Court File and Parties
COURT FILE NO.: CV-13-488020 DATE: 20170303 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: David Bain, Plaintiff - and - UBS Securities Canada Inc. and UBS securities LLC, Defendants
BEFORE: Madam Justice Darla A. Wilson
COUNSEL: Chris G. Paliare, Tina H. Lie and Jessica Elders, Counsel for the Plaintiff Daniel Shields and Hendrik Nieuwland, Counsel for the Defendants
HEARD: By Written Submissions
Endorsement on Costs
[1] I presided over the trial of this action and delivered written reasons for judgment on November 4, 2016. In my judgment, I invited counsel to contact me if they were unable to agree on costs. They did so and each filed written submissions on costs and on the issue of the calculation of pre-judgment interest. The solicitor for the Plaintiff filed reply submissions. I have considered all of the written materials that were given to me.
Background
[2] By way of a brief background, the Plaintiff was employed with the Defendant UBS for fourteen years as a manager doing mergers and acquisitions. He was dismissed when UBS ceased doing this work in Canada and his last day with the company was March 22, 2013. He was not given a bonus for 2012 or 2013. He launched this litigation claiming entitlement to the bonuses and payment for what he argued was the proper notice period of 21 months. Bain also claimed that he was owed payment of other things such as vacation pay, referral fees, and benefits.
[3] The Defendant disputed that the Plaintiff was entitled to a bonus, which was discretionary, and argued that it paid Bain for the proper notice period, which was fourteen months. Further, Bain had no right to payment of vacation pay.
[4] I found the Plaintiff was entitled to 18 months’ notice, payment of a bonus for 2012 and 2013, payment of vacation pay and referral payments, mitigation expenses, and amounts that would have been covered by his benefit package during the proper notice period. The total of the judgment, exclusive of interest, is $2,596,268.35.
Position of the Plaintiff
[5] The Plaintiff submits that he was entirely successful at trial and requests costs on a partial indemnity scale fixed at $302,505.20. This is based on fees and HST of $284,465.75 plus disbursements of $18,039.45. Given the factors listed in Rule 57.01 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 (the Rules), this is a reasonable sum and well within the expectation of UBS. Furthermore, given the manner in which the litigation was conducted by UBS, this sum is appropriate. The Plaintiff submits that UBS played “hardball” and forced him to bring a motion for information of five comparators at UBS in order to determine the proper bonus amount.
[6] Further, UBS only delivered one offer to settle during this litigation and that was just prior to the trial, in a sum less than half of what the Plaintiff recovered at trial.
[7] On the issue of the calculation of pre-judgment interest, Bain submits the proper amount is $122,756.03, calculated on the basis of a “lump sum” approach. He argues that he is entitled to interest on the 2012 damages from February 28, 2013, when it should have been paid, and from March 22, 2013 for his wrongful dismissal damages, since that is when the cause of action arose.
[8] Counsel for Bain notes that UBS never paid any salary continuance to the Plaintiff and, because his job was no longer available to him, he did not have the opportunity to receive working notice. Paying pre-judgment interest on a lump sum basis would not result in a windfall to the Plaintiff; rather, it would approximate what he ought to have received had UBS complied with its common law obligations to give him pay in lieu of reasonable notice. Instead, UBS decided to pay him nothing apart from his Employment Standards Act, 2000, S.O. 2000, c. 41 (the ESA) minimums when he was terminated and nothing since and the Plaintiff remained unemployed at the time of trial.
Position of the Defendant
[9] On the issue of costs, UBS submits that the quantum of costs sought is excessive and not within its reasonable expectations. Counsel points out that the costs of UBS on a partial indemnity basis are less than half of those claimed by Bain. Counsel for the Defendant argues that, while the solicitor for the Plaintiff has used 60 percent of the actual rates charged to the client, these rates are still much higher than the grid rates. Further, the rate charged must be reasonable according to the case law and the amounts charged by the counsel for the Plaintiff are in no way reasonable.
[10] Counsel for UBS argues that the Plaintiff’s counsel overworked the file. UBS says the number of hours charged are excessive in the circumstances of this case, which was not a complex piece of commercial litigation. Rather, it was a relatively straightforward wrongful dismissal action, which took five days of trial and only two witnesses. The disbursements are excessive and consist mostly of photocopying fees. In sum, UBS suggests that fees of $141,594.66 and disbursements of $13,000 are reasonable in all of the circumstances.
