COURT FILE NO.: DC-09-117
DATE: 2009-10-19
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N:
NORA MELARA-LOPEZ AND YURI VARELA-AVILA
M. MUNRO for the Appellants
Appellants
- and -
SHAWN RICHARZ
M.S. VAN ENGEN for Respondent
Respondent
HEARD: October 7, 2009, at Hamilton, Ontario
Regional Senior Justice H.M. Pierce
Reasons on Appeal from Small Claims Court Judgment
[1] The appellants appeal from the judgment of Deputy Judge Robert Nairn of the Small Claims Court and seek leave to appeal the costs award against them. Leave is granted.
[2] The appeal is without merit and is dismissed for the reasons that follow. The appeal of the costs order is also dismissed.
Standard of Review
[3] The reviewing court on appeal cannot simply substitute its views for that of the trial judge. Rather it must be governed by the law related to standard of review in appeals. Against what benchmark is the appeal to be evaluated?
[4] The leading case with respect to standard of review from a trial judge’s decision is Housen v. Nikolaisen, 2002 SCC 33 (S.C.C.). At par. 8, the court determined that on a pure question of law, the appeal court is free to substitute its decision for that of the trial judge, as on a question of law, the trial judge must be correct. Thus, no deference is owed to the trial judge concerning errors of law.
[5] Where findings of fact are concerned, the reviewing court must be satisfied there is a “palpable and overriding error” before it interferes. (See: par. 10). This is a high standard of deference to the trial judge who has the opportunity to see and evaluate the evidence of witnesses, first-hand.
[6] Questions of mixed fact and law are discussed in paras. 36 – 37 of Housen. The standard of review with respect to questions of mixed fact and law is also one of palpable and overriding error, unless it is clear that the trial judge made an error of principle in law that is independent of his application of the law to the facts. If there is an independent error of law that can be identified as separate from the questions of mixed fact and law, then the standard reverts to correctness.
[7] Here, the trial judge made findings of fact, including findings of credibility, at the trial. He then applied the appropriate law to those facts, making findings as to the reasonable foreseeability of damages as a result of solicitor’s negligence. Thus, the process to be reviewed in this court is one of mixed fact and law. The applicable standard of review is that of palpable and overriding error.
The Facts
[8] The facts were accurately stated by the trial judge.
[9] The appellants jointly owned a property in Hamilton, Ontario. They purchased the adjoining property in their joint names, retaining the respondent, Mr. Richarz, as their solicitor. A few years later, the appellants decided to sell the adjoining property and executed an agreement of purchase and sale with closing to occur in March of 2007. They retained Mr. McPherson to act for them on the sale.
[10] Before closing, the purchaser’s solicitor identified that titles to the adjacent properties had merged, as provided in s. 50 (3) of the Planning Act. Mr. McPherson contacted the respondent about this conveyancing problem. Mr. Richarz undertook to correct the Planning Act problem at his own expense. He and McPherson discussed how to repair the title to overcome the problem of the merged titles. They agreed that an application should be brought in the Superior Court of Justice for an order nunc pro tunc to amend the original title to the property so that only one of the spouses would be shown as the original owner.
[11] An agreement was negotiated with the purchaser to hold the agreement of purchase and sale in escrow, on condition that the purchaser would go into possession in the meantime and pay modest rent.
[12] The respondent filed his application for a correcting order in Superior Court on March 29th, a day after the closing date. Initially the application was refused. The chambers judge required that the City of Hamilton be served with the application, and that the application be returnable in motions court.
[13] The trial judge found that until May 15th, the respondent and the appellants’ lawyer were in agreement to proceed by way of nunc pro tunc application. Subsequently, Mr. McPherson decided to embark on a different course by bringing a severance/variance application to the city. In his evidence, Mr. McPherson testified that he believed the respondent had “given up” on the nunc pro tunc application. The trial judge did not accept this testimony. He found that McPherson failed to notify the respondent of his change in approach to the Planning Act problem. The trial judge determined that the respondent was not advised until after the deal closed in August that McPherson had made application to the city for severance/variance.
[14] Ironically, both processes, proceeding in tandem, concluded in July. Mr. Richarz obtained a nunc pro tunc order from the court and the minor variance application was approved by the city. The sale of the property was completed on August 2nd.
[15] The trial judge found the respondent negligent. However, he found that the respondent took reasonable steps to correct the error.
