Court File and Parties
Court File No.: CV-11-3116-00 Date: 2018 11 08
Ontario Superior Court of Justice
Between:
2041094 ONTARIO INC. Operating as TLN MASONRY, Plaintiff
- Counsel: Robert Moubarak
- and -
THE REGIONAL MUNICIPALITY OF PEEL and APLUS GENERAL CONTRACTORS CORPORATION, Defendants
- Counsel: Leora Wise
Heard: February 8, 2016, at Brampton, Ontario
Before: Price J.
COSTS ENDORSEMENT
OVERVIEW
[1] The plaintiff, 2041094 Ontario Inc., operating as TLN Masonry (“TLN”), set this construction lien action down for trial, and it was scheduled to be tried at the May 2016 trial sittings. After the action was set down, the defendant, Aplus General Contractors Corporation (“Aplus”), moved, pursuant to Rule 56.01(1) of the Rules of Civil Procedure, for an order requiring TLN to post security for costs in the amount of $27,000. TLN opposed the motion on the grounds, among others, that Aplus unreasonably delayed bringing the motion, and failed to seek leave to bring it, as required by the Construction Lien Act (“CLA”) and by Rule 48.04 of the Rules of Civil Procedure. In reasons issued March 31, 2016, the Court granted Aplus leave to bring the motion, and ordered TLN to post security for costs. The parties were unable to agree on the costs of the motion. These reasons address that issue.
FINDINGS MADE IN THE MOTION
[2] In its reasons, this Court found that Aplus learned In February 2014, that TLN likely had insufficient assets in Ontario to pay Aplus’ costs if TLN was unsuccessful at trial, but waited a year and a half, until August 2015, before bringing its motion for security for costs. It was not until September 2015 that it notified TLN that the motion would be heard on February 8, 2016.
[3] Notwithstanding Aplus’ delay, this Court concluded that it should be granted leave to bring its motion for security for costs. It found that TLN bore primary responsibility for the delay that had occurred, for the following reasons:
(a) It did not respond to Aplus’ inquiry as to whether the judgments against TLN, and the costs associated with them, had been paid;
(b) When requested, it would not provide dates when it would be available for the hearing of the motion;
(c) It would not postpone the discovery of Aplus’ representative until after the proposed motion was heard, which resulted in counsel spending the ensuing months complying with their respective clients’ undertakings;
(d) It would not agree to a timetable until it had received the motion material, thereby forcing Aplus either to set a hearing date unilaterally, or deliver its motion without a return date;
(e) It delayed advising Aplus that the motion would require an appointment for a long motion hearing, which entailed a further delay of three months;
(f) It insisted that the motion await the pre-trial conference;
(g) It proposed, and later insisted, that the motion be made returnable at or before the trial, and when Aplus proposed adjourning the trial, or returning to the pre-trial judge for an earlier date for a long motion, it refused;
(h) When Aplus obtained dates from the court for the hearing of the motion, TLN’s counsel advised her that he was unavailable on the dates proposed;
(i) When Aplus insisted on scheduling the motion on one of the dates she had obtained, TLN would not choose between them. When Aplus selected one of the dates, TLN complained that it had done so unilaterally.
[4] This Court found that Aplus’ counsel had gone to extreme lengths to secure TLN’s counsel’s consent to a date for the hearing of Aplus’ motion. After she repeatedly tried to accommodate TLN’s counsel’s calendar, he characterized her efforts as a strategy designed to delay the proceeding and frustrate TLN’s effort to have its action tried. The Court found TLN’s criticism of Aplus’ counsel unwarranted and, when seen in the context of his own failure to respond to her efforts to accommodate his calendar, unfair and discourteous. The Court held that in those circumstances, TLN could not be heard to complain that Aplus’ delay in bringing the motion was unreasonable, or that it prejudiced TLN.
[5] The Court found that Aplus had established that there was good reason to believe that TLN had insufficient assets in Ontario to pay Aplus’ costs if TLN was unsuccessful at trial. It found that TLN had not led evidence that it was impecunious and that, in the absence of such evidence, it was not entitled to rely on the fact that its claim was not plainly devoid of merit. The Court found that TLN’s claim did not have a good chance of success, and that an order for security for costs was fair and necessary to level the playing field. For those reasons, the Court ordered TLN, by April 21, 2016, to post security for costs in the amount of $27,000, failing which Aplus would have leave to move to dismiss TLN’s action against it.
