Costs Endorsement on Abandoned Summary Judgment Motion

Court File No.: CV-11-2721-00 Date: 2017-06-20

Superior Court of Justice - Ontario

Re: INZOLA GROUP LIMITED, Plaintiff V. THE CORPORATION OF THE CITY OF BRAMPTON, Defendant

Before: Daley, RSJ.

Counsel: David Chernos and Stuart Svonkin, for the Plaintiff Steven Stieber and Elizabeth Bowker, for the Defendant

Heard: March 8, 2017

Introduction

[1] The defendant The Corporation of the City of Brampton (“Brampton”) brought a motion for summary judgment seeking to dismiss this action. Eventually after several months following the filing of the motion, Brampton withdrew the motion and as a result the plaintiff seeks the cost of this motion.

[2] The plaintiff is a construction company carrying on business in Brampton. In 2009 Brampton issued a request for proposal (“RFP”) for the construction of a new municipal building and public library. The plaintiff filed its submission in respect of this RFP.

[3] In this action the plaintiff asserts that Brampton wrongly disqualified it from the tender process in violation of the terms of the RFP, and as such, it seeks substantial damages for breach of contract and negligence in the sum of $27,500,000, which represents the loss of profits claimed to have been suffered by the plaintiff. The plaintiff also seeks punitive damages in the sum of $1,000,000 in respect of the defendant’s alleged bad faith conduct.

[4] Following the issuance of the statement of claim in this action, the parties were involved in extensive documentary disclosure and examinations for discovery. The discoveries were conducted over the period from May 2014 until approximately January 2016 and the discovery process included motions with respect to productions.

[5] The plaintiff filed its trial record on February 1, 2016.

[6] The defendant served its summary judgment motion on February 6, 2016, approximately 4 ½ years after this action was commenced and 1 ½ years after the defendant completed its discoveries of the plaintiff.

[7] In view of the complexity and size of the record to be considered on the defendant’s summary judgment motion, a fixed date was set for the hearing of this motion before a selected judge, namely 5 days were set aside from January 16-20, 2017.

[8] Approximately 10 months after the filing of the summary judgment motion, the defendant filed a Notice of Abandonment of the motion on November 22, 2016.

[9] The plaintiff seeks costs of this abandoned motion on a substantial indemnity basis in the amount of $665,777.15, all-inclusive, paid forthwith or alternatively costs on a partial indemnity basis in the amount of $458,306.61.

[10] The defendant acknowledges that the plaintiff is entitled to costs on this abandoned motion, however on a partial indemnity basis and payable in the cause.

The Summary Judgment Motion

[11] The documentary disclosure during the discovery process, which predated the launching of the summary judgment motion by the defendant, involved many thousands of documents, some of which were produced in 2016 after the plaintiff had set this action down for trial and after the defendant had brought the summary judgment motion. The late documentary productions delivered by the defendant included 1,146 documents disclosed in March 2016 and a further 3,430 documents disclosed in May 2016.

[12] In its summary judgment motion, Brampton took the position that as an unsuccessful respondent in the RFP process the plaintiff had no standing to assert a claim for breach of contract or negligence. Alternatively, the defendant took the position that the plaintiff’s action would fail because the defendant acted fairly and appropriately in disqualifying the plaintiff’s submission on the RFP.

[13] The time devoted by both parties in marshaling evidence and in preparing for the five-day summary judgment motion was extensive. The defendant’s motion was made up of 5 volumes, including 2 supplementary motion records, followed by a responding motion record. The plaintiff’s motion materials were made up of an 8 volume responding motion record, a supplementary motion record of 9 volumes and a second supplementary record of 6 volumes, a large portion of these records being transcripts of cross examinations.

[14] In responding to the defendant’s motion, the plaintiff’s counsel conducted cross-examination of 14 witnesses, 10 of which were third party witnesses and 4 of which were affiants. These cross examinations were conducted during the period from May 30 to November 4, 2016. Several of the third party witnesses were representatives of the defendant city, including several city councillors, the mayor of Brampton, and the City Commissioner at the time of the RFP in question.

