CITATION: Smith v. Mackinnon, 2017 ONSC 4638

DIVISIONAL COURT FILE NO.: DC-17-242

DATE: 20170731

SUPERIOR COURT OF JUSTICE – ONTARIO

DIVISIONAL COURT

RE: JAMES SMITH and ELIZABETH SMITH, Applicants

AND:

EWEN MACKINNON, Respondent

BEFORE: Mew J.

COUNSEL: Zach Flemming-Giannotti, for the Applicants

Garth B. Allan, for the Respondents

HEARD: 27 July 2017, at Kingston

ENDORSEMENT

(Motion for leave to appeal from a Small Claims Court costs order)

[1] The applicants successfully defended a claim for damages for $25,000 which was brought against them in the Small Claims Court arising from an agreement of purchase and sale of a rental property.

[2] The plaintiff alleged that the defendants had misrepresented to him that the property was part of the Queen’s Landlord Contract Program which, if accurate, would, he alleged, have made the property more attractive as a student rental and been advantageous to him as a landlord.

[3] At trial, the Deputy Judge D. Hurley found that although there had been a misrepresentation, the plaintiff did not rely on it when he decided to purchase of the property.

[4] The Deputy Judge gave comprehensive oral reasons for his decision.

[5] The Deputy Judge invited written submissions on the issue of costs. He subsequently determined that he would make no order as to costs, either of the trial, or of a motion brought by the defendants shortly before trial to amend their pleading, the costs of which were reserved to the trial judge.

[6] No reasons were given for the decision on costs.

[7] The defendants now seek leave to appeal from the costs decision of the Deputy Judge. They argue that he fell into error by not following the usual rule that costs follow the event, an error compounded by the existence of an offer to settle by the defendants on the basis of a without-costs dismissal of the action.

[8] Had the trial judge been inclined to award costs, it is common ground that such costs would have been limited to 15% of the amount claimed, namely $3,750: Courts of Justice Act, R.S.O. 1990, C.43, s. 29. However, had the trial judge concluded that the defendants had obtained a judgment as or more favourable than their written offer to settle, it would have been open to him to award costs to the defendants of up to 30% of the value of the claim: Rules of the Small Claims Court, O. Reg 258/98 (as amended), rule 14.07(2).

[9] In addition to these amounts, the defendants say that they should also have been awarded their reasonable disbursements (Rule 19.01) and their costs of the motion to amend, fixed at $200 (Rule 14.07(2))

[10] The awarding of costs is discretionary: Courts of Justice Act, s. 131. It is a discretion which must be exercised in light of the facts and circumstances of the case and any applicable rules of court. Although in Ontario the normative approach is that costs follow the event, premised upon a two-way, or loser-pay, costs approach, the court has discretion not to award costs or even to award costs against a successful party where the conduct of that party justifies such an order.

[11] Section 133(b) of the Courts of Justice Act provides that leave to appeal is required where an appeal is only as to costs that are in the discretion of the court.

[12] Pursuant to rule 62.02(4) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (as amended), leave to appeal shall not be granted unless:

(a) there is a conflicting decision by another judge or court in Ontario or elsewhere on the matter involved in the proposed appeal and it is, in the opinion of the judge hearing the motion, desirable that leave to appeal be granted; or

(b) there appears to the judge hearing the motion good reason to doubt the correctness of the order in question and the proposed appeal involves matters of such importance that, in his or her opinion, leave to appeal should be granted.

[13] The principles governing motions for leave to appeal a costs order can be summarised as follows:

a. Leave to appeal a costs order will not be granted save in obvious cases where the party seeking leave convinces the court that there are “strong grounds upon which the judge erred in exercising his discretion”;

b. Leave to appeal a costs order, standing alone, is granted only sparingly;

c. A court should set aside a costs award on appeal only if the trial judge has made an error in principle or the costs award is “plainly wrong”;

d. A costs award is a discretionary order and the judge at first instance is in the best position to determine the entitlement, scale and quantum of any such award.

See: McNaughton v. Co-operators General Insurance Company, 2008 ONCA 597, at paras. 24-27; Ravin v. Southwestern Ontario Student Transportation Services, 2013 ONSC 6500 at para. 16.

[14] The applicants argue that given the presumption that costs will follow the event, the specific costs provisions applicable to Small Claims Court matters, and the absence of any reasons having been given by the Deputy Judge for the exercise of his discretion not to award costs, there is good reason to doubt the correctness of his decision.

[15] Many decisions on costs are made without reasons being given therefor. Indeed it would present an unwarranted burden on an already overburdened system if every decision on costs had to be supported by reasons. This is particularly so in the Small Claims Court, which is intended to provide an inexpensive, speedy, and user-friendly forum to accommodate civil disputes involving modest amounts.