[6] The Court’s order provided that if the parties were unable to agree on costs, they should submit written arguments. They later did so, and the court has reviewed their submissions and Costs Outlines.
ISSUES
[7] The Court must determine whether either party should pay the other’s costs and, if so, in what amount.
POSITIONS OF THE PARTIES
[8] Aplus relies on its presumptive entitlement to costs, based on its success in the motion, and seeks its costs in the amount of $15,459.65.
[9] TLN asks the Court to exercise its discretion and not award Aplus further costs based on what it asserts was a finding that it was impecunious, as well as the fact that TLN had not yet posted the $27,000.00 required as security for costs. It further argues that the action was not complex, and that TLN had already incurred significant costs ($14,765.95) in the motion and that it would be fair and reasonable, having regard to TLN’s inability to pay the security for the costs of the action, not to impose on it the further costs of the motion. It argues that if the court awards costs, they should be on a partial indemnity scale and set-off against the costs associated with Aplus’ motion to adjourn/stay the action, which the Court dismissed.
ANALYSIS AND LAW
a) General principles
[10] Justice Boswell set out the general principles governing costs assessments in George v. Landles, 2012 ONSC 6608, where he stated:
The award of costs is governed by section 131 of the Courts of Justice Act, R.S.O. 1990 c. C.43 and by Rule 57.01 of the Rules of Civil Procedure. Section 131 provides for the general discretion to fix costs. Rule 57.01 provides a measure of guidance in the exercise of that discretion by enumerating certain factors that the court may consider when assessing costs. In addition, the Court must always be mindful of the purposes that costs orders serve. As Perell J. summarized in 394 Lakeshore Oakville Holdings Inc. v. Misek, 2010 ONSC 7238, [2010] O.J. No. 5692 (S.C.J.), at para. 10:
Modern costs rules are designed to advance five purposes in the administration of justice: (1) to indemnify successful litigants for the costs of litigation, although not necessarily completely; (2) to facilitate access to justice, including access for impecunious litigants; (3) to discourage frivolous claims and defences; (4) to discourage the sanctioning of inappropriate behaviour by litigants in their conduct of the proceedings; and (5) to encourage settlements (internal citations omitted).
Ultimately, in fixing an amount for costs, the overriding principles are fairness and reasonableness: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.); and Moon v. Sher (2004), 246 D.L.R. (4th) 440 (C.A.). In assessing what is fair and reasonable in the circumstances, the Court is not to engage in a mechanical exercise, but rather must take a contextual approach, applying the principles and factors discussed above, to settle on a figure that is fair and reasonable in all the circumstances: Gratton-Masuy Environmental Technologies Inc. (c.o.b. Ecoflow Ontario) v. Building Materials Evaluation Commission, 2003 ONSCDC 8279, [2003] O.J. No. 1658, at para. 17.
[11] The Court is guided by the factors set out in Rule 57.01(1) of the Rules of Civil Procedure. The Court may consider, among other factors, the following:
(a) The complexity of the proceeding;
(b) The importance of the issues;
(c) The conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;
(d) Any offers to settle;
(e) The principle of indemnity;
(f) The concept of proportionality, which includes at least two factors:
(i) The amount claimed and the amount recovered in the proceeding; and,
(ii) 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;
(g) Any other matter relevant to the question of costs.
b) Importance and complexity of the motion
[12] TLN acknowledges that the motion was important to it because it determined its continued ability to defend the action. It was important to Aplus because TLN had no assets in Ontario that could satisfy a judgment if it was unsuccessful at trial, and an order for security for costs was necessary in order to level the playing field between the parties.