Legal Framework in Considering Costs Entitlement on an Abandoned Summary Judgment Motion

[15] Rule 37.09 (3) of the Rules of Civil Procedure deals with the cost consequences of an abandoned motion and provides as follows:

(3) Where a motion is abandoned or is deemed to have been abandoned, a responding party on whom the notice of motion was served is entitled to the costs of the motion forthwith, unless the court orders otherwise. R.R.O. 1990, Reg. 194, r. 37.09 (3).

[16] A party that was required to respond to a subsequently abandoned motion is entitled to costs, in the absence of exceptional circumstances, and as such a party is presumptively entitled to such costs as a matter of right and to have those costs payable forthwith, unless ordered otherwise: Yang v. Mao, [1995] O.J. No. 1323.

[17] This view has been accepted that a party responding to a summary judgment motion subsequently abandoned is entitled to costs and it is thus the moving party who must convince the court that there are sufficient grounds to depart from the provisions of Rule 37.09 (3).

[18] Thus, the defendant bears the onus of establishing that the court should deviate from the presumptive rule that the plaintiff is entitled to its costs of the motion on a partial indemnity basis payable forthwith. Failing the presentation of such evidence, the plaintiff would be entitled to its costs on a partial indemnity basis.

[19] I have determined that this is not a proper case for the costs of this abandoned motion to be determined after trial, as was urged on behalf of the defendant: Ledore Investments Ltd. v. Murray, [2002] O.J. No. 1073.

[20] Stinson J in Ledore Investments (supra) made a very important statement with respect to the nature and the extent of the costs entitlement that arises in favour of a responding party on an abandoned motion, which is most apt in this case. He stated as follows at paragraphs 18 – 20:

[18] In my respectful view, these submissions reflect a mischaracterization of the costs entitlement of the party who successfully resists a summary judgment motion. That mischaracterization was also reflected by the description of these costs in Matusch's factum and oral argument as "costs thrown away". In my view, it is not appropriate to characterize such costs as costs thrown away. The traditional understanding of the concept of costs thrown away concerns legal expenses that are incurred in an abortive procedure. An example is the costs incurred by a plaintiff in obtaining a default judgment that is subsequently set aside at the request of the defaulting defendant, who is frequently called upon to pay the plaintiff's costs thrown away. In such a situation, the costs thrown away are truly wasted expenses for such steps as requisitioning the noting in default, preparing and requisitioning (or moving for) the default judgment, obtaining writs of seizure and sale, and so forth.

[19] Rule 20.06(1) does not speak of costs thrown away, but rather refers to the prima facie requirement that a moving party who obtains no relief on a motion for summary judgment pay the responding party's solicitor-client costs of the motion. I make this point because, in my view, it would be improper and potentially unfair to limit a costs award in favour of a party who successfully resists a motion for summary judgment to work that would be of no use in the ongoing proceeding. Put another way, a party who incurs legal expenses for work performed in responding to a summary judgment motion should be entitled to recover those expenses as part of its costs on the summary judgment motion even if that same work may assist the party in the continuing proceeding.

[20] This is not to say that double recovery should be permitted. To the contrary, double recovery should not be allowed. The proper way to approach the problem of avoiding double recovery, however, is to make sure that the same costs are not claimed a second time (that is, as part of the recovery of costs after trial) instead of refusing to grant recovery when they are first incurred (that is, as part of responding to the summary judgment motion). It is often difficult to predict -- particularly at the stage of a proceeding when a motion for summary judgment is brought -- what the future course of the proceeding may be. Subsequent to an unsuccessful motion for summary judgment, there may be amendments to pleadings, examinations for discovery, the discovery of other evidence, developments in jurisprudence or other unpredicted events that may alter the course of the litigation. Indeed, it may turn out that the party who prevails at the summary judgment stage may later be the unsuccessful party after trial, and ordered to pay costs to the opposite party. This underscores the potential unfairness of limiting the prevailing party's costs recovery at the summary judgment stage.

