Court File and Parties

Court File No.: CV-12-458641 Date: 2016-09-29 Superior Court of Justice - Ontario

Re: Mabe Canada Inc., Plaintiff And: United Floor Ltd., Defendant

Before: Mr. Justice Graeme Mew

Counsel: Pamela Pengelley, for the Plaintiff Patrick J. Monaghan, for the Defendant

Heard: In writing

Endorsement on Costs

Mew J.

[1] Following an eight day trial, the plaintiff’s action against the defendant was dismissed. The plaintiff failed to establish that a flood in its warehouse was the result of the negligent installation of a concrete floor by the defendant: 2016 ONSC 1060.

[2] The parties were invited to make costs submissions if they were unable to settle costs.

[3] The parties have not been able to agree on costs.

[4] The successful defendant seeks an enhanced award of costs to take account of offers to settle, one which was withdrawn, and the other of which was extant at the commencement of trial, both of which would have represented a significantly better outcome than that achieved by the plaintiff at trial. Because of these offers, the defendant seeks partial indemnity costs throughout except for the attendance at trial and the preparation of closing and costs submissions, in respect of which the defendant seeks costs on a full indemnity basis.

[5] The plaintiff takes the position that the defendant should be denied costs, notwithstanding the defendant’s success at trial. The reasons for this position include the following:

a. Lack of production of relevant documents in a timely manner; b. Conduct on the part of the defendant which caused the plaintiff to incur additional costs to compel the production of relevant information and to respond to last minute disclosure by the defendant; c. Late delivery of an expert reports by the defendant including delivery of an expert report relating to the standard of care and articulating an issue not previously raised, one week prior to trial; d. The defendant’s failure to inform the plaintiff that it had obtained certain building drawings from the City of Brantford’s building department; e. The defendant’s refusal to admit certain facts (ultimately admitted), for example, that the flooding of the plaintiff’s warehouse was due to a punctured hole in an underground drainage pipe, which resulted in the plaintiff having to incur significant expense; and f. The conduct of the defence at trial.

[6] The defendant requests a total of $248,659.09 for costs, inclusive of disbursements and H.S.T. The disbursements alone total $47,397.50 (inclusive of H.S.T.).

[7] Alternatively, the defendant requests an award of costs on a partial indemnity basis throughout in the amount of $220,294.26, inclusive of disbursements and H.S.T.

[8] The plaintiff, while not seeking costs, provided a bill of costs in which partial indemnity fees were calculated to be $128,596.00 plus H.S.T., and disbursements (inclusive of H.S.T.) came to $154,699.28.

[9] Although the plaintiff submits that the costs submitted by the defendant are “excessive, inflated and unjustified”, the plaintiff raises particular concerns only with respect to some of the disbursements claimed, but not with any specific aspect of the fees claimed.

Applicable Principles

[10] In reviewing the submissions of counsel and the bills of costs that have been submitted, I have borne in mind the following general principles:

a. Costs are in the discretion of the court (s. 131, Courts of Justice Act, R.S.O. 1990, c. C. 43 and Rule 57.01 of the Rules of Civil Procedure); b. The normal approach is that costs follow the event and that such costs are awarded on a partial indemnity basis; c. Fixing of costs is not merely a mechanical exercise in reviewing the receiving parties’ costs outline: Agius v. Home Depot Holdings Inc., 2011 ONSC 5272 at para. 11. The amount of costs should reflect an amount that the court should considers to be fair and reasonable rather than an exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier (2002), 119 A.C.W.S. (3d) 341 (Ont. C.A.) at para. 4; d. The reasonable expectation of the unsuccessful party is one of the factors to be considered in determining the amount that is fair and reasonable: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291; Rule 57.01(1)(b) of the Rules of Civil Procedure; e. Where a defendant makes an offer to settle at least seven days before trial which has not expired at the commencement of trial and which has not been accepted by the plaintiff and the plaintiff obtains a judgment less favourable than the terms of the offer, the plaintiff is entitled to partial indemnity costs to the date of the offer and the defendant is entitled to partial indemnity costs thereafter, unless the court orders otherwise: Rule 49.10(2) of the Rules of Civil Procedure.