[16] Where there is a departure from a usual practice, in this case that costs should follow the event, then, as Low J. aptly stated in Mayer v. Zuker (2009), 2009 15147 (ON SCDC), 249 O.A.C. 1 (Div. Ct.) at para. 15:

The absence of reasons itself may provide an impetus to appeal regardless of the result where the presence of reasons, however brief, may have informed a decision to accept the result.

[17] In Gicas Estate v. Gicas, 2014 ONCA 490, an application judge in an estates dispute made a costs order against the appellants personally (as opposed to the more usual order that costs be payable out of the estate) but gave no reasons for doing so. In granting leave to appeal the costs order, Watt J.A. observed, at paras. 68-69:

68 First, the application judge gave no reasons for his costs award. The absence of reasons precludes meaningful appellate review and leaves the appellants without an explanation as to why they were ordered to pay costs personally.

69 Second, and related to the absence of reasons, we cannot determine whether the application judge applied the proper approach to an award of costs in estate litigation.

[18] In light of these judicial observations, and in the circumstances presented, could the absence of reasons for the costs decision in and of itself be regarded as an error of law?

[19] In Mader v. Hunter (2002), 155 O.A.C. 294 (Div. Ct.), the court held that although a motions judge had not given reasons for the exercise of her discretion on the issue of costs, it was nevertheless clear from a perusal of the record before her that she had, in fact, exercised a discretion.

[20] In his reasons for decision, the Deputy Judge confessed “to having wrestled with this one”. He explored the evidence concerning a possible misrepresentation on the part of the defendants and enunciated the applicable legal principles. He concluded that if there had been a negligent misrepresentation of fact, the evidence did not support a finding that the plaintiff relied on such misrepresentation.

[21] In his submissions on costs, then counsel for the plaintiff the plaintiff argued that the decision at trial could quite easily have gone in the plaintiff’s favour and that “as such is a case in which the Court should exercise its discretion not to award costs.” Further on in the plaintiff’s costs submissions it was argued that the motion to amend pleadings had been totally unnecessary and that the defendants amended defence contributed nothing to the final decision by the court.

[22] In my view, the absence of reasons, although unhelpful, does not render the granting of the leave to appeal inevitable.

[23] Where there are no reasons given by a judge for the exercise of his or her discretion, it may nevertheless be possible to find in the record before the court, including the judge’s decision on the merits and the costs submissions which he or she received and would have considered, grounds upon which he or she could properly have exercised his or her discretion, in this case, not to award costs to the successful parties.

[24] In Scherer v. Counting Instruments Ltd., [1986] 1 W.L.R. 615 (C.A.), a motions judge, after dismissing two motions by the defendants for orders dismissing the plaintiffs’ two claims against them for want of prosecution, made an award of costs against the plaintiffs. In considering an appeal from the costs order, for which it would appear no reasons were given, Buckley L.J. stated, at p. 619:

The question is, therefore, whether there were any grounds established before the judge upon which he could properly hold that in relation to those proceedings he could properly exercise his discretion so as to order the plaintiffs, who succeeded, to pay the costs of the defendants, who failed.

[25] In the present case there are ample grounds to conclude that the Deputy Judge exercised his discretion judicially. In particular, he found that there was, indeed, a degree of misrepresentation, as alleged by the plaintiff. In other words, he found that there was a wrong committed by the defendants. The plaintiff lost the case because he could not establish reliance on that misrepresentation. Nevertheless, there was a sound basis for the submission made by the plaintiff in respect of costs that there should be no costs awarded. But for the defendants’ misrepresentation, there would likely have been no lawsuit.

[26] Given these findings, there was a basis upon which the Deputy Judge could properly have exercised his discretion not to award costs to the successful plaintiffs.

[27] In the circumstances I am not persuaded that there is good reason to doubt the correctness of the costs order of the Deputy Judge.

[28] Furthermore, even if I am wrong in my conclusion on the “correctness” element of the requirements of rule 62.02(4)(b), I am not of the opinion that the proposed appeal involves matters of such importance that leave should be granted. It is well established that the matters must transcend the interests of the immediate parties and raise matters of general importance: Greslik v. Ontario Legal Aid Plan (1988), 1988 4842 (ON SCDC), 65 O.R. (2d) 110 (Div. Ct.). While the costs decision of the Deputy Judge may be of great importance to the applicants, it does not, in my opinion, engage matters of public importance and matters relevant to the development of the law and the administration of justice requiring resolution by a higher court.

[29] The motion for leave to appeal is, accordingly, dismissed.

[30] I am presumptively of the view that the respondent should have his costs of the motion for leave to appeal on a partial indemnity basis. If the parties are unable to agree costs, I will consider costs summaries and written submissions, the latter not to exceed two pages in length, to be delivered as follows:

a. by the respondent within 14 days of the date of release of these reasons; and

b. by the applicants within seven days of receipt of the respondent’s costs submissions.

Mew J.

Date: 31 July 2017