[21] Rule 20.06 of the Rules of Civil Procedure deals specifically with the fixing of costs on a summary judgment motion on a substantial indemnity basis and the rule provides as follows:

COSTS SANCTIONS FOR IMPROPER USE OF RULE

20.06 The court may fix and order payment of the costs of a motion for summary judgment by a party on a substantial indemnity basis if,

(a) the party acted unreasonably by making or responding to the motion; or

(b) the party acted in bad faith for the purpose of delay. O. Reg. 438/08, s. 14.

[22] The purpose of the costs order is to advance the administration of justice by indemnifying successful litigants from costs of litigation, facilitating access to justice, discouraging frivolous claims and defences and discouraging inappropriate behaviour by litigants in the conduct of proceedings and encouraging settlements: Net Connect v. Mobile Zone, 2017 ONSC 1097; Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238, [2010] O.J. No. 5692.

[23] The hallmarks of fairness and reasonableness, including the principle of proportionality must be present in any award of costs: Emmet v. Your Community Realty Inc., 2016 ONSC 7446. Further, the fixing of costs is not a simple mathematical exercise, and the exercise of this discretion should not begin or end with the calculation of hours multiplied by rates: Boucher v. Public Accountants Council (Ont.); Davies v. Clarington (Municipality), 2009 ONCA 722.

[24] The fact that a summary judgment motion may have been reasonably brought and then abandoned does not disentitle the responding party to its costs: Augustine v. Inco Ltd., [2005] O.J. No. 1618.

[25] As to an entitlement to costs on a substantial indemnity basis, the provisions of Rule 20.06 contain two disjunctive factors, and where either circumstance exists, the court may exercise its discretion and award costs on a substantial indemnity basis, where the moving party acted unreasonably in pursuing the motion or acted in bad faith for the purpose of delay.

Analysis

[26] I am satisfied that the plaintiff is, at minimum, entitled to partial indemnity costs throughout with respect to the abandoned summary judgment motion. The defendant has not offered any evidence whatsoever that would cause me to exercise my discretion otherwise.

[27] Thus, the issue for determination, apart from the fixing of fair and reasonable costs, is whether substantial indemnity costs are appropriate in all of the circumstances.

[28] It was urged on behalf of the plaintiff that it was in order that substantial indemnity basis be granted principally on four grounds:

(1) the defendant acted unreasonably in bringing its motion; (2) the defendant acted unreasonably in abandoning its motion when it did; (3) the plaintiff’s response to the motion was reasonable; and (4) the city acted in bad faith with the intention of delaying the trial of this action.

[29] With respect to the first ground mentioned above – while no reasonable explanation has been offered by the defendant as to why it waited 4 ½ years from the commencement of this action to bring the summary judgment motion, and this delay ultimately pushed the scheduling of the trial of this action out an additional year from when it otherwise would have been reached for trial on a fixed date basis, I cannot conclude on the record that this was purposeful and done with the intent of delay as submitted under the fourth ground.

[30] The interests of the administration of justice were certainly not met as a result of the unexplained delay in the bringing of the summary judgment motion, as provided for in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87. However, that delay in and of itself would not trigger an entitlement to substantial indemnity costs.

[31] With respect to the second ground urged on behalf of the plaintiff that the defendant acted unreasonably in abandoning its motion – I have concluded that there is merit to this position, specifically with respect to the point in time when this motion was abandoned when considered in the context of the whole of the evidentiary record available to the defendant.

[32] It was urged on behalf of the plaintiff that long before the date upon which the summary judgment motion was abandoned, it was evident or should have been evident to the defendant that there were several triable issues apparent on the record that would result in the summary judgment motion being dismissed.