Scale of Costs

[11] Rule 49.10(2) of the Rules of Civil Procedure does not assist the defendant in this case because, in accordance with the usual practice, the defendant is already prima facie entitled to partial indemnity costs throughout the action.

[12] By contrast, a plaintiff who beats an offer made by the defendant will usually be awarded substantial indemnity costs from the date of the offer: Rule 49.10(1) of the Rules of Civil Procedure.

[13] And the court has a residual discretion, pursuant to Rule 49.13 of the Rules of Civil Procedure, to take into account a non-conforming or revoked offer to settle in making a costs order.

[14] In inviting the court to depart from the usual practice of awarding costs on a partial indemnity scale, at least with respect to counsel fees incurred in connection with the trial and preparing closing and legal submissions on the bill of costs, the defendant refers to S & A Strasser Ltd. v. Richmond Hill (1990), 1 O.R. (3d) 243 (C.A.). In that case, the plaintiff had originally sued the defendant for $1,000,000.00, but scaled the claim down to $70,000.00 just before trial. The defendant had made an offer to settle of $30,000.00 some time prior to the trial. The plaintiff lost, not obtaining any judgment against the defendant at all. Carthy J.A. felt that the circumstances warranted an award of substantial indemnity costs to the defendant following the date of the offer and of partial indemnity costs up to that date. A similar approach was endorsed by the Court of Appeal in Alie v. Bertrand & Frère Construction Co. Ltd. at paras. 272-274.

[15] While there are a number of cases in which a successful defendant has been awarded substantial indemnity costs from the date that an offer of settlement was made – see generally, Mark M. Orkin, The Law of Costs, 2 ed. (Toronto: Canada Law Book looseleaf) at §214 – it remains the case that an award of substantial indemnity costs will usually only be warranted where there are exceptional circumstances: see generally, Davies v. Clarington (Municipality), 2009 ONCA 722.

[16] What then, are some of the circumstances in this case which might warrant departure of the usual practice?

[17] The plaintiff originally claimed damages in the amount of $1,028,584.60 plus interest and costs. At trial, damages were agreed at $951,936.11 (furthermore, certain consulting fees incurred by or on behalf of the plaintiff were accepted by the defendant as constituting damages (rather than costs) during the course of final argument).

[18] The first offer to settle made by the defendant was on 14 October 2014 for the all-inclusive amount of $450,000.00. That offer was withdrawn on 1 October 2015. A second offer was made on 18 January 2016 (seven calendar days before the commencement of trial on 25 January) in which the defendant offered to pay $300,000.00 plus costs and interest. That offer remained open for acceptance until five minutes after the commencement of the trial.

[19] While the court’s discretion to award substantial indemnity costs to a successful defendant should be exercised sparingly, awarding a higher scale of costs from the time of a defendant’s offer not only rewards the defendant for having made the offer but, also, serves the important purpose of encouraging settlement in a manner consistent with the overall objectives of Rule 49 of the Rules of Civil Procedure: see generally, Dulong v. Merrill Lynch Canada Inc. at para. 4: H.L. Staebler Company Limited v. Allan at para. 9.

[20] The magnitude of the offer which was extant at the commencement of trial - $300,000.00 plus interest and costs – was substantial – close to one-third of the total amount claimed. This was not a purely tactical offer made to obtain some sort of costs benefit without any genuine hope that it might be accepted.

[21] It is also important to bear in mind the principle of proportionality. As already alluded to, the rationale underlying Rule 49 of the Rules of Civil Procedure is to encourage settlement. In this case, the bills of costs indicate that total legal spend by the successful defendant, including H.S.T. where applicable, was $313,393.51. The plaintiff’s legal spend was $371,632.16. So, a total of $685,024.67 was spent on legal services, including expert witness expenses, in a case where, ultimately, $951,363.11 plus interest, was at stake.

[22] I should add that even more would have been spent by way of fees and disbursements if the parties had not been able to reach some sensible agreements on important issues (damages and causation).

[23] Finally, on this point, the difference between the defendant’s claim for substantial indemnity costs of the trial itself and its evaluation of partial indemnity costs throughout is not great: $25,101.62 plus $3,263.21 in H.S.T., an uplift of less than 17% overall.

