Court File and Parties
COURT FILE NO.: 10-47917 DATE: 20180718 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
John Greenough and Ingrid Tiessen Plaintiffs – and – Maple Ridge Media Inc., Legalett Canada Inc., Legalett Byggsystem AB, Joshua Teixeira, Chris Love c.o.b. as CCL Construction & Renovations and ARXX Building Products Defendants
Counsel: Eric Williams and Ellie Nekiar for the Plaintiffs Kevin P. Nearing and Michelle Doody for the Defendant Legalett Canada Inc. George Karayannides for the Defendant Joshua Teixeira
Decision on Interests and Costs
[1] The plaintiffs purchased a radiant floor heating system from Maple Ridge Media Inc. The system was designed and supplied by Legalett Canada Inc. (“Legalett”). The plaintiffs were not satisfied with the heating in their newly built house and sued various parties involved in its construction. Prior to trial, the plaintiffs obtained default judgment against Maple Ridge and agreed to consent dismissals against all other defendants except Legalett and Joshua Teixeira.
[2] After a seven day hearing, I concluded that Legalett was liable to the plaintiffs for negligent misrepresentation and breach of a collateral warranty, because statements in its promotional materials reasonably led the plaintiffs to conclude that the radiant floor heating system would generate all of the heat needed to keep the house comfortable. I dismissed the plaintiffs’ claim against Teixeira, the mechanical engineer hired by Legalett to design the system. I found that he was given instructions to design a heating system to certain specifications and that he did so. I also found that he was not responsible for calculating the total heating requirements for the house.
[3] Two issues are outstanding. In my January 26, 2018 decision, I did not deal with the plaintiffs’ claim for pre-judgment interest. Although the parties have not since made submissions on this point, it is appropriate that I address it. I must also determine the parties’ entitlement to costs of the action. The plaintiffs, Legalett and Teixeira each claim they should be awarded costs and argue against awards in favour of other parties. The plaintiffs also seek a Sanderson or Bullock order requiring Legalett to pay any costs they might be ordered to pay to Teixeira.
The Plaintiffs’ Entitlement to Pre-Judgment Interest
[4] I awarded the plaintiffs $29,701.31 for work they had already performed to address the heating shortfall in their house. Pursuant to s. 127 of the Courts of Justice Act, they are entitled to pre-judgment interest on this amount running from March 2010 when they commenced this action to January 26, 2018 when I delivered my decision.
[5] The pre-judgment interest rate for the first quarter of 2010 was 0.5%. I therefore award the plaintiffs the amount of $1167.77 in pre-judgment interest.
Are Either the Plaintiffs or Legalett Entitled to Costs?
The Parties’ Positions
[6] In their statement of claim, the plaintiffs sought $3.5 million in damages, representing the cost to demolish the house and rebuild it with a more robust radiant floor heating system. At the beginning of trial, they reduced their claim to approximately $477,000, the cost of remediation work already performed plus the alleged loss in resale value of their house.
[7] The plaintiffs’ theory of damages assumed that the heating shortfall in the house could not be fixed. Based on the testimony of various witnesses, including the plaintiffs’ experts, I concluded otherwise. I also held that some of the past remediation work was not done to address defects in the radiant floor heating system. As a result, I awarded the plaintiffs total damages of only $36,301.31.
[8] Although they obtained only a fraction of the damages they had claimed, the plaintiffs argue that they should recover costs from Legalett on a partial indemnity basis because they carried the day on the issue of liability.
[9] Legalett argues that costs should not follow the event in this case for three reasons. First, the defendants made a Rule 49 offer prior to trial that was equal to or better than the result obtained by the plaintiffs. Second, the plaintiffs should have agreed to adjourn the trial to implement a proposed remediation plan. Third, this claim should have been brought as a simplified action. Based on these arguments, Legalett says that it should either recover costs from the plaintiffs or that no costs should be awarded to them.