[33] In making this submission, counsel for the plaintiff has put forward an argument based on evidence obtained through the discovery process, including documentary discovery and essentially asks the court to come to the conclusion that the summary judgment would have failed had it been argued. In my view, that would not be appropriate. It is not for the court to consider the ultimate question of whether or not the summary judgment motion would have succeeded or failed had it been argued.

[34] No evidence was offered on behalf of the defendant as to the reasons for the decision to abandon the summary judgment motion in November 2016. It appears from the informational record produced, as distinct from evidence under oath or affirmation, that the evidence of John Corbett, the City Commissioner at the time of the RFP and a member of the Evaluation Steering Committee on the RFP, would be problematic for the defendant in terms of achieving any success on this summary judgment motion.

[35] Mr. Corbett was cross-examined on September 8, 2016, and without reciting the details of his evidence at that time, it is common ground and readily accepted by counsel for the defendant, that his evidence on that cross-examination seriously impugned the credibility of other senior city staff in the employ of the defendant on the critical issues at stake on the summary judgment motion. It was urged on behalf of the plaintiff that as Mr. Corbett was in the employ of the defendant at all material times, it knew or should be imputed to have known of the evidence he offered long before this cross-examination in September 2016.

[36] It is notable that the defendant offered no evidence with respect to when the defendant first became aware of the evidence to be offered by Mr. Corbett which seriously undermined the position of the defendant on this motion. On the other hand, on the type of record presented, absent properly tested viva voce evidence I cannot determine if and when the defendant knew of Mr. Corbett’s views or beliefs, as ultimately were disclosed on his cross-examination.

[37] It is, however, clear from the record that certainly at its latest, the defendant knew in September 2016 following the cross-examination of Mr. Corbett, that its chances of success on the summary judgment motion had been significantly reduced to the point that it would have clearly been prudent to abandon the motion sooner than later.

[38] Again, the defendant has offered no evidence explaining why the motion was not abandoned in September 2016. In fact, further cross examinations were conducted on September 30, October 17, October 27 and November 4, 2016, after it should have been readily apparent to the defendant that the motion should be abandoned. Given the informational record available to me and absent any evidence from the defendant explaining its delay in abandoning the summary judgment motion, I conclude that it failed to act reasonably in a timely way in abandoning this motion. There is no explanation whatsoever for the defendant’s delay between September and November 2016.

[39] It is the uncontradicted submission that the plaintiff incurred $137,362.50 in fees, excluding disbursements or taxes, in the period between September 8 and November 22, 2016. It was submitted that this amount represented 22.4% of the total fee amount claimed by the plaintiff on this abandoned motion.

[40] As to the third consideration listed above, I have concluded that the plaintiff responded reasonably to the defendant’s summary judgment motion.

[41] This is a very substantial action involving multi-faceted legal and evidentiary issues with potentially very sizable damages if the plaintiff is successful. There was a great deal at stake as far as the plaintiff was concerned having regard to the summary judgment motion and the plaintiff was required to put its best foot forward or risk losing its case.

[42] In responding to the motion, the plaintiff proceeded to conduct several cross examinations of third parties pursuant to Rule 39.03 of the Rules of Civil Procedure in order to ensure that all relevant evidence would be available to the motion judge to demonstrate that there were triable issues that justified the action proceeding to trial. On the record available, I cannot conclude that the evidence sought and obtained by counsel for the plaintiff in the course of preparing for the summary judgment motion was unreasonably obtained or unnecessary for the purpose of defending the motion.

[43] Furthermore, the defendant should have reasonably expected that the plaintiff would have taken these steps to marshal all the necessary evidence to defend the summary judgment motion. The resulting abandonment of the summary judgment motion by the defendant more than supports the conclusion I have reached; that the plaintiff responded reasonably to the defendant’s motion.