[11] On the issue of the calculation of pre-judgment interest, it should be done on an incremental approach, not a lump sum approach, to provide fair and accurate compensation to the Plaintiff. This method of calculation results in prejudgment interest of $78,170.22.
Analysis
[12] This is a case where clearly the Plaintiff was successful at trial.
[13] The court is granted a wide discretion when determining the appropriate quantum of costs. Section 131(1) of the Courts of Justice Act, R.S.O. 1990, c. C.43, provides as follows:
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.
[14] Rule 57.01(1) of the Rules identifies the factors a court may consider when exercising its discretion to award costs:
(1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,
(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;
(0.b) the amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;
(a) the amount claimed and the amount recovered in the proceeding;
(b) the apportionment of liability;
(c) the complexity of the proceeding;
(d) the importance of the issues;
(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;
(f) whether any step in the proceeding was,
(i) improper, vexatious or unnecessary, or
(ii) taken through negligence, mistake or excessive caution;
(g) a party’s denial of or refusal to admit anything that should have been admitted;
(h) whether it is appropriate to award any costs or more than one set of costs where a party,
(i) commenced separate proceedings for claims that should have been made in one proceeding, or
(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and
(i) any other matter relevant to the question of costs.
[15] In determining the appropriate amount of costs to which the Plaintiffs are entitled, I am guided by the principles set forth by the court in Andersen v. St. Jude Medical, Inc. (2006), 264 D.L.R. (4th) 557 (Ont. Div. Ct.), leave to appeal refused, 2006 CarswellOnt 7749 (C.A.), at para. 22:
The discretion of the court must be exercised in light of the specific facts and circumstances of the case in relation to the factors set out in Rule 57.01(1): Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.), Moon v. Sher (2004), 246 D.L.R. (4th) 440 (Ont. C.A.) and Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC (2005), 75 O.R. (3d) 638 (C.A.).
A consideration of experience, rates charged and hours spent (formerly a costs grid calculation) is appropriate, but is subject to the overriding principle of reasonableness as applied to the factual matrix of the particular case: Boucher. The quantum should reflect an amount the court considers to be fair and reasonable rather than any exact measure of the actual costs to the successful litigant: Zesta Engineering Ltd. v. Cloutier (2002), 21 C.C.E.L. (3d) 161 (Ont. C.A.), at para. 4.
The reasonable expectation of the unsuccessful party is one of the factors to be considered in determining an amount that is fair and reasonable: Rule 57.01(1)(0.b).
The court should seek to avoid inconsistency with comparable awards in other cases. “Like cases, [if they can be found], should conclude with like substantive results”: Murano v. Bank of Montreal (1998), 41 O.R. (3d) 222 (C.A.) at p. 249.
The court should seek to balance the indemnity principle with the fundamental objective of access to justice: Boucher.
[16] The Court of Appeal has made it clear that the overriding principle when fixing costs is that the amount of costs awarded be reasonable in the circumstances: Davies v. Corporation of the Municipality of Clarington, 2009 ONCA 722, 100 O.R. (3d) 66, at para. 52.
[17] In Boucher, at para. 26, the Court of Appeal noted specifically that the overall objective of fixing costs “is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant.”
[18] I will address the Rule 57.01(1) factors that are relevant to my costs determination as well as the application of the principle of proportionality: Rule 1.04(1.1).
[19] The first factor under Rule 57.01(1) is the principle of indemnity, including the rates charged. Mr. Paliare, who assumed carriage of this matter in the fall of 2015, has 43 years of experience at the Bar and asks for $561 per hour on a partial indemnity basis. This is 60% of his actual billing rate. His associate Ms. Lie, who was at the trial, is a 2007 call and requests $291 per hour on a partial indemnity basis. While Mr. Shields suggests that these hourly rates are unreasonable, I do not agree. Mr. Paliare is a senior member of the Bar, practicing at a litigation boutique, and his rate is commensurate with his experience.
[20] While Mr. Shields notes that he has 33 years of experience at the Bar and his rate is $525 per hour, that fact is not determinative of what the appropriate hourly rate is for Bain’s counsel. I do not know the basis upon which the hourly rates of Mr. Shields were decided upon for UBS. There could be factors that I am unaware of that went into arriving at that hourly rate for use on UBS files. This submission is of little assistance to me in determining the propriety of the hourly rates charged by counsel for the Plaintiff.
