CITATION: Saltsov v. Rolnick, 2010 ONSC 6645

COURT FILE NOS.: 30/09 and 40/09

DATE: 2010-12-22

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

J. WILSON, DAMBROT, MURRAY JJ.

RE: LEON SALTSOV and 968831 ONTARIO INC., formerly known as CASHCODE CO. INC., Appellants

AND:

ABE ROLNICK, Respondent

BEFORE: MURRAY, DAMBROT, WILSON JJ.

COUNSEL: Richard B. Swan and Jason W. Waycheshyn, for the Appellant Leon Saltsov

Rocco DiPucchio and Andrew Winton, for the Appellant 968831 Ontario Inc., formerly known as CashCode Co. Inc.

Brian A. Grosman & John R. Martin, for the Respondent

COSTS ENDORSEMENT

[1] Saltsov and 968831 Ontario Inc., formerly known as CashCode Co. Inc., are entitled to their costs on a partial indemnity basis as a result of their success in the Divisional Court which, by decision dated April 19, 2010, struck Rolnick's counterclaim against Saltsov and his third-party claim against CashCode. Costs were awarded by the Divisional Court to both appellants in the Divisional Court and in the court below.

[2] I agree with the submissions of counsel for the appellants that when fixing costs, the Court should consider the result achieved and fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding. I also agree that comparison to the fees charged by the unsuccessful party can be a helpful indicator of the reasonable expectations of that party. See: Boucher v. Public Accounts Council for the Province of Ontario, (2004), 70 O.R (3^rd^) 291 at para. 26 (O.C.A.).

Costs of the Appellant Saltsov

[3] In the court below Rolnick was successful. He was awarded costs on a partial indemnity basis in the amount of $27,500. Saltsov now seeks costs on the motion below, on the leave to appeal and on the appeal before the Divisional Court on a partial indemnity basis. In addition, because the action by Rolnick was dismissed by the Divisional Court, Saltsov also claims costs of the action itself. Saltsov claims a total amount of $65,918.20, including tax and disbursements.

[4] Rolnick agrees that the aggregate costs claimed by Saltsov are reasonable.

[5] Included in the aggregate amount of $65,918.20 claimed by Mr. Saltsov is the amount of $8,461.50 for fees and disbursements related to a voluntary mediation, including a portion of the mediator’s fees. For reasons set out below, I am deducting this amount from the aggregate claim for costs of $65,918.20.

[6] Saltsov is therefore entitled to costs in the amount of $57,456.70, all-inclusive.

Costs of the Appellant 968831 Ontario Inc., Formerly Known as CashCode Co. Inc.

[7] Rolnick’s counsel is in agreement with costs for the motion on July 16, 2008 being awarded in the amount of $15,651.30, including GST, plus disbursements of $739.59. In light of the agreement of the parties, I fix the amount of for the motion at $16,390.89, all-inclusive. A fair amount to be awarded for the leave to appeal is $5,000, including GST, plus disbursements of $981.56, for a total of $5981.56. With respect to the costs of the appeal before the Divisional Court, I am of the view that a fair and a reasonable amount for costs on the appeal to the Divisional Court is $6,000 including GST, plus disbursements as claimed in the amount of $1,643.18, for a total amount of $7,643.18, all-inclusive. In fixing costs, I have substantially discounted counsel fees in the amount of $2,175, excluding GST claims for preparation of the bill of costs. In addition, I have taken into account that the issues raised in the motion for summary judgment were not particularly complex and involved the application of well established principles of law. The amounts fixed are fair and reasonable.