General Principles on Entitlement to Costs
[10] Section 131(1) of the Courts of Justice Act gives courts the discretion to award costs and to fix the amount of costs. The principles governing the award of costs are well-known. The default or normative approach was summarized neatly by Justice Cumming in DUCA Financial Services Credit Union Ltd. v. Bozzo, 2010 ONSC 4601, at para. 5:
In Ontario, the normative approach is first, that costs follow the event, premised upon a two-way, or loser pay, costs approach; second, that costs are awarded on a partial indemnity basis; and third, that costs are payable forthwith, i.e. within 30 days. Discretion can, of course, be exercised in exceptional circumstances to depart from any one or more of these norms.
[11] A successful litigant is accordingly entitled to recover reasonable costs unless there are “very good reasons” to do otherwise. Yelda v. Vu, 2013 ONSC 5903, at para. 11. Such reasons would include misconduct by the party, miscarriage in procedure, or oppressive or vexatious conduct of proceedings. Yelda, supra.
[12] A successful litigant may also be deprived of costs, and even have to pay the losing party’s costs, if the litigant refused an offer to settle that would have resulted in a better outcome for them than what they obtained at trial.
[13] Finally, a successful litigant may be required to pay the losing party’s costs if it was unreasonable for them to begin and continue their action under the ordinary rules instead of the simplified rules.
Did the Defendants Make a Valid Rule 49 Offer That Exceeded the Plaintiffs’ Result at Trial?
[14] The impact of an offer depends on whether it meets the requirements set out in Rules 49.10 and 49.11. If it does, the party who made the offer is presumptively entitled to costs from the date of the offer, unless the court orders otherwise. If the offer does not meet the technical requirements of Rule 49.10 or 49.11, the court may still consider it in exercising its discretion to award costs. Rules 49.13 and 57.01(1) of the Rules of Civil Procedure.
[15] On October 4, 2017, twelve days before trial, the defendants sent the plaintiffs an offer to pay them $40,000 inclusive of all damages, interest and costs, in return for a dismissal of the action.
[16] The plaintiffs argue that this was not a valid Rule 49 offer, because it did not specify how much each defendant would contribute or whether they would be jointly and severally liable for payment. They also argue that the offer was not better than the trial outcome.
[17] I accept the plaintiffs’ argument regarding the value of the offer. They would not have been better off had they accepted it, because they would have been foreclosed from claiming any costs already incurred, which by that time were roughly double the value of the offer itself. As a result, I will not take the offer into account in fixing costs.
[18] Given my conclusion on this point, I do not need to deal with the plaintiffs’ other arguments about the technical shortcomings of the defendants’ offer.
Should the Plaintiffs Have Used a Simplified Procedure?
[19] Rule 76.02 permits a plaintiff to begin an action as a simplified procedure if the total value of their claim is no more than $100,000. A plaintiff who begins an action under the ordinary rules may seek convert it to a simplified procedure prior to trial. Rule 76.02(7) of the Rules of Civil Procedure.
[20] The purpose of Rule 76 is to provide a more streamlined and less costly procedure. In order to encourage its use, Rule 76.13 imposes costs sanctions on plaintiffs who fail to do so in appropriate cases. Exaggerated claims discourage meaningful settlement discussions and drive up the costs of litigation for all concerned. I agree with Justice Dunphy’s observation that:
Plaintiffs are entitled to “aim high” in commencing a claim, but aiming too high can have consequences. Inflated or overly-optimistic claims seldom awe defendants into settlement but can instead sometimes operate to create obstacles to early settlement. Where the result is the avoidance of the available simplified procedure mechanism of Rule 76, the practice may also impose higher litigation costs and more delay on all parties. Neither outcome is desirable. Oudin v. Le Centre Francophone de Toronto, 2015 ONSC 7622, at paras. 10-12.
[21] If a plaintiff proceeds under the ordinary rules but recovers damages less than $100,000, as a general rule they are not entitled to costs. To obtain costs, they must satisfy the court that it was reasonable for them to have commenced and continued the action under the ordinary procedure. A plaintiff who has failed to use the simplified procedure in an appropriate case may even, at the trial judge’s discretion, be ordered to pay all or part of the defendant’s costs on a partial or substantial indemnity basis.
