CITATION: Propane Levac Propane Inc. v. Macauley, 2011 ONSC 293

DIVISIONAL COURT FILE NO.: 08-DV-1449

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

B E T W E E N:

PROPANE LEVAC PROPANE INC.

Jean-François Laberge, for the Plaintiff (Respondent)

Plaintiff (Respondent)

• and -

IAN MACAULAY

Richard Minard, for the Defendant (Appellant)

Defendant (Appellant)

HEARD: January 6, 2011

REASONS FOR JUDGMENT

J. Mackinnon J.

INTRODUCTION

1Mr Macaulay appeals from the Judgment of Deputy Judge House awarding costs of $1,650 to the Respondent following a trial between the parties. The Small Claims Court judge ordered that if the Defendant had not returned the Plaintiff’s propane tank within 20 days, then the Defendant was to pay the Plaintiff the sum of $2,000. The Appellant initially appealed from the trial Judgment and the award of costs, but has since returned the propane tank and abandoned that aspect of the appeal. In essence, the Appellant says that the deputy judge erred in awarding an amount of costs that exceeds 15 percent of the claim without directing himself to the criteria under s. 29 of the Courts of Justice Act¹, ("CJA"). That section provides as follows:

29. An award of costs in the Small Claims Court, other than disbursements, shall not exceed 15 per cent of the amount claimed or the value of the property sought to be recovered unless the court considers it necessary in the interests of justice to penalize a party or a party’s representative for unreasonable behaviour in the proceeding.

LEAVE TO APPEAL

2The Appellant argued that leave to appeal the costs award was not required because s. 133 of the Courts of Justice Act only requires leave where the costs award has involved an exercise of discretion. Section 133 provides as follows:

133. No appeal lies without leave of the court to which the appeal is to be taken,

(a) from an order made with the consent of the parties; or

(b) where the appeal is only as to costs that are in the discretion of the court that made the order for costs.

3The Appellant maintains that no discretion was exercised in the award here because the trial judge did not direct himself to the criteria under s. 29. I do not accept this submission. The trial judge clearly had discretion as to whether to award any costs and if he did, then, subject to the applicable statute and rules of Court, he also had discretion as to the amount of costs. Accordingly leave is required to appeal from the award of costs.

4The Appellant asked orally that if required, leave be granted. Although this was opposed by the Respondent, I decided to grant leave for these reasons. The learned deputy judge did not refer specifically to s. 29 of the CJA in his Reasons. The question arises then, as to whether his award is nonetheless supportable under that provision. In my view it is desirable that this court comment upon the interplay between r. 14.07 of the Rules of the Small Claims Court², and s. 29 of the CJA. Finally, the merits of the appeal were fully argued before me.

THE JUDGMENT UNDER APPEAL

5The Plaintiff was a supplier of propane and installed a propane tank and regulator for the use of the Defendant, one of its clients. At a certain point in time, the Plaintiff determined that due to the Defendant’s negligible use of propane, it was uneconomical to continue with the contract. The trial judge found that the Plaintiff was entitled to negotiate a new contract subject to compliance with the termination obligations in the existing one. He went on to find that the Plaintiff had proceeded correctly in accordance with the contract and was entitled to serve the Defendant with a notice to terminate the existing contract. He found nothing wrong in the Plaintiff’s conduct and that it had followed the termination procedure to the letter. Despite this, the Defendant wrongly refused to return the Plaintiff’s equipment. The trial judge stated:

Moreover, if the defendant was no longer using propane, what earthly reason in fact, law or equity, would he have for not allowing the plaintiff to remove its equipment, and with respect, he could never by any means, acquire title to these units. There has been no cogent evidence led to support such a position. It [could] have been resolved by the defendant with no penalty.

6The Defendant also argued that that the Plaintiff had acted in a high-handed, arrogant way in conflict with its duty of good faith to the Defendant. The trial judge required written submissions from the parties in respect to these arguments. In his Reasons, he noted that the submissions of law filed by the Defendant had no application to the facts of the case.

7The trial judge ruled in favour of the Plaintiff and went on to add:

I am surprised that on what I heard and read that the removal of the equipment by the plaintiff was refused by the defendant. Since the defendant was for a time up to the present, not using propane as the facts indicate, I am at a loss to find a reason for that reluctance which would have [saved] court time and the costs incurred by the parties.