[13] The motion was moderately complex. It raised issues of the responsibility for the two parties’ counsel for the delay that had occurred in bringing the motion, which required a detailed examination of the history of the proceeding and the correspondence between counsel. It additionally required consideration of the rules governing security for costs and how they apply in circumstances where the plaintiff had failed to establish its impecuniosity, and the distinction between the test of, “not plainly devoid of merit”, applying where impecuniosity is established, and the test of “not having a good chance of success”, applying where it was not, and how the test of a just result applied in the circumstances of this case.
c) Reasonableness and offers to settle
[14] The general rule in a determination of entitlement to costs is that costs follow the event, and will be awarded on a partial indemnity scale. In special circumstances, costs may be awarded on a higher scale, but those cases are exceptional and generally involve circumstances where one party to the litigation has behaved in an abusive manner, brought proceedings wholly devoid of merit, and/or unnecessarily run up the costs of the litigation: Bell Canada v. Olympia & York Developments Ltd. (1994), 17 O.R. (3d) 135 (C.A.); Standard Life Assurance Company v. Elliott (2007), 86 O.R. (3d) 221 (S.C.).
[15] Neither of the parties tendered any offers to settle that would affect the determination of costs.
[16] I must consider whether TLN’s conduct justifies an award of costs against it on a substantial or full indemnity scale. In the normal course, costs are awarded to a successful party on a partial indemnity scale; however, the court has the discretion to order costs payable on a substantial indemnity basis in exceptional cases: Murano v. Bank of Montreal (1998), 41 O.R. (3d) 222 (C.A.), at p. 244, citing 131843 Canada Inc. v. Double “R” Toronto Ltd. (1992), 7 C.P.C. (3d) 15 (Ont. Gen. Div), per Blair J.
[17] I find that TLN’s conduct was unreasonable, having regard to its persistent refusal to co-operate in Aplus’ efforts to schedule the motion and its effort to characterize Aplus’ efforts to accommodate its counsel’s calendar as a strategy designed to delay the trial. Its opposition to Aplus’ motion was devoid of merit and its outcome was a foregone conclusion which should have been anticipated. On this basis, it would be required to pay Aplus’ costs on a substantial indemnity scale, but will be required to pay less because the amount Aplus’ counsel charge their client is less than their substantial indemnity rates and the amount awarded should not exceed the amount actually charged.
d) Indemnity - The hourly rates charged
[18] In determining the appropriate hourly rates to be assigned to the lawyers involved in the motion, the court follows the approach taken by Aitkin J. in Geographic Resources Integrated Data Solutions Ltd. v. Peterson, 2013 ONSC 1041. That is, the starting point is the successor of the Costs Grid, namely, the “Information for the Profession” bulletin from the Costs Sub-Committee of the Rules Committee (the “Costs Bulletin”), which can be found immediately before Rule 57 in the Carthy or Watson & McGowan editions of the Rules, and sets out maximum partial indemnity hourly rates for counsel of various levels of experience.
[19] The Costs Bulletin suggests maximum hourly rates (on a partial indemnity scale) of $80.00 for law clerks and $225.00 for lawyers of less than 10 years’ experience. The upper limits in the Costs Bulletin are generally intended for the most complex and important of cases. Leora Wise, Aplus’ counsel at the hearing, was called to the Bar in Ontario in 2010, and had practiced law for 6 years at the time of the hearing. She was assisted in the preparation of the motion by her Law Clerk of 5 years, Rachel Bezaire. Ms. Wise did not claim a separate amount for her Law Clerk’s time.
[20] Ms. Wise’s years of experience were comparable to that of TLN’s counsel, Mr. Moubarak, who was called to the Bar in 2009. Mr. Moubarak charged his client $300 per hour; Ms. Wise charged hers between $225 and $250. Ms. Wise is entitled to claim a maximum partial indemnity rate somewhat greater than the mid-point between the maximum allowable for Law Clerks and the Maximum allowable for lawyers of under 10 years’ experience, which is to say, $260.00.
[21] On a substantial indemnity scale (using the multiple of 1.5 prescribed by Rule 1 of the Rules of Civil Procedure), Ms. Wise’s rate would be $390.00 ($260 x 1.5).
[22] The Costs Bulletin, published in 2005, is now dated. Aitkin J. considered adjusting the Costs Subcommittee’s hourly rates for inflation, as Smith J. did in First Capital (Canholdings) Corp. v. North American Property Group, 2012 ONSC 1359, but the unadjusted rates of the lawyers in her case were only slightly less than the actual fees they charged, so she elected to use their unadjusted rates. Normally, however, it is appropriate to adjust the hourly rates in the Costs Bulletin to account for inflation since 2005.