[22] Since I concluded that the plaintiffs were entitled to less than $100,000 in damages, Legalett argues that they ought to have commenced or continued the action as a simplified procedure. Since they did not do so, Legalett says that Rule 76.13 applies and they should not recover their costs.
[23] The plaintiffs initially claimed $3.5 million in damages, the costs of demolishing their existing house and rebuilding it with a more robust radiant floor heating system. At trial, they reduced the claim to just under $500,000, on the assumption that the value of their house was diminished because of an intractable heating shortfall. At trial, the plaintiffs’ own expert, Sylvain Chenier and Ross Elliott, conceded that the house could be adequately heated if a remediation proposal made by the defendants prior to trial were implemented.
[24] A cost award should not be based on the benefits of 20/20 hindsight but rather on the basis of “the facts as they existed” prior to trial. Garisto v. Wang, 2008 ONCA 389, at para. 21.
[25] When the plaintiffs began this action in 2010, they were uncertain as to who was responsible for the heating problem or the extent to which further remediation could be effective. Examinations for discovery allowed them to narrow their focus to three defendants and reframe their damages’ claim. They also took some steps to remediate. Although the defendants developed a further remediation plan in March 2017, they did not share it with the plaintiffs until just before trial. At that point, seeking to continue the action under the simplified procedure rules would have made little or no difference to costs. Pursuant to Rule 76.10(6), the trial of an action commenced or continued as a simplified procedure may be subject to ordinary rules.
[26] Furthermore, if the evidence at trial had supported the plaintiffs’ theory about the loss of value of their house, their damages would have been considerably more than the Rule 76 threshold. Murray v. Davis, 2013 ONSC 5950, at para. 12. This is accordingly not a case where the plaintiffs could never have recovered more than $100,000. I agree with other judges who have held that “a plaintiff should not be penalized because it “put its best foot forward’ at trial as long as it has not unduly exaggerated its claim or unnecessarily lengthened the trial process”. This statement was originally made by Justice Tysoe in Dunhill Construction Co. v. Ledcor Industries Ltd., 1993 CarswellBC 3395, at para. 7, and adopted by Justice Broad in Rimmer v. Lahey, 2013 ONSC 7109, at para. 28.
[27] I accordingly conclude that the plaintiffs’ decision to use the ordinary rules was reasonable.
Should the Plaintiffs Have Agreed to Adjourn the Trial?
[28] On October 4, 2017, the same day that the defendants served their settlement offer, they forwarded their further remediation proposal to the plaintiffs and offered to adjourn the trial to implement the proposal. They suggested an adjournment on consent again at a pre-trial a few days later. The plaintiffs refused both offers to adjourn.
[29] Legalett points out that the remediation proposal was the same proposal on which I based an award of future costs of remediation. It argues that the plaintiffs should have adjourned the trial to implement the proposal, and so avoided a trial and its associated costs.
[30] I do not accept this argument. The defendants had proposed other steps to address the heating shortfall in the house in the weeks and months after the plaintiffs moved in. These steps improved the situation but did not fix it entirely. Teixeira developed the final remediation proposal in March 2017, but for reasons unknown did not share it with the plaintiff until the eve of trial. Among other things, the proposal involved increasing the temperature of the water supply flowing to the floor heating system beyond the range set out in its specifications. At trial, Teixeira undertook, on behalf of Legalett, to warrant the life expectancy of the system even at the increased water temperature. Until he did so on the record, however, the plaintiffs did not know whether this part of the proposal risked compromising the long term usage of the heating system.
[31] In summary, after over seven years of litigation and less than two weeks before trial, the defendants offered a further remediation proposal, the implementation of which on its face risked voiding the warranty for the heating system. In these circumstances, it was reasonable for the plaintiffs to reject the offer to adjourn.
What Are the Plaintiffs’ Costs?
[32] Since there is no basis for denying costs to the plaintiffs, I must now consider how much they should recover.
