Court File and Parties
COURT FILE NO.: CV-17-570187 DATE: 20200708 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Kenneth James, Plaintiff AND: Anna Chedli and Anna Chedli in her capacity as Estate Trustee for the Estate of Amdouni Chedli aka Dennis Chedli, Defendants
BEFORE: Pinto J.
COUNSEL: Patrick Bakos, for the Plaintiff/Responding Party Michael R. Kestenberg, for the Defendants/Moving Parties
HEARD: March 11, 2020
COSTS ENDORSEMENT
[1] The defendants were successful in their motion for summary judgment and the action was dismissed: James v. Chedli, 2020 ONSC 3235. As the parties could not agree on costs, I requested and received costs submissions.
[2] The defendants seek costs on a partial indemnity basis in the amount of $111,755.34 inclusive of fees, disbursements and taxes based on their Costs Outline.
[3] Section 131(1) of the Courts of Justice Act, R.S.O. 1990 c. C.43 provides that a judge has the discretion to award costs for a motion. The discretion is subject to the Rules of Civil Procedure.
[4] Rule 57.01 of the Rules lists several factors that the court may take into consideration in determining costs:
57.01 (1) In exercising its discretion under section 131 of the Courts of Justice Act to award costs, the court may consider, in addition to the result in the proceeding and any offer to settle or to contribute made in writing,
(0.a) the principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;
(0.b) 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;
(a) the amount claimed and the amount recovered in the proceeding;
(b) the apportionment of liability;
(c) the complexity of the proceeding;
(d) the importance of the issues;
(e) the conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding;
(f) whether any step in the proceeding was,
(i) improper, vexatious or unnecessary, or
(ii) taken through negligence, mistake or excessive caution;
(g) a party's denial of or refusal to admit anything that should have been admitted;
(h) whether it is appropriate to award any costs or more than one set of costs where a party,
(i) commenced separate proceedings for claims that should have been made in one proceeding, or
(ii) in defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and
(i) any other matter relevant to the question of costs. R.R.O. 1990, Reg. 194, r. 57.01 (1); O. Reg. 627/98, s. 6; O. Reg. 42/05, s. 4 (1); O. Reg. 575/07, s. 1.
[5] In deciding costs, the overall objective is to fix costs in an amount that is fair and reasonable for an unsuccessful party to pay in the particular circumstances, rather than an amount fixed by actual costs incurred by the successful litigant: Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.) at para. 24.
Entitlement
[6] Generally, costs are awarded to the successful party. Here the defendants were entirely successful on their summary judgment motion and there is no question that they are entitled to costs.
[7] I disagree with the plaintiff’s assertion that because the defendants do not have to pay the late Dennis Chedli’s debt to the plaintiff James, the defendants have received a “significant benefit” which I must now take into account in deciding on costs. I also disagree that the defendants allegedly “vaguely-prepared Notice of Motion” or inclusion of the “accommodation maker” argument should result in the defendants’ costs being reduced. The defendants still expended legal costs in defending against a claim that was unenforceable.
Scale of Costs
[8] The defendants seek costs on a partial indemnity scale which is what is generally awarded.
[9] The defendants' Costs Outline provides a breakdown of the fees (based on the hours spent) and the disbursements incurred as follows:
[10] The plaintiff complains that the defendants’ use of a partial indemnity rate of 66% runs contrary to the courts’ consistent calculation of partial indemnity costs at a maximum of 60% of the actual billing (i.e. full indemnity) rate.
[11] In fact, the courts have not been consistent in defining partial indemnity costs. Some cases have used 66% of the full indemnity rate: Prollenium International Corporation v. Vital Esthetique Sarl, 2020 ONSC 3483 at para. 13; Coon v. Gore Mutual Insurance Company, 2020 ONSC 1280 at para. 30; Spielmann v. University of Sudbury, 2019 ONSC 5148 at para. 6; and Barrie Leasing Services Inc. v. Wainman, 2018 ONSC 3012 at para.17.
[12] Other cases, focusing on Rule 1.03, have held that partial indemnity costs are 60% of full indemnity costs: Sydie et al. v. Murad, et al., 2012 ONSC 416 at para. 6; and Moore v. Getahun, 2014 ONSC 3931 at para. 20.
[13] In Chandra v CBC, 2015 ONSC 6519 at para. 61, Mew J. addressed the relationship between partial indemnity costs, substantial indemnity costs and the fees and disbursements actually incurred by a successful party as follows:
[61] A very recent pronouncement from the Court of Appeal in Akagi v. Synergy Group (2000) Inc., 2015 ONCA 771, addresses the relationship between partial indemnity costs, substantial indemnity costs and the fees and disbursements actually incurred by the party in whose favour costs are awarded:
[53] In seeking substantial indemnity costs, counsel appear to have proceeded on the basis that substantial indemnity costs represent 90% of full indemnity. While that may be so in some circumstances, we do not think that is an accurate general principle of law.
