Abco One Corporation v. Pomerleau Inc., 2020 ONSC 246

Court File and Parties

COURT FILE NO.: CV-13-472439 DATE: January 14, 2020

ONTARIO SUPERIOR COURT OF JUSTICE

IN THE MATTER OF the Construction Act, R.S.O. 1990, c.C.30

BETWEEN:

ABCO ONE CORPORATION, Plaintiff Angela Assuras, for the plaintiff, Tel.: 416-213-1225, Fax: 416-213-1251.

• and -

Christian R. Riveros, for Canada-Wide Reinforcing Steel Co. Tel.: 416-926-9474 Fax: 416-926-9483

CITY OF TORONTO, TORONTO TRANSIT COMMISSION, and POMERLEAU INC., Defendants Karen Groulx for Pomerleau Inc. Tel.: 416-975-0002, Fax: 416-975-8002

HEARD: October 2, 3, 4, 5, 9, 10, 11, 12, 31, November 1, 2, 6, 7, 8, 9, 13, 14, 15, 20, December 17, 2018 and January 8, 9, 11, and February 21, 2019. DECISION: August 16, 2019

Master C. Wiebe

Costs and Interest Decision

1On August 16, 2019 I released my Reasons for Judgment concerning the trial hearing in this action. I dismissed the claims by ABCO One Corporation (“ABCO”), including its claim for lien, ordered that the Pomerleau lien bond posted as security for the ABCO claim for lien be returned for cancellation, and ordered that ABCO pay Pomerleau Inc. (“Pomerleau”) $516,458.18. I also ordered that Pomerleau pay Canada-Wide Reinforcing Steel Co. (“CW”) holdback $84,002.92 in thirty (30) days and that upon payment the Pomerleau lien bond posted as security for the CW claim for lien be returned.

2I wish to correct an error in my Reasons. In paragraph 196 I unfortunately stated that I understood “that ABCO is bankrupt” and that my judgment against ABCO is stayed as a result. I had no direct evidence to support that statement and should not have made it.

3As directed in my Reasons, the parties delivered written submissions on costs. I have reviewed these submissions. Pomerleau claims substantial indemnity costs as indicated in its Costs Outline of $733,634.92. While it was not so stated explicitly, the flavor of the Pomerleau written submissions suggests that it wants a costs order only as against ABCO.

4ABCO’s submissions indicate that ABCO seeks costs from Pomerleau; but it is not clear from these submissions as to the amount. The most that was said on this issue was the following: “ABCO submits that the costs referenced in its Costs Outline are a reasonable assessment of the amount Pomerleau . . . ought to have expected to pay and they are proportionate to the issues and the complexity of the case.” ABCO’s costs outline shows $1,268,206.80 in full indemnity costs, $1,087,509.40 in substantial indemnity costs, and $857,530.93 in partial indemnity costs. I will assume that this is what it now claims in costs from Pomerleau.

5CW’s submissions indicate that CW claims substantial indemnity costs of $39,705.83 from Pomerleau. CW corrected its costs outline by reducing the indicated substantial indemnity costs to $39,705.83.

6Under section 86(1) of the Construction Act, R.S.O. 1990, c. C.30 costs are in the discretion of the court. It is well established that the non-exhaustive list of factors outlined in Rule 57.01 of the Rules of Civil Procedure provide a guide to the court on costs in a construction lien proceeding. It is also well established that the court should also be guided by Rule 1.04(1.1), namely the rule that requires that orders be made in proportion to the importance and complexity of the issues and the amount in dispute. Section 86(2) of the Construction Act also provides that a party must be limited to the costs it would have incurred from the “least expensive course.”

Result

7The primary issue on costs is the result. The issue is which party was the “successful” one. On the issues that consumed the trial hearing, it is clear to me that Pomerleau was the successful party as against ABCO. It succeeded on the key issues of contract termination and contractual good faith. It also succeeded in proving the three large back-charges it claimed and which resulted in a judgment for payment in its favour. However, it was unsuccessful in proving its position on the contract issue and its huge completion cost claim. The result was a dismissal of the ABCO claim and a judgment on the Pomerleau set off and counterclaim in favour of Pomerleau as against ABCO in the amount of $516,458.18 out of a total set off and counterclaim of $5,620,008.86.