The Appellants’ Position
[16] The appellants argue that it was not reasonable that a Planning Act problem would be solved by avoiding the provisions of the Planning Act. They also argue that it is reasonably foreseeable that they will incur legal fees to correct their title in the face of the respondent’s negligence. They submit that they should not be forced to rely on the respondent to correct his own negligence.
The Respondent’s Position
[17] The respondent submits that there is no error in the trial judge’s conclusion that once the appellants approved the repair of title proposed by the respondent, it was not reasonably foreseeable that the appellants would embark on another procedure to correct title and claim costs of the parallel procedure against the respondent.
Discussion
[18] The real contest in this trial was damages. The trial judge considered whether damages claimed by the appellants for legal fees for the parallel process (of which the respondent was unaware) were reasonably foreseeable. He determined they were not. He observed,
“…While there may have been other means of accomplishing the same goal, I am not prepared to hold Mr. Richarz liable for the costs of the Defendants’ decision to pursue a parallel application. [sic – it is the plaintiffs’ decision to which the trial judge refers.] These costs would not, in my view, be a reasonably foreseeable consequence of the Defendant’s actions.”
[19] There is no dispute about the other damages assessed by the trial judge.
[20] The nunc pro tunc order is not under appeal here. It is not disputed that the trial judge accurately stated the issue to be determined: the reasonable foreseeability of damages claimed. The appellants simply take issue with how the judge applied the law to the facts.
[21] In my view, there is no palpable and overriding error in either the trial judge’s finding of facts, or in his application of the law to the facts. The trial judge’s conclusion that the respondent was not liable for additional legal fees for parallel proceeding is entirely reasonable. The appellants agreed on the corrective action to be taken; the respondent took timely steps to correct the harm and kept the appellants’ solicitor informed of his progress.
The Costs Appeal
[22] Costs are in the discretion of the trial judge. In this case, the amount claimed by the appellants at trial was $10,000. They recovered $1,393.53 plus pre-judgment and post-judgment interest.
[23] The trial judge considered an offer made by the respondent before litigation began to settle the action for $2,000, and then subsequent to litigation, he offered to settle for $3,000. These offers contemplated that the respondent would also correct the merger of the two titles under the Planning Act at his own expense. Neither offer was accepted by the appellants. Under Rule 49.07, had the appellants accepted either offer, they could have asked the court to fix their costs in addition to the offer.
[24] The trial judge acknowledged generally, costs follow the event. However he applied Rule 14.07 of the Small Claims Court Rules that set out the cost consequences of a failure to accept an offer to settle. Rule 14.07 (2) provides:
“When a defendant makes an offer to settle that is not accepted by the plaintiff, the court may award the defendant an amount not exceeding twice the costs awardable to a successful party, from the date the offer was served, if the following conditions are met:
The plaintiff obtains a judgment as favourable as or less favourable than the terms of the offer;
The offer is made at least seven days before the trial;
The offer was not withdrawn and did not expire before the trial.”
[25] He concluded that both offers to settle would have surpassed the appellants’ recovery at trial and awarded the respondent costs fixed at $3,298.88. The costs award was made under Rule 19.04 which permits an award of a reasonable representation fee.
[26] The appellants submit that the costs award penalized them even though the judgment sustained their claim. They deny they behaved unreasonably in not accepting the offers. They contend that this costs award will discourage meritorious actions from being heard. I do not agree.
[27] Small Claims Court Rule 14.02.1 specifies that an offer to settle can be made at any time. There is no prohibition on offers made before the start of litigation. Nor is there any over-arching principle that costs must follow the event.
[28] Early offers to settle are to be encouraged. Here the trial judge considered carefully the principles relating to costs awards. He determined that the failure to accept a reasonable and timely offer constituted unreasonable behaviour and crafted a costs award accordingly. In my view, there is no error in principle in this conclusion. He exercised his discretion judicially having regard for the principles and objectives in awarding costs.
Costs
[29] If the parties cannot agree on costs of this appeal, an appointment may be obtained from the trial coordinator at Thunder Bay, within thirty days, to argue costs. Counsel may appear by teleconference, if so advised.
Regional Senior Justice H.M. Pierce
Released: October 19, 2009
COURT FILE NO.: DC-09-117
DATE: 2009-10-19
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
NORA MELARA-LOPEZ AND YURI VARELA-AVILA
Appellants
- and –
SHAWN RICHARZ
Respondent
REASONS ON APPEAL FROM SMALL CLAIMS COURT JUDGMENT
Regional Senior Justice H.M. Pierce
Released: October 19, 2009