[8] The action against CashCode was also dismissed by the Divisional Court. As a result, the company also claims costs on a partial indemnity scale related to the litigation. CashCode’s counsel claims $25,330.88 in fees and disbursements (including GST), on a partial indemnity scale. Included in the total amount claimed is the sum of $10,920 for counsel fees related to the mediation (not including GST of $546), and an additional $4,951.80 in mediation-related disbursements (including GST), which includes a portion of the mediator’s fee. Without the mediation related fees and disbursements, the amount claimed for fees and disbursements is $8,913.08. I fix costs for the action itself in the amount of $8,900, including tax and disbursements. For reasons set out below, I am not prepared to award costs or disbursements incurred because of participation in a voluntary mediation agreed to by the parties.

Costs Incurred by the Parties in Mediation

[9] Costs and disbursements incurred as a result of participating in voluntary mediation should not be included in awards of costs determined by the Court. In this case, the submissions of all parties appear to proceed on the assumption that fees and disbursements incurred in voluntary mediation should be considered by the Court in deciding the matter of costs. I disagree.

[10] It is trite to say that the Court is not bound or fettered by the agreement of the parties as to what is properly concluded in an assessment of costs. See Haasz Estate (Re), [1959] O.J. No. 456 (Ontario Court of Appeal) in which Laidlaw J.A said:

The power of the court or judge to determine the matter of costs is set forth in section 78 of The Judicature Act, R.S.O. 1950, Chap. 190, and I reproduce subsection (1) thereof as follows:

"78(1) Subject to the express provisions of any statute, the costs of and incidental to all proceedings authorized to be taken in court or before a judge shall be in the discretion of the court or judge, and the court or judge shall have full power to determine by whom and to what extent the costs shall be paid."

That section means precisely what it says. (The Young Sid (1929) p. 190; 98 L.J.P. 97.) It means that a court or a judge should have absolute discretion over all costs within their jurisdiction, subject only to the express provision of any statute. (Re Foster v. Greatwestern Ry. Co. (1882) 8 Q.B.D. 520 at pp. 521-522.) I refer also to Campbell v. Pollak (1927) A.C. 732, and observe that Lord Cave refers to the discretion possessed by the court or a judge as "absolute." In Sharp v. Wakefield (1891) A.C. 173 at p. 179 Lord Halsbury L.C. said:

"... when it is said that something is to be done within the discretion of the authorities that that something is to be done according to the rules of reason and justice, not according to voluntary opinion: according to law and not humour. It is to be, not arbitrary, vague, and fanciful, but legal and regular. And it must be exercised within the limit to which an honest man competent to the discharge of his office ought to confine himself."

The exercise of the discretion vested in the court or a judge by section 78 of The Judicature Act is not subject to the consent of parties in proceedings, and no such consent can fetter the court or a judge. To so hold would mean that in proceedings authorized to be taken in court or before a judge, the parties can, by their consent, usurp the function and power of a court or judge. I express the firm opinion, free from all doubt, that a judge cannot be bound by such a consent nor by any other means except by the express provisions of a statute, and if he holds himself so bound he is not exercising the discretion vested in him by law. It is both the right and the duty of a judge to exercise that discretion, and he cannot abdicate the right or abandon the duty: (Coniagas Reduction Co. Ltd. v. Hydro-Electric Power Commission of Ontario (1932) 1932 115 (ON CA), O.R. 463 at p. 466). If a judge omits or refuses to exercise the discretion intended by law to be exercised by him or permits a consent of parties or their counsel to be substituted in place thereof, he does not perform his duty and the question left to his discretion is not determined in accordance with the law. It is right and proper that a judge should give great weight and consideration to any consent of parties or counsel acting on their behalf, but such consent does not discharge him from the duty to exercise his discretion according to the particular circumstances in each case.

[11] Justice Laidlaw based his analysis in Haasz Estate (Re) on section 78 of The Judicature Act. The current legislative provision is section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, which states as follows:

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. s. 131 (1).

[12] There is no meaningful difference between section 78 of The Judicature Act and section 131(1) of the Courts of Justice Act and Justice Laidlaw's decision remains an accurate statement of the law. Therefore, any agreement by the parties, either actual or implied, does not bind this Court in the exercise of its discretion.