[44] Subject to the conclusions I have reached below with respect to the latter period of time in the fall of 2016, I have concluded that this is not a proper case for substantial indemnity costs covering the period from the bringing of this motion in February 2016 up to September of the same year.

[45] However, I have concluded that the defendant acted unreasonably in pursuing the motion after the evidence from Mr. Corbett was clearly in the record in September 2016. That evidence demonstrated manifestly that the defendant’s motion was highly unlikely to succeed, and the prudent course would have been to abandon the motion immediately upon receiving that evidence. As such, within the terms of Rule 20.06 I have concluded that this is a proper case for an award of substantial indemnity costs covering the time between September and November, 2016. These costs were needlessly incurred and the plaintiff should be fully indemnified for them.

Fixing the Costs

[46] It is often the case that there is no symmetry whatsoever between the costs of bringing a motion and the costs of responding to one. That is particularly the case on a summary judgment motion, where the responding party is required to put its best case forward, and this typically involves the assembling of substantial evidence in order to defeat the motion. That is certainly the situation in this case.

[47] Furthermore, the risks to be considered by the moving and the responding party are at different ends of the spectrum of risk. As such, it should be reasonably expected by a defendant moving to dismiss an action by a summary judgment motion that the costs and disbursements to be incurred by the responding plaintiff will necessarily be significant having regard to the prospect of the action being summarily dismissed. The moving defendant’s risk is limited to liability for costs of the motion if it fails.

[48] As to the plaintiff’s claim for costs, I have concluded that the plaintiff is entitled to its costs from the service of the motion to September, 2016 up to the cross-examination of the witness Corbett on a partial indemnity basis, and on a substantial indemnity basis thereafter.

[49] There is no doubt whatsoever that the summary judgment motion was complex, multifaceted and required that very significant time be spent in preparing responding evidence and in the cross-examination of affiants and third-party witnesses. Counsel for the plaintiff, David Chernos and Stuart Svonkin, worked collaboratively on different aspects of preparing a response to the defendant’s motion and having considered the Costs Outline submitted on behalf of the plaintiff, I am satisfied that the time devoted by counsel to preparing for the pending motion was reasonably and necessarily incurred. However, it is the position of the defendant that in responding to the defendant’s motion, the plaintiff’s case was over-lawyered, in that there was duplication and overlap between the activities of both counsel and the time spent by each.

[50] The plaintiff’s counsel, David Chernos, was called to the bar of Ontario in 1993 and throughout the handling of the summary judgment motion his actual hourly billing rate was $800 per hour. Stewart Svonkin was called to the bar of Ontario in 2003 and the state of Massachusetts in 1999, and his hourly billing rate was $625 per hour. Both counsel were partners at one of the major Toronto Bay Street law firms at the time this litigation commenced and thereafter continued their practice in a boutique litigation firm.

[51] Counsel for the plaintiff, two associates, and a law clerk spent a total of 986.3 hours in various tasks in preparation for the summary judgment motion. Counsel Chernos and Svonkin each attended on the cross examinations of the affiants and third-party witnesses on the basis that these examinations were scheduled very close in time, and having both counsel in attendance would allow them to each have the necessary time to take turns in examining witnesses and preparing for the next day’s examination. This of course added significantly to the time spent by counsel on these examinations.

[52] The defendant’s lead counsel is Steven Stieber who was called to the bar in 1973, and whose substantial indemnity hourly rate was $477 per hour. Ms. Elizabeth Bowker, who was called to the bar in 2002, had a substantial indemnity hourly rate of $256.50. It was readily acknowledged by counsel for the defendant that these hourly rates were rates established by the defendant’s liability insurer, which I find are significantly below the going market billing rates for lawyers of their expertise and seniority. These lawyers were assisted by associates and law clerks.

[53] Counsel for the defendant, along with their associates and law clerks, incurred 391.80 billable hours on this motion totaling $114,850.58 and $79,72.38 on a substantial and partial indemnity basis, respectively.