[23] The court is guided by the rates in the Costs Bulletin, not the actual hourly rates charged. The actual rates charged are relevant only as a limiting factor, in preventing the costs awarded from exceeding the actual fees charged. The Costs Subcommittee’s rates apply to all lawyers and all cases, so everyone of the same level of experience starts at the same rate.
[24] The court adjusts the hourly rate, or the resulting fees, to reflect unique features of the case, including the complexity of the proceeding, the importance of the issues, and the other factors set out in Rule 57.01(1). If an excessive amount of time was spent, or too many lawyers worked on the file, the court reduces the resulting amount of fees accordingly. As long as the resulting amount does not exceed the amount actually charged to the client, the actual fee that the client agreed to pay is irrelevant. If it exceeds the amount actually charged, the amount awarded should be reduced to reflect the fact that the primary purpose of a costs award is indemnification: Mantella v. Mantella, 2006 ONSC 17337, (2006), 27 R.F.L. (6th) 76 (S.C.J.), subsequently approved by Aitken J., sitting as a Divisional Court judge in Geographic Resources.
[25] Based on the Bank of Canada Inflation Calculator, available online, the 2016 equivalent of the hourly rate in the Costs Bulletin was $267.34 for lawyers of under 10 years’ experience. I find that Ms. Wise’s actual rate of $225 to $250 is reasonable, having regard to the fact that it is less than the $180.00, being the approximate mid-point between the maximum rate for a Law Clerk and the maximum rate for a lawyer of under 10 years’ experience, but significantly less than her rate of $390 per hour on a substantial indemnity scale. It is also less than the rate charged by TLN’s senior counsel, Mr. Moubarak, who had only one more years’ experience. I therefore find her hourly rate to be reasonable.
e) Indemnity - The time spent on the motion
[26] Ms. Wise spent 44.1 hours in the preparation of the motion, and an estimated 3 hours for the hearing. The motion was heard from 2 p.m. to 5:30 p.m., so the 3 hour estimate is conservative. TLN’s lawyer, Mr. Frustaglia, who had 1 year experience, spent a total of 64.9 hours in the preparation of the motion. Mr. Moubarak, TLN’s senior counsel, spent 2 hours in preparation.
[27] The court attached considerable importance to the written arguments that the parties submitted following the hearing. I do not doubt that Ms. Wise spent the amount of time she claims on them. I find the time spent to be reasonable.
f) Proportionality and the reasonable expectation of the unsuccessful parties
[28] The total costs of $15,459.65 that Aplus charged its client is less than 5% more than the $14,765.98 that TLN’s counsel charged it. I find the time spent by Aplus’ counsel was reasonable and, based on the amount that TLN’s counsel charged its client, the amount is clearly within the range that TLN should have expected to pay if unsuccessful on the motion.
[29] I additionally find that amount is proportional to the amount at stake in the motion, having regard to the fact that the outcome of the motion was an Order requiring TLN to post security for costs in the amount of $27,000.00.
g) Other matters relevant to the determination of costs: Disbursements
[30] In fixing costs, the court need not undertake a line by line analysis of the hours or expenses claimed, nor should it second guess the amounts claimed unless they are clearly excessive or overreaching: Fazio v. Cusumano, 2005 ONSC 33782, [2005] O.J. No. 4021 at para. 8 (S.C.). The defendant has not asserted that the amounts claimed for disbursements are unreasonable and accordingly, I do not propose to reduce the amount payable in relation to them. They consist of $716.66 for photocopies, $41.34 for courier charges, $250.00 for filing clerk, and $254.00 paid to the Minister of Finance to set the motion down. Disbursements will be allowed in the amount of $1,262.00 plus HST of $131.04.
CONCLUSION AND ORDER
[31] For the foregoing reasons, it is ordered that:
- TLN shall pay to Aplus its costs of the motion in the amount of $13,841.37, consisting of the following:
a) Fees: $12,448.33
b) HST: $ 1,618.28
c) Disbursements: $ 1,262.00
d) HST: $ 131.04
TOTAL: $15,459.65
Price J.