[13] Tariff A states that the fees for any step in a proceeding authorized by the Rules of Civil Procedure, and counsel fees for motions, applications, trials, references and appeals shall be determined in accordance with section 131 of the Courts of Justice Act and the factors set out in sub-rule 57.01(1). Mediations to which Rule 24.1 apply are governed by a mediator’s fee schedule and by the procedure set out in the Rule. For mandatory mediation pursuant to Rule 24.1, each party bears an equal share of the mediator's fees for the mandatory mediation session process. (I note that the Rules do not speak to counsel fees related to mandatory mediation). On the other hand, voluntary mediation is not a step authorized by the Rules of Civil Procedure and, not being authorized by the Rules, counsel fees and disbursements incurred at mediation are not properly the subject of a costs endorsement and should not be determined in accordance with section 131 of the Courts of Justice Act and the factors set out in sub-rule 57.01(1). The mediation engaged in by the parties in this case is not mandatory mediation required by the Rules after January 1, 2010.

[14] I certainly am not critical of any decision by litigants to try and resolve a dispute by voluntary mediation. Often voluntary mediation is very sensible, efficient and successful. Furthermore, if parties wish to agree that, if the mediation does not result in settlement, the successful litigant will be able to claim mediation-related costs and disbursements, then that is an agreement that they may make between themselves before embarking on mediation. There has been no such agreement here.

[15] In this case, while there is no formal agreement on costs of the mediation, it appears that the claim by the successful appellants to partial indemnity costs and disbursements related to mediation is not disputed in principle by the respondent Saltsov. However, as noted above, an agreement in principle does not fetter the jurisdiction of this Court to deny a claim for mediation-related costs and disbursements.

[16] In Naneff v. Con-Crete Holdings Ltd., [1993] O.J. No. 1756, Blair J. (as he then was) stated as follows:

The foregoing analysis leaves the fees claimed in the Bill of Costs intact and reduces the disbursements by a total of $853.25. In the overall result, however, I intend to fix the fees claimed in an amount which is a little more than $4,000.00 less than that claimed.

I do so principally for the following reason. The parties engaged in a lengthy mediation process before Farley J. They made a genuine effort to settle. They are to be commended for this effort notwithstanding that, in the end, it was unsuccessful. In my view the costs of mediation process -- which is a voluntary effort to find a suitable out-of-court resolution -- should be borne equally by the parties engaging in it. Otherwise, parties will be discouraged from engaging in what can in many instances be a fruitful exercise leading to a self-made result, for fear that at the end of the day, if it is not successful and the proceedings are consequently lengthened, they will bear more costs.

[17] I wholeheartedly endorse the reasons of Mr. Justice Blair. In my view, Justice Blair touched on an important policy issue, that is, (if mediation-related costs are awarded) parties may be discouraged from engaging in constructive dispute resolution processes for fear that at the end of the day, if such proceedings do not lead to settlement, costs will be increased. Thus, he concluded, and I agree, that the costs of mediation process -- which is a voluntary effort to find a suitable out-of-court resolution -- should be borne equally by the parties engaging in it.

[18] There are other policy reasons why voluntary mediation should not be the subject of costs awards by the Court. Without probing into without prejudice discussions/negotiations, it is neither possible nor desirable to attempt to assess the conduct of either party at mediation. Without probing into without prejudice discussions, it is it is neither possible nor desirable to assess the reasonableness of positions taken by the parties or whether the time spent in attempting to find resolution was reasonable. In short, the mediation process is neither subject to nor amenable to supervision by the Court. Finally, the fees charged by mediators vary greatly and the Court should not place its imprimatur on mediators’ fees by treating such fees as bona fide disbursements to be paid by the unsuccessful litigant.

[19] For the above reasons, I have declined to include mediation-related costs and disbursements in the calculation of costs in this case.

MURRAY J.

I AGREE DAMBROT J.

I AGREE WILSON J.

Date: December 22, 2010