8The judge went on to review the Plaintiff’s Offer to Settle which had been more advantageous to the Defendant than the Judgment (return the equipment or pay $1,500 to the Plaintiff), praised its presentation of its case and written submissions and awarded costs in the amount of $1,650.

POSITIONS OF THE PARTIES

9The Appellant submits that the costs award cannot stand because it exceeds 15 percent of the amount claimed, and does not refer to the factors in s. 29 of the CJA that would permit an exception to the 15 percent rule. The Respondent submits that, taken as a whole, the trial judge’s Reasons do provide the factual findings required to support this decision even though he did not refer expressly to s. 29. I agree with the Respondent. The appeal lies from the award of the trial judge, not from the Reasons given. In my view, if his award is supportable on the facts as he found them to be in accordance with the applicable statutory criteria, then it should not be set aside simply for the lack of reference to the particular section.

10In this case, the trial judge’s Reasons addressed what clearly amounts to unreasonable litigation conduct by the Defendant. From the excerpts set out above, his case was found to be unsupportable in fact, law and equity. There was never any prospect that he would be allowed to keep the Plaintiff’s equipment and he could have resolved the entire conflict with no penalty to himself, but did not.

11The trial judge rejected the Defendant’s allegations of bad faith conduct against the Plaintiff and found the Plaintiff had done nothing wrong. The trial judge found that the Defendant’s legal submissions on the point had no application to the case at all. Finally, the trial judge referred to the Plaintiff’s offer, which as I have noted, was more advantageous to the Defendant than the trial Judgment. In my view, failure to accept or to respond to a generous offer, as was the Plaintiff’s, is conduct that may be properly considered under the rubric of “unreasonable” behaviour in the proceeding.

12The trial judge also directed his mind to the interests of justice. He referred to the complete lack of merit in the defence and to the court time and expense to both parties that would have been saved by the simple expedient of returning the equipment to the Plaintiff. Finally, the trial judge also referred to the interests of justice by his commentary on the parties’ written submissions on the question of law raised by the defence, namely that the Defendant’s submission had no application and the Plaintiff’s were excellent, and therefore one can presume, of assistance to the court in its deliberations.

13I agree that it would have been preferable for the trial judge to have set out s. 29 of the CJA and organized these facts in relation to its criteria. Despite this, it is clear that the award made is consistent with and supportable by the criteria under that section.

14The Respondent referred to the decision of Melara-Lopez v Richarz.³ In that case, the deputy judge awarded costs in excess of 15 percent of the amount claimed in reliance on the rejection by the plaintiff of two offers, both of which were more favourable to him than the trial judgment. He did refer himself to s. 29 of the CJA and held that the plaintiff’s failure to accept the two offers can be deemed to be unreasonable behaviour for the purposes of s. 29 of the CJA. I agree. The deputy judge also referred to another decision with approval which appears to have held that r. 14.07 can be applied to award double costs, even if that amount then exceeds the 15 percent limit under s. 29: Beatty v Reitzel Insulation Co.⁴ With respect, I cannot agree with that ruling. In my view, the rules need to be read in a manner that is consistent with the statue, and it is improper in this context to hold in effect that the rule can trump the statute.⁵

STANDARD OF REVIEW

15The standard of review from the discretionary decision of a judge is whether the judge has misdirected himself by an error of principle or whether his decision is so clearly wrong as to amount to an injustice. I am satisfied that the deputy judge exercised his discretion on costs according to the correct principles and that his decision is not clearly wrong. I find no basis upon which I would interfere with his exercise of discretion in the facts of this case. In my view, his award of costs does not, as was submitted by the Appellant, prevent a party from proceeding to court to obtain a ruling on a legal matter; rather it encourages litigants to have regard to the applicable law and to the principle of proportionality in their litigation, including at the Small Claims Court level.

COSTS

16The Respondent is entitled to its costs of the appeal. These are fixed on a partial indemnity basis in the sum of $3,500 all inclusive.

J. Mackinnon J.

Footnotes

1. 1R.S.O. 1990, c. C.43
2. 2O. Reg. 258/98
3. 32009 CarswellOnt 6459 (Sup. Ct.)
4. 42008 CarswellOnt 1364 (Sup. Ct.)
5. 5Ruth Sullivan, Sullivan on the Construction of Statutes, 5th ed. (Canada: LexisNexis Canada Inc., 2008) at 341