8ABCO asserts that it was the successful party as against Pomerleau. Ms. Assuras argued that it “succeeded” in proving the value of ABCO’s work for the purpose of calculating the Pomerleau holdback obligation, namely the value of $840,029. She pointed out that Pomerleau had given ABCO’s work no value in the Scott Schedule. Ms. Groulx rightfully responded that this is not the proper measure of “success” for the purposes of costs. As Justice LeMay stated in Sco-Terra v. The Corporation of the Town of Mono, 2019 ONSC 1725, in paragraph 8, “the question of who was the successful party focuses on the very simple question of who got what they asked for.” ABCO got none of what it asked for its in its claim for lien and damages claim and ended up being liable to Pomerleau on the set-off and counterclaim. This is not success.

9Furthermore, ABCO’s argument breaks down internally upon a closer examination of my determination of the value of ABCO’s work (without set-off). First, I valued the ABCO work based largely on Pomerleau valuation. I found that about 59% of the value of ABCO’s work (without set-off) came from Pomerleau’s assessment of what ABCO had done. The remaining 41% stemmed from issues that were contested and that ABCO succeeded in proving, namely the October certified work and one of eight extra claims. I note as well, as pointed out by Ms. Groulx, that Pomerleau at trial in fact accepted a valuation of ABCO’s work that was significantly higher than zero, although not as high as I eventually found.

10Due to this analysis, I find that my valuation of ABCO’s work (taken in isolation) was at best a minor success for ABCO. But this “success” was significantly outweighed by Pomerleau’s much greater success in defeating the ABCO claims and achieving a judgment in its favour.

11Second, the valuation of ABCO’s work had two purposes. The first, and primary purpose, was to determine what, if anything, was owed to ABCO. On that point, ABCO lost entirely once the set-offs were applied. The other purpose was to determine Pomerleau’s holdback obligation to CW. This purpose was for the benefit entirely of CW. On this point, CW succeeded in getting a judgment for payment of holdback of $84,002.92, which is just over half of what it would have received had ABCO proven its entire claim for lien, and which is about 28% of its own proven claim for lien. In my view, this outcome represents a success to some degree for CW, but not for ABCO.

12Concerning CW, I find that it was the successful party as against Pomerleau. Pomerleau forced CW to attend the trial hearing and prove its $304,905.98 claim for lien, which it did successfully. As noted above, CW also succeeded in obtaining a judgment against Pomerleau requiring Pomerleau to pay CW $84,002.92 in holdback.

13For these reasons, I find that Pomerleau is entitled to costs as against ABCO, and that CW is entitled to costs as against Pomerleau. I will consider Pomerleau’s non-successes and CW’s lack of success in getting a greater holdback amount in making my final determination as to what to award.

Offers to Settle

14The second significant issue is the offers to settle that were served. On March 9, 2016 Pomerleau served ABCO with a Rule 49 offer offering to pay ABCO $113,000 inclusive of interest and costs to settle the ABCO action and counterclaim. This offer remained open for acceptance until the trial hearing began. On September 27, 2018 Pomerleau served ABCO with a second non-Rule 49 offer offering to pay ABCO $500,000 plus HST inclusive of interest and costs to settle the ABCO action and counterclaim. Clearly, the result was less favourable to ABCO than either of these two offers. This is most certainly the case with the second offer. I note as well that there was no reference in the submissions to offers to settle from ABCO, and, therefore, I conclude that there were none.

15While any mandatory provisions under Rule 49.10 do not apply to construction lien proceedings, offers to settle are a significant factor to be considered under Rule 57.01(1) as the court should encourage settlements. Having reviewed these offers, I have concluded that Pomerleau should get partial indemnity costs from the date of the first offer to the date of the second offer, and substantial indemnity costs for the period thereafter. Here are my reasons.

