COURT FILE NO.: CV-12-465124-00A1 MOTION HEARD: 20181129 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Muskoka Standard Condominium Corporation No. 66, Plaintiff AND: Walter W. Thompson, David Kalm and Cindy Hillaby, Defendants AND: Gaydon Contractors Ltd. et al., Third Parties AND: M.S. Hardwood et al., Fourth Parties

BEFORE: Master P.T. Sugunasiri

COUNSEL: Lui, C., Counsel for the Fourth Party, M.S. Hardwood MacQuarrie, J., Counsel for the Third Party, Gaydon Contractors Ltd. Arnold, M., Counsel for the Plaintiff Canto, S., counsel for the Defendants

HEARD: November 29, 2018

Reasons for Decision

Overview and Brief Conclusion:

[1] This is a large multi-party action in which the Plaintiff condominium operating as “Touchstone on Lake Muskoka” resort is claiming 5 million dollars for a number of construction deficiencies. The Defendants are the former directors of the Plaintiff. The Plaintiff generally alleges that following the election of the new board in 2011, the new board discovered that a number of serious deficiencies remained unresolved and that the previous board had allowed warranty periods and limitation periods to expire. Paragraph 14(d) of the Statement of Claim (“Claim”) loosely mentions possible deficiencies in windows, doors and floors with a rectification cost of approximately $30,000.

[2] The Defendants delivered a Statement of Defence dated July 17, 2013. It makes no mention of flooring deficiencies but responds to other specified deficiencies.

[3] On September 10, 2014, before the Defendants issued their Third Party Claim against Gaydon Contractors Ltd. (“Gaydon”), counsel for the Defendants wisely examined a representative of the Plaintiff on the allegations made in paragraph 14 of the Claim. At that time, there was no mention of any flooring deficiencies.

[4] The Defendants then issued their Third Party Claim (“TPC”) against Gaydon with no mention of any flooring issues. Nevertheless, Gaydon proceeded to issue a Fourth Party Claim (“FPC”) against M.S. Hardwood (“MS”) with respect to flooring deficiencies.

[5] On September 5, 2018, a representative of the Plaintiff was again examined for discovery and he confirmed that there were no issues with the installation, workmanship or material deficiencies in the hardwood flooring installed by MS. On September 13, 2018, Gaydon discontinued its FPC against MS.

[6] MS brings this motion to seek its substantial indemnity costs from Gaydon pursuant to rule 23.05 of the Rules of Civil Procedure (“Rules”) which allows a party seek its costs on a discontinuance. For the reasons that follow, I grant the motion and order Gaydon to pay M.S. Hardwood (“MS”) its substantial indemnity costs in the amount of $4,776.68. I dismiss Gaydon’s cross-motion to have these costs paid by the Defendants and the Plaintiff.

Law and Analysis:

[7] The parties agree that rule 23.05 gives the Court wide discretion to fashion a costs award for a discontinued action that is in the interests of justice. The rule reads:

23.05 (1) If all or part of an action is discontinued, any party to the action may, within thirty days after the action is discontinued, make a motion respecting the costs of the action.

[8] The discretion under the rules dovetails with section 131(1) of the Courts of Justice Act and the factors in rule 57.01. The court may decline to award costs if:

a. The materials filed by the initiating party discloses a bona fide claim; b. The claim is not frivolous or vexatious; and c. The initiating party was justified in commencing the lawsuit. [1]

[9] In the present case, I see no basis to excuse Gaydon from paying MS’s costs. Gaydon argues that its sole basis for raising the flooring issue was that it is mentioned in paragraph 14(d) of the Claim and forms part of the general allegations made against it in the TPC. It was therefore reasonable for it to issue the FPC against MS for any deficiencies in flooring.

[10] With respect, I disagree. First, Gaydon failed to take reasonable due diligences steps, as the Defendants had, to ascertain the scope of the deficiencies alleged in paragraph 14. At the very least, there could have been an inquiry as to why the Claim cursorily mentions flooring but the Defence and TPC expressly excludes it. I have no evidence that any questions were asked when the TPC was issued against them. Perhaps if questions were asked, Gaydon would have found out that the Plaintiff had already been discovered and made absolutely no mention of deficient flooring at that early discovery. Communication, rather than rushing to issue a kitchen sink fourth party claim, would have saved everyone time and money. Second, it is frivolous and vexatious to commence a claim based on one word in the Claim that is never mentioned again. Gaydon wanted to minimize its own risk by fourth partying far and wide. That was its choice, but there is a costs risk to that choice.

[11] I also wonder about Gaydon’s choice to expand the flooring deficiency allegations against MS beyond the one word mentioned in the Claim, and its subsequent document dump to particularize those allegations. These choices as well as refusing to discuss settlement with MS, comes at a cost.

[12] In light of all of the circumstances, MS should never have been involved in this litigation. I agree that it should be substantially indemnified by Gaydon.

Gaydon’s cross-motion seeking costs up the line is dismissed

[13] For the same reasons, I dismiss Gaydon’s motion to recover payment of MS’ costs from the Plaintiff and Defendants. While the Plaintiff perhaps should have been more careful when it included flooring as a potential area of defect, it was ultimately Gaydon’s responsibility to at least minimally assess the case before involving MS. If the Plaintiff has any culpability, it is minimal. The Defendants did their due diligence and have absolutely no culpability in the erroneous involvement of MS in this action.

Disposition:

[14] I grant MS’ motion and dismiss Gaydon’s cross-motion. Gaydon shall pay MS the sum of $4,776.68 payable forthwith for the discontinuance of the Fourth Party Action.

Costs of the Motions:

[15] Unbelievably, MS’ motion for a recovery of less than $5000 cost MS over $14,000 to argue and Gaydon over $6,000. The Plaintiff spent over $8500 to resist Gaydon’s cross-motion. The Defendants spent over $2800. MS served a Rule 49 offer to settle the motion and its costs on November 19, 2018. It offered a total of $9,000 payable by Gaydon for the costs of the FPC and costs of the motion.

[16] These numbers speak for themselves and are a perfect example of a motion that is disproportionate, contrary to the interests of any of the parties involved, and immaterial to the just resolution of the action.

[17] I cannot reiterate more that all parties should have resolved these motions. Even if each of Gaydon, the Plaintiff and Defendants had divided MS’ costs equally, they would have spent less than what they have now paid their lawyers to argue this motion. The only party remotely reasonable in time and money spent are the Defendants. No one is entitled to substantial indemnity costs.

[18] Given the overall circumstances, I apply the principle that costs follow the event and assess quantum based on the reasonable expectations of the parties. Gaydon shall pay the following costs of the motion and cross-motion:

a. $5700 inclusive of disbursements and HST to MS within 30 days of today’s date; b. $3500 inclusive of disbursements and HST to the Plaintiff within 30 days of today’s date; and c. $2000 inclusive of disbursements and HST to the Defendants within 30 days of today’s date.

Original signed Master P. Tamara Sugunasiri Date: March 8, 2019

[1] Enerworks Inc v Glenbarra Energy Solutions Inc, 2016 ONSC 4291 at 13-15 (“Enerworks”).