper conduct and because of the plaintiff's tactical approach to the timing of the motion. Given the defendant's tight timetable and the importance of the issues, it was reasonable for the motion judge to conclude that the plaintiff would have expected the defendant to do everything it could to prepare for and present a case with the best possible prospect of succeeding. The motion judge did not err in principle, nor was he plainly wrong to award the costs he did.

Per Matlow J. (dissenting): The motion judge failed to give sufficient weight to the reasonable expectations of the parties and failed to fix costs in a sum that was both fair and reasonable. The sum that he awarded far exceeded the upper limit for such an award even on a substantial indemnity level. The motion judge also erred in taking into account the failure of counsel for the plaintiff to disclose his bill rendered to his own client.

APPEAL from an award of costs.

Cases referred to 2878852 Canada Inc. v. Jones Heward Investment Counsel Inc., [2007] O.J. No. 78, 2007 ONCA 14; Andersen v. St. Jude Medical, Inc., 2006 85158 (ON SCDC), [2006] O.J. No. 508, 264 D.L.R. (4th) 557 (Div. Ct.); Apotex Inc. v. Egis Pharmaceuticals (1990), 1990 6829 (ON SC), 2 O.R. (3d) 126, [1990] O.J. No. 2187, 32 C.P.R. (3d) 559 (Gen. Div.), supp. reasons (1991), 1991 2729 (ON SC), 4 O.R. (3d) 321, [1991] O.J. No. 1232, 37 C.P.R. (3d) 335 (Gen. Div.); Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291, [2004] O.J. No. 2634, 188 O.A.C. 201, 48 C.P.C. (5th) 56 (C.A.); Controlled Media Investments Inc. v. Penfund Capital (No. 1) Ltd., [2000] O.J. No. 614, 106 O.T.C. 374, 95 A.C.W.S. (3d) 572 (S.C.J.); Hamilton v. Open Window Bakery Ltd., [2004] 1 S.C.R. 303, [2004] S.C.J. No. 72, 235 D.L.R. (4th) 193, 316 N.R. 265, 2004 SCC 9, 40 B.L.R. (3d) 1; Henry Schein Arcona Inc. v. Mullin, [2000] O.J. No. 3733, [2000] O.T.C. 740, 100 A.C.W.S. (3d) 30 (S.C.J.); Hunt v. TD Securities (2003), 2003 3649 (ON CA), 66 O.R. (3d) 481, [2003] O.J. No. 3245, 229 D.L.R. (4th) 609, 36 B.L.R. (3d) 165, 39 C.P.C. (5th) 206 (C.A.), supp. reasons 2003 48369 (ON CA), [2003] O.J. No. 4868, 40 B.L.R. (3d) 156, 43 C.P.C. (5th) 211 (C.A.); Moon v. Sher, 2004 39005 (ON CA), [2004] O.J. No. 4651, 192 O.A.C. 222, 246 D.L.R. (4th) 440 (C.A.) Statutes referred to Competition Act, R.S.C. 1985, c. C-34 [page642]

Donald H. Jack and Brian N. Radnoff, for appellant. Robert L. Armstrong and Orestes Pasparakis, for respondents.

[1] PARDU J. (LANE J. concurring): -- Jazz Air appeals from a substantial indemnity costs award made against it by Spence J. in the sum of $160,000 following dismissal of Jazz's motion for an interlocutory injunction. Jazz argues that Spence J. erred:

(1) In awarding substantial indemnity costs in the absence of any finding of reprehensible, scandalous or outrageous behaviour in the conduct of the litigation, and that his decision provided no basis to award substantial indemnity costs;

(2) In awarding costs in an amount that was excessive and unreasonable for a one-day motion;

(3) In allowing costs to be calculated at a minimum increment of .25 hours rather than .1 hours.