16I consider the Pomerleau offers to be in the nature of “defendant’s offers” under Rule 49.10, as the Pomerleau counterclaim was primarily its completion costs claim, a claim that I found to be ill conceived and rather capricious. What formed the core of the Pomerleau case was its defence to the ABCO claim which included the set-off of the Pomerleau successful back-charges. Under Rule 49.10, a defendant who makes an offer to settle that exceeds what the plaintiff obtains at trial is entitled only to partial indemnity costs from the date of the offer. This application of Rule 49.10 to this case seems fair in the circumstances.

17However, the second Pomerleau offer invites a higher standard. The first offer was made after examinations for discovery. At that point, ABCO should have been able to make at least a general assessment of its case. However, the second offer, which was significantly higher, was made on the eve of the trial hearing. By that time, no doubt ABCO had marshalled all the evidence and should have understood its case in detail. In my view, it should have accepted this second offer given the trial evidence, and it should now take full responsibility for not doing so.

18Finally, I am not prepared to award ABCO any costs. It apparently did not even serve a counter-offer. In short, it appears to have made no serious attempt to settle this case. This astounds me in light of the trial evidence. ABCO appears to have had a misguided confidence in its case that should not be rewarded.

19I have reviewed the Pomerleau Costs Outline to decipher the quantum of these amounts. The partial indemnity costs for fees I am prepared to consider start with the pretrial conference on September 19, 2016 and run to the end of trial preparation at the end of September, 2018. These appear to total $134,736.22 (HST inclusive). The substantial indemnity costs for fees I am prepared to consider start with the trial preparation for October, 2018 and run to the end of the trial hearing. These appear to total $368,416.38 (HST inclusive). The sub-total is as follows: $134,737.22 + $368,416.38 = $503,152.60. The disbursement shown, $35,393.23, are not broken down as to timing. They appear to have been incurred after the first offer and will be added on. This produces a grand total of $538,545.83.

20There was a Pomerleau offer to settle the CW claim as well. It was a non-Rule 49 offer to pay CW $100,000 inclusive of tax, costs and interest. It was dated September 7, 2018 and was open for acceptance for five days. Significantly it was not limited to the settlement of Pomerleau’s holdback obligation, but to the settlement of CW’s claims against Pomerleau and ABCO (on the default judgment).

21Given this broad scope, I find this offer unreasonable. The only conceivable reason for the breadth of this offer was that if the offer was accepted, ABCO’s claim against Pomerleau would be reduced by about 72% of the CW claim. This despite what became clear was the merit of the CW default judgment.

22To avoid having CW attend the trial, Pomerleau should have limited the offer to the settlement of the holdback obligation, which was after all Pomerleau’s direct exposure to CW. As such, it would have been a very reasonable offer given what that holdback obligation turned out to be and the costs CW had incurred to September 7, 2018 as indicated in the CW costs outline. Given the merits of Pomerleau’s back-charges, there was no need to broaden the offer’s scope. However, Pomerleau chose not to take this route.

23Ms. Groulx argued that the broad scope of the Pomerleau offer was not unreasonable as it was well known that ABCO was “insolvent.” Whether to pursue the full default judgment against ABCO was, and is, is a decision for CW to make, not Pomerleau. I also find this argument puzzling since it was Ms. Groulx herself who insisted that I remove my misstatement about my understanding of ABCO’s bankruptcy from my Reasons for Judgment. This suggests that Pomerleau wishes to enforce its judgment against ABCO, which is hardly the behavior of a party who believes in ABCO’s “insolvency.” I, therefore, do not give weight to this Pomerleau offer to settle.

Carriage Costs

24Ms. Assuras argued that ABCO should be given carriage costs as it was “de facto” carriage counsel for CW. The essence of this argument is that ABCO did all the work of proving the value of its work from which the basic holdback could be calculated. Also, Ms. Assuras argued that CW had given ABCO “agency” to do this work by Mr. Riveros’ statement in his opening statement at trial that he would leave the determination of the holdback amount to the trial hearing.