[21] Mr. Shields suggests that the rates being charged by the solicitors for the Plaintiff are not appropriate because they are in excess of the grid rates used by the Costs Subcommittee. The costs grid has not been used for determining costs for more than ten years and, in my view, it is of limited usefulness in determining the appropriate hourly rate. I concur with the comments of Newbould J. that “[t]hese rates are completely outdated and unrealistic for an action fought by two major downtown Toronto law firms”: Stetson Oil & Gas Ltd. v. Stifel Nicolous Canada Inc., 2013 ONSC 5213, at para. 22.
[22] The preferable approach, and the one that is usually adopted, is to calculate partial indemnity fees at 60% of the actual fees charged.
[23] The goal, as noted in Boucher, is to fix costs in a reasonable amount, a sum that the losing party could reasonably expect to pay, as opposed to doing a precise mathematical calculation of the costs incurred. In considering the other Rule 57.01 factors, clearly the damages being sought were substantial. Mr. Bain was a managing director prior to his termination and he earned very significant sums of money by way of salary and bonus. He claimed $4 million in damages in his Statement of Claim and recovered in excess of $2.5 million, exclusive of interest.
[24] The Defendant denied the Plaintiff’s entitlement to any bonus for 2012 and the stub year of 2013. Mr. Bain was successful on the bonus issue. He was also successful on the method on which the bonus was calculated, which yielded a higher amount of bonus than the methodology suggested by UBS. Without a doubt, the issues were very important to the parties, particularly the Plaintiff. At the time of trial, he had not secured other employment despite his best efforts. He had received from UBS the statutory minimum payments; he was without health benefit coverage; and he had not been paid the referral amounts for work that he had sent to a different department of UBS.
[25] The conduct of a party is a factor that may be taken into account by the Court when fixing costs. I agree with the submission of counsel for the Plaintiff that UBS wanted to play “hardball” with Mr. Bain. They maintained at trial that he was not entitled to any bonus for 2012, a full year that he had worked, although it was acknowledged that he worked diligently and always acted professionally, even after his termination. As I noted in my reasons for judgment, the bonus was a significant component of Mr. Bain’s income. While the quantum of bonus varied from year to year, depending on the performance of the company and other extrinsic factors, there was never a year that Mr. Bain and the other managers did not get bonuses.
[26] Notwithstanding the history of bonus payments at UBS, the Defendant refused to acknowledge that the reason Bain failed to receive a bonus was related in any way to his termination. At trial, the evidence was clear that all of the other managers received substantial bonuses in 2012, except for Bain and one other manager who was also terminated. As I noted in my reasons:
I am at a loss to understand on what basis UBS decided that Bain was not entitled to a bonus for 2012. Auclair’s testimony that notwithstanding his own assessment of Bain, he was “okay” with the decision not to give him a bonus, struck me as disingenuous. I do not accept that it was a coincidence that the only two managers who did not receive a bonus for 2012 were the two who were terminated. The timing of the terminations and the failure to grant a bonus does not assist the defence.
[27] Parties are entitled to adopt “tough” positions at trial; the Plaintiff has the obligation to prove both liability and damages at trial. In Lopresti v. Rosenthal, 2016 ONSC 7494, at para. 28:
Clearly there are consequences to a party who waits until the last minute to settle a case. In that circumstance, the quantum of fees that will be paid will be much more than if the case had resolved at an earlier stage, and the party who chose not to settle at an earlier date cannot complain that the costs are higher than they otherwise would have been.
[28] The Offer to Settle made by the Defendant two weeks prior to trial was in the sum of $1.1 million, less deductions. The Plaintiff obtained an award that was more than twice the amount of the Defendant’s offer. The result achieved, a factor listed in Rule 57, was excellent and this is an important consideration.
[29] In considering the number of hours spent by the solicitors for the Plaintiff, I would not describe this case as complex, except for the issue of the bonus. The Plaintiff’s bonus was discretionary and was based on a number of factors. The quantum of the bonus varied greatly over the years that Bain was employed at UBS. After an arrangement under the Ontario Business Corporations Act, R.S.O. 1990, c. B. 16, in 2008, the manner in which he received his bonus changed so that he got a percentage in cash and a percentage in shares through the Equity Ownership Plan. The Defendant took the position that Bain was not entitled to deferred compensation based on shares that would not vest within any notice period. This aspect of the case was complex, requiring the use of financial information from other people at UBS who held similar positions to that of Bain.
[30] In reviewing the number of hours claimed, some of the time spent by junior counsel doing pleadings, attending discovery, and working on the motion for undertakings and refusals, which eventually went on consent, seems excessive and there is some duplication. The pre-trial and trial time claimed is reasonable.