[33] In setting costs, the overarching consideration is reasonableness. As stated by the Court of Appeal:
If the judge fails to consider the reasonableness of the costs award, then the result can be contrary to the fundamental objective of access to justice. Rather than engage in a purely mathematical exercise, the judge awarding costs should reflect on what the court views as a reasonable amount that should be paid by the unsuccessful party rather than any exact measure of the actual costs of the successful litigant. Davies v. Clarington (Municipality) (2009), 100 O.R. (3d) 55 (C.A.), at paras. 51-52. This is consistent with the Court’s earlier decision in Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291, at paras. 26 and 37.
[34] In determining a reasonable amount, I will consider fees incurred as well as other factors set out at Rule 57.01, to the extent they are relevant to this case. As the Court of Appeal has repeatedly emphasized, however, the overriding consideration is reasonableness rather than what the winning party’s counsel charged their own client. Coldmatic Refrigeration of Canada Ltd. v. Leveltek Processing LLC (2005), 75 O.R. (3d) 368 (Ont. C.A.), at para. 8; Boucher, supra, at para. 26.
[35] The plaintiffs claim partial indemnity costs in the amount of $151,815.
[36] I consider the following Rule 57.01(1) factors relevant:
- The principle of indemnity. The hourly rates charged by members of the plaintiffs’ legal team, and the division of labour between them, were reasonable. There are a few questionable items, such as a modest time charge for a professional “CR” who is not identified in the costs outline, and some disbursements, such as on-line research, that should be considered general office overhead.
- The costs that Legalett could reasonably expect to pay. The legal costs of an unsuccessful party can be used to assess what they might reasonably expect to pay in costs to the successful party. Teixeira and Legalett were both represented by Borden Ladner Gervais LLP (“BLG”) during most of the litigation. During this period of time, Teixeira paid 50% of BLG’s fees and disbursements. On August 2, 2017, about two and a half months before trial, Teixeira retained Clyde & Co Canada LLP (“Clyde”). Teixeira and Legalett continued to be represented by separate counsel at trial. According to its cost outline, Legalett incurred costs of $95,475.88 on a partial indemnity basis. This is based on 50% of the fees and disbursements charged by BLG until Teixeira retained Clyde and all of BLG’s invoices after that date. Even if Legalett were claiming for 100% of BLG’s invoices throughout the litigation, its partial indemnity costs would be about $116,000, roughly $35,000 less than the partial indemnity costs sought by the plaintiffs. Legalett’s costs at trial would however have been higher had BLG continued to represent Teixeira. BLG would have had to prepare for more extensive examinations and cross-examinations and for legal argument on the issue of Teixeira’s professional liability. Taking this into account, I cannot conclude that the plaintiffs’ partial indemnity costs of approximately $150,000 are appreciably higher than what Legalett reasonably expected to pay.
- The amount claimed and the amount recovered. The plaintiffs recovered less than 10% of the damages they claimed. They are claiming costs that are roughly four times greater than the damages awarded. I will discuss this further below.
- The conduct of the parties. I have already addressed Legalett’s argument on the proposed adjournment. Based on my observations at trial and the parties’ costs submissions, I cannot conclude that the plaintiffs took steps that needlessly increased the parties’ costs or prolonged the trial. Although they argued that Legalett was liable based on a range of causes of action, all of them flowed from the same set of facts.
[37] The only factor that could argue for a discount in the plaintiffs’ costs is proportionality, that is, the difference between the damages claimed and those recovered and the difference between the damages recovered and the costs of the litigation. Legalett relies on two cases, Rimmer v. Lahey, 2013 ONSC 7109 and Dinsmore v. Southwood Lakes Holdings Ltd., 2007 CarswellOnt 427 (ONSC), where courts discounted the plaintiffs’ costs substantially. In each case, the plaintiffs obtained mixed results on liability and much lower damages than they had claimed.