25That is not my understanding of “carriage” cost entitlement. First, it is my understanding that carriage has to be expressly given by the court to a lawyer for carriage costs entitlement to arise. Such an expressed order of carriage was given by Master Polika in RSG Mechanical Inc. 1398796 Ontario Inc., 2013 ONSC 1606 (Ont. Master), at paragraph 243. Yet Ms. Assuras showed me earlier cases where such an express order of carriage was not clear and the entitlement to carriage costs seemed to turn more on what counsel in fact did; see M.S. Electric Co. v. Canada Brick Ltd., 2003 CarswellOnt 2426 (SCJ), at paragraph 6, and see B. A. Robinson Plumbing & Heating Ltd. v. Dunwoodco Ltd. (Trustee) of, 1968 CarswellOnt 219 (Ont. Master), at paragraph 9. There is no doubt that carriage was not expressly given by the court to Ms. Assuras in this case. But, because of this uncertainty in the case authorities presented to me, I am not prepared to ground my ruling on this point.

26Second, it is my understanding that carriage cost entitlement arises when a lien claimant’s lawyer does work that is over and above what would be required to prove his or her client’s claim and that benefits all lien claimants. In B. A. Robinson Plumbing & Heating Ltd., op. cit., in paragraph 5 Master MacRae described what he called “salvage costs” as follows: “. . . the term “salvage costs” . . . denotes those additional costs over and above the costs fairly referable to the realization of the plaintiff’s claim, the results of which benefit all of the lienholders equally.” This proposition is clear in the law and was not disputed.

27In the case before me, I was given no evidence of additional work Ms. Assuras did that benefitted only CW. There is no doubt that she did much work in relation to the valuation of ABCO’s work. But this is work that she did for the benefit of her client, ABCO, and she would have done it regardless of the existence of the CW claim. That work had the collateral effect of benefitting CW by establishing the basis for calculating the basic holdback. But that was an inevitable result of trying to prove the ABCO claim. This was the reason Master Albert excused CW from the reference when it obtained its default judgment against ABCO. For this reason, I am not prepared to grant Ms. Assuras carriage costs.

28As to the agency point Ms. Assuras raised, I do not find Mr. Riveros’ statement at the opening of the trial hearing to be the conferring of any “agency” by CW onto ABCO. I reject this argument.

29Incidentally, I note that Ms. Assuras has not enumerated the actual carriage costs she wants paid. I infer from this that she wants all of her client’s costs paid by Pomerleau as carriage costs on account of CW’s success. That would be a result that would be grossly unreasonable and will not be countenanced, as ABCO was the unsuccessful party.

Reasonable Expectation of the Unsuccessful Party

30Under Rule 57.01(1) an important factor in awarding costs is the reasonable expectation of the unsuccessful party as to what it should have to pay in costs. The best way to identify this reasonable expectation is the costs outlines the parties submitted at the end of the trial hearing, namely before the result was known. These costs outlines identify what the unsuccessful party wanted in costs in the event it succeeded. As a result, the costs outlines provide the measure of what that unsuccessful party should reasonably expect to pay in costs in the event of a loss.

31Concerning ABCO, the costs shown in its costs outline for actual costs, substantial indemnity costs and partial indemnity costs all were significantly greater than all the costs shown on Pomerleau’s costs outline. For instance, the Pomerleau figure for full indemnity costs, $811,217.33, is less than the ABCO figure for partial indemnity costs, $857,530.93. As a result, there is little doubt that Pomerleau’s claim for costs is within the range of what ABCO should reasonably expect to pay in the event of its loss, whether it be substantial indemnity costs or partial indemnity costs.

32Concerning CW, the costs outlines were not helpful. Pomerleau did not deliver a costs outline for the CW claim. Nevertheless, I find that the CW claim is in the range of what Pomerleau could reasonably have expected to pay. The CW costs outline shows a total of 112.3 hours of Mr. Riveros’ time for the entire reference and 11 hours of clerk time. 66% of Mr. Riveros’ time, 74.1 hours, concerned trial preparation and trial work. All of the clerk’s 11 hours concerned trial work. The substantial indemnity hourly rates shown, apparently about $315/hour for Mr. Riveros and $90/hour for the clerk, are reasonable. Despite CW’s limited involvement in the trial, these are all generally not unreasonable figures.