[54] As already noted, symmetry as to time devoted to a matter, as between a moving party and the responding party, particularly a summary judgment motion, is rare. It is urged on behalf of the defendant that the hourly rates applied to the plaintiff’s counsel’s time spent are excessive and that the time actually spent was excessive and that there was duplication in the time spent as between the lawyers primarily involved.

[55] The overarching requirement that costs awarded are reasonable in the circumstances is to be considered by examining the following principles:

1. 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) of the Rules of Civil Procedure;
2. consideration of the experience of counsel, the rates charged and hours spent is appropriate, but is subject to the overriding principle of reasonableness, as applied to the factual matrix of the particular case, and the quantum should reflect an amount that the court considers to be fair and reasonable, rather than an exact measure of the actual costs to the successful litigant;
3. the reasonable expectation of the unsuccessful party is one of the factors to be considered in determining the amount that is fair and reasonable;
4. the court should seek to avoid inconsistency with comparable awards in other cases; and
5. the court should seek to balance the indemnity principle with the fundamental principles of access to justice: Davies v. Clarington (Municipality), 2009 ONCA 722, at paras. 51 – 52.

[56] As to the hourly rates charged by the plaintiff’s counsel, I have concluded that on a solicitor and client basis those hourly rates are appropriate given the nature and complexity of this case, the amount at stake, the seniority and experience of the lawyers involved. However, I have also concluded that there has been duplication and overlap between the services rendered by counsel and their time spent on this matter.

[57] It is clear from the bill of costs submitted on behalf of the plaintiff that there would, by the nature of the services provided at various points in time, be a significant overlap in the responsibility and duplication of time spent on certain aspects of the management of this litigation.

[58] While a team approach to litigation was successful in this case, and may offer many professional and strategic benefits, it is an approach which by definition drives legal fees higher and although such an approach may be entirely appropriate as between a law firm and its client, parties who adopt such an approach to litigation cannot reasonably expect that, even when they are successful, the greater costs arising from this approach will always be borne by the unsuccessful party: Real Group Inc. v. Core Precision Inc., 2011 ONSC 5090, [2011] O.J. No. 4454.

[59] I have concluded that the fees incurred from the commencement of the summary judgment motion to September 2016 should be reduced by 25% to reflect the inevitable duplication in time spent. This is a reflection of the proper reduction with respect to the team approach applied to this matter, which may be entirely appropriate but which approach should not be visited upon the unsuccessful defendant.

[60] With respect to those costs incurred with respect to fees after September 2016, I am satisfied that it is fair and reasonable that the defendant be liable for substantial indemnity costs incurred after it should have been entirely evident to the defendant that the summary judgment motion was doomed to failure.

[61] Taking the total substantial indemnity costs amount as claimed in the plaintiff’s Costs Outline, in respect of fees, at $665,777.15 and deducting the substantial indemnity fees incurred after September through to November 2016 in the sum of $137,362.50, exclusive of taxes, the net remaining is $528,414.65. As partial indemnity costs are in the order of 60% of substantial indemnity costs, a fair and reasonable sum for costs on a substantial indemnity basis that the defendant could reasonably have expected to pay if unsuccessful is $317,048.79. Reducing that sum by 25% for the reasons expressed, the partial indemnity component of the costs to be awarded is $237,786.60: Fairfield Sentry Ltd. v. PricewaterhouseCoopers LLP, 2015 ONSC 4177, [2015] O.J. No. 4177.

[62] Combining the partial indemnity costs as determined with the substantial indemnity costs incurred between September and November 2016 in the sum of $137,362.50, the total costs payable by the defendant to the plaintiff are in the sum of $375,149.10. In addition to that sum is HST on those fees along with the total assessable disbursements including HST in the sum of $43,365.52.

[63] The defendant shall pay these costs within 30 days and judgment shall issue accordingly.

Daley, RSJ Date: June 20, 2017