[38] I agree with the plaintiff that these cases are distinguishable. Considerable evidence at trial focussed on Legalett’s liability. This evidence was not limited to the misrepresentation in Maple Ridge’s proposal to the plaintiffs. It involved, among other things, testimony from various witnesses on their investigation of the cause and extent of the heating shortfall. The plaintiffs were successful on this issue of Legalett’s liability. They were also successful in proving some damages, and would have been far more successful had the evidence at trial supported their theory that the heating problem was irremediable. A plaintiff’s failure to prove all of the damages claimed does not disentitle them to their reasonable costs.
[39] In the circumstances, I conclude that Legalett must pay the plaintiffs $150,000 in costs, inclusive of all fees, disbursements and HST.
Is Teixeira Entitled to Costs and, If So, How Much?
Is There Any Reason to Deny Teixeira Any Costs or Limit Them to a Token Amount?
[40] The plaintiffs argue that Teixeira should not recover no costs or modest costs. They take issue, in particular, with his decision to retain separate counsel prior to trial. In their view, Teixeira’s personal involvement in the action was limited and that his interests and Legalett’s interests were substantially the same. The plaintiffs also contend that I should take into account Teixeira’s current status as a majority shareholder of Legalett.
[41] Teixeira had no direct interest in Legalett in 2007. He was an employee of HSP Engineering and Consulting Services. The two partners who owned HSP also owned another company that was a majority partner in Legalett. Teixeira was furthermore not sued as a representative or principal of Legalett. He was sued for professional negligence.
[42] This is important context in assessing the reasonability of Teixeira’s strategy in defending the suit. He was served with a statement of claim for $3.5 million in damages, alleging that he failed to meet the standard of care of an engineer. His interests were aligned with those of Legalett insofar as they both argued that the plaintiffs’ problems stemmed from their misreading of the promotional material for the Legalett system and their failure to hire someone to perform heat loss calculations. But Teixeira also had separate interests to protect. A finding of liability against him personally would involve his professional liability insurer and his reputation as an engineer.
[43] At trial, Teixeira advanced a defence based, first, on his limited role in the events that gave rise to the plaintiffs’ claim and, second, on a lack of evidence that he breached the relevant standard of care. The question is whether it was reasonable for him to present this secondary defence and to hire his own counsel to assist him in doing so.
[44] I again agree with Justice Dunphy, who, in a case where a plaintiff similarly complained that a defendant had advanced unnecessary lines of defense, observed that:
The plaintiff has the luxury of deciding what issues to pursue; the defendant must be prepared to meet all of them. Oudin, supra, at para. 17.
[45] Teixeira could not be sure how the court would assess the evidence regarding his role. Given the size of the plaintiffs’ claim and its potential impact on him personally, it was reasonable for him to prepare a “belt and suspenders” defence.
[46] The plaintiffs rely on Stevens v. Globe and Mail (The), [1993] O.J. No. 185, 1993 CarswellOnt 928 (ONSC). In that case, Justice Gibson concluded the claim against an individual defendant, Megarry, did not “materially extend or prolong matters”. Stevens, supra, at para. 10. As a result, he declined to award costs to Megarry, even though the claim against him was dismissed. The plaintiffs say that this case is similar, because most of the focus of discoveries and evidence at trial was Legalett’s liability, and Teixeira would have had to testify whether or not he had been sued personally.
[47] There are important factual distinctions between Stevens and this case. Teixeira was separately represented at trial; Megarry was not. The underlying facts of the claim against Megarry and the co-defendant company in Stevens were the same. In this case, the focus of the claim against Teixeira was his preparation of the design for radiant floor heating system after the plaintiffs agreed to purchase it. The focus of the claim against Legalett were the representations made to the plaintiffs months prior.
[48] The plaintiffs chose to sue Teixeira personally. I already found that they should not be penalized for their casting a relatively wide net when they started the action, because they were entitled to explore alternative theories of liability. But in choosing to keep Teixeira in the action after discoveries, they took the risk that the court would find that his role was limited to designing a system to certain specifications, and that he did not breach the standard of care in doing so. It is the plaintiffs, rather than Teixeira, who must bear the costs of this decision.