Conduct of the Parties

33Pomerleau argues that ABCO should be sanctioned in costs for conduct that, according to Pomerleau, unnecessarily lengthened the proceeding. The complaints are outlined at length in the Pomerleau costs outline.

34I find that the following complaints have merit. Ms. Assuras constantly deviated from my trial time schedule, and that she constantly changed her witness lineup. This added to the trial time and made conducting the trial hearing more challenging. ABCO also changed its position at the trial concerning the Peri Formwork forms on site. Prior to the trial, ABCO had taken the position that Peri had accidentally billed costs it incurred on the subject TTC project under the Millhaven Project. At trial, this position changed to Peri authorizing the transfer of the forms to the TTC Project. This led to a mid-trial motion by Pomerleau to have two witnesses added to address this new position, a motion that was opposed and that succeeded. Furthermore, ABCO’s expert witness, Ali Farahzadi, did not identify the documents he had relied upon in preparing his report, which was improper. ABCO also wrongly insisted that Pomerleau had not previously produced the Specifications it relied upon at the trial when it in fact had done so months earlier. ABCO also unsuccessfully attempted to lead similar fact evidence. I do not find that the other complaints have merit.

35Due to these issues, I am further confirmed in my decision to award Pomerleau substantial indemnity costs after the second Pomerleau offer to settle. No further adjustment to my award needs to be made.

36As to CW, I find that CW should be awarded substantial indemnity costs as against Pomerleau. On June 22, 2015 Master Albert ruled that, due to its default judgment against ABCO, CW need not attend the reference any further until the final report is settled or the holdback payout is addressed. However, on December 5, 2017 Pomerleau insisted that, because it had not been a part of the proceeding that led to the default judgment, it required that CW attend trial and essentially re-prove its claim. This happened after production and discovery.

37At trial less than a year later, it became clear that Pomerleau had no real basis to question the CW default judgment. The CW claim was based on CW’s submitted invoices less the payment Pomerleau made to CW. While Ms. Groulx is right that Pomerleau had the right to force CW to prove its claim, that right must be exercised reasonably and with a view to avoiding needless expense. Pomerleau did not do so here.

38Ms. Groulx claimed that ABCO created uncertainty as to the amount of rebar that was delivered to the site. But the evidence was clear that the CW billing reflected accurately the minimum that was owed by ABCO. Forcing CW to re-prove its default judgment was not a reasonable step at all. In reviewing the CW costs outline, I note that almost all of the CW claimed costs occurred after December, 2017, namely after Pomerleau forced CW to re-prove its default judgment.

39Compounding this conduct was the Pomerleau offer to settle the CW claim on September 7, 2018. I have already addressed this matter. Suffice it say here that I find this offer to be in the nature of a presumptuous and “bullying” offer that should be disapproved. All the more reason to award CW substantial indemnity costs.

Complexity and Importance

40I am satisfied that this proceeding was complex and important to the parties. There were many technical issues at the trial, such as the nature of the contract, the nature of the Pomerleau back-charges and the valuation of the ABCO work. There were numerous documents including emails, daily journal entries, schedules, drawings and specifications. I am also satisfied that the case was very important to both parties. Large amounts were in issue. This will all be taken into consideration.

Quantum and Proportionality

41Ms. Assuras did not challenge the Pomerleau costs outline either as to the reasonableness of the amounts shown therein or as to proportionality. Ms. Groulx in turn also did not challenge the CW costs outline on these issues.

42Having reviewed the same documents, I have concluded that the amounts shown in the Pomerleau costs outline are not unreasonable or disproportionate to the issues in dispute or the amounts claimed. However, I have a minor issue with the CW costs outline. The amounts shown in the CW costs outline for Mr. Riveros’s trial participation and written closing submissions seem somewhat excessive given his limited involvement. I will make an adjustment accordingly.

Conclusion as to Costs

43For these reasons, I conclude that ABCO must pay Pomerleau $500,000 in costs for this reference including the trial. This figure is reasonable in the circumstances for the reasons stated above, and in particular given Pomerleau’s lack of success on its completion costs claim.