[31] In my view, taking into account the factors enumerated in Rule 57 and the principle of proportionality applied to the facts of this case, I am of the view that partial indemnity fees in the sum of $225,000, plus HST of $29,250 is both appropriate and reasonable and I fix the costs of the Plaintiff in that amount.
[32] The solicitor for UBS takes issue with the quantum of the disbursements, in particular, the photocopying and binding charges of $10,048.69. I do not know the rate at which the photocopying was done; it seems high, although the joint books of documents and the exhibits were voluminous. I fix the quantum of disbursements inclusive of taxes at $15,000. The total costs figure to be paid by the Defendant to the Plaintiff is $269,250.
Calculation of Pre-Judgment Interest
[33] Section 128(1) of the Courts of Justice Act provides for the payment of prejudgment interest. It states, “A person who is entitled to an order for the payment of money is entitled to claim and have included in the order an award of interest thereon at the prejudgment interest rate, calculated from the date the cause of action arose to the date of the order.”
[34] In actions for wrongful dismissal, depending on the facts, the courts have awarded prejudgment interest on a lump sum basis or on an instalment approach. Counsel for the Plaintiff argues that it ought to be the former while counsel for UBS submits that it ought to be the latter.
[35] In the case before me, there are certain facts which are germane to my determination of which approach is the fairest in the circumstances. Bain was not offered nor did he receive any salary continuation from UBS after he was terminated and worked his last day on March 22, 2013. He did not receive a bonus for 2012 which, in the usual course of events, he would have received at the end of February 2013. When he was terminated by UBS, Bain was offered a lump sum amount which was the equivalent of 14 months of total compensation, including salary and bonus.
[36] The payment of prejudgment interest in wrongful dismissal claims is intended to place a Plaintiff in the same position he or she would have been in had he or she received the proper notice and payments. So, to a certain extent, the Court has to look at what should have been done, what actually was done, and how to restore the Plaintiff to the same position they would have been in had the proper payments been made at the time of termination. The Court wants to avoid either party receiving a “windfall” as a result of payment of prejudgment interest.
[37] Counsel for UBS argues that the reasoning in Olivares v. Canac Kitchens, 2012 ONSC 5946 ought not to be applied in this case because it is not the same situation since UBS had not ceased its operations in Canada and “therefore it does not go without saying that Mr. Bain could only have received pay in lieu of notice.” I do not accept this submission as there was no evidence at trial that there was any other option available to the Plaintiff. The sole reason given for his termination was the fact that UBS stopped carrying on business in mergers and acquisitions in Canada. There was no suggestion that he could have continued working at UBS in some other capacity so he could have received working notice. The job that he held was no longer available and that is why he was instructed to leave on March 22, 2013.
[38] I found that UBS ought to have paid the Plaintiff a bonus for 2012 and, according to the evidence, in the usual fashion, such bonus would have been paid at the end of February 2013. Bain is entitled to prejudgment interest on his bonus from this date. His bonus for the time he worked in 2013 should have been paid to him when he left, on March 22, 2013. It was not and he is entitled to interest from that date on the 2013 bonus.
[39] I found that he was entitled to 18 months’ notice. There was no evidence that any sort of wage continuation would have been implemented. He did not have the option of receiving working notice so in these circumstances, UBS had to make a lump sum payment to Bain. On the contrary, he was given nothing apart from his ESA entitlements. Effectively, he has been without income since shortly after leaving UBS in 2013. I found the other heads of damage ought to have been paid to the Plaintiff when he left and they were not, so he is entitled to interest on those amounts from March 22, 2013 as well.
[40] In the circumstances, I am of the view that the prejudgment interest should be calculated on the lump sum approach. The 2012 bonus ought to have been paid on February 28, 2013, when the other directors were paid their bonuses. The wrongful dismissal damages ought to have been made as of March 22, 2013 and the Plaintiff has been out of pocket those amounts since that time. The employment contract was breached when UBS dismissed Bain without reasonable notice; that is when the cause of action arose. As a result of the failure of UBS to provide Bain with his bonus for 2012 and the proper lump sum payment in lieu of notice, he has suffered a loss and ought to be compensated for that from the time he ought to have received these payments. There is no basis, in my view, for following the incremental approach when awarding prejudgment interest in this case. Based on the calculations contained at tab B of the written submissions of the Plaintiff, the amount of the pre-judgment interest is $122,756.03.
Darla A. Wilson J.