[54] Counsel have referred us to two Superior Court decisions in which judges have concluded that a substantial indemnity hourly rate may fairly represent 90% of the full indemnity hourly rate. They have come to this conclusion based on the premise that a fair partial indemnity hourly rate represents approximately 60% of full indemnity. Applying a factor of 1.5 – the factor set out in the definition of substantial indemnity costs in r. 1.03 – the judges arrived at a substantial indemnity hourly rate of 90% of full indemnity. See OGT Holdings Ltd. v. Startek Canada Services Ltd., 2010 ONSC 1090; and Middleton v. Highlands East (Municipality of), 2013 ONSC 2027.
[55] It is well-established, however, that fixing costs of a proceeding or of a step within a proceeding on a partial indemnity basis pursuant to Part I of Tariff A of the Rules of Civil Procedure is not simply an exercise of multiplying hourly rates by the amount of time expended. The court must balance the discretionary factors set out in r. 57.01(1) and, in the end, arrive at an amount that is reasonable and fair in the circumstances and that bears some relationship to the amount that an unsuccessful party could reasonably expect to pay: see Boucher v. Public Accountants Council for the Province of Ontario (2004), 71 O.R. (3d) 291 (C.A.), at paras. 26, 37-38…..
[56] Costs awarded on a substantial indemnity basis are not a function of full indemnity rates, however, or of full indemnity costs where full indemnity rates are reasonable. Under the Rules, substantial indemnity costs are a function of the costs awarded on a partial indemnity basis. Rule 1.03 is quite clear on this:
“Substantial indemnity costs” mean costs awarded in an amount that is 1.5 times what would otherwise be awarded in accordance with Part I of Tariff A, and “on a substantial indemnity basis” has a corresponding meaning.
[57] In short, costs awarded on a substantial indemnity scale are to be determined on the basis of applying a factor of 1.5 to the amount of the partial indemnity costs as fixed (or that would otherwise have been fixed) in accordance with the Rules and Tariff A….
[62] The effect of the applicable rules and jurisprudence, including 790668 Ontario Inc. v. D’Andrea Management Inc., Akagi v. Synergy Group (2000) Inc. leads me to conclude as follows:
a. While as a general rule of thumb, partial indemnity costs will often be fixed or assessed in an amount that equates with 60% of full indemnity costs, this will not always be so.
b. In determining how much to award for partial indemnity costs, a court must balance the discretionary factors set out in r. 57.01(1) and ultimately arrive at an amount that is reasonable and fair in the circumstances and that bears some relationship to the amount that an unsuccessful party could reasonably expect to pay.
c. Substantial indemnity costs are not determined by reference to full indemnity rates, or of full indemnity costs where full indemnity rates are reasonable, but, rather, are a function of the amount determined for partial indemnity costs.
d. The application of the factor of 1.5 under Rule 1.03 is subject to the indemnity principle (expressly referenced in Rule 57.01(1) (0.a)), such that no award of costs may exceed the legal fees and disbursements actually incurred by the party in whose favour costs are awarded.
e. Costs on a full indemnity scale represent a complete indemnity for those costs that have been reasonably incurred.
f. Costs on a full indemnity scale will usually, but not always, exceed substantial indemnity costs, but substantial indemnity costs will never exceed full indemnity costs.
[14] In sum, partial indemnity costs are 60% of full indemnity costs as a general rule of thumb and 66% is used as an outer marker. Here, based on Rule 1.03 and the guidance provided by the Chandra decision, I find that 60% of full indemnity costs is the appropriate figure.
Quantum
[15] The defendants were represented by two counsel. Mr. Kestenberg has been practicing for 44 years. His actual hourly rate is $675.00 and the corresponding partial indemnity rate is $405.00 representing 60% of his actual rate. Mr. Hershtal has been practicing for 11 years, his actual hourly rate is $285.00, and his partial indemnity rate is $171.00. I consider these rates to be reasonable and disagree with the plaintiff’s assertion that “two senior counsel” were utilized resulting in “double-billing at least to a certain extent.” I find, based on the hours indicated, that work was allocated reasonably between the defendants’ two counsel.
[16] Based on the Rule 57.07 factors, I find as follows:
(a) Amount sought and recovered: The plaintiff's action was for over $2 million plus interest and costs. The defendants' motion for summary judgement disposed of the entire action and the defendants' costs are proportionate to the significant amounts that were at issue.
(b) The importance of the issues: The plaintiff commenced his action after the defendant Anna Chedli's husband Dennis passed away. The action sought, inter alia, ownership and possession of Anna's matrimonial home and significant damages from Anna personally and Dennis' estate. The issues were of critical importance to the defendants.