44I also conclude that Pomerleau must pay CW substantial indemnity costs of $37,000.

Interest

45Concerning interest, I convened a telephone conference call on January 9, 2020 to hear submissions. In advance, Ms. Groulx submitted written submissions on January 8, 2020.

46There is no dispute as to the following: the applicable prejudgment interest rate on the Pomerleau judgment against ABCO is 1.3% per annum; there is no interest liability for Pomerleau on its holdback obligation to CW; the post-judgment interest rate is 3% per annum.

47Concerning the calculation of the prejudgment interest on the Pomerleau judgment against ABCO, Ms. Groulx referred me to section 128(1) of the Courts of Justice Act, R.S.O. 1990, c.C.43 which specifies that any person entitled to a payment of money is entitled to receive in the order interest “calculated from the date the cause of action arose.” She argued that there were three breach of contract “causes of action” in the Pomerleau judgment against ABCO, namely the back-charge for the caisson joint issue, the back-charge for the improperly built caissons, and the back-charge for the formwork labour. She argued that the judgment should be broken down in proportion to the amounts I found for these back-charges. This pro rata distribution is as follows: 56% of the judgment for the caisson joint back-charge; 15% of the judgment for the improperly built caissons back-charge; and 29% of the judgment for the formwork labour back-charge. There was no dispute on this point.

48What was disputed was the commencement dates for the running of the 1.3% per annum prejudgment interest on these three portions. Ms. Groulx argued that the commencement dates should start on dates back in 2012 as these were dates on which the breaches occurred and on which Pomerleau started suffering losses, particularly losses in TTC monthly certifications on Pomerleau draws.

49Ms. Assuras argued on the other hand that the dates should be at least six months after the first dates on which there is evidence of actual cost incurred by Pomerleau. She relied for this proposition on the decision of Justice Gans in Livent Inc. (Receiver of) v. Deloitte & Touche, 2014 CarswellOnt 9317 (SCJ), at paragraph 10. She also relied on CJA section 128(3) which concerns interest on pecuniary loss. She argued that, as there was no persuasive evidence as to when Pomerleau started incurring costs on these issues, I should use the date of the Pomerleau pleading, December 2, 2014, as the commencement date.

50In the course of the argument, it came out that the first dates on which Pomerleau articulated these back-charges in writing for delivery to ABCO were the following: April 9, 2014 for the caisson joint issue; April 9, 2014 for the improperly built caissons; April 16, 2014 for the formwork back-charge. Using my jurisdiction under CJA section 130, I decided during the conference call of January 9, 2020 that the most reasonable and cost-effective result would be to use these dates as the commencement dates. The amount in issue was less than $10,000 and, therefore, a simple solution was necessary. Furthermore, to have interest running before there was concrete evidence of Pomerleau’s final charges plus its intention to back-charge, as evidenced by these documents, did not, in my view, seem fair to ABCO. I ordered that these dates be the commencement dates.

51I required that Ms. Groulx provide me with the calculation of the prejudgment interest to today’s date. She has done so.

52I, therefore, order that prejudgment interest on the Pomerleau $516,458.19 judgment against ABCO be as follows:

• Caisson joint portion of the judgment: $516,458.19 x 0.56 = $289,216.58; [($289,216.58 x 0.013)/365] x 2,106 days from April 9, 2014 = $21,693.62;
• Improperly built caisson portion of the judgment: $516,458.19 x 0.15 = $77,468.73; [($77,468.73 x 0.013)/365] x 2,106 days from April 9, 2014 = $5,810.79;
• Formwork labour portion of the judgment: $516,458.19 x 0.29 = $149,772.87; [($149,772.87 x 0.013)/365] x 2,099 days from April 16, 2014 = $11,196.86;
• Total prejudgment interest: $21,693.62 + $5,810.79 +$11,196.86 = $38,701.27.

53I enclose herewith my Report as signed plus a document entitled “Instructions to Counsel and Self-represented Parties” concerning the process to follow in having my Report confirmed.