[2] This one day motion was no simple matter. On January 31, 2006, one of the defendants terminated the monthly tenancy for premises occupied by Jazz on Toronto Island, effective February 28, 2006. Porter Airlines planned to begin passenger flight operations there and had purchased $500 million dollars worth of new aircraft. It had a tight construction schedule for renovations set to start March 1, 2006. Grant of the injunction restraining termination of the lease for the premises occupied by Jazz would have had catastrophic consequences for Porter Airlines. Jazz did not serve its notice of motion and some of the supporting material until 6:21 p.m. on February 23, 2006. Porter Airlines had heard rumours of the pending motion several days earlier and had begun to prepare for the motion.

[3] Justice Spence [[2006] O.J. No. 1110 (S.C.J.)] reviewed the voluminous materials prepared by the parties over the weekend and heard argument from a flock of senior counsel on Monday, February 27th.

[4] In an endorsement released the same day, Spence J. concluded:

(1) Jazz LP was not a party to the lease, which in any event was likely terminable on one month notice which was given.

(2) A breach of the Competition Act, R.S.C. 1985, c. C-34 was unlikely. [page643]

(3) The termination of the lease was likely in accordance with the terms of the lease.

(4) The defendants had good business reasons to use the leased premises and their conduct would not likely amount to conspiracy.

(5) The claims alleging restraint of trade and intentional interference with economic relations were similarly ill- founded.

[5] On May 24, 2006, Spence J. released his costs endorsement:

The request of the Porter defendants for costs on the substantial indemnity scale and on the order of the large amount they request is supported by their submissions. There is no reason to defer fixing the costs or to send them to assessment. The only reasonable expectation the plaintiff could have had is that Porter would do everything it could to prepare for and present a case with the best possible prospect of succeeding. Without the bill that the plaintiff's counsel are submitting to the plaintiff for this matter, the comment that an attack of the kind they have made on quantum is "no more than an attack in the air" seems quite apt and no doubt could be put more bluntly.

I doubt that the top of the rate is appropriate for all of the lawyers for all of their work, so I would reduce the amount for fees to $160,000 before GST, with disbursements as in the bill of costs plus applicable GST. Costs are to be fixed on the above basis and to be payable in 30 days.

[6] The fees claimed by the defendants totalled $176,321.25, but were reduced to $160,000 by Spence J.

[7] A judge's decision on costs is entitled to a high degree of deference. As observed by Arbour J.:

A court should set aside a costs award on appeal only if the trial judge has made an error in principle or if the award is plainly wrong. [See Note 1 below]

[8] On occasion, reasons must be brief because of the pressure of time. Although not ideal, reasons which incorporate by reference a portion of a party's written submissions are adequate provided that the parties understand the reasons for the decision. [See Note 2 below]

[9] Here the reasons met that test. Spence J. adopted the submissions of the defendants on the issues of whether costs should be awarded on a substantial indemnity basis and in the range of the massive amount claimed.

[10] It was open to Spence J. to award costs on a substantial indemnity basis because of the unsubstantiated allegations of [page644] conspiracy and improper conduct [See Note 3 below] and because of the tactical approach to the timing of the motion.

[11] As Farley J. noted in Controlled Media Investments Inc. v. Penfund Capital (No. 1) Ltd., [2000] O.J. No. 614, 106 O.T.C. 374 (S.C.J.), at para. 16:

. . . that scale of costs (which I would think amply supported by the work involved on a hurry up urgent basis created by Dale) would make other litigants think twice before engaging in such inappropriate tactical skirmishes. If that scale does not have that salutary result, then that scale should be adjusted in any future case under similar circumstances.

[12] Spence J. concluded that the motion for the injunction was entirely without merit.

[13] As observed by Mesbur J.: [See Note 4 below]

An injunction is an extraordinary remedy. Parties who seek injunctions should keep in mind, and remember that they do so at their peril, if they fail. Injunctions should not be undertaken lightly. There is good reason for the moving party to be required to make an undertaking as to the damages. Where the injunction is without merit, the responding parties are entitled to be compensated for its losses. I see an abandoned injunction in this light. Here, damning allegations were made against defendants. They were put to considerable expenses and inconvenience to respond to them, on an urgent basis. . . . I see no reason for the defendants not to receive their solicitor and clients costs, forthwith.