[49] In these circumstances, I see no reason to depart from the usual rule that Teixeira, as a successful litigant, is entitled to his reasonable costs.
What Are Teixeira’s Reasonable Costs?
[50] Teixeira seeks costs on a substantial indemnity basis, or on a partial indemnity basis to the date of its settlement offer and substantial indemnity basis thereafter. Alternatively Teixeira seeks costs on a partial indemnity basis.
[51] I have already found that the defendants’ offer did not represent a better outcome for the plaintiffs than the result at trial. As a result, I could award costs to Teixeira on a substantial indemnity basis only if the plaintiffs “behaved in an abusive manner, brought proceedings wholly devoid of merit, and unnecessarily run up the costs of the litigation”. Standard Life Assurance Co. v. Elliott (2007), 86 O.R. (3d) 221 (ONSC), at para. 9 and authorities cited therein. The plaintiffs did not engage in abusive tactics in this case. They began proceedings against six defendants for $3.5 million. By the time the case was tried, they had settled or dismissed proceedings against three and reframed their theory of damages, seeking under $500,000. The plaintiffs succeeded against two defendants. I rejected their claim against Teixeira but this does not mean the claim was implausible. As a result, there is no basis for an award of substantial indemnity costs in whole or in part against the plaintiffs.
[52] Teixeira’s partial indemnity costs are based on 50% of BLG’s fees and disbursements to August 2, 2017 ($20,584) and all of Clyde’s fees and disbursements after that date through to the end of trial ($97,378), for a total of $117,962.
[53] The plaintiffs have made various arguments on why the costs claimed by Teixeira should be reduced. They say that they should not bear the costs of third party proceedings or Clyde’s fees. If I do award some of the costs based on Clyde’s representation, the plaintiffs say it should be reduced because the time Clyde spent preparing for trial was excessive.
[54] I find that the following Rule 57.01(1) factors are relevant to the exercise of my discretion:
- The principle of indemnity. The costs claimed by Teixeira are consistent with the experience and expertise of his counsel. I have reviewed the fees and disbursements charged. The time recorded by BLG or Clyde was not excessive, bearing in mind the size of the plaintiffs’ claim and the range of causes of action advanced in support of their claim. Mr. Karayannides, the counsel who represented Teixeira at trial, was from Toronto. No claim is made for fees and disbursements arising from his travel to Ottawa. The Clyde invoice has also been discounted by 40 hours to avoid possible duplication of costs following the transfer of Teixeira’s file from BLG.
- The costs that the plaintiffs could reasonably expect to pay. Teixeira’s costs are lower than the plaintiffs’ costs and therefore within the range that they could reasonably expect to pay. I reject the plaintiffs’ submission that they should not have to bear the costs of the defendants’ decision to begin third party claims. This was a reasonable and predictable litigation strategy. Parties who begin multi-million dollar lawsuits against multiple defendants should not be surprised when defendants try to shift liability to other parties. I have no reason to think that the third party claims were devoid of merit.
- The conduct of the parties. This is not a significant factor. It is regrettable that Teixeira did not provide the plaintiffs with his final remediation proposal until shortly before trial. I cannot however conclude that doing so would have avoided a trial.
[55] Taking these factors into account, I conclude that Teixeira’s reasonable costs are $115,000, inclusive of fees, disbursements and HST.
Should I Issue a Sanderson or Bullock Order?
[56] The plaintiffs seek a Sanderson or Bullock order. A Bullock order would require the plaintiffs to pay Teixeira’s costs but allow them to obtain reimbursement from Legalett for them. A Sanderson order would require Legalett to pay Teixeira’s costs directly to Teixeira. Either way, Legalett, rather than the plaintiffs, would end up paying Teixeira’s costs.