[24] It is important for the sake of context to observe that, in order to attract the costs consequences of Rule 49.10 of the Rules of Civil Procedure, an offer to settle must be made at least seven days before the commencement of trial, and remain extant until the commencement of trial. The offer of 18 January was made seven calendar days before the trial commenced on 25 January. However, where a period of seven days or less is prescribed, holidays are not included in the computation of time: Rule 3.01(1)(b) of the Rules of Civil Procedure. Accordingly, the defendant’s offer could not have engaged consideration under Rule 49.10 of the Rules of Civil Procedure, even if that rule was otherwise applicable.

[25] Weighing all of these considerations, an award of partial indemnity costs remains, in my view, sufficient to meet the objectives of the Rules. Although the defendant was completely successful, and the plaintiff will no doubt regret not having accepted what, with hindsight, were attractive offers, the circumstances described above are not truly exceptional. While the defendant’s claim for enhanced costs is not without merit, I do not regard the circumstances as sufficiently compelling to warrant a departure from the normal practice of awarding partial indemnity costs to a successful defendant.

Conduct of the Defendant

[26] The trial was scheduled to commence on 25 January 2016. The defendant served an expert report on 6 October 2015, approximately one week before the pre-trial, which made reference to engineering drawings that had not been previously provided to the plaintiff (they had been obtained from the City of Brantford’s building department). The plaintiff served its Standard of Care Report on 4 December 2015. The defendant immediately responded with a Notice of Motion on 10 December 2015 seeking an Order adjourning the trial on the basis of the late reports and because the defendant had decided to seek leave to commence a third party action against the general contractor. That motion was denied by Pollak J. on 8 January 2016. This resulted in (to quote the defendant) “the hurried exchange of experts’ reports, including a reply report from the plaintiff served 24 January 2016, the day prior to the commencement of trial.” The defendant, in the meantime, served two additional expert reports on 16 January 2016, one week before trial. It was from one of these reports, authored by John Kyle, that the plaintiff claims an issue which ultimately turned out to be a significant one at trial, namely that the subject pipe seemed shallow, was raised.

[27] The timelines provided in the Rules of Civil Procedure for discovery generally and exchange of expert reports in particular exist in order to avoid the very sort of scramble that appears to have occurred in this case. It is regrettable that, despite ample time to prepare for trial, and the scheduling of a pre-trial several months prior to the commencement of trial, this sort of old fashioned frenzy of activity occurred, with rules and timelines honoured more in the breach than in the observance.

[28] While I in no way condone what occurred in the lead up to trial, I agree with the observation by the defendant that the parties chose to proceed knowing the short timelines.

[29] If I was able to form a clear view – which I am not – that one party transgressed more than the other, I would make an appropriate adjustment of costs against the interests of the transgressing party. However, on the basis of the submissions I have received, I am not able to conclude that the conduct of one side was significantly more egregious than the other.

[30] While it does appear that there were motions to compel undertakings and force discovery obligations, I was not made aware of any judicial order reserving the associated costs to the trial judge.

[31] Nor do I find that the defendant’s conduct at trial warrants any sanction. Indeed, my perspective was that the trial was conducted by all counsel present with a high degree of civility and professionalism.

Disputed Disbursements

[32] While I do take issue with some of the disbursements claimed (meals consumed during witness preparation, rental of a witness meeting room at trial, $5,740.67 for photocopying fees), I do not see any basis upon which to interfere with the expert witness fees. Although Mr. Kenney and Mr. Kyle (two of the experts called by the defendant) gave evidence on overlapping of areas of expertise, I do not regard their contributions as completely duplicate of each other and, hence, would allow the expert witness fees of both them.

[33] I have, accordingly, adjusted disbursements from the amount claimed ($47,397.50) to $44,500.00, all inclusive.

Result

[34] The defendant should have its partial indemnity costs of the action. I fix those fees as follows: Counsel fee $175,000, inclusive of H.S.T and disbursements (including H.S.T.) of $44,500, for a total of $219,500.

Graeme Mew J. Released: 29 September 2016