[14] A lost but hard fought battle alone does not justify costs on a substantial indemnity basis, although the stakes are high.

[15] The appellants argue that the $160,000 awarded for costs was grossly in excess of any fair and reasonable expectation of the parties, and that an amount in the $40,000 range would have been more appropriate.

[16] In Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291, [2004] O.J. No. 2634 (C.A.), Armstrong J.A. for the court said at paras. 37 and 38:

The failure to refer, in assessing costs, to the overriding principle of reasonableness, can produce a result that is contrary to the fundamental objectives of access to justice. The costs system is incorporated into the Rules of Civil Procedure, which exist to facilitate access to justice. There are obviously cases where the prospect of an award of costs against the losing party will operate as a reality check for the litigant and assist in discouraging frivolous or unnecessary litigation. However, in my view, the chilling effect of a costs award of the magnitude of the award in this case generally exceeds any fair and reasonable expectation of the parties. [page645]

In deciding what is fair and reasonable, as suggested above, the expectation of the parties concerning the quantum of a costs award is a relevant factor . . .

[17] Given the tight timetable and the importance of the issues, it was reasonable for Spence J. to conclude"the only reasonable expectation the plaintiff could have had is that Porter would do everything it could to prepare for and present a case with the best possible prospect of succeeding."

[18] The plaintiff refused to disclose its own dockets for the motion. It is reasonable to conclude that the plaintiff spent as much or more lawyers' time on the motion. The defendants did not have the luxury of developing a finely calibrated litigation strategy. They had to go flat out with all available resources. Spence J. was entitled to consider this as a factor. [See Note 5 below]

[19] Moreover, Spence J. did not simply take a mechanical approach of multiplying hours spent and an hourly rate, but moderated the hourly rates claimed. The defendant's actual costs of responding to the motion were approximately $280,000. The calculation of time in quarter-hour intervals was insignificant in this case because of the compressed time period over which the work was carried out.

[20] The comments at para. 55 in Andersen v. St. Jude Medical, Inc., 2006 85158 (ON SCDC), [2006] O.J. No. 508, 264 D.L.R. (4th) 557 (Div. Ct.) are equally apt here:

A final submission advanced by the defendants is that an award of this magnitude will have a chilling effect on class proceedings. We do not find this submission compelling in circumstances where the defendants, at least initially, drove the plaintiffs into a game of high stakes poker, sparing no expense in marshalling evidence and then declined to put their own costs before the court. Having lost a very expensive and important motion, it is disingenuous for the defendants to now claim that the costs award is outside the range of what they reasonably expected. If the plaintiffs had lost the motion, it similarly would not lie in their mouths to make this submission.

[21] Although the costs awarded are enormous, Spence J. did not err in principle, nor was he plainly wrong to award the costs he did. Accordingly, the appeal is dismissed. If necessary, the parties may make written submissions as to the costs of this appeal, due from the defendants within 20 days after release of this decision, and from the plaintiff, within ten days thereafter.

[22] MATLOW J. (dissenting): -- With respect, I am unable to agree with the disposition of the majority with respect to the quantum of costs awarded by the motion judge. I would allow the [page646] appeal and vary para. 1 of the order in appeal to provide that the award of costs be fixed in the sum of $80,000 for fees plus the additional amounts specified in that paragraph. This sum is the highest that I would consider to be fair and reasonable in the circumstances. I would also invite counsel to make submissions regarding costs in the manner set out in the reasons of Pardu J. on behalf of the majority.