[57] Sanderson and Bullock orders are exceptional. In Moore v. Wienecke, 2008 ONCA 162, citing Mark Orkin’s The Law on Costs, the Ontario Court of Appeal stated:
In a multi-defendant case in which the plaintiff succeeds against some defendants but not against others, the “normal course” is for the unsuccessful defendant to pay the plaintiff’s costs and the plaintiff to pay the successful defendant’s costs. Moore v. Wienecke, 2008 ONCA 162, at para. 37.
[58] Determining whether a Sanderson or Bullock order is appropriate involves two stages. Moore, supra, at para. 41; Times Square Holdings Ltd. v. Shimzu, 2001 BCCA 667, at para. 9. The court must first ask whether it was reasonable for the plaintiffs to sue multiple defendants in the same action. If the answer to this question is yes, the court must then consider whether, in the circumstances of the case, shifting the burden of costs from the plaintiff to the successful defendant would be just and fair.
[59] In my view, it was reasonable for the plaintiffs to name both Legalett and Teixeira as defendants. When they started the action in 2010, they did not know the exact relationship between the two parties or precisely how Teixeira was involved in the sale, design and construction of the radiant floor heating system they purchased. The plaintiffs have accordingly met the threshold for consideration of a Sanderson or Bullock order.
[60] With respect to the second stage, the Court of Appeal has identified four factors relevant to the court’s discretion to issue such an order: Moore, supra, at paras. 46 to 50.
- Did the defendants try “to shift responsibility onto each other, as opposed to concentrating on meeting the plaintiff’s case”?
- Did the unsuccessful defendant cause the successful defendant to be added as a party?
- Were the causes of action against the defendants independent of each other?
- Is the plaintiff able to pay the successful defendant’s costs?
[61] These factors weigh against a Bullock or Sanderson order in this case. There is no evidence that the plaintiffs are insolvent. Legalett did not cause Teixeira to be added to the lawsuit. They did not issue cross-claims against each other and did not lead evidence suggesting that the other should bear liability. Neither defendant’s counsel cross-examined any of the other’s witnesses. In some instances, they shared the cross-examination of the plaintiffs’ witnesses. To borrow the Court of Appeal’s words, they concentrated on meeting the plaintiffs’ case.
[62] The plaintiffs suggest that the third factor argues in favour of an order and that, more generally, it is fair and just that Legalett pay Teixeira’s costs. They say that it was difficult for them to know, prior to trial, who was ultimately responsible for their damages. They argue that, since Legalett retained Teixeira to design the system, it should be responsible for his costs at trial. Finally, they point out that Teixeira’s employer at the time, HSP, had an ownership interest in Legalett.
[63] I do not find these arguments persuasive.
[64] First of all, Teixeira was examined for discovery in 2013 both as a representative of Legalett and as a defendant in his own right. The plaintiffs had the opportunity to obtain clarification on his role within the company, his role in the sale of the radiant floor heating system to the plaintiffs and his role in designing the system. In light of this, I do not accept their contention that they had some doubt about the extent of his involvement prior to trial.
[65] Second, the causes of action against Teixeira and Legalett were distinct from each other. The plaintiffs alleged that Teixeira was negligent in his preparation of heat loss calculations for the house and negligent in his design of the radiant floor heating system. The case against Legalett focussed on negligent misrepresentations and breach of collateral warranty. Although the plaintiffs also alleged that Legalett had been negligent, the thrust of the allegations against each defendant was quite different.
[66] Finally, I do not see how the relationship between Teixeira and Legalett has any bearing on the plaintiffs’ entitlement for a Bullock or Sanderson order. They each have their own insurer on the claims against them. Although Teixeira is now a majority shareholder of Legalett, they are different parties with different interests.
[67] In the circumstances, I conclude that it would not be fair or just to issue a Sanderson or Bullock order. Legalett never sought to include Teixeira in the claim and did not take a position adverse to him. There is no basis to shift the burden of costs from the plaintiffs to Legalett in these circumstances.
Conclusion
[68] I order Legalett to pay the plaintiffs $150,000 in costs and $1167.77 in pre-judgment interest. I order the plaintiffs to pay Teixeira $115,000 in costs.
Justice Sally Gomery Released: July 18, 2018