(c) The complexity of the proceeding: The action and the motion for summary judgment were factually and legally complex. The hearing of the motion for summary judgment was preceded by a number of Masters’ rulings. The plaintiff decided to examine a non-party and introduce considerable affidavit evidence which I found to be either irrelevant or tangential to the main points on the motion.
With respect to the legal issues, I agree with the defendants' submission that legally, "this motion engaged the intersection of technical aspects of the Bills of Exchange Act, the Currency Act, the Mortgages Act, the Limitations Act, and the Real Property Limitations Act", and that the "legal issues were also complicated because of the plaintiff's delay."
(d) Whether any step was improper or unnecessary: I consider the plaintiff's refusal to concede that this matter was amenable to summary judgment unreasonable. After all, the plaintiff himself brought and then withdrew a cross-motion for summary judgment. Ultimately, the affidavit evidence provided by the plaintiff, other than from the plaintiff himself, was very superficial and not targeted at the points on issue in the summary judgment motion.
[17] There is a very significant discrepancy between each party’s itemization of costs. As the summary judgment motion disposed of the action, the defendants should have submitted a Bill of Costs, not a Costs Outline: Rule 57.01(5). In any event, the plaintiff’s Bill of Costs is $44,574.47 based on $33,201 in fees (partial indemnity), $6,245.43 in disbursements, and the rest in taxes. The defendants claim $111,755.34 based on $86,993.06 in fees (partial indemnity), $9,670.19 in disbursements, and taxes. Accordingly, the defendants’ fees are somewhere between 2 to 3 times the plaintiff’s.
[18] Relatedly, the plaintiff claims 163.4 hours spent by four lawyers and an articling student; whereas the defendants claim 286.50 hours spent by two lawyers.
[19] I find that the plaintiff’s hours spent are unrealistically low and that the defendants’ hours are somewhat high. For instance, counsel for the plaintiff claims to have spent a total of 18 hours in respect of “all preparation and review for responding materials to the motion for summary judgment.” This strikes me as unusually low in light of the lengthy facta and motion materials. Similarly, the plaintiff listed only 7.5 hours for counsel to “review pleadings, affidavits and transcripts.” Once again, given the volume of material on the motion, I find this to be so low as to not be an accurate measure of what is fair and reasonable for the defendants to charge.
[20] Conversely, the defendants’ hours are somewhat excessive. There appears to be some duplication with respect to hours spent dealing with “Tony Aggozino”, inappropriate hours charged in respect of motions before Masters, and excessive hours in respect of interoffice memos and meetings.
[21] Costs are in my discretion. I find that the appropriate number of hours that can reasonably be charged by the defendants is 1.5 times the hours specified by the plaintiff, hence 245.1 hours (1.5 x 163.4) or approximately 250 hours. I would consider 250 hours spent by the defendants justifiable and maintain the defendants’ allocation of hours as between their two counsel. Accordingly, based on Mr. Kestenberg and Mr. Hershtal spending 108.7 hours and 177.8 hours respectively, that represents an allocation of approximately 38% and 62% of time respectively by each counsel.
[22] Translated into fees at a partial indemnity indemnity rate of 60% of their actual rate, I calculate the revised quantum of the defendants’ fees as follows:
| Lawyer | Actual Hourly Rate | Partial Indemnity @ 60% of Actual Rate | Hours Spent (corrected) | Fees (hours x partial indemnity rate) |
|---|---|---|---|---|
| Michael Kestenberg | $675.00 | $405.00 | 95 (38% of 250) | $38,475.00 |
| Aaron Hershtal | $285.00 | $171.00 | 155 (62% of 250) | $26,505.00 |
| Total | 250 | $64,980.00 |
[23] I find the defendants’ disbursements of $9,670.19 to be reasonable.
[24] The quantum of allowable defendants’ costs are:
- Fees (partial indemnity): $64,980.00
- Kestenberg at Motion (6 hrs x $675 x .6): $2,430.00
- HST @ 13%: $876.33
- Disbursements: $9,670.19
- HST on disbursements: $650.64
- Total: $78,607.16
[25] Additionally, the defendants request $1,500 for the costs of preparing their costs submissions, which I find to be reasonable.
[26] Accordingly, I order that the plaintiff pay the defendants' costs in the amount of $80,107.16 within 30 days of the release of this costs endorsement.
[27] As a result of the suspension of the regular court operations, and notwithstanding Rule 59.05, this endorsement should be treated as an Order that is effective, binding and enforceable without the requirement of a formal entry.
[28] If, however, an appeal or a motion for leave to appeal is brought to an appellate court, a party shall submit a formal judgment or order in Word format for my consideration through my judicial assistant with confirmation from opposing counsel that the terms of the draft judgment or order have been agreed upon.
Pinto J. Date: July 8, 2020