[23] The Rules of Civil Procedure, R.R.O. 1990, Reg. 194 now provide relatively few guidelines for judges to apply in the fixing of costs. Judges are generally left to apply a very broad discretion, especially with respect to quantum, based on the costs outlines which must now be filed by counsel. There are hardly any safeguards or restrictions still in place to prevent the making of costs awards that are excessive and there is no real evidence presented upon which most costs awards are based. In the case at bar, the motion judge was left to make his award on the basis of what he learned during his consideration of the motion before him and the bill of costs (not "costs outline") and submissions filed.

[24] The amount that the motion judge awarded solely for fees, namely, $160,000, was a very large sum by any standard. Observers might well be forgiven for considering it odd that such a large sum could be awarded almost summarily and without formal evidence of any kind whereas judgments for even very small amounts of money can generally be granted only after evidence is considered by the court, usually after a trial or some other hearing. The process we now follow might even be seen by those observers to reflect a triumph of expedience over justice when it comes to costs.

[25] This is one of several important reasons why judges must now take into account, in fixing costs, what they consider to be the reasonable expectations of the parties. Those expectations are an important factor in the determination of what is fair and reasonable, the amount which should ideally constitute both the upper and the lower limit of what should be awarded. An amount that exceeds those expectations should be awarded only sparingly and only if it is clearly justified by the circumstances. If there were ever to be a trend showing that awards of costs have risen far above such expectations, litigants would likely lose confidence in the administration of justice and would be unwilling [to] take the risks inherent in litigating in our courts.

[26] I am persuaded that the motion judge failed to give sufficient weight to reasonable expectations and that he failed to fix costs in a sum that was both fair and reasonable. The sum that he awarded far exceeded what I would regard as the upper limit for such an award even on the substantial indemnity level. Although it is not impossible, it is difficult in my view to conceive of any [page647] one-day motion, including the various associated steps also required to be taken, that could ever justify an award of costs for fees at the level of the award made. Regardless of the demonstrated very high importance of the motion to the responding parties and the extremely large amount of time that their counsel and others working with them decided to devote to it, in my view the sum awarded was unreasonable and reflected an error in principle. Despite the deference that the award of the motion judge deserves, I am persuaded that it should now be reduced.

[27] Such an approach was followed by the Court of Appeal in cases such as Moon v. Sher, 2004 39005 (ON CA), [2004] O.J. No. 4651, 246 D.L.R. (4th) 440 (C.A.) and Boucher v. Public Accountants Council for the Province of Ontario (2004), 2004 14579 (ON CA), 71 O.R. (3d) 291, [2004] O.J. No. 2634 (C.A.). Those cases dealt with awards of costs that were made while the grids were in force and apply even more aptly now that the grids have been eliminated. In both cases the court recognized that, in fixing costs, reasonableness was the overriding principle.

[28] It is also my view that the motion judge further erred in principle in taking into account the failure of counsel for the appellant to disclose his bill rendered to his own client. There is no logical reason why the appropriate quantum of the respondents' costs should be related in any way to that bill or the underlying dockets.

Appeal dismissed.

Notes ----------------

Note 1: Hamilton v. Open Window Bakery Ltd., [2004] 1 S.C.R. 303, [2004] S.C.J. No. 72, 2004 SCC 9, at para. 27.

Note 2: 2878852 Canada Inc. v. Jones Heward investment Counsel Inc. [2007] O.J. No. 78, 2007 ONCA 14 (C.A.), at para. 28.

Note 3: Apotex v. Egis Pharmaceuticals 919900, 1990 6829 (ON SC), 2 O.R. (3d) 126, [1990] O.J. No. 2187 (Gen. Div.); Hunt v. TD Securities Inc. (2003), 2003 3649 (ON CA), 66 O.R. (3d) 481, [2003] O.J. No. 3245 (C.A.).

Note 4: Henry Schein Arcona Inc. v. Mullin, [2000] O.J. No. 3733, 100 A.C.W.S. (3d) 30 (S.C.J.), at paras 2, 3 and 6 (emphasis added).

Note 5: Andersen v. St. Jude Medical, Inc. supra, at p. 567 D.L.R.